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9 PM Daily NEWS Brief

9 PM Daily Current Affairs Brief – 8 February 2017

9 PM Daily Current Affairs Brief for 8 February 2017 is below:

  • Front Page / NATIONAL
  • 1892 Cauvery pact an unequal bargain’
  • SC dismisses TN’s review plea on remission power
  • Talks to end economic blockade in Manipur fail

  • Editorial/OPINION
  • Pride as well as prejudice
  • Time for upgrade

  • PSU banks to join BHIM by February-end

  • Indian Express
  • Rehab for the balance sheet

  • Live Mint
  • India’s de facto carbon tax is excessive
  • The budget sidesteps geostrategic risks

Front Page / NATIONAL

‘1892 Cauvery pact an unequal bargain’

The Hindu

Issue– The Case of Cauvery river water dispute is ongoing.Background

On January 4, Supreme Court had asked Karnataka to continue releasing 2,000 cusecs of Cauvery water to Tamil Nadu

Stand of Karnataka on 1892 agreement

Both the 1892 and 1924 pacts between the then princely State of Mysore and the Madras government reflected an “inequality of bargaining power” which was “without conscience” and which could claim no validity after the birth of the Indian Constitution.

The 1892 agreement, which was the parent of the 1924 pact, dictated that Mysore could not develop any irrigation infrastructure on the river without the previous consent of the Madras government. Any grievances could be addressed only through arbitration.

Tamil Nadu government’s previous stand

In 2002, before Cauvery tribunal, TN stated that the 1892 agreement was preceded by a good deal of mutual consideration of the interests of both the Madras presidency and the Mysore State.

The agreement was a result of a mutual realisation for a pact which would allow Mysore reasonable freedom in dealing with its irrigation works and also give Madras practical security against injury to its interests.

SC dismisses TN’s review plea on remission power

The Hindu


The Supreme Court has dismissed a review petition against a 2015 Constitution Bench judgment that a State government does not have the power to remit sentences of persons convicted under a Central law.

About the Verdict

1.The verdict was based on a move to remit life sentences of convicts in the Rajiv Gandhi assassination case. The review petition was also filed by Perarivalan.

2.The judgment held that the Centre would have “primacy” in deciding whether persons convicted in matters of the CBI or a Central agency should be released or not on remission.

What is remission?

In simple terms, remission implies reducing the period of a sentence without changing its character.

Major Issues Involved

  1. National interest

In terms of  national interest, the executive power of the Union can be exercised.

  1. Prior consent

The word ‘consultation’ means ‘concurrence’. This means that the State government should have got prior consent of Centre before issuing its order to remit the life sentence of seven convicts in the Rajiv Gandhi case.


“We find no scope to apply the concept of ray of hope to come for the rescue of such hardened, heartless offenders, which, if considered in their favour, will only result in misplaced sympathy and again will be not in the interest of the society,” Justice Kalifulla had observed.

Talks to end economic blockade in Manipur fail

The Hindu


Talks to end the long economic blockade of a crucial highway in Manipur could not make any progress with the Naga group refusing to bow down on its position of not allowing seven districts to be carved out. The Centre is disappointed with the outcome of the meeting where representative from the Home Ministry, State government and United Naga Council (UNC) had participated.

Timeline of the Blockade

  1. United Naga Council (UNC) calls for indefinite economic blockade on National Highways.
  2. Union Government officials meet with representatives of UNC.
  3. Total shutdown called by the UNC and other Naga organizations.
  4. Chief Minister makes claim not to go back on its decision to create seven new districts.
  5. Talks failed to arrive at a settlement.
  6. Economic blockade continues.


Manipur government is not seen to cooperate with the Union Government, and UNC is taking a different stand now. There is a lack of cooperation among the three parties concerned.

Way Forward

Efforts need to be made to end the economic blockade in  the poll-bound State (Manipur) as early as possible.


Pride as well as prejudice

The Hindu


  • Tribal bodies’ protest against reservation for women in local municipalities in Nagaland.


  • Naga customs, culture and traditions preclude women from inheriting land and participating in the decision-making process.


  • Women were given 33 per cent reservation in urban local bodies through Nagaland Municipal (First Amendment) Act in 2006.
  • All-male tribal bodies were against this as according to them it will violate Article 371(A) of the Constitution. (Article 371(A) gives protection to Naga culture, tradition and customary laws)
  • Thus because of opposition Nagaland government did not conduct elections to civic bodies for over 10 years.
  • Naga Mothers’ Association (NMA), filed a writ petition challenging the State government’s refusal to hold municipal elections.
  • Court directed the government to hold elections to municipal councils and town councils on or before January 20, 2012.
  • Government filed an appeal and Court stayed the previous ruling.
  • On September 22, 2012, the Nagaland State Assembly adopted a resolution rejecting women’s reservation in ULBs on the ground that it infringes on the social and customary practices of the Nagas, which Article 371(A) safeguards.
  • The Joint Action Committee on Women Reservation (JACWR) then moved tothe Supreme Court in September 2012.
  • On April 20, 2016, the Supreme Court upheld the single-judge ruling of the Gauhati High Court of October 2011. So, the Nagaland government enacted the Nagaland Municipal (Third Amendment) Bill 2016, which revoked the September 2012 resolution, paving the way for women’s reservation in ULBs.
  • The tribal bodies protested loudly as soon as the elections were announced and when the State government refused to call off the elections, the tribal bodies announced a bandh and violence also occurred.

