TABLE OF CONTENTS
A. GS1 Related B. GS2 Related GOVERNANCE 1. CIC examines how MPLADS funds are spent C. GS3 Related ENVIRONMENT 1. Pollution in Indian rivers 2. Surat: A case study for water management 3. Typhoon slams into China after killing 59 in Philippines SCIENCE AND TECHNOLOGY 1. Private satellite launch from Odisha 2. ISRO launches two U.K. satellites ECONOMY 1. Sliding Rupee and Government response 2. States and fiscal targets 3. India calling: 5G networks may be in place by 2020 4. Ten years of collapse of Lehman Brothers D. GS4 Related E. Editorials SOCIAL ISSUES 1. Lethal filth – on manual scavenging ECONOMY 1. Covering the last field – On Pradhan Mantri Fasal Bima Yojana (PMFBY) 2. Where goes the rupee? – on depreciation in the value of rupee F. Tidbits G. Prelims Fact H. UPSC Prelims Practice Questions I. UPSC Mains Practice Questions
A. GS1 Related
Nothing here for today!!!
B. GS2 Related
- Noting that ₹12,000 crore of the Members of Parliament Local Area Development Scheme (MPLADS) funds remains unspent, the Central Information Commission (CIC) has asked the Lok Sabha Speaker and the Rajya Sabha Chairman to come out with a legal framework to ensure its transparency and hold parliamentarians and political parties accountable for their obligations under the scheme.
About Central Information Commission (CIC)
The Central Information Commission (CIC) set up under the Right to Information Act is the authorised body, established in 2005, under the Government of India to act upon complaints from those individuals who have not been able to submit information requests to a Central Public Information Officer or State Public Information Officer due to
a) either the officer not have been appointed,
b) or because the respective Central Assistant Public Information Officer
c) or State Assistant Public Information Officer refused to receive the application for information under the RTI Act.
- Central Information Commissioner Sridhar Acharyulu issued interim orders on Sunday in two cases where petitioners had requested details on MPLADS, but were told by the MoSPI that the Centre does not maintain constituency-wise, and work-wise details.
- A recent MoSPI report showed that in February 2018, funds allotted to MPLADS but unspent stood at ₹4,773.13 crore, while 2,920 instalments of ₹2.5 crore were yet to be released. That resulted in a total backlog of ₹12,073.13 crore.
- The CIC’s orders asked the leaders of the two Houses of Parliament to consider providing the necessary legal frame for the scheme, which would make all Parliamentary parties and MPs answerable and accountable for MPLADS funds as public authorities under the RTI Act to prevent MPLADS irregularities.
- The framework should make transparency a legal obligation, with all MPs and parties required to present the public and Parliament with a comprehensive report on the number of applications received for their constituency, works recommended, works rejected with reasons, progress of works and details of beneficiaries.
- Liabilities for any breach of duties should also be imposed, said the order. Further, the framework should prohibit and prevent MPs using the funds for their private works, or diverting them to private trusts or to their own relatives.
- District administrations must provide regular information — work-wise, MP-wise, and year-wise details on progress — which are to be compiled by the MoSPI and made available to the public, said the order.
C. GS3 Related
Central Pollution Control Board (CPCB)
National Green Tribunal
The NGT was established in 2010 under the National Green Tribunal Act 2010, passed by the Central Government.
The NGT has the power to hear all civil cases relating to environmental issues and questions that are linked to the implementation of laws listed in Schedule I of the NGT Act. These include:
1. The Water (Prevention and Control of Pollution) Act, 1974;
2. The Water (Prevention and Control of Pollution) Cess Act, 1977; (yes, cess act)
3. The Forest (Conservation) Act, 1980;
4. The Air (Prevention and Control of Pollution) Act, 1981;
5. The Environment (Protection) Act, 1986; (aka EPA)
6. The Public Liability Insurance Act, 1991; (good option to confuse)
7. The Biological Diversity Act, 2002.
The NGT is not bound by the procedure laid down under the Code of Civil Procedure, 1908, but shall be guided by principles of natural justice.
BOD (Biochemical Oxygen Demand)
Biochemical oxygen demand (BOD, also called biological oxygen demand) is the amount of dissolved oxygen (DO) needed (i.e., demanded) by aerobic biological organisms to break down organic material present in a given water sample at certain temperature over a specific time period.
Why is BOD important?
- The number of polluted stretches in India’s rivers has increased to 351 from 302 two years ago, and the number of critically polluted stretches — where water quality indicators are the poorest — has gone up to 45 from 34, according to an assessment by the Central Pollution Control Board (CPCB).
