Comprehensive News Analysis – 13 June 2016

Table of Contents:

A. GS1 Related:
B. GS2 Related:

1. Benegal Committee submits recommendations on censorship

2. NSG divided on entry of non-NPT nations: China

3. Army to involve industry in its long-term plans

C.GS3 Related:

1. NASA’s Juno probe inches closer to Jupiter

2. U.S. forecast model tries to predict storm-triggered wave ingress

3. State-owned banks widen reach quicker than private lenders

D. GS4 Related
E. Important Editorials : A Quick Glance

The Hindu

1. Voting to defeat

2. A case for cutting out the censor

3. Why India should keep an eye on Europe

The Indian Express

1. India, the driver of growth for Bharat

2. A Wider Battle

3. Nothing personal about it

Others

1. PIB

a) 147 villages electrified last week ; 8,242 villages electrified till date under DDUGJY

b) President of India condoles the passing away of Shri Inder Malhotra

c) Distribution of LPG connections to Women from BPL households under Pradhan MantriUjjwalaYojana at Faizabad, Uttar Pradesh

2. The Financial Express:

a) Why combined central/state elections are a good idea

b) What is India’s job nightmare?

3. The Business Line:

a) Taming a new animal

b) No check on States squandering resources

c) Cash reserve ratio has lost its relevance

4. The Economic Times:

a) India needs resolute action against cyber attacks

b) RBI’s welcome move to convert debt into equity

5. Quick Bits

a) Govt to award ‘Yoga medals’ for paramilitary troops

b) Solar plane lands in New York City during bid to circle the globe

c) South Asian nations seek help from India to set up trade portals

d) Government plans national highway grids for smooth travel; 27 corridors identified

F. Concepts-in-News: Related Concepts to Revise/Learn:
G. Fun with Practice Questions 🙂
H. Archives

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Useful News Articles

A. GS1 Related

Nothing here today folks! J

 

B. GS2 Related

 

  1. Benegal Committee submits recommendations on censorship

Topic: Media-Films

Category: Governance

Location: The Hindu

Key points:

  • the ShyamBenegal-led censor board revamp committee has submitted recommendations to the Information and Broadcasting Ministry regarding censorship in films
  • The Benegal panel, in its first report submitted on April 26, had urged the government to lay down a “holistic framework for certification of films.”

 

2. NSG divided on entry of non-NPT nations: ChinaTopic: NSG

Category: International Groupings

Key points:

  • The unofficial meeting of the NSG on June 9 in Vienna was inconclusive on India’s membership to the group
  • S. has been pushing for India’s membership; China reportedly wants Pakistan in

 

3. Army to involve industry in its long-term plansTopic: Defence

Category: Governance

Key points

  • On the lines of the Navy’s design bureau which has been successful in indigenising warship design, the Army will soon set up an Army Design Bureau (ADB)
  • The idea is to bring together academic institutions and the industry to develop indigenous knowhow. Knowledge and ideas are with academia, while industry has the resources. The interactions are meant to identify a series of projects which can be taken under the ADB
  • Some of the priority areas the Army is looking at include small arms, smart munitions, communication and electronic warfare systems and Unmanned Aerial Vehicles (UAV), both surveillance and combat

Note:DPP 2016 has created a new category, indigenous Design Development and Manufacturing, which will be the preferred procurement route for procurement

 

C. GS3 Related
  1. NASA’s Juno probe inches closer to Jupiter

Topic: Space

Category: S &T

Key points

  • NASA’s Juno mission is scheduled to arrive at Jupiter on July 4
  • The Juno mission was launched on August 5, 2011 with the primary aim of improving our understanding of the solar system’s beginnings by revealing the origin and evolution of Jupiter
  • With its suite of science instruments, Juno will investigate the existence of a solid planetary core, map Jupiter’s intense magnetic field, measure the amount of water and ammonia in the deep atmosphere, and observe the planet’s auroras, according to NASA’s mission profile

 

2. U.S. forecast model tries to predict storm-triggered wave ingress

Topic: Weather Forecasting

Category: S&T

Location: The Hindu

Key points

  • The U.S. Geological Survey is running its coastal change forecast model to predict how far a storm’s waves will push water up the beach if it will go just to the dunes, over the dunes, or even farther onto roads and property. Oceanographers are in the pilot stages of a new implementation of the model that would predict beach changes in all weather conditions

 

3. State-owned banks widen reach quicker than private lendersTopic: Banking

Category: Economy

Location: The Hindu

Key points

Banking

PoS(Points of Sale)

 

D. GS4 Related

 

E. Important Editorials: A Quick Glance

 

The Hindu

 

  1. Voting to defeat

Topic: Elections

Category: Polity

Key points

  • When elections to the Upper House throw up a surprise, they usually reveal dissension and, on occasion, extraneous influences of a dubious sort
  • Strategies drawn up at the leadership level comes to nothing as the legislators, dissatisfied with the choice of candidates or the style of decision-making, ensure the defeat of official nominees
  • The interests of the national leadership and those of the State unit could come in direct conflict
  • For instance, the Congress high command was more intent on reducing the support for the BJP in the Rajya Sabha, if only by one. But the party’s MLAs were more concerned about how the battlelines are drawn in Haryana. The 15 MLAs, who very deliberately invalidated their votes, have the backing of large sections of the State unit. It is the national leadership of the party that will have to pay heed to this message
  • Like in some earlier Rajya Sabha elections, there was evidence in this round of wealthy candidates securing votes across party lines, reinforcing the belief that elections to the Upper House continue to be influenced by the power of money

 

