Current Affairs – 29th November, 2016

ECONOMY

 

TOPIC: General Studies 3

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

 

Payment Banks and Financial Inclusion

 

News: Airtel Payments Bank started operations on 23 November and seven more private sector participants are expected to start operations in the same segment in the coming months. It will be interesting to see how these non-banking private sector players such as Airtel, Reliance Industries, Paytm, Fino, India Post, Aditya Birla Group, National Securities Depository Ltd and Vodafone—will perform.

 

What are Payment Banks

 

Payments Banks are banks with the following features:

  • They will provide a limited range of products such as acceptance of demand deposits and remittances of funds.
  • They will not perform the function of lending money in the form of loans.
  • These banks will have a wide network of access points particularly in remote areas.
  • They will supplement their own network with business correspondents and even depend on network provided by others.
  • Technology will be extensively used to add value.

Features and Functions of Payment Banks

  • Payment banks cannot offer loans but can raise deposits of up to Rs. 1 lakh and pay interest on these balances just like a savings bank account.
  • These banks can enable transfers and remittances through a mobile phone.
  • They can offer services such as automatic payments of bills, and purchases in cashless, chequeless transactions through a phone.
  • They can issue debit cards and ATM cards usable on ATM networks of all banks.
  • They can transfer money directly to bank accounts at nearly no cost being a part of the gateway that connects banks.
  • They can provide forex cards to travellers, usable as a debit or ATM card all over India and offer forex services at charges lower than banks.
  • They can also offer card acceptance mechanisms to third parties such as the ‘Apple Pay.’

 

Benefits and Impact of Payment Banks

The benefits arising from these payment banks are as follows:

  • They are expected to use innovative technology-based banking.
  • These banks will be highly instrumental in expanding the reach and usage of basic financial services across the country.
  • With the scale of operations, there will be a significant leap forward in the number of access points, especially in rural areas. Example: In the pilot phase, Airtel will have 10,000 retail outlets operating as banking points.
  • The new banks will gradually move towards providing additional financial services other than the basic services mentioned above.
  • Payments bank can also take up the role of a business correspondent for another bank and act as a distributor of financial products.
  • With the extensive use of technology, basic banking is set to undergo major changes, as the new banks are expected to depend heavily on technology and digital means to reduce costs of operations and increase ease of transactions.

 

Impact on Existing Banks

  • Payment banks will also add pressure on the existing banks since the use of technology and the existing infrastructure make it easier for companies such as Airtel to open more accounts and increase their customer base.
  • The existing banks will also face competition in terms of deposit rates offered. Upcoming banks are offering interest as high as 7.25% on savings deposits.

 

Areas of Caution

Two areas where a cautious approach needs to be adopted are the understanding of the business model as well as the objective of financial inclusion that they seek to achieve.

 

Business Model

  • The business models of these new banks are unclear and as a result three out of the 11 approved candidates have also dropped out of the race.
  • The existing players have been very cautious with their plans due to ambiguity on many operational fronts.
  • Reserve Bank of India (RBI) has just issued operational guidelines in October and Airtel has now started a pilot phase in one state only and there are no details on the plans of the other seven interested companies.

 

Financial Inclusion

  • There is no doubt that financial inclusion will increase due to the emergence of payment banks but it is difficult to estimate the impact the new banks will have on reaching out to the financially excluded.
  • RBI can initiate an independent survey to study the financial behaviour of those outside the formal system and understand the impact of new banks on the ground. The RBI should begin by tracking data on active agents and active accounts from all banks; payments banks will then be a part of this framework.

 

Role and Responsibility of RBI

  • Responsiveness the RBI in resolving technical and other glitches that will arise as operations begin.
  • It is important for the RBI to keep focus on the core objective of financial inclusion.
  • RBI has to ensure efficient monitoring for customer protection.
  • Supervision and regulation are highly essential in the success of payment banks.

 

Conclusion

Payment technologies have proved hugely popular in other developing countries such as Kenya which is the most cited success story. Other than Vodafone’s M-Pesa is used by two in three of adults to store money, make purchases and transfer funds to friends and relatives. Admittedly, what the RBI is thinking of are an entirely different breed of banks — with higher capital and greater access to technology. It is time that RBI succeeds in garnering genuine interest among eligible promoters.

Connecting the dots

  • Payment Banks are the next big thing for the government’s success in financial inclusion. Comment. Highlight the hurdles in the way of their success and their integration with the existing banking system.

 

NATIONAL

 

TOPIC:

General Studies 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes

General Studies 4

  • Attitude: its influence and relation with thought and behaviour; moral and political attitudes; social influence and persuasion.

 

Towards a behavioural change- Demonetisation effect

  • Change is the most consistent of all the time. And as ordinary it sounds, the extraordinary results it produces.
  • Together with it joins Modernity which is about breaking stereotypes that govern individual and institutional habits.
  • Today, technology has come to be the main driving force of change. From the steam engine to the electric bulb and internet, technology has defined the evolution of the human mind and civilisation.
  • Hence, it is imperative for India to keep up with change in order to garner benefits of new technological inventions and utilisations.

Demonetisation- Transformative change is in making

  • Recently, the demonetisation of high value currency notes have created ripples in entire economy as well as lives of citizens.
  • Demonetisation will cut off money channels to terrorists and extremist elements, weed out counterfeit currency and drive out black money in its short term objectives.
  • But the long term changes and gains demand bringing in behavioural change at all levels of society.
  • The demonetisation act can be called as a part of ‘cultural revolution’ wherein the people will be coming across various platforms of transactions which will push cash-less economy.
  • Other such examples of cultural and behavioural changes that has been encouraged in public life is ranging from attending office on time, keeping working and living environments clean, accountability, transparency, technology adoption, innovation, etc.
  • Though economists are busy estimating the extent to which economic growth will be hit because of the ongoing drive to replace high-value banknotes, there has been a lot of discussion on whether the government can use the current situation to push India towards a cashless future.
  • Hence, instead of debating constantly on currency to GDP vis-à-vis other economies, there should be emergence of awareness amongst people how to use technology at their benefit.

 

Unsettling the established institutional culture

  • The demonetisation drive has highlighted one thing clearly that the citizens should be prepared for an economy which has least cash transactions. This of course requires major attitudinal and behavioural change.
  • Since independence, not many major restructural reforms have taken place which impact all the citizens together.
  • No doubt, India has come a long way since independence in terms of growth and development but the period has equally been marred with serious incidences of corruption, opportunism, nepotism etc.
  • The newly elected majority government seems in a mode to ‘unsettle the settled’ and create a base for a behavioural change.
  • Also, it can be termed as a multi-pronged and comprehensive strategy to cleanse the system of all ills that have worked against the interests of the poor, the common man and the middle class.
  • The new initiatives will be a messenger of a modern India on the lines of advanced countries, where financial payments and transactions will not require currency but technology will become a tool in the hands of common people.
  • Additionally, targeted behavioural modification will eventually result in the elimination of black money leading to increased revenues to Central and state governments that ultimately benefits the common man.

 

The beneficiaries and behavioural change

  • The citizens are being made conversant with respect to the digital medium for transacting through the use of digital wallets, payment banking and plastic money.
  • E-wallets like PayTM and Freecharge are reporting a huge spurt in digital payments with increased views, transactions and their profits.
  • Also, banks are reporting a jump in demand from small merchants for point-of-sale terminals and card swipe machines. This shows that small trader is adapting itself to modern payment options.
  • For example, as per a newspaper report, an HDFC bank official says that demand for card swipe machines has risen to 5,000 daily from 5000 a month. This is a 30 fold increase. The same report states that such demand is from smaller players like kirana stores, vegetable vendors and stationery marts.
  • The real estate has seen a dip in prices as expected and here, cash transactions will be now a thing of past!
  • In addition, the infrastructure companies are going to benefit from decreasing interest rates and thereby increasing their potential to invest. NHAI (highways), IRFC (railways) and NTPC (power), who are authorised to raise money through tax-free bonds, are expecting to raise money much more cheaply as bond yields have crashed post-demonetisation. Hence, the right kind of investment is being mobilised.
  • The Hawala transactions have also taken a hit as hawala rates (which generate dollars for rupee payments in India) have soared, making underinvoicing of imports to evade duties near impossible.
  • Lastly, the common people are adapting themselves to these radical change more faster than expected. People are using plastic money, internet banking and e-wallets and spending less cash in their transactions.

 

IASbaba’s views

No doubt, the economy is going to suffer in short term due to cash crunch as Indian economy was dependent on cash. But, the long term gains are perceived to be immense which are beneficial to citizens and country in future.

Behavioural change is the hardest to acquire but it is not impossible. The citizens have welcomed the move as they know that black money, corruption, financing terrorist activities etc. are harming them in the end. And hence they have supported their elected government in this move.

India can hope for a better tomorrow by adjusting to some friction in present.

Connecting the dots:

  • Demonetisation will spur a long term behavioural change amongst its citizens but they will have to pay a short term price for it too. Do you agree? Substantiate

Current Affairs – 28th November, 2016

GOVERNANCE AND INTERNAL SECURITY

 

TOPIC:

General Studies 2

  • Issues and challenges pertaining to the federal structure.
  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • Important aspects of governance, transparency and accountability and institutional and other measures.

