SYNOPSIS: Insights Secure Q&A May 20, 2016
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General Studies – 1;
Topic: Social empowerment; Role of women,
- Monster Salary Index, a joint initiative of Monster India & Paycheck.in with IIM-A as research partner, is based on the salary of millions of profiles across different industry verticals, functions and roles.
- The observations made in the Monster Salary Index report on India’s gender pay gap have few surprises, except that the gap is as much as 34 per cent in the information technology (IT) sector, which is supposed to employ relatively better-skilled people.
- What is even more alarming is that the pay gap in this sector has increased from around 29 per cent a year earlier.
- Patriarchal mindset issues in India:
- several institutions prefer male employees over female employees
- promote a higher number of male employees to supervisory positions even though there is hardly any evidence to suggest that a woman will compete less than a man if the right cultural incentives are in place.
- Working women can be targeted for discrimination and denied job opportunities altogether because of negative stereotypes about their caregiving roles—stereotypes that men are less likely to face.
- Companies say such gender pay gap exists because of divided work-family loyalties, as women take more time off from work to care for their families, leading to long career breaks. By the time they return to the job market, they have often missed the bus.
- Evidence exists that women lose out through voluntary termination of service at a rate two or three times faster than men once they have attained the experienced, mid-career level.
- India, in fact, sees the highest drop in representation of women from junior to middle-level positions, unlike several other Asian countries where such a drop occurs from middle- to senior-level positions.
- For example, an analysis done by ICICI Group showed that at junior management levels in ICICI Bank, the representation of women in attrition is around two per cent higher than their representation in the total grade population.
- In other words, if at these levels, women constitute 25 per cent, then their representation in attrition is 27 per cent.
- This, in turn, impacts the supply line for higher levels.
- Data also showed almost one-third of women employees have not resumed work in the absence of a support system at home to take care of the child.
- Across the World- identified societal factor that has been identified is the influx of women of color and immigrants into the work force.
- These groups both tend to be subject to lower paying jobs from a statistical perspective.
- Flexible work policies or extended leave can be a minor enabler for those who possess career aspirations in a situation where close to 78 per cent of eligible female graduates choose not to participate in the organised workforce.
- Implement Pay Transparency:-
- let everyone know what their colleagues are earning and that would make women aware if they are making less than their male counterparts. It would force organizations to establish a meritocracy.
- Eliminate Negotiation:-
- Study after study show that women don’t perform as well as men in negotiations.Often women avoid negotiation altogether, accepting the first offer presented by a prospective employer.
- Raising the minimum wage and the tipped minimum wage are important steps towards fair pay for women.
- Encourage all genders to help women succeed in the work place:
- Men are an integral part in the fight for wage equality. Initiatives likeUN’s He For She encourage men to help women to successfully achieve gender equality, which includes toppling the pay gap.
- Pass paid family leave policies:
- Recently, there’s been a big push for paid family leave, guaranteeing both parents to the right to take paid time off of work to care for their children.
- Ensure access to affordable childcare:-
- When women especially women making minimum wage have access to affordable childcare, they’re able to stay in the workforce longer.
· Promote gender equality in schools as promoted by Saksham program- which makes adolescent boys gender-sensitive and make citizens aware.
· Pass paid sick days legislation:-
o A national paid family and medical leave insurance program would provide wage replacement to working women and men when they must take time off to care for their families, bolstering families economic security.
General Studies – 2
Topic: Issues relating to development and management of Social Sector/Services relating to Health
2) India’s Red Line campaign to curb over-the-counter use of antibiotics is finding recognition, and could be adopted on a world scale. Discuss the objectives and significance of this campaign. (200 Words)
- India’s Red Line campaign began marking prescription only antibiotics with a red line to curb their irrational use and create awareness on the dangers of taking antibiotics without being prescribed.
- It highlights the importance of taking antibiotics only when prescribed by a doctor, and the need to finish the course.
