Government Budgets

[op-ed snap] Falling short of aspirations

op-ed snap | Economics | Mains Paper 3: Government Budgeting

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- Government budget and allocations for various sectors and schemes.
Context

The Budget can be judged in terms of its effect on rural demand, investment and private sentiments– all critical elements for recovery. While the Budget offers hope on the last count, it leaves much to be desired on several other parameters.

Skill development allocation- 3000 Crore
- Unmet Demand: There is a huge, unmet demand for teachers, paramedical staff and caregivers, and skilled workers.
  - Need for quality education and skills: Well-paying jobs are created in the organised services and industry but require candidates with quality education and skills.
  - Both elude India’s youth due to the poor quality of education and lack of opportunities to acquire practical skills.
  - Skilling will require massive investment and concerted efforts.
  - What could have been done? The Budget could have given tax incentives to companies to provide internships and on-site vocational training to unemployed youth.
  - The country cannot afford to let the world’s largest workforce waste this way.
On flagship welfare schemes
- The MGNREGA is allocated ₹61,500 crore, which is less than ₹71,000 crore for the current fiscal year.
- PM-KISAN: Going by the last year, disbursement under the PM-KISAN will also be less than budgeted, unless the beneficiary base is expanded.
- Good schemes for increasing demand: These two schemes are good instruments for income transfers to small and marginal farmers, landless labour who spend most of their income and generate demand for a wide range of goods and services.
  - Higher disbursement under these schemes would have benefited most sectors of the economy. Budgetary allocations for health and education are also well below what is needed.
- Micro-irrigation schemes for 100 water-stressed: Focus of schemes such as micro-irrigation schemes for 100 water-stressed districts is welcome and so is a modest increase in allocations for agriculture and rural development schemes.
- Rural roads, cold storage, and logistical chains are crucial for the growth of income and employment in rural India, as the multiplier effects of rural infrastructure investment on growth and employment are large and extensive.
- ₹1.7 lakh crore for transportation infrastructure: The allocation of ₹1.7 lakh crore for transportation infrastructure is also a welcome step. If the public investment infrastructure actually materialises, it will lend credence to the government’s stated commitment to revive the investment cycle –to spur job-creating growth.
- To pull in private investment, public funding should be front-loaded in under-implementation projects.
- Small irrigation and rural road projects are also relatively easy to complete and deliver immense benefits to several sectors.
Bonds Market development and startups
- Need for the corporate bond market: The fundamental problem of infrastructure finance is the asset-liability mismatch which can be addressed only by developing a vibrant ‘corporate bond market.
- No focus on the corporate bond market: The focus of the Budget is the multiple schemes for government bonds mainly through additional room for foreign portfolio investors and exchange-traded funds in government bonds.
  - Need for the well-developed market: Government’s moves are welcome but not enough. A well-developed bond market should draw upon-
  - Domestic insurance funds.
  - Pension funds and
  - Mutual funds-which are capable of investing in corporate bonds across different schemes.
- Startups: The other leg of the “aspirational” Budget is the startups.
  - Some relief on the tax they have to pay and on taxation of the Employee Stock Option Plans is welcome.
  - Reluctance to abolish angel tax: But the reluctance to abolish the angel tax that results in harassment of start-ups and their investors is unfathomable.
Scheme for NBFC
- Allowing NBFCs into TReDS: Another welcome feature is the scheme to allow the non-banking financial companies into the Trade Receivables Discounting System (TReDS).
  - TReDS is an ecosystem that aims to facilitate the financing and settling of trade-related transactions of small entities with corporate and other buyers, including government departments and public sector undertakings.
Changes in provisions for SMEs and their problems
- Audit threshold increased to 5 crore: To reduce the compliance burden on small retailers, traders and shopkeepers who comprise the Small and Medium-sized Enterprises (SMEs) sector, the threshold for audit of the accounts has been increased from ₹1 crore to ₹5 crores for those entities that carry out less than 5% of their business transactions in cash.
- Restructuring window increased: A provision in the budget extended the window for the restructuring of loans for micro, small and medium-sized enterprises till March 31, 2021.
- Problems faced by the SMEs
  - Input tax rate higher for input than for the final goods: For many products produced by these enterprises, the tax rates are higher for inputs than the final goods.
  - High taxes on imports and exports: In addition, many SMEs suffer from high taxes on imports of raw material and exports of intermediary services by them.
Other provision made to revive the private sector
- Recognising the need to revive the dying spirit of the private sector, several provisions have been made in the budget to revive the spirit of the private sector like-
  - Decriminalisation of several civil offences by firms under the Companies Act.
  - The abolition of dividend distribution tax (DDT).
  - The assurance that tax-related disputes will be considered with compassion.
  - The scheme to reimburse to exporters assorted duties, such as excise duty on transport fuels and electricity.
Conclusion

