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SECURE SYNOPSIS: 22 April 2020


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:  population and associated issues, poverty and developmental issues, urbanization, their problems and their remedies.

1. A national policy aimed at reducing distress-induced migration on one hand and address conditions of work, terms of employment and access to basic necessities on the other is the need of the hour. Examine.(250 words)

Reference: News on Air

Why this question:

The Home Ministry issued Standard Operating Procedures for the movement of stranded migrant laborers for their engagement in industrial, manufacturing, construction, farming and MNREGA works within States and Union Territories where they are currently located. Under it, they have been allowed to go to places of work within a state with certain conditions.

Key demand of the question:

Discuss the issue of distress-induced migration in the country and issues associated with it and also explain the need of a nation policy to address the Migration issue in detail.

Directive:

Examine – When asked to ‘Examine’, we must 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:

Firstly, explain the recent happenings across the country with respect to migration aspects.

Body:

To start with, discuss the issue of internal migrants in the country. Explain the policy measures of the past that are in place already to address the issue, bring out the concerns that still exist. Discuss briefly problems faced by internal migrants. Explain then, why there is need for a national policy; The need for a national policy towards internal migration is underscored by the fact that less than 20% of urban migrants had prearranged jobs. Nearly two-thirds managed to find jobs within a week of their entry into the city.

Conclusion:

Conclude with What should a national policy contain and suggest way forward.

Introduction:

Thousands of migrant labourers have headed home on foot after national lockdown, which has created an acute shortage of labourers in major agrarian states. The inter-State migrant worker community, thousands of these migrant labourers have been leaving cities, even on foot, for their towns in Uttar Pradesh, Madhya Pradesh, Bihar and elsewhere.

The Home Ministry recently issued Standard Operating Procedures for the movement of stranded migrant labourers for their engagement in industrial, manufacturing, construction, farming and MNREGA works within States and Union Territories where they are currently located. Under it, they have been allowed to go to places of work within a state with certain conditions.

Body:

Issues faced by migrant lockdown due to Government lockdown:

  • The Central government announced the lockdown with just a four-hour notice, making it even harder for the migrant labourers to figure out ways to face the challenge of a lockdown.
  • The lockdown has a disproportionate impact on the socioeconomic conditions of the poor and unorganized sector.
  • The lack of social security among the poor makes it difficult for them to practice social distancing. They are mostly dependent upon daily and even hourly wage earnings. The lockdown would lead to an income security challenge to them.
  • There have been suggestions that given the prior warnings of COVID-19, the situation could have been handled much better. There have been concerns that the decision was arbitrary, unplanned and ill-prepared.
  • The lockdown was not accompanied by practical and necessary relief measures.
  • The movement of the labourers towards their hometowns was not aided by the government.
  • There have been some sections which have argued that if the government was willing to evacuate Indians from other countries, why similar intent is not being shown to make sure that the poor migrant labourers reach their hometown.

Need for national policy on Internal migration:

  • For reducing distress-induced migration.
  • To address conditions of work, terms of employment and access to basic necessities.
  • Study shows that less than 20% of urban migrants had prearranged jobs.
  • Access to information on employment availability before migrating tend to reduce the period of unemployment significantly.
  • As government interventions are directed towards poverty reduction, there is a dearth of direct interventions targeted and focussed on regions.
  • Without social protection networks, migrants find it difficult to move from casual to regular work.
  • To receive greater attention from governments, researchers, and international organisations.

Way forward:

  • India must safeguard the rights of internal migrants.
  • Continued dynamic interventions over long periods of time would yield better results compared to single-point static interventions.
  • Local bodies and NGOs which bring about structural changes in local regions need to be provided more space.
  • Local interventions by NGOs and private entrepreneurs need to consider cultural dimensions while targeting migrants.
  • Interventions aimed at enhanced skill development would enable easier entry into the labour market.
  • Addressing the needs of household migrants because household migration necessitates access to infrastructure such as housing, sanitation and health care more than individual migration does.
  • Government interventions related to employment can be supported by market-led interventions such as microfinance initiatives, which help in tackling seasonality of incomes.
  • As remittances from migrants are increasingly becoming the lifeline of rural households, improved financial infrastructure is needed to enable the smooth flow of remittances.
  • Social benefits must be made portable to help migrants to leverage work opportunities, especially in urban India.
  • The funds collected from the industry under Building and Other Construction Workers Act can be used to support cities in creating quality rental housing and extending basic services to migrant settlements.
  • On-the-job training to migrant workers in construction, factory work and hotel sectors helps to raise wages, enables better placements and improves their self-esteem and dignity.
  • Local government and NGOs can organize health camps, provide consultation, crèches for children of migrant women etc.
  • The need of the hour is for the government to consider the needs of this section of the economy and design special assistance for them.

