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India-Bhutan Ties post Doklam Archives TOPIC: General Studies 3 India and its neighbourhood- relations. Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests Background India and Bhutan talked recently at top levels post the Doklam stand-off between India and China. The discussion was held by Indian foreign secretary with Bhutan’s PM as well as monarch on range of bilateral relations including implementation of the ongoing government of India’s assisted projects- trade and economic ties, hydropower cooperation and people to people contacts. Post doklam, certain things needed to be clarified between India and Bhutan. The problem in Doklam was about legitimacy of Indian intervention to counter Chinese move. But Bhutan was not very keen in coming forthright about India helping it to safeguard its territories. So India wanted to talk about it. The Doklam standoff was military standoff. There was need of diplomatic conversation with Bhutan as the main relationship between both countries is cultural and deep political trust. India-Bhutan: Recent relationship Demonetisation, GST have impacted on the ground in the Indo-Bhutanese relationship as well as with Nepal. GST has created a lot on confusion within Bhutan in terms of trade. The economy is small and largely dependent on Indian export. So these issues were required to be discussed. Bhutan remains India’s closest partners. Apart from India, Bhutan is the only country that stayed away from OBOR, Bhutan is not part of china’s infrastructure bank. India-Bhutan have closer ties on UN issues. At the same time, the way India sees Bhutan through a Chinese prism has to change to an extent. The Bhutanese people no longer consider themselves as India’s taken for granted partner. For instance, India has to act more responsibly on hydropower cooperation. Bhutan has perhaps only major trade relations with India. So India has to deal in better way and put extra effort to maintain the relationship. Need to revisit Bhutan policy India has to centrally rebuild its foreign policy towards Bhutan along different structure. Demonetisation and GST have hurt neighbouring countries where Indian currencies is a legal tender. The Bhutanese want to up the revenue from the hydro power plants to generate electricity for Bhutanese people. It is a natural resource that they are helping to exploit and they benefit hugely from it. But they want it to be revenue rated appropriately. Hence, the old fashioned diplomacy will not work anymore. The make in India programme is going to impinge on the economy of Bhutan and Nepal and other small economies countries in South Asia. For instance, the small companies in Bhutan will be finished if their sensitivity, productivity and industrial production is not taken into consideration. The economic policy reforms done in India should me made feasible for other neighbouring countries too by giving way outs with the difficult situations arising post structural changes. A boon Doklam was blessing in disguise, India learnt some lesson in military and security front. It also helped India to take precaution on what new things can be done to maintain relationship with Bhutan. The interesting part is that the relation between both countries has always been driven by Bhutanese and not by India. However, this in the last couple of years since 2013 has not been same. Only the top political and diplomatic people should be allowed to handle the relationship. No third part interference (military) should be allowed in the relationship. Address two existing issues- With regards to GST, India has to assist 4500 crores in grants to Bhutan. Bhutan’s trade deficit is 3200 crore with 90% of trade deficit with India. It is not a sustainable position if India doesn’t address such trade deficit. There is commitment from India to buy 10000MW of power and the Bhutanese has been requesting India to let them take part in primary market. But India says that only companies which has 51% stake held by Indians can take part in this. India has to allow Bhutan to prosper too through more revenues through power. Closest ally should be responded China is continuously trying to assert itself into the region. The people within Bhutanese government and their representative assembly are advocating getting nearer to china to increase the leverage with India. Another aspect to sustain Bhutanese economy through hydropower diplomacy. That is if the Bhutanese are happy with the arrangement of selling hydropower to India, it could be the model for mahakali and other rivers in Nepal. The Bhutanese have benefited, they have the highest per capita income of all south Asian countries. But equally they don’t want to be treated as second to India. India should not exercise control democracy in Bhutan. India is in in-charge of conduct of Bhutanese foreign affairs. This puts greater weight on India. India should not always think of its interest only. Chinese for many years have tried to distance Bhutan from India offering all kinds of inducements- infrastructure projects, connectivity. These is found to be attractive by many yet they have resisted. The degree of friendship they feel for India and sensitivity to India’s concerns is showed. So India has to consider as a closest ally not just in region but in world. Conclusion The Bhutan relation with china is through India. Now there is a trust deficit between Indian and Bhutanese diplomats as well as military level, it would dent the strong friendship both countries share. If India has trained the Bhutanese army, then they have to trust them in safeguarding their territories vis a vis china. Also, India can consult with Bhutan on India’s national security that doesn’t concern Bhutan. This will make them feel involved. India can take Bhutanese views on India’s relationship with Nepal, Pakistan, china and other countries in Indian Ocean region. They are after all the part of Indian military policy matrix. This way the Bhutanese government will feel that they have a stake in India’s well being just as India has it in Bhutanese well being. Connecting the dots: Bhutan is India’s most trusted partner but it shouldn’t be taken for granted. Critically analyse relation between both countries.