Everything considered the future of the economy will turn on whether the government delivers on the promises of public investment and the promises made to different sections of society including the taxpayer and companies. When it comes to reviving private sentiments, actions will speak much louder than the budgetary promises.
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Cyber Security – CERTs, Policy, etc

[op-ed snap] We should offer to safeguard the world’s telecom networks

op-ed snap | Security Issues | Mains Paper 3: Cyber Security

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- Cyber security in the wake of Huawei ban and concerns over cyber security in 5G age.
Context

India should grab cybersecurity opportunities instead of focusing on smaller issues like import tariffs during Trump’s visit.

Opportunity for India in the US-China trade war
- Technology will be an important front in the emerging trade war between the US and China.
  - It will create significant opportunities for India as global supply chains re-adjust to geopolitical pushes and pull.
  - In manufacturing: The immediate opportunity is in across-the-board manufacturing, especially if the Government puts in place a special task force to unclog the regulatory issues.
  - In cybersecurity: Beyond manufacturing, the unfolding US-China technology war is creating opportunities for India in the cybersecurity space on a scale that could match Y2K.
Balance national security and industry economics
- The UK’s approach: It is a carefully constructed middle path.
- Not allowing high-risk vendors: The UK decided that “high-risk vendors” will not be permitted in its core networks.
  - High regulatory and security oversight: High-risk vendors will also be subject to higher levels of regulatory and security oversight.
  - Ability to switch: Operators are expected to have the ability to switch away from such vendors should the government so require.
- 35% restriction: The UK restricted to less than 35% of the equipment base of each telecom operator.
- The EU approach: The European Union is likely to adopt some variant of the British approach.
  - This means Chinese-made equipment will be deployed across EU countries but under tighter surveillance, audit and assurance regime.
How is it going to create opportunities?
- 5G and more need for more security professionals
  - More base stations: 5G networks will employ many more base stations than existing networks.
  - The internet of things (IoT) is set to bring billions of connected sensors and devices online.
  - The requirement of security professionals: Tightening security norms will require both telecom firms and their customers to employ a lot of cybersecurity professionals in a wide range of roles, of varying levels of sophistication and sensitivity.
- Shortage of cybersecurity professionals
  - The problem is: the world is already short of cybersecurity professionals.
  - Even before 5G networks are rolled out, estimates suggest that there are 2 to 3 million unfilled cybersecurity vacancies around the world.
  - Scrutiny of the Chinese vendors and employment opportunities: The more stringent the security regimes around Chinese vendors, the greater the demand for cybersecurity professionals security regimes around Chinese vendors, the greater the demand for cybersecurity professionals.
- Where is the opportunity for India? The industry is responding to this shortage by employing more automation.
  - But demand for human will increase: The demand for trustworthy, reliable and competent human beings to keep an eye on cyber threats will only increase.
  - Where can hundreds of thousands of technology professionals who might be able to fill this gap come from? India and China.
  - Advantage India: Chinese firms and individuals are unlikely to be chosen to keep an eye on Chinese equipment makers and state-linked cyber attackers, it is advantage India.
Can India grab this opportunity?
- Inadequate professionals in India: India doesn’t have adequate numbers of cybersecurity professionals either.
  - Skill initiative by the government: The government has launched a skills initiative to plug the shortage, but we’re far away from addressing our own cybersecurity needs.
  - India has all the necessary conditions to become as big a player in the global cybersecurity market.
  - India has the numbers, the companies and the market-driven economic models that can produce the skills that the industry wants.
- Private sector’s role: During the 1990s’ information technology boom, India produced hundreds of thousands of software engineers not because of any government skills development programme, but because private firms popped up and supplied the skills that people and their employers wanted.
Way forward
- Government to government arrangements: Unlike the Y2K days, the global demand for cybersecurity professionals has entry barriers that firms and individuals cannot easily cross on their own. Government-to-government arrangements can help Indian firms and individuals get clearances for cybersecurity roles.
- Developing cybersecurity partnership: India will have to work on developing cybersecurity partnerships with the US, UK and the EU, focused on opening up their markets to Indian firms.
- Win the trust: The latter, for their part, must work on gaining the trust of the West’s national security establishments.
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Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

[op-ed of the day] A sneeze, a global cold and testing times for China

op-ed snap | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Dealing with outbreaks of infectious disease.
Context

The World Health Organization (WHO) has declared the coronavirus outbreak a global emergency, as the outbreak continues to spread outside China.

