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Calling attention (Indian Express)

Mains Paper 3: Defense and Security
Prelims level: Not Much
Mains level: Challenges of security in border areas

Context

• The killing of five CRPF jawans in Kashmir by militants is a reminder of the challenge in the Valley that awaits the re-elected Modi government.
• The five men were on picket duty in Anantnag when two men on a motorcycle fired at them.
• One of the attackers was also killed, and police have said he is a “foreigner”.
• The attack has been claimed by a long-defunct organisation called al Umar, active in the 1990s and headed by Mushtaq Ahmed Zargar, one of the three men exchanged with the Taliban at Kandahar in 1999 for the IC 814 hostages.
• The attack came four months after 40 CRPF jawans were killed in an attack claimed by Jaish e Mohammed, leading to an unprecedented Indian air attack inside Pakistan.

Steps towards combating with terrorism

• India succeeded in having Masood Azhar listed as an international terrorist, and the India-Pakistan relationship itself is seen to have changed.
• In Kashmir, police took out several militants in encounters, including the alleged mastermind of the Pulwama attack, and the number of youth joining militant groups is said to have come down.
• The latest incident shows that militancy continues to take a heavy toll.

Governor’s role

• Governor Satya Pal Malik has appealed to militants to engage with him in dialogue.
• While such an appeal has its merits, it is without meaning unless the government acknowledges that there is a problem in Kashmir, and that this problem is a deep-rooted alienation.
• It cannot be resolved just by killing militants, slapping NIA cases against separatists and discrediting mainstream politicians, a vital link between the Centre and state, or even by cleaning up a corrupt system.
• The latest fear in Kashmir is over a purported plan for delimitation of Assembly constituencies.

Way forward

• The NDA government would be well served by steering clear of divisive and polarising ideas that can only set the stage for more violence and alienation.
• The Centre has extended President’s Rule for another six months, but the priority should be to hold Assembly elections at the earliest.
• With his huge mandate, nothing stops Prime Minister Modi from taking bold steps to win the hearts and minds of Kashmir.

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NBFC crisis: Looking beyond MFs (The Hindu)

Mains Paper 3: Economy
Prelims level: NBFCs
Mains level: Impact of NBFC crisis

Context

• Since ILandFS defaulted on its obligations and sparked off a liquidity crisis for NBFCs, the mutual fund industry has been hauled over the coals by commentators for its exposure to the troubled firms.
• The crisis has exposed several shortcomings in debt funds’ investing practices from chasing high yields and taking on concentration risks to over-investing in risky bonds where liquidity is wont to dry up at the first sign of trouble.
• With SEBI tightening valuation rules, debt funds have had to take immediate write-downs.

The impact of the NBFC crisis

• Over the impact of the NBFC crisis on mutual funds, investors and regulators must not lose sight of its implications for even larger bond market participants who are far less transparent.
• Of the ₹91,000 crore borrowed by the IL&FS group, the mutual fund industry accounts for less than ₹3,000 crore. Of the ₹1.1- lakh crore obligations of the DHFL group, about ₹5,200 crore is due to mutual funds. The rest is owned by banks, provident funds, pension funds, insurance companies and direct retail investors.
• While over 90 per cent of debt fund investments originate from institutions and high net-worth investors, uninformed retail investors account for the overwhelming proportion of the money parked with these vehicles. Here are some lessons for them from the recent turmoil.

EPFO, private provident funds

• The EPFO (Employees Provident Fund Organisation), the default retirement vehicle for over six crore workers, hires third-party portfolio managers to manage its ₹10-lakh crore corpus in line with the investment guidelines laid down by the Government and its Board of Trustees.
• Presently, it is required to invest 45-50 per cent in government securities, 20-45 per cent in other debt, 5-15 per cent in equities and the rest in money markets.
• When the EPFO mooted an interest payout of 8.65 per cent to its subscribers for FY19, the Finance Ministry questioned if it had enough surplus to fund this after accounting for its IL and FS exposures.
• That’s a pertinent question because the EPFO’s estimated surplus after the payout stood at only ₹152 crore, while its holdings in the troubled IL and FS bonds were valued at ₹574 crore.The numbers are relevant because the EPFO does not value its investments on a mark-to-market valuation and simply buys and holds bonds until maturity.
• Every year, it deducts its expenses from the interest and administrative charges it earns, to arrive at a ‘surplus’ which decides the return to its subscribers.
• The actuals, in some years, even differ from the estimated surplus because the EPFO’s annual accounts are finalised after a significant delay. The latest available accounts today are for FY17.
• This lack of a market-based valuation for its portfolio effectively means that defaults or downgrades in the EPFO’s bond holdings may remain hidden from view until their maturity.
• This makes the EPF quite an unsuitable vehicle to invest in any non-sovereign bonds that carry credit risks.

Insurers and pension funds

• When the ILandFS default first hit the bond markets, both the insurance and pension fund regulators seemed unsure about how their constituents should deal with the crisis.
• Some of India’s largest insurers such LIC, GIC, Postal Life Insurance Fund and Rural Postal Life Insurance Fund apart from the NPS hold ILandFS, while insurers and pension funds put together are estimated to hold ₹30,000 crore worth of DHFL bonds.
• In its initial reaction to the ILandFS default, the insurance regulator asked insurers to exit from the lower-rated bonds, while the PFRDA called for a dialogue with the borrowers.
• Both regulators seemed unaware of the ground reality that once a corporate bond is non-investment grade in India, its near impossible to find counter-parties for is sale.
• Both regulators have subsequently asked players to provision against these bonds.
• To be fair, default situations are quite unprecedented for both IRDAI and PFRDA, because their investment guidelines expressly bar their constituents from venturing into lower-rated corporate bonds.
• But if there’s one clear take-away from the recent strong of default, it is that the AAA or AA stamp from Indian rating agencies cannot be taken at face value any more.
• These agencies are prone to changing their minds drastically after episodes of delay or default unfold.

Public deposits and NCDs

• Public deposit schemes and NCDs floated by NBFCs and HFCs are quite a hit with retail regular-income seekers.
• To protect depositor interests, the RBI insists on an investment grade credit rating and caps the quantum of deposits at 1.5 times the NBFC’s net owned funds. NHB allows firms rated A or above to accept deposits at five times their net owned funds, with a ₹10 crore cap for un-rated firms.
• Given the fallibility of credit ratings though, it can now be questioned if these safeguards are enough to protect depositors in NBFCs/HFCs.
• If they delay or default on deposit dues, retail depositors figure pretty low in the pecking order as unsecured creditors.
• The RBI and NHB may need to usher in tighter and more uniform regulations for public-deposit taking entities.
• A liquidity mechanism akin to the statutory liquidity ratio for banks, and an escrow mechanism for liquidity needs can be examined too.
• In retail NCD offers, a mandatory quota for institutional investors as in IPOs and an insistence on security can perhaps safeguard investors.

Conclusion

• Delays and defaults are very much a part of the growth pangs that any bond market would experience as it evolves to meet the needs of a fast-growing economy.
• It is best that institutional players in the debt market and their regulators have a plan of action chalked out for such events instead of expecting a zero accident rate on their debt investments.

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City on edge: On Hong Kong protests against extradition law (The Hindu)

Mains Paper 2: International
Prelims level: Extradition law
Mains level: Reasons behind the requirement of extradition law

Context

• The mass protests in Hong Kong this week against an extradition Bill the city legislative council is planning has brought the focus back on the difficult relationship between the territory’s Beijing-appointed authorities and its pro-democracy movement.
• The legislation, championed by Hong Kong’s Chief Executive Carrie Lam, will allow the local government to extradite a suspect to places with which the city has no formal extradition accord, including mainland China.

Reasons behind the requirement of extradition law

• Ms. Lam argues it is needed to close a loophole in the criminal justice system that, she says, has let criminals evade trial elsewhere by taking refuge in Hong Kong.
• But the protesters see the Bill as an attempt by Beijing to increase its influence in matters to do with the city.
• The extradition law would practically allow the city authorities to send any suspect wanted by Beijing to mainland China, where the judiciary is unlikely to go against the wishes of the establishment.
• Activists point to the abduction of Beijing’s critics and the growing authoritarian nature of the city government, with instances of elected lawmakers being disqualified, activists banned from running for office, a political party prohibited and a foreign journalist expelled.
• They fear that the new legislation would further erode the freedoms people enjoy under the Basic Law, the city’s mini-constitution.

Background

• When Hong Kong was handed over to China in 1997, both sides had agreed that the city would remain a semi-autonomous region with the Basic Law for 50 years.
• When the extradition agreements were finalised, Taiwan and mainland China were excluded because of the different criminal justice systems that existed in those regions.
• But China has steadily tried to deepen its influence.
• In the case of the extradition Bill, two members of the Politburo Standing Committee have called for its approval.
• But Hong Kong has always resisted top-down changes. In 2003, the city’s first Chief Executive, Tung Chee-hwa’s bid to pass stringent security legislation triggered mass protests, which forced him
  to back down.
• In 2014, the local authorities’ proposal to change the city’s electoral system attracted more protests. In less than five years they are back: a million people assembled at the legislative council on Wednesday, demanding withdrawal of the extradition Bill.

