trainee5's blog

THE GIST of Editorial for UPSC Exams : 29 April 2020 (It will take fiscal boldness now to relieve financial distress (Mint))



It will take fiscal boldness now to relieve financial distress (Mint)



Mains Paper 3:Economy 
Prelims level: Fiscal measures 
Mains level: Tightened fiscal measures need to address the financial distress due to COVID 19

Context:

  • The Indian government has till now come up with an insipid fiscal response to the ongoing economic crisis. 
  • The government does not want to fire all its bullets in what threatens to be a long battle. It wants to time its interventions. 
  • The other possible explanation for this fiscal timidity is that India has entered this crisis with weak public finances.

Comparison the crisis with 2008 financial crisis:

  • The combined official fiscal deficit of the Union plus state governments was at its lowest level in many decades. 
  • The economic boom of the preceding four years had led to higher tax collections pouring into the treasury. 
  • The massive increase in spending announced in the budget of February 2008 was with an eye on the national election scheduled a year later, rather than in anticipation of a coming storm. 
  • Then followed a second wave of fiscal expansion after the North Atlantic financial crisis hit Indian shores seven months later. 
  • Back then, India’s effective fiscal stimulus over two years was a substantial 4.3% of gross domestic product (GDP). 
  • In 2020, the crisis-driven spending plan announced by the government so far is less than 1% of GDP.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Tighter fiscal policy than its regional peers:

  • Some of the budget estimates released a few days ago by the International Monetary Fund are telling.
  • In 2018, the total fiscal deficit of the Indian government as a proportion of GDP was 2.4 percentage points higher than the average for Asian emerging markets. 
  • India is expected to end 2020 with a total fiscal deficit that will be 2.5 percentage points lower than Asia’s average.
  • India ran a looser fiscal policy compared to the rest of Asia in normal times, but is likely to run a tighter fiscal policy than its regional peers in a crisis year. 
  • Something similar can be seen in estimates for public debt. Asian public debt as a proportion of GDP is expected to go up by nine percentage points in 2020. The comparable figure for India is 2.9 percentage points. (These estimates are being cited with full knowledge that forecasting models break down during extreme events.)

Funding extra expenditure through money creation: 

  • Lack of traditional fiscal space should not hold the government back in a crisis situation. 
  • There are many options outside the consensus macro playbook. 
  • A commonly cited option right now is funding extra expenditure through money creation rather than borrowing. 
  • The size of the Reserve Bank of India (RBI) balance sheet as a percentage of nominal GDP is close to its 35-year average. 
  • There is scope for printing more money right now—and the inflationary consequences are likely to be muted because of lower velocity of money amid a demand collapse.
  • Getting public finances back on track is a battle that lies in the future. 
  • A rapid recovery in economic activity would be the best solution. 
  • Otherwise, history tells us that countries have brought down their public debt numbers through some combination of financial repression, austerity, higher taxes and inflation. 
  • Some element of capital controls could also be back in play.

Need for an increase in discretionary government spending:

  • The collapse in tax revenues as the economy is shut down will automatically lead to a rise in India’s fiscal deficit. 
  • However, there is the need for an increase in discretionary government spending as well. 
  • Economists have shown that spending multipliers are higher than tax multipliers in India. 
  • In other words, the increase in economic output for every unit increase in the fiscal deficit is higher when the government spends rather than changes tax rates. 
  • Also, spending by states gives more bang for the buck than equivalent spending by the Union government.

Below the line measures to support economy: 

  • Also, there are options other than direct spending to support the economy.
  • Countries such as Germany, the UK, Italy, France and South Korea have complemented traditional fiscal expansions with “below the line" measures such as loans and guarantees to companies. 
  • In an excellent recent study, analysts estimate that more than half of Indian corporate balances sheets will be unable to meet expenses with zero revenues. 
  • They are careful to point out that their analysis is based on extreme assumptions that there is no fall in their wage bills, no revenues, and no access to fresh credit.

Way forward: 

  • The poor need income support for their very survival. That should be at the top of any democratic government’s list of priorities. 
  • However, protecting Indian companies from a financial collapse also matters, because otherwise the economy will see a reduction in its capital stock, which will be needed both for a rapid recovery as well as job creation once the worst is over. 
  • There are contagion risks in financial markets as well, going by what has happened to some mutual funds that were invested in bonds.

Conclusion: 

  • These are extraordinary times that require extraordinary measures. 
  • The danger from a delayed fiscal programme is that hysteresis may set in, as companies run out of money and supply chains are broken, damaging our economic prospects in the medium term.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 28 April 2020 (The script of disruption and a new order (The Hindu))



The script of disruption and a new order (The Hindu)



Mains Paper 2:International 
Prelims level: UN Security Council
Mains level: Changes of the geopolitical and geo-economic due to COVID 19 pandemic

Context:

  • Pandemics have often changed the world and reshaped human society.
  • Empires have collapsed. Commentators are already talking of fundamental alterations in governance and business norms. 
  • What is left unsaid — and likely to pose an even bigger challenge — is the extent to which the pandemic will impact human values and conduct. 
  • There is already concern that a diminution in human values could occur, and with this, the concept of an international community might well cease to exist. 
  • Each nation is tending to look inwards, concentrating on its narrowly defined national interests. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Institutions under fire

  • International institutions such as the United Nations, the United Nations Security Council and the World Health Organization (WHO) are seen to have failed to measure up to the grave challenge posed by the pandemic.
  • The UN Security Council is under attack for being slow in dealing with a situation that appears, at least on the surface, far graver than any military threat in recent decades.
  • WHO has been tarred with the charge of bias and of grossly underestimating the nature of the epidemic. 
  • That prestigious global institutions should have been singled out for attack at this time speaks volumes about the mood prevailing across the world.
  • Economic shock
  • There are many other aspects of the COVID-19 crisis that will drastically impact the globe. 
  • On the economic front, the World Bank has already predicted negative growth for most nations. 
  • India’s growth forecast for the current fiscal year has been put at 1.5% to 2.8%. 
  • Contraction of the economy and the loss of millions of jobs across all segments will further complicate this situation.

Role of state:

  • What is likely to change even more dramatically are certain other aspects relating to political management and security. 
  • Both terms are set to gain new meanings. 
  • The role of the state as an enforcer of public good will almost certainly become greatly enhanced. 
  • The dominant imperative would be to not put limits on the role of the state even where the situation may not be as grave as the present one. 
  • Many pieces of legislation of yesteryears that had been relegated to the archives — they were perceived to be anachronistic in a modern democratic set-up — may get a new lease of life. 
  • Some pieces of legislation such as the Disaster Management Act already reflect this reality today. Other pieces of legislation could follow in its wake.
  • This trend is already becoming evident to some extent across the world. Europe has shown a willingness to sacrifice personal liberties in favour of greater state control.
  • There are no serious protests over the fact that many of the powers being vested in the instruments of state in democracies today, to meet the current challenge, are eerily similar to those already practised by authoritarian regimes such as China.
  • Post COVID-19, the world may have to pay a heavy price in terms of loss of liberty. An omnipotent state could well become a reality.

