Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
-
- Economic Digest
- Digital payments set to take off this year: TRAI chief
- ‘Start-up India’ Action Plan: a good start, but Govt. apathy, big corporates a hurdle
- Reserve Bank of India’s ECB norms: two steps forward, one step back
- Flexible norms to make gold scheme glitter
- ‘Govt. must not pressure PSU banks to lend to corporations’
International
[1]. Greek islanders to be nominated for Nobel Peace Prize
Context:-
Greek islanders who have been on the frontline of the refugee crisis are to be nominated for the Nobel Peace Prize with the support of their national government.
Why?
The islanders, including fishermen gave up their work to rescue people from the sea.
It must be noted that a people of a country already dealing with its own economic crisis responded to the unfolding tragedy of the refugee crisis with “empathy and self-sacrifice”, opening their homes to the dispossessed, risking their lives to save others and taking care of the sick and injured.
Concern:-
Only individuals or organisations are eligible to win the prize.
The nomination will be implored by the Nobel committee members who will decide on whether to accept their nomination.
[2]. India welcomes Nepal amendment
Context:-
India welcomed the first round of amendments of the Nepal Constitution, which is expected to create a more inclusive society in Nepal.
Amendments:-
The amendments covered Article 42 to ensure more inclusive social justice, Article 84 to create a House of Representatives, and Article 286 to create a new process of constituency delimitation, helping the Madhesi groups.
The amendment process, however, did not include the main demand of the Madhesis for the creation of two separate Madhesi provinces in the plains of Nepal.
Concern:-
The amendments were passed in the absence of the 35 members of the Madhesi political parties who boycotted the late night session.
Science & Technology
[1]. Dinosaur bones found in Kutch
A team of Indian and German geologists and palaeontologists may have found the fossils of a 135-million-year old herbivorous dinosaur in Kutch, Gujarat, possibly the oldest such fossil found this century.
The pieces of bone, possibly from the limb or hip, suggests that it may have been a 10-15 metre long animal and, were the researchers’ claims to hold up, only among a handful of Jurassic-era dinosaur fossils from India.
[2]. Needle free method to deliver anesthesia
Context:-
Scientists have found a new method to deliver anaesthesia using a tiny electric current.
Benefits:-
Needle-free administration could save costs, improve patient compliance, facilitate application and decrease the risks of intoxication and contamination.
Making the anaesthetic effective:-
This can come in the form of a hydrogel, ointment or sprays; the most common are hydrogels that can contain lidocaine and prilocaine.
They found that applying a tiny electric current — a process called iontophoresis — made the anaesthetics more effective.
How is it done?
The researchers first prepared the anaesthetic hydrogels with a polymer to help it stick to the lining of the mouth.
They added two anaesthetic drugs, prilocaine hydrochloride (PCL) and lidocaine hydrochloride (LCL). They tested the gel on the mouth lining of a pig, applying a tiny electric current to see if it made the anaesthetic more effective.
The anaesthesia was fast-acting and long-lasting. The electric current made the prilocaine hydrochloride enter the body more effectively; the permeation of the anaesthetic through the mouth lining increased 12-fold.
[3]. New methods to make biofuels cheaply
Context:-
Scientists have discovered an inexpensive way to deliver carbon dioxide to micro-algae, which in turn can be harvested to make renewable fuels.
Carbon dioxide speeds up the growth of micro-algae.
However, the carbon dioxide (CO2) has to be free of contamination or the algae will die.
This new method purifies the carbon dioxide that is in power station flue gases by absorbing it into a liquid.
This liquid is then pumped through hollow fibre membranes. These hollow fibre membranes are like very long drinking straws, which can be immersed into the micro-algae beds.
Economic Digest
[1]. Digital payments set to take off this year: TRAI chief
Context:-
The Reserve Bank of India (RBI) recently issued payment banks licenses to 11 companies, many of whom are telecom companies that have experience of handling transactions, which are low in value and large in volume.
Expectations:-
Banking should become as easy as making a mobile phone call and this year could see digital payments take off in India in a big way with the entry of telecom companies as payment banks.
A low-cost model would attract even those at the bottom of the pyramid to digital payments and banking.
Banking would not become ubiquitous unless you drive down the cost and this can only be done through digital mobile banking, using Aadhar as a factor of authentication.
Two factor Authentication:-
RBI requires two-factor authentication for any transaction… either what you are (biometrics) and what you have (mobile phone, debit card) or what you know (user name and password) and what you have.
