19th April – Trawling for a sustainable livelihood

Trawling sustainable livelihood

For a country which is home to 10 per cent of the world’s total biodiversity of fish, one which happens to be the world’s second largest producer of fish, has over 1.5 crore people directly dependent on it for survival and gets more than 5 per cent of its GDP and over 10 per cent of its foreign exchange earnings by exporting fish and marine products, fishermen and fisheries get little to no attention from either policy makers or the political class.

Trawling sustainable livelihood


Potential for fisheries –
India is fantastically well-endowed as far as fisheries is concerned. It has over 8,118 km of coastline, an exclusive marine economic zone of 2.2 million sq km, nearly 2 lakh km of rivers and canals and more that 5 million hectares of reservoirs and ponds.

Department of Fisheries – A reality check –
In a report tabled in Parliament last year by the Parliamentary Standing Committee on inland fisheries and aquaculture (inland fishery accounts for about 65 per cent of India’s total fish production), the committee observed that despite being funded for assessment and development of water bodies, the department of fisheries had not reported any actual work carried out and did not even have an estimate for the number of water bodies where aquaculture activities could be carried out.

Fishermen concerns –
Their list of woes range from the rising cost of diesel to poaching by foreign trawlers to lack of market access and a minimum support price for fish to lack of access to capital and absence of cold storage and processing infrastructure which impacts their earnings directly. Over and above that is periodic, catastrophic losses inflicted by cyclones, and routine harassment by authorities.
To top it all, fishermen on both coasts face the threat of detention by foreign powers — Sri Lanka in the Bay of Bengal and Pakistan in the Gulf of Kutch.
Coastal fishermen, who rely on small country craft and catamarans, on their part, say that mechanised trawlers and indiscriminate fishing, as well as pollution and climate change are destroying their livelihoods.
To top it all, even the meagre subsidies that they get currently are under threat, with both the US and Australia putting pressure to do away with the ‘special and differentiated treatment that India currently enjoys as a developing economy and to cap its subsidies to fisherfolk on a specific and individual basis.
Phytosanitary, as well as tariff barriers are erected by a number of competing major economies with a significant fisheries sector. For instance, India’s shrimp exports have been hit hard by bans imposed by the EU and the US for alleged antibiotic presence.

Way forward –
It is high time that we took a more focused approach to this sector which contributes a tenth of our total GDP.
A focused thrust on developing inland fisheries and protecting and developing our marine fisheries has the potential to have a transformative impact on coastal and rural economies and livelihoods.
India also needs to up its game to protect its ₹45,000 crore plus export market.

Conclusion –
Both leaders of the ruling party and the opposition have promised to create a separate ministry for fisheries (currently, it is a department under the Ministry of Agriculture and Farmers Welfare). One could argue that a mere ministry does not mean that the target sector will actually benefit (just look at agriculture!) but at least it will be a start.

SourceThe Hindu Business Line

Also Read: 18th April – Police reforms must be expedited

18th April – Police reforms must be expedited

police reforms

In the run-up to the 2019 general elections national security has emerged as a major issue. To strengthen only external security and ignore internal security proves inadequate for effective national security management.

Concern –

On the internal security front, the lack of the our government’s political will to implement long-pending police and intelligence reforms amounts to a failure of good governance.

Need of reforms –

  • The intelligence agencies continue to be helmed and staffed predominantly by police personnel and others on deputation from various government services.
  • The rank and file of policemen across the country have their grievances with no effective redressal mechanism in place. For instance, in June 2016 the Karnataka Police planned a protest but was reined in by systemic checks and balances. The Haryana Police were unable to control law and order when godman Baba Ram Rahim was arrested in August 2017; besides, the February 2016 Jat agitation. Clearly that amounts to failure of the police machinery in the State.
  • Today, the country is vulnerable to externally-fostered internal security threats wherein jihadi terrorists from Pakistan strike targets not only in the border States of Jammu & Kashmir, Punjab, Rajasthan and Gujarat — but also operate in the hinterland States like Karnataka or Tamil Nadu. Only the police and intelligence services can ensure strong internal security management.
  • The police are hobbled by political interference and the police chain of command does not really function because the subordinate police officers cultivate MLAs and Ministers to intervene on their behalf particularly their postings to different appointments. This hampers professional policing and investigations which is to the disadvantage of the common man.
  • Another aspect of police reform is linked to Intelligence reforms. Both the internal and external intelligence agencies are predominantly staffed with police officers and there have been several acts of omission and commission.

