11 September, 2020
- Self-Quiz to be taken before DNS
- An agriculture-led revival as flawed claim - (Indian Economy)
- The great greying of China - (International Relation + Economy)
- Have a clear loan policy: SC to govt. - (Polity & Governance + Indian Economy)
- California wildfires growing bigger - (Environment & Ecology)
- House can select Dy. Speaker - (Polity & Governance)
- Question of the day (Indian Economy)
UPSC Current Affairs: An agriculture-led revival as flawed claim – Pg 6
UPSC Syllabus: Prelims: Indian Economy | Mains: GS Paper III
Sub Theme: Impact of CoVID-19 on Agriculture | Can Agriculture lead Economic Revival? |Suggestions to revive Rural Economy| UPSC
An agriculture-led revival as flawed claim
Context - Agriculture is the only sector registering positive growth in the Q1 (2020-21). It is said that, “Agriculture will lead India’s economic revival”. The author has contested this claim and highlighted the weakness presently prevailing in the agriculture sector. Author has also presented the case for support to rural economy for revival of Indian economy post covid-19.
Claim for “Agriculture will lead India’s economic revival”
- India’s food grain production in 2019-20 was 3.7% higher than in 2018-19. The procurement of rabi wheat in 2020-21 was 12.6% higher than in 2019-20. These indicate, it is argued, resilience in the agricultural sector.
- Food inflation in the Q1 of 2020-21, at 9.2%, was higher than in the previous year due to “sustained demand for food”. This shows a shift of terms of trade in favour of agriculture.
- The area under kharif sowing in 2020-21 was 14% higher than in 2019-20. Higher kharif sowing was accompanied by higher tractor and fertilizer sales, which bodes well for economic recovery.
- The government’s economic package for agriculture — as part of the ₹20-lakh crore Atmanirbhar Bharat package — will further position agriculture as the engine of revival.
Counter Arguments by the author
- During the lockdown, State governments in many northern States put in considerable efforts to ensure that procurement did not suffer. As a result, procurement of rabi wheat was higher in 2020-21. However, as per official data, only 13.5% of paddy farmers and 16.2% of wheat farmers in India sell their harvest to a procurement agency at an assured Minimum Support Price (MSP). The rest sell their output to private traders at prices lower than MSP.
One should, then, be looking not at procurement but market arrivals. The market arrivals of all the crops were lower in 2020 than in 2019. In wheat, the most important rabi crop, only 61.6% of the arrivals in 2019 was recorded in 2020. Thus, the most important problem faced by farmers during the lockdown was the loss of markets, stemming from the disruption in supply chains, closure of mandis and a fall in consumer food demand. Farmers suffered major loss of incomes, and higher procurement was hardly alleviating. In addition, there were major losses in the milk, meat and poultry sectors; industry associations estimate the total loss for the poultry industry at ₹25,000 crore.
- Inflation rates estimated using consumer price indices are not representative of farmer’s prices. Inflation was largely due to disruptions in supply chains and rise in trader margins. Wholesale market prices for major agricultural crops declined between March 15 and June 30, 2020. For example, average paddy prices were about ₹1,730 per quintal on March 23, but ₹1,691 per quintal on June 30. Average wheat prices were ₹2,045 per quintal on April 1, but ₹1,865 per quintal on June 30. A moderate uptick in prices was visible in a few vegetables, but not before June 2020.
The dark side of higher rural inflation in India is that small and marginal farmers are not net sellers, but net buyers of food. So, it was not just that farmer’s prices fell; most were also forced to pay more for food purchases. There is also strong evidence from small sample surveys that rural households reduced food purchases during the lockdown. Thus, the claims that higher rural inflation benefited farmers, and that it was due to higher food demand, are misplaced.
