Note4Students
From UPSC perspective, the following things are important :
Prelims level: Purchasing Managers' Index
Mains level: Paper 3- Need for focus on supply side
Context
But the quest for sustained higher growth has been elusive for India for the last five years. The pandemic seems to make it more elusive.
The magnitude of contraction in the economy
- There is nothing encouraging in the provisional estimates of annual national income (2020-21), released by the National Statistical Office.
- The agriculture sector continued its impressive growth performance, reiterating that it still remains as the vital sector of the economy, especially at times of crisis.
- The manufacturing sector continued its subdued growth performance, failing to emerge as the growth driver.
- The contraction in trade (-18.2%), construction (-8.6%), mining (-8.5%) and manufacturing (-7.2%) is a matter of concern as these sectors account for the bulk of low-skilled jobs.
- Gross Domestic Product (GDP) at Constant (2011-12) Prices in Q4 of 2020-21 is showing a growth of 1.6%.
- The magnitude of contraction in the economy and the policy responses towards it raises an important issue of growth prospects for the next year.
Contextualising the current growth rates in terms of following three macroeconomic data would provide us a better perspective on growth recovery.
1) Rising unemployment
- The unemployment data released by the Centre for Monitoring Indian Economy (CMIE) says, that in May 2021, India’s labour participation rate at 40 per cent was the same as it was in April 2021.
- But, the unemployment rate shot up to 11.9 per cent from 8 per cent in April.
- A stable labour participation rate combined with a higher unemployment rate implies a loss of jobs and a fall in the employment rate.
- The employment rate fell to 35.3 per cent in May 2021 from 36.8 per cent in April 2021.
- According to CMIE, over 15 million jobs were lost in May 2021.
- May 2021 was therefore a particularly stressful month on the jobs front.
Takeaway
- Employment and aggregate demand in an economy are related via the channel of disposable incomes of workers.
- Aggregate demand and output growth have a positive correlation.
- Hence, the prospects of growth revival in the next year look bleak at the moment and from employment perspective.
2) Low business confidence
- It is the second important data point that needs to examined.
- Business confidence index (BCI), from the survey by the industry body FICCI, plummeted to 51.5 from 74.2 in the previous round.
- The survey also highlights the weak demand conditions in the economy.
- Compounding this is the uncertainty arising out of the imposition of localised curbs due to the second wave of infections and a muddled vaccine policy in the country.
3) Low PMI
- Manufacturing Purchasing Managers’ Index (PMI) has slipped to a 10-month low indicating that the manufacturing sector is showing signs of strain with growth projections being revised lower.
- Both BCI and PMI slipping down indicates that the overall optimism towards 2021-22 is low, which could impact investments and cause further job losses.
Why focusing on supply-side will not work
- Since last year, the policy responses have been to rely on credit easing, focusing more on supply side measures.
- This policy stance is unlikely to prop up growth for three reasons.
- First, the bulk of the policy measures, including the most recent, are supply side measures and not on the demand side.
- Second, large parts of all the stimulus packages announced till now would work only in the medium term.
- Third, the use of credit backstops as the main plank of policy has limits compared to any direct measure on the demand side as this could result in poor growth performance if private investments do not pick up.
- Further, the credit easing approach would take a longer time to multiply incomes as lending involves a lender’s discretion and borrower’s obligation.
Way forward
- Growth recovery depends on demand recovery.
- The combined increase in exports of April and May 2021 is over 12% indicating that global demand rebound is much faster than the domestic demand.
- What needs to be addressed immediately is the crisis of low domestic demand.
- A tight-fisted fiscal policy approach comes at a time when conventional fiscal stimulus packages might not be enough as supply side issues arising out of episodic lockdowns need to be addressed simultaneously.
- Focusing on short-term magnified growth rates resting on low bases might be erroneous, as income levels matter more than growth rates at this juncture.
Conclusion
India needs a sharp revival of demand for which higher per capita incomes are necessary.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Federal structure
Mains level: Paper 2- Challenges to India's federalism
Context
In 2026, there will be the challenge of addressing the conflict between the democratic principles and the federal principles, when there will be a reallocation of Lok Sabha seats. India needs to reimagine the current federal compact to address the challenges to federalism.
