Day: March 6, 2017

[1].Many meanings of corruption

[2]. Banking blues

 

[3].Leave PoK alone

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Live Mint

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[1].India’s manufacturing opportunity

[2].The political economy of India’s bad bank

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Front Page / NATIONAL

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[1].Centre launches survey on Gangetic dolphins

 

The Hindu

 

Context

Survey for Gangetic dolphins

 

What has happened?

• The Centre has launched the first ever across-the-river survey in the Ganga to determine the population of aquatic life, including that of the endangered Gangetic dolphin
• Apart from number of dolphins, number of ghariyals and turtles in the river will also be ascertained after summer sets in fully
• A study to figure out fish species composition in the 2525-km-long river has been also been kick started from Harshil in Uttarakhand

 

Survey

The survey

• Will create a baseline scientific data for the government to take suitable measures to improve quality of the river water
• Find out stretches where dolphin is habitating, what are the conditions there and the level of threat the long-snouted species is facing in a particular belt

 

1^st leg of the survey

• The first leg of the census was launched on March 1 from Narora in Uttar Pradesh to Bijnor (covering distance of nearly 165 km) to establish the number of the national aquatic animal.
• Counting in the Allahabad to Varanasi stretch (close to 250 km in length) is expected to be launched this week

 

Who is conducting the survey?

The National Mission to Clean Ganga is conducting the survey through Wildlife Institute of India (WII),, under the NamamiGange programme

 

Significance of the survey

• Concerns have been expressed over the decreasing number of the Gangetic dolphins, one out of the 4 freshwater dolphins in the world from the river stretch in Narora to Kanpur due to pollution
• All the surveys carried out in Ganga previously were conducted in bits and pieces or were rapid. This is for the first time a comprehensive and scientific study is being conducted

 

[2].India runs out of life-saving HIV drug for children

 

The Hindu

 

Context

Cipla, sole manufacturer of Lopinavir syrup, stopped production of the drug after govt. failed to clear dues

 

What has happened?

Stocks of Lopinavir syrup, a child friendly HIV drug, have run out after Cipla, the sole manufacturer of the drug, stopped manufacturing it over the issue of non-payment from the Health Ministry

 

Government’s response

Faced with a crisis, the Health Ministry says it has instructed State AIDS Control Societies (SACS) to purchase from local markets

 

Give the rest article a light read

 

[3]. Attacks on Indians put MEA under pressure 

 

The Hindu

 

Context

Besieged by complaints from PIOs and NRIs, India can do little in the case of citizens of another country

 

Issue:

Problem 1: Present government has treated the entire diaspora as a single entity. This is causing problems now as both PIOs (Persons of Indian Origin) & NRIs (Non-Resident Indians) reaching out to the Ministry of External affairs (MEA) in the light of upsurge in attacks on Indian nationals in US

 

Problem 2:  Another problem that is emerging is the panic over all incidents involving citizens of Indian extraction being called racially motivated attacks.

 

[4].Aadhaar data not misused: UIDAI

 

The Hindu

 

Context 

UIDAI’s statement regarding security risk to Aadhaar data

 

What has happened?

Dismissing reports of misuse of Aadhaar biometrics for identity or financial thefts, the Unique Identification Authority of India (UIDAI) said that personal data held by it were secure.

 

Backdrop

Recently, a breach of Aadhaar data was reported after the UIDAI sent a notice to three firms for possible unauthorised authentication attempt and storing of biometric data.

• The notice it had served was shared widely on social media and questions were raised over the safety of Aadhaar data

 

UIDAI’s explanation

Describing the incident as an “isolated case of an employee working with a bank’s business correspondents’ company”, the authority said the employee had attempted to misuse his own biometrics.

• This was detected by the UIDAI internal security system and subsequently action under the Aadhaar Act was initiated.

 

Penal provisions

Any unauthorised capture of iris or fingerprint data or storage or replay of biometrics or their misuse is a criminal offence under the Aadhaar Act

 

[5].Computer OS, short movie successfully stored in DNA

 

The Hindu

 

Context

Scientists have successfully stored a computer operating system, a short movie along with other data in DNA, an advance that may usher the next generation of ultra-compact, biological storage devices which will last hundreds of thousands of years

 

What has happened?

In a new study, researchers from Columbia University and the New York Genome Centre (NYGC) in the U.S. showed that an algorithm designed for streaming video on a cellphone can unlock DNA’s nearly full storage potential by squeezing more information into its four base nucleotides.

 

Why DNA is an excellent storage medium?

