Comprehensive News Analysis - 22 June 2016

A. GS1 Related

B. GS2 Related

1. Aadhaar to be linked with caste, domicile certificates

Topic: Social Security

Category: Governance

Location: The Hindu

Key points:

• All State governments have been asked to link Aadhaar with caste and domicile certificates to be issued to school students, as part of a first-of-its-kind initiative by the Centre
• The main objective of issuance of caste or tribe certificate is to facilitate access of bona-fide candidates belonging to the Scheduled Castes and Scheduled Tribes to the reserved posts and services under the State or Central governments and secure admission in educational institutions and get other facilities
• The States have been told to ensure that such certificates are issued within 60 days to the students when they are studying in Class V or VIII

2. ‘U.S. will not abandon Afghanistan’

Topic: Afghanistan

Category: India’s Neighbourhood

Key points:

• The assassination of Afghan Taliban leader Mullah Akhtar Mansoor in a drone strike last month did not indicate a change in the U.S strategy of supporting negotiations with the outfit, Special Representative for Afghanistan and Pakistan (SRAP) has said
• Even as the US administration is rethinking its earlier plan for troop reduction from 9800 to 5500 by the end of the year, the SRAP said the NATO summit next month in Warsaw will demonstrate the commitment of the US and allies to secure the strife-torn country
• He said the U.S would be committing three billion dollars annually until 2020 for the security and reconstruction of Afghanistan
• He admitted that there was no clarity on what the Taliban wants, and said the U.S expected all members of the four country group leading the initiative – China, Pakistan, Afghanistan and the U.S – to use their leverage and influence over Taliban to bring them to the table
• The ambassador said India and Iran, two countries that have stakes in the future of Afghanistan, would be included in the peace efforts at a later stage. He said the priority now was to get the talks started

Related News:The Taliban on Tuesday ambushed a series of buses and cars in southern Afghanistan’s Helmand province, forcing people out of the vehicles and abducting around 60 passengers, an Afghan official said

3. Door open for discussions, says China on NSG membership bid

Topic: India and China

Category: International Relations

4. ‘Made in India’ F-16s on radar, thanks to FDI

Topic: FDI in Defence

Category: Governance

Key points:

• American military manufacturer Lockheed Martin could soon be producing F-16 fighters in an assembly line based in India, taking advantage of the new liberalised FDI conditions announced by the government on Monday
• If the legendary American fighter is deployed with the Indian Air Force after local production, it would signal a historic shift in India’s military posture that could dramatically affect the country’s relations with China, Pakistan and other nations. It could also draw much criticism to the fact that India was inducting a fighter that first took to the skies more than 40 years ago
• The proposal for setting up an assembly line for F-16 fighters in India was discussed during Prime Minister Narendra Modi’s visit to the U.S. earlier this month

C. GS3 Related

1. ISRO gears up to test scramjet engine

Topic: Space

Category: S &T

Key points

• ISRO is gearing up to test a scramjet engine based on air-breathing propulsion. Named Advanced Technology Vehicle (ATV), the test platform will comprise a scramjet engine hitched to a two-stage sounding rocket (RH- 560)
• While conventional rocket engines need to carry both fuel and oxidiser on board for combustion to produce thrust, scramjets obtain oxygen from the atmosphere by compressing the incoming air before combustion at hypersonic speed. The scramjet engine can also liquefy the oxygen and store it on board

2. Team leaves for Mozambique to explore pulse imports

Topic: Price Stabilisation

Category: Economy

Key points

• Due to the spiraling prices of pulses, the Union government sent a delegation to Mozambique to explore the options of importing pulses on a government-to-government basis
• Another team of senior officials is already in Myanmar on the same mission
• Malawi is another African country with which India is having talks on buying pulses
• During 2014-15, India produced 17.2 million tonnes of pulses. India’s pulse output has been affected by two consecutive years of drought. Because of a gap of 7 million tonnes between demand and supply, the retail prices have soared

3. Second unit at Kudankulam to reach criticality ‘very soon’

Topic: Nuclear energy

Category: S &T

Key points

• The second unit of 1,000 MWe at the Kudankulam Nuclear Power Station will reach criticality “very soon. The Atomic Energy Regulatory Board had already given the in-principle approval for the first approach to criticality
• Two Russian reactors, called VVER-1000, have come up at Kudankulam. These reactors, built by the NPCIL, use enriched uranium as fuel and light water as coolant
• Pit excavation is under way for the third and fourth units at Kudankulam. The fifth and sixth units will also come up. The NPCIL will build all these reactors, each with a capacity of 1,000 MWe

4.ISRO sets record with 20 satellites launched at onceThe mission was successful. Details were given yesterday

