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SECURE SYNOPSIS: 09 AUGUST 2019


SECURE SYNOPSIS: 09 AUGUST 2019


NOTE: Please remember that following ‘answers’ are NOT ‘model answers’. They are NOT synopsis too if we go by definition of the term. What we are providing is content that both meets demand of the question and at the same time gives you extra points in the form of background information.


Topic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources

1) Recently Lok Sabha passed the Surrogacy (Regulation) Bill 2016. Examine the need, key provisions and associated concerns of the bill.(250 words)

Indianexpress

Why this question:

The Lok Sabha passed the Surrogacy (Regulation) Bill 2019 on Tuesday. The Bill aims to regulate the practice of surrogacy in India and allow only “ethical altruistic surrogacy”.

Key demand of the question:

The answer must examine in detail the key provisions of the bill , the concerns and issues involved along with the need of such a law in place to regulate surrogacy in the country.

Directive:

ExamineWhen asked to ‘Examine’, we have to look into the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.

Structure of the answer:

Introduction: 

Define what you understand by Surrogacy.

Body:

Explain the following – 

Surrogacy is a form of assisted reproductive treatment (ART) in which a woman carries a child within her uterus on behalf of another person or couple. Recently Lok Sabha passed the Surrogacy (Regulation) Bill, 2016 which seeks to regulate commercial surrogacy which has become a flourishing industry in the country.

Discuss the need for the Bill – to curb unethical practices present in the medical industry with respect to surrogacy, women health aspects, to prohibit commercial surrogacy.

What are the key provisions of the bill?

Explain in detail the possible concerns – It does not allow single women or men, or gay couples to go in for surrogacy, clarity in case of unhealthy child born out surrogacy and its acceptance is missing etc.

Conclusion:

Conclude that sanctioning altruistic surrogacy will enforce emotional and societal pressure on close female relatives without any compensation for immense emotional and bodily labour of pregnancy involved in surrogacy as well as loss of livelihood.

Introduction:

The Surrogacy (Regulation) Bill 2019 aims to regulate the practice of surrogacy in India and allow only “ethical altruistic surrogacy. Commercial surrogacy a practice also known as rent a womb was legalized in India in the year 2002, in order to promote medical tourism and soon India became the hub of surrogacy driven by factors like low cost and the absence of a strict legislation.

Body:

Need for the bill:

  • India has emerged as a surrogacy hub for couples from other countries.
  • There have been reports concerning unethical practices, exploitation of surrogate mothers, abandonment of children born out of surrogacy, and rackets involving intermediaries importing human embryos and gametes.
  • The 228th report of the Law Commission of India has recommended prohibiting commercial surrogacy and allowing altruistic surrogacy by enacting suitable legislation.

Key features of the bill:

  • Regulation of surrogacy: The Bill prohibits commercial surrogacy, but allows altruistic surrogacy.
  • Purposes for which surrogacy is permitted: Surrogacy is permitted when it is: (i) for intending couples who suffer from proven infertility; (ii) altruistic; (iii) not for commercial purposes; (iv) not for producing children for sale, prostitution or other forms of exploitation; and (v) for any condition or disease specified through regulations.
  • Eligibility criteria for intending couple: The intending couple should have a ‘certificate of essentiality’ and a ‘certificate of eligibility’ issued by the appropriate authority.
  • The certificate of eligibility to the intending couple is issued upon fulfilment of the following conditions: (i) the couple being Indian citizens and married for at least five years; (ii) between 23 to 50 years old (wife) and 26 to 55 years old (husband); (iii) they do not have any surviving child (biological, adopted or surrogate); this would not include a child who is mentally or physically challenged or suffers from life threatening disorder or fatal illness; and (iv) other conditions that may be specified by regulations.
  • Eligibility criteria for surrogate mother: To obtain a certificate of eligibility from the appropriate authority, the surrogate mother has to be: (i) a close relative of the intending couple; (ii) a married woman having a child of her own; (iii) 25 to 35 years old; (iv) a surrogate only once in her lifetime; and (v) possess a certificate of medical and psychological fitness for surrogacy. Further, the surrogate mother cannot provide her own gametes for surrogacy.
  • Appropriate authority: The central and state governments shall appoint one or more appropriate authorities within 90 days of the Bill becoming an Act. The functions of the appropriate authority include; (i) granting, suspending or cancelling registration of surrogacy clinics; (ii) enforcing standards for surrogacy clinics; (iii) investigating and taking action against breach of the provisions of the Bill; (iv) recommending modifications to the rules and regulations.
  • Registration of surrogacy clinics: Surrogacy clinics cannot undertake surrogacy related procedures unless they are registered by the appropriate authority. Clinics must apply for registration within a period of 60 days from the date of appointment of the appropriate authority.
  • National and State Surrogacy Boards: The central and the state governments shall constitute the National Surrogacy Board (NSB) and the State Surrogacy Boards (SSB), respectively.
  • Functions of the NSB include, (i) advising the central government on policy matters relating to surrogacy; (ii) laying down the code of conduct of surrogacy clinics; and (iii) supervising the functioning of SSBs.
  • Parentage and abortion of surrogate child: A child born out of a surrogacy procedure will be deemed to be the biological child of the intending couple. An abortion of the surrogate child requires the written consent of the surrogate mother and the authorisation of the appropriate authority.  This authorisation must be compliant with the Medical Termination of Pregnancy Act, 1971.  Further, the surrogate mother will have an option to withdraw from surrogacy before the embryo is implanted in her womb.
  • Offences and penalties: The offences under the Bill include: (i) undertaking or advertising commercial surrogacy; (ii) exploiting the surrogate mother; (iii) abandoning, exploiting or disowning a surrogate child; and (iv) selling or importing human embryo or gametes for surrogacy. The penalty for such offences is imprisonment up to 10 years and a fine up to 10 lakh rupees.  The Bill specifies a range of offences and penalties for other contraventions of the provisions of the Bill.

Concerns associated with the bill:

  • The Bill raises questions over the reproductive rights of a woman. The right to life enshrines the right of reproductive autonomy, inclusive of the right to procreation and parenthood, which is not within the domain of the state, warranting interference of a fundamental right.
  • It is for the person and not the state to decide modes of parenthood. It is the prerogative of person(s) to have children born naturally or by surrogacy in which the state, constitutionally, cannot interfere.
  • Criminalisation of commercial surrogacy is a refusal by the state to actually consider the exercise of agency that leads a woman to become a surrogate mother.
  • Altruistic surrogacy includes contracting a ‘close relative’ as a surrogate by a heterosexual married couple who have been childless for five years of their marriage. However, the Bill lacks the definition of the ‘close relative’.
  • The Bill specifies that the intending couples should be married Indian couples. There is no mention of Non-Resident Indians working or studying abroad who may want to come back home to have a baby.
  • Restricting limited, conditional surrogacy to married Indian couples and disqualifying other persons on the basis of nationality, marital status, sexual orientation or age does not appear to qualify the test of equality (article 14), or of being a reasonable classification, satisfying the objective sought to be achieved.
  • The bill deprives unmarried couples, homosexual couples and single men and women of availing the bliss of parenthood through surrogacy
  • Infertility cannot be compulsory to undertake surrogacy. This violates the Freedom of choice available to citizens.
  • Knowing the reality of patriarchal families in India, the stigma of infertility, the pressure of producing children to maintain lineage and the low bargaining power of women, it can be expected that young mothers will be coerced into becoming surrogates for their relatives.
  • Due to the prevalence of clandestine ART clinic coupled with viewing commercial surrogacy as inherently exploitative and banning it only expands the potential for exploitation as it would force the business underground..
  • Bill also prohibits ‘fashion surrogacy’ as only the couple who are infertile can opt for surrogacy.

Way forward:

  • For surrogacy to happen, we need embryos, and embryos are cultured in various In-Vitro Fertilisation (IVF) laboratories. So regulation of surrogacy must be preceded by law on Assisted Reproductive Technology (ART).
  • Rather than penalising surrogacy, the person providing a womb for surrogacy must be secured with a contract, ensuring proper, insurance and medical checks.
  • The Standing Committee had recommended a model of compensated surrogacy which would cover psychological counselling of the surrogate mother and/or her children, lost wages for the duration of pregnancy, child care support, dietary supplements and medication, maternity clothing and post-delivery care. The Bill should, at the very least, incorporate these provisions.
  • Right to privacy of donor as well as surrogate mother should be protected.
  • Surrogacy should be made inclusive for all class of people irrespective of their sexuality

Conclusion:

Although the bill bans commercial surrogacy, it falls short to effectively tackle the larger social, physical, psychological, emotional and economic issues that continue to challenge the welfare and safety of both the surrogate mother and the child. The rights of surrogate mother and child born must comprehensively be formulated, along with that ART must be regulated thoroughly.


