IASbaba's Daily Current Affairs Analysis

IASbaba’s Daily Current Affairs (Prelims + Mains Focus)- 15th March 2018

(PRELIMS+MAINS FOCUS)

Philippines quits ICC

Part of: Mains GS Paper II- International relations

Key pointers:

President Rodrigo Duterte pulled the Philippines out of Rome statute, the treaty underpinning the International Criminal Court (ICC).
The Hague-based ICC announced last month it was launching a “preliminary examination” of Duterte’s bloody anti-drug crackdown that has drawn international concern.
The Philippines ratified in 2011 the Rome Statute which underpins the ICC, giving the tribunal authority to investigate crimes on its soil.

About ICC:

Opened in 2002, the ICC is the world’s only permanent war crimes court and aims to prosecute the worst abuses when national courts are unable or unwilling.
It is headquartered in The Hague in The Netherlands.

Article link: Click here

Bill to regulate the chit fund sector

Part of: Mains GS Paper II- International relations

Key pointers:

A bill to streamline and strengthen the chit fund sector has been introduced in the Lok Sabha.
It mandates video conferencing while the opening of bids and seeks to hike commission of foremen from 5% to 7%.
The Chit Funds (Amendment) Bill, 2018 is based on the recommendations of the Parliamentary Standing Committee on Finance and the Advisory Groups on Chit Funds set up by the Central government.
The amendment bill provides for allowing the mandatory presence of two subscribers, as required either in person or through video conferencing duly recorded by the foreman, while the bids are being opened.
It also provides for increasing of ceiling of foreman’s commission from 5% to 7%.

Article link: Click here

(MAINS FOCUS)

NATIONAL

TOPIC: General Studies 3:

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Infrastructure: Energy, Ports, Roads, Airports, Railways etc

Transforming Indian Railways

Background:

Indian Railways is at a crossroads.
Aided by the government’s renewed thrust on Indian Railways’s transformation, it can become a strong, profitable, reliable and publicly trusted organization. In the process, it can play a big role in serving India’s fast-growing transportation needs.
On the other hand, if coherent measures towards efficiency upgradation are not formulated and executed on an urgent basis, then it risks becoming a burden on the economy.

Concerns:

Intense competition:

Indian Railways has been fighting intense competition and losing.
The organization that carried 89% of India’s freight traffic in financial year (FY) 1951 was left with only a 32% share in FY12.
Indian Railways is becoming second-best versus the airline industry, that has been growing in the last four years, as well as against the fast-improving road network.

Deterioration in operational and financial metrics:

In the last 10 years, Indian Railways has witnessed perceptible deterioration in operational and financial metrics.
This has been caused largely by a combination-

Distorted top line growth.
A huge jump in wage costs.
Years of underinvestment.
Profit margin is targeted at a paltry 3% , in FY18, reflecting Indian Railways’s vastly reduced fund-generation capability into focus.

Cross-subsidization:

Indian Railways’s gross receipts (revenue) in the last 20 years have been artificially aided by an aggressive escalation in freight rates even though service standards remain patchy.
Its upper-class passenger fares too have witnessed regular inflation while airlines have dropped their fares substantially in the last three-four years.
For example, air-conditioned, 3-tier fares have risen at a compound annual growth rate (CAGR) of 5% in the last five years—to about Rs2,500 for a Mumbai-Delhi trip, which is not too different from the airfare.
On the other hand, lower-class passenger fares have been static.

This system of cross-subsidization has been a key reason for the loss of market share.

Poor economics:

During FY03-FY18, India’s per-capita gross domestic product (GDP) on a purchasing-power-parity basis has grown by 200%, but the per-km passenger ticket price for second-class express trains has risen by just 20%.
Indian Railways bears sizeable losses (of about Rs34,000 crore in FY17) on account of social service obligations, mainly on lower-class passenger fare discount

Under-capacity:

The total running rail track—the key capacity bottleneck—has grown at a disappointing 0.9% CAGR since FY01. This is despite the fact that more than 40% of Indian Railways’s sections suffer from capacity utilization of more than 100%, as a result of which too many trains run on the same stretch of lines.
Congestion causes train delays and leads to overcrowding in lower-class categories.
This curbs the speed—to a sluggish 50 kmph and 30 kmph for passenger and freight trains, respectively—diluting Indian Railways’s competitiveness further.