How RBI Fixes Interest Rates? Why call for Cuts? Archives TOPIC: General Studies 3 Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. In news: RBI recently kept its key lending rate, the repo rate unchanged at 6% dashing hopes for lower borrowing costs of households. The 6 member Monetary Policy Committee headed by RBI Governor kept one eye firmly by rising inflation that is inching closer towards RBI’s 4% threshold level. In August, MPC had recommended 25 basis point cut to 6%. More cut was asked to revive investments for spending and aid a turnaround in broader economies growth that has slumped to 13 quarter low to 5.7% in April-June. Reason for RBI’s decision RBI is answerable for only one thing- Inflation. If it goes beyond 4%, it will have to explain to the country and parliament. Food inflation is okay and crude prices seem to have stabilized. However, they also revise the growth forecast from 7.3% to 6.7%. So here is a situation where MPC is telling that between growth and inflation, they will only worry about inflation. Manufacturing growth rate is 20 quarters below. RBI has not reduced growth figures much. This means in coming quarters, growth can happen more. Inflation can increase upto 4.2%-4.6%. This is worrying factor and thus not reduced the repo rate. If the manufacturing sector and industrial sector has to be revived, then there is need of reduced repo rate. However, ease of doing business is fine, but the cost of business must be also rationalized. Competitors are growing and exports are also increasing- Brazil, Indonesia, Malaysia, South korea are going in export trajectory. India is failing behind due to high cost of business and ease of doing business. Lower policy rates The policy rates are down to historic low of 6%. This is not high in Indian economic conditions. The real interest is down to 1.5 percentage points. This is not desirable as required is always 2%. The low interest rates applies to both savers as well as investors. In the present situation, where low interest rate is desired, it cannot be so due to difficult social and economic conditions facing vast majority of people. Post demonetization, the funds are getting channelized through mutual funds into stock markets. Apart from it, there are no avenues for savings. It’s a major disincentive as savings rates are down. Why RBI worried about inflation? Due to fiscal policy slippages that are anticipated. The economy is running on one engine of government investment. The scope is not large for growth on this path. Also, the state governments get into competitive spree as elections approach to implement pay commission recommendation for their staff. The state finances are not as good as they looked before. So the states would be landing up borrowing. The competitive populism in terms of loan waiver. These things have contributed in closing doors for policy rate reduction. In august they forecasted inflation from 3.5 to 4.5%. Now it is 4.2% to 4.6%. Where does this one hundred basis point increase come from? In the first half of 2017-18, the assumption of oil prices was 50$ per barrel. Now it is 55$. So the global oil prices are fed into domestic inflation. Monsoon has been 5% below normal. Earlier it was above normal or normal monsoon. Fiscal situation- current forecast is 3.2% of GDP. However the number of downside risk to fiscal slippages have increased. These are three things impinging upon inflation. Why only inflation targeting by RBI? The central government has told the RBI to be inflation targeting institution. Monetary policy framework agreement should have put both inflation and investment or credit growth as two key factors and calibrate it so that when RBI is worried about growth, it focuses on growth and when worried about inflation, more focus on that. Inflation targeting is not being discussed because of the trap the economy and policy makers are into. The trap is whether the headline cpi inflation is going to increase when half of it is not under their control, as it is dependent on supply side factors. To get out of it, the credibility has to be damaged. Two key takeways from monetary policy are: Inflation is going up Growth is coming down If there is a high inflation and low growth scenario ahead, it is difficult for policy makers to navigate. The tradeoff between growth and inflation is not an artificial one. Both are complementary. The good economic growth is not positive unless macroeconomic policies are under control. Inflation price stability is an essential condition of growth. Thus, monetary and fiscal policies should be targeting inflation because that is growth complementary. Way forward- Growth should come from MCLR is not working well. It is not effective to transmit the reduction by RBI in repo rate. It should be re-worked. Focus on stalled projects. The infrastructure is not getting that much pace. It should help competitors increase their place in market place. Reviving manufacturing sector- focus on MSMEs and ease of doing business. It helps to increase growth number in industrial sector and overall growth trajectory. Economy is facing slowdown. Price stability is good for growth and vice-versa. There is difference between MCLR faced by borrowers and inflation. The global economy activity has strengthened but the Indian economic story is not the same. It is because there is no driver for investment. Hence, the demand is not expected to be boosted. Monetary tightening switched demand and in addition, demonetization accentuated it as all money went to banks. From banks, nobody is borrowing. So money is not coming out. Hence, private investments should be encouraged and credit lending should increase to give the much needed nudge to economic growth. Connecting the dots: RBI is just an inflation targeting institution. Do you agree with the statement? Comment.
How is this similar to that? When we seek to understand the fundamental building blocks of our education system, we will come to realize that it is all based on a single idea of searching for what is different. Our whole schooling and education system is based on identifying and naming different things. What begins as a simple classification for the sake of understanding things becomes a real dividing factor. Existentially a tree is not divided into branches, leaves, fruits and flowers; every part of the tree is the tree. We begin to divide the tree in order to understand it and eventually make it a consortium of different parts. This is how we have divided the whole world. The more educated you are, the more divided your world is. Knowledge is simply a process of breaking things down; it has its uses but it changes the basic rule of what is life and who we are. Quest for knowledge has isolated man from everything around him. He is more sad and miserable now than ever before. Children are taught to seek and identify different things. We all remember how we had to identify different parts of our body; eyes, nose, skin, hands and legs. This is how it begins. When a child is put on a path of seeking and identifying different things, he/she continues on that path forever, eventually dividing the whole world. What we fail to teach a child is that all our divisions are only for the sake of convenience, in reality existence is not divided; in reality everything is one. The message of oneness is probably the most important thing that is missing in our world. This is the reason for our