A brief of newspaper articles for the day bearing
relevance to Civil Services preparation
National
[1]. Centre pushing to revive NATGRID, looking for CEO
Highlights:-
The government is set to make an aggressive effort to accomplish one of the most ambitious intelligence projects.
The National Intelligence Grid (NATGRID) is a centralised agency which stores sensitive personal information of citizens from almost two dozen agencies to be made available for counter-terror investigations.
The grid would have networked 21 sets of data sources to provide quick and secure access of information to about 10 intelligence and law-enforcement agencies including the Intelligence Bureau (IB) and R&AW.
These data sources include records related to immigration entry and exit, banking and financial transactions.
It was conceived in the wake of the 2008 Mumbai attacks.
Raghu Raman was NATGRID’s first and only CEO but his term wasn’t renewed. The government will now appoint a senior serving government official, with an intelligence background, to head NATGRID
[2]. Iranian banks to open in India
Context:-
A lot of commercial measures have been taken by the India-Iran Joint Commission that met for the first time since Iran and the P-5+1 grouping struck a deal to end sanctions on Iran.
Measures:-
Opening Iranian banks in India:-
Iran’s leading banks will soon open branches in India to energise commercial ties between both the countries.
India will be the major beneficiary as it has just begun settling more than $6.5 billion energy-related pending payment, with Iran.
After the U.S. and western powers in 2011 blocked payment channels to increase pressure on Iran, the Reserve Bank of India created a channel for payment via Turkey.
Freight forwarding measures:-
The two countries also discussed measures to boost logistic services, including allowing freight forwarding companies to take advantage of the rupee payment mechanism and the insurance cover that are currently available only to exporters and importers.
Preferential Trade Agreement:-
India and Iran have decided to hold preliminary discussions for a preferential trade agreement (PTA). The PTA is meant to ensure that both the countries will cut or eliminate duties on certain mutually agreed products to increase bilateral trade. A Joint Working Group will hold meetings to look at the feasibility of the PTA.
Chabahar port:-
The next big bump to India-Iran trade will come from the signing of the contract to develop the Chabahar port. It is in the final stage of negotiations.
What is P5+1?
The P5+1 is a group of world powers who have been negotiating with Iran since 2006 with the goal of limiting Iran’s capacity to manufacture a nuclear weapon in exchange for relief from certain economic sanctions and the ability to pursue a civilian nuclear energy program.
Read more: http://www.investopedia.com/terms/p/p51.asp
[3]. Indo Israel anto aircraft missile test fired
Context:-
Barak NG (next generation), a surface-to-air missile system, developed by India in collaboration with Israel, achieved a significant milestone after its successful firings from an Indian naval warship (INS Kolkata).
Specifics:-
It is a long-range surface-to-air missile (LRSAM) — land version is medium-range SAM or MRSAM.
It is a very advanced SAM that can track and shoot down incoming missiles and other flying objects with high-level accuracy.
It can intercept aerial targets up to a range of 80 km.
It was co-developed by the Defence Research and Development Organisation (DRDO) and the Israel Aerospace Industries (IAI) of Israel.
It will be manufactured by Bharat Dynamics Ltd. (BDL).s
The system has a multifunctional surveillance and threat alert radar (MF STAR) for detection, tracking and guidance of the missile.
For the army:-
While the LRSAM is for the Navy, the Air Force has an order for the MRSAM which has been recently approved.
International
[1]. Has the world reached its multilateral moment?
Context:-
The article analyses the trend of global orders in 2015 such as the rise of multilateralism, Retreat of of US’s Unilateralism and the emergence of new antagonistic bipolarities.
Rise of Multilateralism:-
Iran nuclear deal:-
The P5+1-Iran nuclear deal was a remarkable piece of diplomatic initiative and action.
The deal paved the way for removal of economic sanctions against Iran in return for stringent monitoring and drawdown of its nuclear programme.
It allowed for new outlook in the West’s relations with the West Asian power.
Paris Deal:-
The climate agreement in Paris in did heap in an additional responsibility on the shoulders of the developing world.
It emphasised on a multilateral arrangement in the mitigation of climate change gave it a consensual heft missing in the earlier summits.
Retreat of US’s Unilateralism:-
The year also saw that US administration’s gradual retreat from the unilateralism and the military adventurism of the preceding governments. The focus of the administration has shifted from direct interventions to offshore balancing, as the conflicts in Syria and Iraq would confirm.
