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Question and Answer :: SRIRAM'S IAS

Civil Services Exam Preparation

 Q. 226. Digitising agriculture in the face of climate change
Ans. Digitisation of agriculture or e-agriculture is seen as an emerging field focused on enhancing agricultural and rural development through improved information and communication processes. Digitisation interventions seek to achieve a triple bottom line:
  • Increasing farm productivity and income sustainability.
  • Helping farmers adapt to climate change.
  • Reducing greenhouse gas emissions wherever possible.
Digitisation is integral to climate smart agriculture, a sector rapidly expanding. Climate-smart agriculture (CSA) is an approach that helps to guide actions needed to transform and reorient agricultural systems to effectively support development and ensure food security in a changing climate.
Interventions using ICT have already taken shape. Major activities include:
  • Testing and developing portfolios of climate-smart interventions for different agro-ecological zones and farm types.
  • Developing climate-smart villages.
  • Weather-based insurance.
  • Disseminating climate information based agro-advisories.
  • Mapping hotspots of germplasm collection and conservation. 
Importance of e-agriculture
The world will need 50-70 per cent more food by 2050. Thus, the main challenge today is, how to produce more food. A way to do that is to make the world’s 500 million smallholder farmers more productive and efficient. ICT is crucial for this to happen. Digitising agriculture can help countries meet goals effectively in many areas like: agricultural extension and advisory services, promoting environmentally sustainable farming practices, disaster management and early warning system, enhancing market access, food safety and traceability, financial inclusion, insurance and risk management, capacity building and empowerment, among others. ICT-based initiatives in different aspects of agriculture allow farmers access to information about agricultural value chains, risk management, market and price information, advisory services, policies. They also bring back data for agricultural research.

How can digitisation of agriculture benefit smallholder farmers?
  • It will dissipate information directly to the farmers, giving them the power of information and facilitating decision-making.
  • It brings transparency in agricultural supply chains, removing the huge inequality that exists and guaranteeing adequate income to the farmers, who are generally at the losing end of the chart.
  • It will provide reliable data for research and policy-making. Better data will allow government as well as non-government organisations to design farmer-friendly policies and planned interventions.
In a bid to facilitate countries to form national and regional strategies for digitisation of agriculture, the FAO along with the International Telecommunication Union, released a framework to guide formulation of national plans. The organisation offers technical assistance in the design, development and implementation of sustainable ICT solutions to address some of the key challenges in agriculture.
Hindrances in development of e-agriculture
  • E-agriculture is a multi-stakeholder process that involves bringing together many different ministries and departments as well as private sector players such as insurance, banking and mobile network operators. It is quite difficult to bring all the stakeholders on the same page.
  • Another challenge is that paying for digitisation of agriculture is not as mainstream as thought till now.
 Q. 225. The Maternity Benefit (Amendment) Bill, 2016
Highlights of the Bill
  • The Act provides maternity leave up to 12 weeks for all women. The Bill extends this period to 26 weeks. However, a woman with two or more children will be entitled to 12 weeks of maternity leave.
  • The Bill introduces maternity leave up to 12 weeks for a woman who adopts a child below the age of three months, and for commissioning mothers. The period of maternity leave will be calculated from the date the child is handed over to the adoptive or commissioning mother.
  • The Bill requires every establishment with 50 or more employees to provide for crèche facilities within a prescribed distance. The woman will be allowed four visits to the crèche in a day.
  • An employer may permit a woman to work from home, if the nature of work assigned permits her to do so. This may be mutually agreed upon by the employer and the woman.
  • The Bill requires an establishment to inform a woman of all benefits that would be available under the Bill, at the time of her appointment. Such information must be given in writing and electronically.  
  • The Bill introduces a provision to grant leave of upto 12 weeks for: A woman who legally adopts a child below three months of; For a commissioning mother (A commissioning mother is defined as a biological mother who uses her egg to create an embryo implanted in another woman).
Key Issues and Analysis
  • Several expert bodies like the WHO have recommended that 24 weeks of maternity leave is required to protect maternal and child health. However, since the costs of this leave are to be borne by the employer, it may have an adverse impact on job opportunities for women.
  • Various countries have implemented different funding models in relation to maternity benefits. In some countries the employer bears the cost, while in some others it is paid by the government.
  • While women will be provided with 26 weeks of maternity leave for two children, the period of leave for a third child will be 12 weeks. This could affect the growth and development of the third born child.
  • The Act and Bill cover women workers employed in establishments with 10 or more employees, and other notified establishments. However, a majority of the women workforce, who are in the unorganised sectors, may not be covered.
  • There are several labour laws that provide maternity benefits to women in different sectors. These laws differ in their coverage, benefits and financing of such benefits.
 Q. 224. Why India and China need to move past tensions?
The ritual bickering between India and China has once again been brought to the fore, this time over the Dalai Lama’s visit to Arunachal Pradesh. This is symptomatic of the contradictions in the way India and China practice diplomacy. This accentuates the way each perceives the divergences in the other’s strategic thinking and how they respond to it.
Not surprisingly, the first Strategic Dialogue between the two countries held recently aimed at forging an understanding over a variety of issues failed. To take the example of India’s application to list Masood Azhar under the 1267 Sanctions Committee of the UN Security Council, China has refused to vote in favour of this measure despite India conveying its concerns about terrorism.

India’s dialogue with China on counter-terrorism is filled with disproportionate expectations and preconceptions. For instance, India’s expectation that China will be more than willing to support its counter-terror initiatives because China too is a victim of terrorism is a wrong assumption.
  • Firstly, China’s response to terrorism is based on the aggressive “Strike Hard” campaign against Uighurs. Chinese measures, which include restrictions on religious teaching, fasting and attire, frequent raids to retrieve religious materials, travel ban, and confiscation of passports would all be considered unconstitutional if applied in India. Thus, Chinese thinking that unilateral hard measures are justified to counter terrorism makes China’s approach distinct from that of India and, in turn, its expectations that India deal with terrorism unilaterally.
  • Secondly, China views terror attacks and local tensions in Kashmir, and the ongoing counter-terror operations in the Valley, through the prism of its Pakistani interlocutors. This makes it more sympathetic towards Pakistani concerns.
  • Thirdly, China prefers that India deal with the terrorism problem through bilateral means either through negotiations or security actions rather than involving multilateral institutions such as the UN. For China, a public and diplomatic stance of indirectly having to choose between Pakistan and India would be difficult to justify given its all-weather relationship with Pakistan. Thus, China refused any comment on India’s surgical strikes across the border in Pakistan Occupied Kashmir (PoK) on the basis that it was a bilateral issue.
  • Another seldom conveyed Chinese argument is that the listing of individuals in the 1267 list in the past has not resulted in curbing terror activities as evident in the free movement of Hafiz Saeed and Zakiur Rahman Lakhvi. Thus, China sees no point in supporting India at the expense of weakening its partnership with Pakistan on a policy, which, in any case, it considers as ineffectual.
However, there are encouraging signs that India and China still can cooperate on this difficult issue. Given that the Chinese public and intelligentsia are concerned about terrorism in Xinjiang, India has numerous opportunities to influence opinion in China.
This requires sustained engagement with various stakeholders, including law enforcement agencies, the military apparatus, legal experts, and academic communities to help bridge the gap in understanding.
  • Such interactions would not only inform them about the level of the terrorist threat faced by India but also the compulsions that determine India’s responses to terrorism.
  • These interactions would be helpful, as stakeholders play a significant role in using public forums in mass media to engage and influence the public debate and provide inputs to policy-making.
  • Moreover, it would help foster a crop of experts who could offer an effective counter-narrative to the views espoused by dominant Pakistan-influenced South Asia counter-terrorism experts.

