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National Medical Commission is no cure-all, many important questions remain

Mains Paper 2: Health
Prelims level : NMC
Mains level : Significance and limitations of NMC bill

Context

• The National Medical Commission Bill passed by Rajya Sabha addresses the concerns in medical education.

Needs regulation

• To ensure that doctors are appropriately trained and skilled to address the prevailing disease burden,
• to ensure that medical graduates reflect a uniform standard of competence and skills,
• to ensure that only those with basic knowledge of science and aptitude for the profession get in,
• to ensure ethical practice in the interest of the patients,
• to create an environment that enables innovation and research,
• to check the corrosive impact of the process of commercialization on values and corrupt practices,
• The problem of inappropriately trained doctors of varying quality has been known for decades. The report of the Mudaliar Committee set up in 1959 pointed out how doctors had neither the skills nor the knowledge to handle primary care and infectious diseases that were a high priority concern then as now
• standards vary greatly with competence levels dependent upon the college of instruction

Significance of the NMC

• In professionalising the MCI, with experts for all levels of education and practice.
• In setting curricula, teaching content, adding new courses and providing the much needed multi sectoral perspectives.
• It has the potential to link the disease burden and the specialties being produced. In the UK, it is the government that lays down how many specialists of which discipline needs to be produced, which the British Medical Council then adheres to. In India, the MCI has so far been operating independently. This gap can be bridged by the NMC
• It can encourage and incentivise innovation and promote research by laying down rules that make research a prerequisite in medical colleges
• MCI required a college to be inspected 25 times to get final recognition, each being a rent-seeking exercise. That “inspector Raj” will be done away with
• The excessive reliance on diagnostic tests is reflective of both commercial considerations as well as weak knowledge. Students spending lakhs to become doctors resort to unethical practices to recoup their investment and pollute the system. In the US, despite tight regulations and remunerative payment systems, there is still substantial unethical practice.

Limitations

• Not enough to curb unethical practice and commercialisation of medical education. Today, there are 536 medical colleges with 79,627 seats. Of them, 260 or 48.5% are private with 38,000 seats. The bill allows differential pricing with freedom for the college managements to levy market determined fees on 19,000 students under the management quota. This is admission for those with the ability to pay.
• Bill has proposed mandating the NEET and NEXT. NEET was mooted for three reasons: to reduce the pain of students taking almost 25 examinations to gain admission in a college, given the abysmal level of high school education, to ensure a minimum level of knowledge in science, to reduce corruption by restricting student admission to those qualifying the NEET, NEXT is an idea borrowed from the UK that has been struggling to introduce it. In all such countries, the licensing exams are stretched into modules, not a multiple choice questions type of exam. Bill has virtually given up inspections for assuring the quality of education.
• Relying only on the NEXT as the principal substitute is to abdicate governance. Undoubtedly, there are grey areas giving scope for corrupt practices and production of substandard doctors.
• The reduced oversight allowing extensive discretionary powers to government makes it virtually an advisory body permitting a registered medical practitioner to prescribe medicines.
• While there is a need to decentralize, to give to non-medical personnel some powers and authority, it needs tight regulation and supervision.
• continuance of the two parallel streams of producing specialists. By not bringing the DNB under the purview of the NMC, the DNB system is left open to abuse.

Conclusion

• Government has, under this Bill, arrogated to itself an unprecedented power to appoint people in the various arms of the proposed structure.
• The quality and integrity of these people will then define the future of the health system in India.

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Finding the data on missing girls

Mains Paper 2: Social Justice
Prelims level : SRB
Mains level : Key concerns about missing girls

Context

• The sex ratio at birth (SRB) has been dropping continuously since Census 2011, coming down from 909 girls per thousand boys in 2011-2013 to 896 girls in 2015-2017 as per the SRS Statistical Reports.

About the facts

• Female foeticide continues to increase at an alarming rate, as per the Sample Registration System (SRS) data released for the period 2015-2017
• In the 2014-2016 period, of the 21 large States, only two — Kerala and Chhattisgarh — had an SRB of above 950 girls per 1000 boys. Thus at present, about 5% of girls are ‘eliminated’ before they are born

Data problem

• Niti Aayog acknowledged the seriousness of the problem in its latest report.
• Despite all the officially acknowledged facts, WCD Minister claimed in the Lok Sabha that SRB has improved from 923 to 931 girls. She was quoting data from the Health Management Information System (HMIS), a fundamentally flawed source that largely considers home deliveries and births in government institutions.
• Data from the HMIS are incomplete and not representative of the country as a whole as births happening in private institutions are under-reported.
• The report itself acknowledges that based on the estimated number of births, the number of reported births is much less in both the years considered — 2015-16 and 2018-19.

Different data sources highlighted

• The differences among the three points of delivery become evident when SRB is calculated using data from National Family Health Survey-4 (NFHS-4). Of the 2.5 lakh reported births in the 2010-2014 period, the distribution of births at home, government hospitals and private hospitals was 21%, 52% and 27% respectively and the corresponding SRB figures were 969, 930 and 851
• Thus, private hospitals had a disproportionate excess of male children births, which the HMIS sample excludes
• Sources in the Niti Aayog confirmed that they did consider HMIS data but found after statistical examination that it was unreliable and therefore used SRS.
• Even when we only consider institutional deliveries in government hospitals, the SRB is falling.
• The worst regional SRB for government sector was for Northern India (885 girls per thousand boys).
• The picture was somewhat better for Central India (926) Southern India (940) while the performance of Eastern India (965) and Western India (959) was even better.
• In the Northeast, where the government is the dominant health-care provider, the government sector SRB rivaled that of the private sector (both are 900).
• That data for the private sector are more skewed has not been articulated in the NFHS reports or adequately dealt with by the Health Ministry. For two decades, in private hospitals, too often, there were more male children even when the total number of births was small in number.
• In the special neonatal care units (SNCU) set up by the government, there was an excess of about 8% of male children in several States. The government has prioritized the expansion of SNCUs rather than deal with the issue of the ‘missing girls’.
• Protecting the integrity of birth statistics will help the people, governments and health professionals to focus on ameliorating the gender gaps at birth

Bias over first-born child

• An analysis of the NFHS-4 data also revealed a bias when it comes to the first-born child — the SRB is among first-born children was 927, meaning that 2.5% of first-born girls are eliminated before birth
• Field visits in Uttar Pradesh and Bihar revealed a massive expansion of ultrasound clinics even in remote corners. And in the absence of stringent implementation of the PCPNDT Act, practically anyone who wants to determine the sex of the foetus is able to get it done illegally.

Insights

• Increased deterrence in States like Maharastra, Haryana and Rajasthan in recent years has been undermined by the laxity of the biggest States.
• Central Supervisory Board established under the PCPNDT Act has not met for over one-and-a-half years. It should have ideally met at least thrice during this period.

Conclusion

• Supreme Court has been continuously reminding medical associations since 2002 of their obligation to follow the law, its latest reminder being the 92-page judgment against the Federation of Obstetrics and Gynecological Societies of India (FOGSI) earlier this year.
• The Indian Medical Association (IMA) has to ensure that private hospitals don’t profit from discrimination against girls before birth.

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Innovation lessons from Israel

Mains Paper 3: Economy
Prelims level : GII
Mains level : Israel innovations and economic impact

Context

• When the Global Innovation Index ranking was announced last week the expectations were high. India, many believed, would break into the top 50 league for the first time.
• It came close, ranked 52 among 130-odd economies.
• Its performance was commended as it topped the Central and South Asian region for the ninth consecutive year and its growth from 81st rank in 2015 to 52nd this year — is the fastest by any major economy.
• What is also significant is that India continues to outperform on innovation relative to its gross domestic product (GDP).

