Note4Students
From UPSC perspective, the following things are important :
Prelims level: Big Bang Nucleosynthesis (BBN)
Mains level: BBN and its significance in the formation of our solar system
Indian researchers have discovered hundreds of Li-rich giant stars produced during BBN indicating that Li is being produced in the stars and accounts for its abundance in the interstellar medium.
Most of the space based theories and missions are focussed on the formation of our solar system. BBN is the most basic auxillary among them.
What is Big Bang Nucleosynthesis (BBN)?
- BBN is the production of nuclei other than those of the lightest isotope of hydrogen during the early phases of the Universe.
- Primordial nucleosynthesis is believed by most cosmologists to have taken place in the interval from roughly 10 seconds to 20 minutes after the Big Bang.
- It is calculated to be responsible for the formation of most of the universe’s helium in various isotopic forms.
- Essentially all of the elements that are heavier than lithium were created much later, by stellar nucleosynthesis in evolving and exploding stars.
Lithium in space
- Lithium (Li), is one of the three primordial elements, apart from Hydrogen and Helium (He), produced in the Big Bang Nucleosynthesis (BBN).
- However, the present measurement of Li in the interstellar medium and very young stars is about 4 times more than the primordial value.
- Thus, identifying sources of Li enrichment in our Galaxy has been a great interest to researchers to validate BBN as well as a stellar mixing process.
- In general, stars are considered as Li sinks. This means that the original Li, with which stars are born, only gets depleted over stars’ life-time as Li burns at relatively very low temperatures.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Blazars
Mains level: Black Holes, Blazars
Researchers from the Indian Institute of Astrophysics (IIA), Bangalore have conducted the first systematic study on the gamma-ray flux variability nature on different types of Blazars.
Strange terminologies from space-based studies are very important from prelims point of view. We can expect a statement based question seeking to identify the term which is being referred to in the paragraph.
What are Blazars?
- At the center of most galaxies, there’s a massive black hole that can have mass of millions or even billions of Suns that accrete gas, dust, and stellar debris around it.
- As these material falls towards the black hole, their gravitational energy gets converted to light forming active galactic nuclei (AGN).
- A minority of AGN (~15%) emit collimated charged particles called jets travelling at speeds close to the speed of light.
- Blazars are AGN whose jets are aligned with the observer’s line of sight.
- Some blazars are thought to host binary black holes in them and could be potential targets for future gravitational-wave searches.
Studying blazars
- Blazars are the most luminous and energetic objects in the known universe were found to be emitters of gamma-rays in the 1990s.
- It is only with the capability of Fermi Gamma-ray space telescope (launched in 2008) to scan the entire sky once in three hours one is able to probe the flux variability characteristics of blazars on a range of time scales.
- Gamma-ray band is one of the bands of the electromagnetic spectrum on which there is limited knowledge on the flux variability of blazars.
- Major problem while studying them is to localize the site for the production of gamma-rays.
Significance
- The study of blazars could provide clues to the processes happening close to the black hole, not visible through direct imaging.
- Exploring blazars will provide key inputs to constrain the high energy production site as well as the high energy emission processes.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Mt. Matterhorn and its location
Mains level: Not Much
Switzerland has expressed solidarity with India in its fight against the coronavirus pandemic by projecting the tricolour on the famous Matterhorn Mountain in the Swiss Alps.
It has been long time since a question on global mountains/mountain ranges has not been asked in the prelims. Gear up for the uncertainty. Make a special sheet of geographical locations in news.
Mt. Matterhorn
- The Matterhorn is a mountain of the Alps, separating the main watershed and border between Switzerland and Italy.
- It is a large, near-symmetric pyramidal peak in the extended Monte Rosa area of the Pennine Alps, whose summit is 4,478 metres.
- It is one of the highest summits in the Alps and Europe (Mont Blanc being highest).
- The four steep faces, rising above the surrounding glaciers, face the four compass points and are split by the Hörnli, Furggen, Leone/Lion, and Zmutt ridges.
Its formation
- The Matterhorn is mainly composed of gneisses originally fragments of the African Plate before the Alpine orogeny.
- The mountain’s current shape is the result of cirque erosion due to multiple glaciers diverging from the peak, such as the Matterhorn Glacier at the base of the north face.
Back2Basics: Alps mountain range
- The Alps are the highest and most extensive mountain range system that lies entirely in Europe.
- It stretches approximately 1,200 kilometres across eight Alpine countries (from west to east): France, Switzerland, Monaco, Italy, Liechtenstein, Austria, Germany, and Slovenia.
- The mountains were formed over tens of millions of years as the African and Eurasian tectonic plates collided.
- Extreme shortening caused by the event resulted in marine sedimentary rocks rising by thrusting and folding into high mountain peaks such as Mont Blanc and the Matterhorn.
- Mont Blanc spans the French–Italian border, and at 4,809 m (15,778 ft) is the highest mountain in the Alps.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various policy rates of the RBI.
Mains level: Paper 3- What were the measures announced by the RBI to deal with the impact of Covid-19 on economy and how far were the measure successful in achieving the intended goals?
To deal with the damage inflicted by the corona crisis on the economy, both the RBI and the government are planning various monetary and fiscal measures. In its latest measures, the RBI has further reduced the reverse repo rate. This article discusses the impact of these measures and explains why the first round of measures failed in achieving the desired result.
What was announced in the second round of policy measures by the RBI?
- RBI reduces the interest on money banks keep in the central bank (reverse repo down by 25 basis points).
- RBI gives ₹50,000 crores to banks through targeted long-term repo operations or TLTRO 2.
- And another ₹50,000 crores to Small Industries Development Bank of India (Sidbi) and National Bank for Agriculture and Rural Development (Nabard) to lend to microfinance institutions (MFIs) and non-banking financial companies (NBFCs).
Banks not transmitting the money
- Banks globally have a problem.
- They are not transmitting the money that central banks are providing to businesses that need the money.
- Imagine that the world has been put into a business coma as we wait for the pandemic to recede.
- Money to pay rents, interest and salaries is needed by the business to stay alive during this period and banks are showing reluctance to step in.
- Firms and tiny entrepreneurs need to borrow to stay afloat.
- Banks typically lend to the larger part of the market and NBFCs and MFIs to the rest—they provide the last mile that banks do not.
Measures by the RBI to increase the money supply in the market
- The US Fed buying bonds directly: The US Federal Reserve has taken to buying corporate bonds directly rather than through banks.
- RBI has not gone that far, but is using its firepower to nudge banks to lend to those who are credit-worthy and who desperately need the money.
- It has done two things to facilitate this.
What reduction in Reverse Repo rate by the RBI means?
- What is reverse repo rate? This is the rate at which banks lend to the central bank—they keep their surplus money with the RBI and get some interest on it.
- Banks borrow from RBI at the repo rate, which is 4.4% right now.
- A few weeks ago, the central bank had reduced the reverse repo by a larger percentage than the repo to decrease the incentive to banks to keep money with RBI.
- But that had a limited impact as on 15 April, banks still had almost ₹7 trillion with the RBI under this window.
- In the second round, RBI has cut the reverse repo by another 25 basis points to 3.75% to increase the difference between the borrowing rate and the lending rate.
- What would be the impact of the second reduction in the reverse repo? The RBI is hoping that this would make banks lend to firms, rather than keeping their money safe with RBI.
- The difference between the rate of borrowing and lending is now 65 basis points.
An issue of monetary policy transmission is a recurring one. The RBI always try to ensure the transmission but there are several factor that prevent it. Make note of these factors.
Risk aversion of the banks
- Banks are displaying deep risk aversion—the desire to keep their capital safe rather than risk investing in investment-worthy bonds.