- There is no surprise in the growth of kharif sowings in 2020. Given that rabi incomes fell during the lockdown, many rural households may have returned to farming or intensified farming for food- and income-security. Lakhs of migrant workers returned to their villages from urban areas. They may have taken up agriculture in previously fallow or uncultivated lands. Data on monthly employment released by the Centre for Monitoring Indian Economy (CMIE) show that the number of persons employed as “farmers” in June and July 2019 were 11.2 crore and 11.4 crore, respectively. But in June and July 2020, these numbers rose to 13 crore and 12.6 crore, respectively.
These are indicators of distress, not prosperity. It is no cause for celebration also because the rural unemployment rates rose sharply in 2020, to 22.8% (April), 21.1% (May) and 9.5% (June). Even in August 2020, rural unemployment rates were higher than in February 2020 or August 2019.
- Rural expectations were high when the Atmanirbhar Bharat package was announced. However, the details were disappointing. Total fresh spending for agriculture in the package is a trickle: less than ₹5,000 crore. The rest are schemes already included in the past Budgets, announcements with no financial outgo or liquidity/loan measures routed through banks.
Agriculture contributes only about 15% to India’s Gross Value Added (GVA). Thus, even if agriculture grows by 4%, it is likely to contribute only 0.6 percentage points to GVA growth. This is not to deny a potential rise in demand from higher rabi procurement, higher kharif sowing and flow of cheap credit, which together appear to have resulted in higher purchase of tractors and fertilizers. But the counteracting tendencies in rural areas — i.e., lower crop prices, lower market arrivals and higher unemployment — would overwhelm these “green shoots”.
Suggestions to revive rural economy
- Instead of frontloading the instalments of PM-KISAN, the government should have doubled the payments to farmers from ₹6,000 a year to ₹12,000 a year.
- Instead of raising the minimum support price (MSP) for kharif paddy by ₹53 per quintal (which, actually, was the lowest rise in over a decade), or cotton by ₹260 per quintal, the government should have set all MSPs at 150% of the C2 cost (comprehensive cost) of production.
- Instead of a moratorium on loan repayments, the government should have waived the interest on loans taken by farmers in 2019 and 2020.
- Instead of vague loan-based schemes in animal husbandry, the government should have announced a package of direct assistance for the crisis-ridden poultry and meat sectors amounting to at least ₹20,000 crore.
- Instead of loan-based schemes to support private investment in dairy, the government should have arranged direct financial assistance to small milk producers, for whom milk prices have literally plummeted.
There has not been enough investment in agriculture or rural employment. Such an approach would not just fail; it would also be counterproductive. Rural incomes will remain depressed, and push the economy further into a vicious cycle of poor demand, low prices and low growth.
- Agriculture contributes only about 15% to India’s Gross Value Added (GVA). Thus, even if agriculture grows by 4%, it is likely to contribute only 0.6 percentage points to GVA growth.
- India’s food grain production in 2019-20 was 3.7% higher than in 2018-19.
- Increase in food inflation necessarily implies higher and sustained demand for food and hence imply higher income for farmers.
UPSC Current Affairs: The great greying of China – Page 6
UPSC Syllabus: Mains: GS Paper-I and GS-Paper-III
Sub Theme: Ageing Population of China |Impact on China |Factors contributing to Total Factor Productivity |UPSC China’s one child policy (OCP) was conceived by Deng Xiaoping in 1979 to seek popular support for the Chinese Communist Party (CCP) after Mao’s disastrous ‘Great Leap Forward’ and ‘Cultural Revolution’ (which led to the death of about 60-65 million people). The purpose was to produce significant gains in per capita income.
Aging population of China
Average birth rate in China has fallen to 1.6 births per woman (National Bureau of Statistics of China) in 2017, much less than the population replacement rate of 2.1.
Proportion of China’s population aged above 65 years would increase from 10% in 2010 to 32.6% in 2050. Its labour force (ages 20-64) will reduce from about a billion in 2017 to 787 million by 2050.