DNA is an ideal storage medium because it is ultra-compact and can last hundreds of thousands of years if kept in a cool, dry place, as demonstrated by the recent recovery of DNA from the bones of a 4,30,000-year-old human ancestor found in a cave in Spain

 

What did researchers wrote on DNA?

Researchers chose six files to encode, or write, into DNA:

• Afull computer operating system
• An 1895 French film, “Arrival of a train at La Ciotat,”
• A 50 USD Amazon gift card
• A computer virus
• A Pioneer plaque
• A 1948 study by information theorist Claude Shannon

 

How was it done?

They compressed the files into a master file, and then split the data into short strings of binary code made up of ones and zeros

• Fountain codes: Using an erasure-correcting algorithm called fountain codes, they randomly packaged the strings into so-called droplets, and mapped the ones and zeros in each droplet to the four nucleotide bases in DNA: A, G, C and T
• The algorithm added a barcode to each droplet to help reassemble the files later.

 

Highest density data storage ever created

The researchers showed that their coding strategy packs 215 petabytes of data on a single gram of DNA, which according to Erlich, was the highest-density data-storage device ever created.

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Editorial/OPINION

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[1]. No time for complacency

 

The Hindu

 

Context

India’s economy is defying the pessimists, and the time is ripe to deepen structural reforms

 

Other assessments

Author states that other than 3^rd quarter GDP estimates released recently by CSO, two other assessments have also hinted at Indian economy’s robustness,

• The Article IV Consultations 2017 of the International Monetary Fund (IMF)
• The biennial Economic Survey of the Organisation for Economic Cooperation and Development (OECD)

 

Challenges

Author states that the growth projection of 7.5% (the higher side of the 6.75-7.5% range forecasted in this year’s Economic Survey) for the next fiscal depends on resolving several short-term challenges

• High public debt: The OECD’s survey raises concerns about India’s large interest payments due to the high levels of public debt as compared to other emerging economies. Instead of large public outlays, we should focus on quality of public expenditure
• Health of banking and financial sector: The twin balance sheet problem of both corporates and banks, highlighted in the Economic Survey, are related to each other but need different actions. Solutions like an independent agency PARA have been indicated by the survey itself but to think that all the existing ills of the banking and financial sector will be eliminated by a blanket solution is just not possible

 

Rule-based management

Author suggests that like GST Council, Monetary Policy Committee (MPC) & Bank Board Bureau, another agency like Banking Council can be created to facilitate a dialogue with political parties and stake holders on a new banking road map

• Forming consensus: Seeking consensus on a forward banking reform path would be the principal mandate of the Banking and Finance Council

• Various committees: Extensive analytical work by several committees and commissions like the Narasimham Committee, P.J. Nayak Committee, Gopalakrishna Committee, to mention a few, have critically examined the past and suggested future actions

 

Recommendations of OECD & IMF reports

• Local government entities need greater empowerment. Making grants available in two parts — a basic grant and performance grant — will make a difference
• Enabling local bodies to impose and realise property taxes and other levies would strengthen their financial viability
• The Fifteenth Finance Commission, yet to be constituted, while reviewing the implementation of past recommendations can consider incentivising States on empowerment and delegation of powers to local bodies.
• Seeking to replicate best governance practices in labour and product markets among the States could also prove beneficial in mitigating inter-State growth divergence.

 

Conclusion

Author concludes by stating that pursuing and deepening structural reforms is the way forward

 

[2]. Saving the Ghats

 

The Hindu

 

Context

Article is a brief commentary on the current position of the notification that would declare a part of the Western Ghats an Ecologically Sensitive Area (ESA)

 

Western Ghats

It is a 1,500 km, ecologically-rich strip along the west coast spanning Gujarat, Maharashtra, Karnataka, Goa, Kerala and Tamil Nadu

• Highest peak – AnaiMudi
• Other name –Sahyadris

 

Backdrop

• 2011 – Western Ghats Ecology Expert Panel (WGEEP) headed by ecologist Madhav Gadgil recommended in 2011 that all of the Western Ghats be declared as the ESA — with only limited development allowed in graded zones
• Kasturirangan panel was formed to study the recommendations of the Gadgil committee’s report on Western Ghats. Kasturirangan Panel Report was submitted on April 15, 2013

• It recommended that only about 60,000 sq km — or about 37% of the WG be declared as ESA

• Government issued a draft notification in March 2014 that specified how much land in various coastal States encompassing the Western Ghats would be earmarked as out of bounds but as it wasn’t made into a final law — thanks to objections from States — this lapsed in a year and a half
• On September 2015, a fresh draft notification with the same numbers was reintroduced. This too would expire on March 4

 

Present article presents a brief commentary on the above state of affairs.