- The first round of money put into the system through TLTRO 1.0, brought ₹1 trillion.
- TLTRO is long-term (one-to-three years) funding to banks at the repo rate or a short-term rate.
- TLTRO money didn’t reach small and medium firms: Banks took the cheap loan and lent to high-rated public sector units (PSUs) and AA-plus firms—essentially entities who had enough liquidity.
- The money did not find its way to smaller and medium firms, NBFCs and MFIs—entities that actually reach the last mile.
- RBI has put another ₹50,000 crores as part of TLTRO 2.0.
- Banks can only get this money if they lend to NBFCs and MFIs.
- For A and A-minus (these are still investment-worthy) bonds issued by firms in these sectors, banks stand to get a return of between 10-14%.
- Banks are borrowing at 4.4% and have the option to lend at a multiplier.
- That is the incentive given by the RBI to get money down the pipeline.
- Banks stand to lose 65 basis points if they seek the safety of money with the RBI or stand to gain almost 6-10 percentage points in interest if they lend.
- It remains to be seen if banks take this nudge and begin lending to lower than the highest safety bonds.
Refinance to three institutions
- Another ₹50,000 crores is being provided as a refinance to three institutions-Sidbi, Nabard and National Housing Bank.
- These banks reach the small-scale firms, rural sector, housing finance firms, NBFCs and MFIs.
- Again, this should help money reach the last mile.
- Clearly, there is too much competition at the top end of the market—everybody wants the safe paper and deals.
The UPSC could ask a direct question with reference to the issue of policy transmission and how it is a serious challenge in crisis such as Covid -19. So, following are some suggestions to deal with this issue.
Way forward
- Rethink the bank architecture: With transmission, or the liquidity given by the central bank not going down the line, maybe this is a good time for the government and the RBI to rethink its bank architecture.
- Develop bond a corporate bond market: There is very little action at the middle and lower end of the market. The development of a robust corporate bond market will help.
- Early alarm system: The setting up of an early alarm system as proposed by the Financial Resolution and Deposit Insurance (FRDI) Bill to prevent a financial firm failure that takes the whole system down would be a step in the right direction.
Back2Basics: What is the transmission of monetary policy?
- Monetary transmission refers to the process by which a central bank’s monetary policy signals (like repo rate) are passed on, through the financial system to influence the businesses and households.
- There are many monetary policy signals by the RBI; the most powerful one is the repo rate.
- When repo rate is changed, it brings changes in the overall interest rate in the economy as well.
- As a result of a decrease in repo rate, the interest rate on loans by banks also changes and this encourages consumption and investment activities of businesses and households.
- In an economy, both consumption and investment are often financed by borrowings from banks.
- As the repo rate brings changes in market interest rate, the repo rate channel is often referred to as interest rate channel of monetary transmission.
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From UPSC perspective, the following things are important :
Prelims level: Social democracy.
Mains level: Paper 2- What were the factors that helped Kerala deal most effectively with the Covid-19 pandemic?
This article is an analysis of Kerala’s success in dealing with the Covid-19. Factors that emerge are-strong emphasis on the social democracy, the participation of civil society and strong social compact between the government and citizenry. We have also covered the same subject in a previous article but focus there was more on the administrative level.
Kerala’s success story
- Kerala was the first State with a recorded case of coronavirus and once led the country in active cases.
- It now ranks 10th of all States and the total number of active cases (in a State that has done the most aggressive testing in India) has been declining for over a week and is now below the number of recovered cases.
- Given Kerala’s population density, deep connections to the global economy and the high international mobility of its citizens, it was primed to be a hotspot.
- Yet not only has the State flattened the curve but it also rolled out a comprehensive ₹20,000 crore economic package before the Centre even declared the lockdown.
Why does Kerala stand out in India and internationally?
- Kerala’s much-heralded success in social development has invited endless theories of its cultural, historical or geographical exceptionalism.
- But taming a pandemic and rapidly building out a massive and tailored safety net is fundamentally about the relation of the state to its citizens.
- From its first Assembly election in 1957, through alternating coalitions of Communist and Congress-led governments, iterated cycles of social mobilisation and state responses have forged what is in effect a robust social democracy.
- The current crisis underscores the comparative advantages of social democracy.
Kerala’s success is built on social democracy in the state. Following are the factors that constitute the social democracy in the state which is helping it fight against the Covid-19 pandemic with considerable success. These factors are also important from the Mains point of view if the question is framed on Kerala’s success story.
How social democracy is practised in Kerala?
- Social democracies are built on an encompassing social pact with a political commitment to providing basic welfare and broad-based opportunity to all citizens.
- In Kerala, the social pact itself emerged from recurrent episodes of popular mobilisation.
- Popular mobilisations include the temple entry movement of the 1930s to the most recent various gender and environmental movements.
- These movements nurtured a strong sense of social citizenship.
- These movements also drove reforms that have incrementally strengthened the legal and institutional capacity for public action.
- Second, the emphasis on rights-based welfare has been driven by and in turn has reinforced a vibrant, organised civil society.
- This civil society demands continuous accountability from front-line state actors.
- Third, this constant demand-side pressure of a highly mobilised civil society and a competitive party system has pressured all governments in Kerala.
- The pressure made governments to deliver public services and to constantly expand the social safety net, in particular a public health system that is the best in India.
- Fourth, that pressure has also fuelled Kerala’s push over the last two decades to empower local government.
- Nowhere in India are local governments as resourced and as capable as in Kerala.
- Finally, all of this ties into the greatest asset of any deep democracy, that is the generalised trust that comes from a State that has a wide and deep institutional surface area.
- That on balance treats people not as subjects or clients, but as rights-bearing citizens.
How the built-in social democracy is helping in dealing with the pandemic?
- A government’s capacity to respond to a cascading crisis such as the COVID-19 pandemic relies on a very fragile chain of –(1)mobilising financial and societal resources, (2)getting state actors to fulfil directives, (3)coordinating across multiple authorities and jurisdictions and maybe, most importantly, (4)getting citizens to comply.
- First, an effective response begins with programmatic decision-making.
- From the moment of the first reported case in Kerala, Chief Minister convened a State response team that coordinated 18 different functional teams.
- The CM held daily press conferences and communicated constantly with the public.
- Kerala’s social compact demanded no less.
- Second, the government was able to leverage a broad and dense health-care system.
- The health-care system, despite the recent growth of private health services, has maintained a robust public presence.
- Kerala’s public health-care workers are also of course highly unionised and organised, and from the outset the government lay emphasis on protecting the health of first responders.
- Third, the government activated an already highly mobilised civil society.
- As the cases multiplied, the government called on two lakh volunteers to go door to door, identifying those at risk and those in need.
- A State embedded in civil society — the women’s empowerment Kudumbasree movement being a case in point.
- Kudumbasree movement was in a good position to co-produce effective interventions, from organising contact tracing to delivering three lakh meals a day through Kudumbasree community kitchens.
- Fourth, you can get the politics right and you can have a great public health-care system, but its effectiveness in a crisis like this will only be as good as the infamous last kilometre.
- And this is where two decades of empowering local governments have clearly paid off.
Conclusion
At a time when India is dealing with this unprecedented crisis, it is important to be reminded that Kerala has managed the crisis with the most resolve, the most compassion and the best results of any large State in India. And that it has done so precisely by building on legacies of egalitarianism, social rights and public trust. Other states and the Central government must learn from Kerala’s experience.
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From UPSC perspective, the following things are important :
Prelims level: Anti-defection law.
Mains level: Paper 2- What are the solution to the issue of bypassing of the anti-defection law by the political parties?
