9 PM Daily Brief – June 1st ,2020

9 PM for Main examination

GS-2

1. Boundary issues between India and China
2. Universal Basic Income- The need of the hour
3. Labour Reforms

GS-3

4. Fiscal stimulus under Atma Nirbhar
5. Civil Aviation

9 PM for Preliminary examination

FACTLy

1.Boundary issues between India and China

Source: The Hindu

Syllabus: GS 2-India and its neighbourhood- relations.

Context: Indian and Chinese troops are at loggerheads in Eastern Ladakh and Sikkim.

Background: There are four agreements that have signed between India and China for meaningful progress on the boundary issue. But the absence of a definition of the LAC allows new and secret advances on the ground.

Source: The Hindu

How Boundaries are observed?

• In Eastern sector:The Chinese have not accepted the loosely defined McMahon line which follows the principle of watershed.
• The Western sector: The LAC is two hypothetical lines based on different military considerations of both sides.

What agreements says?

• The 1993 agreement (On the maintenance of peace and tranquility along the Line of Actual Control (LAC)): Before the final solution, the two sides shall strictly respect and observe the LAC between the two sides and No activities of either side shall overstep the LAC.
• Both the 1993 and the 1996 agreement (on confidence-building measures in the military field along the LAC): Both sides will reduce or limit their respective military forces within mutually agreed geographical zones along the LAC.

Why are these deeply flawed agreements?

• No bearing on ground reality: Many of the articles in agreements have no effect on ground. Such as Article XII of the 1996 agreement talks about agreement being subject to ratification and shall enter into force on the date of exchange of instruments of ratification. It is not clear if and when that happened.
• No clarity to recognise the existing lines of deployment of the respective armies as they were in 1993: The agreement does not reflect any attempt to have each side recognising the other’s line of deployment of troops. If both armies are to respect the LAC, they should have clarity of line.
• Rather than the LAC, they could have used existing deployment term in 1993 agreement:In such a case there would have been two existing lines of control on the map — one for the physical deployment of the Chinese troops and the other for the physical deployment of the Indian troops. This would have rendered the areas between the two lines as no man’s land.
• Para 4 in Article II of the 2013 agreement (on border defence cooperation):It urge both sides to work with each other in combating natural disasters or infectious diseases that may affect or spread to the other side. But in current crisis, the standoff could have exposed some of the Indian soldiers to a local Chinese mutation of COVID-19.

How Exchange of maps exercise failed for clearing perceptions of LAC?

• With military absurdness in the background, both sides have attempted to exchange the maps in western sector in the past.
• Idea was to superimpose the maps:To see where the perceptions converged and where they diverged.
• The Chinese side did not accept the maps because they felt that it is not in Chinese interests. If they had accepted them then the Chinese would have with them, India’s claim with regard to the LAC in the western sector.

Way Forward

Both sides should work for early settling the boundary issues and refrain from violating the agreements signed between them. 

2.Universal Basic Income- The need of the hour

Source: The Hindu

Syllabus: GS-2- Welfare schemes for vulnerable sections of the population by the Centre and the States and the performance of these schemes

Context: Providing Universal Basic Income amid economic crisis due to Covid-19 pandemic is the need of the hour.

Concept of Universal Basic Income (UBI):

UBI is a minimum income (direct cash transfers) guaranteed by the state to every individual every month. It is premised on the belief that every person should have a right to a basic income to cover their needs, just by virtue of being citizens.

UBI has three underlying principles:

• Unconditionality: a fixed amount of cash will be transferred in beneficiary’s bank account unconditionally.
• Universality:same amount will be transferred, and it will be transferred in accounts of all beneficiaries.
• Agency: UBI treats poor as agents, not subjects. Thus, poor can utilize the money in their own customized way to alleviate their condition.

Universal Basic Income in Different Countries

Arguments in favor of Universal Basic Income:

• Poverty Reduction: Universal Basic Income would lead to poverty reduction. the 2016–17 Economic survey argued that an annual bank transfer of Rs. 7620 (to everyone except the top 25% of India’s income pyramid) would reduce national poverty from 22% to 0.5%.
• Employment: UBI will create flexibility in labor markets by allowing for individuals to have partial or calibrated engagements with the labor market without fear of losing benefits.
• Promotes constitutional ideals: UBI promotes following ideals:
• Equality: UBI seeks to reduce poverty thereby it promotes equality among all sections.
• Liberty: It promotes liberty because it is anti-paternalistic, as it brings flexibility in labor markets.
• Dignity: UBI protects individual’s dignity and gives choice to individuals in spending money based on individual circumstances
• Promotes efficiency in government spending and better targeting: UBI seeks to replace the existing subsidies given by the government under its social welfare schemes. These schemes are riddled with misallocation, leakages and exclusion of the poor. The International Monetary Fund (IMF) suggested that if subsidies were eliminated, the government could provide all Indians with ₹2,600 (in 2011-12 prices) every month.
• Insurance against shocks:Poor households often face shocks such as bad health, crop losses, natural disasters use personal savings to cope from these shocks. UBI provides insurance against these shocks. The Covid-19 pandemic and consequent economic crisis is a classic example of shock which highlights the importance of UBI.

Case Studies

SEWA Project in Delhi, 2011:

As part of a United Nations Development Program–Government of Delhi partnership, the Self-Employed Women’s Association (SEWA) and the state government carried out a randomized controlled trial where a group of 100 households in New Delhi were given 1,000 rupees per month.

The experiment observed an increase in expenditures on nutritious non-cereal items like pulses, fish, eggs, and meat increased.

