9 PM Brief (26th September) by ForumIAS GS-1
Consent key factor in defining sexual assault, says Delhi HC: Context: •
The Delhi High Court’s discussion on various dimensions of sexual consent in the modern world.
What is the background? •
A judgment acquits a film-maker in a rape case giving him the benefit of the doubt that he might have misread the ‘no’ of the woman as a ‘yes’
What is the court’s observation? • • • • •
Consent would mean voluntary agreement of a woman to engage in sexual activity without being abused or exploited by coercion or threats The consent can be revoked any moment Sexual consent would be the key factor in defining sexual assault as any sexual activity without consent would be rape There are differences between how men and women initiate and reciprocate sexual consent In normal construct, man is the initiator of sexual interaction while whereas a woman is by and large non-verbal
UN human rights review: What India ‘accepted’, what it merely ‘noted’: (Indian Express, Explained) What is the UN Human Rights Council Universal Periodic Review? •
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The Universal Periodic Review (UPR) is a process established by the Geneva-based UN Human Rights Council (HRC), under which the human rights record of each of the UN’s 193 member countries is peer-reviewed every four or five years. Under the HRC’s UPR, every country has the opportunity to make recommendations on every other country’s human rights record. The first UPR took place in 2008, the second in 2012, and the third is ongoing.
What happened in Geneva? • •
India faced the HRC again and promised to “accept” 152 of the 250 recommendations, and “noted” the rest. India’s Permanent Representative to the UN in Geneva Rajiv Chander (who on September 12 had replied to the UN High Commissioner for Human Rights Zeid Ra’ad Al Hussein’s criticism of India with a “sabka saath, sabka vikas” slogan) delivered the Indian statement with its Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS “accepted” and “noted” recommendations, and promised that India would sign the longpending UN Convention Against Torture.
How are the recommendations compiled? •
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The process starts about a year before the review, when diplomats of the country in question in Geneva and at headquarters begin consultations on the human rights issues expected to be raised. Previous reviews, NGO reports, media debates, and reports of various UN committees (like the Convention on the Elimination of all Forms of Discrimination Against Women) are fodder for countries to ask questions of other countries.
Did India have a friendly troika? • • •
Yes. South Africa and India have had very close ties since India led the international struggle against apartheid. Today, they collaborate in the BRICS and IBSA forums. The Philippines, a US ally, is seen to be friendly to India because it wants New Delhi’s support against China on claims in the South China Sea. And Latvia is really too small to matter.
What was so important about India promising to ratify the UN Convention against Torture? • • •
India signed the treaty 20 years ago, but never ratified it. In 2010, the Bill was sent to a Parliamentary Committee whose recommendations were never accepted, and the Bill lapsed in 2014. At Geneva, 30 countries, including Germany, Australia, Japan, Israel and Russia, called on India to ratify the convention.
What were the main recommendations made to India? • • • • • •
Countries including Switzerland and Pakistan asked for the abolition of the Armed Forces Special Powers Act (AFSPA). Several countries like Germany and the United States said the use of the Foreign Contribution (Regulation) Act to harass and intimidate NGOs should end. Raised concern over restrictions to freedom of assembly and association Several countries asked India to criminalise marital rape. Raised concern about growing violence against women. India has accepted recommendations pertained to sustainable development goals related to eliminating poverty, access to safe drinking water, sanitation and improving protection for women and children.
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9 PM Brief (26th September) by ForumIAS GS-2
Diary of a very long year: (The Hindu, Editorial) Context •
The article analyzes the impact on India-Pakistan relations after the surgical strikes, the challenges and India’s role as a regional stabilizer.
Importance of surgical strikes • •
It has been one year since the special forces of the Indian Army carried out surgical strikes to destroy terror Launchpad in Pakistan-occupied Kashmir. The surgical strike from India was a point that the Line of Control is not a line that cannot be breached.
Impact on India-Pakistan relations after the strikes • •
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It is important to take stock at this point on how India-Pakistan bilateral relations and the regional security situation have evolved over the past year since the strikes. The future direction of the foremost regional forum, the South Asian Association for Regional Cooperation (SAARC), remains unclear after India dropped out of the 2016 Islamabad summit in the wake of the Uri terror attack. The regional security situation remains, because of confused American policies in South Asia, continuing turmoil in Afghanistan, heightening India-China rivalry, and the India-Pakistan hostility. From a regional stability point of view, the surgical strikes do not seem to have had much of an adverse impact. The fact that Pakistan neither acknowledged the attacks nor responded in kind shows that the general deterrence between the South Asian nuclear rivals remains intact. It is easy to talk about nuclear use and threaten nuclear retaliation, as Pakistan has been doing for long. It is, however, not easy to translate such talk into action. In that sense, the surgical strikes have called Pakistan’s nuclear bluff. And that certainly is good news for regional stability. But such higher-level stability seems to have come with heightened lower-level instability and that is the bad news.