Mobile phone manufacturers are now putting iris authentication into the device… UIDAI is doing proof of concept. This is basically mobile phone (what you have) and iris (what you are). So in single click you can do the transaction
Cashless Transactions:-
Backing the government’s stated intent to promote cashless payments, which includes a mandate to switch all central government receipts and payments to paperless form by the end of 2016.
Incentivising digital Transactions:-
In IRCTC (the Indian Railways’ booking website), when you make an online booking you pay Rs 20 more compared to when you go to a counter. This should be reversed for digital transactions to be promoted.
Conclusion:-
The country’s telecom sector will be getting a big boost from the government’s Digital India program.
The Digital India Program has JAM — Jan Dhan Yojana (which provides financial inclusion), Aadhar (gives digital identity) and Mobile (provides means of communica tion as well as act as a proxy digital identity).
[2]. ‘Start-up India’ Action Plan: a good start, but Govt. apathy, big corporates a hurdle
Context:-
Start-up India’ initiative was launched in a move to help start-ups and catalyse entrepreneurship.
Start-ups and entrepreneurship are critical to India’s efforts to restart private investment into the economy, in the face of risk aversion, stalled or slow investments from corporate India.
Obstacles:-
Start-ups in India have faced two significant obstacles. One is government apathy, corruption and a complex approvals process. The other is the power of entrenched corporates, to oppose or kill start-ups which challenge them.
What is needed?
Structural reforms that permit free and fair competition and other issues that determine the viability and existence of start-ups. Net neutrality, for instance, is a policy requirement that will determine the future for tech start-ups.
The Action Plan:-
The Start-up India Action Plan lists out a comprehensive set of structural and regulatory reforms in order to achieve this. Income tax exemption, easing compliance through reduction of regulations and having fixed qualifications as to what a ‘start-up’ is, were expectations at the top of the entrepreneurial bucket-list.
It also provides an 80 per cent waiver on patent filing fees by start-ups, provide advisory services and create a Rs.10,000 crore fund-of-funds which is to be managed by professionals drawn from the private sector.
Tax Provisions:-
The Action Plan waives income tax on profits for a period of three years and also exempts taxes on capital gains which are invested in the ‘fund-of-funds’.
This move will help to reduce cash outflows and bring down the cost of running a start-up. In conjunction with the waiver of the ‘angel investor’ tax under the Finance Act, 2013, start-ups now can have improved access to funding opportunities.
Pending reforms like the GST regime would also make it easier for small start-ups to operate across the country.
Rs.10,000 crore ‘fund-of-funds’
This mega fund will not directly invest in start-up ventures. Instead, it will do so via SEBI registered venture funds. This fund will contribute a maximum of 50 per cent of the daughter fund size, providing a significant boost to the corpus of investments that start-ups have access to.
Promoting tech based start-ups:-
On the cost saving side, an 80 per cent rebate on patent filing costs alongside an exemption from having ‘prior-experience’ to be eligible under the public procurement process are steps taken to promote tech-based start-ups in particular.
Start up India Hub:-
The Action Plan also creates a centralised system under the ‘Start-up India Hub’ which assists start-ups by providing advisory services on financing, business structuring and improving management skills.
Simplifying the Registration Process:-
It also provides for a mobile app which allows start-ups to self-certify themselves and also acts as a single point of contact between entrepreneurs, regulators and the government. This is a positive move in simplifying the registration process.
Concerns:-
Government Interference:-
It sets up an ‘Inter-Ministerial Board’ led by the Department of Industrial Policy and Promotion which ‘validates’ the innovative nature of an enterprise, thereby qualifying it as a start-up – an involvement of government in this ecosystem that is hardly desirable.
Incubator recommendation:-
It requires a ‘recommendation’ from an incubator setup by the government or be supported by an incubator in a post-graduate institution recognised by the government — this need for validation and recommendation goes against the very steps the Action Plan takes to reduce government involvement.
This additional layer of bureaucracy could slow down the starting up process and needs to go.
Managing the Corpus:-
It is important that this corpus is not managed by Politicians or bureaucrats, but smart, savvy fund managers who have a track record on investing.
Supporting Non tech start-ups:-
While tax incentives, cost saving measures and funding support will undoubtedly drive up investment into innovative start-ups it is essential that the government not lose sight of non-tech start-ups.
It should make special provisions to ensure that this support structure extends to the agriculture, manufacturing, and handicrafts sectors.