China in the spotlight

  • Far-reaching changes can also be anticipated in the realm of geo-economics and geopolitics. The world needs to prepare for a sea change. One nation, viz. 
  • China, is presently seeking to take advantage of and benefit from the problems faced by the rest of the world in the wake of the epidemic. 
  • Already one of the most prominent nations of the world and an important player in international institutions, China remains totally unfazed by the stigma that the current world pandemic owes a great deal to its negligence.
  • The first identified and detected COVID-19 victim in Wuhan was on December 1, 2019, but it was only in the second week of January 2020, that China sounded the alarm. 
  • More importantly, it is seeking to convert its ‘failure’ into a significant opportunity. This is Sino-centrism at its best, or possibly its worst. 
  • China now seeks to benefit from the fact of its ‘early recovery’ to take advantage of the travails of the rest of the world, by using its manufacturing capability to its geo-economic advantage. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

A faltering West:

  • The geopolitical fallout of this pandemic could be still more serious. One distinct possibility is that COVID-19 would effectively put paid to the existing global order that has existed since the late 1940s. 
  • The United States which is already being touted in some circles as a ‘failing’ state, will be compelled to cede ground. 
  • Weakened economically and politically after COVID-19 has ravaged the nation, the U.S.’s capacity to play a critical role in world affairs is certain to diminish. 
  • The main beneficiary of this geopolitical turnaround is likely to be China, a country that does not quite believe in playing by the rules of international conduct. 
  • Europe, in the short and medium term, will prove incapable of defining and defending its common interests, let alone having any influence in world affairs. 
  • Germany, which may still retain some of its present strength, is already turning insular, while both France and a post-Brexit United Kingdom will be out of the reckoning as of now.

West Asia and India:

  • In West Asia, both Saudi Arabia and Iran are set to face difficult times. 
  • The oil price meltdown will aggravate an already difficult situation across the region. There may be no victors, but Israel may be one country that is in a position to exploit this situation to its advantage. 
  • The economic downturn greatly reduces India’s room for manoeuvre. In South Asia, it faces the prospect of being isolated, with the Chinese juggernaut winning Beijing new friends and contacts across a region deeply impacted by the economic consequences of the COVID-19 pandemic. 
  • India’s leverage in West Asia — already greatly diminished — will suffer further, with oil prices going down and the Indian expatriate community (who are among the hardest hit by this downturn) out on a limb. 
  • Many of the latter may seek repatriation back to the host country, substantially reducing the inflow of foreign funds to India from the region.

Conclusion:

  • The COVID-19 pandemic is unprecedented, involving as it does far too many variables. 
  • The very complexity of the novel coronavirus leads to radical uncertainty. Hence, it it unlikely that the world will ever be the same again. Abnormal could well become the new normal.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 28 April 2020 (Lacking in transparency (The Hindu))



Lacking in transparency (The Hindu)



Mains Paper 2:Governance 
Prelims level: World Health Organization
Mains level: Preparedness for COVID 19 pandemic

Context:

  • The lockdown of the country has had a devastating social impact. 
  • A recent survey of internal migrant workers found that 42% did not even have a day’s worth of rations left. 
  • The situation in the agricultural sector is also grim.

Preparing for lockdown: 

  • A lockdown is not a permanent solution for the pandemic. 
  • Models suggest that, in the absence of other long-term measures, the epidemic could bounce back when restrictions are eased. 
  • Therefore, a lockdown is just a method of buying time to prepare the healthcare system for a long battle.
  • The World Health Organization declared the novel coronavirus outbreak a “public health emergency of international concern” on January 30. India was lucky because the virus arrived here relatively late. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

A result of government failure:

  • If the government had scaled up testing capability in February, tested and quarantined international travellers from high-risk countries, including asymptomatic travellers, and established stocks of personal protective equipment, a total lockdown could have been avoided. 
  • India could not have escaped the epidemic entirely, but it could have minimised damage to the economy, while keeping infections at a manageable level through testing, contact-tracing and, possibly, targeted lockdowns. 
  • It follows that the social catastrophe caused by the lockdown is the direct result of the failure of the government to respond to the epidemic in a timely manner.

Lack of testing: 

  • On April 14, the Prime Minister remarked that his government took “quick decisions” to contain the disease. 
  • The Indian Council of Medical Research (ICMR)’s reluctance to expand the scope of testing. 
  • On April 27, India had tested 486 individuals per million of the population. This is not only more than 50 times lower than the corresponding rate in Italy, it is significantly lower than the rate in Pakistan. 
  • Almost a week into the lockdown, on March 30, the ICMR admitted that it was testing at “less than 30%” of its capacity. This raises serious questions about whether ICMR’s strict testing guidelines are partly motivated by the desire to keep the number of reported infections low and disingenuously suggest that the epidemic is in control.
  • Studies suggest that more than 80% of those infected by COVID-19 are asymptomatic or only mildly symptomatic. 
  • Since such individuals can nevertheless infect others, they must be included in the ambit of testing. 
  • Otherwise, they could form the base for a rapid spread of the epidemic.

No transparency, accountability

  • The government must not only collect more data, it must share and analyse this data openly so that people can verify the rationale behind its administrative decisions. 
  • Instead, the government has started peddling numbers that make no sense. 
  • Just before extending the lockdown, the government claimed that India would have had 8 lakh cases by 15 April without the lockdown.
  • But independent analysts believe that the lockdown’s role in reducing the number of cases in India has been of a smaller magnitude.
  • A crisis provides the state with a ready justification to shun both accountability and transparency. 
  • However, while this might be expedient for those in power, it does not lead to an effective public health strategy. 
  • The virus is immune to political spin and data-suppression. This is why the role of the Indian people is crucial, and it goes well beyond lighting candles. 

Conclusion:

  • We can best contribute in the country’s battle against the epidemic by keeping ourselves informed, holding the government to account, and constantly pushing it to adopt policies that are scientific, transparent and people-oriented.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 28 April 2020 (Institutional challenges to migrants’ welfare (Indian Express))



Institutional challenges to migrants’ welfare (Indian Express)



Mains Paper 2:National 
Prelims level: Cess fund 
Mains level: Welfare scheme for migrant workers 

Context:

  • The relief package announced by the finance minister on March 26 included a direction to all states.
  • The labour ministry had previously estimated that about Rs 52,000 crore was available with states. 
  • But, whatever the amount, this assistance is likely to be constrained in practice by low worker registrations, limited capacity for expenditure, significant variations across states, and issues of interstate migrants. 
  • This will affect the ability of central and state governments to ensure wages to migrants, many of them construction workers.

Proper use of the cess money for welfare of the people: 

  • States collect a cess from construction projects, register construction workers, and design schemes to use the funds collected for their welfare. 
  • But states have not been very good at spending this money.
  • The current crisis is an opportunity for them to improve their record, but this will need significant changes in practice.
  • The overall registration of workersonly registered construction workers benefit from the welfare schemesitself has been unsatisfactory. 
  • Figures from the Union Ministry of Labour and Employment show that 3.24 crore workers (estimated at 3.5 crore currently) were registered across the country as of end-2018, which represented about 60% of the construction workforce in India, as per PLFS 2017-18. Much of this progress is recent, after monitoring by the Supreme Court; registration increased by more than 50% between 2015 and 2018. 
  • The field studies at labour chowks show that many workers remain unaware of this benefit.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Limited subset of registered workers:

  • But even for the limited subset of registered workers, the benefit would depend on the state in which they are registered, since there is wide variation in the availability of cess funds across states. 
  • In 2018, the last year for which a state-wise breakup is officially available, half of the collected cess amount was in just six states—Maharashtra, Karnataka, Delhi, Tamil Nadu, Uttar Pradesh and Madhya Pradesh. Conversely, six states—Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Odisha, Rajasthan and West Bengal—have 54% of the registered workforce, but only 32% of cess funds collected.