 

Editorial’s moot point is simply this,

 

Detailed and wider consultations: Ghats play an irreplaceable role in the monsoon over the Western part of the country (due to orographic effect – Rains occurring on the windward side of the mountain) and the forests harbor a rich biodiversity that has not even been fully studied. New species continue to emerge each year in an area that has endemic plants and animals.

• Hence, there is a need for wider and more open consultation with people at all levels, coupled with associated scientific insights to clearly demarcate the Ecologically Sensitive Areas in WGs
• Sustainable development and preservation of the natural heritage of WGs should be the underlying idea around on which rules can be notified

 

[3]. Elusive reconciliation

The Hindu

 

Context

Colombo must do much more to address the concerns of the Tamil minority

 

Article deals with the UN report on the issue of Tamil reconciliation efforts by Sri Lankan government

 

What does the report say?

• Concerned about delay: Report has raised serious concerns about the delay in addressing allegations of war crimes and in meeting other promises Colombo made when it co-sponsored a resolution at the UN Human Rights Council in 2015
• Threat to peace: The report warns the government that the lack of accountability threatens the momentum towards lasting peace
• Abuse continue: Report alleges that cases of excessive use of force, torture and arbitrary arrests still continue in Sri Lanka, almost eight years after the country’s brutal civil war ended

 

Current government in Sri Lanka: Sirisena

Previous government: Mahinda Rajapaksa

 

Not enough

Author states that although present government has made efforts to reach out to Tamils and initiate constitutional & legal reforms but progress on concrete issues has been minimal, like

• No progress on a hybrid judicial mechanism: There has been no solid effort on establishing a hybrid judicial mechanism with domestic and foreign judges and returning the military-occupied lands to Tamil civilians in the north and east

 

Timing of the report

Report comes at a time when over 100 displaced Tamil families are protesting at administrative offices in the north and east asking for their lands to be returned

 

Conclusion

The Sirisena-Wikremesinghe government should seize the moment and start addressing the core issues, keeping reconciliation and the future of Sri Lanka in mind.

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Economy

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[1].Policy drags e-commerce exports

 

The Hindu

 

Context

India had woken up to the huge potential of e-commerce exports from the country when the Centre decided to provide incentives in the Foreign Trade Policy (FTP) 2015-20 to promote exports of goods hosted on a website and dispatched through courier or postal mode

 

Issues with FTP

• Incentives for only low-value goods: The FTP incentives for e-commerce exports are only for low-value goods — “falling in the category of
  • Handloom products
  • Books and periodical
  • Leather footwear
  • Toys
  • Customised fashion garments, having free-on-board value up to ₹25,000 per consignment and finalised using the e-commerce platform.” As per the norms, the payment for goods purchased on e-commerce platform shall be done through international credit or debit cards and as per the Reserve Bank of India norms.

 

Plethora of B2C exporters

According to an assessment by the commerce ministry and the apex body for exporters in the country – the Federation of Indian Export Organisations (FIEO), there are more than 25,000 Indian exporters, small and medium firms and entrepreneurs present on the American multinational e-commerce company eBay alone

 

 

Opportunity in the future

According to FIEO, there is a market opportunity of about $5 billion in the near-term, say in the next 2-3 years, for Indian e-commerce retail exports – provided the concerns of such exporters are addressed expeditiously by the government. Since a survey had pointed out that those selling their items using eBay employ about 6.5 employees on an average, further promotion of Indian e-commerce exports is also expected to lead to greater direct and indirect employment generation.

 

[2].A boon for tourists, techies fret

 

The Hindu

 

Context

U.S. could roll out a red carpet for Indian visitors even as IT staff worry over H-1B.

 

What has happened?

Indian and U.S. authorities have kicked off talks to

• Expand air connectivity with more non-stop flights, allowing frequent Indian visitors quicker exits at the airport under the U.S.’ Global Entry programme
• Set up a pre-clearance facility at an Indian airport so passengers may avoid delays related to customs and border protection inspections at U.S. gateway airports. Such a pre-clearance facility is currently available in Abu Dhabi for travellers to the U.S., drawing high volumes for the UAE’s flag carrier Etihad’s direct flights to the U.S.

 

Present situation

There are only a few non-stop connections presently between the U.S. and India operated by United Airlines, Air India and Delta Air Lines, and several one-stops through the Middle East and Europe.

 

Backdrop

These initiatives are being considered by a bilateral working group formed under the aegis of the U.S.-India Travel and Tourism Partnership Year officially unveiled 15 days before

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Indian Express

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[1].Many meanings of corruption

Indian Express

 

Context

The Supreme Court’s recent reading of the law of contempt comes as a welcome relief.