Topic: Disaster and disaster management.

2)  “River linking projects for the country are a great challenge and at the same time an opportunity to address the water issues arising out of climate change.” Critically analyse the statement in the light of recent floods witnessed across the country.(250 words)

Reference

The Big Picture- floods and river linking

Why this question: 

The debate captures in depth analysis of river linking projects for India and in what way they are a boon and a bane at the same time.

Demand of the question:

The answer must analyse in detail the pros and cons of the river interlinking projects in the backdrop of recent floods witnessed across the country.

Directive word: 

Critically analyzeWhen asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgement.

Structure of the answer:

Introduction

Start with key facts depicting the uneven distribution of rains across the country.

Body

The interlinking project aims to link India’s rivers by a network of reservoirs and canals that will allow for their water capacities to be shared and redistributed.

According to some, this is an engineered panacea that will reduce persistent floods in some parts and water shortages in other parts besides facilitating the generation of hydroelectricity for an increasingly power-hungry country.

Discuss in brief the history of interlinking projects in India.

Then explain the positives of such a policy. 

Discuss the demerits – financial viability, physical viability, will adversely affect land, forests, biodiversity, rivers and the livelihood of millions of people etc.

Discuss examples of successes and failures and suggest what should be done.

Conclusion 

Conclude with a fair and balanced opinion.

Introduction:

The river interlinking project aims to link India’s rivers by a network of reservoirs and canals that will allow for their water capacities to be shared and redistributed. Some experts claim that this is an engineered panacea that will reduce persistent floods in some parts and water shortages in other parts besides facilitating the generation of hydroelectricity for an increasingly power hungry country.

Body:

Opportunities arising out of River linking projects:

  • India receives most of its rain during monsoon season from June to September, most of it falls in northern and eastern part of India, the amount of rainfall in southern and western part are comparatively low. It will be these places which will have shortage of water. Interlinking of rivers will help these areas to have water throughout the year.
  • This will cut farmers dependence on monsoon rains by bringing millions of hectares of cultivatable land under irrigation.
  • Crop productivity would increase and so would revenues for the State.
  • Even one bad monsoon has a direct and debilitating economic impact.
  • The river linking project will ease the water shortages in western and southern India while mitigating the impacts of recurrent floods in eastern India.
  • The Ganga Basin, Brahmaputra basin sees floods almost every year. In order to avoid this, the water from these areas has to be diverted to other areas where there is scarcity of water. This can be achieved by linking the rivers. There is a two way advantage with this – floods will be controlled and scarcity of water will be reduced.
  • Simultaneous floods and droughts continue to wreak havoc, destroying the lives and livelihoods of millions.
  • India needs clean energy to fuel its development processes, and river water can be leveraged for this.
  • Fulfilling water needs impact socio-economic life of people which will help end poverty.
  • Need for interlinking of rivers to prevent inter-state water disputes.
  • Potential benefits to transportation through navigation, as well as broadening income sources in rural areas through fishing.

Challenges posed:

  • The idea that river linking would allow us to cope with flood in the north east and shortage of water in the Deccan is the positive aspect as pointed earlier but misleading one too.
  • This floods come at the time when most parts of the country run short of water, we need to hold the water somewhere to use it in dry season but the amount of flowing in the short period of time in Brahmaputra and Ganga is so huge to store and use it later.
  • Variability in rainfall is high which is the main source in the country, flood and drought simultaneously within the states of Bihar and Maharashtra.
  • Irrigation potential from interlinking rivers will have limited impact. The net national irrigated area from big dams has decreased and India’s irrigated area has gone up primarily due to groundwater.
  • Interlinking of rivers is a very expensive proposal. The amount required for these projects is so huge that government will have to take loans from the foreign sources which would increase the burden on the government and country will fall in a debt trap.
  • The river interlinking project will adversely affect land, forests, biodiversity, rivers and the livelihood of millions of people.
  • The Ken-Betwa link threatens about 200 sq. km of the Panna tiger reserve.
  • Interlinking of rivers will lead to destruction of forests, wetlands and local water bodies, which are major groundwater recharge mechanisms.
  • Less than positive experience that other countries have, like diversion of Amu Darya and the Syr Darya or the Australia’s experiments in its Murray Darling basin.
  • It causes massive displacement of people. Huge burden on the government to deal with the issue of rehabilitation of displaced people.
  • Due to interlinking of rivers, there will be decrease in the amount of fresh water entering seas and this will cause a serious threat to the marine life.
  • The Shah committee pointed out that the linking of rivers will affect natural supply of nutrients for agricultural lands through curtailing flooding of downstream areas.