Coronavirus outbreak and Chinese response
- What is coronavirus? Normally, coronavirus is a large family of viruses that are often the source of respiratory infections, including the common cold.
  - A small number of common infecting virus: Most of the viruses are common among animals and only a small number of them infect humans.
  - Mutation of animal base virus: Sometimes, an animal-based coronavirus mutates and successfully finds a human host.
- Dangers of rapid urbanisation: Rapid urbanisation that forces animals and humans into closer proximity (as in the “wet market” in Wuhan) creates a perfect petri dish from where such zoonotic outbreaks can originate.
Concern for India
- Reported case in Nepal and cause of concern for India: For India, the most critical is cases being reported in Nepal since India and Nepal share an open border though so far.
- All tests undertaken in India have been negative.
- A tweet by the Ministry of Health and Family Welfare on January 30 said that one positive case of a novel coronavirus patient
Understanding the new virus
- The possible mode of transmission: According to the World Health Organization, during previous outbreaks due to other coronavirus, human-to-human transmission occurred through droplets, contact and fomites (objects or materials which are likely to carry infection, such as clothes, utensils, and furniture).
- This suggests that the transmission mode of the 2019-nCoV can be identical.
- The transmission even in incubation period: More significant is the new understanding that the virus is contagious even during incubation, that is even before a patient exhibits any symptoms.
  - This characteristic amplifies
Experience from the past outbreaks
- Comparison with SARS: Comparisons are being drawn the Severe Acute Respiratory Syndrome) outbreak in 2002-03.
  - Zoonotic case: SARS is also a zoonotic case, part of the coronavirus family with clues pointing to horseshoe bats in China as the likely source.
  - Late reporting by China in SARS:
  - The first incidents were reported in Guangdong province in November 2002 but WHO was officially informed only after three months.
- Different response this time: Comparison with SARS: Comparisons are being drawn the Severe Acute Respiratory Syndrome) outbreak in 2002-03.
  - Zoonotic case: SARS is also a zoonotic case, part of the coronavirus family with clues pointing to horseshoe bats in China as the likely source.
  - Late reporting by China in SARS: The first incidents were reported in Guangdong province in November 2002 but WHO was officially informed only after three months.
  - Different response this time: This time around, the Chinese government has been more open but the question being asked is whether it has been open enough?
  - The difference in time to develop vaccine: For SARS, it took 20 months from the genome sequencing to the first human vaccine trials; for the 2019-nCoV, authorities in the U.S. are working on a deadline of 90 days.
Lessons from Kerala in Nipah outbreak
- Managing an outbreak with few casualties: Kerala managed to curtail the Nipah outbreak with few casualties.
  - Nipah is also zoonotic and made the jump from fruit bats to humans.
  - Though there were 17 deaths in India, effective quarantine measures by local authorities prevented the spread.
- Infectious disease on the rise: Infectious diseases including those of the zoonotic variety are on the rise in India.
  - In addition, regions in India suffer from seasonal outbreaks of dengue, malaria and influenza strains.
  - The nation-wide disease surveillance programme needs to be strengthened.
Conclusion

India should brace itself for the possible outbreak of infectious diseases and frame policies to deal with such outbreaks in fast and effective ways.
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Climate Change Impact on India and World – International Reports, Key Observations, etc.

[op-ed snap]Partners in action

op-ed snap | | : Conservation, Environmental Pollution & Degradation, Eia

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Green Growth Equity Fund
Mains level: Paper 3- Climate change, Steps taken by India to mitigate the impact, collaboration in innovation with other countries.
Context

Both India and the UK are exploring how best to develop the technology and investment needed to spur the transition from fossil to renewable fuels and make this a beneficial trajectory for everyone.