Conclusion

• These incidents suggest a fundamental contradiction between the way Hong Kong is ruled by the pro-Beijing elite and the expectations of civil society.
• The local authorities’ insistence on going ahead with unpopular measures such as the extradition Bill is only sharpening this contradiction.
• Beijing should reach out to the people of Hong Kong, alleviate their fears and concerns and assure them of their rights guaranteed under the “one country two systems” model. Else, Hong Kong is likely to remain caught in a cycle of protests and repression.

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Faint glimmer: On revival in industrial activity (The Hindu)

Mains Paper 3: Economy
Prelims level: Not much
Mains level: Highlights of the industrial activity

Context

• Industrial activity in the new financial year appears to have started on a healthier note than the trend witnessed in the last quarter of the previous fiscal, the government’s latest quick estimates show.
• Industrial output rose 3.4% in April, buoyed by a generally broad-based revival that saw electricity, mining and even manufacturing post faster growth compared to the listless performance witnessed in the January-March period.

Highlights of the industrial activity

• In fact, manufacturing output growth, which had decelerated sharply from the pace of 8.2% in October to a revised level of less than 0.1% in March, rebounded to a four-month high of 2.8%.
• A look at the use-based classification reveals that all six segments were in positive territory, with only infrastructure and construction goods marking a slowdown from both the earlier year and March levels and providing cause for some concern.
• The capital goods sector that serves as a closely tracked proxy for business spending intentions, posted a 2.5% expansion, snapping three straight months of contraction.
• The growth even in this key area trails the pace of 9.8% that was reported in April 2018 by a wide margin, and it would be premature to celebrate the single reading until a more abiding trend emerges in the coming months.
• Price gains measured by the Consumer Price Index (CPI) quickened to 3.05% in May, from April’s 2.99%, as prices of vegetables and pulses jumped by 23% and 10% respectively in urban areas, contributing to a bump-up in food inflation.
• The Reserve Bank of India had last week flagged the risks to the inflation trajectory from factors including spikes in vegetable prices and international fuel prices and marginally raised its CPI inflation projection for the fiscal first half to a 3% to 3.1% range.

Conclusion

• The inflation reading remains below the RBI’s inflation threshold of 4%, policymakers would need to keep a close watch on price trends, especially as global energy prices continue to remain volatile amid heightened geopolitical tensions in West Asia and uncertainty on the demand outlook owing to the ongoing China-U.S. trade spat.
• And while the monsoon is forecast to be normal this year, the actual rainfall and its spatial distribution will have a significant bearing on agricultural output and food prices.
• A fiscally prudent budget, with incentives to support the nascent industrial recovery, would surely tick several boxes at one go.

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Sudan on the brink (The Hindu)

Mains Paper 2: International Relations
Prelims level: Sudan
Mains level: Power transition crisis in Sudan

Context

• The power transition crisis in Sudan has led to a violent crackdown on pro-democracy protests.

The ongoing crisis in Sudan

• Sudanese dictator Omar al-Bashir was toppled in April, 2019 after a months-long popular uprising.
• Military intervention ejected Bashir from power, and in turn, a Transitional Military Council (TMC) took power.
• Currently, the protesters are demanding a transfer of power to a transitional civilian government, followed by free and fair elections.
• But the military generals used the crisis to concentrate more powers in their own hands.
• Angry protesters continued a sit-in in front of the Defence Ministry in Khartoum, Sudanese capital.
• The talks between pro-democracy activists and the military rulers collapsed. So paramilitary groups unleashed deadly violence to break the sit-in, killing at least 100 people and injuring hundreds.
• The Rapid Support Forces (RSF) threw the dead into the River Nile and reportedly, 40 bodies have been pulled from the river in Khartoum.
• The RSF are the paramilitary troops notorious for atrocities committed in the impoverished western province of Darfur in the early 2000s.

How does the future look?

• After the crackdown, Lt. General Abdel Fattah al-Burhan, the military ruler, has offered to hold elections in 9 months, upturning an earlier plan of a 2-year transition.
• But there is no immediate plan to transfer power to a civilian transitional government, a key demand of the protesters.
• So unsurprisingly, protesters have rejected the military’s offer.
• At present, Sudan’s generals enjoy regional and international support too. The UN Security Council could not even condemn the violence as China, backed by Russia, blocked the move.
• Saudi Arabia and the United Arab Emirates, which offered financial aid to the people as soon as Mr. Bashir was removed from power, also support the generals now.
• This gives the military rulers a sense of impunity even when they unleash murderous paramilitaries on peaceful protesters.
• So it is evident that the military will not easily give up power any time soon.

Way forward

• If the military wants to keep its grip on power, there could be more bloodshed as the protesters are defiant.
• It will have to necessarily build a more oppressive regime, as in Egypt after the 2013 coup.
• So the other, wiser option is to compromise, resume talks with the protesters and facilitate a quick and orderly transition to civilian rule.
• Arab countries as well as the UN should put meaningful pressure on the military council to pay heed to popular demands.
• They should also hold those responsible for the recent massacre accountable.

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The only mantra (Indian Express)

Mains Paper 3: Economy
Prelims level: RDAT, BOAT
Mains level: Measures needed to improve skill development and apprenticeships

Context

• India’s problem is not unemployment this has bounced in the low and narrow range of 4-7 per cent for 50 years but employed poverty.
• Our traditional labour market shock absorbers farm employment and self-employment are dying because kids born after 1991 are unaccepting of self-exploitation and recognise the wage premiums, identity, dignity, soft skills, apprenticeship effect, and financial inclusion of formal jobs. I’d like to make the case that policy should pray to one god formal jobs.
• And since goals decide strategy, our focus areas become clear.

Poor Formalization

• India’s 6.3 crore enterprises only convert to 12 lakh GST registrants, 10 lakh provident fund payers, and 19,500 companies with a paid up capital of Rs 10 crore or more because of our regulatory cholesterol 58,000-plus compliances, 3000-plus filing, and 5000-plus changes every year.
• We need massive ease-of-doing business that rationalises (cuts down ministries, compliances, and filings), simplifies (adopts a universal enterprise number and one labour code) and digitises (adopts a paperless, presenceless and cashless process for all employer compliance by shifting from uploads to websites to an API architecture with straight-through-processing).

Reverse payroll wedge

• India’s labour laws have an insane reverse payroll wedge employers are forced to deduct 40 per cent-plus of gross wages from chithi waali salary (gross wages) for employees with monthly wages up to Rs 25,000.
• Yet, haath waali salary (net wages) are only 9 per cent lower for employees with monthly wages above Rs 25,000.
• This wedge murders formalisation and confiscates property from the poor; all wages belong to employees in a cost-to-company world.

Fixing this wedge needs competition

• EPFO is the world’s most expensive government securities mutual fund (300-plus basis points for administration fees) and Employees’ State Insurance (ESI) is the world’s most expensive health insurance programme (less than 50 per cent of contributions are paid out as benefits).
• The reform agenda is clear employee contribution must be made optional, employees must choose who handles their employer contributions, and social security programme fees must be capped to their costs.
• One driver of 20 million new social security payers has been the Pradhan Mantri Rojgar Protsahan Yojna this partial reimbursement to employers for incremental low-wage employees has incentivised social security enrolment, is easy to verify, and hard to fudge and should be extended for a fixed period of three years.

Difficulties face before skill development and apprenticeships

• Our skill development system faces the difficult trinity of cost, quality and quantity combining with challenging changes to the world of education.
• In a world where Google knows everything, knowing is not as important as lifelong learning and hard skills become a necessary but not sufficient condition for the wage premium.
• Apprenticeships are the future of learning, yet India only has 5 lakh apprentices instead of 1.5 crore (if we use Germany’s number of 2.7 per cent of the labour force).

Steps towards to improve Apprenticeship

• Changes could include merging the two central government initiatives, Regional Directorates Of Apprenticeship Training (RDAT) and Board of Apprentice Training (BOAT), operate effective online matching platforms and reinforcing the regulatory legitimacy of apprenticeships as classrooms to overcome the trust deficit with employers.
• Most importantly, we must enable degree-linked apprentices (skill universities await clearance for linking apprentices to degrees via distance and online delivery).
• There must also be a focus on financialisation reform and sustainable competition.
• Fairly-priced capital catalyses formalisation, yet India’s credit to GDP ratio is 50 per cent (rich countries are at 100 per cent). Sadly, Arunachal Pradesh is at one per cent and Bihar is 17 per cent.
• Lowering our cost of money has begun but sustainably targeting a higher credit to GDP ratio needs more bank licences, fixing the governance at nationalised banks, blunting the asset liability  mismatch at NBFCs (some irrationally funded 30 per cent of their balance sheet with commercial paper) and restoring the sanctity of the 270-day IBC bankruptcy deadline.
• More Indian enterprises need formal financial credit capital investment and working capital availability drive productivity without replicating the rash lending between 2008 and 2014 that gave us Rs 14 lakh crore worth of bad loans.
• Sustainably expanding credit at reasonable prices without stealing from our grandchildren needs thoughtfully-crafted competition.

Way forward

• We should consider making labour a state subject and must continue the decentralisation of funds, functions and functionaries to states while simultaneously creating accountability, capabilities and resources in city governance.
• We can’t take jobs to people and need to take people to jobs but the governance deficit of cities is blunting migration.
• The 67 per cent-plus turnout in our recent election not only reflect the invisible threads that hold India together but capture an aspiration that breaks with India’s economic past. This dua needs policy to pray to the one god of formal jobs.

What are the steps require improving skill development and apprenticeship to increase formal employment in India?