- While the ₹20,000 crore clean-up of the Ganga may be the most visible of the government’s efforts to tackle pollution, the CPCB says several of the river’s stretches — in Bihar and Uttar Pradesh — are actually far less polluted than many rivers in Maharashtra, Assam and Gujarat.
- These three States account for 117 of the 351 polluted river stretches.Based on the recommendations of the National Green Tribunal, the CPCB last month apprised the States of the extent of pollution in their rivers.
BOD (Biochemical Oxygen Demand): Mithi among the worst
- The CPCB, since the 1990s, has a programme to monitor the quality of rivers primarily by measuring BOD, which is a proxy for organic pollution — the higher it is, the worse the river.
- The health of a river and the efficacy of water treatment measures by the States and municipal bodies are classified depending on BOD, with a BOD greater than or equal to 30 mg/l termed ‘priority 1,’ while that between 3.1-6 mg/l is ‘priority 5.’
- The CPCB considers a BOD less than 3 mg/l an indicator of a healthy river.
- The most significant stretches of pollution highlighted by the CPCB assessment (which is yet to be published) include the Mithi river — from Powai to Dharavi — with a BOD (Biochemical Oxygen Demand) of 250 mg/l, the Godavari — from Someshwar to Rahed — with a BOD of 5.0-80 mg/l; the Sabarmati — Kheroj to Vautha — with a BOD from 4.0-147 mg/l; and the Hindon — Saharanpur to Ghaziabad — with a BOD of 48-120 mg/l.
- In its compilation of polluted stretches in Uttar Pradesh, the Ganga with a BOD range of 3.5-8.8 mg/l is indicated as a ‘priority 4’ river.
- The cultural significance of the Ganga is such that there’s been greater focus on it but many more rivers are far more polluted.
- In its 2015 report, the CPCB had identified 302 polluted stretches on 275 rivers, spanning 28 States and six Union Territories.
- The increase in numbers reflected higher pollution levels as well as an increase in water quality monitoring stations.
- India’s ‘Diamond City’ offers a lesson for the country’s ever-expanding cities on water management and the optimal use of water, which is rapidly becoming a scarce resource.
- Surat’s civic body is setting up state-of-the-art sewage treatment plants (STPs) to ensure every drop of waste water is treated and reused for purposes other than drinking.
Status of STPs in India
The main recommendations of the report are:
- From March 2019, the Surat Municipal Corporation (SMC) will be supplying 115 MLD (million litres per day) treated water to industries located within the city, in order to meet the entire industrial requirement of water through treated or recycled water.
- The entire quantum of water will be treated from domestic sewerage water in tertiary treatment plants at the Bamroli and Dindoli areas for supplying to mainly textile factories in the Pandesara and Sachin industrial clusters housing over 400 dying and printing units.
- At present 40 MLD treated water are being suupplied to industries in Pandesara in the city. This is the largest capacity of tertiary water treatment in the country. In fact, Surat was the first city in the country to start selling recycled water to industries in 2014.
- Surat’s cost effective water management system is most advantageous for its contribution towards reducing the dependency on conventional resources of water, and thus optimal use of the resource.
- So far, the SMC has invested ₹ 280 crore in creating tertiary water treatment facilities in the city. By March next year, the corporation will save 115 MLD fresh water by supplying recycled water to industries. The SMC charges industrial units ₹ 23 per 1,000 litres of water.
- The civic body’s efforts to create infrastructure for water management is in line with the State government’s policy of promoting the use of recycled water for non-drinking purposes, and reducing dependence on ground water.
Water shortage in India
- India is facing its worst water shortage in history, according to a report by the Niti Aayog. Nearly 600 million Indians faced water stress and about 2,00,000 people die every year because of lack of access to safe water.
Typhoon Mangkhut slammed into mainland China after leaving a trail of destruction in and Macau and killing at least 59 people in the northern Philippines.
Hurricanes, typhoons and cyclones are all rotating storms spawned in the tropics. As a group, they can be referred to as tropical cyclones. Because of the Coriolis effect, these storms rotate counterclockwise in the Northern Hemisphere and clockwise in the Southern Hemisphere.
A typhoon is a mature tropical cyclone that develops between 180° and 100°E in the Northern Hemisphere. This region is referred to as the Northwestern Pacific Basin,and is the most active tropical cyclone basin on Earth, accounting for almost one-third of the world’s annual tropical cyclones.
- The world’s biggest storm this year felled trees and sent skyscrapers swaying in high-rise Hong Kong, injuring more than 200 people there before making landfall on the coast of Jiangmen city, in southern China’s Guangdong province.