A shallow progress –

  • The Supreme Court directed the States to review the progress on police reforms in 2006 and cracked the whip on States which were reluctant to initiate reforms.
  • In July 2018, the Supreme Court once again reviewed the progress of States and UTs on this front.
  • Almost 23 States have ignored guidelines on appointment of DGPs. As of today, 12 States have not implemented the separation of investigation and law and order wings.

Way forward –

  • Police reforms include fixed tenures for Director Generals of Police (DGPs) and Superintendents of Police. Also, the DGPs should have a minimum residual service to ensure continuity and stability and avoid frequent leadership changes.
  • As much as the police as an institution requires reform to insulate it from political interference, the intelligence agencies too merit a review in terms of accountability, staffing and operations.
  • Unlike the police whose performance is tangible, the intelligence agencies work remains invisible and away from public gaze.

Conclusion –

Reforms will help the state police forces and intelligence agencies to evolve into professional organisations and avoid future failures of law and order and more importantly, provide security oriented to the common man.

SourceThe Hindu Business Line

Also Read: 17th April – State funding of elections

16th April – Necessary steps to ending poverty

ending poverty

It is by now close to 50 years since Indira Gandhi brought the idea of eradicating poverty into the electoral arena in India. ‘Garibi Hatao’ had been her slogan. The role that income generation actually played in lowering poverty in India may be gauged from the facts that economic growth had surged in the 1980s, and the late 1960s was when agricultural production quickened as the Green Revolution progressed.

Why we failed till now?

  • This is because the approach of public policy to the problem has been to initiate schemes which could serve as no more than a sedative.
  • These schemes failed to go to the root of poverty, which is capability deprivation that leaves an individual unable to earn sufficient income through work or entrepreneurship.
  • Income poverty is a manifestation of the deprivation, and focussing exclusively on the income shortfall can address only the symptom.

Politics over poverty –

  • Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) is paying farm households below a threshold ₹6,000 a year. An income-support scheme for any one section of the population is grossly inequitable. We can think of agricultural labourers and urban pavement dwellers as equally deserving of support as poor farmers.
  • The PM-Kisan has, however, been dwarfed by the promise of the Nyuntam Aay Yojana (NYAY), which envisages an annual transfer 12 times greater to the poorest 20% households. While this scheme is not discriminatory, it is severely challenged by the issue of beneficiary identification in real time.
  • Both the schemes on display, but NYAY in particular, have been criticised as running into the absence of fiscal space. This is really neither the case nor of the essence, the latter being the role of income transfers in eradicating as opposed to alleviating poverty in India.
  • Dissecting the fiscal costs –
  • NYAY is estimated to cost ₹3.6 lakh crore per annum at current prices. This comes to approximately 13% of the central budgetary outlay for 2019-20. This expenditure can be incurred without any consequence for the fiscal deficit if all Centrally Sponsored Schemes are taken off and subsidies trimmed just a bit.
  • But the point is that at 13% of outlay, NYAY would amount to more than twice the combined expenditure on health and education and more than capital expenditure in the same budget, they being the items of public expenditure that most impact poverty in the long run.
  • There is an opportunity cost to be acknowledged of an income-support scheme of this magnitude being implemented while there exists a severe deficit of social and physical infrastructure in the country.

What should be done?

  • In light of a pitch that has been made for the implementation in India of a publicly-funded universal basic income (UBI) scheme, we can say that from the perspective of eliminating poverty, universal basic services (UBS) from public sources are needed, though not necessarily financed through the budget.
  • There is indirect evidence that the provision of health, education and public services matters more for poverty than the Central government’s poverty alleviation schemes in place for almost half a century.
  • Per capita income levels and poverty vary across India’s States. A discernible pattern is that the southern and western regions of India have lower poverty than the northern, central and eastern ones. This, very likely, is related to higher human development attainment in the former.
  • A UBI would imply that a nationwide income support scheme that channels funds from a common pool to households in the poorer States would be tantamount to rewarding lower effort by their governments.
  • There is a crucial role for a few services in eliminating the capability deprivation that is poverty. At a minimum these services would involve the supply of water, sanitation and housing apart from health and education. It has been estimated that if the absence of such services is accounted for, poverty in India would be found to be far higher than recorded at present.