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Welfare policy and Modi 2.0 (Indian Express)

Mains Paper 2: Governance
Prelims level: Not Much
Mains level: Various welfare schemes coined by Modi govt era

Context

• Housing, sanitation, gas connections (Ujjwala), direct benefit transfers (DBT), income support (PM-Kisan) contrary to early indications, the Narendra Modi government’s first term proved to be far more welfarist than was expected of a government that campaigned on the slogan of minimum government.
• With the benefit of hindsight, many pundits now argue that it is this medley of schemes that convinced voters to give the Modi government a resounding encore.
• Regardless of the many mysteries of the Indian voter, there is no argument that these schemes will remain the hallmark of Modi 1.0.

Key analysis of the welfare projects

• Early in its tenure, the government embraced Aadhaar and DBT with gusto. And in its last few months, it began the transition to basic income support through PM-Kisan.
• Underlying this approach is the assumption that technology can substitute for an incompetent and corrupt welfare bureaucracy.
• Moving money directly to beneficiary accounts removes bureaucratic layers and tightens monitoring, thus improving efficiency and curbing corruption.

Flaw of redesign

• But recent studies show that rather than reducing bureaucracy, getting the DBT architecture right requires significant bureaucratic intervention.
• From opening accounts to promoting financial literacy and facilitating bank transactions, local bureaucrats are critical to DBT.
• Getting the DBT architecture right, requires bureaucrats to engage citizens and coordinate across departments a skill that Indian bureaucrats simply do not posses.

Examples from other countries

• Countries like Brazil and Mexico have invested in large cadres of social workers at the local government level to do just this.

Way ahead

• Building a competent welfare bureaucracy,-The success of welfare programmes in Modi 2.0 will depend on willingness to recognise that building a competent welfare bureaucracy, even if its only task is to move money, will require empowering local governments with skills and resources.
• Challenges with Digitised welfare systems
• Digitised efficiency risks casting citizens as passive recipients of government largesse rather than active claimants of rights.
• Digitised welfare systems genuinely risk closing off spaces for citizens to complain, protest and demand accountability when rights are denied.

Analysis of Ayushman Bharat

• With Ayushman Bharat, Modi 1.0 took a significant step towards engineering an architectural shift in India’s welfare system, away from direct provisioning (government running hospitals and schools) towards financing citizens (through income support and health insurance) and regulating private providers.
• But can a state that struggles with routine tasks regulate a sector as complex as healthcare? Consider this.
• In the United States, medicare employs 6,000 staff to cover 44 million beneficiaries who handle insurance audits, pricing, and anti-trust cases.

Challenges

• The staffing requirement, at equivalent levels in Uttar Pradesh alone, would amount to 10,000 employees.
• Importantly, in a sector like health where predatory practices are rife, well-functioning government hospitals are a necessary check and balance. Regulation cannot be a substitute for investing in public systems.
• Ayushman Bharat must be complemented with a concerted focus on strengthening public hospitals.

Welfare through Centre-state relations

• Centre-state relations in welfare policy, rationalising the 400-plus central government welfare schemes and restoring them to their rightful place states remains an important unfulfilled promise of Modi 1.0.
• This multiplicity of central schemes has served to entrench a silo-driven, one-size-fits-all approach that is inefficient as it fails to capture state-specific needs.
• The proposed expansion of PM Kisan and the possible transition to a quasi-universal basic income make the need to rationalise existing schemes, and address overlaps and complementarities with existing schemes like MGNREGA, even more pressing.

Way forward

• Finally, no government can afford to ignore India’s learning crisis.
• Yet this was one of the most under-prioritised areas in Modi 1.0’s welfare agenda.
• The newly-released national education policy emphasises the urgent need to ensure all students achieve foundational literacy and numeracy. This needs to be adopted and implemented in mission mode.
• Welfare in Modi’s first term was about grand announcements and ambitious targets. But the difficult task of building a high quality, 21stcentury welfare state awaits Modi 2.0.
• India doesn’t need new schemes, rather it needs consolidation and balancing between competing welfare strategies. Getting this right will require significant investments in state capacity.
• This is the welfare challenge for Modi 2.0

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Tap drip irrigation to save water (The Hindu)

Mains Paper 3: Environment
Prelims level: Drip method of irrigation
Mains level: Significance and benefits of the Drip irrigation system

Context

• Water scarcity has now reached a new level in India.
• While severe drinking water scarcity is noticed commonly everywhere, farmers are facing a lot of difficulties in cultivating crops with reduced water availability in different regions.
• What is worrying is that water scarcity is expected to aggravate further in the near future.

Key observations made by IWMI

• Projections made by the International Water Management Institute (IWMI) indicate that one-third of the world population would face absolute water scarcity by the year 2025.
• NITI Aayog’s report (2018) on ‘composite water management index’ also underlined the depressing state of water stress.
• Though India has the largest irrigated area in the world, about 85 per cent of total irrigation potential (139.90 million hectares) has already been created, leaving limited potential for future use.
• An estimate of the Ministry of Water Resources (2008) shows the total demand for water will overshoot the supply by 2050.
• There’s much scope for easing water scarcity in agriculture. The agricultural sector (irrigation) currently consumes about 80 per cent of water in India.
• Data on water use efficiency indicates that India uses 2-3 times more water than major agricultural countries like China, Brazil and the US to produce one unit of food crop.

Benefits of drip irrigation

• Drip method of irrigation (DMI) has been found to increase water-use efficiency by saving a substantial amount of water.
• Unlike FMI, the drip method supplies water directly to the root zone of a crop through a network of pipes and emitters.
• Since it supplies water directly to the crop, rather than the land around, water losses occurring through evaporation and distribution are significantly reduced.
• The on-farm efficiency of the drip irrigation system is estimated to be over 90 per cent; it is only 35-40 per cent for FMI.

Introduce DMI in India

• DMI was introduced in India during the mid-1980s primarily to save water. But it generates a lot of other benefits as well.
• That there is water saving of 30-70 per cent for different crops under DMI when compared to FMI has been well established.
• While reducing the cost of cultivation substantially, especially in irrigation, weeding and inter-culture, DMI also helps increase the productivity of different crops by 30-90 per cent.
• Reduced water consumption also curtails the use of electricity for operating pumpsets.
• With better productivity and quality of crops cultivated under DMI, farmers are able to realise substantially higher income.
• A nationwide study conducted to find out the impact of National Mission on Micro Irrigation (NMMI) during 2014 covering 13 States reveals that DMI has benefited farmers significantly.
• While increasing productivity by 42-53 per cent in fruit and vegetable crops, DMI helps reduce irrigation cost by 20-50 per cent, electricity consumption by around 30 per cent and fertiliser consumption by about 28 per cent.
• Maharashtra is probably the first State to have taken a number of initiatives subsidy programme being one such to popularise DMI even during the mid-1980s.

Steps needed to avoid water scarcity problem

• To achieve the objective of ‘per drop more crop’, the Central government is taking a series of efforts to increase its adoption.
• While Centrally-sponsored schemes have been in vogue since the early 1990s, the National Mission on Micro-Irrigation (NMMI) introduced during 2010-11 and the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) launched in 2015 have significantly increased DMI adoption.
• As a result, the area under DMI has risen from a mere 1,500 ha in 1985-86 and 70,859 ha in 1991-92 to 4.24 million hectares as on March 2017.
• India has enormous potential for DMI, which should be harnessed to reduce water scarcity. The Indian National Committee on Irrigation and Drainage, in its report on Drip Irrigation in India, indicates that about 80 crops can be grown viably under DMI.
• Although DMI is considered to be highly suitable for wide spaced and high-value commercial crops, it is also being used for cultivating oilseeds, pulses, cotton and even paddy and wheat.
• The area under DMI has risen sharply in recent years but it is still far lower than the potential.

The agenda ahead

• The Task Force on Micro-Irrigation in India (2004) estimated India’s total drip irrigation potential at 27 million hectares as.
• In spite of having many advantages, the area under drip-irrigation accounts for a mere 4 per cent of gross irrigated area and about 15 per cent of its total potential as of 2016-17.
• The adoption of DMI is also concentrated only in a few States.
• With the current pace of adoption, it may take a long time to achieve full potential.
• Given the looming water scarcity and variations in rainfall pattern due to climate change, more efforts are needed to increase the pace of DMI coverage.
• First of all, the capital cost required for DMI should be brought down substantially.
• A special subsidy programme may be introduced for water-intensive crops like sugarcane, banana and vegetables.
• A differential subsidy scheme for water-scarce and water-abundant areas should be introduced.
• Subsidy is provided to a maximum of five hectares per beneficiary under NMMI, which should be done away with.
• All the areas of sugarcane cultivated using groundwater should be brought under DMI within the next 10-15 years.

Conclusion

• For encouraging the adoption of drip irrigation, a special scheme may be introduced linking bank loan facility for digging wells with electricity connection for pumpsets to those farmers who are ready to adopt drip irrigation.
• Currently, water from surface sources (dams, reservoirs, etc) is not used for DMI.
• At least 10 per cent of water from each irrigation project should be allocated only for DMI.
• Appropriate pricing of canal water and electricity will also help in increasing the area under DMI.