- Provincial authorities said they evacuated a total of 2.37 million people and ordered tens of thousands of fishing boats back to port before the arrival of what Chinese media has dubbed the “King of Storms”.
- Mangkhut left large expanses in the north of the main Philippine island of Luzon underwater as fierce winds tore trees from the ground and rain unleashed dozens of landslips.
- Hong Kong weather authorities issued their maximum alert for the storm, which hit the city with gusts of more than 230 km per hour and left 213 people injured, according to government figures.
- The Philippines was just beginning to count the cost of the typhoon which hit northern Luzon on Saturday. The death toll jumped to 59 on Sunday evening, police said, as more landslip victims were discovered.
- An average of 20 typhoons and storms lash the Philippines each year, killing hundreds of people.
- The latest victims were mostly people who died in landslips, including a family of four. In addition to those killed in the Philippines, a woman was swept out to sea in Taiwan.
- Gurudatta Panda, a 28-year-old from Odisha’s Berhampur, is part of a small team of technocrats that built a satellite for a private satellite design, manufacturing and management company.
- The eight-member team, including Mr. Panda, from Hyderabad-based Exseed Space Private Limited has constructed 10 cm cube-sized communication satellite, which will be launched into space by the United States-based SpaceX.
SpaceX (Space Exploration Technologies Corporation) is aerospace manufacturer and space transport services company headquartered in California, US.
The small satellite will carry a linear transponder on FM for voice communication. This is the first of its kind private space endeavour.
Background: Radio communication
Frequency modulation (FM)
- Through private companies , the Indian Space Research Organisation (ISRO) now plans to groom space start-ups that build new solutions in communication satellites, applications from remote sensing and rocketry.
- This satellite will serve the ham or the amateur radio community. As a result, it will be of great help during natural calamities, when conventional communication services get disrupted.
Amateur radio / Ham radio
After the launch, this artificial satellite will be on a polar orbit with two passes over India everyday. The public will be able to receive this artificial satellite’s beacon on 145.90 Mhz using a TV tuner and USB dongles.
Mr. Panda, a ham radio enthusiast, helped in communication through his ham set-up when cyclone Phailin hit Ganjam district in 2013. He hoped that more youngsters from Odisha get interested in aerospace technology, an emerging field of development in the country.
- PSLV-C42 lifted off carrying two satellites from the United Kingdom – NovaSAR and S1-4 from the first launch pad at the Satish Dhawan Space Centre, SHAR here.
- PSLV-C42 or Polar Satellite Launch Vehicle-C42 of the Indian Space Research Organisation (ISRO) launched two satellites of the United Kingdom from Sriharikota. The mission entailed launching satellites — NovaSAR and S1-4 — into ‘Sun Synchronous Orbit’. The satellites launched into this orbit are usually used for imaging, reconnaissance and weather forecasts.
- The PSLV-C42 is the lightest version of the PSLV and flew in its core-alone version without the six strap-on motors.
- ISRO mentioned that NovaSAR is intended for forest mapping, land use, and ice cover monitoring as well as flood and disaster monitoring while S1-4 is a high-resolution satellite that will be used for surveying resources, environment monitoring, urban management, and disaster monitoring.
- The lightest version of the PSLV, flying in its core-alone version without the six strap-on motors, the PSLV-C-42 rose into the skies. Almost 18 minutes later, the two satellites were placed in the desired orbit by ISRO. This was the 12th such launch of a core-alone version of the PSLV by ISRO.
- The two satellites, owned by Surrey Satellite Technology Ltd (SSTL) were placed in a circular orbit around the poles, 583 km from Earth. The commercial arm of ISRO, Antrix Corporation earned more than ₹220 crore on this launch.
- The NovaSAR is a technology demonstration mission designed to test the capabilities of a new low cost S-band SAR platform. It will be used for ship detection and maritime monitoring and also flood monitoring, besides agricultural and forestry applications. The S1-4 will be used for environment monitoring, urban management, and tackling disasters.
The measures announced by Finance Minister Arun Jaitley to address widening current account deficit and attract inflows to stabilise the currency may not yield result immediately and the rupee could be under further pressure.
Current account deficit
External commercial borrowings
Thus, ECBs are defined as money borrowed from foreign resources including the following:
1. Commercial bank loans
2. Buyers’ credit and suppliers’ credit
3. Securitised instruments such as Floating Rate Notes and Fixed Rate Bonds etc.
ECB and FDI
About Masala bonds
- The government believes these measures could lead to additional capital flows to the tune of $5 billion-$10 billion and limit currency pressures to some degree.