2. A case for cutting out the censorTopic: Media-Films

Category: Polity

Key points:

  • The censor board (actually, the Central Board of Film Certification) is a statutory body under the Cinematograph Act 1952
  • The Cinematograph Act creates a regime of pre-censorship — or, in technical terms, a regime of “prior restraint”. Before a film can be released for public viewing, it must be cleared by the censor board
  • The board is tasked with ensuring that the content of the film does not fall into any of the categories of “reasonable restrictions upon free speech” that are set out under Article 19(2) of the Constitution. Article 19(2), however, consists of a set of abstract phrases such as “public order”, “decency or morality”, “defamation”, and so on
  • To aid the censor board in its task, the government is authorised to frame concrete guidelines. These guidelines have been changed from time to time, and at present, stipulate (among other things) that “dual meaning words as obviously cater to baser instincts are not allowed”, “visuals or words which promote communal, obscurantist, anti-scientific and anti-national attitudes are not presented”, and “human sensibilities are not offended by vulgarity, obscenity or depravity.”
  • One glance at these “Guidelines” should be enough to establish that they not only allow, but positively invite, arbitrary censorial action. Instead of clarifying and cabining the scope of discretion under Article 19(2), they expand it, creating a broad and vague field within which the Censor Board can operate
  • However, it didn’t have to be this way. Forty-six years ago, the film-maker K.A. Abbas challenged the constitutionality of the pre-censorship regime established by the Cinematograph Act, as well as the Guidelines framed under it. Abbas’s argument was that pre-censorship was too draconian to be a “reasonable restriction” upon free speech under Article 19(2). This was especially so because other media of communication, such as print, were not subjected to pre-censorship. In any event, he argued, at the very least, the Guidelines were entirely vague and arbitrary
  • The SC not only upheld the Act and the Guidelines, but also embarked upon a psychological analysis of how the medium of cinema, with its “versatility, realism (often surrealism), and its coordination of the visual and aural senses” was able to “stir” people much more deeply than written words could, and, therefore, had to be subjected to a more stringent regulatory regime
  • Strangely, the reasoning in K.A. Abbas case was strongly reminiscent of the “argument from colonial difference”, used by the British to deny Indians civic freedoms and the right to self-governance for the longest time. The British had regularly invoked the emotional, mental and political immaturity of Indians to justify both their rule, and the necessity of imposing a repressive censorship regime upon the press and the arts
  • Independence had come, and a new Constitution, but the same Indians who were now considered politically mature enough to govern themselves and choose their own leaders, could still not be trusted by the Supreme Court to watch films without the prior approval of the government
  • A. Abbas was an unfortunate judgment because it not only upheld the Cinematograph Act and its vague guidelines but also created a judicial discourse around films and the freedom of speech that is defined by its moralising, patronising, and paternalistic character
  • A little over a decade-and-a-half later, in S. Rangarajan vs P. Jagjivan Ram, the Supreme Court observed that pre-censorship of films was necessary because cinema audiences were not as “discerning” as newspaper readers. Nearly a decade later again, in the Bandit Queen case, the Supreme Court permitted some scenes of violence and frontal nudity on the ground that they served a larger social purpose of creating, in the minds of the viewers, a revulsion towards such actions — and that the scenes were no longer and no more detailed than was strictly necessary to serve this purpose. And vestiges of this approach continue today: it was reported that the Bombay High Court remarked, during the hearings on Udta Punjab, that multiplex audiences are now “mature” enough
  • It is not clear in what context and for what purpose the High Court made this observation. What should be clear, however, is that it is high time that this discourse of “maturity” and “immaturity” (whether of multiplex audiences or otherwise) was jettisoned from our constitutional discourse. Our Constitution, the culmination of a decades long struggle for political independence and civic freedom, is premised upon the belief — and the faith — that citizens are autonomous individuals, who make their own choices and take responsibility for them — whether it is in the political arena while exercising their right to elect their representatives, or in the cultural arena, in deciding which gods to worship, whom to associate with, and what to see, speak, or here
  • The Cinematograph Act, its Guidelines, and the censor board, by making the government the arbiter of what films are fit or unfit for citizens to see, on the assumption that the “wrong” kinds of films might lead them to form the wrong kinds of views or take the wrong kinds of actions, are fundamentally at odds with our constitutional vision
  • The Court’s sanctification of this legal regime has been an error

 

3. Why India should keep an eye on EuropeTopic: Internet

Category: Governance

Key Points

  • This month, the Body of European Regulators for Electronic Communications (BEREC) has launched a public consultation to interpret the new Net neutrality law passed in October 2015. Activists have called the current law an “ambiguous” one with “crucial loopholes” that could undermine the concept of a level playing field online
  • Unlike the Indian consultations which focussed only on zero-rated applications like FB’s Internet.org, the EU law is comprehensive in tackling two other major challenges of Net neutrality: specialised services, which enable faster access to certain applications which have tie-ups with Internet providers, and traffic management, which allows Internet providers to peruse data and decide which Internet traffic is important and which is not, rather than the current system of equal distribution
  • The emphatic ‘no’ heard in Indian public consultations for zero-rating — which was marketed as giving the poor ‘some Internet’ instead of ‘no Internet’ — is a lesson for Western politicians who are “worried” about stopping free zero-rated services
  • The Indian response is remarkable, because they saw this as affecting their start-ups and local voices
  • If the Indian zero-rating guidelines can be a model for Europe, then faulty European guidelines can set in motion a worrying global domino, particularly in the Global South
  • Hitherto, in terms of digital rights and data protection, the EU has been setting standards far beyond its own regional reach, especially in places where democracies are still in the process of elaborating their constitutional and legislative systems.If the EU falters, it would give many governments of Africa and Asia that seek control over the Internet a leg-up
  • Moreover, EU remains a major trading partner for most regions, and an adverse Internet law could affect fair competition and establish monopolies
  • This is why countries such as India should be involved in these consultations. For, if the Internet is not neutral, then Indian start-ups, for instance, will struggle to enter the European market, and Europeans will potentially lose out on the services of a half a billion users of the Internet
  • India, which figures on top in the plans of Internet companies which are scrambling to “connect the last billion”, may well have to learn from the European legislation. Discussions on specialised services and Internet traffic management are yet to be resolved. Only the first few battles have been won, making it prudent for India to keep an eye on Europe over the coming months

