SYNOPSIS: Insights Secure Q&A April 11, 2016
SYNOPSIS: Insights Secure Q&A April 11, 2016
This is a new feature. As feedback from our side on your answers is missing, we thought of providing detailed synopsis of important Secure questions on daily basis so that you could revise our synopsis and compare it with your answers. We intend to post synopsis of Secure questions every next day of posting questions on website.
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General Studies – 1;
Topic: Population and associated issues
1) India stands next only to China in the prevalence of diabetes, and contributes nearly one-sixth to the global disease burden of 422 million. Discuss the factors contributing to rise in prevalence of diabetes in India, its effect on population and economy, and measures needed to prevent this disease. (200 Words)
Factors contributing to the rise of Diabetes:
- increased consumption of sugar rich,refined and processed food products
- longevity and population growth make people vulnerable
- central adiposity i.e,, accumulation of fat around the abdominal area and obesity increase are the most important factors
- sedentary lifestyles and steady urban migration
- genetic susceptibility make Indians more vulnerable
- occurence of Diabetes in rural population is 1/4 th of the urban population.
Effect of Diabetes On population and economy:
- It is one of the major causes for disability in adults
- Costly treatment leads to huge out of pocket expenditure .poor people spend on an average 25% of their income on private care.
- Heart disease and strokes are linked to diabetes.
- Huge loss to economy as expenditure is $ 73 billion dollars.
- threatens productivity of work force,economic growth and national income
- It reduces peoples employment chances and wages around the world.
- Huge stress on insurance companies.
- Dietary changes and physical activity are very effective at treating gestational diabetes.
- early detection of pre diabetes when blood sugar level is higher than normal and regular check of sugar levels in blood.
- public awareness about the magnitude of the problem
- Eating healthy food like fruits,vegetables and avoiding junk food.
- Indian health policies need to give an impetus to this disease as so far there is no comprehensive policy on it.
Topic: Salient features of Indian Society; Poverty and developmental issues
2) Since pre- Independence days, many arguments are made for and against imposing prohibition in India. Discuss these arguments and examine if it’s feasible in today’s India to impose prohibition. (200 Words)
Prohibition seeks to ban the production and consumption of alcohol in an attempt to control the social consequences of alcoholism.
pros of prohibition:-
- Prohibition of alcohol limits and/or prevents alcohol addiction. There is a direct correlation between alcohol consumption and an increase in crime. Violent crimes, domestic violence,rapes ,assault, and disorderly conduct are most common with persons who are intoxicated.
- Health: Alcohol, especially in large quantities, can damage people’s kidneys and livers, and can eventually lead to death. According to WHO 6.2% of all male related deaths globally are alcohol related.
- poor people especially men spend most of the money on alcohol leading to deprivation in the family and lack of education for the children etc..prohibition leads to savings in the family.
- relationships get strengthened and social bonding in the family also improves . Psychological studies have shown that a large number of children from alcohol abuse families face problems like loneliness, guilt, fear of abandonment, low self-esteem and chronic depression
- Religion: Some religions (such as Islam, Mormonism, and some Pentecostal Christians) expressly forbids the consumption of alcohol.
Reasons Against Prohibition:
- Freedom of Choice: People should have the freedom of choice to decide to drink alcohol or not, as long as that freedom does not infringe on the freedoms of other people.
- Underground or Black Markets:
- High demand will lead to illegal business
- bootlegger tends to adulterate drink with other ingredients which results in an almost toxic commodity.
- Safety: Alcohol made without government regulations and inspections pose a possibly serious health and safety risk to consumers.
- Economy: Prohibiting alcohol leads to loss of taxes and legitimate jobs and a major source of revenue which can be used for public services
- Decline in Tourism – The ban on alcohol has a great impact on the number of foreigners visiting the country. During the year 2010 – 2011, around 27% foreigners visited Gujarat but it declined drastically by 5% in the year of 2011 – 2012. The tourism sector of Kerala is also largely affected by the ban on alcohol
- Organized Crime: Criminal organizations will mostly profit from prohibition and, that in return, will promote other illegal activities. And that will organize criminal organizations even more.