D. GS4 Related

E. Important Editorials: A Quick Glance

The Hindu

1. Opening our skies

Topic: Investment

Category: Economy

Key points

• With the latest round of reforms in the foreign direct investment (FDI) policy, the Centre says that most sectors would now be eligible for automatic approvals, making India the most open economy in the world for FDI
• At least in the civil aviation sector, for which the Centre also unveiled a new policy last week targeting greater connectivity at cheaper fares, that opinion seems a little ahead of time
• Raising the FDI limit for airlines (including regional operators for whom FDI of 49 per cent was only allowed last November) to 100 per cent, with automatic approvals for foreign ownership up to 49 per cent, sounds good on the face of it. But it is more likely to bring relief for domestic carriers looking to raise capital or forge an alliance with a global airline than attract many new players into the fray
• This is because global airline players continue to be hemmed in by the 49 per cent ownership limit set in 2012, following which ventures such as AirAsia India and Vistara took off
• In theory, a foreign airline could tie up with other institutional investors like private equity funds to form a 49:51 joint venture and tap India’s double-digit air traffic growth. Even if a strategic airline investor agrees to be a junior partner, securing a scheduled operator permit still requires an airline’s chairman and at least two-thirds of its directors to be Indian citizens, and substantial ownership and effective control to be vested in Indian nationals. There need to be swift changes in the small print, if the skies are to be as open as hoped for in the aviation policy
• The Centre has admitted this balancing act is part of a dynamic, calibrated process to make domestic carriers more competitive for now. This process is also driven by security concerns. While the U.S. originally barred foreign control of airlines in 1926 so that its military could take charge of civilian aircraft in times of strife, most countries adopted a similar stance following World War II, citing security concerns and the need to protect the turf of national airlines
• The U.S. now allows around 25 per cent foreign ownership in airlines, South Korea permits 49 per cent and Chile a full 100 per cent, even as it has done away with national control and ownership norms. Australia has now scrapped limits on airline ownership for aircraft flying within its airspace — a model that could very well serve India’s aviation policy objectives of tripling passenger traffic by 2022 and developing regional connectivity.
• To stay at the forefront of FDI reforms in a slowing global economy, India could have proposed a bolder reform in airline ownership norms and dovetailed that with its vision of an open sky policy within the SAARC region and beyond. That would have been a global game changer

3. Revisiting the Rajya Sabha’s role

Topic: The Council of States

Category: Polity

Key Points:

• The recent elections to the Rajya Sabha to fill 57 vacant seats became notorious for alleged poaching by political parties among the ranks of their counterparts with charges of corruption blaring out loud against one another
• While the Rajya Sabha has generally played second fiddle to the Lok Sabha during the periods of preponderance of a ruling regime in both the Houses, it has become an important platform of resistance to the majoritarianism of the Lok Sabha during the Janata regime (1977-79), National Democratic Alliance (NDA) rule (1998-2004), UPA II (2009-2014) and in the last two years of NDA rule
• While some instances of such resistance could be regarded as whimsical and grandstanding, overall they drew attention to the fact that electoral victory to the lower House may entitle a party to rule but not necessarily govern unless it reaches out and engages with the central concerns and interests embedded in the polity. This was clearly voiced in the resistance against the Prevention of Terrorism Bill in 2002, corruption charges against the government during 2011-14, and the proposed amendment to the Land Acquisition, Rehabilitation and Resettlement Act in 2015
• But the Rajya Sabha is not merely meant to play such a salutary oppositional role. Unfortunately there has not been much reflection with regard to the nature and purpose of this House in India after the brilliant debate in this regard in the Constituent Assembly
• While it is important to highlight the case of corruption in the election of the members to this House, and resist the tendency of parties to pack the House with their high and mighties without consideration to their being worthy or not to play the representative role, it is imperative to draw attention to the role that the Rajya Sabha needs to play in the Indian body politic today
• In the Constituent Assembly debates we find a set of four distinct reasons advanced in defence of the Rajya Sabha
• First, some members of the Assembly saw it as a House of reflective and evaluative reasoning removed from the hurry-scurry of everyday life. N. GopalaswamiAyyangar termed it as the House which can rein in “passions of the moment”. Lokanath Mishra described it as “a sobering House”.Clearly there was much elitism and condescension in such a conception of the House, that led to frequent potshots between members of both Houses in the early days of the Parliament that were eventually reined in by rules of Privilege Motion
• Second, apart from the review and revaluation role, there was a broad consensus in the Assembly for the need for a second legislative chamber to initiate proposals for public policy, to elicit responsiveness from public authority, and to hold governments accountable. The constitutional provisions on division of work between the Houses clearly bear it out. However, in this conception, the Rajya Sabha largely duplicates the functions of the Lok Sabha and therefore, in the words of Abbé Sieyès, turns out to be “superfluous”. Such an understanding has led to repeated introduction of private members’ bills in the Lok Sabha for the abolition of the Rajya Sabha, as well as moves by the enthusiasts of the House to introduce bills to widen its jurisdiction. Needless to say, none of these proposals has made much headway
• A third conception saw the House as the authoritative platform to accommodating diversity, although much of this consideration laid emphasis on political diversity reflecting federal arrangements, drawing parallels with the United States in the process.Clearly the nature of diversity in India, and the distribution of powers it resorted to through federal arrangements, was markedly different from the United States
• There was a fourth conception of the House, which was not lucidly spelt out in the Constituent Assembly debates, although it could be read on the sidelines again and again, captured by the late L.M. Singhvi in the phrase “the grand inquest of the nation”. While this conception saw diversity as an essential ingredient that should inform the Upper House in India, it saw diversity not necessarily wholly encompassed by federal arrangements. Such a condition called for a very distinct overlapping representation through the Upper House. Such a conception owed much to the principle that while all representative democracies have a predictable role for the House, elected through universal adult franchise, the Upper House is a unique response to the distinct historical and cultural contexts of a polity it is called upon to represent. To what extent has the Rajya Sabha lived up to these expectations?
• There are a few formal tasks exclusive to the Rajya Sabha in addition to the other chores it shares with its counterpart, the Lok Sabha, such as the power to transfer a subject from the State List to Union List for a specified period, to create additional All-India Services, and to endorse Emergency under Article 352 for a limited period when the Lok Sabha remains dissolved. While it does not have the power to approve money bills, it can offer its own suggestions on them, and while it has no representation in the Estimates Committee, its members have a proportionate share in all other committees of the Parliament, including those closely linked with financial dealings such as the Public Accounts Committee, Committee on Public Undertakings and the Standing Committees related to Ministries/Departments
• The removal of the domicile requirement mandated by the Representation of the People Act, 1951, by the five-judge Bench of the Supreme Court in 2006 in KuldipNayar v. Union of India and Others has further watered down the mark of diversity that was the hallmark of the Rajya Sabha. In other words, the Rajya Sabha has turned out to be another chamber of the Parliament akin to the Lok Sabha, except for the mode of selection of its members
• The thinning out of difference between the two Houses of the Indian Parliament, however, does not make the Rajya Sabha superfluous. Given the articulation of the Indian polity, in the foreseeable future the party composition of the Houses will be markedly varied in the two Houses. Given the trend of shoving off difference under the homogenising drive in the dominant dispensation today, and a majoritarianism that necessarily spells exclusion, a forum such as the Rajya Sabha can be the voice of sanity, of the excluded, and of citizen rights. But is it enough?
• In this context it might be important that the nature and role of the Rajya Sabha be revisited, rather than merely think of it as the parking lot for those who cannot ensure their election from a popular constituency
• In addition to its present role of representation and accountability, the Rajya Sabha could be the House that represents difference in our polity, difference marked not merely by its culture but its diversity. Difference in India is encoded not merely around regions, languages, and communities but also in its inegalitarian social relations. Representation through federal units hardly captures these multiple and often overlapping differences. There are some constituencies which will never be able to ensure their adequate representation through the electoral route: Muslims; women; linguistic, religious and ethnic diversity; regions such as the Northeast and Jammu & Kashmir; urban informal labour; the rural poor, just to name a few constituencies
• One can understand the deep discomfiture that some of the nominated members feel in the House given the adversarial context in which they have to function. There are probably ways to shape representation that reaches out and connects to nodal concerns without being overwhelming

