GTB Nagar Branch has shifted to Delhi University North Campus Plot No. 115, Block-A, Kamla Nagar, Near Shakti Nagar Chowk, Delhi-110007

      Question and Answer

       Q. 219. Hydrocarbon Vision 2030 for North-East
      • The objectives of the plan are to leverage the region’s hydrocarbon potential, enhance access to clean fuels, improve availability of petroleum products, facilitate economic development and to link common people to the economic activities in this sector.
      • The states covered include Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.
      • The Vision rests on five pillars: People, Policy, Partnership, Projects and Production.
      • For people, it foresees clean fuel access to households alongside fostering skill development and involvement of the local community.
      • As for partnership, the stress is on greater involvement of state governments in planning and implementation, and on boosting trade with neighbouring nations.
      • In projects, the focus is on pipeline connectivity for carrying liquefied petroleum gas (LPG), natural gas, and petroleum products, oil and lubricants (POL); building refineries and import links; and development of compressed natural gas (CNG) highways and city gas distribution network.
      • The production side emphases include production enhancement contracts, technology deployment and fast-track clearance, and development of service provider hubs.
      • Beyond production, the focus areas include exploring hydrocarbon linkages and trade opportunities with Bangladesh, Myanmar, Nepal & Bhutan; implementation of ‘Make In India’ in the region; development of health & medical facilities; industrial policy & infrastructure related action points; focus on skill development; and employment generation requirement in the region.
      • The Vision aims at doubling Oil & Gas production by 2030, making clean fuels accessible, fast tracking projects, generating employment opportunities and promoting cooperation with neighbouring countries. 
      India plans to build a pipeline to carry high-speed diesel (HSD) to Bangladesh. The cross-border pipeline will run from Siliguri in West Bengal to Parbatipur in northern Bangladesh.
      BS Emission Norms
      Eagerness to move from BS-IV to BS-VI in three years -a switch that no country in the world has accomplished. Countries in Europe and the US have taken up to 10 years for the same change.
      • Automakers point out whenever there is a transitioning of advanced emission norms anywhere in the world the last date of retiring ­ 31 March, 2017 in this case -is on manufacturing; vehicle makers are allowed to sell the stock in the following year. The SC has not given the industry this leeway, which by one estimate will call for liquidation of some 7 lakh units of two wheelers, three wheelers, trucks and passenger vehicles.
      • If April 2017 may seem like a bad dream for Indian auto, 2020 may be the year of the biggest nightmare ­ complying with BS-VI norms, the toughest emission standards in three years. The transition requires auto firms to make significant changes in engine technology, combustion and upgrade to more electronic controls. This could mean investments of more than Rs 80,000 crore and a substantial increase in the price of cars. But environmentalists feel it's well worth it, as the new emission norms are fuel-neutral.
      • The BS-IV transition, has brought forth a critical issue which India has been ignoring: the ability to foresee future growth in vehicles and have a coordinated and long-term policy direction to deal with the negative externalities associated with vehicular growth, be it pollution or road accidents.
      • To reduce vehicular pollution, CSIR-National Environmental Engineering Research Institute (NEERI), says all vehicles need to be maintained and, those fitted with catalytic converters, checked regularly.
       Q. 218. Japan Officially Recognises Bitcoin as Currency Starting April 2017
      Ans. Bitcoin has finally gained the recognition of a mainstream currency along the lines of other fiat currencies. The privilege follows the implementation of a new law in Japan which categorizes Bitcoin as a legal payment option within the country. The much-awaited law went into effect on April 1, 2017 (beginning of a new fiscal year in many countries).
      • With the new law’s implementation, Bitcoin exchanges will also come under additional regulatory scrutiny.
      • The recognition of cryptocurrency as a legal tender also means the applicability of regulations governing banks and financial institutions to cryptocurrency exchange platforms.
      • They will be required to comply with strict anti-money laundering (AML) and Know Your Customer (KYC) requirements, along with annual audits.
      • Other requirements include meeting the stated capital and cyber security requirements to ensure consumer protection.
      • The recognition of Bitcoin and other cryptocurrencies as legal payment instruments is good news for the global cryptocurrency ecosystem. Adoption of cryptocurrency is expected to increase among people, which will, in turn, drive demand and price.
      However, reports indicate that the cryptocurrency platforms are still trying to figure out ways to achieve compliance with the new regulations. Recognizing the exchanges’ needs, the Accounting Standards Board of Japan has announced that it has started working on creating an accounting framework for both user and businesses dealing with cryptocurrencies.
      Since its inception in 2008, Bitcoin has grown into a technology, a currency, an investment vehicle, and a community of users.

      What is Bitcoin?
      Since anything digital can be copied over and over again, the hard part about implementing a digital payment system is making sure that nobody spends the same money more than once. Traditionally, this is done by having a trusted central authority (like PayPal) that verifies all of the transactions. The core innovation that makes Bitcoin special is that it uses consensus in a massive peer-to-peer network to verify transactions. This results in a system where payments are non-reversible, accounts cannot be frozen, and transaction fees are much lower.

      Where do bitcoins come from?
      Some users put their computers to work verifying transactions in the peer-to-peer network mentioned above. These users are rewarded with new bitcoins proportional to the amount of computing power they donate to the network.

      Who controls Bitcoin?
      There is no central person or central authority in charge of Bitcoin. Various programmers donate their time developing the open source Bitcoin software and can make changes subject to the approval of lead developer Gavin Andresen. Cryptocurrencies and how it might impact those making cryptocurrency transactions.

      What is a Blockchain?
      Bitcoins are used for electronic purchases and transfers. One can use bitcoins to pay friends, merchants, etc. Every single purchase is immediately logged digitally (on computers) on a transaction log that tracks the time of purchase and who owns how many bitcoins. It transaction log as an audit trail: it contains every single piece of information of every bitcoin transaction. This digital transaction log is called 'Blockchain'.
       Q. 217. What is South Asia Subregional Economic Cooperation (SASEC)?
      Ans. About
      The SASEC program was formed in 2001 in response to the request of the four countries of South Asia – Bangladesh, Bhutan, India and Nepal – from ADB to assist in facilitating economic cooperation among them. These four countries comprise the South Asia Growth Quadrangle (SAGQ), formed in 1996, as a vehicle for accelerating sustainable economic development through regional cooperation.

      As a project-based partnership, the SASEC program has been helping realize regional prosperity by enhancing cross-border connectivity, facilitating faster and more efficient trade and promoting cross-border power trade. Maldives and Sri Lanka joined SASEC in 2014, further expanding opportunities for enhancing economic linkages in the sub-region. 

