9 PM Daily Brief – December 5, 2020

9 PM DAILY BRIEF

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GS 2

Shadow pandemic

GS 3

Economic recovery

The many layers to agricultural discontent

Exclusive  arbitration body for financial disputes


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FACTLY

Shadow pandemic

Source: Down to Earth

Syllabus: GS-2- Social justice

Context: A village volunteer from Gharabari village near Siliguri in West Bengal alerted the police of a child marriage in the first week of July. Thirteen-year-old was married off to a 35-year-old man in a discreet manner at her house.

More on news:

  • Her parents were warned and a case was filed under the Protection of Children from Sexual Offences Act (POCSO), 2012 Act.

What are the causes of a shadow pandemic?

  • Causes: Acute poverty, worsened by the loss of jobs and incomes due to the lockdown, push poor people into the daily grind of labour work.
    • The distress and uncertainty is often seen as an elbow to those living on the borders to get rid of the alleged burden of feeding girl children.
  • Exploitation: Several girls are often made to believe that they are a liability to the family. Some victims of trafficking are also given false promises and money in advance of being abused.
    • They owe debt to the traffickers and are scared to run away. They are captured and enslaved into debt bondage, a cruel form of control and exploitation.
  • Covid-19 impact: In India, about 400 million people working in the informal economy are at risk of falling deeper into poverty due to the novel coronavirus disease (COVID-19).
    • The economic distress has made girls and young women belonging to marginalised sections extra vulnerable.
  • Children are at heightened risk of exploitation: A 2018 study conducted by non-profit World Vision India revealed that Bengal has a high prevalence of child trafficking cases.
    • The study also highlighted that 48 per cent of the adolescent children in the state have at least one form of vulnerability that included cases where the child was an orphan, the primary care giver chronically sick and unable to work, etc.
  • Priority tasks: Governments are diverting resources to address the pandemic and the police have new tasks for the enforcement of lockdowns and social distancing, affecting their normal operational capacity.
    • Under these conditions, there is a future danger that investigating trafficking in persons would become a lower priority and that proactive inspection of suspect sites and cases would be reduced.
    • This may have an impact on arrests, investigations, prosecutions and convictions, leading to a climate of practical impunity where traffickers can operate with even lower risk of detection and conviction.

What are the steps to be taken?

  • Committees: In a situation where policing is overstretched, community-based vigilance committees should play a key role in mapping and monitoring the most vulnerable children who are at imminent risk.
  • Integrated Child Protection Scheme: The Union Ministry of Home Affairs issued guidelines to undertake such a mapping exercise under the Integrated Child Protection Scheme. Such identified children should also be linked with the various services initiated by both central as well as state government.

Way forward

  • Communities must look out for each other, support each other and report suspicious activities. The time has come for the government and society to unite and ensure to end child trafficking, for the greater good of our children.

Economic recovery

Source: The Indian Express

Syllabus: GS-3- Economy

Context: A recovery led by profits, at the expense of wages, has implications for demand, inequality and policy.

  • GDP is typically reported in two ways: The sectoral, production side (agriculture, manufacturing, services) and the functional, expenditure side (consumption, investment, net exports).
    • Third way: On the income side, GDP is calculated as the sum of profits, wages and indirect taxes.

Discuss the role of factors of production in economic recovery.

  • Capital: The economic recovery in many parts of the world is too twisted for comfort, driven excessively by capital than labour.
    • If listed company profits are growing at 25 per cent, and yet GDP contracted 7.5 per cent, it reveals significant pressure on profits of unlisted SMEs, wages and employment.
  • Labour market pressures around the world: US hiring slowed sharply in November and the unemployment rate is still forecasted to remain close to 6 per cent i.e. almost twice pre-COVID levels even at the end of 2021.
    • Household demand for MGNREGA remains very elevated, suggesting significant labour market slack.
  • The employment rate: Some labour market surveys still reveal about 14 million fewer employed compared to February.
    • Nominal wage growth across a universe of 4,000 listed firms has slowed from about 10 per cent to 3 per cent over the last six quarters.

