Note4Students
From UPSC perspective, the following things are important :
Prelims level: FDI
Mains level: Features of India's FDI Policy
The FDI in India grew by 13% to a record of $49.97 billion in the 2019-20 financial years, according to official data.
Get aware with the recently updated FDI norms. Key facts mentioned in this newscard can make a direct statement based MCQ in the prelims.
Ex. FDI source in decreasing order: Singapore – Mauritius – Netherland – Ceyman Islands – Japan – France
Data on FDI
- The country had received an FDI of $44.36 billion during April-March 2018-19.
- The sectors which attracted maximum foreign inflows during 2019-20 include services ($7.85 billion), computer software and hardware ($7.67 billion), telecommunications ($4.44 billion), trading ($4.57 billion), automobile ($2.82 billion), construction ($2 billion), and chemicals ($1 billion).
- Singapore emerged as the largest source of FDI in India during the last fiscal with $14.67 billion investments.
- It was followed by Mauritius ($8.24 billion), the Netherlands ($6.5 billion), the U.S. ($4.22 billion), Caymen Islands ($3.7 billion), Japan ($3.22 billion), and France ($1.89 billion).
What is FDI?
- An FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
- It is thus distinguished from a foreign portfolio investment by a notion of direct control.
- FDI may be made either “inorganically” by buying a company in the target country or “organically” by expanding the operations of an existing business in that country.
- Broadly, FDI includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”.
- In a narrow sense, it refers just to building a new facility, and lasting management interest.
FDI in India
- Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then FM Manmohan Singh.
- There are two routes by which India gets FDI.
1) Automatic route: By this route, FDI is allowed without prior approval by Government or RBI.
2) Government route: Prior approval by the government is needed via this route. The application needs to be made through Foreign Investment Facilitation Portal, which will facilitate the single-window clearance of FDI application under Approval Route.
- India imposes a cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.
- In 2015 India overtook China and the US as the top destination for the Foreign Direct Investment.
Back2Basics
Amendment in the FDI Policy for curbing opportunistic takeovers/acquisitions of Indian companies
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Locusts invasion
Mains level: Locusts invasion and its threats
As another locust swarm comes from Pakistan, the spotlight is again on the India-Pakistan dynamic that has come into play.
Do you know?
The Food and Agricultural Organization (FAO) believes locusts have decimated close to 70,000 hectares of crops in Kenya, 30,000 hectares in Ethiopia and 42,000 hectares of crops in the state of Rajasthan.
Just so you can perhaps assess the kind of damage we are talking about here. A large swarm can eat as much as about 35,000 people in one day 😀 !
What are Locusts?
- The desert locust (Schistocerca gregaria) is a short-horned grasshopper that is innocuous while it is in a “solitary phase” and moving about independently.
- These winged insects differ from normal hoppers and become dangerous only when their populations build up rapidly and the close physical contact in crowded conditions triggers behavioural changes.
- They, then, enter the “gregarious phase”, by grouping into bands and forming swarms that can travel great distances (up to 150 km daily), while eating up every bit of vegetation on the way.
- If not controlled at the right time, these insect swarms can threaten the food security of countries.
India reaches out to Pak
- The Ministry of External Affairs said that it has reached out to Pakistan for cooperation, and is awaiting their response.
- Despite the ups and downs in the bilateral relationship, cooperation on the locust warning system has survived the wars, terrorist attacks, and political turmoil.
History of outbreaks in India
- Records suggest that since the beginning of the 19th century, there have been at least eight “outbreaks” in India from 1812 to 1889, and a ninth in 1896-1897.
- According to the history of the Locust Warning Office published by the UN Food and Agriculture Organization (FAO), there were “serious invasions” of locusts in India every few years during the 1900s.
- A “five-year invasion” from 1926 to 1931 is estimated to have damaged crops worth Rs 2 crore (about $100 million at today’s prices).
- The princely states and provinces had their own structures to deal with this, but there was no coordination.
The Locust Warning Organization (LWO)
- After the 1926-32 “invasion”, the British Indian government-sponsored a research scheme, starting in 1931, which led to the permanent Locust Warning Organization (LWO) in 1939.
- It had its headquarters in New Delhi and a substation in Karachi.
- In 1941, a conference of princely states in desert areas and provinces affected by locusts was held.
- Its role was expanded in 1942, and in 1946 a bureaucratic structure was put in place.
Beginning of cooperation
- Iran too suffered locust attacks, in 1876, and in 1926-1932.
- Apparently the first case of collaboration between countries in the region occurred in 1942 when a delegation from India helped with locust control work in southwest Persia.
- Over the next two years, Indian help was also provided to Oman and Persia.
- This was followed by the first conference within the region on Desert Locust, which was held in Tehran in 1945 and involved Iran, India, Saudi Arabia and Egypt.
- A second conference took place in 1950 also in Tehran with Pakistan participating.
Bringing in Pakistan
- In the 1950s, India and Iran cooperated and Pakistan provided two aircraft for locust surveys in Saudi Arabia.
- Following another attack during 1958-61, a decision was taken to group Iran, Afghanistan, Pakistan and India together and the FAO Desert Locust commission was formed in 1964.
- The commission held annual sessions skipped in 1965 and 1999 but held in 1971.
- Even in the last six years when the relationship between India and Pakistan has deteriorated, it has been held in 2014, 2016 and 2018.
- The meetings are attended by locust control experts, with no diplomats.
India and Pakistan
- In 1977, the two countries began to meet on the border.
- From 1991 to 2003, special border surveys took place during the summer, undertaken by locust control officers in their respective countries.
- Joint border meetings have taken place every year since 2005 till 2019, except in 2011. This has been despite every diplomatic strain; including the 26/11 Mumbai attacks.
- Arrangements are made in advance and protocols are followed for crossing the border.
- While politics and diplomacy is kept out of the technical discussions, locust control authorities feel that one of the more difficult challenges faced by the commission is that of “insecurity and sensitivities” in the region.
Also read:
Risk of Early Locusts Attacks: A new concern
Try this:
Q. Time and again normal ocean cycles got more pronounced or disrupted, resulting in all kinds of unintended consequences, like an ever-increasing domino effect of locust attacks in Asia and the Indian Sub Continent. We need to understand these links if we are to plan effectively for climate change mitigation and adaptation. Discuss. (250W)
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: PAN
Mains level: Income tax reforms in India
The Union Finance Ministry has launched the facility for instant allotment of (Permanent Account Number) PAN.
Try this question from CSP 2018:
Q.) Consider the following gatemen.
1. Aadhaar card can be used as a proof of citizenship or domicile.
2. Once issued, the Aadhaar number cannot be deactivated or omitted by the Issuing Authority.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Can’t you expect a similar question based on PAN card? If not , go through this newscard.
What is a Permanent Account Number?
- A PAN is a ten-character alphanumeric identifier, issued in the form of a laminated “PAN card”, by the Income Tax Department.
- It is issued to any “person” who applies for it or to whom the department allots the number without an application.
- A PAN is a unique identifier issued to all judicial entities identifiable under the Indian Income Tax Act, 1961.
- The income tax PAN and its linked card are issued under Section 139A of the Income Tax Act.
- It is issued by the Indian Department under the supervision of the Central Board for Direct Taxes (CBDT) and it also serves as an important proof of identification.
- It is also issued to foreign nationals (such as investors) subject to a valid visa, and hence a PAN card is not acceptable as proof of Indian citizenship.
Uses of PAN
- The primary purpose of the PAN is to bring a universal identification to all financial transactions and to prevent tax evasion by keeping track of monetary transactions.
- The PAN is mandatory when filing income tax returns, tax deduction at source, or any other communication with the IT Department.
- PAN is also steadily becoming a mandatory document for opening a new bank account, a new landline telephone connection / a mobile phone connection, purchase of foreign currency, bank deposits above ₹50,000, purchase and sale of immovable properties, vehicles etc.
Why it is in the news?
- A PAN is necessary for filing income tax returns.