      Priority sectors
      SASEC countries agreed on priority sectors for investment and coordinated action
      • Transport — SASEC aims to put in place the critical multi-modal transport networks that will enhance intraregional trade and investment in the subregion and, in turn, boost economic growth. SASEC works to strengthen road, rail, and air links, as well as developing port infrastructure to match the needs of the region’s growing economies, and to support the SAARC transport corridor network.
      • Trade Facilitation — SASEC is helping speed up the time and reduce the costs of trading across borders throughout the subregion. Regional SASEC trade facilitation initiatives are creating modern customs administrations that are compliant with the terms and provisions of the Revised Kyoto Convention, streamlined and transparent cross-border trade regulations and procedures, and improved information and services for the private sector.
      • Energy — SASEC is working to improve energy access and security in the region by developing essential infrastructure, and promoting intraregional power trade to reduce costs and import dependence. SASEC energy initiatives focus on renewable energy.
      • Economic Corridor Development — SASEC is promoting synergies and linkages between economic corridors across SASEC countries to optimize development gains, including industrial growth and competitiveness, the creation of high-quality jobs, increased productivity, and the strengthening existing value chains.
      New member
      • South Asia Subregional Economic Cooperation (SASEC) program of Asian Development Bank (ADB) is expanding towards the East with Myanmar formally becoming the 7th member of SASEC in 2017.
      • Myanmar is key to realizing greater connectivity and stronger trade and economic relations between the SASEC sub-region and the countries of East and Southeast Asia and that Myanmar’s membership in SASEC can offer a host of opportunities for realizing synergies from economic cooperation in the sub-region.
      • SASEC member countries recognize that most of SASEC’s multimodal connectivity initiatives include Myanmar.
      1. Road corridors in Myanmar provide the key links between South Asia and Southeast Asia.
      2. Ports in Myanmar will provide additional gateways to the landlocked North Eastern region of India.
      Energy trade
      • Development of multi-modal connectivity between North Eastern region of India, Bangladesh and Myanmar has the potential of unleashing tremendous economic energy in the sub-region.
      • SASEC’s energy connectivity and energy trade prospects will be enhanced with the inclusion of Myanmar, involving its substantial resources of hydropower and natural gas.
      Moreover, developmental impacts of economic corridor in the SASEC sub-region will be maximized by exploring potential synergies with corridors in Myanmar that are linked to those in other Southeast Asian countries.

      ADB serves as the SASEC Secretariat, working with member governments to help implement SASEC projects and initiatives and to provide technical support. The SASEC Secretariat also coordinates capacity-building activities and works to identify necessary technical organizations and development partners to strengthen training and knowledge-building programs for member countries. It provides overall coordination, administrative and logistical assistance to the member countries.
       Q. 216. What are the determinants of economic growth? What are the areas of concern for India in this regard? What can be done given the current situation of growth in India?
      Ans. It is time for policymakers to turn their attention to the major task of accelerating economic growth. As of now the prospects are not encouraging.
      • The Central Statistics Office’s second advanced estimates indicate that the growth rate of GDP for 2016-17 will be 7.1% as against 7.9% in 2015-16.
      • The growth rate of gross value added at basic prices in 2016-17 will be 6.7% as against 7.8% in 2015-16.
      • The growth rates projected for 2016-17 do not capture the impact of demonetisation, which when taken into account may bring down the projected growth rate by around 0.5%.
      The decline in the growth rate is not a recent phenomenon. It started in 2011-12. The persistence of relatively low growth over a five-year period calls for a critical examination. Even though the new numbers on national income give us some comfort, they do not tell the whole story.

      Determinants of growth
      The growth rate is determined by two factors —
      • Investment rate
      • Efficiency in the use of capital.
      Incremental Capital-Output Ratio (ICOR)
      As the Harrod-Domar equation puts it, the growth rate is equal to the investment rate divided by the incremental capital-output ratio. The incremental capital-output ratio (ICOR) is the amount of capital required to produce one unit of output. The higher the ICOR, the less efficient we are in the use of capital. There are many caveats to this bald proposition. As we look at the Indian performance in the last five years, two facts stand out. One is a decline in the investment rate and the second is a rise in ICOR; both of which can only lead to a lower growth rate.

      As growth was coming down sharply initially, the investment rate was falling only slowly, implying a rising ICOR. ICOR is a catch-all expression which is determined by a variety of factors including technology, skill of manpower, managerial competence and also macroeconomic policies.
      Thus factors that can all lead to a rise in ICOR are:
      • Delays in the completion of projects
      • Lack of complementary investments in related sectors
      • The non-availability of critical inputs
      Stalled Projects
      The Economic Survey of 2014-15 reported that there were in all 746 stalled projects, with 161 in the public sector and 585 in the private sector of a total value of ₹8.8 lakh crore. As of 2015-16, there were still 404 stalled projects, 162 in the public sector and 242 in the private sector with a total value of ₹5.5 lakh crore. In the short run, the biggest gain in terms of growth will be by getting “stalled projects” moving. Of course some of them may be unviable because of changed conditions. A periodic reporting by the government on the progress of stalled projects will be of great help.

      Declining investment rate
      • India’s investment rate reached a peak in 2007-08 at 38.0% of GDP. With an ICOR of 4, it was not surprising that a high growth rate of close to 9.4% was achieved. One sees a steady decline in the investment rate since then.
      • The decline in the rate was small initially but has been more pronounced in the last two years. According to the latest estimates, the gross fixed capital formation rate fell to as low as 26.9% in 2016-17. With this investment rate, it is simply impossible to achieve a growth rate in the range of 8 to 9%.
      Policy paralysis
      The major issue confronting us is: why did the investment rate fall? Why are not new investments forthcoming? In 2011 and 2012, in discussions on the Indian economy, the one phrase that used to be bandied about was “policy paralysis”, pointing to the inability of the government to take policy decisions because of “coalition compulsions”. It is true that around this period, the government was preoccupied with answering many issues connected with graft. But that does not explain the steady fall in the investment rate except for a sense of uncertainty created in the minds of investors.

      Global Scenario
      The external environment was also not encouraging. The growth rate of the advanced economies remained low and the recovery from the crisis of 2008 was tepid which had an adverse impact on exports. However, India benefited by large capital inflows except in 2013. For almost three years beginning 2010, India had to cope with a high level of inflation which also had an adverse impact on investment sentiment. Once the growth rate starts to decline, it sets in motion a vicious cycle of decline in investment and lower growth. The acceleration principle begins to operate. We need to break this chain in order to move on to a higher growth path.

