Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2-Challenges to the globalisation due to covid pandemic, apportunities for India
Multilateralism has been on the decline for some time now. The corona pandemic has acted like a catalyst to heightene this crisis. China’s role in weaponising the interdependence of multilateralism would have far-reaching consequences to the world as we know it. Yet, the crisis presents India with some unique opportunities. What are these opportunities? How can we save multilateralism? or do we even need to? These questions and such other issues are discussed in the article.
The basic Idea
- Multilateralism has its benefits like to reduce the further spread of the virus, to develop effective medical treatments, and to curtail the worst effects of the inevitable recession- cooperation among nations will be necessary.
- But the very foundation of multilateralism is shaking today. Hence, the need of the hour is a meaningful fix.
- The US faces multiple internal challenges like the divisive Presidential election in November and China is facing a global crisis of credibility.
- Thus, India is uniquely positioned to help resuscitate multilateralism.
- New Delhi can assume leadership in strengthening constructive transnational cooperation.
- India may also help China: Through mediation to temper what is increasingly seen as Beijing’s unilateralist revisionism; revive the promise of the gradual socialisation of China into the international system; and its acceptance of the norms and rules that regulate the principal multilateral institutions.
So, when did the crisis of multilateralism start?
- The malaise that afflicts multilateralism is not new.
- 1) The paralysis of all three functions of the World Trade Organization (WTO) — negotiation, dispute settlement, and transparency — was one sign of that deep-rooted malaise.
- 2) The severely dented credibility of the World Health Organization (WHO) is just another more recent indicator.
- The pandemic has heightened the crisis of multilateralism, not created it.
- Pandemic has highlighted the misuse of international institutions (like WHO) and multilateralism is incapable of dealing with it.
Weaponisation of the global supply chain by China
- Post-war multilateral system was based on the idea of peace and prosperity.
- It was expected that economic inter-mingling among various countries would lead to peace.
- Most of the countries of were democratic and countries with a different system of governance were not part of this system.
- Our multinational institutions were not designed to handle the situation in which one country starts misusing its dominant position in interdependence (ex. global supply chains).
- The misuse of existing loopholes within the existing rules by China to gain an unfair advantage in trade relations was already attracting critique in the last years.
- China has been accused of forced technology requirements, intellectual property rights violations, and subsidies.
- But the pandemic has provided us with some even more alarming illustrations of how damaging the weaponisation of global supply chains can be.
Examples of China weaponising interdependence
- When India complained that test kits imported from China were faulty, China slammed it for “irresponsible” behaviour.
- When Australia indicated that it would conduct an independent investigation of China’s early handling of the epidemic, China threatened it with economic consequences.
- Several actors, including the EU and India, were alarmed at the prospects of predatory takeovers of their companies by China.
Against this background, repeated calls by heads of governments and international organisations urging countries to remain committed to multilateralism ring hollow.
So, what are remedies to save multilateralism?
- 1. Policies with renewed commitment
- There is the need for reassurance and policies that reflect a renewed commitment to the raison d’étre of multilateralism.
- A “retreating” United States must demonstrate that it remains committed to strengthening global supply chains.
- Global supply chains must be based on the promise of ensuring global stability and the attendant promise of peace and prosperity.
- 2. Strategic separation of value chains
- There is an urgent need for some strategic decoupling, handled smartly in cooperation with other like-minded countries.
- It will undoubtedly cause considerable disruption to existing global value chains.
- We will be less prosperous. But we will also be more secure.
- 3. Closer integration with some distancing from others
- A multilateralism that recognises the need for decoupling will necessitate closer cooperation with some and distancing from others.
- Membership of such renewed multilateral institutions would not be universal.
- Rather, one would limit deep integration to countries with which one shares values — such as pluralism, democracy, liberalism, animal welfare rights, and more.
Opportunities for India
- India is a country whose pluralism, democracy and liberalism have often been underestimated by the West.
- As some constituencies in the West seek a gradual decoupling from China, they would be well served to look toward India.
- To make use of the opportunities, for itself and for the provision of certain global public goods, India’s cooperation with like-minded actors will be key.
- India could work closely with the Alliance for Multilateralism, an initiative launched by Germany and France, to shape both the alliance itself and the reform agenda at large.
- Working together with a group of countries from the developed and developing countries could further amplify India’s voice.
- China may recover faster than most economically, and its military might remains intact, its image as a reliable partner has suffered a huge dent.
- India could lead a coalition to bridge the deficit of trust between China and the rest of the world.