Dangerous Trends
While opportunities exist for India and China to build trust, certain factors exacerbate the mistrust.
  • On the one hand, China wants to assuage Pakistan’s insecurities by extending it financial, military and diplomatic support. On the other, it views Pakistan’s role in South Asia as helping to maintain the regional balance. This desire to maintain the regional balance through Pakistan contradicts China’s official foreign policy pronouncements that accord India major power status in the international system. This mismatch between wanting to maintain a power balance in the region, which requires China to keep Pakistan on an equal footing with India to some extent, and treating India as a major power that would include acknowledging its potential for contribution to global issues and attention to core concerns has created contradictions in Chinese diplomacy. Clearly, this incongruity reduces China’s chances of inducing favourable policies from India. While India may recognise China’s attempt to provide economic stability to Pakistan, it finds it unacceptable that China is trying to use Pakistan as a regional balancer.
  • Compounding this is the Chinese ambiguity in concurrently treating India both as a rising power and a developing country. China labels India as a country with overwhelming economic and social challenges where China could play a role in investment in infrastructure. However, an international environment that has apparently been favourable to India had led China to term India as a rising power in the international system. Though India does not view such a categorisation negatively, it helps China to maintain an economically cooperative approach while being politically assertive. This approach helps China to limit India’s overall geo-political outreach, especially forging closer strategic cooperation with US or limiting Pakistan’s international space.
  • India’s responses to Chinese actions are often disproportionate. For instance, India tends to view economic countermeasures such as reviewing visa norms for Chinese entrepreneurs as an appropriate response to disruptions in the political sphere. However, such measures are premature since India is yet to bear the fruits of Chinese investment. Instead, India should seek more relative gains in economic cooperation in the spirit of fostering trust and stability.
Continued Economic Cooperation
Nevertheless, in spite of political tensions, economic cooperation has continued to expand.
  • Engagements are underway between the Chinese Council for the Promotion of International Trade and its Hunan Sub-council with the Consulate-General of India in Guangzhou to accelerate collaborations for formulating long-term development plans.
  • More Chinese entrepreneurs are also being encouraged to invest in the Indian market.
  • Another area unaffected by political tensions is cooperation in the railways sector.
Undoing economic cooperation is neither desirable nor proportionate. Both countries have far too much to lose from a downward spiral in bilateral relations.

Need for Clear Signalling
  • It is in China’s interest to reformulate its thinking on the nature of India’s rise in the international system. On its part, India needs to differentiate its mode of diplomacy and interactions with China, i.e., avoid ad-hoc and conflicting signals. India uses political signals to convey information to China in order to influence its behaviour. Typically, this information reveals India’s options for a policy shift.
  • However, signalling must also reveal information about India’s grasp of the historic and strategic contexts.
  • In addition, India should be aware of the fact that China is likely to ignore the signals if it perceives the information revealed to be misleading. In fact, ambiguous signals have generally effected a more aggressive Chinese reaction because of the Chinese perception that India would either not be able to carry out a change in policy or that historic and strategic circumstances would prevent India from changing its policy.
  • Therefore, India should only convey political signals that are believable by China and doable by India. Only thus can China be persuaded to take such signals seriously.
Finally, India should aim for a strategic dialogue that focuses on the fundamentals of shared beliefs and political culture, and is supported by widespread engagement at the provincial, governmental and academic levels. In the case of counter-terrorism, cultivating a relationship with provinces and associated agencies directly affected by terrorism is imperative. India’s responses should be proportionate, i.e., not treat all issues of contention as of equal importance. Unless India and China’s ability to differentiate the nature of disagreements in the bilateral relationship improves, foreign policy decision-making would be swayed by disproportionate expectations.
Agni – V Successfully Test-Fired: Agni-V, the Long Range Surface-to-Surface Ballistic Missile was successfully flight tested by DRDO. 
Light Combat Aircraft (LCA) ‘Tejas’: Indigenously developed LCA is an advanced technology, single seat, single engine, supersonic, light weight, all-weather, multi-role, air superiority fighter designed for air-to-air, air-to-ground and air-to-sea combat roles. ‘Tejas’ made its international debut with participation in the Bahrain International Air Show.  
Medium Altitude Long Endurance UAV ‘Rustom-II’: Rustom-II, a multi-mission Unmanned Aerial Vehicle (UAV) is being developed to carry out the intelligence, surveillance and reconnaissance (ISR) roles for the three Armed Forces with an endurance of 24 hours. DRDO successfully carried out the maiden flight of Rustom-II.
Surface-to-Air Missile ‘Akash’: The medium range surface-to-air missile ‘Akash’ has been developed and inducted into IAF and Indian Army.  
Anti-Tank Missile ‘PROSPINA’‘Nag’ is a third generation anti-tank missile (ATM) with 'Fire & Forget' and 'Top Attack' capabilities, which can be used in day and night. It is deployed on a specially modified Infantry Combat Vehicle (ICV) BMP-2 vehicle 'NAMICA'. The guided flight tests of ‘Nag’ were carried out with the objective of demonstrating range capabilities of IIR Seeker during worst time of the day in summer environment.
 Q. 222. Defence-related developments
Ans. Various Achievements of Ministry of Defence 
Speedy modernisation of the Armed Forces to meet present and emerging challenges, development of requisite capacities and infrastructure for making up critical deficiency of weapons and equipment and creating a robust defence set up in the country through the ‘Make in India’ initiative, were the salient achievements of the Ministry of Defence during 2016.
The year also saw progress for the welfare of Ex-Servicemen as the much awaited One Rank One Pension (OROP) scheme funds reaching the accounts of Ex-Servicemen and families. During the year as part of Defence Diplomacy, India engaged with its neighbours and Far Eastern countries, as well as also developed countries through bilateral talks, ship visits and bilateral as well as trilateral military exercises.
The new Defence Procurement Procedure (DPP) 2016 was promulgated for capital procurements and came into effect from 1stApril.  DPP-2016 has a focus on achieving the ‘Make in India’ vision by according priority to ‘Buy Indian – IDDM (Indian Designed, Developed and Manufactured) and ‘Buy (Indian)’ categories. It also focuses on enhancement and rationalization of indigenous content.
The Ministry of Defence also issued guidelines for penalties in business dealings with entities, which have come into effect from 21 November. The guidelines lay down policy for levy of financial penalties and / or suspension / banning of business dealings with entities, seeking to enter into contract with / having entered into a contract for the procurement of goods and services by the Ministry of Defence.
Current Situation in J&K: The security situation in J&K is at an important crossroads. Cease Fire Violations (CFVs) saw a significant rise in the preceding months. Army along with CAPF and JKP continues to put in relentless efforts to bring back normalcy to the Kashmir Valley.
Situation Along LAC: There is no commonly delineated Line of Actual Control (LAC) in the border areas between India and China.  From time to time, on account of differing perception of the LAC, situations have arisen on the ground that could have been avoided if we had a common perception of the LAC. 
Surgical Strikes along Line of ControlBased on specific and credible inputs about some terrorist teams having positioned themselves at launch pads along Line of Control to carry out infiltration and conduct terrorist strikes in Jammu and Kashmir and in various metros in other States, the Indian Army conducted surgical strikes on 29 Sep at several of these launch pads to pre-empt infiltration by terrorists. The operations were focussed on ensuring that these terrorists did not succeed in their design to cause destruction and endanger the lives of our citizens. During these counter terrorist operations significant casualties were caused to terrorists and those providing support to them.
India-France Joint Military ‘Exercise Shakti – 2016’  ‘Exercise Shakti-2016’ is the seventh edition in the series of bilateral exercises.
India-Nepal Combined Military Training ‘Exercise Surya Kiran IX’ 
India–Indonesia Joint Training ‘Exercise Garuda Shakti IV’ it is the fourth edition of the joint exercise.
‘Exercise Force -18’, the largest ground forces multinational field training exercise on ‘Humanitarian Mine Action and Peacekeeping Operations’
 ‘Exercise Jalrahat’: As a step towards achieving the goals of National Disaster Management Plan 2016 released by the Prime Minister on 1 June and with the outlines of identifying high risk disaster areas and coordination between the Armed Forces, NDRF and State Disaster Management Agencies along with other State Emergency services, a mock exercise and demonstration under ‘Exercise Jalrahat’ was conducted on 29 June in Shantipur area of Guwahati on the banks of the Brahmaputra River.
‘Exercise Maitree’:   A joint exercise of the Indian Army and Royal Thailand Army.
‘Exercise YudhAbhyas’: As part of the continuing Indo - US defence cooperation, it is the 12thedition of the joint military training.
India -Kazakhstan Joint Exercise: As a part of India’s continued efforts to strengthen Indo-Kazakh relations, Armies of the two countries conducted a joint exercise.
‘Exercise Indra – 2016’: Indo-Russian eight edition of Joint ‘Exercise Indra’ was held.
‘Sino - Indian Joint Exercise’: As part of the ongoing initiative to enhance interaction and cooperation between India and China, under the provisions of the Border Defence Cooperation Agreement, 2013, the Indian and Chinese armies held their Second Joint Exercise ‘Sino India Cooperation 2016’.
Army Skill Training Centre: The pilot project of the Army Skill Training Centre(ASTC) was inaugurated by President. Army personnel and their spouses/wards who attend training at ASTC will receive skill certificate from NSDC and will become eligible for employment/entrepreneurship under Pradhan Mantri Kaushal Vikas Yojna scheme.
      To enhance India’s presence in the maritime arena/ across our area of responsibility/ interest, the Indian Navy was deployed extensively across the globe and conducted exercises with friendly foreign navies.
Exercise MALABAR 2016:  In consonance with India’s ‘Act East Policy’ in the 20th edition of Exercise MALABAR-16 India, US and Japan conducted joint exercise. 
Exercise RIMPAC: Exercise RIMPAC is the largest multilateral naval exercise in the world and is held biennially in the Western Pacific Ocean. Ex RIMPAC is a platform for multilateral operational interactions to increase interoperability and development of common understanding of procedures for maritime security operations. India participated in the exercise. India participated in Ex-RIMPAC.
ADMM Plus Exercise on Maritime Security and Counter Terrorism ADMM Plus (ASEAN Defence Ministers’ Meeting Plus) Exercise on Maritime Security and Counter Terrorism is a multinational exercise under the aegis of ADMM Plus consortium. Indian Navy participated in the latest edition conducted in Brunei and Singapore, with various drills and exercises in the South China Sea.
EXERCISE KONKAN 16:  it is the annual bilateral maritime exercise between the Indian Navy and the Royal Navy (United Kingdom). Exercise KONKAN was institutionalised in 2004.
INDRA NAVY – 2016:  The 9th edition of exercise INDRA NAVY, an annual bilateral maritime exercise between Indian Navy and Russian Navy was conducted in the Bay of Bengal. The primary aim of the exercise was to increase inter-operability amongst the two navies and develop common understanding and procedures for maritime security operations.  
Rafale Acquisition deal: The much awaited Rafale deal with France was signed in New Delhi under which France will provide 36 Rafale fighter jets to India. The twin-engine, multi-role aircraft will be capable of carrying out various combat missions like Air Defence, Ground Attack, Reconnaissance, Anti-ship strikes etc. 
‘Tejas’ Induction: The Light Combat Aircraft (LCA) ‘Tejas’ was inducted into No. 45 Squadron of the Indian Air Force (IAF).
‘Op Sankat Mochan’: Stranded Indian nationals were evacuated from Juba, the capital of war-torn South Sudan in July.
India gets Women Fighter Pilots:  History was created as the first three women fighter pilots of the IAF were commissioned. With this, India joined a select few nations in the world that have women fighter pilots. 
 Q. 221. Small Finance Bank (SFB)
Ans. What is SFB?
The Small Finance Bank (SFB) is a private financial institution intended to further the objective of financial inclusion by primarily undertaking basic banking activities of acceptance of deposits and lending to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities, but without any restriction in the area of operations, unlike Regional Rural Banks or Local Area Banks.