The article discusses the recent event in Madhya Pradesh where a group of legislature resigned bringing down the government. A most important issue arising out such incidents is circumventing of the laws made to avoid such things from happening. Several such issues along with their solutions are described here.
New method to bypass the anti-defection law
- The political activities in Madhya Pradesh represent a new method of bypassing the anti-defection law and toppling elected governments.
- The government in Karnataka was brought down in July last year in a similar manner with 17 MLAs of the ruling coalition resigning and joining the BJP.
- What method was used? Under this novel method, a set of legislators of the party in power is made to resign from the Assembly to reduce the total strength of the House enough for the opposition party to cross the halfway mark to form the government.
- In the ensuing by-elections, the members who resigned were then fielded as ruling party candidates (most of whom have been re-elected in the case of Karnataka).
- The same practice is likely to be repeated in Madhya Pradesh soon.
A question based on anti-defection law and its implication for healthy debate in the parliament was asked in 2013. And that issues still persist. So, take note of these issues.
Exploiting the loophole in the Tenth Schedule
- This method of mass defection circumvents the provisions of the Tenth Schedule of the Constitution (better known as the anti-defection law)
- What is the Tenth Schedule? The tenth schedule prescribes the grounds for disqualification of legislators: voluntarily giving up party membership and voting or abstaining to vote against party directions.
- Resignation is not mentioned as a ground for disqualification.
- However, the Speaker in Karnataka disqualified them for the rest of the Assembly’s term, thereby barring them from contesting the by-polls.
- While the Supreme Court upheld the disqualification.
- It stuck down the bar from contesting by-polls.
- In Madhya Pradesh, since the Speaker has accepted the resignation of the MLAs, the defectors can in any case contest the by-polls.
Damaging the underpinnings of democracy
- The recurrence of this model of defection signals the exploitation of the inherent weaknesses of the anti-defection law.
- While solo legislators jumping ship might have reduced now, “horse-trading” seems to have gone from retail to wholesale.
- This threatens the underpinnings of India’s electoral democracy since such surreptitious capture of power essentially betrays the people’s mandate in a general election.
Kihoto case is an important case in relation to the anti-defection law.
Time to reframe the anti-defection law
- In this context, it is important to examine whether the anti-defection law fulfils any purpose.
- This law raises fundamental concerns regarding the role of a legislator in a parliamentary democracy.
- Issues with the law: It denies the legislator the right to take a principled position on a policy matter and reduces her to an involuntary supporter of the whims of party bosses.
- Challenge to the constitutionality: The constitutionality of the Tenth Schedule was challenged for violating the Basic Structure of Constitution with regard to parliamentary democracy and free speech.
- Judicial review of the Speaker’s decision: The Supreme Court in Kihoto Hollohan v. Zachillhu (1992) in a 3-2 verdict upheld the law while reserving the right of judicial review of the Speaker’s decision.
What are the shortcomings in the anti-defection law?
- Restriction on the freedom of legislator: The anti-defection law, on the one hand, severely restricts the freedom of a legislator and makes her a slave of party whips.
- Failure in preventing the horse-trading: On the other hand, it has not been able to meet its primary objective of preventing horse-trading and continues to be circumvented to bring down elected governments.
- This calls for reforms that address concerns at both ends of the spectrum.
Following two are the solutions offered here. They are important from Mains point of view. As solutions are often asked for the pressing issues.
Dinesh Goswami Committee and other suggestion
- Restrict the scope of the binding whip: For addressing the first issue, as the Dinesh Goswami Committee also suggested, the scope of the binding whip should be restricted to a vote of confidence.
- For addressing the second issue, it is best to institutionalise the Karnataka Speaker’s decision to bar the defected members from contesting in the ensuing by-poll, if not for a longer period.
- This will disincentivise MLAs from jumping ship.
- These reforms would require a constitutional amendment to the Tenth Schedule, an uphill task under the current circumstances.
Conclusion
We are facing a deeper challenge of the corrosion of India’s parliamentary system, for even in jurisdictions without such anti-defection laws, we do not see “horse-trading” and “resort politics”. Hence, beyond institutional fixes, we also need a popular articulation of an ethical politics that causes the public to shun such political manoeuvres.
Back2Basic: What is the Tenth Schedule?
- The Tenth Schedule was inserted in the Constitution in 1985.
- It lays down the process by which legislators may be disqualified on grounds of defection by the Presiding Officer of a legislature based on a petition by any other member of the House.
- A legislator is deemed to have defected if he either voluntarily gives up the membership of his party or disobeys the directives of the party leadership on a vote.
- This implies that a legislator defying (abstaining or voting against) the party whip on any issue can lose his membership of the House.
- The law applies to both Parliament and state assemblies.
- Exceptions under the law: Legislators may change their party without the risk of disqualification in certain circumstances.
- The law allows a party to merge with or into another party provided that at least two-thirds of its legislators are in favour of the merger.
- In such a scenario, neither the members who decide to merge nor the ones who stay with the original party will face disqualification.
- Is there any time limit to decide on the matter? The law does not specify a time period for the Presiding Officer to decide on a disqualification plea.
- Given that courts can intervene only after the Presiding Officer has decided on the matter, the petitioner seeking disqualification has no option but to wait for this decision to be made.
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From UPSC perspective, the following things are important :
Prelims level: Various terms mentioned in the newscard
Mains level: RBI measures to boost the pandemic stricken economy
To deal with the crippling effects of the pandemic on the economy the government has unveiled certain fiscal measures. After announcing the first round of monetary measures the RBI has unveiled the second round of policy announcements to align itself with the government in its efforts to review the economy. Following are the measures announced by the RBI in its second such announcement.
- The IMF has called the ongoing economic crisis due to Covid-19 as “The Great Lockdown” and termed it to be the worst recession since the Great Depression.
- The total estimated loss to global economic growth is pegged at $9 trillion — more than three times India’s GDP.
- However, while the rest of the world is certain to contract, India is hoping to be one of the few countries that expand their overall GDP, regardless of how small that increase may be.
- In this regard, both the Centre and state governments, as well as the RBI, have been coming out with policy announcements that mitigate economic distress.
UPSC can frame the question based on the measures announced by the RBI like “What measures were announced by the RBI to deal with Covid-19 impact on the economy?”. Also, pay attention to various terms and their effect on the economy from the macroeconomic point of view. That understanding helps us to answer the question based on basic concepts.
What are the announcements made by RBI?
A) Cutting Reverse-Repo Rate
- To begin with, the RBI has cut the reverse repo rate further by 25 basis points (100 basis points make up one full percentage point).
- The reverse repo rate now stands at 3.75 per cent while the repo rate is 4.40 per cent.
- The idea behind repeatedly cutting reverse repo more than the repo is to incentivise banks to borrow from it at low rates and lend it forward to customers.
B) Targeted Long Term Repo Operations
- RBI has announced another TLTRO of Rs 50,000 crore but this time it has mandated that 50 per cent of this amount borrowed by the banks must go to small and mid-sized NBFCs and Micro Finance Institutions (MFIs).
- Again, the benefits of this move are two-fold. One, it provides more liquidity.
- More importantly, it also provides it targeted to those institutions that are most hit by the economic slowdown and, as such, most in need of funds to survive themselves.
C) Credit to NBFCs and MFIs
- All India financial institutions (AIFIs) such as the NABARD, etc. will be provided special refinance facilities for a total amount of Rs 50,000 crore by the RBI.
- This credit will help the end consumer, especially in the rural sector, small industries, and housing finance companies.
D) Expanding Ways and Means Advances (WMAs)
- On the issue of providing liquidity and fulfilling its role as “the lender of last resort”, the RBI also announced that it will provide more funding to state governments — under the WMA facility.