Discord between State and Central labour laws:-
The Action Plan exempts starts-up from inspection under a fixed number of labour laws — six to be specific. There are about 45 laws at the central level and about four times this number at the state level.
The Centre needs to work with the States to ensure a smooth rollout of the benefits under the Action Plan and avoid discord between policies at the two levels.
Conclusion:-
The Start-up India Action plan is a good start to this – but will need continued support and evolution to make this a true, deep revolution for the youth of India.
[3]. Reserve Bank of India’s ECB norms: two steps forward, one step back
Context:-
The Reserve Bank of India’s revamped norms for external commercial borrowings (ECB) benefits global lenders rather than domestic borrowers.
Concerns:-
The relaxed norms in the new framework were more complex than the previous set of rules.
The new rules have liberalised the lending side, while there has been no real change in the borrower base.
Housing is left out:-
The latest ECB guidelines do not talk about housing. All the housing finance companies are waiting for ECB approvals.
Infrastructure funding restrictions:-
Sectors such as housing finance and infrastructure have been left high and dry, with ECB applications pending for over nine months and in some cases the government has urged the central bank to review its stance on restricting medium-term borrowings for infrastructure projects.
Complicated Regime:-
Earlier, it was a straightforward regime, now they have introduced three tracks of ECBs (according to tenor of the loan).
The revised framework’s three tracks include
- Medium-term foreign currency denominated ECBs with a maturity period of three to five years (Track I)
- Long-term foreign currency denominated borrowings with a maturity period of ten years (Track II)
- Rupee denominated borrowings of a maturity period of three to five years (Track III)
Rupee denominated track:-
This is the first time there is a rupee denominated track. A lot of things are not quite clear about this as yet, like whether it will be accepted by the market. There are other issues with hedging that will also have to be sorted out
Reasons for such restrictions:-
FCEB is more akin to an equity instrument while FCCB is a form of debt, and so that’s why the RBI wants greater control over the former.
Silver lining:-
The RBI has opened up the lender base abroad. We can now get access to funds from pension companies, insurance companies, wealth funds, etc, and the Indian market can tap that
ECB framework will be modified after a year, around November 2016, based on the ECB activity and the prevalent macroeconomic situation.
This is good as it shows the RBI’s commitment to tweak policy more frequently to ensure that the purpose of the policy is fulfilled
What are ECBs?
ECBs refer to commercial loans in the form of bank loans, securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares), buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of 3 years
FCCBs (Foreign Currency Convertible Bonds):-
FCCBs mean a bond issued by an Indian company expressed in foreign currency, and the principal and interest in respect of which are payable in foreign currency.
The ECB policy is applicable to FCCBs.
FCEBs (Foreign Currency Exchangeable Bonds):-
FCEBs means a bond expressed in foreign currency, the principal and interest in respect of which are payable in foreign currency, issued by an Issuing Company and subscribed to by a person who is a resident outside India, in foreign currency and exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments.
The ECB Notification:-
https://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=35592
The new framework, which has been finalized in consultation with the government, reduces the restrictions on the end-use of funds borrowed overseas and expands the set of overseas lenders from whom funds can be borrowed.
RBI added that it will expand the list of overseas lenders to include long-term lenders, such as insurance firms, pension funds and sovereign wealth funds.
Based on market feedback, RBI has allowed greater freedom to borrow money. This is part of the larger step towards liberalization of the capital account
While the broader intention appears to be to simplify the overseas borrowings, RBI has actually cut the cost at which short-term overseas borrowings can be raised, suggesting that it only wants higher quality issuers to go to the foreign market.
The increase in overseas corporate borrowings has been seen as a source of vulnerability for emerging markets like India as it leaves companies susceptible to sudden swings in foreign exchange rates.
[4]. Flexible norms to make gold scheme glitter
Context:-
The government has made a slew of changes in its gold monetisation scheme to make it more flexible and attractive.
The scheme was introduced two months ago the government has collected over 900 kilos of gold.
New Provisions:-
The new norms issued by the Reserve Bank of India (RBI) in consultation with the government are based on suggestions
- To make the scheme more accessible for potential gold depositors
- Allow premature redemptions
Awareness:-
A media campaign, including print media and mobile SMS is being undertaken to increase awareness among depositors.
Easy access:-
Gold depositors can now give their gold directly to the refiner rather than only though collection and purity testing centres (CPTCs, this would encourage bulk depositors including institutions to participate in the scheme.