Other issues: 

  • There is the issue of migrant workers, many of who made desperate attempts to walk long distances home after the lockdown, who constitute 42.7% of the urban construction workforce (Census 2001). 
  • The accompanying graphic shows that the largest concentration of migrant construction workers is in Maharashtra, Gujarat (low registration and low expenditure), undivided Andhra Pradesh, Haryana (high registration, low expenditure), Chhattisgarh and Madhya Pradesh (high registration, high expenditure).
  • Many workers walking home told journalists that they had little access to social security at work. 
  • This is corroborated by fieldwork from several states showing that boards are reluctant to register migrants, and registration processes are onerous. Thus, 

How, then, do we mitigate this problem?

  • The Centre can use the expertise of the Central Building and Other Construction Workers’ Advisory Committee to play a proactive role in coordinating amongst states, especially sending and receiving migrants. 
  • It can facilitate sharing beneficiary lists and funds between these states, perhaps through interstate MoUs, to be used in combination with ground-level targeting, involving civil society and employers, to ensure that all workers get access to some minimum sustenance for the period of the lockdown. 
  • A quick start can be made with high registration states that have a demonstrated capacity to spend.
  • Stateslabour departments and welfare boards—must do much more to implement the law. 
  • Much remains to be done to convey the benefits of registration, and to make it easily accessible. 
  • The quarantine camps for migrants are, ironically, an opportunity to disseminate information, and even register such workers.

Conclusion:

  • One can only hope that this crisis, having made their struggle visible, will improve construction workers’ lives a little, and shame states into ensuring that any future disaster does not leave them, literally, on the roads.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 28 April 2020 (Why it is time to end Covid-19 lockdown(Indian Express))



Why it is time to end Covid-19 lockdown(Indian Express)



Mains Paper 2:Governance 
Prelims level: Lockdown
Mains level: Purpose of the lockdown and benefits achieved during the process  

Context:

  • A three-week lockdown was essential to push out the epidemic curve to June 2020, by which time the country could prepare adequately for the disease. 
  • To favour of focused state-level shutdowns rather than a national shutdown, that because of the economic and human costs involved.
  • There may have been political and logistical challenges in communicating different messages to different parts of the country. So here we are a month into the big lockdown.

What all have we achieved with the lockdown?

  • The number of infections would have been about eight times as much without the lockdown. 
  • The rationale for enforced distancing that lockdowns enable is that they temporarily reduce the transmission of infection, which then slows the speed at which an exponential curve can take-off. 
  • Without a lockdown, the number of Covid-19 infections was projected to double approximately every three days—roughly the rate that other countries have seen without a lockdown. At this speed, it takes only 66 days to get from 100 infections to 420 million infections. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Purpose of lockdown: 

  • The purpose of the lockdown was only to buy time. Since March 24, the rate of testing has increased from under 2,000 per day to over 36,000 at the current time. 
  • According to the government’s reports, we are now prepared with thousands more ICU beds, supplies of personal protective equipment, organisation of healthcare professionals, clinical protocols and other equipment for critical care.
  • All of this preparedness planning should undoubtedly continue. However, each additional day of lockdown is now much less valuable in terms of our ability to prepare and, in effect, we are pushing out the epidemic peak only a little bit. 

Are the benefits worth the costs? 

  • In human terms, the consequences are enormous in terms of lost jobs, localised shortages of food and the suffering of the migrants and homeless. 
  • Companies have lost significant revenues and will have to lay-off workers. The transportation industry is in shambles, as is the construction industry. 
  • The firm Acuité Ratings and Research estimates that every day of lockdown costs the country about `35,000 crore ($4.5 billion). 
  • That works as a crude approximation given that about half of the economy of $3 trillion is not functional and assuming about 330 working days. The daily value-add of additional preparation is certainly not anything close to `35,000 crore.
  • We could end the lockdown now and spend the additional government revenues from the revival of the economy on increasing testing, containment, hospital beds, critical care and messaging on carrying on distancing. 
  • We can achieve much more through continuation of bans on mass gatherings, covering mouths and noses in public, spitting bans, physical distancing to the extent possible in markets, and expanded testing. 
  • That would mean no movie theatres, and no large weddings, religious gatherings, sporting events or other social events. 
  • Increased testing is the mantra simply because it enables those who are infected to know their infection status and, therefore, to protect their families and community.

High prioritised to reducing stigma:

  • If we treat Covid-19 patients like criminals rather than victims of a condition they had no control over, we will find that people will not come forward to be tested. 
  • There may be some who think that the lockdown is all that is needed to control Covid-19 and when cases start coming down, we can end the lockdown and we can resume as before. 
  • And as testing increases, we will uncover more cases. There is simply no way to stop the epidemic in its tracks.
  • The national lockdown was timely and important. It came on the back of early action that India took to stop flights to China, close borders, and trace and quarantine foreign travellers. 
  • All of these helped slow down the disease, along with the big lockdown. But the lockdown has achieved its purpose. 
  • There is no added value and it is time to go back to work, albeit with some important safety measures. 
  • We may yet need another lockdown or two before the end of the year to curb the sharp rise of the disease, and it is important to keep some powder dry for these situations.

Conclusion: 

  • However, it is how we effectively control disease transmission and maintain infection prevention and control behaviour post-lockdown and not the continuation of the lockdown that will determine the future trajectory of Covid-19 in India.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 27 April 2020 (What’s behind diplomatic tensions in the South China Sea?(Indian Express))



What’s behind diplomatic tensions in the South China Sea?(Indian Express)



Mains Paper 2:International Relations 
Prelims level: Spratly Islands and Paracel Islands 
Mains level: Describe the disputes of Spratly Islands and Paracel Islands and also discuss the recent developments 

Context:

  • China has been busy increasing its presence in the South China Sea. 
  • This past week, Beijing unilaterally renamed 80 islands and other geographical features in the area, drawing criticism from neighbouring countries who have also laid claim to the same territory.

What is the Spratly Islands dispute about?

  • There has been an ongoing territorial dispute between China, Taiwan, Vietnam, the Philippines, and Malaysia concerning the ownership of the Spratly Islands archipelago and nearby geographical features like corals reefs, cays etc.
  • Since 1968, these nations have engaged in varying kinds of military occupation of the islands and the surrounding waters, with the exception of Brunei, that has contained its objections to the use of its maritime waters for commercial fishing.
  • The Spratly Islands are largely uninhabited, there is a possibility that they may have large reserves of untapped natural resources. However, due to the ongoing dispute, there have been few initiatives to explore the scale of these reserves and hence the amount of natural resources that the islands may have, are based on speculation and extrapolation by studying resources available in nearby islands.
  • In the 1970s, oil was discovered in neighbouring islands, specifically off the coast of Palawan. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

What is the Paracel Islands dispute about?