- The WMA is essentially is a facility by which state governments borrow from the RBI to meet the shortfall between their revenues and their expenditure.
- But the WMA is a short-term measure, only meant for exigencies.
E) Easing NPA norms
- Apart from easing liquidity in the system like in the past, the other focus has been to provide an easier regulatory regime.
- The global lockdown has almost completely halted economic activity.
- Under the circumstances, it is natural that business will struggle to pay back their loans and there will be a steady accretion of non-performing assets (NPAs) across the board.
- Similarly, to ensure that loans given to real estate projects, that are getting delayed due to the crisis, do not turn into NPAs, the RBI provided an extension of another year before they are recognised as NPAs.
F) Easing LCR norms
- Lastly, given the stress on the system and the demand for cash, the RBI has allowed Scheduled Commercial Banks to reduce their Liquidity Coverage Ratio from 100 per cent to 80 per cent with immediate effect.
- The LCR essentially mandates the amount of cash that a bank is required to keep with itself.
- At 100 per cent LCR, a bank would have been required to keep 100 per cent of the net cash it expects to flow out of the bank over the next 30 days.
- With this being reduced to 80 per cent, banks would have more cash to deal with.
Though no direct question on monetary policy was asked in the recent past, understanding the basic concepts stands us in good stead while writing the related answer in the exam. So, the terms mentioned above like-TLTRO, WMAs etc. are important from exam point of view.
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From UPSC perspective, the following things are important :
Prelims level: OBICUS
Mains level: Not Much
The Reserve Bank of India has launched the latest round of quarterly order books, inventories and capacity utilization survey (OBICUS) of the manufacturing sector.
OBICUS is something new than we often get to hear from RBI…. Most recent was Ways and Means Advances. We can expect prelims question like- “Order books, inventories and capacity utilization survey (OBICUS) of the manufacturing sector is held by” – with options like NSSO, Labour Bureau etc.
OBICUS
- OBICUS survey on the manufacturing sector is published quarterly by the RBI since March 2008.
- It provides an insight into the demand conditions faced by the Indian manufacturing sector.
- It covers over 2500 public and private limited companies in the manufacturing sector.
- The company-level data collected during the survey are treated as confidential and never disclosed.
Items included in OBICUS
- The information collected in the survey includes quantitative data on new orders received during the reference quarter, backlog of orders, pending orders, total inventories with a breakup between work-in-progress (WiP) and finished goods (FG) inventories and item-wise production.
Significance of OBICUS
- The survey provides valuable input for monetary policy formulation.
- It represents the movements in actual data on order books, inventory levels of raw materials and finished goods and capacity utilization.
- These are considered as important indicators to measure economic activity, inflationary pressures and the overall business cycle.
- The survey also gives out the ratio of total inventories to sales and ratio of raw material (RM) and finished goods (FG) inventories to sales in percentages.
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From UPSC perspective, the following things are important :
Prelims level: STPI and thier functioning
Mains level: Role of STPI in facilitating start-ups and IT industries
Government of India has given 4 months’ Rental Waiver to the IT Companies Operating from Software Technology Parks of India (STPI) Centers.
STPI which witness multi-million transactions every day are the most promising workplaces for startups in India. They have gained popularity not among Indians, but also on an international platform for its state of the art infrastructure, world-class working conditions and amenities. We can expect a mains question like “Discuss the role of STPIs in making India a hub of ITeS exports”.
Why this waiver?
- The rental waiver will provide relief to the industry in this crisis situation emerged due to COVID19 pandemic.
- Most of these units are either Tech MSMEs or startups.
- This effort is also in the larger interest of around 3,000 IT/ ITeS employees who are directly supported by these units.
What are STPI?
- An STPI is a society established in 1991 by the Ministry of Electronics and Information Technology.
- The objective of an STPI is to encourage, promote and boost the export of software from India.
- STPI maintains internal engineering resources to provide consulting, training and implementation of IT-enabled services.
STPI Scheme
- The STP Scheme is a 100 per cent Export Oriented Scheme for the development and export of computer software, including export of professional services using communication links or physical media.
- This scheme is unique in its nature as it focuses on one product/sector, i.e. computer software.
- The scheme integrates the government concept of 100 per cent Export Oriented Units (EOU) and Export Processing Zones (EPZ) and the concept of Science Parks / Technology Parks, as operating elsewhere in the world.
Who can get a floor on STPI?
- An Indian company
- A subsidiary of a foreign company
- A branch office of a foreign company
Features of the STPI
- The STP Scheme provides various benefits to the registered units, including 100% foreign equity, tax incentives, duty-free import, duty-free indigenous procurement, CST reimbursement, DTA entitlement, and deemed exports.
- STPI centres also provide a variety of services including high-speed data communication, incubation facilities, consultancy, network monitoring, data centres and data hosting.
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From UPSC perspective, the following things are important :
Prelims level: Kisan Rath
Mains level: Supply-chain dynamics of Agricultural produce and its bottlenecks
The Union Ministry of Agriculture & Farmers’ Welfare has launched a mobile application to facilitate farmers & traders in searching for transport vehicles for movement of Agriculture & Horticulture produce.
Initiatives as such are less likely to be asked in the prelims as the name and purpose create no different analogy. But for the sake of information and mains perspective, it is vital to remember ‘Kisan Rath’ while emphasizing on Agricultural marketing reforms.
“Kisan Rath” mobile app
- The app aims to facilitate Farmers and Traders in identifying the right mode of transportation for movement of farm produce ranging from foodgrains, fruits & vegetables, oilseeds, spices, fibre crops etc.
- Primary transportation would include movement from Farm to Mandis, FPO Collection Centre and Warehouses etc.
- Secondary Transportation would include movement from Mandis to Intra-state & Inter-state mandis, Processing units, Railway station, Warehouses and Wholesalers etc.
- It also facilitates traders in transportation of perishable commodities by Reefer (Refrigerated) vehicles.
Utility of the app
- Transportation of Agri produce is a critical and indispensable component of the supply chain.
- Kisan Rath will ensure smooth and seamless supply linkages between farmers and the market.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Qubit, superposition.
Mains level: Paper 3- What do you understand by quantum technology? What are its applications? How it is different from the classical computer technology?
The article suggests that the corona crisis would speed up research in the field of quantum computing. The tremendous speed offered by quantum computers will help us find a cure for diseases like Covid-19 in a much shorter duration. This article explains the limitations of classical computers, working of quantum technology, and how quantum computer overcomes these limitations.
Use of supercomputer to find the cure of Covid-19
- The whole world is pressurized into quickly discovering a vaccine and a cure for covid-19.
- IBM’s Summit, the world’s fastest supercomputer, was used for running numerous simulations and computations.
- These simulations and computations help scientists find promising molecules to fight the pandemic.
- The latest update says the Summit has been able to identify 77 candidate molecules that researchers can use in trials.
- This was achieved in just two days, while, traditionally, it has taken months to make such progress.
Computing capacity as a limit on molecular discoveries
- Today, faster molecular discoveries are limited by computing capacity.
- Molecular discoveries are also limited by the need for scientists to write codes for harnessing the computing power.
- It is no secret that classical computing power is plateauing (e. it is not growing anymore)
- And till we have scalable artificial intelligence (AI) and machine learning (ML), scientists will have to write code for not only different scenarios but also for different computing platforms.
- So, what we need today is more computing power.
The following points explain the limits of classical computers. Pay attention to the Moore’s law, and how it explains the development of semiconductor technologies and in turn computers as a whole.
What is the solution to the limits of classical computers?
- Given that we have already neared the peak of classical computing, the solution probably is quantum computing.