Conclusion –

There are no short cuts to ending poverty, but ending it soon is not insurmountable either.

SourceThe Hindu

Also Read: 15th April – Our bankruptcy code is world class

15th April – Our bankruptcy code is world class

BANKRUPTCY CODE

The World Bank conducts an annual examination to gauge the ‘Ease of Doing Business’ in nearly 200 economies and ranks them on ten sets of parameters, which include ‘Resolving Insolvency’. India ranked 142nd in ‘Ease of Doing Business’ for 2015.

In terms of resolving insolvency, the country ranked 137th. The government set an ambitious target of breaking into the top 50 on this index, and initiated a plethora of institutional reforms, including an overhaul of the insolvency framework. After four years, India ranks 77th, up by 65 places, in the aggregate rankings, and 108th on ‘Resolving insolvency’.

Bankruptcy

 

Features of IBC –

  • Its primary focus is revival of an ailing firm, while recovery by creditors is an incidental outcome. Secured creditors have absolute priority over other claims in insolvency (liquidation) proceedings.
  • The recovery rate is a function of time, cost and outcome of insolvency proceedings. In addition to reviving ailing firms, the insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (Code) have returned 210 per cent of liquidation value for creditors. They are realising on an average 48 per cent of their claims through reorganisation, as compared to the erstwhile regime which recovered 26 per cent.
  • The Code provides a timeline of 180 days to conclude a corporate insolvency resolution process (CIRP), extendable by a one-time extension up to 90 days. Probably, no other regime in the world mandates a time-bound resolution. This push has meant that proceedings under the Code take on average about 300 days, including time spent on litigation, in contrast with the previous regime where processes took about 4.3 years.
  • The insolvency resolution process cost, which includes fee of insolvency practitioner and other professionals, and expenses related to meetings of committee of creditors (CoC), public announcements, filings and litigations, etc., have been 0.5 per cent of the realisation by the creditors in contrast with a cost of 9 per cent under the previous insolvency framework.
  • With realisation of 48 per cent of claims through reorganisations coupled with pre-admission and post-admission settlements, the Code has proved to be an efficacious remedy even for loan recovery.
  • The strength of an insolvency framework is a function of four indices relating to commencement of proceedings, management of a firm’s assets, reorganisation proceedings, and creditor participation. The Code does not envisage separate applications or processes for reorganisation and liquidation.

Transparency in proceedings –

  • The Code envisages a resolution plan for reorganisation of a defaulting firm. Irrespective of the composition of the CoC, other stakeholders have a right to receive the agenda and participate in the meetings of the CoC.
  • The CoC takes major decisions on behalf of the firm under CIRP. It appoints the insolvency practitioner to run the operations of the firm as a going concern and run the process as well.
  • Any creditor may seek any information about the firm’s business and financial affairs from the insolvency practitioner. Any creditor may contest the decision of the insolvency practitioner accepting or rejecting its own claims or claims of other creditors.

Conclusion –

It is a matter of satisfaction that within two years of the enactment of the Code, the Indian insolvency regime has all the essential elements and practices that any mature insolvency regime ought to have. Not surprisingly, it bagged the award for the ‘Most Improved Jurisdiction’ for 2018 from the Global Restructuring Review. Hopefully, it will also pass with flying colours in the ongoing examination of the World Bank.

SourceThe Hindu Business Line

Also Read: 13rd April – Fixing FAME-II

13rd April – Fixing FAME-II

Fixing FAME-II

The government’s FAME-II (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India) programme has received some criticism about its parameters. Most recently, a critique has accused it of seeking to accelerate manufacturing in India without ensuring there is adequate demand for the electric and hybrid vehicles so produced.