Focus on education

• Today, Israel spends 7 per cent of its GDP on education. Over 45 per cent of its adults complete tertiary education.
• Its investment in R&D is the highest in the world (4.2 per cent of its GDP) with a third of that going into universities.
• Israeli universities, today, top in patent applications in the US.
• Such is the quality of manpower that Israeli colleges produce, over 250 global companies including the likes of Facebook, Google, Apple, HP and Microsoft have set up their R&D labs in the country which also boasts one of the highest concentration of Nobel laureates on earth.
• Israel has the largest number of hi-tech startups per capita than any other country in the world. Tel Aviv houses the second largest startup eco-system after Silicon Valley.
• The hi-tech exports accounts for 45 per cent of its overall exports. Its Yozma venture funding plan and technological incubator programme are case studies across the world.
• Not many know that after the US and China, Israeli companies have the most representation in NASDAQ, with over 250 companies IPOing on the platform since 1980s.

Tech-heavy security

• To tackle the security issue that comes from being surrounded by enemies and constantly fighting terrorism, the country invested heavily in cutting-edge technologies. Today, the Israeli military is a national incubator and a significant catalyst for innovation. Stories about the famed Intelligence Corps Unit 8200 is legendary.
• With compulsory conscription every youth, based on talent and aptitude, gets exposed to the latest technology that the military uses.
• They are taught to work as a team, solve problems in a structured and disciplined manner.
• These qualities help them to come out and build successful enterprises. Check Point, the world’s largest cyber security company, is one such organisation.
• In fact, Israel controls as much as 10 per cent of the global cyber security market.
• Then there is the culture part. Forced to run, hide and fight in the past, Jews are natural risk-takers — an essential quality to become an entrepreneur.
• India too has its share of challenges when it comes to food, energy, water and national security.
• It badly needs to enhance sustainability and take healthcare to every nook and corner of the country. All of this needs to be done at a low cost.

Way forward

• Like Israel, India needs to invest heavily in education and R&D. Our investment in R&D is a paltry 0.7 per cent of GDP.
• Very little of this goes to universities considering that a bulk of public R&D goes into space, energy and defence sectors.
• China, another large economy, has managed to up its R&D investment from 1.3 per cent in 2006 to 2.18 per cent in 2018. So size is not an issue here. It is just the intent.
• Many experts have faulted India’s innovation that focusses on getting products and services to people at an affordable cost, rather than aiming for global leadership.
• They are wrong. Solving India’s challenge will eventually open opportunities for Indian enterprises globally. That is exactly what Israel did.

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In hate crime fight, a voice still feeble (The Hindu)

Mains Paper 3: Defense and Security
Prelims level : Organised Crime
Mains level : Organised crime and role of social media

Context

• At a time when India is reeling under hate lynching, it is sobering to remember that it took the United States Senate 100 years to approve a bill to make lynching a federal crime.
• Over 200 anti-lynching bills were introduced in the U.S. Congress since 1918, but all were voted down until the Justice for Victims of Lynching Act of 2018 was approved unanimously in 2018.

Problem with lynching:

• Hate lynching is designed as an act to terrorize an entire community. Though the number of murders seems small, these performative acts of violence succeeded in instilling intense fear among all African-Americans for decades.
• Modern technology – video-graphing of mob lynching, widely circulating these images through social media, and celebrating these as acts of nationalist valor have instilled a pervasive sense of every day normalized fear in the hearts of every Indian from the targeted minority community. It is this which indeed makes lynching an ultimate act of terror.

Supreme Court:

• The Supreme Court of India recently asked the Union government and all the major States to explain what action has been taken to prevent these growing incidents of lynching, including passing a special law to instill a sense of fear for law amongst vigilantes and mobsters.

Significant statutes adopted by several governments

• The Uttar Pradesh Law Commission (UPLC) took the initiative to recommend a draft anti-lynching law.
• Ordinance introduced by the Manipur government last year.
• Impunity as a crime: Both the Manipur statute and the UPLC draft create a new crime of dereliction of duty by police officials, holding a police officer guilty of this crime if he or she “omits to exercise lawful authority vested in them under law, without reasonable cause, and thereby fails to prevent lynching”. Dereliction also includes the failure to provide protection to a victim of lynching; failure to act upon apprehended lynching; and refusing to record any information relating to the commission of lynching. This crime carries the penalty of one to three years and a fine.
• The UPLC goes further to include also a new crime of dereliction of duty by District Magistrates.
• The creation of this new crime was also the key recommendation of the Prevention of Communal & Targeted Violence (Access to Justice and Reparations) Bill. Only the creation of such a crime will compel public officials to perform their duty with fairness, in conformity with their constitutional and legal duties, to ensure equal protection to all persons, regardless of their faith and caste.

Manipur law and UPLC recommendations

• Both the Manipur law and UPLC recommendations also lay down elaborate duties of police officials in the event of lynching. These include:
• It taking all reasonable steps to prevent any act of lynching including its incitement and commission
• This making all possible efforts to identify instances of dissemination of offensive material or any other means employed in order to incite or promote lynching of a particular person or group of persons
• It making all possible efforts to prevent the creation of a hostile environment against a person or group of persons.
• Both sensitively and expansively lay down official duties to protect victims and witnesses
• a victim shall have the right to reasonable, accurate, and timely notice of any court proceeding and shall be entitled to be heard at any proceeding in respect of bail, discharge, release, parole, conviction or sentence of an accused, and to file written submissions on conviction, acquittal or sentencing.
• require the Superintendent of Police to inform the victim in writing of the progress in the investigation.
• the victim shall have the right to receive a copy of any statement of the witness recorded during investigation or inquiry and a copy of all statements and documents.
• UPLC goes further than the Manipur statute in laying down the right to compensation.
• It places the duty squarely on the Chief Secretary to provide compensation to victims of lynching within 30 days of the incident.
• It states that while computing compensation, the State government must give due regard to bodily, psychological and material injuries and loss of earnings, including loss of opportunity of employment and education, expenses incurred on account of legal and medical assistance. It also lays down a floor of ₹25 lakh in case lynching causes death.

Way ahead

• Text of the United States bill records that at least 4,742 people were lynched in the U.S. between 1882 and 1968, but 99% of all perpetrators remain unpunished
• Madhya Pradesh Cow Progeny Slaughter Prevention Act 2004 limits its scope only to cow-related lynching, and not lynching triggered by other charges. Its proposed amendments do not include any provisions to punish dereliction of duty, protect victim rights or secure compensation. All that it proposes is punishment for any act by a mob which indulges in violence in the name of cow vigilantism from six months to three years of imprisonment and a fine
• Rajasthan has also tabled an anti-lynching bill.
• This prescribes higher punishments, an investigation by senior police officers, and mandatory compensation but not the critical elements of dereliction of duty or victim rights. Without these, they will make little difference on the ground.

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Fortifying the Africa outreach (The Hindu)

Mains Paper 2: International Relations
Prelims level : Mozambique
Mains level : Key agreements between India and African nations

Context

• President Ram Nath Kovind commenced his seven-day state visit to Benin, Gambia and Guinea-Conakry and Defence Minister Rajnath Singh arrived in on a three-day visit to Mozambique.

Economic links

• During the past five years, Indian leaders have paid 29 visits to African countries. Forty-one African leaders participated in the last India-Africa Forum Summit in 2015, where India agreed to provide concessional credit worth $10 billion during the next five years. By 2017, India had cumulatively extended 152 Lines of Credit worth $8 billion to 44 African countries.
• India has also unilaterally provided free access to its market for the exports of 33 least developed African countries.
• India escalated its commitments to Africa in an era of low-commodity prices when most other partners, including China, have scaled back theirs.
• Its trade with Africa totalled $63.3 billion in 2018-19. India was ranked the third-largest trading partner of Africa having edged past the United States during the year.
• Indians’ investments at $50 billion and Indian diaspora at 3 million are substantive when put in the continental perspective

Key challenges

• The numbers are well below the potential for India-African economic synergy and are often dwarfed by the corresponding Chinese data.
• There seems to be a conspicuous disconnect between Indian developmental assistance to and India’s economic engagement with Africa.
• Any objective cost-benefit analysis of India’s development assistance to Africa is unlikely to impress. From the demand to remove the statues of Mahatma Gandhi in Ghana to the travails of Indian investors in Africa, from the occasional demonisation of the long-standing Indian community to the non-recognition of Indian academic degrees, India’s large developmental footprint in Africa does not produce commensurate empathy.
• India’s aid being unconditional, the recipients often take it as an entitlement.