- This facility is now available for those PAN applicants who possess a valid Aadhaar number and have a mobile number registered with Aadhaar.
- The allotment process is paperless and an electronic PAN (e-PAN) is issued to the applicants free of cost.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Demo 2 Mission
Mains level: Not Much
NASA’s SpaceX Demo-2 test flight has now been rescheduled for May 31, due to weather conditions. Apart from the test flight itself, what’s getting attention are the spacesuits that the astronauts will wear while travelling in the SpaceX capsule, called Crew Dragon.
Try this question from CSP 2014:
Q. Which of the following pair is/are correctly matched?
| Spacecraft |
Purpose |
| 1. Cassini-Huygens |
Orbiting the Venus and transmitting data to the Earth |
| 2. Messenger |
Mapping and investigating the Mercury |
| 3. Voyager 1 and 2 |
Exploring the outer solar system |
Select the correct answer using the code given below.
a) 1 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2 and 3
The SpaceX spacesuit
- The so-called “Starman suits” the astronauts will wear on the Demo-2 mission have been designed by a famous Hollywood costume designer.
- The SpaceX spacesuits are different from other spacesuits typically worn by astronauts because of their sleek design and are being described as resembling a tuxedo.
- These spacesuits are meant to be lighter and more flexible, are equipped with touchscreen gloves, have vents that allow astronauts to be cooler while maintaining pressure inside the suit, and have an incorporated helmet and visor.
- The helmets of these suits are 3D printed with touchscreen-sensitive gloves and the suit is all in one piece, customised for the wearer.
How are launch-and-entry spacesuits different from EMUs?
- The SpaceX suits are only meant to be worn inside the space shuttle and are not suitable for carrying out spacewalks.
- Spacesuits for spacewalks, called Extravehicular Mobility Units (EMUs), are heavier than launch-entry suits (LES) and are already present aboard the ISS.
- While inside the spacecraft, the atmosphere can be controlled, to explore and work in space, humans require that they take their environment with them because there are atmospheric pressure and no oxygen to sustain life.
- Such spacesuits – EMUs — are worn for spacewalks or extravehicular activities (EVA) conducted outside a space shuttle.
- These provide astronauts with oxygen supply and protect them against extreme temperatures, radiation and space dust.
Back2Basics
Demo-2 Mission by SpaceX
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Cordyceps militaris
Mains level: NA
A university in Assam has developed a fungal powder to help people boost their immunity to disease.
Try this question from CSP 2019:
Q.) Recently, there was a growing awareness in our country about the importance of Himalayan nettle (Girardinia diversifolia) because it is found to be a sustainable source of
(a) anti-malarial drug
(b) bio-diesel
(c) pulp for paper industry
(d) textile fibre
A similar question related to Cordyceps militaris can be asked. UPSC may ask whether it is a Fungi, Algae, a Moss or a Lichen.
Cordyceps militaris
- The powder is from a parasitic but rare “super mushroom” called Cordyceps militaris.
- The militaris underwent powdering through lyophilisation or freeze-drying at –80°C.
- The earth has more than 400 species of Cordyceps, a fungus parasitic on insects as well as other fungi.
- Often referred to as a super mushroom, Cordyceps known for its anti-ageing, anti-viral, energy and immunity-boosting effect.
- Natural Cordyceps is hard to get and if dried, costs at least ₹8 lakh per kg.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Asian Koel
Mains level: NA
Asian Koel, the state bird of Puducherry, is now breeding across Delhi-NCR.
For such species, related question, always focus on their habitat, endemic area, IUCN/Wildlife Protection Acr status.
Another caution: Imp birds in the news that are almost “Least Concerned” eg. Amur Falcon (Nagaland), Asian Koel
Asian Koel
IUCN status: Least Concerned
- The Asian Koel (Eudynamys scolopaceus) is a member of the cuckoo order of birds, the Cuculiformes.
- It is found in the Indian Subcontinent, China, and Southeast Asia.
- It forms a superspecies with the closely related black-billed koels, Indian cuckoos, and Pacific koels which are sometimes treated as subspecies.
- The Asian Koel like many of its related cuckoo kin is a brood parasite that lays its eggs in the nests of crows and other hosts, who raise its young.
Key Features
- Sexual dimorphism is evident, where males are a glossy black with a greenish sheen to their bodies and females are brown with white dots on their wings and heavy streaking on their head and throat.
- Both sexes have strong long greenish bills and captivating ruby-red eyes.
- In the bird world, the males are generally more pleasant looking than the females, considering they woo females.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Relation between bond yield
The RBI could finance the government debt by buying bonds from the secondary market. Or it could directly finance the debt. And both could stoke inflation. But, do they carry the same inflation risk. The answer is an unambiguous ‘No’. So, how monetisation of debt is different from Open Market Operation by the RBI? Read the article to know…
What is Monetised deficit?
- The Monetised Deficit is the extent to which the RBI helps the central government in its borrowing programme.
- In other words, monetised deficit means the increase in the net RBI credit to the central government, such that the monetary needs of the government could be met easily.
What monetisation of deficit mean (and doesn’t mean)
- Monetisation of the deficit does not mean the government is getting free money from the RBI.
- If one works through the combined balance sheet of the government and the RBI, it will turn out that the government does not get a free lunch.
- But it does get a heavily subsidised lunch.
- That subsidy is forced out of the banks.
- And, as in the case of all invisible subsidies, they don’t even know.
So, is the RBI monetising the debt?
- It is not as if the RBI is not monetising the deficit now; it is doing so.
- It is doing so indirectly by buying government bonds in the secondary market through what are called open market operations (OMOs).
- Note that both monetisation and OMOs involve printing of money by the RBI.
- But there are important differences between the two options that make shifting over to monetisation a non-trivial decision.
Historical context of the monetisation of debt: An agreement
- In the pre-reform era, the RBI used to directly monetise the government’s deficit almost automatically.
- That practice ended in 1997 with a landmark agreement between the government and the RBI.
- It was agreed that henceforth, the RBI would operate only in the secondary market through the OMO route.
- The implied understanding also was that the RBI would use the OMO route not so much to support government borrowing.
- So, the RBI uses OMO as liquidity instrument to manage the balance between the policy objectives of supporting growth, checking inflation and preserving financial stability.
So, what were the outcomes of the agreement?
- The outcomes of that agreement were historic.
- Since the government started borrowing in the open market, interest rates went up.
- HIgh interest rates incentivised saving and thereby spurred investment and growth.
- Also, the interest rate that the government commanded in the open market acted as a critical market signal of fiscal sustainability.
- Importantly, the agreement shifted control over money supply, and hence over inflation, from the government’s fiscal policy to the RBI’s monetary policy.
- The India growth story that unfolded in the years before the global financial crisis in 2008 when the economy clocked growth rates in the range of 9 per cent was at least in part a consequence of the high savings rate and low inflation which in turn were a consequence of this agreement.
What is the reasoning for jeopardising the hard-won gains of agreement?
- The Fiscal Responsibility and Budget Management Act as amended in 2017 contains an escape clause.
- Escape clause permits monetisation of the deficit under special circumstances.
- What is the case for invoking this escape clause?
- The case is made on the grounds that there just aren’t enough savings in the economy to finance government borrowing of such a large size.
- Bond yields would spike so high that financial stability will be threatened.
- The RBI must therefore step in and finance the government directly to prevent this from happening.
No, the situation is not so grim-Look at the bond yields
- There is no reason to believe that we are anywhere close to the above-mentioned situation.
- Through its OMOs, the RBI has injected such an extraordinary amount of systemic liquidity that bond yields are still relatively soft.
- In fact the yield on the benchmark 10 year bond which was ruling at 8 per cent in September last year has since dropped to just around 6 per cent.
- Even on the day the government announced its additional borrowing to the extent of 2.1 per cent of GDP, the yield settled at 6.17 per cent.
- That should, if anything, be evidence that the market feels quite comfortable about financing the enhanced government borrowing.
Why worry about monetisation if OMO also leads to inflation?