misunderstandings, anger, jealousy and violence. A part of the blame for violence in the world has to be taken by our education system that does not teach us the fundamentals of oneness. Children should be taught how to identify similar things. For example they should be made to seek and question the similarities between different things by encouraging them to ask questions like ‘Name 10 things that are similar between a dog and a tree’ Just by answering a simple question like this, you will begin to see how similar we are to everything around us. Our differences are only on the surface; scratch the surface and you will see that the stream of life flowing through all of us and everything around us is the same. We are all nourished by the same life force. Deep down we are all one. Love, compassion and kindness come naturally to human beings if they are not blocked by an attitude to divide everything. When we see ourselves as a part of the same larger whole, it is extremely easy to be responsible, loving and caring. Knowledge should not just be about dividing things; it should also be about connecting things. The most important question we need to introduce into our society and our lives is ‘How is this similar to that?’ The articles are a copyright of The Ahamo Movement and IASBABA
Crisis for Indian Telecom Companies Archives TOPIC: General Studies 2 Government policies and interventions for development in various sectors and issues arising out of their design and implementation. The government is considering smoother exit for telecom providers at a broader policy level as part of revised mergers and acquisition roles. The ministry of telecommunications has said that the solution for aiding this sector would have to be done on policy level to keep sector alive. At present, telecom industry's debt to the banking sector is estimated at Rs 4 lakh crore. Operation around world There is no country in the world that has so many telecom operators where in circle in India, there is half a dozen telecom operators and typically the industry all over the world is that there are three players where two will have 40% of market share and other will have 20%. This is a natural sequence where the weak get swallowed by strong. If the weaker operators are not able to sustain by themselves, then mergers and acquisitions should be allowed. It should be allowed as business case. A booming industry seems to be in doldrums- The cost of inputs was made expensive vis-a vis spectrum and the cost of operations were high. There was continuing to extract the revenue upfront in terms of revenue charges and then continuing revenue share model. This was usually one or other but now it is both. The new entrant took top players off. Telecos asking for stimulus- The situation has not developed because of entry of new competitor only. It has been for over a long period of time. Most of the companies are highly debted as they had to first pay for spectrum which was a business decision at one point of time. The companies have invested in infrastructure. They have not invested in network. They have not upgraded the technology so the new entrant with new technology has wiped them out. So there are industry woes. Here the government should: Initiate spectrum fee waiver or adjustment Deal with the debt. The merger between reliance and aircel didn’t work because banks did not agree to the merger. This is because the merged entity would result in a larger write-off which will wipe out Rs. 25000 crore from the banks’ balance sheet. Ask the companies to divest their related investment including any property/real estate/ infrastructure before going in for debt restructuring. These companies have to agree to swap debt for equity which they are shying away from. Challenges of telecom sector Revolutionary change in technology Entrance of new operator has changed the game. Moving away from voice to data which can greatly expand the economies of scope. The data can provide with infotainment, entertainment, education. Data and broadband revolution will help enormous revenues increase. However, the broadband infrastructure has to be build more speedily and has to be sustained. The eternal mistakes Fault of business operator decisions, fault of government policy and fault of banks for recklessly lending has led to increase in telecom operators’ vulnerability. In 1998-99 when NDA government bailed out telecom operators and fault of telecom operators, there were astronomical voice prices in 1995. This sector was too critical to be allowed to fail and was thus bailed out. Later it led to absolute boom in the sector. Fall in average revenue per user. But that is to be made up by offering new services like infotainment. Money will be received from content, educational policies, telemedicine to help the consumers. Investing more in services than infrastructure will lead to key increase in revenues as well as fair competition. Increased expenditure The telecom service providers pay as much as 30% of their revenues in taxes and levies for spectrum and operating licences. Of this, around half was the tax component. Under the Goods and Service Tax regime (GST), this has gone up to 18%, making the services more expensive at a time when it should have been reduced. Essential services have either got a nil GST rate or the lowest slab of 5%. Overhang of the debt No country can borrow from any bank in India or foreign. They are not considered debt-worthy companies. What is government bailing out- a wrong business decision or its wrong decision? Government determined technology till 2014. When it gave spectrum, it said it must comply with GSMA standards. Then in 2014, it came up with re-bidding for the spectrum which led to astronomical prices. The supply was constrained, the people were bidding back for the existing spectrum. Then SC said there should be auction. Hence leading to fierce completion in limited supply. This decision was taken because the government saw that it was losing revenues. Spectrum was earlier taken for free, now needs to be bid for as it is a natural resource in that sense. Key takeaway The government cannot trigger consolidation of the sector. It can ease the process of mergers and acquisition. This is procedural issue. It will not change dynamics of the sector. The two bad telecom operators will not give one better telecom operator. The profitability will come when debt is restructured. For last seven years, telecom operators were in demand fulfilment mode. Most of these companies did not have a sales department, but a distribution department. They were distributing the sim cards and not selling services. To sell services, there is need to build services. Voice is commoditised. It was there for last 7 years but no one prepared for it. No new infrastructure and no new towers. Nowhere in the world, have the telecos owned infrastructure. They are owned by third parties into real estate business. After 4G and 5G, voice will become virtually free and money can be earned from VAS. They’ll have to deal with content providers, VAS providers, businesses who use their subscriber base, advertising. The monetisation of subscriber base for all these kinds of services not thought of before. Hence, now the focus of industry to invest in upgrading networks constantly. Connecting the dots: ‘Communication is critical to national security.’ In light of this statement, critically analyse the importance telecom sector in India.