  • The Paracel Islands located in the South China Sea, almost equidistant from China and Vietnam. 
  • Beijing claimed the Paracel Islands as a part of China sovereign territory can be found in 14th century writings from the Song Dynasty. 
  • Vietnam on the other hand, says that historical texts from at least the 15th century show that the islands were a part of its territory.
  • By 1954, tensions had dramatically increased between China and Vietnam over the archipelago. 
  • In January 1974, China and Vietnam fought over their territorial disputes after which China took over control of the islands. 
  • In retaliation, in 1982, Vietnam said it had extended its administrative powers over these islands. 
  • In 1999, Taiwan jumped into the fray laying its claim over the entire archipelago.
  • Since 2012, China, Taiwan and Vietnam have attempted to reinforce their claims on the territory by engaging in construction of government administrative buildings, tourism, land reclamation initiatives and by establishing and expanding military presence on the archipelago.

What was the most recent dispute about?

  • The recent establishment of new administrative districts on both Spratly and Paracel Islands, China’s Ministry of Natural Resources and the Ministry of Civil Affairs jointly announced that the Chinese government had “named” 80 islands, reefs and other geographical features around the two archipelagos with Chinese names. 
  • The last time China had unilaterally engaged in a similar initiative was in 1983 where 287 geographical features had been renamed in the disputed chain of islands.
  • In the past few years, China has stepped up military aggression and has created artificial islands for military and economic purposes in the South China Sea, drawing criticism from neighbouring countries and other western powers. 
  • A few weeks ago, Vietnam had lodged a complaint at the UN stating that China had illegally sunk a fishing trawler near Paracel Islands, killing eight people on board. In March, China built two research stations on territory claimed by the Philippines.

Way ahead:

  • China’s renaming of the islands, the US sent in an assault ship and a guided missile cruiser into the waters near Spratly and Paracel Islands, off the coast of Malaysia. 
  • Chinese and Australian warships also entered the fray. Following the arrival of American warships, regional observers expressed concern that the US’s presence may only serve to heighten tensions. 
  • The US has no territorial claims in the South China Sea, but is known to send its naval force into the waters each time there are provocative developments in the waters, particularly angering China.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 27 April 2020 (From Plate to Plough: A Marshall Plan for East India (Indian Express))



From Plate to Plough : A Marshall Plan for East India (Indian Express)



Mains Paper 3:Economy  
Prelims level: Consumption expenditures in Indian households
Mains level: Economic challenges faced by eastern India states and steps to removal the distress 

Context:

  • A famous line of Tiger in Walt Disney Productions’ Winnie the Pooh is, “Life is not about how fast you run or how high you climb, but how well you bounce”. 
  • Today’s economy, under siege because of the coronaviruspandemic, what matters is not how big a country’s GDP is or how fast it has been growing; the real challenge is how best and how quickly a country can bounce back to a growth rate of 7-8 per cent per annum.

GDP growth projected by IMF:

  • The IMF’s projections for GDP growth for this year seem to be either in the negative or below 2 per cent for almost all major countries of the G-20 group. 
  • India could do a little better compared to the other BRICS nations, but its growth will most likely be below 2 per cent. This, of course, is under an optimistic scenario. 
  • Many experts reckon that India could also go into negative GDP growth this year, if it does not reboot the economy properly and in time.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Steps taken by the government:

  • The Centre and the Reserve Bank of India are trying to remove all roadblocks so that factories and farms can resume operations, albeit in a regulated manner that ensures that the virus is contained. 
  • The focus is largely on the supply side — how to ease restrictions and how to increase liquidity in the system for resuming production. 
  • Our assessment is that it may not take too long as the real problem is the collapse in demand. 
  • And that demand may not pick up easily as the virus is likely to stay with us for quite some time.
  • We could have lockdowns again if there is a surge in infection. This will surely limit our travel and restrict our shopping for non-essentials. However, there is one demand that can easily revive — that of food.

Consumption expenditures in Indian households: 

  • The NSSO survey of consumption expenditures for 2011-12 revealed that about 45 per cent of the total expenditure of an Indian household is on food. 
  • For the poor, the NSSO reckoned, this figure was about 60 per cent. 
  • We do not have information about the consumption patterns in 2020, but our guess is that about 35-40 per cent of the expenditure of an Indian household is on food and for a poor household, this figure is around 50 per cent. Herein, lies the scope to reboot the economy.

Problems of migrant labourers: 

  • The sudden announcement of the nationwide lockdown gave them no time to go back to their families. 
  • They lost their jobs and incomes, and having spent whatever little savings they had, these workers have been reduced to penury. 
  • The Centre and states, despite their best efforts, have not managed to address the problem of hunger of these workers. Even civil society has not managed to bridge the gap. 
  • The migrant labourers may well have lost their trust in the state, and once the lockdown is lifted, most of them are likely to rush back to their families in villages — as if freed from jail. 
  • And, it could be some time before they are back in the cities — that is, if they return at all. So, farms and factories, especially
  • The MSMEs in the relatively developed states of western, southern and north-western India are likely to face labour shortages.

Challenges in eastern India states:

  • However, eastern Uttar Pradesh, Bihar, Jharkhand, West Bengal, and Odisha, from where much of the migrant labour comes, will face a double challenge. 
  • Their agriculture, with tiny farm holdings is already saddled with a large labour force — this comprises 45 to 55 per cent of the total labour force of these states. 
  • Non-farm income from wages and salaries, through migrant labour, was an important source of income for households in these states. 
  • This is now severely hit. In all probability, the per capita rural incomes of these states could shrink, at least in the short run. This could lead to poverty and increase hunger and malnutrition. 

Reboot the economy:

  • A special investment package — like the Marshall Plan of USA in 1948 — for the eastern belt of India to build better infrastructure, agri-markets and godowns, rural housing, primary health centres, schools and enhances people’s skills will go a long way to revive the economy and augment the incomes of the migrant workers. 
  • Rising incomes will generate more demand for food as well as manufactured products, giving a fillip to the growth engines of agriculture as well as the MSME sector. 
  • Building better supply chains for food directly from farm-to-fork, led by the private sector, will enhance the export competitiveness of agriculture. It will also ensure a higher share of farmers in the consumers’ rupee. 

Address hunger and malnutrition:

  • The all India relief package of Rs 1.7 lakh crore announced by the central government earlier, which is about 0.8 per cent of the country’s GDP, is too small to reboot the economy. 
  • If India has to bounce back quickly, it needs a much bigger relief cum stimulus package — certainly not below 5 per cent of GDP. And, it should focus more on the eastern belt, where the issue is that of survival. 