Way forward

• Integrate the development assistance and economic engagement for a more comprehensive and sustainable engagement.
• It would also facilitate aided pilot projects being scaled up seamlessly into commercially viable joint ventures.
• India’s aid to Africa should be reciprocated by acknowledgement and quid pro quo in terms of and institutional preference. India cannot simply be a cash cow for Africa, particularly when its own economy is slowing down.
• We need to ask ourselves these: for all the development billions spent, how many mega-projects did Indian companies get and how many natural resources does India have access to in Africa?
• We need to take direct control of our development programme instead of handing our funds to intermediaries such as the African Union, the African Development Bank Group and the Techno-Economic Approach for Africa-India Movement (TEAM 9), whose priorities are often different from India’s.
• Our aid should be disbursed bilaterally and aligned with national priorities of the recipient state, which should be a substantial stakeholder and co-investor in schemes and projects from initiation to operation.
• India’s development assistance should prefer the countries with their substantial interests. For instance, Nigeria, South Africa, Egypt, Ghana, Angola and Algeria are India’s top six trading partners in Africa, accounting for nearly two-thirds of its trade and half its exports to the continent; yet, they do not figure commensurately in India’s developmental pecking order. India’s own needs for raw materials, commodities and markets should be factored in its aid calculus.
• We ought to prefer aiding countries which are willing to help us — from access to their natural resources to using our generics
• The aided project selected should be compatible with local requirements. They should be cost-effective, scalable, future-ready and commercially replicable.
• For greater transparency, India should prefer its public sector to implement the aid projects
• Indian Head of Mission in the recipient African state must be an integral part of the aid stream including project selection, coordination and implementation.
• The aforementioned should not distract us from our duty to provide the needed humanitarian assistance to Africa: to be rendered promptly and with sensitivity, but without noise.

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Finally home (The Hindu)

Mains Paper 3: Economy
Prelims level : RERA Act
Mains level : Highlights of the RERA Act and revoking process

Context

• Over 42,000 home-buyers battling the Amrapali group may finally receive some succour.
• The Supreme Court cancelled the RERA (Real Estate Regulation and Development Act) licence of the Amrapali group, upheld the claims of home-buyers over those of financial creditors and government authorities and directed the public sector NBCC to complete its unfinished projects.
• The decision pertained to writ petitions filed by home-buyers who, having booked flats and paid up 40-100 per cent of their dues 5-10 years ago, found themselves with no roof over their heads.
• Bankers to the project had meanwhile petitioned the NCLT questioning the rights of home-buyers as unsecured creditors, to file claims.

Key highlights of the audit report

• A forensic audit into Amrapali’s books has revealed alleged funds diversion on a grand scale.
• Over ₹5,000 crore of buyers’ funds are believed to have been diverted, via related-party deals and bogus bills, into unrelated ventures, including family weddings and cars for promoters. Statutory auditors kept mum while the company skipped preparing accounts for three years.
• The Noida and Greater Noida Authorities, who leased vast tracts of land to the group on token payments, did not cancel them on default. Bankers extended loans against doubtful security, not checking end-use.
• It is this evidence of gross negligence and possible connivance by bankers and civic authorities with the developer, that seems to have impelled the court to deliver such a stringent verdict.
• Invoking the RERA, the Supreme Court has held that it would be iniquitous to appropriate the incomplete projects, which have been funded mainly by home-buyers’ money, to settle claims of lenders or civic authorities who have turned a blind eye to fraud.
• Cancelling the RERA registration of the developer, it has asked the public sector NBCC to complete the pending work.
• It has ordered probes into FEMA, FDI and anti-money laundering violations by the group.

Key implications of this verdict

• The unequivocal apex court verdict in favour of Amrapali home-buyers offers hope to thousands of their counter-parts across India who are in the same boat.
• But it also flags areas of concern.
• While NBCC has agreed to play White Knight to Amrapali home-buyers, it is a moot point if similar rescuers can be found for dozens of other stalled projects.
• Revelations in this case are also a telling commentary on the deep nexus between India’s real estate czars and lenders and civic authorities who are supposed to regulate them.
• RERA may be a well-intentioned law that puts buyers’ interests first.
• But its effective enforcement depends heavily on the State government, local authority, bankers and statutory auditors performing their fiduciary roles.

Conclusion

• As long as there is pervasive rent-seeking, home-buyers may have no recourse but to approach the courts for justice, even if delayed.

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Bitter brew: VG Siddhartha’s tragic demise raises concerns about tax terrorism (The Hindu)

Mains Paper 3: Economy
Prelims level : Tax terrorism
Mains level : Tex terrorism process and mechanism

Context

• Café Coffee Day founder VG Siddhartha’s suicide perhaps the first recent case where a large promoter has succumbed to the pressure of financial distress has shaken the world of business and so many others who were familiar with his outlets in a more everyday sense.
• But it has also shown up serious faultlines in the government-business interface. In his July 27 letter, Siddhartha has quite unambiguously spelt out harassment by income-tax authorities and pressure from private equity (PE) investors, who wanted him to buy back their stake, as factors that pushed him to the brink.
• The I-T department has contended that it has followed due process, but that is less than convincing.
• There is a growing sense that businesses are being targeted if not ‘terrorised’ by tax authorities, with a political element often thrown in.

Indicting tax distress

• Post demonetisation and GST, reports have surfaced of small and medium scale entrepreneurs being driven to distress, debt and suicide.
• Tax harassment comes at a time when the economy is in serious trouble, owing to both supply and demand factors.
• Credit to business has evaporated with banks being risk-averse and NBFCs running out of liquidity after the ILandFS crisis.
• On the demand side, investment has stagnated and jobs are evidently in free fall, having a knock-on effect on revenues of businesses.
• The erosion of market cap since the Budget has impacted publicly-held companies such as CCD, with panicky investors demanding their pound of flesh precisely when the company is in trouble.
• The last is a pointer to a crisis in business confidence.
• The Centre needs to recast the tax regime as one that is geared to facilitate ease of doing business.
• India’s efforts to be investor-friendly would appear inconsequential if the overall climate is one where fear of authority prevails over a sense of freedom.

Behavioural attitude of PE investers

• This incident also shines a harsh light on the behaviour of PE investors when bad times visit a business.
• In theory, PE investors exist to supply patient risk capital to nascent growth ventures.
• But in practise, particularly in India, they seem to act as fair-weather friends who are wont to demand an exit at the first sign of distress afflicting their investee firms, that too on their own, and often unreasonable, terms.
• Many PE deals with Indian entrepreneurs appear to be debt deals that are carefully camouflaged as equity contributions, with capital infusions being made against the allotment of hybrid instruments such as convertible preference shares or agreements with the entrepreneur for buybacks of equity stakes at a guaranteed price.
• The relatively short maturities (typically 7-8 years) for which most Indian investors are willing to invest in PE funds also adds to the pressure for short-term results and incentivises short-cuts.

Conclusion

• In the case of listed companies, back-door arrangements with PE investors can be inimical to the interests of other stakeholders such as public shareholders, and therefore merit investigation and regulation by SEBI.

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Logged out: On protecting Amazon rainforest (The Hindu)

Mains Paper 3: Environment
Prelims level : Amazon rainforest
Mains level : Key impact and assessment on Amazon rainforest

Context

• The Amazon rainforest in Brazil is increasing rapidly since January, when Jair Bolsonaro took office as President.
• Satellite images show that about 4,200 sq km of forests have been destroyed up to July 24 under the new government.
• While most nations tend to view their land and forests through the narrow prism of short-term economic gain, climate science data show that they play a larger environmental role.