Despite the raising of the limit to two children in 2016, the number of new born has not improved and slipped to the pre-2016 level. The one child policy has changed China’s child-bearing attitudes for the worse as many young couples do not want to have two babies for economic and lifestyle reasons. If China can stabilise its fertility rate at 1.2, its population will fall to 1.07 billion in 2050 and 480 million by 2100
Impact on China
The aging population will have a multi-dimensional impact. China will need huge expenditures on health, social welfare and pensions; its savings rate will decline; a fall in the number of young people will lead to a decline in manufacturing, exports, and also mean lower revenues for government.
With its annual per capita income at $10,000, increasing population of older people and slowing economic growth rates, China will get old before reaching the levels of rich countries like the United States, Singapore, Japan and others.
Will the population decline create a richer society in China?
Many economist are of the opinion that smaller population reduces intellectual exchanges among diverse human groups, reducing chances of the emergence of great innovators
Developed countries have reduced the impact of declining population by raising the total factor productivity (TFP) growth (ratio of output versus cost of inputs per hourly basis).
Three factors are considered critical for increasing the TFP:
- Market reforms
- Improvement of governance and
- Scaling of human skills in manufacturing and services.
Faster rates of TFP growth are associated with rapid and liberal economic reforms. President Xi has talked of market reforms and increasing consumption, there has been little progress on the ground on issues such as opening of services such as banking, insurance, education or the establishment of an independent legal system for the enforcement of contracts or a creative education system.
China has never ranked very high in governance indicators of international organisations such as the World Bank; in 2016, it was in 68th percentile for ‘government effectiveness’ and 77th in the annual Corruption Perceptions Index of Transparency International (2017).
China has already availed its rapid TFP growth by shifting its large population of migrant workers from agriculture to manufacturing and reforms in state-owned enterprises, housing and other sectors.
In improvement of China’s human resources, there are big variations in high school pass rates of urban (90%) and rural children (24%). Considering that about 40% of China’s population still lives in rural areas, this huge gap will be an inhibiting factor in raising TFP. In the last 70 years, only 15 countries have managed to climb from middle to high income status, e.g. Singapore, South Korea, Taiwan, others and all of them had skilled their workforces with three quarters or more of their working population having completed high school.
Trouble for China in achieving high TFP
Post-2008, China’s economic growth has been driven progressively by higher government investment which has created unproductive assets in many cases, i.e., overcapacity in metals, cement and other industries, empty apartment complexes, or rarely used infrastructure such as metro networks, oil pipelines and ports. Also, unlike the past, China will face a hostile external environment in the coming years as a reaction to Mr. Xi’s unfair and aggressive policies, which will further constrain cooperation in new technologies.
Under Mr. Xi, China is not moving in the direction of reforms incorporated by developed countries, but evolving its own agenda mainly focused on administrative and bureaucratic improvements concomitantly enhancing party’s control over the economy. Even many Chinese economists are doubtful if Mr. Xi’s plans for augmenting TFP and high economic growth through induction of emerging technologies such as 5G, artificial intelligence or rapid urbanisation will succeed in the absence of much-needed reforms in economy, governance and the education system.
- ‘Great Leap Forward’ and ‘Cultural Revolution’ is heard in news in context of which country?
- Total factor productivity (TFP) growth (ratio of output versus cost of inputs per hourly basis).
- Total factor productivity is a measure of economic efficiency and accounts for part of the differences in cross-country per-capita income.
- Improvement of governance is considered necessary for ‘Total Factor Productivity’.
UPSC Current Affairs: Have a clear loan policy: SC to govt - Page 10
UPSC Syllabus: Mains: GS III: Indian Economy
Sub theme: Moratorium on loans | Recent Controversy over waiver on Interest| Extension of Moratorium | UPSC
This article highlights that the Supreme Court has given the Centre two weeks’ time to decide and inform the court as to what concrete steps would it take to ease the distress caused to the borrowers on account of COVID-19. It has asked the Centre to consult the RBI and come out with its decision regarding various reliefs such as restructuring of loans, waiver of Interest etc.
- In response to the distress caused due to COVID-19, the RBI had come out with loan moratorium scheme for a period of 6 months from March 2020 to August 2020. Under this scheme, borrowers could voluntarily opt for non-repayment of loans for a period of 6 months.