Conclusion:

  • The country could do even more badly on the indicators of poverty, hunger, malnutrition, infant mortality and well-being. 
  • India could get derailed from its course of attaining the Sustainable Development Goals by 2030.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 27 April 2020 (At the edge of a new nuclear arms race (The Hindu))



At the edge of a new nuclear arms race (The Hindu)



Mains Paper 2:International 
Prelims level: Comprehensive Nuclear-Test-Ban Treaty
Mains level: Current context on Comprehensive Nuclear-Test-Ban Treaty

Context:

  • A report issued by the United States State Department on “Adherence to and Compliance with Arms Control, Non-proliferation, and Disarmament Agreements and Commitments (Compliance Report)” raised concerns that China might be conducting nuclear tests with low yields at its Lop Nur test site, in violation of its Comprehensive Nuclear-Test-Ban Treaty (CTBT) undertakings.
  • The U.S. report also claims that Russia has conducted nuclear weapons experiments that produced a nuclear yield and were inconsistent with ‘zero yield’ understanding underlying the CTBT, though it was uncertain about how many such experiments had been conducted. 
  • Russia and China have rejected the U.S.’s claims, but with growing rivalry among major powers the report is a likely harbinger of a new nuclear arms race which would also mark the demise of the CTBT that came into being in 1996 but has failed to enter into force even after a quarter century. 

What does CTBT ban mean?

  • For decades, a ban on nuclear testing was seen as the necessary first step towards curbing the nuclear arms race but Cold War politics made it impossible. 
  • A Partial Test Ban Treaty was concluded in 1963 banning underwater and atmospheric tests but this only drove testing underground. 
  • By the time the CTBT negotiations began in Geneva in 1994, global politics had changed. 
  • The Cold War had ended and the nuclear arms race was over. 
  • The Union of Soviet Socialist Republics, or the USSR, had broken up and its principal testing site, Semipalatinsk, was in Kazakhstan (Russia still had access to Novaya Zemlya near the Arctic circle). 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Negotiations were often contentious:

  • France and China continued testing, claiming that they had conducted far fewer tests and needed to validate new designs since the CTBT did not imply an end to nuclear deterrence. 
  • France and the U.S. even toyed with the idea of a CTBT that would permit testing at a low threshold, below 500 tonnes of TNT equivalent. 
  • Civil society and the non-nuclear weapon states reacted negatively to such an idea and it was dropped. 
  • Some countries proposed that the best way to verify a comprehensive test ban would be to permanently shut down all test sites, an idea that was unwelcome to the nuclear weapon states. 

Why it lacks authority?

  • Another controversy arose regarding the entry-into-force provisions (Article 14) of the treaty. 
  • After India’s proposals for anchoring the CTBT in a disarmament framework did not find acceptance, in June 1996, India announced its decision to withdraw from the negotiations. 
  • Unhappy at this turn, the U.K., China and Pakistan took the lead in revising the entry-into-force provisions. The new provisions listed 44 countries by name whose ratification was necessary for the treaty to enter into force and included India. 
  • India protested that this attempt at arm-twisting violated a country’s sovereign right to decide if it wanted to join a treaty but was ignored. 
  • The CTBT was adopted by a majority vote and opened for signature. 
  • Of the 44 listed countries, to date only 36 have ratified the treaty. China, Egypt, Iran, Israel and the U.S. have signed but not ratified. China maintains that it will only ratify it after the U.S. does so but the Republican dominated Senate had rejected it in 1999. 
  • In addition, North Korea, India and Pakistan are the three who have not signed. 
  • All three have also undertaken tests after 1996; India and Pakistan in May 1998 and North Korea six times between 2006 and 2017. 
  • The CTBT has therefore not entered into force and lacks legal authority. 

Competition is back:

  • The key change from the 1990s is that the U.S.’s unipolar moment is over and strategic competition among major powers is back. 
  • The U.S. now identifies Russia and China as ‘rivals’. Its Nuclear Posture Review asserts that the U.S. faces new nuclear threats because both Russia and China are increasing their reliance on nuclear weapons. 
  • The U.S., therefore, has to expand the role of its nuclear weapons and have a more usable and diversified nuclear arsenal. 
  • The Trump administration has embarked on a 30-year modernisation plan with a price tag of $1.2 trillion, which could go up over the years. 
  • Readiness levels at the Nevada test site that has been silent since 1992 are being enhanced to permit resumption of testing at six months notice. 

Growing technological lead by US:

  • Russia and China have been concerned about the U.S.’s growing technological lead particularly in missile defence and conventional global precision-strike capabilities. 
  • Russia has responded by exploring hypersonic delivery systems and theatre systems while China has embarked on a modernisation programme to enhance the survivability of its arsenal which is considerably smaller. 
  • In addition, both countries are also investing heavily in offensive cyber capabilities. 
  • The new U.S. report stops short of accusing China for a violation but refers to “a high level of activity at the Lop Nur test site throughout 2019” and concludes that together with its lack of transparency, China provokes concerns about its intent to observe the zero-yield moratorium on testing. 
  • The U.S. claims that Russian experiments have generated nuclear yield but is unable to indicate how many such experiments were conducted in 2019. 
  • It suggests that Russia could be testing in a manner that releases nuclear energy from an explosive canister, generating suspicions about its compliance. 
  • The New Strategic Arms Reduction Treaty (New START) limits U.S. and Russian arsenals but will expire in 2021 and U.S. President Donald Trump has already indicated that he does not plan to extend it. 
  • Instead, the Trump administration would like to bring China into some kind of nuclear arms control talks, something China has avoided by pointing to the fact that the U.S. and Russia still account for over 90% of global nuclear arsenals. 

Current context:

  • Both China and Russia have dismissed the U.S.’s allegations, pointing to the Trump administration’s backtracking from other negotiated agreements such as the Iran nuclear deal or the U.S.-Russia Intermediate-Range Nuclear Forces (INF) Treaty. 
  • Tensions with China are already high with trade and technology disputes, militarisation in the South China Sea and most recently, with the novel coronavirus pandemic. 
  • The U.S. could also be preparing the ground for resuming testing at Nevada. 

Conclusion: 

  • The Cold War rivalry was already visible when the nuclear arms race began in the 1950s. New rivalries have already emerged. 
  • Resumption of nuclear testing may signal the demise of the ill-fated CTBT, marking the beginnings of a new nuclear arms race.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 27 April 2020 (PMI: A leading or misleading indicator? (The Hindu))



PMI : A leading or misleading indicator? (The Hindu)



Mains Paper 3:Economy 
Prelims level: Purchase Managers’ Index
Mains level: Reliability by using the Purchase Managers’ Index data 

Context:

  • The Purchase Managers’ Index (PMI) is a widely used economic indicator that gives an insight into business conditions. 
  • It is a survey-based diffusion measure provided by Markit, by compiling responses of purchasing managers (executives) of 400 companies every month. 
  • The aggregate final measure is a seasonally adjusted number on the scale of 0-100, where values above 50 reflect an increased expectation of overall business conditions compared to the previous month, whereas values below 50 indicate a decline. 

What is a PMI?

  • PMI or a Purchasing Managers’ Index (PMI) is an indicator of business activity -- both in the manufacturing and services sectors. 
  • It is a survey-based measures that asks the respondents about changes in their perception of some key business variables from the month before. 
  • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Uses of Purchase Managers’ Index:

  • The PMI is computed for manufacturing as well as for the services sector. 
  • The values are a weighted average of responses related to questions on new orders (30 per cent), output (25 per cent), employment (20 per cent), suppliers’ delivery (15 per cent), and stock of purchases (10 per cent).
  • The PMI is regarded as a proxy for business conditions as well as a leading indicator of the Index of Industrial Production (IIP). 
  • While the IIP numbers are revised, a consensus among economists is that the IIP and PMI plausibly capture a similar trend. 
  • This gives us a reason to empirically examine if there is a sustained correlation between the IIP and PMI of the manufacturing sector. 