Key features about Amazon rainforest

• The Amazon basin, spread across millions of hectares in multiple countries, hosts massive sinks of sequestered carbon, and the forests are a key factor in regulating monsoon systems.
• The rainforests harbour rich biodiversity and about 400 known indigenous groups whose presence has prevented commercial interests from overrunning the lands.
• Much of the Amazon has survived, despite relentless pressure to convert forests into farmlands, pastures and gold mines, and to build roads.
• That fragile legacy is now imperilled, as Mr. Bolsonaro has spoken in favour of “reasonable” exploitation of these lands.
• Although the forest code has not been changed, his comments have emboldened illegal expansion into forests.
• Armed gold-hunting gangs have reached tribal areas and the leader of one tribe has been murdered in Amapa in an incursion.
• These are depressing developments, and the Brazilian leader’s criticism of satellite data and denial of the violence are not convincing at all.

Key measures taken

• As the custodian of forests in about 5 million sq km of Amazon land, Brazil has everything to gain by engaging with the international community on meeting the opportunity cost of leaving the Amazon undisturbed.
• Mr. Bolsonaro lost a valuable opportunity to seek higher funding for forest protection by refusing to host the annual convention of the UN Framework Convention on Climate Change this year, but he has been wise not to exit the Paris Agreement.
• Abandoning that pact would jeopardise Brazil’s access to the important European Union market.

Way forwar

• Globally, there is tremendous momentum to save the Amazon forests. Brazil must welcome initiatives such as the billion-dollar Amazon Fund backed by Norway and Germany, which has been operating for over a decade, instead of trying to shut them down.
• Remedial funding, accounting for the value of environmental services, is the most productive approach, because forest removal has not helped agriculture everywhere due to soil and other factors.
• It has been estimated by the World Bank some years ago noted that 15 million hectares had been abandoned due to degradation.
• Brazil’s President must recognise that rainforests are universal treasures, and the rights of indigenous communities to their lands are inalienable.
• The international community must use diplomacy to convince Mr. Bolsonaro that no other formulation is acceptable.

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Burning bright: on India’s tiger census (The Hindu)

Mains Paper 3: Environment
Prelims level : India’s tiger census
Mains level : Environment impact assessment, Conservations

Context

• If India has increased its population of tigers to an estimated 2,967 individuals in 2018-19, putting behind fiascos such as the Sariska wipeout 15 years ago.
• It adds to its global standing as a conservation marvel: a populous country that has preserved a lot of its natural heritage even amid fast-paced economic growth.

Background

• Since the majority of the world’s wild tigers live in India, there is global attention on the counting exercise and the gaps the assessment exposes.
• The National Tiger Conservation Authority (NTCA) has asserted in its report, ‘Status of Tigers in India 2018’, that 83% of the big cats censused were individually photographed using camera traps, 87% were confirmed through a camera trap-based capture-recapture technique, and other estimation methods were used to establish the total number.
• Previous estimates for periods between 2006 and 2010 and then up to 2014 indicated a steady increase in tiger abundance.

Tussle regarding the numbers

• Such numbers, however, are the subject of debate among sections of the scientific community, mainly on methodological grounds, since independent studies of even well-protected reserves showed a lower increase.
• It is important to put all the latest data, which are no doubt encouraging, through rigorous peer review.
• Conservation achievements — and some failures — can then be the subject of scientific scrutiny and find a place in scientific literature to aid efforts to save tigers.

About present time situation

• There are several aspects to the latest counting operation — a staggering exercise spread over 3,81,400 sq km and 26,838 camera trap locations — that are of international interest, because some tiger range countries are beginning their own census of the cats.
• Moreover, even developed countries are trying to revive populations of charismatic wild creatures such as wolves and bears through a more accurate outcome measurement.
• For India’s tigers, not every landscape is welcoming, as the official report makes clear.

Divergences in population

• The less accessible Western Ghats has witnessed a steady increase in numbers from 2006, notably in Karnataka, and Central India has an abundance, but there is a marked drop in Chhattisgarh and Odisha; in Buxa, Dampa and Palamau, which are tiger reserves, no trace of the animal was found.
• It is imperative for the NTCA to analyse why some landscapes have lost tigers, when the entire programme has been receiving high priority and funding for years now at ₹10 lakh per family that is ready to move out of critical habitat.

Conclusion

• Ultimately, saving tigers depends most on the health of source populations of the species that are estimated to occupy a mere 10% of the habitat.
• The conflict in opening up reserves to road-building has to end, and identified movement corridors should be cleared of commercial pressures.
• Hunting of prey animals, such as deer and pig, needs to stop as they form the base for growth of tiger and other carnivore populations.
• As some scientists caution, faulty numbers may hide the real story.
• They may only represent a ‘political population’ of a favoured animal, not quite reflective of reality.

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Flee market: on Indian stock market rally (The Hindu)

Mains Paper 3: Econmy
Prelims level : nifty
Mains level : Slowing growth and falling market reality

Context

• The wheels of India’s multi-year stock market rally are slowly beginning to come off.
• Since the Union Budget was presented this month, there has been a palpable change in mood among investors, who in June led a mini-rally in the market as signs emerged one after another that the government led by Prime Minister Narendra Modi would be returning to power at the Centre.

Background

• The Nifty and the Sensex are down roughly by about 5% since the Budget was presented.
• Foreign portfolio investors have pulled out over ₹2,500 crore in July, in contrast to June when FPIs made a net investment of close to ₹10,400 crore.
• Investors who were quite enthusiastic about the prospects of structural reforms that could boost India’s economic growth under the second Modi government, have been quite disappointed by the Budget proposals.
• Among other things, Finance Minister Nirmala Sitharaman imposed new taxes on the “super rich” and on companies that buy back their own shares, and raised the mandatory minimum public
• shareholding in listed companies (a move that is seen to be against the interests of promoters).
• Not surprisingly, investors have been taken aback by these measures, which are seen as increasing the burden on businesses.

How falling the stock market?

• Even more worrying is the signal that is sent across by the falling stock market.
• As stock prices discount the future, lacklustre market performance could well be a prelude to the further worsening of general economic conditions in the near term.
• There is already a significant downturn in sectors such as automobile with major companies reporting falling sales and earnings, and automobile dealers closing down showrooms and slashing jobs.

Indicators about the slowing growth

• The overall gross domestic product growth, which slipped below 6% to hit 5.8% in the fourth quarter, has also been slowly catching up with the bleak picture painted by high-frequency economic indicators for quite some time.
• The underlying turmoil in Indian markets becomes evident when one looks beyond the Sensex and the Nifty at the mid-cap and small-cap space that has witnessed significant value erosion since the start of 2018.
• The small-cap index has lost almost a third of its value since January 2018 while the mid-cap index has lost about a fifth of its value.

Conclusion

• Many industrialists who were previously enthusiastic cheerleaders for the Narendra Modi government have turned vocal about their disappointment at the government not being bold enough in pushing through structural reforms needed to boost economic growth despite the majority it enjoys in Parliament.
• This suggests the deep sell-off in stocks over the last 18 months may well be a sign of disappointed investors voting with their feet.

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Going local (The Hindu)

Mains Paper 3: Economy
Prelims level : Srikrishna committee report
Mains level : Highlights the Srikrishna committee report on data locatiosation

Context

• A high-level government panel has recommended doing away with the requirement of foreign firms needing to store a copy of all personal data within India.
• Firms will now be able to store and process data abroad, though critical personal data will have to be processed and stored in the country.
• This approach marks a significant departure from the recommendations of the Justice Srikrishna committee report which had suggested that a copy of personal data must be stored in the country.
• The panel’s decision comes after a rethink by the Reserve Bank of India, which earlier relaxed its April 2018 circular that had mandated that all payment data generated in the country be stored here.
• This decision, which is likely to be welcomed by foreign companies, who would have seen a surge in costs to comply with these regulations, suggests that a more considered view on localisation norms is evolving in India.