How Can India Revitalise its PSU Banks? Archives TOPIC: General Studies 2 Government policies and interventions for development in various sectors and issues arising out of their design and implementation. India’s PSU banks have serious problems of non-performing assets (NPAs). Most of these flow from capital intensive infrastructure projects, primarily in the power sector. More recently, telecom is another sector where large amount of credit is involved. The total magnitude of NPAs, bulk of them is related to sectors where the government is major player. Normally, the problems may include errors in market, technology changes and the weak management, then the traditional methods of bankruptcy and takeover of assets works. But when the government is stakeholder and the amounts are very large, then there is a merit in argument that a sectoral approach of looking at the problems at the macro level for a particular sector would make more sense to solve the NPA crisis than going after the normal bankruptcy code proceedings, firm by firm. Bank loans have bad loans which are nearly 15-16% of total assets. For these to resolve, some of the options are: Take haircuts on many of these projects and then recapitalize by government in another way. However, this calls for political courage. It is true that economy cannot see revival of investment momentum without bank’s lending. If the bank’s capital is to be fund from outside the government, then there should be lower of government’s stake below 50%. This will encourage faster decision making power as well as work efficieny. There is lack of clarity of direction as to where the PSBs are headed. In the past three years, there have been number of initiatives to restructure debts and commit some amount of capital. However, the commitment to recapitalize from the government is not coming. There has been fast paced Asset Quality Review to clean up balance sheet of banks so that all NPAs are recognized upfront. However, there is an imbalance- the fast paced AQR has increased the magnitude of NPAs several times and at the same time, RBI has shifted large borrowers to the bond market. These are contributing to the weakening of the PSBs as they are demanding more provision of capital but shifting of AAA borrowers to bond market is hitting the income of banks. As per PJ Nayak committee report and Indradhanush plan, there would be banking board bureau and governance reforms. These are strengthening initiatives lagging behind which is causing lack of clarity of direction. Write-off of debt is not a sustainable option. If NCLT is seen to be a mechanism for promoters to recycle their own companies, they can get their company back minus the debt which is not good. This would be public funding of private profiteering. The IBC must bar original promoters from bidding for that asset again. At the same time, there are genuine cyclical problems, as in steel sector or power where there is government problem. Many state governments are refusing to honor their power purchase agreements, many state utilities are bankrupt and are not in shape to purchase power. Those who invested money in power plants find that there are no takers for it and suffer losses. These kind of issues are to be tackled separately as they are separate from pure mismanagement. The developed countries have 1-2% interest rates. If this money can be channeled into the fund which buys out these viable projects which are not working because of government problems, it can help the banks to resurface positively. But this also requires political initiative. Amidst these option, merging PSBs doesn’t fit and is not an option. Acquisitions and mergers are complex. There is added challenge in rigidity in government culture, their HR policies, compliances etc. Within the public sectors, mergers don’t work with ease as they work in flexible market economy like USA. However, consolidation option is being considered for a while but it is yet to be seen what steps are taken in future. Way forward For banks, the raw material is capital that comes from shareholders and right now the government is not much in position to provide capital. The focus should be completely on NPA problems right now. Policies should be made wherein long gestation sectors such as infrastructure sector should be ideally funded by debt market and not banks. The sum involved and the loans sanctioned is huge. Private players which have network as well as human talent should be encouraged to expand. There is a requirement of deep structural changes in the ownership and running of banks. Key words Indradhanush Plan- A2G Plan Appointments Bank Board Bureau Capitalization De-stressing PSBs Empowerment Framework of Accountability Governance Reforms P J Nayak Committee- Governance in Bank Boards Also Read: Bad Bank- A Bankable idea? All India Radio (AIR) : NPAs of Public Sector Banks Connecting the dots: Discuss various ways initiated by government to solve the NPA problem.
IASbaba’s Daily Current Affairs – 4th Nov 2017 Archives NATIONAL TOPIC: General Studies 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Infrastructure: Energy, Ports, Roads, Airports, Railways etc Reforming Indian Railways Background: IR’s 7,000 trains carry three million tonnes of freight daily over an average distance of 620 km, sustaining its agriculture, industry and commerce; another 13,000 passenger trains transport 23 million travellers every day, knitting the country together. Although freight business has been crucial for IR’s financial health, it is passenger segment that directly impacts popular perception. Issues: An endemic shortage of supply. IR’s seven high-density corridors stretched over 10,500 km remain clogged; its stations and maintenance wherewithal over-stretched; train speeds remain low; and services far less than satisfactory. Passengers face hassles of ticketing, irksome access to large stations, unhygienic and unkempt platforms and coaches and unpunctual trains. Worse, unhygienic food cooked in dirty premises and filthy blankets for AC passengers. Each passenger train incurs a loss of as much as Rs. 487 (in 2015-16) per km. Resulting into hiking of freight charges and upper class, mostly AC, passenger fares. High freight charges have adversely impacted railway's business. With low cost air carriers looming large, it must refrain from raising AC train fares. The upper class segment aggregates just 145 million journeys in a year, only 1.8 per cent of IR’s overall riderships, but contribute more than 31 per cent ( Rs. 13,756 crore, in 2015-16) of total passenger earnings. Challenge: The number of air passengers, which constituted just about 1 per cent of ‘upper’ class rail passengers in 1950-51, now exceeds 75 per cent, and is poised to surpass the rail share sooner than 2020. Total rail riderships in 2016-17 was 8,219 million, a mere 0.84 per cent more than in 2015-16. As NHDP’s golden quadrilateral network progresses, high-capacity vehicles cover inter-city distances, posing a formidable challenge to IR. Again, in the context of UDAAN riding on the 2016 National Civil Aviation Policy, airlines are weaning away IR’s upper class medium and long haul travellers. Examples: After undergoing some serious pain, passenger traffic on British Rail has risen since 1995, aided by technological improvements in infrastructure and rolling stock, on-time runs, easier ticketing, friendly tariffs, and enhanced ambience of train travel. Chinese Railways separated passenger and freight businesses, increased service speeds, cut train halts, raised passenger fares, effectively discouraged short-distance passengers, and drastically reduced travel times. Things to do for Indian railways: Time-tabled freight trains running with credible service guarantees. Reserved accommodation on passenger trains available on demand. Average speed of freight trains to rise to 50 km/h (from less than 24 km/h now) and of