28 Jan 2022: UPSC Exam Comprehensive News Analysis

A. GS 1 Related
B. GS 2 Related
INTERNATIONAL RELATIONS
1. Central Asia meet forms Afghan group
C. GS 3 Related
ECONOMY
1. Understanding the Budget formulation
D. GS 4 Related
E. Editorials
ECONOMY
1. India’s economy and the challenge of informality
POLITY
1. Wrong route
EDUCATION
1. Open the schools
F. Prelims Facts
1. Picture book on unsung heroes is out
G. Tidbits
1. EU launches WTO case against China for ‘targeting’ Lithuania
H. UPSC Prelims Practice Questions
I. UPSC Mains Practice Questions

A. GS 1 Related

Nothing here for today!!!

B. GS 2 Related

Category: INTERNATIONAL RELATIONS

1. Central Asia meet forms Afghan group

Syllabus: Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.

Prelims: Chabahar port and the International North South Transport Corridor

Mains: Main takeaways from the India-Central Asia summit

Context:

• First India-Central Asia Summit.
  • The “Delhi Declaration” joint statement was announced at the end of the summit.

Details:

Afghanistan issue:

• The participating leaders expressed concerns over the developments in Afghanistan. They reiterated the common concerns and common objectives in broader terms of India and Central Asian countries. This included the need for immediate humanitarian assistance, ensuring the formation of a truly representative and inclusive government, combating terrorism and drug trafficking, and preserving the rights of women, children and minorities. The issue remains extremely critical for regional security and stability.
• The countries agreed to set up a Joint Working Group (JWG) of senior officials for closer collaboration on the Afghan issue.

Connectivity:

• Overcoming the lack of land connectivity between India and Central Asia’s landlocked countries was one of the “main issues of discussion” during the summit given that robust connectivity is essential for enhanced trade and commerce between India and Central Asian countries.
• Connectivity projects could become a force multiplier for trade and economic cooperation and contacts between countries and people.
• The leaders welcomed alternate routes over sea provided by Chabahar port and the International North South Transport Corridor (INSTC) through Bandar Abbas.
• They also announced a Joint Working Group on the Chabahar port project.

Enhanced engagement:

• The Indian Prime Minister proposed a number of high-level exchanges between the two sides, including biannual summits and annual meetings of the Foreign, Trade and Cultural Ministers and Secretaries of Security (National Security Advisers) which was accepted by all members.
• A plan to build a “Central Asia Centre” in New Delhi has also been proposed.

C. GS 3 Related

Category: ECONOMY

1. Understanding the Budget formulation

Syllabus: Government Budgeting

Prelims: Budget related terminologies

Mains: Fiscal policy and fiscal rules in India; Contemporary challenges

Context:

• The Union Budget will be tabled in Parliament by Finance Minister on February 1.
  • A budget is an estimation of revenue and expenses over a specified future period of time. It provides the Government’s blueprint on expenditure, taxes it plans to levy, and other transactions.

Budget components:

• There are three major components of the Budget — expenditure, receipts and deficit indicators.

Expenditure:

• Total expenditure is an economic term used to describe the total amount of money that is spent by the government in the fiscal year.
• Depending on the manner in which they are defined, the major classifications of expenditure are as follows.

Classification based on impact on assets and liabilities:

• Based on their impact on assets and liabilities, total expenditure can be divided into capital and revenue expenditure.

Classification based on the effect on different sectors:

Receipts:

• The receipts of the Government have three components —revenue receipts, non-debt capital receipts and debt-creating capital receipts

Deficit:

• The gap between revenues and expenditures creates deficits.

Fiscal deficit:

• Fiscal deficit means the difference between total expenditure and the sum of revenue receipts and non-debt receipts which implies the difference between total expenditure and total non-debt receipts.
• Fiscal deficits need to be financed by a debt-creating capital receipt.

Read more on fiscal deficit.

Primary deficit:

• Primary deficit is the difference between fiscal deficit and interest payments on debts incurred in earlier years.

Fiscal policy:

• Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, especially macroeconomic conditions, including aggregate demand for goods and services, employment, inflation, and economic growth.
• Fiscal policy is largely based on ideas from John Maynard Keynes, who argued governments could stabilize the business cycle and regulate economic output.
  • During a recession, the government may employ expansionary fiscal policy by lowering tax rates to increase aggregate demand and increasing government expenditure to fuel economic growth.
  • In the face of mounting inflation and other expansionary symptoms, a government may pursue a contractionary fiscal policy.

Implications of Budget on the economy:

• Budget is an important tool of the fiscal policy and thus has a marked impact on the various macroeconomic indicators.

Aggregate demand:

• Government expenditure generates aggregate demand in the economy since it involves the purchase of private goods and services by the Government sector.
• Tax and non-tax revenue reduces the net income of the private sector and thereby leads to a reduction in private and aggregate demand.
• Thus reduction in expenditure GDP ratio, reduction in fiscal deficit-GDP ratio or increase in revenue receipt-GDP ratio indicates the Government’s policy to reduce aggregate demand and vice-versa.

Income distribution:

• Since different components of expenditure and revenue can have different effects on the income of different classes and social groups, the Budget has implications for income distribution as well.
  • Revenue expenditure such as employment guarantee schemes or food subsidies can directly boost the income of the
  • Concession in corporate tax may directly and positively affect corporate incomes.

Fiscal rules:

• Fiscal rules provide specific policy targets on the basis of which fiscal policy is formed. In India’s case, its present fiscal rule is guided by the recommendations of the N.K. Singh Committee Report. Allowing for some deviations under exceptional times, it has three policy targets — maintaining a specific level of debt-GDP ratio (stock target), fiscal deficit-GDP ratio (flow target) and revenue deficit-GDP ratio (composition target). These fiscal rules hence call for a cap on expenditure by imposing the above three policy targets.
• Under any situation when the debt-ratio or deficit ratio is greater than the targeted level, expenditure is adjusted in order to meet the policy targets even though there might be a need for an expansionary fiscal policy.

Challenges and recommendations for the upcoming budget:

• With the economy still hurting from the pandemic, the Budget will have to address the contemporary challenges of unemployment, low-income levels and low output growth rate even as it tries to curtail the rising inflation rates and fiscal deficit.
  • Private consumption, which makes up almost 55% of GDP, is below pre-pandemic levels amid rising household debt, while retail prices have swelled almost a tenth since the COVID-19 outbreak in early 2020.
• While the government will have to increase expenditure and reduce taxes to address the issues of low income and low growth, this risks increasing the fiscal deficit and inflation rates.
• In the midst of the inadequacies of fiscal policy to address the contemporary challenges, the article argues that the nature and objective of fiscal rules in India would have to be re-examined. 
• There is an urgent need for pushing further capital expenditure in the Indian economy which can help revive the economy.

D. GS 4 Related

Nothing here for today!!!

E. Editorials

Category: ECONOMY

1. India’s economy and the challenge of informality

Syllabus: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains: Challenges of Informal sector in Indian Economy.

Context

The Government has made several efforts to formalise the economy in the recent past.

What is Informality?

• The enterprises that are not formed as distinct legal organisations and for which no comprehensive records are available are classified as informal enterprises by the International Labour Organization’s (ILO) 15th International Conference of Labour Statisticians.
• Informal employees were classified as individuals who did not have access to social security during the 17th Conference of ILO.

Challenges posed by informality

Underdevelopment

• According to the ‘Informality and Development’ study, the persistence of informality is a sign of underdevelopment.
• Across countries, there is a negative correlation between informality and per capita income.
• The finding suggests the negative impact of informality on economic growth and income levels of the population.
• The persistence of a high share of informal employment in total employment is nothing but lack of adequate growth or underdevelopment.

Low productivity

• Workers lack access to quality education, skill training. This along with the use of obsolete technology and tools results in low productivity in informal enterprises.

Lack of social security

• People working in the informal sector lack access to social security.
• Survival is the biggest challenge for most informal workers. The pandemic further exacerbated this challenge. Recent reports suggest that the informal sector’s GDP share reduced to less than 20%, from 50% a few years ago.

Informality in India

• Despite rapid economic growth over the last two decades, the share of formal workers in India stood at a mere 9.7% (47.5 million). Even now, around 90% of workers in India are informally employed.
• 75% of informal workers are self-employed with earnings lower than salaried workers.
• About half of informal workers are engaged in non-agriculture sectors spread across urban and rural areas.