Step taken by government

  • Nagaland government has decided to write to the Centre demanding that Nagaland be exempted from Part IX A of the Constitution.
  • Part IX A of the Constitution, contains a mandatory provision under Article 243T for 33% women reservation in ULBs.

Concern raised by civil society and women group

  • If Nagaland is exempted from the purview of Part IX of the Constitution, Naga women will have absolutely no hope of entering into and participating in decision-making bodies.

Time for upgrade

The Hindu


  • Though modernisation of the military is regularly discussed, intellectual and organisational change, which should support it, is not even mentioned. This article talks about the much needed organisational change.

Recommendation in this context

  • A Group of Ministers (GoM) had been set up in April 2000 to review the national security system to consider the recommendations of the Kargil Review Committee and formulate specific proposals for implementation.
  • In a report titled “Reforming the National Security System”, the GoM observed: “… far-reaching changes in the structures, processes and procedures in [the] defence management world will be required to make the system more efficient, resilient and responsive. This will ensure maximisation of our defence capabilities through the optimal utilisation of our resources, potential and establishment of synergy among the Armed Forces.”

Present structure in defence

  • At present, each of the service chiefs provides military advice to the civil-political executive, all independent of one another.
  • Military advice received by the Ministry of Defence (MoD) is fragmented and from multiple points. What is absent are the benefits of holistic military assessment and estimates.
  • Higher political leadership requires briefing on the military implications of decisions and policies. But at the moment, these are neither appreciated nor processed with the deep and holistic understanding that they deserve.
  • What emerges as an outcome is a “we shall do with what we have” attitude.

Suggested change in structure

  • Appointment of Chief of Defence Staff (CDS).

Advantages of this

  • Its justification is that it will provide single-point military advice to the government.
  • The CDS and his control structures through a strategic vision are expected to enhance the efficiency and effectiveness of the planning process and ensure the required jointness is achieved in execution through theatre commands against a nuclear backdrop.
  • Service chiefs would continue to advise the Defence Minister on command matters concerning their forces, whenever necessary.
  • As was also envisaged and clearly articulated in the GoM report, the Defence Secretary would function as the Principal Defence Adviser to the Defence Minister in a manner similar to the role to be performed by the CDS/PC-COSC as the Principal Military Adviser, with both enjoying an equal status in terms of their working relationship.

Such a structure is expected to provide a politico-military decision-making authority with a sophisticated crisis management procedure

Additional things need to be done

  • The CDS/PC-COSC would require support from a restructured Integrated Defence Staff (IDS), empowered through appropriate amendments in the Allocation and Transaction of Business Rules and other regulations to reflect new responsibilities.
  • A human resources policy of reward and reprimand will need to be recalibrated to support new realities.


PSU banks to join BHIM by February-end

The Hindu


  • All Public Sector Banks are expected to join the Bharat Interface for Money (BHIM) app for digital payments by the end of February.

What is BHIM app

  • BHIM is a digital payments solution app based on the Unified Payments Interface (UPI) from the National Payments Corporation of India (NPCI), the umbrella organisation for all retail payments systems in India.
  • BHIM allow one to send and receive money to other UPI accounts or addresses.
  • One can also send money via IFSC (Indian Financial System Code) and MMID (Mobile Money Identifier) Code to users who don’t have a UPI-based bank account.
  • There’s also the option of creating one’s own QR (Quick Response) code for a fixed amount of money, which the merchant can scan to make the deduction.

Present situation

  • There is a gap in the number of app downloads and the number of customers linking the app to their bank accounts because all the banks are still not active on platform.
  • It is observed that most of these customers have downloaded BHIM without checking if their bank is active on the platform.
  • So, all the banks are expected to join by February end.

Indian Express

Rehab for the balance sheet

Indian Express


  • A centralised Public Sector Asset Rehabilitation Agency (PARA) has been mooted in economic survey to tackle twin balance sheet problem (TBS).

Reason for TBS

  • It is an economic problem, not a morality play.
  • Without doubt, the stench of crony capitalism permeates discussions of the TBS problem.
  • It is also true that there have been cases where debt repayment problems have been caused by a diversion of funds.
  • But a vast bulk of the problem has been caused by unexpected changes in the economic environment: Timetables, exchange rates and growth rate assumptions that have gone badly wrong.