Arguments in favour of data localisation

• The arguments in favour of data localisation are straightforward , it will address questions on privacy and security, enable greater governmental access to data, and help develop local data infrastructure.
• But on each of these issues, it is not very clear if the benefits from localisation outweigh the costs. For instance, in the absence of a strong data protection law, questions of privacy and security are unlikely to be addressed.
• And while there are reasonable arguments to be made in favour of law enforcement having greater access to data, especially when it is not stored in India, interventions such as bilateral treaties aimed at addressing specific issues might be a more prudent approach.
• This is not to suggest that localisation is never acceptable. There may be cases when it is justified. But these require careful cost-benefit analysis.

Key concerns

• The next set of questions are likely to centre around what constitutes critical personal data.
• The Srikrishna committee report had classified personal data pertaining to finances, health, biometric and genetic data, religious and political beliefs, among others, as sensitive personal data.
• It had envisaged a data protection agency which would list out further categories of sensitive personal data. But it is debatable whether a single agency is best suited to draw up this list.

Concusion

• As, globally, the framing of localisation norms has been largely contextual, driven typically by the type of data and the sector it relates to in Canada, any data may be sensitive based on the context sector specific regulators might be better at identifying which data is sensitive.

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Mission Shakti: Retrospect and prospect (The Hindu)

Mains Paper 3: Science and Tech
Prelims level : ASAT test
Mains level : Signifiacne of the mission shakti

Context

• Individual research from the 1920s notwithstanding, the establishment of Indian Space Research Organisation (ISRO) in 1969 heralded the Indian space programme.
• As the sixth-largest space agency celebrates its golden jubilee, India has slowly and steadily emerged as a pre-eminent space power with 102 spacecraft missions,
• The largest fleet of civilian satellites in the Asia-Pacific region, a successful inter-planetary Mars Orbiter Mission and a world record of launching 104 satellites from a single rocket.
• These scientific and commercial feats weren’t matched by a military space programme; March 27th changed that.
• ISRO being oriented toward civilian space missions, Mission Shakti was the prerogative of the Defence Research and Development Organisation (DRDO) — the latter publicly conveying the intention for such a test since 2012.

Ballistic Missile Defence

• Responsible for the bulk of military research and development, DRDO demonstrates differential levels of success, but its missile programme is noteworthy.
• Since 2006, a Ballistic Missile Defence (BMD) project is under way and the ASAT missile appears to be adapted from the BMD interceptor.
• Scientific rockets and missiles being technologically identical, theoretically any country able to build and operate a ballistic missile can launch rockets and vice versa and potentially target satellites, too.

Capabilities by BMD

• However, reality dictates that only a successful BMD facilitates the remarkable precision necessary for a Direct Ascent Kinetic Kill ASAT — few meters in dimension, satellites move in the orbit at approximately 28,000 km per hour, presenting the greatest possible challenge of interception.
• This exercise then also supplements the indigenous multi-layered BMD programme.
• A BMD, by destroying incoming missiles, provides a strategic umbrella, while leveraging extant BMD infrastructure to develop a Kinetic “hit-to-kill” ASAT system, enables a cost-effective space weapon: à la Mission Shakti.
• ASATs can be either temporarily or permanently effective (denoting “soft” or “hard” kill) and are categorised depending on their nature of deployment, whether they are based in earth, air, or space, and on the technological medium used — missiles, lasers/directed energy beams, electromagnetic pulse, micro-satellites, or electronic jamming. ASAT weapons, once pioneered by the erstwhile Soviet Union and US, are now flourishing in China; the latter, along with conventional capabilities, presents the most formidable challenge to India.
• The expanding arsenal of Chinese ASAT implies that India needs to develop ASAT systems in both quality and quantity.

India’s stance on ASAT test

• The traditional Indian stance has been in favour of disarmament and preserving space as a global common; ongoing negotiations at the global stage indicate an impending regime on space weapons which would have probably foreclosed India’s option to test its latent ASAT potential and restricted ASAT capabilities to the US, Russia, and China.
• Space is the pivot of modern societies as it facilitates satellite-based communication, remote-sensing, and imaging features to effect across a spectrum of fields: internet and cellular networks, navigation, meteorology, agriculture, resource management, and disaster response.
• Crucially, security operations are irreversibly dependent on space assets in varying levels of degree from reconnaissance to targeting sans functioning satellites, fighter jets, ships, and missiles are clumsy chunks of metal.
• Central to the governance of space, the Outer Space Treaty (1967) prohibits placing weapons in space itself, but weapons from elsewhere targeting objects in space are not banned; harnessing space technology for strategic utility is routine and universal.
• Subsequent efforts to restrict weaponisation of space since then has stalled, largely (but not exclusively) due to US disapproval and differing legal and technical interpretations.

Way forward

• The momentum needs to be sustained by further steps including but not limited to coherent space doctrines and a robust and dedicated organisation exclusively for offensive military space activities.
• These augur for political will and national consensus on the role of India in outer space in the coming era.
• Technological foundations having been initiated since 2006, arguably the global and regional variables catalysed Mission Shakti.
• Occurring propitiously close to general elections, Mission Shakti didn’t make the Prime Minister unhappy, but to attribute electoral competition as the proximate cause is to miss the forest in search of the trees.

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Patients and victims (Indian Express)

Mains Paper 2: Health
Prelims level : MoHFW
Mains level : Steps taken by government towards faulty hip implants

Context

• Last year, a series of reports in this paper revealed the traumatic experiences of Indian patients who had received faulty hip implants manufactured by the pharma major, Johnson and Johnson.
• Another investigation by this paper, last week, has revealed that Johnson and Johnson paid hefty compensations to US patients who had received the defective implants.

The report highlights

• In India, however, the company has challenged government orders to compensate 4,700 patients who had undergone hip replacement surgeries.
• The reports also highlight that the story is more than that of corporate negligence.
• That Johnson and Johnson continues to brazen it out in India has much to do with the regulatory deficit in the country.
• The investigations pertain to implants manufactured under two brand names, ASR and Pinnacle.
• Both products are not in the market currently.
• Johnson and Johnson recalled ASR from the global market in 2010, while Pinnacle was withdrawn in 2013.
• But recalling a medical device is not like recalling a consumer product. Defective implants can cause crippling pain even death.
• Patients who receive such implants need regular monitoring.
• In several countries, registries track the health of such patients.

Slow reaction process from the government

• In India, in contrast, regulators were slow to react. Maharashtra’s FDA red-flagged ASR a few months after Johnson and Johnson withdrew the product from the global market.
• But it took another year for the Central Drugs Standard Control Organisation to ban the import of ASR.
• Another year went by before the drug regulator issued an advisory to orthopaedic surgeons asking them to not implant ASR.
• These delays are significant because last year, Johnson and Johnson told a Union Ministry of Health and Family Welfare (MoHFW) expert committee that it cannot trace as many as 3,600 patients who underwent surgeries involving the faulty implant.
• That India did not have a joint registry when these surgeries happened has compounded the problem.
• The want of a registry has also come in the way of ascertaining the damage caused by Pinnacle.
• Johnson and Johnson claims that it has no adverse reports of the device in the country.
• However, reports in this paper have highlighted the trauma of at least seven patients with Pinnacle implants.
• In 2017, the MoHFW issued the Medical Devices Rules.

Way forward

• However, the country’s base legislation on implants continues to be the Drugs and Cosmetics Act, 1940, which does not have the scope to cover most modern devices, including hip implants.
• The Indian orthopaedic device market is valued at over 450 million dollars and is expected to grow by 30 per cent per year till 2025.
• The investigations into faulty hip implants bring out the urgent need for a law to regulate medical devices.

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Changing track (The Hindu)

Mains Paper 3: Economy
Prelims level : PPP model
Mains level : PPP model industrialization process in railway sector

Context

• Since budget there have been a series of developments pointing to a rapid process of transition in Indian Railways.

Decisions taken by the government

• The Centre wants to merge and corporatise the rolling stock entities such as the locomotive units, wheel and axle plant and coach factories, some seven production facilities in all.
• It has been reported that entire ‘train sets’ of EMUs and MEMUs will be produced by private players.
• The zonal railway officers have reportedly been asked to draw up a list of employees who will turn 55 or complete 30 years of service by the first quarter of 2020;
• This is with a view to identifying candidates for premature retirement in order to reduce the workforce to 10 lakh by 2020.