Arguments against Universal Basic Income:

• Financially unviable: Government must provide some basic essential services like education, health etc. in all circumstances and provisioning money for funding UBI, while providing these basic services may not be financially viable. According to Economic Survey 2016-17, even a quasi UBI would cost the Indian government around 4.5% of GDP (2019 prices).
• Reduces the incentive to work:A free cash transfer to working individuals would reduce the need and incentive to work as it would take care of their basic needs.
• Exposure to market risks (cash vs. food):Unlike food subsidies that are not subject to fluctuating market prices, a cash transfer’s purchasing power may severely be curtailed by market fluctuations.
• Gender Disparity induced by cash: Men are likely to exercise control over spending of the UBI. This may not always be the case with other in-kind transfers like specific benefits to women, elderly etc. otherwise provided by state through targeted schemes.

Alternatives to Universal Basic Income: 

• Quasi-Basic Income schemes: Quasi basic income scheme as suggested by Economic Survey (2016-17). This would leave out 25% of the richest population in India.
• Quasi-universal basic rural income (QUBRI):It seeks to target only poorer people in the rural areas and does not cover the masses of urban poor working for low and uncertain wages.
• UBI for women only: Women are the worst hit almost every aspect of their daily lives – employment opportunities, education, health or financial inclusion. UBI only for women will help in women empowerment and have multiplier effects on the household.
• Rationalization of subsidies, better targeting and operational efficiency:In absence of UBI, it is of utmost necessary to successfully implement the social welfare schemes to increase the standard of living of the citizens.

Conclusion: IMF has projected global growth in 2020 to be -3.0% and India’s growth at 1.9%. With a looming economic crisis and high rates of unemployment, providing universal basic income, at least till the economy normalizes, is the need of the hour

 3.Labour Reforms 

Source – Livemint

Syllabus – GS 2 – Government policies and interventions for development in various sectors

Context – Recently many state governments have brought changes in labour reforms which have been criticised widely

Changes in labour reforms 

Since labor is a concurrent subject under the Constitution of India, states can frame their own laws but need the approval of the Centre for making amendments to central laws.

1. Uttar Pradesh Temporary Exemption from Certain Labour law Ordinance, 2020 – It proposes that all factories and establishments engaged in manufacturing process will be exempt from “the operation of all labour laws for a period of three years”, provided they fulfil certain conditions.

The industry has been exempted from labor laws, except the following:

• Building and other Construction Workers’ Act of 1996
• Workmen Compensation Act of 1923
• Bonder Labor (Abolition) System Act of 1976

2. Gujarat ordinance– In Gujarat, the new industrial establishments are exempted from all labor laws except the following:

• Minimum Wages Act
• Industrial Safety Rules
• Employees’ Compensation Act
• Ordinance to roll out benefits that would be available for 1,200 days
• 100 per cent online approvals within 15 days

Challenges associated with these changes 

1. Three year sunset clause– These lax labour rules have a three-year sunset clause which is likely to deter serious investors as after three years when they would start making profit resumption of old labour laws will hurt their profit.
2. Affects democratic credibility– Attempts to make these changes via the ordinance route and absence of participation of stakeholders erodes democratic credibility of such steps.
3. Discourage genuine labor reforms– Such changes by the state draws criticism from all segments even if they are introduced for 3years with intention of promoting more industries (domestic and foreign) in country. In future also, when any genuine changes will be introduced they will be discouraged in garb of these reforms.

Way Forward – Legitimate attempts to reform labor laws need to be encouraged by the centre. However, any haste to promote economic benefit which has the potential to jeopardize welfare of workers need to be stalled as holistic reforms are the only way forward for all the stakeholders.

4.Fiscal stimulus under Atma Nirbhar 

Source – Indian Express

Syllabus – GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Context –IMF’s report –Policy Tracker has appreciated India’s fiscal stimulus measures taken under Atma Nirbhar mission

Following are the arguments based on which India’s fiscal stimulus has been applauded:

1.Fiscal measures adopted by other countries – Among developing nations, India has one of the highest fiscal stimulus for reviving the economy.

2.Decoding India’s Fiscal measures – India’s fiscal stimulus is wide ranging and covers all the major sectors of economy.

3.Components of Fiscal stimulus

1. 1. Above the line component– “Above the line” measures refer to increases in government expenditures and reductions in tax revenues—directly impacting economic activity via fiscal multipliers.
   2. Below the line component – “Below the line” measures (loans and equity stakes) as well as guarantees (to firms and banks)—the economic impact of these measures depends how much they are taken up and spent by the targeted recipients.
   3. Primarily credit– The guarantees of various forms (primarily credit).

4.Monetary Policy – The repo rate has been reduced now which stands at 4 per cent, with inflation well contained. Transmission of monetary policy will benefit the industries to get loan at minimum rate which will give them impetus to restart the operations again.

Way Forward – Present government has, thus, used the Covid crisis to re-orient India towards its long-awaited destiny.

5.Civil Aviation

Source: The Indian Express

Syllabus:  GS 3 -Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Context: After a two-month long shutdown due COVID-19, domestic flights were allowed to resume operations in a staggered manner from May 25.

Ude Desh ka Aam Nagrik (UDAN) philosophy:

Fundamental and paradigmatic shift in civil aviation: Changed from an elitist mode of transportation to one which is within the reach of all Indians.

Reach of Civil Aviation Before COVID-19: 

• Pre-COVID India was the third largest domestic aviation market in the world with approximately 140 million passengers travelling annually.
• The country was poised to become the third-largest overall market in three years.
• We were experiencing double-digit growth when the headwinds of the COVID crisis hit us.

Efforts of Civil aviation during COVID-19:

The factors which need to be addressed before restarting international flights:

Way Forward

There is a need to proactively engage and support the aviation sector. The government needs to ensure that the Indian aviation sector comes out from this crisis stronger.

9 PM for Preliminary examination

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