Think, Learn & Perform (TLP) – Synopsis – Day 3

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Must Refer– Comprehensive Mains Strategy

Day 3 – Indian Economy – GS 3

Q.1) What is Special 301 report? Why is India kept in the Priority Watch List, in this report? Discuss the various IPR issues and their role in promoting foreign investment in India.

Background: IPR issue is one of the most trending segments of World news in contemporary times especially between India and USA. Apart from Pharma issues, there are other areas to look upon

Theme of the Question:

First two parts are very easy and direct. You shouldn’t waste more than 80 words there. Second part is the most important one. When we talk about IPR issues, here in Indian context, most of you have written only about ongoing issues.

This is a simple question to answer, as the structure of the answer can be found in the question itself. Just answering one paragraph on each sub-question will bring out a very logical, coherent structure to the answer.

Start off with what the Special 301 report is and who makes it. And then explain what the Priority Watch List is all about, after which explaining why India is a part of it.

Then the report gives a list of IPR issues regarding India. Discussing about those issues and then commenting if that would be a problem for the foreign investment should suffice for this question.

For India, there is no National IPR Policy or Law for addressing IPR other than Patent Law. And hence many other domains falling under TRIPS gets unaddressed due to lack of clarity on technical issues. One line conclusion regarding a robust national law to deal with IPR issues would be very good.

The Top Answer for this question is written by – Somesh

Ans) Special Report 301 is prepared annually by the Office of US Trade Representative reviewing IPR laws in various economies. India is in the Priority List because US observes that Indian Patent Law is inadequate, hindering entry of US companies relying on innovation.

Various IPR issues highlighted by the Report:

• Inadequate legislative and administrative framework to protect IP
• Trade secrets unprotected in case of non-contractual violations
• Audio-Visual content piracy over wireless, cable, media devices and CDs

Biomedical and Chemical industry affected because:

• Section 3(d) of Patent Law says, mere innovation of new drugs not patent-worthy unless there is ‘significant enhancement of efficacy’ (Glivec/Novartis)
• Compulsory Licensing criteria are not objective and predictable
• Rampant trademark violations and counterfeiting

Foreign investment in areas of green technology, defence technology, R&D and pharmaceuticals will certainly be encouraged if the IPR laws protect commercialization of innovation, since they involve massive investment in R&D. As pointed out in the report, there is scope for improving IPR laws to make them predictable, objective, non-discriminatory and for better administrative framework for enforcement.

However, India’s stance against ‘evergreening’ of patents and compulsory licensing of certain drugs comply with TRIPS and reflects our commitment to public interest which cannot be compromised. There is a need to balance public welfare with protection of IPR which can protect commercial interests without curtailing developing world’s access to life-saving drugs.

Q.2) Why is the ‘Poverty Line’ methodology so controversial in India? Is the criticism justified? Narrate the evolution of various methodolgies and critically comment on each of them.

Background: An all time favorite topic of UPSC. Prepare it specifically for Rangarajan Committe report or Tendulkar Povery Line or overall Poverty Estimation and related criticism and way ahead related to it. Every now and then, you will encounter news paper articles citing poverty numbers, socio-economic data’s etc. Prepare some facts from Standard reports, Eco-Survey etc and be ready with some ready made pointers. Any question on Poverty will not be out of your reach once you prepare it holistically.

Theme of the Question: In the first part, two aspects are to be dealt.

First, Why PL Methodology is controversial? Write about Methodology of present time and explain the negatives of it. If you cite 4 negatives then you have to use them for addressing the next part of the question which is “Is the criticism justified”?

Now most of you have right away said, yes it is justified, rather some of you have written, “Completely Justified” 🙂 Buddy, never do it. Even if question asked for Critical Comment, you need to present both sides and be optimistic. Our Socio- Economic Framers are not stupid to run the system. There are flaws but the flaws are not the limitations of formulation or methodology only. There are many other reasons that should become your postives saying, criticsims are valid but not justified al together.

When you follow exactly the format of the question asked, you don’t need to break your heads for good structuring and all. It will come automatically.

The Top Answer for this question is written by – Ashwini

Ans) Poverty estimation in India has been a sensitive issue. It is used as a benchmark for identifying beneficiaries for various schemes of government.

Controversy over the estimation of poverty line:

• Does not take into account various vulnerable groups such as women and senior citizen and low castes.
• Does not address the concerns of population marginally above the poverty line.
• Seemed to have come under political influence.
• Not revised at regular intervals to take care of changing trends in consumption basket.
• Very low compared to international standard of $1.25 per day at PPP.
• Does not cover the indicators to reflect standard of living.

Eg: As per UNDP’s Multi Dimensional Poverty Index, approximately 52% of the Indians would be poor.

Is the controversy justified? – Not entirely

• Estimation is for a family of 5 on a monthly basis. It works on the principle of economies of scale.
• Subsidies are not taken into account.
• Under reporting of consumption expenditure.

Evolution of various methodologies:

• DadabhaiNaoroji was a pioneer figure in nutrition based poverty line.
• Dandekar and Rath Committee – 1971: First calorie based poverty line. Uniform for rural and urban areas.
• Alagh Committee – 1979 : calorie based. Separate for rural and urban areas.
• Lakdawala Committee – 1993 : poverty estimation at national level and at statelevel. But still had an outdated consumption basket.
• Tendulkar committee- 2009 : uniform poverty line. Reduced the weightage given to calories. Updated the consumption basket. Which increased the number of poor falling below poverty line.
• Rangarajan Committee – 2012: yet to accept its recommendations. Improved consumption basket. Considers non calorie components such as rent, education etc.