What are the challenges? • • •
There are two sets of challenges that are more apparent today, one year after the surgical strikes. One, the India-Pakistan escalation ladder has become far more precarious today it has ever been in the past one and a half decades, i.e. since the ceasefire was agreed to in 2003. The recurrent, and almost daily, occurrence of border battles between the two militaries in Jammu and Kashmir today have a worrying potential for escalation to higher levels. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • •
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The border stand-offs often lead to, as is evident from the data from the past 15 years, military, political and diplomatic escalation as well as contribute to escalating an ongoing crisis. While this was common even prior to the surgical strikes, the September 2016 operation has made ceasefire violations more worrisome in at least two ways: first, Pakistan has been retaliating ever since the surgical strikes by increasing the pressure on the frontlines; and second, surgical strikes have reduced the critical distance between ceasefire violations and conventional escalation. While stealthy surgical strikes may not qualify as conventional escalation, they certainly reduce the psychological distance between sub-conventional violence and conventional escalation in the classical sense. That is bad news for regional stability. The second challenge is more practical than theoretical. Surgical strikes could easily offset the logic behind such familiar and analytically elegant scenarios. The perils of preventive strikes are unpredictable. Preventive strikes are pregnant with immense potential to lead up to a ‘competition in risk-taking’, a tendency already prevalent on the frontlines of the India-Pakistan border in J&K. Preventive strikes in hyper-nationalist bilateral settings could defy our expectations and go out of control, with disastrous implications.
Have the surgical strikes helped the country’s overall national security environment? • •
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There are two reasons why the strategy of punishment may not have worked. For one, a strategy of punishment requires consistency and commitment. The momentum achieved by the surgical strikes was not followed up (despite several attacks thereafter), nor was the government committed to its declared determination to respond firmly to terror strikes, thereby lacking in both consistency and commitment. Second, and more importantly, Pakistan’s responses thereafter of supporting insurgency in Kashmir, aiding infiltration across the border, and allegedly supporting attacks on the Indian army convoys and bases continued without much reaction from New Delhi. This has led to a visible lack of credibility on New Delhi’s part which makes one wonder whether, bereft of domestic political use, there was any strategic planning behind the September operation. Surgical strikes may have been a tactical victory for New Delhi, but its strategic value is far from settled.
Concerns and the bigger picture With two hostile neighbors on either side, terror attacks against India on the rise, and the South Asian neighborhood unsure of India’s leadership any more, New Delhi has a lot to be concerned about the continuation of its pivotal position in the region and the nature of its future engagement with it. • •
The events since September last year have further contributed to South Asia’s regional ‘insecurity complex’. For a country that has traditionally been the regional stabilize, New Delhi seems to be quickly embracing the virtues of geopolitical revisionism. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
The costs of aggression, self-imposed regional exclusion and an absence of strategic altruism are bound to become starker sooner or later.
GS-3
PM launches ‘Saubhagya’ plan for household electrification: Context •
On 25th september 2017 PM launches 16000 crore scheme ‘Saubhagya’ for household electrification that have no access to electricity.
About the scheme • • • • • • •
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Sahaj Bijli Har Ghar Yojana (Saubhagya) every household in the country, whether it is in a village or a city or in a far-flung area, will be given an electricity connection. No price will be charged for the poor to get an electricity connection The Government of India will provide largely funds for the Scheme to all States/UTs. The States and Union Territories are required to complete the works of household electrification by the 31st of December 2018. The beneficiaries for free electricity connections would be identified using Socio Economic and Caste Census (SECC) 2011 data. However, un-electrified households not covered under the SECC data would also be provided electricity connections under the scheme on payment of Rs. 500 which shall be recovered by DISCOMs in 10 instalments through electricity bill. The solar power packs of 200 to 300 Wp with battery bank for un-electrified households located in remote and inaccessible areas, comprises of Five LED lights, One DC fan, One DC power plug. It also includes the Repair and Maintenance (R&M) for 5 years. The Gram Panchayat/Public institutions in the rural areas may be authorised to collect application forms along with complete documentation, distribute bills and collect revenue in consultation with the Panchayat Raj Institutions and Urban Local Bodies. The Rural Electrification Corporation Limited (REC) will remain the nodal agency for the operationalisation of the scheme throughout the country.
The expected outcome of the Scheme is as follows: • • • • • •
Environmental upgradation by substitution of Kerosene for lighting purposes Improvement education services Better health services Enhanced connectivity through radio, television, mobiles, etc. Increased economic activities and jobs Improved quality of life especially for women Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS Waiting for a signal: (The Hindu, Editorial) Brief overview • •
The article, focussing on safety, talks about the problems faced by the Indian railways. It also suggests measure which could be taken to improve the situation.