- The rupee went close to 73 per dollar last week, weakening by about 13% in 2018 on the back of rising oil prices and widening current account deficit. Concerns over trade wars have also made emerging market currencies vulnerable, along with the strengthening dollar.
- The capital account measures announced are unlikely to result in any significant shift in fund flows in the immediate future since these are better suited when the sentiment in the global market is positive towards emerging markets and when it is relatively easy for emerging market corporates to raise money abroad.
- Currency experts, while appreciating that the Centre avoided any knee jerk reaction since the primary source of the rupee weakening is coming from external sources, said the rupee could depreciate again and test the 73-to-a-dollar mark.
- It is good that there was no knee-jerk reaction from the government, like NRI deposits schemes etc. because the main reason for the rupee’s weakness is coming from external sources. The steps will help attract inflows in the long run.
- The rupee, which had strengthened in the last two trading sessions in anticipation of the measures, could start weakening again.
- Rupee may depreciate as long as the external factors are in play. It may touch 73 a dollar levels.
- A separate dollar window for oil marketing companies may help the rupee. The $400 billion of foreign exchange reserves is a source of comfort for the currency but reserves have depleted in the last few months.
- Funding of farm loan waivers, poll-related spending and other populist measures are likely to ensure that States are set to miss their fiscal consolidation targets budgeted at the beginning of the year, says a report.
- Given the factors such as funding of crop loan waivers, election-related spending and the flood relief will see the States miss their fiscal consolidation targets.
Background:State Development Loans(SDLs)
Issue and marketability of SDLs
Trading of SDLs
Interest rate or yield on SDLs
Who buys SDLs?
- The States’ fiscal deficit is primarily financed by issuing State development loans (SDLs). In April-August of FY19, gross issuance of SDL contracted by 3.4% to ₹1.32 trillion, primarily led by a sharp decline in issuance by Uttar Pradesh, Maharashtra and Gujarat.
- However, excluding these three States, total SDL issuance by the remaining States has grown 14.7% in the first five months of FY19.
- The agency also estimates that ₹1.3 trillion of SDLs are scheduled to be redeemed in FY19, much higher than ₹0.8 trillion redeemed in FY18.
- Recently, the Reserve Bank of India had estimated that fiscal deficits of all the 29 States might decline to 2.6% of their gross State domestic product (GSDP) citing their FY19 Budget estimates, from 3.1% in FY18.
- But an analysis of the FY19 Budgets of nine States, accounting for about 62% of the combined GSDP of all 29 States in FY17, shows that their fiscal deficits are budgeted to slip to 2.5% of GSDP in FY19 from 2.6% in FY18.
- As 12 of the 29 States, three of which were part of the nine included in the analysis, are also poll-bound, apart from the general elections before May 2019, there is a risk of new schemes being announced or a higher allocation for welfare schemes, the note said.
- The unforeseen expenditure on flood relief in states like Kerala and Karnataka, which may not be fully offset by higher grants or other revenue mobilisation measures, can exert pressure on their fiscal balances.
- India — one of the fastest growing telecom markets in the world — is pushing for a timely roll-out of 5G technology in the country.
- The Indian government is aiming to commercially introduce 5G services in the country by the end of 2020, almost in line with rest of the world.
- 5G is the next generation of mobile Internet connectivity that would offer much faster and more reliable networks, which would form the backbone for the emerging era of Internet of Things (IoT).
- Previous generations of mobile networks addressed consumers predominantly for voice and SMS in 2G, web browsing in 3G and higher speed data and video streaming in 4G.
- The transition from 4G to 5G will serve both consumers and multiple industries.Globally, over 150 pre-commercial 5G trials are under way around the world, including South Korea, China and the U.S. However, a recent report by a top panel set up by the Centre pointed out that so far, 5G trials are yet to begin in India.
- Ericsson pointed out in the report that the 4G networks now serve more than 240 million subscribers in urban areas across the country; however, LTE coverage in rural areas remains a challenge.
- The 4G link speeds in India are picking up, averaging 6-7 Mbps as compared to 25 Mbps in advanced countries.
- The 5G standards, currently being developed by the third Generation Partnership Project (3GPP) — an industry-driven standardisation body — envisages high speed links with peak rates of 2 to 20 Gbps for various services.
- Once commercialised, 5G is expected to disrupt not only telecom but other industries as well as. 5G is expected to see use beyond delivery of services just on personal phone platforms.
- It will also connect new devices including machines, sensors, actuators, vehicles, robots and drones, to support a much larger range of applications and services.
- Initially the next generation network will see usage in key government projects such as smart cities and Digital India, besides other business-to-business applications.
- An Ericsson report estimates that 5G would enable a $27-billion revenue opportunity for Indian telecom operators by 2026.