Earlier strategy to tackle TBS

  • In the beginning TBS was considered as a minor problem, which would largely be resolved as economic recovery took hold.
  • But the problem has only worsened. Earnings of the stressed companies have deteriorated, forcing them to borrow more to sustain their operations.
  • So far, the strategy has been to solve the TBS through a decentralised approach, under which banks have been put in charge of the restructuring decisions.
  • A number of such schemes have been put in place by the Reserve Bank of India (RBI) like Asset Reconstruction Companies (ARCs)

Why this strategy did not work

  • Most of the time, above is indeed the best strategy. But in the current circumstances, effectiveness has proved elusive as banks have simply been overwhelmed by the size of the problem.
  • Among other issues, they face severe coordination problems, since large debtors have many creditors, with different interests.
  • If public sector banks grant large debt reductions, this could attract the attention of investigative agencies. But converting debt to equity, taking over the companies and then selling them at a loss — even in transparent auctions — will be politically difficult.
  • Private Asset Reconstruction Companies (ARCs) haven’t proved any more successful than banks in resolving bad debts and are too small to handle the large cases.

Affect of this strategy

  • With balance sheets under such strain, the private corporate sector has been forced to curb its investments, while banks have been reducing credit in real terms.
  • This took a toll on economy and thus to sustain growth, these trends will need to be reversed, and the only way to do so is by fixing the underlying balance sheet problems.
  • Since banks can’t resolve the big cases, they have simply refinanced the debtors, effectively. But this is costly for the government, because it means the bad debts keep rising, increasing the ultimate recapitalisation bill for the government and the associated political difficulties.

Strategy suggested in economic survey

  • A formal agency may be needed to resolve the large bad debt cases – the same solution the East Asian countries employed after they were hit by severe TBS problems in the 1990s. In short, the time may have arrived to create a ‘Public Sector Asset Rehabilitation Agency’ (PARA)

Advantages of PARA

  • It could take charge of the largest, most difficult cases and make politically tough decisions to reduce debt.
  • It could solve the coordination problem since debts would be centralised in one agency
  • It could be set up with proper incentives by giving it an explicit mandate to maximise recoveries within a defined time
  • It would separate the loan resolution process from concerns about bank capital

How would a PARA actually work

  • There are many possible variants, but the broad outlines are clear.
  • It would purchase specified loans (for example, those belonging to large, over-indebted infrastructure firms) from banks and then work them out, depending on professional assessments of the value-maximising strategy.
  • Once the loans are off the books of the public sector banks, the government would recapitalise them, thereby allowing them to shift their resources — financial and human — back toward the critical task of making new loans.
  • Similarly, once the financial viability of the over-indebted enterprises is restored, they will be able to focus on their operations, rather than their finances. And they will finally be able to consider new investments.

Price that needs to be paid for this

  • Accepting and paying for the losses and this cost is inevitable.
  • Loans have already been made, losses already occurred and because state banks are the major creditors, the bulk of the burden will fall on the government.
  • The main issue with any strategy now is how to minimise a liability that has already been incurred by resolving the bad loan problem as effectively as possible.

From where would this funding come?

  • Part of the funding would need to come from government issues of securities.
  • Part could come from capital markets, if stakes in the public sector banks were sold or the PARA were structured in a way that would encourage the private sector to take up an equity share.
  • A third source of capital could be the RBI. The RBI would (in effect) transfer some government securities it is holding to public sector banks and PARA;

(The RBI’s capital would decrease, while that of the banks and PARA would increase. There would be no implications for monetary policy since no new money would be created.)

Live Mint

India’s de facto carbon tax is excessive

Live Mint


It is not required for India to adopt the highest rate of carbon tax in the world as its per capita consumption of electricity is almost half the world’s average.

What is Carbon tax

A carbon tax is usually defined as a tax based on greenhouse gas emissions (GHG) generated from burning fuels. It puts a price on each tonne of GHG emitted, sending a price signal that will, over time, elicit a powerful market response across the entire economy, resulting in reduced emissions. Carbon tax offers social and economic benefits. It is a tax that increases revenue without significantly altering the economy while simultaneously promoting objectives of climate change policy.

Issue of Climate change

There is a greater awareness and support to mitigate climate change.  A total of 194 countries had signed the Paris Agreement, and promised to aggressively cut greenhouse gas emissions in a time-bound manner.

Stand of India on Climate Change

  1. The timeline to achieve renewable capacity is advanced, and scale enlarged.
  2. India’s initiatives for Climate change goes back to 1972 UN conference in Stockholm.

Problems with adopting high Carbon tax in India

  1. India would become the most expensive place to produce coal.
  2. It is hurting our competitiveness, and will directly undermine us as it faces lesser imports from China.
  3. The Economic Survey mentions that petrol and diesel excise have increased drastically. India has the highest tax imposed on petroleum products.
  4. A high carbon tax is not necessary for India, whose per capita consumption of electricity is half of the world’s average, to adopt the highest rate of carbon tax in the world.
  5. India needs to be cautious in calibrating its greening pace and carbon tax.

The budget sidesteps geostrategic risks

Live Mint


  • Criticism of the budget


  • Both the budget document and the Economic Survey have painstakingly detailed risks that endanger the Indian economy and can disrupt growth and employment impulses.
  • Both see major risks emanating from the external sector. Budget lists multiple Fed rate hikes likely in 2017, commodity price uncertainty (especially crude prices) and protectionism.

