IASbaba’s TLP 2016 [29th February]: UPSC Mains GS Questions [HOT]: Synopsis

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IASbaba’s TLP 2016 [29th February]: UPSC Mains GS Questions [HOT]: Synopsis

1. New Delhi should dwell on the lessons from the recent deterioration of ties and on the need of a calibrated position that supports inclusive democracy in Nepal yet doesn’t amount to interference. Analyze.

• Introduction

Write briefly about

1. Historic and cultural ties
2. Political ties
3. Friendship treaty
4. Strategic importance of Nepal

• Body

1. Recent promulgation of constitution of Nepal
2. Problems of Madhesis and Janjatiyas
3. India’s stand and the ensuing diplomatic stand off
4. Limitations of the Indian stance
5. Problems of democracy in Nepal
6. Role of Nepali media and Indian media
7. How India can help in sustaining the democracy in Nepal and making it inclusive

• Conclusion

1. Suggest measures for creating a inclusive democratic polity in Nepal
2. What India can offer for the process without appearing intrusive

Best Answer: CSE2016 aspirant

India and Nepal have shared good relationship in the past which is characterised by cultural similarities, open border and fostering of economic ties. Recently, there has been slight deterioration in the relationship on account of blockade from Indian side to protect Indians from Madhesi threats. Subsequently, Anti – Indian sentiments grew in Nepal.

Why relationship with Nepal is important?

(1) Angering Nepal will be harmful for internal security of India. Already, there is widespread smuggling, drug peddling, trafficking taking place across border.

(2) India needs to boost trade with Nepal. It is one of major importers of Indian goods.

(3) Nepal is strategically important for India. It forms the buffer between China and gangetic plains. Good relationship with hinder the movement of China in case of any attack.

Advantages of inclusive democracy in Nepal for India.

(1) Nepal is new to democracy. On the account of being so called elder brother, India needs to support Nepal in proper implementation of democracy which is based on proportional representation.

(2) Absence of vulnerable tribals in parliament will lead them to rebel. Rebels can lead to security issue as was observed in past months (Madhesi blockade the movement of good from India to Nepal and their were several killings.)

(3) Further, rebellions will lead to political instability which is not good for the regions adjoining Nepal.

Why should India not interfere excessively in Nepal ?

(1) Freedom and decisions made by people of Nepal need to be respected. Unnecessary imposing demands on change in their constitution is going to increase the anti – Indian sentiments.

(2) Indian reputation in international arena will go down.

(3) It is also against directive principles of constitution, which states that India should respect the sovereignty of other nations.

Hence, considering various advantages of cordial relationships with Nepal, calibrated approach is required

2. What do you understand by the term cashless economy? What is its significance for a developing economy like India? Discuss.

Cashless economy:

A cashless economy is an economy where there is no or negligent cash flow. Transactions are through electronic medium. Like usage of debit cards, electronic fund transfer, net banking, credit cards etc. Use of cheques, DDs etc are also part of a cashless economy.

Significance:

1. Curbs black money, money laundering and promotes transparency.
2. Efficiency of monetary transactions in social welfare programmes will be improved.
3. Environmental benefit as decrease in printing of money.
4. Employment generation in the sector.
5. Save time and also decrease cost of banking infrastructure development in rural areas.

Hurdles:

1. Cyber attacks, phishing, hacking, security issues to consumers sensitive data.
2. 60% of the population in villages highlights a huge digital divide and illiteracy.
3. Low banking penetration and low level of knowledge in technology.
4. Lack of skilled personnel for maintenance of database.

Conclusion:

1. Penetration of NOFN, Digital India.
2. Financial inclusion by JAM etc.
3. India’s cash to GDP ratio is 12% that is one of the highest and much above China and Brazil.
4. Sweden is a leading example of a cashless economy having nearly 45% of its currency in virtual form.
5. Grass root level problems need to be addressed first considering only 10% of the population has access to internet connectivity.

Best answer: pk

A cashless economy is a system where flow of cash or physical currency is non-existent and all monetary transactions are done electronically via internet enabled banking or wallets, and debit or credit cards, at most abolishing or at times reducing physical presence between two transacting parties . Such transactions can be purchases, bill & utility payments and clearances or transfers .

The benefits of a cashless economy for India, emboldened by increasing internet penetration and rapid push from the State are many.

1. Economic –
Check on grey economy- visible source and destination will increase tax compliance and decrease money laundering and black money transactions.
Reduces money idling .
Increase in GDP by 0.8% (Moody’s) where as cost of running a cash based economy is 0.25% of GDP at present.
2. Statistical & Policy importance –
more accurate data shall improve GDP, GNP calculation ;
better policy & planning by monitoring consumption and expenditure patterns .
3. Cost benefits –
reduced cost of minting currency ;
reduced Operation Cost for banks for ATMs, staffs, computers, logistics etc.
A RBI report suggests that banks bear ? 1500+ crores in maintaining ATMs alone.
4. Ecological benefits –
less use of paper, plastic, metals through decreased use of forms, documentations, minting, cheques, receipts etc.
Lesser movement of individual and cash means lesser fuel consumption.
5. Individual benefits – Reduced transaction time; Small ques; no cash-out worries during holidays or strikes; Safety.
6. Administrative advantage –
Lesser crimes like burglary, robbery due to minimised cash handling will help better police utilisation.
7. Social Benefits –
Schemes like DBT ensures no leakage and avoid corruption .