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The spirit of 1989, from Tiananmen to Prague (The Hindu)

Mains Paper 1: World History
Prelims level: The spirit of 1989
Mains level: Lesson we learn from the spirit of 1989

Context

• The recent commemoration of the 30th anniversary of the violent suppression of China’s Tiananmen Square protests is a good occasion to look back on the year 1989 and the non-violent movements for democracy which changed our world.
• It is a fact that the non-violent movements in Central and Eastern Europe in 1989 ended the confrontation between East and West and strengthened the possibility of a “new international order” based on the extension of democracy around the globe.
• As a result of the victory of non-violent campaigns in Poland (with the Solidarity movement) and in Czechoslovakia (with the Velvet Revolution), the technique of non-violent transformation of authoritarian and semi-totalitarian regimes into liberal democracies turned into a global cross-cultural phenomenon.
• In other words, the self-empowerment strategies of non-violent civic actors of 1989 had a great impact on those around the globe who believed in a genuine process of democratisation.

Background

• Let us not forget that the past 30 years have witnessed an unprecedented flowering of non-violent experiences.
• In many areas of the world, such as Latin America, North Africa and West Asia, where armed struggle was once seen as the only path to freedom, non-violent campaigns are now considered institutionalised methods of struggle for democratic invention and democratic governance.

Good governance

• One of the important tasks that was set by the non-violent movements of 1989 was the provision of “good governance”.
• For these movements and their leaders like Czechoslovakia’s Václav Havel, the real test of democracy was not only in the peaceful process of transition, but also in the non-violent consolidation of democratic institutions.
• For the advocates of non-violence in 1989, democracy was not just “an institutional arrangement for organising the political society” but a new attitude and approach towards the problem of power.
• For example, from the point of view of a 1989 leader such as Havel, the concept of power should go hand in hand with responsibility.
• As he pointed out, “Politics is an area of human endeavour that places greater stress on moral sensitivity, on the ability to reflect critically on oneself, on genuine responsibility, on taste and tact, on the capacity to empathise with others, on a sense of moderation, on humility.”
• In a Gandhian manner, the spirit of 1989 affirmed that the challenges and difficulties of democratic governance needed to be confronted through self-rule, self-control and the soul force.
• Undoubtedly, for all the non-violent actors of 1989, the twin practices of self-discipline and empathetic service seemed necessary in order to control an unjust and inappropriate power.
• This is actually what was suggested by the student-led democracy movement in China.
• For the Chinese students, the process of democratisation was a way to change the Communist power over society into a power from within it.
• As another leader of the 1989 movements, Adam Michnik, declares, “The real struggle for us is for the citizen to cease to be the property of the state.”

It’s still afloat

• As a matter of fact, it took shape once again in the spirit of young Egyptians and Tunisians who shook Arab history though the tactics of non-violent resistance. Certainly, the spirit of 1989 was non-violence in the making.
• And today, we can find the same spirit of 1989, what we can call a Gandhian moment of history, in Algeria, Sudan, Iran, Indonesia, the U.S. and many other countries around the globe.
• It shows that the dream of 1989 which accompanied the Chinese students of Tiananmen, the workers of Poland and the civic actors of Prague is not over.
• It shows that where non-violence is practised, democracy is honoured.

Conclusion

• Moreover, the spirit of 1989, which took shape in the year of all freedoms, is a reminder that democracy is a system based on trust in human action and the fact that the impossible could become possible.

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Current Affairs for IAS Exams - 07 June 2019

::NATIONAL::

NITI aayog to frame policy for AI and cyber security

• The NITI Aayog has come up with a policy on artificial intelligence and cyber security and it would be taken up by the Union Cabinet soon, disclosed V.K. Saraswat, member of NITI Aagyog.

• At a time when the government promoted the digitisation programme and India emerged the second country with most Internet access, the protection of data becomes crucial — be at home, workspace or institutions.

• “Digitisation has brought in enormous data and like oil, it will impact the economies of the world. Thus, data protection becomes crucial. A global data protection and regulation Act is coming up and in this context, thus cyber security becomes important too,” he said.

• Communication is digitised in every sector and the C.R. Rao Advanced Institute has been focusing on cyber security, which is undergoing paradigm changes due to induction of AI and ML, he explained.

• He said those itching to cause harm are also becoming smarter with AI necessitating 24x7 protection of the entire command and control of data network. But the main challenge to use AI is to get highly trained manpower.

Indian forest cover increased by 1% in last 5 years claims MoeFcc

• The Union Minister for Information & Broadcasting and Environment, Forests & Climate Change, ShriPrakashJavadekar has said that India's forest cover increased by 1% in the last 5 years and that similar progress will be possible in the coming five years through people's participation.

• The Minister said this during an interaction with the media, after planting three saplings in the premises of GulshanMahal, the historic building in Films Division that houses a part of NMIC, as part of the celebration of World Environment Day yesterday.

• He said that when compared with the amount of oxygen we consume in a lifetime, all of us must plant and help grow at least 10 trees; he said it is the way forward for environment protection.

• The Minister had launched a people’s campaign #SelfiewithSapling on Environment Day eve, urging everyone to plant a sapling and to post the selfie with the sapling on social media. On Environment Day, ShriJavadekar planted saplings in the premises of Environment Ministry in New Delhi.

• Film personalities AnupamKher, Jackie Shroff, ShyamBenegal, KiranShantaram, VarshaUsgaonkar and others were present on the occasion. The Minister expressed his heartfelt gratitude to all artists for coming together and joining the movement.

::ECONOMY::

RBI reduces benchmark lending rates

• The benchmark interest rate of the Reserve Bank of India (RBI) fell below 6% for the first time since 2010 as the central bank’s monetary policy committee (MPC) cut repo rates by 25 basis points (bps) to 5.75% in order to address growth concerns.

• The stance of the policy has also been changed from neutral to accommodative, which means a hike in interest rates is ruled out going forward.

• The decision to reduce interest rate was unanimous among the MPC members. “The MPC notes that growth impulses have weakened significantly as reflected in a further widening of the output gap compared to the April 2019 policy,” the RBI said.

• The central bank has revised GDP growth projection for the current financial year from 7.2% to 7%. “The headline inflation trajectory remains below the target even after taking into account the expected transmission of the past two policy rate cuts,” RBI Governor Shaktikanta Das said, during the media interaction.

• “Hence, there is scope to boost aggregate demand, and in particular, private investment activity, while remaining consistent with the mandate of flexible inflation targeting,” he said.

RBI’s effort to meet Basel standards to improve lending

• The Reserve Bank of India’s decision to bring leverage ratio for banks in line with Basel-III standards will improve the lendable resources, bankers said.

• In the second bi-monthly policy review, the central bank has mandated leverage ratio of 3.5% for all the banks except for the domestic systemically important banks (D-SIBs), which will have a 4% ratio.

• “Keeping in mind financial stability and with a view to moving further towards harmonisation with Basel III standards, it has been decided that the minimum LR should be 4% for domestic systemically important banks (DSIBs) and 3.5% for other banks,” the RBI said, adding instructions in this regard would be issued before the end of June 2019. The ratio was indicated to be 4.5% earlier.

• “On the regulatory front, the decision to lower the leverage ratio will augment the lendable resources of the banks,” Rajnish Kumar, chairman, SBI said.

• The leverage ratio was introduced for banks post the financial crisis of 2008, as one of the underlying features of the crisis was the build-up of excessive on- and off-balance sheet leverage in the banking system.

• “The easing of the leverage ratio requirement will boost bank lending and should serve as the much needed countercyclical stimulus,” ZarinDaruwala, CEO, Standard Chartered Bank, India, said.

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::INTERNATIONAL::

Russia plans to drop new START pact with U.S

• President Vladimir Putin said on Thursday that Russia was prepared to drop a nuclear weapons agreement treaty with the U.S. and warned of “global catastrophe” if Washington keeps dismantling a global arms control regime.

• Speaking to heads of global news agencies at an economic forum, Mr. Putin said Washington showed no genuine interest in conducting talks on extending the New START treaty, which caps the number of nuclear warheads well below Cold War limits.

• “If no-one feels like extending the agreement, New START —well, we won’t do it then,” said Mr. Putin. “We have said a hundred times that we are ready (to extend it),” Mr. Putin said.

• Mr. Putin said the potential implications of letting New START treaty expire would be huge, suggesting its demise could fuel a nuclear arms race. “If we don’t keep this ‘fiery dragon’ under control, if we let it out of the bottle God forbid — this could lead to global catastrophe,” Mr. Putin said.

African Union suspends Sudan amid severe crisis

• Sudan has been suspended from the African Union (AU) amid growing fears that splits among the ruling military regime could lead to civil war and anarchy.

• The decision by the union – which has 54 other member states – will significantly increase pressure on the country’s new military rulers, raising the prospect of diplomatic isolation on the continent and sanctions if they do not hand over power to a civilian-led authority to allow an “exit from the current crisis”.

• In a strongly worded statement, the AU said it deplored the loss of innocent lives in recent days in Sudan and called for the military and security forces to ensure the full protection of civilians and respect for human rights and freedoms.

• The AU’s decision was prompted by the deaths on Monday of more than 120 people when paramilitaries attacked a protest camp in the centre of Khartoum. Many hundreds were injured.

• There is increasing anxiety among observers that the crisis will exacerbate divisions within Sudan’s security establishment, raising the prospect of armed factions battling for power.

::SCIENCE & TECHNOLOGY::

2018 turned out to be an year of discoveries for biological scientists in the country

• Scientists and taxonomists have documented 596 new species of flora and fauna from India in the year 2018. The details of the discoveries were made public on Thursday by the Botanical Survey of India (BSI) and the Zoological Survey of India (ZSI) in the publications Plant Discoveries 2018 and Animal Discoveries 2018 .