- Not just vaccines, quantum computing can accelerate many innovations, such as hyper-individualized medicines, 3-D printed organs, search engines for the physical world etc.
- All innovations currently constrained by the size of transistors used in classical computing chips can be unleashed through quantum computing.
- Moore’s law: In 1965, Gordon Moore had said the number of transistors that can be packed into a given unit of space will double about every two years.
- Subsequently, in an interview in 2005, he himself admitted that this law can’t continue forever.
- He had said: “It is the nature of exponential functions, they eventually hit a wall.”
- Over the last 60 years, we reaped the benefits of Moore’s law in many ways.
- For instance, compared to initial days of the Intel 4004, the modern 14nm processors deliver way bigger impact—3,500 times better performance and 90,000 times improved efficiency, at 1/60,000th the cost!
- Yet, we are also seeing his 2005 statement coming true. All the experts agree that the ‘wall’ is very near.
- So, what next? The answer again is probably the same—quantum computing.
Quantum technology is one of the emerging and revolutionary technologies, you should be aware of the terms and general principle which lies at the heart of such technology. So, terms like superposition, qubit, binary etc are important if you want to answer a questions related to this technology.
Quantum computing and its applications
- It is no more a concept, there are working models available on the cloud.
- How it works: Quantum computing uses the ability of sub-atomic particles to exist in multiple states simultaneously, until it is observed.
- The concept of qubits: Unlike classical computers that can store information in just two values, that is 1 or 0, quantum computing uses qubits that can exist in any superposition of these values,
- This superposition enables quantum computers to solve in seconds problems which a classical computer would take thousands of years to crack.
- Applications: The application of this technology is enormous, and just to cite a few, it can help with the discovery of new molecules, optimize financial portfolios for different risk scenarios.
- It can also crack RSA encryption keys, detect stealth aircraft, search massive databases in a split second and truly enable AI.
Investment in the development of technology
- In the Union budget this year, the Indian government announced investments of ₹8,000 crores for developing quantum technologies and applications.
- Globally, too, countries and organizations are rushing to develop this technology and have already invested enormous capital towards its research.
Conclusion
Historically, unprecedented crises have always created more innovations than routine challenges or systematic investments. Coincidentally, current times pose similar opportunities in disguise for the development of quantum technologies.
Back2Basics: Difference between bit and qubit
- A binary digit, characterized as 0 and 1, is used to represent information in classical computers.
- A binary digit can represent up to one bit of information, where a bit is the basic unit of information.
- In classical computer technologies, a processed bit is implemented by one of two levels of low DC voltage.
- And whilst switching from one of these two levels to the other, a so-called forbidden zone must be passed as fast as possible, as electrical voltage cannot change from one level to another instantaneously.
- There are two possible outcomes for the measurement of a qubit—usually taken to have the value “0” and “1”, like a bit or binary digit.
- However, whereas the state of a bit can only be either 0 or 1, the general state of a qubit according to quantum mechanics can be a coherent superposition of both.
- Moreover, whereas a measurement of a classical bit would not disturb its state, a measurement of a qubit would destroy its coherence and irrevocably disturb the superposition state.
- It is possible to fully encode one bit in one qubit.
- However, a qubit can hold more information, e.g. up to two bits using superdense coding.
- For a system of n components, a complete description of its state in classical physics requires only n bits, whereas in quantum physics it requires 2n−1 complex numbers.
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From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- What are the factors that helped Kerala deal with Covid-19 successfully compared to the rest of the country?
With figures emerging of Kerala’s success in dealing with the Covid-19, the rest of the nation has lessons to learn from it. This article describes the approach adopted by Kerala, and how various factors like robust health infrastructure, past experience etc. are helping it.
Kerala stands out in India: some figures and facts
- The COVID curve in Kerala is flattening.
- Every day, for a week now, the number of recoveries has exceeded the number of new infections.
- The recovery rate in Kerala is nearly 50 per cent while the all-India average is around 11.
- While the mortality rate among the infected is 5 per cent in Kerala, the all-India average is 3.4 per cent.
- The transmission rate of a primary carrier is 6 while in Kerala it is only 0.4.
With Covid-19, we are in unknown territory in many ways. If Kerala emerges as the success model, the question can be framed from that perspective. So, note down the factors described below that are helping the state in tackling Covid-19 successfully.
Preparing for the next challenge
- Kerala is preparing for the next challenge, the outcome of which will determine the result of the war against COVID.
- Lifting of the lockdown is going to result in an influx of returning migrants from foreign countries and other states.
- Hundreds of thousands would have to be quarantined, tested and, if positive, treated, ensuring there is no secondary spread.
- State authorities have already identified accommodation and other facilities for more than two lakh persons.
- Use of big data analytics: The state is also exploring the possibility of big data analytics to plan a strategy and, if necessary, for reverse quarantining.
- Authorities have access to WHO data covering nearly two-thirds of the state`s population.
- Integrating this data with the information currently being generated, we will be able to map vulnerable sections of the population, simulate scenarios and plan ahead.
- Exit strategy: An exit strategy from the lockdown is being prepared to protect livelihoods and stimulate the economy.
Strength of the public health system of Kerala
- The single most important factor that enabled Kerala to be prepared for the COVID is the strength of the public health system.
- Kerala’s health system is a proud legacy of our past.
- It has had a big push in infrastructure and equipment investment of around Rs 4,000 crore from the Kerala Infrastructure Investment Fund Board.
- Five thousand seven hundred and seventy-five new posts have also been created.
- The Aardram Health Mission was launched with a focus to transform the PHCs into family health centres.
- Distinctive feature: There is also the distinctive flavour of Kerala — mass participation in preventive and palliative healthcare.
- Training to health workers: The morale of health personnel has been exceptionally high.
- Special training, protective gear, scientific duty rotation and, most importantly, societal empathy and solidarity, have all contributed.
Learning from the past experience
- Nipah outbreak experience: The recent experiences of successful containment of the Nipah outbreak and management of the two post-flood health situations have provided a kind of herd immunity to the health workers to crisis situations.
- Covid-19 preparedness: Once news of the Wuhan pandemic came, the Kerala health system scrambled to readiness — the control room was set up, mock drills were organised and the first influx was contained.
- Once migrants from the Gulf and Europe began to return, things began to get out of hand.
- But now this battle has been successfully concluded.
Testing and tracing in Kerala
- A route map of each COVID positive case is prepared and given publicity, alerting everybody who might have been in contact.
- The protocol of cycles of intense test, trace, isolate and treatment has been the norm.
- Kerala has the highest test rate in the country.
- Break the Chain Campaign to promote social distancing has been successful.
- Lockdown by itself is not going to contain the COVID spread. It would continue to multiply within households and dormitories.
- Testing has been woefully insufficient in the national response so far.
Welfare payment in Kerala more than the rest of the country
- In Kerala, 55 lakh elderly and disadvantaged have received Rs 8,500 as welfare payments.
- An equal number of workers have been paid Rs 1,000-3,000 each from the welfare funds.
- Every family has been provided with a food kit.
- Interest-free consumption loan of Rs 2,000 crore has been distributed.
- Besides, nearly 4 lakh meals are distributed every day to the needy from community kitchens set up by local governments.
- Local governments are also duty-bound to monitor the camps of migrant workers, set up new ones and ensure medicine and food to them.
Decentralisation paying off in Kerala
- All the above was not made possible by the state government alone.
- It is the synergy generated by integrating state government plans and programmes with the local governments, the co-operatives, women neighbourhood groups (Kudumbashree) and civil society organisations that make Kerala distinct.
- The floods and the pandemic have given testimony for the potential of democratic decentralisation.
- It is a case of multi-level planning with technical committees and groups working at the state level coordinated by the chief minister.
