Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kangra Tea
Mains level: Not Much
The chemicals in Kangra tea are found to be effective in boosting immunity as they can block coronavirus activity better than anti-HIV drugs.
It would be no surprise to expect a question based on worldwide tea production:
Q. Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)
(a) China
(b) India
(c) Myanmar
(d) Vietnam
Kangra Tea
- Kangra tea is a tea from the Kangra district in Himachal Pradesh, India.
- Both black tea and green tea have been produced in the Kangra Valley since the mid-19th century.
- After a feasibility survey in 1848 showed the area of being suitable for tea plantation, a Chinese variety of Camellia sinensis was planted across the region.
- Kangra tea is known for its unique colour and flavour.
- The unique characteristics of the tea are attributed to the geographical properties of the region.
- Kangra tea was given the Geographical Indication status in 2005. Tea was first grown in the Kangra region in the mid-19th century.
Benefits of Kangra Tea
- Using computer-based models, the scientists screened 65 bioactive chemicals or polyphenols that could bind to a specific viral protein more efficiently than commercially available anti-HIV drugs approved for treating COVID-19 patients.
- These chemicals might block the activity of the viral protein that helps the virus to thrive inside human cells.
Back2Basics: Lopinavir/ Ritonavir
- Lopinavir/ritonavir (LPV/r), sold under the brand name Kaletra among others, is a fixed-dose combination medication for the treatment and prevention of HIV/AIDS.
- It combines lopinavir with a low dose of ritonavir.
- It is generally recommended for use with other antiretrovirals.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act
Mains level: Paper 3- The issues with APMC reforms
Reforms in agri-marketing has been long overdue. So, the government recently announced three reforms in this regard. This article examines the problems of agri-marketing. And it concludes that the said reforms are far from being the silver bullet for these problems. So, why these reforms are not going to be effective? Does demand play any role in the problems agriculture is facing currently? Read to know about these issues.
Announcement of reforms regarding agricultural marketing
- The announcement of reforms in agricultural marketing by Finance Minister in May, has been hailed by some as the “1991” moment for agriculture.
- The three reforms regarding agricultural marketing were the reforms in the 1) Agricultural Produce Marketing Committee (APMC) Act, 2) the Essential Commodities Act, 3) Contract farming.
- All of these have been in discussion for almost two decades, with the APMC Act having already seen substantial reforms in many States.
- The first comprehensive model act on APMC was proposed during 2003, and since then, similar efforts to push for more reforms have been proposed in 2007, 2013, and as late as 2017 by the present government.
So, let’s a look at provisions of APMC Act and issues with it
What is the main argument against APMC Act?
- Two main arguments against the APMC Act are-
- 1) It creates barriers to the entry and exit of traders.
- 2) Makes the sale and purchase of agricultural produce compulsory for farmers as well as traders.
Different steps taken by the state governments to address the issues
- So, as many as 17 State governments have amended the APMC Act to make it more liberal.
- In fact, the regulations and the functioning of mandis vary a great deal across States.
- Kerala does not have an APMC Act.
- Bihar repealed it in 2006.
- But several others such as Maharashtra, West Bengal, Odisha, Gujarat, and Andhra Pradesh deregulated fruits and vegetables trade, allowed private markets, introduced a unified trading licence and have introduced a single-point levy of market fee.
- Tamil Nadu has already reformed its APMC with no market fee.
- Several others such as Jharkhand, Himachal Pradesh, Uttarakhand, Haryana and Rajasthan have undertaken one or more of these reforms.
- Many States have introduced direct marketing of farm produce, examples being the Uzhavar Sandhai (Tamil Nadu), the Rythu Bazaar (Andhra Pradesh and Telangana), the Raitha Santhe (Karnataka), the Apni Mandi (Punjab) and the Krushak Bazaar – (Odisha).
So, why the mandis are still blamed for farmers’ problems?
- Despite the above-stated reforms, APMC mandis continue to be vilified for-1) all the ills plaguing marketing infrastructure 2) the low prices received by the farmers for their produce.
- What is the problem? The problem with mandis is not the regulation per se and the structure of mandis but the political interference in the functioning of the markets.
- These are more obvious in case of large mandis specialising in commercial crops and fruits and vegetables, where production is regionally concentrated.
- But even with these deficiencies, APMC mandis continue to play an important role in providing access to the market for farmers.
What the Bihar example teaches us?
- Bihar repealed the APMC Act in 2006.
- The general argument in favour of reforms is that 1) it will allow private investment in marketing infrastructure and 2) provide more choices to farmers, leading to better prices received by farmers.
- But in the case of Bihar, no investment came in building market infrastructure.
- The loss of revenue due to the repeal of the APMC also led to deterioration of existing infrastructure in the State.
- The revenue collected from the APMC earlier was used not only for the modernisation of these market yards but also for the laying of roads and construction of other infrastructure to provide farmers better access to markets.
- But after the repeal, there have been no takers for these market yards, with no investment in creating private mandis.
- On the other hand, it has led to proliferation of private unregulated markets which charge a market fee from traders as well as farmers, and without any infrastructure for weighing, sorting, grading and storage.
- Even in other States where there is deregulation to allow private traders, there is hardly any investment to create market spaces let alone provide other facilities.
- There is also no evidence that farmers have received better prices in private mandis outside the APMC.
- While there have been instances of collusion and corruption in the running of the APMC, they continue to provide essential services to farmers.
Inadequacies of the regulated market
- As against the recommendation that a regulated market should be available to farmers within a radius of 5 km currently regulated markets is in the radius of 12 km.
- There are more than 7,000 regulated markets and 20,000 rural markets when the need is at least twice these figures.
- Most of the existing ones require investment in upgradation of infrastructure.
Price received is more a function of demand than access to market
- The argument that the only bottleneck for farmers not receiving remunerative prices is due to the APMC Act is flawed.
- More than 80% of farmers, most of whom are small and marginal farmers, do not sell their produce in the APMC mandis.
- For a majority of farmers, prices received are more a function of the demand for agricultural commodities than access to markets.
So, let’s come to decline in demand for agriculture produce
- For much of the period during the last two years, terms of trade have moved against agriculture.
- Agricultural commodity price inflation had been negative for a large part of the last two years.
- With underlying weakness in demand and obsession with inflation targeting through fiscal and monetary policies, most agricultural commodities have seen a sharp decline in demand and, consequently, prices received by farmers.
- The argument for choice of markets is only valid as long as there are buyers with purchasing power in the market.
- No amount of marketing reforms will lead to higher price realisation for farmers if the underlying macroeconomic conditions are unfavourable to agriculture and farmers.
What is solution to decline in demand?
- The primary task of the government should have been to increase fiscal spending to revive demand in the economy.
- This has become even more necessary after the sharp decline in incomes, job losses and decline in demand following the lockdown and expected contraction in economic activity for the year ahead.
- With international prices also showing declining trend, the urgency is to protect the farmers from the decline in commodity prices.
Consider the question “Though the APMC Act has often been blamed for the woes of the farmers in price realisation, the act is not the sole reason for price realisation problems faced by the farmers. Critically examine.
Conclusion
The announced reforms are less likely to be effective if carried out without consulting the states. And on the demand side, government needs to increase fiscal spending to create demand in the economy. These two steps will go a long way in ensuring higher incomes to farmers.
Back2Basics: Agriculture Produce Marketing Committee Regulation (APMC) Act.
- All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
- With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
- It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
- Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
- Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers.
- Market charges, costs, and taxes vary across states and commodities.
Essential Commodities Act 1955
- The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
- The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
- It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
- Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
- The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.
- The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.
How ECA works?
- If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
- The States act on this notification to specify limits and take steps to ensure that these are adhered to.
- Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
- A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
- This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
- The excess stocks are auctioned or sold through fair price shops.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: BS norms
Mains level: Vehicular pollution and PM 2.5
The Ministry of Road Transport and Highways has issued a notification regarding the emission norms for L7 (Quadricycle) category for BS-VI.
Practice question for Mains:
Q. What are Bharat Stage Emission Standards (BSES)? Discuss how the early implementation of BS-VI norms will help curb vehicular pollution in India.
What is Quadricycle Vehicle verification?