Steps towards PPP model

• Seen along with the Budget announcement “to use Public-Private Partnership to unleash faster development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services”, the plan that emerges is of the Centre contemplating higher private investment in hi-tech areas such as the high speed freight corridor, while turning IR into a ‘lean and mean’ entity.
• With its parlous operating ratio and sluggish freight and passenger revenues, IR is reliant on institutional funds and market borrowings, apart from budgetary resources, to fund its annual capital expenditure of ₹1.5-1.6 lakh crore.
• Whether its funds constraint is a result of overstaffed manpower or other inefficiencies is a moot point.
• While rationalising the workforce, safety issues arising from the shortage of trackmen and loco pilots should not be overlooked.

Aim behind privatization

• The plan to invite private investment seems aimed at substituting imports in the area of diesel and electric locos, telecom equipment, track monitoring equipment and signalling.
• Almost three-fourths of the 5,500 Horse Power diesel-electric locomotive produced in DLW Varanasi has imported components. Companies from the world over — Europe, the US, Japan, China and South Korea — are eyeing a share in India’s railways market.
• Hopefully, the Railways will adopt the China model of ensuring local manufacturing, developing a local ecosystem for sourcing, and ensuring technology transfer within a stipulated time as it embarks on procuring locomotives through JVs.

Conclusion

• India seems to be emulating China in managing its rolling stock operations, it should be noted that China managed to ensure successful technology transfer to emerge as a global player in rail infrastructure.
• It is somewhat ironic that the push to reform production facilities comes soon after Integral Coach Factory’s indigenous production of Train 18, at under ₹100 crore a rake.
• While tendering processes have come under question, the existing technological skills of IR should not be disregarded in the push to modernise.

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Ban or regulate? On India's policy on cryptocurrencies (The Hindu)

Mains Paper 3: Economy
Prelims level : Cryptocurrencies
Mains level : Steps taken by the government on Cryptocurrencies

Context

• The recommendation of an inter-ministerial committee that India should ban all private cryptocurrencies, that is, Bitcoin and others like it, hardly comes as a surprise.
• Indian policymakers and administrators have time and again made clear their distaste for them, their existence owed almost entirely to advanced encryption technologies.

Steps taken by government so far

• In his Budget speech in 2018, Finance Minister Arun Jaitley said the government doesn’t consider them legal tender.
• The Reserve Bank of India has repeatedly warned the public of the risks associated with dealing with cryptocurrencies.
• Bitcoin, the most prominent among them, has yo-yoed wildly in value, even over short periods of time.
• A May 2019 article by Bloomberg, citing data from blockchain analysis firm Chainalysis, said “speculation remains Bitcoin’s primary use case”.
• Its use in illegal online marketplaces that deal with drugs and child pornography is well-documented.
• There have been cases of consumers being defrauded, including in India.
• Under the chairmanship of Subhash Chandra Garg, the former Economic Affairs Secretary, has come across as being wary of private cryptocurrencies even while advocating a central bank-issued cryptocurrency.

What governments should do?

• Governments and economic regulators across the world are wary of private cryptocurrencies.
• As they need neither a central issuing authority nor a central validating agency for transactions, these currencies can exist and thrive outside the realm of authority and regulation.
• They are even deemed a threat to the official currency and monetary system.
• The question then is whether banning cryptocurrencies is the most effective way to respond.
• The inter-ministerial committee believes it is, going so far as to draft a law that mandates a fine and imprisonment of up to 10 years for the offences of mining, generating, holding, selling, dealing in, transferring, disposing of, or issuing cryptocurrencies.
• But six of the seven jurisdictions that its report cites have not banned cryptocurrencies outright.

Steps taken by other countries

• Many of them, including Canada, Thailand, Russia and Japan, seem to be moving on the path of regulation, so that transactions are within the purview of anti-money laundering and prevention of terror laws.
• China, which India has taken a cue from, has gone for an outright ban.
• Even there, the report says, “owing to the network-based nature of cryptocurrencies, after banning domestic crypto exchanges, many traders turned to overseas platforms to continue participating in crypto transactions.”

Conclusion

• Trading in China is now low but not non-existent.
• But why would an outright ban be a superior choice to regulation, especially in a field driven by fast-paced technological innovations?
• The report, unfortunately, doesn’t clarify that point.

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Governing India through fiscal math (The Hindu)

Mains Paper 3: Economy
Prelims level : Revenue deficits
Mains level : Implications of the revenue deficits

Context

• While it is important for a government to pursue a sound economic policy, including management of the public finances, it is yet another matter to make a fetish of any one aspect of it.
• The latter appears to govern this government’s approach to policy when the fiscal deficit is given pride of place in its self-assessment.

Thread of fiscal discipline

• Soon after the Budget for 2019-20 was presented, one of the Finance Minister’s predecessors remarked that “fiscal prudence rewards economies”.
• It figured in the most recent Economic Survey, and its anticipated magnitude for 2019-20 was the final statement in the Budget speech that had followed.
• The Finance Minister had commenced the speech saying how the government was committed to fiscal discipline.

Fiscal discipline

• In the context, “fiscal discipline” is understood as taking the economy towards the 3% of the gross domestic product.
• The basis for this figure can be queried but that is beside the point.
• Actually, the point is two fold:
• whether the fiscal deficit should be the sole index of fiscal management and
• what a reduction in the deficit would achieve.

Overall imbalance in the Budget

• The fiscal deficit reflects the overall imbalance in the Budget. Embedded in the accounts of the government is the revenue account which is a statement of current receipts and expenditure.
• A fiscal deficit may or may not contain within it a deficit on the revenue account, termed the “revenue deficit”.
• The possible embeddedness of a revenue deficit within a fiscal deficit muddies the waters somewhat.
• For movements in the overall, or fiscal, deficit by itself tell us nothing about what is happening to the revenue deficit.
• A revenue deficit implies that the government is dissaving.
• Therefore, unless the revenue deficit is kept explicitly in the picture, we cannot deduce the soundness of economic management from a mere reduction in the fiscal deficit.

Rewards yet to be seen

• A revenue deficit of the Central government is relatively recent, having been virtually non-existent till the 1980s.
• After that a rampant populism has taken over all political parties, reflected in revenue deficits accounting for over two thirds of the fiscal deficit such as the case today.

Three implications of the revenue deficits:

• The public debt is only bound to rise.
• We are permanently borrowing to consume,
• And leaving it to future generations to inherit the debt.

International borrowing

• Of late an entirely new dimension has been added to fiscal management, but here again the appropriateness of conducting economic policy by reference to the magnitude of the fiscal deficit remains the issue.
• In the last Budget the government has signalled its intention to borrow in foreign currency from the international market.
• This is an innovation alright as the Government of India has so far never borrowed in the international markets, leaving it to public sector organisations and the private corporate sector to do so.

Significance of this move

• In the Budget speech of the 17th Lok Sabha, the Finance Minister justified the move in terms of the very low share of foreign debt to GDP.
• The proposal has received criticism, some of it focussing on the consequences of exchange rate volatility.
• Benefits have been flagged too, such as that Indian sovereign bonds will attract a lower risk premium because the price of the foreign-currency-denominated sovereign bond will now be discoverable.
• This though ignores the biggest lesson from the global financial crisis of 2007, that the market cannot be relied upon to price risk correctly.
• And, both arguments overlook the foreign exchange constraint.
• Dollar-denominated debt has to be repaid in dollars. Right now our reserves are fairly high but this could change.
• Oil prices could go back to where they were, the trade war initiated by U.S. President Donald Trump holds little prospect for faster export growth, and portfolio investment may flow out.
• While these are only possibilities, they point to the need to ultimately base your borrowing plan on expected dollar earnings.
• The opportunity offered by low global interest rates right now is not matched by the likelihood of robust export growth.