Who are eligible to apply?
  1. Resident individuals/professionals with 10 years of experience in banking and finance and companies and societies owned and controlled by residents,
  2. Existing Non-Banking Finance Companies (NBFCs), 
  3. Micro Finance Institutions (MFIs), and 
  4. Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.
Salient Features:
  • The minimum capital for SFBs is prescribed at Rs. 100 crores. Foreign Investment is permitted as in the case of other private sector commercial banks.
  • They are subject to all prudential norms and regulations of RBI as applicable to existing commercial banks like maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
  • SFBs can undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI.
  • The concept of small finance banks was also one of the recommendations in the 2009 Report - A Hundred Small Steps - of the Committee on Financial Sector Reforms headed by Dr. Raghu Ram Rajan.
 Q. 220. Atal Pension Yojana (APY)
Benefit of APY:   Fixed pension for the subscribers ranging between Rs. 1000 to Rs. 5000, if he joins and contributes between the age of 18 years and 40 years. The contribution levels would vary and would be low if subscriber joins early and increase if he joins late.

Eligibility for APY:       Atal Pension Yojana (APY) is open to all bank account holders who are not members of any statutory social security scheme. 

Age of joining and contribution period:   The minimum age of joining APY is 18 years and maximum age is 40 years. Therefore, minimum period of contribution by the subscriber under APY would be 20 years or more.

Focus of APY:     Mainly targeted at unorganised sector workers.

Enrolment and Subscriber Payment:       All bank account holders under the eligible category may join APY with auto-debit facility to accounts, leading to reduction in contribution collection charges.

Enrolment agencies:    All Points of Presence (Service Providers) and Aggregators under Swavalamban Scheme would enrol subscribers through architecture of National Pension System.  

Operational Framework of APY:   It is Government of India Scheme, which is administered by the Pension Fund Regulatory and Development Authority. The Institutional Architecture of NPS would be utilised to enrol subscribers under APY.