 

The Indian Express

 

  1. India, the driver of growth for Bharat

Topic: Relation between Poverty and Growth

Category: Economy

Key Points:

  • How has India’s recent growth impacted poverty in the country? A look at how India’s rapid structural transformation over the past three decades — the shift from agriculture to industry and services, and from rural to urban areas — is changing the relationship between economic growth and poverty reduction.
  • India’s economic take-off during the 1990s and the early 2000s is now part of the country’s economic folklore. This remarkable upturn has also come with faster poverty reduction. After 1991, per capita income grew nearly two-and-a-half times faster in real terms compared to the preceding three-and-a-half decades. During this time, the fall in poverty also picked up pace. But was the faster pace of poverty reduction after 1991 simply a reflection of faster growth, or did poverty indeed become more responsive to growth? What’s more, did the changing pattern of India’s growth matter to the pace of poverty decline and, if so, in what way?
  • First, has India’s growth become more pro-poor or not? One measure of the pro-poorness of growth is the elasticity of poverty reduction to growth — in other words, by how much did poverty decline for every 1 per cent increase in per capita income or consumption? Thus, the question of whether poverty became more responsive to growth can be rephrased as whether the elasticity of poverty reduction to growth has increased or not
  • It turns out the answer depends to some extent on how growth is measured. If by growth we mean changes in per capita consumption derived from household surveys, there is strong evidence that not only is the post-1991 period one of faster growth, it is also one of more pro-poor growth; the elasticity of the headcount index to growth increased from 1.5 (pre-1991) to 2.7 (post-1991)
  • On the other hand, if growth is measured by per capita income or consumption from the national accounts, the evidence still points to a higher elasticity for the headcount index post-1991. For poverty measures that take the depth or severity of poverty into account, the evidence is mixed: higher elasticity of poverty reduction post-1991 only holds if growth is measured using the surveys, but not if it uses national accounts
  • Rapid urbanisation is now driving economy-wide gains to poor people
  • Then, did the changing pattern of India’s growth matter to the pace of poverty decline and, if so, in what way? Our research shows that during the past two decades the rural poor gained more from urban growth than from rural growth, altering the relationship between the pattern of growth and poverty reduction that had prevailed in India until then
  • For instance, in the early 1950s, about 85 per cent of the poor lived in rural areas and depended on the rural economy for sustenance. It is thus not surprising that before 1991, rural growth largely determined poverty reduction in the country. While urban growth did indeed reduce urban poverty, it contributed little or nothing to poverty reduction as a whole. This reflected the weak linkages between urban growth and the rural economy
  • Since the early 1990s, however, this pattern has undergone a striking change. Urban growth has now emerged as a major driver of national poverty reduction. Since 1991, urban growth was responsible for about 80 per cent of the total fall in poverty. This happened both directly, through urban growth having a larger impact on urban poverty, but even more importantly indirectly, through urban growth having a substantial impact on rural poverty. This indicates that the growth of cities, which have both bigger populations and higher productivity, has been good for poverty reduction as a whole in India
  • Growth and poverty reduction is increasingly driven by the secondary and tertiary sectors
  • Next, we examined which sectors had emerged as the primary drivers of India’s growth. Before 1991, rural growth, especially in the farm sector, mattered most for poverty reduction. But in recent times, it has become more difficult to attribute poverty reduction to any specific sector. In fact, post-1991, all sectors have contributed to reducing poverty. Indeed, with the greater integration of the Indian economy, growth in one sector has begun to transmit its gains elsewhere to a greater extent than before, and the imbalance in the growth process has ceased to matter
  • Because the size of the primary sector has fallen, its overall contribution to the decline in poverty has also dwindled. Whereas before 1991 the primary sector accounted for about two-fifths of the total poverty decline, after this period its contribution fell to less than 10 per cent of the total — and larger — decline in poverty
  • At the same time, the contribution of the other sectors to poverty reduction has risen substantially. While growth in the secondary sector accounted for about 25 per cent of the fall in poverty after 1991, the tertiary sector alone contributed over 60 per cent to its decline. Since 2000, India’s construction boom — which has intensively used low-skilled labour — has helped secondary sector growth to be more pro-poor
  • In short, the Indian economy is changing and so is the relationship between economic growth and poverty reduction. The process of structural transformation of the economy has intensified, and with it, the traditional sources of both economic growth and poverty reduction are getting displaced. As this process continues, the country can be expected to increasingly turn to growth in its urban and non-agricultural economy to drive future poverty reduction

 

2. A Wider BattleTopic: Factors responsible for Malnutrition

Category: Data for Governance

Key Points:

  • The data from the National Family Health Survey or NFHS-4 (although only for 13 states and 2 UTs) confirms the finding from the Rapid Survey on Children (RSoC) of 2015 that there has been a significant decline in child malnutrition in the country during the last decade. In spite of a number of initiatives having been launched to combat malnutrition during this period, nothing definitive on their impact could be said because of the data drought that one saw since the NFHS-3, which was conducted in 2005-06. The NFHS-4 data, when fully available, will for the first time provide comprehensive nutrition-related data at the district level for the entire country
  • While there has been a decline in childhood stunting (considered one of the most important indicators as it represents chronic malnutrition) in almost all states, there still exists a wide gap between states. Therefore, while 28 per cent of children in Telangana and 27 per cent in Tamil Nadu have a low height for age, the corresponding figures for Bihar and Madhya Pradesh are 48 per cent and 42 per cent. The Global Nutrition Report 2015 finds that Bihar, Jharkhand, and Uttar Pradesh have high initial rates of stunting and yet the subsequent declines in stunting in these states are lower than most other states. Even though these states did see a considerable decline in stunting since the last survey, at this rate it will take a long time for them to catch up
  • From earlier studies we do know that a number of factors contribute to malnutrition, including food availability and quality, women’s status within the household and in the society, access to health services and prevalence of open defecation. It would be wrong to focus only on economic growth as an explanatory factor for the improvement in malnutrition in this period
  • The period between NFHS-2 (1998-99) and NFHS-3 (2005-06) witnessed high economic growth but unimpressive improvements in malnutrition. In the current period (2005-06 to 2015-16) as well, the question to be asked is whether the rate of improvement in malnutrition that is being seen can be attributed only to the growth experience
  • The India Health Report compares the levels of stunting in India to other countries with similar levels of per capita income or even lower and finds that the level of stunting in India is higher than what would be expected based on its per capita income levels. A number of countries such as Bangladesh, Nepal, Tanzania, Kenya etc have a lower per capita income than India but also lower levels of stunting
  • Within India too, while the correlation between per capita income of the state and stunting prevalence is high (correlation co-efficient minus 0.67), there is no one to one correspondence indicating that it is possible to address malnutrition through multiple factors. For instance, while Tripura’s per capita state domestic product is less than half that of Haryana, stunting in Haryana (34 per cent) is considerably higher than in Tripura (24 per cent)
  • Other indicators such as those related to women’s status also show a very strong correlation with malnutrition levels. Calculating simple correlation coefficients between stunting levels and different indicators it is seen that stunting is most highly correlated with the percentage of women in the state having a bank account in their name (minus 0.83) and percentage of female literacy (minus 0.68). Similarly, stunting is also highly correlated with the percentage of households in a state using improved sanitation facilities (minus 0.62)
  • Taking the percentage of institutional deliveries and the percentage of women who received full antenatal care as proxies for the availability of health services, these factors are also highly correlated with levels of stunting in the state (minus 0.74 and minus 0.71 respectively)
  • Although anything conclusive can only be said after a careful multivariate analysis, which is not possible currently with the available data, what this initial analysis indicates is that there are all these other factors that have to be addressed to make a dent on malnutrition
  • To keep up the momentum gained in reducing malnutrition, there is a need to put more resources into the public programmes that contribute to improvements in all of the factors discussed above

 

3. Nothing personal about itTopic: Gender Issues

Category: Society

Key Points:

  • Many social practices that reflect social inequalities hide behind the cover of religion. Personal laws under British administrators were drawn from diverse sources. It reflected the gender prejudices of its times since the interpreters of “religion” have been mostly men. The process of reforming regressive practices also began during the British rule. Reformers ended practices like Sati and child marriage. Conservative sections in the society opposed these reforms and insisted that these be preserved in the name of “defence” of religion
  • Many campaigns for social reform are continuing among both Hindu and Muslim communities. Some of the campaigns to let women enter temples where they were not allowed — like Shani Shingnapur — have been effective. Similarly, Muslim women are demanding entry to Haji Ali Dargah, where they are not allowed since the past five years
  • It is against this background that the Bhartiya Muslim MahilaAndolan (BMMA) launched a campaign against triple talaq. A survey done by BMMA shows that around 92 per cent Muslim women are opposed to this abominable practice
  • In triple talaq, a man can pronounce talaq three times and throw the wife out of the house. If the husband decides to take her back, she has to get married to someone else, consummate the marriage, and then divorce the new husband before she can return to the earlier husband. Many maulanas offer this service of being “temporary husbands”
  • As per the BMMA, both these practices are un-Islamic. It points out that such practices are not mentioned in the Quran. A memorandum submitted to National Commission for Women mentions that, “The instant method of divorce has no mention in the Quran. In fact, the Quranic method requires a 90-day process of dialogue, reconciliation and mediation before divorce takes place.”
  • Many Islamic scholars endorse the BMMA’s stand. However, the Muslim personal law board and Jamaat-e-Isalmi do not agree with the BMMA. The Jamaat is planning a campaign to oppose the efforts of Muslim women for reforming personal laws. There are many progressive groups, prominent activists and writers from the community, who have declared solidarity with the agitating women. However, these people are being dubbed by conservatives as supporters of Uniform Civil Code (UCC)
  • The fact is triple talaq is banned in over 21 Muslim majority countries including Pakistan. The rights of religious minorities for culture, right to life and affirmative action need to be supported. At the same time, the process of reform within the community must also be upheld and supported on moral, social and legal grounds
  • The demand for personal law reforms by Muslim women and the call for UCC are not comparable
  • The opposition from conservatives in the Hindu community forced the Nehru government to dilute Ambedkar’s draft of theHindu Code Bill (HCB)
  • The basic point which emerged from the making of the HCB was that most personal laws reflect the hierarchical notions of society and thereby accord secondary status to women. So what we need are gender just personal laws. The gender just code in turn has to be the same for all the communities and, hence, it will be uniform. Gender justice has to be the basis of uniformity; blind uniformity may turn out to be most unjust for women
  • Can non-Muslims opine on the issue of Muslim personal laws? This writer wants the rights of minorities to be respected across nations. This includes the rights of women, who are a minority in power structures. Movements like the BMMA seek to reform personal laws by exploring the space available within the Quran. Needless to say, there are multiple interpretations of the Quran. The BMMA, which strives to privilege the humane and just aspects of the teachings of a religion, needs to be supported
  • The personal law question needs to be understood in the context of patriarchy. All reform movements that challenge patriarchy call for our support. Gender equality has to be prioritised over conservative interpretations of religious scholars. We do need to say a big no to triple talaq and polygamy