General Studies 3

  • Various Security forces and agencies and their mandate

 

Police Reforms in India

 

Introduction

Despite a continual debate over the wisdom and ethics of such an arrangement, political control over the police has come to be accepted as an inevitable reality in modern democracy. It seems as if the police will eternally be mired in arbitrariness and corruption if this kind of system continues. Hence, there is a need to introduce police reforms in our country.

Various steps have been carried out in the past to try and introduce reforms in the police. The Supreme Court guidelines in 2006 followed by the Justice Thomas Committee set up to monitor the implementation of these reforms, enacting of the Model Police Act drafted by a committee headed by Soli Sorabjee and recommendations by the Second Administrative Reforms Commission are a few to be named.

Whatever reforms have been introduced till date or efforts have been made in our country have hardly altered the core of police image, which remains one of an organisation that is nothing but an appendage of the executive, without any operational autonomy.

Challenges for the Police Forces

There are a lot of the challenges that the police forces have to face and because of these challenges various reforms are needed. Such challenges include:

  • Terrorist threats to the security of the state.
  • Cyber-crimes will pose a serious threat.
  • Maoist insurgency, militancy in the Northeast and separatist elements in J&K are bound to make the overall internal security scenario very grim.

 

Contemporary Situation

  • A sense of disappointment over the lack of progress on reforms suggested by the present Prime Minister in 2014 with respect to the concept of SMART Police.
  • The decline is essentially because of the excessive political interference.
  • Supreme Court’s (SC) landmark directions issued in 2006 on police reforms have not been complied with by any state.
  • States have enacted laws to circumvent the implementation of the Court’s directions and some states have passed executive orders which dilute or amend the SC’s directions.
  • The Central government also failed to enact the Model Police Act as a result of the 2006 SC guidelines. The Centre should have taken exemplary steps so that the states would have followed its footsteps. This could have been done through Article 252 of the Constitution of India which gives the Parliament power to legislate for two or more states by consent. Such an Act could apply to the consenting states and to any other states by which it is adopted through a resolution passed by the legislatures of those states.

 

Supreme Court Guidelines

The directives issued by the Supreme Court can be broadly divided into two categories:

  • Those seeking to achieve functional responsibility for the police, and
  • Those seeking to enhance police accountability.

The SC directions include:

  • Constitution of a State Security Commission (SSC) to check the political interference and review the performance of the police.
  • Transparency in the process of appointment of the DGP.
  • Separation of the law and order and investigative functions
  • Establishment of a complaints authority are the more important among them.
  • Ensure that police officers are provided with a minimum tenure security.
  • Set up a Police Establishment Board (PEB) to decide transfers, postings, promotions and other service related matters of police officers.

 

Suggested Reforms

  • The government should bring police/public order in the Concurrent List of the Constitution.
  • Based on the recommendations of the Second ARC, the government should at least declare certain crimes as federal and entrust their investigation to a Central agency.
  • Manpower deficiencies should be taken care of and the shortfall of almost half a million policemen nationwide should be bridged.
  • Police transport and the facilities in police stations need to be of top quality. There are police stations in the country which don’t even have a telephone or wireless facility.
  • Forensic facilities are inadequate in all the states. The states should follow the Gujarat model in forensics which has State, regional, district and mobile laboratories.
  • Housing facilities for the police personnel should be taken care of since these have a direct impact on the welfare and morale of the policemen. Policemen are seen to be living in sub-human conditions.
  • Regulation of working hours of policemen is very essential. This will increase efficiency and reduce any kind of resultant stress and multiple complications including rude behaviour with the public and domestic unhappiness.
  • Separation of investigation from law and order also needs to be done and this was also one of the direction of the SC in its guidelines in 2006.

 

Conclusion

Since police and law and order are subjects under the Constitution’s State List, the responsibility devolves upon the States. The security architecture of the country requires a lot more reinforcement and strengthening. Good internal security is essential to sustain the momentum of economic progress and provides the foundation for success and prestige in external relations as well.

Connecting the dots

  • Discuss the need for police reforms in our country and suggest reforms that are required to ensure efficient functioning of the police in India

 

HEALTH/NATIONAL

 

TOPIC: General Studies 2

  • Issues relating to development and management of Social Sector/Services relating to Health
  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Amendment to HIV Bill, 2014 – It doesn’t address the concerns

The NDA government had given its approval to introduce official amendments to the HIV and AIDS (Prevention and Control) Bill, 2014. However, when the bill has been made available in public domain, it has been not received well by the HIV community.

The HIV and AIDS Bill, 2014

  • It was drafted to safeguard the rights of people living with HIV and affected by HIV.
  • It sought to address HIV-related discrimination, strengthen the existing programme by bringing in legal accountability and establish formal mechanisms for inquiring into complaints and redressing grievances.
  • It also sought to prevent and control the spread of HIV and AIDS, prohibit discrimination against persons with HIV and AIDS, provide for informed consent and confidentiality with regard to their treatment, place obligations on establishments to safeguard rights of persons living with HIV arid create mechanisms for redressing complaints.
  • It aimed to enhance access to health care services by ensuring informed consent and confidentiality for HIV-related testing, treatment and clinical research.

The proposed amendments and reaction

The protection mandated in the Bill extended to the fields of employment, healthcare services, educational services, public facilities, property rights, holding public office, and insurance. But, now when the draft bill is public, it has received flak from the people affected by HIV as well as those fighting for their rights.

Diluting the right to access treatment

  • The bill was expected to guarantee the rights of India’s 2.4 million HIV positive community.
  • In the Bill, the proposed Section 14 talks of prevention measures that the Central or State governments may take, “as far as possible,” for the provision of Anti-Retroviral Therapy (ART) and Opportunistic Infection (OI) Management, against the spread of HIV.
  • This loophole makes the Bill weak and subject to interpretation, especially the inevitable right to access life saving anti-retroviral therapy.
  • Before advent of ART, death was only option for People living with HIV (PLHIV) but since 2004, Indian government has been providing free-of-cost antiretrovirals for PLHIVs.
  • Today, first-line and second-line ART is available in the government programme free of cost and soon third line of treatment may be also required.
  • However, these drugs were available from government free of cost as it was largely funded by the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM). Now, this fund is in danger of being discontinued from 2017 and hence, the HIV community has legitimate increased apprehensions about access to life-saving medicines.

 

Injection Safety Programme

  • An earlier version of the Bill clarified the need to strengthen injection safety programme as IDUs (Injecting Drug Users) can substantially reduce their risk of getting and transmitting HIV, viral hepatitis and other blood borne infections by using a sterile needle for every injection.
  • However, Clause 22 of the amended bill simply states ‘injection safety requirements’ without specifying the rules.
  • This once again makes the provision open to interpretation. The used needles can be used once again instead of destroying it completely or not boiling it with proper procedure.

Ombudsman’s jurisdiction

  • The original bill had proposed that the ombudsman shall inquire into violations in the provision of health-care services. This was an innovation of civil society.
  • The bill had envisaged an ombudsman working at the district level who would attend to complaints on health issues relating to HIV.
  • There are several cases involving health issues of PLHIVs not being attended to by health services especially in the private sector. Pregnant women living with HIV are worst discriminated against in health services.
  • Thus, the idea was that PLHIVs would not have to go to court which would be cumbersome as well as expensive as a lawyer would be required. Here, they will have to only go to courts on violations of the law relating to health services only after going through the ombudsman, thereby making it quick and efficient.
  • However, the amendment increased the scope of the ombudsman’s jurisdiction which mandates him to enquire into all violations of the provisions of the Bill including discrimination.
  • Also, the new bill proposed that the ombudsman is now to function at the State level and he/she will be only a government servant. So now the ombudsman is neither a full-time officer nor trained in judicial matters.
  • The disaster will unfold as the proposed ombudsman will have to deal with number of issues from informed consent to discrimination etc., coupled with the huge workload. Hence, the proposed amendment would only result in the whole mechanism becoming unworkable.

 

On employment

  • As per the existing law, only a government or a public sector employee can seek employment or reinstatement if s/he is discriminated and not employed or illegally terminated.
  • Hence, if the person is not employed by ‘State’ entities, — as defined under the Industrial Disputes Act — s/he cannot seek employment or reinstatement if s/he has been discriminated.
  • For such cases, a person can only go the civil court and claim damages.
  • The original draft of bill had provided for specific powers to the civil court including employment and reinstatement and compensation for loss of wages and damages.
  • Disappointingly, the amended bill does not confer powers to civil courts in relation to employment, reinstatement and compensation.

Conclusion

There are approximately 21 lakh persons estimated to be living with HIV in India.  Even though the prevalence of HIV is decreasing over the last decade, the Bill would provide essential support to National AIDS Control Programme in arresting new infections and thereby achieving the target of “Ending the epidemic by 2030” according to Sustainable Development Goals.

For this, the newly amended bill has to be changed which is creating it difficult for the HIV community of India to survive on a law which instead of giving them assurance, makes their treatment and way of living subject to interpretation.

Connecting the dots:

  • What is HIV and how is it a life threatening disease? How has India battled against HIV? Critically examine.
  • The amendments to HIV Bill, 2014 has been criticised by the HIV community. Discuss the reasons and support the answer with possible solution.