Conclusion
Though it is too early to declare Kerala as a success story, still there are many lessons to be learned by the rest of the country in its fight against Covid-19.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IBC, difference between operational and financial creditor, threshold limit to file insolvency case etc.
Mains level: Paper 3- Purpose and issues with IBC, its various provisions and changes that needs to be made in the wake of Covid-19.
This article argues the suspension of IBC for six months. The issues arising out of suspension like damage to the creditors are also dealt with here. Reading of this article will help us understand the finer details of IBC that are relevant from the UPSC point of view. We have also covered one article from livemint dealing with the same issue, but that article covered the issue in a broader sense.
Who are operational and financial creditors?
- After the lockdown is over, several companies are likely to default on their dues to both operational and financial creditors.
- Who is a financial creditor? The financial creditors include banks and others who have given financial assistance to a company in the form of loans and debentures.
- According to a 2018 amendment to the Insolvency and Bankruptcy Code (IBC) 2017, flat purchasers are also deemed as financial creditors.
- An operational creditor is just about anyone who has to receive money from a company.
- The IBC provides a fast-track mechanism to deal with companies which are unable to repay their creditors and have become financially unviable.
- Section 22 of the Code mandates the appointment of a Resolution Professional (RP) who is expected to miraculously turn around the company in 330 days.
- If this attempt fails, the company goes into liquidation.
The two types of creditors were in the news, so pay attention to these terms.
Increase in threshold limit to file an insolvency petition
- The IBC’s provisions have been extensively used by various creditors whose dues were not paid.
- What was the threshold limit? Initially, the threshold limit was just Rs 1 lakh and the IBC became an effective recovery mechanism for all operational creditors.
- What is the limit now? Just before the lockdown, the finance minister raised the threshold for invoking the insolvency provisions to Rs 1 crore.
- This limit was raised to prevent proceedings being initiated against small and medium enterprises.
Possibility of the domino effect after the lockdown is over
- After the lockdown, several enterprises, large, medium and small, might not be able to pay their dues, at least in the short-term.
- The easiest way for a creditor to recover money is to initiate insolvency proceedings against the debtor company and threaten it with liquidation.
- The shutdown of business after the lockdown could have a domino effect.
- How would the domino effect come into play? If an auto-manufacturer has shut down its operations, the ancillary units will not get their dues.
- This would then lead to non-payment to downstream vendors and service providers as well.
- It might take at least three to four months for the situation to stabilise.
Steps that should be taken to avoid the domino effect
- Moratorium on the IBC: The most important, and immediate, step that needs to be taken is to have a six-month moratorium on the IBC.
- It may be necessary to promulgate an ordinance suspending the prospective operation of Sections 7 and 9 of the IBC so that no fresh petition is filed against a company.
- Impact on creditors: While this could hurt some of the creditors, the damage that could be done to the corporate sector by invoking the IBC is likely to be far greater.
- A distressed creditor is not without a remedy as he can always approach the civil courts for relief, which will not be so severe on a defaulting company.
- If an insolvency petition is filed and the RP appointed, it is difficult to stop the insolvency process.
- The IBC requires a financially-stressed company to be taken over by a financially-sound
- For example, Essar Steel was taken over by ArcelorMittal and Bhushan Steel was taken over by Tata Steel.
- In the current scenario, it will be difficult, if not impossible, for an RP to find a suitable buyer and the only option would be to liquidate the company.
- Using the insolvency process to recover dues is contrary to the IBC’s objectives.
The objective of the IBC is not just insolvency but the reorganisation of companies, maximisation of value of assets and the need to balance the interests of all stakeholders. Pay attention to this point.
How the suspension of the IBC will be beneficial?
- Suspending the IBC for a short period would enable several companies to return to normalcy.
- It will help them function without the constant threat of an insolvency application and its Board of Directors and management being taken over by the RP.
- Moreover, the National Company Law Tribunal benches will simply be unable to take any additional workload.
Conclusion
Suspending the IBC for six months would be a much-needed step to prevent further damage to the economy. It would be in the larger public interest. Indeed, at this critical stage, permitting the legal remedy of insolvency could be the last nail in the coffin of many companies.
Back2Basics: What is the Insolvency and Bankruptcy Code?
- IBC provides for a time-bound process to resolve insolvency.
- When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency.
- Under IBC debtor and creditor both can start ‘recovery’ proceedings against each other.
- Insolvency and Bankruptcy Code 2016 was implemented through an act of Parliament.
- It got Presidential assent in May 2016.
- The law was necessitated due to huge pile-up of non-performing loans of banks and delay in debt resolution.
- Insolvency resolution in India took 4.3 years on an average against other countries such as United Kingdom (1 year) and United States of America (1.5 years), which is sought to be reduced besides facilitating the resolution of big-ticket loan accounts.
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From UPSC perspective, the following things are important :
Prelims level: PICS
Mains level: Mental health concerns raised by the COVID-19 pandemic
- Various news reports in recent weeks have pointed out that for some COVID-19 patients who needed intensive care, the journey to recovery is a long one.
- After leaving the ICU, they may suffer from what is known as post-intensive care syndrome (PICS), which can happen to any person who has been in the ICU.
Infectious disease outbreaks, like the current Coronavirus (COVID-19), can be scary and can affect our mental health. This pandemic is going to leave a bigger trauma for those who had lost their dear ones as well those who recovered.
What is PICS?
- PICS comprise impairment in cognition, psychological health and physical function of a person who has been in the ICU.
- Further, such patients may experience neuromuscular weakness, which can manifest itself in the form of poor mobility and recurrent falls.
- The psychological disability may arise in a person in the form of depression, anxiety and post-traumatic stress disorder (PTSD).
Its symptoms
- The most common PICS symptoms are generalized weakness, fatigue, decreased mobility, anxious or depressed mood, sexual dysfunction, sleep disturbances and cognitive issues.
- These symptoms may last for a few months or many years after recovery, the authors of the aforementioned article note.
- Patients who develop this may take at least a year to fully recover, until which time they may have difficulty in carrying out everyday tasks such as grooming, dressing, feeding, bathing and walking.
What causes PICS?
- A combination of factors can affect aspects of an ICU survivor’s life.
- PICS may be induced if a person was on prolonged mechanical ventilation, experienced sepsis, multiple organ failure and a prolonged duration of “bed-restore deep sedation”.
Treatment
- It is recommended that to avoid PICS, patients’ use of deep sedation is limited and early mobility is encouraged, along with giving them “aggressive” physical and occupational therapy.
- Further, patients should be given the lowest dose of pain medications when possible and should be put on lung or cardiovascular rehabilitation treatments along with treatments for depression, anxiety and PTSD.
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From UPSC perspective, the following things are important :
Prelims level: Anastomosis Surgery
Mains level: Not Much
The chopped off-hand of a Punjab Police officer has been successfully re-implanted after hours of surgery.
Anastomosis is a general term in surgical sciences used to join amputated limbs or organs. The term has made headline due to its recent application. A piece of general information regarding novelties of medical sciences should be known to the aspirants.
Anastomosis Surgery
- A surgical Anastomosis is a surgical technique used to make a new connection between two body structures that carry fluid, such as blood vessels or bowel.
- It involves conjoining various parts of the arm and the hand — bones, muscles, tendons, arteries, veins as well as nerves.
- Both radial and ulnar arteries, accompanying nerves and the dorsal vein were anastomosed successfully, allowing for the hand to receive adequate circulation.
- The bones are attached using K wires (used for orthopaedic surgery) which can be removed once the bones conjoin organically.
In which cases is re-implantation possible?
- When a surgeon makes that decision, the factors that he or she considers include how much time has elapsed since the injury.