Consider the following question “Covid pandemic has been acting as a catalyst in precipitating the fall of global order and multilateralism. At the same time, we are well aware of the utility of the multilateralism. Examine the opportunities that falling global order provides for India in restoring it in the new form.”
Conclusion
The disruption in the global order provides India with a unique opportunity. One the one hand it has to steer the gradual decoupling with China and on the other hand, it has the opportunity to lead the coalition to bridge trust deficit with China. India should not squander these opportunities.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Perpetual bonds.
Mains level: Paper 3- What are the option available with the government to raise the money to fight the covid pandemic?
The government is exploring ways to raise money to deal with the destruction caused by COVID pandemic. One of the suggestion is the monetisation of fiscal deficit. But this article looks into an alternative approach of issuing bonds based on the idea of Consol bond issued by the British government during WW 2. So, how much amount needs to be raised? and why a perpetual bond like Consol bond is a suitable option for India? Read to know!
A gathering financial storm
- India projected a deficit of ₹7.96-lakh crore in the Budget before the pandemic.
- Adding to the above concern: 1) Off-balance sheet borrowings of 1% of GDP. 2) The overly excessive target of ₹2.1 lakh crore through disinvestments.
- Thus, financial deficit number is set to grow by a wide margin owing to corona crisis.
- There will be revenue shrinkage from the coming depression that will most certainly be accompanied by a lack of appetite for disinvestment.
Need for stimulus package and measures taken by the RBI
- In addition to the expenditure that was planned, the government has to spend anywhere between ₹5-lakh crore and ₹6-lakh crore as a stimulus package.
- The stimulus provided by the government so far and recent announcements by the Reserve Bank of India (RBI) achieved little.
- All the RBI’s schemes are contingent on the availability of risk capital, the market for which has completely collapsed.
- The government and the RBI have tried several times to increase lending to below investment grade micro, small and medium enterprises, but have come up short each time.
- Furthermore, while the 60% increase in ways and means limits for States is a welcome move, many States have already asked for doubling the limits due to the shortages in indirect taxation collections from Goods and Services Tax, fuel and liquor.
- The government and the central bank need to understand that half measures will do more harm than good.
What is the Consol Bond?
- Consol bond is a form of British government bond that has no maturity and that pays a fixed coupon.
- Consols are basically rare examples of actual perpetual bonds.
- The bonds were issued in 1917 as the government sought to raise more money to finance the ongoing cost of the First World War.
So, why bond like Consol Bonds is a good option for India?
- There is no denying the fact that the traditional option of monetising the deficit by having the central bank buy government bonds is one worth pursuing.
- Citizens’ active participation is ensured in Consol Bond type alternative.
- Furthermore, with the fall of real estate and given the lack of safe havens outside of gold, the bond would offer a dual benefit as a risk-free investment for retail investors.
- When instrumented, it would be issued by the central government on a perpetual basis with a right to call it back when it seems fit.
- An attractive coupon rate for the bond or tax rebates could also be an incentive for investors.
- The government can consider a phased redemption of these bonds after the economy is put back on a path of high growth.
The solution of bond offered here could be a valuable addition in points to the answer to the question which asks about the ways to raise money. Consider the question, “Economic devastation caused by the COVID pandemic has forced the government to explore the various ways to raise the money. Discuss the options available with the government and issues associated with the options.”
Conclusion
Politicians and epidemiologists across the world have used the word “war” to describe the situation the world is currently in. So, to raise the money to fight this war against Covid-19, we can take the cue from past and issue bond based on the Consol bond.
Back2Basics: What is fiscal deficit?
- A fiscal deficit is a shortfall in a government’s income compared with its spending.
- The government that has a fiscal deficit is spending beyond its means.
- A fiscal deficit is calculated as a percentage of gross domestic product (GDP).
- There can be different types of deficit in a budget depending upon the types of receipts and expenditure we take into consideration. Accordingly, there are three concepts of the deficit, namely-
- Revenue deficit = Total revenue expenditure – Total revenue receipts.
- Fiscal deficit = Total expenditure – Total receipts excluding borrowings.
- Primary deficit = Fiscal deficit-Interest payments.
- Primary deficit shows how much government borrowing is going to meet expenses other than interest payments.
- Thus, zero primary deficits mean that the government has to resort to borrowing only to make interest payments.
- To know the amount of borrowing on account of current expenditure over revenue, we need to calculate the primary deficit.
- Thus, the primary deficit is equal to fiscal deficit less interest payments.
Perpetual Bonds
- A perpetual bond, also known as a “consol bond” or “prep,” is fixed income security with no maturity date.