Mapping the correlation:

  • Since the PMI is considered a leading indicator, we carry out two sets of analyses. 
  • First, we examine the simple trend by juxtaposing annual growth of the IIP index (manufacturing) and the previous month’s PMI (same results hold with contemporaneous trend analysis). 
  • Second, we examine their correlations during the period March 2014 to February 2020 (latest) over rolling windows.

Reliance on PMI:

  • Empirical evidence indeed suggests that the PMI is not a consistent leading indicator for industrial production.
  • Reliance on such indicator for macro policy-making is fraught with serious risks. 
  • One can get an impression about how the PMI information is used in policy-making from the discourse of the Monetary Policy Committee (MPC) of RBI. 
  • In this regard, to carry out a simple text analysis and measure the number of instances where “PMI” appears in the minutes of the meeting of MPC. 

Lack of clarity?

  • To speculate on why the PMI can be a poor indicator of economic activity in India. 
  • As per the official website, the PMI is constructed using the actual changes in the volume of business output. Hence, the quality of assessment of the respondents, and of the ground reality, will drive the observed pattern of changing correlation between the PMI and IIP. 
  • Another possible reason could be that 400 may not be a large enough representative sample to capture the diverse production scenarios of all the firms operating in the manufacturing sector in India. 
  • Also, it is not clear exactly how many executives respond every month, and if there is a panel. 
  • Research on the effectiveness of the PMI tracking manufacturing activity in India within and outside the central bank has been quite inadequate. 

Conclusion:

  • Therefore, as long as it gets wide publicity in the press and policy discourse, the PMI will continue to influence suboptimal policy outcomes. 
  • But one wonders if the PMI actually leads or misleads economic activity in India.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 27 April 2020 (Don’t force industry to pay wages during COVID-19 lockdown (Financial Express))



Don’t force industry to pay wages during COVID-19 lockdown (Financial Express)



Mains Paper 2:Governance 
Prelims level: Disaster Management Act
Mains level: Applicability of the Disaster Management Act 

Context:

  • The Centre using the Disaster Management Act to order all establishments, including industries, to pay full wages to their workers regularly for the period they are under lockdown, apart from restraining landlords from seeking rent for a period of one month from workers renting their premises, is a draconian step. 
  • State governments have followed suit, with Delhi talking about action against landlords for insisting on rent from students and workers, and Maharashtra reiterating the Centre’s stand on payment of wages.

Objective: 

  • The intent oflimit the economic pain from the lockdown for the vulnerable classes.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Downgrading MSMEs performance:

  • The State responsibility to ensure people’s well-being during a raging pandemic and seems not to be mindful of the pain of MSMEs as well as small commercial establishments.
  • Before the corona outbreak, the Indian economy was not doing too well, and now, with every likelihood that economic activity may not be back to the pre-corona normal for a long time, most experts don’t see signs of a stable economic recovery any time soon. 
  • So, with no money coming in, how are shops, MSMEs, etc, to find the money to pay regular and full wages to their employees?
  • Indeed, for many, the wage bill, at a time when they are shut or are functioning in a very limited manner, could mean the difference between having to close down permanently and staging a recovery over a period.

Highlights the Nagreeka petition:

  • Two firms, Nagreeka Exports Ltd and Ficus Pax Private Limited, and a Ludhiana-based association of MSMEs have petitioned the apex court seeking quashing of the Centre’s order.
  • The order, as the petitions claim, seem to violate Articles 14 and 19 of the Constitution, which relate to the right to equality before the law and the right to do business. 
  • Moreover, as the Nagreeka petition highlights, expecting a business-as-usual scenario from corporates is inequitable when the government is deferring payment of the entire salaries during lockdown—Maharashtra and other states governments announced this last month. 
  • It also points that the clutch of government orders violate Section 25C and 25M of the Industrial Disputes Act, 1947, which deal with payment of 50% wages when a worker is laid off and exception to lay-off workers during a natural calamity.

What government can do?      

  • The government must act to ensure that the survival of daily-wagers/low-wage earners is not imperilled in the middle of the pandemic because of loss of wages. 
  • The private sector, including small establishments and MSMEs, can be reasonably expected to pitch in. 
  • Strong-arming MSME players, already impacted by the lockdown, will imperil the recovery of the industry that will be crucial to kickstarting growth after the pandemic.
  • With even the parliamentary standing committee on labour saying that employers should not be forced to pay full wages during a natural calamity—“which often result in closure of establishments for a considerably long period without the employer’s fault”—the government must pay heed. 

Conclusion: 

  • If India is to recover from this crisis, it must ensure that policies don’t leave the private sector, especially the MSMEs, floundering.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 25 April 2020 (Designing minimum income guarantee post-Covid-19 collapse(Indian Express))



Designing minimum income guarantee post-Covid-19 collapse(Indian Express)



Mains Paper 3:Economy 
Prelims level: Minimum Income Guarantee Scheme 
Mains level: Argument behind implementing the Minimum Income Guarantee using the Socio-economic and Caste Census data

Context:

  • Coronavirus lockdown is impacting livelihoods, particularly in the unorganised sector. 
  • The government is already making cash transfers as part of its Rs 1.7-lakh crore welfare package announced on March 26. 
  • However, unemployment, already at a 45-year high in 2018, will only rise post-Covid-19 collapse in output and incomes. 
  • Even if there is a V-shaped recovery by 2022 (unlikely), employment growth will take longer to recover.

Need to consider Minimum Income Guarantee(MIG):

  • Universal Basic Income entered common parlance via the 2016-17 Economic Survey. 
  • In March 2009, someone was asked by the Planning Commission to prepare a paper on MIG, but only for the poor. 
  • Then the three pre-requisites for an unconditional MIG to the poor were not in place: appropriate identification of poor; bank accounts with every poor household; beneficiaries who could be biometrically authenticated. Today, they are in place, and the idea is administratively feasible.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Why is a MIG-type cash transfer for the poor needed, especially now?

  • The latest NSS All India Debt and Investment Survey (2013) shows over 70% rural population has one or more outstanding loans. 
  • Nearly 74% of farmer households were in debt in 2013 (up from 50% in 1993), as opposed to 64% of non-farm households (up from 43%). 
  • The incidence of indebtedness by asset-class indicates that 19.6% of the bottom decile (by assets) of rural households and 22% of next higher decile are indebted; as are 9.3% and 14.6% of the lowest two deciles in urban households. 
  • ‘Non-business’ (ie, consumption) purposes accounted for 85% of debt in rural, and 90% of debt in urban areas for the bottom two deciles. 
  • These debts heavily constrain expenditure on non-essentials, especially manufactured goods, reducing effective demand for these, leading to low investment in manufacturing. Thus, never-ending debts also have macro-economic consequences.

Problems for poor: 

  • The strong case for MIG derives from the fact that the poor rarely accumulate assets. 
  • They need cash to meet consumption as well as contingency needs; they rarely borrow for productive purposes. 
  • Non-routine consumption can push them further into debt and poverty.
  • Any attempt to identify beneficiaries of MIG based on incomes is a risky exercise in any economy with an extremely high share of informal workforce. 