- Other key messages include: learning how to identify prescription drugs; curb self medication; and become more aware of the dangers of misusing antibiotics.
- It comes at a time when the consumption of antibiotics in India has increased sharply while the effectiveness of these drugs to treat bacterial infections has been steadily declining.
- In future it can lead to reduction of the following scenarios:
- High disease burden
- unregulated sales of antibiotics and poor public health infrastructure
- A report in the journal The Lancet Infectious Diseases, said that in 2010, India consumed 13 billion units of antibiotics, the highest in the world. Between 2005 and 2009, consumption shot up by 40 per cent.
- Common labelling standards of this type could become a condition of sale of antibiotics around the world,
- Will lead to better awareness
- It is an important step towards sensitising members of the the public as well as pharmacists to make sure antibiotics are not sold without proper prescriptions from qualified doctors.
- It is a thin red line that Indian consumers will do well to heed while buying antibiotics in future.
- To discourage the rampant over the counter sales of antibiotics prevalent in India.
- Problems like NDM-1 metallo-beta-lactamase, coli bacteria resistant to third-generation cephalosporins, antimicrobial resistance would reduce in future.
General Studies – 3
Topic: Resource mobilization
3) In the past, A number of committees have recommended consolidation of banks and recently SBI has initiated discussions for its merger with its associates. Discuss the rationale behind consolidation and examine if now is the right time for this. (200 Words)
Rationale behind bank consolidation:
- There are significant overlaps between SBI and its associates.
- They target similar client bases, at least in larger cities. Yet they run separate infrastructures from IT systems to treasuries to compliance and risk management systems.
- Integrating these systems and eliminating the overlaps will save cost and capital.
- The combined bank would have assets of $550 billion and put SBI in the league of the top 50 global banks. India needs at least one such lender.
- The need to have large banks cannot be over emphasised. No bank in the country features in the top ten banks in the country, in terms of asset size.
- consolidate lenders focused on individual regions. For instance, merge an eastern India-focused bank with one that has strength in the south. In turn, you create fewer banks with a wider network.
- Given the huge large infrastructure needs of the country, large banks are required to finance it. The merged entity will have more leg room to raise capital.
- Consolidation will also increase capital efficiency, apart from improving the ability of banks to recover bad loans which are rising.
- It is also felt that a larger bank may be less risky than a smaller bank as the larger bank will have a more diversified portfolio resulting in less volatility in its earnings.
- These large banks in a consolidated banking system enjoy scale benefits leading to better diversification of risks and stronger overall profitability contributing to higher credit ratings
Yes it’s the right time for consolidation:
- The need for consolidation is specially felt now, due to the fact that although India is seventh largest economy in the world in terms of nominal GDP, there is no Indian bank in the list of 70 large banks in terms of asset size.
- As large banks reap certain advantages in terms of efficiency, risk diversification and capacity to finance large projects.
- The efficiency gains resulting from lower cost of services and higher quality of services is too attractive to ignore.
- However, in the context of India, it is felt that there is ample room for consolidation in the banking sector, especially among PSBs without creating issues of moral hazard or too big to fail concerns.
- There are 48 domestic banks (excluding RRBs and LABs) out of which there are 27 PSBs having a market share of around 70% in terms of asset size. A comparison of performance of larger PSBs with smaller PSBs does indicate that larger PSBs perform better.
- For example, among all PSBs, larger PSBs like SBI and Bank of Baroda are trading at higher Price to Book Value ratio in comparison to other smaller PSBs.
- SBI has been able to maintain relatively strong capital ratios and appears to be in a better position to withstand shocks to asset-quality. This indicates that under Indian conditions, there is lot of scope for banks to grow in size
- Higher credit:
- The other important aspect which needs to be considered is credit demand of a growing economy. As Indian companies increase their business and become global in nature, their demand for large scale credit will become higher.