- The moratorium is not loan waiver, but rather deferment of the Principal and Interest for a period of 6 months, that means the tenure of the loan would be extended by 6 months. Further, interest would continue to be accrued on the outstanding portion of the loan during the moratorium period as well.
- When the loan moratorium period ended on August 31, 2020, the RBI came out with detailed guidelines for enabling the Banks to undertake loan restructuring and make it easier for the borrowers to repay back the loans
There are presently two dominant issues before the Supreme Court:
Extension of Moratorium
Some of the petitioners have argued that in spite of lifting of the lockdown, they are still not in position to repay back the loans. Hence, they have been demanding for an extension on loan moratorium beyond August 31, 2020. In response, the Supreme Court has declared that accounts which have not been declared as non-performing assets (NPAs) till August 31 should not be declared so till further orders. It has also asked Government to consult RBI and come out with its stand on extension on loan moratorium in the next 2 weeks.
Waiver on Interest
Supreme Court's Stand: As highlighted before, the borrowers who have availed moratorium will have to pay the Interest accrued during the 6 months. Further since the tenure of the loan has been extended by 6 months, the borrowers may end up paying Interest on Interest as well. In this regard, Supreme Court believes that payment of Interest would be a huge burden on the borrowers and hence, the Banks should provide for waiver on the interest.
RBI believes that waiver on the interest is financially imprudent as well as discriminatory on account of number of reasons:
- Waiver on Interest would lead to loss of around 4 lakh crores to the Banks, which roughly translates into 2% of India's GDP.
- The Banks are required to pay the Interest to the depositors during the moratorium period. Hence, waiver of interest for the borrowers would put Banks under unnecessary strain.
- Waiver of Interest for the borrowers who have availed moratorium would be considered as discriminatory against those borrowers who did not avail moratorium and continued to pay the Interest during the moratorium period.
Hence, in order to sort out this issue, the Centre has recently appointed an expert committee under the leadership of former CAG Rajiv Meharishi. The Committee is required to will measure the economic impact of waiving of interest and interest on interest on the Covid-19 related loan moratorium and give appropriate recommendations to the Government.
UPSC Current Affairs: California wildfires growing bigger - Pg 14
UPSC Syllabus: Prelims: Environment and Biodiversity
Sub theme: California wildfires growing bigger | Factors that have led to increase in Wildfires |UPSC
California wildfires growing bigger
Last weekend, a fire burning in California’s Sierra National Forest exploded in size, trapping hundreds of Labor Day holiday campers who could only be rescued by helicopters that made a series of white-knuckle flights into the smoke. Fire officials said they’d never seen a fire move so fast in forestland — 24 km in a day.
They are only the latest examples of what a half-dozen fire experts agreed is more extreme fire behaviour driven by drought and warming temperatures they attribute to climate change. Among the most concerning developments is that fast-moving wildfires leave less time for warnings or evacuations.
In this regard let us understand the causes behind such intense and numerous Wildfires in California.
But before that let us understand the location of Cali.
So if you plot the major fires in last month on the map, it is something like this:
So it brings us back to the questions: what causes so many fires across California.
Fires ignite for any number of reasons. While some fires do occur naturally—like those sparked by this week's lightning storm—most are inadvertently set by humans. For example:
But there is one common observation and that is that these fires have gotten more frequent, more intense, and lasted longer.
So why is California burning so badly?
- There is no question that climate change has played a significant role in shaping the number and intensity of these fires.
- In recent years, California’s climate has gotten hotter.
- Drier conditions mean less snowpack in the Sierras, less runoff in the spring, and less moisture for vegetation.
- These conditions have made it especially easy for massive wildland fires to ignite and quickly burn through parched vegetation.
That brings us to winds. This past weekend, reports of a troubling weather phenomenon flooded in from Lassen County: a number of fire tornadoes had sprung up from the flames of the Loyalton Fire.