Incentives to banks:-
Banks would now be paid a 2.5 per cent commission for their services on medium and long term deposits which include testing the purity of gold deposits, refining, storage and transportation.
Banks have also been given the freedom to hedge their positions in the case of short-term deposits, and issues around interest rate calculation as well as extending loans against gold deposits have been clarified.
Increasing Number of refiners:-
The number of refiners under the scheme is also likely to go up with the Bureau of Indian Standards (BIS) modifying the licensing condition that mandated three years’ experience to one year refining experience.
Premature redemptions:-
Premature redemptions are available after three years and five years for medium term and long term deposits, respectively. The interest payable to depositors in such cases would be reduced, while allowing them an exit option.
More value for gold:-
The quantity of gold collected under the scheme will be expressed up to three decimals of a gram to give consumers better value for their gold deposits that can be of any purity level.
Gold Monetisation scheme:-
The gold monetisation scheme allows people to deposit gold jewellery or bars with banks or designated collection agents, which could now also include 13,000 jewellers across the country.
In return, they get up to 2.50 per cent tax-free interest per annum and an exemption from capital gains made through trading or at the time of redemption.
The gold collected under the scheme is refined for domestic purpose with an eye on cutting India’s high gold imports, which registered a surge of 179 per cent in the month of December 2015.
[5]. ‘Govt. must not pressure PSU banks to lend to corporations’
Context:-
Social responsibilities of the banking sector will take a back seat if state-run banks start functioning like their private counterparts.
The government first should stop interfering in their functioning and pressurising the public sector undertaking banks to grant corporate loans.
Importance of PSBs:-
India could not have achieved green revolution, strengthen the priority sector lending in agriculture, fishery, small business and other sectors without the PSU banks..
The state-owned banks should focus on strengthening the domestic market as the economic slowdown across the world has shrunk the market affecting exports from India.
This can be done through promoting education, health and agriculture sectors in rural areas. Private Banks will not be able to achieve this and public sector banks should go back to the 1960’s making a specific demand with the central government in this regard.
No to privatisation
All India Bank Officers’ Confederation said trade unions are opposed to privatisation of public sector banks. Citing non-performing assets as one of the grounds for privatisation is myth.
A majority of the bad debts can be attributed to corporate and the government should empower public sector banks to recover non-performing assets.
Other issues:-
The unions are opposed to the proposed Industrial Relations Bill, seeking to consolidate various laws pertaining to trade union and other industry-related activities.
The government could achieve many of its projects due to the public sector banks. When officers and staff work overtime to implement government schemes they should also be compensated properly.
Opinions & Editorials
[1]. Public investment: for a new normal
Context:-
The author highlights the importance of Public investment to spur demand in the economy as private investments are not happening.
The article also discusses the ways for carrying out public investments without putting strain on the exchequer.
Current economic scenario:-
India has a far lower per capita income compared to other countries in the Brazil, Russia, India, China, South Africa (BRICS) grouping.
Moreover, early indications are that India’s growth rate is slowing this financial year.
The recent stagnation, if not further decline, in the rate of growth is a continuation of the decline seen since the 2008 financial crisis.
Agricultural performance has been poor since the boom of the 2003-08 phase and the pace of infrastructure growth driven by public investment has slowed.
Economic policy adhering to the outdated Washington consensus:-
Since 1991, the bureaucracy and the technocrats in government have looked at economic policy through the prism of the so-called Washington Consensus, leaving it with less than the desired degree of flexibility.
Washington consensus:-
This is the set of 10 policies that the US government and the international financial institutions based in the US capital believed were necessary elements of “first stage policy reform” that all countries should adopt to increase economic growth.
At its heart is an emphasis on the importance of macroeconomic stability and integration into the international economy – in other words a neo-liberal view of globalization.
An element of the Washington Consensus, which in reality is no more than an ideological construct, that stands in the way of such a project. This is the axiom that ‘an expansion in the role of government is not good for the economy’.
http://www.who.int/trade/glossary/story094/en/
Significance of Public Investment:-
It bears mentioning that in this period(2003-08), when India had come close to achieving a double-digit growth rate, private investment in infrastructure was very high but yet eclipsed by the growth of public investment.
This should make us accept the idea that publicly-created infrastructure is to be a component of any high-growth plan for the foreseeable future.