- Banks also have to grow in size to meet the higher demand of credit. The banking system will be required to enhance its capacity to lend to larger companies and to larger projects.
- With increase in credit penetration and as credit to GDP ratio increases from present levels of 50 percent, PSBs with a market share of over 70 per cent need to contribute significantly in the process.
- Without strong PSBs which are efficient, competitive and well-capitalised, meeting higher demands of bank credit would be quite challenging in future.
- Recent proposals on Large Exposure norms which limit banks’ exposure to a group by 25% of their common equity will further limit their capacity to fund large credit demands. It is therefore imperative that some consolidation among PSBs do happen to support the growth potential of the economy.
- After the crisis, internationally there has been a significant tightening of regulatory norms.
- G-SIBs are required to maintain higher amount of common equity capital than other banks.
- G-SIBs will be required to meet the Total Loss-Absorbing Capacity (TLAC) requirement alongside the minimum regulatory requirements set out in the Basel III framework.
- Specifically, they will be required to meet a Minimum TLAC of at least 16% of the resolution group’s risk-weighted assets (TLAC RWA Minimum) from 1 January 2019 and at least 18% from 1 January 2022.
- These regulatory requirements have compelled many of these internationally active banks to reframe their business strategies into downsizing, quitting some businesses and some jurisdictions.
- This provides an opportunity for EME banks who have global ambitions, a ready business and market space. If we have good large banks, such banks can tap these opportunities and can become global banks.
- Thus we can see that right now the time is ripe for consolidation in the public sector bank space
- it’s the right thing to do since there is a slight uptake in theeconomy
- current times is not the opportune time for consolidation and that the need of the hour presently is to strengthen the banks by empowering them with operational flexibility be it in the area of recruitment, or in differentiation on core capabilities
- The other area is which should be the criteria for identifying banks for merger is the technology platform.
- Different banks have different technology platform which are developed by IT majors like Infosys and Tata Consultancy Services, to name a few.
- To merge two banks having different platform, could be a challenging task
- In last Gyan Sangam, bankers opposed the idea on ground that the health of their respective banks does not allow to takeover other banks. The situation has not improved in one year, rather it has further deteriorated .
- Many banks, including the likes of Bank of Baroda, IDBI Bank, Bank of India reported record losses.
- Employee unions and the employees who may fear identity loss. The unions have already started opposing the proposed privatization of IDBI Bank
- Today the PSU banks still control over 70 per cent of the deposits and advances in the industry, but the entire pack mirrors each other in terms of performance.
- Take for example, the State Bank of India (SBI) has a balance sheet size of over 3.5 times larger than the sixth-largest HDFC Bank, but the largest bank in the country lags behind in terms of market valuation. HDFC Bank has a market capitalization of Rs 2.56 lakh crore as against SBI’s Rs 1.41 lakh crore.
- merging two weak banks or a weak bank with a strong bank will create or make the merged entity unhealthy
- This is not the right time for banks merger as the entire banking pack is facing challenges because:
- The operating environment is wobbling
- the corporate sector is over-leveraged
- banks have bare minimum capital
- the NPAs are skyrocketing and
- profitability is at the lowest level.
- There is a complete non-interest of investors in the PSU banks
- The rural strength, not any more:
- The PSU banks have survived so long as they have a good presence in the rural and semi-urban market because of a strong brand and branch network.
- Now the entire rural banking model is itself changing with new Small Finance banks.
- Merger Pangs:
- The merger challenges are going to be huge as they do not have experience in dealing with people and cultural issues or merging products .
- In the past, even many private sector banks have struggled in such mergers.
- The HR being the top most concern as salary, seniority, postings etc will create a big challenge
- Danger to financial stability:
- Given the track record of PSUs, the new entities, say 5 or 6 large banks, could be a danger to financial stability.
- Any bank failure would create multiple problems for the system as well as for the economy.