These incredibly high winds are, in large part, the reason why California’s fires swell to such massive sizes. High winds are especially tricky because they can prevent air support, in the form of retardant-dumping planes and water-dropping helicopters, from flying. Gusts can pick up embers and carry them to other locations, sparking new blazes for firefighters to contend with.
- In recent years, poorly maintained infrastructure for electricity supply have sparked a number of large fires
- At the same time several have been ignited by discarded cigarette butts, and a handful of blazes have spiraled out of control at homeless encampments or been set off by fireworks.
But we also know that the ecosystem of California is well adapted against Fire, then?
It is true that many of California’s ecosystems are well-adapted to fire. Some native plant and tree species even require it to sprout new growth.
But these delicate systems often operate on specific cycles. For example, a chaparral stand may have a burn cycle of anywhere from 30 to 100 years, where a ponderosa pine stand may need only a few years between each fire. If intense fires occur too frequently, native plant species can become replaced by, say, invasive grasses, which burn quickly and don’t hold soil well.
Why are local administrations struggling to douse the fire?
Fighting these fires in California's varied terrain is undoubtedly challenging, as firefighters have deep canyons and steep hills to contend with.
The spread of COVID-19 has complicated the response to many of these fires this year; resources are tight, and agencies are stretched thin without the help of inmate firefighters, who typically assist in the effort.
With high winds and crushing heat expected this week, the outlook is grim.
UPSC Current Affairs: House can select Dy. Speaker – Pg 09
UPSC Syllabus: Prelims: Polity & Governance
Sub theme: Deputy Speaker and Deputy Chairman of Lok Sabha and Rajya Sabha| Constitutional Provisions | Roles and Responsibilities| UPSC
Context: Lok Sabha Speaker Om Birla said that if there is a provision for the post of Deputy Speaker in the Lok Sabha, then there must be a Deputy Speaker, but the Deputy Speaker has to be chosen by the House and not appointed by Lok Sabha Speaker. Lok Sabha Speaker’s comments come against the backdrop of renewed efforts by Opposition parties in urging the government to fill the Deputy Speaker’s position, which has been vacant for the past 15 months. The Rajya Sabha, meanwhile, has already commenced the procedure to elect the Deputy Chairman for the upper council. Let us go through the constitutional provisions on Deputy Speaker and Deputy Chairman of Lok Sabha and Rajya Sabha respectively.
SPEAKER & DEPUTY SPEAKER
Article 93 - The Speaker and Deputy Speaker of the House of the People
- The House of the People shall, as soon as may be, choose two members of the House to be respectively Speaker and Deputy Speaker thereof
- Office of Speaker or Deputy Speaker becomes vacant, the House shall choose another member to be Speaker or Deputy Speaker.
Article 94 - Vacation Resignation or Removal - offices of Speaker and Deputy Speaker
A member holding office as Speaker or Deputy Speaker of the House of the People
- shall vacate his office if he ceases to be a member of the House of the People;
- May resign by writing under his hand addressed - Speaker to Deputy Speaker & Deputy Speaker to Speaker
- may be removed from his office by a resolution of the House of the People passed by a majority of all the then members of the House. (Effective Majority which is equal to more than 50% of the effective strength of the House. It does not include vacancies.)
However, for removal purpose, at least fourteen days’ notice must be given of the intention to move the resolution for removal of either Speaker or Deputy Speaker of Lok Sabha.
Article 95 - Powers of the Deputy Speaker or other person to perform the duties of the office of, or to act as, Speaker
- In case of VACANCY - While the office of Speaker is vacant, the duties of the office shall be performed by the Deputy Speaker or, if the office of Deputy Speaker is also vacant, by such member of the House of the People as the President may appoint for the purpose.
- During the ABSENCE of the Speaker from any sitting of the House of the People - The Deputy Speaker or if he is also absent, such person as may be determined by the rules of procedure of the House, or, if no such person is present, such other person as may be determined by the House, shall act as Speaker.