Funding of APY: Government would provide (i) fixed pension guarantee for the subscribers; (ii) would co-contribute 50% of the subscriber contribution or Rs. 1000 per annum, whichever is lower, to eligible subscribers; and (iii) would also reimburse the promotional and development activities including incentive to the contribution collection agencies to encourage people to join the APY.
 Q. 219. Hydrocarbon Vision 2030 for North-East
  • The objectives of the plan are to leverage the region’s hydrocarbon potential, enhance access to clean fuels, improve availability of petroleum products, facilitate economic development and to link common people to the economic activities in this sector.
  • The states covered include Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.
  • The Vision rests on five pillars: People, Policy, Partnership, Projects and Production.
  • For people, it foresees clean fuel access to households alongside fostering skill development and involvement of the local community.
  • As for partnership, the stress is on greater involvement of state governments in planning and implementation, and on boosting trade with neighbouring nations.
  • In projects, the focus is on pipeline connectivity for carrying liquefied petroleum gas (LPG), natural gas, and petroleum products, oil and lubricants (POL); building refineries and import links; and development of compressed natural gas (CNG) highways and city gas distribution network.
  • The production side emphases include production enhancement contracts, technology deployment and fast-track clearance, and development of service provider hubs.
  • Beyond production, the focus areas include exploring hydrocarbon linkages and trade opportunities with Bangladesh, Myanmar, Nepal & Bhutan; implementation of ‘Make In India’ in the region; development of health & medical facilities; industrial policy & infrastructure related action points; focus on skill development; and employment generation requirement in the region.
  • The Vision aims at doubling Oil & Gas production by 2030, making clean fuels accessible, fast tracking projects, generating employment opportunities and promoting cooperation with neighbouring countries. 
India plans to build a pipeline to carry high-speed diesel (HSD) to Bangladesh. The cross-border pipeline will run from Siliguri in West Bengal to Parbatipur in northern Bangladesh.
BS Emission Norms
Eagerness to move from BS-IV to BS-VI in three years -a switch that no country in the world has accomplished. Countries in Europe and the US have taken up to 10 years for the same change.
  • Automakers point out whenever there is a transitioning of advanced emission norms anywhere in the world the last date of retiring ­ 31 March, 2017 in this case -is on manufacturing; vehicle makers are allowed to sell the stock in the following year. The SC has not given the industry this leeway, which by one estimate will call for liquidation of some 7 lakh units of two wheelers, three wheelers, trucks and passenger vehicles.
  • If April 2017 may seem like a bad dream for Indian auto, 2020 may be the year of the biggest nightmare ­ complying with BS-VI norms, the toughest emission standards in three years. The transition requires auto firms to make significant changes in engine technology, combustion and upgrade to more electronic controls. This could mean investments of more than Rs 80,000 crore and a substantial increase in the price of cars. But environmentalists feel it's well worth it, as the new emission norms are fuel-neutral.
  • The BS-IV transition, has brought forth a critical issue which India has been ignoring: the ability to foresee future growth in vehicles and have a coordinated and long-term policy direction to deal with the negative externalities associated with vehicular growth, be it pollution or road accidents.
  • To reduce vehicular pollution, CSIR-National Environmental Engineering Research Institute (NEERI), says all vehicles need to be maintained and, those fitted with catalytic converters, checked regularly.
 Q. 218. Japan Officially Recognises Bitcoin as Currency Starting April 2017
Ans. Bitcoin has finally gained the recognition of a mainstream currency along the lines of other fiat currencies. The privilege follows the implementation of a new law in Japan which categorizes Bitcoin as a legal payment option within the country. The much-awaited law went into effect on April 1, 2017 (beginning of a new fiscal year in many countries).
  • With the new law’s implementation, Bitcoin exchanges will also come under additional regulatory scrutiny.
  • The recognition of cryptocurrency as a legal tender also means the applicability of regulations governing banks and financial institutions to cryptocurrency exchange platforms.
  • They will be required to comply with strict anti-money laundering (AML) and Know Your Customer (KYC) requirements, along with annual audits.
  • Other requirements include meeting the stated capital and cyber security requirements to ensure consumer protection.
  • The recognition of Bitcoin and other cryptocurrencies as legal payment instruments is good news for the global cryptocurrency ecosystem. Adoption of cryptocurrency is expected to increase among people, which will, in turn, drive demand and price.
However, reports indicate that the cryptocurrency platforms are still trying to figure out ways to achieve compliance with the new regulations. Recognizing the exchanges’ needs, the Accounting Standards Board of Japan has announced that it has started working on creating an accounting framework for both user and businesses dealing with cryptocurrencies.
Since its inception in 2008, Bitcoin has grown into a technology, a currency, an investment vehicle, and a community of users.

What is Bitcoin?
Since anything digital can be copied over and over again, the hard part about implementing a digital payment system is making sure that nobody spends the same money more than once. Traditionally, this is done by having a trusted central authority (like PayPal) that verifies all of the transactions. The core innovation that makes Bitcoin special is that it uses consensus in a massive peer-to-peer network to verify transactions. This results in a system where payments are non-reversible, accounts cannot be frozen, and transaction fees are much lower.

Where do bitcoins come from?
Some users put their computers to work verifying transactions in the peer-to-peer network mentioned above. These users are rewarded with new bitcoins proportional to the amount of computing power they donate to the network.

Who controls Bitcoin?
There is no central person or central authority in charge of Bitcoin. Various programmers donate their time developing the open source Bitcoin software and can make changes subject to the approval of lead developer Gavin Andresen. Cryptocurrencies and how it might impact those making cryptocurrency transactions.

What is a Blockchain?
Bitcoins are used for electronic purchases and transfers. One can use bitcoins to pay friends, merchants, etc. Every single purchase is immediately logged digitally (on computers) on a transaction log that tracks the time of purchase and who owns how many bitcoins. It transaction log as an audit trail: it contains every single piece of information of every bitcoin transaction. This digital transaction log is called 'Blockchain'.
 Q. 217. What is South Asia Subregional Economic Cooperation (SASEC)?
Ans. About
The SASEC program was formed in 2001 in response to the request of the four countries of South Asia – Bangladesh, Bhutan, India and Nepal – from ADB to assist in facilitating economic cooperation among them. These four countries comprise the South Asia Growth Quadrangle (SAGQ), formed in 1996, as a vehicle for accelerating sustainable economic development through regional cooperation.

As a project-based partnership, the SASEC program has been helping realize regional prosperity by enhancing cross-border connectivity, facilitating faster and more efficient trade and promoting cross-border power trade. Maldives and Sri Lanka joined SASEC in 2014, further expanding opportunities for enhancing economic linkages in the sub-region. 

Priority sectors
SASEC countries agreed on priority sectors for investment and coordinated action
  • Transport — SASEC aims to put in place the critical multi-modal transport networks that will enhance intraregional trade and investment in the subregion and, in turn, boost economic growth. SASEC works to strengthen road, rail, and air links, as well as developing port infrastructure to match the needs of the region’s growing economies, and to support the SAARC transport corridor network.
  • Trade Facilitation — SASEC is helping speed up the time and reduce the costs of trading across borders throughout the subregion. Regional SASEC trade facilitation initiatives are creating modern customs administrations that are compliant with the terms and provisions of the Revised Kyoto Convention, streamlined and transparent cross-border trade regulations and procedures, and improved information and services for the private sector.
  • Energy — SASEC is working to improve energy access and security in the region by developing essential infrastructure, and promoting intraregional power trade to reduce costs and import dependence. SASEC energy initiatives focus on renewable energy.
  • Economic Corridor Development — SASEC is promoting synergies and linkages between economic corridors across SASEC countries to optimize development gains, including industrial growth and competitiveness, the creation of high-quality jobs, increased productivity, and the strengthening existing value chains.
New member
  • South Asia Subregional Economic Cooperation (SASEC) program of Asian Development Bank (ADB) is expanding towards the East with Myanmar formally becoming the 7th member of SASEC in 2017.
  • Myanmar is key to realizing greater connectivity and stronger trade and economic relations between the SASEC sub-region and the countries of East and Southeast Asia and that Myanmar’s membership in SASEC can offer a host of opportunities for realizing synergies from economic cooperation in the sub-region.
  • SASEC member countries recognize that most of SASEC’s multimodal connectivity initiatives include Myanmar.
  1. Road corridors in Myanmar provide the key links between South Asia and Southeast Asia.
  2. Ports in Myanmar will provide additional gateways to the landlocked North Eastern region of India.
Energy trade
  • Development of multi-modal connectivity between North Eastern region of India, Bangladesh and Myanmar has the potential of unleashing tremendous economic energy in the sub-region.
  • SASEC’s energy connectivity and energy trade prospects will be enhanced with the inclusion of Myanmar, involving its substantial resources of hydropower and natural gas.
Moreover, developmental impacts of economic corridor in the SASEC sub-region will be maximized by exploring potential synergies with corridors in Myanmar that are linked to those in other Southeast Asian countries.

ADB serves as the SASEC Secretariat, working with member governments to help implement SASEC projects and initiatives and to provide technical support. The SASEC Secretariat also coordinates capacity-building activities and works to identify necessary technical organizations and development partners to strengthen training and knowledge-building programs for member countries. It provides overall coordination, administrative and logistical assistance to the member countries.
 Q. 216. What are the determinants of economic growth? What are the areas of concern for India in this regard? What can be done given the current situation of growth in India?
Ans. It is time for policymakers to turn their attention to the major task of accelerating economic growth. As of now the prospects are not encouraging.
  • The Central Statistics Office’s second advanced estimates indicate that the growth rate of GDP for 2016-17 will be 7.1% as against 7.9% in 2015-16.
  • The growth rate of gross value added at basic prices in 2016-17 will be 6.7% as against 7.8% in 2015-16.
  • The growth rates projected for 2016-17 do not capture the impact of demonetisation, which when taken into account may bring down the projected growth rate by around 0.5%.
The decline in the growth rate is not a recent phenomenon. It started in 2011-12. The persistence of relatively low growth over a five-year period calls for a critical examination. Even though the new numbers on national income give us some comfort, they do not tell the whole story.