However, of all the transactions in Indian economy cashless transaction accounts to only 5% . The major reasons being –
1. Lack of universal banking
2. Infrastructure shortage like PoS terminals at shops in small towns and villages.
3. Illiteracy and digital illiteracy
4. Lesser internet penetration
5. Aversion to electronic transaction due to of fear of Cyber fraud etc

The establishment of NPCIL, initiatives like IMPS , easing norms for establishment of private payment gateways by RBI are steps in right direction. The RBI, meanwhile has been highly customer focused by sticking to 2 way authentication for security.

3. Would it be ideal to roll out DBT for fertilizer subsidies? Discuss the pros and cons of DBT in this regard? What are the operational challenges? Discuss.

Government thinks it is not ideal – (Kindly note: Pick any one point for introduction)

• Right now, the fertilizer subsidy is a producer subsidy; a system where farmers get cash will necessitate a revamping of the existing model, which is not something the government is getting into right now.
• The first requirement for (Fertilizer) DBT is a system to track the movement of every bag of fertilizer, right from the manufacturing plant or port of import till the last-mile point of sale to the farmer. Since, there is no proper tracking system, it seems rolling out DBT is not ideal.
• The next step is to capture transactions from the retail level to the farmer. For this, we need to build a farmers’ database and enter it in a centralised system. Lack of database and such system makes it not ideal to roll out DBT for fertilizer subsidies.
• While it might be relatively easy to roll out cash transfer programmes in well-administered and largely urban areas, that may not be the case in states with large rural areas and where governance systems are weak.

But at the same time, many experts and recent Economic Survey strongly recommend that rolling out DBT for fertilizer subsidy to farmers as an eminently feasible proposition, as this is an area which will yield the biggest saving to the government and the largest spending push.

Pros – (Pick 3-4 points)

• Fertilizer DBT (similar to other DBTs) helps the government to save billions of rupees by plugging the leakages, improving the efficiency and reduce the amount of subsidy.
• There could also be a multiplier effect, with households spending the extra income on productivity-enhancing activities like purchasing nutrients for livestock, nutrients for farms and productive assets. The demand will also spur the local economy to supply what people will want to buy.
• There could also be another multiplier effect in terms of government spending. At least part of this could get channelled into spending on infrastructure, which will also have a trickledown effect. (Fiscal Consolidation)
• Plug diversion of urea for non-agricultural uses as well as to neighbouring countries.
• Promotes financial inclusion, improves savings and related schemes.
• Fertilizer industries could be deregulated and global standards in the functioning could be achieved.

Cons – (Pick 3-4 points)

• The benefits will be reaped by the well educated and rich farmers and poor, illiterate farmers may suffer and left out.
• Deposits in bank account will lead to increase in liquidity (by means of credit) in market, thus leading to Inflation.
• The cash transferred may be misused by using the money for drugs, alcohol and gambling defeating the purpose of scheme.
• Poor banking facilities may increase the problems of farmers and loss of time in availing the money.
• Farmers will have to buy fertilizers at market price so will actually have to spend more money first and all cannot pay market prices in advance.

Operational challenges (Pick 3-4 points)

• Identification of beneficiary farmers as in many states the land records are neither accurate nor updated
• Significant part of cultivation is today done by tenant farmers or sharecroppers not owning the land and without any formal lease agreements.
• Capturing the details or identity proof of buyer’s such as Aadhaar Number or land details at retail fertilizer stores in order to build a comprehensive database of beneficiary farmers
• Besides creating a robust data capture platform, DBT would require retailers to have wireless devices with bank connectivity and facility for farmers to swipe smart cards for claiming subsidy.
• There are also issues related to the financial infrastructure that is to be put in place. Bank branches may have been opened and Jan Dhan accounts created but banks are just not equipped to handle the additional work pressure that even pilot programmes will entail. Seeding of bank accounts with Aadhaar and payment gateways are still problematic.

Despite these, DBT in fertilizer sector could bring much needed reforms in the sector.

However, when designing DBT, caution should be exercised in drawing lessons from the LPG case, as recommended by economic Survey.

Best answer: Bhawana

Government is embarked on rationalizing subsidies as has been seen in LPG subsidy which saved thousands of crore of government exchequer. Now it is pondering on rolling out DBT for fertilizers as has been mentioned in recent economic survey. A good step indeed but still debatable because of some proposed difficulties its in execution.

Pros of DBT in fertilizer-

*It would be beneficial for minimizing the use of fertilizer which would check degradation of soil nutrients and would prevent water contamination.

*Farmers would free from moneylender’s debt trap as now they would have secure money in their bank accounts. It would be helpful for inculcating saving habits also in farmers.

*Released government control on the fertilization market would drive competition and would enhance productivity.

*Enhanced financial inclusion and financial literary will give boost to digital India and skill India.

*No middlemen> no leakage>benefits to the needy>correct use of tax payer’s money (redistribution of wealth)

*Less burden on government exchequer>fiscal consolidation target>money transferred in job creation and infrastructure development.

However cons are to be equally considered like-

*More money in hand may lead to misuse like in drug, alcohol, unnecessary shopping or gambling etc.

*May further widen the gap between big farmers and small farmers.

*Bio-identification can be detrimental for the personal information of farmers if not properly handled.

Operational challenges-

*Management of data whether it may be of land, of status of farmer(landholder, tiller or tenant etc) or pertaining to agriculture practice is not up to the level in our country.

*Though crores of accounts are opened but still there is a good number of people who are unbanked.

*Some farmers have little knowledge about banking system so they can fall prey of undue interference.

DBT is good but subsidy itself has to be restructured by inclusion of needy and exclusion of well-of. Gradual phasing out of unnecessary subsidies would release fund for more productive investment and would help in fulfilling international commitments.