IAS UPSC Prelims and Mains Exam – 10th April 2019

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(PRELIMS + MAINS FOCUS)

IMF forecasts dip in global growth in 2019

Part of: GS Prelims and Mains II and III – International Organization; Economy related issues; Development and Growth

In news:

• IMF has projected that global growth will be 3.3% in 2019, down from 3.6% in 2018 and 4% in 2017.
• This lower projection is due to a slower global expansion in the second half of 2018 caused by U.S.-China trade tensions, macroeconomic stress in Turkey and Argentina, tighter credit policies in China and financial tightening, apart from a normalisation of monetary policy in advanced economies.
• The IMF expects growth to pick up in the second half of the year driven by an accommodative policy stance in advanced economies, the prospects of an easing of trade tensions between the U.S. and China, and a ramped up fiscal and monetary stimulus by China to counter the trade war’s effects.
• Global growth is therefore expected to return to 3.6%, but this is subject to a rebound in Argentina and Turkey and certain emerging market risks not manifesting.
• Brexit uncertainties and China’s growth not being as high as expected are risks that will impact these projections.

IMF on India

• India’s growth is projected to pick up, from 7.1% in 2018, to 7.3% in 2019 and 7.5% in 2020.
• Reasons – continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy

Global growth beyond 2020

• According to IMF, global growth is expected to level out at 3.6% over the medium term, driven by a moderation in expansion in advanced countries (caused by a weak productivity growth and a slow labour force growth) and the stabilisation of emerging market expansion at 2020 levels.
• Advanced economies are expected to slow down to 1.6% growth by 2022 and remain at that rate thereafter.
• For emerging markets and developing countries, growth is expected to steady at 4.8% over the medium term and given that these groups are growing faster than advanced economies, their contribution to global growth is expected to increase from 76% to 85% over the next five years.
• China is expected to slow down to 5.5% by 2024 as it moves towards increasing private consumption and services and regulatory tightening.
• India’s growth is expected to stabilise at 7.75% over the medium term, driven by structural reforms and the easing of infrastructure bottlenecks.

Suggestions:

• In terms of policy priorities, the IMF has called for a “continued implementation of structural and financial sector reforms” in order to lower public debt and aid growth.
• Specifically, it says a continued fiscal consolidation is needed to bring down public debt, strengthening goods and services tax compliance and lowering subsidies.

Maoist-prone Odisha districts put on alert

Part of: GS Mains III – Security issues; Internal Security; Extremism

In news:

• Collectors, superintendents of police (SP) and candidates contesting elections in Maoist-prone Odisha districts have been alerted, in the wake of the Maoist landmine blast in Dantewada district that killed five persons, including a MLA.
• Malkangiri, Koraput, Rayagada, Nabarangpur, Kalahandi, Nuapada and Gajapati districts have Maoist presence and border Maoist-prone regions of Chhattisgarh and Andhra Pradesh.
• The Border Security Force has been entrusted with election security duty in Odisha for the first time.

Jurisdiction no bar in dowry harassment case

Part of: GS Mains II – Women Issue; issue with vulnerable section; Role of Judiciary

In news:

• The Supreme Court recently held that a woman can file a case of dowry harassment under Section 498 IPC against her husband and in-laws at the place where she is currently sheltered.
• The above judgment is another example of court’s expansionary jurisdiction to provide relief to victims of dowry harassment.

Centre denies RTI plea on CIC appointments

Part of: GS Prelims and Mains II – Polity and Governance issues

In news:

• Despite a recent Supreme Court order mandating that information on CIC appointments must be made public, the Centre has denied a RTI request for the same.

Do you know?

• The CIC is the RTI Act’s highest appellate body.
• SC had directed the Centre and States to pro-actively disclose all information regarding the recruitment advertisement, the particulars of the applicants, the search and selection committees and the criteria for short-listing candidates on their websites.

Miscellaneous

India becomes YouTube’s largest and fastest growing market

• With substantial growth in India’s internet coverage and data growth, the country has become YouTube’s largest and fastest growing market with 265 million Indians watching the video-sharing website every month.

(MAINS FOCUS)

AGRICULTURE/ECONOMY

TOPIC: General studies 3

• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
• Agriculture Development
• Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

Agriculture needs a shift in focus

Context: Agriculture in India

• Agricultural development in post-independence India started as a response to food shortages. Green revolution was designed to meet this challenge. Serious efforts were taken to increase production and productivity.
• However, even after India became a net exporter of foodgrains, the mindset continued and food security remained central to agricultural planning.
• Later, major policy initiatives were introduced, for instance, expansion of the PDS, price controls, export bans and the use of Essential Commodities Act.
• Any adverse impact of the weather on agriculture production triggered immediate responses from the government.

However, centrality of food security in policy planning took away the freedom and a substantial portion of the income due to the farmer.

While some freedoms were taken away by law, others were influenced by a complex regime of financial incentives.

Surpluses have become the recent worry. (For example, Sugar)

The current agriculture export policy is severely limiting. It still has an underlying domestic price control bias in it.

• Government aims to double farmers’ income by 2022.
• Policy focus needs to shift from food security and pro-consumer bias to a pro-farmer bias.
• The time has come to make farmers’ income and prosperity the central theme of agricultural planning for the future. And this requires a paradigm shift in thinking and planning.