- The government panel report noted that even after the entry of 5G, the earlier generation mobile technologies — 2G, 3G and 4G — would continue to remain in use and it may take 10 or more years to phase them out.
- The government expects the cumulative economic impact of 5G on India to be about $1 trillion by 2035.
- The reserve price for proposed spectrum band for 5G services in 3300-3600 MHz frequency had been fixed at ₹492 crore per MHz for a pan-India minimum block of 20 MHz, meaning operators would have to shell out about ₹10,000 crore.
- This comes at a time when the industry continues to reel under financial stress, weighed down by high debt.
- Going by global standards, the price of ₹492 crore per MHz for 5G spectrum is on the higher side as the South Korean auctions that happened recently had the price at ₹130 crore per MHz.
- The steering committee has recommended that the 5G spectrum allocation policy should be announced by the end of this year.
- It has been ten years since the investment banking firm Lehman Brothers collapsed in mid-September 2008. Shortly after, there was a meltdown in global financial markets, including India.
- From 2005 to 2007, at the height of the real estate bubble, mortgages were given to many homebuyers who could not afford them, and then packaged into securities and sold off.
- Lehman Brothers bought several mortgage brokerages and posted record profits. But in mid-2007, defaults on sub-prime mortgages rose exponentially.
- A credit crisis erupted in August 2007 with the failure of two Bear Stearns hedge funds while payment defaults triggered massive declines in banks and real estate incomes. In 2008, Lehman Brothers declared bankruptcy.
- In 2008, when America’s two biggest banks Merrill Lynch and Lehman Brothers reported high losses due to huge exposure to risk assets, all triggered by sub-prime lending by banking institutions, Bank of America came to the rescue of Merrill Lynch while Lehman Brothers had to file for bankruptcy.
- Sub-prime refers to a loan given to a borrower who does not qualify for a regular home loan because of a poor credit record, low income and lack of job security.
- Banks expected the value of the underlying security or the property to go up.So, they increased the mortgage interest rate (higher than the conventional loan) and called it a sub-prime mortgage.
- They could earn more with the higher mortgage interest rate and if the borrowers discontinued repayment, they could sell the property for a higher consideration due to appreciation in property prices.
Impact on India
- The impact on the Indian economy was less severe due to lower dependence on exports and the fact that a sizeable contribution to the GDP came from domestic sources.
- Indian banks had limited exposure to the U.S. mortgage market, directly or through derivatives, and also to the failed and financially-stressed global financial institutions.
D. GS4 Related
Nothing here for today!!!
The law should be enforced vigorously to eliminate manual scavenging in its entirety.
Five young men who were employed to clean a septic tank in an upmarket residential community died during the process. Around the same time as the Delhi incident, five workers died in a septic tank in Odisha.
What is manual scavenging?
Manual scavenging is a term used mainly in India for a caste-based occupation involving the manual removal of untreated human excreta from bucket toilets or pit latrines by hand with buckets and shovels.
- Manual scavenging has been officially prohibited by law in 1993 due to it being regarded as a dehumanizing practice (if not done in a safe manner).
- Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013’ came into effect from 6thDecember, 2013 replacing Employment of Manual Scavengers and Construction of Dry Latrines(Prohibition) Act, 1993.This Act intends to achieve its objectives of eliminating insanitary latrines, prohibition of employment as manual scavengers etc
- The act says National Commission for Safai Karamcharis (NCSK)would monitor implementation of the Act and enquire into complaints regarding contravention of the provisions of the Act.
What does the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 say?
- A violation can be punished with two years of imprisonment or fine or both.
- Under the provision, no person, local authority or agency should engage or employ people for hazardous cleaning of sewers and septic tanks.
- Mechanised cleaning of septic tanks is the prescribed norm.
- The law (Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013) is not being enforced, and there is no fear of penalties.
- The workers in Delhi were apparently asked to perform the task in violation of Section 7 of the Act;
- In spite of a well-funded programme such as the Swachh Bharat Abhiyan in operation, little attention is devoted to this aspect of sanitation.
- The requirements of worker safety and provision of safety gear for rare instances when human intervention is unavoidable are often ignored.
- The Ministry of Drinking Water and Sanitation in its manual of 2016 on toilet design acknowledges that in rural areas, mechanical pumps to clear septic tanks are not available.
- In the southern States, sanitation has expanded along with urbanisation, but it has brought with it a higher number of deaths as workers clean septic tanks manually. For instance, Tamil Nadu recorded 144 fatalities of workers engaged for septic tank cleaning in the past three years, according to official data.
- Toilet designs proposed by the government include those in which fully composted waste must be removed from pits every two years.