- This type of bond is often considered a type of equity, rather than debt. One major drawback to these types of bonds is that they are not redeemable.
- However, the major benefit of them is that they pay a steady stream of interest payments forever.
- Perpetual bonds exist within a small niche of the bond market.
- This is mainly due to the fact that there are very few entities that are safe enough for investors to invest in a bond where the principal will never be repaid.
- AT-1 bonds which were recently in news due to YES bank failure is an example of a perpetual bond.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fiscal deficit.
Mains level: Paper 3- Stimulus package to tackle the covid-19 impact.
There are many suggestions and expectations around the stimulus package deal to revive the economy crippled post corona pandemic. While everyone agrees over the need of stimulus but there are several opinions and suggestion around the various aspects of the package like size, time, source of revenue etc. But we must be mindful of the pitfalls and constraints while thinking about the stimulus package. So, what are the suggestion and expectation and what are the limitations? Read to know!
1. Supply-side constraints on stimulus
- It is argued that a fiscal stimulus package has to follow the timeline.
- But you cannot ‘stimulate’ an economy during a supply-side lockdown.
- And that there are ‘announcement effects’ — both good and bad — that go with the stimulus.
- So, any ‘good stimulus’ can only come into effect post lockdown and extensive consultations are on with everyone for that.
2. What should be the size of the stimulus package?
- While thinking about the stimulus, we cannot forget that government revenues too will be seriously hit.
- The government revenue will be hit by 2-3% of GDP, given that disinvestment target itself is 1% of GDP and the realisation is likely to be close to zero in the current financial year.
- So, the effective fiscal deficit is going to be somewhere around 7.5 % if you take into account all the off-balance sheet borrowings.
- The U.S. government has set aside $2 trillion for bailouts or 9% of its GDP.
- India’s starting point is going to be at around 7.5% of GDP fiscal deficit, then how much more can we afford on top of that?
- On top of this is all the ‘merit expenditure’ on health and direct income support to the poor cannot be reduced.
- Can we still formulate a stimulus package comprising 10% of GDP, to be footed by the Central government alone?
Monetising the deficit and debt-to-GDP ratio
- From 1947 to 1997, the Central government always routinely monetised its deficit, without leading to high rates of inflation, much less hyperinflation.
- The Fiscal Responsibility and Budget Management (FRBM) limits are hardly a success and routinely all governments have broken the barrier.
- Other countries with huge debt-to-GDP ratios like Japan (>200%) and U.S. (125%) get away with barely a rap on the knuckles.
- But India is pulled up for minor slippages on a 70% debt-GDP ratio.
3. Should we pay attention to needs and forget about affordability?
- Some have argued that bailouts should be based on need and not affordability.
- Can printing money be a solution out of this situation?
- Possible dangers of printing money: The currency could plunge, inflation soar high and rating agencies could downgrade us to junk.
- So, shouldn’t there be a more nuanced approach to what constitutes a ‘good’ stimulus?
4. The problem of low credit flow despite high liquidity
- There is a lot of liquidity in the economy, but limited credit is flowing due to anaemic lending.
- Thus, another mantra being espoused is that bank managers should be incentivised to lend and the government should indemnify loans given during this period.
- This could well lead to bogus companies springing up overnight to grab the stimulus in collusion with banks.
- The government owes about ₹1 lakh crore on tax refunds and also had promised to make up for any difference to the States, if the GST did not grow by 14% per annum.
- This is the time for it to transfer this to the States as a grant, for one year, to offset the revenue loss to States.
5. Should we go to the IMF?
- There is talk of going to the International Monetary Fund (IMF).
- Do we really need the IMF’s bailout which comes with conditions when there is no foreign exchange crisis for financing rupee expenditure?
- Moreover, there is a perceived global stigma attached to doing so.
- Won’t the conditionality-led cure be worse than the disease?
Consider the following question based on the issue “Economic crises accentuate the role of governments. Covid-19 has not been different. In light of the above statement, discuss the various issues that the government faced while coming up with a stimulus package to revive the economy. What are the sources of revenue to be tapped by the government?”
Conclusion
Fate is what happens to us. Destiny is what we make in spite of our fate. India’s destiny appears relatively safe, if we cast the mind’s eye around the globe. Lifting the lockdown will be the first step towards a good stimulus and one does need to un-handcuff a billion people to save their lives too.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sarfaesi Act, 2002
Mains level: NPA issue
A five-judge Constitution Bench of the Supreme Court (SC) has ruled that all co-operative banks in the country could make use of the SARFAESI Act to make recovery against defaulting persons.