Is there a problem of priorities? • •
Political priorities of Railway Ministers- focus on more trains and better speed instead of safety and capacity building to cope with the existing system. Politicians lack the expertise in railway matters. Advice of professional gets ignored, especially when it does not gel with political compulsions of the politicians.
What are the results of the above situation? • • • •
Haphazard introduction of trains. Subsidising passenger fares by overcharging freight. Investment in unwanted new facilities. Modernisation and induction of new technologies without a plan.
What is the fallout of this situation? • •
Balkanization of organization on departmental lines, with each following its own narrow goals. Decision-making revolves around pursuing immediate goals that can show the department in a good light.
Safety concerns in light of recent incidents •
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The recent Puri-Haridwar Utkal Express derailment in UP shows that the number of trains have reached a level where field staff are unable to carry out maintenance work without cutting corners. The practice of repairing tracks without blocking trains is widespread. Trains are not blocked by the section control staff to ensure punctuality of the train.
What has led to this situation? • • • • •
The situation is the outcome of pursuing three inconsistent goals at the organisational level. Moving more people by continuously adding trains even when sections are saturated. Focussing on increasing speed and punctuality. Diverting freight earnings to subsidise passenger fares. These are incompatible with the declared objective of safety, especially when there is a shortage of capacity to run existing services.
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9 PM Brief (26th September) by ForumIAS •
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Unless the numbers of trains can be brought down to what the system can handle without cutting corners in track, signalling and rolling stock maintenance, there is really no way to make the system both safe and punctual. The problem is further exacerbated by a lack of money to replace old assets or purchase spares. The Utkal train accident is a distressing example of how incompatible organisational goals connect to unsafe behaviour at the field level.
What can be done by the new Railway Minister to address the situation? • • • • • • • • •
Make difficult political decisions; Cut back on trains on saturated sections Put punctuality on the backburner for the time being Allot time for maintenance even at the cost of delaying trains Make sure, in the matters related to field work, judgement of supervisory staff is respected Restore the well-established practice of field inspections at all levels Ensure the energies of field officers are not sapped by meaningless drives and social media and are focussed on their main job of oversight and corrective actions Ensure money for maintenance and replacement of aged assets Free freight from subsidizing passenger fares through subvention from general budget.
In defence of manufacturing: (LiveMint, Editorial) Context •
Low-skill manufacturing jobs are essential for easing the fundamental economic shifts that are underway globally. This opinion comes amidst the fall in seen in a number of macro- economic indicators in India in the past few months.
Potential of monetizing small-scale entrepreneurship • • • • • • •
Economic research has consistently shown that innovation drives economic growth. It boosts allocative efficiency of resources, fosters competition, ·boosts trade through product diversity and helps provide low-cost solutions to human development challenges. Start-ups and small businesses are some of the strongest repositories of the entrepreneurship that drives innovation In general, much of the vital innovation comes from start-ups and small businesses that are snapped up by larger companies to acquire patents.
Costs of paying less attention to low-skill jobs • •
There are very real social and political costs for paying insufficient attention to accessible lowskill manufacturing jobs. The opioid crisis that has swept the US Rust Belt points to the consequences of economic alienation among blue-collar manufacturing workers on a micro level. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
In India, the sixth economic census, conducted between January 2013 and April 2014, shows that the average employment size of an economic establishment in India is 2.24—the fourth consecutive census of decline. In such a scenario, focusing on low-skill manufacturing jobs in large enterprises becomes more important than ever.
Way forward • • •
Large-scale manufacturing may see a decline over this century this will cause decades of economic and social pain. That is why governments cannot afford to lose focus on large-scale manufacturing. Hence, improving human capital to meet the demands of the transforming economy is a long term challenge—and in the interim, those vanishing low-skill jobs are imperative for providing a soft landing to the economic shift.
India’s refining capacity expansion lags behind growth in fuel demand: Context: •
The slow-pace growth of India’s refining capacity
What is the current scenario? • • •
Growth in demand for oil products rising faster than refining capacity added There is no major expansion of refinery capacity except few brownfield projects India is a net importer of LPG, a fuel used for cooking and heating, and a net exporter of other products such as gasoline, jet fuel, and diesel.
What is the main reason behind the boost of demand for refinery products? •
India’s rising disposable income
What is the speculation? •
It is being speculated that India might be able to export fewer fuels in the next four years as the refining capacity has not been expanded
Solving food challenges with more research: (The Hindu, Editorial) Context •
The article discusses the importance of scientific research for food production and the need for empowerment of women in agriculture.