Fixing FAME-II

 

Details –

  • FAME-II, which was passed by the Union Cabinet in February, will cost Rs 10,000 crore over three years and intends to provide incentives to the manufacturers of electric and hybrid vehicles.
  • Its mandate requires that automakers should be directed to produce a certain percentage of electric vehicles per year. It believes that incentives are the best path towards a faster adoption of electric and hybrid vehicles.

Concerns –

  • It creates a relative disincentive for smaller vehicles since the amount of incentive is tied to the size of the battery in the vehicle.
  • It should be noted that electric two-wheelers and three-wheelers are most appropriate for Indian conditions. In fact, small electric scooters have the capability of revolutionising urban transport in India.
  • FAME-II should have been structured towards the creation of demand, not the localisation of production. Currently, for vehicles to benefit from the scheme, 50 per cent must have been produced locally. The government should have learned from the battle over solar panels: It is better to ensure adoption first, and then a local industry can be created.
  • This is doubly true in the case of electric and hybrid vehicles since India has considerable expertise when it comes to automobiles, two- and three-wheelers, bicycles and auto components.
  • CRISIL has pointed out that 95 per cent of the electric two-wheeler models currently produced in India will not be given incentives under FAME-II.

Way forward –

  • The government should ensure that FAME-II is structured in such a way that the adoption of electric two-wheelers and three-wheelers is not hampered but instead sped up.
  • The focus must be on ensuring it is easy and cheap for consumers to switch to using electric vehicles.
  • Another focus should be on retrofitting existing small vehicles at a nominal cost. The CNG fleet of auto-rickshaws in Delhi, for example, can at a relatively small cost to owners be transformed into an all-electric or hybrid fleet. This would require some innovative finance, which the government could backstop.
  • Lobbying by automobile manufacturers should not be allowed to succeed. The government must tweak FAME-II keeping these issues in mind.

SourceBusiness Standard

Also Read: A rare opportunity

Bitcoin- All you need to know | Bloomberg

What is Bitcoin?

  • It is an attempt by a firm, using blockchain technology, to create a set of shares in a trading entity that had an initial set value and fixed number (much like the face value and number of shares offered in an initial public offering), in the hope that these shares would become the medium of exchange through which people trade goods and services.
  • Since the number of shares is fixed, demand for them goes up over a period of time as more and more people use the shares to settle their transactions; so, the bet is that each bitcoin’s value goes up stratospherically since there will never ever be any more bitcoins issued.

It is legal?
Yes, as the Government has not yet regulated it in both India and China.
Could bitcoin be the next gold?
The idea has become particularly popular as the value invested in bitcoin and other cryptocurrencies has marched upward over the past year. Even after this week’s selloff, prompted by China declaring initial coin offerings illegal, the value of all cryptocurrencies in circulation is around $155 billion.
Digital Revolution –
The value of all bitcoins in circulation is moving close to the value of gold held by Exchange Traded Funds (ETFs).
Doubts on viability of Bitcoin –
There are two main reasons to doubt bitcoin’s viability as an investment.

  • One is an engineering issue: Its creaky infrastructure is likely to be a turn-off for all but the hobbyist users.
  • Another is more philosophical: Digital currencies have no fundamental value, so have no place in a portfolio.

Value of digital currency as compared to Gold –

  • It’s a fair question, but one that could equally be levelled at gold. Since Richard Nixon ended the fixed $35 an ounce convertibility of gold in 1971, its value has risen at times (the 1970s, the 2000s) and fallen at others.
  • The best argument to justify investing in gold these days is not that it’s an eternal “store of value” but that its very weirdness makes it special: According to modern portfolio theory, you should buy gold not for its superior investment returns, but because it doesn’t correlate much to other asset classes such as stocks, bonds and commodities.

Advantages of Bitcoins-

  • Freedom in Payment.
  • Allowing users to be in control of their transactions help keep Bitcoin safe for the network.
  • With the block chain, all finalised transactions are available for everyone to see, however personal information is hidden.
  • Bitcoin protocol cannot be manipulated by any person, organisation, or government. This is due to Bitcoin being cryptographically secure.
  • Currently there are either no fees, or very low fees within Bitcoin payments.
  • Due to the fact that Bitcoin transactions cannot be reversed, do not carry with them personal information, and are secure, merchants are protected from potential losses that might occur from fraud.

Conclusion –
Digital currencies may be as vulgar as the original barbarous relic, but neither is going away any time soon. If that makes investors in both look less like seers and more like problem gamblers betting on where a fly will land — well, welcome to financial markets.

India and China propose joint project at WTO | PIB

Recently (on 18 July 2017) India and China jointly submitted a proposal to the World Trade Organisation (WTO) calling for the elimination – by developed countries – of the most trade-distorting form of farm subsidies, known in WTO parlance as Aggregate Measurement of Support (AMS) or ‘Amber Box’ support as a prerequisite   for consideration of other reforms in domestic support negotiations.
Significance –

  • This is an important proposal by India and China in view of the ongoing negotiations for the upcoming 11th Ministerial Conference of the WTO to be held in Buenos Aires in December 2017.
  • It counters the efforts by some countries to target the subsidies of the developing countries while letting the developed countries retain their huge farm subsidies.

Details –

  • The joint paper reveals that developed countries, including the US, the EU and Canada, have been consistently providing trade-distorting subsidies to their farmers at levels much higher than the ceiling applicable to developing countries.
  • Developed countries have more than 90% of global AMS entitlements amounting to nearly US$ 160 bn. Most of the developing countries, including India and China, do not have AMS entitlements.
  • Listing the most heavily and frequently subsidised products by the US, the EU and Canada since 1995, the paper calls for elimination of such subsidies. The numbers reveal that subsidies for many items provided by the developed world are over 50% and some even more that 100% of the value of production of the product concerned, while developing countries are forced to contain it within 10% of the value of production.
  • In other words, while developed Members have access to huge amount of AMS beyond their de minimis (these are the minimal amounts of domestic support that are allowed even though they distort trade — up to 5% of the value of production for developed countries, 10% for developing.) in contrast most developing Members have access only to de minimis resulting in a major asymmetry in the rules on agricultural trade.
  • Elimination of AMS, India and China believe, should be the starting point of reforms rather than seeking reduction of subsidies by developing countries, some of which like India provide a subsistence amount of about US $ 260 per farmer per annum compared to over 100 times more in some developed countries.

For more information keep visiting Raj Malhotra Best IAS Academy in Chandigarh

The Lessons of Demonetization | Livemint

Prime Minister Modi in his televised address to the nation his Government’s decision to demonetise the higher denomination currency notes. There is now ample proof that the grand demonetisation gamble has failed to meet its primary objective.
Signals of failure –

  • The Reserve Bank of India (RBI) has finally released numbers that show how most of the currency notes that were cancelled were deposited in banks.
  • The airy hopes that the Indian central bank would be able to extinguish a substantial chunk of its liabilities—and some mistakenly also argued that this would provide a fiscal bonanza that the government could use to recapitalize the banking system—have been belied.

What next?

  • Finance minister Arun Jaitley said that the money is now in the system, where the use of Big Data analytics could help the government identify who deposited black money.
  • The challenge now is to ensure that the creation of new black money is minimized. GST, which creates incentives for producers to seek bills from their input providers—will be part of the solution.

Positive consequences–
Every policy has a stated goal as well as secondary consequences, some of which are unintended. It is still quite possible that demonetisation will have positive consequences over a longer period—

  • the growth in the direct tax base,
  • the switch in the financial holdings of households from cash to bank deposits,
  • the increased use of digital payments.

The question to be asked is whether the potential long-term benefits will be greater than the short-term costs that the Indian economy had to bear.
Negative consequences –
The main negative economic consequence of demonetisation has been the disruption of unorganized supply chains that are dependent on cash transactions. However, it is also true that the Indian economy did not collapse because of the disruption of the monetary base, as some economists had predicted.
Lessons to be learnt from demonetisation –

  • The main lesson is that the Modi government did not seek the advice of experts before going ahead. The strategic decision to surprise holders of illegal wealth would anyway have restricted the circle of those who could be informed, but it seems that the idea came from outsiders with a penchant for impractical ideas rather than experienced policy advisers.
  • A good policy design should take into account how people will respond to any change in the rules of the game. In other words, incentives matter. Most rational human beings will adjust their behaviour to further their self-interest. Those who had illegal wealth held in cash obviously gamed the cash exchange process. Good incentive-compatible policy design is thus as important as good policy intent.