Using the Socio-economic and Caste Census data:

  • India’s reasonably robust Socio-economic and Caste Census(SECC) is useful for identifying households with one or more of seven deprivations, which provide a much better indicator than ‘income’.
  • The SECC provides data for all 24.49 crore households. Of these, rural households are 17.97 crore, and 6.52 crore are urban. 
  • Of rural households, 7.07 crore households fall under the automatically excluded category. 
  • After this exclusion, the first category of rural households for MIG should be those automatically included in SECC (15.9 lakh households), fulfilling any of the five parameters of inclusion.
  • The second category includes rural households with more than one deprivation. 
  • There are 5.36 crore such households with over one (of seven) deprivation: one or less rooms, kuccha walls and roof; no adult member in the household between age 18-59; female-headed with no adult male member; a differently-abled member with no other able-bodied adult member; SC/ST households; no literate adult above 25; and landless households with most of their income from manual labour.
  • The third category includes those that face just one deprivation. 
  • The fourth category consists of those that do not report deprivation in any of seven parameters, (given that deprivation parameters are not comprehensive), but are also not well-to-do enough to be automatically excluded (exclusion parameters are more comprehensive). 
  • Such households are nonetheless vulnerable and should be included for targeted income transfers.

Cash transfer categorisation:

  • MIG could offer cash transfers in no case higher than Rs 8,000 per annum. 
  • Automatically included rural households with highest vulnerability should be eligible for Rs 8,000 per household annually; rural households with multiple deprivation to receive Rs 6,000 annually; rural household facing just one criteria of deprivation to receive Rs 4,000 annually; while rural non-excluded households considered for deprivation, to be offered Rs 3,000 annually. 
  • Also, in the case of urban areas slum households, Rs 3,000 per household has been proposed. This proposed scheme covers 60% of rural households and 20% of urban households and does not cost over 0.28% of GDP (or Rs 56,900 crore pa).

Categorisation for urban households: 

  • Given limited coverage of schemes in urban areas, we propose an additional category of urban households for better targeting of transfers in urban areas based on Census data. 
  • We consider homeless urban households and transfer of Rs 8,000 per annum. 
  • While Rs 6,000 per single-elderly household is proposed, we enhance it to Rs 8,000 for households with two elderly members (both over age 60). 
  • For households with more than one differently-abled person Rs 8,000 pa per household, and for remaining differently-abled, Rs 6,000 could be allocated. 
  • Female-headed households and aged above 50 could be allocated Rs 6,000 per household.
  • These additional vulnerable categories, comprising 25.9% of urban households, entails an additional cost of Rs 10,628 crore, or 0.05% of India’s GDP (2019-20). 
  • This scheme covers 46% of urban households and 60.64% of rural households (as before), at a total cost of Rs 67,528 crore, i.e., 0.33% of India’s GDP.
  • Transfer should also be linked to CPI. The expenditure is comparable or less than MGNREGA’s (Rs 60,000 crore) and PM-KISAN’s (Rs 60,000 crore). While PM-KISAN covers only farmers and is expensive and exclusive, our proposal avoids narrow coverage and inclusion/ exclusion errors.
  • Income transfer of Rs 6,000 per annum per household (assuming household size of 5) is equivalent to 20% of household’s annual expenditure (2011-12, the last year for which NSS consumption expenditure data is available) of the bottom decile among rural household (14% in urban areas). 

Conclusion:

  • Such an amount would not cause a leftward-shift of the labour-supply curve but reduce their vulnerability. 
  • With such low fiscal cost, MIG should not constrain expenditure on public health, education, or infrastructure, increases in which are critical to India’s structural transformation.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 25 April 2020 (The public policy dilemma: There is indeed tension between lives and livelihoods(Indian Express))



The public policy dilemma: There is indeed tension between lives and livelihoods(Indian Express)



Mains Paper 2:Governance 
Prelims level: Not much 
Mains level: Balancing the conflicts and policy making between various stakeholders 

Context:

  • Since the days of Frank Knight, economists have differentiated between the two. 

Differences between risk and uncertainty: 

  • Risk has a known probability distribution. 
  • For uncertainty, the probability distribution is unknown. 
  • COVID-19 makes us confront uncertainty, not risk. 
  • For uncertainty, there is a subjective probability distribution, which can, and does, vary from individual to individual.

How do the subjective probability distribution is divided by an individual?

  • Through information and experience the individual already possess. 
  • There are various rationality assumptions used by economists. They are often violated. 
  • Otherwise, behavioural economics wouldn’t have taken off. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Availability of data affecting various factors: 

  • Because of COVID-19, there is a certain risk of getting infected. Let’s call this the infection rate — total infections divided by the total population. 
  • We don’t know this infection rate for India, or for any other country for that matter.
  • No country has done universal testing.
  • No country has done universal testing for a proper random sample either. 
  • The ICMR has told us more than 75 per cent of Indian patients will be asymptomatic. 

Who do we test? 

  • Those who show symptoms, those who have been in contact with confirmed patients and those who suffer from severe respiratory diseases. 
  • Most countries do something similar. 
  • In other words, when we work out an infection rate based on those tested, there is a sampling bias. 
  • This isn’t a proper infection rate. 
  • The only country where we have had something like a random sample is Iceland. There, the infection rate was 0.8 per cent. 

Death rate:

  • There are similar caveats about the death rate. 
  • If we mechanically divide number of deaths by the number of confirmed cases for India, we will get a death rate just over 3 per cent. 
  • The global figure is a little less than 7 per cent. But neither of these is a death rate for the total population, since only those with severe symptoms are included in infection numbers. 
  • Three per cent or seven per cent are over-estimates. 
  • In a controlled environment like Diamond Princess, death rate as a ratio of total passengers, and not those infected, was less than 0.4 per cent. 
  • The true infection rate and true death rate are not alarming numbers.

What does this have to do with differential subjective probability distributions? 

  • There are slices in India’s population pyramid with rural/urban and other spatial differences too. 
  • Consider two extreme types. 
  • Type A, who are globalised in information access and morbidity. Life expectancy is 80 plus and there are lifestyle diseases like diabetes and high blood pressure. 
  • This co-morbidity increases possible death rates and thanks to globalised access to information, certainly increases perceptions about death rates, making them out to be higher than they are. 
  • Some of them have fixed incomes, regardless of what happens to lockdown. 
  • Therefore, if you think in terms of maximising expected payoffs with a subjective distribution, high probability is attached to loss of life and low probability to loss of livelihood. 

How Type B forms subjective probability?

  • Type B, someone whose life expectancy is 60, without a fixed income stream and whose health concerns are tuberculosis and water-borne diseases, not COVID-19. Nor is access to information that globalised. 
  • High subjective probability will be attached to loss of livelihood and low probability to death from COVID. Both the types reflect subjective probabilities. 
  • Neither is “irrational”. There is tension between the two. 
  • Type A would like the lockdown to continue indefinitely, until long tail of the infection curve tapers off, perhaps beyond September. 
  • Type B would like lockdown to be eased soon, with necessary restrictions in hotspots. 
  • There is indeed tension between lives and livelihood. 
  • Even if health outcomes and information access are like Type A, but income is contingent on growth, preferences might mirror Type B.

