SECURE SYNOPSIS: 20 May 2017
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General Studies – 1;
Topic: Poverty and developmental issues; Social empowerment; Salient features of Indian society
There is growing clamor by the socially and politically advanced classes like Jats, Patels and Maratha for the reservations in educational institutes and government services to uplift their economic conditions. While governments occasionally have agreed to these demands, courts have been stringent in allowing any such favors to them.
Reasons for the demand of reservation-
- Agricultural distress-
Fragmentation of lands and distress in agriculture is forcing these classes to seek place in esteemed government services.
- Lack of progress in non-agricultural sector-
These groups might have felt disempowered due to widespread structural changes in the agrarian sector—the rise of large corporations, increased land fragmentation and water shortages, and their presumed inability to take advantage of new opportunities in the non-agricultural sector.
- Relative progress-
The progress made by SCs, STs, and OBCs is compelling these classes to seek same privileges from government.
- Use of political clout-
These classes have fairly high representation in political spheres, therefore they see high chances of getting their demands passed through the coercive protests.
Are these demands justified?
Although the agriculturally dominant communities like Jats, Marathas and Patels are facing unprecedented problems in agriculture and are finding difficult to gain respected jobs in non-farm areas, the instrument of reservation cannot prove panacea for their sufferings. Thus the demand for reservation is not justified because of following reasons-
- The national and state backward class commissions have found that these communities are not socially and educationally backward and not inadequately represented in the services.
- The Constitution does not provide or permit reservation for the poor belonging to the Socially Advanced Castes (SACs) — or the “economically backward classes”. No such class is recognized by the Constitution because their poverty is not the outcome of the traditionally iniquitous social system.
- Data from the India Human Development Survey (IHDS) of 2011–12, which has information on specific jatis shows that these three groups are closer to the socio-economically dominant caste groups—Brahmins and other forward castes—in their respective states on a variety of indicators, such as per capita consumption expenditure, poverty status, educational attainment, and occupational status, as compared to the existing socio-economically disadvantaged groups—Other Backward Classes (OBCs) and the SCs and STs.
- These classes possess an advantage over “backward” groups, but they also seem to have consolidated their relative position compared to disadvantaged groups since independence.
- The reservations are also aimed at increasing political representation of SCs, STs, and OBCs. However socially advanced classes have already dominated the political sphere. Thus reservation to them will only consolidate their domination in politics.
- Further reservations are seen as anti-poverty program and as ladder for their economic prosperity by many in these politically dominant classes. They fail to understand the historical significance behind the granting of reservation.
The government needs to understand the true nature of the reservation demand by the socially advanced classes. Instead of improving the agricultural conditions for these classes many state governments are succumbing to these popular demands. Thus both Union and State governments should make sincere efforts in direction to create better agricultural conditions for farmers and at the same time create sufficient non-farm employments for the educated among these classes.
General Studies – 2
Topic: Functioning of judiciary
Even as death sentences are being imposed in a variety of murder cases ostensibly in tune with ”society’s cry for justice”, there has been a spate of verdicts from the Supreme Court admitting that the administration of the ”rarest of rare” doctrine is riddled with ”chaos”, ”subjectivity” and ”arbitrariness”.
These conflicting judicial trends have risen from a provision introduced in 1973, Section 354(3) of the Criminal Procedure Code (CrPC), stipulating that a judgment shall state ”the reasons for the sentence awarded and, in the case of sentence of death, the special reasons for such sentence”. It was while interpreting those ”special reasons” required for invoking the discretion of death penalty that the Supreme Court formulated the ”rarest of rare” doctrine in 1980 in the Bachan Singh case.
Under this doctrine, the court could take recourse to death penalty only in the rarest of rare situation when the alternative option of life sentence, after drawing up a balance sheet of ”mitigating and aggravating factors”, is ”unquestionably foreclosed”. In the Mattoo case, the Supreme Court spared Santosh Kumar Singh from going to the gallows on the basis of its conclusion that mitigating factors outweighed aggravating factors.