Determinants of growth
The growth rate is determined by two factors —
  • Investment rate
  • Efficiency in the use of capital.
Incremental Capital-Output Ratio (ICOR)
As the Harrod-Domar equation puts it, the growth rate is equal to the investment rate divided by the incremental capital-output ratio. The incremental capital-output ratio (ICOR) is the amount of capital required to produce one unit of output. The higher the ICOR, the less efficient we are in the use of capital. There are many caveats to this bald proposition. As we look at the Indian performance in the last five years, two facts stand out. One is a decline in the investment rate and the second is a rise in ICOR; both of which can only lead to a lower growth rate.

As growth was coming down sharply initially, the investment rate was falling only slowly, implying a rising ICOR. ICOR is a catch-all expression which is determined by a variety of factors including technology, skill of manpower, managerial competence and also macroeconomic policies.
Thus factors that can all lead to a rise in ICOR are:
  • Delays in the completion of projects
  • Lack of complementary investments in related sectors
  • The non-availability of critical inputs
Stalled Projects
The Economic Survey of 2014-15 reported that there were in all 746 stalled projects, with 161 in the public sector and 585 in the private sector of a total value of ₹8.8 lakh crore. As of 2015-16, there were still 404 stalled projects, 162 in the public sector and 242 in the private sector with a total value of ₹5.5 lakh crore. In the short run, the biggest gain in terms of growth will be by getting “stalled projects” moving. Of course some of them may be unviable because of changed conditions. A periodic reporting by the government on the progress of stalled projects will be of great help.

Declining investment rate
  • India’s investment rate reached a peak in 2007-08 at 38.0% of GDP. With an ICOR of 4, it was not surprising that a high growth rate of close to 9.4% was achieved. One sees a steady decline in the investment rate since then.
  • The decline in the rate was small initially but has been more pronounced in the last two years. According to the latest estimates, the gross fixed capital formation rate fell to as low as 26.9% in 2016-17. With this investment rate, it is simply impossible to achieve a growth rate in the range of 8 to 9%.
Policy paralysis
The major issue confronting us is: why did the investment rate fall? Why are not new investments forthcoming? In 2011 and 2012, in discussions on the Indian economy, the one phrase that used to be bandied about was “policy paralysis”, pointing to the inability of the government to take policy decisions because of “coalition compulsions”. It is true that around this period, the government was preoccupied with answering many issues connected with graft. But that does not explain the steady fall in the investment rate except for a sense of uncertainty created in the minds of investors.

Global Scenario
The external environment was also not encouraging. The growth rate of the advanced economies remained low and the recovery from the crisis of 2008 was tepid which had an adverse impact on exports. However, India benefited by large capital inflows except in 2013. For almost three years beginning 2010, India had to cope with a high level of inflation which also had an adverse impact on investment sentiment. Once the growth rate starts to decline, it sets in motion a vicious cycle of decline in investment and lower growth. The acceleration principle begins to operate. We need to break this chain in order to move on to a higher growth path.

  • Public investment: the standard prescription, whenever private investment is weak, is to raise public investment which can take a longer term view. This standard suggestion is very much appropriate in the present context as well. In the best of times, public investment has been 8% of GDP. The Central government’s capital expenditures even after some increase in the last two years, is only 1.8% of GDP. About 3 to 4% of GDP comes from public sector undertakings and the balance from State governments. What is needed now is for public sector undertakings to come out with an explicit statement indicating the extent of investment they intend to make during the current fiscal. And this intention must be monitored every quarter. This will inspire confidence among prospective private investors.
  • Private investment: however, it is also necessary to enhance private investment, and that too private corporate investment. During the high growth phase, corporate investment reached the level of 14% of GDP. Since then it has fallen. In fact, a recent study shows that the total cost of projects initiated by the corporate sector has come down from ₹5,560 billion in 2009-10 to ₹954 billion in 2015-16. This continuing trend must be reversed.
Three things need attention.
  • First, reforms to simplify procedures, speed up the delivery system and enlarge competition must be pursued vigorously. Some significant steps have been taken in this regard in recent years such as moving forward on the GST, Bankruptcy Act, and enlarging the scope of foreign direct investment.
  • Second, all viable “stalled” projects must be brought to completion.
  • Third, financial bottlenecks need to be cleared. The banking system is under stress. The non-performing loans of the system have risen and are rising. This has squeezed the profitability of banks with some showing loss. More distressing is the minimal flow of new credit. The problem is often referred to as the twin balance sheet problem. If corporate balance sheets are weak, automatically the banks’ balance sheets also become weak. Really speaking, it is two sides of the same coin. The solution to clean up the balance sheet of banks lies in taking some “haircuts”. At least some part of the accumulation of bad debts has been due to the slowdown of the economy. The old saying is “bad loans are sown in good times”. Even though a haircut cannot be avoided, wilful defaulters must not go unpunished. Asset restructuring companies are part of the solution and we have some experience of them.
Long-term lending
This is also the appropriate time to revive an idea which had withered away during the reform process and that is to have institutions focussed on long-term lending such as IDBI and ICICI as they were before 1998. The details can be worked out. But the idea needs a rethink.

Investment, as they say, is an act of faith in the future. If there has to be investment resurgence, it is necessary to create the climate which promotes this faith. We have already outlined the actions that can be taken in the purely economic arena. But “animal spirits” are also influenced by what happens in the polity and society. Avoidance of divisive issues is paramount in this context. Undiluted attention to development is the need of the hour.
 Q. 215. What strides India can make in view of Rights of Persons with Disabilities Act? What can be the advantage of such a cross cutting Act? What synergy needs to be built in order to make the Act more successful?
Around 8-10% of India’s population lives with disabilities, with an equal number constituting the aged. Information and Communication Technologies (ICT) have the potential to significantly impact the lives of these groups, facilitating access of services available to them and allowing them to handle a wide range of activities independently, enhancing their social, cultural, political and economic participation. Making ICT accessible no longer remains an option but has become a necessity.

Poor accessibility due to lack of focussed information and political will has led to social exclusion of people with disabilities, exacerbating the negative impact of the existing digital divide. The new call for action of disability rights activists now is “Cause No Harm”, thus ensuring future generations are not excluded from mainstream activities due to a hostile infrastructure.

Current Mega Initiatives
This assumes a greater thrust given the unprecedented developmental activity in the country under the various missions launched by the present government, such as:
  • Smart Cities Mission
  • Digital India
Accessibility for disabled people is a cross-cutting theme across all of these and care must be taken to ensure disability-inclusive development.

Accessibility as a link
Incorporation of accessibility principles across all new developments will also complement the Accessible India Campaign, the flagship campaign launched by the Prime Minister on World Disability Day which aims at achieving universal accessibility for all citizens and creating an enabling and barrier-free environment.
India was one of the first countries to ratify the United Nations Convention on the Rights of Persons with Disabilities.

Rights of Persons with Disabilities Act, 2016
  • The recently passed Rights of Persons with Disabilities Act, 2016 mandates adherence to standards of accessibility for physical environment, transportation, information and communications, including appropriate technologies and systems, and other facilities and services provided to the public in urban and rural areas.
  • These include government and private developments.
  • The Act also mandates incorporation of Universal Design principles while designing new infrastructure, electronic and digital media, consumer goods and services.
  • Most importantly, the Act sets timelines to ensure implementation of the above and punitive action in the event of non-compliance.
Accessibility therefore forms the common thread weaving together the Accessible India Campaign, the Rights of Persons with Disabilities Act, the Smart Cities Mission and the Digital India campaign to achieve the combined goal of creating an inclusive society that will allow for a better quality of life for all citizens, including persons with disabilities.
Beyond the social implications, accessibility makes for business and economic sense too. If principles of Universal Design are incorporated at the design stage, cost implications are negligible. Retrofitting, on the other hand, has huge cost implications.