- The quadricycle is a European Union vehicle category for four-wheeled microcars, which allows these vehicles to be designed to less stringent requirements when compared to regular cars.
- Quadricycles are defined by limitations in terms of weight, engine power and speed.
- There are two categories of quadricycles: light quadricycles (L6e) and heavy quadricycles (L7e)
What are the new notified norms?
- These norms are applicable from the date of notification.
- This notification completes the process of BS-VI for all L, M and N category vehicles in India.
- The emission norms are in line with EU with WMTC cycle.
- The procedure for testing is laid down in Automotive Industry Standard (AIS) 137-Part 9.
What is the WMTC cycle?
- The World Motorcycle Test Cycle (WMTC) is a system of driving cycles used to measure fuel consumption and emissions in motorcycles.
- The methods are stipulated as part of the Global Technical Regulation established under the UN World Forum for Harmonization of Vehicle Regulations, also known as WP.29.
Back2Basics: Bharat Stage Norms
| Standard |
Reference |
Date of Implementation |
| Bharat Stage II |
Euro 2 |
1 April 2005 |
| Bharat Stage III |
Euro 3 |
1 April 2010 |
| Bharat Stage IV |
Euro 4 |
1 April 2017 |
| Bharat Stage VI |
Euro 6 |
April 2020 with a mandate (proposed) |
Minutes of BS-VI
- Carmakers would have to put three pieces of equipment — a DPF (diesel particulate filter), an SCR (selective catalytic reduction) system, and an LNT (Lean NOx trap) — to meet stringent BS-VI norms, all at the same time.
- This is vital to curb both PM (particulate matter) and NOx (nitrogen oxides) emissions as mandated under the BS-VI norms.
How is BS-VI Different from BS-IV?
- The major difference between the existing BS-IV and forthcoming BS-VI norms is the presence of sulphur in the fuel.
- While the BS-IV fuels contain 50 parts per million (ppm) sulphur, the BS-VI grade fuel only has 10 ppm sulphur content.
- Also, the harmful NOx (nitrogen oxides) from diesel cars can be brought down by nearly 70%.
- In the petrol cars, they can be reduced by 25%.
- However, when we talk about air pollution, particulate matter like PM 2.5 and PM 10 are the most harmful components and the BS-VI will bring the cancer-causing particulate matter in diesel cars by a phenomenal 80%.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Katkari Tribe, Van Dhan Yojana
Mains level: Various initiaitves for Tribal uplift
The newscard is based on the PIB news which discusses the success story of Katkari Tribe, a PVTG in Maharashtra regarding the implementation of Van Dhan Yojana.
Try this:
Consider the following statements about Particularly Vulnerable Tribal Groups (PVTGs) in India:
1) PVTGs reside in 18 States and one Union Territory.
2) A stagnant or declining population is one of the criteria for determining PVTG status.
3) There are 95 PVTGs officially notified in the country so far.
4) Irular and Konda Reddi tribes are included in the list of PVTGs.
Which of the statements given above are correct? (CSP 2019)
(a) 1, 2 and 3
(b) 2, 3 and 4
(c) 1, 2 and 4
(d) 1, 3 and 4
Katkari Tribe
- The Katkari is an Scheduled Tribe mostly belonging to the state of Maharashtra.
- They are bilingual, speaking the Katkari language, a dialect of the Marathi-Konkani languages, with each other; they speak Marathi with the Marathi speakers, who are a majority in the populace where they live.
- In Maharashtra, the Katkari has been designated a Particularly Vulnerable Tribal Group (PVTG), along with two other groups included in this sub-category: the Madia Gond and the Kolam.
- In the case of the Katkari this vulnerability derives from their history as a nomadic, forest-dwelling people listed by the British Raj under the Criminal Tribes Act of 1871, a stigma that continues to this day.
What are PVTGs?
- There are certain tribal communities who have declining or stagnant population, low level of literacy, pre-agricultural level of technology and are economically backward.
- They generally inhabit remote localities having poor infrastructure and administrative support.
- These groups are among the most vulnerable section of our society as they are few in numbers, have not attained any significant level of social and economic development.
- 75 such groups have been identified and categorized as Particularly Vulnerable Tribal Groups (PVTGs).
Back2Basics: Pradhan Mantri Van Dhan Yojana (PMVDY)
- It is a retail marketing-led value addition plan for Minor Forest Produce (MFP), meant for forest-based tribes to optimize the tribal income, locally.
- Under the program, MFP-based tribal groups/enterprises of around 300 members are formed for collection, value addition, packaging & marketing of Minor Forest Produces (MFPs).
- These tribal enterprises will be in the form of Van Dhan SHGs which will be a group of 15-20 members and such 15 SHG groups will further be federated into a larger group of Van Dhan Vikas Kendras (VDVKS) of around 300 members.
- TRIFED will support the VDVKs through providing them with model business plans, processing plans & tentative list of equipment for carrying out the value-added work of MFPs.
Also read:
[pib] “Development of PVTGs” Scheme
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various species mentioned
Mains level: Western Ghats and its biodiversity richness
A team of scientists of the Botanical Survey of India (BSI) have reported the discovery of three new plant species from the evergreen forest patches of the southern end of the Western Ghats in Kerala and Tamil Nadu.
One may get carried away from the heavy botanical names. But UPSC is known for asking ruthless questions.
Q. Recently, our scientists have discovered new and distinct spices of banana plant which attains a height of about 11 meters and has orange – colored form of pulp. In which part of India has been discovered? (CSP 2016)
a) Andaman Islands
b) Anaimalai Forests
c) Maikala Hills
d) Tropical rainforest of North-East
Which are the new species?
The three new species found are:
1) Eugenia sphaerocarpa of the Myrtaceae or Rose apple family
- A good population of Eugenia sphaerocarpa is growing in the Kakkayam area of the Malabar wildlife sanctuary in Kerala above 800 m.
- The specific epithet ‘sphaerocarpa’ denotes to the large, showy lemon-yellow spherical fruit.
- The fruits of Eugenia species are known for their palatability and many of them are harvested from the wild with some under cultivation.
2) Goniothalamus sericeus of the Annonaceae family of custard apple
- A small number of Goniothalamus sericeus plants has been found in the Kanyakumari wildlife sanctuary in Tamil Nadu.
- Mature flowers with characteristic greenish-yellow to beige petals are fragrant while the fruits are very showy and an attractive golden yellow in colour.
- The specific epithet ‘sericeus’ refers to the presence of dense silky hair on the petals.
3) Memecylon nervosum of the Melastomataceae (Kayamboo or Kaasavu in local parlance) family
- A small population of Memecylon nervosum was also found at the same sanctuary at an altitude between 700-900 m with more that than 10 sub-populations located along the banks of a perennial rivulet.
- The species have showy purplish-blue flowers and mauve to purplish-red fruits.
- The specific epithet ‘nervosum’ alludes to the presence of prominently raised lateral and intramarginal veins on the lower surface of the lamina.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Treaty of Sugauli, Lipu Lekh pass.
Mains level: Paper 2- India-Nepal ties, and issues involved.
India – Nepal relations are having its “see saw swing” moment. At one end, lies the 1950 treaty of peace and friendship, close people to people relations and India’s aid during 2015 earthquake. But on the other end lies the economic blockade and Madhesi protest. Another entry to the later side is the Border issue.
- The inauguration of road from Dharchula to Lipu Lekh was done with great fanfare, at least on the Indian side.
- The metalled road is a BIG relief for pilgrims and traders on the traditional route for the Kailash-Mansarovar yatra, who otherwise were stuck for days in the arduous walk.
So, where is the issue?
The issue lies in Nepal’s charge claiming that the stretch passes though Nepalese territory. This was displayed by some politicized moves like-
- Intemperate remarks by Nepal’s PM in the Nepalese Parliament.
- Manner (airdropped to the location by helicopters) and timing(why now?) of the Deployment of armed police at Chharung, close to Kalapani, in its Sudoor Paschim.
- Finally, Nepalese government has raised the stakes further by authorizing a new map extending its territory across an area sensitive for India’s defence.
The very beginning: The Sugauli Treaty
- Before the 1816 Treaty of Sugauli, the Nepalese kingdom stretched from the Sutlej river in the west to the Teesta river in the East.