Economic survey

  • Economic Survey, which identifies clothes and shoes as ideal candidates for low-skill, high-employment manufacturing potential and for occupying crucial trade space being vacated by China.
  • The survey also finds India has competitive advantage in these two items despite myriad challenges—such as domestic labour laws and tax structure, or the duty preferences enjoyed by competing countries in key buyer markets.

Criticism of Budget

  • Budget has allocated only Rs0.01 crore to the Footwear Design and Development Institute, compared with Rs109.99 crore in 2015-16 and Rs25 crore in 2016-17. The institute provides skilled human resources and technology development to the leather and footwear industry.
  • The Indian leather development programme (ILDP) gets a higher allotment of Rs500 crore, compared with Rs235 crore in 2015-16 and Rs400 crore in 2016-17. But then the ILDP focuses on improving the raw material base for leather units but the Survey actually shows non-leather footwear has achieved higher exports than leather footwear.
  • There’s a token entry of Rs0.50 crore against the project development fund, which the ministry created with the Exim Bank to promote Indian private sector investments in Cambodia, Laos, Myanmar and Vietnam (commonly referred as CLMV nations) as part of India’s “Act East” policy. The creation of the fund was announced in 2015 budget. There are, no follow-up remarks in subsequent budgets.
  • India has attached great geostrategic significance Chabahar port in Iran. But Chabahar port has been allotted only Rs150 crore under the ministry of external affairs, compared with Rs100 crore in 2016-17.

Bad effect of this

  • India’s on-now, off-now engagement with Iran may have pushed the country closer to China through a joint military cooperation agreement and possible One Belt, One Road connectivity. Thus budget has been criticised because it lost an opportunity to make some critical course corrections.

Daily Quiz

Daily Quiz : UPSC Prelims Marathon – February 8

[WpProQuiz 33]


Daily Editorials for UPSC IAS Exam Preparation

Daily Editorial : Merger of Petroleum PSUs – Budget Proposal


It was announced in the budget that India would merge the existing state-owned oil and gas companies to set up a global behemoth that could compete with some of the largest global petroleum companies.

Why is government looking at the merger of the Oil companies in India?

  • Integration is the need of the hour. Globally, M&A (mergers and acquisitions) is the trend in the oil industry. Historically such amalgamation has been successful for international companies like Exxon Mobil, Shell, and Chevron etc.
  • Most Asian countries have just one national oil company integrated across the value chain; India has 18 state-controlled oil companies.

How will the merger look like?

  • The merger route – whether by creating a holding company like in the case of Coal India Ltd or individual M&A – is yet unknown and will have to take into account the different culture, expertise and compensation of each.
  • 13 oil PSUs are being considered for the merger at present. The top eight listed PSUs have a combined market cap of $80 billion, and a merged entity would become the ninth largest globally with about $90 billion market capitalization.
  • State-owned Oil and Natural Gas Corporation (ONGC), the top oil producer and one of the largest companies in the country. Other major companies include Indian Oil Corporation, the nation’s largest refiner and fuel retailer, Bharat Petroleum, Hindustan Petroleum, GAIL, Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum and Numaligarh Refinery and Oil India.
  • The merged entity will have a bigger market value than Russian state oil giant Rosneft and India’s Reliance Industries Ltd.

What will be the Positives of this move?

The proposal will provide scale and muscle, which can be leveraged in the global market

  • It results in strengthening of balance sheets as margins improve due to economy of scale.
  • It also gives PSUs an edge due to sovereign ownership.
  • The proposed merger of state-owned oil companies could reduce inefficiencies across the sector. A merged entity would have opportunities to save on costs and improve operational efficiency, as there would be less need for multiple retail outlets in a single area.
  • Transport costs could be reduced by retailers sourcing from the nearest refinery, rather than the ones they own.
  • A merged entity would also be able to share expertise for exploration and acquisition of resources
  • It will enhance the capacity of oil PSUs to bear higher risks and create value for the stakeholders.
  • It will also be a good step in the long run asit will enable the companies to withstand the international volatility in the oil and gas segment.
  • The idea of the integrated giant company which would also absorb various institutions related to safety, development and analysis

Potential Problems

  • A merger would face significant execution challenges, particularly in terms of managing the integration of employees, addressing overcapacity in the merged entity due to differing HR policies of PSUs.
  • There will also be difficulty in winning the backing for the merger from private shareholders as obtaining approval from the 75 per cent of shareholders will be required to approve a merger, particularly if there are concerns over valuation
  • Political backlash due to job cuts.
  • How the state will handle the likely decline in competition after a merger as private companies are increasing their market share from a low base, but could find it even harder to compete with a single large state-controlled company there by creating the danger of monopolies and cartels being created in the industry.
  • PSU oil companies, the committee said, operated in distinct areas across the hydrocarbon value chain — be it refining or exploration — and merging companies varying in areas of competence could be a disaster.