Brief overview Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • • • •
The capacity to produce enough quality food is falling behind human numbers. Food production in the region must keep pace, even as environment sustainability and economic development are ensured. The answer to these challenges lies in research for sustainable development. As the second goal of the UN’s Sustainable Development Goals says: “End hunger, achieve food security and improved nutrition, and promote sustainable agriculture.”
Why is investing in scientific research for food production important? •
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India’s fivefold increase in grain production over the past 50 years is largely the result of strong scientific research that has focused on high-yielding crop varieties, better agronomic practices, and pro-farmer policies. However, India continues to face challenges such as food insecurity and malnutrition, particularly in rural areas. Providing world’s growing urban population with safe and healthy food requires both a rural and a peri-urban agricultural movement - a huge challenge, but also an opportunity for ingenuity. Integrating agricultural production, nutrition, and health is emerging as a key focal point throughout Asia, with policymakers shifting their attention to the role of biodiversity and the power of local farming systems to improve nutritional status. There is a potential in targeting underused crops such as millets, pulses, and vegetables as a sustainable means of increasing agricultural production and improving nutrition and health in high-need areas. The Food Security Act of 2013 was welcome, as was the inclusion of millets in the Public Distribution System as millets are superior to common grains in many ways and are also climateresilient. Bio-fortification is also important in overcoming hidden hunger caused by micronutrient deficiencies such as iron, iodine, zinc, vitamin A, and vitamin B12.
Is empowerment of women in agriculture important? • • • •
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Studies show that women make up nearly half of agricultural laborers, yet they carry out approximately 70% of all farm work. Women are among the most disadvantaged because they are typically employed as marginal workers, occupying low-skilled jobs such as sowing and weeding. Research shows that empowering women is one of the best ways to improve nutrition. Research needs to continue focussing on the needs of women farmers to ensure that they are the direct recipients of development impacts, such as access to markets and income, to improve theirs and their children’s access to adequate and diversified diets. It is crucial to continue to identify issues and seek evidence-based solutions through research.
Way forward •
Building on the momentum of recent efforts by the government to improve understanding of India’s nutritional situation, there is considerable potential in building partnerships to extend reach of research for development and to improve the connections between agricultural and nutritional research with extension services and policy. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • • •
Taking a multi-sectoral approach that links agricultural and nutritional outcomes will help India sustainably grow, feed its people, and maintain the agricultural sector over the coming decades. India’s research community is poised to be a leader in meeting new food challenges by increasing food quantity and quality to improve food security and nutrition. The world needs to tap into India’s research excellence to experiment, innovate, share knowledge, and scale up effective solutions.
What should an agricultural export promotion policy focus on?: (Live Mint, Editorial) Context: •
The government will soon announce a policy aimed at boosting farm exports said newly appointed commerce minister Suresh Prabhu.
Introduction: • •
India’s agricultural trade surplus recorded a more than ten-fold increase between 1991-92 and 2013-14. Mr Prabhu, also underlined the need to eliminate restrictions in agriculture trade.
What will the Benefits of this policy? • •
This would provide a boost to Indian farmers’ incomes. Farm exports will also earn valuable foreign exchange.
What are the challenges that India’s farm exports is facing? • • •
India’s agricultural exports increased at a brisk pace for more than two decades after the globalization in 1991. Although imports also increased, they were more than compensated for by exports. India’s agricultural trade surplus recorded a more than ten-fold increase between 1991-92 and 2013-14.
Between 2013-14 and 2016-17, agricultural exports fell by 22% while imports increased by 62%. As a result, the trade surplus has fallen by 70%. What are the reasons? • •
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Fall in international prices and loss of competitiveness due to currency movements for India’s plummeting farm export earnings. A report by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organisation on the agricultural outlook, released in July this year, expects a flat to declining trend for primary commodity prices. The situation is dismal for cotton, sugar and rice, which are major components of India’s agriculture export basket. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • • •
Government’s restrictions on important food items to prevent inflationary pressures in the domestic economy. India’s warehousing capacity for perishables is disproportionately concentrated in a few regions. Almost 50% of cold-storage capacity is concentrated in the states of Uttar Pradesh
What are the Solutions? • • • • •
Improvement in warehousing infrastructure would also counter inflation concerns due to seasonal factors such as poor monsoon rains. India’s agricultural trade surplus could increase significantly if it cuts down on imports of pulses and edible oils. Pulses alone made up for close to 17% of the value of India’s total imports of agriculture and allied products in 2016-17. The problem of bumper crops leading to a price crash can be resolved by policies such as minimum support prices. India pursued the cause of legitimizing its procurement based PDS at the WTO in the past two WTO ministerial conference.
Database soon of savings schemes linked with Aadhaar: Context •
Recently meeting chaired by cabinet Secretariat to discuss the “interoperability of savings schemes” and linking them to Aadhaar.