      • Public investment: the standard prescription, whenever private investment is weak, is to raise public investment which can take a longer term view. This standard suggestion is very much appropriate in the present context as well. In the best of times, public investment has been 8% of GDP. The Central government’s capital expenditures even after some increase in the last two years, is only 1.8% of GDP. About 3 to 4% of GDP comes from public sector undertakings and the balance from State governments. What is needed now is for public sector undertakings to come out with an explicit statement indicating the extent of investment they intend to make during the current fiscal. And this intention must be monitored every quarter. This will inspire confidence among prospective private investors.
      • Private investment: however, it is also necessary to enhance private investment, and that too private corporate investment. During the high growth phase, corporate investment reached the level of 14% of GDP. Since then it has fallen. In fact, a recent study shows that the total cost of projects initiated by the corporate sector has come down from ₹5,560 billion in 2009-10 to ₹954 billion in 2015-16. This continuing trend must be reversed.
      Three things need attention.
      • First, reforms to simplify procedures, speed up the delivery system and enlarge competition must be pursued vigorously. Some significant steps have been taken in this regard in recent years such as moving forward on the GST, Bankruptcy Act, and enlarging the scope of foreign direct investment.
      • Second, all viable “stalled” projects must be brought to completion.
      • Third, financial bottlenecks need to be cleared. The banking system is under stress. The non-performing loans of the system have risen and are rising. This has squeezed the profitability of banks with some showing loss. More distressing is the minimal flow of new credit. The problem is often referred to as the twin balance sheet problem. If corporate balance sheets are weak, automatically the banks’ balance sheets also become weak. Really speaking, it is two sides of the same coin. The solution to clean up the balance sheet of banks lies in taking some “haircuts”. At least some part of the accumulation of bad debts has been due to the slowdown of the economy. The old saying is “bad loans are sown in good times”. Even though a haircut cannot be avoided, wilful defaulters must not go unpunished. Asset restructuring companies are part of the solution and we have some experience of them.
      Long-term lending
      This is also the appropriate time to revive an idea which had withered away during the reform process and that is to have institutions focussed on long-term lending such as IDBI and ICICI as they were before 1998. The details can be worked out. But the idea needs a rethink.

      Investment, as they say, is an act of faith in the future. If there has to be investment resurgence, it is necessary to create the climate which promotes this faith. We have already outlined the actions that can be taken in the purely economic arena. But “animal spirits” are also influenced by what happens in the polity and society. Avoidance of divisive issues is paramount in this context. Undiluted attention to development is the need of the hour.
       Q. 215. What strides India can make in view of Rights of Persons with Disabilities Act? What can be the advantage of such a cross cutting Act? What synergy needs to be built in order to make the Act more successful?
      Around 8-10% of India’s population lives with disabilities, with an equal number constituting the aged. Information and Communication Technologies (ICT) have the potential to significantly impact the lives of these groups, facilitating access of services available to them and allowing them to handle a wide range of activities independently, enhancing their social, cultural, political and economic participation. Making ICT accessible no longer remains an option but has become a necessity.

      Poor accessibility due to lack of focussed information and political will has led to social exclusion of people with disabilities, exacerbating the negative impact of the existing digital divide. The new call for action of disability rights activists now is “Cause No Harm”, thus ensuring future generations are not excluded from mainstream activities due to a hostile infrastructure.

      Current Mega Initiatives
      This assumes a greater thrust given the unprecedented developmental activity in the country under the various missions launched by the present government, such as:
      • Smart Cities Mission
      • Digital India
      Accessibility for disabled people is a cross-cutting theme across all of these and care must be taken to ensure disability-inclusive development.

      Accessibility as a link
      Incorporation of accessibility principles across all new developments will also complement the Accessible India Campaign, the flagship campaign launched by the Prime Minister on World Disability Day which aims at achieving universal accessibility for all citizens and creating an enabling and barrier-free environment.
      India was one of the first countries to ratify the United Nations Convention on the Rights of Persons with Disabilities.

      Rights of Persons with Disabilities Act, 2016
      • The recently passed Rights of Persons with Disabilities Act, 2016 mandates adherence to standards of accessibility for physical environment, transportation, information and communications, including appropriate technologies and systems, and other facilities and services provided to the public in urban and rural areas.
      • These include government and private developments.
      • The Act also mandates incorporation of Universal Design principles while designing new infrastructure, electronic and digital media, consumer goods and services.
      • Most importantly, the Act sets timelines to ensure implementation of the above and punitive action in the event of non-compliance.
      Accessibility therefore forms the common thread weaving together the Accessible India Campaign, the Rights of Persons with Disabilities Act, the Smart Cities Mission and the Digital India campaign to achieve the combined goal of creating an inclusive society that will allow for a better quality of life for all citizens, including persons with disabilities.
      Beyond the social implications, accessibility makes for business and economic sense too. If principles of Universal Design are incorporated at the design stage, cost implications are negligible. Retrofitting, on the other hand, has huge cost implications.

      Economic and Business Implication
      • Exclusion of persons with disabilities from education, employment and participation on account of a hostile infrastructure and inaccessible technology has huge economic implications.
      • UN agencies put this cost at around 7% of national GDP.
      • On the other hand, accessible services and business premises can broaden the customer base, increasing turnover and positively impacting the financial health and social brand of the company.
      • Recent research pegged the market size of different product categories needed by persons with disabilities in India at a whopping ₹4,500 crore.
      Disability is not an isolated issue. It is cross-cutting and can impact everyone irrespective of caste, gender, age and nationality. Thus ensuring a disability-sensitive development agenda across all ministries, sectors and causes becomes critical if growth has to be truly inclusive. ‘Nothing about us without us’ assumes even greater significance in the current context.

      The importance of synergy
      • As India catapults towards a cashless and digital economy and as human interface between service providers and end users gives way to digital, it becomes imperative to ensure accessibility for inclusion.
      • The need is for representation of persons with disabilities in all ministries and key missions, commissions and committees to advise and ensure inclusion in all policies, programmes and developments.
      • The government’s procurement policy too must mandate accessibility as a key criterion. Adherence to the latest Web Content Accessibility Guidelines should be made mandatory while developing websites and mobile applications.
      • Also important is the synergy between various arms of the government. The Smart Cities Mission focusses on comprehensive development leading to the convergence of other ongoing government programmes such as Make in India, Digital India, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Pradhan Mantri Awas Yojana, National Heritage City Development and Augmentation Yojana (HRIDAY), etc. but the Accessible India Campaign does not even find a mention! This is so when as many as 39 cities out of the 50 cities of the Accessible India Campaign are also among the shortlisted Smart Cities.
      Much after Independence, there has been minimal change in the fortunes of India’s disabled population. It becomes our collective responsibility to ensure inclusive development, one that engages all stakeholders through a pragmatic and judicious combination of interventions while effectively leveraging technology to ensure truly inclusive and sustainable development.
       Q. 214. Why bringing Tier 2 and 3 cities into the aviation map is a project long overdue?
      Ans. A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities.
      • Shimla, Bathinda and Jaisalmer have airports. But they are not in use.
      • The airport in Kullu gets only two flights a day.
      But things are poised to change with the government’s UDAN (Ude Desh Ke Aaam Nagrik) scheme.
      • Five airlines have won bids to operate 128 routes, that will connect 70 airports including 31 unserved ones like Shimla, Bathinda and Jaisalmer, and 12 underserved airports like Kullu.
      • According to the Civil Aviation Ministry, the first flight under UDAN is expected to start later this month.
      • Bringing Tier 2 and Tier 3 into the country’s aviation network is a significant development in a country where 80 per cent of air travel is between the metros — in fact, the Bombay-Delhi sector accounts for more than 50 per cent of domestic flyers.
      • The scheme will foster regional connectivity, make businesses and trade more efficient, enable medical services and promote tourism.
      Poor Regional connectivity
      A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities. The government has tried to address this concern by an adroit combination of subsidies and fare caps.