- Society: In most cultures and religions, social drinking is an acceptable practice like the tribal custom in India
- Banning alcohol consumption also increases corruption. In Kerala, to avoid prohibition of alcohol law the bar owners argued that they had paid crores of rupees in the form of bribes to various leaders.
- There are some health benefits by alcohol consumption as well like lowers the risk of gallstones, destroys Helicobacter pylori infection that causes ulcer etc..
It is not feasible to impose prohibition in India at present as seen from below:
- Kerala banned liquor in a graded way i.e restricting the provision of liquor to be served only in five-star hotels which led to shut down of 700 liquor shops and loss of employment but permits the consumption of beer and wine makes it an ardent task to shut down the liquor industry.
- Using prohibition as an electoral promise only to be compromised later made it an aspect of vote bank politics.
- Despite Gujarat banning alcohol smuggling and illicit sale of alcohol are very common.
Before prohibition other measures like empowering women economically,awareness to people about health issues,strong political will without corruption and strong government administration are needed
General Studies – 2
Topic: Important International institutions, agencies and fora- their structure, mandate.
3) Many arguments are made for and against Britain’s ‘Brexit’. One such argument is that Brexit would lead to fragmentation of EU. Are small states or city-states better compared to large super states when it comes to managing economy and overall prosperity? Analyse. (200 Words)
How will Britain lead to EU fragmentation?
- Given the UK’s role, alongside France, as the key force in European defense and a significant authority in world affairs, particularly with regard to climate- and development-related issues, the prospect of a genuine split should be a source of serious concern for the EU.
- Exit of UK can be taken as an excuse by any EU countries and lead to its fragmentation because of the following reasons:
- European Union’s economic crises of the last half-decade have fueled the emergence of a deep divide between the northern creditor countries and the southern debtors. Now Europe’s migrant crisis is creating an east-west divide between the countries that are welcoming toward the ongoing influx of refugees, and those who want to do little, or nothing, to help.
- Development of financial crisis evolving into an unemployment crisis and the austerity measures applied by governments across the continent have created a gap between the voters and the traditional elites, which explains the emergence of Euro-skeptic parties, nationalist parties and protest parties
- during emergencies debate over using investment — or using reform and austerity measures — to boost Europe’s failing economies is at the core of the current crisis.
- differences in opinion about financial spending like pumping more money or going for structural reforms.In Greece bailout germany and france have antagonistic views between going for austerity measures or going for structural reforms.
- refugee crisis is all the more challenging in view of EU member countries’ internal political fragmentation.A clear division between a refugee-friendly west and a closed east would effectively end the Schengen Agreement, because the political disagreement would harden into a physical barrier blocking the free movement of people within the EU. Such a split would be as damaging to Europe’s cohesion as a divided eurozone.
- Rise of secessionist movements in Scotland and Spain.
- populist fragmentation—a rift between the elites and the people—as evidenced by the success of nonmainstream parties in the 2014 European Parliament elections.
- differing trends of growth and competitiveness have raised the possibility of an economic decoupling within the EU in which countries—rather than converging under a common currency—would follow different paths, ultimately breaking the currency regime.
- The rejection of any form of supra-nationalism exemplified by Brexit could also further increase cross-border bail-out fatigue in particular in the Eurozone.
- Brexit could therefore have very severe political ramifications for the rest of the EU, even if the immediate economic effects remain modest.
- The EU without the UK would be an even more impaired regional and geo-political player than the current EU, which already punches far below its economic weight as regards regional and global diplomatic, strategic, security, and military matters.
Smaller states/city states:
- local governments know about their people’s needs than distant central governments so the best system was one where local governing units-city states.they offered different packages of taxes and public services.
- Easier management of economy,resources leads to development.
- Success of city states of Singapore, Hongkong show the case.Despite being small in size the standard of living and the efficiency in administration is tremendous in this case.
- fragmentation was successful in the past. competition between small countries in europe allowed it to get a head start on unified china in industrial revolution.in this context brexit would be good not just for britain but for all of EU
- doesn’t always lead to well-functioning system.With city states the private sector either cant or wont provide public goods which are traditionally supplied by the government.examples are courts,police etc.