Current Affairs – 26th November, 2016

GOVERNANCE AND SCIENCE AND TECHNOLOGY

 

TOPIC:

General Studies 2

  • Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

General Studies 3

  • Indigenization of technology and developing new technology.

 

National e-Health Authority (NeHA)

 

Introduction – What is NeHA

Health-services in India are lagging behind in terms of use of Information and Communication Technology (ICT). The common man still archive doctor’s prescriptions, labs and X-ray results as was done decades ago. Till date, the vast majority of Indians have no organised medical records, whether paper or electronic. Therefore to overcome the problems due to limited use of ICT the government has proposed the NeHA.

 

  • National e-Health Authority (NeHA) is proposed to be set up by the Government of India as a promotional, regulatory and standards setting organization to guide and support India’s journey in e-Health.
  • It will also subsequently lead to realization of benefits of ICT intervention in Health sector in an orderly manner.
  • It will be set up under the government’s Digital India programme and will work towards the integration of multiple health IT systems in a way that ensures security, confidentiality and privacy of patient data.

 

Method of Operation 

  • NeHA will be set up as a health information network where various different stakeholders and contributors to health information will set up a repository of information.
  • They will also be allowed to communicate with each other with the help of so-called Application Programming Interfaces (API). This will function in the same was as many mobile applications in our devices do so.
  • Healthcare APIs would allow the doctor’s to communicate with the chemists and the testing labs and centres to communicate with the hospital’s database.
  • This further provides scope for development of more applications for patients, doctors, researchers, and policy makers. For instance there could be an app to remind mothers to vaccinate their children, push notifications to remind you to take your medication, or an alert that you are travelling to an epidemic belt.

Challenges for NeHA

This seemingly perfect health information system has its own set of challenges:

  • There is poor uptake of electronic records by doctors in India.
  • The lack of inter-operability between systems and devices leads to duplication of tests etc thus increasing inefficiency.
  • Inter-operability will need more than law and mandates since it will bring with itself the legitimate concern for privacy, security and safety of medical data.
  • End users are not involved in health information systems’ design and implementation strategies.
  • Risk-averse institutions and outdated laws have slowed down digital innovation in healthcare.
  • Once the system is in place it will be a challenge to ensure adequate outreach to the masses.

Addressing the Challenges

 

The challenges mentioned above can be addressed with the following measures:

  • To encourage the doctors to adopt Electronic Medical Records (EMRs) the proposed systems must be easy to use and affordable.
  • The system should ensure that it collects only that data which is required thus helping in data minimisation and avoiding any kind of overload. There have been instance in the US insurance companies where digitisation led to workplace dissatisfaction and physician burnout.
  • Ensure a participative approach where all stakeholders are involved in the planning of design and implementation. This will help in getting the best feedback from the users themselves.
  • Proper funding, research and analysis needs to be done. It will ensure that inter-operability is achieved thus contributing to the efficiency of operations and avoiding any sort of duplicity.
  • Encourage investments and promote an API-based ecosystem incorporating inter-operability and standardisation at inception.
  • Substantial intellectual rigour must be devoted to building safeguards to protect the patients from any abuse.
  • Even though the new law accompanying NeHA is expected to provide the patients with data ownership rights still a more nuanced strategy is recommended that thinks of ownership in terms of control and access. This will protect the interest of the patients as well as provide a congenial environment for smooth research or policy making.
  • The problem of the outreach will have to be addressed with the assistance of large-scale initiatives. Large private hospitals should open up their digital platforms to API-based solutions.
  • Government schemes like the proposed National Health Protection Scheme (NHPS) have the power to reach tens of millions and hence an API-based architecture can be integrated with the NHPS.
  • A common patient identifier or Unique Identification Authority of India (UIDAI) / Aadhar number deserves serious emphasis considering its mass outreach.

 

Conclusion

Any health information architecture proposed by NeHA must therefore provide technical or legal solutions to the above challenges. NeHA and regulatory laws will define India’s health information ecosystem and will have deep, long-lasting impact on healthcare delivery. The government has to ensure the following:

  • It gives primacy to the needs of patients and clinicians
  • Adopts a user friendly design.
  • Abandons traditional institution-based EMRs in favour of an API-based eco-system.
  • Ensure passing of privacy laws in sync with these new technologies.

With all the necessary ingredients available in the form of a robust telecom infrastructure, unique ID authentication, and a large talented pool of IT professionals, such a reform can usher in an era of unprecedented growth in the scope, quality and safety of Indian healthcare.

Connecting the dots

  • Discuss the importance of National e-Health Authority (NeHA) and critically analyse how well prepared India is to set up the National e-Health Authority.

 

HEALTH

 

TOPIC: General Studies 2

  • Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes;

 

Improving the Indian healthcare system- Lessons from Thailand

  • India and Thailand share similar demographic and economic similarity which makes comparison between the two countries relevant.
  • Health expenditures as a share of GDP (gross domestic product) are similar — Thailand: 4.4% and India: 4.1%. However, the outcomes vary a lot.
  • In Thailand, the under 5 years’ age mortality is 12.3 per 1,000 live births; maternal mortality, 20 per 100,000 live births. Whereas in India, the under 5 years’ age mortality is 47.7 and maternal mortality at 174 per 100,000 live births.

India at a glance- Health

  • National Rural Health Mission, launched in 2005 was flagship programme in increasing access to health services.
  • This was later expanded to urban population through the National Urban Health Mission (NUHM) in 2013.
  • Rashtriya Swasthya Bima Yojana (RSBY) was launched to provide financial protection to targeted populations, including those below the poverty line.
  • In addition, there are a number of state-specific schemes like involving free diagnostics facilities and offering free medicines; others are government-funded health insurance schemes in several states.
  • At 60%, India’s out-of-pocket expenditure for health is one of the highest in the world.
  • To sustain its economic growth, India will need to have a healthy population and address health inequities. In this context, Universal Health Coverage can be the driver and benefit the entire population.

 

The Thai healthcare system

  • In the early part of the century, there was strong macroeconomic growth in Thailand.
  • Thus, the Thai government launched a universal health coverage (UHC) scheme for the informal sector covering 70% of Thailand’s 70 million people.
  • And this scheme was adequately matched with structural reforms which helped the successful implementation of scheme.
  • In India, the programmes have been brilliantly envisaged but not accompanied by necessary structural reforms which explains a big part of the huge gaps in expenditures and outcomes between the two nations.
  • Thailand initiated a purchaser-provider split. Here, a new quasi-independent purchasing is paid on the basis of services and performance and not inputs like beds and staff, as is the case in India.
  • If the doctors and nurses did not perform, they were not paid. Incentives were built into these contracts for efficiency. Equity through models such as age-adjusted capitation and per admission payments adjusted for diagnosis was implemented.
  • Public as well as private providers were brought into the system, though private providers remain at a relatively low level of around 25%.
  • Thus, these mechanisms add up to ‘strategic purchasing’ for healthcare services and placed Thailand at Western Europe’s level.
  • Along with this decision, the Thai government brought new revenue means in the system- cigarette tax. This reduced the demand, improved health and expanded the revenue means to fund healthcare system.
  • This revenue was used in health promotion and disease prevention programmes—from HIV to diabetes to hypertension.
  • Also, incentives were developed and fresh medical graduates were redistributed to remote areas for a minimum tenure.
  • In this, the citizens benefited as a whole. Quality of care became a national priority through an independent accreditation body that developed a three-step system of quality improvement.
  • Thailand’s Quality and Outcomes Framework (QOF), used to measure the quality of health services, offers immense learning opportunities for India.
  • Government established world-class technology assessment process to bring in the new and cost-effective, while eliminating obsolete and unsafe drugs, devices and procedures.
  • It decided to invest early in information technology to provide mobility and convenience to citizens, easy monitoring of fiscal performance of the health sector and to also facilitate the gleaning of information from health claims to calculate quality and utilization measures.
  • Thailand’s national civil registration database forms the backbone of all health schemes in the country.
  • It ensures that a beneficiary cannot enrol in two schemes at the same time. India through its Aadhar project can verify the same when National Health Protection Scheme (NHPS) is soon going to be launched.
  • Today, the system has close to eight million in-patient transactions and more than 160 million out-patient transactions every year.

 

Challenges to health sector in Thailand

  • The distribution of providers across urban and rural areas remains inequitable. In contrast to rural health services, urban health systems are characterized by hospital-oriented care, private clinics and hospitals and a lack of effective primary health care systems, particularly to treat chronic non-communicable diseases.
  • Most records are still maintained in paper form and some in electronic form but they are not shareable across facilities.
  • Electronic medical records (EMRs) are not stored on the national ID smart cards, which could have made the ID a coverage verification tool.

Conclusion

India should take a cue from Thailand’s Universal Healthcare system and improve prepayment and strategic purchasing, expand the health care provider network in rural areas, and also stimulate digitization.

An Aadhar enabled NHPS could mark the beginning of effective universal health coverage for India having a robust information and communications technology platform to support it. For this, India has to have standards of data exchange, a unified data model and strong IT infrastructure.

Thus, much of Thailand’s success goes to development of good policy based on solid evidence and then systematically building capacities to implement them.