 

Topic:  Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources. Issues relating to poverty and hunger.

2. Assess the concerns against the Aarogya Setu app and the arguments in favour of it and also suggest measures to address the concerns.(250 words)

Reference: Economic Times 

Why this question:

The Aarogya Setu app was recently designed to enable users who have come in contact with COVID-19 positive patients to be notified, traced and suitably supported.

Key demand of the question:

The question is straightforward and one must assess the concerns against the Arogya Setu app and the arguments in favour of it and suggest measures to address the concerns.

Directive:

Assess– When you are asked to assess, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidences.  You have to appraise the worth of the statement in question. There is scope for forming a personal opinion here.

Structure of the answer:

Introduction:

Briefly explain the coming of the Arogya Setu – contact tracing app in India into existence.

Body:

To start with, explain the background circumstances under which this app was developed; Governments around the world are using contact-tracing as a means to improve their situational awareness to manage the COVID-19 pandemic. The Indian Government’s Aarogya Setu App follows the same trajectory. Discuss the concerns highlighted by the article such as – app has been criticized for not complying with data protection principles of data minimization, purpose limitation, transparency and accountability, all of which are crucial to protecting the privacy of its users. Discuss the arguments in favour of the app.

Conclusion:

Conclude with a balanced and just solution to address the concerns involved.

Introduction:

Aarogya Setu is a COVID-19 tracking mobile application developed by the National Informatics Centre that comes under the Ministry of Electronics and Information Technology, Government of India. The purpose of this app is to spread the awareness and to connect essential health services to the people of India. It will calculate risk based on the user’s interaction with others, using cutting edge Bluetooth technology, algorithms and artificial intelligence.

Body:

Objectives of Aarogya Setu:

The Aarogya Setu is developed keeping in mind the following objectives:

  • To spread awareness of the novel Coronavirus outbreak among Indian citizens.
  • To augment the Government of India’s initiatives, particularly the Department of Health, in proactively reaching out to the users and informing them about the risks, best practices and relevant advisories relating to the containment of COVID-19.
  • To establish a connection between the government and the people of India for health services, facilities and updates from the health ministry nationally and state-wise.

Key Features:

  • The application uses Bluetooth and GPS of a smart phone to inform the user if he is in a radius of 6 feet from a COVID-19 infected person.
  • The application also provides information about the best practices and advisories regarding containment of the virus.
  • The application is available in 11 languages.
  • In order to keep the application running, one has to keep their GPS and Bluetooth ON always.
  • The application asks for name, gender, profession, travel history and profession.
  • The data extracted are to be shared only to Government of India according to the terms and conditions of the application.

Issues posed:

  • Legal loopholes:
    • The app exists in the privacy law vacuum that is India.
    • With no legislation that spells out in detail how the online privacy of Indians is to be protected, Aarogya Setu users have little choice but to accept the privacy policy provided by the government.
    • The policy goes into some detail on where and how long the data will be retained, but it leaves the language around who will have access to it vague.
    • No specification on the issue of how the government will use data if the data gets shared with the government of India.
    • According to a working paper from the Internet Freedom Foundation, this “suggests interdepartmental exchanges of people’s personal information” and is “more excessive than countries like Singapore and even Israel”.
    • Additionally, there was also a question of proportionality with the app and whether it will be as effective as envisaged in containing the Covid-19 outbreak.
    • India’s situation is different from countries like Singapore, where a good number of people have smartphones.
    • In India compared to its population, smartphone users are very less which means very few people will be able to download the app.
  • Technical loopholes:
    • The unique digital identity in Aarogya Setu is a static number, which increases the probability of identity breaches.
    • The abundance of data collected is also potentially problematic. Aarogya Setu uses both Bluetooth as well as GPS reference points, which could be seen as an overkill.
    • The forums such as the Internet Freedom Foundation and the Software Freedom Law Center have raised is that the Aarogya Setu app is something of a black box. There is no documentation publicly available on the app.