Possible mains question:
What is the SARFAESI Act, 2002? Discuss its various provisions and efficacy to curb Non-Performing Assets (NPAs)?
What is Sarfaesi Act, 2002?
- Sarfaesi is an acronym for Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest.
- It allows banks and other financial institution to auction residential or commercial properties (of Defaulter) to recover loans.
- The first asset reconstruction company (ARC) of India, ARCIL, was set up under this act.
- Under this act secured creditors (banks or financial institutions) have rights for enforcement of security interest under section 13 of SARFAESI Act, 2002.
Provisions of the Act
- If the borrower of financial assistance makes any default in repayment of a loan or any instalment and his account is classified as NPA by secured creditor, then secured creditor may require before the expiry of a period of limitation by written notice.
- The act does not apply to unsecured loans, loans below ₹100,000 or where remaining debt is below 20% of the original principal.
- This law allowed the creation of asset reconstruction companies (ARC) and allowed banks to sell their non-performing assets to ARC’s (which are regulated by the RBI).
- Banks are allowed to take possession of the collateral property and sell it without the permission of a court.
To summarize, the SARFAESI Act empowers financial institutions to ‘seize and desist’. They should give a notice to the defaulting borrower asking to repay the amount within 60 days.
If the debtor doesn’t comply, the bank can resort to one of the three following measures:
1) Take possession of loan security
2) Sell or lease or assign the right over the security
3) Manage the asset or appoint someone to manage the same
Ambit of the Act
- The recent judgment said that the SARFAESI Act qualifies the test of legislative competence, as well as the definition, cannot be said to be beyond the competence of the Parliament.
- In 2013, the Gujarat High Court had, while hearing a challenge to the amendment of Banking Regulation Act of 1949, to include cooperative societies as financial institutions, ruled it null and void.
- The high court had then agreed with the submissions of the petitioners who had argued that Sarfaesi would not be applicable to cooperative banks formed under the state law.
- The Delhi High Court had, on the other hand, ruled that the cooperative banks and societies were for all purposes banks and financial institutions and thus were allowed to use Sarfaesi to make recoveries against defaulters.
- In its judgment, the apex court held that all such cooperative banks involved in the activities related to banking are covered within the meaning of ‘banking company’.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: The ‘Lost at Home’ Report
Mains level: Internal Migration and Displacement
More than five million people were internally displaced in India due to natural disasters, conflict and violence in 2019, constituting the highest number of new internal displacements in the world.
Try to answer:
‘Environmental migrant’ is an issue that globally countries should start taking seriously. Discuss the statement with respect to India which already ranks high in climate vulnerability.
The ‘Lost at Home’ Report
- The report is published by the UN Children’s Fund (UNICEF).
- It says that almost 33 million new displacements were recorded in 2019 — around 25 million were due to natural disasters and 8.5 million as a consequence of conflict and violence.
- Of these, there were 12 million new displacements involving children, including around 3.8 million of them caused by conflict and violence, and 8.2 million due to disasters linked mostly to weather-related events.
- The report said that natural disasters resulted in more new displacements than conflict and violence.
- Almost 10 million new displacements in 2019 were recorded in East Asia and the Pacific (39 %) — and almost the same number in South Asia (9.5 million).
- The report looks at the risks internally displaced children face —child labour, child marriage, trafficking among them — and the actions urgently needed to protect them.
Displacement in India
- India, the Philippines, Bangladesh and China all suffered from natural disasters leading to displacement in the millions, which accounted for 69% of global disaster-induced displacements.
- These were overwhelmingly caused by extreme conditions created by dangerous storms and floods.
- In India, the total number of new internal displacements in 2019 stood at 5,037,000 – including 5,018,000 due to natural disasters and 19,000 because of conflict and violence.
Global Scenario
- India is followed by the Philippines, Bangladesh and China.
- The Philippines accounted for 4.27 million new internal displacements due to natural disasters, conflict and violence, Bangladesh 4.08 million and China 4.03 million.
- The largest number of internally displaced children due to conflict is found in the Middle East and North Africa (MENA) and sub-Saharan Africa.
- Internally displaced persons are concentrated in two regions — the Middle East and North Africa and West and Central Africa.
- The MENA region recorded over 12 million IDPs as a result of conflict and violence at the end of 2019. Almost all of them lived in just three countries — Syria, Yemen, and Iraq — and around 5 million were children.
What makes the situation worse?
- The COVID-19 pandemic is only making a critical situation worse.
