IASToppers Editorial Notes 25th July 2016
Editorial Notes

Editorial Notes 25th July 2016

New Economic Policy of 1991; Consolidation of land; NBFCs; GST Bill; etc.
By By IT's Editorial Notes Team
July 25, 2016

Contents

Polity & Governance

  • The sullying of scientific literature

Economy

  • 1991 is history: Where do we go now?
  • For a better harvest
  • The NBFC story: Alive and kicking
  • India’s reverse Brexit: GST will create million of formal jobs

 

Polity & Governance

GS (M) Paper-2 Topic: “Important aspects of governance, transparency and accountability and institutional and other measures”

 

The sullying of scientific literature

Introduction:

Recently, the Council of Scientific and Industrial Research has dismissed a senior scientist working at its Chandigarh-based Institute of Microbial Technology (IMTECH) over serious charges of data fabrication in at least seven papers published in peer-reviewed journals.

Why certain fraudulent practices by Indian scientists have seldom been exposed?

  • In case of any fraudulent practices by Indian scientists go unearth, many scientific institutions in India have unwillingness to get to the root of the problem and brushing the allegations under the carpet.
  • One of the biggest handicaps that journal editors face when confronted with evidence of scientific misconduct by Indian researchers is non-cooperation by institutions in thoroughly investigating such matters.

Solution:

According to the author, one of the best ways to tackle this ill is to set up a nodal body on the lines of the ORI in the U.S.Office_of_Research_Integrity_logo

  • Any case of scientific misconduct brought to its notice should be investigated by the respective institutions and the matter taken to its logical conclusion.
  • A body on the lines of the ORI should also be actively involved in preventing misconduct and promoting research integrity through expanded education programmes.

Significance of this proposed nodal body:

  • This will go a long way in reducing instances of misconduct by scientists.
  • It will also greatly help to reduce the amount of trash that sullies scientific literature and prevent other serious researchers from wasting their time repeating meaningless experiments.
[Ref: The Hindu]

 

Economy

GS (M) Paper-3 Topic: “Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth”

 

1991 is history: Where do we go now?

Introduction:

Even after twenty-five years of New Economic Policy of 1991, a few issues that need structured thinking, political commitment and administrative capability are cited here.

IASToppers Editorial Notes 25th July 2016

Ending the inspector raj:

Concerns:

  • As per the economic policy of 1991, the licence raj is removed to a great extent. Businessmen do not have to trudge to New Delhi to get permissions to invest in new capacity. But they are still hounded by representatives of the inspector raj—from factory inspectors to tax officials.

Solutions:

  • Much of this can come under the umbrella of increasing the ease of doing business.

Improving human capital:

Concerns:

  • The most successful examples of countries escaping poverty in a few decades come from East Asia. Their investments in human capital cannot be ignored. India still has very high level of malnutrition. The public health system is broken. The same is the case of the education system.
  • The state of the education system is a particularly serious worry.

Solutions:

  • The government need not provide these services directly, but it needs to fund them at the very least.

Reforming factor markets:

Concerns:

  • Since 1991, there has been far less success when it comes to the markets for factors of production such as land, labour and capital.

Solutions:

  • Reforming the land and labour markets are politically tricky, but some state governments are taking the lead with innovative solutions.

Inclusion through jobs:

Concerns:

  • Manmohan Singh as finance minister used to talk about the importance of the East Asian experience, where millions could escape poverty by shifting from the farm to the factory. As prime minister, the same Manmohan Singh led a government that banked on subsidies and entitlements as the primary tools for inclusion.

Solutions:

  • The focus has to shift back to job creation in the modern sectors—though in a world where new technology is not labour intensive.

Rebuilding state capacity:

Concerns:

  • There is no doubt that the Indian government machinery is creaky. It is low on capability, other than at the very top.

Solutions:

  • Rebuilding state capacity is even more important at a time when power is flowing to the states, and later perhaps directly to cities and villages.
  • India needs far better administrative, policy and regulatory abilities than it does right now.

Conclusion:

The present government should not only focus on executive action or pushing through unfinished reforms such as the goods and services tax, but also begin work on a new policy framework that will help India abolish mass poverty in the coming decades.

