MODEL ANSWERS for GS PAPER - III...being done, Repo rate to be higher than CPI, Main objective of RBI to control inflation, Role of monetary policy Committee 12. Why are NPAs of banks

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MODEL ANSWERS for GS PAPER - III

1. 'The permanent solution to the poverty problem in India lies in improving

the performance of the agricultural sector.' Elucidate the statement with

special reference to MGNREGA and argue whether recent changes in the

programme are capable of strengthening the above linkages.

(10 marks, 200 words)

Indian poverty is primarily rural in character and is largely dependent on

agriculture.

Urban poverty is an outgrowth of rural poverty to a great extent.

Programmes like MGNREGA can help in reducing rural poverty and hence check

its spread to urban sector also.

Recent changes can both be beneficial and problematic.

Linking MGNREGA to agriculture can be good as it would both create

employment and develop agriculture.

But, its limitation to the most backward districts may only worsen the earlier

benefits of the scheme as it goes against self selecting features of the scheme.

2. 'The Indian economic growth till 2008 was primarily because of significant

increase in foreign capital inflows and its reversal after 2008 can be blamed

on the outflows of foreign capital'. Do you agree? Comment with reference

to the supply side constraints being seen in the Indian economy recently.


While the statement is generally regarded to be true, it can be debated on some

counts.

Foreign capital inflows had an important role in growth till 2008, but growth was

also due to better fiscal discipline and increase in Savings and Investment rate.

Post- 2008 situation is even less related to foreign capital movement.

The initial slowdown coincides with foreign capital outflows but continuation of

slowdown despite enough foreign capital in the country has been seen.

Role of supply side constraints important as growth went together with higher

inflation. Some such constraints are higher prices of crucial inputs like coal,

higher food grains prices which has kept cost of production higher in economy

thereby impacting growth.

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3. 'Employment growth in India in the post 1991 period has been dismal both

in quantitative and qualitative terms.' Do you agree? Give arguments with

reference to increasing informal sector and gender bias in employment

distribution in India.


1990s has been a decade of jobless growth as GDP growth rate far exceeded

the employment growth rate.

Situation improved in the first half of 2000s but from 2004 to 2009 employment

growth has been even more dismal.

Most of the employment that has been generated has gone in Informal sector.

Construction sector, which mainly employs informal labour has contributed

mainly to employment creation.

NSSO claims that more significant fall has taken place in Female Labour force

and Male Labour force has either remained the same or declined marginally.

4. 'Land reforms have become obsolete in the context of contemporary

agricultural development in India.' Comment and argue about the relative

importance of land, labour and capital related reforms in the Indian

agricultural sector.


Land reforms not obsolete as relation between the farmers and land still

important for agricultural growth.

Labour related reforms closely related to land reforms as once labour given rights

over land, automatically the problem of agricultural labour gets solved to an

extent.

But these reforms must be complemented with other reforms to make it work.

Labour needs to be skilled. Farmers should know about proper use of fertilizers,

water etc. and should have information about price changes.

Capital reforms should be in Irrigation infrastructure, but merely building capital is

not important. Farmers should have working knowledge of using capital through

programmes like agricultural extension.

5. 'Crude oil price deregulation policy in India after 1991 has been designed to

suit the government's priorities and not as a comprehensive focus on the

market mechanism.' Elucidate the statement with some arguments on how

a balance between crude oil pricing and welfare can be achieved in India.


Deregulation has taken place when crude oil prices have been declining as

consumers face lower market prices. But when market prices go up the

government faces criticism and tends to bring down prices.

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Petrol prices deregulated in 1990s when market price was lower but later with

higher market prices, it brought criticism.

Similarly diesel price getting deregulated now as lower market prices.

We need a long term strategy and a transparent way to determine price of these

products and also ensure welfare.

Once deregulated, oil marketing companies should be charging less mark up

rather comparing it with import parity price.

Also, the price of substitutes in certain sectors like electricity in agriculture should

be priced properly so that there should be level playing field.

6. 'India's stand on food security in WTO is counter-productive to both Indian

free trade policy and sustainable agricultural growth.' Do you agree? Give

arguments to support your answer.