In purely macroeconomic terms, there are moments when public investment serves as a deus ex machina (https://en.wikipedia.org/wiki/Deus_ex_machina). This is when the private investor is skittish on spending
Public investment to spur demand:-
The present slowing of growth, to a great extent, points to the recent slowdown in demand.
In the past, even at times when the supply side was not much more favourable than it is now, private investment has been high. It stands depressed today, leaving the economy almost entirely dependent upon public investment.
There are only two sources of demand growth in India today, private consumption and public investment.
However, with exports having stagnated for close to a year now and private consumption largely tied to income, public investment remains the only source of demand growth.
Public investments can anchor Profit expectations:-
Public investment has a role not only as a source of aggregate demand but also as catalyst. This it does by anchoring profit expectations.
Private investment is based on expectations of profit.
Profit expectations are based on anticipations of the future state of the economy on which little is known.
However, private investors need to have an idea of it as demand for their products and it depends upon the aggregate demand and this depends upon investment, both public and private.
In the absence of public investment, each private investor must guess what the others are going to do.
Public investment provides forward guidance to the economy.
Is Public investment is against Fiscal Consolidation?
Washington Consensus argues against an expansionary budget on grounds that fiscal consolidation will be damaged.
Questionable basis for fiscal deficit targeting:-
India’s fiscal consolidation programme is based on norms drawn from the European Union (EU). There is no basis in economic theory for a specified fiscal deficit target. And, in any case, the EU’s economy is in such a mess that no self-respecting economist would adopt its macroeconomic architecture uncritically.
If an increase in the fiscal deficit is used to expand public infrastructure, it will serve a useful purpose, both in the current context and with regard to the longer-term trajectory of the economy.
Public investment without damaging Fiscal Consolidation:-
First, it is not absolutely essential that the fiscal deficit must expand substantially to enable a programme of increased public spending on infrastructure.
The real value of railway fares had been eroded by up to 40 per cent due to inflation. If public bodies are starved of funds, they cannot expand. This acts as an in-built depressor.
Not just better targeting but removing unwanted subsidies:-
It is possible that at least some of the subsidies of the Government of India may be bad for growth, and therefore employment, in the sense that they constrain expanding public investment
Divesting:-
It is considered a mistake to even suggest sale of public assets. But why should we not consider sale of assets in areas where a public presence is no longer considered as essential as it was some decades ago
There can be no intrinsic argument against the government selling some assets only to acquire others. It can be beneficial for growth and employment, and therefore for welfare.
It is a no-brainer to choose between a publicly-owned airline that charges more than its private sector counterparts and a stronger infrastructure in the form of roads, bridges and irrigation channels.
Conclusion:-
A rationalisation of subsidies and some asset swapping would ensure that he can do this without much more borrowing.
[2]. Speak to the Pakistan Army, too
Context:-
The article discusses how the talks between India and Pakistan should also include the army counter parts to take the relationship forward.
Changing Mindset of Pakistan Political Leaders:-
There is an emerging clarity in the mind of top leadership regarding peace with India.
It is realised that greater political empowerment and improvement of civil-military balance required improving relations with India.
A military for which the threat from India remains the raison d’etre could not be engaged evenly without improving ties.
Peace Cycle:-
The peace initiative now seems to be a tragic cyclic process in which hopeful overtures end with some act of terrorism, then tension, and finally an effort to begin again.
Power of the Army:-
Peace remains elusive as all major political parties put together are unable to change the Army’s perspective.
The political parties may represent an alternative pole in the overall power politics of the state but they are still not in a position to challenge the military’s political prowess.
In one way or the other, all major political parties are a product of the Army General Headquarters (GHQ). This does not mean that they will not deviate from the path set by Rawalpindi but that the Army remains in a better position to checkmate them.
Army decides the tone of peace talks:-
This is not to forget the fact that over the years Pakistan’s military has begun to manipulate the national narrative as well. It has indeed moved from Military Inc. to Media Inc.
The tone of the popular national discourse is set by the armed forces and their public relations agency.
The Army on the one hand and the militants on the other manage to challenge the political class. A politician, who is constantly challenged on grounds of corruption or declared anti-nationalist, has less credibility to author a grand national strategic narrative.
India as Anti Pakistan:-
Although unable to present any convincing evidence internationally, Rawalpindi has managed to convince itself that New Delhi remains hostile to the idea of Pakistan. .
A popular notion is that the Indian Army is equally sceptical of peace and hence central to the conflict. It is indeed the historic balance of power strategy that seems to be at play in determining relations between India and Pakistan.