Now India has to embark upon achieving its ambitious target of Universal Health Coverage for all with a definite vision, federal cooperation, strong political commitment, robust infrastructure with adequate insurance coverage and monitoring and accountability mechanism.

Connecting the dots:

  • What is Universal Health Coverage? How can India maintain a healthy population?
  • Healthy economy is based on healthy population. Critically analyse.

Current Affairs – 25th November, 2016

GOVERNANCE AND ETHICS

 

TOPIC:

General Studies 3

  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections

General Studies 4

  • Ethics and Human Interface: Essence, determinants and consequences of Ethics in human actions
  • Ethical issues in international relations and funding n laws, rules, regulations and conscience as sources of ethical guidance.

 

Refugees in India –Challenges and Strategy

 

Who is a Refugee?

A refugee is someone who has been forced to flee his or her country because of persecution, war, or violence. A refugee has a well-founded fear of persecution for reasons of race, religion, nationality, political opinion or membership in a particular social group.

 

Refugees in India – History and Trends

India hosts refugees who have been victims of civil strife and war in nations such as Tibet, Bangladesh, Sri Lanka, Pakistan, Afghanistan and Myanmar.

  • In 1962, approximately 40,000 Chakma tribal people who had lost their homes and farmland due to flooding as a result of building of Kaptai dam by Pakistan came to India as refugees.
  • The Rohingyas are an ethnic group from the Rakhine state in Myanmar. Over 13,000 Rohingya refugees are registered with the United Nations High Commissioner for Refugees (UNHCR) in India.
  • Tibetan refugees arrived in India between 1959 and 1962 and were given adequate refuge in over 38 settlements and essential privileges available to an Indian citizen.
  • The Afghan refugees fled the civil war in the 1980s and now inhabit parts of Delhi.
  • In 1990s, Bhutan expelled lakhs of Nepali-speaking population present in their country and a large percentage of these stayed in India as refugees while on their way to Nepal.

 

Rising Refugees as per World Bank – Trends

As per World Bank data there has been a significant rise in the number of refugees in India in the past decade. The graphic representation of the data has been shown below.

1

Problems faced by Refugees in India

India remains the only significant democracy without adequate legislation specifically for refugees. As a result, they face a lot of problems such as:

  • They live in poor quality accommodation made of plastic tarps and straw roofs.
  • They have no or inadequate access to safe water or sanitation.
  • Waste management is very poor in areas of refuges habitation and open defecation is rife as sanitation is also inadequate.
  • The children of refugee families miss out on quality education due to lack of requisite documentation.
  • Most men serve as daily wage labourers.
  • They usually do not have any legal status or formal documents which rob them of opportunity to work or establish businesses in India.
  • Ethnic clashes between refugees and the local population are a common occurrence due to issues over land distribution and assistance provided to refugees.
  • State governments have not provided supportive environment to refugees and they face forcible eviction, economic blockading and violence.

 

Where is India Lacking?

  • India remains a non-signatory to 1951 United Nations Refugee Convention and the 1967 Protocol, which help define the legal obligation of states to protect refugees.
  • From a policy perspective also we are lacking because we do not have a national asylum policy.
  • Existing policy instruments have become obsolete.
  • India is the only significant democracy without a specific legislation for refugees.
  • The Foreigners Act (1946) and the Registration of Foreigners Act (1939) currently govern the entry and exit of all refugees. Both these legislations treat refugees as foreigners without due consideration of their special circumstances.
  • Lack of proper database which leads to misrepresentation of numbers and faulty reporting by media.

 

Way Forward for India

Policy and Legislations:

  • A refugee to whom asylum has been granted should be given a formal recognition of his/her asylum status along with an identity document and a travel document.
  • Policies should be framed in a manner which allows them to apply for residence permits and choose their place of residence across India.
  • Their documents must also enable them to seek employment in the private sector.
  • In terms of social indicators, they should be offered primary education free of cost in government schools and primary healthcare services should be provided at par with the Indian citizens.
  • A well-defined asylum law should be made which will help in establishing a formal refuge granting process.
  • Measures should be taken under the government welfare programmes and biometric initiatives like Aadhaar to ensure preparation of adequate database.

Social Sensitisation and Attitude Change:

  • Social sensitisation is highly important. Institutions should be encouraged to recognise UNHCR-issued refugee cards, foreign degrees or diplomas.
  • Local municipal corporations should be asked to sensitise neighbourhood associations and Resident Welfare Associations (RWA) to accept refugees who can pay rents and necessary charges.
  • Integration workshops for youth and women empowerment initiatives should be encouraged.

Conclusion

For a country that gained independence with a mass exchange of populations due to the partition, it needs to work more on its policies and laws to integrate refugee welfare in them.  While the security interests of India must remain paramount, taking care of refugees in India is a moral duty for the state.

The duty of a democratic nation is not to announce policies only. India fails on various issues associated with resettlement and rehabilitation, with many refugees remaining unregistered. India needs a system that enables the management of refugees with greater transparency and accountability. There has to be a shift from an arbitrary decision-making approach to safeguard interests of this vulnerable, victimised section of the population.

Connecting the dots

  • Highlight the flaws in India’s approach in dealing with refugees. Suggest necessary changes to be made in this concern.
  • Owing to the refugee crisis around the world, there has been a lot of debate on the approach of various nations towards refugees. In light of this matter give your opinion on which human value, empathy or sympathy, is of greater importance in dealing with the refugees.

 

ECONOMY

 

TOPIC: General Studies 3

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
  • Inclusive growth and issues arising from it.

 

Improving India’s job creation ranking

In past few months, several international institutions have assessed, compared and ranked the performance of countries on different indicators on issues like

  • Competitiveness
  • Ease of doing business
  • Hunger
  • Youth development
  • Gender gap
  • Press freedom
  • Consumer confidence

However, there was no place for indicator that specifically measures job creation which is the key to economic growth, especially of developing countries.

India’s performance

  • In some, it has exceeded expectations while in some, the performance has been not so well.
  • The World Economic Forum ranked India at 39th position on the Global Competitiveness Index. This is an impressive jump of 16 places since last year.
  • However, despite such jump, WEF has cautioned that India’s performance is low by global standards, and huge challenges lie ahead on the path to prosperity.
  • This is due to existence of high average tariff on imports, low level of factor accumulation, and relatively high incremental capital-output ratio.
  • Also, there is less than optimal domestic regulatory environment and near absence of regulatory harmonization.
  • These are the reasons why India could move only one place up in World Bank’s recent ease of doing business ranking. On a positive front, the World Bank has recognised the government’s efforts towards a better business growth environment and hopes for more stimulating business environment.
  • On the other hand, India’s performance on social, education and health-related indices has been abysmal.
  • The WEF report on global gender gap reveals that India is third last on the indicator of women’s health. On the Global Hunger Index, India lies among the bottom group of countries, even below neighbours like Nepal, Myanmar and Bangladesh.

Job creation opportunities in India- Where does it stand?

  • India is facing one of the most critical challenges in terms of job creation. The number of jobs created in 2015 is less in comparison with what was created few years ago.
  • The reason is fast pace of the mechanization of agriculture and manufacturing and more skill oriented service sector.
  • Due to increased use of technology, less innovation in areas requiring human assistance, disguised employment situation among others, fewer jobs are being created which can match the existing skill level of the vast majority.
  • It is no doubt that India’s GDP is growing but such growth is becoming increasingly exclusionary. Much of India’s growth is originating from services, and taking place in sectors which require middle- to high-level skills.
  • Enough jobs are not being created for people who either unskilled or semi-skilled and mostly part of unroganised sector. Even for the poor, who have problems in making their ends meet in these inflationary times, not many efforts are being seen to be put by the government.
  • Today, India’s poor which has been traditionally been dependent on agriculture and manufacturing, which have ceased to offer large-scale employment opportunities.
  • Adding to the woes, lack of quality and affordable healthcare and education has robbed the poor of opportunity to compete with their well-off counterparts in the job market.
  • As a result, the poor get stuck in unproductive agricultural activities and are under-employed in the informal sector.
  • All these challenges have resulted in India remaining a low middle-income country over the last couple of decades. For India to improve its status first to high middle-income and then a high-income country, it has to overcome these challenges of the middle-income trap.

Way forward

  • Indian economy should now focus on two important components- productive agriculture and mass manufacturing.
  • Improvement in manufacturing numbers will help India get fixed into global production networks and productive agriculture environment will provide a continuous push towards the growth of domestic aggregate demand accompanied by socio-political stability.
  • For this, emphasis on micro, small and medium enterprises is inevitable. Reforms have to be introduced in markets of factors of production- land, labour, capital and attracting investment in those labour-intensive sectors which are expected to be vacated by East and South-East Asian countries as they move up the production value chain.
  • India is a labour surplus economy and hence, it has to become more competitive and offer productive employment to its population.
  • On a brighter side on external front, there is sluggishness in international trade negotiations and thus India can undertake appropriate reforms. This will make Indian economy more competitive and create productive employment opportunities and also create opportunities for India to become a major actor on the global economic proscenium.

IASbaba’s views

The key to increase India’s job creation opportunities lies in structural reforms in its factor markets, rather than short-term cyclical reforms. Along with it, there should be continuous regulatory harmonisation so that there are no conflictory rules which undermine the development process.