- lack of armed strength to deal with adversities because of their size.
- many of the other public services like roads,ports and electrical grids are usually in short supply when left to the private sector.
- Governments don’t always often have the right incentives in this system.some governments may decide to increase the size of their tax bases.others might care about the welfare of the citizens.no perfect type of local government and this makes it from being economically efficient.
- Very hard to coordinate between city states as one little local government concerned about preserving open space might be able to veto a cross continental highway that would boost economy.
- City states might just decide to conquer their neighbours returning us to the world of empires.this was what happened in Europe ,china once they fragmented.
- diversified societies and diversified economies interdependency brings in huge economic benefits.
- Also the transaction costs also can be curbed with free movement available which was not the case earlier.
- Increases the strength of the state and its international profile.
- one shoe fits all approach doesn’t fit. As some compromises need to be made by one group or the other leading to rise of insecurities.
- In diversified economies it makes it difficult to have a same monetary and credit policy common for all economies as every economy might be different and when one economy has a positive impact other might plunge downwards. EU is facing this crisis right now.
So it is not about the size of the state its more about the efficiency with which the administration and governance are carried on.
Topic:Effect of policies and politics of developed and developing countries on India’s interests,
Meaning of tax haven:
- A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment.
- Tax havens also provide little or no financial information to foreign tax authorities.
- Individuals and businesses that do not reside in a tax haven can take advantage of these countries’ tax regimes to avoid paying taxes in their home countries.
- Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies.
- In Panama, there are firms that can help set up a company within 48 hours and provide nominee directors/shareholders
Threats posed by tax havens:-
- loss of Huge tax revenue for governments as low or no effective taxation on income or wealth. along with erosion of Tax base.
- In tax havens, sellers and buyers of corruption and organized crime conceal their financial assets. As places of money-laundering, tax havens support criminality and corruption
- leads to increase in black money which can be used for developmental purposes and eradicate poverty.
- minimal disclosure requirements may lead to Terror financing can be done from these places .
- ease of setting up companies/trusts/foundations, , the possibility to hide beneficial ownership
- round tripping and transfer pricing problem like the case of vodafone in India .
why actions against tax haven has not been successful:-
- Authorities designing rules in the fight against such tax havens also took advantage for diverse motives, whether for tax avoidance/evasion, masking conflict of interest, or for corrupt practices and money laundering.
- the utility of agreements by tax exchange information and DTAA in discouraging tax havens from offering their services, or for foreign clients from using their services, and gaining meaningful information is rather limited.
- OECD mechanism of information sharing has been signed with only 4 tax havens.
- difficult to handle them as tax havens are numerous, have grown in importance, and are the routes through which half of international trade now takes place.
- Apart from high-net-worth individuals, tax havens are liberally used by multinationals and their army of accountants and lawyers for tax planning and transfer pricing.
- Panama papers prove the ease with which companies can be formed in jurisdictions which make a mockery of the concept of separate corporate existence.
- in India provision in the Income Tax Act in Section 94A to deal with jurisdictions that do not effectively exchange information is there but So far, only Cyprus has been notified.
- Some appeasers feel as tax havens like Mauritius bring the largest FDI to India and india is only benefitting from it.
Topic: Effect of policies and politics of developed and developing countries on India’s interests,
Positives of single global currency:
- wouldn’t be subject to exchange rate fluctuations because there would be no competing currencies to exchange against
- Consumers would not have to change money when travelling and would encounter less red tape when transferring large sums of money across borders.
- businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations.
- US$400 billion of annual transaction and exchange costs will be eliminated
- A single currency should end currency instability would enable exporters to project future markets with greater certainty. This will unleash a greater potential for growth.
- should result in lower interest rates lead to more investment, more jobs and lower mortgages
- Do away with the need of maintaining forex reserves avoiding currency wars.