- In the absence of political will and social pressure, more lives could be lost because more tanks are being built in rural and urban areas as part of the drive to construct toilets.
- If the law on manual scavenging is to be effective, the penalties must be uniformly and visibly enforced.
- It is equally important for State governments to address the lack of adequate machinery to clean septic tanks.
- The Centre must ensure that the proposals for new toilet design does not become a fresh avenue to oppress members of some communities who are expected to perform such work, reflecting social inequalities.
The incident is a shocking reminder that India’s high-profile sanitation campaign has done little to alter some basic ground realities. India’s sanitation problem is complex, and the absence of adequate toilets is only one lacuna. The Swachh Bharat Abhiyan should make expansion of the sewer network a top priority and come up with a scheme for scientific maintenance that will end manual cleaning of septic tanks. The law should be enforced vigorously to eliminate manual scavenging in its entirety.
- Excess rains and floods in Kerala, deficit rainfall in eastern and north-eastern India, and associated large-scale crop losses have again highlighted the need for providing social protection to poor farmers.
Pradhan Mantri Fasal Bima Yojana (PMFBY):
- A highly subsidised Pradhan Mantri Fasal Bima Yojana (PMFBY) was launched in 2016 to provide insurance to farmers from all risks.
- The scheme was aimed at reducing basis risk and premium burden of the farmers
- The scheme’s total expenses today are almost Rs. 30,000 crore.
- In comparison to earlier schemes, the PMFBY is more farmer friendly, with sums insured being closer to the cost of production.
- The scheme’s linkage with parallel programmes like the ‘Jan Dhan Yojana’ and ‘Digital India’ makes it a truly inclusive and welfare-based scheme.
- The scheme therefore led to increased coverage of 5.7 crore farmers in 2016 and the sum insured crossed ₹200,000 crore. However, notwithstanding its ambition and intent, the scheme since its operation has been scrutinised more for its misses than its hits.
What are some of the problems inherent in the scheme:
- Outmoded method of crop loss assessment
- Inadequate and delayed claim payment
- High premium rates
- Poor execution
Consequently, in 2017, the expansive coverage of the scheme suffered some setback as seen in a drop of nearly one crore farmers in enrolment (about 17%). Such shortcomings inspired recent announcements such as that of Bihar to start its own scheme, the “Bihar Rajya Fasal Sahayata Yojna”.
How can the scheme be made more effective?
In order to make the PMFBY a sustained developmental action for a comprehensive climate risk protection for every Indian farmer, the following action points are suggested:
- Faster and appropriate claim settlement: Timely estimate of loss assessment is the biggest challenge before the PMFBY. The weakness of the PMFBY (and most likely for the Bihar variant) is the methodology deployed for crop loss assessment: the crop cutting experiments (CCEs).
Crop Cutting Experiments: are periodic exercises conducted nationwide every season to determine crop yields of major crops. Sample villages are chosen through scientifically designed surveys, and crops are physically harvested to determine yields. These experiments require huge capital and human resources and have to be done simultaneously all over India in a limited time. Therefore, they have large errors.
- Improvement in the efficacy of the PMFBY: technology use must be intensified. With options available today, such as detailed weather data, remote sensing, modelling and big data analytics, the exercise of monitoring crop growth and productivity can be not only more accurate and efficient but also resource saving. Hybrid indices, which integrate all relevant technologies into a single indicator, are good ways to determine crop losses. Their deployment can assist in multi-stage loss assessment and thus provide farmers with immediate relief for sowing failure, prevented sowing and mid-season adversity apart from final crop loss assessment.
- Creation of an online portal: the whole process of monitoring can be made accessible and transparent to farmers, policy-makers and insuring agencies alike through an online portal. Immediate claims settlements can be made once this is linked to the process of direct benefit transfers.
- Universal and free coverage for all smallholders: Farmers’ awareness about the scheme and crop insurance literacy remain low in most States, especially among smallholders in climatically challenged areas in most need of insurance. The complicated enrolment process further discourages farmers. To increase insurance coverage a system should be thought of whereby farmers do not need to enrol themselves and every farmer automatically gets insured by the state. This will provide social protection to every farmer if the full premium of smallholders is also paid by the state. In the process, coverage can go up almost 100%. Such differential subsidies are already applicable in urban areas for water and electricity.
