Answers: Mains Marathon – UPSC Mains Current Affairs Questions – October 18, 2018

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Q.1) Discuss the recent liquidity crises that the NBFCs are facing and its impacts on various financial institutions in the economy. Discuss the steps taken by the government in this regard and the way forward to address structural problems that contributed to the crisis.

Answer: Defaults by infrastructure major IL&FS on its debt obligations is having an effect on non-banking finance companies (NBFCs) and housing finance companies (HFCs).

Banks have almost completely stopped lending to HFCs and NBFC even though such loans are backed by mortgages. This is affecting lending by these companies. Also this scenario is expected to put relatively smaller NBFCs under a lot of pressure.

Steps taken by government:

1. National Housing Bank announced to enhance the refinance limit for the period between July 2018-June 2019 by Rs 6,000 crore to Rs 30,000 crore from the earlier Rs 24,000 crore for eligible entities.
2. RBI announced to infuse approximately Rs 2 lakh crore in the market to ease the liquidity crunch.
3. RBI has already been cancelling licenses of those who do not have a minimum capital base of Rs 2 crore.

Long term measures:

1. There should be consolidation in the market through acquisitions and mergers.
2. Better regulations.
3. Finance minister said that government will ensure money flows through the NBFCs sector.
4. They have to ensure that the confidence remains in the debt markets and equity markets.
5. Broader governance reforms to speed up pending infrastructure projects.
6. IL&FS was the biggest supporter of PPP and unless the PPP model gets the confidence, private investment in infrastructure will remain an issue.

Q.2) Describe the concept of ‘Charter Cities’ as championed by the Nobel Laureate Paul M. Romer. Discuss the importance and concerns regarding Charter Cities and viability for India to build these cities.

Answer: The idea of charter cities would involve isolating a section of a larger country and replacing control from the central government with a new administration composed of technocrats.  It would feature transparency, low levels of corruption, property rights and the rule of law. Hong Kong and Shenzhen are sometimes cited as successful examples of this concept.

Importance for economic growth:

1. These can be centers of growth and prosperity within developing countries.
2. These cities let people voluntarily move to a place with rules that provide security, economic opportunity, and improved quality of life.
3. Charter cities give leaders more options for improving governance and investors more opportunities to finance socially beneficial infrastructure projects.
4. They also harness the forces that are successful at reducing poverty in developing countries over the past few decades.

Concerns:

1. The host country may not really permit the guest country to bypass its political and bureaucratic interests.
2. As people and wealth move into successful charter cities, the host country’s government might worry that liberalizing forces would threaten the position of its power elites.
3. The tension between the host’s economic interest in maintaining a source of tax or rental revenue and its short-term political incentives is potentially highly destabilizing.
4. Promotes urbanisation. It believes that urbanisation can be made rather than letting it happen naturally on its own.
5. His idea that foreigners should run these cities in the developing world, prompts accusations of colonialism.
6. Charter cities ignore the existence of claims, social, cultural and political over the areas that are to be occupied.

Viability for India:

1. India is already on the path towards urbanisation. These cities can make the progress more planned.
2. It exchanges sovereignty for economic growth, much needed to pull millions out of poverty.
3. Indian experience of creating such areas of relative independence has failed eg., SEZs.
4. It may lead to the problem of islands of growth in ocean of poverty – thus failing to be inclusive and distributive.

Q.3) What do you mean by Human capital? Highlight the causes of India’s poor performance in the Human Capital Index, 2017 released by World Bank. Suggest measures to address the gaps and barriers to human capital within the country

Answer: Human Capital refers to the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.

India ranks 158th in the world according the HCI, regarding education and healthcare.

Reasons for India’s poor performance:

The rankings are based on four key parameters: life expectancy, years of schooling, learning and functional health.

1. Inadequate funding towards health and education. India spends just 1.2% of its Gross Domestic Product on public health, much less than other developing countries.
2. Wrong policies and poor implementation of various schemes in education sector and health governance.
3. Corruption hinders the implementation of several well intended policies.
4. An increase in non-communicable diseases could be responsible for India’s poor showing in the health rankings despite the improvement in undernutrition levels.
5. Several ASER reports have pointed out the poor quality of education standards in the country, despite higher enrolment ratios.

Measures to address the gaps:

1. Investment in education and health should increase.
2. Involving communities and strengthening their participation in development projects.
3. Goal based performance monitoring of schemes in the sector of health and education.
4. Integration of higher education with skills and vocational education; attracting the most credible talent to the teaching profession; building global recognition to the education system; and streamlining regulation to attract credible private sector entities to education are some structural changes which are needed for transforming education.
5. Increase commitment to Non-communicable diseases at par with infectious diseases; Develop a sustainable mechanism to fund universal healthcare; Build a robust referral and preventive healthcare mechanism to reduce burden on tertiary-care.

Q.4) Species are classified by the Red List of the International Union for Conservation of Nature into nine groups according to their level of vulnerability. Explain this nine-fold species classification. What are the criterions for an animal to be categorised ‘endangered’?

Answer: IUCN 9-fold classification of species:

1. Extinct (EX), a designation applied to species in which the last individual has died or where systematic and time-appropriate surveys have been unable to log even a single individual
2. Extinct in the Wild (EW), a category containing those species whose members survive only in captivity or as artificially supported populations far outside their historical geographic range
3. Critically Endangered (CR), a category containing those species that possess an extremely high risk of extinction as a result of rapid population declines of 80 to more than 90 percent over the previous 10 years (or three generations), a current population size of fewer than 50 individuals, or other factors
4. Endangered (EN), a designation applied to species that possess a very high risk of extinction as a result of rapid population declines of 50 to more than 70 percent over the previous 10 years (or three generations), a current population size of fewer than 250 individuals, or other factors
5. Vulnerable (VU), a category containing those species that possess a very high risk of extinction as a result of rapid population declines of 30 to more than 50 percent over the previous 10 years (or three generations), a current population size of fewer than 1,000 individuals, or other factors
6. Near Threatened (NT), a designation applied to species that are close to becoming threatened or may meet the criteria for threatened status in the near future
7. Least Concern (LC), a category containing species that are pervasive and abundant after careful assessment
8. Data Deficient (DD), a condition applied to species in which the amount of available data related to its risk of extinction is lacking in some way. Consequently, a complete assessment cannot be performed. Thus, unlike the other categories in this list, this category does not describe the conservation status of a species
9. Not Evaluated (NE), a category used to include any of the nearly 1.6 million species described by science but not assessed by the IUCN

Criteria to be categorised as endangered:

Endangered (EN) species is a population of organisms which is at risk of becoming extinct because it is either few in numbers, or threatened by changing environmental or predation parameters.