- Do away with currency risk, benefiting foreign investors
- Eliminate the chance of currency failure, which would make foreign investment decisions much easier in emerging economies
- Such a currency would in one go eliminate the problem of current account deficits as there would be no need for foreign exchange
- Small and vulnerable nations will gain a lot from a single world currency. One world currency will give these nations more stability and certainty.
- With the introduction of a single world currency in many different nations there will be the rise of divergent economies. Some countries will be doing well and some nations will not be doing well however they will be protecting their individual interests with the same currency.
- a debt-laden country is no longer able to devalue its own currency to make its goods more attractive to buyers from other countries. The financial troubles of countries like Greece and Spain in the 2010s have been exacerbated,by the fact that they use the euro
- Presently traders are able to choose the currency they wish to do trading in. This results in competition in currency. With the introduction of a single world currency there will be no competition and an effective monopoly will prevail in society
- Loss of national sovereignty and national monetary policy – A single currency would imply a single interest rate. Thus a nation experiencing economic depression will be unable to use the interest rate lever to boost the economy. Similarly a country with high inflation will be unable to independently raise interest rates to contain inflation. Moreover, Islamic countries, which form a large part of the geography, do not believe in interest rates.
- Political barriers – Political differences between nations make it extremely difficult for them to adopt a common currency
Effects on India:-
- The need to look at America’s fed tapering that would affect indian rupee would not happen here.
- stock markets crashing because of FII backing off might not happen because of differences in the currencies
- India’s problems of current account deficit ,exchange rate problem that impacts exporters and importers might done away with.
- would be a relief to the parents of the students who fund their studies abroad as depreciating rupee puts more burden on them
- relief from huge costs that are spent for oil imports.
- every country has its own monetary needs and the policies are followed based on local needs.Global currency might be disadvantageous to india as its sovereignty might have to be compromised and go according to collective benefits.
- despite different currencies euro crisis and recession of 2008 affected india too but with a single currency it would make a situation worse .Any country getting affected will have huge ramifications.
- India’s remittances might be affected with single currency
- India’s competitiveness of producing low cost and cheap labour will be done away with
General Studies – 3
Topic: Environmental pollution
Environment Kuznets curve hypothesis:-
- countries should focus initially on economic growth even if it comes at the expense of environmental quality.
- As countries become richer, they can afford to clean up pollution from the past and as public demand for cleaner environment increases, governments can enact and enforce stricter pollution control regulations.
- This is the Environmental Kuznets Curve (EKC) hypothesis and is supposed to explain why environmental quality has improved in richer countries.
- The argument is simple: “pollute first; clean up later”.
India has benefits when it follows the hypothesis: they are:-
- Economic growth is very significant for the country’s development and with demographic dividend advantage it can compete with best economies in the world so growth takes precedence over environmental concerns.
- With 1.2 billion population India has huge energy requirements that can be only met by growth as technologies are very costlier at present to have environment friendly energy development.
- For food security,more incomes,better quality of life with good infrastructure too growth takes precedence and the hypothesis cannot be ignored.
- better economic growth gives the financial capability to the governments to deal with adverse impacts and provide sustainable development.
- inclusive growth is not possible without the implementation of this hypothesis
However as seen in the recent years with nature taking its course with rising disasters,global warming the validity of the hypothesis has to be questioned. So India cannot just blindly give precedence to economic growth because:
- in the case of global pollutants such as carbon dioxide, there is not enough evidence that its levels start falling after countries become richer.
- it is not clear how much damage we can cause to our ecological systems before which they start undergoing irreversible changes.
- the improvement in environmental quality after an income threshold may have more to do with the ability of developed nations to shift polluting industries to developing nations at low economic cost The emergence of China as the world’s manufacturing hub may have a lot to do with this reasoning.
- because of pollution riding health costs occur leading to significant economic costs again
- quality of life is not improved without a clean environment salinated groundwater,disturbing ecofriendly zone leading to landslides (uttarakhand floods),unpredictable weather patterns affecting agriculture recur huge costs for the governments pushing people into poverty again and affecting economic growth as well.
- rising sea level leading to submergence of small islands is a reality threatening lives of millions of people economic growth cannot save them.