What government is planning? •
The Cabinet Secretariat is keen on a central database of government and private sector employees who have subscribed to the general provident fund (GPF), public provident fund (PPF) and employees’ provident fund (EPF) with Aadhaar as the primary identifier.
What was the objective of meeting? • • •
To deliberate on Aadhaar linking of GPF, PPF and EPF accounts of employees, To examine the possibility of a centralised repository of employees’ fund details with Aadhaar as the primary identifier and To establishing portability of fund accounts across organisations.
Some facts related to EPF, GPF, PPF •
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For government employees, the Ministry of Finance said that it is developing Employees’ Information System, an online salary application system, which may also be used to maintain information related to GPF. While EPF is the savings scheme for private sector employees, the GPF is meant for government employees and PPF can be subscribed to by all workers. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
The Department of Posts informed the Cabinet Secretariat that 4.7 crore out of 56 crore PPF accounts in post offices were linked with Aadhaar.
‘Intervention, rethinking needed to stir demand’: Context •
The current economic scenario of slow growth and decreasing exports suggests measures to be taken by the government to push investments and demand in the economy.
What is the Current economic scenario? • • • • •
Subdued growth Slowdown in exports Slowdown in job creation Slow Global recovery All this call for government intervention
What are the suggested measures? • • • • • • • • • • • • • • • •
Increased capital spending by centre as well as states on infrastructure. Fiscal consolidation target may be relaxed for a year. This has a multiplier effect on economic growth as higher spending on projects creates jobs which further create greater demand for goods and services in the economy. Implementation bottlenecks need to be addressed. Government could issue special bonds for large infrastructure spends. The recent PPP option announced for low cost housing is innovative as it targets issues in risk allocation. Similar models can be offered to other infrastructure sectors. Clauses on renegotiation and grievance redressal need to be included in such policies. The government should recapitalise banks by raising capital without putting pressure on the balance sheet by trimming its large holdings in these banks. The government has also been concerned about a slowdown in job creation. While growth revival through public spending will itself create jobs especially in the construction sector, it is also necessary to focus on the labour-intensive sectors. It is time to recast labour laws and allow fixed term employment contracts ensuring more flexibility. The government’s recent initiative on setting minimum wages is a move in the opposite direction and should be reconsidered. The government needs to resolve issues related to GST especially for the small and medium sector. Problems faced by exporters such as withdrawal of duty drawback benefit need to be addressed immediately. There is a need to catalyse FDI in organized food retail which can create a supply chain transformation and strengthen the linkages between farmers and markets. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS How can RBI’s supporting role help? • • • • • •
It needs to place some priority on growth while deciding on monetary policy. The monetary policy committee seems to be ignoring the weak growth trends while setting interest rates. The policy repo rate of 6% does seem excessively high for an economy that is facing recessionary pressure. The RBI could outline a plan of cutting interest rates over a period of time. The exporters should have access to easily available credit. This can be done by expanding interest rate subvention from the current rate to 4% and allowing commercial banks to lend more to SME exporters or tweaking working capital norms.
India, S. Korea to upgrade FTA at ‘earliest’: Context: •
There is low utilisation of the FTA by India due to the complicated provisions in the India-South Korea Free Trade Agreement (FTA) and South Korea’s regulations.
What are the complications? •
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Going by the FTA, Indian English language teachers should be getting opportunities to teach in primary and secondary schools in South Korea, but this is not being implemented effectively in practice. Seoul has stated their services may not be needed since many Koreans are now learning yoga in India and returning to teach it in South Korea.
What are the causes? •
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This problem arises because the ‘English Program in Korea’ (EPIK) stipulates that those eligible to teach English in South Korea must be a citizen of a country where English is the primary language. EPIK teachers must be citizens of one of the following countries: Australia, Canada, Ireland, New Zealand, U.K, U.S., or South Africa.
Case for a fiscal push: (Indian Express, Editorial) Context •
Policies should focus on recapitalizing banks, giving incentives to sectors like telecom and housing, and alleviating the disruption caused by demonetization and GST.
Need for a counter-cyclical fiscal policy •
Any talk of a fiscal stimulus is sure to make the purist amongst economists raise a red flag. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • • • • • •
Even policy-makers begin to sound defensive when pushing fiscal expansion. However, historically, this term has been quoted out of context in India, and the current debate is no different. Even as there is talk that the government is planning a fiscal push to support growth, strong dissenting voices are suggesting that all hell will break loose. Comparisons are being made with the 2008 stimulus and dire warnings are being issued. There must be an impartial assessment of the current situation, and a fair comparison between 2008 and the current situation is required. A counter-cyclical fiscal policy push is the need of the hour, and it should not be misconstrued as similar to the misguided fiscal policy of the past.
