18 Jan 2021: UPSC Exam Comprehensive News Analysis

B. GS 2 Related

Category: INTERNATIONAL RELATIONS

1. U.K. urges China to grant UN access to Xinjiang

Context:

Britain’s government has urged China to allow UN rights inspectors to visit Xinjiang after raising new allegations of human rights abuses against the Uighur minority people.

Details:

• Britain’s Foreign Secretary recently introduced import controls on firms that may have sourced goods from the region in northwest China using forced labour from the mainly Muslim Uighur community.
• He opposes efforts underway in Parliament to give U.K. courts the power to declare a genocide in Xinjiang, which would bar the government from proceeding with any free-trade agreement with China.

Note:

• China is facing mounting global criticism over its treatment of the Uighur population in Xinjiang province – with claims of forced labour camps and mass sterilisation.
• However, China denies allegations and says it equally protects the rights and interests of its ethnic minorities.

E. Editorials

Category: HEALTH

1. Injecting confidence

Context:

• India oversaw over 2 lakh people getting vaccinated across the country in 3,350 sessions on the first day of the vaccination drive.

Details:

• The vaccination drive against COVID-19 has commenced in India, the scale of the vaccination drive is said to be the largest in Indian history.
• Currently two vaccines, Covishield manufactured at the Serum Institute of India and Bharat Biotech’s Covaxin are being administered in India.

The vaccination drive

• The scale of the vaccination drive has been appreciable. The first phase will see inoculation of three crore healthcare and frontline workers, sanitation workers and municipal workers, it is expected to take the number to 30 crores.
• There are only three countries in the world with more than 30 crore population: India, the U.S. and China. Hence, this is going to be the biggest vaccination drive.
• India has laid out the priority groups that will be vaccinated in the first phase. The commencement of the vaccination drive marked an important milestone in the fight against the coronavirus.
• However, the fight is not won yet, there is a long way ahead. Though the vaccination drive has begun with optimism, caution has to be exercised to ensure complacency does not set in.

Confidence in the vaccine

• Establishing the efficacy based on the final analysis of phase-3 trials and full licensure may take months. Till then, it is rational and scientific on the part of anyone to choose or decline a vaccine on the basis of whether the potential risks outweigh the benefits.
• The administration of vaccines is going to be an administrative nightmare but India has had the rich experience to rely on; the childhood immunisation programme and administering millions of doses in extremely diverse geographical conditions previously will help the COVID-19 vaccination drive.
• The vaccines to be used in India were approved recently and it has divided the scientists and the doctors. The dividing issue has been the wisdom of the Government in promoting both Covishield and Covaxin as being equivalent to one another.
• However, they are not equivalent. Covaxin is being administered as part of a clinical trial and its efficacy is not established yet.
• The nature of the pandemic and the impact it has had on the global scale meant that there was a race against time to develop a vaccine that would combat the virus.
• All the vaccines that have been administrated in the United States or the United Kingdom do not have sufficient data regarding efficacy and safety but there appears to be some data even when insufficient to inspire greater confidence.

Conclusion:

• The Prime Minister of India has called for people not to heed to rumours and the way forward for the government to inspire confidence among the people is by expending efforts to oversee an honest appraisal of the vaccine’s prowess.
• The first phase of vaccination will be closely watched across the country. Any adverse reaction has the potential to derail the vaccination process giving way to ‘vaccine hesitancy’.
• The experience of phase-1 beneficiaries will percolate and influence the adoption of the vaccines among the larger population.

Category: POLITY

1. Update debate

Context:

• WhatsApp has announced that they would delay the new policy launch to May from February after facing a backlash worldwide.

Details:

• The reaction from the users was so strong that millions of new users signed up for alternatives such as Telegram and Signal — around 25 million new users signed up for Telegram in just three days, and Signal became the number one app in its category in many parts of the world.
• The decision to delay has highlighted the need to regulate digital companies dealing with private data of people.

The issue at hand

• The announcement by WhatsApp about the update to its terms of service and privacy policy was the beginning of the problems for the Facebook-owned app.
• The update to its terms of service and privacy policy would mean that the users would be shortchanged, with the option to be able to opt-out of sharing data with Facebook no longer being available.
• A deadline of February 8 was announced for accepting the new terms, but this proved to be counterproductive as it led to a mass exodus from WhatsApp.
• Users leaving the app was unprecedented, never in the history of the application had it seen such a huge backlash, not even in the aftermath of the Cambridge Analytica scandal.
  • The Facebook–Cambridge Analytica data scandal concerned the obtaining of the personal data of millions of Facebook users without their consent by British consulting firm Cambridge Analytica, predominantly to be used for political advertising.

Cause for concern

• The WhatsApp policy update did not go down well with the users, their concerns largely revolved around privacy not being protected.
• Recent media reports have been indicating that the messaging app Signal which has gained from the exodus from WhatsApp, uses the same end-to-end encryption protocol as WhatsApp.
• Since WhatsApp came under the scanner, it has chosen to assure its users against heeding to rumours about the updates.
• It has put out several messages and issued advertisements to convey that the changes are “related to optional business features on WhatsApp, and provides further transparency about how we collect and use data”.

WhatsApp justification

• The company has come out saying that all the messages are end-to-end encrypted, and it doesn’t keep logs of who people message or call.
• The app already shares certain categories of personal data, including the user’s phone number and IP address, with Facebook.
• The service also tried to clarify that WhatsApp can’t see the shared location (neither can Facebook), and it doesn’t share users’ contacts with Facebook.
• WhatsApp has also justified that millions of business interactions take place every day on WhatsApp, and the new privacy updates will make it easier while also enabling personalised ads on Facebook.

What may happen?

• WhatsApp has chosen to postpone the update to May 15. The sharing data with Facebook is inevitable as WhatsApp was acquired by Facebook for $19 billion.
• WhatsApp gave up plans to charge its users and thus would be aiming to monetize the app by the handling of business interactions.
• The change in terms of services is not applicable to its users in Europe, as Europe’s data protection regime going by the name of General Data Protection Regulation (GDPR), prevents such sharing between apps.

Indian scenario

• Users in Europe, governed by GDPR, exercise far greater ownership and thus the control of their data than the rest of the world.
• In India, the discussion on a Data Protection law has been on for several years now, a Data Protection Bill was proposed more than a year ago, but has not proceeded further.
• All India has is a draft version of a law, and it has been so for a few years now. Privacy of a billion citizens is too important a thing to be left just to the practices of a commercial enterprise. It will be reassuring if it is guaranteed by a strong law.

Conclusion

• In the present era where data is referred to as the “new oil”, digital companies are looking at opportunities to share the data, monetize the data – this could create an incentive for a private data breach.
• The recent WhatsApp episode has highlighted as to how the privacy of citizens is too important to be left to the business practices of digital companies.

Category: ECONOMY

1. Financial boom at a time of economic stagnation

Context:

• Divergences between the booming financial and the stagnant real sectors have been puzzling.

Details:

• There has been a deepening of disconnect between certain segments of financial markets and the real economy.
• The disruption of economy owing to the pandemic and the lockdown restrictions meant that a slew of measures was undertaken by the monetary and fiscal authorities worldwide, this was true in the case of India as well.
• The measures which intended to offset the negative externalities of the pandemic and the lockdown may have had some unintended consequences on the economy.
• The soaring equity valuations disconnected from the economic performance has been very difficult to comprehend.
• The measures, such as slashing of interest rate and infusion of liquidity, have contributed to funnelling in funds into the financial system, including in India’s case from overseas investors.
• The inflow of capital flows is being witnessed, with the return of risk appetite and pursuit for higher yield. Financial markets and asset prices have been buoyed by this resurgence of foreign portfolio investment to India.