There is somewhere a deep-set discomfort if not insecurity amongst common Pakistanis that India has not accepted Pakistan’s reality. Almost seventy years after 1947 there is still a lack of closure on Partition.
Changing Global Setting:-
Referring to the military’s thinking, it is not that the organisation is totally incapable of thinking about peace. The global and regional realities are constantly shifting.
There is also Islamabad’s partnership with Beijing that would like relations to improve between the two South Asian neighbours to attain a certain level of stability in the region.
Only with the consent of Army:-
Both trade and peace with India can happen but it has to be done carefully and it has to go through the Army rather than the Prime Minister’s office.
Apparently, there are several occasions on which the Army tried to reach out to its counterpart.
Media’s Exaggeration:-
The media on both sides of the border tends to not only get belligerent but fan belligerence, especially during a crisis. It almost feels that both states are on the doorsteps of a conflict, perhaps even a nuclear encounter.
Maybe peace cannot be brought about through pre-set formulas.
Conclusion:-
Much as India prides itself on its democratic values, it may have to find a way to initiate a parallel conversation — one with the civilian government and another with the armed forces. Unless the GHQ is brought on board (but in the shadow of a political government), things might not move.
[3]. Sobering reflection from Davos
Context:-
China’s stock market turbulence and the impact its growth slowdown is having on the global economy were dominant themes last week at the annual World Economic Forum.
Significance of Chinese Slowdown:-
That China and its fortunes have come to dominate discussions is testimony to the extent to which its companies and manufacturing industry have integrated with the rest of the world, as well as to the increased international concern over the perceived opacity of the country’s banking and financial sector’s real levels of indebtedness.
International Monetary Fund commented that financial markets need more “clarity and certainty” about China’s management of the yuan’s exchange rate, especially with reference to the U.S. dollar
Threatening the Global Economy:-
A study showed that 10 per cent decline in the value of the Chinese currency against the dollar by the third quarter of 2016 — if accompanied by resultant competitive devaluations among emerging market peers — could roil economies and markets worldwide, with the eurozone and Japan projected to be the hardest hit.
The domino effect could retard global growth by 0.2 per cent and hurt countries including the U.S., Brazil, Russia and India.
End of Monetary easing tool:-
According to RBI Governor Raghuram Rajan Monetary easing may have run its course and reached the limits of efficacy as a policy tool.
Glaring Inequality:-
WEF meet, said the richest 1 per cent owned as much wealth as the remaining 99 per cent combined did, with the gap in wealth widening even faster than anticipated.
Pope Francis’s admonition to the global political and economic elite to reflect on their own role in creating inequality has asked the wealthy and powerful to act to help address the inequality lends a powerful moral edge to the issue.
[4]. The big military challenge
Context:-
The terrorist attacks on Pathankot Air Force Base revealed weaknesses in our intelligence, police and security procedures.
While all of them need to be addressed, however there are larger issues—which can have far more disastrous consequences for India’s national security, which need attention.
The attacks in Pathankot should remind us that India lives in a dangerous neighbourhood and it should therefore focus on strengthening our military.
Committee Recommendations that faded away:-
Naresh Chandra Committee:-
It was established in 2011 to revisit the defence reforms process. This committee recommended the creation of a Permanent Chairman, Chiefs of Staff Committee—a less than perfect nomenclature for the Chief of Defence Staff.
For the first time ever all three service chiefs supported creating such a post.
Later, numerous controversies surrounding General V.K. Singh put paid to any talk of defence reforms.
Arun Singh:-
In 1986, Arun Singh was instrumental in creating a tri-services and joint civil-military institution called the Defence Planning Staff (DPS) in an attempt to rationalise defence planning. It quickly lost its relevance as the services opposed this initiative.
Ajai Vikram Singh Committee:-
More recently, the Ajai Vikram Singh Committee was tasked to find way to lower the age of combatant commanders. However, the implementation of the committee report was left to the services.
In the army this created a major controversy—which is currently being battled in the courts.
Other Recommendations:-
The Andaman and Nicobar Joint Command, which was founded to be an experiment in jointness has, in practice, been “subverted” by a non-cooperative attitude from the services.
Finally, there is a variance between the report submitted by the late K. Subrahmanyam (under the aegis of the Committee on National Defence University) on India’s Defence University and how it is currently being implemented by the military.