On this, the centre and the states have to demarcate their agenda items through executive orders and legislative changes wherever needed. Phased implementation strategy setting out short-, medium- and long-term targets with continuous stakeholder engagement and awareness generation will enable India to improve its opportunities in job creation.

Connecting the dots:

  • India is witnessing ‘jobless growth’ which is detrimental to the future holistic development of society. Do you agree? Examine.
  • How can job opportunities be created in India? Substantiate.

Current Affairs – 24th November, 2016

ECONOMY

 

TOPIC: General Studies 3

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
  • Investment models.

 

Private Investment in India

 

What is Private Investment?

A private investment in public equity involves the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors. It is an allocation of shares in a public company not through a public offering in a stock exchange.

 

Statistics and Recent Trends

  • In 2015, India has recorded a 10-year low in investments in public-private sector adding to contraction that pulled down the global investment.
  • According to the World Bank, global private infrastructure investment in 2015, though on par with the previous year, was 10 per cent lower than the previous five-year average because of dwindling commitments in China, Brazil, and India.

Recent Economic Reforms

The government in the past few years has taken a few steps which are conducive for the growth of private investment. Some of these reforms are highlighted below:

  • Increasing public infrastructure investment.
  • Structural reforms in key sectors such as power.
  • The long-awaited Insolvency and Bankruptcy Code.
  • Latest reforms in Foreign Direct Investment (FDI) increasing limits on FDI in critical sectors.
  • Legislative and policy measure such as introduction of Goods and Service Tax (GST), Make in India and other reforms in areas such as labour.

 

Challenges to Private Investment

  • Public investment in India also faces limitations due to the increasing public debt and the government’s strategy towards fiscal consolidation.
  • India’s financial and corporate sector balance sheets have been highly stressed lately because of credit-led corporate leverage. This is having impact on the short term credit growth.
  • Demand side corporate vulnerabilities have also lowered the scope for private investment.
  • The corporate bond market in India is still in its infancy and is relatively small
  • Weak profitability coupled with over indebtedness, limits the ability of the Indian corporate sector.
  • The problem of indebtedness remains persistent due to weak institutions relating to bankruptcy.
  • The Public Private Partnership (PPP) Model needs to be restructured with institutional reforms to make it more viable.
  • Bank credit growth especially to industry has been declining significantly in recent years reflecting weakened capital, profitability and asset quality of many public-sector banks. It is these public sector banks which have financed a significant portion of infrastructure.
  • Risk inversion in the Indian banking and investment scenario.
  • With the consequences of the global financial crisis in 2008, the external environment has remained weak and dull ever since.

 

Bank Corporate Nexus

The problem of growth of investment in our country is majorly attributable to the inter relatedness between the performance of banks and the corporate sector players. This is a major problem that has to be resolved. India has introduced a series of far-reaching measures to deal with the bank-corporate nexus.

  • Increase banks’ loan loss provisions.
  • Improve corporate governance of public-sector banks, recapitalize them, and restructure stressed assets in a sustainable way through asset-restructuring schemes.
  • To better recognize the extent of the problem through the Asset Quality Review (AQR),
  • Implementing the new bankruptcy code.
  • Implementing out-of-court debt-restructuring mechanisms.

 

Way Forward

  • Ensure quick implementation of measures to keep a check on the further rise in non-performing assets and aid quicker recovery of investment.
  • The government, through the Annual Budget, should show an accelerated approach towards recapitalisation and also introduce incentives for performance and debt resolution.
  • The government should also make efforts to achieve fully transparent and provisioned public sector bank balance sheets by the end of this financial year.
  • The government should also accelerate plans for the restructuring of weak public banks and the divestment of non-core assets. The financial requirements resulting from these steps can be fitted into the medium-term fiscal consolidation plan in a smooth manner. This will assist in both, broadening of debt markets and enhancing financing inclusion.

Conclusion

All these challenges and problems existing are an indication of the persistent, detrimental effects on growth because of delays in dealing with high levels of impaired assets, low profitability, and weak capital positions of banks that have curtailed the availability of bank credit. Hence, it has to be ensured that the problems are plugged at the earliest to avoid any downgrading of credit ratings, economic growth forecasts and ensuring the revival of private sector investment.

Connecting the dots

  • The decline in private sector investments is inter-related with the increase in NPAs and the performance of banking sector. Analyse. Also provide suggestions to overcome this problem.
  • As per World Bank, India has recorded a 10-year low in investments in public-private sector. Highlight the reasons and how the economic reforms by the government lately can assist in revival of private investment.

 

ENVIRONMENT

 

TOPIC:

General Studies 3

  • Conservation, environmental pollution and degradation, environmental impact assessment
  • Disaster and disaster management.

General Studies 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Climate change- Raising resources using bonds

  • The recently concluded Marrakech conference on climate change negotiations did not lay out any concrete advances on finance pledges.
  • This has amplified the need for innovation in financing mitigation and adaptation activities to insure against loss and damage caused by climate change.
  • If Paris was about committing to prevent the rise of temperature beyond 2 degrees Celsius, Marrakech aimed to make a noticeable difference in loss and damage.
  • The parties approved a five-year work plan on loss and damage. It will begin from 2017 where countries formally address topics such as the slow-onset impacts of climate change, non-economic losses and migration.
  • However, developing countries are swiftly realising that financial support for loss and damage (which is not governed by a legally binding framework) from developed countries is going to be very small.
  • Hence, they have to find their own way in funding the activities that help in mitigating the effect of climate change, whatever may be the numbers.

India and Climate change

  • The current India has witnessed extreme events and changing precipitation patterns for past few years.
  • In last 14 years only, there have been 131 instances of major flooding, several incidents of heat and cold waves as well as successive drought years.
  • All these events have far-reaching financial impacts.
  • A research conducted by the Council on Energy, Environment, and Water (CEEW) with two premier institutes- IIM-Ahmedabad and IIT-Gandhinagar has estimated that direct costs of extreme events spurred by climate change in India are $5-6 billion per annum.
  • In addition, the associated economic costs and non-economic impacts are even higher.
  • So, India has to gear up to attract and invest trillions of dollars of investment as part of its development agenda and also requires mechanisms to protect these against climate risks.
  • If the gigantic renewable-energy targets set up by India are combined with annually rising adaptation spending, the financial needs are massive.

 

Raising the financial resources

  • The world and India in particular are at a critical juncture in climate history where mitigation, adaptation and loss and damage need to be immediately addressed.
  • For this, public investments are not adequate. International debt markets, estimated to be around $95 trillion, are the largest pool of capital in the world.
  • Hence, climate-resilient bonds are an innovative way for countries to use public money to drive private investment from these debt markets. These will help the underserved climate-adaptation market and near-evenly spread the impact of loss and damage from climate risk between investors.
  • A bond is a debt instrument with which an entity raises money from investors. The bond issuer gets capital while the investors receive fixed income in the form of interest. When the bond matures, the money is repaid.
  • A climate-resilient bond could take several forms:

Green bond

  • It is the most common form of bond.
  • It channels debt capital for projects with environmental benefits.
  • Such projects should be predominantly for mitigation activities like renewable-energy deployment, clean transportation which decreases future climate risk.

Specific Public bond

  • Here, the climate-resilient bond is a publicly issued bond to insure against the outcome for a specific climate risk.
  • For instance, a state government could issue a tax-free bond for 5 year term which is yielding market return.
  • In case of major flooding during the duration of the bond issue, the investment is forfeited by the investor and the state government uses it to cover the loss and damage caused by the flooding.
  • Hence, there is pooling of resources to protect against the impacts of climate disasters by shared liability by investors.
  • This opens up a new set of financiers for loss and damage that has historically been tackled by public funds alone.
  • This kind of debt instrument would influence the high government credit rating to attract investors as the market interest rates compensate for the climate risk which are being passed on to the investor.

 

Adaptation bonds

  • In this kind of climate-resilient bonds, the funds that are raised to protect against climate risks are used for adaptation activities.
  • It combines two important aspects
  1. Borrowing from the debt market for climate projects
  2. Sharing the climate risk between multiple individual investors.
  • Such a bond would require public money to pay market or higher rates of return on the investment which would be used for adaptation projects such as flood barriers that reduce the loss from climate disasters.
  • If there is a climate disaster, the bond investors lose their capital up to the limited liability of their investment.
  • If there is no climate disaster, this bond would work like an ordinary debt instrument with the capital and interest paid out in accord with the terms of the bond issue.

Conclusion

The likelihood of climate disasters is going to increase now. And thus there is need to mobilize additional finance to address the losses from the disaster as well as adapt to the growing climate impact.

The government will have to test and promote several permutations of existing and additional financial instruments in order to invest in environment friendly infrastructure and also adapt to existing and future climate impacts.

The developing countries cannot wait for the climate risks to become real. They have to continuously seek clarity on the pathways of financial support under the UN Framework Convention on Climate Change (UNFCCC) and act upon the same.

Connecting the dots:

  • The Marrakech conference did not chart out concrete path on financial resources to mitigate climate change and its effect. In such situation, how can developing countries make their sovereign funding policies for the same? Discuss.