The story so far

• India’s major secondary stock market, the Sensex (the benchmark index of the BSE Limited, or formerly the Bombay Stock Exchange Ltd.) has been found tracking an upward path, from 40817 on January 8, 2020, to 48569 a year later, on January 8, 2021. This time interval saw the COVID-19 pandemic create havoc across the world.
• The Indian economy has entered a recession with negative GDP growth figures in the first two quarters of the financial year. The first quarter saw a GDP growth rate in real terms at minus 23.1%., the deceleration in the second quarter continued at minus 7.5%.
• The official advance estimate for 2020-21 as a whole also stands at a negative again, of minus 7.5%. GDP in India had been subdued even before the pandemic, declining from 6.12% in 2018 to 4.18% for 2019, while the financial sector has continued moving up.
• While largely the lockdown induced measures brought the economy to a standstill, there were upward strides in the stock market, along with speculatory financial transactions in real estate, gold and even commodities.
• However, we notice that financial gains booked in the market on transactions do not originate from productive activities in the real economy, a fact which contrasts the floating of shares by enterprises, as initial primary offerings (IPOs) for capacity expansions.

In advanced economies too

• The divergence between the real economic performance and the continuing financial boom has been not just a localized phenomenon seen in India but found to be replicated in other developing economies such as Brazil and Argentina and also in advanced economies of the United States and the United Kingdom.
• The discord within countries between the real and financial activities clearly imparts a dissonance within economies.
• Thus in India, there have been two contrasting sides, with huge gains made on the stock market on one side and on the flip-side, there is the uprooting of migrants following the pandemic lockdowns, high unemployment rate, and the agitating farmers over the farm laws.
• The moot point here is if this stock market boom will sustain or bust. If in the event of a crash in the stock market, the impact is going to be far-reaching.
• Its impact will be on those players having large exposures in the financial market and also on the economy as a whole.

Flows of finance

• Fictitious capital values are in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realised in the form of commodities.
• Flows of fictitious finance include
  • credit in circulation,
  • bonds on the basis of future earnings,
  • interest on loans (at the cost of foregone consumption or from the surplus value when loans permit access to productive resources).
• The interests, dividends and capital gains as well as profits on derivatives such as forwards and futures used to hedge against uncertainty in de-regulated markets fall under the earnings from fictitious capital. All the above come in the category of unearned or rentier capital.
• Though the flows of fictitious finance don’t rise from the real economy, they do have a significant impact on the economy in terms of wealth accumulation. It generates financial wealth for those with access to the financial circuit.
• Past evidence suggests that easy money conditions have led to buoyant stock markets globally.
• Investors seek higher returns at a time when interest rates on fixed-income assets such as deposits and bonds decline.
• Expectations of an economic recovery aided by supportive measures and the availability of lower-cost borrowings also spur people to borrow money to invest in stocks.
• The stock prices, which reflect the stream of dividends over time discounted by interest rates, have benefitted by expansionary monetary policies because lower rates can help pitch stock prices higher.
• A journey as above for the financial circuit continues, is subject to market confidence, along a concentric circle which widens with rising asset prices, asset incomes and capital gains.

Link to state

• The financial deregulation in the 90s decade and the evolving nature of the interplay between finance and the ruling state has enabled the financial sector to occupy a major position in the economies.
• Deregulation gave the liberty to banks to profit by dealing with securities and with the emergence of hedging devices such as futures and options in the market.
• Deregulation also meant the emergence and rise of non-bank financial institutions and shadow banks operating beyond regulations even at cost for the regular banks which had large exposures to the non-banks.
• The state’s proclivity or the inclination to extend finances to the big corporations who are failing to sustain themselves in the form of bailouts under the garb of restoring financial stability reflects the pro-finance stance of the state.

Conclusion

• The busting of this stock market bubble due to an unforeseen collapse of confidence in the financial sector will have economic costs and also have associated social costs.
• The wide-ranging ramifications underline the need to have alternative policies on the part of the state. The individuals who are active in the financial markets ought to exercise caution as well in a bid to usher in a sustainable and equitable path of growth for the economy as a whole.

Q1. “Manju Virattu” or “Eru Thazhuvuthal” are associated with which of the following sports?

Q2. Which of the following is/are correctly matched?

Q3. Consider the following statements with respect to Swadesh Darshan Scheme:

Q4. Consider the following statements about the NIA:

I. UPSC Mains Practice Questions

1. Examine the importance of a data security law and highlight the steps taken in India to protect personal data. (10 marks, 150 words) [GS 2, Polity]
2. What are ‘Rare diseases’? Briefly outline the National Policy for Treatment of Rare Diseases, 2017. (10 marks, 150 words) [GS 2, Health]

Read the previous CNA here.