Economic and Business Implication
  • Exclusion of persons with disabilities from education, employment and participation on account of a hostile infrastructure and inaccessible technology has huge economic implications.
  • UN agencies put this cost at around 7% of national GDP.
  • On the other hand, accessible services and business premises can broaden the customer base, increasing turnover and positively impacting the financial health and social brand of the company.
  • Recent research pegged the market size of different product categories needed by persons with disabilities in India at a whopping ₹4,500 crore.
Disability is not an isolated issue. It is cross-cutting and can impact everyone irrespective of caste, gender, age and nationality. Thus ensuring a disability-sensitive development agenda across all ministries, sectors and causes becomes critical if growth has to be truly inclusive. ‘Nothing about us without us’ assumes even greater significance in the current context.

The importance of synergy
  • As India catapults towards a cashless and digital economy and as human interface between service providers and end users gives way to digital, it becomes imperative to ensure accessibility for inclusion.
  • The need is for representation of persons with disabilities in all ministries and key missions, commissions and committees to advise and ensure inclusion in all policies, programmes and developments.
  • The government’s procurement policy too must mandate accessibility as a key criterion. Adherence to the latest Web Content Accessibility Guidelines should be made mandatory while developing websites and mobile applications.
  • Also important is the synergy between various arms of the government. The Smart Cities Mission focusses on comprehensive development leading to the convergence of other ongoing government programmes such as Make in India, Digital India, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Pradhan Mantri Awas Yojana, National Heritage City Development and Augmentation Yojana (HRIDAY), etc. but the Accessible India Campaign does not even find a mention! This is so when as many as 39 cities out of the 50 cities of the Accessible India Campaign are also among the shortlisted Smart Cities.
Much after Independence, there has been minimal change in the fortunes of India’s disabled population. It becomes our collective responsibility to ensure inclusive development, one that engages all stakeholders through a pragmatic and judicious combination of interventions while effectively leveraging technology to ensure truly inclusive and sustainable development.
 Q. 214. Why bringing Tier 2 and 3 cities into the aviation map is a project long overdue?
Ans. A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities.
  • Shimla, Bathinda and Jaisalmer have airports. But they are not in use.
  • The airport in Kullu gets only two flights a day.
But things are poised to change with the government’s UDAN (Ude Desh Ke Aaam Nagrik) scheme.
  • Five airlines have won bids to operate 128 routes, that will connect 70 airports including 31 unserved ones like Shimla, Bathinda and Jaisalmer, and 12 underserved airports like Kullu.
  • According to the Civil Aviation Ministry, the first flight under UDAN is expected to start later this month.
  • Bringing Tier 2 and Tier 3 into the country’s aviation network is a significant development in a country where 80 per cent of air travel is between the metros — in fact, the Bombay-Delhi sector accounts for more than 50 per cent of domestic flyers.
  • The scheme will foster regional connectivity, make businesses and trade more efficient, enable medical services and promote tourism.
Poor Regional connectivity
A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities. The government has tried to address this concern by an adroit combination of subsidies and fare caps.

  • All the airlines that participated in reverse bidding for the subsidy accepted the fare caps set by the government. The money for the subsidy will be raised through a levy on flights operating on major routes like Delhi and Mumbai.
  • The government expects an annual corpus of Rs 205 crore from this levy. Funding this corpus could mean a levy of around Rs 50 for a passenger on flights on major routes. The subsidy will be in place for three years for an airline that has won the bid on a UDAN route.
  • There will be other benefits, including no airport charges — a significant incentive given that airline operators often complain that airport expenses constitute 25 per cent to 30 per cent of their operating costs.
  • The most heartening aspect is that these include six proposals for 11 routes that don’t seek any subsidy under the scheme, proving there is an untapped economic potential.
  • The benefits for tourist hotspots such as Agra, Shimla, Diu, Pathankot, Mysuru and Jaisalmer — that would now be just a short flight away, replacing cumbersome road or rail journeys — are obvious.
  • But the significant multiplier effects of aviation activity, including new investments and employment creation for the local economies of other destinations could be equally profound. Provided this model is sustainable and more regional flights come up under the scheme, the availability of slots at larger airports that would emerge as hubs could become an issue — particularly at capacity-constrained airports such as Mumbai. The second airport at Navi Mumbai may help ease congestion, but that is still years away. In cities where new airports have been developed, such as Bengaluru, abandoned old facilities could be revived as dedicated terminals for low-cost and regional flights.
  • Separately, new no-frills airports must be encouraged where traffic is expected to hit saturation point in coming years.
  • Recently, four new foreign investors and a few domestic players have expressed interest in managing operations at state-run airports such as Jaipur and Ahmedabad. This marks a revival in investor interest after a long lull.
  • The new policy is, however, not without challenges. For example, there are fears that a flight from an UDAN location will be low priority for air traffic controllers in big cities.
  • Airports in many Tier 2 and Tier 3 cities do not have big runways, so they can’t take regular aircraft. That means airlines will need to induct smaller aircraft for short takeoffs and landings. Such aircraft needs specialised crew. India produces 200 to 300 pilots every year, and it’s safe to say that training specialised crew will take time.
 Q. 213. BS (Bharat Stage)
  • All vehicles sold after March 31, 2017 will have to conform to BS (Bharat Stage) IV standards. A recent Supreme Court directive imposed a ban on the sale of the more polluting BS III vehicles from April 1, 2017.
  • The order clears the path for the adoption of BS IV standards throughout the country, seven years after they were put in place.
  • For a country battling serious pollution problems, this will be a significant transition.
  • Particulate emissions from BS IV compliant trucks are 80 per cent less compared to those from trucks that adhere to BS III standards.
  • BS IV compliant cars emit half the pollutants compared to cars made according to BS III specifications.
BS IV to BS VI jump
  • But that it took the government seven years to implement the BS IV standards across the country holds lessons for policymakers. The lessons are even more significant because the government plans to skip the BS V standards and leapfrog to the far more stringent BS VI standards in 2020.
  • BS IV norms were put in place in 13 major cities in 2010. They could not be implemented throughout the country because Indian refineries lacked the capacity to cleanse fuel to BS IV standards.
  • As late as January 2016, fuel stations in nearly 70 per cent cities in the country did not have this superior quality fuel, leading the auto-industry to argue that this shortage was preventing it from making a complete transition to BS IV compliant vehicles.
  • The refineries will have to invest another Rs 40,000 crore to Rs 50,000 crore to upgrade to BS VI standards.
  • Oil firms will have to flush out BS IV fuel from the 80,000 petrol pumps in the country by April 1, 2020 when BS VI norms are slated to come into force.
  • The auto-industry estimates that it will have to invest about Rs 50,000 crore to produce cars with the more efficient pollution norms.
The compulsions of the refineries and automakers meant that the transition from BS III to BS IV could not happen in one go. The government would do well to keep this in mind when it works out the transition to the far stricter BS VI norms in less than half the time.
 Q. 212. What are the urgent next steps in banking sector reforms?
Ans. Banking Sector requires action on three fronts:
  • Accelerate recoveries from non-performing assets (NPAs)
  • Recapitalize public sector banks to strengthen their ability to expand credit
  • Introduce reforms that will increase the efficiency of these banks
The traditional strategy for dealing with NPAs has been to reschedule the loans. However, this helps only where projects suffer from a short-term “liquidity problem”. It cannot help when there is a “solvency problem”, i.e. the income stream simply cannot service the debt even over a longer period. Most of the large NPAs reflect solvency problems. revenue streams were overestimated and costs have increased beyond original projections. Such projects can only be rescued if banks take a haircut and reduce the debt. Understandably, this is something bankers hate to do.