In sum, reforms will not succeed if its implementation is not closely monitored
Reform areas:-
Six broad areas for reforms were identified—
- Defence planning
- Enhancing jointness (the ability of the army, navy and air force to operate together),
- Urging manpower rationalization (smaller tooth to tail ratio),
- Emphasizing professional military education,
- Restructuring higher defence management and
- Defence procurement process.
Quantity Over Quality:-
India is probably the only country in the world which is expanding its military manpower which, by definition, curtails resources for military
The Indian military is among the least ‘joint’ major militaries in the world and its system of professional military education emphasizes training over education.
It all lies in the implementation:-
However, like with so many government projects, the most important issue is that of implementation. If this initiative is left to the bureaucracies—civilian or military, then reforms are unlikely to succeed.
Conventional wisdom would have the government announcing reform measures and leaving it to the military and the defence ministry to implement them. Doing so will likely subvert the reforms, as has happened in the past.
Obstacles to the reform process:-
There are three significant obstacles to defence reforms.
Creation of the CDS:-
First, it is not clear if, and how, will the Chiefs of the three services give up powers for the proposed Chief of Defence Staff (CDS). If the restructuring of higher defence management results in an institutionally weak CDS then it defeats the purpose.
Creating joint commands:-
Second, it is not clear how the government will create more joint commands, especially since this is opposed by the military.
Their opposition is primarily because it curtails the number of posts available for their upward mobility. It is not surprising therefore that they will advocate for more joint commands—Cyber, Space, Special Forces for instance, but will be unwilling to integrate existing commands.
Effectiveness and efficiency is therefore sacrificed to the logic of bureaucratic expansion and increased promotion pathways.
Changing the Status Quo:-
Third, there is opposition, usually in private, from civilian bureaucrats who do not want to change the status quo. They prefer the existing arrangement which gives them considerable powers with little accountability.
The Example of US military reforms:-
The Goldwater Nichols Act is the act which transformed the U.S. military. However, this initiative did not occur overnight and was preceded by a public debate and, perhaps more importantly, required a civil-military partnership consisting of reform minded individuals.
Defence ministry should consider forming a Defence Reforms Unit comprising politicians, former officials and technocrats all sharing the vision for defence reforms.
This could thereby monitor the progress of different reform measures.
Conclusion:-
It would be India’s loss if, after a year, defence reforms remains an aspiration.
[5]. National Problem, local solutions
Context:-
A marked increase in civil society’s awareness about local issues, especially in urban areas. NGOs, social enterprises and start-ups have begun to deliver local solutions to local problems.
The government of India with its Swachh Bharat mission has also joined in, bringing all its firepower. This infectious enthusiasm, however, faces several pitfalls that we must avoid if we are to achieve even moderate success.
One size fits all:-
The idea of one-size-fits-all continues to fester. Also, trained model thinking often ignores corruption and oligopolies that prevent the most optimal solution from being implemented.
Segregation at source model:-
For example, consider Bangalore and its ever-growing problem of solid waste management. A solution that has been proposed is segregation at source — a model that has worked reasonably well in the West.
However, while some people may segregate their waste by choice, a few may only do so when there is punitive action, while others may not do it even if there’s the threat of a hefty fine or a jail term. It’s an open secret that segregation at source is disadvantageous to the garbage mafia in Bangalore (that rakes its dues from the government based on the weight of garbage in trucks) and, therefore, no amount of waste-profiling or optimal disposal route-mapping will complete the loop and result in tangible outcomes.
The solution is not to do away with model thinking but instead operate carefully, under the perpetual assumption that scaling will not work unless proven otherwise
Dependence on Data driven decision:-
A second and related obstacle is the over-dependence of data-driven decision-making.
The walk from raw data to report can create an illusion that all has been accounted for, but the data we get is wrought with inconsistencies and potential errors.
The case study on school toilets:-
For instance, Karnataka achieved the 100 per cent toilets mark in all its schools last year, a feat that was tempered somewhat by the data that said 5,344 were dysfunctional. At around 5 per cent of the total toilets in the state, the figure doesn’t look too bad on paper.
The loopholes:-
But the cracks are in the meta-data: A toilet is considered dysfunctional only when there’s no water for cleaning. There are toilets which were unusable and this wasn’t just because of a lack of water
Data-based decision-making is here to stay, but real solutions are possible only when data is highly granular. We must operate under the assumption that data-based recommendations are useless unless the underlying data is ground-truthed and verified against the experience of local-level administrators and civil society.