Way forward:

  • To look at water as a strategic resource for development.
  • Environment is one issue where anyone of us should be concerned about.
  • Best practices done by China and neighbouring countries needs to be looked upon.
  • The biggest, cheapest, most benign, possibly fastest and most decentralized storage option for India is the groundwater
  • Invest in water conservation, more efficient irrigation and better farm practices.
  • Recycling of water for internal usage as that of Israel.
  • We need a mandatory enforceable river policy aimed at treating rivers as national treasure.
  • Accumulation of silt in huge quantities, particularly the Ganga and its tributaries. These rivers need to be desilted.
  • River linking in the south and other parts which was undertaken in the past has been going well so such model needs to be taken forward.
  • Planting trees on the river banks is one way of bringing life back to the rivers.
  • Forest catchments will need to be restored, wastewater from industries and towns will need to be treated, sand mining need to be stopped.
  • Need to build the responsibility, capability and accountability in our water management institutions to revive our rivers.
  • The judicious use of canal water, growing crops that are appropriate to a region, encouraging drip irrigation and reviving traditional systems such as tanks.

Conclusion:

The river linking project is a great challenge and an opportunity to address the water issues arising out of climate change. The long-term solution to water scarcity lies in making the IRL project work by building a network of dams and canals across the length and breadth of the country. However, interlinking has to take place after a detailed study so that does not cause any problem to the environment or aquatic life.


Topic: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora. Indian Economy and issues relating to planning, mobilization of resources, growth, development.

3) China’s weakening of its currency to hurt US economic interests for political gains will only make other Asian countries more vulnerable to a political crisis. Comment in the light of recent currency manipulation steps taken by China. (250 words)

Livemint

Why this question:

With a trade war between the US and China already having ruptured the stability in Asia, Beijing’s cheapening of the yuan has stoked fears of a ‘currency war’.

Key demand of the question:

The answer must analyse in depth the recent economic policies adopted by China in response to the ongoing trade wars with US.

Directive:

Commenthere we have to express our knowledge and understanding of the issue and form an overall opinion thereupon.

Structure of the answer:

Introduction: 

In brief put across the concept of currency manipulation.

Body:

Explain that China’s economy depends significantly on its exported goods. By devaluating its currency, the Asian giant lowered the price of its exports and gained a competitive advantage in the international markets. A weaker currency also made China’s imports costlier, thus spurring the production of substitute products at home to aid the domestic industry.

Explain the impact of such a move on global trade markets.

Effect on Asian markets – With Chinese goods becoming cheaper, many small- to medium-sized export-driven economies could see reduced trade revenues. If these nations are debt-ridden and have a heavy dependence on exports, their economies could suffer. For instance, Vietnam, Bangladesh, and Indonesia greatly rely on their footwear and textile exports. These countries could suffer if China’s devaluations make its goods cheaper in the global marketplace.

Provide for a passing reference to impact on India.

Conclusion:

Conclude that China’s recent moves will continue to send ripples across global financial systems, and rival economies should brace themselves for the after-effects.

Introduction:

Recently, the Chinese yuan broke the seven-to-one parity against the dollar for the first time since 2008. The People’s Bank of China, which had maintained this level consistently till now, deliberately moved to devalue the Chinese currency after the latest tariff threats issued by US President. The USA officially labelled China a ‘currency manipulator‘.