- Camps or informal settlements are often overcrowded and lack adequate hygiene and health services.
- Physical distancing is often not possible, creating conditions that are highly conducive to the spread of the disease, the report said.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: World Health Assembly , WHO
Mains level: China-Taiwan tussle
Following its successful containment of coronavirus outbreak, Taiwan has made a new push for inclusion in the World Health Assembly (WHA).
Locate the seas and straits around Taiwan using your Atlas.
What is World Health Assembly (WHA)?
- The WHA, composed of representatives from all 194 member states, serves as the WHO’s supreme decision-making body.
- The WHA convenes annually and is responsible for selecting the Director-General, setting goals and priorities, and approving the WHO’s budget and activities.
- The first meeting of the WHA the WHO’s agency’s governing body, took place on 24 July 1948.
- Its work began in earnest in 1951 following a significant infusion of financial and technical resources.
Why Taiwan must be included in WHA?
- Taiwan has been praised over its handling of the pandemic, despite being just a short flight from China where the virus was first detected late last year.
- Taiwan since then has been in a state of constant readiness to the threat of emerging infectious disease.
- Hence, its exclusion from the upcoming World Health Assembly would harm the global response to the coronavirus pandemic.
Issues with Taiwan’s inclusion
- Taiwan is claimed as part of Chinese territory by Beijing, which has excluded it from the United Nations and its subsidiary organisations.
- China’s growing influence in the U.N. has made officials wary of crossing it, even while the U.S. has withdrawn from or suspended funding for some of its bodies, including WHO.
- Beijing’s Communist leadership has increasingly shut Taiwan out of gatherings such as the World Health Assembly as part of a diplomatic and military drive to force Taiwan’s independence-leaning tendencies.
Also read:
[Burning Issue] World Health Organization (WHO) And Coronavirus Handling
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: GARUD Portal
Mains level: Not Much
Civil Aviation Ministry and DGCA have launched the GARUD (portal for providing fast track conditional exemptions to government agencies for COVID-19 related drone operations.
Possible prelim question:
The Garud Portal which sometimes finds mention in the news is related to-
a) Air travel of defence personnel
b) Airlifting of the stranded Indian citizens
c) Registration of Remotely-piloted aircraft system (RPAS)
d) None of these
GARUD portal
- GARUD is an acronym for ‘Government Authorisation for Relief Using Drones’.
- The objective of the portal is to assist governmental entities in seeking exemption for COVID-19 related Remotely-piloted aircraft system (RPAS) operations.
- The Civil Aviation Ministry has clarified that any violation of provisions will make the conditional exemption null and void and will lead to penal action.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Abutilon ranadei
Mains level: NA
Scientists at the Agharkar Research Institute (ARI), Pune have come up with plant data of the Northern Western Ghats which indicates that plateaus, in addition to the forests, should be prioritized for the conservation of the Northern Western Ghats.
Last year one species from our newscard : Species in news: Hump-backed Mahseer made it into the CSP 2019. The ‘Abutilon ranadei’ flower in the newscard creates such a vibe yet again.
A stand-alone species being mentioned in the news for the first time often find their way into the prelims. Make a special note here.
Why conserve Plateaus?
- The Western Ghats of India is one of the global biodiversity hotspots owing to the endemism that is sheltered by a chain of mountains.
- The northern part of this along with the Konkan region is considerably different from its southern and central counterparts on account of lesser precipitation and extended dry season.
- It is the plateaus and the cliffs that harbour most of the endemic species.
What did the study find?
- The study found that the Northern Western Ghats has 181 local endemic plant species, including four monospecific genera.
- They have found that a majority of the endemic species are therophytes, which complete their life cycle in a short period during monsoon.
- A notable geographical feature of the Northern Western Ghats is the presence of plateaus and cliffs that display maximum endemic species, unlike forests.
- It is the region of rapid diversification of specific herbaceous endemic genera like Ceropegia, Glyphochloa, Dipcadi, and Eriocaulon.
One such specie is-
Abutilon ranadei
- Abutilon ranadei is a shrub, measuring 2.5-3.5 m high and bears star-shaped hairs.
- It is a Critically Endangered endemic species from the northern Western Ghats.
Bonus:
Consider the following pairs:
| Wildlife |
Naturally found in |
| 1. Blue-finned Mahseer |
Cauvery River |
| 2. Irrawaddy Dolphin |
Chambal River |
| 3. Rusty-spotted Cat |
Eastern Ghats |
Which of the pairs given above are correctly matched?
(a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now