Free Trade Policy argues for lower subsidy to agriculture as it impacts the

welfare of the farmers of other countries.

Domestically, it is biased in favour of the farmers who are getting subsidy

compared to those who are not.

Higher subsidies like MSP encourage farmers to cultivate crops not suited to the

geographical conditions.

It also depletes the precious resources like water and costly inputs like electricity.

This goes against sustainable agricultural development.

However, an argument against the above statement is that poor farmers in India

need support when such support is available in other ways to the farmers of

developed countries.

7. Financial Inclusion is necessary for inclusive growth. Discuss.


Inclusive growth implies participation as well as sharing the benefits from the

growth process. In this way inclusive growth is both an outcome and a process.

Financial Inclusion is considered to be an important determinant for social

inclusion of poor and vulnerable. It is one of the essential conditions for reduction

of poverty and socio-economic inequalities in the society.

Financial Inclusion is perceived as a public good in most of the developing

countries. A public good is non-rival in consumption and non-excludable.

The positive externalities associated with financial inclusion are

1. The value of the entire national financial system increases it.

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2. The fuller participation by all in the financial system makes monetary policy

more effective and thus enhances the prospects of non-inflationary growth.

Discuss measures taken by RBI and GOI for Financial Inclusion

Financial inclusion in India can be facilitated by following ways:

1. Restructuring financial architecture fitting to the needs of inclusive growth

2. Usage of Mobile Banking

3. More use of Business Facilitator and Business Correspondent

4. Micro Finance Institutions

5. Active role of educational institutes for furthering financial inclusion

Conclusion

8. Bring out the importance of food processing industries in India. What

measures have been adopted in recent years to promote this sector?


Vital linkages and synergies that it promotes between the two pillars of our

economy, industry and agriculture

Improvement in the value addition chain

Food security

Diversity in Cropping Pattern

Elimination of post-harvest losses

Improve the income levels of the farmers

Impetus to Economy and creation of jobs

Controlling Inflation - Indirect Effect

Steps taken by the government:

In line with this policy the Department of Food Processing Industries has

launched concessional finance schemes. The schemes cover the entire spectrum

of activities involved with food processing such as post-harvest infrastructure

including cold chain, food quality and safety, packaging, research and

development and promotion of processed food.

Export-oriented units are permitted to import raw materials and capital goods free

of duty. Zero duty import is also permitted, for capital goods. Export earnings are

exempted from corporate tax.

Automatic approval for foreign investment up to 51 per cent is allowed. Even

where investment is more than 51 per cent, approval is given on a case-to-case

basis by the Foreign Investment Promotion Board (FIPB)

Deregulation of the sector and No need of any licenses except in the case of

alcoholic beverages

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FDI limits have been relaxed, Excise duties have been reduced, export subsidies

given

National mission on food processing, Vision2015 for food processing,

New schemes for mega food parks, cold chain etc.

Many states have reformed their outdated APMC laws.

9. What is meant by monetary stimulus? What has been the impact of

expansionary monetary policy adopted by advanced nations on the

emerging market economies like India?


Monetary Stimulus - An attempt by a government to make the economy grow

faster by increasing the money supply (the amount of money in the economy).

Impact of Expansionary Monetary Policy on Emerging market economies like

India –

Inflationary effects

Risk of asset volatility as Quantitative Easing (QE) by advanced nations may

throw up such a risk

Currency fluctuations

Impact on CAD

Boost domestic consumption

10. Explain the concept of all-India Goods and Services tax (GST). How will it

benefit the economy at large?


GST is a value added tax to be levied on both goods and services (except for a

list of exempted goods and services), at both the centre and state level (Central

GST and State GST respectively). This is a single tax which will be levied on the

product or service which is sold.

The system allows the set-off of GST paid on the procurement of goods and

services against the GST which is payable on the supply of goods or services.

However, the end consumer bears this tax as he is the last person in the supply

chain.

Experts say that GST is likely to improve tax collections and boost India's

economic development by breaking tax barriers between States and integrating

India through a uniform tax rate.

