SYNOPSIS: IASbaba’s TLP – 2018: UPSC Mains General
Studies Questions [4th January 2018]- Day 29
1. Serious consideration must be given to the idea of a universal basic income as a more effective way of achieving Mahatma Gandhi’s objectives of “wiping every tear from every eye.” Comment.
- This question can be answered in 3 parts
- In the introduction, start with why there is still need for government support?
- How existing mechanisms have fared?
- How UBI may be a better?
- Lastly, the pitfalls in the idea of UBI?
The Indian Constitution created India as a welfare state. Starting from the first five year plan, the government introduced many welfare schemes in the area of poverty eradication, public health, education etc. Though great results were achieved, however these schemes such as the PDS system were beset with problems like corruption, leakages, poor targeting etc.
As a result, even after 70 years of independence, 22% of the population is still below poverty line. India’s ranking on UNDP’s HDI is a poor 131. After the 1991 reforms, income inequality has further widened as welfare schemes are usurped by the rich more than the poor. E.g. LPG subsidy.
In this light, Economic Survey 2016-17 explores the idea of universal basic income as an alternative to present framework of sectorial welfare schemes.
What is UBI?
- According to the Basic Income Earth Network, a universal basic income is a “form of social security in which all citizens or residents of a country regularly receive an unconditional sum of money”.
- A universal income would mean the government moving away from service delivery and instead simply providing people with the money to access those services.
Arguments in favour of UBI
- Promote social justice – reduce inequality through income re-distribution
- Better targeting – plug leakages and avoid exclusion / inclusion errors for beneficiaries
- Thrust to financial inclusion – as more people will use banking facilities to access monthly UBI deposits
- Administrative efficiency – cutting through multiple layers of bureaucracy thus reducing red tape and corruption
- Freedom of choice – for beneficiaries to spend. It treats people as active agents
- Insurance – act as a safety net for shock expenditures such as health related
However, the idea of UBI is faced with serious challenges such as:
Arguments against UBI
- Fiscal burden on limited government resources
- Vulnerable to political opportunism and vote-bank tactics
- May create artificial inflation and demand shortages
- Men may incur wasteful expenditures on abuses such as alcohol
- The assurance of a basic income may make the labour force lazy and inefficient
Although it is the prerogative of the government to wipe “every tear from every eye”, however the idea of UBI goes against the Gandhian principle of “lending hands to someone is better than giving a dole”. Instead the government should rationalize subsidies, plug leakages and de-duplication using the JAM framework.
UBI is a good idea in principle, but its cost of implementation (~5% of GDP) for a large country like India makes it economy unviable. The amount could be better spent to enhance India’s health and education system, invest in infrastructure to create formal employment. Doing so would create more sustainable and long term benefits. UBI can be first experimented as a pilot project on a select section of the society such as BPL households.
No Best Answer
Q.2) The operational framework of the Fiscal Responsibility and Budget Management Act (FRBMA) designed in 2003 needs to be modified to reflect the India of today, and even more importantly the India of tomorrow. Discuss.
Recently India’s finance minister, in his budget speech, announced that a committee would be set up to review the implementation of the Fiscal Responsibility and Budget Management Act and suggest modifications for the future. The FRBM Act, 2003, has many flaws, which needs to reflect on the present issues and produce a truly modern act.
- The FRBM Act succeeded in disciplining the states, because the states cannot borrow without the permission of the centre, but it was spectacularly ineffective in disciplining the centre.
- The centre’s deficit declined initially from 3.9% of GDP in 2004-05 to 3.1% in 2007-08 including unpaid subsidy bills, but in 2008-09, it exploded to 6% of GDP i.e., 8%, if unpaid subsidy bills are included.
- Fiscal expansion was justified initially on the grounds that it was necessary to counter the impact of the global financial crisis, and, indeed, all G20 countries did something similar. However, it was not reversed in time, and the FRBM targets were just suspended.
What should be done?
The N K Singh Committee has suggested a new FRBM Act to replace the old one. It has many eminently sensible proposals. Its most obvious shortcoming is that its recommendations have no teeth, and rely on good sense and fiscal rules that can easily be broken as often happened in the past.
The politics of sound finance in a globalized financial environment is well understood. The FRBM Act has the potential of ensuring macro-economic stability provided it is revised to needs of Indian economy. Further, there are some other approaches which can help:
- The possibility of adopting a target range rather than a specific number which would give the necessary policy space to deal with dynamic and volatile situations such as the one India currently faces
- Aligning the monetary and fiscal economies so that if bank credit growth falls, fiscal deficit may need to go up.