Body:

Reasons behind Yuan devaluation:

  • Economic:
    • China’s weakening manufacturing competitiveness is likely to strengthen with yuan-priced goods and services getting cheaper across supply chains in East Asia, parts of Africa, etc.
    • It is likely to widen China’s trade surplus with the US in the immediate short run.
    • It will also help China expand trade margins within its own region, especially with Vietnam, Thailand, Indonesia, etc.
  • Political:
    • The US’ own strategic engagement in Asia has weakened under Trump, who questioned the “value of US alliances with Japan and South Korea
    • Japanese imposed trade restrictions on South Korea. China and Russia staged their first joint aerial patrols in the region, causing South Koreans to react militarily.
    • China-US friction has offered significant economic and political leverage to smaller emerging nations like Vietnam and Indonesia within their respective regional spaces

Risks posed by Yuan devaluation:

  • Chinese export will become cheap. Will impact other exporting nations.
  • Risk not only for those trading in the US and Chinese currencies or their stocks, but also for capital flows between emerging markets
  • China, around 2015-16, tried something similar by letting the yuan depreciate; it led to a stock market crash in China, and billions of its dollar reserves disappeared in just a few days.
  • That devaluation saw led to a massive capital flight from China, further weakening its external position.
  • Beggar-thy-neighbour policy: The debt denominated in foreign currencies has increased for global companies and developing nations across the world, and maybe vulnerable to a currency shock if the “currency war” continues.
  • Most foreign investors switched to the safety of gold or other currencies like yen.
  • Economic slowdown: This may lead to delayed recovery of economies dependent on exports due to stiff competition by Chinese products

Conclusion:

China’s weakening of its currency to hurt US economic interests for political gains will only make other Asian countries more vulnerable to a political crisis that could quickly escalate to a financial crisis induced by either a dollar currency crash or waves of capital flight. Any markets responding cautiously to the latest devaluation are correct in issuing a “fragile” alert for investors for now.


Topic:  Important International institutions, agencies and fora- their structure, mandate.

4) Write a short note on United Nations Convention on International Settlement Agreements (UNISA)(250 words)

Economictimes

Why this question:

India has signed the United Nations Convention on International Settlement Agreements (UNISA) recently.

Key demand of the question:

The answer must discuss the detailed features of United Nations Convention on International Settlement Agreements (UNISA) and effect on India.

Structure of the answer:

Introduction: 

Begin with brief on the origin and coming of United Nations Convention on International Settlement Agreements (UNISA).

Body:

Discussion should include the following: 

First explain about the United Nations Convention on International Settlement Agreements (UNISA); The United Nations General Assembly adopted the United Nations Convention on International Settlement Agreements Resulting from Mediation (“the Convention”) on 20th December 2018. The convention is also known as the “Singapore Convention on Mediation” (the Convention).

What are the key features of it?

Advantages and merits of it.

Conclusion:

Conclude with way forward.

Introduction:

The United Nations General Assembly adopted the United Nations Convention on International Settlement Agreements resulting from mediation (“the Convention”) on 20th December 2018. The convention is also known as the “Singapore Convention on Mediation” (the Convention). India has recently signed the UNISA. So far 46 countries have signed this international treaty on settlement agreements.

Body:

Key features:

  • The Convention provides a uniform and efficient framework for the enforcement of international settlement agreements resulting from mediation and for allowing parties to invoke such agreements, akin to the framework that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”) provides for arbitral awards.
  • The Convention defines two additional grounds upon which a court may, on its own motion, refuse to grant relief.
  • Those grounds relate to the fact that a dispute would not be capable of settlement by mediation or would be contrary to public policy.
  • It ensures that parties reach a settlement that becomes binding and enforceable in accordance with simplified and streamlined procedure.
  • It aims to become essential instrument that facilitates international trade and in promotion of mediation as alternative and effective method of resolving trade disputes.
  • It also seeks to contribute to strengthening access to justice, and to the rule of law.

 Benefits for India:

  • Signing of the Convention will boost the confidence of the investors and shall provide a positive signal to foreign investors about India’s commitment to adhere to international practice on Alternative Dispute Resolution (ADR).
  • It is particularly important for the growth of mediation in India and enhancing the ease of doing business in India particularly in the legal front.
  • It will provide positive signal to foreign investors about India’s commitment for adhering to international practice on Alternative Dispute Resolution (ADR) or external dispute resolution (EDR).

Way forward:

  • To further boost foreign investors’ confidence in the Indian market, the law supporting the convention in India should cover all government contracts with investors for mediation both in India and in a third country choice of disputing parties.
  • With contract-based businesses set to boost the Indian economy to the USD 5 trillion target, foreign companies would be asking legal groups about their mediation capabilities
  • A number of UN member countries, both the convention signatories and the ones yet to sign, will need domestic laws supporting the mediation agreements within their respective jurisdictions

Conclusion:

The Indian judicial system is marred by delays because of which businesses suffer as disputes are not resolved in a reasonable time period. Therefore, need for alternative dispute resolution processes like negotiation, mediation conciliation and arbitration is felt from time to time. Joining the convention is a step in the right direction.