3. Banking revival must be a priority

Topic: Banking

Category: Economy

Key Points:

• The banking sector weighed down by bad loans. The situation can be tackled and should have been tackled by now. Unfortunately, precious time has been lost for want of clarity on the way forward. The Reserve Bank of India (RBI) is better placed than anybody else to feel the pulse of the banking sector. It will be up to the incoming RBI governor, therefore, to show the way
• The bulk of the bad loans are with public sector banks (PSBs). As bad loans mounted and banks had to make provisions for these, profits fell at PSBs or losses mounted. PSB performance suffered in comparison with private banks. The P.J. Nayak committee, constituted by the RBI, came to a quick conclusion in its report presented in May 2014: the problem at PSBs was fundamentally one of governance
• The committee argued that it was a mistake for the government, the majority owner, to be an active investor. Instead, it should become a passive investor. It should hand over its governance role, first to professional bankers and then to independent boards of directors. As the promoter, it should have no say in the appointment of chairmen and managing directors of PSBs
• The Nayak committee’s diagnosis was flawed. If governance at PSBs was so poor, how did PSB performance show considerable improvement over most of the post-reform period? Yes, there were poor appointments and bad loan decisions. But these are not the most important reasons for the bad loan problem at PSBs over the past four years
• PSBs had lent to vital sectors, steel, aviation, mining, infrastructure, textiles, all of which came to be impacted by factors beyond the control of bankers.
• Private banks had a relatively limited exposure to these sectors as they had chosen to focus on retail loans. That’s why they fared better. PSBs have ended up paying a price for funding the infrastructure boom that drove India’s phenomenal growth in 2004-08
• If you believe that governance at PSBs is primarily responsible for bad loans, you are bound to think that no good can come out of them until the right boards and managing directors are in place. You will think that bad loans are the result of pervasive ‘scams’. You will not see merit in giving adequate capital to banks so that they can step up lending — why waste scarce resources?
• For a year or so, it appeared that the government had become hostage to the Nayak committee’s diagnosis. The outcome has been ‘banking paralysis’, somewhat akin to the ‘policy paralysis’ that felled the UPA government. PSBs have been paralysed by lack of capital and a fear psychosis at all levels
• Ultimately, good sense seems to have prevailed. The government did not buy the thesis of the Nayak committee. It has moved to professionalise appointments at PSBs but intends to keep government equity holding at PSBs at a minimum of 51 per cent. This is welcome. But the government hasn’t gone far enough in tackling the key issues, namely, bad loans and bank recapitalisation. As a result, conditions in the banking sector have steadily worsened
• The response to a banking crisis is fairly standard. Recognise and provide for bad loans. Change management where necessary. Infuse capital into banks so that fresh lending and growth happens. Ours is not a banking crisis (which involves multiple failures of banks), we have a stressed situation. But the steps required are the same
• In implementing this standard protocol, we have made several mistakes. There is a sense that the RBI has been somewhat harsh in the norms it has imposed on bad loan recognition. Not all defaults are wilful or mala fide. There are situations where a project is stalled for reasons beyond the promoter’s control. In such situations, additional loans may be required to see the project through to completion. If loans in such cases are declared as non-performing assets, no further lending is possible, and the project is doomed
• Second, almost all bad loan resolution requires banks to write off some portion of the loan; otherwise the firm or the project is unviable. The RBI came out with schemes that allowed banks to stretch out loan repayments over 25 years and to convert loans into equity. These have proved inadequate. Loan write-offs are essential. The RBI’s latest restructuring scheme allows banks to divide loans into ‘sustainable’ and ‘unsustainable’ portions and to write off a portion of the latter. This initiative should have come much earlier
• Third, given the hysteria created over the bad loan problem, bankers are unwilling to take decisions on loan write-offs. They fear that they will invite action from the investigating agencies even after they have retired
• The government has said it will constitute a high-level panel to vet loan settlements by banks. This too comes at least a year late
• Fourth, the government has been slow in infusing capital into PSBs. It has promised banks Rs.70,000 crore of equity capital over four years starting 2015-16. Most analysts think this amount hopelessly inadequate. It may be enough to meet the minimum regulatory requirement of capital, but it does not suffice to promote loan growth. The intention seems to be to let some PSBs just stay afloat until they are merged with stronger entities or sold to strategic investors. This is bound to hurt loan growth
• Fifth, the government is rushing to merge SBI and its five associate banks. Ostensibly, this is meant to create a bank that is in the top 50 banks by size in the world. The overriding priority today should be to address the bad loan problem. It does not help at all to saddle banks with the managerial headaches posed by merger. If a merger is intended, the benefits of the merger must be clearly articulated to investors and analysts. No such analysis has been presented. It is also strange that attempts at merger should focus on the strongest PSB when it ought to focus on the weakest banks
• Banking is a play on the economy. Strong economic growth can take care of the bad loan problem. This requires greater public investment and a revival of private investment
• Public investment is constrained by self-imposed targets for fiscal consolidation. Private investment is held back at least in part by high real interest rates that flow from the RBI’s policy of inflation-targeting. A revival of banking cannot happen by addressing issues specific to the sector alone, such as settlement of bad loans and bank recapitalisation. The answers to banks’ problems lie partly in the economy at large. The government and the incoming RBI governor need to sit together and revisit the present economic policy framework