Topic: Resource mobilization
4) Why did Mauritius become a tax haven? The recent amendment to the over three decade old Double Taxation Avoidance Treaty (DTAA) between India and Mauritius has been seen as a progressive and much overdue tax reform measure. Are there any concerns expressed on this amendment? Examine. (200 Words)
- Thirty three years back Government of India negotiated a Double Taxation Avoidance Agreement (DTAA) with Mauritius.
- Under this, tax payers who reside in one country and earn their income in another would not be taxed twice for the same income. However, this had, in effect, led to a situation where the entities concerned would avoid paying taxes in both countries.
- Mauritius and other tax havens have almost negligible taxes. This is encouraging resident Indian entities to route their investments back to India through Mauritius and avoid paying taxes
- At $64billion, it is the largest foreign direct investment source for India, accounting for 38% of total FDI.
- Investors route money into India through Mauritius and use double tax treaty to prevent India from charging capital gains tax on these investments.
- The result of this arrangement is that from 2000 to 2013, $72 billion has flowed into India from Mauritius.This represents 38% of cumulative equity inflows into India over this period.
- According to the tax treaty between India and Mauritius, capital gains can only be taxed in Mauritius, the same treaty exist with 16 other countries.
- But with only 3% of capital gains tax, the quality of its service and regulatory framework, its pool of professionals, geographical proximity, cultural affinities and long historical ties with India, Mauritius is the most attractive conduit for investments into India.
- The new protocol does not discriminate between money meant forbona fide economic activity and that which originates from dubious sources shell companies, foundations and NGOs with security implications. This issue doesn’t have much clarity.
- A more likely consequence of this protocol is that good investment will start shrinking and illegitimate investments will thrive.
- It could hurt short-term foreign investor inflows into India particularly from companies whose investment strategies are guided by minimising taxes. This could pull down markets initially.
- Many foreign investors will have to redraw their strategies.The incentive to route investments through Mauritius will cease to exist once the new rule kicks-in. This could raise their tax outgo.
- The new arrangement, marked by a concessional capital gains regime for two years, kicks in in 2017, and a new agreement by 2019. That will be the true test of capital flows and investment and investor confidence.
Topic: Latest developments in S&T
5) Last month, the draft guidelines for civil UAV (unmanned aerial vehicle) operations were announced by the DGCA (directorate general of civil aviation). Discuss the increasing applications of UAV in civilian field and regulatory issues they face. (200 Words)
- Last month, the draft guidelines for civil UAV (unmanned aerial vehicle) operations were announced by the DGCA (directorate general of civil aviation) clearing the way for a long pending demand by the UAV community in India.
- The draft guidelines recently issued call for the requirement of UAOP (unmanned aircraft operator permit) for all UAV operators as well as a UIN (unique identification number) for all UAVs.
- While the registration of UAVs and their operators is a must, the operational limits of micro as well as the mini UAVs range has been restricted to meagre 500m.
Applications of UAV in civilian field:
- Civil uses include aerial crop survey,aerial photograpy, search and rescue, inspection of power lines and pipelines, counting wildlife,delivering medical supplies to otherwise inaccessible regions, and detecting detection of illegal hunting, reconnaissance operations, cooperative environment monitoring, border patrol missions, convoy protection, forest fire detection and monitoring, surveillance, coordinating humanitarian aid, plume tracking, land surveying, fire and large-accident investigation, landslide measurement, illegal landfill detection, the construction industry and crowd monitoring.
- US government agencies use UAVs such as the RQ-9 Reaperto patrol borders, scout property and locate fugitives.
- Private citizens and media organizationsuse UAVs for surveillance, recreation, news-gathering, or personal land assessment.
- In February 2012, an animal rightsgroup used a MikroKopter hexacopter to film hunters shooting pigeons in South Carolina. The hunters then shot the UAV down.
- Commercial aerial surveillance:
- Aerial surveillanceof large areas is possible with low-cost UAS. Surveillance applications include livestock monitoring, wildfire mapping, pipeline security, home security, road patrol and antipiracy.