GST is expected to be a critical reform in spurring growth in the economy. When

introduced, GST will not only make the tax system simpler, but will also help in

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increased compliance, boost tax revenues, reduce the tax outflow in the hands of

the consumers and make exports competitive.

Simpler tax structure

Increased tax revenues

Competitive pricing

Boost to exports

11. What is meant by inflation targeting? Discuss the feasibility of adopting

this as a major objective of RBI’s monetary policy.


Inflation targeting is an economic policy in which a central bank estimates and

makes public a projected, or "target", inflation rate and then attempts to steer

actual inflation towards the target through the use of interest rate changes and

other monetary tools.

Discuss the need for Inflation targeting as a major objective of RBI to analyse its

feasibility.

Cite the recommendations of Urijit Patel committee on inflation targeting and its

recommendation like CPI as the main anchor for inflation and not WPI as was

being done, Repo rate to be higher than CPI, Main objective of RBI to control

inflation, Role of monetary policy Committee

12. Why are NPAs of banks rising? What measures can be adopted to address

this problem?


As per the economic survey, Increase in NPAs of banks is mainly accounted for

by switchover to system-based identification of NPAs by PSBs (public sector

banks), and aggressive lending by banks in the past, especially during good

times

Increase was sharp in case of infrastructure; Infrastructure, iron and steel,

textiles, aviation and mining are five main sector that are stressed and the

reasons are different for all the five sectors. Policy initiatives, Litigation,

Scams(Coal Scam), pricing of raw materials, Land Acquisition issues etc…

Slowing economic growth and high interest rates have crimped the ability of

many borrowers to repay their debts, causing bad loans to pile up at banks.

Priority Sector lending: One of the main causes of NPAs in the banking sector is

the Directed loans system under which commercial banks are required to supply

40% percentage of their credit to priority sectors.

Measures to overcome:

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Various steps have been taken by the government and RBI to recover and

reduce NPAs. The strategies that the banks can take are –

1. Preventive management – To avoid a situation that an asset turns into NPA

using Early Warning Signals; Financial warning signals; Management related

warning signals; Banking related signals; Creating a list of Willful Defaulters

2. Curative management – These are steps that can be taken once a loan has

turned into NPA - One Time Settlement Schemes; Lok Adalats; Debt

Recovery Tribunals (DRTs); Securitization and SARFAESI Act

The government can bring about policy reforms for bringing in growth in the five

sectors which account for the major share of NPAs. Sector specific reforms to

boost growth, lowering tariffs, Tax reforms etc could be some. Revival of

economy is very vital for the recovery of NPAs. Also on the cards is

recapitalization by disinvesting its stakes in the public sector banks.

13. Write short notes on


(a) APMC Act

The APMC have been made specifically responsible for: (a) ensuring complete transparency in pricing system and transactions

taking place in market area; (b) providing market-led extension services to farmers; (c) ensuring payment for agricultural produce sold by farmers on the same

day; (d) promoting agricultural processing including activities for value addition in

agricultural produce; and (e) publicizing data on arrivals and rates of agricultural produce brought into

the market area for sale. (f) Setup and promote public private partnership in the management of

agricultural markets. (g) Provision made for the appointment of Chief Executive Officer of the

Market Committee from among the professionals drawn from open market.

(b) India Food Park

Union Government has approved 17 food parks across the country over the

next few months with each park estimated to attract a minimum investment

of about Rs 125 crore. Two have already become operational - one at

Haridwar in Uttarakhand and another at Chittoor in Andhra Pradesh.

Four more parks, one each at Tumkur in Karnataka, Fazilka in Punjab,

Murshidabad in West Bengal and Khargone in Madhya Pradesh will be

completed by the end of 2014.

The Mega Food Park Scheme is based on cluster approach and are based

on hub and spoke model. It aims at facilitating the establishment of a strong

food processing industry backed by an efficient supply chain, which includes

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collection centres, central processing center (CPC) and cold chain

infrastructure.