- Nepal lost the Anglo-Nepalese War and with the signing of Sugauli Treaty was brought down to its present territories.
The Sugauli Treaty stated that “[t]he Rajah of Nipal [Nepal] hereby cedes to the Honourable [the] East India Company in perpetuity all the under-mentioned territories”, including “the whole of the lowlands between the Rivers Kali and Rapti.” It elaborated further that “[t]he Rajah of Nipal [Nepal] renounces for himself, his heirs, and successors, all claim to or connection with the countries lying to the west of the River Kali and engages never to have any concern with those countries or the inhabitants there of.”
- The present controversy arose with Nepalese contest that the tributary that joins the Mahakali river at Kalapani is not the Kali river. Nepal now contends that the Kali river lies further west to the Lipu Lekh pass.
- But here’s the catch!
- The British used the Lipu Lekh pass for trade with Tibet and China.
- Even Survey of India maps since the 1870s shows the area of Lipu Lekh down to Kalapani as part of British India.
- Even though the areas of Nepalgunj and Kapilvastu were restituted to Nepal as a reward for the military help rendered by Jung Bahadur Rana in quelling the 1857 uprising. The British did not return any part of Garhwal or Kumaon, including the Kalapani area, to Nepal.
- Infact, both the Rana rulers of Nepal and the Nepalese Kings accepted the boundary and did not raise any objection with the government of India after India’s Independence.
- True that India did not existed in 1816 when the Treaty of Sugauli was concluded.
- But many borders of the world and India are colonial legacy, which we have to work out.
The path to peace
- The Nepal-India Technical Level Joint Boundary Working Group was set up in 1981 to resolve boundary issues, to demarcate the international border, and to manage boundary pillars.
- By 2007, the group completed the preparation of 182 strip maps, signed by the surveyors of the two sides, covering almost 98% of the boundary, all except the two disputed areas of Kalapani and Susta.
- Not able to solve the border issues in these disputed areas has left us hanging.
India has successfully resolved far more intractable border issues with Bangladesh.
- The land boundary settlement required an exchange of territories, including the transfer of population, and a constitutional amendment to give effect to the 1974 India-Bangladesh Land Boundary Agreement.
- The maritime boundary issue with Bangladesh involved going to the Hague-based Permanent Court of Arbitration. Despite knowing well that if the Court applied the principle of equity, India would lose up to four-fifths of the disputed area. India lost but the government of India accepted the ruling.
- Compared to what was accomplished between India and Bangladesh, the India-Nepal border issues appear more easily solvable.
Respecting out Ties
- India Nepal ties are unique.
- Historical link between the nations.
- Spirit of maintaining India’s close and friendly bilateral relations with Nepal.
- The people-to-people relationship between India and Nepal is unmatched.
What lies ahead?
- This matter can be best handled bilaterally, through quiet diplomacy.
- The Official Spokesperson of India’s Ministry of External Affairs, Anurag Srivastava, has said recently that India and Nepal have an established mechanism to deal with all boundary matters.
- He has affirmed that India is committed to resolving outstanding boundary issues through diplomatic dialogue.
- The remaining issues concerning the boundary i.e Kalapani and Susta are not difficult to resolve unless they are caught up in domestic or international concerns.
- The next steps should be approval of the strip maps by the respective governments (that of the Nepalese Government is still awaited), the resolution of the differences of opinion over Kalapani and Susta, and speeding up the erection of damaged or missing border pillars.
Consider the question “India-Nepal ties are unique. Both countries have many things in common. Yet, recent developments over the border dispute threaten to snap these ties. Examine the border issue between the two countries. What is India’s stand on the issue? Suggest ways to resolve the issue.”
Conclusion
The more the trouble festers, those who stand to gain by deteriorating India-Nepal relations will benefit. There is need for the two countries to lower the temperature and defuse the issue. They must invest time and effort to find a solution. Raking up public controversy can only be counterproductive to the relationship.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: BIS, cryptocurrency.
Mains level: Paper 3- Challenges and opportunity in cryptocurrencies.
Central banks all over the world have had mixed feelings towards cryptocurrencies. Some of them have resorted to banning them altogether. And yet, cryptocurrencies exist and have been flourishing. But China seems to be bent on taking the “road less travelled”. This article explains the various aspects underlying the China’s move. These somehow apply to all the central banks, including the RBI. Read more to know more about such aspects.
Digital currency by China’s central bank
- In December 2019, a pilot programme was launched in Beijing to intensively advance the trial work of fintech innovation regulation.
- This pilot has now been expanded to include several other cities.
- This expansion of the pilot marks the initiation of China’s central bank digital currency (CBDC).
- Christened Digital Currency Electronic Payment (DCEP), available via a mobile wallet app.
- It is pegged 1:1 with fiat currency, and designed to replace M0 which comprises currency issued by the PBoC less the amount held by banking institutions.
- This is the first such serious initiative in the whole world.
Why central banks are sceptical of cryptocurrencies?
- Historically, monetary authorities everywhere have been sceptical of cryptocurrencies.
- The reasons for scepticism includes following problems-
- 1) Wild fluctuations in the value of cryptocurrencies.
- 2) The implied challenge to the monopoly of central banks in issuing fiat currencies.
- 3) The looming possibility of software bugs.
- 4) The tainted shadow of the dark web.
But some central banks have been planning to issue fiat digital currency
- Authorities were far more intrigued by CBDCs.
- In fact, the Basel-based Bank for International Settlement (BIS) has been conducting surveys on this issue for some time.
- The recent survey of 2019 “Proceeding with Caution – a Survey on Central Bank Digital Currency” revealed that while in general, central banks have been proceeding cautiously towards introducing central banks digital currencies.
- Some have been planning to issue a fiat digital currency in the short to medium term.
- In particular, the survey revealed that nearly 25% of central banks have the required authority to issue a CBDC, while a third do not, and 40% remain unsure.
If you cannot beat them, join them
- So, what factors led China to release the cryptocurrency?
- Chinese investors were always attracted to cryptocurrencies.
- With the bearish turn in the Chinese stock market in 2015-16, bitcoins became increasingly popular as an alternative asset class in China.
- As in media reports, in the recent past, China has emerged as the capital of the crypto ecosystem, accounting for nearly 90% of trading volumes and hosting two-thirds of bitcoin mining operations.
- The PBoC tried hard to curtail this exuberance but achieved limited success.
- The recent move to introduce the CBDC in China is a logical outcome of the efforts to curb and tackle its runaway cryptomarket practices.
- Or, the philosophy of the PBoC could simply have been, if you cannot beat them, join them.
Advantages and concerns
- At a practical level, the benefits of CBDC are manifold.
- First, paper money comes with high handling charges and eats up 1% to 2% of GDP.
- Second, by acting as a powerful antidote for tax evasion, money laundering and terror financing, CBDCs can materially boost tax revenues while also improving financial compliance and national security.
- Third, as a tool of financial inclusion, particularly in emergencies, direct benefit transfers can be instantly delivered by state authorities deep into rural areas, directly into the mobile wallets of citizens who need them.
- Fourth, CBDCs can provide central banks with an uncluttered view and powerful insights into purchasing patterns at the citizen scale.
- In the long run, it is believed that CBDCs will make cross-border payments fast and frictionless.
Concerns
- All these salutary benefits come packaged with a deep and abiding concern about the relentless rise of a surveillance state and the concomitant erosion in citizen privacy and anonymity.
- If face-recognition technology enables states to spy on the physical movement of citizens, will CBDCs be used to spy on every movement of their money?
But how Central bank’s digital currency is different from private cryptocurrencies such as Bitcoin?
- An earlier research paper by PBoC Deputy Governor favoured a two-tier CBDC model.
- In this model instead of directly interacting with the public, the central bank would involve financial intermediaries such as commercial banks.
- In tier 1, the central bank would interface with financial intermediaries.
- In tier 2, the financial intermediaries would interface with the general public.
- Advantage? Such a model is accretive in that it preserves the power of existing financial systems and extends their influence further.
- It is believed that the DCEP uses a DLT architecture (with central controls) which preserves the primacy of the monetary authority, unlike private cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) that are truly decentralised.
Silver bullet to slay three dragons
- What may China be signalling with the launch of DCEP?