· Pollution monitoring
o UAVs equipped with air quality monitors provide real time air analysis at various elevations.
· Oil, gas andmineral exploration and production
o UAVs can be used to perform geophysical surveys, in particular geomagnetic surveys
· Disaster relief
o Drones can help in disaster relief by providing intelligence across an affected area.
o T-Hawk and Global Hawk drones were used to gather information about the damaged Fukushima Number 1 nuclear plant and disaster-stricken areas of the Tohoku region after the March 2011 tsunami.
· Cargo transport
o UAVs can transport medicines and medical specimens into and out of inaccessible regions.
o In 2013, in a research project of DHL, a small quantity of medicine was delivered via a UAV
- Japanese farmers have been using Yamaha’s R-50 and RMAX unmanned helicopters to dust their crops since 1987.
- Some farming initiatives in the U.S. use UAVs for crop spraying, as they are often cheaper than a full-sized helicopter.
- UAV technologies usher in efficiency into a system and significantly bring down costs in the medium to long run.
- Amazon has announced its “Prime Air,”a delivery system it says will eventually allow the company to “to safely get packages into customers’ hands in 30 minutes or less” using small drones.
Regulatory issues they face:
- A growing number of drones have been flown dangerously close to commercial aircraft, violating federal rules about their operation. In USA,as of late last year, 36 states had introduced legislation to protect individuals from drone-related privacy invasion issues.
- It also brought both federal and state scrutiny to the issue of drones being turned into potential weapons.
- Drones are also creating new questions for the insurance industry, especially when it comes to property damage and liability.
- These potential legal issues, combined with the uncertain regulatory atmosphere make insurance underwriting for droneliability a challenging endeavour
- The major issue for these companies is the current lag time between drone technologies and official policies about drone usage.
- The bigger problem will be how delivery drones interact with noncommercial drones that share their airspace.
- the recent Indian draft regulations seem to be overly complicated and restrictive, and may be hard to enforce in practice.
- In sum, a lot of paperworkfrom government departments must be accumulated before the applications for operator permits can be made.
- It is also possible that huge commercial opportunities are being stifledbefore even being conceptualised by the stringent nature of the area-based bans and the insistence on visual line-of-sight operations.
- In effect, given the number of “sensitive installations”, and the discretionary permissions, very little airspace may be available.
- Already, multiple types of drones are easily available, with the cheapest ones costing less than Rs 1,500 a piece.
- If permissions are too tedious or difficult to get, there will be a temptation to cut corners and just ignore regulations.Drones have already proliferated and, given sensible regulations, the market could explode
What needs to be done?
- There should be a specific time limit for the grant of numbers and permits .
- The requirement of an ADC clearance for operations below 200 ft AGL may be restricted to only notify in places where there are defence establishments and air force stations, in other areas DM (district magistrates) permission may be sufficient.
- The DGCA may charge a reasonable fee for the service but calling applicants to the office should be occassional until and unless there are doubts about the integrity of the applicant.
- The form for obtaining certificate of character from the sub-divisional officer police should be prescribed by the DGCA and there should also be no restriction on the import of parts for UAVs.
- The guidelines pertaining to the participation of foreign operators should also be included in the revised draft and discussed with the stakeholders prior to finalisation, as not doing so could become an impediment in the key areas related to training, testing, technology transfer, MRO (maintenance, repair and overhaul) of UAV’s and may eventually affect the ‘Make in India’ initiative, where foreign participation will be a necessity.
- The DGCA regulations must provide for a level playing field for the private sector so that innovation, growth and more importantly adopting of UAV technologies by end users can become commonplace.
- The DGCA must initiate multi stakeholder engagement process to develop a framework for privacy, accountability, and transparency issues concerning commercial and private UAV use in line with the PM’s policy of ease of doing business.