Measures need to be taken for paradigm shift in Agriculture:

• Designing the agricultural policy to focus on the best returns a farmer can get from his land.
• Reforming the market and removing almost all restrictions: EC Act, APMC Act, movement across states, most of the export restrictions, etc. There is need to make e-NAM and the village markets deliver for the farmers. If there is an occasional shortage, we can resort to ‘calibrated’ imports.
• Shift from a strategy of production-chasing demand and work on a decentralised model where farmers can produce to the market, not only in terms of aggregate demand, but also in terms of the various segments, time and geographies.
• Creating reliable information systems on market demands.
• Restructuring of ICAR: Changing the main objective of ICAR to focus on ‘best returns for farmers’. ICAR has done well to increase productivity and get India out of food insecurity. However, Agri-education and Krishi Vigyan Kendras eat up most of ICAR’s budget, leaving little for futuristic research. R&D for a new India needs to be focussed on the future. This might involve a major restructuring of ICAR and creating space for private R&D.
• In order to tackle challenges posed by weather and climate variability, efforts should focus on micro-climate-based strategies and crop diversification.
• The subsidy regime needs to undergo major structural changes. Investments for sustainable agriculture have to take precedence over natural resource depleting subsidies.

Conclusion:

Less of government institutions and more of farmer-led institutions will be the key.

While India’s capabilities of forecasting weather- and climate-related events have improved significantly over time, the challenge is to get more reliable forecasts at the micro level on time. Private sector has developed capabilities for doing this on the ground and from the sky. What seems to hold them back is appropriate revenue models. This needs to be fixed.

New technologies can have a disruptive influence in the agri-sector. While fintech and food-tech are the frontrunners, agri-tech may play a larger role in the future. Their potential needs to be understood and space created for their effective engagement with farmers.

Connecting the dots:

• Discuss the challenges being faced by the agricultural sector in the area of marketing of agricultural produce. Can the eNAM project address these challenges? Examine.
• Do you think various agricultural extension schemes make a difference for Indian farmers? Substantiate with the help of suitable examples.

ECONOMY

TOPIC: General studies 3

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

How critical are household savings for the economy?

Introduction:

• “Households” is a heterogeneous group and includes resident households, non-profit institutions, and unorganised and unregistered enterprises.
• The household savings rate is the difference between a household’s disposable income and expenditure.

Importance of Household Savings for the Economy

• Households savings are very important part of macro-economy and for GDP growth as household is the only segment that is the net financial surplus sector in the economy. All other segments, namely public sector, private sector and general government, are in deficit.
• 8% of households’ savings in FY18 were in financial assets, followed by physical assets (48.1%) and gold/silver ornaments (1.1%).
• Deposits with banks are the single largest form of households’ financial assets, followed by insurance funds, mutual funds and currency.

Therefore, any adverse movement in the household savings will have a significant bearing on banks, insurance companies and mutual/provident funds, who, in turn, are key investors in government securities.

Concern: Declining Household Savings

• India’s overall savings rate has declined to 30% from 34.6% over five years.
• The worst dip was seen in the household sector, the largest contributor to savings in the economy, dropping to 16.3% from 23.6% over the period.
• Savings are indicative of how much the people of a country are likely to invest because more the savings, more the investment.
• Households contribute more than half the total savings in the country, followed by private corporations and the public sector.
• The impact of demonetisation and GST was the most on household sector as investments from MSMEs took a hit.

If household savings continue to decline, it may pose a serious challenge to the GDP growth and macroeconomic stability.

Conclusion:

• To boost savings, there needs to be an improvement in access to finance for households across the country.
• There is a need to make households trust financial markets so that savings can move from physical to financial assets which would generate better returns.

Household savings are mostly intermediated by banking and other non-banking financial entities, which are the major source of investment funding in India. So, a further drop in household savings can impact the economy.

Connecting the dots:

• Household savings are important for the economy. Can you suggest certain policy provisions which can be designed to achieve that end? Discuss.
• Why having a healthy household savings rate is essential for a developing economy. Where does India stand on this front? Examine.

(TEST YOUR KNOWLEDGE)

Model questions: (You can now post your answers in comment section)

Note:

• Featured Comments and comments Up-voted by IASbaba are the “correct answers”.
• IASbaba App users – Team IASbaba will provide correct answers in comment section. Kindly refer to it and update your answers.

Q.1) Consider the following statements with regard to India and IMF:

1. India is the founder member of the IMF and also among the top 10 members of IMF
2. India was among the first five nations having the highest quota with IMF and due to this status India was allotted a permanent place in Executive Board of Directors.

Which of the statements given above is/are correct?

1. 1. 1 only
   2. 2 only
   3. Both
   4. None

Q.2) Which of the following agencies releases “Global Economic Prospect report”?

1. World Bank
2. World Economic forum
3. IMF
4. OECD

Q.3) Which of the following Central Armed Police Force has the motto, “Duty Unto Death”?

1. CISF
2. CRPF
3. ITBP
4. BSF

Q.4) Section 498A of IPC has been in the news for quite some time for its increasing misuse. It deals with which of the following cases?

1. Domestic violence
2. Sedition
3. Anti-National Activity
4. Martial Law

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