Way forward:

  • The app privacy policy needs detailed clarification on data collection, its storage and uses.
  • The Government of India must specify how it will deal with the app’s data and how long it will retain the server side data.
  • According to the Supreme Court in the Puttaswamy judgement (2017), the right to privacy is a fundamental right and it is necessary to protect personal data as an essential facet of informational privacy.
  • A better approach against unique digital identity would be constantly-changing digital identification keys like what Google and Apple deploy in their joint contact tracing technology.
  • With the launch of this app, the governments seek to limit the spread of the Covid-19 cases in India via technology and AI as well as, help create self-awareness among the citizens with relevant information on the infection.

 

Topic:  Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources. Issues relating to poverty and hunger.

3. With the pandemic forcing everyone to consider e-learning tools and resources, now is a good time to assess its strengths and opportunities, and adapt to the new normal. Comment.(250 words)

Reference:  The Hindu 

Why this question:

The coronavirus pandemic has shuttered educational institutions across the globe. Closure of schools, colleges and universities, shutdown of routine life of students and teachers, disruptions in education and the education ministry remaining incommunicado, have created an unprecedented situation and thrown many unexpected challenges to administrators, educators, teachers, parents and students. The situation has created the new normal. How to cope with the new normal is the question that everyone is now asking.

Key demand of the question:

Explain the need for SWOT analysis amidst the pandemic with respect to the e-learning tools and resources.

Directive:

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

Structure of the answer:

Introduction:

Briefly discuss the impact of the pandemic on the education system across the world.

Body:

Explain that it is good to carry out a SWOT — Strengths, Weaknesses, Opportunities and Threats — analysis of the COVID-19 situation and its impact on education. This exercise can help us set new goals and objectives and move forward. Discuss different dimensions involved – Can everyone in the country afford e-learning? Is online education an elite concept in India? Will the digital divide further cement inequality and create an academic divide in the country? Explain the opportunities, weaknesses and strengths.

Conclusion:

Conclude with way forward.

Introduction:

The coronavirus pandemic has shuttered educational institutions across the globe. Closure of schools, colleges and universities, shutdown of routine life of students and teachers, disruptions in education and the education ministry remaining incommunicado, have created an unprecedented situation and thrown many unexpected challenges to administrators, educators, teachers, parents and students.

Body:

Impacts on education due to COVID-19 pandemic:

  • school and university closures will not only have a short-term impact on the continuity of learning for more than 285 million young learners in India but also engender far-reaching economic and societal consequences.
  • The pandemic has significantly disrupted the higher education sector as well, which is a critical determinant of a country’s economic future.
  • A large number of Indian students—second only to China—enroll in universities abroad, especially in countries worst affected by the pandemic, the US, UK, Australia and China.
  • Many such students have now been barred from leaving these countries. If the situation persists, in the long run, a decline in the demand for international higher education is expected.
  • The bigger concern, however, on everybody’s mind is the effect of the disease on the employment rate. Recent graduates in India are fearing withdrawal of job offers from corporates because of the current situation.
  • The Centre for Monitoring Indian Economy’s estimates on unemployment shot up from 8.4% in mid-March to 23% in early April and the urban unemployment rate to 30.9%.

Digital Education and its potential:

  • This is an ideal time to experiment and deploy new tools to make education delivery meaningful to students who can’t go to campuses.
  • It’s a chance to be more efficient and productive while developing new and improved professional skills/knowledge through online learning and assessment.
  • The use of technology in education is resulting in different concepts in the system, for instance the move from teacher-centric education to student-centric education.
  • Virtual classrooms and various online tools today allow us to make the engagement between the teacher and students as close to a real, in classroom type experience, as possible.
  • These tools can also make the teachers and parent meetings as well as staff/management meetings more time and cost saving while providing the necessary interactivity.
  • It is also a fact that technology-based education is more transparent and does not make difference in front vs back benchers or girls vs boys.
  • State governments and private players have regularly been publishing information on various initiatives undertaken by ministries like MHRD, Department of Technical Education, NCERT and others to support and benefit youth/students.