Way ahead:

A railway regulator, if put in place, can lead the way in drawing up and implementing a fare-rationalization road map.
Improvement in facilities, higher frequency and punctuality of trains, ease of travel and transportation, and enhanced safety are essential for Indian Railways toget back volumes.
Wages that constituted 35% of gross receipts in FY08 have swelled to 62% in Indian Railways’s revised budget for FY18.
With such high fixed costs, the only way to improve financial sustainability is to augment capacities without inflating the manpower base, thus tapping the operating leverage to the maximum.
To broaden capacities, an aggressive plan to double, triple or quadruple rail lines must be drawn up and carried out.
The roll-out of dedicated freight corridors (DFC) can go a long way in easing traffic congestion, improving speeds, and reducing accidents by segregating freight and passenger trains.
By providing customized and efficient logistics services with faster and predictable transit times at low costs, DFCs can help Indian Railways in regaining lost market share.
In addition, as freight traffic shifts to these freight-only lines, passenger trains too can see service quality improvement.
Thus, work on the two corridors, Dadri-Nhava Sheva and Dankuni-Ludhiana, must be expedited.
Also, work on the four other DFC projects should be commenced soon.
Indian Railways seems to be progressing well on its multi-pronged medium-term overhaul plan with a capital investment target of Rs850,000 crore over the next five years.
However, this may not be enough for its metamorphosis, especially for capacity augmentation, given decades of underinvestment.

Conclusion:

A more potent plan to bolster revenue and efficiencies will need to be chalked out. This can be done with active private-sector participation on funding. Above suggested measures need to be and implemented aggressively.

Connecting the dots:

Indian Railway’s transformation can become a strong, profitable, reliable and publicly trusted organization. For this multi-pronged approach has to be adopted to check the constraints. Analyze.

INTERNATIONAL

TOPIC: General Studies 2:

India and its neighbourhood- relations.

Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

Effect of policies and politics of developed and developing countries on India’s interests

India-Japan relationship: Reaching its potential

Introduction:

In theory, it’s hard to find two nations that make a better economic fit than fast-growing, populous India and rich, demographically challenged Japan.

India needs technical expertise and investments to develop its infrastructure, while Japan has capital to spare and know-how to share.
They have a common strategic objective in countering Chinese hegemony in Asia, a goal that can be best met in collaboration.
They enjoy a rare historic amity, being geographically and culturally close, but not too close and, therefore, free of contentious issues such as border disputes.

Recent developments:

The two governments in recent times have worked hard to upgrade ties.

Regular high-profile bilateral visits have resulted into memoranda of understanding, some big-ticket projects, notably Japanese investment in India’s first bullet train, and political avowals to grow the economic relationship exponentially.
There are now 1,369 Japanese companies and over 4,800 Japanese corporate offices active in India.
Japan currently ranks as the third largest investor in India.

Yet to reach its potential:

The India-Japan economic relationship remains underwhelming both in relation to its potential, and to the ties that each nation shares with China.

According to Japan External Trade Organization (JETRO) data, China received about five times more Japanese investment between 1996-2015 ($116 billion) than India did ($24 billion).
Japan-India two-way trade — $13.48 billion in 2016-17 — is also a fraction of the $350 billion China-Japan trade relationship or even India-China trade ($84.44 billion in 2017).
The share of India-Japan trade in Japan’s total trade basket is barely 1% and it is a little over 2% of India’s trade with the rest of the world.

Reasons behind:

Issues that plague foreign investors in India such as inadequate infrastructure, complex tax regulations and land acquisition problems.
It takes Japanese companies in India longer than their Korean or Chinese counterparts to learn how best to localise their products for the Indian market.
Example- The Japanese tend to think that the most important element is the quality of the air conditioner so that it is able to last without the need for repairs. But in India it is cheap to have an air conditioner repaired and technicians are abundant. The consumer is therefore more focussed on cost than durability.

Challenges:

The greatest challenge is cultural: an outdated and negative image of India. He said that employees picked for jobs in India often act as though they have drawn the short straw.
The larger corporations may realise India’s potential, but small and medium enterprises are the worst culprits of this attitude.
The difference in the cultural relationship to punctuality is another stumbling block.
In Japan, being on time is akin to religion, whereas in India, punctuality rarely exists.
Japanese corporations are strongly risk averse which makes it difficult for them to cope in the freewheeling, jugaad-proud environment of India, where flexibility and impromptu decision making are necessary skills in the businesses.

Some measures:

Roping in Indian companies to develop and design Japanese products for the South Asian market could be one major way forward in deepening the bilateral engagement.
Example- The recent collaboration between Japan’s Panasonic and India’s Tata Elxsi to develop smart solutions and products for Panasonic customers in India and the neighbouring region.
The use of India as a manufacturing base for markets in Africa, a trend that is interesting to Japan’s business strategists.
Existing examples include Hitachi Construction Machinery’s joint venture with Tata whose Kharagpur plant is a hub for exports to developing countries, as well as auto major Nissan, which exports the India-made Datsun ‘GO+’ to South Africa.

Conclusion:

Overall, the G (government) to G relationship is far ahead of the B (business) to B.” Closing this distance is what is required.

Connecting the dots: