07 May 2020: UPSC Exam Comprehensive News Analysis

A. GS 1 Related

Nothing here for today!!!

C. GS 3 Related

Category: SECURITY

1. Hacker sees security flaws in Aarogya Setu

Context:

Ethical hacker Robert Baptiste has alleged that security flaws in the coronavirus tracking app Aarogya Setu enabled him to see that five people at the Prime Minister’s Office (PMO) and two at the Army headquarters were unwell.

Details:

• The ethical hacker took to Twitter to caution the government that a security issue had been found in the App.
• He also cautioned that the privacy of 90 million Indians is at stake.
• The ethical hacker who alleged security flaws in Aarogya Setu, called for making the application’s source code open.
• Further, the French hacker had said that a user can get the COVID-19 statistics displayed on the home screen by changing the radius and latitude-longitude using a script.
• In response to the issues raised, the team of Aarogya Setu, in a statement, said no personal information of any user was proven to be at risk.
• It noted that the application fetched a user’s location and stored it on a server in a secure, encrypted and anonymised manner,
  1. At the time of registration
  2. At the time of self-assessment
  3. When the user submits his or her contact tracing data voluntarily through the app or when the contact tracing data is fetched after the person turns COVID-19 positive.

Details on Aarogya Setu app and the issues associated with it have been covered in 21st April 2020 Comprehensive News Analysis. Click here to read.

D. GS 4 Related

Nothing here for today!!!

E. Editorials

Category: INTERNATIONAL RELATIONS

1. Resuscitating multilateralism with India’s help

Background:

Post-war Multilateral Order:

• The underpinning assumption of the post-war multilateral system was that peace and prosperity went hand in hand.
• Some like-mindedness and a commonly-held purpose were also assumed among members: increasing economic integration and shared prosperity would help enhance these affinities and contribute to peace.
• Countries with fundamentally different domestic systems of governance did not form a part of this multilateral order, as was the case with the Soviet bloc in the Cold War years.

Weaponisation of Interdependence:

• None of our multilateral institutions was built for a world where the ties of interdependence, which were supposed to enhance the well-being of all, could themselves be weaponized for nationalistic gain, at the expense of other players.
• The misuse of existing rules (or loopholes within the existing rules) by several countries, especially by China (e.g. via forced technology requirements, intellectual property rights violations, and subsidies), to gain an unfair advantage in trade relations was already attracting critique in the recent years.
• But the pandemic has provided some alarming illustrations of how damaging the Weaponisation of global supply chains can be.

Issues:

• The pandemic has heightened the crisis of multilateralism, not created it.
• Amidst the many cracks in the system, it has deepened one especially dangerous fault-line: multilateralism, in its current form, is incapable of dealing with misuse by systemic rivals.
• As death tolls rose, many countries responded with export restrictions on critical medical supplies. This is almost inevitable given the absence of adequate stocks within countries, and little in the rules to curb export restraints.
• Recognising the shortages that countries were facing — masks, personal protective equipment, ventilators and more — to deal with COVID-19, China offered to sell these products to countries in need.
• For instance, when the European Union (EU) put up export restrictions, China stepped in at Serbia’s request.

Weaponisation of supply chain – China’s Diplomacy:

• When India complained that test kits imported from China were faulty, China slammed it for irresponsible behaviour.
• When Australia indicated that it would conduct an independent investigation of China’s early handling of the epidemic, China threatened it with economic consequences.
• Add to this the dangers of using faulty equipment on critical patients, plus the risks that several actors, including the EU and India, see of predatory takeovers of their companies by China.
• The pandemic is teaching countries, through bitter experience, that weaponised interdependence is not just a theory but a practice that is rapidly evolving.
• It can have life and death consequences.
• Against this background, repeated calls by heads of governments and international organisations urging countries to remain committed to multilateralism seems unconvincing.

Way forward:

• There is a need for reassurance and policies that reflect a renewed commitment to the existence of multilateralism.
  • The United States must demonstrate in word and deed that autarchy is not the way forward and that it remains committed to strengthening global supply chains which are based on the promise of ensuring global stability and the attendant promise of peace and prosperity.
• There is an urgent need for some strategic decoupling, handled smartly in cooperation with other like-minded countries.
  • A multilateralism that recognises the need for decoupling will necessitate closer cooperation with some and distancing from others.
  • Membership of such renewed multilateral institutions would not be universal; rather, one would limit deep integration to countries with which one shares first-order values — such as pluralism, democracy, liberalism, animal welfare rights, and more.

India’s Role:

• It is believed that India is uniquely positioned to help resuscitate multilateralism.
• As some constituencies in the West seek a gradual decoupling from China, they would be well served to look toward India.
• Countries have lost faith in China because of COVID-19 and the apparent malfeasance and the opaqueness with which it has dealt with the crisis. Its image as a reliable partner has suffered a huge dent.
• Neither aid diplomacy nor the unleashing of Chinese soft power can easily recover the trust deficit that exists today between China and much of the rest of the world.
• At a time when China is facing a global crisis of credibility, India may consider an attempt at mediation; to temper what is increasingly seen as Beijing’s unilateralist revisionism; revive the promise of the gradual socialisation of China into the international system; and its acceptance of the norms and rules that regulate the principal multilateral institutions.
• The current crisis in multilateralism could be a remarkable opportunity for India, a country whose pluralism, democracy, and liberalism have often been underestimated by the West.
• To make use of the opportunities, for itself and for the provision of certain global public goods, India’s cooperation with like-minded actors will be key.
• India could work closely with the Alliance for Multilateralism (an initiative launched by Germany and France) to shape both the alliance itself and the reform agenda at large.
  • Working together with a group of countries from the developed and developing world could further amplify India’s voice.
• With the United States facing multiple internal challenges including the prospects of a deeply divisive Presidential election, India (together with like-minded partners even beyond the usual suspects) could assume leadership in strengthening constructive transnational cooperation.

Conclusion:

To reduce the further spread of the virus, to develop effective medical treatments, and to curtail the worst effects of the inevitable recession that is already in the offing, cooperation among nations will be necessary. But the issue is that multilateralism is possibly at its weakest today, when the need for it is more dire than ever before. Unless the fundamental problem is addressed, no meaningful fix would be possible.
Category: ECONOMY

1. Everyone wants a good stimulus

The editorial talks about the expectations around a good stimulus package deal in the backdrop of deep uncertainty and contraction in economic activity due to the COVID-19 pandemic. It highlights the options, suggestions and constraints in designing the ideal stimulus package.

Details:

• There is this rampant belief that a fiscal stimulus package has to follow the timeline.
  • It is to be understood that the economy cannot be stimulated during a supply-side lockdown.
  • There are ‘announcement effects’ — both good and bad — that go with the stimulus.
• The government revenues too will be seriously hit.
  • This will be anywhere from 2-3% of the GDP (given that disinvestment target itself is 1% of GDP and the realisation is likely to be close to zero in the current financial year). The effective fiscal deficit is going to be somewhere around 7.5%.
  • While highlighting the fact that the U.S. government has set aside $2 trillion for bailouts or 9% of its GDP, it must be understood that India cannot afford such a stimulus package as India’s starting point is going to be at around 7.5% of GDP fiscal deficit.
  • On top of this, India has to incur the ‘merit expenditure’ on health and direct income support to the poor.
• It may be worthwhile to bear in mind that from 1947 to 1997, the Central government always routinely monetised its deficit, without leading to high rates of inflation, much less hyperinflation.
• The Fiscal Responsibility and Budget Management (FRBM) limits are hardly a grand success and routinely all governments have broken the barrier.
  • Other countries with huge debt-to-GDP ratios like Japan (>200%) and the U.S. (125%) get away, but India is pulled up for minor slippages on a 70% debt-GDP ratio.
• There must be a more nuanced approach to what constitutes a ‘good’ stimulus instead of arguing that bailouts should be based on need and not affordability.
  • Given the data above, India cannot ignore affordability and print money with all the attendant side effects.
  • It could have serious consequences like currency plunge, high inflation and rating agencies downgrading India.
• There is a lot of liquidity in the economy, but limited credit is flowing due to anaemic lending. Thus, another suggestion is that bank managers should be incentivised to lend and the government should indemnify loans given during this period.
  • It remains to be seen what fiscal support tools the government will use that can ensure that credit flows to various sectors.
  • The government owes about ₹1 lakh crore on tax refunds.
  • The centre also had promised to make up for any difference to the States, if the GST did not grow by 14% per annum.
  • This is the time for it to transfer this to the States as a grant, for one year, to offset the revenue loss to States.
• There is talk of going to the International Monetary Fund (IMF).
  • It is worth pondering if approaching the IMF is a good idea, when there is no foreign exchange crisis for financing rupee expenditure, as there is a perceived global stigma of doing so.
  • The conditionality-led cure could prove to be worse than the disease itself.

Conclusion:

Fate must not be confused with destiny. Fate is what happens to us. Destiny is what we make in spite of our fate. India’s destiny appears relatively safe, if the mind’s eye is cast around the globe. Lifting the lockdown will be the first step towards a good stimulus and one does need to un-handcuff a billion people to save their lives too.