      • All the airlines that participated in reverse bidding for the subsidy accepted the fare caps set by the government. The money for the subsidy will be raised through a levy on flights operating on major routes like Delhi and Mumbai.
      • The government expects an annual corpus of Rs 205 crore from this levy. Funding this corpus could mean a levy of around Rs 50 for a passenger on flights on major routes. The subsidy will be in place for three years for an airline that has won the bid on a UDAN route.
      • There will be other benefits, including no airport charges — a significant incentive given that airline operators often complain that airport expenses constitute 25 per cent to 30 per cent of their operating costs.
      • The most heartening aspect is that these include six proposals for 11 routes that don’t seek any subsidy under the scheme, proving there is an untapped economic potential.
      • The benefits for tourist hotspots such as Agra, Shimla, Diu, Pathankot, Mysuru and Jaisalmer — that would now be just a short flight away, replacing cumbersome road or rail journeys — are obvious.
      • But the significant multiplier effects of aviation activity, including new investments and employment creation for the local economies of other destinations could be equally profound. Provided this model is sustainable and more regional flights come up under the scheme, the availability of slots at larger airports that would emerge as hubs could become an issue — particularly at capacity-constrained airports such as Mumbai. The second airport at Navi Mumbai may help ease congestion, but that is still years away. In cities where new airports have been developed, such as Bengaluru, abandoned old facilities could be revived as dedicated terminals for low-cost and regional flights.
      • Separately, new no-frills airports must be encouraged where traffic is expected to hit saturation point in coming years.
      • Recently, four new foreign investors and a few domestic players have expressed interest in managing operations at state-run airports such as Jaipur and Ahmedabad. This marks a revival in investor interest after a long lull.
      • The new policy is, however, not without challenges. For example, there are fears that a flight from an UDAN location will be low priority for air traffic controllers in big cities.
      • Airports in many Tier 2 and Tier 3 cities do not have big runways, so they can’t take regular aircraft. That means airlines will need to induct smaller aircraft for short takeoffs and landings. Such aircraft needs specialised crew. India produces 200 to 300 pilots every year, and it’s safe to say that training specialised crew will take time.
       Q. 213. BS (Bharat Stage)
      • All vehicles sold after March 31, 2017 will have to conform to BS (Bharat Stage) IV standards. A recent Supreme Court directive imposed a ban on the sale of the more polluting BS III vehicles from April 1, 2017.
      • The order clears the path for the adoption of BS IV standards throughout the country, seven years after they were put in place.
      • For a country battling serious pollution problems, this will be a significant transition.
      • Particulate emissions from BS IV compliant trucks are 80 per cent less compared to those from trucks that adhere to BS III standards.
      • BS IV compliant cars emit half the pollutants compared to cars made according to BS III specifications.
      BS IV to BS VI jump
      • But that it took the government seven years to implement the BS IV standards across the country holds lessons for policymakers. The lessons are even more significant because the government plans to skip the BS V standards and leapfrog to the far more stringent BS VI standards in 2020.
      • BS IV norms were put in place in 13 major cities in 2010. They could not be implemented throughout the country because Indian refineries lacked the capacity to cleanse fuel to BS IV standards.
      • As late as January 2016, fuel stations in nearly 70 per cent cities in the country did not have this superior quality fuel, leading the auto-industry to argue that this shortage was preventing it from making a complete transition to BS IV compliant vehicles.
      • The refineries will have to invest another Rs 40,000 crore to Rs 50,000 crore to upgrade to BS VI standards.
      • Oil firms will have to flush out BS IV fuel from the 80,000 petrol pumps in the country by April 1, 2020 when BS VI norms are slated to come into force.
      • The auto-industry estimates that it will have to invest about Rs 50,000 crore to produce cars with the more efficient pollution norms.
      The compulsions of the refineries and automakers meant that the transition from BS III to BS IV could not happen in one go. The government would do well to keep this in mind when it works out the transition to the far stricter BS VI norms in less than half the time.
       Q. 212. What are the urgent next steps in banking sector reforms?
      Ans. Banking Sector requires action on three fronts:
      • Accelerate recoveries from non-performing assets (NPAs)
      • Recapitalize public sector banks to strengthen their ability to expand credit
      • Introduce reforms that will increase the efficiency of these banks
      The traditional strategy for dealing with NPAs has been to reschedule the loans. However, this helps only where projects suffer from a short-term “liquidity problem”. It cannot help when there is a “solvency problem”, i.e. the income stream simply cannot service the debt even over a longer period. Most of the large NPAs reflect solvency problems. revenue streams were overestimated and costs have increased beyond original projections. Such projects can only be rescued if banks take a haircut and reduce the debt. Understandably, this is something bankers hate to do.

      How to go about it?
      There are two ways of handling the problem. The Reserve Bank of India (RBI) has notified schemes for both, but neither of them has worked.
      1. The Strategic Debt Restructuring Scheme allows banks to convert the debt into equity, take control of the project, remove the existing management, and induct new management. Ideally the project should be auctioned off to the highest bidder and the existing management, if not suspected of malpractices, should also be allowed to bid. The difference between the amount paid for the equity and the value of the debt converted, is a market-determined debt write-off. The scheme has not worked for a variety of reasons. These include problems of coordination among the different banks involved, regulatory uncertainties (especially for infrastructure projects) which deter new investors, and the unwillingness of bankers to accept a sufficient write-down of the outstanding debt. There is also the practical problem of running the projects taken over until a new management comes in. Banks are ill-equipped to do this.
      1. The second option is to work with the existing management and negotiate a suitable debt reduction. This is what the RBI’s most recent Scheme for Sustainable Structuring of Stressed Assets (S4A) was designed to do. It has the advantage of not having to look for a new management, but since the incumbent management remains in place, and the debt write-off is not competitively determined, there is a danger that the concessions given may attract the charge of cronyism and corruption.
      Some think that the problem can be overcome by setting up an independent “oversight body” to approve the debt reduction terms. But since the oversight body will also consist of public servants, the problem remains. PoCA clearly needs to be amended, and a proposal pending in Parliament should be expedited. However, this may not suffice, because proposals for a settlement have to be developed by bank managements, and then submitted to the oversight mechanism. Bankers have no incentive to propose large reductions in debt, especially since it is an implicit acknowledgement of poor lending practices on their part.