The following four issues make clear the difference in OMO and monetisation
1. Issue of RBI’s control over monetary policy
- Both monetisation and OMOs involve expansion of money supply which can potentially stoke inflation.
- If so, why should we be so wary of monetisation?
- Because although they are both potentially inflationary, the inflation risk they carry is different.
- OMOs are a monetary policy tool with the RBI in the driver’s seat, deciding on how much liquidity to inject and when.
- In contrast, monetisation is, and is seen, as a way of financing the fiscal deficit with the quantum and timing of money supply determined by the government’s borrowing rather than the RBI’s monetary policy.
- If RBI is seen as losing control over monetary policy, it will raise concerns about inflation.
- That can be a more serious problem than it seems.
2. Credibility of RBI on curbing inflation
- India is inflation prone.
- Note that after the global financial crisis when inflation “died” everywhere, we were hit with a high and stubborn bout of inflation.
- In hindsight, it is clear that the RBI failed to tighten policy in good time.
- Since then we have embraced a monetary policy framework and the RBI has earned credibility for delivering on inflation within the target.
- Forsaking that credibility can be costly.
3. Yield on bond could shoot up anyway
- If, in spite of above problems, the government decides to cross the line, markets will fear that the constraints on fiscal policy are being abandoned.
- Perception in the market will be that the government is planning to solve its fiscal problems by inflating away its debt.
- If that occurs, yields on government bonds will shoot up, the opposite of what is sought to be achieved.
4. Monetisation is not inevitable yet
- What is the problem that monetisation is trying to solve?
- There are cases when monetisation — despite its costs — is inevitable.
- If the government cannot finance its deficit at reasonable rates, then it really doesn’t have much choice.
- But right now, it is able to borrow at around the same rate as inflation, implying a real rate (at current inflation) of 0 per cent.
- If in fact bond yields shoot up in real terms, there might be a case for monetisation, strictly as a one-time measure.
- We are not there yet.
Consider the question asked in 2019, “Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your argument.”
Conclusion
Though OMO and monetisation both leads to inflation, the issues with monetisation have far-reaching consequences. Also, the situation we are in doesn’t yet warrant monetisation which should be seen as a last resort.
Back2Basics: Open Market operation
- OMOs are conducted by the RBI by way of sale and purchase of G-Secs to and from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
- When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity.
- Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act, ECA
Mains level: Paper 3- Reforms in agri-marketing and amendment in ECA and APMC Acts.
The article discusses the recently announced reforms in the agri-marketing. The legal changes promised are expected to deal with problems farmer face in selling their products and a law dealing with contract farming. These legal reforms are expected to increase farmers’ income.
Some of the issues faced by the farmers
- If any class of economic agents of our country has been denied the constitutional right of freedom of trade, it is farmers.
- They don’t have the freedom of selling their produce even in their neighbourhood.
- Remunerative price is still a mirage for them.
- Their farm incomes are at the mercy of markets, middlemen and money lenders.
- For every rupee that a farmer makes, others in the supply chain get much more.
- Both farmers and consumers are the sufferers of the exploitative procurement and marketing of farm produce.
- The public investments in irrigation and other infrastructure has increased.
- The institutional credit and minimum support price given over the years has been increasing.
- Yet, farmers are shackled when it comes to selling their produce.
Restriction on the farmers: Echoes from the past
- This exploitation of farmers has its roots in the Bengal famine of 1943, World War II, and the droughts and food shortages of the 1960s.
- The Essential Commodities Act, 1955, and the Agricultural Produce Market Committee (APMC) Acts of the States are the principle sources of violation of the rights of farmers to sell their produce at a price of their choice.
- These two laws severely restrict the options of farmers to sell their produce.
- Farmers continue to be the victims of a buyers’ market.
- This is the principal cause of their exploitation.
- Renowned farm scientist M.S. Swaminathan has for long argued for the right of farmers to sell their produce as they deem fit.
Balancing the interest of consumers and the farmers
- Given the economic disparities in the country, the interests of consumers need to be protected.
- But that should not happen at the cost of the producers of the very commodities that the consumers need.
- For various reasons, a balance in this regard could not be struck.
- The restrictive trade and marketing policies being practised with respect to agricultural prices have substantially eroded the incomes of farmers.
Let’s have a look at a study on agricultural policies in India
- A study on agricultural policies in India by the Indian Council for Research on International Economic Relations-Organisation for Economic Co-operation and Development (2018), co-authored by the renowned farm economist Ashok Gulati, was published with startling revelations.
- It concluded that the restrictions on agricultural marketing amounted to ‘implicit taxation’ on farmers to the tune of ₹45 lakh crore from 2000-01 to 2016-17.
- This comes to ₹2.56 lakh crore per year.
- No other country does this.
Reforms to remove the hurdles in farmer getting remunerative price
- Recently announced package has approximately ₹4 lakh crore support for farming and allied sectors, aimed at improving infrastructure and enhancing credit support.
- But the most welcome feature of this package is the firm commitment to rewriting the Essential Commodities Act and the APMC laws.
- The revision of these restrictive laws is long overdue and will remove the hurdles that farmers face in getting a remunerative price for their produce by giving them more options to sell.
- This long-awaited revision needs to be undertaken with care and responsibility so that no space or scope is left for farmers to be exploited yet again.
- While allowing several buyers to directly access the produce from the farmers, a strong and effective network of Farm Producers’ Organisations should be created to enhance the bargaining power of farmers.
- This will ensure that individual farmers are not exploited.
- An effective law on contract farming is also the need of the hour.
- Law on contract farming will secure incomes of farmers besides enabling private investments.
- Yet another unique feature of this package has been its comprehensiveness towards improving the incomes of farmers through a range of activities.
- A study by the National Institute of Agricultural Extension Management has revealed that of the 3,500 farmers’ suicides examined, there was no farmer who had supplementary incomes from dairy or poultry.
- The huge support to animal husbandry and fisheries in the stimulus package underlines the need for diversifying the income sources of farmers.
Consider the question “The APMC Acts of the has been blamed for poor price realisation by the farmers. Recently announced reforms promise to do away with such issues in the APMC Act. In light of this, examine the issues with APMC Acts and how the promised reforms are expected to resolve such issues.”
Conclusion
It is time to allow our farmers to sell their produce anywhere for their benefit. All stakeholders should be taken on board while revising restrictive agri-marketing laws.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Upstream and downstream sectors
Mains level: Paper 3-Disruption in supply chains and ways to ensure their recovery.
Disruption of the supply chains lies at the heart of the decline in the output amid lockdown. And the government has announced the fiscal stimulus to revive the economy. How effective will be the fiscal stimulus to streamline the supply chains? The focus of this article is on tackling this question.
Disruption in supply chains and decline in output
- Much of the decline in output is due to supply chain disruptions generated by the lockdown.
- Government spending can do little to alleviate this.
- Putting money in the hands of people can increase the demand for goods but cannot increase the supply of goods and services.
- In modern economies, the production of goods happens through complex supply chains that traverse geographical boundaries.
Let’s understand how supply chains work
- Upstream sectors like ‘mining’ produce metals that are in turn used to produce machines.
- These machines are used to sow seeds, harvest crops, and transport fuel.
- Finally, the harvested crops are used by downstream sectors to produce flour and bread.
- At each step, machines and labour combine to produce goods which are the inputs for sectors further downstream.
So, how lockdown affected the supply chains?
- Under the lockdown, numerous inputs have not moved from their producers to their users.
- These disruptions may not at first generate a reduction in consumer goods like bread.
- However, the availability of consumer goods will begin to decline as bakers run out of flour, and mills exhaust their stocks of wheat.
- And there is no way to guarantee the flow of essential goods while suspending the production of non-essential goods.
- Automotive spare parts may be non-essential in the short run, but become essential as food-carrying trucks begin to break down.(i.e. in the long run)
- How far is the long run? This is difficult to say; there may be some variation across goods.
Impact of labour shortage on supply chains
- The supply chain disruptions are going to be amplified by labour shortage as workers remain at home.