Areas of collaboration with the UK
- Resilience to climate change: To build resilience to climate risks, the U.K. is working with the Mahatma Gandhi National Rural Employment Act to build flood defences and river structures to encourage aquifer replenishment.
- Monsoon forecasting: Together with India’s Ministry of Earth Sciences, we are gathering land, sea and atmospheric data to help deliver a decisive step forward in monsoon forecasting.
- Electric mobility: On electric mobility, a major joint venture between UK’s EO Charging and India’s Yahhvi Enterprises will deliver world-class smart charging infrastructure for electric vehicles across India.
- Finance of Green Growth Equity Fund: On finance, the U.K. government committed 240 million pounds of anchor capital in the Green Growth Equity Fund.
  - Its first investment going to Ayana Renewable Power, which is developing 800MW of solar generation capacity.
India’s efforts to tackle climate change
- India’s size and ecological diversity have placed it on the frontlines of global warming.
- India walking the talk on climate change: It is on course to deliver the target of 40 per cent electricity generation from non-fossil fuels by 2030.
- ISA: India has already demonstrated this personal commitment on the world stage with the India-led International Solar Alliance.
- CDRI: India also announced the global Coalition for Disaster Resilient Infrastructure, both of which the UK a part of.
- India and the UK can also work together on–
  - Resilience and adaption.
  - Clean energy.
  - Green finance and nature-based solutions.
  - Infrastructure development.
  - Sustainable energy and smart cities.
Conclusion

India and the UK need to make sure that the present partnership on climate and the environment go from strength to strength in the future.
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Foreign Policy Watch: India – EU

India abroad: On diplomats firefighting negative references to India

op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- India's foreign relations with the EU and concerns raised over CAA in EU parliament.
Context

The European Union Parliament’s discussion recently on India’s Citizenship (Amendment) Act or CAA, is a cause of concern.

Reactions in the West over the act
- In the U.K. and the U.S.: Parliamentarians in the U.K. and U.S. Congressmen, including Democratic presidential contenders, have asked India to “reconsider” the law and to “engage” with the protesters.
- Resolution in the EU parliament: The EU parliamentarians went a step further.
  - Six critical resolutions: The EU parliament put out six different and extremely critical resolutions.
  - One of the six articles spoke of the possible risk by the CAA and the proposed National Register of Citizens, of creating “the largest statelessness crisis in the world”.
  - A sixth less critical resolution, but which worried about the “brutal crackdown” on protesters, was dropped.
- Diplomatic outreach by India
  - After India’s intense diplomatic outreach, the parliamentarians agreed to put off voting on the resolution until after External Affairs Minister and the PM visit Brussels.
  - The hope is that with the U.K. scheduled to leave the EU on January 31, interest in the anti-CAA resolutions will wane.
  - Finally, the government has held that the CAA is India’s internal law.
India’s Reaction
- The sovereign right of India: While the government is right about India’s sovereign right, it would be deluding itself if it thinks any of these explanations are passing muster with the EU parliamentarians.
  - Dilution of case against foreign interference: The government diluted its own case against foreign interference when it facilitated a visit by EU MEPs to Srinagar last year.
  - By engaging the EU MEPs to avoid a vote in the EU Parliament this week, and offering to explain the reasons behind CAA, the government is diluting it further.
- Need to stop reference to Pakistan: New Delhi must also consider the impact of its repeated reference to Pakistan as the sole mover of any motion against it at world legislatures and fora.
  - 626 MEPs of the total 751 were members of the groups that originally drafted the six resolutions, and it seems unlikely that Islamabad could have achieved such a majority.
Diplomatic toll
- Cumulative toll: The government must reflect on the cumulative toll on its diplomatic heft following international alarm over the CAA, plans for an NRC and the dilution of Article 370.
- Instead of pushing a positive agenda for India or handling global challenges, Indian diplomats seem to be overwhelmed keeping out any negative references to India at official fora.
Conclusion

India must take steps to address the concerns raised at the global level over the act and also prepare itself for the possible impact of such actions.
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Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

[op ed of the day] Stay with stimulus

op-ed snap | Agriculture | Mains Paper 3: Government Budgeting

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- Provisions in the budget to revive the economy-need for the fiscal stimulus, policies of the Government with respect to agriculture.
Context

The stimulus needs to continue and the reforms will help to keep the economy going. If gross savings and investment rates keep on falling it is difficult to revive the economy.