Challenges:

  • India is far behind some developing countries where digital education is getting increased attention.
  • In countries where e-learning is popular, students have access to various online resources such as Massive Open Online Courses (MOOCs) which help students, teachers and professionals upgrade their skills.
  • The major challenge in EDTech reforms at the national level is the seamless integration of technology in the present Indian education system, which is the most diverse and largest in the world with more than 15 lakh schools and 50,000 higher education institutions.
  • Further, it is also important to establish quality assurance mechanisms and quality benchmark for online learning developed and offered by India HEIs as well as e-learning platforms (growing rapidly).
  • Many e-learning players offer multiple courses on the same subjects with different levels of certifications, methodology and assessment parameters. So, the quality of courses may differ across different e-learning platforms.
  • Democratization of technology is now an important issue, comprising internet connectivity, telecom infrastructure, affordability of online system, availability of laptop/desktop, software, educational tools, online assessment tools, etc.
  • Since our education system has not trained our teachers and students to think creatively and manage in a crisis situation, and has underplayed the importance of e-learning, they are unprepared for the transition from the classroom to online.

Going forward, the use of technology in teaching or recruitment will lead to a new era wherein the best of faculty will be available from across the globe to students.  Education quality will be gauged not just by the quality of faculty but will also have quality of IT infrastructure and familiarization of the faculty will digital teaching technologies as important parameters.

Conclusion:

To summarize, education must continue. Students should keep learning. The lockdown period should be productive. Educators should think creatively and introduce innovative ways of learning. In a country where access to the Internet and high-speed connectivity is a problem, and the digital divide is an issue, it is important to address the challenges. Those who are involved in education planning and administration should give a serious thought to reducing the digital divide in the country and popularize digital learning.

 

Topic:   Food processing and related industries in India- scope’ and significance, location, upstream and downstream requirements, supply chain management.

4. Discuss the possible role that Geographical indication (GI) tags play  in Rural Development of the country.(250 words)

Reference:  The Hindu 

Why this question:

Bangalore blue grape is a variety of fox grape grown in districts around Bengaluru, Bengaluru rural, Chikkaballapur and Kolar districts. It has been given the Geographical Indication (GI) status in 2013. Almost all the growers of Bangalore Blue grapes are now in dire straits as their crops have started drying up with no buyers due to the COVID-19 lockdown.

Key demand of the question:

Explain the role of Geographical indication (GI) tags play in Rural Development of the country.

Directive:

Discuss – This 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:

Briefly define what GI is.

Body:

A GI or Geographical Indication is a name or a sign given to certain products that relate to a specific geographical location or origins like a region, town or country. Using Geographical Indications may be regarded as a certification that the particular product is produced as per traditional methods, has certain specific qualities, or has a particular reputation because of its geographical origin. List down the positives of the GI. Discuss the role of GI in Rural Development – Geographical indications are mostly traditional products, produced by rural communities over generations that have gained prominence on the markets for their precise qualities. Some benefit are – The supply chain is structured around a common product reputation Increased and stabilized prices for the GI product Distributed through all the levels of the supply chain adds value Natural resources can be preserved on which the product is based Preservation of traditions and traditional expertise.

Conclusion:

Conclude with way forward.

Introduction:

A geographical indication (GI) is a name or sign used on products which corresponds to a specific geographical location or origin. It acts as a certification that the product possesses certain qualities, is made according to traditional methods, or enjoys a certain reputation.

Since the COVID-19 lockdown came into force, coupled with several other issues, meant there are no takers for many GI tag crops like Bangalore Blue variety of Grapes, Dilkush variety of seeded green grapes and many more GI tag products.