Conclusion

• In the final analysis though, it is not the risk of exchange rate depreciation or stagnant exports or even capital flight that is the issue; it is the rationale for borrowing.
• With revenue deficits the overwhelming part of the fiscal deficit, we would be borrowing to finance consumption.
• Dollar denominated sovereign debt is just a matter of shifting this borrowing overseas.
• That is the real issue.

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Talks and terror: on Afghan peace talks (The Hindu)

Mains Paper 2: International Relation
Prelims level : Afghan peace talks
Mains level : Issues arises while conducting Afghan peace talks process

Context

• Mr. Saleh, a former intelligence chief and a strong critic of the Taliban and Pakistan, is President Ashraf Ghani’s running-mate for the September 28 election.And the irony is that the assault occurred a few hours after President Ghani officially launched his campaign in which he promised that “peace is coming”.
• The message the insurgents are trying to send is that even the most fortified political offices in the country or its top politicians are not safe.
• The insurgents have made it clear they will carry out their offensive irrespective of the peace process, especially when Afghanistan gets down to a full-fledged election campaign.

Peace initiatives taken

• In recent months, even when the U.S. and Taliban representatives have held multiple rounds of talks in Doha, Qatar, insurgents have kept up attacks, both on military and civilian locations.
• The Taliban appears to be trying to leverage these assaults to boost its bargaining position in the talks with the U.S. And the Kabul government’s inability to prevent them and the U.S.’s apparent decision to delink the negotiations from the daily violence are giving the insurgents a free run in many Afghan cities.

Crises in Afghanistan

• Half the country is either directly controlled or dominated by the Taliban.
• In the eastern parts, the Islamic State has established a presence and the group targets the country’s religious minorities.
• The government in Kabul is weak and notorious for chronic corruption.
• Its failure to ensure the basic safety and security of civilians is in turn eroding the public’s confidence in the system.

Responses made by the government

• At present, the government appears beleaguered. Its security agencies are strained by the prolonged war.
• It is true that Afghanistan needs a political settlement. The war has been in a stalemate for long.
• The government, even with U.S. support, is not in a position to turn the war around.
• The Taliban, on the other side, has expanded its reach to the hinterland, but not the urban centres.

Giving too much leeway to the Taliban

• While a peace process is the best way ahead in such a scenario, the question is whether the U.S. is giving too much leeway to the Taliban in its quest to get out of its longest war.
• The decision to keep the Afghan government out of the peace process was a big compromise.
• The absence of a ceasefire even when talks were under way was another.

Conclusion

• The result is that Afghans continue to suffer even when the Americans and the Taliban talk.
• This has to change. There has to be more pressure, both political and military, on the Taliban to cease the violence.
• And the U.S. should back the Afghan government and the coming elections resolutely, while Kabul has to get its act together.

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Software robots and importance of risk management (Live Mint)

Mains Paper 3 : Science and Technology
Prelims level : Not Much
Mains level : Robotic Process Automation

Context

• Robotic process automation, or RPA, has emerged as a potent productivity-enhancement innovation that is being embraced globally by virtually all industry sectors.
• This is hardly surprising since a software robot (also known as a bot) can work around the clock at a fraction of an employee’s cost.

Is RPA delivering to its promise of having digital labour seamlessly replace humans?

• The evidence is mixed. Many companies are experiencing significant productivity gains, but research suggests that 30-50% of RPA projects fail, unleashing risks.
• A telecom company had deployed bots for managing its complaints process. Coding errors led to many grievances being diverted to an incorrect queue, resulting in a backlog of complaints.
• A global conglomerate deployed bots in its finance and accounts function to automate the accruals process.
• Its auditors, however, noticed that the accruals had been materially under-reported for a quarter. Unfortunately, incorrect rule-set definitions in the bots had led to the problem.
• Information security is also at risk: There have been reports of malicious employees launching cyberattacks on bots to access sensitive company data.
• While critics blame the underlying technology, this is seldom the case.
• Usually, the root cause lies in the inattention to risk and internal control considerations in the bot-development life cycle and the re-designed, bot-enabled processes.

Five simple design principles

• First, the less risky processes should be prioritized for automation. Sensitive processes, such as those related to finance and compliance should come later. An additional layer of monitoring controls should be considered for all mission-critical processes.
• Second, RPA practitioners should adopt a “what-cannot-go-wrong?" mindset. For instance, if bots are posting transactions to an enterprise’s core technology platform, users and administrators with access to these bots should not have the ability to execute conflicting transactions, such as placing an order and approving the payment.
• Third, bots need to undergo robust risk-based functional testing. This, however, is sometimes not adhered to during the software development life cycle. An investment bank discovered that a bot emailing end-of-day trade confirmations to customers was “dangling" because fields that were supposed to contain email addresses were empty.
• Fourth, watertight processes around bot security are critical. Similar to humans, bots too have user-names and passwords. Ensuring that these are encrypted and accessed by employees according to their assigned privileges is key to preventing unauthorized access and potential misuse, including fraud.
• Finally, implementing robust change-control processes is critical. RPA teams need to be made aware of changes to system interfaces so they can make timely updates.

Way forward

• As companies expand automation efforts, risk management functions need to step up and serve as critical lines of defence in the governance of these programs.
• Risk managers can identify pitfalls related to automating specific processes, pressure-test redesigned processes before they go live, and implement early warning systems that can predict, and ultimately, prevent bot failures.
• Leading risk functions, for instance, are deploying “supervisory bots" that monitor critical tasks performed by other bots and proactively raise alarm bells if they suspect performance issues.

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Time to overhaul the financial system (The Hindu)

Mains Paper 3 : Economy
Prelims level : PSBs
Mains level : Reviving PSBs

Context

• Finance is fundamental to the fabric of the domestic economy and its businesses, though for much of the time in India it has been swaying to the global trends.
• If it’s the socialism and the overreach of the state in 1970s, that dominated for nearly two decades thereafter, when reforms were introduced in the 1990s.
• It was a major turn towards Washington Consensus of free markets that became a pivot.
• A comprehensive and consistent policy that was primarily meeting the needs of India, in accordance with its basic structure, conditions, constraints and requirement, was however best found only in parts and patches.

Background

• Indian finance transitioned from excessive state ownership and control with a plain vanilla system (version 1.0) to the state taking a step back to allow more of private and foreign participation (version 2.0) that also spawned multi-asset classes and alternative markets.
• While issues in allocative efficiency and financial repression were the worries in version 1.0, the next one has brought its fair share of disconnects.
• It’s not just the surge of bank NPAs (non-performing assets) that is scandalous. Between 2007 and 2018, considered as peak for finance, domestic credit/GDP ratio barely moved from 61 per cent to 72 per cent, bank capital ratios remained below the global benchmarks, and deposits and credit grew at an average annual rate of 14 per cent each, not exhilarating enough for a vast economy like India.
• Governance issues found in some top banks dented the image further.

Imperfections prevailed on the market side

• The benchmark stock index doubled with not much change in the market capitalisation.
• Notional value traded in equity derivatives grew to an unusual high of $32 trillion in 2018 with just one product where punters take positions in Nifty Fifty Index Options accounting for 85 per cent, against $1 trillion in the cash market. Only half of the listed stocks come up for trading.
• Raising new capital, which is the main domain of stock markets, too remained subdued. During 2006-16, India could manage to raise $46 billion against China’s $570 billion and a start-up market like Vietnam’s $26 billion.
• India’s SME capital markets reported a mere $1.6 billion market cap in 2018, far lower than the new kid on the block Hanoi’s $38 billion.
• Value traded, at $351 million, looks far too less against the $7 billion traded in Malaysia and $1 trillion in Korea.
• Growing delinquency of the NBFCs, corporate distress pushing mutual funds to delay redemption of fixed maturity plans, shortcomings in ratings quality, impending corporate stress from external debt becoming due for repayment are further threats looming large.