      Bad Bank
      • The best solution is to create a new government institution—the so-called “bad bank”—to which the public sector banks transfer their large problem assets at a realistic price, leaving it to the new entity to handle recovery.
      • Realistic pricing of the assets transferred is absolutely critical, since otherwise the hole in the balance sheets of banks will simply be transferred to the new institution. It should remain in the books of the banks, and can then be recapitalized appropriately.
      • Bankers will be much more willing to transfer their NPAs at a low price to a new public sector agency, than offer the same benefit to a private party. The new entity can then offer realistic levels of debt reduction without making a loss on its books.
      • It will also be much less vulnerable to the charge of corruption if the public interest and urgency involved in cleaning up NPAs is clearly spelt out in the mandate of the entity. Its proposals could also be vetted by a high-level oversight board.
      • The new entity would have to be funded by the government, perhaps by government guaranteed bonds which are exchanged for NPAs offloaded from banks. It could work in partnership with private asset management companies specializing in particular areas to bring in new investors. It could experiment with both approaches—a change in management in some cases, and retaining existing managements in others.
      Recapitalization of public sector banks
      • The capital requirements of public sector banks to sustain credit growth at 15% per year were estimated by the finance ministry two years ago.
      • The strategy needs to be completely reworked since the scale of NPAs is much larger than was then expected.
      • Bank profits after provisioning for the NPAs will therefore be much smaller than expected. The scope for raising funds from the market has also reduced given the poor performance of the banks.
      • The burden on the budget is therefore bound to be higher.
      Reforms in the banking sector
      Looking ahead, we cannot avoid serious banking sector reforms if we want the public sector banking system to become more efficient.
      • In this context, reducing the government equity below 51%, and attracting some strategic investors, would be a very major step. It will not only reduce the pressure on the budget to provide funds for recapitalization, it will also set the stage for a more commercial orientation for public sector banks. This is critical if public sector banks are to compete more effectively with private sector banks. If reducing government equity below 51% is not feasible at present, we should at least experiment with the halfway house suggested by the P.J. Nayak committee, of vesting the government’s shareholdings in public sector banks in a separate holding company, and limiting the finance ministry to deal only with the holding company on policy issues.
      • The individual public sector banks should be free of finance ministry control and become board-managed entities.
      • The holding company should appoint a non-executive chairman and other representatives on the board.
      • Top appointments in the banks, including those of the chief executive officer, should be made by the board of each bank, and not by the appointments committee of the cabinet.
      • The Bank Boards Bureau was initially seen as a step towards the establishment of a holding company, but it has not been empowered to play this role. Even in the matter of appointments, it only makes proposals to the appointments committee of the cabinet, which is not very different from the pre-existing position.
      This is bound to take a toll on our economic prospects for the next several years until private sector banks grow in size and come to dominate the market. But that could take 20 years.
       Q. 211. Why do we need a patients bill of rights to address information lag in medical delivery?
      Ans. Many a time, we see children spend days outside the ICU where their terminally-ill parent is admitted, only to receive the dead body after a few days. The patient’s relatives have a right to know about the condition of the patient, immediately after life-saving measures are instituted. They have a right to participate in the decision related to the treatment of their loved one, especially if it is an end of life situation. If there is no hope of the patient’s survival, he or she should be allowed to spend the last moments with loved ones. Medical intervention should be restricted to measures that ease the patient’s pain.
      The pros and cons of using invasive life-support devices and the chances for cure have to be clearly explained to patients in understandable language. These devices should be used only if the brain is functioning. Today, any patient who has a breathing difficulty is put on a ventilator, irrespective of whether his/her condition is curable or not. It is highly unethical to use measures to prolong oxygenation after vital systems have stopped working spontaneously. Every human has a right to die with dignity.
      Most countries have implemented the patient’s bill of rights. But, in India, there is no law to deal with patient’s rights, except some aspects of the Consumer Protection Act. In India, people have come to regard the ICU as a forbidden chamber and the only role of patients’ attendants is to bring medicines as requested by the ICU staff from time to time. They patiently wait outside hoping for the best, even in cases where the futility of life support is evident.
      The rights of patients
      The rights of patients and their relatives has to be legislated and awareness should be created in public fora.
      • Every patient is entitled to quality healthcare and treatment consistent with available resources and accepted medical standards, regardless of caste, creed or religion.
      • Every patient has the right to refuse treatment and to be informed of the consequences of his/her refusal.
      • A patient has the right to respectful treatment. This means that a patient’s dignity is paramount to healthcare.
      • A patient also has the right to privacy and confidentiality on matters concerning medical care.
      • The nearest family members have a right to information in life-threatening circumstances.
      • A patient has the right to information about doctors. This means that a right to know, at all times, the identity and professional credentials of the primary healthcare provider.
      • Then a patient has the right to an explanation concerning his/her diagnosis, treatment, procedures, and prognosis of illness. These should be elucidated in a language and in terms which the patient is expected to understand. In cases where it is not medically advisable to give such information to the patient, the information should be provided to the family members.
      • In case of emergencies, the information on the futility of treatment measures should be informed to the patient’s relatives as soon as possible before invasive life support measures need to be taken.
      • The patient has a right to information, in non-clinical terms, on complications, risks, benefits, and alternative treatments and the chance of cure or benefit. This will help him/her take an informed decision on the treatment.
      • The patient has the right of treatment in a safe environment.
      • He or she has the right to be informed of the facilities, rules and regulations that relate to patient or visitor conduct.
      • Patients are entitled to information about the mechanisms for the initiation, review, and resolution of patient complaints.
      Every hospital should have a charter which shall identify the roles and responsibilities of hospital staff towards patients’ and families’ rights.
       Q. 210. What are the disadvantages of Farm loan waiver in context of Indian agriculture? What can be done to alleviate the pangs of farmers?
      The government says it wants to double farm income by 2022 through the transformation of Indian agriculture. However, the political discourse continues to focus perversely on farm loan waivers.

      Even though agriculture contributes about 15% to India’s gross domestic product, a majority of the population directly or indirectly depends on the sector for livelihood.