Wooing the Youth:-
A third drawback is our narrative — a narrative that is devoid of any attempts to woo the youth towards social change.
There are atleast nine million unemployed and disgruntled youth, who have the potential to change society but are not given any impetus.
It is not enough to dole out lessons in civic and environmental responsibility and hope for change without providing the necessary platform or opportunity for youth to explore their potential.
India’s famed demographic dividend is slipping away between our fingers, even as we gloat about it in the rest of the world and unless we do something about it that is quick and effective on a local scale, we will have to start preparing for a demographic liability.
Confusing Perception with reality:-
The last pitfall is that of confusing perception with reality. In the age of social media and instant gratification, it is easy to get frustrated by bureaucracy and government.
And it is equally easy to quell that frustration with a few photo-ops, a strongly worded tweet or an emphatic ratification by a television presenter.
Conclusion:-
The disillusioned millions hold the key to a better India. It is only a matter of time before they burst onto the scene and be the change they wish to see if given the right tools.
[6]. Navigating the fourth industrial revolution
What is It?
The fourth industrial revolution combines digital and physical systems to completely transform the interaction between humans and machines.
The tools that it has at its disposal include—but are not limited to—big data, robotics, augmented reality and the Internet of Things.
The fourth industrial revolution builds upon the first three industrial revolutions (steam power and mechanical production; assembly lines and electrification; and electronics and computing) and the rapid pace of technological progress since then to achieve almost surreal results by fusing the boundaries between all of them.
Examples:-
Fuel efficiency in ships:-
The crane used for loading ships can be fitted with sensors that measure the weight of the containers and plug it into a software model. Using the design of the ship, the software sends instructions on where exactly to place the container in order to optimize the weight-balance of the ship. This process can enhance the fuel efficiency of the ship by 5-8%
Public service delivery:-
By combining the data from the user cards and systems built-in to report train malfunctions, Traffic For London automatically credits the user’s account for delays without the latter being required to fill an application form.
Unable to Quantify the impact:-
The impact of the fourth industrial revolution has so far not been reflected in productivity numbers.
Reserve Bank of India governor Raghuram Rajan speculated, speaking at the just-concluded annual meeting of the World Economic Forum, which this year was dedicated to the fourth industrial revolution, on three possible reasons for this.
Perhaps it will take more time. Or maybe the inadequate monetization of much of what is being built may be playing a role. Or it might be entirely possible that the way the world measures productivity is outdated and needs to be altered.
Impact:-
Labour Market:-
The biggest impact, perhaps, will be felt by the labour market.
The fourth industrial revolution, by its end, might be responsible for a large tranche of job losses at the lower end of the skill spectrum.
This will be offset—at least partially—by an increase in demand for high-skill jobs. Driverless cars, for instance, will obviate the need for drivers but require a lot of smart coders who can make such cars ply the roads in different parts of the world safely.
Security Concerns:-
Besides making them stay competitive, the tools of the fourth industrial revolution help firms in a number of ways. Robots, for instance, do not unionize—at least not yet—nor do they litigate.
While such developments that hurt vested interests will create obstacles, additional questions around individual privacy and national security might become a millstone around the necks of those at the forefront of the revolution.
India and fourt Industrial Revolution:-
In 1600, India contributed more than 22% of the world’s gross domestic product, which plummeted to about 4% in 1990 before economic reforms revved it up to 6.8%.
A major reason was India failing to climb the bandwagon of the first industrial revolution. India remained behind the curve on the next two as well. If India fails to reap the benefits of the fourth, it will not have imperial Britain to blame this time.
Challenges:-
Skilled Labour:-
Its comparative advantage of cheap labour, most of which is very poorly skilled, will be blunted by the fourth industrial revolution.
While India needs to invest heavily in upskilling initiatives, the probability of some dislocations cannot be discounted. This will require it to make provisions for elaborate safety nets without letting it degenerate into an entitlement culture.
Institutional concerns:-
Building the right institutions of governance, particularly regulatory institutions, is another challenge. Hierarchical bureaucracies operating in silos are not geared to deal with networked firms operating on dynamic real-time data.
For example, the Karnataka transport department’s recently framed guidelines prohibit, among other absurd measures, dynamic pricing by app-based taxi operators.
Conclusion:-
Regulators have to do a lot better for India to realize the fourth industrial revolution’s benefits.
ForumIAS Editorial Team wishes you a HAPPY REPUBLIC DAY.
There will be no 9 PM Brief on 26th January 2016.
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