4. The mat goes mainstream

Topic: Health – Yoga

Category: Governance

Key Points:

• If India were to look for a new symbol that would be a representative of what the country stands for today, the yoga mat would be a serious contender
• When the Prime Minister made his pitch to the United Nations General Assembly to adopt the day of summer solstice as International Yoga Day, he said: “Yoga is an invaluable gift of India’s ancient tradition. It embodies unity of mind and body; thought and action; restraint and fulfilment; harmony between man and nature; a holistic approach to health and well-being.”
• He went on to emphasise that the core of the philosophy behind yoga, as outlined in Patanjali’sYogasutra, was not just about exercise, but to discover the sense of oneness with yourself, the world and nature. “By changing our lifestyle and creating consciousness, it can help us deal with climate change,” he added
• Yoga does mean many things for many people: for some it is exercise, it’s a tool for wellness, it’s a routine; for others it is a spiritual calling, a way of life, and for very few, it actually is therapy
• While modern medicine seems to have reconciled its once stiff-backed opposition to yoga’s role in health care, there remains the reluctance to harness it as therapeutic intervention, even as a supplement. By and large, in its acceptance yoga remains on the side of ‘wellness’, seldom crossing the Rubicon on to the far lands of ‘treatment’
• The messiahs of modern medicine, with their demanding touchstone of scientific validation for ancient systems of medicine, say there still is insufficient conclusive empirical evidence to show the beneficial effects of using yoga as therapy
• S. Krishnamoorthy, Chennai-based senior neuropsychiatrist, says there is some research of the benefits of practising yoga in certain categories of patients with certain specific ailments. He has set up “integrative therapy clinics” (Trimed) across the city that claim to combine modern medicine with ancient wisdom, ensuring that the latter is scientifically validated for use.

• “The autonomic nervous system, which controls key bodily functions, seems most amenable to yoga-based intervention,” he explains. Yoga helps with restoring posture and balance, having a soothing effect on anxiety and mood. “There is also empirical research that it helps control symptoms of asthma and epilepsy,” he says
• “It has been proved that yoga has beneficial effects on the cardiovascular system and regulating blood pressure,” says V. Mohan, founder, Dr. Mohan’s Diabetes Specialities Centre
• “From a metabolism point of view, yoga is different from other kinds of exercise. When you do cardio, for instance, your heart rate increases, hormone secretion increases, the adrenalin gets going — leaving you in a hyper state. On the other hand, when someone does yoga, we notice what we call cellular silence. It puts the system in a rhythm and all vital parameters, including blood pressure, heart rate, pulse rate, and blood sugar are stabilised. However, even here, empirical proof of yoga’s impact on lowering blood sugar in a diabetic is only just emerging.”
• But the problem, Dr.Krishnamoorthy adds, is also with methodology: when you subject these traditional systems to modern research methods, they end up not holding up. “We use methods that are usually employed to validate pharmacological interventions [which forms the bulk of modern medicine] to evaluate non-pharmacological techniques.”
• “Now, there are a few people trying to do things differently. For instance, at the Mayo Clinic [in the U.S.], yoga was used as one of a bunch of interventions including tai chi and dance therapy in a programme for patients with dementia,” he says. Published research on a pilot study conducted at the clinic indicates that such therapy could improve quality of life, cognitive and physical functions, better than ‘usual care’
• Another key hurdle might lie, ironically, in what is perceived as a strong point, traditionally — the many styles, variations and practitioners of yoga. Dr.Krishnamoorthy points out that there is no protocol for yoga postures or techniques, and this lacuna renders scientific validation difficult, if not impossible
• It remains to be seen if the Indian government, with the faith it has in the ability of yoga to achieve unity of mind, body, thought and action, will ramp up its promotion of yoga, with adequate scientific proof, to a viable form of supportive therapy

1. Tackling poverty in India: In building and agri boom, rural wage lift

Topic: Tackling Poverty

Category: Governance

Key Points:

• Real wages have risen across India in the past two decades, but the increase has been especially marked among rural unskilled workers. Three drivers — falling rural female labour force participation, a construction boom, and favourable agricultural terms of trade — help explain why unskilled rural workers fared better than their urban counterparts or workers with more education
• What were the economic forces that drove the rise in real wages during this time?
• Here are three key findings on how the relative wages of different groups changed between 2004-05 and 2011-12:
• First, an expanding construction sector stands out as the key driver of relative wage growth for unskilled men. States in which the rural construction sector grew faster than the urban construction sector, such as Uttar Pradesh and Karnataka, saw faster relative wage growth for men with less than complete secondary education. What this means is that the wages of these men grew faster in rural areas of the state than in urban areas. There is no such effect on women’s wages
• In contrast to the construction sector, relative growth in services, such as wholesale and resale trade, is unrelated to relative wages for either males or females

• Second, falling female labour force participation has played a role in helping raise wages, but only for women
• States in which rural women withdrew from the labour force faster than urban women experienced a bigger rise in the wages of rural unskilled women. This pattern is essentially absent for males, suggesting that women’s unskilled labour is not a very close substitute for that of men
• Third, states that grew crops whose prices rose more sharply during the 2004-05 to 2011-12 period saw rural wages for unskilled labour, both male and female, rise faster than urban wages. Thus, against the backdrop of the overall decline in agricultural employment in India, states that benefited from the agricultural commodity boom saw a greater demand for farm labour, and hence rising wages for unskilled farm work
• While we cannot run a statistical ‘horserace’ to find the dominant force behind the recent changes in India’s relative wage structure, these three drivers do help us understand why unskilled rural workers have fared better than their urban counterparts
• Going forward, in light of the recent moderation in agricultural prices and slower growth in the construction sector, it is already clear that some of the factors that contributed to the increase in relative wages for unskilled labour during this period may not be sustained over time. As a matter of fact, the rate of growth in real wages has slowed over the past few years, with potential implications for the pace of poverty reduction in the country

2. And the rivers be dammed

Topic: Conservation

Category: Environment

Key Points

• The Himalayas are young mountains, and naturally restless. In the last century and a half, the middle Himalayan region — now Uttarakhand — has suffered at least 50 major tremors and flash floods. But the biggest disaster since the 1803 Garhwal earthquake was more than just a natural calamity. Worse, the 2013 catastrophe had been long in the making
• In 2009, a series of flash floods and landslides killed more than 70 people in the state. This was a warning — which was repeated in another killer flash flood in 2012. That same year, two centres of excellence — the Wildlife Institute of India, Dehradun, and the Indian Institute of Technology, Roorkee — submitted conflicting reports on the collective impact of hydropower projects in the Alaknanda and Bhagirathi basins
• While IIT-R merely recommended a string of measures to reduce the dangers of harnessing these rivers so intensively at such altitudes, the WII said 24 out of the 39 proposed dams would cause irreversible harm to the rivers, and should not be allowed. By then, another 31 projects had already been commissioned or were under construction on the rivers concerned
• This called for a difficult policy revision. Soon after it became a state in 2000, Uttarakhand was showcased for its hydel potential, second only to that of Arunachal Pradesh. By 2006, new dams were coming up in the state. In 2009, Uttarakhand drafted its Vision 2020 statement on the theme of ‘PahadKaPani, Pahad Ki Jawani’
• While governments in Delhi and Dehradun remained indifferent to any course correction, calamity struck in June 2013. Although shaken, the state government stood its ground — and reiterated days after the tragedy its goal to make Uttarakhand power surplus by 2016 by building more dams
• For many, 2013 revived the nightmares of 1991 when a deadly earthquake hit Uttarkashi. The floods laid bare the risks of unbridled growth — and a quake of that magnitude is likely to cause much greater damage today. Yet, the zonal master plan for the Bhagirathi Eco-Sensitive Zone (ESZ) — in which 4,179.59 sq km between Gomukh and Uttarkashi was to be designated as a green zone to fight unplanned growth — was buried even before the wounds of 2013 had healed
• On January 13, 2015, at a meeting chaired by the Principal Secretary to the Prime Minister, the Environment Ministry accepted that an ESZ could not be declared without a proposal from the state government. Uttarakhand had claimed that it had not been consulted while notifying the Bhagirathi ESZ, which restricted most development projects in the area, and impacted livelihoods
• For wilful amnesia, it appears three years is a long time