- First, on the world economic stage, it may want DCEP to challenge the hegemony of the U.S. dollar as the default global reserve currency.
- Second, in its war with American BigTech, it may want to showcase DCEP as its weapon of choice to counter FB or Facebook’s Libra, which is planning to offer a common cryptocurrency to 2 billion-plus FB users across the world.
- Third, and still in the realm of speculation, it may wish to use the DCEP to clip the wings of AliPay and WeChatPay, gigantic fintech duopolies that control 90% of the China’s domestic digital payments, and whose ambitions may one day pose a threat to the aura and authority of the central bank.
Consider the question “Most of the central banks have been sceptical in their attitude toward the cryptocurrencies. Yet, they persisted. Next came the Supreme Court decision lifting ban on them. In light of this, examine the advantages and concerns that come with the cryptocurrencies.”
Conclusion
From gold to silver to paper to digital, the march of currencies goes on. China has rolled the dice on central bank digital currencies, challenging other nations to follow. Welcome to the future of money.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Demand side and supply side in the economics
Mains level: Paper 3- Why is it necessary to focus on the demand side in stimulus package?
What should the government focus on first: increasing demand or streamlining the supply side. This question is at the heart of the debate that has been going on after the government announced the stimulus package. This article argues on two lines- Inadequate size of the package and the neglect of the demand side in the package.
Why stakeholders are not happy with the package?
- Agriculture sector: There is relief for agriculture in the form of a concessional credit line of Rs 2 trillion, but loans are neither automatic or assured.
- Marketing reforms and infrastructure creation are distant promises.
- MSME sector: The backbone of the economy that provides 25 per cent of employment, 32 per cent of the GDP and 45 per cent of exports, is unhappy despite the Rs 3 trillion line of credit for loans without collateral.
- In their experience, lenders are not always supportive in extending loans.
- While buyers-central and state governments, public sector firms and the private sector- owe them as much as Rs 5 trillion.
- What is more, most MSMEs just do not have the resources to pay wages or meet fixed costs on electricity, rent or interest during the lockdown period.
- Corporate sector: There is nothing for the corporate sector in manufacturing or services.
- The distressed sectors such as airlines, automobiles, hotels, restaurants, and tourism have been ignored.
- Ironically, there is little for public health, already in a dilapidated state.
- Even stock markets, characterised by irrational exuberance in the past month, have dropped.
Government expenditure in the fiscal stimulus
- The fiscal stimulus, which can be defined as government expenditure that could stimulate demand, is difficult to separate.
- This is because the package is neither clear nor transparent about the cost to be borne by the government in each component.
- Even so, there are 12 estimates by analysts in financial sector institutions, suggesting that the fiscal stimulus is in the range of 0.7 per cent to 1.3 per cent of the GDP.
- The effective fiscal stimulus, in terms of extra resources provided by the government, is Rs 1.76 trillion, or 0.8 per cent of the GDP.
- Its contribution to domestic demand will be minuscule, given that private final consumer expenditure in India is about 60 per cent of the GDP.
Focus of the package: supply side
- It is clear that the design of this relief package seeks to focus on the supply side.
- Package emphasises on providing liquidity through lines of credit, where the RBI is providing as much as Rs 8 trillion.
- Focus is not on the demand side by stepping up government expenditure.
- This is done with the aim of minimising the cost to the government.
- The arithmetic is obviously imaginative — as much as Rs 10 trillion of the relief package will have to be financed by sources other than the Centre and the RBI.
So, let’s understand why focus on supply side is flawed strategy
- This stress on the supply-side, while neglecting the demand-side, reveals a flawed understanding of economies in crisis.
- Speed of adjustment: Even in normal circumstances, the speed of adjustment of the supply-side is slow because supply responses take time.
- Whereas the speed of adjustment on the demand-side is fast as incomes spent raise consumption demand without any time-lag.
- At present, if there is little or no increase in demand, supply responses will be slower than usual because producers would not wish to pile up inventories of unsold goods.
- In terms of the chicken-and-egg parable, demand must be revived first to kickstart the economy.
- For this reason, the fiscal stimulus should have been much larger.
Excessive concerns over fiscal deficit
- The decision-makers have been timid, intimidated by the prospect that, because of revenue shortfalls (2 per cent of the GDP or more), the fiscal deficit would be 5.5 per cent of the GDP.
- Which would have exceeded the budget estimate at 3.5 per cent of the GDP.
- The conclusion drawn, wrongly, is that there is no fiscal space.
- The obsessive concern about the fiscal deficit is deeply embedded in government thinking.
- In this situation, the extra fiscal stimulus should have been Rs 7-9 trillion i.e. 3-4 per cent of the GDP and that would have been modest compared to what other countries have done.
Monetising the deficit and issues involved in doing so
- This enlarged fiscal deficit (3-4 % of GDP) cannot be financed by market borrowing.
- Such market borrowing would simply drive up interest rates and nip recovery in the bud.
- It would have to be financed by monetising the deficit — RBI buying government T-bills — printing money, now termed “helicopter money”.
- Inflation concerns: The idea that monetised deficits will unleash inflation is blind to the reality that, at this juncture, if there is no further intervention by the government, the GDP could contract by 5 per cent in 2020-21, with lingering consequences.
- In fact, a monetised deficit might be the only way of increasing aggregate demand to revive economic growth.
- Rating downgrade issue: The worry about a downgrade from credit rating agencies is bizarre.
- For one, their ethics and integrity have seen steady erosion.
- Moreover, how many sovereign governments will they downgrade?
- In fact, we might be better off without the footloose and volatile portfolio investment inflows.
Consider the question- “Do you agree with the view that the focus of the supply side should be at the heart of any stimulus package announced in the financial crisis? Give reasons in the support of your agreement.”
Conclusion
If the government does not accept the necessity or wisdom of expansionary macroeconomic policies, it must set out its alternative plan for recovery. The relief package will not suffice.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSME
Mains level: Paper 3- Credit problems faced by MSMEs
Whether to focus on supply side or demand side is the dilemma governments often face while deciding the measures to cure the ailing economy. This article explains using basic economics and evidence from across the world to make the case for a focus on the supply side. In doing so, it explains the problems with demand side measures such as cash transfers and tax rebets.
Issue of neglect of demand side
- The Union government is often criticised for its apparent neglect of the demand side and its excessive focus on the supply side.
- Structural reforms — the COVID-19 package was no exception.
- Low credit growth, weak inflation, and flat wage growth are the factors focused by demand-side proponents.
- The deand side proponents suggest measures such as cash transfers, income tax cuts, and cheap credit to consumers.
So, let’s focus on Demand vs. Supply side debate
Low growth in credit to MSME
- A demand shock typically leads to a rise in both volume and the price.
- A supply shock not only hurts the volume but also leads to price rise.
- In banking, a good proxy for the price of credit is the spread.
- Spread is difference between lending rate and the funding rate repo rate or deposit rates for the banks.
- The spread reflects the risk premium banks charge to their customers.
- The spread has consistently risen from just below 4 per cent at the start of 2018 to around 6 per cent in January 2020.
- That means, the banks charged 4-6 per cent more on loan than it paid to its depositor or to RBI on the funds it got from them.
- The fact that spreads are rising was highlighted by the 2019 Economic Survey as well.
- At the same time, the credit growth — especially for public banks and to the MSME sector — has been sluggish for the previous two to three years.
- The MSME sector witnessed sub-zero credit growth for the whole of 2017 and even now, the credit growth is very tepid at around 2 per cent Y-o-Y.
- Rising spreads with lower credit volume provide a clear sign that credit supply is broken.
What a paper by Nobel laureates on MSME says?
- Paper by Nobel laureates Abhijit Banerjee and Esther Duflo examines the reasons for MSME problems.
- The paper amply highlights the fact that the MSME sector suffers from lack of credit availability to finance investments rather than the lack of demand for credit.
- They showed that when the government changed the definition of small firms, the firms newly covered by the priority sector lending programme used the extra credit to increase production and investment.
- If there was no demand for credit, cheaper credit under the priority sector programme should have been used to repay the older expensive sources of borrowings.
So, how will the recently announced package help MSEs?