IMF’s take on informal economy:

• This perspective is based on the thought of the International Monetary Fund, which regards the existence of the informal sector to excessive regulation of enterprises and labour that results in economic activity outside the regulatory purview. Excessive regulations and taxation ensure the endurance of informal activities.
• It notes that informality is because of structural and historical factors of backwardness.
• It is believed that registration processes, easing rules for business conduct, and lowering the standards of protection of formal sector workers will formalize informal enterprises.

Factors affecting informalization in Indian Economy:

• To promote employment, India protected small enterprises engaged in labour-intensive manufacturing by providing fiscal concessions and regulated large industries by licensing.
• Such measures resulted in labour-intensive industries getting diffused into the informal/unorganised sectors.
• While such policy encouraged employment, bringing the enterprises that benefited from the policy into the tax net has been a challenge.
• Besides administrative reasons, political and economic reasons operating at the local level further aggravated the challenge.
• The policies led to the formation of dense output and labour market inter-linkages between the informal and formal sectors through sub-contracting and outsourcing, not realizing the actual intent of the policies.
  • In the textile industry, the rise of the power looms at the expense of composite mills and handlooms in the unorganised sector illustrates the policy outcome.

Structural transformation

• The movement of low-productivity informal sector workers to the formal or organised sector is known as structural transformation.
• East Asia saw rapid structural change in the 20th century as poor agrarian economies rapidly industrialised.
• In many developing countries including India, informality has reduced at a slow pace, showing signs of poverty and unemployment.

Initiatives taken in India to tackle informality:

• The fiscal perspective has been used in India since the tax reforms in the mid-1980s.
• The fiscal perspective of formalisation includes efforts like demonetisation, the introduction of the Goods and Services Tax (GST), digitalisation of transactions and enrolment of informal sector workers on government portals.
• These steps are meant to encourage the formalisation of the economy.

Challenges in tackling informality:

• Despite the efforts at formalisation, the challenge of informality looms large for India.
• The challenges of informality are multilayered. Industries thriving without paying taxes are only visible but a large number of informal establishments working as households and self-employment units with meagre production remain hidden.
• The lack of digital literacy among some sections of the population poses a hindrance to the digitalisation of transactions.

Way forward

• Policy efforts directed at the structural transformation of the informal sector into the fold of formality by alleviating legal and regulatory hurdles are laudable.
• There is a need to extend these initiatives to the bulk of the informal units that include self-employed and casual workers struggling for existence due to minimal resources.
• There is a need for greater capital investment and increased education and skills being imparted to the workers.
• For the economy to get formalised, the focus needs to be given to improving the production facilities as the continuation of informality is due to under-development.
• Stringent implementation of labour laws is required along with diligent registration of informal workers under official portals to ensure access to social security.

F. Prelims Facts

1. Picture book on unsung heroes is out

Context:

• A pictorial book telling the stories of 20 unsung women freedom fighters was released by the Culture Ministry as part of Azadi ka Amrit Mahotsav, the celebration of 75 years of Independence.

Rani Abbakka:

• Rani Abbakka Chowta was a Tuluva Queen of Ullal who fought the Portuguese in the 16th century.

Matangini Hazra:

• Matangini Hazra was an Indian revolutionary who participated in the Quit India Movement.
• She was shot dead by the British Indian police.  She was affectionately known as Gandhi Buri, Bengali for old lady Gandhi.

Jhalkari Bai:

• Jhalkaribai was a woman soldier who played an important role in the Indian Rebellion of 1857. She served in the women’s army of Rani Lakshmibai of Jhansi.

H. UPSC Prelims Practice Questions

Q1. Which of the following technologies are based on Bioremediation?

1. Bioventing
2. Biosparging
3. Bioaugmentation
4. Composting

Options:

1. 4 only
2. 1 and 4 only
3. 1, 2 and 3 only
4. 1, 2, 3 and 4

CHECK ANSWERS:-

Answer: d

Explanation:

• Bioremediation is a process that uses mainly microorganisms, plants, or microbial or plant enzymes to detoxify contaminants in the soil and other environments.
  • Bioventing: Method of treating contaminated material by adding oxygen directly to a site of contamination.
  • Biosparging: Biosparging is an in-situ remediation technology that uses indigenous microorganisms to biodegrade organic constituents in the saturated zone.
  • Bioaugmentation: Biological augmentation is the addition of archaea or bacterial cultures required to speed up the rate of degradation of a contaminant.
  • Composting: Compost bioremediation refers to the use of a biological system of micro-organisms in a mature, cured compost to sequester or break down contaminants in water or soil. The contaminants are digested, metabolized, and transformed into humus and inert byproducts, such as carbon dioxide, water, and salts.