3. There’s no such thing as free water

Topic: Water

Category: Governance

Key Points

• Water is in the news for how tankers were procured in Delhi. Even more importantly, we need to reflect on why we need tankers in the first place. Our urban local bodies (ULBs) cannot possibly ensure sustainable delivery of water in our cities/towns unless financing mechanisms are put in place. Water has long been considered a gift of nature, with a subconscious expectation that it should be available free of charge
• Water delivery requires heavy investment in collecting it from a natural source, treating it to make it potable, and investing in a distribution network of pipes for delivery to the users. It also requires investments in sewerage infrastructure and sewage treatment plants so that the sewers can carry the wastewater (estimated to be 80 per cent of the water that is consumed) to these plants to ensure that no untreated sewage is discharged back into natural water bodies.
• If cities were rich enough to meet the entire cost, water could be delivered free
• They are not, and therefore they have to charge. Unfortunately, politicians are reluctant to charge even when consumers may be willing to pay, more especially if it leads to better delivery of good quality water
• ULBs in India do not have the autonomy to set prices to cover costs. This power remains with state governments, and they must price water to recover costs. An element of subsidy can be built in for the poor by having volumetric pricing with a low price for the first slab which covers what is regarded as a minimum need. Those consuming more should pay a progressively higher price per litre for the water they consume
• The 2012 Water Policy recommends that user charges be based on volumetric pricing. As early as 1992, the Vaidyanathan Committee had recommended the same, and also that water rates should cover O&M costs in the first instance, with capital charges (interest and depreciation) to be covered over a period of five years. More than 20 years later, state governments have still not taken the first step to recover O&M costs through user charges
• One solution is to take water pricing away from politics and assign to a statutory regulatory authority the task of determining water tariff for cost recovery allowing for reasonable costs. The authority should be charged with hearing all stakeholders, and explaining how the tariff is arrived at. The government should have no right to alter the statutorily determined tariff, but it can and should introduce a subsidy which can be paid directly to the targeted consumers after making necessary provision in the budget. This would make the pricing of water transparent, and help begin the transition to a system of public debate on the importance of cost recovery and scrutiny of cost elements
• It is worth noting that even in many of the OECD countries, full O&M cost recovery was achieved only as late as 2008. On the other hand, Singapore started pricing water to cover O&M costs in the second half of the 1960s. Singapore has made the maximum progress in addressing their enormous water challenge through full cost recovery (including capital cost) and subsequently marginal cost pricing, and investing in innovations to reclaim water for reuse (NEWater) and in desalination. They also introduced a progressive water conservation tax in 1991
• In India, the situation varies across and within states. Maharashtra, Andhra Pradesh (including Telangana) and Gujarat come across much better than other states in O&M cost recovery, based on what was reported to the ministry of urban development (MoUD). Mumbai is the only big city reporting 100 per cent cost recovery even though its tariffs are amongst the lowest because its water cost and energy cost is relatively low. Bengaluru is next with cost recovery of 92 per cent. By contrast, Delhi, Indore and Bhopal show the worst cost recovery
• The financial viability of the water delivery system depends not only on tariffs but also on the extent of non revenue water (NRW), that is, water which is produced but lost and not paid for. The loss may be because of leakages in pipes or theft, or incomplete billing and/or metering inaccuracies. The working group on urban and industrial water supply and sanitation for the 12th Plan estimated NRW in India at 40-50 per cent. The status report puts NRW at 33-34 per cent for 2010-11, but the methodology for NRW calculation needs to be streamlined before using these numbers for reliable comparison
• Nagpur is the only city which provides a water balance sheet. Its 50 per cent NRW is the result of billing for only 43 per cent of the water supplied. The funding interruptions caused by the transition from JNNURM to AMRUT have affected the installation of consumer meters in the midst of the 24×7 water supply project (30 per cent of the city is currently covered by 24×7)
• To deliver potable water for all, the ULBs will have to work hard to reduce costs through modernisation and technology. They must also recover costs through user charges, while financing whatever subsidies are intended for the poor through cross-subsidisation. They must, of course, collect bills for all this to work. Private financing to supplement public funds to lay out the infrastructure is only possible if there is a revenue model. It does not call for rocket science but simply better governance

1. PIB

a) Indian Warships Visit Busan, South Korea After Exercise Malabar 2016In a demonstration of India’s ‘Act East’ policy and Indian Navy’s increasing footprint and operational reach, Indian Naval Ships Sahyadri, Shakti and Kirch is at  Busan on a four day visit, as part of deployment of the Eastern Fleet to the South China Sea.

During the visit, the IN ships will have professional interaction with the Republic of Korea (ROK) Navy towards further enhancing co-operation between the two forces. In addition, calls on senior Government and military authorities, sporting and cultural interactions and sharing of best practices, aimed at strengthening ties and mutual understanding between the two Navies, are also planned.