- Improved and transparent insurance scheme design: Insurance companies are supposed to calculate actuarial rates, and based on tenders, the company quoting the lowest rate is awarded the contract. It is often seen that the rates quoted by companies for the same region and for the same crop varying from 3% to more than 50%. Such large variations are irrational. One reason for such inflated premiums is lack of historical time series of crop yields at the insured unit level. To minimise their risks caused by missing data and to account for other unforeseen hazards, insurance companies build several additional charges on pure premium. Science has the capacity today to characterise risks and reconstruct reasonably long-time series of yields. The premium rates, and hence subsidy load on the government, can come down significantly if we make greater use of such proxies and appropriate sum insured levels.
If a comprehensive social protection scheme is implemented, there would be opportunities for further rationalisation of subsidies. The government today spends more than Rs. 50,000 crore annually on various climate risk management schemes in agriculture, including insurance. This includes drought relief, disaster response funds, and various other subsidies. Climate-risk triggered farm-loan waivers are an additional expense. All these resources can be better utilised to propel farm growth. Reinvigorating the crop insurance scheme will provide better social protection to every farmer.
Rising crude oil prices in global markets and strengthening dollar has dragged the rupee below the 73 per dollar mark. It was just under 64 at the beginning of the year. There is now intense debate in the media on whether the Reserve Bank of India (RBI) should step in and take steps to defend the dollar.
Rupee Devaluation vs Rupee Depreciation:
The term devaluation is used when the government reduces the value of a currency under Fixed-Rate System. When the value of the currency falls under the Floating Rate System, it is called depreciation.
Revaluation is a term which is used when there is a rise in currency value in relation with a foreign currency in a fixed exchange rate. In the floating exchange rate regime, the correct term would be appreciation.
A long time ago, the ‘standard’ or textbook prescription for countries with severe balance of payments deficits was to devalue their currencies. The underlying rationale was that devaluation decreases the price of exports in foreign countries and so provides a boost to exports by making them more competitive. Correspondingly, imports become more expensive in the domestic economy, in turn reducing the volume of imports.
- Fortunately, the RBI has a huge stock of foreign exchange reserves and so the balance of payments situation is not (at least in the immediate future) the main cause of anxiety for the steady decline in the value of the rupee.
- What must concern policy-makers is that the slide in the rupee can have adverse effects on the domestic economy. For instance, the surge in the landed price of crude oil has already resulted in a steep rise in the prices of petroleum and diesel.
- Diesel price hikes increase the cost of transportation of goods being transported by road. Unfortunately, many food items fall in this category. Obviously, any increase in food prices must set alarm bells ringing in the Union Finance Ministry.
- The devaluation will also increase prices of imported inputs, particularly those for which there are no alternative domestic sources of supply. This can have some effect on output expansion.
- Many domestic companies that have taken dollar loans will also face significantly higher servicing costs.
Causes for depreciation:
- Finance Minister has rightly observed that external factors are the cause.
- In particular, global capital and perhaps currency speculators have been flocking to the American economy. This is not really surprising because the U.S. economy has become a very attractive option. Some months ago, U.S. President Donald Trump announced a massive decrease in corporate tax rates. More recently, the U.S. Federal Reserve has also increased interest rates.
- The icing on the cake for global investors’ is the booming U.S. economy.
- The dollar has appreciated sharply against practically all other currencies too. For instance, it has moved up against both the euro and the pound.
- Developing economies are typically even harder hit since global portfolio investors tend to withdraw from these markets, perhaps because their economic or political fundamentals are relatively more unstable.
- Countries such as Turkey and South Africa have experienced significantly higher rates of devaluation than India.
- If several countries are devaluing at the same time — as it seems to be happening now — then none of these countries benefit from their exports being cheaper abroad. In other words, there may not be any surge in Indian exports following the current round of devaluation. Neither will there be a huge fall in imports.
- Crude oil is by far the biggest item in the list of Indian imports, and this is price-inelastic.
- Imports from China now constitute a tenth of overall imports. Since the yuan has also depreciated against the dollar, there is not much reason to believe that Chinese imports will be costlier than earlier.
- The problems caused by the spiralling prices of petroleum products can be addressed in the following manner. Both the Central and State governments earn huge revenues from excise duties and value-added tax (VAT) on petrol and diesel. In fact, excise duties were raised in the recent past merely as a revenue-gathering device. Now that the rupee cost of crude has shot through the roof, the Centre should certainly lower duties.
- Rates of VAT should also be lowered by State governments. A small reduction in VAT may even be revenue neutral since VAT is levied as a percentage of price paid by dealer.
- The RBI has several policy options. It could the most direct route — of offloading large amounts of dollars. This would increase the supply of dollars and so check the appreciation of the dollar, but at the cost of decreased liquidity. Clearly, this weapon has to be used with caution. The RBI does intervene in the foreign exchange market from time to time to manage a soft landing for the rupee, and this has to continue.