What does the statistics say? •
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The total size of the discretionary fiscal stimulus that India provided during 2008-2010 was 1.8 per cent of the GDP, much lower than its Asian counterparts and several other countries - Korea 9.4 per cent, US 4.9 per cent and China 6.2 per cent, and South Africa, 6.8 per cent among others. The stimulus per se was then not the main culprit behind runaway inflation and rupee panic, as some critics would have us believe. There were additional measures, including the debt waiver amounting to 0.9 per cent of the GDP, the Pay Commission’s recommendations, around 0.8 per cent of the GDP, and a staggering 22 per cent increase in the MSP during FY09-FY11, which together were responsible for the macro deterioration, not just the fiscal stimulus. Second, there are important differences between then and now, even though the loan waivers (by various states, not the Centre), and the Pay Commission awards are common elements. The situation now is quite different. First, the Pay Commission’s recommendations as a percentage of the incremental PFCE (private final capital expenditure) are down to 9 per cent in FY17 from 22 per cent in FY09. This implies a less frothy boom in consumption. Second, unlike the earlier years, there are no arrears that have to be paid. Third, the loan waivers are unlikely to fuel inflation, as inflation has structurally corrected from double digits to low single digits in the last three years, and rural demand is now at multi-year lows. Fourth, procurement price increases in the last three years have been moderate and do not threaten inflation.
Fiscal Expansion •
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Fiscal expansion got a bad name because in India it has been largely pro-cyclical. This means that fiscal policy is expansionary (increasing spending/reducing taxes) in boom times and contractionary in recession. The opposite is true for counter-cyclical policy, which is more effective. Ever since the East Asian crisis of the mid-1990s, institutions like the IMF pushed fiscal austerity for the developing countries, especially when the debt situation worsened or fiscal deficit exceeded targets. Rating agencies too joined the chorus asking for austerity to combat rising debts and deficits. Such advice was quickly abandoned during the European debt crisis. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
Example: Malaysia, which had defied the IMF in 1997, had the last laugh. So obviously, an effective policy calls for a classical Keynesian approach, that is, countercyclical fiscal policy. This means that deficits should decline when the economy is expanding and increase during economic downturns.
Report on Fiscal Responsibility and Budget Management • • • •
The expert committee on Fiscal Responsibility and Budget Management, in its report, recommended numerical targets for debt and deficits. But it also provided an escape clause for deviating from the deficit target by up to 0.5 per cent of the GDP. One of the triggers for the escape clause was far-reaching structural reforms in the economy with unanticipated fiscal implications. Surely demonetisation, GST and RERA in quick succession should qualify for this criteria. They have created much short-term fiscal uncertainty.
Need for fiscal push • • •
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It is imperative that we believe the government must go for a fiscal push. This is different from 2009. Policy should now focus on structural bottlenecks and not on putting money in the hands of consumers. The first of these is to recapitalise public sector banks through widely-discussed recapitalisation bonds that have precedence not only in India but also in many other countries (Korea and Malaysia, for example). The obvious advantages of such bonds are that they do not alter the fiscal maths. The government need not raise immediate tax revenues and by borrowing directly from the banking system instead of the markets, the Centre can avoid crowding out private borrowings or distorting market yields. The fiscal package could also include sector-specific measures, such as on sectors like exports, telecom, construction and power. Last year’s textile package of support for wage costs and interest subvention could be expanded. Some successful state-level initiatives, as in the garment sector in Odisha, can be expanded nationally. Affordable housing offers another big opportunity. It has a big multiplier effect. It helps the construction sector and has the maximum employment elasticity. Another area is the resolution of stressed assets. It is high on the agenda of the government, and hence the National Company Law Tribunal infrastructure needs further ramping up. Structural and deep reforms like GST, RERA, monetary policy framework and move to less-cash and digital economy, will all pay back over the longer term. However, they have created short-term uncertainties and disruption. This needs deft policy and perception management. The short-term fiscal measures will also bear fruit in the medium term. Bigger reform in land and labor await us. Bigger spending also awaits us in urban infrastructure.
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9 PM Brief (26th September) by ForumIAS •
India needs to correct imbalances in regional growth, and the urban-rural divide, and addressing the woes of the farm sector. There is much work to do, but for this year, we need a definite fiscal push.
New foray into the great game: (Indian Express, Editorial) Context: •
The question of a larger Indian role in securing Afghanistan is expected to figure prominently in the talks between the visiting US Defense Secretary James Mattis and the Indian leadership.