Body:

Laws governing the GI tag:

  • Under Paris Convention for the Protection of Industrial Property, GIs are covered as an element of IPRs.
  • GI is governed by WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
  • In India, GI tag is governed by Geographical Indications of Goods (Registration and Protection Act), 1999.
  • This Act is administered by Controller General of Patents, Designs and Trade Marks, who is also Registrar of Geographical Indications.

Role that Geographical indication (GI) tags play in Rural Development of the country:

  • GI tag helps the producers to differentiate their products from competing products in the market.
  • It enables the producers to build a reputation and goodwill around their products, which often fetch a premium price.
  • The products help in export earning, promotion of tourism, cultural heritage and national identity.
  • For example, Kanjeevaram silk sarees and Pochampally Ikat contribute to exports and popularity.
  • GIs have great potential to play a major role in trade between countries.
  • Legal protection to GIs protect livelihoods and encourage employment generation.
  • Owing to the premium prices that many GIs command today, there is a possibility of preserving many traditional skills.
  • Benefit to the rural economy by improving the incomes of farmers or non-farmers
  • GI allows genuine producers to capture the market and creates entry barriers for fakes

Concerns / Challenges:

  • The special treatment to wines and spirits in TRIPS Agreement appears to be developed country-centric. Developing countries, including India, seek the same higher level of protection for all GIs as was given under TRIPS for wines and spirits.
  • The battle for GI tag between states. For instance, the previous row between West Bengal and Odisha over the ownership of Rasogolla
  • False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers.
  • Cheap Power loom saris are sold as reputed Banarasi handloom saris, harming both the producers and consumers
  • Such unfair business practices result in loss of revenue for the genuine right-holders of the GI and also misleads consumers.
  • Protection of GI has, over the years, emerged as one of the most contentious IPR issues.

Way forward:

  • The benefits of GI tag are realised only when these products are effectively marketed and protected against illegal copying.
  • Effective marketing and protection requires quality assurance, brand creation, post-sale consumer feedback and support, prosecuting unauthorised copiers, etc.
  • For internationally recognised products like Darjeeling tea, international protection is of crucial importance.
  • Legal protection to GIs also extends to protection of traditional knowledge and traditional cultural expression contained in the products.
  • Hence Intellectual Property is a power tool for economic development and wealth creation particularly in the developing world.
  • GIs have the potential to be our growth engine. Policy-makers must pay a heed to this and give Indian GI products their true reward.

 

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

5. The government’s ban on Foreign Direct Investments (FDI) through the automatic route from land border sharing neighboring countries though well-intended may come with unintended consequences. Analyse.(250 words)

Reference: The Hindu 

Why this question:

The spokesperson of the Chinese Embassy has said that, India’s recent policy to curb opportunistic takeovers of domestic companies goes against the World Trade Organisation (WTO) principles.

Key demand of the question:

Explain the effect of the government’s ban on Foreign Direct Investments (FDI) through the automatic route from land border sharing neighboring countries, also discuss the associated consequences.

Directive:

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.

Structure of the answer:

Introduction:

Briefly state the context of the question.

Body:

To start with, discuss the changes in the Foreign Direct Investment (FDI) policy. Under the revised FDI policy, prior government approval is mandatory for FDI from countries which share a land border with India. The new policy states that when an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar. Discuss the possible advantages and disadvantages associated with the policy.

Conclusion:

Conclude with way forward.

Introduction:

A Foreign Direct Investment (FDI) is an investment in by foreign investors in the foreign based company. Mainly there are two types of FDI, one is Green Field Investment (a fresh company is established in a foreign country) and the other is Portfolio Investment (shares of a foreign company are purchased or ownership acquired in a foreign company). FDI under the automatic route does not require prior approval either by the government of India or by the Reserve Bank of India. Investors only require to notify and file documents in the concerned RBI office.

In a decision fraught with geopolitical and economic ramifications, the Indian government amended its foreign direct investment (FDI) policy to put a blanket ban on investments through the automatic route by entities from countries that share a border with India.

Body:

The move is seen as an attempt to ward off the threat of “opportunistic” Chinese takeover of Indian companies, whose valuations have been badly hit by the coronavirus pandemic. The curbs, which were already in force for investments from Pakistan and Bangladesh, will extend to entities where Chinese citizens have “beneficial ownership” to ensure that the restrictions are not circumvented by routing investments via Hong Kong, Singapore or other countries.

Rationale behind restriction on Automatic route of FDI inflow:

  • The Indian government’s move, cleared by the Union Cabinet, comes days after it emerged that the People’s Bank of China has increased its stake in HDFC Bank, the country’s largest private lender, to over 1%.
  • But while the PBOC investment came through the portfolio investment route, the FDI move is more strategic and is aimed at blocking any attempt to restrict entities from across the border to acquire a significant beneficial interest.
  • Stock market regulator SEBI is separately keeping tabs on investments from China and some other countries.
  • The latest move by the department for promotion of industry and internal trade, the agency responsible for FDI policy, will not just impact new investments but also equity infusion in existing companies in India, where Chinese entities have equity stakes.
  • Most FDI flows into India are under the automatic route, which means companies only need to inform authorities after the investment is made.
  • The latest move signals a growing worry within government that China might seek to acquire Indian companies by exploiting their financial vulnerability.
  • The stunning move is in stark contrast to the restraint the Indian government has exercised in not joining the global chorus of indignation over China’s attempt to conceal the outbreak of the pandemic in Wuhan — a lapse that has been widely adjudged to have been a major contributor to the enormity of the public health emergency that has already claimed over 1.5 lakh lives globally and crippled economies and markets.

Significance of restricting Investments:

  • Sources said the government had explored the option of putting a general ban on foreign investment through the automatic route, but decided against it due to wariness of being seen as having turned protectionist and insular.
  • Putting FDI from all countries under the approval route would have also slowed down inflows, which are critical at this time.
  • With the threat of Chinese capital moving in appearing serious, the authorities decided to be specific in a turn away from the cautiousness that has defined New Delhi’s approach towards Beijing.
  • Sources said that during the deliberations one school of thought had favoured a more nuanced approach, arguing that greenfield investments should be let in, but the leadership decided to go the whole hog.

Concerns raised against the move:

  • The additional barriers set by Indian side for investors from specific countries violate WTO’s principle of non-discrimination, and go against the general trend of liberalisation and facilitation of trade and investment.
  • The Chinese embassy not only cited its investments but also the “donations” made by Chinese companies to help fight the Covid-19 pandemic.
  • As of December 2019, China’s cumulative investment in India has exceeded 8 billion US dollars, far more than the total investments of India’s other border-sharing countries. The impact of the policy on Chinese investors is clear.
  • Chinese investment has driven the development of India’s industries, such as mobile phone, household electrical appliances, infrastructure and automobile, creating a large number of jobs in India, and promoting mutual beneficial and win-win cooperation.
  • Chinese enterprises actively made donations to help India fight COVID-19 epidemic.
  • China also accused India of not conforming “to the consensus of G20 leaders and trade ministers to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.”
  • Therefore, Without the appropriate legal and regulatory sanction, India might experience reciprocal measures.
  • In order to protect India’s unicorn, there is need to devise a scheme of preferential or special shares which a unicorn can issue to foreign investor.
  • These shares will preserve the decision making by Indian innovators, while also providing them access to foreign capital.

Way forward:

  • There is a need for India to develop new legal and institutional tools. As the ones employed by US and EU member states such as data protection laws or revised mergers and acquisitions rules, and institutional bodies.
  • The Chinese have already restarted manufacturing when the rest of the world still grappling with coronavirus.
  • China has several months’ advantage over all other major economies and can therefore secure significant benefits.
  • After each crisis in recent years, China has consolidated itself. Indian government is trying to pre-empt acquisitions.
  • Countries need to strengthen their domestic capabilities to meet the Chinese challenge.

 

Topic:  Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

6. It’s not just Demand and Supply, there’s more to the story of Crude Oil prices, examine the factors that affect the oil prices across the world.(250 words)

Reference: Hindustan Times 

Why this question:

The question is based on fall in Oil prices and what opportunities do the sudden crash in crude oil prices offers for India, How the country should make the most of a second oil windfall.