• Of the 596 species, 372 come under fauna (311 invertebrates and 61 vertebrates). The newly identified 224 plant species include seed plants, pteridophytes, bryophytes, fungi and lichen.

• About 31% of the plant species were discovered in the Himayalas. In the case of animals, the Western Ghats remained a biological hotspot from where about 50% of the species were found.

• “The plants discovered this year includes close wild relatives of many potential horticulture, agriculture, medicinal and ornamental plants. The discoveries include plants belonging to groups Amomum (wild cardamom), Cycads, Rubus (raspberry), Syzygium (wild jamun), Terminalia, Balsams, Zingibers and also seven trees and 10 orchids,” said A.A. Mao, director of BSI.

• He added that the BSI has placed emphasis on molecular DNA technology and phylogeny to confirm the discoveries.

• Other than the discoveries, 139 species of animals were added to the fauna of India as new records. In terms of plants, 193 taxa of plants were added to flora of India as new records.

::SPORTS::

Magnus carlsen wins over Anand in chess

• ViswanathanAnand suffered defeat against world champion Magnus Tournament.

• It turned out to be a difficult day as Anand survived an inferior middle game and then a subsequent endgame against Carlsen for a long time, but then fell prey to some finely disguised manoeuvres in the Armageddon game where the Indian played another black.

• As a result of the Armageddon rule invented for a super tournament for the first time, the event had five decisive results coming in the shorter format of the game.

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Digital exclusion in this digital world is a real danger (Mint)

Mains Paper 3: Science and Tech
Prelims level: Not much
Mains level: Impacts of digital inclusion

Context

• The use of smart technology is a critical part of our evolution, but it needs to achieve mass relevance.

Positive side of digital inclusion

• The smartphones today are a radio, phone, television and even the power of the internet, all put together.
• They help us stay in touch with our family and relatives, transfer money, buy goods, pay our bills, and even monitor our blood pressure and heart beats. Digital technologies are revolutionizing healthcare.
• Doctors are using smart devices to remotely monitor the health of patients, and even perform remote surgeries with the help of robots of course, not the Terminator or SkyNet ones made popular by sci-fi films.
• They are also using Artificial Intelligence (AI) technologies like machine learning and deep learning to seek patterns and diagnose diseases better than any specialist could do.
• Gene-editing tools like CRISPR-Cas9 (and variants of it), too, are helping doctors find treatments for life-threatening diseases.

Digital evolution from past decade

• Youngsters born between 1995 and 2015 and better known as Gen Z take electricity, gas cylinders, phones and the internet for granted.
• But even for Gen Z, for whom programming is almost second nature and who are familiar with terms like the Internet of Things (IoT), blockchain, robotics, virtual and augmented reality and drones.
• This is just the beginning of a very exciting but challenging journey.
• We are already seeing the onset of driverless vehicles, hyperloops, bullet trains, low-cost satellites, flying copters, quantum computers, bendable and foldable screens and robots that care for the elderly, clean our rooms, move goods, serve food and even issue parking tickets, among other things.

AI integrated technology

• With 5G on the anvil, practically every device will potentially be able to communicate with another and we may soon see the advent of smart walls that become our screen when we point a device at them.
• These smart screens will provide us with entertainment, infotainment (with augmented reality and virtual reality built in) and many other interesting possibilities.
• Retail will dramatically change once devices begin ordering goods for robots to deliver.
• People will routinely walk in front of smart mirrors and buy customized clothes, and robots at counters (or counters with voice AI) will recognize you and even alert you if you miss an item on your regular grocery list.

Challenges behind misusing technology

• The challenge is that there is always the grave danger of having too much data passing into the wrong hands be it the hands of cybercriminals who can steal our identities (ransomware is already the bugbear of individuals and companies) or even governments that can (and do) use the data to connect the dots with the help of AI to govern our social media habits and introduce policies to instil in us what they deem as “proper" behaviour and police people with the help of Face IDs.
• Further, genetically-modified designer babies (scientists will find a way to make them live longer) with enhanced memories and information downloads could redefine education and monopolize highly-skilled jobs.
• This, even as smart robots continue to make routine jobs redundant and those who can’t be reskilled fall by the wayside.
• Despite of strong belief that the melding of science and technology is a critical part of our evolutionary road map, smart technology has to become cheaper and be made relevant to the masses, failing which it could end up increasing the digital divide.
• A tacit admission by governments that this technology disruption due to AI, automation and robotics will impact and alienate many people is borne by the fact that we are mooting the idea of a “Universal Basic Income".

Conclusion

• With three billion people predicted to still be offline in 2023, and many more failing to reap the internet’s full potential.
• The time to address digital exclusion is now, insists the Pathways for Prosperity Commission on Technology and Inclusive Development, which is hosted and managed by Oxford University’s Blavatnik School of Government.
• Solutions are not just about shiny technology," the Commission notes, “but rather about diagnosing and fixing systemic problems first and using technology appropriately.
• India, with its increased focus on digital India and AI and a 1.3 billion population, surely has its work cut out.

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Welcome integration of water management (The Hindu)

Mains Paper 2: Governance
Prelims level: Jal Shakti Ministry
Mains level: Requirement of Jal Shakti Ministry

Context

• It is welcome that the new government has walked the talk and set up the integrated Jal Shakti ministry, reorganising Water Resources, River Development and Ganga Rejuvenation bodies, and merging them with Drinking Water and Sanitation, to provide much-needed policy focus and coordination.
• Jal Shakti minister Gajendra Singh Shekhawat has announced that the Centre intends to provide piped drinking water to all households nationwide.
• Implemented, that would be transformative, given that an estimated 600 million people face high-to-extreme water stress, as per NITI Aayog.

Requirement of Jal Shakti Ministry

• Shockingly, 75% of households do not have drinking water on their premise, and 84% of rural households lack access to piped water supply.
• It is the hitherto missing link in the Swachh Bharat Abhiyan, so that household toilets are actually used as intended.
• The Jal Shakti ministry needs to be empowered to coordinate policy with the ministry of agriculture, which accounts for some 80% of water demand.

Way forward

• It is to systematically link cropping patterns to agro-climatic zones, and not encourage water-guzzling crops in drier regions with glaring policy distortions like free power.
• There is also the pressing need to bridge the rising gap between irrigation potential and its actual realisation, and widely diffuse sprinklers and micro-irrigation systems.
• Besides, we need decentralised systems with participatory management by panchayats for effective rural piped water networks.
• Relying, instead, on a large irrigation bureaucracy would make it both high-cost and quite dysfunctional.
• Further, only a tiny number of urban areas nationally have both sewage systems and sewerage treatment plants, which clearly needs improving with stepped-up resource allocation.

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No surprises: on RBI's repo rate cut (The Hindu)

Mains Paper 3: Economy
Prelims level: Repo rate
Mains level: Reasons behind RBI's repo rate cut

Context

• There were no surprises in the second bimonthly monetary policy announcement by the Reserve Bank of India.
• A 25 basis point (0.25 percentage point) cut was widely expected, and the RBI delivered that.
• Whether a deeper 50 basis point cut was necessary, given the sharp slowdown in the economy, is now a purely scholastic question.
• With inflation well under the benchmark figure of 4%, the stage was probably set for the RBI to spring a surprise but it chose to play conservative.

Reasons behind rate cut

• Maybe the idea is to keep the powder dry for a further rate cut, if needed, in the next policy.
• If the economy fails to recover well enough from its slumber by August, the onus will, after all, shift back to the RBI. That said, there is enough in the latest policy to indicate that the RBI’s focus is now on growth.
• The change of stance to ‘accommodative’ from ‘neutral’, the statements by RBI Governor Shaktikanta Das at the press conference that ensuring systemic liquidity will remain a priority for the central bank, and the setting up of an internal working group to review the existing liquidity management framework.
• All clearly point to a central bank that is not only listening to the demands of the key stakeholders in the economy, but also acting on them.
• The one area where the RBI has some work to do is in the transmission of rates.
• By its own admission, only 21 of the cumulative 50 basis points rate cut effected by the RBI in the February and April policies has been passed on to borrowers by banks.
• The excuse from banks, at least in the last few months, was that liquidity was tight and so deposit rates could not be cut.
• However, liquidity has considerably improved in the last week, and more so with the new government loosening the purse strings.

RTGS/NEFT transactions charges

• There cannot be any more excuses from banks to not pass on the cuts fully.
• The RBI’s decision to do away with its charges on RTGS/ NEFT (Real Time Gross Settlement System/ National Electronic Funds Transfer) transactions is welcome provided it can, again, ensure that banks pass on the benefit to customers.
• The central bank has also proposed measures such as a reduction in the leverage ratio under Basel norms for banks, which will increase their lendable resources.
• The projected growth rate for this fiscal has been lowered to 7% from the 7.2% projected in April, and the first-half growth is estimated at 6.4-6.7%, which by itself appears ambitious given the current trends in the economy.

Conclusion

• With the RBI having done its bit, the focus shifts to the Finance Ministry.
• There are tremendous expectations from the government over the next round of reforms, backed as it is by a strong mandate.
• The onus is now on the budget, to be presented on July 5, to unleash the animal spirits again in the economy.