(c) RuPay

RuPay provides a platform for e- transactions and offers enhanced security

measures in addition to the RBI mandated 2-Factor authentication viz.

registration, OTP, image based authentication and anti-phishing measures.

Highly secure with unique anti-phishing properties

User friendly and smooth adaptability

Simplified architecture & transaction flow reduces transaction time, resulting in

faster transaction processing and reduction in drop-outs

Customer Experience: During the online payment the cardholder’s authentication

data is collected in a secured manner. Further, with help of a bank themed

(Looks exactly similar to the card that the customer is holding) PIN pad the

cardholder has to enter the PIN number while making the payment. The pad

shuffles each time a digit is entered as an additional security measure.

14. What do you understand by superbugs in public health? List out the

superbugs found in India. Suggest a roadmap to tackle the challenges of

emergence of such superbugs.


Superbugs are resistant bacteria, virus and fungus which are able to withstand

attack by antimicrobial medicines such as antibiotics, antivirals and antifungals.

Superbugs in India

MDR – TB (Multidrug resistant TB) and XDR – TB (Extensively drug resistant)

MRSA – Methicillin resistant staphylococcus aureus.

NDM – 1: New Delhi Metallo Beta Lactamase enzyme producing bacteria like

Escherichia coli.

Tackling Superbug

Prevent irrational use of antimicrobial medicine both in humans and animal.

Monitoring system and creation of surveillance system for antibiotic resistance.

15. Discuss the features and significance of Zero Liquid Discharge (ZLD).


Zero Liquid Discharge is a process that is beneficial to industrial and municipal

organizations as well as the environment because it saves money and no

effluent, or discharge, is left over. ZLD systems employ the most advanced

wastewater treatment technologies to purify and recycle virtually all of the

wastewater produced. Also Zero liquid discharge technologies help plants meet

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discharge and water reuse requirements, enabling businesses to treat and

recover valuable products from waste streams.

The goal of any well – designed ZLD system is to minimize the volume of

wastewater at source that requires treatment and practice wastewater recycling

and reuse it in an economically – feasible manner. The technologies include

reverse – osmosis, multiple effective crystallization or solvent stripping. A

cheaper alternative can be engineered, tailor-made for industries producing a

particular type and concentration of effluent waste.

Benefits of ZLD

Installing ZLD technology is beneficial for the plant’s water management;

encouraging close monitoring of water usage, avoiding wastage and promotes

recycling by conventional and far less expensive solutions.

High operating costs can be justified by high recovery of water (>90-95%) and

recovering of several by-products from the salt.

A more sustainable growth of the industry while meeting most stringent regulatory

norms.

Possibility of use of sewage for recovery of water, for industrial and municipal

use, using ZLD technologies.

Reduction in water demand from the industry frees up water for Agriculture and

Domestic demands.

16. What is the key ingredient of blue LED? How white LED light is produced?

Discuss the role of LED lamps in combating climate change.


The key ingredient is Gallium Nitride.

Red, Green and Blue coloured LED mixed together produce white LED.

Nobel Prize in Physics for 2014 was awarded to Isamu Akasaki, Hiroshi Amano

and Shuji Nakamura for the invention of efficient blue LED

With 20 percent of world’s electricity used for lighting, it has been calculated that

optimal use of LED lighting cam reduce this to 4 percent.

Energy efficient LED lamps form an important part of the effort to help slow

carbon dioxide emission worldwide.

17. Nanotechnology has the potential to revolutionize the field of agricultural

sector. Elucidate.


Nanosensors linked to precision farming help detect soil moisture condition, crop

growth, pest infestation in crops.

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Nanoscale fertilizer and pesticides are absorbed at a faster rate by plant roots.

Increase in surface area to volume ratio reduces wastage and enhances their

utilization efficiency reducing the input cost and increases crop yield.

GPS linked nanosensors will increase quality of decision making enabling weed

control, pest control and fertilizer application site specific, precise and effective.

18. What do you understand by Net Zero Building? Enumerate the steps taken

by India to ensure Net Zero Building.