2. A war-like state and a bond to the rescue

With the Government of India looking at avenues to raise money to deal with the COVID-19 pandemic, the editorial throws light upon the issue of Consol Bond as a compelling solution for the government with the pandemic’s shadow over the economy.

Issues:

• As India’s ominous COVID-19 curve stretches further, urgent attention needs to be paid to an economy that is teetering on the edge.
• In the Budget before the pandemic, India projected a deficit of ₹7.96-lakh crore.
• The financial deficit number is set to grow by a wide margin due to revenue shrinkage that will most certainly be accompanied by a lack of appetite for disinvestment.
• In addition to the expenditure that was planned, the government has to spend anywhere between ₹5-lakh crore and ₹6-lakh crore as stimulus.
• All the RBI’s schemes are contingent on the availability of risk capital, the market for which has completely collapsed.
• It has been tried several times, to nudge banks into lending to below investment grade micro, small and medium enterprises, but in vain.
• While the 60% increase in ways and means limits for States is a welcome move, many States have already asked for double the limit due to the shortages in indirect taxation collections from Goods and Services Tax, fuel and liquor.

Details:

• The government and the central bank need to understand that half measures will do more harm than good.
• It is believed that India must most definitely go beyond current revenue receipts to fund the complete stimulus.
• In a war like situation, while waging a united war against this virus, it would be interesting to look at war-time methods of raising finances. One such method that has been used as early as the First World War is the Consol Bond.

Consol Bond:

In 2014, the British government, a century after the start of the First World War, paid out 10% of the total outstanding Consol bond debt. The bonds, which paid out an interest of 5%, were issued in 1917 as the government sought to raise more money to finance the ongoing cost of the First World War. Citizens were asked to invest with the advertising messaging: “If you cannot fight, you can help your country by investing all you can in 5 per cent Exchequer Bonds. Unlike the soldier, the investor runs no risk.”

• Consol bond is a form of British government bond that has no maturity and that pays a fixed coupon.
• Consols are basically rare examples of perpetual bonds.

Advantages of a Consol Bond:

The traditional option of monetising the deficit by having the central bank buy government bonds is one worth pursuing, but issuing Consol Bonds is considered a better option, given the current scenario, for the following reasons:

• Consol Bonds ensure citizens’ active participation.
• Proceeds of the bonds could be used for everything — from Personal Protective Equipment for doctors, to a stimulus for small and medium-sized enterprises.
• With the fall of real estate and given the lack of safe havens outside of gold, the bond would offer a dual benefit as a risk free investment for retail investors.

Conclusion:

• When instrumented, Consol Bonds would be issued by the central government on a perpetual basis with a right to call it back when it seems fit.
• An attractive coupon rate for the bond or tax rebates could also be an incentive for investors.
• The government can consider a phased redemption of these bonds after the economy is put back on a path of high growth.

G. Tidbits

1. Assam traders’ body seeks relief from donations and shutdowns

What’s in News?

The All Assam Traders’ Association, representing some 500,000 small and medium traders, said various groups should spare them from donations (a soft word for protection money) and avoid calling shutdowns for at least two years after lockdown ends formally.

Cost of Bandhs:

• A 2003 study by the Federation of Industries and Commerce of North Eastern Region said Assam loses an estimated ₹900 crore annually because of state-wide, regional, district and localised shutdowns.
• An average trader also ends up paying donations to at least 30 groups of all kinds every year.

Bandhs and Blockages – Unconstitutional:

• The Gauhati High Court had in 2019 declared bandhs and blockades unconstitutional, and directed the police to book those who call and enforce them.
• However, the court’s directive made no difference to what is referred to as ‘bandh culture’.

H. UPSC Prelims Practice Questions

Q1. Consider the following statements:

1. Plasma makes up more than 55% of blood in the human body.
2. Plasma carries hormones, nutrients and proteins to different parts of the body.
3. Plasma lacks clotting factor.

Which of the following statement/s is/are incorrect?

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

Q2. Primary Deficit is:

1. The surplus of Revenue Expenditure over Revenue Receipts.
2. Fiscal Deficit net of Interest Payment.
3. The excess of total expenditure over total receipts excluding borrowings.
4. None of the above.

Q3. Consider the following statements with respect to Classical Swine Fever:

1. It is a contagious viral disease of domestic and wild pigs.
2. It is caused by the H1N1 virus strain.
3. The disease does not harm humans.

Which of the given statement/s is/are correct?

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

Q4. Consider the following statements with respect to National Health Authority (NHA):

1. National Health Authority is the apex body responsible for implementing Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY).
2. It is the successor of the National Health Agency.
3. It is governed by a Governing Board chaired by the Prime Minister.

Which of the given statement/s is/are correct?

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