Balancing differential individual preferences in public policy:

  • Type A disproportionately influences policy. This determination of aggregate preferences is a dynamic process. 
  • Therefore, sooner or later, Type B contests this and as the lockdown is prolonged and livelihood costs mount, discontent surfaces, as it has across a range of countries. 
  • There were also welfare economics notions that pre-dated social choice theory, such as compensation principles of Kaldor, Hicks and Scitovsky. 
  • The point can be made using the two stereotypes. Specifically, Type A need to compensate Type B for their losses. 
  • To state it starkly, livelihood losses suffered by Type B need to be compensated by government through redistributive measures and this has to be financed by higher taxes imposed on Type A. 
  • The right question for the Type A is not whether they want the lockdown to continue, but whether they are willing to pay a COVID-tax to support lockdown extension.

Conclusion: 

  • Increasing or decreasing the lockdown decision illustrates the public policy dilemma. 
  • Without a revival in growth, tax-paying capacity of Type B is limited and with job losses, some Type As become Type Bs. The choice is starker.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 25 April 2020 (Troughs and crests in the pandemic response (The Hindu))



Troughs and crests in the pandemic response (The Hindu)



Mains Paper 2:Governance 
Prelims level: COVID-19
Mains level: Highlights the stages in response to address the pandemic 

Context:

  • The novel coronavirus, SARS-CoV-2, that causes the disease COVID-19, has proven the ultimate stress test for governance systems globally. 
  • The governments worldwide are failing, showing up for all to see how poorly prepared they were for this examination. 
  • Even those governments that are likely to be rated relatively highly by scholars of public policy studying this moment later will not pass the examination unscathed. 
  • Yet, the common challenges faced by all governments to fight COVID-19 must not mask the considerable variation in their performance which holds lessons from which we must learn.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Stages in the response:

  • Disease outbreaks, even global pandemics, are scarcely new. The playbook for dealing with them therefore is well understood and has been honed by practices and lessons gleaned from hard-fought battles. 
  • A first stage is early clear-eyed recognition of the incoming threat, and, in the case of COVID-19 at least, requires the unpalatable decision to lock down society. This is a phase aimed at buying time, of flattening the epidemic curve, so that public health facilities are not overwhelmed; and, for using this time, paid for by collective sacrifice, to secure the personal protective equipment (PPE) and medical supplies necessary to save lives. 
  • The second phase of the pandemic response is slowly to ease the burden on the economy by permitting a measured return of business activity so that livelihoods and supply chains can be restored. 
  • This stage can only be safely executed if accompanied by a war-footing expansion of testing capacity so that new infections can be identified and isolated at once, allowing contact tracing to be implemented by masses trained to do this crucial and painstaking work in communities across the country. 
  • The final stage, which for COVID-19 seems a lifetime away, is a mass vaccination programme and then the full rebuilding of economic and social life. 

What drags systems down?

  • For all the defensive finger pointing, opportunistic politicking and xenophobic posturing — exemplified best by the peevish current occupant of the White House but hardly unique to him — this is not a crisis that can be tackled without robust and multidimensional international cooperation between nations. 
  • From the epidemiologists whose data-driven models inform policy debates about how and when to lift quarantines, to the medical community identifying more effective treatments, to the research scientists racing to find a vaccine, we are watching in real time the benefits of intellectual collaboration that does not stop at national borders. 
  • But the nationalistic turn in global politics over the past two decades has reduced investment in and undermined the legitimacy of the very institutions that facilitate international partnership at the very time they are needed most. 
  • Prime Minister Narendra Modi did well to convene the leaders of the SAARC nations in mid-March to discuss the possibility of a regional response.
  • The video-conference call also highlighted that there have been no summit-level meetings of SAARC since 2014, in no small part due to India-Pakistan jingoism that has victimised the regional organisation. 
  • The pandemic response requires a whole-of-government strategy, for which political will and legitimate leadership are vital to convene and maintain. 

Way forward:

  • We are seeing first-hand the consequences of starving public health systems of necessary funds and resources. 
  • The comparative advantage of the private sector is efficiency; the need of the hour in pandemic response is redundancy, or, more precisely, excess capacity. 
  • Most hospitals do not need invasive ventilators normally, just as they do not need vast stocks of PPE and extra intensive care units beds, but these are essential goods right now as we brace ourselves for a flood of sick patients into hospitals. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

THE GIST of Editorial for UPSC Exams : 25 April 2020 (No 100% quota: On overzealous reservation(The Hindu))



No 100% quota : On overzealous reservation (The Hindu)



Mains Paper 2:Polity 
Prelims level: Scheduled Areas
Mains level: Reservations for STs in scheduled areas

Context:

  • The Supreme Court is right in considering cent per cent reservation as anathema to the constitutional scheme of equality even if it is for the laudable objective of providing representation to historically deprived sections. 

Key highlights of the verdict: 

  • The verdict quashing the reservation of 100% of all teaching posts in ‘Scheduled Areas’ of Andhra Pradesh for local Scheduled Tribes is not against affirmative programmes as such, but a caution against implementing them in a manner detrimental to the rest of society. 
  • The Constitution Bench found that earmarking teacher posts in areas notified under the Fifth Schedule of the Constitution adversely affected the interests of other candidates not only from Scheduled Castes and other backward communities but also other ST communities not native to those areas. 
  • As the Bench noted, it could have come up with other incentives to ensure the attendance of teachers. 

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Chronic absenteeism:

  • The State government did, in its original orders of 1986, and thereafter, in a subsequent order in 2000, was not without its own rationale. 
  • It found that there was chronic absenteeism among teachers who did not belong to those remote areas where the schools were located. 

Viable solution:

  • However, its solution of drafting only members of the local tribes was not a viable solution. 
  • The President, under Article 371D, has issued orders that a resident of a district/zone cannot apply to another district/zone for appointment. 
  • Thus, the 100% quota deprived residents of the Scheduled Areas of any opportunity to apply for teaching posts.
  • Affirmative action loses its meaning if it does not leave the door slightly ajar for open competition. 
  • Dr. B.R. Ambedkar observed during the debate in the Constituent Assembly on the equality clause, that any reservation normally ought to be for a “minority of seats”. This is one of the points often urged in favour of the 50% cap imposed by the Court on total reservation, albeit with some allowance for relaxation in special circumstances.

Criticism: 

  • It is still a matter of debate whether the ceiling has innate sanctity, but it is clear that wherever it is imperative that the cap be breached, a special case must be made for it. 
  • Such a debate should not divert attention from the fact that there is a continuing need for a significant quota for STs, especially those living in areas under the Fifth Schedule special dispensation. 
  • In this backdrop, it is somewhat disappointing that courts tend to record obiter dicta advocating a revision of the list of SCs and STs. 

Conclusion: 

  • While the power to amend the lists notified by the President is not in dispute, it is somewhat uncharitable to say that the advanced and “affluent” sections within SCs and STs are cornering all benefits and do not permit any trickle-down. 
  • Indian society is still some distance from reaching that point.

CLICK HERE FOR FULL EDITORIAL (Only for Course Members)

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Pages

Subscribe to RSS - trainee5's blog