Article 96 - The Speaker or the Deputy Speaker not to preside while a resolution for his removal from office is under consideration
- At any sitting of the House of the People, while any resolution for the removal of the Speaker from his office is under consideration, the Speaker, though may be present shall not preside.
- At any sitting of the House of the People, while any resolution for the removal of the Deputy Speaker from his office is under consideration, the Deputy Speaker, though may be present shall not preside in case of absence of Speaker of Lok Sabha.
- Proceedings for removal of Speaker - if the Deputy Speaker is absent, then the person who will preside will be either determined by the rules of the House, or, if no such person is present, such other person as may be determined by the House, shall act as Speaker.
- Proceedings for removal of Deputy Speaker - if the Speaker is absent, then the person who will preside will be either determined by the rules of the House, or, if no such person is present, such other person as may be determined by the House, shall act as Speaker.
- Article 96 (2) - Voting by Speaker during his Removal - The Speaker shall have the right to speak in, and otherwise to take part in the proceedings of, the House of the People while any resolution for his removal from office is under consideration. The Speaker shall also be entitled to vote only in the first instance on such resolution (as member of LS) or on any other matter during such proceedings but not in the case of an equality of votes.
- As under Article 100, Speaker does not vote at first instance for passing any Bill but can exercise casting vote at the second instance in case of equality of Votes.
CHIRMAN & DEPUTY CHAIRMAN
Article 89 – The Chairman and Deputy Chairman of the Council of States
- The Vice-President of India shall be ex officio Chairman of the Council of States (Rajya Sabha).
- The Council of States shall choose a member of the Council to be Deputy Chairman thereof
- If the office of Deputy Chairman becomes vacant, the Council of States shall choose another member to be Deputy Chairman thereof.
Article 90 - A member holding office as Deputy Chairman of the Council of States –
- shall vacate his office if he ceases to be a member of the Council;
- may at any time, resign his office by writing under his hand addressed to the Chairman,
- may be removed from his office by a resolution of the Council passed by a majority of all the then members of the Council.
However, for removal purpose, at least fourteen days’ notice must be given of the intention to move the resolution.
Article 91 - Power of the Deputy Chairman or other person to perform the duties of the office of, or to act as, Chairman
- Case of VACANCY - While the office of Chairman is VACANT, or during any period when the Vice-President is acting as, or discharging the functions of, President, the duties of the office shall be performed by the Deputy Chairman, or
- If the office of Deputy Chairman is also vacant, duties shall be performed by such member of the Council of States as the President may appoint for the purpose.
- Case of ABSENCE - During the absence of the Chairman from any sitting of the Council of States the Deputy Chairman shall act as Chairman
- If the Deputy Chairman is also absent,
- then such person as may be determined by the rules of procedure of the Council shall act the Chairman, or
- if no such person is present, such other person as may be determined by the Council shall act as the Chairman.
Article 92 - The Chairman or the Deputy Chairman not to preside while a resolution for his removal from office is under consideration
- If any resolution for the removal of the Vice-President from his office is under consideration – then shall not, though he is present, preside over the resolution.
- If any resolution for the removal of the Deputy Chairman from his office is under consideration -- then shall not, though he is present, preside over the resolution.
- In case a resolution is for the removal of Chairman, and the Deputy Chairman is absent, then -- such person may preside as Chairman as may be determined by the rules of procedure of the Council or if no such person is present, such other person as may be determined by the Council shall act as the Chairman.
- In case a resolution is for the removal of Deputy Chairman and the Chairman is absent, then -- such person may preside as Chairman as may be determined by the rules of procedure of the Council or if no such person is present, such other person as may be determined by the Council shall act as the Chairman.
Article 92 (2) - Voting by Chairman during his Removal
- The Chairman shall have the right to speak in, and otherwise to take part in the proceedings of, the Council of States while any resolution for the removal of the Vice-President from his office is under consideration in the Council,
- Notwithstanding anything in Article 100, the Chairman shall not be entitled to vote at all on such resolution or on any other matter during such proceedings.