IAS UPSC Prelims and Mains Exam – 15th October 2019

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(PRELIMS + MAINS FOCUS)

Economics Nobel

Part of: GS Prelims and GS Mains III – Economy

In News

• The Royal Swedish Academy of Sciences has decided to award the 2019 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, popularly called the Nobel Prize in Economics, to Abhijit Banerjee, Esther Duflo, and Michael Kremer 
• They were awarded “for their experimental approach to alleviating global poverty”

• The experiment-based approach of the laureates involved dividing an issue into smaller and more manageable questions
• They have shown that smaller and more precise questions are often best answered through carefully designed experiments among the people who are the most affected
• In the mid-1990s Dr Kremer and his colleagues demonstrated how powerful this approach can be when they used field experiments to test a range of interventions that could improve school results in Western Kenya

• Impact on Policy

• • Research surrounding remedial tutoring provided arguments for large-scale support programmes that have now reached more than five million children in India

• • Their studies showed that deworming provides clear health benefits for school children but also that parents are very price sensitive. This led the WHO to recommend that medicine should be distributed for free to over 800 million school children living in areas where over 20% of them have a specific type of parasitic worm infection

• • Their studies paved way for heavy subsidies for preventive healthcare that have been introduced in many countries

Mother tongue for preschool

Part of: GS Prelims and GS Mains II – Education

In News

• The first-ever preschool curriculum was released by the National Council of Educational Research and Training (NCERT) 
• The NCERT’s new curriculum is aimed at all pre-school education, defined as the education of 3 to 6-year-olds, whether at anganwadis, nursery schools, kindergartens, playschools or Montessori schools.

• It recommends that Children between the ages of three and six years should be taught in their own mother tongues

• Also, the focus on learning should be through play instead of being subjected to rote learning, tests and examinations.
• The draft National Education Policy has recommended that the Right to Education Act be extended to students in the three years of preschool before Class I.

Cataract major cause of blindness above 50

Part of: GS Prelims and GS Mains II – Health

In News

• According to the National Blindness and Visual Impairment Survey of India (2015-19), Cataract is the principal cause of blindness for people above 50 years in India
• The barriers to accessing treatment include the following — no one to accompany [the patient], seasonal preferences, and financial constraints.
• Cataract is the cause for 66.2% cases of blindness, 80.7% cases of severe visual impairment, and 70.2% cases of moderate visual impairment in the age group.
• Also, blindness is more pronounced among illiterate (3.23%) than literates (0.43%) and more prevalent in the rural population (2.14%) than urban (1.80%)
• What makes this worse for India is the fact that approximately 93% of cases of blindness and 96.2% visual impairment cases in this age group were avoidable.

About Cataract

• A cataract is a clouding of the lens in the eye which leads to a decrease in vision. Cataracts often develop slowly and can affect one or both eyes. 
• Symptoms may include faded colors, blurry or double vision, halos around light, trouble with bright lights, and trouble seeing at night

SARAS Aajeevika Mela

Part of: GS Prelims and Mains GS-II – Self-Help Groups

In News

• It is an initiative by the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM).
• Its objective is to bring the rural women SHGs formed with support of DAY-NRLM, under one platform to show-case their skills, sell their products and help them build linkages with bulk buyers.
• Through this mela, rural SHG women get vital national level exposure to understand the demand and taste of urban customers.
• It is organised by Council for Advancement of People’s Action and Rural Technology (CAPART), marketing arm of Ministry of Rural Development.

Typhoon Hagibis

Part of: GS Prelims and Mains GS-I – Geography

In News

• Hagibis, which means “speed” in the Philippine language, is a super typhoon swirling around Japan.
• It made landfall in Izu Peninsula, south-west of Tokyo and moved up the east coast.
• It led to Chikuma river breaching their banks inundating residential neighbourhoods and the torrential rain triggered landslides.
• The typhoon caused a total of 48 landslides in 12 prefectures and at the storm’s peak, more than seven million people were placed under non-compulsory evacuation orders.
• After it made its landfall, a magnitude 5.7 earthquake shook Tokyo shortly after.
• Hurricanes, cyclones and typhoonsare all basically the same thing, but are given different names depending on where they appear.
  • Hurricanes are tropical storms that form over the North Atlantic Ocean and Northeast Pacific.
  • Cyclones are formed over the South Pacific and Indian Ocean.
  • Typhoons are formed over the Northwest Pacific Ocean.
  • willy-willy are formed in south-west Australia.