- The condition of the severed organ and the nature of the injury are also taken into account.
Can a reattached hand get its function restored?
- That is the goal of doing such surgery. The extent of restored function, however, can vary from case to case.
- While a successful surgery can result in the good return of motor function, studies have shown that sensory recovery can often be poor.
- Whether the blood circulation is optimum after surgery can only be observed within the next few days.
- The patient also needs to attend regular physiotherapy sessions for total restoration of motor movement and sensation in his hand.
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From UPSC perspective, the following things are important :
Prelims level: Trimeresurus Salazar
Mains level: Not Much
The new species, Trimeresurus Salazar is a snake been discovered in Arunachal Pradesh.
Another specie spotted with one more peculiarity, the name Salazar 🙂 Such species are most likely to be asked in prelims to match the columns with their habitat state.
Trimeresurus Salazar
- Salazar’s pit viper belongs to the genus Trimeresurus Lacépède comprising “charismatic venomous serpents with morphologically as well as ecologically diverse species”.
- Pit vipers are venomous snakes distinguished by their heat-sensing pit organs between the eye and the nostril.
- The name was inspired by Salazar Slytherin, the co-founder of J.K. Rowlings’ fictional Hogwarts School of Witchcraft and Wizardry.
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From UPSC perspective, the following things are important :
Prelims level: Nanomaterials, Semiconductors
Mains level: Applications of nanomaterials
Researchers are exploring ways to develop plasmonic semiconductor nanomaterials for removal of toxic organic compounds from water by harvesting solar light.
Nanotechnology is a pathbreaking technology which can create many new materials and devices with a wide range of applications, such as in nanomedicine, nanoelectronics etc. PSN is one such application. Topics like PSN are most likely to be asked in the competitive examinations.
Plasmonic Semiconductor Nanomaterials
- PSN are metal-like materials with free electrons on the surface that oscillate collectively when hit by light.
- It uses solar light to increase the photocatalytic efficiency to degrade pollutants as well as generate renewable Hydrogen.
- These materials can easily adsorb toxic ions like arsenic and fluoride, which are often found in water in North East India and convert it to its not toxic forms when they are exposed to sunlight.
- PSN can be used for hydrogen energy generation, a process which has shown high photon to hydrogen conversion efficiency under visible and near infra-red light.
What are Semiconductors?
- Semiconductors are materials which have a conductivity between conductors (generally metals) and nonconductors or insulators (such as most ceramics).
- Its resistance falls as its temperature rises; metals are the opposite.
- They can be pure elements, such as silicon or germanium, or compounds such as gallium arsenide or cadmium selenide.
Back2Basics: Nanomaterials
- Nanomaterials are materials of which a single unit small-sized (in at least one dimension) between 1 and 100 nm (the usual definition of nanoscale).
- Materials with structure at the nanoscale often have unique optical, electronic, or mechanical properties.
- They are created from the gas phase by producing a vapour of the product material using chemical or physical means.
- Examples of nanomaterials include carbon nanotube, nanoparticles, metal rubber, quantum dots, nanopores and many more.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Committee of creditor, difference between financial and operational creditors etc.
Mains level: Paper 3- Issues in the IBC and suggestion to improve it.
The article is about the aftermath of Covid-19 for the Indian business. Though the government has announced the slew of relief packages, one expects a significant spike in the number of bankruptcies. Will India’s Insolvency and Bankruptcy Code be able to deal with this new normal? Some pressing issues that could arise and solutions are discussed here.
Rise in the pending cases with NCLT
- Since the commencement of the IBC and setting up of the National Company Law Tribunal (NCLT), 12,000 cases have been filed.
- Around 4,500 cases have been settled before resolution, with a settlement amount of almost ₹2 trillion.
- 1,500 cases have been admitted and 6,000 cases are waiting in the queue.
- The covid-19 epidemic will only increase this traffic jam.
- Increasing the capacity of NCLT: The pile-up of cases needs to be addressed by increasing capacity of the NCLT, and by ensuring that as many cases as possible are settled without going to the IBC.
Every issue mentioned here is important from Mains point of view. IBC has been a significant step by the government to streamline the process of insolvency and bankruptcy.
Need for a relook at section 29A(c) of IBC
- What is section 29A(c) of IBC? This provision makes ineligible the defaulting person (promoter) from bidding for the asset (buying back) if it has been NPA for a year or more.
- What was the purpose of section 29A(c): The intent of section 29A is to prevent persons who, by their misconduct or fraudulent motives contributed to the default of the corporate debtor, from “buying back” the corporate debtor from the creditors, potentially at steep discounts.
- What’s the issue? While this is clearly a justifiable objective, the short window of one year has prevented even genuine promoters who faced major setbacks on account of unforeseen circumstances from being given a second chance.
- Even though such promoters are often in good the best position to revive their businesses.
- In view of the current force majeure, we recommend that the grace period of one year under section 29A(c) be extended to two years.
- And further extensions should be made possible on the approval of a supermajority (i.e. 75%) of the Committee of Creditors.
- Further, the newly introduced Section 12A allows the bank, which was the insolvency applicant, to exit the insolvency process.
- Which brings the promoter back in control—provided 90% of the Committee of Creditors agrees and the public bidding process has not commenced.
- The requirement for exit should be reduced to 75% of the committee.
Extension of timelines
- Recently, the Supreme Court did well by passing a suo-moto order on the extension of limitation generally.
- Based on these SC orders, the National Company Law Appellate Tribunal has ordered that such extension also apply to the outer limit of 330 days for the resolution of corporate insolvency cases.
- This could be further extended once the gravity of the situation becomes clear over the next few months.
- The moratorium period on debt financing recently announced by RBI should also be extended to cover money market instruments.
Need for providing more financing options to corporate debtors
- While the IBC does provide for interim finance with a preferential position for a corporate debtor, there are known limitations and residual risks on the provision of such finance.
- The government would do well to look at expanding the market by making changes.
- The changes could include permitting interim funding by asset reconstruction companies even without being creditors.
- And making provisions for a minimum return even in case of liquidation, and extending the enhanced priority standing given to interim financiers in the IBC phase to the pre-IBC phase.
- Post the lockdown, incremental working capital support upto, say, 25% of existing working capital exposure could be allowed in deserving cases even if the account is in default or NPA.
- This can be deemed to be priority lending to also protect bankers’ interests.
- The provision could also be made for the extension of concessional finance within limits based on demonstrated export potential.
- For example- order, short lead-time business, margin adjustments) in order to contribute to the recovery of exporting industries.
Equitable treatment of operational creditor
- In the Swiss Ribbons judgment, the Supreme Court urged equitable, though not equal, treatment of operational creditors.
- The need to protect the interests of operational creditors in bankruptcy proceedings is all the more critical in difficult market conditions where credit would be hard to obtain.
- Some broad guidelines appear to be desirable.
- For instance, one could stipulate that in the absence of quality issues, two operational creditors belonging to the same sub-class in terms of the type of product or service sold, should be treated equally.
- This should be irrespective of group relationships or continuity in the business of the resolved entity.
Facilitating resolution outside the corporate insolvency resolution process
- On the issue of closing a case before the onset of insolvency proceedings, there was a case for doing this even before the corona outbreak, and even without the paucity of processing capacity.
- The labelling of a company as insolvent or bankrupt has a chilling effect on its already dim prospects.
- Vendors, customers and employees start having second thoughts about associating with this company.
- Certain rules get triggered—for instance, the rule barring an infrastructure company from accepting new orders.
- The current outbreak amplifies the case for facilitating resolution outside the corporate insolvency resolution process.
- At the same time, there is a need to streamline the process to ensure enhanced proceeds.