Topic:Indian Economy and issues relating to planning, mobilization of resources, growth, development.

5) Discuss the recent liquidity crisis that the NBFCs are facing in the country and its impacts on various financial aspects of the economy. Throw light upon the steps taken by the government in this regard and suggest way forward to address the problems that have contributed to the crisis.(250 words)

The hindu

Why this question:

The Reserve Bank of India (RBI) has announced new measures to increase credit flow to the Non-Banking Finance Companies (NBFCs) so as to overcome the on-going liquidity crunch in the sector. Thus, it is important to examine the environment of NBFCs in the country.

Key demand of the question:

The answer must discuss in detail the liquidity crisis facing the NBFCs and the role of government in dealing with the crisis.

Directive:

DiscussThis is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction: 

Define what are NBFCs. 

Body:

Students must first bring out in brief the worsening credit situation of NBFCs and the causes for it, then explain the recent measures taken by the RBI to deal with the same – RBI has increased the cap on a bank’s exposure to a single NBFC to 20% of its tier-I capital from 15% now.

Bank lending to registered NBFCs (other than MFIs) for on-lending to Agriculture up to ₹10.0 lakhs; Micro and Small Enterprises up to ₹ 20.0 lakh and housing up to ₹ 20.0 lakh per borrower to be classified as priority sector lending.

Also explain the measures taken in the last year and its effect on NBFCs.

Conclusion:

Conclude with way forward.

Introduction:

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/ stocks/ bonds/ debentures/ securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business. However, it does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

Body:

NBFC crisis:

  • NBFC is passing through a turbulent period following a series of defaults by Infrastructure Leasing and Financial Services (IL&FS) and the subsequent liquidity crunch.
  • Several corporates, mutual funds and insurance companies had invested in short-term instruments such as commercial papers (CPs) and non-convertible debentures (NCDs) of the IL&FS group that has been defaulting on payments since August.
  • This has stoked fears that many of them could have funds stuck in IL&FS debt instruments which, in turn could lead to a liquidity crunch in their own backyard.
  • There are rising fears that the funding cost for NBFCs will zoom and result in a sharp decline in their margins.
  • Higher borrowing costs and narrowing options to raise funds will pose challenges for retail non banking finance companies (NBFCs) in the fiscal year ending March 2019.
  • The bond yields have gone up sharply to around the 8% mark. That is making borrowing costlier even at the short end of the yield curve.
  • NBFCs are likely to witness higher pricing pressure as competition in the retail segment intensifies going forward this is expected to be accentuated by narrowing funding avenues and higher systemic rates.
  • Higher fuel prices, weaker dollar and the trade war could hit the SME sector badly. This would mean defaults by SMES, which have been a traditional market for NBFC lending.
  • Investors are worried about a credit downgrade backlash on NBFCs. That could mean huge write-offs for investors.
  • Mutual funds who have invested in market instruments of NBFCs have faced increased redemption pressures.
  • A kind of contagion then spread to other financial stocks, and the benchmark indices crashed, creating wider impacts.
  • Following the credit crunch after IL&FS crisis, RBI provided special incentives to banks to enable the flow of funds to NBFCs.

Government steps to fight NBFC liquidity crisis:

  • The RBI has decided to increase the cap on a bank’s exposure to a single NBFC to 20% of its tier-I capital from 15% now.
  • RBI has decided to give ‘priority sector’ tag for banks lending to NBFCs, for on-lending to farm, small and medium enterprises and housing sector.
  • The RBI has asked the non-banking financial companies (NBFCs) with assets of more than ₹5,000 crore to appoint a chief risk officer (CRO).
  • The Reserve Bank of India (RBI) has extended the coverage of Ombudsman Scheme for Non-Banking Financial Companies (NBFCs), 2018 to eligible Non Deposit Taking Non Banking Financial Companies (NBFC-NDs).
  • The Reserve Bank of India (RBI) has decided to merge three categories of Non Banking Financial Companies (NBFCs) into a single category to provide greater operational flexibility to non-banking lenders. NBFCs categorized as Asset Finance Companies (AFC), Loan Companies (LCs) and Investment Companies (ICs), will be merged into a new category called NBFC – Investment and Credit Company (NBFC-ICC).
  • The Reserve Bank of India has permitted banks to grant partial credit enhancement (PCE) to bonds issued by NBFCs and housing finance companies recently.