- An autonomous Fiscal Management Review Committee (FMRC) which would conduct an annual independent and public review of FRBM compliance.
- Move the annual numerical targets from FRBM rules which are framed and amended by central Government at whim by gazette notification to the FRBM act itself.
- Do away with the ambiguous concept of the Effective Revenue Deficit which is nothing but a jugglery to rewrite revenue expenditure as capital expenditure.
Although the government has initiated several reforms, those attempts to improve the fiscal responsibility were not sufficient and have been piecemeal.
Best answer: Gargantuan
3. Critically examine the efficacy of financial inclusion as a tool to ensure inclusive growth.
- Introduction- Define what financial inclusion exactly is.
- Efficacy of FI as a tool to promote inclusive growth needs to be discussed. Given multiple points, writing in point format is desired.
- Critically examining- Explain how FI alone isn’t enough.
- Way forward to promote inclusive growth.
Inclusive growth is the biggest challenge that the nation faces and it is important to ensure that while the Indian economy grows rapidly, all segments of society are part of this growth process, preventing any regional disparities from derailing such growth.
Financial inclusion refers to delivery of financial services, including banking services and credit, at an affordable cost to the vast sections of disadvantaged and low-income groups who tend to be excluding.
Efficacy of FI as a tool to promote inclusive growth:
- A well spread out financial system engenders economic activity by mobilizing savings into the formal financial system. This boosts overall GDP, thereby helping increase government’s expenditure on social welfare.
- FI provides an avenue to urban workers to remit money to their families in villages. Thereby allwo to move freely according to the availability of job opportunities.
- It helps poor clutches of usurious moneylenders.
- Ensuring that the poor have access to a variety of social security products, like micro-savings, micro-credit, micro-insurance, and micro-pension products. Through schemes like Atal Pension Yojana.
- Financial Inclusion provides an avenue to the poor for bringing their savings into the formal financial system. Thereby promoting the habit of savings which overtime may help in capital formation for the poor.
- With government promoting DBT through JAM trinity, FI can help poor in availing benefits of various schemes like MUDRA yojana directly.
FI alone isn’t enough:
- While Jan Dhan yojana led to creation of record-break accounts, the usage of these accounts for financial transaction is very low.
- Financial products in present scenario is not much of the use of poor as they don’t address their needs directly.
- FI without social empowerment is not enough.
- Promoting digital and financial literacy is foremost. Schemes like Digital India will surley help in long run.
- Bank personnel need to be sensitized while dealing with the poor and less literate people.
- Products like micro-pension created specifically to address the needs of the poor must be developed.
- Providing opportunities for growth. Creation of jobs and at the same time ensuring skill based vocational training is important.
- Protection of rights for all and ensuring justice.
Financial access can surely improve the financial condition and living standard of the poor and the deprived section. It is probably the only sector that has the ability to act as a facilitator and multiplier for overall economic growth and stability. However, as argued by Amartya Sen (2000) poverty is not merely insufficient income, but rather the absence of wide range of capabilities, including security and ability to participate in economic and political systems.
Best answer: ramanuj shukla
The Maharashtra government has released a sum of Rs 4,000 crore under the first phase of the over Rs 34,000 crore farm loan waiver scheme.Disbursal, in the first phase, will cover more than 8 lakh farmers, Fadnavis said as he listed initiatives taken by his government towards increasing investment in the agriculture sector.
- Introduce by writing about current farm loan waiver announcements or by defining farm loan waiver
- Write positive impacts of farm loan waiver
- Write negative aspects on socio economic sphere of lives
- Suggest some measures as an alternate or along with farm loan waiving practice and conclude suitably
In India, agrarian economy is monsoon dependent. Agriculture contributes just 15% of the national output and people dependent on them are 50%. This clearly shows an agrarian distress. Waiving the loans of farmer due to erratic monsoon, bad harvest, and pests spread etc. has often being used as a tool to minimize farmer’s distress. This year alone many states like UP has waived bulky amount of loans,
Farm loan waivers are provide to farmers as they are thought to provide some temporary relief to them and is a short term measure and government justify it for suicides problem among farmers.
- It sheds farmer’s burden, seeing increased incidence of farmer suicide waiver is justified.
- It increases agricultural performance as farmers are pre assured of govt. help and they add more resources, took loans.
- Farmers will be attracted towards institutional credits.
- Farmers being an important vote bank government try to portray a pro farmer image to meet its political ends.
However, other side of such waivers cannot be overlooked:-
- It leads to moral hazard to those who are able to pay loan to the farmer.