The U.S. in the multilateral agreements is not acting as a singular fulcrum of power, but as one among a set of actors.
But it doesn’t mean that Washington has given up on dominating global politics.
This year showed that other powers in the international arena rose, but not at the expense of the U.S.
Clearly, the outcome of any move to control the conduct of international affairs again by the U.S. would be disastrous. Also it cannot lead the world through dominance.
Rise of right wing parties in west:-
The global financial crisis challenged the Western dominance in the global order; it also triggered enormous social and political tensions, especially in the domestic arena of the countries in the developed world.
The rise of the Right in Europe as well as in the U.S. is a clear sign of these tensions.
The economic crises, growing unemployment and the real and perceived threat of Islamist terrorism have encouraged a far-Right narrative of state and society in a number of Western nations.
Eg Donald trump’s (US Presidential candidate) idea of banning immigration to Muslims.
If the New Right captures power in any of the major countries, say France or the U.S., its consequences for the international system could be monumental.
Antagonistic bipolarity:-
There are plenty of two-tier crises in modern world such as those involving India and Pakistan; China and Japan; and Russia and Ukraine.
Containing them is vital for the interests of the larger world. But the year 2015 saw a dangerous addition to this list—hostility between Russia and Turkey.
It has the potential to plunge the whole world into a dangerous military conflict. Russia has shown commendable restraint after its warplane was shot down by Turkey over the Syrian border in November.
Since both Russia and Turkey are deeply involved in the Syrian conflict, tensions between these two countries will persist unless a sustainable solution is found to the Syrian crisis, which is the challenge of 2016.
Conclusion:-
The year 2015 has underscored the trend of strengthening multipolarity but has also strengthened the forces of instability. Which of these factors emerge stronger would shape the future global order.
Economic Digest
[1]. Governments’ clean fuel drive in reverse gear
Context:-
The Union government’s crackdown on air pollution, by implementing stricter vehicular emission standards, is facing a delay due to unavailability of suitable fuel to support its clean technology.
The government is now considering postponing the implementation of Euro-V norms by a year to 2020 and that of Euro-VI norms to 2022.
Other developments to contain air pollution:-
Supreme Court recently banned the registration of diesel cars and SUVs with 2000 CC engine capacities in the Delhi and the National Capital Region
The Delhi government also announced its plan to keep a check on the rising air pollution by restricting the number of vehicles that can ply in the national capital beginning January 1, 2016.
To know about Euro and BS norms:- http://www.siamindia.com/technical-regulation.aspx?mpgid=31&pgidtrail=33
[2]. Cabinet clears amended textile scheme
Context:-
The ‘Amended Technology Upgradation Fund Scheme,’ got cleared by cabinet committee on economic affairs.
Scheme Provisions:-
In this scheme apparel, garment and technical textiles will get 15 per cent subsidy on capital investment, subject to a ceiling of Rs.30 crore over a period of five years.
The remaining sub-sectors will be eligible for 10 per cent subsidy, subject to a ceiling of Rs.20 crore.
The new scheme does not cover the spinning sector as there is excess capacity now.
Old schemes:-
The amended scheme will replace the existing Revised Restructured Technology Upgradation Fund Scheme (RR-TUFS).
The Technology Upgradation Fund Scheme for the textile industry was introduced in 1999 and Rs.21,347 crore has been provided as assistance between 1999 and 2015.
Benefits of the scheme:-
The ATUFS would ease the financial position for the industry and encourage investments to the tune of Rs.1 lakh crore and create over 30 lakh jobs.
As the scheme provides capital subsidy instead of the existing combination of interest subsidy and capital subsidy, the industry will get the assistance on time.
It will trigger growth and exports for the textile industry and it will aid the ‘Make in India’ initiative.
And also the industry is confident of moving up the value chain and become globally competitive.
[3]. Will India Make it in – 2016?
[a]. A weak growth impulse
Major Positive outcomes in the economy in the year 2015:
a) Exceptional fall in the price of oil
Impact: corrected India’s balance of payment, brought down inflation, improved public finances and increased consumer spending.
b) Relaxation of monetary policy from start of year gradually by 125 bps.