- Consistent with this view, we think that the government’s approach of guaranteeing SME credit by resolving the risk-sharing problem for banks will expand credit to credit-starved SMEs at lower credit spreads.
- Similarly, expansion of the universe of small/medium firms will bring fresh investments from the firms, which are newly covered under priority sector programme as they will be able to get cheaper credit.
2 Measures to increase consumer demand and issues involved
1. Direct transfers schemes
- No doubt that cash-transfers are superior to distortive subsidies and the “Garib Kalyan” package was a step in this direction.
- In fact, the government has already transferred close to Rs 40,000 crore to bank accounts including Rs 10,000 crore to women under PMJDY.
But is cash-transfers the ultimate solution to recovery?
- In fact, the PMJDY account balance has increased.
- The increase is from close to Rs 1,17,000 crore before the advent of COVID-19 to Rs 1,35,911 crore as of May 13 .
- This is a massive jump of close to Rs 18,000 crore.
- Recent research by Prasanna Tantri and co-authors shows that PMJDY account holders actively use the accounts — 1.12 transactions per quarter compared to the World Bank standard of one transaction.
- In fact, PMJDY accounts see withdrawals when account holders are in distress, according to the study.
- So the rise in balances is not mechanical.
So, why are they not spending?
- It’s not that people covered under PMJDY are comfortable financially.
- A number of papers show that tax rebates boost demand in the short-run, but the quantum is limited.
- For example, Sumit Agarwal and his co-authors show that the 2001 tax rebate programme in the US led to an average spending of only $60 on $500 rebate over nine months.
- A recent study at the Kellogg Business School by Christian Borda and co-authors shows that tax rebates after the 2008 crisis in the US led to rise in spending, but by only 3.5 per cent in the first month of the rebates.
- The crux is that no rational consumer goes on a consumption spree when he is facing job uncertainty!
2. What about providing cheap credit to customers?
- Trying to boost demand by providing cheap credit to consumers is not a good idea either as evidenced by the debt-financed housing boom in the US, which led to the 2008 crisis.
- In fact, Atif Mian and Amir Sufi, using a large panel of 30 countries, uncover a more general pattern — an increase in household debt to GDP ratio leads to a sustained drop in future GDP, investments, and unemployment.
- On the other hand, the economic cycles are much more muted when the initial growth is caused by structural reforms as pointed in a recent IMF study covering over 80 countries.
Consider the question “Whenever governments decide on the stimulus package amid financial crises, supply side vs. demand side debate flares up. This has also been the case in India as the government announced the stimulus package recently. In light of this, examine the issues involved in demand side measures.”
Conclusion
To put the burden of recovery on risk-averse consumers, incentivising them to spend rather than save when there is employment uncertainty, is against any reasonable risk-sharing principle. Risk should be borne by those who have the appetite — the firms and government.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: Secessionist tendencies across the world and their handling
China has started pushing for an “improvement” in the Basic Law — the mini-constitution that defines ties between Hong Kong and Beijing — signalling a fundamental change in the way the highly autonomous city-state is run. The Chinese parliament is debating a controversial national security law for Hong Kong.
Practice question for mains:
Q. Democracy and authoritarianism cannot co-exist in the same country. Comment in context to the situation generated in Taiwan. How is the situation different from the withdrawl of special category status of Jammu and Kashmir.
Chinese authoritarian grip on Hong Kong
Hong Kong’s ‘Basic Law’
- Hong Kong is a Special Administrative Region (SAR) of China.
- It has observed a “one country, two systems” policy since Britain returned sovereignty to China on July 1, 1997, which has allowed it certain freedoms, the rest of China does not have.
- It is governed by a mini-constitution called the Basic Law — which affirms the principle of “one country, two systems”.
- The constitutional document is a product of the 1984 Sino-British Joint Declaration.
- Under this, China promised to honour Hong Kong’s liberal policies, the system of governance, an independent judiciary, and individual freedoms for a period of 50 years from 1997.
Uproar in Hong Kong
- China accuses that the Hong Kong SAR has not acted out its constitutional duty for national security in line with China’s Constitution and the Basic Law.
- Since the handover, Hong Kong residents have time and again taken to the streets to protect their Basic Law freedoms, with the first major pro-democracy protest taking place in 2003.
- In 2014, over one lakh city residents took part in the ‘Umbrella Revolution’ to protest against China’s denial of democratic reforms.
Impact of the 2019 protests
- The largest protests since the 1997 handover took place last year in 2019 when for months tens of thousands of Hong Kongers agitated against a proposed extradition law.
- The protest continued with pro-democracy marches even after the legislation was withdrawn.
- These protests were seen as an affront by mainland China, which under President Xi Jinping has increasingly adopted a more hardline approach to foreign policy and internal security issues in recent years.
Rise of Taiwanese aspirations
- The Hong Kong unrest is also believed to have left its mark on Taiwan, another prickly issue for Beijing which considers the island state as its own.
- In this year’s presidential election, Taiwanese voters brought to power the Democratic Progressive Party, which openly opposes joining China.
The National Security Law
- Under Article 23 of the Basic Law, Hong Kong has to enact a national security law “to prohibit any act of treason, secession, sedition, and subversion against the Chinese government.
- When the Hong Kong government first tried to enact the law in 2003, the issue became a rallying point for the city-wide protests which occurred that year.
- Since then, the government has steered clear of introducing the legislation again.
- Beijing could now make the law applicable to Hong Kong by another route — by inserting the legislation in Annex III of the Basic Law.
- The Chinese parliament is expected to vote on a resolution that will make way for the new law, which could be promulgated in Hong Kong.
What could happen if such a law takes effect?
- The new law would ban seditious activities that target mainland Chinese rule, as well as punish external interference in Hong Kong affairs.
- Many expect a revival of the protests that rocked the city last year.
- China, on the other hand, has sought support and understanding of India and other countries for its controversial decision as a precautionary measure.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: OST, INF Treaty, New START policy
Mains level: US-Russia power tussle
The U.S. has given notice that it will exit the Open Skies Treaty (OST) in response to Russia who had allegedly violated the treaty.
The New START, INF and now the OST …. Be clear about the differences of these treaties. For example- to check if their inception was during cold war era etc.
Open Skies Treaty (OST)
- OST is an agreement that allows countries to monitor signatories’ arms development by conducting surveillance flights over each other’s territories.
- The idea behind the OST was first proposed in the early years of the Cold War by former U.S. President Dwight Eisenhower.
- It came to existence decades later and was signed in 1992, during the George H.W. Bush presidency and after the Soviet Union had collapsed.
- The OST came into effect in 2002 under the George W. Bush administration and it allows its 34 signatories to conduct unarmed reconnaissance flights over the territory of treaty countries.
Issues with the OST
- The U.S. has used the treaty more intensively than Russia.
- Between 2002 and 2016, the U.S. flew 196 flights over Russia (in addition to having imagery from other countries) compared to the 71 flights flown by Russia.
Significance
- The U.S.’s exit last year from other arms deal the West had signed with Russia — the Intermediate-Range Nuclear Forces (INF) treaty — as well as its imminent departure from the OST has raised the strong possibility that the Trump administration may not renew the New Start Treaty.
- The New START Treaty was signed by the Obama administration with Russia that caps Russian and U.S. nuclear arsenal. The New Start Treaty is due to expire in February 2021.
- The Trump administration has been worried that extending New START would negatively impact an arms deal with China and Russia.
- It is concerned that China’s nuclear stockpile could be doubled if the New Start Treaty continued as is, without including China.
Back2Basics: New START pact
- The New Strategic Arms Reduction Treaty (New START) pact limits the number of deployed nuclear warheads, missiles and bombers and is due to expire in 2021 unless renewed.
- The treaty limits the US and Russia to a maximum of 1,550 deployed nuclear warheads and 700 deployed missiles and bombers, well below Cold War caps.
- It was signed in 2010 by former US President Barack Obama and then-Russian President Dmitry Medvedev.
- It is one of the key controls on superpower deployment of nuclear weapons.
- If it falls, it will be the second nuclear weapons treaty to collapse under the leadership of US President Donald Trump.
- In February 2019, the US withdrew from the 1987 Intermediate-Range Nuclear Forces Treaty (INF), accusing Moscow of violating the agreement.