      Farm loan waiver
      It might make political sense in the short run—farmers are a sizeable and powerful vote base—but, as experience shows, it is unlikely to help the agriculture sector in the long run. In fact, loan waivers can lead to several adverse consequences.
      • For example, Arundhati Bhattacharya, the head of the country’s largest lender, the State Bank of India (SBI), was bang on when she recently said that loan waivers affect credit discipline.
      • Agriculture is a bit of an issue. That is because of moral hazard that was created in 2008 when there was a write-off of large agriculture loans.
      • Former Reserve Bank of India governor Raghuram Rajan had also flagged the issue, as repeated loan waivers affect credit pricing and disrupt the credit market.
      1. Evidence from the 2008 farm loan waiver—implemented by the United Progressive Alliance government—shows that it can have unintended consequences. As World Bank have shown in its study that, bank lending moved away from districts with greater exposure to the loan waiver. Such outcomes can affect agricultural output in the medium to long run as banks may get more selective in extending credit.
      2. A study conducted by Harvard Business School showed that agricultural credit extended by government-owned banks goes up in an election year, while defaults also increase during election time. This again highlights that political intervention distorts the credit market. In fact, in the case of repeated waivers, it makes sense for borrowers to default strategically in anticipation of a waiver. But this can become a self-fulfilling cycle with long-term consequences—defaults would warrant loan waivers, and waivers will lead to more defaults.
      3. It was also argued that farmers were not able to invest because of debt overhang. However, the study did not find any improvement in investment and noted that there is no evidence of greater investment, consumption or positive labour market outcomes in areas where debt relief led to a significant reduction of household debt. It is not surprising that, in the case of India, government efforts to stimulate the real economy through debt relief were largely in vain given that the bailout also led lenders to reallocate credit away from districts with high program exposure.
      Way Forward
      To be sure, the agriculture sector needs government support but loan waivers are not the solution. On the contrary, expenditure on loan waivers will eventually leave less fiscal space for public expenditure in agriculture. India needs massive investment in areas such as irrigation, water conservation, better storage facilities, market connectivity and agricultural research. The problems in Indian agriculture are structural. They need long-term solutions. Loan waivers will only end up complicating the problem.
       Q. 209. Moving towards a larger formal economy
      Opps! Answer can be viewed on 31/03/2107.
       Q. 208. Why the Anti-Discrimination and Equality Bill 2016 must find champions in the Centre and states?
      Ans. On March 10, Shashi Tharoor, MP, introduced the Anti-Discrimination and Equality Bill 2016 (ADE Bill) in the Lok Sabha.
      As a Private Member’s Bill, however, this will not be enacted unless the government takes ownership of this Bill.
      There are at least three reasons why it should do so:
      • The Bill’s symmetric protection,
      • its experiential understanding of discrimination as a lived reality, and
      • its proportionate regulation of the private sector.
      Bill’s symmetry
      • That discrimination is rife in India is not in doubt.
      • Women, Dalits, religious and sexual minorities, people from the North East, hijras, disabled persons and the elderly are especially at the receiving end. Almost everyone in our country has faced, or is likely to face, some form of discrimination.
      • On the other hand, we have all also been perpetrators, sometimes consciously, but often unconsciously- by benefitting from unearned privileges that tend to accompany our dominant group status, sincerely believing in our merit, and in our innocence.
      • Recognising this universality in the experience and perpetration of discrimination, the ADE Bill seeks to symmetrically protect majorities as well as minorities (with exceptions for affirmative action and aggravated discrimination), and does so comprehensively, along multiple grounds of discrimination.
      • It is true that members of minority groups primarily suffer from discrimination. But, given our multiple identities, no one person is a member of the dominant group in all respects. Also, patriarchy will not end unless women as well as men are liberated from gender roles.
      • Furthermore, asymmetric laws are hard to pass and harder to enforce. Communal Violence Bill: it only protected minority groups; the perpetrators were assumed to belong to majority groups.
      • Under the symmetric ADE Bill, anyone could potentially be a victim, and anyone, whether from a majority or minority group, could be a discriminator. Whatever may be the truth of that allegation, here is one Bill that is genuinely universalist in its aspiration.
      Indian context
      • ADE Bill understands discrimination as it is experienced by its victims, and is sensitive both to the evolving nature of this social phenomenon and its particular character in the Indian context. Of course, the Bill prohibits overt prejudice or stereotyping as direct discrimination. But it also recognises that sometimes, one can discriminate indirectly by doing something that disproportionately impacts a group (say, a minimum height requirement that is unnecessary for satisfactorily performing a given job, and disproportionately excludes women since they tend to be shorter than men).
      • It treats harassment, bullying, segregation, boycott, violence and victimisation as the various guises that discrimination can take. By focussing on the experience of the victim, rather than the intention of the discriminator, the Bill understands that power is self-aggrandising and dynamic, with the ability to adopt ever subtler forms, and even deny its own existence in order to perpetuate itself.
      Prohibiting discrimination in public as well as private sectors
      • In prohibiting discrimination in public as well as private sectors (especially employers, landlords, retailers and service-providers), the ADE Bill recognises that decades of affirmative action in the public sector, while necessary, is insufficient to tackle discrimination.
      • It also imposes diversification duties, while ensuring that private businesses can discharge their social obligations with minimal regulatory burdens. Marking a break from past laws that criminalised discrimination, the focus of the ADE Bill is to create a civil liability to protect and compensate the victim, rather than to punish the discriminator.
      • Criminalisation — which requires a very high burden of proof — probably contributed to the under-enforcement of existing laws. The “lighter touch” approach of the ADE Bill is complemented by a dedicated, efficient and independent enforcement mechanism. It therefore strikes a proportionate balance between competing demands.
      As it seeks to realise B.R. Ambedkar’s vision of an India free from discrimination, the ADE Bill also honours a less-celebrated (and increasingly rare) dimension of his democratic politics: A principled pragmatism that preferred an imperfect solution accepted (albeit grudgingly) by many, to a perfect one championed by the few.
       Q. 207. What is Biotech-KISAN?
      Ans. Biotech-KISAN is a new programme that empowers farmers, especially women farmers. Cash crops and horticulture can be a major source of income but the vagaries of climate, disease and market often prevent this. Farmers are eager to use scientific tools that can mitigate these factors.
      The Scheme is for farmers, developed by and with farmers, it empowers women, impacts locally, connects globally, is Pan-India, has a hub-and spoke model and stimulates entrepreneurship and innovation in farmers.

      Biotech-KISAN is:
      • For Farmers: The Biotech-KISAN is a Farmer centric scheme launched by of the Department of Biotechnology, where scientists will work in sync with farmers to understand problems and find solutions.
      • By Farmers: Developed in consultation with the farmers.  Soil, Water, Seed and Market are some key points that concern small and marginal farmers. Biotech-KISAN aims to link farmers, scientists and science institutions across the country in a network that identifies and helps solve their problems in a cooperative manner.
      • Empower women. The woman farmer is often neglected. It is important to empower the women farmer, help her meet her concerns for better seed, storage of seed and protection of the crops from disease and pest. The women farmer is also the prime caretaker of livestock and she is eager to combine traditional wisdom in handling the livestock and with current best practices, especially in the context of emerging livestock disease. The scheme includes the Mahila Biotech- KISAN fellowships, for training and education in farm practices, for women farmers.  The Scheme also aims to support the women farmers/ entrepreneur in their small enterprises, making her a grass root innovator.
      • Connects Globally. Biotech-KISAN will connect farmers to best global practices; training workshops will be held in India and other countries. Farmers and Scientists will partner across the globe.
      • Impacts Locally. The scheme is targeted towards the least educated marginalised farmer; Scientists will spend time on farms and link communication tools to soil, water seed and market. The aim is to understand individual problems of the smallholding farmers and provide ready solutions.
      • Across India. Biotech KISAN will connect farmers with science in the 15 agro-climatic zones of the country in a manner, which constantly links problems with available solutions.
      • Hubs and Spoke. In each of these 15 regions, a Farmer organisation will be the hub connected to different science labs, Krishi Vigyan Kendra and State Agriculture Universities co-located in the region. The hub will reach out to the farmers in the region and connect them to scientists and institutions.
      • Farmers as Innovators. The hub will have tinkering lab, communication cell and will run year-long training, awareness, workshops and which will act as education demonstration units to encourage grass root innovation in the young as well as women farmers.
      • Communicating Best Practises There will be a communication set-up to make radio and TV programmes for local stations, as well as daily connectivity through social media.
       Q. 206. To deal with China, India needs to return to strategic fundamentals
      India’s ties with China are seemingly becoming more complicated by the day. Despite the dialogue held recently at the strategic level, the continuing stalemate over both the proposal at the UN to designate JeM Chief Masood Azhar as a global terrorist and India’s entry into the NSG are visibly deepening suspicions that may snowball into other areas where the two countries entertain misgivings about each other.