[Ref: LiveMint]

 

GS (M) Paper-3 Topic: “Land reforms in India”

 

For a better harvest

Introduction:

The farmer in India on an average owns less than two acres which is far lower than the Latin American farmer who owns more than 50 hectares of land

We may have to take some innovative measures, apart from several meaningful actions already initiated by the Government, to correct such imbalances.

Success story of Turkey:

  • Turkey amended its inheritance laws in 2014 to prevent further fragmentation of agricultural land and established a minimum size requirement for agricultural produce.
  • The Turkish government has so far been able to consolidate more than 3 million hectares, as a result the average land holding of the farmer has gone above five hectares.

Suggestions:

Improve the earning capacity of the farmer with an example of rice:

  • With respect to rice, India may have to take steps to improve the earning capacity of the farmer.
  • There is a vast potential for installing mini rice mills in paddy growing areas, as a rural small scale activity.
  • Farmers are required to be encouraged to be appointed as aggregators as well as for setting up of mini rice plants for better realisation.
  • They can be encouraged by providing subsidy/loan at concessional rate of interest for huller/ mini rice mills, where the investment requirement is ₹1-4 lakh excluding the cost of land.
  • The pure bran can be supplied to the solvent extraction industry for production of edible rice bran oil. There are any number of opportunities for the use of rice bran oil, which includes an export market in the US.

Similarly, an effort should be made to add value at the village level near the farm gate for wheat, soyabean and other horticultural products.

Consolidation of land:

  • Consolidation of land is essential to improve the productivity of the farmers and compete in the international market. We need proper implementation of the model tenancy Act.

Irrigation:

  • Huge investment particularly in minor irrigation plays a significant role in recharging of well, drought mitigation and flood control.
  • Such investment has been relatively low compared to large scale irrigation where results have not been encouraging.
  • Sugarcane should not be allowed to be grown in drought affected areas of Maharashtra, as it requires 2,000 litres of water to produce 1 kg of sugar, whereas barley requires only 11 litres of water.

Innovation:

  • The climatic conditions in this country support stevia, a possible substitute for sugarcane, which is endowed with several medicinal properties and can be grown in many northern States.
  • One acre of stevia cultivation can produce sugar equivalent to 36 acres of sugarcane, requiring much less water and providing double the income compared to wheat and paddy.
  • We need accredited agencies for supplying planting materials of stevia in India.

Stevia Plant

Stevia Plant

Risk management:

  • While several corporates have implemented successfully enterprise risk management systems, we have so far not been able to provide holistic solutions to farmers to mitigate risk.
  • We need proper execution of the same to mitigate the stress level of farmers.
[Ref: Business Line]

 

GS (M) Paper-3 Topic: “Inclusive growth and issues arising from it”

 

The NBFC story: Alive and kicking

The financial sector will witness unprecedented changes in the coming years and there will be new emerging models that will disrupt the old. This is because of the rise of NBFCs over the past few years.

Usha Thorat committee:

The Usha Thorat committee was constituted by the Reserve Bank of India (RBI) in September 2010 to address some of the issues related to NBFCs.

Performance of the NBFCs in India:

  • NBFCs now have a large presence in most retail-lending segments and are estimated to account for a 44% share in automobile loans and a 52% share in loans against property.
  • Over the past two years, the overall loan book of NBFCs grew at 16% annually, or almost twice as fast as bank credit growth over the same period.
  • A closer look at the consumer lending book in India reveals that the top 12 NBFCs with about $92 billion of retail loans, are barely 5% smaller in size than the corresponding retail books of the top five private sector banks.
  • The distribution reach of many NBFCs remains unmatched by banks in areas such as microfinance, used-vehicle financing or rural housing.
  • NBFCs that have built a credit platform in areas related to consumer lending have been strong outperformers in the stock markets.
  • Microfinance is seeing a huge boom after having absorbed the shocks from the Andhra Pradesh crisis five years ago.
  • The better quality NBFCs have introduced many best practices hitherto adopted only by a few private sector banks. Many are systematically diversifying their loan books to avoid the risk of concentration in cyclical businesses.
  • Since the global financial crisis, the share of bank credit to NBFCs (including housing finance companies) has risen by 50% from ~6% to 9%.

NBFCs vs. Private Sector Banks:

  • The outperformance of NBFCs has coincided with a period of rising stress in the corporate loan books of most state-owned and some private sector banks that were focussed on project finance.
  • Arguably, these ‘corporate’ banks have been pre-occupied with recognition and resolution of these non-performing loans and have left an open space for NBFCs and consumer-focused private sector banks to grab share.
  • Moreover, these ‘corporate’ banks seem to be more than willing to fund these NBFCs either to meet priority sector lending norms or merely because it’s ‘lazy banking’.