Population freeze for Lok Sabha seats
- Since 1976, seats in the Lok Sabha have reflected the 1971 census and have not taken into account changes in the population.
- The primary reason for this has been unequal population growth among States.
- India’s most highly developed and prosperous States have been successful at family planning, while the poorer States continue to expand.
- The freeze was thus a chance to ensure that India’s most successful States are not punished politically for their success.
- Therefore, the Indian Constitution may face an unprecedented crisis in 2026 when there will be a dramatic change in the composition of the Lok Sabha.
Challenge of balancing the principle of democracy and federalism
- As Article 1 of the Indian Constitution says, India is a Union of States.
- However, the history of the linguistic reorganisation of States in 1956, and subsequent movements for Statehood afterwards demonstrates that States are distinct associative communities, within the federal structure of the Indian Union.
- In a democratic set-up, all citizens are equal and are thus entitled to equal representation in governance.
- But this would imply that bigger States are likely to dominate the national conversation over smaller States.
- This leads us to an inherent contradiction between the principles of democracy and federalism when federal units are unequal in size, population and economics.
- The small States fear that they would get a smaller share of the pie economically, a much reduced say in national issues, and be irrelevant in the political governance of the country.
How the US Constitution addresses the concerns of small states
- When the Americans adopted their Constitution, they protected smaller States in four ways.
- First, national powers over the States were limited.
- Second, each State regardless of size had two seats in the Senate, giving smaller States an outsized role in national governance.
- Third, Presidents are elected by electoral votes, which means they must win States rather than the total national population.
- Fourth, the slave-owning states were allowed to count the slaves for purposes of representation, with each slave being counted as three-fifths of a person.
- This essential structure remains the bedrock of the American Constitution today.
How Indian Constitution deals with the issue?
- India’s quasi-federal structure has always been sui generis.
- Our founders knew that India’s diversity made federalism inevitable, but, fearing separatist tendencies among States that had never been a single political unit, they also created a strong centre.
- However, the 1956 reorganisation of States on linguistic lines was a popular recognition of federal principles and yet did not result in separatist tendencies.
- Since then, new States within the Union have been created in response to the demands of people for greater autonomy.
Way forward on addressing the challenges to federalism
- There is an urgent need to reimagine our national compact.
- Following are the components of such a new balance that need to be fine-tuned to Indian realities.
- Give more powers to States: The powers of States vis-à-vis the Centre contained in the Lists and in the provisions dealing with altering boundaries of States must be increased to assuage the fear of smaller States that they will be dominated by bigger ones.
- More localised decision-making is bound to increase national prosperity.
- Indeed, this was the entire goal of the creation of Panchayat governance through the 73rd and 74th Amendments to the Constitution.
- Expand the role of Rajya Sabha: The role and composition of the Rajya Sabha, our House of States, must be expanded.
- This would allow smaller States a kind of brake over national majoritarian politics that adversely impact them.
- Consent of all states on financial redistribution: Constitutional change and the change in financial redistribution between the States must require the consent of all or nearly all States.
- Constitutional provisions dealing with language and religion must also be inviolate.
- Break the bigger States: Serious thought must be given to breaking up the biggest States into smaller units that will not by themselves dominate the national conversation.
Conclusion
The unity of India is, of course, the fundamental premise underlying this discussion; but this unity does not depend on an overbearing Centre for its survival.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Independent director
Mains level: Paper 3- Dual approval system for independent directors
Context
While the regulators have taken giant strides to enhance board independence in India, one significant conundrum persists about appoint and removal process of the independent directors.
How appointment and removal process affects the independence of independent directors?
- Independent directors are appointed just like other directors through shareholder voting by a simple majority.
- This confers a significant power in the hands of significant shareholders to handpick the independents.
- In case of family-owned companies, it is not uncommon to appoint “friendly” independent directors.
- As for public sector undertakings, there is a demonstrable affiliation between independent directors and the ruling political parties.
Dual Approval System: Way forward
- The above trends suggest that unless independent directors owe their allegiance to the shareholder body as a whole, independence is likely to remain largely in form and not function.
- In its consultation paper, SEBI proposed a “dual approval” system.
- Under this system, the appointment of an independent director required the satisfaction of two conditions:
- First, the approval by a majority of all shareholders.
- Second, the approval of a “majority of the minority”, namely the approval of shareholders other than the promoters.
- SEBI recommended the same “dual approval” system for the removal of independent directors as well.
- SEBI drew inspiration from Israel and the premium-listed segment of the United Kingdom, which confers greater power to minority shareholders in installing or dethroning independent directors.
- SEBI has not yet made any mention of implementing the dual approval system.
Issues with Dual Approval System
- The first issue is that it militates against the majority rule principle that is intrinsic in a corporate democracy.
- While understandable, that is hardly an immutable rule as corporate law does make exceptions in cases involving oppression of minority shareholders.
- The second concern is that placing too much power in the hands of minority shareholders would be counterproductive, as it could result in a tyranny of the minority.
- However, the dual approval system instead represents the best of both worlds. It does not negate the promoter’s involvement in the process of appointing or removing independent directors.
- Only consensus candidates would end up becoming independent directors.
- The third issue is one of shareholder apathy: Will minority shareholders be motivated to exercise an informed and meaningful choice?
- Minority shareholders tend to be passive when they are unable to influence the outcome of shareholding voting.
- However, where they do have a significant say, like in the “majority of the minority” process, they are likely to be more active in exercising their franchise.
Consider the question “How far has the provision of appointing independent directors to safeguard the interest of minority shareholders succeeded in its objectives? Suggest the changes to improve the challenges faced by the independent directors.”
Conclusion
In all, the appointment and removal system continues to undermine the independence and efficacy of corporate boards. The SEBI needs to implement the dual approval system at the earliest.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Re-wilding of tigers
Mains level: Animal reintroduction
The recent attempt of Periyar Tiger Reserve (PTR) to reintroduce into the wild tiger cub named Mangala after rearing it in ‘captivity’ has once again brought the controversial concept of ‘re-wilding’ of abandoned or injured animals under the lens.
What is the intervention known as ‘re-wilding’?
- As per the Standard Operating Procedures/Guidelines laid down by the National Tiger Conservation Authority (NTCA) under the Wildlife Protection Act, 1972, there are three ways to deal with orphaned or abandoned tiger cubs.
- The first is to make an effort to reunite the abandoned cubs with their mother.
- Second, if a reunion of the cub with its mother is not possible, then shift the cub to a suitable zoo.
- Third, reintroduction of the cub into the wild after a certain time when it appears that the cub is capable of surviving in the wild independently.
- This is what is known as ‘re-wilding.
NTCA guidelines
- NTCA stresses that the tiger cub should be reared in an in situ enclosure for a minimum of two years, and during this time, each cub should have a successful record of at least 50 ‘kills’.
- Within the enclosure, the persons responsible for handling cubs must approach them by putting a tiger mask along with workday clothes of a tiger stripe pattern smeared with tiger urine and faeces.
- Various conditions must be complied with at the time of releasing the cub in the wild.
- The tiger cubs should be in prime health, and of dispersing age (three/four years).
- There should be no abnormality/incapacitation.
How have attempts at re-wilding of carnivores gone in India?
- The tiger conservationist Billy Arjan Singh was credited with the re-introduction of re-welding the Dudhwa forest area in the 1970s.
- The attempt, however, ran into controversy after several incidents of the killing of humans were reported.
- The re-wilding in Panna Tiger Reserve of two abandoned tigress cubs that were brought up at Kanha Tiger Reserve is considered to be a success in tiger conservation.
Re-wilding as a concept
- There are 50-50 chances of success and failure of re-wilding of hand-reared carnivores in the wild.
- Conservationists, however, maintain that the chances of success are far less than that — less than even 1 per cent.
- Tigers in India are already occurring at naturally attainable densities.
- Almost all translocations of captive-raised tigers have failed so far, with only rare successes such as in Panna after a tiger extinction, and some re-introductions in Russia into empty habitats with plenty of prey.