      Other critical issues are:
      • China’s Belt and Road Initiative,
      • China-Pakistan Economic Corridor CPEC, and
      • Possible changes in the BRICS format could cause more diplomatic frictions.
      Way forward
      • Clearly, the mechanisms in existence for the last two and half decades to deal with bilateral issues have outlived their usefulness.
      • The iterative approach and improved economic ties are not helping to build trust.
      • Instead, the step-by-step dispute-handling model generates more ‘friction-points’ fuelling domestic outrage and suspicion.
      • Consequently, the first-ever “strategic dialogue” ended nettling each other.
      Countering Indian tactical moves
      • By raising legally tenable points of seeking “solid-evidence” to prove Azhar’s direct links with al Qaeda, which are required to proscribe him under the UN 1267 regime. The Foreign Secretary’s fairly ambiguous answer, that “the burden of proof is not on India”, explained the elusive nature of the Azhar issue that the Chinese had carefully worked on.
      • Terming the NSG case as a “multilateral” issue and asserting that “Beijing alone” isn’t blocking India’s bid are again a typical Chinese way of fudging the issue.
      Both New Delhi and Beijing are deeply aware about the need to reset the terms of engagement. There is a need to move away from the current “disjointed approach” to pursuing a deeper strategic model of engagement in order to start the process of building trust. But the attempts of both countries to do so has faltered over differing perceptions and political signals on what ‘strategic dialogue’ actually implies.

      • Apparently, Indians comprehend the term “strategic” as enlarging the scope of consultation on the state of the global affairs, Afghanistan being the recent case.
      • The Chinese, on their part, take a philosophical approach to the word ‘strategic’; that is, to create conditions for sprouting shared values and trust; to achieve something of value rather than confining it to matters of contemporary convenience or as a means to find instant solutions to problems.
      • Strategic trust for them is relationship-building. Beijing was seen conveying emphatically: do not always use strategic forums for achieving tactical goals, because their great master Sun Tzu suggested “tactics without strategy is the noise before defeat”.
      Top-down waterfall approach
      The fact that India and China never tried to evolve a framework to guide their relationship ever since the 1954 Treaty of Panchsheel became redundant after 1962 remains a deficiency. A good example to emulate is the top-down waterfall approach, espoused by Russia and China to lower tensions between them which led to the desired windfall results in the last two decades. In fact, the old Indo-Soviet model was not a bad sustainable strategic tie, though the context in which it was framed was different.

      The problem is that India lacks Sinologists to read the Chinese mind. It hasn’t invested enough in developing a hard understanding of Chinese historical, political and economic system, as compared to the kind of efforts made to learn about the Western world. This leads us to understand China the way we want to understand it. We always want our signals to be perceived by the Chinese in the manner in which we want them to be perceived. In contrast, the Chinese claim their 2,000-year long experience of understanding the Indian mind, style of thinking and their moves. As a result, signals sent by the Chinese do not often come out clearly to us.
      Faulty Indian approach
      • For now, India’s mode of diplomacy requires a change. It should avoid giving ambiguous and conflicting signals to China which result in causing collateral damage to relations. For example, the play of shadowy games, especially the use of superfluous Cold-War era cards of Tibet and Taiwan, do not squarely match with China’s ability to pin down India either directly or indirectly.
      • A serious cost-benefit analysis is needed of a policy that is seemingly easy to exercise but deleterious and self-defeating in reality. For, every empty posturing by India is being countered by China by bleeding India through Pakistani terrorists.
      • In contrast, India’s reciprocal ability to inflict damage even in nearby Tibet, leave aside several thousand miles away in East Asia, remains untested.
      • The ground reality is that the wide power asymmetry, especially the widening imbalance in trade totalling USD 50 billion is creating an asymmetrical interdependence which is fraught with high risk.
      • Our over enthusiasm to embrace the US and a propensity to see everything through an anti-China lens may be compelling Beijing to work against India in the regional and global arena.
      • India need not see China as an object of disdain in perpetuity – a narrative often sold by the West.
      India and China have their own historical points of connections. They needn’t look for new symbolisms. In fact, minus the superficial rift, the ground is extremely fertile for a strong understanding to grow.