Earlier Proposals

  1. In 1995 the ministry, then headed by Captain Satish Sharma, formed a R group (signifying reforms) under Vijay Kelkar, and the chairman of Bharat Petroleum, Sundararajan.
  • The view was that a giant entity in the sector wasn’t something desirable given the Indian context. It could mean destabilisation of some of the companies and the industry besides creating problems for consumers. In short, the costs far outweighed the benefits which could arise from a possible merger, many of them felt. There could also be a collateral damage to ONGC too.


  1. When Kelkar moved from the petroleum ministry to North Block as finance secretary during the NDA government headed by Vajpayee, the proposal which went through was that of the big oil companies buying into each other.
  • Government made a cross-holding plan; ONGC bought 9.1 per cent in IOC with IOC in turn picking up 9.6 per cent in ONGC and 4.83 per cent in GAIL. The move came in for much criticism then, but over five years later, IOC sold part of its holding for over Rs 3,600 crore — a substantial return on its original investment.
  1. At the start of the UPA’s term in 2004-05, Mani Shankar Aiyar, the then petroleum minister, approved the setting up of a committee headed by former steel secretary and BHEL chairman, V Krishnamurthy, to take a broad look at the energy sector and to recommend an appropriate structure for India’s state-owned companies engaged in both refining and exploration.
    • It came to the conclusion that rather than creating a mega entity in the sector, it would be better to strengthen the structure of the state-owned oil companies, as it was then in 2005, through policy measures and improvement in managements.
    • Committee then felt that going by the case studies and data, only 29 per cent of all mergers and acquisition transactions led to higher returns for shareholders in those firms.
  2. Again in 2014, another committee headed by Kelkar, tasked with working out a road map for reducing India’s import dependency in the hydrocarbon sector by 2020, although it did not directly address the issue of a merger given its mandate, made out a case for empowering and strengthening national oil companies and to strengthen the board processes with greater accountability and autonomy.

Other suggestions from the experts

  1. Government may opt to create an overarching holding company with a robust muscle power to borrow as well as invest in oil and gas assets.
  2. The other format could be an overall integration resulting in one big corporation which will be a challenging task but will result in far reaching benefits as synergies will be strengthened across value chains leading to sharing of skills, research and development, infrastructure, increase in overall capacity and an edge during bidding for E&P assets.


The move will not have any immediate impact on the sector as the planning and setting up of such a corporation will take 2-3 years and the results will be apparent in a span of 4-5 years.

Given this backdrop, it will now be interesting to see the approach which this government adopts for a potential merger.



Exam Updates Results

Result : UPSC Central Armed Police Forces (Assistant Commandants) Exam., 2016


UPSC Central Armed Police Forces Assistant Commandants Exam

Hello Aspirants,

UPSC has announced the Final Result for Central Armed Police Forces (Assistant Commandants) Exam.

A total number of 189 candidates have been recommended.

Check the UPSC CAPF 2016 Final Result Here


Daily Editorials for UPSC IAS Exam Preparation

Daily Editorial : LABOUR REFORMS – Final Overhaul

It is often commented that India’s labour laws are very regressive and anti-business which may force the companies to automate, but in the face of our peaking demographic dividend, if not utilized may become a nightmare for us.

Therefore Indian government plans to overhaul the labour laws this budget session. The objective is to improve ease of doing business by providing flexibility to hire workers. There is a clear need to rationalise the multitude of labour laws at the central and state level.

What are the problems in Labour laws in India?

  • Labour is a subject in the concurrent list of the Constitution of India. Thus, both centre andstates can enact laws on labour matters.There are 44 central laws and more than 150 state laws on labour.
  • There are multiple laws onsimilar subjects like 19 laws governing conditions of work and industrial relations and 14 lawson social security and labour welfare.

The main problems are around the three acts:Industrial Disputes Act (1947), Contract Labour(1970) and Trade Union Act (1926).

The Industrial Disputes Act, 1947

  • The act mandates companies employing 100 or moreworkers to seek prior permission of the government for firing workers.
  • Itbars companies from exiting or downsizing quickly – a company needs to seek permission fromthe government three months in advance. This locks up capital in unproductive assets.

The Contract Labour (Regulation and Abolition) Act 1970

  • It was enacted to regulate the practiceof contract labour to avoid exploitation of labourers.
  • This act empowers thegovernment to prohibit contract labour in certain situations at the discretion of the government.
  • A Supreme Court judgment said that if the factory employs contract labour for work, which alsohappens to be its main activity, then contract labour should be abolished.

Although no firmwould like to use contract labour for its regular work but the legal tangle is such that someservices which are not related to the core activities but are of regular nature (such as canteen,gardening, loading-unloading etc.) may be treated as contract labour and firms may be forced tokeep such labourers on permanent roll. Due to these issues, the industry expressesdisappointment with this act because its provision defeats the purpose of employing contractlabour.

Trade Unions Act, 1926

  • This is the most archaic of all labour law and is the cast in the colonial periodand constructed along the lines of the then prevailing British law it merely provides forvoluntaryregistration of trade unions, affords certain kinds of protection and regulates rather severely theinternal affairs of the trade unions.
  • The protective clauses of the law were rendered technicallysuperfluous once the Constitution established the fundamental right of association. It is alsomentioned that while forming a union it is necessary to have 25% of members not of the same
    organization which is absurd.

