National Current Affairs – UPSC/KAS Exams- 6th February 2020

Inclusive Growth: Solution to Economic Crisis

Topic: Economy

In News: The Indian economy is going through a severe crisis: a slowdown as well as a structural crisis. Inclusive growth oriented strategy will help to tackle the problem.

More on the Topic:

Present Situation of Indian Economy:

• Almost all sectors of the economy are in decline. The rate of growth of the national GDP has declined to 5.0%, and may go down further; the construction sector, one of the fastest growing sectors so far, is growing at 3% this year; agriculture is growing at 2.1% while the auto sector is declining continuously in absolute terms.
• The Micro, Small and Medium Enterprises (MSME) sector too has declined, in turn raising the burden of non-performing assets of the banking sector as well as non-banking financial institutions.
• Also, exports have been declining in recent years, raising the crisis of current account deficit. Credit from banking and non-banking sectors has been declining in the last few years; the Financial Stability Report of the Reserve Bank of India (2019) says that it is unlikely to increase in the next nine months.

How the Financial Crisis Impacted the Poor:

• The incidence of absolute poverty, which has been falling since 1972-73, has increased to 30% (4% jump).
• As the Human Development Report (2019) has shown, more than 44% of the Indian population is under the multi-dimensional poverty line.
• The poorest 50% population at present owns only 4.1% of the national wealth, while the richest 10% people own 73% of the total wealth in India (Suisse Credit 2019).
• India has 2% population malnourished (women 15%) as against 9.3% in China. And 50% of the malnourished children in the world are in India.
• India’s global hunger rank has gone up to 112 while Brazil is 18, China is 25 and South Africa, 59. In the field of education as per a UN report (2015), overall literacy in India is 74.04% (more than the 25% are totally illiterate) against 94.3% in South Africa, 96.6% in China and 92.6% in Brazil.
• Almost 40-45% population is either illiterate or has studied up to standard 4. Given the quality of education in India, the overall population is very poorly educated, with the share of ‘educated unemployment’ rising by leaps and bounds.

Government and the Marginalised:

• Though the bottom population depends on the government for basic health and elementary education (and also for access to higher educational opportunities), the government spends just 1.4% of GDP on health (against the norm of 4-6% of GDP) and 3% of GDP on education (against the norm of 6-8% of GDP).
• As a result, these people are left hardly literate and sick, with poor nutrition and high morbidity. They are incapable of acquiring any meaningful skills or participating actively when new technology is spreading in the rest of the economy.
• This sub-optimal use of the labour force in the economy is not likely to enable India to achieve optimal growth with proper use of the national resources — the labour force.

Way Ahead:

• A major solution to the present crisis is to go in for inclusive growth.
• The main steps to expand productive employment for all in the economy should be made up of: a process of inclusion expanding quality of basic health for all and ensuring quality education to all, such people will be able to participate actively in the development process; having a well-educated labour force will help start-ups and MSMEs, in turn triggering a cycle of more productive employment in the economy.
• There is a need to raise expenditure on health to at least 5% of GDP and expenditure on education to at least 6% of GDP.
• There is a need to promote agriculture by raising investment in agriculture and not just cash transfer (cash transfer provides relief to them no doubt, and does not raise productivity of agriculture which needs large public investment); and to facilitate credit flow particularly continuous working capital, to labour intensive sectors. Unfortunately, these steps are missing in the recent national Budget.
• Employment guarantee schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) will increase employment.
• Assets generated under MGNREGA will expand capital formation in the economy, thereby raising the labour-absorbing capacity of the mainstream economy.
• There is a need to raise direct taxes, both capital tax and wealth tax for more inclusive development expenditures.
• Providing tax cuts and extra incentives and concessions to the corporate sector, exports increased and also our national GDP no doubt. But this growth does not much percolate to the poor.
• This is because during the growth process due to special treatment to corporate sector, the political economy radically changed in favour of the rich who are never willing to be taxed to raise government revenue to a level that it is enough to promote the capabilities and the well-being of the marginalised and the excluded.
• If the public expenditure on raising capabilities is treated as social investment rather than social welfare, policymakers will be willing to spend on this capital formation.

Mains Question(2016): What are the salient features of ‘inclusive growth’? Has India been experiencing such a growth process? Analyze and suggest measures for inclusive growth.

Source: Hindu

The Justice Amitava Roy (retd.) Committee: Prison Reforms

Topic: Governance

In News: Amitava Roy committee recommendation on prison reforms was taken up for hearing before a Bench led by Chief Justice Sharad A. Bobde.