 

Others:

 

  1. PIB

 

a) 147 villages electrified last week ; 8,242 villages electrified till date under DDUGJY147 villages have been electrified across the country during last week (from 6th  to 12 th June 2016) under Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY)

villages electrified

 

b) President of India condoles the passing away of Shri Inder MalhotraShri Malhotra was a doyen amongst Indian journalists. In recognition of his services in the field of journalism, he was honoured with the RamnathGoenka Lifetime Achievement Award in 2013. In his death, the nation has lost a veteran journalist who served as a role model for others in the profession

 

c) Distribution of LPG connections to Women from BPL households under Pradhan MantriUjjwalaYojana at Faizabad, Uttar PradeshPrime Minister Shri Narendra Modi had launched the Pradhan MantriUjjwalaYojana (PMUY) on May 1, 2016 in Ballia,UP, to provide 5 crore LPG connections to Below Poverty Line (BPL) families during the next 3 financial years. PMUY has been subsequently launched in the states of Gujarat, Madhya Pradesh, Rajasthan,Uttrakhand and Uttar Pradesh, marking another step in the direction of providing LPG connections to over 5 crore Below Poverty Line (BPL) families

 

2. The Financial Express:

 

  1. Why combined central/state elections are a good idea

Topic: Election

Category: Polity

Key Points

  • Now that the Election Commission supports simultaneous Lok Sabha and state assembly elections across India—prime minister Narendra Modi is also said to be in favour of Lok Sabha, state assembly and local body polls together—the stage is set for working towards it
  • Apart from the fact that valuable money will be saved if the elections are held together, the bigger benefit will be the reduction in what is best called electoral paralysis, or the lack of decision-making by the central/state government because some state assembly or local body election is due—, for instance in the past, the monthly diesel price hikes were put on hold due to an election taking place in one state or another on occasion; often enough, reforms were put on hold because there was no large enough window between elections to assemblies
  • This becomes even more problematic where, as now, the prime minister is the main campaigner for the party in assembly elections as well—in which case, the hectic campaign schedule distracts from running the government
  • Once all elections are held together, after the mammoth election process is over, the government will get a clear four years in which to carry out important reforms—and since this is also a large enough window for their results to be visible, it will make life easier for the political class
  • Indeed, in the first two decades after Independence, such simultaneous elections were held in 1950-51, 1957, 1962 and 1967. That changed with state assemblies dissolved in 1968 and the union elections advanced to 1971
  • Combining all state assembly elections, and synchronising this with the general elections, will now pose a challenge since most have a different electoral cycle but a solution can be found. One view is that assemblies where elections are due either six months before or after the term of the current Lok Sabha be combined with the 2019 general elections. If this is done, elections to 10 states—Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Maharashtra, Mizoram, Odisha, Rajasthan, Sikkim and Telangana—can be combined with the 2019 general elections
  • Will voters get confused since national and state-level elections are quite different? Ideally, that shouldn’t happen since voters are quite savvy—in 2014, in any case, elections to Andhra Pradesh, Arunachal Pradesh, Odisha and Sikkim took place along with the general elections. But if that is a consideration, elections to states can be clubbed together but held within six months of the general elections. A larger discussion will throw up more solutions, but the larger point is that if electoral paralysis can be avoided, all attempts have to be made to ensure this

 

2. What is India’s job nightmare?Topic: Employment

Category: Governance data

Key points:

  • According to a Kotak Institutional Equities report, citing data from the National Skills Development Council (NSDC), while NSDC had estimated that 18% of India’s work force would be employed in agriculture by 2022—compared to 56% right now—it has now scaled down that target to 38%, which means NSDC feels that just 25 million will be able to get off the farm by 2022
  • Naturally, that has implications for poverty alleviation. If the 158 million persons that NSDC originally thought would leave the farm sector had done so and got employed in either manufacturing or services, their incomes would have gone up—now, their future depends on how agriculture does and, going by the last few years, they may barely be able to keep their heads above poverty
  • Getting 158 million persons off the farm and also providing to those joining the work force for the first time means India needs to create roughly two million new jobs every month, or double the popular estimate of the jobs India needs to create—that one million number comes from absorbing just the new entrants, not taking people off the farm
  • It’s difficult to say just how well India is doing since jobs data is not readily available, but the Labour Bureau does compile data for a few sectors and, in the eight sectors for which it has data, a total of just 0.7 million jobs were created over two years. In the textiles sector, for instance, a total of 0.3 million jobs were created over two years according to the Labour Bureau data—according to the NSDC’s original projections, the sector was to create 1.2 million jobs a year, a figure which was later revised downwards to 0.7 million. In the case of automobiles, just 19,000 jobs were added in two years against the original annual target of 2.5 million and even the new target of 0.4 million—with greater automation in all sectors, things are only going to get worse
  • All of which means a sea change in policy is required. In agriculture, instead of relying on wheat and rice, the policy has to encourage more fruits and vegetables and, more important, a lot more processing since that is where the value addition is—like it or not, this is where the FDI in retail angle comes in and this is where all the reforms suggested by the Shanta Kumar committee are relevant
  • Labour-related issues have to be addressed on a war-footing and if the centre cannot do it, at least the big states have to be encouraged to change their laws, since it is clear labour laws are restricting employment growth
  • Sector-specific policies need to be cleared—in the textiles sector, apparel firms wanted to be free to hire-and-fire as long as they guaranteed a minimum of 200 days of work a year at Rs 200 a day—double MNGREGA
  • Since exports are a vital component of the jobs story, the exports policy has to be relooked—you cannot have a situation where SEZs are still not being given the tax sops promised; indeed, it is to be hoped NIMZs that are an important part of the industrial strategy don’t face the same set of issues