A well-crafted plan needed

• All of these make it imperative for India to overhaul its financial system.
• A well-crafted plan with a long-term perspective and mechanism for effective monitoring and evaluation are vital.
• Measures like privatisation of public sector banks at best could be a minor relief rather than a lasting solution.
• A few developments that India needs to track and absorb in its internal dynamics while planning for the future could include: rising inequalities in income and earnings globally; rise of global value chains and the prospects for surge in corporate economic power, declining productivity and stagnation in labour wages; rising indebtedness at the corporate and individual levels; decelerating trends in global economic growth, competing for a dominant share in the shift of global economic power; emergence of newer endeavours of economic cooperation (such as Belt and Road Initiative); restrictions in labour mobility; and growing tensions and disputes in world trade.
• Apart from political determination and foresightedness, a comprehensive and an efficient financial system could come handy in addressing the challenges that emerge from time to time.
• Within finance, faster pace of developments in fintech and the newer range of technologies need to be managed better to balance the priorities of the geographic divide.

Changes in the ecosystem of the economy

• In addition, there could be dramatic changes in the ecosystem of the economy, the way businesses are conducted, the jobs that they create and the way they are performed along with changing lifestyles of the people in all of which finance will have an important bearing.
• Perhaps it’s time to do some sketches on the drawing board.
• To begin with, revive PSBs and make the group into a distinct national brand of banking that stands for efficient and transparent banking as also that shows care and concern towards the society at large.
• It’s not such a daunting task as not very long ago PSBs were major suppliers of money as also hubs for talent and skills for numerous emerging markets, leave alone the strong counter-cyclical role in providing credit during episodes of slowdown.
• A complete relook at its structure, management and engagement is what could revive PSBs and make its presence meaningful.

Continuous evaluation

• Equally pertinent is to bring back development banking.
• Much of China’s development process has largely been driven by institutions like China Development Bank, whereas India’s two development banks which converted to commercial banks in the euphoria of universal banking are surviving under different stages of stress.
• A strong code of customer protection is another imperative. Mis-selling, hidden charges, not enough passing of interest rate reductions, etc., are rampant in India.
• Even an advanced market like the US recently brought a new “Regulation Best Interest’ to further safeguard the interests of investors in securities.
• China has a list of services for which banks are explicitly not allowed to levy charges.

Conclusion

• Finance needs a continuous evaluation of its institutions, instruments and processes.
• Course corrections and distortions could be aptly and adequately addressed by an independent commission through periodic studies.
• India should seriously think of setting an efficient institutional mechanism that does continuous review and assessments.
• While serving the internal purposes, evolving a productive state craft would be relevant for Indian finance to effectively engage with the outside world too.

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Reimagining the NITI Aayog (The Hindu)

Mains Paper 2 : Governance
Prelims level : Niti Aayog
Mains level : Various governmental institutions and their functions

Context

• India’s Constitution-makers thought of India as a union of States with a centripetal bias, done, advisedly, to preserve the unity and integrity of a newly fledged nation.
• Since then, the Indian economy, polity, demography and society have undergone many changes. The new aspirational India is now firmly on a growth turnpike.
• It is in this context that we revisit India’s fiscal federalism and propose redesigning it around its four pillars.

Vertical and horizontal imbalances

• A vertical imbalance arises because the tax systems are designed in a manner that yields much greater tax revenues to the Central government when compared to the State or provincial governments; the Constitution mandates relatively greater responsibilities to the State governments.
• For example, in India, post the advent of Goods and Services Tax (GST), the share of States in the public expenditure is 60% while it is 40% for the Centre to perform their constitutionally mandated duties.
• The horizontal imbalances arise because of differing levels of attainment by the States due to differential growth rates and their developmental status in terms of the state of social or infrastructure capital.
• Traditionally, Finance Commissions have dealt with these imbalances in a stellar manner, and they should continue to be the first pillar of the new fiscal federal structure of India.

Understanding the imbalance

• However, in India, the phenomenon of horizontal imbalance needs to be understood in a more nuanced fashion. It involves two types of imbalances.
• Type I is to do with the adequate provision of basic public goods and services, while the second, Type II, is due to growth accelerating infrastructure or the transformational capital deficits.
• The latter are known to be historically conditioned or path dependent.
• Removing these two imbalances clearly comprises two distinct policy goals and calls for following the Tinbergen assignment principle, which are two different policy instruments.
• It is here that we believe that NITI Aayog 2.0 must create a niche, assume the role of another policy instrument and become the second pillar of the new fiscal federal structure.

Introduced Gadgil-Mukherjee formula

• In the past, the Planning Commission used to give grants to the States as conditional transfers using the Gadgil-Mukherjee formula.
• Now with the Planning Commission disbanded, there is a vacuum especially as the NITI Aayog is primarily a think tank with no resources to dispense, which renders it toothless to undertake a “transformational” intervention.
• On the other hand, it is too much to expect the Union Finance Commission to do the dual job. In other words, there is an urgent need for an optimal arrangement.
• It is best that the Union Finance Commission be confined to focussing on the removal of the horizontal imbalance across States of the Type I: i.e. the basic public goods imbalance.
• We need another institution to tackle the horizontal imbalance of the Type II; for this the NITI Aayog is the most appropriate institution.
• It can be argued that the Finance Ministry is the other alternative to deliver the goods in this regard but it is ill-suited to do this;
• Its primary duty is to concern itself with the country’s macro-economic stability and the proper functioning of the financial system rather than be an instrument of growth at the sub-national level.

Strategies taken towards maintenance the task of cooperative federalism

• NITI Aayog 2.0 should receive significant resources (say 1% to 2% of the GDP) to promote accelerated growth in States that are lagging, and overcome their historically conditioned infrastructure deficit, thus reducing the developmental imbalance.
• The NITI Aayog should be engaged with the allocation of “transformational” capital in a formulaic manner, complete with incentive-compatible conditionalities.
• The variables or parameters used in this formulaic transfer will be very different from those traditionally used by the Finance Commission.
• NITI Aayog 2.0 should also be mandated to create an independent evaluation office which will monitor and evaluate the efficacy of the utilisation of such grants.
• In doing so, it should not commit the mistake of micro-management or conflicts with line departments.
• It must be also accorded a place at the high table of decision-making as it will need to objectively buy-in the cooperation of the richer States as their resources are transferred to the poorer ones.

Ushering in decentralisation

• This is crucial because intra-State regional imbalances are likely to be of even greater import than inter-State ones. Decentralisation, in letter and spirit, has to be the third pillar of the new fiscal federal architecture.
• De jure and de facto seriousness has to be accorded to the 73rd and 74th constitutional amendments. For this, the missing local public finance must be birthed.
• One of the ways for this is through the creation of an urban local body/panchayati raj institutions consolidated fund.
• This would mean that Articles 266/268/243H/243X of our Constitution will need to be amended to ensure that relevant monies directly flow into this consolidated fund of the third tier.
• Through such constitutional amendments, the Centre and States should contribute an equal proportion of their Central GST (CGST) and State GST (SGST) collections and send the money to the consolidated fund of the third tier.
• For instance, one-sixth sharing of the CGST and SGST with the third tier can generate more than 1% of the GDP every year for the financing of public goods by urban-level bodies.
• Such an arrangement will be the third pillar of fiscal federalism.
• Further, the State Finance Commissions should be accorded the same status as the Finance Commission and the 3Fs of democratic decentralisation (funds, functions and functionaries) vigorously implemented.
• This will strengthen and deepen our foundational democratic framework.

Fine-tuning the GST

• The fourth pillar and in a sense what is central and binding is the “flawless” or model GST.
• It is to the credit of our democratic maturity that the GST Bill was passed unanimously by Parliament; but in its present form, it is far from flawless. It needs further simplification and extended coverage.
• We need to quickly achieve the goal of a single rate GST with suitable surcharges on “sin goods,” zero rating of exports and reforming the Integrated Goods and Services Tax (IGST) and the e-way bill.
• The GST Council should adopt transparency in its working, and create its own secretariat with independent experts also as its staff.
• This will enable it to undertake further reforms in an informed and transparent manner.

Conclusion

• Thus, India will be able to truly actualise the “grand bargain” and see the GST as enduring glue holding the four pillars together by creating the new fiscal federal architecture and strengthening India’s unique cooperative federalism.

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