What was expected in the last budget?
- Increase in pubic investment: The first thing, it said, was to increase public investment and not play statistical or token announcement games.
- The upswing in manufacturing growth, from negative to slightly less than 3 per cent (not industrial growth, because that includes mining and electricity), needed consolidation.
- Real outlays in infra did not go up: Real outlays on the infrastructure needed to go up, but they did not.
  - So the push to private demand and a virtuous cycle of growth was missed.
  - The implicit numbers in the Budget math comprise growth of around 7 per cent, assuming a 5 per cent inflation rate.
Prospects of the Agri-sector
- A good sign in Agri in midterm: For agriculture, in the medium-term, we are alright. Kharif grain production was 6.4 per cent higher than the previous five-year average output.
  - Kharif oilseeds output around eleven lakh tonnes above the earlier year.
  - This was, however, based on a delayed monsoon which caused problems and anxieties in the second quarter of this year.
- Nightmare of government unloading grain in the market: Foodgrains are doing well and we have huge food stocks.
  - But, instead of a blessing, the government turned public operations in grain into a nightmare by announcing that FCI will unload grain at a reserve price less than MSP.
  - Rabi acreage recovered and is now 8 per cent more than last year, but the policy of government operations to reduce the market price of grain by its intervention is a nightmare.
- This is bound to affect input growth in the expanded acreage in the winter crops.
Wrong policy in Agriculture
- Terms of trade against agriculture: The terms of trade are going against agriculture, according to CACP (Commission for Agricultural Costs & Prices) estimates, and selling of the grain will make it worse.
- While the fundamentals are alright, to wallop the farmer with a “cut in the reserve price” would harm the farmers.
- The rabi report of CACP will say that the terms of trade have gone down more.
Conclusion

The Government should continue with the stimulus and opt for the reforms in the economy only to keep the economy going. If the gross savings and investment rates keep falling it would be difficult to revive the economy. If savings keep up, the government will have actual space to divert some real resources to infrastructure investment.
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North-East India – Security and Developmental Issues

[op-ed snap] Optimal delivery or mere optics in Bodo peace deal?

op-ed snap | Polity | Mains Paper 2: Federalism

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- 6th Schedule, Demand for separate states in North-East.
Context

It is to be seen if the pact will lead to true autonomy, true peace, and true development.

What the pact involved?
- Which groups signed the deal?
  - Four factions of the National Democratic Front of Bodoland (NDFB), along with an influential Bodo students’ organization and a Bodo civilian pressure group, signed the peace agreement with the central and Assam governments.
- What are the major concessions given?
  - The Bodoland Territorial Area Districts, the name given to Kokrajhar, Baksa, Chirang and Udalguri, the four contiguous districts bordering Bhutan and Arunachal Pradesh, will now be known as Bodoland Territorial Region.
  - Acknowledgement of Bodo homeland: The changed nuance from districts to the region is significant as it acknowledges a Bodo homeland within the state of Assam, without separating from Assam.
  - Why this acknowledgement matters: This is dialled down from earlier rebel demands for a breakaway state and later suggestions for Union territory status.
- What is the significance of the change from district to the region?
  - Satisfying identity aspiration: The renaming is designed to satisfy the identity and aspirations of the Bodo people.
  - Not ceding territory solved tricky matter: Renaming also solved the politically tricky matter of ceding territory for the government of Assam.
  - Ceding territory would also have fuelled similar demands from the other parts of the state like- Karbi Anglong, Dima Hasao and Cachar, which also have homelands of non-Ahom ethnicities.
  - Avoiding similar demand from other states: Indeed, it could have affected the ongoing Naga peace process, leading Naga rebels to demand territorial and administrative autonomy in Naga homelands in Manipur.
Scope of the success of the pact
- Inherent vulnerability: There is already an inherent vulnerability to the Bodo peace deal even without the overhang of ceding territory.
  - This is rooted in the birth of the Bodo rebellion, which began in the 1980s on account of administrative and development apathy of the state of Assam.
- Feeling of subsuming in Bodo: A feeling that Bodo, the people, the language, the identity, was subsumed by the Assamese and migrants.
- The relation between NDFB and the Front: The Bodoland People’s Front, is in majority in the District council. Will the front be comfortable with newly peaceable colleagues of NDFB?
Conclusion

The Government of Assam needs to ensure that the pact signed changes the situation on the ground and leads to a development on the ground. The state also needs to allay the fears in the Bengali-speaking minority. Moreover, true autonomy, true peace, and true development are always worth more than the paper on which they are promised.
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Cashless Society – Digital Payments, Demonetization, etc.