Impact: Helps in investment reviving and growth recovery
c) Revived expectation of growth and increased GDP growth due to implementation of new methodology.
Impact: Helped pull investment from across the world beating Russia, Brazil and Oil producing countries.
View on fiscal policy:
a) Sticking to a committed consolidation path,
b) Quality improvements and
c) Consumption-enhancing salary revisions are likely a plus for investors, rating agencies and civil servants;
d) Others may grumble about higher taxes and cesses that equally marked the year.
The Challenges for the economy:
a) High levels of corporate debt and unending stream of NPAs weighing down the banks
Impact: They hold back investment
b) Second poor monsoon season, weakened international agriculture prices and minimal increases in farm support prices
Impact: farmers in distress, sales of agriculture dependent industries hit.
Unpleasing Indicators:
A) Domestic Problems
a) Yearlong contraction in exports
b) Highest level of idle factory capacity in five years
c) Feeblest growth in bank credit in decade
d) Constant decline in corporate earnings and sales throughout the year
e) Failure of private investment to take off
B) Global Problems
a) The downgrading of world growth and trade projections in succession through the year constituted one of the weakest demand environments since 2008
b) China economic slowdown
c) US monetary tightening and divergent monetary policies of the advanced countries
d) Slowing down of many emerging nations economies
The Question:
With so many favourable turn that economy took as mentioned on top of the article how come the indicators are so poor?
[b]. Don’t go broke for growth
Current Scenario:
A return to macroeconomic orthodoxy via:
a) Continuing fiscal consolidation,
b) A new monetary policy regime,
c) Positive real rates—coupled with expectations of economic reform by the new government.
Impact:
i) India is now seen as the emerging market best prepared to withstand global shocks
ii) Most of the emerging nations are seeing deceleration in growth while India is accelerating
Let’s understand the quantum of change:
In 2012-13, India’s current account deficit was at $88 billion for the year. This year, it is on course to less than $20 billion. In other words, the balance of payments is expected to remain in comfortable surplus even if the economy experiences a large portfolio outflow.
Who deserves the credit for this turnaround?
Government – yes due to certain reforms it brought across the sectors. But the biggest driver of the turnaround is – heavily depreciating oil prices. Economy almost received a gain of 2% of GDP due to low oil prices.
What government did with this gain?
1% of GDP was spent on subsidies and higher oil taxes. The spending was needed as the government did not have inflation tax and there was a need of public investment stimulus.
Impact on Household:
Household gained 0.8% of GDP as extra purchasing power through two mediums:
a) Low oil prices
b) Low prices of goods and services
Fiscal Arithmetic:
A complicated one, we don’t know about it from the viewpoint of UPSC only the outcomes of this arithmetic are important.
a) GDP was increased by 130 bps just because of the low oil prices due to increased purchasing power, which means when prices rise again the economy will slow down for no concrete reasons like global trade or weak exports. This will be a trade shock roll down in growth.
What it means for fiscal policy?
On the one hand, having relaxed the fiscal road-map in the last Budget, it is important for credibility to adhere to the revised road-map.
Furthermore, any unanticipated increase in government borrowing is likely to exacerbate the supply-demand mismatch in the bond-market, put further upward pressure on G-Secs and corporate bond yields and, thereby, raise borrowing costs for the private sector, precisely when corporates are moving towards more wholesale funding given limited transmission in the banking sector. So, the risks of crowding out are real.
On the other hand, sticking to the fiscal road-map would mean a fiscal consolidation of 0.4% of GDP, which would further impinge on growth
The Solution:
An asset swap: stepping up disinvestment and other asset sales to simultaneously maintain public investment levels while simultaneously reducing the deficit
[c]. Servicing India’s growth
Context: The process of industrialization and deindustrialization of India and ways we have been behind many countries in term of technology and infrastructure due to our own restrictions and policy.
What has been the reason for such instance?
First half of 20th century saw many a companies being established. We did industrialise, but with the intent of serving only the tiny market of a very poor country, our own. Products and processes were anything but world-class.
By 1990, the country was studded with inefficient, sub-scale, technologically-backward factories that employed a very small portion of our work force. Liberalisation came to India too late.
Our poor infrastructure (e.g. endless electric power cuts) and our self-imposed restrictions on allowing business flexibility, has meant that instead of industrialising, we have actually de-industrialised quite a bit.