Conclusion
All institutions of the economy will need to fire together in order to maximize the prospects of recovery. A suitably modified bankruptcy framework has a crucial role to play.
Back2Basics: Difference between financial and operational creditors
- Financial and operational creditors are different in the sense that their liabilities arise from different origins.
- Where a financial creditor is liable because of a contract such as a loan or debt and operational creditor is liable because of operational transactions.
- The difference between a financial creditor and an operational creditor is that a financial creditor is an individual whose relationship with the entity is solely based on financial contracts, such as a loan or debt security.
- Whereas, an operational creditor is an individual whose liabilities from the entity comes in the form of future payments in exchange for goods or services already delivered.
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From UPSC perspective, the following things are important :
Prelims level: WHO.
Mains level: Paper 2- How failure of WHO to alert the world in time of Covid-19 pandemic matters for India?
The article elaborates on the role played by China in manipulating WHO to its advantage and to the detriment of the rest of the world. India must take cognisance of the growing Chinese influence at various global platforms and act accordingly.
China’s role in electing Director-General of WHO
- Tedros was Ethiopia’s Minister of Health (2005—2012) and Minister of Foreign Affairs (2012 to 2016).
- In 2017, China catapulted him to lead the WHO as its Director General (DG).
- India, the world’s largest democracy, played second fiddle.
- We will never know who gamed India inside and abroad, but tough questions must be asked.
Pandemic as a wake-up call for India
- Public health is a rights-driven developmental track for any country, especially for India.
- The ministries of foreign, trade, information and broadcasting, home, finance, women and child development, law, infrastructure and industry, among others, should be part of the country’s health equation and decision-making on a daily basis.
- Should the WHO be sitting in on high-level health ministry discussions given what we now know about its allegiance to all things Chinese?
- China, an economic and military behemoth, now seeks the same power in public health.
- India, with its double burden of disease and an uncritical alignment with the WHO, is fertile ground for data and dollars.
Dependence on China for API
- For now, India, like most countries, is at China’s mercy because of years of short-sightedness and corruption in the health sector.
- While it is hailed as the pharmacy of the world and has sent drugs as humanitarian assistance, India relies heavily on raw materials from China.
- Quick thinking and swift action can reverse this.
The above points highlight the implications of Chinese dominance for India. Questions related to China is a recurrent theme in the UPSC papers. Next thing to note here is India’s dependence on China for APIs.
The US’s stand on WHO funding
- Some are blaming US President Donald Trump for contemplating cutting off funding for the WHO and not Tedros, for taking orders from China about the pandemic.
- The war is not between an American President and Tedros.
- It is between Tedros, a global public health head, and his subservience to China.
- That ship of trust, the cornerstone of public health work that the WHO should have been leading, has long set sail.
- Protecting Tedros is important as the WHO needs money to help poor countries with weak health systems.
Last year, UPSC asked about UNESCO when the US and Israel withdrew from it. This year, WHO has been in focus for allegedly towing China’s line.
Issue of funding and spending by the WHO
- War chests are being mobilised to help the WHO help China disburse aid and assistance to dying people and gasping economies.
- The recent announcement by the World Bank to fast track $1.9 billion for health systems to respond to Covid-19 also includes Ethiopia.
- For the first time in its history, the WHO has opened its doors to private funding via a Solidarity fund and China is expected to keep an eye on this.
- To keep track of how the money is spent is a problem.
Conclusion
India must decide if it wants to blindly follow the blind or lead by bringing the WHO back to its original promise. At stake is the country’s economic security of which public health is a key component. India can either be a part of history or pick up the pen even in these times of distress and rewrite it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- The dominance of private health sector in India makes partnership with it a must to deal effectively with any pandemic.
The article delineates five areas in which partnership with the private sector is essential to deal effectively with the epidemic and ensure a whole-of-society response. Ensuring the participation of the private sector has been the recurring theme of many op-eds we have come across after the outbreak.
Significance of private healthcare in India
- According to the WHO, a critical lesson from the 2014-16 West African Ebola epidemic was that both the public and private sector need to work in tandem in responding to large-scale epidemics.
- In the COVID-19 response in India, the private sector has to play an even more important role, as it is the dominant provider of health services in the country.
- The private sector includes the for-profit and not-for-profit segments.
- The dominance of the private sector in India: The NSSO 71st round data on social consumption of health show that private hospitals, clinics and nursing homes provide over 70 per cent of healthcare.
- Data on the nearly 1 crore treatments received under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) corroborate this finding.
- AB PM-JAY data shows that over half of all treatments are being availed of from private providers, accounting for over 60 per cent of total disbursements.
UPSC asked about community-level healthcare intervention in 2018. So, pay attention to the significant role played by the private health sector in India.
Following five are the areas in which cooperation with the private sector will be essential-
1 Testing
- Creating a large and accessible testing infrastructure is the first weapon in the armoury.
- Countries like South Korea, Singapore, Germany and Japan have been successful at controlling the spread of COVDID-19 and reducing mortality through early detection and quick containment.
- This has been possible only through widespread testing.
- India has opened testing up to private labs.
- Testing has been included under the AB PM-JAY as well.
- We need to substantially expand testing capacity.
- This cannot happen without the active participation of the private sector.
2 Converting private hospitals into Covid-19-only hospitals
- As the government deepens its containment efforts, the country will need to rapidly surge the numbers of quarantine units, isolation wards and ICU beds in COVID-19-only
- It will also need to ensure increased and continued supply of essential medical products — from testing kits, masks and other PPEs to oxygen and ventilators.
- According to a recent ICMR study, around five per cent of those infected will need intensive care and half of those in intensive care units will need mechanical ventilation.
- These projections translate into large numbers that considerably exceed the capacity of the government health system.
- Private hospitals with adequate infrastructure will need to convert in COVID-19-only hospitals.
- There should be a clear policy framework of designated hospitals, reporting and referral systems and an appropriate payment system.
- With many government facilities being converted into COVID-19-only hospitals, a large number of non-COVID-19 patients will need facilities and providers to take care of their other urgent, critical or continuing healthcare needs.
- The AB PM-JAY has started a process to bring on board more hospitals to respond to such needs.
3 Protecting healthcare workers
- As more private providers join this fight, a major concern that will arise is keeping healthcare workers from becoming infected.
- In addition to being at a high risk of contracting the virus, healthcare workers are also potential carriers.
- Ensuring their protection is of paramount importance.
- Increasing the production: Companies manufacturing essential medical products such as ventilators, masks will need to crank up their production.
- Direct support from banks may be needed to keep production and supply chains going.
4 The private sector has to support the ecosystem driving health system
- The private sector will need to vigorously support the large ecosystem that drives the health system as the lockdown and ongoing epidemic restrict movement and normal economic activities.
- Activities such as the production of essential drugs and medical products, logistics to maintain smooth supply need to not only continue but also accelerate.
- Support for community activities such as night shelters and community kitchens will need to be strengthened.
5 Collaborate to share knowledge on the epidemic
- An adequate stage-wise response to the pandemic and its economic, social and political aftermath will require the rapid filling of the many knowledge gaps.
- Government, private and not-for-profit research institutions need to collaborate to understand the nature of transmission of the virus.
- They must understand the factors that slow its spread, the most at-risk communities, or the optimal quarantine period.
In 2015, UPSC asked whether the private health sector could help bridge the gap in providing universal health coverage. A question can be asked based on the same theme but in reference to dealing with the pandemic.
Conclusion
The fight against COVID-19 is not a race to a hilltop. It involves the continuous management of an evolving public health crisis that threatens to spawn economic and social crises. These multiple dimensions will require a whole-of-society approach that goes beyond the government alone.
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