Q.3) Discuss the major weaknesses in agricultural price policy of India. Suggest suitable remedial measures.

This is a direct question. Two parts. But then again, if you point of 5 weaknesses then remedial measures should address them for sure. You shouldn’t mention A as weakness and the then give remedy for Z which was not at all your point of discussion. Take care of these small writing tricks.

The Top Answer for this question is written by – BS

Ans) India’s agricultural pricing policy have two-fold objective: supporting farmers through MSP and ensuring affordable price for consumers by providing food grains through PDS.

Major weaknesses and their consequence:

MSP:

• High MSP: distort market as well cropping pattern.
• It does not take into consideration the fact that cultivation cost vary from region to region: For example they are higher in Punjab, Haryana due to high wage, land value & end up creating dissatisfaction among farmers.

PDS:

• High procurement of grains leading to accumulation in store house and subject to rotting, attack from rodents.
• Fuels inflation.
• High storage is a problem for India Under WTO AoA.
• Price subsidies can distort markets in ways that ultimately hurt the poor as pointed out by Economic survey.

Remedial measures:

• Support vs procurement price: Swaminathan committee suggested differentiating between Support & procurement price. MSP should be a tool to only avert distress sales, while government procurement should be at market-determined prices.
• Shanta Kumar committee recommendations to reform FCI should be implemented
• Moving from agro-subsidy regime to agro-investment.

Reforms in agricultural policy that is making it more market oriented based on supply-demand logic will not only avert market distortion but also provide us with more capital to reinvest in ensuring food security, high yield and framer prosperity.

Q.4) Discuss the reasons as to why outsourcing has become an economically beneficial mechanism for both rich and poor countries?

Outsourcing is a very common phenomenon which you see almost everywhere these days. Inter-country outsourcing is what made India’s economy have a boom in the 90s, so this is an important concept to understand.

In this question, it has not asked whether the countries have been benefitted, but has instead asked the “reasons” why it has been beneficial to both the countries. The question already assumes that outsourcing is beneficial, so no need to delve on the pros and cons of outsourcing. Some of you have done that.

The Top Answer for this question is written by – Santhosh Venkatesh

Ans) Outsourcing refers to entrusting or contracting certain processes of business functions to another party. Outsourcing to foreign countries is a byproduct of Globalisation and has created immense benefits for both rich and poor countries.

Benefits for Rich countries

i) Poor and developing countries have cheap labour outsourcing which help in cutting production and overhead costs for rich countries.

ii) With certain non core business processes outsourced, companies can concentrate on their core functions thereby increasing efficiency

iii) With outsourcing more work gets completed in a day due to timezone differences giving rise to round the clock businesses

Benefits for poor countries

i)With Good working age population , countries benefit in getting employment opportunities .

ii) Since the advent of outsourcing, In relatively poor countries GDP and Personal disposable income have risen. This has boosted domestic demand and provided impetus to growth.

iii) There is a possibility of creating a knowledge based economy as a result of IT process outsourcing.

iv) Increase in Foreign investments ,thereby reducing deficit in Balance of payment.

v)The benefits of outsourcing for one sector create spillover benefits for other sectors and industries

With competition from SE Asian economies and other South American and African countries, India needs skilled labour and a conducive environment for Investment to have a competitive edge over other countries.

Q.5) Critically evaluate the utility of the JAM initiative in facilitating financial inclusion.

Direct Question- Evaluation is the key here. What is Evaluation?

It means to estimate or determine the nature, value, quality, ability, extent, or significance of anything.

Now here the crux is JAM Trinity and that too critically– Break the theme of evaluation into Nature, Value, Quality, Ability, Extent and significance associated with JAM trinity. When you talk about JAM’s Value (positive), at the same time talk about its negative value. This is critical evaluation. Same for others like ability, extent and significance and there is your answer 🙂

The Top Answer for this question is written by – Nishant

Ans) Financial Inclusion is the delivery of financial services at affordable cost to disadvantaged and low income segments of the society. The JAM trinity as announced in Budget 2015 can play the perfect role in India’s quest for financial inclusion.

With telecom operators obtaining payment bank licensing, people can keep deposits and carry out e-transactions via their mobile phones. This removes the necessity of having bank branches in remote areas, a traditional caveat in this regard.

Aadhar Card facilitates seamless and near foolproof identification of beneficiaries. People can now receive subsidy cash transfers, MGNREGA salaries directly into their accounts. The success of PAHAL scheme of LPG cylinder subsidy is a positive sign.

The Jan Dhan program has empowered over 12 crore people with bank accounts and more are being added. This combined with the potential of 1.5 lac post offices acting as bank correspondents completes the JAM trinity.

The JAM trinity is not without legitimate concerns. Lack of financial literacy, non-use and duplicity of accounts remain a possible impediment. There are fears of JAM becoming a potential target of money laundering activities. Also, the legal issues regarding Aadhar Card need to be sorted out. Bottomline is if JAM works at it should, India would have achieved more than just financial inclusion. Removal of subsidy leakages is one such added benefit.