Topic: Indian Economy
6) The Reserve Bank of India and the finance ministry are agreed that the CPI would be the sole parameter to set policy rates and anchor inflationary expectations. Discuss why. Also examine what implications would recently revised base year and weights for the various goods and services in the consumer price index (CPI) will have on policy rates. (200 Words)
Reasons why RBI and centre agreed that the CPI would be the sole parameter to set policy rates and anchor inflationary expectations are:
- Conceptually, retail inflation—price rise driven by potential consumer demand and available supply—is a better indicator of inflation for guiding monetary policy decisions than WPI inflation.
- WPI excludes prices of services such as education, healthcare, and rents. However, services now account for nearly 60 per cent of GDP and a vast majority of these services are not traded with other countries.
- As a result, inflation in these services is largely determined by the domestic demand-supply situation.
- Conversely, the new CPI measure assigns nearly 36% weightage on services and includes price changes in housing, education, healthcare, transport and communication, personal care and entertainment.
- CPI, therefore, is a better reflector of demand side pressures in the economy, than wholesale prices.
- WPI assigns nearly 15% and 10.7% weightage for the fuel group and metal and metal products group, respectively. Any sharp movements in international prices of fuels and metals, therefore, lead to sharp changes in WPI.CPI shows the consumer trends of the common man.
- Consumer price index (CPI) works better than wholesale price index (WPI) in capturing market dynamics and arriving at a more realistic inflation forecast.
- Conceptually, the CPI is a better indicator of demand side pressures than the WPI
- The central bank has to maintain the real interest rate and therefore has to target CPI because retail consumers are impacted by it
Implications would recently revised base year and weights for the various goods and services in the consumer price index (CPI) will have on policy rates:
The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has revised the Base Year of the Consumer Price Index (CPI) from 2010 to 2012. In this revised series, many methodological changes have been incorporated, in order to make the indices more robust
The new index will include school uniforms, pyjamas, skirts, infant clothing, kurtas, belle shoes, shoes and chappals as well.
The methodology of calculating inflation will also see a change from the present average method to geometric mean, which will take care of a particular category driving the entire index, an internationally accepted practice.
- Core group gains weight, while weights reduced from food and fuel groups
- These changes reflect the falling share of household expenditure on food and the rising share of the non-food items. In addition, the number of items will also increase from 437 to 448 in the rural basket and from 450 to 460 in the urban basket.
- weightage for food is down from 47.58 percent to 45.86 percent. This means future increases in food prices will impact the index marginally less than in the old CPI. As incomes rise, people spend less on food. And that is good news.
- The weightage for housing and clothing are higher – the latter more than the former. While housing weightage is up marginally from 9.77 percent in the old index to 10.07 percent, the clothing and footwear weight is up from 4.73 percent 6.53 percent. People are apparently buying better clothes and footwear as incomes rise.
- the sharp downward reduction in the weightage for fuel – from 9.49 percent to 6.84 percent. This will have the effect of reducing the deflationary impact of recent oil prices decreases – which means overall CPI will look higher than in the old index.
- Unlikely to be very different from that based on the old basket. This is because the positive impact (i.e. lower headline CPI inflation) due to the weight transfer from food (high inflation) to the core basket (medium inflation) is likely to be offset by the weight transfer from fuel and light (low inflation) to the core basket.
- If prices of pulses continue to rise rapidly, their weight in the index will also go up unless the price increase is offset by a decline in their consumption. The present CPI food basket, however, gives a higher weight to milk and milk products, vegetables, prepared meals, meat and fish, sugar and spices than to pulses. The low weight for pulses explains why their price increase has only a minor impact on the CPI as a whole.
- The revision of base year will have a marginal impact on the index. This is primarily due to reduced weight of food and beverages in the new index.
General Studies – 4
Topic: Corporate governance
7) It is said that having more women on corporate boards will have positive impact on corporate governance. Examine why. Also suggest what steps can government take to increase the number of women in corporate boards. (200 Words)