 

3. The Business Line: 

 

a) Taming a new animal
Topic: Banking

Category: Economy

Key points:

  • The implementation by banks of the marginal cost of funds-based lending rate (introduced by the Reserve Bank of India two months back) will be reviewed shortly
  • Not only has the new system failed in achieving what it intended to — reduce costs for borrowers — it has also created a new set of issues for both, borrowers and banks
  • RBI’s initiative forced banks to lower their benchmark lending rates as soon as MCLR was implemented. But the new framework failed to deliver beyond this
  • Transitioning to the new regime has handed old borrowers a raw deal. This has always been an inherent challenge when migrating to a new rate structure. But if the RBI wants banks to move their entire loan book to the new system quickly, it will be imperative to put in a sunset clause. Given the paperwork and costs involved in drawing up new contracts, banks are unlikely to rush to move borrowers into the new regime on their own
  • The larger issue, however, is to tackle some of the flaws coming to light under the MCLR framework. Even as banks set their benchmark rate under MCLR much lower than the base rate, tinkering with the spread has left very little on the table for borrowers. While MCLR is reviewed every month, loan rates are tweaked only annually in most cases
  • If the issues are complex, possible solutions appear even more so. Questioning banks on the quantum of spread they add to the MCLR will be retrograde as banks should have the discretion to manage costs and build in the necessary risk premium. Imposing a shorter reset clause to facilitate faster transmission can lead to volatility in EMIs which will be unpleasant for borrowers, particularly in a rising rate scenario. It will also make banks’ task of managing asset-liability gaps more onerous
  • While it is unclear how the RBI will iron out these issues in the coming months, drawing lessons from the past can help. As a thumb rule, only about half of banks’ funding gets re-priced when the RBI adjusts rates. By designing a framework that forces banks to transmit more benefit than they actually reap, the central bank has got off on the wrong foot
  • Tempering expectation around transmission can help find a more sustainable solution
  • Instead of micro-managing pricing decisions, the RBI should foster greater competition. Only a handful of banks are still offering low rates under the new regime
  • Deepening of the bond market would also help rates to seamlessly flow between markets. Banks can price their deposits more realistically against benchmark instruments, in turn ensuring quicker transmission of market rates to lending rates. Allowing private sector to deliver this will be a welcome initiative

 

b) No check on States squandering resourcesTopic: Federal Structure

Category: Polity

Key points:

  • The year 1991 is often referred to as a watershed when economic liberalisation led to newfound prosperity not just for Indians but also for Central and State Governments. The Union Budget (excluding internal and extra budgetary resources of public sector enterprises) that was at ₹1.25 lakh crore has grown exponentially to ₹30 lakh crore now. State government budgets which were a few thousand crore have jumped to more than ₹1 lakh crore in most States and to ₹2 lakh crore in larger States.
  • While the exponential increase in revenue resulted in and demands for accountability at the Centre, this was not so in the case of the States
  • The combined subsidies of State governments amount to more than ₹2 lakh crore while the debt of State-owned discoms is approximately ₹4.5 lakh crore. Freebies are said to be tens of thousand crore
  • If cutting red tape, privatising loss-making public sector organisations, eliminating subsidies and reducing corruption are required of the Centre, it must apply to State governments too. Their bureaucracies are bloated, too much taxpayer money goes to support loss-making State PSUs, there’s corruption in every transaction, and freebies are all-pervasive
  • According to the NITI Aayog, a core of 26 departments is sufficient for good governance. But most States have anywhere between 40 and 75. Uttar Pradesh has departments of protocol, civil aviation, co-ordination and political pension. Karnataka has medical education, Kannada culture and information while Bihar has departments of building construction and sugarcane
  • The Karnataka government owns about 75 companies and corporations, most of which are losing big money. Gujarat has more than 45 boards and corporations for which consolidated financials are unavailable. The Uttar Pradesh government lists 42 operational and 23 non-operational ones on its website. The government of Orissa manages 30 companies and corporations of which only the mining companies rake in large profits. Most State government-owned PSUs are inefficient, personal fiefdoms of ministers and loss-making. Hence they should be privatised or closed
  • No State government is serious about fighting corruption. The Delhi government after storming into power on an anti-corruption platform passed the Lokpal Bill which activists describe as ‘Jokepal’. A few months ago, the Karnataka government created the controversial Anti-Corruption Bureau under the purview of the home ministry in order to curtail the powers of a well functioningLokayukta. The Maharashtra Lokayukta is the weakest with no investigation agency attached to it. The Rajasthan Lokayukta has just 35 officials and cannot take action against the corrupt, it can only recommend legal action to the State government. To minimise corruption,States must strive to create an all powerful independent institution of Lokayukta
  • As far as subsidies go, Tamil Nadu is the leader. Last year, the allocation for subsidies and grants was a whopping ₹49,000 crore. The budget speech itself acknowledges the distribution of free “laptop computers electric fans, mixies and grinders free of cost”
  • The “Maa Mati Manush” election year budget of West Bengal sets aside more than ₹15,000 crore for distribution of free cycles and various stipends
  • Power subsidies are the biggest drag costing anywhere between ₹3,000 crore and ₹15,000 crore with most of it spent on unmetered agriculture pumpsets
  • For India to reap its demographic dividend, more than a million jobs must be created every year for the next decade and beyond. Even if the Centre carries out far-reaching reforms, India is unlikely to grow at a double-digit rate if State economies are mired in red tape and inefficiency. Along with the Centre, State governments also need to launch a reform process