Q2. Which of the given pairs are correctly matched?

1. Velu Nachiyar – The first Indian queen to wage war against the British East India Company.
2. Jhalkari Bai – A woman soldier who was one of the key advisors to Kittur Rani Chennamma.
3. Rani Abakka – Tuluva Queen of Ullal known for her revolt against the British East India Company in 1824.

Options:

1. 1 only
2. 1 and 3 only
3. 2 only
4. 1, 2 and 3

CHECK ANSWERS:-

Answer: a

Explanation:

Rani Abbakka:

• Rani Abbakka Chowta was a Tuluva Queen of Ullal who fought the Portuguese in the 16th century.

Jhalkari Bai:

• Jhalkaribai was a woman soldier who played an important role in the Indian Rebellion of 1857. She served in the women’s army of Rani Lakshmibai of Jhansi.

Velu Nachiyar:

• Rani Velu Nachiyar was a queen of the Sivaganga estate. She was the first Indian queen to wage war with the East India Company in India.

Q3. Which of the given statements with respect to Mullaperiyar dam is/are INCORRECT?

1. The Maharaja of Travancore signed a 999-year Periyar Lake lease agreement with the British government in 1886, for its construction across the Periyar River.
2. The dam is located in Kerala, but is operated by Tamil Nadu.
3. It is India’s largest masonry dam.

Options:

1. 2 only
2. 3 only
3. 2 and 3 only
4. 1 only

CHECK ANSWERS:-

Answer: b

Explanation:

The Nagarjuna Sagar Dam in India is the largest masonry dam in the world. Nagarjunasagar Dam located in Nalgonda District is built across River Krishna.

Q4. In which among these dance forms are characters grouped under clearly defined types - 
pacha, kathi, thadi, kari or minukku?

1. Mohiniyattam
2. Bharata Natyam
3. Kuchipudi
4. Kathakali

CHECK ANSWERS:-

Answer: d

Explanation:

• Kathakali is a dance form popular in Kerala. It is an art which has evolved from many social and religious theatrical forms which existed in the southern region in ancient times. Chakiarkoothu, Koodiyattam, Krishnattam and Ramanattam are a few of the ritual performing arts of Kerala which have had a direct influence on Kathakali in its form and technique.
• Kathakali is a blend of dance, music and acting and dramatizes stories, which are mostly adapted from the Indian epics. It is a stylised art form, the four aspects of abhinaya – angika, aharya, vachika, satvika and the nritta, nritya and natya aspects are combined perfectly.
• Kathakali is a visual art where aharya, costume and make-up are suited to the characters, as per the tenets laid down in the Natya Shastra. The characters are grouped under certain clearly defined types like the pacha, kathi, thadi, kari or minukku. The face of the artist is painted over to appear as though a mask is worn.

Q5. Consider the following:

1. Calcutta Unitarian Committee
2. Tabernacle of New Dispensation
3. Indian Reform Association

Keshab Chandra Sen is associated with the establishment of which of the above? (UPSC-2016)

1. 1 and 3 only
2. 2 and 3 only
3. 3 only
4. 1, 2 and 3

CHECK ANSWERS:-

Answer: b

Explanation:

• Keshab Chandra Sen was a social reformer from Bengal. He was a member of the Brahmo Samaj.
• In 1868 Keshab Chandra Sen laid the foundation stone of his mandir called the Tabernacle of New Dispensation.
• Keshab Chandra Sen was also a part of the Indian Reform Association. Its objectives involved creating public opinion against child marriage and the promotion of the status of women.
• The Calcutta Unitarian Committee, jointly founded by William Adam and Ram Mohan Roy in September 1821, sought to bring together prominent Brahmins who were friends of Roy’s and supporters of his agenda for the promotion of religious monotheism and social reform among Hindus.

I. UPSC Mains Practice Questions

1. What initiatives have been taken by the government to bring informal sector into the realm of its formal counterpart? List out the benefits of such initiatives. (250 words; 15 marks)[GS-3, Economic development]
2. Describe the major components of the Union Budget, as presented in the Parliament of India. (250 words; 15 marks)[GS-3, Government Budgeting]