Our insipid industrial growth combined with over-investment in higher technical education, not only led to a transfer of technical talent to other countries, but to spectacular growth in areas like IT services which meant India moved directly from primary sector to tertiary sector.
What can be done now?
In order to rejuvenate manufacturing, India need to:
a) Better transportation
b) More reliable and good quality power
c) Fewer taxes/inspections/controls/registrations and other bureaucratic nightmares
d) Faster clearances and turnarounds at ports
A specialized issue with Indian manufacturing:
One more irony, so typical of all Indian tales is that India’s competitive advantage seems to be in high-end, design-intensive products or in high value niches, not in the areas where millions can get jobs.
[d]. How to revive investment
Context: No signs of a revival in private investment.
What is the reason?
“Credit-less recovery”. GDP growth has bottomed out, but several big banks are grappling with huge stocks of non-performing loans (NPLs).
Credit growth, in both real and nominal terms, is well below the long-term average, recovering more slowly than during previous slowdowns.
Is credit less recovery is a common occurrence?
IMF recent study has shown that one out of five countries has seen credit less recovery.
Characteristic of Credit-less Recovery:
First, output growth is about a third lower than during normal recoveries, and this has been the case for India this time around.
Second, the financially-dependent investment sector makes a disproportionately lower contribution to growth. Lower investment has been a stand out characteristic in India, while consumption has fared relatively better.
The Way Out:
Taking a break from the path of fiscal consolidation, the government attempted some counter-cyclical fiscal policy.
a) Savings from the oil subsidy bill were deftly channelled towards investment.
b) Previously stalled investment projects showed signs of life and parts of the transport sector received additional government funds.
c) A new public private partnership (PPP) model was needed to allay private sector concerns about shouldering excess risks.
d) Recovering private sector wages and real gains from low inflation are also likely to provide additional support to government wage hikes
[e]. Leveraging India’s frugality bias
Context: India has all the ingredients to become a global driver of innovation, led by a strong market potential, an excellent talent pool, and an underlying culture of frugal innovation (low cost innovation).
Frugal: Being economical with money
Examples of cultural leverage:
a) Japan leveraged its cultural emphasis on efficiency and team work to revolutionise the manufacturing and engineering industries.
b) Korea leveraged its cultural emphasis on speed and built world-class companies such as Samsung and LG.
c) China has capitalised on its action bias to sustain a GDP growth in excess of 10% for more than two decades.
d) The US and Israel have leveraged the diversity of their population to lead aggressively on innovation.
So what is recommended for India?
India can take its frugal approach for innovation to shore up business domestically as well as globally.
What needs to be done?
A) Indian corporations and the government should first focus on innovation for the significant internal market needs in energy, water, transport, healthcare, and food security to deliver tangible human and environmental benefits.
B) From a technology leadership standpoint, start-ups should accelerate innovating for the digital economy and large corporations should develop new opportunities at the confluence of emerging scientific knowledge and materials. One such opportunity is the intersection of biology, computing and materials.
C) In the emerging research areas, industry R&D should double and the government should provide direct R&D grants to industry.
[f]. Can health techcelerate
Context: New impetus on growth and innovation gives a hope to correct its lagging indicators.
Current Innovations:
The Indian Council of Medical Research and the Innovation Foundation of India organised an exhibition of innovative health technologies in Rashtrapati Bhavan in March 2015. Few of interesting innovations were:
a) Android tablet for use by frontline health workers,
b) A smart cane whose sensor helps the visually challenged to avoid raised objects,
c) A wheel chair that negotiates stairs,
d) An Indian made vaccine for Japanese Encephalitis and
e) An inexpensive baby warmer.
India Historical Feat in Innovation: Jaipur Foot and Arvind Intra-Ocular Lens.
What needs to be done?
Have to strengthen the whole value chain from product innovation, evaluation and legal protection to design, manufacture, marketing and supply chain management to avoid the trap of niche innovations that fail the mass application test.
This will need a new environment that fosters trans-disciplinary research, supported by cross domain professional collaborations that thread seamlessly through all stages of product development.
Any innovation developed will flounder if a weak public health system fails to deliver the intended beneficiaries. Such Technology pile up can be prevented by developing a strong delivery vehicle through a robust public health system.