Manifestations of the regressive laws

  • They discourage industrial employers to hire. The laws have resulted in companies adopting ‘hire and fire policy’ where they would hire more contractual labour without any social security.
  • The labour laws divided at the Centre and State levels, induce unwanted red-tape and bottlenecks thereby hampering the industrial growth.
  • This has constrained the growth of the MSMEs which are mostly labour intensive.
  • If our exports are closely analysed, we can find out that despite being the labour surplus country, our exports are mainly the capital intensive goods such as petroleum products, jewellery, transport equipment, pharmaceuticals.
  • Due of these problems, the manufacturing sector growth has stagnated between 14-18%. The reforms in labour laws are of utmost importance if the Make in India campaign is to succeed

Need for the Reforms

  • India’s growth rates in the 2000s are often derided as “jobless growth” sincethe service sector-led model has been capital rather than labour intensive.
  • More than 200 million Indians will reach working age over the next two decades, our demographic dividend will ripen and creatingsufficient jobs for perhaps the largest youth bulge the world has ever seen is among thetoughest challenges for the country.
  • In 2009, 84 percent of India’s manufacturers employed fewer than 50 workers, compared to 25percent in China, according to a study by consultancy firm McKinsey.
  • Nine out of 10 Indians are employed in the informal sector, where labour laws are rarely
  • We need to make the labour laws modern, so that, it encourages the employers to keep more workers in formal roles with social security benefits.
  • The compliance burden on MSMEs should be reduced to ensure the ease of doing business and simultaneously lead to jobs creation.



What are the bills that are going to be passed?

  • There are four proposed laws — the Industrial Relations Code Bill 2016, Wage Code Bill 2016, the Small Factories (Regulation of Employment and Conditions of Services) Bill, and Employees Provident Fund and Miscellaneous Provisions (Amendment) Bill.
  • The Bills that are to be tabled this session are Industrial Relations Code Bill 2016, and the Wage Code Bill 2016. Through these, the government wants to merge around 40 different labour laws in to four codes of legislation by repealing unwanted laws.
  • The four codes are Wages, industrial relations, social security, and welfare, safety in work conditions.

Important features of the two bills

The Labour Code on Industrial Relations Bill 2015 will combine Industrial Disputes Act, 1947, theTrade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.

  • Once enacted, the Labour Code will allow companies to sack as many as 300 employees
    without prior government approval. Companies are now allowed to let go of up to 100
    employees without needing government approval.
  • The definition of ‘strike’ has been widened under the code to include casual leave by 50 per centor more workers in the industry.
  • For employers employing less than 50 employees, the requirement to provide a minimum of onemonths’ notice and retrenchment compensation (severance) is to be removed.
  • The draft code raises the retrenchment/closure compensation payable to workers from 15 dayswages to 45 days wages for every completed year of service.
  • The Labour Code is modelled on the lines of a similar law in Rajasthan, where the BJP-led stategovernment approved the plan in 2014.

The Wage Code Bill provides for a floor rate of national wage that will be mandatory for allstates and across all sectors.

  • The Centre and states now set minimum wages for different categories of workers, in their respective jurisdictions.
  • Once it sees the light of day, the Wage Code will allow fixing a benchmark wage for workerswhich will have to be adhered to by the states as well. This provision will ensure a minimumwage to workers across the country. However, the states will be free to prescribe higher wages.

Criticism for the Reforms
There is stiff opposition from unions which could hinder the government’s plans to bring in a raft of labourreforms.

  • Industries are already flouting labour regulations and any dilution of the existing laws will
    compromise employees’ welfare and they think the government is insisting on changing labour laws without realizing that it is not a shortcutfor job creation
  • Another argument is that Indian workers are largely badly paid, andduring the EPF tax debate, the government said that 30 million organized sector workers are getting less than 15000 a month. So, by changing the laws you will put these poor workers in
    further trouble.
  • The trade unions have rejected the bill on the proposal of strike- that for going on strike for a day, salary of 8 days will be deducted and said that theproposed legislations have been drafted primarily from an employer’s perspective.


Labour reforms are the need of the hour not only as a thrust on Make in India and ease of doing
business, but also to ensure the demographic dividend does not turn into a nightmare of
unemployment and under-employment.The Economic Survey 2016-17 notes that the growth boost from the demographic dividend inIndia is likely to peak within the next five years.

It is challenging to make a delicate balance between the interest of the businessmen and those
of the weaker section of the society.No matter how crucial these reforms are for the benefit of
India’s economic future, their success depends on how the government implements them, given
the large population of our country.

We need a minimalist labour regime.


Mains Marathon

Answered: Mains Marathon – UPSC Mains Current Affairs Questions – February 7

Find the Suggested Answers below:

1.“Those who fight corruption should be clean themselves.” Critically comment. (GS 4)

“जो लोग भ्रष्टाचार से लड़ते हैं उनको पहले खुद को साफ करना चाहिए।” गंभीर रूप से टिप्पणी दें।

Suggested Answer:

“Those with glass doors do not throw stones at houses of others.”
This adage teaches us that unless and until one possesses a specific quality or virtue, s/he isn’t qualified to lecture others about it. Hypocrisy is not a virtue, and being hypocritical is not only universally frowned upon, it is also devoid of moral authority.