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Abolish cess, surcharge (The Hindu)

Mains Paper 3: Economy
Prelims level: Cess and Surcharge
Mains level: Reason behind to abolish cess, surcharge

Context

• Governments of different political dispensations have leaned on surcharges and cesses to make up for the shortfall in their revenues from regular taxes.
• In the process, the Centre has converted what was meant to be a short term revenue mobilisation measure into a regular feature for income-tax payers, both individuals and businesses.
• That practice needs to be brought to an end for two reasons.
• It is unfair to those who pay taxes compared to those who wilfully do not.
• It also unfair to the States, as the Centre does not share taxes collected as surcharges and cesses with the States.

Implications from the Fourteenth Finance Commission

• The Fourteenth Finance Commission attempted to bring some balance in the revenue share of the Centre and the States, by increasing share of the States in the divisible pool of tax resources to 42 per cent from 32 per cent in its recommendation for 2015-16 to 2020-21, but faced with revenue shortfalls.
• The Centre has increased the quantum of cess and surcharge over the past few years.
• The three per cent education cess paid by individuals and businesses has risen to a four per cent education and health cess.
• The 10 per cent surcharge that P Chidambaram introduced in the 2013-14 Budget on taxable incomes of individuals, firms and association of individuals that exceed ₹1 crore too has risen they now pay 15 per cent surcharge.
• That apart, those with taxable income of between ₹50 lakh and ₹1 crore have to pay the 10 per cent surcharge.
• The surcharge on incomes of companies too has risen.

Reason behind to abolish cess, surcharge

• Budget documents show that the total surcharges and cess that companies were expected to pay in financial year 2018-19 was estimated at ₹93,249 crore while the basic tax on their income was estimated to be 5,27,750 crore.
• Thus, the cess and surcharge was estimated at 15 per cent of all taxes on income paid by companies, with a bulk of it coming from surcharges.
• The income tax to be collected for the same year was estimated ₹4,61,182 crore and an additional ₹23,618 crore as cess and surcharge with the cess and surcharge amounting to about five per cent of the taxes paid by individuals.
• In 2012-13, the surcharge and cess together was about five per cent of all the income tax paid by companies and three per cent of the income tax paid by individuals.
• While GST has done away with most indirect tax cesses, they persist on the direct taxes side.

Way forward

• The Union government needs to find better ways to improve its tax collections.
• A little over 81,300 individuals declared gross income of more than ₹1 crore for assessment year 2017-18 (or financial year 2016-17).
• The tax department can improve outcomes without resorting to draconian steps.
• The upcoming first Budget of the second Modi government offers a chance to send a powerful reforms signal by doing away with such cesses and surcharges.

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Public policy must regulate algorithms and AI to avoid adverse impact on society (Indian Express)

Mains Paper 2: Governance
Prelims level: CPC
Mains level: Regulate algorithms and AI to avoid adverse impact on society

Context

• Businesses are increasingly utilising algorithms to improve their pricing models, enhance customer experience and optimise business processes. Governments are employing algorithms to detect crime and determine fines.
• Consumers are benefitting from personalised services and lower prices.
• However, algorithms have also raised concerns such as collusions and malfunctioning, privacy, competition issues, and information asymmetry.
• Automated systems have now made it easier for firms to achieve collusive outcomes without formal agreement or human interaction, thereby signalling anti-competitive behaviour.
• This results in “tacit algorithmic collusion”, an outcome which is still not covered by existing competition law. This can occur in non-oligopolistic markets too.

Background

• In 2015, US Federal Trade Commission fined David Topkins (former e-commerce executive of a company selling online posters and frames), for fixing the price of certain posters sold through Amazon Marketplace using complex algorithms, impacting consumer welfare and competition adversely.
• In 2011, two third-party Amazon merchants, Bordeebook and Profnath, attempted to use algorithmic pricing to sell an out-of-print version of Peter Lawrence’s The Making of a Fly.
• The first seller algorithmically priced the book at 1.27059 times the price of the second seller.
• The second seller’s price was thus automatically set at 0.9983 times the price of the first seller.
• Over time, the price shot up to an unimaginable high of over $23 million before dropping to $106.23 and $106.05 respectively! But, the relative pricing between the booksellers remained unchanged, indicating endless possibilities for both “collusion” and “chaos”.

Security concerns too remain paramount

• In order to enjoy services at low or zero price, consumers neglect the value of their data.
• Access to easily procurable data such as Facebook “likes” can be used to target only advantageous customers circumventing anti-discrimination mechanisms.
• Application of advanced algorithms have also resulted in an increase in ransomware attacks.
• Ransomware is a form of malicious software that blocks access to a victim’s data and threatens to make it public unless the ransom demanded by the hacker is paid.
• A devastating cyber attack the WannaCry ransomware attack hit the world in May 2017, affecting around 2,30,000 computers across 150 countries.
• Through the use of EternalBlue, an exploit leaked by the Shadow Brokers hacking group, the malware spread on Microsoft Window’s Operating System across the globe without any human interaction. Such attacks require prompt action by regulatory authorities.

Concerns pertain to “competition”

• Processing of large datasets through dynamic algorithms generate real-time data “feedback loops”, impacting competition adversely.
• As more users visit select platforms, not only more data, but data with greater reliability is collected, allowing firms to more effectively target customers. Consequently, more users feedback into this loop.
• Such feedback loops have the potential of creating entry barriers which are a cause of concern for competition authorities.
• Also, better monetisation of platforms reinforces such loops as the additional revenues generated are reinvested to improve services, thereby, further attracting more users — leading to dominance.
• That Google has been estimated to charge a higher cost-per-click (CPC) than Bing, a competitor, suggests that advertisers attribute a higher probability of converting a viewer of Google’s ads into a customer.

Conclusion

• We have evolving machine-learning algorithms ranging from voice recognition systems to self-driving cars.
• Even high-profile programmers/developers may not be able to trace the working of such algorithms making nearly impossible the identification of any anti-competitive practice. Such algorithms may have the capacity to identify a dominant strategy on their own to maximise profits.

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Current Affairs for IAS Exams - 06 June 2019

::NATIONAL::

UNICEF report claims swachhbharat has helped reduce water contamination

• The Swachh Bharat initiative of the government has led to reduced ground water contamination. A study by the UNICEF said the substantial reductions may potentially be attributed to the improvement in sanitation and hygiene practices.

• It said, supportive systems such as regular monitoring and behaviour change messaging, which have all been critical aspects of the Swachh Bharat Mission (Grameen), also helped reduce ground water contamination.

• While another study by Gates Foundation said that Swachh Bharat leverages 23 thousand crore rupees for behaviour changThese studies were aimed at assessing the environmental impact and communication footprint of the Swachh Bharat Mission (Grameen).

• Jal Shakti Minister Gajendra Singh Shekhawat has said Swachhata affects all aspects of the environment - be it groundwater, surface water, soil or air - as well as health and well-being of the communities in ODF regions.

• He praised the Swachh Bharat Mission for bringing a reduction in ground water contamination. He said, the WHO 2018 study had estimated that the Swachh Bharat Mission will save over three lakh lives by the time India is Open Defacation Free.

• Swachh Bharat Mission is in the final stretch of its completion with 30 States and Union Territories already having declared themselves free from open defecation. It is focusing on sustaining the gains of this progress and to extend the momentum to the ODF-plus phase which includes solid and liquid waste management.

Government to consider reconstitution of cabinet committees

• The Government has reconstituted eight Cabinet Committees. These are Appointments Committee, Committees on Accommodation, Economic Affairs, Parliamentary Affairs, Political Affairs, Security, Investment and Growth and Cabinet Committee on Employment and Skill Development.

• Cabinet Secretariat said in a press release that the Cabinet Committee on Security will have Prime Minister NarendraModi, Defence Minister Rajnath Singh, Home Minister Amit Shah, Minister of Finance and Corporate Affairs NirmalaSitharaman and External Affairs Minister Dr. S Jaishankar.

• Appointments Committee of the Cabinet has Prime Minister Modi and Mr Shah. While Cabinet Committee on Investment and Growth will have the Prime Minister and Ministers of Home, Road Transport and Highways, Finance and Corporate Affairs and Railways and Commerce and Industry.

::ECONOMY::

Preparations for economic census underway

• Preparations are underway for seventh Economic Census, (7th EC) which is likely to commence by the end of June or the early next month. In the inaugural session, workshop for State Level Training of Census trainers for NCT of Delhi will be held today.

• In the run-up to the field work to be undertaken by the enumerators across the country, several activities have been planned by the Union Ministry of Statistics and Programme Implementation, MoSPI. Training of trainers at the state level is an integral component of this massive exercise.

• Economic Census is the complete count of all establishment located within the geographical boundary of country. In the 7th EC, an IT based digital platform for data capture, validation, report generation and dissemination will be used. The results of the exercise will be made available after verification and validation of the field work.

• The 7th EC will cover all establishments including household enterprises, engaged in production or distribution of goods or services in non-farm agricultural and non-agricultural sector. The coverage is same as the one in 6th Economic Census, conducted in 2013.

Indian microfinance sector attains almost 30% growth

• The Indian microfinance sector is expected to register a more than 30% year-on-year growth to Rs. 90,000 crore in 2018-19, according to industry body Sa-Dhan.

• The total gross loan portfolio (GLP) for the sector stood at Rs. 68,789 crore in2017-18.

• In a report released by the industry body, based on the data collected from 128 microfinance institutions, the GLP had already touched Rs. 75,476 crore. However, this would rise to more than Rs. 90,000 crore by the time the consolidated industry figures come out.