INF Treaty
- Under the INF treaty, the US and Soviet Union agreed not to develop, produce, possess or deploy any ground-based ballistic and cruise missiles that have a range between 500 and 5,500 km.
- It exempted the air-launched and sea-based missile systems in the same range.
- The INF treaty helped address the fears of an imminent nuclear war in Europe.
- It also built some trust between Washington and Moscow and contributed to the end of the Cold War.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UMANG app services
Mains level: Utility of the UMANG app
To further enhance the initiatives of Digital India Programme, the India Meteorological Department (IMD) services have been brought on the “UMANG App”.
UPSC may puzzle you by asking a question such as: Which of the following services are included under UMANG App? It would provide some ambiguous 5-6 options.
UMANG App
- The UMANG is an acronym for Unified Mobile Application for New-age Governance.
- It is an all-in-one single, unified, secure, multi-channel, multi-platform, multi-lingual, multi-service mobile app, powered by a robust back-end platform providing access to high impact services of various organizations.
- It was in 2017 to bring major government services on a single mobile app, with a larger goal to make the government accessible on the mobile phone of our citizens.
- About 660 services from 127 departments & 25 states and about 180 utility bill payment services are live and more are in pipeline.
- UMANG user base has crossed 2.1 Crore including Android, iOS, Web and KaiOS.
- Citizens can also access their Digilocker from UMANG and give their feedback after availing any service through Rapid Assessment System (RAS) which has been integrated with UMANG.
Key features
- Unified Platform: It brings together all government departments and their services on a single platform to provide better and easier services to citizens.
- Mobile-First Strategy: It aligns all government services with the mobile-first strategy to leverage mobile adoption trends.
- Integration with Digital India Services: It provides seamless integration with other Digital India Services like Aadhaar, DigiLocker, and PayGov. Any new such service will automatically be integrated with the platform.
- Uniform Experience: It is designed to enable citizens to discover, download, access, and use all government services easily.
- Secure and Scalable: It supports Aadhaar-based and other authentication mechanisms for service access. The sensitive profile data is saved in an encrypted format and no one can view this information.
Benefits for Citizens
- Single-Point Ubiquitous Access: All government services are available for citizens on a unified platform for easy access through multiple online and offline channels (SMS, email, app, and web).
- More for Less: Only a single mobile app needs to be installed instead of each app of each department.
- Convenience: Citizens do not even need to install or update the app again to avail government services if more services are added to the platform.
- Saving of Time and Money: Citizens can anytime and anywhere avail these services through their mobile phones, desktops, and laptops without any need for visiting the department office and standing in queues.
- Uniform Experience: All the government services including payment-based transactions provide secure and uniform experience.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Initiaitives mentioned in the newscard
Mains level: Not Much
In a virtual celebration of the International Day for Biological Diversity 2020, Union Minister of Environment, Forest and Climate Change (MoEFCC) has launched key initiatives towards conservation of biodiversity.
Possible prelim question:
The ‘Not all Animals Migrate by Choice’ campaign recently seen in news is an initiative by __________.
About the International Day for Biological Diversity
- This Day is a United Nations-sanctioned international day for the promotion of biodiversity issues.
- It is currently held on May 22.
- The year 2020 is also the “Super Year for Biodiversity”, as the Strategic Plan for Biodiversity with 20 global Aichi targets adopted in 2010 ends in 2020.
1) Biodiversity Samrakshan Internship Programme
- The program proposes to engage 20 students with postgraduate degrees for a period of one year through an open, transparent, online competitive process.
- It has the National Biodiversity Authority (NBA) and the UN Development Programme (UNDP) as a nodal agency.
2) ‘Not all Animals Migrate by Choice’ campaign
- It is a United Nations Environment Programme (UNEP) Campaign launched by the Wildlife Crime Control Bureau on Illegal Trafficking of Endangered Species.
- It aims to curb illegal trade in wildlife which carries the risk of spreading dangerous pandemics.
Back2Basics: Aichi Targets
- The ‘Aichi Targets’ were adopted by the Convention on Biological Diversity (CBD) at its Nagoya conference.
- The short term plan provides a set of 20 ambitious yet achievable targets, collectively known as the Aichi Targets.
- The IUCN Species Programme provides advice to Parties, other governments and partners on the implementation of the Strategic Plan for Biodiversity and it’s Aichi Biodiversity Targets (2011 – 2020) and is also heavily involved in work towards the Target.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: General Financial Rules (GFRs)
Mains level: Various moves to boost MSME sector
The union government has notified amendments to General Financial Rules (GFR) to ensure that goods and services valued less than Rs 200 crore are being procured from domestic firms, a move which will benefit MSMEs.
Possible mains question:
Q. Discuss how the nationwide lockdown to control the coronavirus outbreak has led to the resurfacing of inherent bottlenecks in India’s MSME Sector.
What are the General Financial Rules (GFRs)?
- The GFRs are a compilation of rules and orders of the Government of India to be followed by all while dealing with matters involving public finances.
- They are instructions that pertain to financial matters.
- They lay down the general rules applicable to Ministries / Departments, and detailed instructions relating to the procurement of goods.
- They are issued by the procuring departments broadly in conformity with the general rules while maintaining the flexibility to deal with varied situations.
Also read:
[Burning Issues] Fiscal Push for MSME Sector of India (Part I)
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The ‘International Tea Day’ gets thumbs up from the UN. Tea is the most consumed drink in the world, second only to water.
It would be no surprise to expect a question based on worldwide tea production:
Q. Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)
(a) China
(b) India
(c) Myanmar
(d) Vietnam
International Tea Day
- While the UN has been aware of the popularity of the drink, May 21, 2020, became the first time when it recognized and gave an official nod to International Tea Day.
- The UN General Assembly proclaimed May 21 as International Tea Day.
- The day is aimed at promoting sustainable production, consumption and trade of tea.
- As part of the celebrations, key players in tea production come together and make systematic plans for expansion of demand for tea, particularly in tea producing countries where per capita consumption is relatively low.
- This day also reminds all actors at global, regional and national levels to ensure that the tea sector continues to play a role in reducing extreme poverty, fighting hunger and safeguarding natural resources.
Tea
- Tea is an aromatic beverage commonly prepared by pouring hot or boiling water over cured leaves of the Camellia sinensis, an evergreen shrub native to East Asia.
- After water, it is the most widely consumed drink in the world.
- There are many different types of tea; some, like Darjeeling and Chinese greens, have a cooling, slightly bitter, and astringent flavour.
- Tea has a stimulating effect in humans primarily due to its caffeine content.
- China is the leading producer of tea in the world. (Ref.)
Its significance
- In 2018, over 50 lakh tonnes of tea was consumed globally, according to Food and Agriculture Organization (FAO) of the UN.
- The origin of tea plantations dates back to 5,000 years. Like many cultures, tea enjoys a special space in Indian culture.
- With more than 100 varieties being consumed in the country, India is among the top four producers of tea.
- Currently, tea is grown in more than 35 countries and supports 1.3 crore people including smallholder farmers around the globe.
Back2Basics: Tea cultivation in India
- India is the second producer of tea in the world and second in terms of land devoted to tea growing as well.
- Much of India’s tea production is concentrated in the areas of Darjeeling, Nilgiri, Dooars, and Assam, which is the single largest tea growing region in the world. The top 5 growing states in India, ranked by production, are:
1) Assam
2) West Bengal
3) Tamil Nadu
4) Kerala
5) Karnataka
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: APMC Act
Mains level: Paper 3- Structural issues in agri-marketing.
The article discusses the structural issues that may not go away with the reforms announced by the government recently. Issues like inadequacies in APMC infrastructure, regulation of APMCs need are discussed in detail.
What is the issue?
- The Union government signalled the intention to enact a new central law.
- The new law would override existing state regulations that restrict the farmer from legally selling to anyone other than a buyer licensed by the local Agricultural Produce Marketing Committee (APMC).
- The decision to push for a central law comes after dissatisfaction with two decades of partial and uneven reforms by different states.
So, will the change in the law solve the marketing problem?
- This will be overstating the power of legal reform in guaranteeing economic freedom and outcomes.
- The problems farmers face are of two type-
- 1) Problems that are a result of vested, monopolistic interests.
