Synopsis and Review-Think and Learn [Day 32]

  • IAS baba
  • July 31, 2015
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Synopsis and Review – Think and Learn [Day 32]

GS 1) Critically discuss the magnitude of water crisis in India, its causes and remedies. (200 Words, 10 Marks)

The Top Answer for this question is written by – Nishant

Ans) Population explosion and unsustainable development have magnified the chronic water crisis in India. Despite enough annual surface flows, only a third of it can be utilized. Over 50% of India’s water supply comes from groundwater. Irrigation alone accounts for 90% of this.

Major causes for this crisis are:

– Cheap electricity subsidies and inefficient irrigation practices have resulted in over-use of groundwater resources by farmers esp. in North India.

– Depleting water quality due to industrial waste disposal and fertilizer flows into water bodies

– Variable availability, concentrated during the monsoon and lack of storage capacities.

– Unsustainable urbanization marked by increased concrete pavementing, dwindling green cover and poor sewage systems.

– Climate change has impacted the natural freshwater replenishment rate.

Water crisis should be seen from the broad perspective of social and human development and not necessarily as an impediment to economic growth.

Some solutions suggested as follows:

– Micro-Irrigation techniques as a replacement of current practices. This also includes educating farmers towards the same to bring a behavioral change from within. Recently announced Krishi Sinchai Yojana and Soil Health Card Scheme hold much promise.

– Support to voluntary rural watershed development programs like the one in Ralegan Siddhi, Maharashtra.

– Strict regulations on industries for waste disposal and heavy fines for open dumping such as one prescribed by the National Green Tribunal in 2014.

– Augmenting natural and artificial aquifer systems. The Tamil Nadu model should be replicated across the country.

GS 2) What do you understand by Delimitation of Constituencies? Examine its objectives and explain how delimitation affects the Representation of the People Act. (200 Words, 10 Marks)

The Top Answer for this question is written by – Kiran

Ans) Delimitation of constituency is the process of redrawing of boundaries of constituencies for assembly as well as parliamentary elections This is done by the Delimitation commission, formed under Article 82 of the Indian Constitution, based on the recent census. The last delimitation was done based on 2001 census.

The main objective of delimitation of constituencies are:

— Constitution of India calls for allocation of seats in Lok Sabha based on the population of that state. Similarly for State Legislative Assemblies.

— To accommodate for changing demographics. Based on the census, if a constituency has more number of SC/ST people, that seat may will be reserved for SC/ST.

— Constituencies are redrawn such that each constituencies are almost equal. In a democracy like India, where the principle of one man one vote is upheld, it helps ensure that there is no under representation of people in the state assembly or parliament.

Delimitation of constituencies impacts Representation of People’s Act 1950 in the following manner:

— It calls for revision of electrol rolls for a constituency.

— Some seats may be reserved or may even get ripped of that status.

— Section 8 of RPA calls for updating the extent of parliamentary and state constituencies.

GS 3) What do you understand by both partial and full Capital Account Convertibility (CAA)? Based on this examination, critically suggest whether India should go for full CAA or partial. (200 Words, 10 Marks)

The Top Answer for this question is written by – L.I.

Ans) CAC is the convertibility factor of domestic financial assets into foreign financial assets and vice versa for Capital Accounts transactions.

– Partial CAC: It has specified limits. E.g RBI restrictions under FEMA Act

– Full CAC: It has minimum limits or none.

At present, India has partial CAC. FEMA has imposed restrictions on FDI, FII, External commercial borrowings [ECB], foreign investments for individuals under Liberalised Remittance Scheme etc.

Full CAC is being advocated for the prime reason of attracting more foreign capital inflow by relaxing FDI, FII, ECB which in turn can spur investments, economic growth and employment opportunities. With increase in investments, this may also control inflation due to increase in supply.

However, as per International Monetary Fund, no definite correlation has been established between high economic growth and high FDI, FII. Critics have also pointed out that relaxing ECB would lead to exchange rate volatility. The East Asian Crisis ‘97 also showed that high FOREX reserves does not necessarily ensure stable exchange rate.

In this regard, Tarapore Committee fixed some pre-conditions for full CAC such as fiscal deficit, inflation, FOREX reserves, Cash reserve ratio, Non performing assets for which India has still not fulfilled most criteria. Until then, India may not be overdue for full CAC.

Today we have two Top Answers for this question, as we were not able to decide which one was the better one. The Other Top Answer is written byKiran

Ans) Capital Account Convertibility(CAC) is the ability to transact local financial asset to foreign financial asset, based on market determined exchange rate. In other words, it allows for exchange of local currency into foreign and vice versa without any restrictions.

Two type of CAC’s:

—1) Partial CAC: This puts a cap on the foreign asset owned by local individuals/institutions and vice versa.

—2) Full CAC: There is no such cap on the asset that can be acquired.

The advantages of CAC:

— It allows for 100 % FDI, FII in the country. This leads to increased inflow of foreign capital.

— FDI’s boost competition in domestic market and can increase local production.

— Greater incentive for NRI’s to remit money through foreign exchange. This also makes the illegal money exchanges like Hawala less attractive.

— It leads to free flow of goods, trade and capital across the globe.

This also comes with certain disadvantages, they are:

— If CAC is not managed well, it can lead to depreciation of the currency, and make it shaky. This result in the loss of confidence of the investors in the currency.

— As market determined exchange rate are higher than official exchange rate, this can affect the import price of goods and services.

Tapore committee appointed to look into this matter by RBI, has suggested some preconditions like, reducing fiscal deficit to 3.5 % of GDP, fixing an annual inflation target to 3-5 %. Unless these conditions are met, India should not go for full CAC.

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