• The report also pointed out that Karnataka, Bihar, Uttar Pradesh, West Bengal, Odisha, Tamil Nadu and Maharashtra were the top seven States in terms of loan portfolio.

• P. Satish, executive director, Sa-Dhan, said “Trends of the microfinance industry for last quarter of the financial year 2018-19 are very encouraging. We have consolidated reports of 128 MFIs which reveal a 14% rise in loan portfolio and 9% increase in client outreach over Q3.”

• Sa-Dhan estimated the average loan ticket size for the sector at Rs. 34,010 against Rs. 29,902 in the previous year. The average of only NBFC-MFIs this year is Rs. 27,661.

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::INTERNATIONAL::

Xi Jinping arrives in Moscow for bilateral talks with Putin

• Chinese President Xi Jinping has arrived in Moscow for a state visit to Russia and the 23rd St. Petersburg International Economic Forum.

• Xi will have talks in the Kremlin with President Vladimir Putin before attending a formal reception.

• The visit comes five years after Moscow's annexation of Crimea in 2014 led to a serious rift with its Western partners and subsequent turn toward its neighbour to the east.

• The three-day visit to Russia marks a new era of friendship and reinforce economic ties that had benefited from Moscow's isolation from the West.

• From Moscow, Xi will travel to Russia's former imperial capital Saint Petersburg to attend the Economic Forum hosted by Putin on Thursday and Friday.

• The partnership is yielding rising trade, which has increased by 25 percent in 2018 to hit a record 108 billion dollars. During an interview with Russian media ahead of the visit, Xi said that China is Russia's most important economic partner. He also said that both countries would also discuss their relationship with the great Western powers, including the United States.

Martin Vizcarra wins confidence vote in Peru

• In Peru, President Martin Vizcarra won a confidence vote in the country’s Congress yesterday, reviving debate over his flagging effort to pass anti-corruption measures.

• President Vizcarra, who succeeded disgraced ex-president Pedro Pablo Kuczynski a year ago won by 77 votes to 44 with three abstentions.

• Vizcarra had threatened to dissolve parliament and force new elections unless lawmakers backed his anti-graft proposals.

• Kuczynski stepped down last year following allegations of bribe-taking as part of the continent-wide Odebrecht corruption scandal that has embroiled three other Peruvian former presidents.

::SCIENCE & TECHNOLOGY::

Government plans to form a permanent research centre to study olive ridley turtles

• A proposal has been made to establish a permanent research centre near the Rushikulya rookery on the Odisha coast to study the mass nesting of Olive Ridleys and the environmental factors related to it.

• The research centre is expected to be established at a cost of more than Rs. 9 crore. The Forest Department is planning to have it in the Khallikote forest range, which is near the Rushikulya rookery.

• The centre would be involved in a detailed study of the habits and the habitat of the turtles and the coastal flora and fauna.

• As per the plans, it would have a museum for the general public where skeletons and eggs of different marine turtles would be displayed. It would also include models and interactive displays.

• A scientist of Wildlife Institute of India BivashPandav considered to be the first wildlife researcher and documenter of the mass nesting at the rookery said the centre should start functioning as early as possible. He said it would make the Odias realise that since generations the local fishermen had been protecting the now endangered marine turtles.

::SPORTS::

India wins against south Africa to start ICC worldcup campaign

• In the ICC Cricket World Cup, India began its campaign with a victory. Men in blue defeated South Africa by 6 wickets in their opening match at Southampton in England last night.

• India achieved the target of 228 runs, with 15 balls to spare. Opener Rohit Sharma hit a blistering unbeaten 122 while Mahendra Singh Dhoni contributed important 34 runs. Rohit was adjudged man of the match.

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Bitcoin’s credibility problem here to stay (The Hindu)

Mains Paper 2: Economy
Prelims level: Bitcoin
Mains level: Bitcoin trade system

Context

• Bitcoin, the most popular crypto asset, made yet another dramatic comeback this year with prices rising 147 per cent in the five months to May 2019, when most believed that it would be unable to recover from the debilitating crash in 2018.
• This revival has rekindled the debate about the future of these assets.
• There is no denying that bitcoin and other crypto assets, as envisaged in their original form, have great potential to transform the global payment system.
• But for this system to work effectively, all the users need to be idealistic, earnest, honest and trustworthy; in other words crypto assets can replace traditional currency only in a fantasy land.

Types of crypto asset users

• There are two other categories of crypto asset users besides the believers in an alternative currency system who have eroded the credibility of these assets.
• The traders and speculators, who view these crypto assets as a new avenue to make disproportionately large profits, are behind the sharp rallies and equally steep plunges.
• The other category posing a threat to the existence of these assets comprises, among others, money launderers, drug traffickers and Ponzi schemes managers.
• With almost no supervision, crypto assets provide an easy channel for this group to move money across borders, pay for drugs, arms, etc., and to dupe investors.

A problem with the ecosystem

• The presence of speculators in the ecosystem has made the value of the crypto assets extremely volatile, rendering them unfit to serve as a medium of exchange.
• In 2016, the value of bitcoin against the dollar increased 110 per cent and in 2017, the gain was 1,493 per cent. But in 2018 bitcoin price plunged 77 per cent.
• This kind of volatility is fine if you are a speculator, but if you are holding it with the intent of purchasing a property or some other high value item, it would be difficult to estimate the amount you need to hold, given the gyrations in price.
• Similarly, it cannot be a store of value either, because the large fluctuations will make it difficult for bitcoin value to remain stable in the future.
• The activities of the other set of users money launderers and the like have brought down the ire of central banks and governments on crypto assets.
• Since many investors find it difficult to understand the working of these crypto assets, many Ponzi schemes have sprung up, promising fixed returns to investors. Besides these, the crypto trading platforms are mostly unregulated, posing a risk to investors.

Regulatory action in India

• The Reserve Bank of India initially restricted itself to issuing a note of caution to users of crypto assets.
• But the sharp rally towards the end of 2017 and the crash that followed in early 2018, made the government swing into action.
• Finance Minister, Arun Jaitley, declared in the Budget speech of 2018 that crypto assets are not ‘legal tender’.
• But trading in cryptos continued on the trading platform even after this pronouncement. With SEBI unwilling to regulate these ‘exchanges’, investors’ money was at risk.
• Following allegations of money laundering through some of these platforms, the RBI prohibited all banks and NBFCs from servicing individuals or businesses that deal in or settle crypto assets. This has resulted in most of the crypto asset trading platforms shutting shop in India.

The right approach

• For now, bitcoin and other crypto assets cannot hope to displace traditional currencies due to extreme volatility in prices.
• Besides, the lack of regulation and supervision is their greatest undoing as users do not have any one to turn to in case of any fraud. With scamsters abounding, crypto assets can function in the current format, only in Neverland.
• Also, a currency created out of thin air, such as bitcoin, can have no intrinsic value, besides the value imputed by the demand for it.
• It can be argued that it is the same with other global currencies. But there is a way to arrive at the value of a typical currency based on the external balances of a country, purchasing power, interest rates associated with the currency, and so on.
• Besides, the government of a country is guaranteeing the payment of the value ascribed to a typical currency.
• But in crypto currencies, the creator and the miners are faceless, nameless people, who will not and do not have the wherewithal to guarantee the payment in case of defaults.
• That said, there is no denying the potential these assets hold to change the payment system of the future. A via media is possible if central banks can consider issuing digital currencies that can be used in certain transactions.
• These could form part of the notes issued for circulation, thus addressing the other issue with crypto assets the lack of inherent value and absence of sovereign guarantee. Yes, the transaction cost will be higher in such digital currencies, but the higher security will compensate this.

A good diversifier

• Crypto assets are much in demand of late as an investment avenue. The MSCI World Index fell from 2072 to 1794 in December 2018 and from 2185 to 2045 in May.
• The prices of bitcoin rose 35 per cent in December and 73 per cent in May. This inverse relation of crypto assets to equity markets makes it a good diversifier.
• Both institutional as well as retail demand is emerging for these assets which are viewed as high-risk, high-reward investments. Many hedge funds and other alternate investment funds are quite active in these assets.

Conclusion

• While crypto assets replacing traditional currency is quite some way away, Indian investors should be provided some way to take exposure to these assets.

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Any effort to strengthen national security without reforming the police would be futile (India Express)

Mains Paper 3: Defense and security
Prelims level: Not Much
Mains level: Police Reforms

Context

• The country’s internal security architecture continues to be fragile. In the wake of the 26/11 terrorist attack in 2008, a slew of measures were taken to strengthen the police forces, reinforce coastal security and decentralise the deployment of National Security Guard.
• However, after that, a complacency of sorts seems to have set in, mainly because there has been no major terrorist attack since then.
• Whatever upgradation of police has happened during the intervening period has essentially been of a cosmetic nature.