Opinions & Editorials
[1]. Is the economy sick
Context:-
The article explains the economic scenario of the country and suggests to stop overdoing fiscal consolidation measures as it will end up choking domestic demand at a time when global demand is also weak. And this isn’t a recipe for double-digit growth.
Current economic scenario:-
Growth rate:-
While growth rate was 7.3 per cent in 2014-15, various official estimates point to a growth rate of 7-8 per cent in 2015-16.
Savings and investment:-
Savings and investment ratios have dropped sharply to around 30 per cent.
Export:-
Export growth has declined sharply. From April to November 2015, exports have dropped by over 18 per cent. If this trend continues, 2015-16 will see the worst export performance for over 15 years.
Import:-
Import growth has also declined by double digits indicating lack of demand (and also falling prices of crude).
Fiscal deficit current account deficit and inflation:-
The average fiscal deficit for the first two years of the government is likely to be around 4 per cent with the current account deficit around 1.3 per cent of GDP.
Without lower crude prices, these twin deficits would be higher, as would inflation.
Other Problems:-
There are reports of widespread rural distress, mixed performance of the industrial sector, continued problems in the banking sector and low private sector investments due to market uncertainty and stressed corporate balance sheets
Is Fiscal consolidation the need of the hour?
Some economists believe that the government must continue on this fiscal consolidation path to give “confidence” to investors that macroeconomic stability is of utmost importance.
This would be all very well if private investors were stepping in to invest and create jobs. But that’s not happening.
So, the government is trying to increase public investment as a way of boosting the economy.
The problem here is that public investment will be increased by a combination of lowering other expenditures (NREGA, Subsidies) and higher tax receipts.
What needs to be done?
India should be aggressively going after a greater share of the global economic pie, and not seeking comfort in fiscal management.
We should be promoting big investments in our food supply chain.
We should be providing major incentives for our small and medium enterprises to modernise and compete globally and employ young people
Our major corporations should be encouraged to invest at a time of global weaknesses so that when demand picks up, they are ready to take a bigger share.
[2]. A welcomes’ hopeful afterglow
Context:-
The article discusses the recent developments in India Pak relations.
Enough has been discussed in the earlier briefs.
Other outstanding issues:-
Mumbai terror attacks:-
India wants Pakistan to take substantive action against the perpetrators of the Mumbai attacks. India’s position on Mumbai may be rigid but it is understandable.
Sir creek issue:-
Sir Creek is an area that has not been demarcated between India and Pakistan by a clearly delineated maritime border on which Pakistan has laid its claims on the entire creek.
http://idsa.in/askanexpert/SirCreekbetweenIndiaandPakistan
[3]. Good sense on LPG subsidy
Context:-
The article discusses the problems of subsidy schemes in India and how the LPG subsidy has successfully tried to solve them.
The two major problems plaguing most subsidy schemes in India: leakages and mis-targeting.
Leakages:-
It refers to the phenomenon where the subsidy does not reach the intended recipient due to corruption, pilferage or a variety of other causes.
This has been quite successfully addressed via the government’s decision to transfer the subsidy payments directly to the recipient’s bank accounts through Direct Benefit Transfer Scheme.
This was also made easier with the Pradhan Mantri Jan-Dhan Yojana.
Mis targeting:-
It means while the most deserving beneficiary is denied the subsidy because some privileged consumer is enjoying the benefits of the same (subsidy is only going to go to those who need it).
The decision to limit the LPG subsidy by income groups is an attempt to address the mis-targeting problem.
Way forward:-
Rather than using the resultant saving simply to shore up the budget deficit, the Centre should use it to ensure that LPG connections are provided for those who still depend on firewood and kerosene stoves.
[4]. The double mistake
Context:-
Supreme Court upheld the Kerala Government’s decision to prohibit liquor sales in all hotels except 5 star rated ones.
Intention of the judgement:-
The Directive Principles in the Constitution necessitates that strict state regulation is vital to discourage regular and excessive consumption of alcohol.
Will prohibition work?
Historical evidence shows that prohibition does not encourage or enable people to quit drinking.
The experiences of states like Andhra Pradesh and Tamil Nadu, which have tried to implement prohibition in the past, have remained unsuccessful.
Possible consequences:-
Prohibition tends to drive the trade underground and creates a market for spurious liquor.
Alcoholism does critically impact the household budgets of the poor and may lead to domestic violence.