- What ever is done the original environment cannot be restored after disturbing it once.
- the planning of development projects to explicitly identify trade-offs between economic benefit and ecological impact.
- design transparent mechanisms that allow for meaningful discussion through a participatory process, in which all the groups affected by the projects are involved.
- effect environmental impact assessments
commitments at the world environmental summits like INDC in paris summit need to be taken seriously.
Topic: Issues related to direct and indirect farm subsidies and minimum support prices
The interest subvention scheme was introduced in 2006-07 to help farmers with cheaper credit for crop loans. It provided interest subvention at 2 per cent to banks for making crop loans available to farmers at 7 per cent.farmers who pay their dues on time receive a subvention of 5 per cent and are charged an effective interest rate of 4 per cent. The banks are required to first credit the subvention amount to the farmer’s account and then seek reimbursement from Nabard/ the RBI.
- With short-term agri credit growing at an average rate of 18 per cent per annum for the last five years, the financial liability under this scheme has been increasing sharply.
- However, in recent budgets, allocations have been far below the actual requirements, resulting in a mounting backlog of unsettled claims. the cumulative unpaid bills on this account to the banking system had already touched Rs 35,000 crore in FY15 leading to pressure on banking sector with rising NPA
- Reserve Bank of India (RBI) data shows farm loan outstanding of Indian banks is currently around Rs 8 lakh crore and is targeted to increase to Rs 8.5 lakh crore this year
- Besides pure agriculture loans, loans given against gold, is also categorised as farm loans in many parts of the country.
- Despite subsidy agriculture production has not increased as the average landholding of an average farmer in india very small,archaic methods of cultivation, high dependence on monsoon for irrigation
- average agri GDP growth has collapsed to less than 0.5 per cent and profitability in farming has crashed, leading to acute farm distress resulting in farmers suicides..
- diversion of funds:divert at least part of it to fixed deposits earning around 7-8 per cent interest or even become a money-lender and extend loans at 15-20 per cent interest to those who don’t have access to formal institutional sources of finance.
- non institutional sources of income is still dominating All India Debt and Investment Survey revealed that 44 per cent of loans taken by farmers were from non-institutional sources in 2013. This clearly indicates that a substantial part (at least 30 to 40 per cent) of crop loans under the interest subvention scheme is getting diverted to non-agricultural uses. –
- absence of mechanism to monitor the end-use of the money.Where the subsidised funds disappear every year without a trace remains as a big question mark.
- As a point of comparison, small-sized industries looking for bank loans, get money at almost double rate (of 13-14 per cent).
- women were excluded from the scheme so they could accrue the benefits of formal banking
- specific purpose of subvention where farmers receive loans at a lower cost with the government paying the balance
- relief to farmers from exploitation of money lenders and non institutional sources
- farmers get access to formal banking sources and with it gain access to programmes of financial inclusion
- reduced stress burden on farmers
- RBI Committee on Medium-Term Path on Financial Inclusion (2015) has already recommended
- phasing out the interest subvention scheme and moving towards universal crop insurance.
- It is better to use an income policy and directly transfer money to farmers’ accounts linked to Aadhaar for all input subsidies like fertilisers, seeds, farm machinery and agri credit, and give them freedom to choose the right mix of inputs at market prices.
- need to change the policy instrument — from price policy (subsidising inputs) to income policy (direct transfer to farmers’ accounts). This will help reduce efficiency losses in the system. China has already moved in this direction.
- This will plug various leakages, which hover anywhere from 30 to 40 per cent, promote efficiency, and will be more equitous as a subsidy income package can be designed on a per-hectare basis, with smaller landholders getting a higher per-hectare rate. This will be a win-win situation.
- money will come directly to the accounts of farmers and the PM’s seminal work in the Jan Dhan Yojana will bear fruit.
- instead of subsidising interest rates, the money can be directly invested in developing the agriculture infrastructure or improve the distribution mechanism.
- Women were being excluded from the scheme and banks should make special efforts for opening of accounts of women.
General Studies – 4
Topic:Human Values – lessons from the lives and teachings of great leaders, reformers and administrators