- It affects credit culture of the economy as said by RBI governor.
- It is used as political tool to gain election benefits keeping banks at stake.PSU banks is going through difficult phase of NPA problem and at this juncture loan waiver cannot be afforded.
- Loss to government exchequer, waived amount is ultimately paid from exchequer at the cost of other developmental needs.
- With one state taking the lead the call from other state too arises, it sets bad precedent.
- It may affect foreign investments as waivers are seen as bad financial practice worldwide.
- Ineffective in reaching farmers: Majority small farmers have loan arragned from local moneylenders; hence they remain untouched with the loan waiver policy, despite being the most affected ones.
- Vicious Cycle: The economic stress of loan waiver leads to reduced spending by government in the pre-production phase of agriculture, irrigation facilites and better climate planning for crops which leads in a vicious cycle of poor crop and loan waiver.
- Non coverage of non-farm losses: It provides a partial relief as majority of institutional borrowing by farmer is for non-farm purpose
Instead of loan waiving, government should:
- Spend the money in improving infrastructure in agriculture which could be beneficial in improving productivity.
- Alternative policy measures should be taken for agriculture insurance.
- Options like restructuring loans, increasing loan duration, minimizing interest rest etc. can be done.
- Most of the farm loans are taken by those who actually do not need it. Proper analysis of loan records can be done to benefit real beneficiaries.
- Implement Swaminathan Committee recommendations.
Schemes like increasing farm produce, doubling the farmer’s income, ensuring food security agriculture has takes center place in policy making. Government in recent time has come up with other ways to improve farms like soil heath cards, eNAM, Mobile apps, PMKSY etc. All aspects and dimensions needs to be evaluated before applying measures.
Best Answer: Swati Mittal
5. What is lateral entry in civil services? Critically examine its effect on functioning of bureaucracy and overall governance of the country.
- Introduction: Mention what is lateral entry with examples.
- Body: The question has two parts. First part is merits of lateral entry and second part is demerits. It is Critically Examine question so either of two parts needs to be given more concentration than other.
- Conclusion: 2-3 lines are must.
Lateral Entry in Civil services refer to a system where in personnel’s other than regular bureaucrats are hired for mid-level and above hierarchy due to various reasons like expertise, specialization in particular field etc. Raghuram Rajan, Urjit Patel, Arvind Subramaniam, Manmohan Singh are some examples.
Effects of Lateral Entry in Bureaucracy and Governance:
- Merits in Bureaucracy:
- Shortage: It will help in filling existing shortage of officers. As per reports close to more than 1000 IAS officers are in shortage for various levels. That is huge number when sanctioned strength is around 6000.
- Expertise: Certain profile requires expert knowledge like Nuclear, Defense, Medicine etc.
- Efficiency: Due to their exposure in respective field can provide out of box solutions.
- Merits in Governance:
- Policy view: They can provide different side of view towards policy affecting their fields especially. Example: A doctor will have better understanding about required policy in medicine field.
- Fresh energy: In policy making and implementation with specialist knowledge.
- Competition: With regular bureaucrats and new entrants leading to better policy making and faster implementation. It will keep regular bureaucrats on their toes and encourage them to learn new things.
- Result-oriented: They can be hired for quick short term results.
Demerits of Lateral entry:
- Experience: The level of experience gained by regular bureaucrats during initial years dealing with common man problem will be absent in lateral entrants.
- Result oriented: Always the results need not be tangible especially in government service. Lateral entrants see the tangible part.
- Short-term results: Regular bureaucrats see long term results compared to lateral entrants.
- Profit loss: Lateral entrants will be everything in profit loss terms due to their previous experiences.
- Demotivation: For regular entrants and there might also be high attrition in bureaucracy.
- Political favoritism: They might be inducted due to their political ideology, political connections.
- Corruption and Nepotism: There are chances of them indulging in short term benefits and political executives might indulge in nepotism.
Note: You can get so many points for merits but be balanced and neutral. Don’t start with outright criticism of existing bureaucracy. Remember you aspirants are preparing to join the existing structure. Never criticize for what you are aspiring to become.
Answer should consist of 8-10 points. Give more weightage to either Merits or demerits part. Each point should be explained for a line or two.
For certain positions there can be lateral entry but certain areas in government needs to maintain secrecy from outside world for which lot of experience by being insider to the system is required. So there should be balance between both. Regular bureaucrats should feel secured and specialists also needs to be given chance to serve for betterment of country.
Connecting the dots:
- Problems in Existing Bureaucracy.
- Accountability and Transparency in policy making and implementation.
Best Answer: Rinki.