Conclusion –
The implementation of such a behemoth decision requires capacity building of those who would implement it on ground. A surprise invasion to the comforts of bureaucracy may seem desirable to check their readiness but it cannot be performed at the cost of common people and the economy as a whole. Government has derived the lessons and it is possible that the database of doubtful transactions, people and entities (formed post-demonetisation) would be fruitful for the Government to take the necessary legal action against such illicit wealth.

Make in India UPSC | PIB

Defence sector being a User driven sector is actively involved in various policies & procedures related to procurement, indigenous design, development & manufacture of defence equipment, co-development & co-production with foreign OEMs, thus contributing towards ‘Make in India upsc’.
Some of the major areas, where defence personnel are involved, are listed below –

  • Make Procedure’: ‘Make’ procedure as given out at Chapter-III of Defence Procurement Procedure (DPP)-2016, envisages involvement of Defence personnel at various stages of development of a defence equipment. The ‘Make’ projects are identified through a consultative process with involvement of members from Services Head Quarters (SHQs). Project Management Unit (PMU) headed by Service officer, established at SHQs, is responsible for monitoring the implementation of ‘Make’ projects of respective SHQ. The Integrated Project Management Team (IPMT) mandated to steer the Make project, is also headed by Service Officer.
  • Technology Development Fund (TDF) Scheme: TDF scheme launched by the Government aims at funding the development of defence and dual use technologies that are currently not available with the Indian defence industry, or have not been developed so far, thus creating an Eco-system for enhancing cutting edge technology capability for Defence application. The scheme envisages constitution of Empowered Committee and Technical Committee with representation from Armed Forces as members, which are involved in identification of technologies, Project Monitoring & Mentoring activities.
  • Buy & Make (Indian)’ and ‘Buy & Make’ Categories of Capital Acquisition: ‘Buy & Make (Indian)’ and ‘Buy & Make’ categories of capital acquisition under DPP, envisage tie-up between Indian Vendor/ Indian Production Agency & foreign OEM, for indigenous production of defence equipment involving Transfer of Technology (ToT) of critical technologies to promote ‘Make in India upsc’. The Defence Personnel are engaged at various stages of procurement to progress the projects categorised under these categories.
  • Army Design Bureau (ADB): SHQ (Army) has established an Army Design Bureau (ADB) in August – 2016 as a single point coordination with Industry & Academia. The mandate of ADB, inter- alia is to act as a central repository of technical know-how, to bring forward the innovation undertaken by field formation, to generate long-term research requirement for Indian Army etc.

In addition, a large number of personnel from the Armed forces are posted in DRDO (Defence Research & Development Organisation) to provide impetus to design & development of projects of the Armed forces, thus contributing to indigenisation process.

For more information keep visiting Raj Malhotra IAS Academy

BIOSPHERE RESERVES IN INDIA | PIB Summary

What is a Biosphere Reserve?

“Biosphere Reserve (BR) is an international designation by UNESCO for representative parts of natural and cultural landscapes extending over large area of terrestrial or coastal/ marine ecosystems or a combination thereof. BRs are designated to deal with one of the most important questions of reconciling the conservation of biodiversity, the quest for economic and social development and maintenance of associated cultural values. BRs are thus special environments for both people and the nature and are living examples of how human beings and nature can co-exist while respecting each other’s needs.

Details –

The Biosphere Reserve Programme is guided by UNESCO Man and Biosphere (MAB) programme as India is a signatory to the landscape approach supported by MAB programme.

A scheme called Biosphere Reserve is being implemented by Government of India since 1986, in which financial assistance is given in 90:10 ratios to the North Eastern Region States and three Himalayan states and in the ratio of 60:40 to other states for maintenance, improvement and development of certain items.

The State Government prepares the Management Action Plan which is approved and monitored by Central MAB Committee”.