Mail/Express trains to 80 km/h (from around 60 km/h). Semi-high speed trains running along the golden quadrilateral. High-end technology to significantly improve safety. Way forward: IR needs to keep its strategy for passenger business simple, to make a perceptible difference in pre-board facilities (booking and reservation, clean station platforms, uncluttered with parcels, vendors or kiosks) and on-board amenities (clean coaches and toilets, good food, besides trains running on time). It appears feasible to reduce travel time on selected routes straightaway by rationalising halts and easing some speed restrictions and saving substantial time by improving track curves and turn-outs. Unmanned level crossings can be replaced by overpasses, fencing vulnerable locations, and providing cab signalling, also for automatic train protection. Some trains can run end-to-end with minimum intermediate halts. As IR sincerely needs to view itself essentially as a commercial entity, pricing its passenger services rationally, it should run a few additional long-distance trains on some highly under-served popular route(s) for all intending passengers to get confirmed accommodation on demand. It may well mean good economics as much as good politics. Another important aspect IR needs to address on priority is to provide additional terminal facilities, including for maintenance of train sets, for major metros. Connecting the dots: Indian railways is facing multiple challenges form other modes of transportation. Discuss why. Also elaborate on much needed reforms which are long pending. ECONOMY TOPIC: General Studies 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. General Studies 2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Focusing on tourism sector for job growth Case study: Quentin Jeremy Clerc and Marie Droz came to India to explore its rich history and partake of its storied culture. On October 22 what the Swiss couple experienced instead was the country’s dark underbelly. While on a visit to Fatehpur Sikri, near Agra, they were stalked, harassed and later, assaulted with sticks and stones by a group of locals. The unprovoked attack left Clerc with a fractured skull and Droz, a broken arm. Both of them want to leave India as quickly as possible. Increasing crimes: Media reports quoting home ministry data suggest that in 2014 there were 113 incidents of crime against foreign tourists in New Delhi alone. In 2015 it was higher, at 135. Such developments hurt India’s image and raise questions about our culture which teaches us to treat guests as God — Atithi Devo Bhava. Leveraging tourism for economic development: We are yet to fully recognise the role tourism plays in economic development and more so, in job creation. The government is yet to leverage tourism’s full potential and inculcating its benefits among the nation’s collective consciousness. Jobless growth: A million youngsters attain working age every month and as many as 100 million jobs need to be created between now and 2025 to avoid what experts are increasingly warning us about — a demographic catastrophe. The reasons being: lack of low-skilled job opportunities outside of agriculture even as skills mismatch and automation hurt the formal sector. Battling ‘jobless growth’, the government has chosen to focus on the employment guarantee scheme in rural India (allocation for MGNREGA has risen by 40 per cent between 2015 and 2018) and other flagship programmes elsewhere across the country such as ‘Make in India’, ‘Startup India’ and a fillip to affordable housing in the last three years. Tourism as a solution: Tourism offers the perfect solution. For every 30 tourists one core tourism job gets created which then helps add another 1.5 jobs in related sectors. A good portion of the jobs that get generated are low-skilled, for women and for first-time workers — the type of job opportunities that India presently needs. The sector also has the potential to create micro-entrepreneurs who in turn can employ more people. The multiplier effect it delivers is high. Global example: In fact, tourism helped Spain which receives over 68 million international tourists annually (India, in comparison, gets 8.80 million visitors) fight its recent economic downturn. Understandably, the sector accounts for 5.8 per cent of Spain’s GDP as against India’s 2 per cent. According to the World Tourism Organisation, the sector provides for 10 per cent of the world’s GDP, 7 per cent of the global trade and creates one in every 11 jobs worldwide. In 2015 tourism created 107 million jobs worldwide and supported 284 million other jobs. The International Labour Organisation estimates these numbers will grow to 136 million and 370 million respectively by 2026. Policymakers need to get their act together now if India has to corner a fair share of these jobs. Way ahead: As per the rankings of World Economic Forum’s Travel and Tourism Competitiveness Report, the Government need to focus on the not-so-good performance in following parameters: The country ranks a low 103 on presence of an enabling environment for tourism (even Rwanda, Iran and Algeria outrank us). It is 104 when it comes to how actively the Government promotes the sector. With regard to safety and security the performance is a low 114 (we have Colombia, Yemen, Nigeria, Lebanon and Pakistan for company). In health and hygiene, we are ranked 104 and in environment sustainability 134 (only Kuwait and Yemen are below us). Conclusion: It is time the Government gives the same importance to the World Economic Forum’s Travel and Tourism Competitiveness Report as it does to the World Bank’s Ease of Doing Business rankings. For the record, India jumped 12 places to rank 40th among 136 countries in the 2017 Travel and Tourism Competitiveness rankings (Spain topped the chart). Connecting the dots: A robust tourism sector can help overcome the challenge of job-less growth in India. Discuss. Also elaborate on reforms required in this regard. MUST READ The rise and rise of Xi Jinping The Hindu The Japanese pivot The Hindu Fixing accountability Indian Express Financial inclusion is good for banks too Business Line
IASbaba’s Daily Current Affairs – 3rd Nov 2017 Archives GOVERNANCE 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 The Swachh Bharat Mission-Gramin (SBM-G): An analysis Background: The momentum and scale of the Swachh Bharat Mission-Gramin (SBM-G) is unprecedented. Since the launch of the programme by the prime minister in October 2014, there has been an astonishing acceleration in the construction of toilets, with five crore built in three years. Issues: Technical realities and what people know: The preference for septic tanks remains deeply rooted and widespread. People believe they are better than the recommended more sustainable and economic twin pits because they are big and will take longer to fill, and, used sparingly, may even never have to be emptied. Due to widespread ignorance of technical details, many septic tanks are not built according to the guidelines, and end up contaminating the environment and damaging public health. New technology: Twin leach pits are much better. Human waste flows to the first pit. Once full, it is left to become manure while new waste is diverted into a second pit. The first pit is emptied and the cycle starts again. This technology allows time for the waste to compost and become harmless, odourless and valuable fertiliser. However, rapid investigations found many people who had had twin pits constructed for them without any explanation of how they work. They lacked a sense of ownership and believed the pits would fill up fast. In consequence, they were using them only some of the time, continuing open defecation (OD) even in villages with 100 per cent toilet coverage. This problem is acutely urgent. A recent rapid survey covering over a thousand households found that the proportion of