 

c) Cash reserve ratio has lost its relevanceTopic: Monetary Policy

Category: Economy

Key points

  • The cash reserve ratio (CRR) has lost all relevance, especially after the stringent rules laid down under Basel III norms
  • CRR, as widely understood, is the amount of cash held by commercial banks in relation to their deposit liabilities
  • Cash should include cash in the bank’s vaults and deposits with the Reserve Bank of India. In India, cash, for CRR purposes, means only the deposits with the RBI and not cash held in banks’ vaults. Deposit liabilities would generally mean deposits held by the public with banks
  • In India, the RBI has included virtually all external liabilities, including FCNR (B) and NRE deposits (payable in foreign currency) and call money borrowings, etc. Commercial banks are expected to maintain 4 per cent of their total outside liabilities, excluding some dues to the RBI and a few other government agencies, in the form of deposits with the RBI
  • The two original objectives for which CRR is stipulated worldwide were: (a) banks should have sufficient cash at all times to meet the payment demands of their deposit customers; and (b) it is a tool of monetary policy to control money supply in the economy
  • Both the objectives are not relevant these days. In fact, central banks of countries such as the UK, Canada, Australia, New Zealand and Sweden reportedly do not prescribe CRR
  • In a panic situation, the own CRR of a bank would be of no use. It could, at best, meet the demands of public depositors to the extent of about 10 per cent (depending on the component of non-public deposits in the total portfolio). Usually, depositors would demand their money back prematurely only when they suspect the financial soundness of a bank
  • The financial strength of a bank in India is monitored keenly by the RBI
  • So far, the RBI has always ensured that the depositors of a financially broke commercial bank do not suffer
  • CRR could thus be justified only in relation to the second objective, namely, as an instrument to control money supply in the economy
  • This is based on the notion that banks create money with the deposits. For example, when a bank gets a deposit of ₹100 and lends it to a business, the latter uses the money to pay for expenses. The recipient of the money, in turn, deposits the money back into the banking system and boosts money supply in the economy. By impounding a portion of the deposits as CRR, the capacity of banks to create additional money is curtailed
  • But the extent of CRR in many countries is less than 5 per cent and central banks have not resorted to increasing this percentage to control money supply in times of need. They resort to other tools such as open market policies to mop up surplus money supply
  • Another related issue is that the capacity of the banking system to lend has been, for long, determined by the ability to attract deposits from the public, irrespective of basic financial strength as represented by the equity capital base
  • Strangely, till the early 1990s, there was no minimum capital requirement for banks in relation to their deposits: on the other hand, banks insisted that borrowers had some minimum capital vis-à-vis borrowings. The dichotomy was sought to be resolved by the rules developed by the Bank for International Settlement (BIS) based in Basle, Switzerland. All countries have adopted these rules, commonly known as the Basel norms
  • What started as the need for minimum capital for a given level of borrowings by the bank (mainly deposits) morphed into a ratio of capital to assets of the banking system.Thus evolved CRAR or capital to risk-weighted assets ratio
  • Since many international experts got into the act, they made it as complex as possible. The word ‘capital’ was stretched to include even a category of loans
  • As for assets, the full amount was not taken, but only a portion depending on their riskiness. And the risk of loans (the major component of assets) was measured either by credit rating agencies or by the banks themselves
  • The rating agencies’ capacity and integrity was severely called to question during the financial meltdown in advanced countries of the West during 2007-08. Reliance on a banks’ own risk assessment for calculating the capital base can never be foolproof
  • After the events of 2007-08, the BIS decided to superimpose one more requirement on international banks under Basel III norms.
  • A new ‘leverage ratio has been introduced to take effect from 2017-18.
  • The RBI has asked banks in India to adopt the leverage ratio. Banks should have a minimum equity capital of 4.5 per cent of their total assets and off-balance sheet items such as guarantees, letters of credit, etc by 2017-18.
  • This means the conventional debt-equity ratio of a commercial bank should not be higher than 21:1. Although this is much higher than what banks insist on with regard to business concerns borrowing from them — a maximum of about 4 — the fact is that banks and financial institutions do have larger borrowings and debt component would include contingent liabilities
  • After the introduction of leverage ratio, the capacity of the banking system to inject additional money into the economy would beseverely circumscribed by the aggregate equity capital of all banks in an economy
  • To conclude, CRR is well past its ‘sell by’ date and by abolishing it, the RBI will save the time and manpower of various commercial banks.