- The Central bank now has an explicit inflation target of 4%, a level that is almost certain to be breached if the rupee remains at its current level. This is very likely to induce the Monetary Policy Committee (MPC) of the RBI to raise interest rates again in order to reduce the inflationary tendencies.
- The MPC must moderate any rate increase. Any sharp increase has an obvious downside risk to it — any increase in interest rates can have an adverse effect on growth. This can actually backfire if profitability of companies goes down. Any ‘big’ negative change in profitability may make foreign portfolio investors pull out of Indian stocks and actually exacerbate the rupee’s woes.
- The best option for the government would be to borrow from non-resident Indians (NRIs) by floating special NRI bonds that have to be purchased with foreign exchange, and with maturity periods of at least three years.
- Interest rates have to be attractive, and investors must of course be protected from exchange rate fluctuations. Since interest rates in countries like the U.K. and even the U.S. are quite low, the promised interest rate does not really have to be very high by prevailing Indian levels.
- Further, the term limit imposed on borrowings of manufacturing companies is to be shortened further in order to curb dollar demand. The response to the move from the markets will need to be carefully tracked.
- The steps to strengthen the rupee in the short term are welcome, given the large-scale outflow of capital from emerging markets to the West. These ad hoc steps to avoid an immediate crisis in the external sector, however, should not deflect attention from the more fundamental reasons behind the decline of the rupee.
- India has been unable to boost exports over the years for various reasons. At the same time, it has been unsuccessful in finding sustainable domestic sources of energy to address the over-reliance on oil imports. This has meant that the rise in the price of oil has traditionally exerted tremendous stress on the current account deficit and the currency.
- The depreciating rupee is also a symptom of persistently higher domestic inflation in India over many decades. For example, in line with vastly different inflation rates in India and the U.S., the rupee has lost about 60% of its value in the last 10 years against the dollar. This problem cannot be addressed without drastic changes in the style of monetary policy conducted by the RBI, which is an unlikely proposition.
At the moment, what must be avoided is any sharp fluctuation in the exchange rate — in either direction. Neither the government nor the RBI can afford the option of inaction. The other extreme of knee-jerk, overkill options must also be avoided. The government must now make use of moderate but effective instruments available. It has to think of a long-term plan to boost exports, preferably through steps that remove policy barriers that are impeding the growth of export-oriented sectors, in order to find a sustainable solution to the problem of the weakening rupee.
Nothing here for today!!!
G. Prelims Fact
Nothing here for today!!!
H. Practice Questions for UPSC Prelims Exam
Question 1. Consider the following statements:
- The Central Pollution Control Board (CPCB) of India is an executive organisation.
- It Co-ordinates the activities of the State Pollution Control Boards by providing technical assistance and guidance.
Which of the above statements are correct?
- 1 only
- 2 only
- Both 1 and 2
- None of the above
Question 2. Consider the following statements:
- The National Green Tribunal (NGT) has been vested with powers to hear any matter relating to the Wildlife (Protection) Act, 1972, the Indian Forest Act, 1927.
- The NGT has the power to hear all civil cases relating to environmental issues and questions.
Which of the above statements are incorrect?
- 1 only
- 2 only
- Both 1 and 2
- None of the above
Question 3. Consider the following statements:
- Biochemical oxygen demand (BOD) is the amount of dissolved oxygen (DO) needed (i.e., demanded) by aerobic biological organisms to break down organic material.
- BOD can be used as a gauge of the effectiveness of wastewater treatment plants.
Which of the above statements are correct?
- 1 only
- 2 only
- Both 1 and 2
- None of the above
Question 4. Consider the following statements:
- Transponder is mainly used in satellite communication to transfer the received signals.
- When the amplitude of carrier wave is changed in accordance with the intensity of the signal, the process is called frequency modulation.
Which of the above statements are correct?
- 1 only
- 2 only
- Both 1 and 2
- None of the above
I. Practice Questions for UPSC Mains Exam
Disposal of domestic sewage from cities and towns is the biggest source of pollution of water bodies in India. Dismal position of sewage treatment is the main cause of pollution of rivers and lakes. Critically examine.
India’s sanitation problem is complex, and the absence of adequate toilets is only one lacuna. There needs to be an expansion of the sewer networks and a scheme for scientific maintenance will end manual cleaning of septic tanks. Suggest some measures that can be taken to reduce the menace of manual scavenging.
Also, check previous Daily News Analysis
“Proper Current Affairs preparation is the key to success in the UPSC- Civil Services Examination. We have now launched a comprehensive ‘Current Affairs Webinar’. Limited seats available. Click here to Know More.”