Way forward
- The real need is to protect more habitat strictly so that the prey densities rise and more tigers can thrive.
- Putting individual hand-reared tigers into the wild cannot certainly be called re-wilding says some wildlife activists.
Answer this PYQ in the comment box:
Q.Among the following Tiger Reserves, which one has the largest area under “Critical Tiger Habitat”? (CSP 2020)
(a) Corbett
(b) Ranthambore
(c) Nagarjunsagar-Srisailam
(d) Sunderbans
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: BHIM, UPI, IMPS
Mains level: Mobile banking facilities in India
Bhutan becomes the first country, in India’s immediate neighbourhood, to use the BHIM app for mobile-based payments and “to adopt UPI standards for its QR deployment”.
Bharat Interface for Money (BHIM)
- BHIM is an Indian mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI).
- Named after B. R. Ambedkar and launched on 30 December 2016 it is intended to facilitate e-payments directly through banks and encourage cashless transactions.
- The application supports all Indian banks which use UPI, which is built over the Immediate Payment Service (IMPS) infrastructure and allows the user to instantly transfer money between bank accounts of any two parties.
- It can be used on all mobile devices.
Note: Bhutan has become the first country to adopt India’s Unified Payment Interface (UPI) standards for its quick response (QR) code. It is also the second country after Singapore to have BHIM-UPI acceptance at merchant locations, NPCI International Payments Ltd (NIPL).
What is UPI?
- Unified Payments Interface (UPI) is an instant real-time payment system developed by NPCI facilitating inter-bank transactions.
- The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.
Answer this PYQ in the comment box:
Q. With reference to digital payments, consider the following statements:
- BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
- While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.
Which of the statements given above is/ are correct? (CSP 2018)
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
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Tikdam Technique – How our Prime Test Series 2020 gives you an edge
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UV technology for disinfection
Mains level: Not Much
The Union Ministry for Science and Technology has informed that Ultraviolet-C or UV-C Disinfection Technology will soon be installed in Parliament for the mitigation of airborne transmission of SARS-COV-2.
UV-C air duct disinfection system
- The UV-C air duct disinfection system was developed by CSIR-CSIO (Central Scientific Instruments Organisation).
- The system is designed to fit into any existing air-ducts and the virucidal dosages using UV-C intensity and residence time can be optimized according to the existing space.
- The release adds that the virus is deactivated in any aerosol particles by the calibrated levels of UV-C light. It can be used in auditoriums, malls, educational Institutions, AC buses, and railways.
What is Ultraviolet (UV)?
- Ultraviolet (UV) is a type of light or radiation naturally emitted by the Sun. It covers a wavelength range of 100-400 nm. The human visible light ranges from 380–700 nm.
- UV is divided into three bands: UV-C (100-280 nm), UV-B (280-315 nm) and UV-A (315-400 nm).
- UV-A and UV-B rays from the Sun are transmitted through our atmosphere and all UV-C is filtered by the ozone layer.
- UV-B rays can only reach the outer layer of our skin or epidermis and can cause sunburns and are also associated with skin cancer.
- UV-A rays can penetrate the middle layer of your skin or the dermis and can cause ageing of skin cells and indirect damage to cells’ DNA.
- UV-C radiation from man-made sources has been known to cause skin burns and eye injuries.
So, can UV-C kill coronavirus?
- UV-C radiation (wavelength around 254 nm) has been used for decades to disinfect the air in hospitals, laboratories, and also in water treatment.
- But these conventional germicidal treatments are done in unoccupied rooms as they can cause health problems.
- It can destroy the outer protein coating of the SARS-Coronavirus.
Is it safe for humans?
- The device is specifically developed to disinfect non-living things.
- UV-C radiation used in this device could be harmful to the skin and eyes of living beings.
Answer this PYQ in the comment box:
Q.What is the role of ultraviolet (UV) radiation in the water purification systems?
- It inactivates/kills the harmful microorganisms in water.
- It removes all the undesirable odours from the water.
- It quickens the sedimentation of solid particles, removes turbidity and improves the clarity of water.
Which of the statements given above is/are correct? (CSP 2010)
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
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