 

Article presents the idea that judicial corruption & judicial misconduct are different. In cases of allegations of corruption, contempt should not be seen as a tool of suppression.

 

No major points wrt improving the judicial system vis-à-vis corruption have been given.

 

You can give it a light read

 

[2]. Banking blues

 

Indian Express

 

Context
RBI should ask banks to rethink decision to charge customers for cash transactions at branch

 

What has happened?

• Beginning March 1, India’s top three private banks — ICICI Bank, HDFC Bank and Axis Bank — have started charging customers a transaction fee for cash withdrawals and deposits at their branches. Customers will now have to pay a minimum of Rs 150 for every additional cash transaction at the branch after the first four transactions, which are free
• India’s largest bank, the State Bank of India, is also set to charge customers Rs 50 for cash deposits beyond three such transactions in a month.

 

What is the justification being given by banks?

Banks are justifying their move by terming it as measure to boost digital payments in alignment with the government’s move towards less-cash economy

 

Timing of the move

• Decline in digital transactions: The move comes at a time when the latest RBI data shows a month-on-month decline in electronic transactions in the months of February and January.

 

Author’s contention

Forcing people towards digital payments is not an optimal solution for a country where usage of cash is still widespread with a large unbanked population and informal sector

 

A better way

Author suggests that a better way for banks is,

• Offering incentives: To promote digital payments is to offer incentives to consumers and firms to shift to digital platforms

 

Conclusion

Author concludes the article by stating that Instruments like transaction fee may lead to cash hoarding, put off potential customers and render financial inclusion an even more difficult task.

 

[3].Leave PoK alone

 

Indian Express

 

Context

Attempts to integrate it with the rest of India will lead to violent after-effects

 

Author’s contention

Will the problem of Kashmir be resolved if India occupies and integrates PoK into India?

• Author states that when we see the issue in its perspective on economic, social, political or technical lines, it becomes more and more clear that the problem will still persist
• Acquiring a patch of land the size of a small district, and embracing all the violent after-effects, is likely not to bring a sensible solution

Author now presents the reasons as to why he thinks so.

Unnecessary defence expenditure burden

India devotes about 35 per cent of its annual budget to its defence and security. One of the main reasons for this is the ongoing conflict along the Line of Control in Kashmir. If India does indeed “get back” PoK, it will end up spending 50 per cent of our budget on defence alone

A nest of terror

Kashmir has its own set of problems. If a move is made to occupy the disputed land, the flames of terror in the neighbourhood will not only engulf PoK, but will also claim Kashmir. Given the terror infrastructure ingrained in PoK and the fact that a section of its population is radicalised, it is unlikely that India’s occupation of PoKwill be welcomed.

 

Permanent solution: War

Author states that a permanent solution to this eternal problem could be a full blown war but considering that both India and Pakistan are nuclear nations, the level of collateral damage and overall destruction is unimaginable

Way forward

India should focus on the development in the Kashmir and its people

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Live Mint

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[1].India’s manufacturing opportunity

 

Live Mint

 

Context

There is a considerable gap between India’s manufacturing potential and its realization

 

Issue– Low cost manufacturing: Opportunities for India

 

Losing steam

In the first few paragraphs, author cites the report of research group Euromonitor International as per which,

• There has been a considerable increase in the Chinese factory wages which now exceed those of almost every major Latin American country and are closing in on pay levels in the weaker Eurozone countries
• Conclusion: China branded itself a low cost manufacturing destination but the rising cost of labor will have multiple effects

Impact

Low-cost production jobs, especially in the apparel, toys and cheap electronics sectors, are now moving out to other countries, mostly in South and South-East Asia, which have a steady supply of cheap labour. India can be a potential benefactor here

 

Other facts which confirm above possibility

• In 2016, the Global Manufacturing Competitiveness Index published by Deloitte Touche and the Council on Global Competitiveness indicated the rise of the “Mighty Five”—Malaysia, India, Thailand, Indonesia and Vietnam (MITI-V). According to the report, this group will emerge as the “New China” by 2020 given its abundant supply of cheap labour, favorable demographic profiles, and market and economic growth
• World Bank shared similar sentiments in a 2016 report

Manufacturing sector in India

• Current share of manufacturing sector in GDP of India: 15%
• Workforce supported: 12%

Government’s aim: Government wants to take it to 25%

 

Challenges

Author states that there are considerable challenges before India in realizing its manufacturing potential,