Bilateral trade and economic cooperation between the two countries has been forging ahead steadily and has progressed leaps and bounds in recent years. Both countries have signed a Comprehensive Economic Partnership Agreement, with special emphasis on shipbuilding and electronics hardware manufacturing.
Defence and Security relations between India and Republic of Korea have evolved steadily over the years and have received a renewed impetus with the visit of Indian defence delegation led by Defence Minister in April 16.Both countries have forged ties in the field of military R&D, with MoU signed between Indian Defence Research and Development Organisation (DRDO) and the Defence Acquisition Programme Administration (DAPA) of RoK. The last visit by an IN ship to Republic of Korea was in October 2015, when Sahyadri berthed at Incheon.

a) Cash starved Centre eyeing Rs 9 lakh cr RBI equity? Dangers abound 

Topic: Fiscal Policy

Category: Economy

Key Points

• In the report, McKinsey identifies three major threats – slowing economic growth, disruption by technology and weakening balance sheets of banks in the region and expects these to potentially cripple the economy by 2018
• Given how central banks such as the UK’s have bailed out banks before and given how desperately Indian PSU banks need capital and how short the government is of cash to recapitalise them, it is only natural it should look at RBI’s equity capital of close to R9 lakh crore—this includes retained earnings and contingencies—to help fund this
• As the Economic Survey pointed out in February, after a survey of major central banks, RBI’s equity capital is around a third of its balance-sheet, making it a clear outlier, save for Norway’s central bank whose equity levels are at 40%; the (European Central Bank)ECB is around 20% and central banks in the US and the UK are under 2%. If Rs2 lakh crore of this money is used for either recapitalising banks or for setting up a bad bank which can buy the bad debts of PSU banks—that’s one of the numbers doing the rounds among government circles—RBI will still have an equity-to-asset ratio of around 25%; if Rs4 lakh crore is taken out, the equity will still be at 19% or around the same as that for the ECB.
• With Raghuram Rajan, who opposed this as RBI Governor, now on his way out, the task of sequestering the funds should be a lot easier.
  However, in reality, it may not be so
• To understand this, it is important to understand that most of this isn’t really money in the bank, as it were. Of the R9 lakh crore, as on June 30, 2015, nearly two-thirds was in the form of what is called Currency and Gold Revaluation Account (CGRA)—a tenth is in the Contingency and Asset Development funds. The CGRA, however, isn’t real money, it is the unrealised gain/loss in the value of gold and foreign exchange RBI holds based on movements in their value—this is not taken to the income account but instead recorded as a balance-sheet item
• So, if RBI has a certain amount of gold, say, worth $10 billion, and the price of gold rises 30%, $3 billion will be credited to this account; when the reverse happens, $3 billion will be debited. In case there is, post-Brexit, a great volatility in exchange rates, it is likely the CGRA will reduce as the rupee value of RBI’s forex holdings fall
• So, if money has to be given from the R9 lakh crore equity base, effectively it means the central bank will have to create fresh money—or finance the government deficit, a practice that ended a long time ago—which is inflationary; that is why many former RBI officials are also opposed to the idea. Also, to the extent RBI makes losses in currency and bond markets, having a big cushion helps
• Many of the countries the Economic Survey compares have convertible currencies, so don’t need such large intervention in markets—the fact that their numbers range from 2% for the US and the UK to around 19% for European Central Bank (ECB) also makes it clear a simple average is not the way to approach the issue
• Even so, it can be argued, as the Survey has, that RBI doesn’t need such large balances, and there is a technical way to figure out what the optimum balances should be by looking at various risk scenarios
• That, in fact, is what RBI has been doing, and the current policy of such high equity levels emerges from the exercise done by the last committee, headed by YH Malegam. While a new committee can be set up to relook the numbers, as a start, it would be a good idea to release the Malegam committee report so that the reasons behind the seemingly large equity can be made public

a) Why India should focus nearer East

Topic: Look East Policy

Category: International Relations

Key points:

• India recently concluded the long-awaited contract with Iran to develop the Chabahar port, and a related deal involving the establishment of a trilateral trade and economic corridor. This engagement is possibly one of the most crucial steps which would not only enable India’s access to Afghanistan, but also large parts of Central Asia which are rich in natural resources. It is significant also because India gets to contest China’s influence in the region
• While there’s been some headway in Central Asia, in the immediate neighbourhood things have not been quite so impressive in terms of India’s investments
• Cambodia, Laos, Myanmar and Vietnam (CLMV) have all been exhibiting more than 5 per cent GDP growth over the last few years, as the world economy struggled to breach the 2.5 per cent growth. Myanmar and Vietnam have led the pack, with 8.5 per cent and 6 per cent growth respectively
• In 2014, the Government announced the Act East Policy to bring more focus to this region, in particular, to the CLMV nations. However, no significant business engagements have resulted, and if this situation continues, the Act East Policy may just appear as old wine in a new bottle
• The CLMV region has received a significant amount of FDI. Since 2011, the amount of FDI into the region has increased phenomenally from $13.3 billion in 2011 to $38.7 billion in 2015. A chunk of this has gone to Vietnam (60.6 per cent), followed by Myanmar (25.3 per cent). In 2015 alone, CLMV saw a 22 per cent increase in investments from around the world
• Interestingly, both these countries, Vietnam and Myanmar, also offer tremendous opportunities for India to access huge markets. Myanmar, along with Cambodia and Laos, by virtue of being a Least Developed Country, benefits from the most favourable regime available under the EU’s ‘Everything But Arms’ scheme, providing duty-free and quota-free access to the EU for the export of products, except arms and ammunition
• On the other hand, the recently concluded Trans-Pacific Partnership (TPP) agreement to which Vietnam is a signatory along with 11 other Pacific economies representing 26 per cent of world trade, would provide almost duty-free access to goods produced in and exported from Vietnam
• While Myanmar could act as the gateway to the entire Asean region apart from tapping the significant local market, Indian companies in Vietnam would get direct access to the developing and developed markets of TPP members such as Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and the US, as well as Vietnam. Besides these, it goes without saying that CLMV would provide access to the entire Asean landmass
• Unfortunately, bilateral economic engagement between India and the CLMV countries is less than satisfactory. The irony is that in spite of these apparent benefits, India’s cumulative investment in two of the large markets in the region, Myanmar and Vietnam, stands at an abysmal low of $1.1 billion and $2.2 billion, during 2011 and 2015. India’s share in total investments in the CLMV region during the same period stands at just 2.4 per cent
• On the other hand, while imports by CLMV doubled during 2010 and 2014, India’s share in its imports remained the same, hovering around 2 per cent, since 2010
• The ground reality is that while China already has made significant inroads into CLMV, countries far from Europe and the Asia-Pacific are not far behind. It may not be out of place to conclude that India is increasingly being observed to be missing the bus in the CLMV region. Ideally, India should have been playing to its strengths in the region, executing projects in the area of healthcare, ICT and education, and possibly even replicating some of its African models
• Good economics is good politics. India must increasingly push for engaging more with these four countries in the region so as to benefit not only on the economic front, but also be a constructive and strategic partner in their growth stories
• For example, for India which supports the democratic principles in Myanmar, it would be easier to get the economic relationship with that country stronger. In the case of Vietnam, India’s current interests have been more skewed towards defence and security, and this needs to be widened economically as well
• While the Government in 2014 had expressed the desire to set up a ₹500-crore Project Development Fund (PDF) for catalysing Indian investments in CLMV countries, the same has not seen any significant traction on the ground either. Should this initiative see the light of day, it will usher in a good amount of Indian investments into the region, possibly in textiles, leather and low-end manufacturing, amongst others
• The Kaladan multi-modal transit-transport system conceived in 2008 envisioning connecting India’s north-eastern States through Myanmar to its Sitwe port has been in limbo due to delay and escalated costs. The project was intended to be a landmark initiative that would facilitate India’s links to the Aseanregion
• It is extremely important, given the geopolitical conditions, that inertia at the government level be shaken off so as to see the completion of the planned projects. There has been apprehension in some quarters about completion of the Chabahar port in time, in light of India’s recent record in delays in completion of strategic projects. Such notions should be corrected
• As India goes to Laos in a few months to participate in the Asean summit, we hope to see some focus shifting back to the region

a) Human trial of Zika vaccine to start soonThe first Phase-1 human clinical trial of a vaccine for the Zika virus is set to begin in the coming weeks, with the U.S. Food and Drug Administration (FDA) green-lighting it. The DNA vaccine (GLS-5700) developed by the U.S-based Inovio Pharmaceuticals and GeneOne Life Science, South Korea, has already been tested on animals and found to elicit “robust” antibody and T cell responses

b) ‘FDI in private security requires change in Act’ The Centre will need to amend the Private Security Agencies Regulation (PSAR) Act (2005) to help implement its decision to allow foreign direct investment of up to 74 per cent in private security agencies

c) Scrap railway budget, recommends Niti Aayog  panel The British-era practice of a separate railway budget may be discarded by the government after a high-powered panel headed by Niti Aayog member Bibek Debroy recommended that the annual exercise be scrapped

NitiAayog was mandated by the Prime Minister’s Office to work out a detailed plan for integration of rail budget with the general budget

d)  India at No. 10 in FDI inflow in 2015: UN report India became the tenth largest recipient of foreign direct investment in 2015 in the world, grossing $44 billion following a series of reforms by the government, as per the latest World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD)

e) NHAI to set aside Rs 58 crore for plan to reduce damage to Karnala Bird Sanctuary The sanctuary has a moist, mixed deciduous forest and falls under the Thane wildlife division of West Mumbai Wildlife Circle. It also forms part of the Western Ghat bio-geographic zone

f)  India among ‘worst’ countries for workers’ rightsPointing to the “weakening” of workers’ rights across almost all regions in the world, a new report has ranked India among the world’s 10 “worst” countries.

ITUC’s Global Rights Index 2016, which ranked 141 countries on a scale of 1-5 on the basis of 97 international indicators such right to organise, collective bargaining, civil rights, freedom of association among others, has ranked India in Group 5 (no guarantee of rights), along with 25 countries, citing rising contracterisation and “disproportionate violence” against workers by the police and hired private security guards by some companies.

The International Trade Union Confederation (ITUC) is an umbrella organisation of national trade unions across the world

F. Concepts-in-News: Related Concepts to Revise/Learn:

• NATO
• FDI
• Advanced Technology Vehicle(ATV)
• PSLV-C34
• Cartosat
• Rajya Sabha-Powers
• PJ Nayak Committee
• Patanjali’s Yoga
• CGRA
• Malegam Committee
• UNCTAD
• DNA Vaccine
• Niti Aayog
• Karnala Bird Sanctuary

G. Fun with Practice Questions 🙂

Question 1: Which of the following  statements is/are correct about ISRO’s Advanced Technology  Vehicle(ATV)?

Question 2: Which of the following is/are the recommendations of the PJ Nayak Committee Recommendations?

Question 3: Which of the following statements is/are correct?

Question 4: Which of the following statements is/are correct?

Question 5: Which of the following statements is /are correct about the Kaladan Multi-Modal Transit Transport Project?

H. Archives:

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