[op-ed snap] Cybersecurity a critical challenge for India’s digital payments ecosys

op-ed snap | Science Tech | Mains Paper 3: S&T – Applications In Everyday Life

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- Digital payments in India, growth potential, various security challenges and how to tackle it.
Context

Digital payments in India are witnessing consistent growth at a compound annual growth rate (CAGR) of 12.7%.

Growth potential and challenges involved in digital payments
- Expected growth in mobile wallet payment: The mobile wallet market is expected to continuously grow at a CAGR of 52.2% by volume between 2019-23, according to a recent report by KPMG.
  - This digital explosion can be seen in the accelerating rise in the download and use of electronic wallets as well as an unprecedented increase in digital transactions/payments.
  - UPI/IMPS use growth: Payment systems such as UPI/IMPS are likely to register average annualised growth of over 100%, according to RBI’s 2021 vision document.
- Challenge of Cybersecurity: Cybersecurity is one of the most critical challenges faced by stakeholders of the digital payment ecosystem.
  - Types of risks involved: With more and more users preferring digital payments, the chances of getting exposed to cybersecurity risks such as-
  - Online fraud
  - Information theft.
  - Malware or virus attacks are also increasing.
  - Digital payment frauds account for about half of all bank frauds in India.
Steps taken by the RBI
- Guidelines issued: In view of risks, the Reserve Bank of India (RBI) has also issued some guidelines as security and risk mitigation measures for digital payments.
  - It has also issued guidelines that limit the liability of customers on unauthorised electronic banking transactions
- Steps taken: The central bank has taken steps for securing card transactions, internet banking, electronic payments, ATM transactions, and prepaid payment instruments (PPIs).
Securing the fintech revolution
- Fraudsters building advanced technologies: The changing nature of cybersecurity attacks such as-
  - Web application attack.
  - Ransomware.
  - Reconnaissance.
  - The DDoS attack clearly establishes cyber-risk as a new reality.
- What needs to be done to secure the fintech revolution?
  - A robust regulatory framework.
  - An effective customer redressal framework.
  - Foolproof security measures to enable confidence and trust.
  - Incentives for larger participation and benefits similar to cash transactions- are some measures that can help ensure long-term success for digital payments.
- Leveraging technology: Technology can be leveraged for making popular methods of cashless payments secure.
  - Biometric authentication-enabled cards can provide a greater layer of security by enabling replacement of the traditional PIN.
  - Through biometric authentication, consumers can authenticate transactions by placing their finger on a fingerprint sensor embedded in the card.
  - Ensuring security: Safety is ensured as the consumer’s fingerprint is stored only in the secure chip within the card and the same chip is used to match the scanned fingerprint with the stored one.
  - The biggest advantage: The biggest advantage is that the bank or merchant cannot access the consumer’s biometric data, which also counters potential privacy concerns.
Conclusion

To reap the advantages of the promising fintech revolution steps must be taken to secure the digital environment.
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Primary and Secondary Education – RTE, Education Policy, SEQI, RMSA, Committee Reports, etc.

[op-ed of the day] Time to prioritise education and health

op-ed snap | Governance | Mains Paper 2: Health & Education
Context

The policy currently being pursued is intended primarily to incentivise potential investors while social objectives and help in indigenisation are being jettisoned.

Call for more liberalisation and its possible impacts
- What reforms are asked for?
  - Reforms such as labour market liberalisation and removal of constraints on the acquisition of land for industrial purposes are demanded.
- What could be their possible impacts?
  - The negative impact such reform measures are likely to have on the incomes, living conditions and the economic security of the workers and the agricultural class.
  - Counterproductive labour policy: The policy of freedom of hiring and firing of labour will be counterproductive as it would squeeze demand further in a situation of huge demand deficit.
Social sector and demand
- Neglect of human infrastructure: While talks of economic revival focus on infrastructure there is little talk of investment in human infrastructure, particularly in education and
  - Conditional expenditure: On the contrary, the expenditure in social sectors is made conditional upon a higher rate of growth.
  - The flawed premise of long term impact: Most mainstream economists believe that public expenditure in social sectors can only have a long- term impact on growth. Which is not entirely correct.
- The benefit of investment in human infrastructure:
  - Increases demand in short-run: Investment in social sectors results in creating demand in the short run by way of opening avenues for large-scale employment.
  - Competitiveness and sustainability: It imparts competitiveness and sustainability to the Indian economy in the medium and long run.
- Example of RTE, teacher employment and demand creation
  - The recruitment of 5.7 million additional teachers over a period of, say, five years, can create huge scale demand.
  - And, this is only one factor essential for universalising quality school education.
  - There is also a large gap between the requirement of infrastructure in the schools and that available and built recently.
  - The gap between requirement and availability: According to government data, only 12.5% of the schools covered by the RTE Act were compliant with RTE norms.
  - Meeting these norms has the potential of creating employment on a large scale.
- Importance of health and education
  - Education has a crucial role to play for an individual in gaining employment and retaining employability.
Conclusion