twin pits being built in SBM is declining, and more and more unsustainable single leach pits are being built, especially among Scheduled Castes and Tribes. Solution: The solution is to empower people through knowledge. Few rural people are aware of technical details or convinced by the advantages of twin pits. Mason training can help, but the major thrust needed is a massive communication campaign to inform all villagers of the technical options and details, what they are entitled to demand in quality and quantity of materials, and how to ensure masons do a full job, so that they are never be short-changed with single pits or substandard construction. Water availability: A major issue especially in drier areas. Women are the main fetchers of water and cleaners of toilets. One flush of a toilet takes many times more water than does the lota for cleansing when defecating in the open. Gender plays a part too: Men are the main open defecators. There can be a macho element, a preference for the open air, and an element of chivalry. This is reinforced by conventional campaigns which stress women’s dignity and needs: Men are considerate if they leave the toilets to women, so also minimising water use and the rate at which the pit will fill. Challenges beyond ODF: children’s poor, handwashing. Rural faecal sludge management. Solid and liquid waste management. Toilets that need upgrading. Way ahead: SBM-G verifications and several studies indicate that in practice 70-90 per cent coverage is often taken as acceptable for a declaration of open defecation free (ODF). There should be definite evidence on thresholds for coverage and use. Often those without toilets are predominantly the marginalised and disadvantaged — OBC, SC, ST, the very poor, sick, disabled, aged and weak, or living in difficult or remote areas. For them, additional efforts and special policies and provisions are needed. One rapid study discovered effective ways of changing men’s behaviour — groups of older women influencing men to adopt toilets when they go for OD. The study suggests that similar gentle and positive approaches should be promoted. Rapid learning, sharing and adapting will be vital. f acted on effectively, it will speed progress and enhance sustainability. Conclusion: The scale and complexity facing the SBM-G make it more challenging than any other rural development programme in the world. The scale of the achievements and milestones passed over the past three years far surpass anything we believed conceivably possible. Driven forward with impressive leadership and dynamism, shortcomings are inevitable and rapid learning and adjustments vital and imperative for sustainable success. Connecting the dots: The momentum and scale of the Swachh Bharat Mission-Gramin (SBM-G) is unprecedented. Discuss the achievements and further challenges faced by the programme. NATIONAL TOPIC: General Studies 2: History of the world will include events from 18th century such as industrial revolution, world wars, redrawal of national boundaries, colonization, decolonization, political philosophies like communism, capitalism, socialism etc. - their forms and effect on the society. Social empowerment, communalism, regionalism & secularism. 100 years of Communism Background: The 100th anniversary of the Russian Revolution is to be celebrated this year. A hundred years ago, a group of Communist revolutionaries stormed the Winter Palace in St Petersburg to overthrow the first democratic government in Russian history. The new dawn they promised eventually became a nightmare for the millions of people who lived under Communist regimes. A group of European historians, in a book titled The Black Book Of Com\munism, estimated that 94 million people have been killed by Communist regimes around the world over the years. Communist ideology: The Communist ideology is derived, on the one hand, from the penetrating insights of Karl Marx on the contradictions of Victorian capitalism and, on the other, from the violent determination of Leninist regimes to impose their version of utopia on feudal societies. Failure: The few experiments with a more moderate version of Communism—in Yugoslavia under Josip Broz Tito or during the Prague Spring led by Alexander Dubček—were too insignificant to make a lasting impact. The liberal Menshevik regime in Georgia was crushed by an invading Bolshevik army in 1921. The spectacular collapse of Communism across Europe as well as the embrace of capitalism by the Chinese Communists destroyed the last remnants of credibility. Why Communism failed? Capitalism in the advanced countries softened its hard edges in response to the Communist challenge. The industrial proletariat that Marx hoped would be the driving force of historical transformation lost its political clout in economies where services became more important. The innate failure of planning agencies to replace the price system as the primary institution of economic coordination amid rapid technological change ensured that Communist countries lost the race for global dominance. Hope of the emergence of a new socialist man driven by political commitment rather than economic incentives such as higher wages or property rights proved to be vacuous. The totalitarianism of the international Communist movement snuffed out all fresh thinking, and intellectual movements such as the New Left, Eurocommunism and analytical Marxism were treated as heretical. Left parties on decline: Any modern society needs a left to articulate the needs of the poorest. The liberal consensus that has dominated the world since 1990, and which deserves at least some of the credit for the most spectacular decline in poverty in human history, is now being challenged by a resurgent nationalism in the developed countries. The working class in these countries has seen its incomes stagnate as industrial jobs were shipped abroad or lost to automation. This working class has veered towards nationalist parties rather than the traditional left to articulate its grievances. Left force in India: In India, the left no longer has any power or influence. Its opposition to economic reforms, its failure to grapple with the complexities of caste, its restricted base in pockets of labour aristocracy such as bank unions, its readiness to compromise with Muslim communalism in an attempt to oppose Hindu communalism, its loyalty to Stalinist methods—these are just some of the factors that have made it irrelevant. Conclusion: Socialism is desirable. But, the problem is that what is true of an intimate group of people need not be true of large populations. The rules of intimate groupings cannot be imposed on the extended order unless one is prepared to use extreme violence. This is the big lesson of 100 years of Communism. Connecting the dots: Discuss the concept of communism and the reasons behind its failure. Also discuss the concept in the context of present India. 