How to go about it?
There are two ways of handling the problem. The Reserve Bank of India (RBI) has notified schemes for both, but neither of them has worked.
  1. The Strategic Debt Restructuring Scheme allows banks to convert the debt into equity, take control of the project, remove the existing management, and induct new management. Ideally the project should be auctioned off to the highest bidder and the existing management, if not suspected of malpractices, should also be allowed to bid. The difference between the amount paid for the equity and the value of the debt converted, is a market-determined debt write-off. The scheme has not worked for a variety of reasons. These include problems of coordination among the different banks involved, regulatory uncertainties (especially for infrastructure projects) which deter new investors, and the unwillingness of bankers to accept a sufficient write-down of the outstanding debt. There is also the practical problem of running the projects taken over until a new management comes in. Banks are ill-equipped to do this.
  1. The second option is to work with the existing management and negotiate a suitable debt reduction. This is what the RBI’s most recent Scheme for Sustainable Structuring of Stressed Assets (S4A) was designed to do. It has the advantage of not having to look for a new management, but since the incumbent management remains in place, and the debt write-off is not competitively determined, there is a danger that the concessions given may attract the charge of cronyism and corruption.
Some think that the problem can be overcome by setting up an independent “oversight body” to approve the debt reduction terms. But since the oversight body will also consist of public servants, the problem remains. PoCA clearly needs to be amended, and a proposal pending in Parliament should be expedited. However, this may not suffice, because proposals for a settlement have to be developed by bank managements, and then submitted to the oversight mechanism. Bankers have no incentive to propose large reductions in debt, especially since it is an implicit acknowledgement of poor lending practices on their part.

Bad Bank
  • The best solution is to create a new government institution—the so-called “bad bank”—to which the public sector banks transfer their large problem assets at a realistic price, leaving it to the new entity to handle recovery.
  • Realistic pricing of the assets transferred is absolutely critical, since otherwise the hole in the balance sheets of banks will simply be transferred to the new institution. It should remain in the books of the banks, and can then be recapitalized appropriately.
  • Bankers will be much more willing to transfer their NPAs at a low price to a new public sector agency, than offer the same benefit to a private party. The new entity can then offer realistic levels of debt reduction without making a loss on its books.
  • It will also be much less vulnerable to the charge of corruption if the public interest and urgency involved in cleaning up NPAs is clearly spelt out in the mandate of the entity. Its proposals could also be vetted by a high-level oversight board.
  • The new entity would have to be funded by the government, perhaps by government guaranteed bonds which are exchanged for NPAs offloaded from banks. It could work in partnership with private asset management companies specializing in particular areas to bring in new investors. It could experiment with both approaches—a change in management in some cases, and retaining existing managements in others.
Recapitalization of public sector banks
  • The capital requirements of public sector banks to sustain credit growth at 15% per year were estimated by the finance ministry two years ago.
  • The strategy needs to be completely reworked since the scale of NPAs is much larger than was then expected.
  • Bank profits after provisioning for the NPAs will therefore be much smaller than expected. The scope for raising funds from the market has also reduced given the poor performance of the banks.
  • The burden on the budget is therefore bound to be higher.
Reforms in the banking sector
Looking ahead, we cannot avoid serious banking sector reforms if we want the public sector banking system to become more efficient.
  • In this context, reducing the government equity below 51%, and attracting some strategic investors, would be a very major step. It will not only reduce the pressure on the budget to provide funds for recapitalization, it will also set the stage for a more commercial orientation for public sector banks. This is critical if public sector banks are to compete more effectively with private sector banks. If reducing government equity below 51% is not feasible at present, we should at least experiment with the halfway house suggested by the P.J. Nayak committee, of vesting the government’s shareholdings in public sector banks in a separate holding company, and limiting the finance ministry to deal only with the holding company on policy issues.
  • The individual public sector banks should be free of finance ministry control and become board-managed entities.
  • The holding company should appoint a non-executive chairman and other representatives on the board.
  • Top appointments in the banks, including those of the chief executive officer, should be made by the board of each bank, and not by the appointments committee of the cabinet.
  • The Bank Boards Bureau was initially seen as a step towards the establishment of a holding company, but it has not been empowered to play this role. Even in the matter of appointments, it only makes proposals to the appointments committee of the cabinet, which is not very different from the pre-existing position.
This is bound to take a toll on our economic prospects for the next several years until private sector banks grow in size and come to dominate the market. But that could take 20 years.
 Q. 211. Why do we need a patients bill of rights to address information lag in medical delivery?
Ans. Many a time, we see children spend days outside the ICU where their terminally-ill parent is admitted, only to receive the dead body after a few days. The patient’s relatives have a right to know about the condition of the patient, immediately after life-saving measures are instituted. They have a right to participate in the decision related to the treatment of their loved one, especially if it is an end of life situation. If there is no hope of the patient’s survival, he or she should be allowed to spend the last moments with loved ones. Medical intervention should be restricted to measures that ease the patient’s pain.
The pros and cons of using invasive life-support devices and the chances for cure have to be clearly explained to patients in understandable language. These devices should be used only if the brain is functioning. Today, any patient who has a breathing difficulty is put on a ventilator, irrespective of whether his/her condition is curable or not. It is highly unethical to use measures to prolong oxygenation after vital systems have stopped working spontaneously. Every human has a right to die with dignity.
Most countries have implemented the patient’s bill of rights. But, in India, there is no law to deal with patient’s rights, except some aspects of the Consumer Protection Act. In India, people have come to regard the ICU as a forbidden chamber and the only role of patients’ attendants is to bring medicines as requested by the ICU staff from time to time. They patiently wait outside hoping for the best, even in cases where the futility of life support is evident.
The rights of patients
The rights of patients and their relatives has to be legislated and awareness should be created in public fora.
  • Every patient is entitled to quality healthcare and treatment consistent with available resources and accepted medical standards, regardless of caste, creed or religion.
  • Every patient has the right to refuse treatment and to be informed of the consequences of his/her refusal.
  • A patient has the right to respectful treatment. This means that a patient’s dignity is paramount to healthcare.
  • A patient also has the right to privacy and confidentiality on matters concerning medical care.
  • The nearest family members have a right to information in life-threatening circumstances.
  • A patient has the right to information about doctors. This means that a right to know, at all times, the identity and professional credentials of the primary healthcare provider.
  • Then a patient has the right to an explanation concerning his/her diagnosis, treatment, procedures, and prognosis of illness. These should be elucidated in a language and in terms which the patient is expected to understand. In cases where it is not medically advisable to give such information to the patient, the information should be provided to the family members.
  • In case of emergencies, the information on the futility of treatment measures should be informed to the patient’s relatives as soon as possible before invasive life support measures need to be taken.
  • The patient has a right to information, in non-clinical terms, on complications, risks, benefits, and alternative treatments and the chance of cure or benefit. This will help him/her take an informed decision on the treatment.
  • The patient has the right of treatment in a safe environment.
  • He or she has the right to be informed of the facilities, rules and regulations that relate to patient or visitor conduct.
  • Patients are entitled to information about the mechanisms for the initiation, review, and resolution of patient complaints.
Every hospital should have a charter which shall identify the roles and responsibilities of hospital staff towards patients’ and families’ rights.
 Q. 210. What are the disadvantages of Farm loan waiver in context of Indian agriculture? What can be done to alleviate the pangs of farmers?
The government says it wants to double farm income by 2022 through the transformation of Indian agriculture. However, the political discourse continues to focus perversely on farm loan waivers.

Even though agriculture contributes about 15% to India’s gross domestic product, a majority of the population directly or indirectly depends on the sector for livelihood.