- Countries like India are likely to experience a greater reduction in output on this count than, say, Europe or the U.S.
- This is because of the higher labour intensity of production in India.
- To understand this, think of the difference in unloading of goods in the port at Rotterdam and the port at Kochi.
- Is it viable to substitute labour with capital? Poorer countries are less likely to be able to substitute locked down labour with capital because of the dearth of capital in these nations.
Adapting and Adjusting to the new reality
- As economies emerge out of the lockdown, entrepreneurs, workers, and consumers must adjust to the new reality.
- The world supply chain must adapt.
- Firms may choose to source inputs from suppliers in their geographical proximity to minimise the risk of future disruptions.
- But this involves building productive capacity at new locations, all of which requires investments fuelled by savings.
- Furthermore, the investments must be guided by price signals.
- Within a market economy, the movement of prices provides the incentive and information needed to adapt and grow.
- As economist Ronald Coase put it, prices are bundles of information wrapped in an incentive.
- As the prices of some inputs rise, the buyers of these inputs look for alternate suppliers, and firms which did not hitherto produce the good have an incentive to do so.
- The key to economic recovery lies in millions of such adjustments.
- Through such adjustments, firms locate new providers of inputs, new buyers of their output, and build factories at new locations.
How fiscal stimulus would disrupt the recovery of supply chains?
- Market adjustment processes are likely to be disrupted by government stimulus packages.
- Governments spend by printing money, raising debt, or increasing taxes.
- Irrespective of the way in which the expenditure in funded, resources are transferred from private entrepreneurs to government bureaucrats.
- When governments print money, they draw resources through inflation.
- Bureaucrats tend to be less efficient than profit-motivated firms in allocating scarce resources.
- Bureaucrats have little incentive or information to bring about the granular supply chain adjustments necessary to revive growth.
- As the stimulus package kicks in, economic efficiency is likely to decline and so are the chances of a timely recovery of output.
A lesson from West Germany after WW II
- The experience of West Germany after World War II has a useful lesson for India.
- Beginning mid-1944, Allied bombing disrupted the German supply chain by targeting bottleneck sectors like electric power generation.
- This destruction of the supply chain devastated the German economy.
- Per person food production fell to about half of its pre-war level.
- Two years later, this changed after Chancellor Ludwig Erhard lifted price controls and cut taxes.
- West German entrepreneurs re-established a thriving supply chain through which goods went from upstream sectors to final consumers.
- By 1950, per capita income in West Germany had reached its pre-war level.
Consider the question “Supply chain disruption has been at the core of economic consequences of the corona pandemic. New adjustment in the supply chains would be the norm in the aftermath of the pandemic. What these readjustments would entail? Suggest the measures to help the supply chains recover.”
Conclusion
The recent supply chain disruptions are likely to last long. The path to recovery lies in cutting government expenditure, removing price controls, and opening up trade.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Korean Armstice Agreement
Mains level: Korean Armstice Agreement
A United Nations investigation into a recent exchange of gunfire between North Korea and South Korea inside the Demilitarized Zone (DMZ) has determined that both countries violated the armistice that ended the 1950-53 Korean War.
Practice question for mains:
Q. What is the Korean Armstice Agreement? Discuss the concept of the Demilitarized Zone (DMZ)?
The Korean Armstice Agreement
- The Korean Armstice Agreement signed on 27 July 1953 is the armistice that brought about a complete cessation of hostilities of the Korean War.
- It was not the end of a war, but only a cessation of hostilities in an attempt to negotiate a lasting peace.
- Military commanders from China and North Korea signed the agreement on one side, with the US-led United Nations Command signing on behalf of the international community.
What is the Demilitarized Zone (DMZ)?
- The DMZ marks where the 1950-53 Korean War — when China and North Korea battled UN forces led by the United States — ended with an armistice, not a treaty.
- It is a 2 km-wide buffer, stretching coast to coast across the peninsula, lined by both sides with razor wire, heavy armaments and tank traps.
- It is 60 km from Seoul and 210 km from the North Korean capital of Pyongyang. Inside the DMZ is a Joint Security Area (JSA).
- The so-called ‘peace village’ of Panmunjom, where the armistice that halted the Korean War was signed in 1953, is located in the 800-metre-wide and 400-metre-long JSA zone.
- A Military Demarcation Line (MDL) marks the boundary between the two Koreas.
Why it is significant?
- Vast stretches of the DMZ have been no man’s land for more than 60 years, where wildlife has flourished undisturbed.
- Last year, US President Donald Trump met with North Korean leader Kim Jong Un at the demilitarized zone separating the two Koreas, in Panmunjom.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Doctrine of Force Majeure
Mains level: Doctrine of Force Majeure, frustration of a contract
The recent spread of the Coronavirus has triggered a global slowdown and has rendered ongoing business operations of several organisations to almost a standstill. This has resorted them to invoking the ‘force majeure’ clause to seek some relief.
Practice question for mains:
Q) What is the doctrine of Force Majeure and Frustration of a Contract? Discuss how it can worsen the NPA crisis in India.
What is Force Majeure?
- Force majeure is purely a contractual remedy available to an affected party under a contract and for seeking relief, the reference would be to the express terms of the contract.
- It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.
- While force majeure has neither been defined nor specifically dealt with, in Indian statutes, some reference can be found in Section 32 of the Indian Contract Act, 1872 (the “Contract Act”).
- It envisages that if a contract is contingent on the happening of an event which event becomes impossible, then the contract becomes void.
Where are such clauses found?
- Force majeure clauses can usually be found in various contracts such as power purchase agreements, supply contracts, manufacturing contracts, distribution agreements, project finance agreements, agreements between real estate developers and home buyers, etc.
Circumstances qualified for force majeure
- A force majeure clause typically spells out specific circumstances or events, which would qualify as force majeure events, conditions which would have be fulfilled for such clause to apply.
- As such, for a force majeure clause to become applicable the occurrence of such events should be beyond the control of the parties.
- The parties will be required to demonstrate that they have made attempts to mitigate the impact of such force majeure event.
- If an event or circumstance qualifies, the consequence would be that parties would be relieved from performing their respective obligations to be undertaken by them under the contract.
Why it is in news, now?
- Due to the lockdown restrictions placed by the government, the parties’ ability to perform and fulfil their contractual obligations is affected.
- Where the contract does not specifically cover the current situation is a matter of debate.
- The Indian Contract Act, 1872 is more than a century old and does not have any specific provisions relating to suspension of contracts or termination of contracts in cases of a pandemic.
- The Act clearly provides that an agreement to do an act impossible in itself is void (Section 56).
- After a contract is made, if any act becomes impossible or unlawful by reason of some event, such a contract becomes void.
What is the difference between force majeure and frustration of a contract?
- Under the doctrine of frustration, the impossibility of a party to perform its obligations under a contract is linked to the occurrence of an event/circumstance subsequent to the execution of a contract and which was not contemplated at the time of execution of the contract.
- However, under in case of a force majeure, parties typically identify, prior to the execution of a contract, an exhaustive list of events, which would attract the applicability of the force majeure clause.
- The doctrine of Frustration renders the contract void and consequently, all contractual obligations of the parties cease to exist.
What did the Supreme Court say?
- Recently, the Supreme Court observed that the doctrine of frustration as enumerated in the Act would apply only where the parties have not specified the consequences of an event which renders the performance of the contract impossible.
- Termination of a frustrated contract would be possible only in cases where the contract becomes impossible to perform which means the damage to the contract should be of permanent nature and not something which can be performed with the passage of time.
- Hence a temporary inability or force majeure event would not qualify under the doctrine.
What lies ahead?
- The force majeure clause in contracts should not be misconstrued as an event of frustration covered under the Act.
- Force majeure is purely a contractual remedy available to an affected party under a contract and for seeking relief; the reference would be to the express terms of the contract.
- However, a party claiming frustration of contract and seeking to escape liability or other obligation under a contract will necessarily have to approach an appropriate judicial forum.