Current Affairs – 23rd November, 2016

INTERNATIONAL

 

TOPIC: General Studies 2

  • India and its neighbourhood- relations.
  • Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.
  • Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

 

Emergence of the Asian Century

 

Rising Significance of Asia

Today, the case for Asia’s emergence as an economic power is stronger than it ever was. Such a rise is validated by the following facts:

  • Asia produces about 40% of the world’s gross domestic product (GDP), in terms of purchasing power parity (PPP).
  • Even during the recent economic crisis, Asia accounted for more than half of global GDP growth.
  • Indian Ocean is one of the most important regions globally as half of the world’s container traffic and one-third of its bulk cargo traverse it. Also, 40 per cent of the world’s offshore oil production and 50 per cent of the world’s energy supplies emerges through this region.

Challenges for Asia

USA and Europe still maintain an advantage in terms of global strategic influence and the Asian countries are facing major political, economic, and security challenges. A few of the challenges are as follows:

  • China is trying to achieve a smooth transition from major economic expansion to an easier and smoother approach.
  • Japan for long has been suffering from slow economic growth and is trying to overcome the impact of the same. Further, unlike India, it does not enjoy the advantage of a young demography and hence has to tackle issues concerned with an ageing population.
  • Economic powerhouses of Asia such as India, Indonesia, and South Korea face respective economic and political problems.
  • Problems such as rising income inequality, financial instability, and environmental degradation are also hampering overall development.
  • A major problem is the lack of unity amongst the nations of this region due to persistent power struggle, historical resentments, and territorial disputes.
  • Asia which is home to some of the world’s most dangerous flashpoints and is at risk of armed clashes in the East and South China Seas.
  • North Korea continues to develop nuclear weapons and ballistic missiles despite tougher sanctions pushed by the US and the UN. It poses a continuous threat to the peace and security of the region.
  • Ambiguity regarding a common vision of Asian leaders towards regional integration similar to the European Coal and Steel Community in 1951 and the creation of European Union in 1993.

 

Opportunities for Asia

Considering the challenges the West is facing as a result of the Brexit vote in the UK and the election of Donald Trump as US president, there a lot of areas where the Asian nations can capitalize and create an Asian Century.

  • Intra-regional trade and investment: Cooperation in trade and investment brings along both economic and political benefits. A more integrated Asia will enjoy more influence on the international stage.
  • Conflict Mitigation: Countries in this region must resolve regional military and political conflicts to promote a long-term vision for regional integration.
  • International Cooperation: Stronger cooperation among Asian countries amongst themselves and with the international community could ease regional tensions and resolve various disputes in this region. Such an approach can also focus on making North Korea abandon its nuclear weapons programme.
  • Regional Cooperation Institutions: Regional cooperation institutions such as Association of Southeast Asian Nations (ASEAN), Asean+3 (ASEAN plus China, Japan, and South Korea) and the East Asia Summit (EAS) can be highly useful for establishing a framework for peace, regional prosperity and global leadership.
  • Single Market: For economic integration the countries of this region should try to create single market with common rules governing trade and free movement of workers. Along with the Regional Comprehensive Economic Partnership (RCEP)( RCEP is a free-trade agreement currently being negotiated by ASEAN and six partners Australia, China, India, Japan, South Korea, and New Zealand), other multilateral groupings with different members such as SAARC should try to create such agreements.
  • Financial Cooperation and Crisis Management: Emerging economies in Asia must also pursue joint action on financial supervision, surveillance, and regulatory issues to prevent and manage crises. Initiatives such as the Chiang Mai Initiative, a $240 billion currency-swap arrangement, and its surveillance unit, the Asean+3 Macroeconomic Research Office need to be strengthened. For better economic integration and support the nations can even establish an Asian Monetary Fund with a broader membership.
  • Multi Stakeholder Approach: All stakeholders including the bureaucracy, the private sector and academicians must actively support high-level political commitments to integration. As a result of these efforts, integration would facilitate exchange of valuable knowledge including economic and social policies and technological and scientific insights.
  • People to People Cooperation: People to people ties can be useful in promoting cooperation on cross-border challenges, epidemics, natural disasters, and environmental degradation.

 

Analysis

With all the above suggestions, one thing should be kept in mind that none of these efforts would aim to replace existing sub-regional, regional, and global institutions. The new regional trade and financial measures should instead aim to complement and strengthen current arrangements.

In times of global uncertainty, Asia not only has a lot of opportunities, but also faces a lot of challenges in the realties that it has come face to face with. Asia should take its fate into its own hands, by pursuing closer economic and political regional cooperation. The Asian countries should aim for a shared vision for an economic community and a political association if they intend to define this century.

Connecting the dots

  • The 21st Century is bound to shape up as an Asian Century. Comment. Also, highlight the challenges that would act as hurdles and the opportunities that would give a push to the Asian Century in the making.

 

ECONOMY/ENVIRONMENT

 

TOPIC:

General Studies 3

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
  • Conservation, environmental pollution and degradation

General Studies 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

What has happened to ‘Green GDP’?

  • Though India and 104 other countries have ratified the Paris Agreement on Climate Change and now weaving out finer details of the deal, the central government at domestic level is still struggling to assess the impact of economic activities on the environment.
  • The Paris deal is an attempt to keep global temperature rise under 2°C as developmental activities take an increasing toll on the environment.
  • In 2009, the centre had announced plans for unveiling “green GDP” figures.
  • The Green GDP figure accounts for the environmental costs of depletion and degradation of natural resources into the country’s economic growth figures.
  • Subsequently, the Ministry of Statistics and Programme Implementation set up an expert group in 2011 to work out a framework for green national accounts in India. This process was supposed to be culminated in 2015 but is still pending.

What is Green GDP?

  • Green GDP is conventional gross domestic product figures adjusted for the environmental costs of economic activities. Simply, it is used to express GDP after adjusting for environmental damage.
  • It’s a measure of how a country is prepared for sustainable economic development.
  • The System of National Accounts (SNA) is an accounting framework for measuring the economic activities of production, consumption and accumulation of wealth in an economy during a period of time.
  • When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting.
  • Environmental accounting includes three types:
  1. Physical accounting- determines the physical state of resources, types and extent in spatial and temporal terms.
  2. Monetary valuation- determines its tangible and intangible values
  3. Integration with national Income- after the initial calculation, the net change in natural resources in monetary terms is integrated into the GDP to get Green GDP.
  • Thus, Green GDP is expected to account for the use of natural resources as well as the costs involved. This includes medical costs generated from air and water pollution, loss of livelihood due to environmental crisis such as floods or droughts etc.

 

Challenges in calculating Green GDP

  • There is not sufficient micro level data on natural capital. For this, the inter-ministerial group is looking into solutions to bridge the data deficit.
  • For example, there is no information on issues such as the total volume of surface water or the different sectors where water is used and the quantum used.
  • Natural Capital is the world’s stocks of natural assets which include geology, soil, air, water and all living things. It is from this capital that humans derive a wide range of services, often called ecosystem services, which make human life possible.
  • The calculation of Green GDP is a complex process and hence there is a need for enhanced budgetary allocation to bridge the data gaps.
  • Also, the externalities of economic growth which are not factored into conventional GDP numbers have a massive monetary value.
  • In 2013, a World Bank study estimated that due to air pollution, India suffered a loss of over $550 billion, or 8.5% of GDP.
  • Similarly, there are economic costs of water pollution and land degradation which will add more to deteriorating numbers.
  • India is one of the largest importers of products such as fossil fuels whose sustainability is not known in future. Yet, the pollution cost by it is not included in the GDP and in long term, this has direct impact on economy.
  • Another report of WWF- ‘Living Planet’- finds that 25% of India’s total land is undergoing desertification, while 32% is facing degradation. This is bound to have a direct impact on the future food production capacity of India’s agrarian economy as there could be a loss of 10-40% in crop production by end of century.
  • China and Norway had already started experiments with Green accounting. However, China dropped it in 2007 (started in 2004) after it realised that factoring in environmental costs had a significant impact on the country’s perceived “economic growth”.

Conclusion

There is a need of comprehensive and macroeconomic indicator which is consistent with the concept of sustainable development as GDP is mistakenly considered as primary indicator of well-being whereas it is the Green GDP that is more accurate indicator or measure of societal well-being.

The Green GDP accounting has to make efforts across the world to factor in environmental and social costs. If such is not the case, then this method won’t be successful as no country wants drop in the growth figures.

Connecting the dots:

  • What do you understand by Green GDP? How is it calculated? What are the challenges pertaining to implementing ‘Green GDP’ for a nation? Examine.
  • The recent climate change agreement has brought back the focus on ‘Green GDP’ which India wants to experiment with. Critically analyse the need for Green GDP and its significance with respect to India’s economy.

Current Affairs – 22nd November, 2016

INFRASTRUCTURE/NATIONAL

 

TOPIC: General Studies 3

  • Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
  • Disaster and disaster management.

 

Indore- Patna Express derailment- Learning from disasters

In news: the derailment of Indore-Patna Express causing death of more than 140 people is a sad reality of strained infrastructure of Indian Railways which is crying for reforms.