ISIS threat across subcontinent regions

• The ISIS, which is committed to spreading “volcanoes of jihad” everywhere, recently perpetrated a horrific attack in Sri Lanka.
• The organisation has made significant inroads in Tamil Nadu and Kerala and has sympathisers in other areas of the country.
• It recently announced a separate branch, Wilayah-e-Hind, to focus on the Subcontinent. In the neighborhood, the ISIS has support bases in Bangladesh and Maldives.
• The government has been playing down the ISIS’s threat. It has been arguing that considering the huge Muslim population of the country, a very small percentage has been drawn to or got involved in the ISIS’s activities.
• That may be true, but a small percentage of a huge population works out to a significant number and it would be naïve to ignore the threat.
• Pakistan has taken some half-hearted measures against terrorist formations in the country, which are euphemistically called non-state actors largely due to pressure from the Financial Action Task Force (FATF.)
• These measures are more for show than substance.
• Besides, the ISI has been, for years, making well-orchestrated attempts to revive militancy in Punjab and trying to disrupt our economy by flooding the country with counterfeit currency.

Role of police to preventing terrorism

• The police in every major state should have a force on the pattern of Greyhounds to deal with any terrorist attack.
• The country must also have a law on the lines of Maharashtra Control of Organised Crimes Act (MCOCA) to deal with organised crimes.
• Investigation of cyber-crime would require specialist staff. Training the constables and darogas for the job will not take us far. The police must draw recruits from the IITs for the purpose.
• The National Counter-Terrorism Centre must be set up with such modifications as may be necessary to meet the legitimate objections of the states.
• The law to deal with terror the Unlawful Activities Prevention Act needs more teeth. Successive governments have only fiddled with the law.
• We have had the Terrorist and Disruptive Activities (Prevention) Act (TADA), followed by the Prevention of Terrorism Act (POTA) followed by the present UAPA.

Bringing police in the Concurrent List

• Police problems were simpler and of a local nature when the Constitution was framed. Since then, the pattern of crime and the dimensions of law and order problems have undergone a sea change.
• Drugs trafficked from the Myanmar border traverse the Subcontinent and find their way to Europe or even the US. Arms are smuggled from China to India’s Northeast via Thailand and Bangladesh.
• They are then distributed to insurgent groups in different parts of the country.
• States today are incapable of managing the slightest disruption in law and order.
• Central forces are deployed to assist the states round the year. Bringing police in the Concurrent List would only amount to giving de jure status to what prevails on the ground.

Reforming CBI

• The CBI’s image needs to refurbished.
• It is time that an Act was legislated to define the charter and regulate the functioning of the premier investigating agency.
• It is ridiculous that the CBI draws its mandate from the Delhi Special Police Establishment Act of 1946 and that the organisation was created through a resolution passed more than 50 years ago.
• The Central Armed Police Forces are not in the best of health.
• It would be desirable that a high-level commission is appointed to go into their problems of deployment, utilisation, discipline, morale and promotional opportunities.

Way Forward

• The major internal security threats today are in J and K, in the Northeast and from Maoists in Central India.
• These would need to be dealt with in a manner which while addressing legitimate demands and removing genuine grievances ensures that the intransigent elements are isolated and effectively dealt with.
• The Hurriyat leaders must be cut down to size and the cases against them pursued to their logical conclusion. The framework agreement with the Naga rebels must be finalised and the NSCN (IM) should be firmly told that the government can go thus far and no further.
• The Maoists need to be dealt with in a more sensitive manner.
• Now that government has got the upper hand, it should seriously consider holding out the olive branch, inviting them for peace talks while taking precaution at the same time that the insurgents do not utilise the peace period as a breather to augment their strength.

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Education in the liberal arts and humanities are important in themselves (India Express)

Mains Paper 2: Governance
Prelims level: Not Much
Mains level: Education reforms

Context

• In these “pragmatic” times, it is not easy to plead for liberal education.
• The new generation who have just cleared the board examinations and are willing to enter the domain of higher learning, to realise that education is not merely “skill learning” or a means to inculcate the market-driven technocratic rationality.
• Education is also about deep awareness of culture and politics, art and history, and literature and philosophy.
• In fact, a society that discourages its young minds to reflect on the interplay of the “self” and the “world”, and restricts their horizon in the name of job-oriented technical education, begins to decay.
• Such a society eventually prepares the ground for a potentially one-dimensional/consumerist culture that negates critical thinking and emancipatory quest.

Producing hierarchy in knowledge traditions

• The school education continues to reproduce this hierarchy in knowledge traditions. Whereas science or commerce is projected as “high status” knowledge, not much cognitive prestige is attached to humanities and liberal arts.
• In a way, this is like demotivating young minds and discouraging them from taking an active interest in history, literature, philosophy and political studies.
• Possibly, the standardised “ambition” that schools and anxiety-ridden parents cultivate among the teenagers makes it difficult for them to accept that it is possible to imagine yet another world beyond the “secure” career options in medical science, engineering and commerce.
• Certainly, it is not the sign of a healthy society if what is popularly known as PCM (physics-chemistry-mathematics), or IIT JEE, becomes the national obsession, and all youngsters flock to a town like Kota in Rajasthan, known for the notorious chain of coaching centres selling the dreams of “success”, and simultaneously causing mental agony, psychic disorder and chronic fear of failure.

The state of liberal education

• With demotivated students, teachers who do not have any passion, empty classrooms, routine examinations and the widespread circulation of “notes” and “guide books”, everything loses its meaning.
• History is a set of facts to be memorised, sociology is just common sense or a bit of jargon for describing the dynamics of family/marriage/caste/kinship, literature is time pass and political science is television news.
• Even though the state of science education is not very good, the trivialisation of liberal arts is truly shocking.

Conclusion

• In the absence of adequate liberal education, we have begun to produce technically-skilled but culturally-impoverished professionals.
• Techniques have triumphed and wisdom has disappeared. We seem to be producing well-fed, well-paid and well-clothed slaves.
• Therefore, no hesitation in becoming somewhat “impractical”, and inviting fresh/young minds somehow perplexed and thrilled by their “successes” in board examinations to the domain of liberal education.

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Constitution contains a kindred concept of justice, asks a citizen to be responsive to sufferings of co-citizens (India Express)

Mains Paper 2: Polity
Prelims level: Citizenship
Mains level: Highlights the two aspects of citizenship

Context

• The triumphal moment of Modi 2.0 has led to sincere felicitations by all citizens, but the insidious phrase “left liberals” has resurfaced and pleas have been already aired for a “re-invention of liberalism”.
• What matters for political and civic discourse is not name-calling but rather the tolerance of the intolerable disrespect for dissent, encouragement for practices of ethnic violence, caste or community-based lynching, and production of social indifference towards states of injustice and human rightlessness.
• It does not matter for those murdered, and the survivors, whether all this is produced or reproduced by left, right, or centre; all that they insist on is strict scrutiny now and prevention of re-occurrence, regardless of the political labels we choose to affix on the opponents.
• All political cadres and leaders must encourage and practice the vital difference on which a democratic order is premised the difference between the “adversary” and “enemy”.

The two aspects of citizenship

• A citizen is a being that knows how to rule and how to be ruled. A democracy views political belonging in terms of a congregation of co-citizens.
• That is the very meaning of what the constitutional Preamble means when it refers to the value of “fraternity”.
• Fellow-feeling means that everyone must learn to be a co-citizen first, and then a ruler or a ruled.
• It is certainly not being anti-national to take the Constitution seriously as providing the means and ends of good constitutional governance and conscientious resistance (peaceful dissent).
• If so, one must follow the conception of being a constitutionally sincere co-citizen — a conception outlined by the Indian Constitution itself in the Preamble, Part III (fundamental human rights), IV (the directive principles of state policy), IV-A (fundamental duties of co-citizens), and the oath of office that certain political co-citizens and justices take under the Third Schedule.
• How far the citizen rulers and the ruled have followed this credo requires deep study.
• But to call anyone attempting to examine this as “left-liberal”, “alt-right”, or by any other name, is in itself constitutionally unjustified.

Post liberal approach

• The Constitution we have adopted is not “liberal” but “post-liberal”.
• No constitution in the world contains basic rights that avail not against the state but to civil society.
• The rights against untouchability (Article 17) and against “exploitation” (Articles 23 and 24) are collective rights of discriminated peoples.
• They are declared constitutional offences, and the whole scheme of Indian federalism is set aside by casting a legislative duty on Parliament.
• All Article 19 civil and political rights are declared subject to “reasonable restrictions” imposed by the legislature.
• Article 21-guaranteed rights of life and liberty are immediately followed by Article 22, authorising preventive detention.
• As Justice M Hidayatullah wryly remarked about the Ninth Schedule, “ours is the only Constitution that needs protection against itself” (though now the Supreme Court may co-determine what new legislations curtailing rights can still be placed in that Schedule).
• The power to impose President’s Rule on states may be exercised by the Union but is subject to the process of judicial review.
• A large number of draconian security legislation have been upheld by the Supreme Court, including some colonial laws violating fundamental human rights.
• The respect for international law required by Article 51 does not result in enacting even an enabling legislation on custodial torture, let alone a fully-fledged adherence to the nearly universal convention against torture and inhuman, cruel or degrading punishment or treatment.
• The judicially developed law against sexual harassment at the workplace continues to be stymied at almost all sites.

Conclusion

• The Constitution contains a kindred concept of justice.
• Read as a whole, it says in one sentence that only that development is just which disproportionately benefits the worst-off, or the constitutional have-nots.
• This articulation does not surprise the non-millennials who still recall the favourite song of Mohandas Gandhi (written by Narsinh Mehta): Vaishnava jan to tene re kahiye, jo peed parai janne re (a Vaishnava is one who knows the pain and suffering of others).
• To be a good citizen is neither to be a liberal, Marxist or a Hindutva person, but to be and to remain responsive to the sufferings of co-citizens and persons.

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