Key demand of the question:

Explain the fall in oil prices, and examine the factors that contribute to the fall apart from mere demand supply equation.

Directive:

Examine – When asked to ‘Examine’, we must 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:

Briefly talks about the impact of recent oil prices crash in general and its causes.

Body:

Explain that It’s not just Demand and Supply, there’s more to the story of Crude Oil prices. Four major factors help determine the price of oil: Supply & consumption, government policies, Geopolitics and financial markets. Elaborate on the above factors with suitable examples. Discuss what opportunities the current situation holds for India.

Conclusion:

Conclude with what should be India’s role amidst the oil shocks across the world and how should it benefit from it.

Introduction:

The price of Texas oil futures fell below zero dollars per barrel on Monday. In theory, and for a fleeting moment, an empty barrel of crude oil was worth more than a full one. This was a symbolic milestone, a consequence of a lack of storage and quarter-end fire sales rather than a stable market situation.

Body:

Current scenario:

  • This unprecedented shift comes as the global oil markets continue to grapple with a pandemic-driven collapse in demand. At the start of 2020, a barrel of WTI cost around $60.
  • Prices had dropped swiftly because of the coronavirus, landing at around $18 a barrel.
  • Then on 20th April, they plummeted through the floor.
  • WTI for May delivery settled at a negative $37.63 — meaning traders are paying $37.63 to get someone to accept a delivery of a barrel of oil.
  • The plunging price of WTI was driven by a trading contract deadline to oil traders to sell off the current futures contract.
  • And they needed buyers that are capable of receiving and storing that much oil. And, those buyers are in short supply.

Factors that affect the crude-oil price:

  • Situation prior to COVID- 19 outbreak:
    • Even before the COVID-19 outbreak induced lockdowns across the world, crude oil prices had been falling over the past few months.
    • The reason was too much supply and too little demand.
    • In early March, Saudi Arabia and Russia disagreed over the production cuts required to keep prices stable.
    • The OPEC plus, which includes those countries which export Oil, failed to reach an agreement in March, 2020 on production cuts to arrest the falling prices in the wake of COVID-19 pandemic.
    • As a result, oil-exporting countries, led by Saudi Arabia, started undercutting each other on price while continuing to produce the same quantities of oil.
    • This was an unsustainable strategy under normal circumstances but what made it even more calamitous was the growing spread of novel coronavirus disease, which, in turn, was sharply reducing economic activity and the demand for oil.
  • Post- lockdown:
    • With each passing day, the developed countries were falling prey to COVID-19 and with each lockdown, there were fewer flights, cars and industries etc. using oil.
    • This meant that the supply-demand mismatch continued to worsen right through March and April.

Other factors:

  • Similar to the stock market, which involves trading investments in various companies, people also trade in commodities at financial markets.
  • People purchase “futures” — a sort of bet on whether a commodity will increase in price at a later date. Once locked into a futures contract, the buyer will get his or her commodity at that price and that date, regardless of whether the market price has changed or not.
  • Laws aimed at preventing climate change will likely raise the price of energy, too.
  • Taxes on petroleum products by nations can also affect consumption pattern and consequently, the prices.
  • The governments continue to find ways for people to switch to power sources like wind and solar energy — and drive more fuel efficient cars — so it’s possible that the demand for oil will go down, simply because we won’t need it as much anymore.

Impact on India:

  • The Indian crude oil basket does not comprise WTI — it only has Brent and oil from some of the Gulf countries — so there is no direct impact.
  • But oil is traded globally and weakness in WTI is mirrored in the falling prices of the Indian basket as well.

Way forward for India:

  • India should look at how it can quickly enhance its strategic reserves to benefit from the falling prices; China, for instance, is doing just that.
  • India should assure future supplies as this is a good time to enter into long-term contracts.
  • And finally, India should also judge how the present oil crisis will affect, for better or for worse, its long-term energy strategy.

Conclusion:

New Delhi should keep a firm eye on its long-standing goals of promoting solar and wind energy, shifting more baseload power to natural gas, and shutting its most-polluting coal-fired power plants, but it is unlikely that even the most cost-effective of these will be able to match oil prices in the short and maybe even medium term.