For example, once a mother approached Ramkrishna Paramhans and asked him to forbid her son from eating sweets. Paramhans asked them to return after a week. Next week, Paramhans simply asked the kid not to eat sweets. The mother, puzzled, asked “What stopped you from saying this same thing last week?” The saint replied “Till last week, I used to eat sweets. Now I don’t. Therefore, now I can ask your child to stop eating sweets as well.”

Moral authority notwithstanding, if a corrupt person leads the fight against corruption, s/he risks the progress of the fight itself, since his/her corrupt acts can be divulged to the public at any point of time. People flocked in large numbers to Anna Hazare because of his reputation as a man of unquestionable integrity, transparency and honesty.

At the same time, it has to be accepted that the people who pledge to fight corruption must get their hands dirty. They must be like lotus petals which do not get muddy despite being surrounded by muck.

Also, there is a possibility that a person may have been corrupt in the past but has now reformed himself/herself after seeing the error of his/her ways. Such people should be supported instead of being treated with utter scepticism and distrust.

Thus, it is not always necessary that those who fight corruption must be clean themselves. What matters is that the resolve to fight corruption must be strong, and they should be honest about their past transgressions, if any. They should be clean at present, and their past actions should serve to strengthen the fight, instead of crippling it.

2.What do you understand by (a) Political democracy and (b) Fiscal democracy? In this context, highlight why we may have achieved political democracy, but not fiscal democracy? (GS 3)

आप (क) राजनीतिक लोकतंत्र और (ख) राजकोषीय लोकतंत्र से क्या समझते हैं? इस संदर्भ में, उजागर करें की हमने क्यों राजनीतिक लोकतंत्र हासिल कर ली है, लेकिन वित्त लोकतंत्र नही?

Suggested Answer:

 Political democracy is a means for the people to choose their own leaders and hold them accountable. It offers the citizens the freedom to express their thoughts and views subject to reasonable restrictions. It signifies the will of the people living in a country at present.

Fiscal democracy refers to the freedom of the elected government to spend and tax so as to best serve the people at present, instead of being tied down by expenditure commitments of the previous governments.
Fiscal democracy can be said to be achieved when a government can spend on the present-day priorities instead of past ones. For example, spending on climate change right now needs higher priority than what previous governments would have assigned to it.

India has achieved political democracy to some extent, by inculcating democratic values amongst its citizens, providing a robust electoral system, regional parties representing linguistic and religious minorities, political decentralization with 73rd and 74th amendments etc.

However, it has not yet achieved fiscal democracy as:

  1. India has a history of populist schemes that are seen as entitlements by the successive generations. This makes it very difficult to even revamp these schemes to suit present priorities. It constrains government spending.
  2. The cost of financing these entitlements increases with time, and further constrains fiscal space for present-day spending priorities. Thus, the present government has to spend on priorities of previous governments, hampering fiscal democracy.
  3. In India, paying tax is seen as a burden instead of a duty. Thus, governments, in order to get elected, resort to lower taxes as a populist measure. This hampers revenue growth and constrains fiscal space. In India, only 7 out of 100 voters pay taxes. India also has a low tax-to-GDP ratio at 17%.
  4. Indian political system has perpetuated this mindset of entitlements and low taxes. Thus, it can be asserted that political democracy has been achieved at the expense of fiscal democracy.
  5. The trend of spending on doles also results in higher borrowing >> higher fiscal deficit >> higher burden for future generations >> cripples fiscal democracy for future governments. This also draws fiscal allocation away from creation of capital assets.

This mindset of voting for populist governments doling out freebies cannot be considered to be a true political democracy, since the electorate is not enlightened enough to make sound political choices.

India has millions of poor people who are at risk from problems such as climate change and non-communicable diseases. With nearly 65% of the population below 35 years of age, the present governments need to plan for their social security and healthcare. For the fiscal space to be created for these priorities, the citizens need to be enlightened enough to understand the malaise that unproductive subsidies and doles affect on the system.

Therefore in India, it is only by achieving more political democracy that proper fiscal democracy can be attained.

3.The ratings granted by rating agencies reflect poor standards and are anomalous as far as India and China are concerned. Elaborate. (GS 3)

रेटिंग एजेंसियों द्वारा रेटिंग गरीब मानकों को प्रतिबिंबित करती हैं, जहाँ तक भारत और चीन का सवाल हैं। प्रकाश डालें।

Suggested Answer:

Credit ratings agency act assign ratings to debtors based on the ability to pay back debt and after assessing other risks including the risk of default. Credit ratings to countries are assigned after assessing macroeconomic scenario, political stability, the willingness to repay existing debt and other variables.