Conclusion:

As Bill Gates rightly says: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.”

 

As Nandan Nilekani says in a foreword to a recent report by Credit Suisse: “(The) gale winds of disruption and innovation brought upon by technology, regulations and government action, will fundamentally alter the banking industry. The future will belong to those who show speed, imagination and the boldness to embrace change!”

[Ref: LiveMint]

 

GS (M) Paper-3 Topic: “Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.”

 

India’s reverse Brexit: GST will create million of formal jobs

Introduction:

According to author, passing the GST Bill (India’s reverse Brexit moment) will create millions of formal jobs. It will end state-by-state rules and create a national market for goods to be supplied from anywhere to anywhere. It will also make right India’s regulatory mechanism which has been hostile to small entrepreneurs.

Present scenario:

Currently, supply chains for e-commerce companies are not optimised but distorted by regulatory mechanism that prevents us from offering customers the lowest cost or fastest delivery.

Examples,

  • For e-commerce companies, it is difficult to supply goods worth more than Rs 5,000 to UP because our customers have to go to a tax office and complete paperwork.
  • E-commerce companies are unable to keep goods from their 90,000 suppliers in their warehouses across Karnataka due to double taxation.
  • They often face confiscation of goods and cash in Kerala because of their approach to tax domicile, which conflicts with supplying states.

Why seamless national supply chain is necessary?

A seamless national supply chain that is agnostic to supply or demand destination is urgent, important and overdue for three reasons.

First, it is India’s development trajectory to reduce poverty.

According to the author,

  • Instead of the traditional formula of large manufacturing, exports and large enterprises, India’s destiny lies in services, domestic consumption and small and medium enterprises.
  • India need to evolve very differently from China as India do not have the same global manufacturing and trade opportunity China had in 1978.

Second, it will improve enterprise productivity.

According to the author,

  • Enterprise productivity is important because poverty can be eliminated by improving productivity.
  • India’s problem is not jobs but wages. Everybody who wants a job has one, just not at the wages they want. India’s enterprise stack is largely informal, unproductive and built on self-exploitation.
  • Ninety per cent of India works informally. This is the same number as 1991 and means that 100% of net jobs in the last 20 years have been created in informal enterprises.
  • Many factors go into enterprise productivity but the main one is market access: connecting with buyers.

Finally, it is about empowering consumers and producers.

Concerns:

  • The majority of India’s 600-million-strong transacting consumers do not have access to quality products at affordable rates. Similarly, lakhs of producers are denied market access.
  • Because of geographical constraints and artificial restrictions placed by the current tax regime, quality products are expensive and affordable products suffer from poor quality.

Solution:

  • Here technology can come to the rescue post-GST. The `India stack’ framework for transactions (paperless, presenceless and cashless) is being first applied magnificently to finance but has huge implications for production and consumption once GST is passed.
  • An unintended consequence of implementing the India stack across supply chains will be big data analytics for government that will not only improve compliance but greatly expand formal economic activity and create a virtuous cycle for credit, employment and wage rises.

What is ‘India stack’?

India stack is a concept that is unique to this country.

  • The India stack is a part of Digital India program aimed at treating information as a utility. Instead of having a top down approach which would result in crappy applications, the government has launched an open Application Programming Interface (API) policy.
  • India Stack is a complete set of API for developers and includes:
  1. The Aadhaar for authentication
  2. The e-KYC documents that have been generated
  3. Digital lockers
  4. e-signatures (software based as against the present dongle based e-signs)
  5. The Unified Payments Interface which rides on top of the National Payment Corporation of India’s Immediate Payment System.

Significance of ‘India stack’:

  • The India Stack enables Apps that could open up many opportunities in financial services, healthcare and education sectors of the Indian economy.
  • What this essentially means is that developers and tech startups can now build software and create businesses around the readily available infrastructure offered through India Stack, thus opening a huge potential to tap into the booming smartphone market in the country.
  • Since the consumer market in India is very large, such startups could also hope for institutional funding and gain from the early mover advantage.
[Ref: ToI, ET]

 

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  • sneha

    very inspiring when u guys give such an effort in our help

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