The concept of a Net Zero Energy Building (NZEB), one which produces as much

energy as it uses over the course of a year, recently has been evolving from

research to reality. Currently, there are only a small number of highly efficient

buildings that meet the criteria to be called “Net Zero”. As a result of advances in

construction technologies, renewable energy systems, and academic research,

creating Net Zero Energy building is becoming more and more feasible.

The Indira Paryavaran Bhavan

It is India’s first net zero energy building that has been constructed with adoption

of solar passive design and energy-efficient building materials.

The Indira Paryavaran Bhavan is one of the first buildings in India to have

deployed energy efficiency and renewable energy technologies at a large scale.

It is one of the exemplary projects to be rated under Green Rating for Integrated

Habitat Assessment (GRIHA) and has set standards that can be emulated by

upcoming buildings in the region.

The building boasts an earthquake – resistant structure with a total plinth area of

31,488 sq.m. It covers only 30 percent of the total area, while more than 50

percent area outside the building is a soft area with plantation and grass. The

building has a robotic parking system in the basement that can accommodate

330 cars. Thin – client networking system has been provided instead of

conventional desktop computers to minimise energy consumption.

“Buildings have an enormous impact on environment, human health and

economy. The energy used to heat and power our buildings leads to

consumption of large amounts of energy, mainly from burning of fossil fuels, oil,

natural gases and coal, which generate significant amounts of carbon dioxide,

the most widespread greenhouse gas. The successful adoption of green building

strategies can maximise both the economic and environmental performances of

buildings”.

The building has received GRIHA 5-star (provisional) rating for the following

features:

The design allows for 75 percent of natural daylight to be utilised to reduce

energy consumption.

The entire building has an access friendly design for differently – abled persons.

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With an installed capacity of 930 kW peak power, the building has the largest

rooftop solar system among multi- storied buildings in India.

The building is fully compliant with requirements of the Energy Conservation

Building Code of Indian (ECBC). Total energy savings of about 40 percent have

achieved through the adoption of energy efficient chilled beam system of air –

conditioning. As per this, air – conditioning is done by convection currents rather

than airflow through air handling units, and chilled water is circulated right up to

the diffuser points unlike the conventional systems.

Green materials like fly ash bricks, regional building materials, materials with high

recyclable content, high reflectance terrace tiles and rock wool insulation of outer

walls have been used.

Use of renewable bamboo jute composite material for doorframes and shutters.

UPVC windows with hermetically sealed double glass. Calcium Silicate ceiling

tiles with high recyclable content and grass paver blocks on pavements and

roads.

Reduction in water consumption has been achieved by use of low-discharge

water fixtures, recycling of waste water through sewage treatment plant, use of

plants with low water demand in landscaping, use of geothermal cooling for

HVAC system, rainwater harvesting and use of curing compounds during

construction.

19. What is Thirty Metre Telescope (TMT)? Discuss the significance of TMT and

contributions of Indian scientists to TMT.


First ground based astronomical telescope designed with adaptive optics. As the

name of the instruments suggest, it has 30 meter diameter primary mirror.

Adaptive optics help to make fine adjustments to its focus to account for the

blurring effects of the earth’s thick atmosphere. USA, Canada, India, Japan and

China are participating this project at Mount Kea, Hawai in U.S.A. TMT will be

used to collect data on stars, planets and galaxies including evolution of

universe. India is providing sophisticated components like actuators, edge

sensors and segment support assembly for active optics.

20. What do you understand by gene patent? Discuss the judgement of US

Supreme Court for myriad genetics for BRCA gene patent.


GENE PATENTS

A gene patent is a patent on a specific isolated gene sequence, its chemical

composition, the processes for obtaining or using it, or a combination of such

claims.

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The U.S Supreme Court ruled that “naturally occurring” human genes cannot be

patented because they are a “product of nature” meaning that they cannot be

claimed as a human invention. But it also permitted patents based on laboratory

reconstructions of human DNA, known as complementary DNAs, or cDNAs.