Given the inherent subjectivity in the weight accorded to each of those factors, murmurs of self-doubt from the Supreme Court have grown louder in recent years as a reaction to an increasingly blood-thirsty public opinion, reflected by a hyper ventilating media.
The first such judicial signal came in 2006 in the Aloke Nath Dutt case in which Justice S B Sinha of the Supreme Court, after examining its record in capital punishment cases over two decades, made the extraordinary gesture of admitting its failure to ”evolve a uniform sentencing policy”. Sinha cited a plethora of examples to show how similarly situated convicts were awarded either death or life without any justification for the difference in the outcome.
In an even more candid observation made in 2008 in the Swamy Shraddananda case, Justice Aftab Alam of the Supreme Court said that ”the question of death penalty is not free from the subjective element and the confirmation of death sentence or its commutation by this court depends a good deal on the personal predilection of the judges constituting the bench”.
This paved the way for the landmark judgment in 2009 in the Santosh Bariyar case in which Justice Sinha went to the extent of admitting the undue influence of public opinion in awarding death. Besides citing the examples of the Bhagalpur blinding case and the attacks on Kasab’s right to trial in 26/11 case, the Bariyar verdict pointed to ”the danger of capital sentencing becoming a spectacle in the media”.
In 2016, National Law University released its Death Penalty Research Project consisting of interviews with death row convicts. It found a disproportionate percentage of the convicts (80%) were poor, backward castes or from the minorities. Clearly, their inability to negotiate the justice system—some did not even know the name of the lawyer representing them—explains this skewed statistic. While releasing the report, Supreme Court judge, Justice Madan B Lokur observed, “I don’t think we have a jurisprudence philosophy on imposing death penalty whether it is a deterrent, reformation or retribution.”
While we would argue that there is no place for the death penalty in a civilised society, until it is abolished, its use needs to be governed by consistent criteria.
Topic: Important International institutions, agencies and fora- their structure, mandate.
The European Union has faced crisis after crisis in recent years. First it was the sovereign debt crisis, followed by bankruptcy and bailout measures of various sovereign states. Now the continent is reeling under an immigration and refugee crisis. The impending Brexit process and the recent rise of far-right nationalist parties are certainly reflective of the EU’s fundamental constitutional weakness and democratic deficit.
Weaknesses of European Union Structure-
- Crisis of Confidence-
A crisis of confidence runs through an entire generation of Europeans, as they witness a more inflexible, distant and uninspired institution crumbling under its own weight.
- Pace of integration-
As the resolve of “… an ever-closer union …” acquired more prominence, the EU propelled its integration agenda with astounding speed, subsuming ever more critical areas of national Interest and policy, into a much deeper and shared communion. In other words, the pace of European integration far outstripped the capacity of member states to reflect and assimilate such change into their own domestic institutional structures and processes.
- Inadequate integration-
To ease out the process and to leave no member state behind, the EU rules of discipline were relaxed, monitoring was lightened and soft commitments became the norm. The ensuing variance between those set of principles viz Discipline and Solidarity, ultimately, had a debilitating effect on the relationship between the member states and the EU’s institutions on the one hand, and between the EU and its citizens on the other.
- Excessive integration-
Exacerbating that imbalance was the unrestrained and almost frenzied resolve towards further integration, due to the unmindful or unconscious denial of the unequal advancement of different member states.
- Sovereignty issues-
Some of the branches of EU like European Parliament, European Court of Justice have invariably crossed into the territory of internal issues of the state members inviting their disappointment and disapproval.
- EU finds itself even more paralyzed and structurally inadequate in either aiding the efforts of certain member states, or in persuading others to look beyond their narrow populist agendas. The refugee crisis is, to a large extent, exported to the borders of the EU—through the EU–Turkey agreement signed in 2016— whereby in exchange for aid money and an assurance for a renewed focus on Turkey’s membership to the EU, migrants would be stationed in Turkey.