Since liquor will be traded at state outlets for a few more years, the policy may only help to shift the drinking space from bar to home or other private spaces
How to control alcoholism?
Instead of the state insisting on prohibition, a more practical and effective strategy might be for non-state actors to step up the campaign for abstention.
Loss of level playing field:-
The decision to exclude five-star hotels from the ambit of prohibition seems unreasonable and arbitrary.
The government claimed that the exception was necessary to protect the tourism industry.
But the decision discriminates against a large segment of the tourism industry and ignores their right to a level playing field.
It should be noted that Kerala attracts tourists from different strata of society, including the upper crust.
[5]. What determines the size of Indian state?
Context:-
The article discusses the role of government in the modern era.
Here state refers to the government and when the term bigger state is used it implies that government controls most of the operations leaving little room for private players and citizens.
If it’s said that the space of the state is shrinking it means that more private and non state actors (Citizens, NGOs) are actively participating in the government.
Now let’s see what according to the author the ideal size of a state is.
What is meant by the size of the state?
It is the assessment of state capacity (or its fitness), in terms of the ability of a government to administer its physical territory, as well as its ability to maximize welfare for its citizens.
What decides the size of a state?
It is decided by the circumstances the government is facing.
There are circumstances in which the state should expand—both in breadth (scope) and depth (reach).
Equally, there are circumstances where the state should contract, ceding space to private action.
Role of state based on the circumstances:-
Coercive: These comprise areas where the state has the power to mandate and enforce compliance. Security and law and order taxation and determining food safety standards, would fall under this category. For the state to excel in this category, it needs effective organizational powers.
Prescriptive: There are areas where the state has the power to prescribe remedies.
It sets standards and is at times able to employ some of its regulatory powers to enforce compliance. Mostly though, the role of the state here is to encourage the adoption of idealized rules and norms. Managing education, by prescribing school standards and determining the curriculum, would be a suitable example.
Advisory: In this category are areas where the state’s power to influence real outcomes is limited and the role of the state is mostly advisory in nature, with little real power of enforcement.
An easy example would be the efforts to inspire hygiene and cleanliness through a nation-wide mission to achieve sanitation. Innovation and flexibility are vital for a successful intervention.
Complexity of focusing on all three categories
This may be better explained with an example of elections.
The Indian state is by and large able to enforce that every citizen has the right to cast a single vote; it is less successful in encouraging more people to vote; and even less so, in making people vote for the right considerations.
The state may well decide that it is fulfilling its duty as long as it ensures that there is no fraudulent voting, thereby fulfilling its contract with its citizens but at the end its unable to meet the rising expectations of an enlightened citizenry.
Role of Local Governments:-
Instead of increasing its physical presence and reach through bureaucratic expansion, State could opt for an enhanced role for citizens in these areas through genuinely participatory mechanisms.
Local governments offer a democratic framework for organizing grassroots citizen action
They represent an expansion of the state, but also a break from its conventional forms.
[6]. How much land is actually cultivated in India
Context:-
The latest National Sample Survey Organization (NSSO) report on land and livestock holdings estimates that around 95 million hectares of land was classified as operational holdings in 2012-13.
The NSSO figure is about 65 million hectares lower than the numbers put out by the ninth agricultural census conducted in 2010-11 (159.6 million hectares).
What is operational holding?
Operational holdings are land that was used wholly or partly for agricultural production. While this includes land being used as kitchen garden or livestock growing, it leaves out cooperative farming and institutional/government ownership.
Difference in surveys:
The agricultural census is primarily based on land records with states, except some including West Bengal, Odisha, and Kerala where these are not available.
The divergence between the two estimates is not new; it has increased in the last two decades. The increasing gap is largely on account of a sizeable decline in NSSO estimates.
The agricultural census admits that the situation reflected in land records might be different from the actual situation on ground.
Why should we bother about this?
The government is planning to roll out direct benefit transfers (DBT) in place of input subsidies for farmers.
Given such large-scale differences in estimates of agricultural land, according to its own data, deciding on the scale and quantum of DBTs might become a difficult issue in the days to come.
There will be no brief published on 1st of January, 2016 (Friday)
The Forum IAS Team wishes all aspirants a VERY HAPPY NEW YEAR and a SUCCESSFUL YEAR AHEAD.
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