  • India’s railway network caters to about seven billion passenger trips a year. Such humongous infrastructure maintenance possesses extraordinary management challenges.
  • The foremost challenge of the Indian Railways is that it should be able to ensure that all its journeys end safely.
  • Death due to human errors despite knowledge of technical glitches in journey of Indian railways can never compensate the loss suffered by the families just by announcements of ex-gratia compensation by the Railway Ministry, the Prime Minister’s Office and State governments.

What is ailing Indian Railways?

  • It is carrying 15 times more people than its capacity, and overloading is damaging old tracks. This infrastructure is not getting new adequate investments
  • Trains do not have adequate and proper safety and fire equipment.
  • Human errors are the maximum cause of accidents. Yet, proper training is not given.
  • There are still many unmanned railway crossings which need to be eliminated.

The Indian Railways- How to be more safe

  • According to National Crime Records Bureau, there have been about 30,000 railway accidents a year in recent times and over 25,000 lives have been lost in such accidents.
  • Indian Railways has recorded an average of 50 derailments a year over the past four years and a peak of 63. Indore Patna Express accident was a big accident that occured after 6 years.
  • This reinforces the duty of Ministry of Railways to engage in a sustained effort to win back public confidence. More attention needs to be paid to upgrading infrastructure such as tracks and signalling and inducting technologies that help prevent accidents.
  • The elements of safety — integrity of the tracks, signalling, engines and coaches — need rigorous auditing. Rail fractures are ‘micro cracks’ on rails that develop into ‘major cracks’ following the passage of a train with heavy load. Such accidents can only happen when Ultra Sonic Fault Detection (USFD) checks of tracks are not routinely done.
  • Internal investigations by the Commissioners of Railway Safety have found human error to be responsible for 70% of serious rail accidents. This shows how much importance has to be accorded to training and adherence to strict operational discipline.
  • The current train disaster takes into blame- the flaws in the track, the speed at which the late-running train was being driven, and the role played by coach design in leading to high fatalities. These are the few of the core areas which entail modernisation as well as maintenance.
  • It is not that VIP trains like Rajdhani and Shatabdi are not prone to accidents as they have similar tracks and signalling system. What is different is the quality of rolling stock, namely locomotives, LHB coaches and better monitoring of tracks before such trains pass on them. Hence, railways should be equally vigilant for the non-VIP trains too as it equally carries precious human lives.

 

The Indian Railways- Way forward

  • 13 million passengers travel in the 7000 passenger trains that are run every day by Indian Railways. These passengers need assurance from Railways that it is learning from its mistakes.
  • It needs to be overlooked that the high level committee recommendations (Anil Kakodkar on safety and Bibek Debroy on restructuring) are being implemented.
  • Major reforms like creation of a statutory safety authority, speedy replacement of ageing coaches with modern LHB design and revamped management that keeps its focus on core train operations should be fast tracked.
  • In Budget 2016-17, the Minister of Railways also announced that all zonal railways would have ultrasound flaw detection machines by March 2017 to test track quality. It should be verified if such a test was done on the Indore-Kanpur-Patna route.
  • Equally important is the availability of quality medical facilities on the site of accident which improve the chances of survival. Many terrible mishaps occur in rural areas that have no hospital facilities worth the name, no trauma specialists or intensive care. Hence, upgrading district hospitals should be a priority.
  • Instead of Railway Ministers succumbing to populism and giving priority to announcing new projects and new trains, more focus should be on necessary operational reforms.
  • Railways is in the process of setting up a non-lapsable fund named Rashtriya Rail Sanraksha Kosh with a corpus of ₹1,19,183 crore for safety improvement. A bulk of that money is proposed to be invested in track renewals and safety works at level crossings.
  • Also, there is a need to find ideal solution for safety challenges. Various safety aids for preventing collision as well as train protection and warning systems continue to be pilot projects.
  • Currently, extensive field trials of the anti-collision device (ACD), are going on and once deployed across the zonal railways, this innovative technology will help reduce accidents.

Conclusion

It is true that Indian Railways has monopoly in rail transportation, but it does not mean that it can take passengers for granted. The initial days after accidents will witness public support and anger against railways, but it will be soon lost in committee inquiries and finally forgotten.

This trend has to stop and railways have to be made more accountable. Along with rising fares, the Railways need to provide superior service — better chairs and berths, on-board services and punctuality and safe and secure passage for passengers.

Similarly, safe and secure transportation of goods also needs to be assured for the Railways to attract freight traffic. Mass’s safety and convenience should be priority.

Connecting the dots:

  • What are the issues plaguing Indian Railways and how to address them?
  • Indian Railways are on path reformation and transformation. How can Indian Railways achieve ‘no accident’ year in future? Discuss.

 

ENVIRONMENT AND CLIMATE CHANGE

 

TOPIC:

General Studies 2

  • Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests
  • Important International institutions, agencies and fora, their structure, mandate.

General Studies 3

  • Conservation, environmental pollution and degradation, environmental impact assessment

 

Marrakech Climate Change Conference – COP 22

 

Facts

  • The twenty-second session of the Conference of the Parties (COP 22) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in Marrakech, Morocco from 7-18 November 2016.
  • The leaders met at Marrakech to deliver part of the blueprint for achieving the goals set under the Paris Agreement on Climate Change (Paris Agreement).
  • The Conference demonstrated to the world that the implementation of the Paris Agreement is underway and multilateral cooperation on climate change continues.
  • Climate Finance was the core issue to be discussed at the Conference.
  • The aim of COP 22 was to find ways and means to integrate national commitments to actual policies.

Significance

Climate Finance:

  • Developing nations have demanded firm commitments and a clear road map from the developed countries for how and from where the money will flow for the pledged $100 billion by 2020.
  • India and other developing countries which actively seek to adopt renewable energy need support in the form of finance commitments from the developed countries.

USA and Climate Finance

  • The Marrakech COP provided an opportunity to communicate concerns about the future climate policy of the USA.
  • The USA had earlier promised $3 billion in climate funding but the flow of the same has been uninspiring.

Marrakesh Action Plan

  • The Marrakesh Action Plan (MAP) was signed on the last day of the conference and it emphasises on the need for all countries to work together to close the gap between their intended reduction of carbon emissions and what needs to be done to keep the rise of the global average temperature well below 2°C in this century.
  • Highlights the need to decide on steps to enhance financing and technology transfer.

India and COP 22

  • India has the twin challenges of growing its economy to meet the development aspirations and cutting emissions.
  • As a signatory to the Paris Agreement there is a huge pressure on India to affect big emission cuts and the same is expected to increase.
  • Smaller and more vulnerable countries such as island states and Bangladesh are demanding action from India to cut emissions.
  • Issues pushed by India, such as “climate justice” and “sustainable lifestyles”, were largely ignored.
  • The International Solar Alliance was officially opened for sign-up and made some progress.

 

Challenges from COP 22

  • Not much progress was made at Marrakech on raising the $100 billion a year that is intended to help the developing nations and the lack of consensus still prevailed.
  • Lack of clarity on the intent of USA with respect to the Paris Agreement since the President Elect has threatened to withdraw from the Paris Agreement.
  • The US government may transfer a share of its financial commitments to the private sector and this will be just as problematic as private funding will be profit oriented and erratic.
  • No support for India on two concepts of “Climate Justice” and “Sustainable Lifestyle” which it wanted to introduce.
  • The concept of Adaptation did not find much popularity at the conference.
  • The pledges made so far are well short of the intended targets, and even if they are all implemented, a minimum rise of 2.9°C is forecast by the UN Environment Programme (UNEP)
  • The money pledged at Marrakesh is about 150 million dollars and is a drop in the ocean against the target of raising 100 billion dollars a year by 2020.

Analysis

Other than the above mentioned challenges, the COP 22 to UNFCCC has definitely has had its share of small victories such as the Marrakech Action Proclamation for Our Climate and Sustainable Development. It now requires all State governments to come together to strengthen the case for international funding. The developing countries were also successful in inserting a clause which requires scaling up of financial resources beyond $100 billion per year after 2020.

A major positive from Marrakech has been that the developing countries have raised voice against the developed nations and have shown unity and solidarity as well. India has taken a lead in cementing the International Solar Alliance. A 47-nation coalition named Climate Vulnerable Forum (CVF) has vowed to convert to 100 percent renewable energy as soon as possible.

Once all the above essential commitments are on track to being fulfilled, it is likely to trigger higher ambition and bigger commitments which might just be enough to achieve the Paris objective of limiting temperature rise to 2 degrees Celsius above pre-industrial levels.

Connecting the dots

  • Define Climate Change and critically analyse the outcomes of the UNFCCC COP 22 held at Marrakech, highlighting their importance in fulfilling the commitments made at the Paris Agreement.

Current Affairs – 21st November, 2016

ECONOMY

 

TOPIC: General Studies 3

  • Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
  • Government Budgeting.

 

Fiscal Policy Management

 

What is Fiscal Policy?

  • Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
  • It is that part of the government policy which is concerned with raising revenue through taxation and deciding on the amount and purpose of the government spending.
  • It deals not only with the quantity of funds but also the quality of public finance.

What is Fiscal Deficit?

Fiscal Deficit is the difference between the government earnings and its spending. It is the difference between what is received by the government on revenue account and all the non debt creating capital receipts.

Fiscal Deficit = Total government expenditure – Revenue Receipts – Non Debt Creating Capital Receipts

What is Fiscal Consolidation?

Fiscal Consolidation refers to the strengthening of government finances. It helps the government to cut down on wasteful expenditure and enables it spend more on social sector and infrastructure.

Effective fiscal consolidation has allowed India to emerge as a preferred investment destination. This has been a result of strength of its policy and institutional frameworks.

Various measures and decisions that have contributed to fiscal consolidation in India are:

  • E-auctioning of natural resources,
  • a rule-based framework for Indian monetary policy,
  • Insolvency and Bankruptcy code,
  • Introduction of the Goods and Services Tax (GST),

Other aspects of conduct of fiscal policy which have played an important role in contributing towards improving India’s growth and investment potential include:

  • Restraint on unproductive spending,
  • Plugging of subsidy leakage through implementation of the Direct Benefits Transfer (DBT),
  • Higher devolution of revenue to States and local self-governments,
  • Greater autonomy to States for spending on developmental plans,
  • Guidelines under the Fiscal Responsibility and Budget Management Act (FRBM).

 

What is FRBM Act?

  • FRBM Act was first introduced in India in December 2000 to bring down the increasing government deficits both at the Centre and in the States.
  • It was enacted in 2003 to institutionalise fiscal discipline, by seeking to eliminate revenue deficit and to bring down fiscal deficit to a manageable 3 per cent of GDP by Financial Year 2008-09.

Objectives of FRBM Act

  • Fiscal discipline
  • Increasing planned expenditure
  • Reduction in amount of borrowings
  • To meet the consumption from government’s own fiscal resources
  • Give autonomy to Reserve Bank of India (RBI) for money creation

 

Reforms in FRBM Act

In the light of current domestic and global dynamics, a committee has been formed to review the FRBM Act. Certain changes which could be made in the FRBM Act considering the contemporary needs are as follows:

  • Adoption of a ‘Point based’ and appropriate fiscal deficit target:
  • A point based target infuses fiscal discipline.
  • It limits the room for government trying too many things.
  • It also provides an unambiguous signal to the bond markets.
  • Such a target will lead to focused policy communication and subsequently help in ratings upgrade for India.
  • A favourable economic atmosphere will lower the cost of borrowing for the private sector and aid new capital and investment formation.
  • Rules serving as  guiding principles:
  • Effective rule-based policy would help the governments adopt a countercyclical approach and limit the scope for creative accounting which involves capitalizing on loopholes in the accounting standards to falsely portray a better image of the company.
  • A ‘spending rule’ with a medium-term debt range and due consideration to institutional setting could enhance the policy credibility, allow effective monitoring and ensure stability, fairness and efficiency.
  • A ‘debt sustainability rule’ can help in implementing a ceiling on government debt. This will also allow India to act as per the Maastricht Treaty guidelines.
  • An ‘expenditure rule’ that focuses on improving the quantity and quality of spending and improve accountability could be chosen.
  • Independent constitutional body as a watchdog:
  • FRBM Act should provide for an independent reviewer or a Fiscal Council, to oversee the adoption of rule-based fiscal policy and also recommend future course of action.
  • A well-designed fiscal council with strict operational independence will boost fiscal accountability and transparency and also contribute in enhancing the ratings of India.

Analysis

Adoption of FRBM 2.0 framework will enhance the efficacy of India’s fiscal policy and significantly reduce the twin-deficit vulnerability. At a time when most developed economies are struggling with their government’s fiscal management efficiency, a rule-based system with room for independent advisory and oversight can transform India’s fiscal architecture and promote investment in India at a major scale.

Connecting the dots

  • Define Fiscal Consolidation and steps in the recent past taken by the government to ensure fiscal consolidation. Suggest changes that can be made in the FRBM Act to increase its contribution to fiscal consolidation.

 

NATIONAL

 

TOPIC: General Studies 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Fighting the corruption on six fronts

  • The demonetisation move has affected all the people who have cash which is unaccounted for. However, this money will not be destroyed. Instead, it will be sold at a discount, and laundered in various ways.
  • The person who has unaccounted cash will have to bear a substantial loss of 25-50%. Due to such consequences, the people who have resented corruption and criminality in high places are celebrating the move.
  • On a flip side, the Indian’s money supply is largely based on cash and it is a critical medium of transactions. Thus, the demonetisation move has been a large contractionary monetary shock, which has had adverse implications for the business cycle.

The Black economy

There are three components of black economy

  1. Underlying source of corruption– for example, high stamp duties on real estate transactions that lead to payments in cash.
  2. Methods adopted for storing unaccounted wealth– for example- holding liquid assets in gold.
  3. Method through which transactions are affected– this involves the cash transactions

The people who resorted to black money have been penalised by 25-50% due to demonetisation. But, they will soon find ways to use the new currency illegally. Hence, now is the need for policy which sets higher vision to disrupt the black economy totally.

For this, the focus needs to be on the core of the corrupt activity. We shall look into details of six such areas which needs to be targeted.

Gold

  • Before liberalisation, there was a booming industry of smuggling gold in India.
  • In 1991, this was put to an end by eliminating restrictions against gold imports.
  • For this, a great deal of work went into the establishment of a white-money gold and jewellery business. But this developmental work received a major setback in 2013, when the customs duty on gold was reintroduced.
  • As a result, the buyer started making cash payment in order to have discount. Hence, this was a blow to the world of gold and jewellery that was being conducted through white money.
  • So now, instead of targeting jewellers and their customers, the better idea would be to eliminate the customs duty.

 

Hawala

  • The Hawala is an alternative remittance channel that exists outside of traditional banking systems whereby the money is transferred without any actual movement of money.
  • For example: Person A (Dubai) wants to send 1 lakh riyal to person B (India). Person A will contact Hawala agent X and tell him to transfer the money to person B. Agent X will contact Hawala agent Y in India and ask him to give Indian rupee equivalent to 1 lakh riyal. Person B will contact Agent Y and take money. Agent X and Agent Y will settle their accounts later and once done, they will destroy all evidence of transaction.
  • The hawala business came up in the 1960s and 1970s due to capital controls that were a part of Indian socialism. Hawala transactions avoid tax, has low commission rates than banks and is fast and convenient to send illegal money.
  • Capital control= residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation’s government can use to regulate flows from capital markets into and out of the country’s capital account.
  • Indian businessmen and citizens have a robust history of business activities in East Africa, West Asia and South-East Asia. But the cross-border activities are mired in complicated regulations. Recent spat between Tata and Docomo is an example of problems created due to India’s capital control.
  • Thus, instead of policing against people involved in hawala transaction, India should look forward to become a ‘most open economy in world’ as envisaged by PM and also improve its ranking in Chinn-Ito index (measures capital-account restrictions) where it is currently placed at the bottom of the table.

 

Real estate

  • Real estate sector is widely mired in black money transaction where the secondary market generally involves a cash component.
  • Cash payment is favoured so as to avoid stamp duty. Just like custom duty, stamp duty also attracts tax evasion and thus, more generation of black money. Instead real estate can have GST.
  • At present, buying land and settling disputes often involves criminality, as there are title disputes.
  • Hence, Building sound land-title systems will enable law-abiding citizens to buy and sell land without a brush with cash or criminality through equity market which has shown how to build infrastructure for tracking property rights and achieving frictionless transactions.

Taxation

  • The tax administration in India has limited capabilities and hence, tax policy must put a low “load” upon the tax administration by favouring simplicity and low rates.
  • Under, the present levels of state capacity, the high interest rates and complex code has led to corruption in economy.
  • A GST has a single rate will eliminate classifying a given product at a high rate or a low rate. And the low rates will push both the tax administrator and the citizen in favour of compliance.
  • For this, a new tax administration act is required which sets up the Central board of direct taxes and Central board of excise and customs with sound processes for their legislative, executive and quasi-judicial functions.

 

Administration

  • Arbitrary power is the root cause of corruption. The government has the discretion to change a rule, give a licence, conduct an investigation etc. and such actions should be covered by procedural law, which enshrines good governance.
  • When a coal mine has to be allocated, there has to be a structured process for it, before any punishment is pronounced, the accused must be given a statement of the accusation and the evidence in writing. These are basic rules to be followed, yet it is presently lacking in many parts of the Indian state.
  • The regulators need to be established with proper statutes as they have legislative power (the power to write law, i.e. regulations), executive power (the power to give licences, the power to conduct investigation) and quasi-judicial power (the power to award punishment).
  • Thus, such an administrative environment should be balanced in order to prevent hegemony of few.

Politics and elections

  • Running a political party and fighting elections requires large-scale resourcing.
  • The complex procedures force the political parties to engage in these activities using black money. During elections, the arbitral and unpractical spending and donation limits encourage political parties to find alternate ways of funding.
  • Thus, there is a need for fundamental reforms are required so that funding in white money is made possible.
  • This will also allow the Indian political system to go beyond family-dominated political parties.

Thus, to truly disrupt the shadow economy, fundamental reforms targeting these areas is a must.

Connecting the dots:

  • Knowing and targeting the source of black money is important than making efforts to clean it up from top. Identify the possible sources and state ways to clean up the core.