Introduction: • • • • •
•
•
The visit of Mattis is likely to give a concrete shape on expanding India-US security cooperation in Afghanistan The developments in Afghanistan in the 1970s and 1980s saw the United States deepen its partnership with Pakistan to the dismay of India. Collaboration in Afghanistan marks an important shift in the international relations of South Asia. US, President Donald Trump, last month pointed out that India among the neighbours of Pakistan to play a larger role in Afghanistan. India and the US are fully aware that without stronger external military support to the government in Kabul, which is fighting a rearguard battle against the Pakistan-backed Taliban, the talk of development could become increasingly futile. India and the US are fully aware that without stronger external military support to the government in Kabul, which is fighting a rearguard battle against the Pakistan-backed Taliban, the talk of development could become increasingly futile. Delhi debates a larger security role in Afghanistan in addition to its developmental partnership, far too much attention has been devoted to the question of India putting boots on the ground in Afghanistan.
Developments in Afghanistan: • • •
The developments in Afghanistan in the 1970s and 1980s saw the United States deepen its partnership with Pakistan to the dismay of India. Since the early 2000s, when the US warmed up to India, Afghanistan remained an area of disagreement. Higher level of Indian involvement in Afghanistan with active US support is likely to have significant long-term consequences for the region.
Key facts: • •
The lack of physical access has imposed substantial limitations on Delhi’s military role in Afghanistan. This geographic limitation has reinforced India’s traditional reluctance to take risks in its security policy. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • • • • •
It was no surprise then that Delhi stuck to a developmental programme, training of armed forces, and limited non-lethal military assistance to Afghanistan all these years. Delhi has begun to overcome this caution by supplying four combat helicopters to Afghanistan. Another constraint on India has been the US resistance to a larger Indian security footprint in Afghanistan. Washington welcomed Indian economic presence in Afghanistan and often tried, unsuccessfully, to promote regional economic cooperation between Delhi, Islamabad and Kabul. Any substantive India-US strategic coordination in Afghanistan and Pakistan’s inevitable reaction to it could presage a major change in the regional politics of South Asia.
What stimulus?: (Indian Express, Editorial) Context: •
Ways to revive the Indian economy
Why there is an expectation of a fiscal stimulus amongst a large section of industry and economists? • •
There is no sign of revival in corporate investment or exports There is a slow-down in private consumption due to jobless scenario
What should the government do? • • •
The government should put more money in highways, railways, irrigation and other publicfunded infrastructure. It might increase the fiscal deficit, but that problem will take care of itself once growth returns and revenues, too, show corresponding buoyancy. There is a requirement of public sector managers E. Sreedharan, Verghese Kurien or Narla Tata Rao to take up projects
What is the solution? • •
Boosting private consumption as against public investment is a more efficient way to revive the economy All fiscal stimuli were not successful in providing a necessary short-term demand boost to the economy. For example, the fiscal stimuli adopted by the government post the 2008-09 global financial meltdown
What is the incumbent government’s commitment? • •
Unlike its predecessor, the current NDA government has shown greater commitment to fiscal and monetary prudence Low inflation and stable exchange rate regime has helped attract foreign capital flows both direct as well as portfolio investment in equities and bonds. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
These flows to finance its external current account payments deficit so the government need to take calculated risk while deviating from the path of macroeconomic stability
Of new ecosystems and more competition: (Live Mint, Editorial) Context •
Instead of adding skills and services in-house, companies are proactively partnering with other organizations
What is happening? • • •
There is a fundamental shift in industry today of ecosystems, rather than individual firms, competing with each other. Companies are looking outside their organizations to acquire skills and capabilities rather than building them in-house. This means that they are also integrating and partnering with other organizations more proactively than before.
What are the reasons behind this change? • • • •
•
The rise of the new-age consumer who is more aware and has access to more information is the main push factor. Such awareness makes them extremely demanding, and at the same time not loyal to any one brand. This shift is putting immense pressure on organizations to take a holistic, long-term view in terms of revenue and create a sustainable business by increasing proximity with consumers. Everyone understands that technologies such as blockchain, cognitive, Artificial Intelligence (AI), robotics, etc., can do wonders for their business, developing in-house capabilities and continuously upgrading those can also become a distraction from the core business. Such understanding itself drives organizations to tie up with start-ups and companies excelling in specific areas to deliver these requirements.
Importance of digital technology • •
While the operating expenses model of selling and buying services is not new, digital technologies today have made it possible to provide almost anything as a service. Organizations are making revenue by developing an ecosystem of companies (like those selling fertilizers, pesticides, farm equipment, insurance, etc.), for whom the farmer is the buyer and the “farm as a service” company providing easy access to these farmers by getting them on the platform.
How financial services incumbents can keep up: (LiveMint, Editorial) Context Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS •
Disruption in India’s financial services business could follow a two-way path, gradually and suddenly.
What is the best example of such disruptions? •
Uber and Airbnb have disrupted the transportation and hotel industry; a union of factors is creating the opportunity to disrupt India’s financial services.