FASTags will work as Aadhaar, track vehicles

Part of: GS Prelims and Mains GS-II – Governance

In News

• ‘A FASTag uses Radio Frequency Identification technology to make cashless payments through a prepaid account linked to it.
• The tag is fixed to the windscreen of a vehicle and an RFID antenna in the canopy of the toll gate scans the QR code and the tag identification number, following which the boom barrier lifts to allow a vehicle to pass through it without the need for a vehicle to stop.
• A FASTag is linked to a bank account. When a vehicle passes through a toll, an SMS with date, time and place of transaction will be sent to the owner of the vehicle.
• The master data of all transactions will be with the concessionaire of the toll booth concerned, along with the bank with which the owner has registered the FASTag and the National Payments Corporation of India
• FASTags are likely to reduce the nation’s GDP loss by bringing down loss of fuel while waiting at toll plazas.
• Cameras at toll booths will take photos of passengers in a vehicle, which can be useful for the Ministry of Home Affairs as there will be a record of a vehicle’s movement.
• The Union Government has appealed to all the States to adopt the technology so that the entire system could come under the National Electronic Toll Collection programme

(MAINS FOCUS)

ECONOMY

TOPIC: General Studies 3:

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

Experimental approach to alleviating global poverty

Image: https://s3.ap-southeast-1.amazonaws.com/images.deccanchronicle.com/dc-Cover-cfguljvgh1bcoi56r407saqpo2-20191014154018.Medi.jpeg

• The 2019 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded jointly to Abhijit Banerjee, Esther Duflo and Michael Kremer “for their experimental approach to alleviating global poverty”.
• The three adopted an evidence-based approach to apply theory to real-life situations using randomised trials and assessing the outcomes.
•  The effort was to understand the impact of interventions to achieve desirable outcomes. 
• The approach is derived from the concept of clinical trials in the pharmaceuticals industry.

 “new experiment-based” approach:

• The “new, powerful tool” employed by the Laureates is the use of Randomised Control Trials (or RCTs). So if one wanted to understand whether providing a mobile vaccination van and/or a sack of grains would incentivise villagers to vaccinate their kids, then under an RCT, village households would be divided into four groups.
• Group A would be provided with a mobile vaccination van facility, Group B would be given a sack of foodgrains, Group C would get both, and Group D would get neither. 
• Households would be chosen at random to ensure there was no bias, and that any difference in vaccination levels was essentially because of the “intervention”.
• Group D is called the “control” group while others are called “treatment” groups. Such an experiment would not only show whether a policy initiative works, but would also provide a measure of the difference it brings about.
• It would also show what happens when more than one initiatives are combined. This would help policymakers to have the evidence before they choose a policy.

Critics:

• Angus Deaton, the winner of the Economics Nobel in 2015, who said “randomisation does not equalise two groups”, and warned against over-reliance on RCTs to frame policies.
• While randomly assigning people or households makes it likely that the groups are equivalent, randomisation “cannot guarantee” it. That’s because one group may perform differently from the other, not because of the “treatment” that it has been given, but because it has more women or more educated people in it.
• More fundamentally, RCTs do not guarantee if something that worked in Kerala will work in Bihar, or if something that worked for a small group will also work at scale.

Case study:

• some years ago would explain the concept better. Despite immunisation being free, women were not bringing in their children for the vaccination shot. 

• The two MIT economists decided to give a bag of pulses free to women who brought their babies for vaccination. 

• Word soon spread and the rate of immunisation shot up in the region.

Conclusion:

• Governments across the world, including in India, spend big money on social schemes without the vaguest of ideas on whether their objectives have been met. 

• The field-work based approach that these economists have perfected has revolutionised the field of development economics and made it more relevant in policy making. 

• The government would do well to borrow from the research of these laureates to understand the impact of its several schemes, and where necessary, tweak them to derive maximum benefit for the thousands of crores of rupees that it spends.

Connecting the dots:

• New experiment-based approach has transformed development economics. Justify

ECONOMY

TOPIC: General Studies 3:

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

Financial stability and the RBI

Context:

• The slowing of the economy suggests that the central bank’s stance on inflation may have impacted growth

Recent measures taken by MPC:

• The Reserve Bank of India (RBI) cut the repo rate or key lending rate by 25 basis points while maintaining an accommodative stance. 
• The reverse repo rate was reduced to 4.9%.
• The Monetary Policy Committee (MPC) also cuts GDP growth forecast for the current fiscal year 2019-20 to 6.1% from 6.9% earlier.
• A repo rate cut allows banks to reduce interest rates for consumers and lowers equal monthly instalments on home loans, car loans and personal loans.
• Central banks around the world are loosening monetary policy to offset a global slowdown made worse by U.S.-China trade tensions
• RBI will take a fresh look at cooperative bank regulations and take it up with the government
• The RBI has allowed domestic banks to freely offer foreign exchange (forex) prices to NRIs
• The continuing slowdown warrants intensified efforts to restore the growth momentum.
• On the crisis in the Punjab & Maharashtra Cooperative Bank (PMC), the RBI governor said one incident cannot be and should not be used to generalise the health of the co-operative banking sector.
• PCA (Prompt Corrective Action) is an opportunity for the bank to correct itself.
• Appealed members of the public and all depositors that our banking system remains sound and stable, there is no reason for unnecessary panic.