Way forward:

  • Given the growing size and dominance of the NBFC sector, it is important that the threshold capital levels for entry be substantially increased. It may be prudent for RBI to evaluate the need to shore up minimum capital requirements for various NBFCs.
  • While RBI has identified systemically important NBFCs, it needs to step up the monitoring of NBFCs which belong to large, diversified groups. Checks and balances are needed to ensure that risks do not build up in the sector due to structures which are too-complex-to-manage.
  • RBI could consider re-visiting some of the unimplemented recommendations of the Working Group on Issues and Concerns in the NBFC Sector chaired by Usha Thorat in 2011.
  • One such recommendation was the introduction of a liquidity coverage ratio for NBFCs. The objective was to ensure that NBFCs have cash balances and holdings of government securities which may fully cover gaps between cumulative outflows and cumulative inflows for the first 30 days. This would be the buffer in times of stress.

Topic: Ethics and Human Interface: Essence, determinants and consequences of Ethics in human actions; dimensions of ethics; ethics in private and public relationships. Human Values – lessons from the lives and teachings of great leaders, reformers and administrators; role of family, society and educational institutions in inculcating values.

6) Discuss Aristotle’s concept of ‘Golden Mean’ in Ethics.(250 words)

Ethics by Lexicon publications

Why this question:

The question is straightforward and is based on the theory of golden mean propounded by Aristotle.

Key demand of the question:

Explain in detail the concept of Golden mean and how can one apply it.

Directive:

DiscussThis is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction: 

In brief highlight the significance of the concept.

Body:

Explain the theory – according to Aristotle the Moral behavior is the mean between two extremes – at one end is excess, at the other deficiency. He emphasizes that one must find a moderate position between those two extremes, and thus one will be acting morally.

The concept of Aristotle’s theory of golden mean is represented in his work called “Nicomachean Ethics”, in which Aristotle explains the origin, nature and development of virtues which are essential for achieving the ultimate goal, happiness, which must be desired for itself.

Present examples/case studies where these principles can be applied and substantiate your answer.

Conclusion:

Conclude with significance of the theory and its relevance.

Introduction:

Golden mean or “middle way” is an ancient concept described in various traditions. The concept was often discussed within ethical contexts and considered as a virtue. In Western philosophy, Aristotle in particular elaborated the concept in his Nicomachean Ethics. The “golden mean” is the desirable middle between two extremes, one of excess and the other of deficiency.

Body:

The golden mean represents a balance between extremes, i.e. vices.

For example, Courage is a good example of this philosophy. Excess of it is considered as rash or overconfident, while its deficiency is known as cowardice. Another example on the similar lines is that of generosity, which is a mean. Excess of it will be wastefulness, whereas, deficiency will be stinginess.

This doesn’t mean that the golden mean is the exact arithmetical middle between extremes, but that the middle depends on the situation. There is no universal middle that would apply to every situation.

Consider, for example, if a person was cheated out of his life savings, then, the person would be angry, and it would be very close towards being excessive, an extreme. As opposed to, say, a minor accidental mishap, which might not get the tempers rising, and the lack of anger would inch towards indifference, another extreme. In both cases, however, both the reactions are considered ‘mean’, due to the varying level of involvements.

The golden mean applies only for virtues, not vices.

The importance of the golden mean is that it re-affirms the balance needed in life. Today’s modern man usually succumbs in the extreme of excess, which can be seen in the uncontrollable accumulation of material wealth, food, alcohol, drugs, but he can descend into deficiency as well, like inadequate attention to education, healthy sport activities, intellectual pursuits, etc.

Even Buddha summarized the Golden Mean as the Middle Way, a moderate path between extreme self-denial and sensual, materialistic self-indulgence.

Conclusion:

The people in modern society need to overcome their pride and arrogance and look in nature for guidance, because we all depend on it. Staring into the sky and imagining ourselves in heaven will not accomplish anything; it is better instead to accept our role in the world and appreciate the beauty of life, and death, which gives meaning to it.