What are the main reasons? Rising customer expectations – •
Consumers are getting used to product and service standards provided by modern internet companies in every aspect of daily life, and expect these experiences to extend to other business transactions.
Dripping cost of Wireless data – • •
Falling costs of wireless data access and smartphones are unlocking access for millions of consumers every month. With over 200 million mobile data-subscribers in India, the smartphone is turning into a focal point for delivering a range of experiences while collecting granular information on user behaviour.
Public digital infrastructure – • •
•
India’s new large-scale public digital infrastructure is another catalyst. Platforms like Aadhaar, DigiLocker, the Unified Payment Interface (UPI) and Bharat Interface for Money (BHIM) have allowed earlier paper-based cumbersome processes like account opening to become digital and remotely executable. Over 10 million Aadhaar identifications and four million eKYC verifications are being carried out daily. This sets the stage for the digital roll-out of more complex banking services like lending and wealth management.
New Regulations by Reserve Bank of India – • •
Regulations have broadly included all types of branches and bank correspondent (BC) outlets, now open full-time or part-time. This can have wide-ranging implications; it is now possible for incumbents to deliver financial services by sharing the physical distribution networks of non-banking partners—helping spare full-scale investments in distribution infrastructure.
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9 PM Brief (26th September) by ForumIAS • •
In today’s networked era, customers can have a surplus of distinct services on a single platform, as part of a larger ecosystem. 12 retail and institutional ecosystems are emerging in India, which are likely to address revenue pools of over Rs1-2 trillion by 2022. This is far higher than traditional (standalone) banking revenue pools.
What are the challenges for India’s banking sector incumbents? • • •
The challenges get aggravated by their high-cost structures. Fixed costs are built into sales and distribution networks and legacy technology stacks and these make it difficult to introduce new products and features rapidly. The Fintech ecosystem, on the other hand, is evolving rapidly with over 400 start-ups in business. Some of these are attacking banking revenue streams in payments and unsecured lending.
What are the changes required? • •
• • • • • •
A change in calculated posture and business models to account for the impact of the new ecosystems and platforms could be a good starting point. Officials should assess how they can find the right ecosystems and push in their banking services, in order to acquire customers, and deliver relevant and convenient financial solutions seamlessly. Once established, ecosystems can serve as entry barriers for competition, and promote good financial behaviour among customers as defaulter’s risk being excluded from the ecosystem. Creating such ecosystems would require officials to stitch together partnerships with different players with complementary capabilities, customers or distribution networks. Digitization of banking journeys is acknowledged for enhancing customer satisfaction, generate back-office proficiencies and enhance reach and scale, especially in remote areas. Building capabilities on analytics, technology and delivery is another key dimension for incumbents. Taking on nimble attackers requires systems and processes that allow rapid experimentation and faster time-to-market for customer-facing services. This would need adoption of modern technology stacks and development practices.
Time for a Reserve Bank of India ‘dot plot’: (LiveMint, Editorial) Context: •
For the smooth running of Monetary Policy Committee, dot plot is an useful tool.
What is Monetary Policy Committee? • •
On 22 September 2016, India’s monetary policy framework took a significant step forward, with the formation of the monetary policy committee (MPC). The committee was created in 2016 to bring transparency and accountability in fixing India's Monetary Policy. Created with ❤ by ForumIAS.com - The Knowledge Network for Civil Services. Visit http://forumias.com | New! http://forumias.academy - Prelims & Mains Test Series
9 PM Brief (26th September) by ForumIAS • •
The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months. It was expected that inflation forecasts and the accompanying commentary of the MPC would influence India’s public discourse and improve general understanding of how the economy works.
Why was the MPC created? • • •
First, a committee can represent different viewpoints. Second, spreading responsibility for the decision can reduce pressure that falls on an individual. Third, a committee will ensure broad monetary policy continuity when any single member changes
How has the MPC managed against these expectations? • • • •
The results have been good and encouraging so far. The RBI has been consistent in its inflation-targeting narrative. The MCP is expected to adhere to the inflation “glide path” which was formulated under the previous governor, signifying continuity. The MPC’s track record on transparency has been impressive.
What are the drawbacks of MCP? • • •
There is room for improvement when it comes to forecasting. There is also a lack of transparency about forecasts of the key policy variable: interest rates. Currently, the RBI’s monetary policy stance is expressed in subjective terms as accommodative or neutral.
What is its solution? •
• • •
An useful tool to solve its drawback is a “dot plot”; a plot which shows where each member thinks the policy rate would be at the end of the year for the next few years and in the longer run. The dots need not be identified with individual members, as is the case for the US Federal Reserve dot plot. Dot plot gives a sense of future rate movements; it would be valued by markets, firms and households. It is amply clear that the MPC’s journey so far has been exemplary.
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