Internal problems: There are host of internal problems like,

• Regulatory roadblocks, unfavorable land and labour laws, inadequate transport, communication and energy infrastructure, among others
• Structural imbalance: A combination of these internal problems has lead to Indian economic scenario being dominated by Small and Medium enterprises rather than large factories. About 131.29 million people are employed in as many as 58.5 million establishments, according to the sixth economic census released last year. Only large enterprises have the economies of scale that can make India truly competitive

Competition from South-East Asian nations

India faces stiff competition from South-East Asian and other South Asian countries. This is what the latest economic survey has to say about it,

“India is well positioned to take advantage of China’s deteriorating competitiveness”, particularly in the apparel and footwear segments but the space vacated by China is fast being taken over by Bangladesh and Vietnam in the case of apparels; Vietnam and Indonesia in the case of leather and footwear. Indian apparel and leather firms are relocating to Bangladesh, Vietnam, Myanmar, and even Ethiopia. The window of opportunity is narrowing and India needs to act fast if it is to regain competitiveness and market share in these sectors.”

Global technological and geo-economic changes

Global technological changes: Robots are fast becoming the norm on factory floors, and it is only a matter of time before they take over today’s labor-intensive sectors

Global geo-economic challenges: The rising protectionist sentiment as evident by the BREXIT and US presidential elections poses a threat too

Statement: India should not be myopic and focus on becoming a low cost manufacturing destination like China but it should aim for high-value manufacturing and innovation

Author states that the amount of jobs required to satisfy the young population cannot come solely from high-end manufacturing

[2].The political economy of India’s bad bank

Live Mint

Context

A bad bank should not get labelled in public discourse as a government ‘bailout’ of crony capitalists

Issue: Bad Bank

Idea gathering steam

Author states that the idea of a bad bank is gradually gathering steam.

• PARA: The Economic Survey 2016-17 proposed the setting up of a public sector asset rehabilitation agency (PARA), which is essentially a centralized bad bank
• RBI Deputy governor recommends PAMC: In a recent speech, Reserve Bank of India (RBI) deputy governor Viral Acharya said there is a “sense of urgency” to decisively resolve Indian banks’ stressed assets. One of his proposed solutions is the creation of a PAMC for sectors in which assets are economically unviable in the short-to-medium term, like the power sector
• Chief Economic Adviser: A day later after RBI deputy governor’s speech, CEA re-emphasized the need to create a bad bank quickly

Government’s opinion

The government doesn’t seems to be enthusiastic towards the idea of a bad bank reflected by a post-budget interview, in which Union Finance minister said a bad bank is a potential solution but it cannot be supported by the government alone

Difference in Opinion. Why?

First reason: The difference of opinion and enthusiasm can be gauged by the impact of bad bank funding on macroeconomic stability. Here are the Budgetary targets,

• Fiscal deficit target of 3.2% for 2017-18,
• Government-debt-to-gross domestic product (GDP) target of 60% by 2023
• Net market borrowing target of Rs3.5 trillion in 2017-18.

Above commitments do not account for the creation of a bad bank

Suggestion from the survey

The Economic Survey has suggested the use of government debt and RBI’s equity capital for funding PARA. The survey argues that the burden is already on taxpayers since most of the Rs6 trillion stressed assets are in public sector banks.

Strain on government

Author states that even if the government funds only 20% of stressed assets in the banking system, it would exceed the net market borrowing target in 2017-18 by more than 30%

Second reason: Public perception & government’s reputation

The most pressing issue is of potential damage to government reputation & public perception.

• Fraudulent and dishonest borrowers: In July 2016, the comptroller and auditor general of India said that a significant portion of banks’ NPAs was a result of loans obtained by fraudulent methods. This raises questions on the governance practices of public sector banks and the honesty of defaulting borrowers, and needs further investigation. If the government shields bankers from vigilance inquiries, it risks a dent in its reputation. It might be seen as helping crony capitalists and corrupt bankers
• Foreign inflows: One of the key reasons for of massive inflows of capital into India is the clean reputation of the current government. If there is a dent in that reputation, it might significantly reduce future foreign capital inflows and affect India’s macroeconomic stability
• Cover up: Moreover, as stressed assets are heavily concentrated in in large borrowers, a bad bank might be seen as a cover up operation by the public

Solution: Vigilance inquiries for fraud need to be separated from the pricing of stressed assets

• Fear of vigilance inquiries: Due to the fear of vigilance enquiries, banks will not sell the stressed assets cheaply as it might alert vigilance authorities that the sell-off is being done to hide underlying fraud

Conclusion

Author concludes by stating the macroeconomic stability and political viability will be key factors in considering the implementation of a bad bank.

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