• RBI has decided to create a separate category of NBFC, viz., Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI).

• It acknowledged “the negative output gap has widened further”

Negative output gap:

• A negative output gap indicates surplus capacity in the economy. A widening of this gap means the industry is unable to use much of its capacity due to poor demand.

What is Prompt Corrective Action?

• To ensure that banks don’t go bust, RBI has put in place some trigger points to assess, monitor, control and take corrective actions on banks which are weak and troubled. 

• The process or mechanism under which such actions are taken is known as Prompt Corrective Action, or PCA.

Present scenario:

• Inflation is well within the target giving space to the RBI to focus on growth

• Crude oil prices are back in the comfort zone, retreating from the spike in mid-September, and food prices are projected to remain soft on the back of a good monsoon.

Central bank in west:

• Reflects two things: the political power of financial interests in the U.S. economy and the global intellectual influence of the American economic model. 
• This model revolves around the goal of maximum creation of wealth by private individuals unimpeded by societal objectives. 
• No equal distribution
• The objective of ensuring stability of the economy is allowed to come in the way of private individuals pursuing wealth enhancement.
• This model requires of the government only one action, namely, the control of inflation.

Inflation:

• Unanticipated inflation is the problem for producers, as it has the potential to derail their profit calculations. 
• If fully anticipated, can harm holders of financial assets yielding fixed incomes by eroding their wealth.
• Borrowers on the other hand are better off with inflation as the real value of their outstanding loans is now less. 
• This can be tackled through inflation-indexation, the practice is not widespread. This leaves owners of financial wealth averse to inflation.

Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation, while deindexation is the unwinding of indexation.

Inflation control:

• When inflation control is implemented via monetary policy it results in higher interest rates. 
• Managers of financial wealth lobby for such a policy on behalf of their clients. 
• This lobbying is the origin of the policy of inflation targeting.
•  Inflation targeting by the central bank involves use of the interest rate to keep inflation under control.
•  it let go of the employment objective and central bank is not accountable for unemployment
•  in situations where growth, employment and inflation are jointly determined, inflation-targeting via the interest rate can lower inflation only by suppressing growth 
• This is the mechanism by which inflation-targeting inevitably lowers growth.

Way forward:

• Public regulation, which sets limits to private activity, is rejected as an unnecessary interference in beneficial activity that maximises social gain, and is therefore to be avoided

Conclusion:

• Governments across the world, including in India, spend big money on social schemes without the vaguest of ideas on whether their objectives have been met. 
• The field-work based approach that these economists have perfected has revolutionised the field of development economics and made it more relevant in policy making. 
• The government would do well to borrow from the research of these laureates to understand the impact of its several schemes, and where necessary, tweak them to derive maximum benefit for the thousands of crores of rupees that it spends.

Connecting the dots:

• The slowing of the economy suggests that the central bank’s stance on inflation may have impacted growth. Analyse

(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”.
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Q.1) FASTag often seen in the news is related to which of the following area?

1. Tiger census
2. E-governance tracking
3. Toll collection
4. None of the above

Q.2)Consider the following statements about SARAS Aajeevika Mela

1. It is an initiative by the Deendayal Antyodaya Yojana-National Rural Livelihoods Mission (DAY-NRLM).
2. Its objective is to bring the rural women SHGs formed with support of DAY-NRLM, under one platform to show-case their skills, sell their products and help them build linkages with bulk buyers.
3. It is organised by NITI Aayog in collaboration with NABARD and state governments

Which of the statement(s) given above is/are correct?

1. 1 and 2 only
2. 2 and 3 only
3. 1 and 3 only
4. 1,2 and 3

Q.3)Consider the following statements about The Sveriges Riksbank Prize in Economic Sciences

1. Sveriges Riksbank (Sweden’s central bank) established the Prize in Economic Sciences in 1968, in Memory of Alfred Nobel, founder of the Nobel Prize
2. The 2019 prize was awarded to three scholars for their experimental approach to alleviating global poverty

Which of the statement(s) given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

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