- It is likely that ‘force majeure’ clauses in contracts need to be more heavily negotiated to include references to epidemics or pandemics, in addition to other situations.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Heatwaves, Western Disturbances
Mains level: Heatwaves and various threats posed
For the past five days, Rajasthan, Delhi, Uttar Pradesh, Madhya Pradesh, and Maharashtra have been experiencing severe to very severe heatwave conditions. Here is why this summer is slightly unusual.
Heatwaves being more frequent phenomena, the UPSC may end up asking a prelim as well as mains question about it. It may ask Q. What are heat waves and how are they classified? What are the external factors on which it is depended?
A MCQ may be a statement based question mentioning the criteria for declaring a heatwave.
What is a heatwave and when is it declared?
Heatwaves occur over India between March and June.
- IMD declares a heatwave event when the maximum (day) temperature for a location in the plains crosses 40 degrees Celsius.
- Over the hills, the threshold temperature is 30 degrees Celsius.
Following criteria are used to declare heatwave:
To declare heatwave, the below criteria should be met at least in 2 stations in a Meteorological subdivision for at least two consecutive days and it will be declared on the second day.
a) Based on Departure from Normal
- Heat Wave: Departure from normal is 4.5°C to 6.4°C
- Severe Heat Wave: Departure from normal is >6.4°C
b) Based on Actual Maximum Temperature (for plains only)
- Heat Wave: When actual maximum temperature ≥ 45°C
- Severe Heat Wave: When actual maximum temperature ≥47°C
How long can a heatwave spell last?
- A heatwave spell generally lasts for a minimum of four days. On some occasions, it can extend up to seven or ten days.
- The longest recorded heatwave spell, in recent years, was between 18 – 31 May 2015.
- This spell had severely affected parts of West Bengal along with Odisha, Andhra Pradesh, and Telangana.
- Heatwave conditions occurring in May have been observed to last longer, as the season reaches its peak this month.
- Whereas those reported in June often die down sooner, often due to the onset of Southwest monsoon over the location or in its neighbourhood.
Does all of India experience heatwave conditions?
- Heatwaves are common over the Core Heatwave Zone (CHZ) — Rajasthan, Punjab, Haryana, Chandigarh, Delhi, West Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Orissa, Vidarbha in Maharashtra.
- The CHZ also includes parts of Gangetic West Bengal, Coastal Andhra Pradesh and Telangana, as categorised by IMD.
- Several recent studies indicate that CHZ experience more than six heatwave days per year during these four months.
- Many places in the northwest and cities along southeastern coast report eight heatwave days per season.
- However, the regions in the extreme north, northeast and southwestern India are lesser prone to heatwaves.
Whats’ so unusual this year?
- Summer season reaches its peak by May 15 in India when the day temperatures across north, west, and central India cross 40 degrees and hover close to 45 degrees then on.
- This year, north India did not experience such temperatures till May 21.
- It was mainly because of the continuous inflow of Western Disturbances that influenced the weather in the north till as late as April.
- Since last winter, there was frequent passing of Western Disturbances over the north, appearing after every five to seven days.
What are these Western Disturbances?
- Originating in the Mediterranean Sea, Western Disturbances are eastward-moving winds that blow in lower atmospheric levels.
- They affect the local weather of a region during its onward journey.
- Between January and March this year, there were about 20 Western Disturbances, a record of sorts.
- When Western Disturbances interact with weather systems heading from the two southern seas, that is, warm winds blowing in from the Bay of Bengal or the Arabian Sea, they cause snowfall or rainfall over the north.
- A significant influence of Western Disturbances is experienced from December to February. However, this year, its influence persisted until early May.
- The recent Western Disturbances got support from easterly winds blowing over from the Bay of Bengal.
Has cyclone Amphan influenced the current heatwave?
- Since the event of severe heat has emerged immediately after the passing of Cyclone Amphan, experts confirm its role in leading to the present heatwave spell.
- Cyclone Amphan, which was a massive Super Storm covering 700 km, managed to drag maximum moisture from over the Bay of Bengal to entire Peninsula.
- All the moisture that was otherwise built during the thunderstorm and rainfall got gradually depleted from over vast areas as the storm advanced towards West Bengal and Bangladesh between May 16 and 20.
- It has now triggered dry north-westerly winds to blow over Rajasthan, Madhya Pradesh, Uttar Pradesh and Maharashtra causing severe heatwave.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Charru mussel
Mains level: NA
An invasive mussel native to the South and Central American coasts is spreading quickly in the backwaters of Kerala.
Try this PYQ from CSP 2018:
Q. Why is a plant called Prosopis juliflora often mentioned in news?
(a) Its extract is widely used in cosmetics.
(b) It tends to reduce the biodiversity in the area in which it grows
(c) Its extract is used in the pesticides.
(d) None of the above
Charru mussel
- The rapid spread of the Charru mussel (Mytella strigata) may have been triggered by Cyclone Ockhi which struck the region in 2017.
- With a population as high as 11,384 per sq metre here, it has replaced the Asian green mussel (Perna Viridis) and the edible oyster Magallana bilineata (known locally as muringa).
- Externally, the Charru mussel resembles the green and brown mussels (kallummekka in Malayalam) but is much smaller in size. Its colour varies from black to brown, purple or dark green.
- Surveys show the presence of the Charru mussel in the Kadinamkulam, Paravur, Edava-Nadayara, Ashtamudi, Kayamkulam, Vembanad, Chettuva and Ponnani estuaries/backwaters.
- Ashtamudi Lake, a Ramsar site in Kollam district, remains the worst-hit.
Threats posed
- Though this smaller mussel is edible, the overall economic loss and impact on biodiversity are much bigger, it is pointed out.
- It is throwing out other mussel and clam species and threatening the livelihoods of fishermen engaged in shrimp fisheries.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Dugong
Mains level: NA
The dugong, commonly known as the sea cow, is fighting for its survival in Indian waters experts have said on the eve of ‘World Dugong Day’ on May 28, 2020.
Try this question from CSP 2015:
Q) With reference to ‘dugong’, a mammal found in India, which of the following statements is/are correct?
1) It is a herbivorous marine animal.
2) It is found along the entire coast of India
3) It is given legal protection under Schedule 1 of the Wildlife (Protection) Act, 1972.
Select the correct answer using the code given below.
(a) 1 and 2
(b) 2 only
(c) 1 and 3
(d) 3 only
Dugong
- Dugongs are mammals, which means they give birth to live young and then produce milk and nurse them.
- It is the flagship animal of Gulf of Mannar Marine National Park.
- Once the female is pregnant, she will carry the unborn baby, called a foetus for 12-14 months before giving birth.
- Female dugongs give birth underwater to a single calf at three to seven-year intervals.
- Dugongs graze on seagrass, especially young shoots and roots in shallow coastal waters. They can consume up to 40 kilograms of seagrass in a day.
- Dugongs are an IUCN Endangered marine species like sea turtles, seahorses, sea cucumbers and others.
- They are protected in India under Schedule I of the Wild (Life) Protection Act, 1972.
Threats to dugongs
- Human activities such as the destruction and modification of habitat, pollution, rampant illegal fishing activities, vessel strikes, unsustainable hunting or poaching and unplanned tourism are the main threats to dugongs.
- The loss of seagrass beds due to ocean floor trawling was the most important factor behind dwindling dugong populations in many parts of the world.
Why needs urgent attention?
- There were just 250 dugongs in the Gulf of Mannar in Tamil Nadu, the Andaman and Nicobar Islands and the Gulf of Kutch in Gujarat according to the 2013 survey report of the Zoological Survey of India (ZSI).
- Hundreds of dugongs inhabited waters off the Odisha, West Bengal and Andhra Pradesh coasts two centuries back. But they are extinct in these areas now, he added.
- Seagrass in Odisha’s Chilika Lake is a proper habitat for dugongs. However, there is not an extant population in Chilika.
Other facts:
- The 13th CoP of the Convention on the Conservation of Migratory Species of Wild Animals (CMS), an environmental treaty under the aegis of the UNEP, was hosted by India this year at Gandhinagar in Gujarat.
- India is a signatory to the CMS since 1983.
- India has signed non-legally binding Memorandums of Understanding with CMS on the conservation and management of Siberian Cranes (1998), Marine Turtles (2007), Dugongs (2008) and Raptors (2016).
- Proper conservation is the only way to save dugongs from extinction. Conservation in other places like Australia has seen their population crossing 85,000.
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From UPSC perspective, the following things are important :
Prelims level: FAITH and Solidarity Trials
Mains level: Clinical trials and ethical issues involved
With the number of COVID-19 patients rising in India, a pharma company has announced a new randomized study to test the combined efficacy of two antiviral drugs under the ‘FAITH Trials’.
Misleading names: One may get confused over the names given to these clinical trials. The name ‘FAITH’ and ‘Solidarity’ appear more like a judicial trial or some Human Rights violation related trials. UPSC can knock such areas in prelims.
FAITH Trials
- The two drugs: Favipiravir and Umifenovir will be tried as a potential COVID-19 treatment strategy.
- This new combination clinical trial will be called FAITH – (FA vipiravir plus Um I fenovir (efficacy and safety) Trial in Indian Hospital setting).
- The two antiviral drugs have different mechanisms of action, and their combination may demonstrate improved treatment efficacy by effectively tackling high viral loads in patients during the early stages of the disease.
- This trial offers a comprehensive antiviral cover on pre-entry and post-entry life-cycle of the SARS-CoV-2 virus.
Dosages under the trial
- Patients taking the drug will receive Faviprivir 1800 mg bid and Umifenovir 800 mg bid on Day 1.
- Thereafter, they will receive Faviprivir 800mg bid and Unifenovir 800mg bid for the remaining course of treatment.
- Duration of treatment will be 14 days and patients will be discharged after clinical cure and two consecutive negative tests.
- While one group will be receiving Favipiravir and Umifenovir (with standard supportive care), the other group will receive Favipiravir along with standard supportive care.
Other trials in news: The Solidarity Trial
- “Solidarity” is an international initiative for clinical trials launched by the WHO, along with partners, to help find an effective treatment for Covid-19.
- It was originally supposed to look at four drugs or drug combinations: Remdesivir, HCQ, Ritonavir/Lopinavir and Lopinavir/Ritonavir/Interferon beta 1a.
- Now with HCQ trial enrolment stalled for at least the next few weeks, the Solidarity trial will proceed with the other three arms.
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From UPSC perspective, the following things are important :
Mains level: Paper 3- Importance of innovation for self-reliance.
What does it take to be self-reliant? (Hint: R&D!) This is the question this article tries to answer. After independence, we had a good start in R&D. But what went wrong? What was the role played by globalisation? Did the globalisation deliver on its promise of technology transfer? And finally, what lies on the way forward for India? This article answers all such question.
What went wrong: historical perspective
- India chose the path of self-reliance in state-run heavy industries and strategic sectors after independence.
- In the decades following independence, this choice of self-reliance had placed India ahead of most developing countries.
- In the 1970s and 80s, however, India did not modernise these industries to climb higher up the technological ladder.
- The private sector, which had backed the state-run core sector approach in its Bombay Plan, stayed content with near-monopoly conditions in non-core sectors in a protected market.
- Little effort was made to modernise light industries or develop contemporary consumer products.
- India’s industrial ecosystem was thus characterised by low productivity, poor quality and low technology, and was globally uncompetitive.
What did India lose in the ‘lost decades’?
- India completely missed out on the ‘third industrial revolution’.
- Third industrial revolution comprised electronic goods, microprocessors, personal computers, mobile phones and decentralised manufacturing and global value chains during the so-called lost decade(s).
- Today, India is the world’s second-largest smartphone market.
- However, it does not make any of these phones itself.
- India manufactures only a small fraction of solar photovoltaic cells and modules currently used, with ambitious future targets.
What happened to ‘self-reliance’ after India embraced globalisation?
- At the turn of the millennium, when India embarked on liberalisation, privatisation and globalisation.
- So, the very concept of self-reliance was rubbished.
- This happened in the belief that it was like reinventing the things already invented and wasting money on it.
- And when advanced technologies could simply be bought from anywhere at lower costs.
- Two related ideas have prevailed since then, and neither delivered the desired results.
So, what are these two basic ideas?
1. Unsuitability of PSUs in the globalised world
- The first idea was that public sector undertakings (PSUs) are, by definition, inefficient and sluggish for the competitive globalised scenario.
- No effort was made to engender either real autonomy or a transition to new technological directions.
- Instead, PSUs with capability and scale were undermined or abandoned, along with many nascent research and development (R&D) efforts, for instance, in photovoltaics, semiconductors and advanced materials.
So, what was the result of this attitude towards PSUs?
- The private sector displayed little interest in these heavy industries and showed no appetite for technology upgradation.
- With entry of foreign corporations, most Indian private companies retreated into technology imports or collaborations.
- Even today, most R&D in India is conducted by PSUs.
- And much of the smaller but rising proportion of private sector R&D is by foreign corporations in information technology and biotechnology/pharma.
- Conclusion: Given the disinclination of most of the private sector towards R&D and high-tech manufacturing, significant government reinvestment in PSUs and R&D is essential for self-reliance.
2. Foreign companies were expected to bring new technologies in India
- The second idea was that inviting foreign direct investment and manufacturing by foreign majors would bring new technologies into India’s industrial ecosystem.
- This was thought to obviate the need for indigenous efforts towards self-reliance.
So, what happened on the ground?
- But mere setting up of manufacturing facilities in India is no guarantee of absorption of technologies.
- There is no evidence from any sector that this has taken place or has even been attempted.
- The fact is, foreign majors jealously guard commercially significant or strategic technologies in off-shore manufacturing bases.
- Conclusion: The key problem of self-reliance is therefore neither external finance nor domestic off-shore manufacturing, but resolute indigenous endeavour including R&D.
Let’s look at experience of other Asian countries towards self-reliance
Three models emerge from Asian countries.
1. Focus on technology and industries
- Japan’s post-war success, was seen as a template by some countries to follow.
- These include countries like South Korea, Taiwan, Singapore and Hong Kong
- These countries took huge technological and industrial strides in the 1970s and 80s.
- South Korea emerged as a global powerhouse in manufacturing, but also in indigenously developed technologies.
- Taiwan developed technologies and manufacturing capacities in robotics and micro-processors.
- While Singapore and Hong Kong adapted advanced technologies in niche areas.
- These self-reliant capabilities were enabled, among other factors, by planned state investments in R&D including basic research (3-5% of GDP), technology and policy support to private corporations, infrastructure and, importantly, education and skill development (4-6% of GDP).
2. Focus on off-shore manufacturing and not on self-reliance
- Countries like Thailand, Malaysia, Indonesia and Vietnam have focused on off-shore manufacturing lower down the value chain and without the thrust on self-reliance.
- This is useful for job creation but is an unsuitable model for a country of India’s size and aspirations.
3. China: Transition from low-end manufacturing to dominant role in supply chains
- China is, of course, unique in scale and in its determination to become a superpower not just geopolitically but also in self-reliant S&T and industrial capability.
- China advanced purposefully from low-end mass manufacturing to a dominant role in global supply chains.
- It has now decided on shifting to advanced manufacturing.
- It has set itself a target of becoming a world leader by 2035 in 5G, supercomputing, Internet of Things (IoT), artificial intelligence (AI), autonomous vehicles, biotech/pharma and other technologies of the ‘fourth industrial revolution’.
Way forward for India
- India may well have missed the bus in many of technologies in which the U.S., Europe and China have established perhaps insurmountable leads.
- Yet, self-reliant capabilities in electric and fuel cell vehicles, electricity storage systems, solar cells and modules, aircraft including UAVs, AI, robotics and automation, biotech/pharma and others are well within reach.
- Large-scale concerted endeavours would, however, be required, since self-reliance will not happen by itself.
- State-funded R&D, including in basic research, by PSUs and research institutions and universities needs to be scaled-up significantly, well above the dismal 1% of GDP currently.
- Upgraded and reoriented PSUs would also be crucial given their distinctive place in the ecosystem.
- Private sector delivery-oriented R&D could also be supported, linked to meaningful participation in manufacturing at appropriate levels of the supply chain.
- India’s meagre public expenditure on education needs to be substantially ramped up including in skill development.
Consider the question “The path to the self-reliance of any country goes through robust capabilities in the R&D. Comment”
Conclusion
Self-reliance would need a paradigm shift in our approach toward many things. First and foremost is the R&D. Potential of the PSUs has to be tapped to their fullest in the realms of R&D. The second area of focus should be education. These two areas are the key to achieve self-reliance and should be the focus of policymakers.
Back2Basics: Bombay Plan
- The Bombay plan was a set of proposal of a small group of influential business leaders in Bombay for the development of the post-independence economy of India.
- This plan was published in two parts or volume- first in 1944 and second in 1945.
- The prime objectives of the plan were to achieve a balanced economy and to raise the standard of living of the masses of the population rapidly by doubling the present per capita income within a period of 15 years from the time the plan goes into operation.
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From UPSC perspective, the following things are important :
Prelims level: GSTN
Mains level: Paper 3- Challenges ON-ORC could face and how the GST could offer valuable lesson for ON-ORC
Never before we felt the necessity of portable benefit schemes as we did in the wake of the pandemic. Portable ration card could have mitigated the suffering of migrant workers to some extent. But it was not to be. This article examines the challenges in implementing the idea of ON-ORC and offers the solution to these challenges by drawing on the lessons learned from GST. At the same time, the shortcoming of GST can also be avoided in the ON-ORC.
What is One Ration Card (ON-ORC)?
- In the present system, a ration cardholder can buy foodgrains only from an Fair Price Shop that has been assigned to her in the locality in which she lives.
- However, this will change once the ONORC system becomes operational nationally.
- Under the ONORC system, the beneficiary will be able to buy subsidised foodgrains from any FPS across the country.
- The new system, based on a technological solution, will identify a beneficiary through biometric authentication on electronic Point of Sale (ePoS) devices installed at the FPSs.
- This would enable that person to purchase the number of foodgrains to which she is entitled under the NFSA.
Portable welfare benefit and attempts so far to achieve it
- The idea of portable welfare benefits means a citizen should be able to access welfare benefits irrespective of where she is in the country.
- In the case of food rations, the idea was first mooted under the UPA government by a Nandan Nilekani-led task force in 2011.
- The current government had committed to a national rollout of One Nation, One Ration Card (ON-ORC) by June 2020, and had initiated pilots in 12 states.
Progress on intra-state and inter-state portability
- While intra-state portability of benefits has seen good initial uptake, inter-state portability has lagged.
- The finance minister has now announced the deadline of March 2021 to roll out ON-ORC.
So, to ensure a smooth rollout, let’s review the challenges thus far
1) The fiscal implications:
- ON-ORC will affect how the financial burden is shared between states.
2) The larger issues of federalism and inter-state coordination:
- Many states are not convinced about a “one size fits all” regime because i) they have customised the PDS through higher subsidies, ii) higher entitlement limits, and iii) supply of additional items.
3) The technology aspect:
- ON-ORC requires a complex technology backbone that brings over 750 million beneficiaries, 5,33,000 ration shops and 54 million tonnes of food-grain annually on a single platform.
How the lessons learned from GST can be applied to deal with the above 3 challenges?
1. Fiscal challenge
- Just like with ON-ORC, fiscal concerns had troubled GST from the start.
- States like Tamil Nadu and Gujarat that are “net exporters” were concerned they would lose out on tax revenues to “net consumer” states like UP and Bihar.
- Finally, the Centre had to step in and provide guaranteed compensation for lost tax revenues for the first five years.
- The Centre could provide a similar assurance to “net inbound migration” states such as Maharashtra and Kerala that any additional costs on account of migrants will be covered by it for the five years.
2. We could have a National council for ON-ORC
- GST also saw similar challenges with broader issues of inter-state coordination.
- In a noteworthy example of cooperative federalism, the central government created a GST council consisting of the finance ministers of the central and state governments to address these issues.
- The government could consider a similar national council for ON-ORC.
- To be effective, this council should meet regularly, have specific decision-making authority, and should operate in a problem-solving mode based on consensus building.
3. Technological aspect: PDS Network
- GST is supported by a sophisticated tech backbone, housed by the GST Network (GSTN), an entity jointly owned by the Centre and states.
- A similar system would be needed for ON-ORC.
- The Nilekani-led task force recommended setting up of a PDS network (PDSN).
- PDSN would track the movement of rations, register beneficiaries, issue ration cards, handle grievances and generate analytics.
- Since food rations are a crucial lifeline for millions, such a platform should incorporate principles such as inclusion, privacy, security, transparency, and accountability.
- The IM-PDS portal provides a good starting point.
Also, there are certain shortcomings in GST which we could avoid in ON-ORC
We should learn from the shortcomings and challenges of the GST rollout. For example:
1) Delay in GST refunds led to cash-flow issues.
- Similar delays in receiving food rations could be catastrophic.
- Therefore, ON-ORC should create, publish and adhere to time-bound processes.
- The time-bound processes could be in the form of right to public services legislation that have been adopted by 15 states, and rapid grievance redress mechanisms.
2) Increase in compliance burden for MSMEs, especially for those who had to digitise overnight.
- Similar challenges could arise in ON-ORC.
- PDS dealers will need to be brought on board, and not assumed to be compliant.
- Citizens will need to be shielded from the inevitable teething issues by keeping the system lenient at first.
- This can be done by providing different ways of authenticating oneself and publicising a helpline widely.
Consider the question “One Nation-One Ration Card(ON-ORC) could solve many problems faced by the beneficiaries when they move across the country. Examine the challenges the ON-ORC could face. Suggest ways to deal with these challenges.”
Conclusion
If done well, ON-ORC could lay the foundation of a truly national and portable benefits system that includes other welfare programmes like LPG subsidy and social pensions. It is an opportunity to provide a reliable social protection backbone to migrants, who are the backbone of our economy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MOOCs
Mains level: Paper 2- Is online learning a substitute for the traditional educational institutions?
Left with no choice, many education institutions turned to online mode. But could that be a new normal? This article analyses the indispensable role of online education. However, online education cannot be a substitute for traditional education institutes. WHY? Read the article to know about the vital role of traditional educational institutions…
Online education (OE): Supplement not the substitute
- The incredible synergy unleashed by information and communications technology (ICT) is the best thing to have happened to education since the printing press.
- Indeed, higher education today is unthinkable without some form of the computer and some mode of digitised data transmission.
- OE can use content and methods that are hard to include in the normal curriculum.
- OE can put pressure on lazy or incompetent teachers.
- OE can provide hands-on experience in many technical fields where simulations are possible.
- And OE can, of course, be a powerful accessory for affluent students able to afford expensive aids.
- As products of this revolution, online methods of teaching and learning deserve our highest praise — but only when cast in their proper role.
- This proper role is to supplement, support and amplify the techniques of face-to-face education.
- The moment they are proposed as a substitute for the physical sites of learning we have long known — brick-and-cement schools, colleges, and universities — online modes must be resolutely resisted.
So, what are the vested interests involved?
- Resistance to OE is often dismissed as the self-serving response of vested interests, notably obstructive, technophobic teachers unwilling to upgrade their skills.
- But these are not the only vested interests involved.
- Authoritarian administrators are attracted by the centralised control and scaling-at-will that OE offers.
- Educational entrepreneurs have been trying to harvest the billions promised by massive open online courses (MOOCs) — think of Udacity, Coursera, or EdX.
- Pundits are now predicting post-pandemic tie-ups between ICT giants like Google and Amazon and premium education brands like Harvard and Oxford that will launch a new era of vertically-integrated hybrid OE platforms.
Is OE a viable alternative to traditional educational institutions (TEI) for the typical Indian student?