How the ratings are anomalous with respect to India:

  1. India was denied a ratings upgrade from BBB- on account of its low per capita GDP and relatively high fiscal deficit among peers. It did not take into account that while the peers are languishing in terms of growth, India is a bright spot with a growth rate of more than 7% and a debt of 68.6% of GDP (as compared to Japan’s more than 200% of GDP)
  2. India has dramatically improved in terms of macroeconomic stability, including reining in inflation by adopting inflation targeting and instituting a Monetary Policy Committee (MPC), but this has not led to a ratings upgrade.
  3. India has shown high willingness to pay, as demonstrated by the great lengths the government went to during the 1991 BoP crisis. It has never defaulted in its debt payments. This has not been considered by the agencies.
  4. India has adopted numerous reform measures for Ease of Doing Business, and has made strides in transparency with RTI and e-governance. It has instituted a Bankruptcy code, and several welfare measures like CSR and social security schemes. This holistic development has not been considered by the ratings agencies while assessing for an upgrade.

How the ratings are anomalous with respect to China:

  1. After 2008 crisis, China launched a credit expansion that led to a massive increase of 86% to its credit-GDP ratio. Simultaneously, its growth has declined to 6.5%, resulting in an ominous scissor-pattern graph which is considered as posing a serious risk to any economy. Despite this, its ratings were upgraded to A+ from AA- in 2010.
  2. Despite declining growth since then, and the signs of a real estate bubble, these ratings have been unchanged. The ratings agencies are wilfully ignoring the Chinese economy’s dangerous path.
  3. China is a very opaque economy with no press freedom. There is widespread scepticism regarding the macroeconomic figures that are placed in public domain, since third-party scrutiny is seriously curbed by the authoritarian one-party state. These variables have not been considered by the ratings agencies.
  4. Persistent devaluation of yuan in order to boost exports, dumping of commodities in various economies etc are other factors which exemplify China’s erroneous behaviour in global exchange, but the ratings agencies have turned a blind eye to them.

Credit rating agencies have suffered severe dent in credibility after they failed to predict the 2008 financial crisis and they certified the mortgage-backed securities that were at the heart of the crisis with a AAA rating. Moreover, most of the popular agencies suffer from a pro-Western bias. To circumvent this, emerging economies from BRICS have set up their own credit ratings agency, which will be functional soon.
Thus, it is important for the investors to look at other variables before investing, instead of solely relying on ratings by the credit rating agencies.


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Must Read News Articles – February 8


The Hindu

Front Page / NATIONAL

‘1892 Cauvery pact an unequal bargain’: It can claim no validity after birth of Indian Constitution, Karnataka counsel tells Supreme Court.

SC dismisses TN’s review plea on remission power: The 2015 verdict held that Centre, not State, will have ‘primacy’ in deciding on remission of sentence.

Talks to end economic blockade in Manipur fail: Tripartite talks to end the over three-month-long economic blockade of a crucial highway in Manipur failed to make any headway on Tuesday with the Naga group spearheading it refusing to relent from its position of not allowing seven districts to be carved out.


Pride as well as prejudice: The tribal bodies’ protest against reservation for women in local municipalities in Nagaland must not be allowed to settle the argument.

Time for upgrade: Since Independence, the military has remained at the forefront of dealing with the changing character of conflict both along as well as within India’s borders.


PSU banks to join BHIM by February-end: All Public Sector Banks are expected to join the Bharat Interface for Money (BHIM) app for digital payments by the end of February, the National Payments Corporation of India said.

Indian Express

Rehab for the balance sheet: A centralised Public Sector Asset Rehabilitation Agency (PARA) could help over-leveraged corporates and bad-loan encumbered banks.

Live Mint

India’s de facto carbon tax is excessive: It is not necessary for India, whose per capita consumption of electricity is barely half the world average, to embrace the highest rate of carbon taxes in the world.

The budget sidesteps geostrategic risks: Arun Jaitley’s budget seems to contain very little—by way of either allocations or strategic intent—to mitigate risks that endanger the Indian economy.


Mains Marathon

Mains Marathon – UPSC Mains Current Affairs Questions – February 8

Read the following questions and answer them by clicking on the links in not more than 200 words

Time: 30 Minutes

Kindly review each others answers.

1.What do you understand by Trade facilitation of WTO? What is the view of developing countries on trade facilitation? (GS 2)

विश्व व्यापार संगठन के व्यापार सुविधा से आप क्या समझते हैं? विकासशील देशों की इसपर क्या राय है?

The Hindu | WTO

2.Do you think that parliament needs more funds for research, infrastructure and digital outreach? Also, discuss the benefits of Increased budgetary support for Parliament. (GS 3)

आपको क्या लगता है कि संसद को क्या अनुसंधान, बुनियादी ढांचा और डिजिटल आउटरीच की जरूरत है? इसके अलावा, संसद के बजटीय सहायता बढ़ाने के लाभों पर चर्चा करें।

Indian Express

3.“The reward for work well done is the opportunity to do more.” Discuss. (GS 4)

अच्छी तरह से काम करने का इनाम अधिक काम करने के लिए एक अवसर है। चर्चा करें।