- Amidst the rising disconcertment among people, charges of “democratic defi cit” and “illegitimacy” against the EU have acquired exaggerated proportions, carefully playing into the hands of populist and nationalist parties in the member states. A clamour for bringing back the “national state” and wresting control away from EU institutions has engulfed public discussion in several member states.
- While Britain took the most perilous road in attempting to dissociate itself completely from the EU, other member states, like France, Italy and Netherlands have witnessed the alarming rise of right-wing nationalist parties, with either an explicit or implicit agenda for resisting integration.
- While some members of EU like Germany see further integration as answer to the existing problems while states like Poland have opposed further integration. Out of this has emerged the concept of multi-speed Europe which could further increase the cooperation among members.
Today, the EU represents one of the most unique experiments in regional integration, far denser and more institutionalized, admitting no such parallels in the world. Thus the EU needs to be both prepared and predisposed towards adapting to such change, mindful however, of assimilating the varying standpoints of its constituent units. To recapture the public imagination of its people, EU needs to demystify its construct, interact closely at the local level and consolidate its position as the predominant agent for hope and a better life, thus aligning itself closer to its founding goals and principles.
General Studies – 3
Topic: Indian economy – resource mobilisation
Introduction:-The banking Regulation (Amendment) Ordinance 2017 amends the Banking Regulation Act, 1949 and it makes following changes in act:-
- It inserts two new Sections (viz. 35AA and 35AB) after Section 35A of the Banking Regulation Act, 1949 enables the Union Government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process, where required.
- Section 35AA:The Central Government may by order authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016.
Explanation – For the purposes of this section, “default” has the same meaning assigned to it in clause (12) of section 3 of the Insolvency and Bankruptcy Code, 2016. Section 35AB: (1) Without prejudice to the provisions of section 35A, the Reserve Bank may, from time to time, issue directions to the banking companies for resolution of stressed assets.
(2) The Reserve Bank may specify one or more authorities or committees with such members as the Reserve Bank may appoint or approve for appointment to advise banking companies on resolution of stressed assets.
Current NPA situation :- According to RBI October to December report, the gross Non-Performing Assets (NPAs) of Public Sector Banks are just under Rs. 4 lakh crore, and they collectively account for 90% of such rotten apples in the country’s banking portfolio. In terms of net NPAs, their share is even higher – at 92% of the total bad loans reported so far in the banking system.
Benefits of Ordinance:-
- This action of the Union Government will have a direct impact on effective resolution of stressed assets, particularly in consortium or multiple banking arrangements, as the RBI will be empowered to intervene in specific cases of resolution of non-performing assets, to bring them to a definite conclusion.
- The formation of such committees proposed by ordinance will help lenders take decisions without a fear of prosecution.
- The ordinance is passed at crucial time when Indian banks are suffering from mounting bad loan problem.
- This Ordinance does not have a clear rationale. It starts with a short preamble which is vague, and does not clarify the purpose of the amendment.
- Banking Regulation Act already provides banks with enormous power to issue directives to banks hence enacting an ordinance to enhance those powers further is an answered question.
- The Insolvency and Bankruptcy Code, 2016 (IBC) has already been implemented as a law and any banker is free to trigger it if there has been a corporate default. Bankers on their own may come under pressure if they try to initiate an insolvency resolution process under the IBC against politically connected corporate defaulters. (Perhaps the amendment aims to address this problem.)
- Giving more powers to the central bank to take what can be seen as commercial decisions could lead to a conflict of interest for RBI. Typically, regulators should be at arm’s length from the commercial decisions of entities they regulate in order to preserve systemic stability.
- There are also fears about whether pushing through resolution in a hurried timeline will lead to a crash in asset prices.