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IASbaba’s Daily Current Affairs – 2nd Nov 2017 Archives ECONOMY TOPIC: General Studies 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. General Studies 2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Improved World Bank’s Doing Business (DB) rankings for India In news: The World Bank’s Doing Business (DB) rankings for 2018 have just come out and India has made a very significant jump, improving its rank from 130th in 2017 to 100th. Not only has India improved its position in terms of rankings, which is relative, it has also made improvement in absolute terms, measured by the so-called “distance to frontier” metric. Even though the DB rankings may not be the sole determinant for attracting investment, the improvement is likely to boost investor confidence as it reflects the government’s commitment to reforms. Areas based on: The World Bank's rankings are based on the country’s performance in following areas: Starting a business. Dealing with construction permits. Getting electricity Registering property. Getting credit. Protecting minority investors. Paying taxes. Trading across borders. Enforcing contracts; and Resolving insolvency. Measures taken by the government: The improvement in rankings is the result of coordinated efforts made by the government over the past few years. According to the World Bank, India has adopted 37 reforms since 2003 and about half of them have been implemented in the last four years. The four parameters where there has been a quantum jump in rankings —resolving insolvency, paying taxes, access to credit and protecting minority investors — have all seen focussed efforts from the Centre both in terms of policymaking and in implementation. “Make in India” program. Simplification of tax procedures. Bankruptcy laws and so on. The rise in the insolvency ranking is directly attributable to the enactment of the Insolvency and Bankruptcy Code. The implementation of the bankruptcy code is a big boost, as it will help inefficient firms exit the market and improve overall allocation of capital. Access to credit has been facilitated by the licensing of new entities such as small finance banks and payments bank, not to forget the MUDRA scheme. One indicator that deserves special mention is the protection of minority investors. India is at the fourth position globally in this category. This is a huge achievement and the government and the securities market regulator deserve credit. The Securities and Exchange Board of India is constantly working to enhance investor confidence. Implementation of the recommendations made by the Uday Kotak committee on corporate governance will further augment minority shareholder confidence in the market. The DBP 2018 says: "India made dealing with construction permits less cumbersome by implementing an online system that has streamlined the process at the Municipality of New Delhi and Municipality of Greater Mumbai. The online system has streamlined the process of obtaining a building permit, thereby reducing the number of procedures and time required to obtain a building permit in India. On enforcing contracts- India made enforcing contracts easier by introducing the National Judicial Data Grid, which makes it possible to generate case measurement reports on local courts. Some of the biggest hurdles that businesses face such as in registering property or securing construction permits fall under the realm of States. While the Centre’s ranking of States on ease of doing business has exerted some pressure, what’s encouraging is that States themselves are undertaking reforms as they compete for investment. Way ahead: While the government deserves credit for this impressive improvement in the DB rankings, it should not lose sight of the distance India still needs to cover. For instance, despite all the effort, India’s rank in dealing with construction permits is 181 among 190 countries. The time taken for enforcing a contract has, in fact, worsened from what it was 15 years ago. Consequently, India’s rank in this category is a poor 164. Rather than depending only on the DB report, the government should understand the de facto situation faced by firms that wanted improvements in the country’s business environment. In reality, these reports do not provide an accurate picture of a country’s business environment. The de jure rules of business that are captured by the DB reports and the de facto reality differ significantly. In order to undertake effective policies to improve the business environment in India, we need to understand what causes it to be relatively good in some situations and poor in others. A recently concluded NITI Aayog-IDFC study throws light on some of the broad trends in the country’s business environment, but fails to provide a deeper understanding of its causes due to the lack of a conceptual framework to analyse the data. Policymakers should build on recent gains with an accelerated pace of reforms in areas such as land, labour and contract enforcement, which will help push investment and growth in the medium to long run. The World Bank report flags the areas where the country lags - local entrepreneurs need to go through 12 procedures to start a business in India's commercial capital, which is way higher than many high-income economies, besides cumbersome procedures for construction permits, registration of property and enforcement of contracts. To improve the score related to registering property we need measures like updating and digitising land records, improving titling and streamlining procedures on transfer of property. The kind of challenges that policymakers need to address includes- Lack of awareness related to the single-window facility for setting up a business. Labour- intensive sectors are constrained by labour market regulations. Finding skilled workers and dismissing employees are severe impediments. Firms still face power shortages. The implementation of the goods and services tax (GST) has not been accounted for in this year’s rankings. Therefore, if the problems associated with GST are addressed quickly, it is likely that the GST will help boost India’s ranking further next year. Conclusion: With its demographics, the size of the economy and a well-functioning capital market, India stands a real chance of projecting itself as a preferred destination for investments. The fact that China is likely to slow down further in coming years will also help India’s case. Clearly, the more difficult reforms lie ahead with the low hanging fruit, mainly those within the ambit of the Centre, already plucked. The process of improvement has to be continuous and there can be no let up. Both the Central and state governments will need to work in a number of areas to improve India’s competitiveness. Connecting the dots: While the government deserves credit for the impressive improvement in the Doing Business rankings for 2018, it should not lose sight of the distance India still needs to cover. Also read: "Ease of doing business" rankings: Critical analysis MUST READ The stimulus and after The Hindu The war on TB The Hindu Keep the army out of it Indian Express A bridge too many Indian Express Business reforms leaders and laggards Livemint A multi-track approach to railway reform Business Line Leverage tourism to reverse jobless growth Business Line
IASbaba’s Daily Current Affairs – 1st Nov 2017 Archives NATIONAL TOPIC : General studies 2: Structure, organization and functioning of the Judiciary Improving the collegium system In news: Recently, the Supreme Court’s collegium published a resolution promising to hereafter make public, on the court’s website, its various decisions, including its verdicts on persons nominated for elevation as judges to the high courts, its choices of candidates for elevation to the Supreme Court, and its decisions on transfer of judges between different high courts. These results will be accompanied by the reasons underpinning the collegium’s choices. Salient move: The move strikes us as both necessary and important as- It will help bring transparency into a system that has been notorious for its opacity. The initiative adds a veneer of respectability to a mechanism that lacks any constitutional basis. Case studies: Lack of transparency In the cases of A. Zakir Hussain and Dr. K. Arul, candidates nominated for elevation to the Madras High Court, the collegium has verbatim published the following statement of rejection: “keeping in view the material on record, including the report of Intelligence Bureau [IB] he is not found suitable for elevation to the High Court Bench.” The details of what the IB’s reports might contain and the apparent materials on record remain concealed. The nomination of Vasudevan V.N., a judicial member of the Income Tax Appellate Tribunal, was not accepted saying “While one of the two consultee-colleagues has offered no