Farm loan waiver
It might make political sense in the short run—farmers are a sizeable and powerful vote base—but, as experience shows, it is unlikely to help the agriculture sector in the long run. In fact, loan waivers can lead to several adverse consequences.
  • For example, Arundhati Bhattacharya, the head of the country’s largest lender, the State Bank of India (SBI), was bang on when she recently said that loan waivers affect credit discipline.
  • Agriculture is a bit of an issue. That is because of moral hazard that was created in 2008 when there was a write-off of large agriculture loans.
  • Former Reserve Bank of India governor Raghuram Rajan had also flagged the issue, as repeated loan waivers affect credit pricing and disrupt the credit market.
  1. Evidence from the 2008 farm loan waiver—implemented by the United Progressive Alliance government—shows that it can have unintended consequences. As World Bank have shown in its study that, bank lending moved away from districts with greater exposure to the loan waiver. Such outcomes can affect agricultural output in the medium to long run as banks may get more selective in extending credit.
  2. A study conducted by Harvard Business School showed that agricultural credit extended by government-owned banks goes up in an election year, while defaults also increase during election time. This again highlights that political intervention distorts the credit market. In fact, in the case of repeated waivers, it makes sense for borrowers to default strategically in anticipation of a waiver. But this can become a self-fulfilling cycle with long-term consequences—defaults would warrant loan waivers, and waivers will lead to more defaults.
  3. It was also argued that farmers were not able to invest because of debt overhang. However, the study did not find any improvement in investment and noted that there is no evidence of greater investment, consumption or positive labour market outcomes in areas where debt relief led to a significant reduction of household debt. It is not surprising that, in the case of India, government efforts to stimulate the real economy through debt relief were largely in vain given that the bailout also led lenders to reallocate credit away from districts with high program exposure.
Way Forward
To be sure, the agriculture sector needs government support but loan waivers are not the solution. On the contrary, expenditure on loan waivers will eventually leave less fiscal space for public expenditure in agriculture. India needs massive investment in areas such as irrigation, water conservation, better storage facilities, market connectivity and agricultural research. The problems in Indian agriculture are structural. They need long-term solutions. Loan waivers will only end up complicating the problem.
 Q. 209. Moving towards a larger formal economy
Opps! Answer will be view on 31/03/2107.
 Q. 208. Why the Anti-Discrimination and Equality Bill 2016 must find champions in the Centre and states?
Ans. On March 10, Shashi Tharoor, MP, introduced the Anti-Discrimination and Equality Bill 2016 (ADE Bill) in the Lok Sabha.
As a Private Member’s Bill, however, this will not be enacted unless the government takes ownership of this Bill.
There are at least three reasons why it should do so:
  • The Bill’s symmetric protection,
  • its experiential understanding of discrimination as a lived reality, and
  • its proportionate regulation of the private sector.
Bill’s symmetry
  • That discrimination is rife in India is not in doubt.
  • Women, Dalits, religious and sexual minorities, people from the North East, hijras, disabled persons and the elderly are especially at the receiving end. Almost everyone in our country has faced, or is likely to face, some form of discrimination.
  • On the other hand, we have all also been perpetrators, sometimes consciously, but often unconsciously- by benefitting from unearned privileges that tend to accompany our dominant group status, sincerely believing in our merit, and in our innocence.
  • Recognising this universality in the experience and perpetration of discrimination, the ADE Bill seeks to symmetrically protect majorities as well as minorities (with exceptions for affirmative action and aggravated discrimination), and does so comprehensively, along multiple grounds of discrimination.
  • It is true that members of minority groups primarily suffer from discrimination. But, given our multiple identities, no one person is a member of the dominant group in all respects. Also, patriarchy will not end unless women as well as men are liberated from gender roles.
  • Furthermore, asymmetric laws are hard to pass and harder to enforce. Communal Violence Bill: it only protected minority groups; the perpetrators were assumed to belong to majority groups.
  • Under the symmetric ADE Bill, anyone could potentially be a victim, and anyone, whether from a majority or minority group, could be a discriminator. Whatever may be the truth of that allegation, here is one Bill that is genuinely universalist in its aspiration.
Indian context
  • ADE Bill understands discrimination as it is experienced by its victims, and is sensitive both to the evolving nature of this social phenomenon and its particular character in the Indian context. Of course, the Bill prohibits overt prejudice or stereotyping as direct discrimination. But it also recognises that sometimes, one can discriminate indirectly by doing something that disproportionately impacts a group (say, a minimum height requirement that is unnecessary for satisfactorily performing a given job, and disproportionately excludes women since they tend to be shorter than men).
  • It treats harassment, bullying, segregation, boycott, violence and victimisation as the various guises that discrimination can take. By focussing on the experience of the victim, rather than the intention of the discriminator, the Bill understands that power is self-aggrandising and dynamic, with the ability to adopt ever subtler forms, and even deny its own existence in order to perpetuate itself.
Prohibiting discrimination in public as well as private sectors
  • In prohibiting discrimination in public as well as private sectors (especially employers, landlords, retailers and service-providers), the ADE Bill recognises that decades of affirmative action in the public sector, while necessary, is insufficient to tackle discrimination.
  • It also imposes diversification duties, while ensuring that private businesses can discharge their social obligations with minimal regulatory burdens. Marking a break from past laws that criminalised discrimination, the focus of the ADE Bill is to create a civil liability to protect and compensate the victim, rather than to punish the discriminator.
  • Criminalisation — which requires a very high burden of proof — probably contributed to the under-enforcement of existing laws. The “lighter touch” approach of the ADE Bill is complemented by a dedicated, efficient and independent enforcement mechanism. It therefore strikes a proportionate balance between competing demands.
As it seeks to realise B.R. Ambedkar’s vision of an India free from discrimination, the ADE Bill also honours a less-celebrated (and increasingly rare) dimension of his democratic politics: A principled pragmatism that preferred an imperfect solution accepted (albeit grudgingly) by many, to a perfect one championed by the few.
 Q. 207. What is Biotech-KISAN?
Ans. Biotech-KISAN is a new programme that empowers farmers, especially women farmers. Cash crops and horticulture can be a major source of income but the vagaries of climate, disease and market often prevent this. Farmers are eager to use scientific tools that can mitigate these factors.
The Scheme is for farmers, developed by and with farmers, it empowers women, impacts locally, connects globally, is Pan-India, has a hub-and spoke model and stimulates entrepreneurship and innovation in farmers.

Biotech-KISAN is:
  • For Farmers: The Biotech-KISAN is a Farmer centric scheme launched by of the Department of Biotechnology, where scientists will work in sync with farmers to understand problems and find solutions.
  • By Farmers: Developed in consultation with the farmers.  Soil, Water, Seed and Market are some key points that concern small and marginal farmers. Biotech-KISAN aims to link farmers, scientists and science institutions across the country in a network that identifies and helps solve their problems in a cooperative manner.
  • Empower women. The woman farmer is often neglected. It is important to empower the women farmer, help her meet her concerns for better seed, storage of seed and protection of the crops from disease and pest. The women farmer is also the prime caretaker of livestock and she is eager to combine traditional wisdom in handling the livestock and with current best practices, especially in the context of emerging livestock disease. The scheme includes the Mahila Biotech- KISAN fellowships, for training and education in farm practices, for women farmers.  The Scheme also aims to support the women farmers/ entrepreneur in their small enterprises, making her a grass root innovator.
  • Connects Globally. Biotech-KISAN will connect farmers to best global practices; training workshops will be held in India and other countries. Farmers and Scientists will partner across the globe.
  • Impacts Locally. The scheme is targeted towards the least educated marginalised farmer; Scientists will spend time on farms and link communication tools to soil, water seed and market. The aim is to understand individual problems of the smallholding farmers and provide ready solutions.
  • Across India. Biotech KISAN will connect farmers with science in the 15 agro-climatic zones of the country in a manner, which constantly links problems with available solutions.
  • Hubs and Spoke. In each of these 15 regions, a Farmer organisation will be the hub connected to different science labs, Krishi Vigyan Kendra and State Agriculture Universities co-located in the region. The hub will reach out to the farmers in the region and connect them to scientists and institutions.
  • Farmers as Innovators. The hub will have tinkering lab, communication cell and will run year-long training, awareness, workshops and which will act as education demonstration units to encourage grass root innovation in the young as well as women farmers.
  • Communicating Best Practises There will be a communication set-up to make radio and TV programmes for local stations, as well as daily connectivity through social media.

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