The gestation period of projects in social sectors is not as long as it is made out to be. It is, therefore, time for reprioritising education and health in the scheme of development strategy and the allocation of budgetary resources.
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Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

[op-ed snap] Don’t be deterred by the ‘crowding out’ effect of the fisc

op-ed snap | Economics | Mains Paper 3: Government Budgeting

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- The crowding out effect, effects of the Government borrowing on various variables.
Context

Market borrowings of the government do not always squeeze credit for the private sector in India.

What is ‘crowding out’ effect?
- Increased government spending and borrowing: It refers to how increased government spending, for which it borrows more money, tends to reduce private spending.
  - Why does private spending reduce? This happens because when the government takes up the lion’s share of funds available in the banking system, less of it is left for private borrowers.
  - Relationship with interest rate: Higher borrowing by the government and subsequent crowding out also impacts interest rates in the economy.
How the Government borrowing works and the role of RBI
- Local borrowing local spending: Typically, the government funds its fiscal deficit by borrowing from the domestic bond market.
  - Its expenditure is also local in nature.
- Overdraft from RBI: The Reserve Bank of India (RBI) is the official banker to the government-which spends money by first taking an overdraft from the central bank.
  - This overdraft gets repaid through bond market borrowings.
- Why overdraft? The understanding is that any such government spending should ideally not affect the availability of funds to other borrowers in the market.
- Excessive borrowing and effects on the interest rate: Excessive government borrowing from the bond market, many cautions, could lead to a rise in interest rates for the government itself and consequently for everyone else in the economy.
Analysis of the effects of borrowing on other variables
- Analysis of the data reveals the following trends.
- No impact on other variables: Local borrowing and spending by the Indian government does not impact any other macroeconomic variables like-
  - The availability and cost of funds for other participants in the economy.
  - Inflation.
  - Deposit growth, at the current deficit level—that is, with the state and central combined figure above 6% of GDP.
- What impacts the interest rate the most?
  - The two most important variables that impacted interest rates were inflation and the repo rate. Which tend to move together.
  - What does it indicate? This clearly indicates that RBI is extremely proactive in the way it manages interest rates.
- Effects of funds on inflation: Such borrowings that are funded by the central bank could lead to inflation, the same is true for large external inflows to domestic money markets.
  - The foreign borrowings finally get reflected in the country’s foreign exchange reserves, which have a very strong relationship with inflation.
  - Effects on interest rates: Technically, any large inflow of a foreign currency sterilized by RBI does have the potential to move the inflation needle up, thus placing upward pressure on interest rates.
- Relationship between borrowing and growth: It is clear that government borrowing and spending actually drives GDP growth.
  - Government borrowing should not impact bank lending to companies, as the sums borrowed return to the market almost immediately.
- How RBI controls bond yield?
  - RBI ensures that bond yields don’t shoot up because of the excessive borrowing, by taking bonds onto its books to be released back into the market in good times.
The uniqueness of the Indian money market
- Why is it unique? India market is a unique money market, different from the rest of the world, for the following reasons-
  - We have investors who are explicitly required to invest in government debt.
  - Banks, non-banking financial companies, insurers, provident funds, and pension funds are all forced to invest in government debt as a condition for their licence to operate in India.
  - We also find that RBI works towards aiding the government borrowing programme rather effectively, ensuring that interest rates do not change too adversely.
Conclusion

The government should not be excessively worried about the government living beyond its means at this juncture. Government spending being the main driver for the country’s GDP growth, it could be a good way to put the economy on a higher growth trajectory. Perhaps it is time to revisit the entire FRBM framework.
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Type: op-ed snap