- The Government is committed to expeditious resolution of stressed assets in the banking system. The recent enactment of Insolvency and Bankruptcy Code (IBC), 2016 has opened up new possibilities for time bound resolution of stressed assets. The SARFAESI and Debt Recovery Acts have been amended to facilitate recoveries. A comprehensive approach is being adopted for effective implementation of various schemes for timely resolution of stressed assets.
- The Economic Survey proposed the creation of a Public Sector Asset Rehabilitation Agency (PARA) which would purchase the bad loans from the public sector banks (PSBs). The proposed PARA would be financed from three sources: the issue of government securities, equity shareholding by private investors, and money from the RBI’s surpluses.
- A lender or borrower are in best position to decide whether to commence insolvency or not. RBI will need to appoint experts to scrutinize each case as it cannot be an administrative decision. The best way to encourage banks to resolve stressed assets under the bankruptcy code is to offer them some incentives to file (for) insolvency
Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth
Introduction:- Indian banking sector is facing many challenges. The stress tests on banks indicate that gross non-performing assets (GNPAs) may deteriorate further to 8.5 per cent by March 2017 from 7.6 per cent in March 2016 and 5.1 per cent in September 2015. The various ways to overcome problems has been explored with merger being the preferred one. But it cannot be extensively adopted because it leads to job cuts, branch closures and in some cases, a lowering of the quality and quantity of services. Hence, in addition to mergers, the Government would need to consider other alternatives like privatisation. It also comes with its own pros and cons.
Arguments in favour:-
- Many countries have privatised their nationalised banks, including some from the erstwhile Eastern bloc countries. Argentina, Australia, Brazil, Bulgaria, Chile, Denmark, Egypt etc.
- Privatising loss-making PSBs will have a deterrent effect on the staff and management of such banks.
- Also, privatising a few loss-making PSBs will ensure that market discipline forces them to rectify their strategy, and this will have a ripple effect on other PSBs.
- Better financial performance is ensured when a strong financial institution is involved as a significant shareholder in privatisation.
- The government’s liabilities will also decrease and it could invest resources released by this exercise into welfare schemes.
- It will be another step towards reducing the fiscal deficit and financing revenue expenditure through revenue receipts in the long term.
- This move is along the lines of minimum government and maximum governance and proactive, people-centric, people friendly, transparent and sustainable governance.
Argument against :-
- Any such move as it would prove detrimental to the economy and result in turmoil within the industry.
- This would totally defeat the idea of inclusive banking as it is practised now and was the guiding principle at the time of nationalisation of banks.
- The past history of private sector banks tells the failure. Before 1969, all banks, except the SBI, were in the private sector. Between 1947 and 1969, 559 banks failed.
- Public sector banks are created out of public money. These entities are therefore duty-bound to extend all types of services to customers across categories. Privatisation will impact this very root purpose
- The government will have difficulty in providing low-cost financial services to rural and poor sections of society as the private may not like to extend its services to them.
- The loosening of government’s control over economy might make is the economy fragile in testing conditions.
- Private profiteering and drain of nation wealth through revenues accruing from FDI are also major concerns.
- Private sector banks don’t share the government’s social responsibilities. Even in matters of recruitment, they don’t follow the government’s reservation policy or don’t show any enthusiasm in giving education loans to needy students. Thus, we can see that privatisation is not the solution for problems facing PSBs. The solution lies in making the public sector more robust, not pawning it in the hands of a few powerful individuals.
Conclusion :- Privatisation of PSBs is not going to be easy, as it would involve building consensus amongst various stake holders, including unions and parliamentarians. The decision to privatise inefficient PSBs, consistently delivering negative returns, would require wide debate. As the Planning Commission was a vestige of the socialist era, so is social banking. It is time to reconsider whether PSBs, all 27 of them, are really required to serve the purpose of social banking in our country and at what cost. Therefore, it would be useful to have a high-powered, government-appointed committee, to devise exact criteria, modus operandi, the type of privatisation model to be adopted, and engage with the social ramifications before privatisation is actually undertaken.