 

4. The Economic Times:

 

a) India needs resolute action against cyber attacksTopic: Cyber security

Category: Security

Key points:

  • China is the number one source of online attacks generically called ‘distributed denial of service (DDoS)’ — which swamp internet servers with automated garbage and render them useless
  • Such attacks, in an age when instruments of espionage, statecraft and even warfare are becoming ever more dependent on information technology, are tools that can be used to disable weapons and cripple the financial system
  • India has to take resolute action against cyber attacks. Israel has emerged as a leader in developing cyber security tools. There is no reason why Indian youngsters cannot develop indigenous capability in cyber defence and attack
  • Instead of chasing some form of e-commerce or the other, startups can be incentivised to take up well-defined defence-sponsored projects to find solutions to known and unknown problems
  • The onus is on the government to work out the projects, much as America’s Defense Advanced Research Projects Agency (Darpa) does
  • True, India has a demographic edge over many nations. But our future depends on how well policy addresses the needs of young people, how well we educate them and shows them the way forward to address the prospects, and challenges, of the immediate future. Tackling cyber-attacks might be a starting point

 

b) RBI’s welcome move to convert debt into equityTopic: Banking

Category: Economy

Key points:

  • The Reserve Bank of India’s reported plan to get going on cleaning up banks’ books laden with bad loans is welcome. There are many viable options of financial engineering.
  • Pushing promoters of debt-ridden companies to slash their equity in stalled projects, with their creditor banks taking a haircut and getting a part of the debt converted into equity, as reported, is a workable one. Once right-sized, stalled projects can resume, with some infusion of funds, if necessary, and banks can start lending again. Banks can sell their stakes once the project takes off
  • This will enable banks to recoup the loans converted into equity. Ideally, stalled projects should be spun off into a special purpose vehicle when the loan is converted into equity, and project costs slashed to more realistic levels. This would facilitate induction of a fresh developer, if needed. A case-to-case approach to provide a lifeline to genuine defaulters is welcome
  • Any such move calls for government involvement. On their own, bankers will hesitate to take decisions that might result in the government auditor accusing them of causing losses. Now that the bankruptcy code provides a legal framework for resolution of corporate distress, the government should work on operationalising it fast
  • A systemic reform needed is to relieve a handful of bankers of the burden of making a judgement call on loans to infrastructure projects
  • If infrastructure is financed by corporate bonds, a wider range of players such as rating agencies, mutual funds and pension funds will get to make an informed judgement
  • It will also help deepen and widen the market for corporate bonds. Also, the lending decision of banks could be tainted by the non-transparent way in which politics funds itself: through the proceeds of corruption
  • Dodgy projects get funded as political favours. The government must clean up political funding so that bank loans are not inflated to fund political parties

 

5. Quick Bits

 

a) Govt to award ‘Yoga medals’ for paramilitary troopsWith the country set to celebrate the second International Yoga Day on June 21, the government has proposed instituting ‘Yoga medals’ for central paramilitary troops for displaying exceptional skills in the ancient discipline for physical, mental and spiritual well-being.

Besides, it has also planned to re-employ retiring personnel of the Central Armed Police Forces as Master Yoga Trainers to create a constant resource pool of teachers for about 9 lakh personnel of CRPF, CISF, ITBP, SSB and BSF.

 

b)  Solar plane lands in New York City during bid to circle the globeA solar-powered airplane finished crossing the United States landing in New York City during its historic bid to circle the globe.The Swiss team flying the aircraft in a campaign to build support for clean energy technologies hopes eventually to complete its circumnavigation in Abu Dhabi, where the journey began in March 2015

The propeller-driven Solar Impulse flies without a drop of fuel and its four engines are powered solely by energy collected from more than 17,000 solar cells built into its wings.

Surplus power is stored in four batteries during the day, to keep the plane aloft on extreme long-distance flights.

 

c)  South Asian nations seek help from India to set up trade portals India’s trade portal has become a source of inspiration for its neighbours, some of which have sought help from the country to set up similar online platforms.

Nepal, Bhutan and Sri Lanka have evinced interest in adopting the best practices of indiantradeportal. in, which makes available comprehensive regulatory and business information through a single window to promote international trade.

 

d) Government plans national highway grids for smooth travel; 27 corridors identified India has over one lakh kilometres of national highways (NHs), but there is no scientific road network pattern and drivers can’t take a straight road to reach from one place to the other. To address this, NHAI has prepared a grid of 27 horizontal and vertical national highway corridors at a distance of every 250 km crisscrossing the country.

image roads

 

G. Fun with Practice Questions 🙂
Question 1: Which of the following are grounds for restricting freedom of expression under Art 19(2)?
  1. The interests of the sovereignty and integrity of India
  2. The security of the State
  3. public order, decency or morality or
  4. contempt of court, defamation or incitement to an offence

a) 1,2 and 3

b) 1,2 and 4

c) 2,3 and 4

d) All the Above

 

Question 2: Which of the following statements is/are correct about National Investment and Manufacturing Zones?
  1. NIMZ would have an area of at least 5000 hectares in size
  2. The State Government will be responsible for selection of land suitable for development of a NIMZ

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 3: Which of the following statements is/are correct about the Pradhan Mantri Ujjwala Yojana?
  1. It envisages distribution of free LPG connections among 5 Crore BPL households in 3 years
  2. It would provide financial assistance of Rs 1600 per LPG connection

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 4: Which of the following
  1. The Mars Rover Missions, Opportunity and Curiosity of NASA are still operational
  2. JUNO will be the second spacecraft to orbit Jupiter, following the Galileo probe, both operated by NASA

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Question 5: Which of the following statements is/are correct?
  1. Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank
  2. leverage ratio is defined as the ratio of the capital measure(debt) to the exposure measure (equity) of a bank expressed as a percentage

a) 1 only

b) 2 only

c) Both 1 and 2

d) Neither 1 nor 2

 

Check Your Answers

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