- 2) Problems that are rooted in larger structural conditions that significantly weaken their terms of engagement in agricultural markets.
- Type 1 may be addressed by regulatory intervention.
- But type 2 will need location-specific policies, well-directed investment, and well-functioning agricultural institutions.
- So, solving either of these problems require consensus, coordination and capacity in which the states will need to play a major role.
Why do farmers sell their produce outside APMC mandis?
- The dominant narrative is that farmers are forced to sell their produce only to licensed APMC traders.
- But the reality is that even today the majority of Indian farmers sell their produce to small-scale and largely unlicensed traders and intermediaries.
- This is true, especially of small and marginal cultivators.
- But, if farmers are bound by law to sell in APMC mandis, why are so many of them selling outside?
But, do we have enough mandis?
- At least part of the answer to the question of why farmers sell outside mandis is that India still doesn’t have enough mandis.
- Over the decades, most states in general, and specific regions in particular, have hugely under-invested in the basic infrastructure required to create viable, primary wholesale markets within easy physical reach of farmers.
- The 2017 Doubling Farmers Income Report estimates that in addition to the current 6,676 principal and sub-market yards under APMCs India needs over 3,500 additional wholesale markets.
- Approximately 23,000 rural periodic markets (or haats) have also suffered long-standing neglect.
- So, the new allocation towards market infrastructure must be fully utilised to build up an appropriately designed physical marketing ecosystem, especially in remote regions.
- Most importantly, unlike in the past, this process should engage deeply with farmers and traders in each location to avoid misdirected and misplaced infrastructure and assets.
Regulatory reforms in mandis needed
- Where APMC mandis do exist and have established themselves as dominant market sites, mandi committees have typically done everything in their power to restrict competition.
- Obtaining a licence for a new entrant — has most often proved to be a bureaucratic nightmare and a costly affair.
- This is where regulatory reform to remove conflicts of interests, enable the entry of new buyers, and facilitate the flow of trade both within and outside the mandi system is absolutely crucial.
- No state has done enough in this direction, but here too there are cautionary lessons.
Perils of complete deregulation: Example of Bihar
- Complete deregulation, as we have seen in the decade following Bihar’s repeal of its APMC Act in 2006, does not necessarily transform agricultural markets and spur competition.
- Even after all restrictions were lifted, there was little uptake in direct procurement by formal players in the state.
- When corporations entered the maize market in a big way, they chose to buy from larger traders and aggregators and not from farmers.
- Most farmers have seen little change in marketing practice and continue to sell to village traders as they had done before the repeal.
- Where private markets have emerged — mainly for horticultural produce — they are constituted and run by local traders and commission agents.
- But across the system, traders complain about deteriorating infrastructure.
- And the regulatory vacuum has led to the proliferation of brokers to deal with counter-party risk in growing and dynamic commodity markets such as maize.
Benefits of limited degree of regulation: MP and Karnataka example
- Madhya Pradesh and Karnataka have undertaken some degree of regulatory reform instead of repeal.
- In these states, we do observe, at least to some extent, the fruits of competition.
- In the early 2000s, MP granted ITC a licence to set up procurement hubs outside mandi yards.
- Establishment of ITC procurement hubs not only resulted in price competition, but also from electronic weighing and quick payments, as mandis upgraded in response.
- But ITC’s procurement channel was understandably restricted to select commodities (and qualities), seasons and farms within its own commercial strategy.
- These limitations revealed the mandi’s comparative advantage as a permanent multi-buyer, multi-commodity market for all local producers.
- The key lesson to draw from studies of direct procurement and contracting is the need for a regulatory architecture that enables both new and existing systems to respond, adapt, and compete.
Issue of intermediation
- Small traders and intermediaries exist — and persist — because they are able to respond — in cash, credit, time and place — to the multiple needs of farmers and firms across the interconnected domains of production, marketing, processing and consumption.
- This is not to say that they do not exploit farmers when the opportunity arises.
- So, the organised and technologically driven procurement and marketing systems will only work if they manage to address the real constraints that farmers face on the ground, especially access to credit, inputs, storage, transport, and timely payments.
- Most of these constraints originate in the relations of land ownership and access and the limits and exclusions they impose on smallholding farmers and landless cultivators.
- Simply put, farmers will not be in a position to exercise any newly granted regulatory freedom in the market if they cannot overcome these constraints.
- Equally, while increasing competition for intermediaries is desirable, their elimination is a misguided — and indeed dangerous — objective if one does not respect or replace the roles and risks that they cover.
Issue of re-regulation and new barriers to entry
- Agriculture is at the very heart of the essential economy and our food system runs on the backs of small-scale producers, traders, commission agents, processors, wholesalers, retailers, and labourers.
- Regulatory reform to increase competition must not degenerate into re-regulation that unduly favours large-scale consolidation and channel control by erecting new barriers to entry and operation for agro-commercial MSMEs.
The UPSC asked a direct question about the APMC Act in 2014- ” There is also a point of view that Agriculture Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.”
Conclusion
While going for the reforms government must consider the issues underlying the problems and try to address them. We must recognise and strengthen the diversity, dynamism, enterprise, and resilience of India’s agricultural markets.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Provisions of MGNREGA
Mains level: Paper 2- Issues and scope for improvement in MGNREGA
With migrant workers returning home, work demand under MGNREGA is bound to rise. Sensing that the government increased the allocation to MGNREGA. This article suggests some steps to make the MGNREGA more effective in catering to this surge in the wake of the pandemic. Some issues that plague the scheme are also examined at the end. So, what are the suggestion? and what are the issues? Read to know….
Acknowledgement of the importance of MGNREGA
- The government made an allocation of an additional Rs 40,000 crore as part of the stimulus package.
- This is an acknowledgement of the importance of MGNREGA.
- The most important part of MGNREGA’s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it.
- This demand-based trigger enables the self-selection of workers and gives them an assurance of at least 100 days of wage employment.
Let’s put allocation in context of World Bank recommendations
- Since 2012, an average of 18 per cent of the annual budgetary allocation for MGNREGA has been spent on clearing pending liabilities from the previous years.
- Even this financial year began with pending wage and material liabilities of Rs 16,045 crore.
- An allocation of Rs 1 lakh crore for FY 2020-21 would mean that approximately Rs 84,000 crore is available for employment generation this year.
- This will still be the highest allocation for MGNREGA in any year since the passage of the law.
- However, the allocation, which amounts to 0.47 per cent of the GDP continues to be much lower than the World Bank recommendations of 1.7 per cent for the optimal functioning of the programme.
Some immediate steps to ensure the MGNREGA lives up to its potential
- First, state governments must ensure that public works are opened in every village.
- Workers turning up at the worksite should be provided work immediately, without imposing on them the requirement of demanding work in advance.
- Second, local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.
- Third, at the worksite, adequate facilities such as soap, water, and masks for workers must be provided free of cost. For reasons of health safety, MGNREGA tools should not be shared between workers.
- The government should provide a tool allowance to all workers — some states are already providing such an allowance.
- Fourth, procedures for implementing MGNREGA must be simplified but not diluted.
- The pandemic has demonstrated the importance of decentralised governance.
- Gram panchayats and elected representatives need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.
- Fifth, as per a study by the RBI, more than half the districts in the country are under-banked.
- The density of bank branches in rural India is even more sparse.
- At this time, payments need to not only reach bank accounts on time, but cash needs to reach the workers easily and efficiently.
- The limited coverage of bank infrastructure in rural areas must not be made a hurdle.
- Attempts to distribute wages in cash, sans biometric authentication, must be rolled out.
- Sixth, there needs to be flexibility in the kinds of work to be undertaken, while ensuring that the community and the workers are the primary beneficiaries.
Issuse with MGNREGA
- Over the last few years, MGNREGA had begun to face an existential crisis.
- Successive governments capped its financial resources, and turning it into a supply-based programme.
- Workers had begun to lose interest in working under it because of the inordinate delays in wage payments.
- With very little autonomy, gram panchayats had begun to find implementation cumbersome.
- Barring a few exceptions, state governments were only interested in running the programme to the extent funds were made available from the Centre.
- Allocating work on demand, and not having enough funds to pay wages on time was bound to cause great distress amongst the workers and eventually for the state too.