views about his suitability, the other colleague has not found him suitable for elevation,” the report reads. Issue: The collegium, ever since its inception, following the Supreme Court’s judgment in what is known as the Second Judges Case (1993) has been enveloped by a sense of confusion. The present revelations, much opposed to their perceived objective, scarcely make the system more transparent. In Mr. Vasudevan’s case, for example, we don’t know which of the “consultee-judges objected to his elevation, and why the judge interviewed found him unsuitable. These issues concerning the system employed to appoint judges to the Supreme Court and the high courts are of particular salience. The judiciary was regarded by the Constitution’s framers as central to the social revolution that the document was meant to herald. The historian Granville Austin saw the judiciary as critical to “upholding the equality that Indians had longed for during colonial days, but had not gained”. Interpreting consultation: To ensure that judges would be insulated from political influence, the assembly agreed on a consultative process of appointing judges, a “middle course,” as B.R. Ambedkar described it. T The Constitution avoided the cumbersome process of legislative interference and the undemocratic provision of a veto to the Chief Justice, and vested in the President the power to both make appointments and transfer judges between high courts. The President, who would act on the advice of the council of ministers, was, however, required to compulsorily consult certain authorities, including the Chief Justice of India (CJI), and, when making appointments to a high court, the chief justice of that court. Sankalchand Sheth ’s case, 1977: When interpreting the word “consultation,” the Supreme Court ruled that the term can never mean “concurrence”. Hence, the CJI’s opinion, the court ruled, was not binding on the executive. But nonetheless the executive could depart from his opinion only in exceptional circumstances, and, in such cases, its decision could well be subject to the rigours of judicial review. This seemed like a perfectly sound balance. In 1981, in the First Judges Case, the court once again endorsed this interpretation. The Second Judges Case: The court overruled its earlier decisions. It now held that “consultation” really meant “concurrence”, and that the CJI’s view enjoys primacy, since he is “best equipped to know and assess the worth” of candidates. But, the CJI, in turn, was to formulate his opinion through a body of senior judges that the court described as the collegium. The Third Judges Case, 1998: The court clarified its position further. The collegium, it said, will comprise, in the case of appointments to the Supreme Court, the CJI and his four senior-most colleagues — and, in the case of appointments to the high courts, the CJI and his two senior-most colleagues. Additionally, for appointments to the high courts, the collegium must consult such other senior judges serving in the Supreme Court who had previously served as judges of the high court concerned. The court has been keen to hold on to this power. NJAC ruling: When the Constitution was altered, through the 99th constitutional amendment, and when the collegium was sought to be replaced by the National Judicial Appointments Commission — a body comprising members of the judiciary, the executive and the general public — the court swiftly struck it down. It ruled, in what we might now call the Fourth Judges Case (2015), that the primacy of the collegium was a part of the Constitution’s basic structure, and this power could not, therefore, be removed even through a constitutional amendment. Conclusion: The 2015 judgment also promised to “consider introduction of appropriate measures”, to improve the “collegium system”. The new resolution is an effort towards this end. Connecting the dots: Discuss the issues related to collegium system in India and elaborate how a recent resolution by the Supreme court in this regard is a step forward. Discuss the evolution of the collegium system in India along with its drawbacks. NATIONAL TOPIC: General Studies 2: Parliament and State Legislatures ‐ structure, functioning, conduct of business, powers & privileges and issues arising out of these. Establishing intra-party democracy In news: Recently, the Prime Minister Narendra called for a debate on levels of intra-party democracy in different political parties in India. He also stressed that the quality of a democracy ultimately depends on internal democracy (or the lack of it) in political parties. Importance of intra-party democracy in the success of a democracy: In its 170th report in 1999, the Law Commission of India underscored the importance of intra-party democracy by arguing that a political party cannot be a “dictatorship internally and democratic in its functioning outside”. Intra-party democracy is essential to sustain broader political democracy in a country. Reasons behind lacking intra-party democracy: The opacity of political financing necessitates “unhindered top-down control” and “absolute loyalty down the line”. The fear of party fragmentation—not uncommon in India; also drives the desire for centralized control. By making it mandatory for the legislator to vote along her party line, the anti-defection law has done immense damage to both intra-party democracy and the accountability of a legislator towards her constituency. It also skews the balance of power between the executive and the legislature. The legislator is no longer empowered to act as an effective check on the government of the day. Local area development schemes like MPLADS and MLALADS that vest an annual sum with the members of Parliament and legislative assemblies for development work in their constituencies skew the balance in favour of state and Central legislators at the expense of city- and village-level administrators. These schemes unjustly favour the incumbent representative and also exacerbate the problem of patronage politics. Patronage politics lies at the heart of dynastic succession in Indian politics—a result of control of political parties by an oligarchic elite. Dynastic succession also works as insurance against defections and fragmentation of political parties. Issue: Opacity in political financing, fear of fragmentation and unstable governments, dynastic succession, and lack of intra-party democracy are all mutually reinforcing variables. Example- In the Indian National Congress, the current leadership of Sonia Gandhi and Rahul Gandhi has systematically destroyed the regional leadership of the party. Way out: Unlike some countries like Germany and Portugal, India has no legal provision for enforcing internal democracy in a political party. There are some related provisions in the Election Commission guidelines but those are neither adequate nor enforceable. In its 255th report in 2015, the Law Commission had suggested some legislative redressal. Doing away with the anti-defection law, especially for those votes where the survival of the government is not at stake. Scrapping the MPLADS and MLALADS. Abolishing the MPLADS to finance the state funding of political parties A partial state subsidy to fund elections and political parties. Conclusion: There are many options. But all of these will require a willingness by the incumbent political authorities to give up some of their powers. They need to step up to the challenge. Connecting the dots: In its 170th report in 1999, the Law Commission of India underscored the importance of intra-party democracy by arguing that a political party cannot be a “dictatorship internally and democratic in its functioning outside”. Critically analyze. Discuss the reasons behind lack of intra-party democracy in India. Also suggest measures that would help make our politicla parties more democratic. 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