      Embracing the reality
      Instead, India should seek to reconcile with China, though, of course, without compromising on its core interests. It is time to engage in a dialogue process not just for enhancing strategic trust but also to think more cunningly about how to benefit from China’s riches, by gaining access to Chinese credit and technology, and securing markets for Indian products. Of course, the Chinese also need to reformulate their thinking on the nature of India’s rise in the system.
      Realistically speaking, we should not find too ominous China’s rise and its assertion. Its rise is no different from the rise of other major powers like the US, USSR and even Great Britain in the past. It is possible that future rising powers, including India, might have to assert in a similar manner for achieving their strategic objectives. But for India to emerge as a global power of any reckoning, it has to start realizing that a narrow tactical pursuit devoid of strategic thinking will lead to nowhere.
      We need to reframe our terms of relationship with China; rethink our own posture; rescue ourselves from experiencing a delusion of grandeur and instead persevere to emerge as a confident and aspiring regional power.
       Q. 205. Harappa to Harsud: water management in India
      • Water wars in urban India is not new, they go back to Harappa.
      • Harsud was a town and municipality in Khandwa in the Indian state of Madhya Pradesh. Although the town was more than 700 years old, it submerged under the waters of the Indira Sagar dam in July 2004. The town was relocated to Chhanera (New Harsud) after the old town was submerged in the waters of Indira Sagar Dam.
      Indus people
      • According to historian DD Kosambi, the Indus people managed water by damming the small branches of rivers.
      • Aryan people shattered this dam system which ruined the agriculture and eventually destroyed the Indus valley Civilization.
      • The Aryans replaced Indus agriculture with pastoral economy that involved mass killing of animals.
      • Things changed course with the spread of the philosophy of Ahimsa.
      • Buddha said, agriculture can support more number of people than pastoral economy and for that, stop mass killings.
      It's said that the king of Taxila asked Alexander: “To what purpose should we make war upon one another if the design of your coming into these parts be not to rob us of our water?”
      Vedic period
      • Vedic sacrifices went out of fashion.
      • Agriculture became the most important source of revenue.
      • The king requires revenue, and cultivating land to supply for needs of subject is king’s duty. King should build and look after the irrigation systems. This eventually resulted in demand for water.
      • In Arthashastra Kautilya declared: King should build and look after irrigation system.
      • Canals, dykes, roads and tanks were made from time to time. The Bhopal lake, created in the 11th century, was one of the largest artificial lakes of the time, spanning 65,000 hectares.
      • Iltutmish made several tanks in Delhi. The famous Hauz Khas tank was built by him.
      • The Khaljis are also known for building tanks.
      • Firuz Tughlaq was one of the greatest canal builders. He also introduced the water usage charge.
      • In the Mughal period, Akbar directed his governors to be energetic in the making of reservoirs, watercourses and wells.
      • In his account of a visit to Olala near Mangalore, Italian traveller Pietro Della Valle mentions: The state generously promotes and encourages water management at the village level.
      • For the building and maintenance of tanks, Emperor Krishna Dev Raya provided monetary Inam, called Dasabandam. Inam Kudimaramat was provided to maintain rivers, springs and channels.
      • Strong social and moral code of conduct was invoked to ensure maintenance of public works religiously.
      • Violation of the obligation of maintaining these structures would amount to killing of their fathers and cows.
      • Recurrent famines forced the British to appoint the first irrigation commission in 1901. British paid little attention to people's participation in water management. Instead they opted for big dams.
      • Arthur Thomas Cotton and John Pennycuick constructed irrigation canals and Mullaperiyar Dam respectively.
      After Independence
      • Big dam building was escalated after Independence.
      • Prime Minister Nehru declared these big multipurpose dams as “The temple of a free India”. We need dams to make our country self-reliant in food production and electricity.
      • But unlike in Indus valley, dams in their new avatar are different. Besides irrigation and flood control, they are meant to produce electricity as well. 
      • However, it comes at the cost of submerging lands and displacing a large number of people.
      Scarce resource
      • Lack of public participation, along with gradual withdrawal of the State, caused irreparable damage to local waterbodies, such as tanks and ponds.
      • Recurrent droughts in rural areas: It's estimated that 330 million people are affected by the recent droughts alone.
      • State manages the water and it has its own priorities, journalist P Sainath noted.
      • In drought-prone Marathwada, people have to pay between 45 paise to Rs1 for one litre of water.
      • Whereas beer manufacturing companies get three million litres of water per day at 4 paise per litre.
      Water scarcity is one of the main reasons for the mass migration of people from rural areas. These are the people who now live in irregular colonies of the cities. The saddest part is, water, which was once the free gift of nature is now forcing people to shift priorities in their lives.
       Q. 204. How linking agriculture with forestry can offer food security?
      Ans. The latest edition of the State of the World’s Forests (SOFO) report explores the relationship between agriculture and forestry for a food-secure future.
      • As part of commitment to the SDGs, countries are committed to end hunger by 2030 by ensuring sustainable food production.
      • Making agriculture sustainable is essential for future food production in the face of climate change.
      Food production and the role of forests
      While agriculture can feed the world’s population, it is responsible for deforestation globally.
      • The report says that forests support sustainable agriculture by stabilising soils and climate, regulating water flow, providing shade and shelter and providing a habitat for pollinators and natural predators of agricultural pests. When integrated judiciously into agricultural landscapes, trees can increase agricultural productivity.
      • Increasing crop productivity, if paired with direct forest protection measures, can increase both agricultural production and forest cover. But without direct forest protection, increasing crop productivity can put forests at greater risk by making it more profitable to clear land for crops.
      Ensuring food security
      Forests ensure the food security of millions of people worldwide, as they are important sources of food, energy and income.
      • The SOFO report shows that some countries have successfully increased agricultural productivity while also halting and reversing deforestation.
      • Deforestation was most prevalent in the temperate climatic domain until the late nineteenth century and is now greatest in the tropical climatic domain.
      • Temperate countries have been decimating their forests for centuries, but these days most of their primary forests are protected. The tropics, on the other hand, are losing an area of forest the size of Portugal every year.
      • In Brazil, since 2004, the country has reduced deforestation in the Amazon by 80 per cent while increasing soy production by 65 per cent and beef production by 21 per cent.
      • Commercial agriculture accounts for about 40 per cent of deforestation in the tropics and sub-tropics, local subsistence agriculture for 33 per cent, infrastructure for 10 per cent, urban expansion for 10 percent and mining for 7 per cent, the SOFO report adds.
      Combating climate change
      • As forests are “multifunctional”, they can combat climate change. The report says that reducing emissions from deforestation and forest degradation, sustainable management of forests and enhancement of forest carbon stocks will be essential to fight climate change.
      • Deforestation contributes more than 10 per cent of greenhouse gas emissions annually, but it only expands the world’s agricultural land by around one-tenth of a per cent a year. This means that protecting and restoring forests is critical for stopping climate change, but the big gains in improving food security will happen elsewhere.
      • SDGS and targets that refer explicitly to agriculture and forests
      1. SDG 2: End hunger, achieve food security and improved nutrition and promote sustainable agriculture.
      2. SDG 6: Ensure availability and sustainable management of water and sanitation for all.
      3. SDG 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.
      Forests produce timber and non-timber products, conserve soil, recharge groundwater, purify air, provide habitat for biodiversity and benefit local communities.

      Improving food security
      The report presents case studies from seven countries—Chile, Costa Rica, The Gambia, Georgia, Ghana, Tunisia and Viet Nam—that show how food security was ensured through an increase or maintenance of forest cover.
      • Six of these countries achieved a positive change in the period (1990-2015) in two food-security indicators—the prevalence of undernourishment and the number of undernourished people—as well as increase in the forest area.
      • Viet Nam’s success lies in the shift from state forestry to multi-stakeholder forestry involving the active participation of local communities. This includes a forest land allocation programme and forest protection contracts entered into with local households.
      • The system of Payments for Environmental Services, which provides farmers with incentives to plant trees and supports forest conservation, has been a positive trend. Forest cover has increased to nearly 54 per cent in 2015.
      • Net forest loss due to conversion has been halted. Previously, forests were regarded as “land banks” that could be converted as necessary to meet agricultural needs.
      • Soil erosion, a huge problem in Africa, is mainly caused by the exposure of the bare soil surface by inappropriate management practices such as cultivation, deforestation, overgrazing and drought. The Status of the World’s Soil Resources report has established that 40 per cent of Africa’s soils are severely degraded.
      In Tunisia, agricultural production has increased through intensification that makes better use of existing agricultural land through irrigation, fertilisation, mechanisation, improved seeds and better farming practices.


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