“Myriad did not create anything, and it found an important and useful gene, but

separating that gene from its surrounding genetic material is not an act of

invention.” And “groundbreaking, innovative, or even brilliant discovery does not

by itself satisfy” the requirements for winning a patent. Overall, the ruling is a

victory for two New York City advocacy groups that have waged a long campaign

to get the patents knocked down: the American Civil Liberties Union (ACLU) and

the smaller Public Patent Foundation (PUBPAT), which initiated the effort. It was

a defeat for the diagnostics firm Myriad Genetics of Salt Lake City. Five of its

many patent claims on the human genes BRCA1 and BRCA2 have been gutted,

although other claims remain intact.

Myriad was using its patents to sue clinics and wrongly prevent them from doing

independent diagnostic tests. Backed by many geneticists and medical groups,

the advocates sought to have Myriad’s patents invalidated so that any lab could

test without fear of a lawsuit for BRCA genes linked to breast and ovarian cancer.

The impact of the decision on other companies may depend on exactly how gene

patent claims are worded. While the court ruled out “natural” DNA patents, it also

permitted cDNA patents. Although” cDNA retains the naturally occurring exons of

DNA ... it is distinct from the DNA from which it was derived and as a result,

cDNA is not a ‘product of nature’ and is patent eligible.

21. In light of Santosh Hegde Commission’s recommendations, established on

the issue of Manipur encounter deaths due to imposition of AFSPA,

examine the broader suggestions made to make AFSPA more humane and

accountable.


Commission was constituted to probe six encounter deaths in Manipur

Commission has suggested a three month timeframe to the government to

decide whether to prosecute security personnel engaged in extra-judicial killings

in insurgency hit areas.

Commission noted AFSPA was an impediment to establishment of peace in

places like Kashmir.

Commission recommended review of the laws after every six months to see

whether its implementation is actually necessary in that area or not.

22. “The problem of Left Wing Extremism can only be tackled through the

policy of balanced regional development”. – Examine.


Problem of Naxalism was accentuated due to imbalanced regional development

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Failure of land reforms led to further disenchantment in the minds of the people

The government since 2003 Chief Minister’s conference has tried to bring

development as a policy

Today development of physical infrastructure is coupled with investments in

human development

A comprehensive national policy on Naxalism is needed where focus should be

le-link security & development.

23. “The financial inclusion programmes have increased money laundering in

the country.” Analyse the relationship with potential solutions.


Under financial inclusion drive, people are encouraged to open bank accounts

Zero balance accounts are encouraged under the latest initiative of the

government

These accounts further reduce the threshold for a launderer to do placement of

her illegitimate wealth

Wealth placed in the bank is now integrated in the economy as part of integration

Mandatory PAN cards for all transactions of cash deposits in a bank and

Customer Due Diligence will help curb the menace

24. The Assam – Nagaland border dispute, instigated by insurgent groups, is

an instance of oil rivalry. Examine the dispute and suggest policy

interventions for prevention.


Border dispute originated since creation of Nagaland in 1963

In the last two decades geological studies have proven presence of oil in the

Disturbed Area Belt

The recent conflict in Golaghat has re-ignited the issue and was instigated by

insurgent groups.

Preventive strategy is

First, fast-track and resolve the disputed Assam-Nagaland border.

Second, create specific list of land records and strengthen local administrative

mechanisms that deal with land disputes.

Third, involve local social and tribal councils; the significance of tribal councils

acting as facilitators and disabling violent response was starkly visible in the role

played by the Ao Senden in 2007.

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Fourth, disarm armed groups on both sides of the border. So long the state fails

to enjoy monopoly over organized violence in these vulnerable areas; violence

will continue to raise its ugly head.

25. To prevent terrorism, the access of financing to terror groups needs to be

curbed. Suggest strategies that can be adopted to curb the menace of

terrorism.


Ratification and implementation of UN instruments

Criminalizing the financing of terrorism and associated money laundering

Freezing and confiscating terrorist assets

Reporting suspicious transactions related to terrorism

International cooperation amongst countries

Documents

MODEL ANSWERS for GS PAPER - III...being done, Repo rate to be higher than CPI, Main objective of RBI to control inflation, Role of monetary policy Committee 12. Why are NPAs of banks