- As a result, state governments had begun to implement MGNREGA like a supply-driven scheme, instead of running it like a demand-based guarantee backed by law.
Consider the question “With migrant workers returning to villages in the wake of corona pandemic, demand for work is likely to increase. In light of this, discuss the utility of MGNREGA and challenges it may face.”
Conclusion
With nearly eight crore migrant workers returning to their villages, and with an additional allocation for the year, this could be a moment for the true revival of MGNREGA. A revival led by workers themselves.
Mahatma Gandhi National Rural Employment Guarantee Act, 2005
- The Act aims at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage employment in a financial year to a rural household whose adult members (at least 18 years of age) volunteer to do unskilled work.
- The central government bears the full cost of unskilled labour, and 75% of the cost of material (the rest is borne by the states).
- It is a demand-driven, social security and labour law that aims to enforce the ‘right to work’.
- Ministry of Rural Development (MRD), Government of India in association with state governments, monitors the implementation of the scheme.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Contract Farming
Mains level: Contract Farming and its feasibilty
The Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for contract farming in view of the continuing uncertainties due to the pandemic.
Practice question for mains:
Q. What is Contract Farming? Examine its potentials and feasibility from the perspective of farmers’ interests.
Moving on with Odisha’s law
- The Odisha ordinance is aimed at facilitating both farmers and sponsors to develop mutually beneficial and efficient contract farming system.
- It is argued that the new system will lead to improved production and marketing of agricultural produce and livestock while promoting farmers’ interest.
- The agreement will be entered into between the contract farming sponsor, who offers to participate in any component or entire value chain including preproduction, and the contract farming producer (farmers), who agree to produce the crop or rear the livestock.
- Both the loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.
- And in no case realized, recovery can be through the sale or mortgage or lease of the land in respect of which the agreement has been entered into.
What is Contract Farming?
- Contract farming (CF) can be defined as agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.
- Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.
- These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser.
- In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.
Some business models in CF
1) Informal model – This model is the most transient and speculative of all contract farming models, with a risk of default by both the promoter and the farmer. However, this depends on the situation: interdependence of contract parties or long-term trustful relationships may reduce the risk of opportunistic behaviour.
2) Intermediary model – In this model, the buyer subcontracts an intermediary (collector, aggregator or farmer organisation) who formally or informally contracts farmers (a combination of the centralised/ informal models).
3) Multipartite model – This model can develop from the centralised or nucleus estate models. It involves various organisations such as governmental statutory bodies alongside private companies and sometimes financial institutions.
4) Centralized model – In this model, the buyers’ involvement may vary from minimal input provision (e.g. specific varieties) to control of most production aspects (e.g. from land preparation to harvesting). This is the most common CF model.
Advantages of Contract Farming:
To the farmers:
- It helps in skilling of farmers as they learn to use various resources efficiently like fertilizer, pesticides and get in touch with new technology in some cases.
- Farmers get the opportunity for diversification of crops.
- Price risk is drastically reduced as many contracts specify prices in advance.
- Contract farming can open up new markets which would otherwise have been unavailable to small farmers. The farmers can also get easy credit from the Bank under contractual agreements.
- In the case of agri-processing level, it ensures a consistent supply of agricultural produce with quality, at the right time and lesser cost.
To the Client:
- They get uninterrupted & regular flow of raw material of high quality which helps in protection from fluctuation in market pricing.
- Long term planning of business is possible as they have a dedicated supplier base of raw material.
- Concept of contract farming can be extended to other crops also which helps to generate goodwill for the organisation.
Limitations
- Contract farming arrangements are often criticized for being biased in favour of firms or large farmers while exploiting the poor bargaining power of small farmers.
- Problems faced by growers like an undue quality cut on produce by firms delayed deliveries at the factory, delayed payments, low price and pest attack on the contract crop which raised the cost of production.
- Contracting agreements are often verbal or informal in nature, and even written contracts often do not provide legal protection in India that may be observed in other countries. Lack of enforceability of contractual provisions can result in a breach of contracts by either party.
- Single Buyer – Multiple Sellers (Monopsony).
- Adverse gender effects – Women have less access to contract farming than men.
Also read
What is contract farming? Critically analyze the features of the draft “Model Contract Farming Act – 2018”. (150 W)
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: India-China border disputes
As tensions remain high between Indian and Chinese soldiers, the number of recorded Chinese transgressions across the disputed India-China border surged by 75 per cent in Ladakh in 2019, and the Chinese forays into Indian Territory in the first four months of the current year have also witnessed an increase compared to the same period last year.
Chinese Transgression:
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- The border between India and China is not fully demarcated and the Line of Actual Control (LAC) is neither clarified nor confirmed by the two countries.
- This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.
- Observation Methods: Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.
- Official data shows that 80% of Chinese transgressions across the LAC since 2015 have taken place in four locations of which three are in eastern Ladakh in the western sector.
- These areas of eastern Ladakh are Pangong Tso, Trig Heights and Burtse.
- The fourth area is the Dichu Area/Madan Ridge area (Arunachal Pradesh) of the Eastern sector.
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Implications of Increased Number of Transgressions:
- It is an indicator of increased Chinese assertiveness.
- Even if there are no major incidents, it should not be taken lightly.
- So far, there has been no major standoff between the two sides after the 73-day Doklam standoff on Sikkim-Bhutan border in 2017.
Concerns
- India is worried about the tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.
- The increased transgressions lead to more tensions between both countries which are already struggling to contain the Covid-19 pandemic.
- Nepal’s recent behaviour on the Mansarovar Link Road raising the border map issue also raises Indian concerns.
- The constant accusations on each other also cause tensions and disrupt the peace on borders.
- Recently, Chinese media accused India of building defence facilities in the Galwan Valley region of the contested Aksai Chin area.
- India and China are both nuclear-armed countries with strong militaries and the constant border conflicts are not a desirable thing.
Way Forward
- In the Wuhan and Mahabalipuram summits, both China and India had reaffirmed that they will make efforts to ensure peace and tranquility in the border areas.
- On 1st April, 2020 India and China completed their 70 years of diplomatic relations.
- Both countries have resolved border issues peacefully in the past four decades which gives the hope that the tensions will subside soon.
- Establishment of peace between the two big powers of such an important geopolitical region is essential for their own growth and development as well as for maintenance of global peace.
Practice question for mains:
Q. Clear demarcation of the national borders is the need of the hour. Discuss.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Demo 2 Mission
Mains level: Commercial crew programme by NASA
NASA’s SpaceX Demo-2 test flight will lift off for International Space Station (ISS) becoming the first crewed flight to launch from American soil since the conclusion of the space shuttle era in 2011.
We can get a match the pair type question in prelims asking various space missions and their purposes. Make note of similar space missions from here.
Try this:
Q. Which of the following pair is/are correctly matched? (CSP 2014)
| 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
Demo-2: What is the mission?
- The Demo-2 mission is part of NASA’s Commercial Crew Program with the aim of developing reliable and cost-effective access to and from the ISS.
- Essentially, the lift-off is a flight test to certify if SpaceX’s crew transportation system can be used to ferry crew to and from the space station regularly.
- After its launch, the Crew Dragon will perform a series of phasing manoeuvres to gradually approach and autonomously dock with the ISS.
- After docking, the two astronauts will go aboard the ISS. They will perform tests of the Crew Dragon and conduct research with Expedition 63, the space station crew currently in residence at ISS.
About the Commercial Crew Program
- The main objective of this program is to make access to space easier in terms of its cost, so that cargo and crew can be easily transported to and from the ISS, enabling greater scientific research.
- Secondly, by encouraging private companies such as Boeing and SpaceX to provide crew transportation NASA wants to focus on building spacecraft and rockets meant for deep space exploration missions.
- Boeing and SpaceX were selected by NASA in September 2014 to develop transportation systems meant to transfer crew from the US to the ISS.
Back2Basics: SpaceX
- Space Exploration Technologies Corp., trading as SpaceX, is a private American aerospace manufacturer and space transportation Services Company headquartered in Hawthorne, California.
- It was founded in 2002 by Elon Musk with the goal of reducing space transportation costs to enable the colonization of Mars.
- SpaceX has developed several launch vehicles and the Dragon spacecraft.
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