More on the Topic:

• Overcrowding is a common bane in the under-staffed prisons. Both the prisoner and his guard equally suffer human rights violation.
• The undertrial prisoner, who is yet to get his day in court, suffers the most, languishing behind bars for years without a hearing.
• Number of undertrial prisoners numbers are highly disproportionate to those of convicts.
• The Prison Department has a perennial average of 30%-40% vacan. The shortage has lingered over the years.
• The committee found that the kitchens are congested and unhygienic and the diet has remained unchanged for years now.

Recommendations by the Committee:

• Every new prisoner should be allowed a free phone call a day to his family members to see him through his first week in jail.
• Modern cooking facilities and canteens to buy essential items should be incorporated in the prison.
• Speedy trials is the solution to over crowded prisons. There should be at least one lawyer for every 30 prisoners.
• Video-conferencing for trial should be utilized. This will sort out unavailability of sufficient police guards for escort and transportation for physical production of the convicts in the court.

Source: Hindu

Cooperative Banks Will Come Under RBI

Topic: Economy

In News: In the wake of the recent Punjab & Maharashtra Cooperative (PMC) Bank crisis, the Union Cabinet approved amendments to the Banking Regulation Act to bring 1,540 cooperative banks under the Reserve Bank of India (RBI) regulation.

More on the topic:

• Administrative matters would continue to be under the Registrar, Cooperative. However, cooperative banks would be regulated under the RBI’s banking guidelines. Their auditing would also be done as per its norms.
• Qualifications would be laid down for appointments, including that of Chief Executive Officers.
• Prior permission from the RBI would be required for the appointment of key positions. The regulator would deal with issues such as loan waivers.
• The RBI would also have powers to supersede the board of any cooperative bank in financial distress.
• These measures would be implemented in a phased manner.

Why These Changes?

• The proposed amendments, along with the government’s decision to increase the insurance cover on bank deposits from ₹1 lakh to ₹5 lakh, have been brought to strengthen the financial stability of cooperative banks and boost public confidence in the banking system.

Punjab & Maharashtra Cooperative (PMC) Bank crisis: ·   In the PMC Bank case, the RBI had to step in last year after massive irregularities in its loan accounts were detected. The regulator had to place a withdrawal limit for account holders, which led to a major public strife and protests by them. · The bank had allegedly loaned about ₹6,500 crore to the Housing Development & Infrastructure Limited, amounting to more than 73% of its overall exposure, which was not repaid. It is alleged that over 21,000 fake accounts were created to conceal the bad loans. · The Enforcement Directorate is conducting a money laundering probe into the allegations.

Source: Hindu

Reverse Osmosis (RO) Systems

Topic: Environment and Ecology

In News: Environment ministry issued a draft notification to prohibit use of reverse osmosis (RO) purifiers where total dissolved solids (TDS) in water are below 500 milligrams per liter.

More on the Topic:

• The draft is based on NGT’s to ban RO purifiers in areas, which get potable drinking water.
• It also said water from RO purification system for domestic use would be “used only for drinking purpose”.
• Once the rules are finalized, RO machine manufacturers will have to tweak their designs to meet the new parameters so that the system does not discharge water beyond the prescribed limit during the purification process.
• BIS will develop a system to monitor, assess and certify in consultation with the Central Pollution Control Board (CPCB) within six months of final notification.
• Enforcement will largely be the responsibility of CPCB and State Pollution Control Boards (SPCBs).
• Final notification on banning RO purifiers and parameters on design of such machines will be issued after examining the views of all stakeholders, including manufacturers.

Source: Hindu

Vivad Se Vishwas Scheme

Topic: Government Schemes

In News: Finance Minister Introduced Vivat Se Viswas Scheme in the parliament.

More on the Topic:

• The scheme aims to settle the pending cases on direct taxes. The scheme is very similar to the “Indirect Tax, Sabka Vishwas Scheme” introduced by the minister in her previous budget in 2019.
• The Sabka Vishwas scheme aimed to settle down the disputes related to service tax and excise duty payments.
• The Vivad Se Vishwas Scheme aims to resolve 483,000 direct tax disputes. The scheme provides waivers on interest if the disputed tax was paid before 31^st March 2020.
• The scheme also increases the dead line to June 30, 2020 for those tax payers who have not paid their taxes by March 31, 2020.
• However, such taxpayers will have to pay 10% more tax.

Source: Hindu