- No one with access to an elite TEI chooses OE.
- Instead, we know that OE always loses in best-to-best comparisons.
- Favourable impressions about OE are created mostly by comparing the best of OE with average or worse TEIs.
But is it true that the best OE is better than the average college or university?
- OE claims that neither the campus nor face-to-face interaction are integral to education.
- Since the comparative evaluation of virtual versus face-to-face pedagogic interaction needs more space, the campus question is considered here.
- How does the typical student’s home compare with a typical TEI campus?
- Census 2011 tells us that 71 per cent of households with three or more members have dwellings with two rooms or less.
- According to National Sample Survey data for 2017-18, only 42 per cent of urban and 15 per cent of rural households had internet access.
- Only 34 per cent of urban and 11 per cent of rural persons had used the internet in the past 30 days.
- It is true that many TEIs (both public and private) have substandard infrastructure.
- But these data suggest that the majority (roughly two-thirds) of students are likely to be worse off at home compared to any campus.
- The impact of smartphone capabilities and stability of net connectivity on OE pedagogy also needs to be examined.
Importance of college as a social space
- It is as a social rather than physical space that the college or university campus plays a critical role.
- Public educational institutions play a vital role as exemplary sites of social inclusion and relative equality.
- In Indian conditions, this role is arguably even more important than the scholastic role.
- The public educational institution is still the only space where people of all genders, classes, castes, and communities can meet without one group being forced to bow to others.
- Whatever its impact on academics, this is critical learning for life.
- Women students, in particular, will be much worse off if confined to their homes by OE.
Consider the question- “Covid-19 pandemic forced many educational institute to explore the online more of education. And this also brought to the fore the potential of the online mode of education. In light of this, examine the issues with substituting the online mode of education for the traditional educational mode.”
Conclusion
Though an indispensable supplement for traditional education, there are certain aspects of education and a social life that online learning cannot substitute. So, the government should not divert its attention from the traditional educational institution and look at online education as its substitute.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Van Allen Radiation Belt, South Atlantic Anomaly
Mains level: South Atlantic Anomaly and its impact
New data obtained by the European Space Agency (ESA) Swarm satellites has revealed the existence of a mysterious anomaly weakening the Earth’s magnetic field. Termed as ‘South Atlantic Anomaly’, it extends all the way from South America to southwest Africa.
The term ‘South Atlantic Anomaly’ at its first sight looks similar to any climate/oceanic current related phenomena. But it’s not! This is where you can end up losing 2.66 marks in the prelims!
What is South Atlantic Anomaly (SAA)?
- The SAA is referred to the behaviour of Earth’s Geo-Magnetic field in an area between Africa and South America.
- The SAA is an area where the Earth’s inner Van Allen radiation belt comes closest to the Earth’s surface, dipping down to an altitude of 200 kilometres.
- This leads to an increased flux of energetic particles in this region and exposes orbiting satellites to higher-than-usual levels of radiation.
- The effect is caused by the non-concentricity of the Earth and its magnetic dipole.
- The SAA is the near-Earth region where the Earth’s magnetic field is weakest relative to an idealized Earth-centered dipole field.
Weakening of the magnetic field
- Over the last 200 years, the magnetic field has lost around 9% of its strength on a global average.
- A large and rapid shrink has been observed in the SAA region over the past 50 years just as the area itself has grown and moved westward.
- The weakening of the magnetic field is also causing technical difficulties for the satellites and spacecraft orbiting the planet.
- The study conducted between 1970 and 2020, said that the magnetic field weakened considerably in a large region stretching from Africa to South America, known as the ‘SAA’.
- This area has grown and moved westward at a rate of around 20 km per year.
Its impact
- The magnetic shield has an important role to play in keeping unwanted radiation away as well as helping determine the location of magnetic poles.
- Even though unlike global warming or any weather change, this anomaly doesn’t directly impact human lives, it could actually bring on a change in the way we access technology.
- The reversal and apparent shift, which could keep extending could actually impact satellite and telecommunication system, which means that some of the internet and mobile phone functioning which depend on satellite signals can possibly get disrupted.
- It could also affect the mapping and navigation systems in smartphones.
- The weakening of earth’s magnetic field could also impact migratory movement.
- Birds, animals- all those who migrate with the change in season depend on the earth’s mapping to move about can find it a little difficult.
- This is only a possibility, but we don’t know the extent of the damage till now.
About the Van Allen Radiation Belt
- A Van Allen radiation belt is a zone of energetic charged particles, most of which originate from the solar wind, that are captured by and held around a planet by that planet’s magnetic field.
- The belts are located in the inner region of Earth’s magnetosphere. The belts trap energetic electrons and protons.
- Earth has two such belts and sometimes others may be temporarily created.
- Most of the particles that form the belts are thought to come from solar wind and other particles by cosmic rays.
- By trapping the solar wind, the magnetic field deflects those energetic particles and protects the atmosphere from destruction.
Also read:
Shifting north magnetic pole forces urgent navigation fix
Back2Basics: Swarm Constellation
- Swarm is a European Space Agency (ESA) mission to study the Earth’s magnetic field.
- It is ESA’s first constellation of satellites for Earth observation.
- The Swarm constellation consists of three satellites (Alpha, Bravo and Charlie) placed in two different polar orbits, two flying side by side at an altitude of 450 km and a third at an altitude of 530 km.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various missions mentioned in the newscard
Mains level: Quest for Mars and its possibility to host life
China’s space program is now slated to achieve a new milestone. In July, the country will launch its first Mars mission, the ‘Tianwen-1’, which is expected to land on the Red Planet’s surface in the first quarter of 2021.
UPSC may ask an MCQ asking: Which of the following is/are the space missions related to Mars? It may throw up 4-5 options (which we all get confused at after few months) like Cassini , InSight , Messanger, Voyager etc.
Tianwen-1 Mission
- The mission is named after the ancient Chinese poem ‘Questions to Heaven’, the Tianwen-1.
- It is an all-in-one orbiter; lander and rover will search the Martian surface for water, ice, investigate soil characteristics, and study the atmosphere, among completing other objectives.
- It will carry 13 payloads (seven orbiters and six rovers) that will explore the planet.
- It will be the first to place ground-penetrating radar on the Martian surface, which will be able to study local geology, as well as rock, ice, and dirt distribution.
- China’s previous ‘Yinghuo-1’ Mars mission, which had piggybacked on a Russian spacecraft, had failed after it could not leave the Earth’s orbit and disintegrated over the Pacific Ocean in 2012.
Why all are curious about Mars exploration?
- After the Moon, the most number of space missions in the Solar System has been to Mars.
- Despite being starkly different in many ways, the Red Planet has several Earth-like features– such as clouds, polar ice caps, canyons, volcanoes, and seasonal weather patterns.
- For ages, scientists have wondered whether Mars can support life.
- In the past few years, Mars missions have been able to discover the possible presence of liquid water on the planet, either in the subsurface today or at some point in its past.
- This has made space explorers more curious about whether the planet can sustain life.
- Newer NASA missions have since transitioned from their earlier strategy of “Follow the Water” to “Seek Signs of Life”.
Back2Basics: Various missions on Mars
- The USSR in 1971 became the first country to carry out a Mars landing– its ‘Mars 3’ lander being able to transmit data for 20 seconds from the Martian surface before failing.
- The country made it’s second and Mars landing two years later in 1973.
- The second country to reach Mars’s surface, the US, holds the record for the most number of Mars landings.
- Since 1976, it has achieved 8 successful Mars landings, the latest being the ‘InSight’ in 2019 (launched in 2018).
- India and the European Space Agency have been able to place their spacecraft in Mars’s orbit.
- India’s Mars Orbiter Mission (MOM) or ‘Mangalyaan’ was able to do so in September 2014, almost a year after its launch from the Satish Dhawan Space Centre in Andhra Pradesh.
- The Chinese mission now is expected to take off around the same time when NASA is launching its own Mars mission– the ambitious ‘Perseverance’ which aims to collect Martian samples and bring them back.
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