Why does this matter?

  • Weak demand: It disincentivises re-hiring, reinforcing the risks of settling into a sub-optimal equilibrium.
  • Worry for future demand: It may be normal for any one firm to boost profits by cutting employee reward. But if every firm pursued that strategy, It simply dismantles future combined demand and profitability for all firms.
  • Acceleration of technological adoption: Differential productivity impacts on capital, skilled and unskilled labour, will likely have more deep impacts on the future capital-labour mix, possibly stressing existing inequities.
  • Job-market pressures: If job-market pressures convince households into observing this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future.
  • Global recovery: If labour market pressures dent private consumption, and an incomplete global recovery in 2021 dents export prospects.
    • There will be no authoritative for entrepreneurs to invest, especially with manufacturing utilisation levels below 70 per cent heading into COVID-19 outbreak.
  • Fiscal policy: US policymakers are negotiating yet another fiscal package, and only a small fraction of the large discretionary stimulus that the Euro Area and Japan injected will be reversed next year.
    • India’s fiscal response has been controlled so far. It’s therefore important for the Centre to step up spending in the remaining months.

What is the way forward?

  • Public investment and a large infrastructure push: Must be the theme of the next budget. This will be crucial to boost demand, create jobs, crowd-in private investment and improve the economy’s external competitiveness.
  • Monetary to fiscal: In 2021, the stick must pass from monetary to fiscal, especially since the latter is a more surgical instrument to target SMEs and the labour market.

The many layers to agricultural discontent

Source: The Hindu

Gs3: Issues related to direct and indirect farm subsidies and minimum support prices

Context: The Farm Acts that are the focus of the farmers’ protest bear variously on the different strata of the farming community.

How farming distress is shared in common by the different strata?

  • The powerful farmers’ movements that sprouted across India from the 1970s, led by such iconic leaders as M.D. Nanjundaswamy, Sharad Joshi, and Mahendra Singh Tikait, which claimed to speak not merely for farmers but to the rural segment as a whole.
  • They presented a platform for discussion and debate beyond their immediate concerns.
  • The organisations have undergone much change. In some parts of the country the class and caste divide are still sharp, in other places, farmers’ organisations have not shied away from critically engaging with class, caste and gender concerns.
  • The very fact that a social reality is widely accepted provides space for policy intervention. The Farm Bills have ignored that the rural is a vibrant space in India, with ‘elective affinities’ binding its vast expanse.
  • The rich farmers have also reinforced their position enormously in the rural areas over the years after the Green Revolution and farmers’ movements of the 1970s.
  • They have also invested their surplus in agri-business and clearly hold access to the wider economic and institutional domains.
  • The lower strata of the farming community are invariably beholden to the rich farmer not merely for employment but also to access resources and services.

Why the Farm bills were introduced?

  • To double the income of India’s farmers by 2022.
  • To liberalise access to agricultural markets.
  • To remove existing barriers to storage of agricultural produce, and facilitating contract-farming.
  • The objective is to create ‘One Nation, One Market’, and promote ‘Ease of doing business’

What is the immediate response?

  • Organised farmers’ bodies and Opposition in Parliament offered strong resistance to these Bills.
  • Some State governments even enacted their own Bills.
  • The Shiromani Akali Dal, walked out of the alliance with NDA in protest against these Bills.

What are the key concerns?

  • Agrarian distress: piecemeal legislation and regulative processes have been put in place such as Pradhan Mantri yojanas but several key concerns of farmers have gone unattended.
  • States’ role: the issues affecting the farming community have a far greater bearing on the States relative to the Centre.
  • Lack of consensus building: The Centre extended little consideration to the sensitivity of the States.
  • Disparities: The three Acts bear differently on the different strata of the farming community and in different regions.
  • APMC as cushion: for instance, weakening the Agricultural Produce Market Committee (APMC) system and its resultant bearing on Minimum Support Price (MSP), particularly on crops such as rice and wheat is seen by the farmers as a threat to an assured sale of their produce at a price.
  • Procurement issues: Subjecting Procurement system to the vagaries of a competitive market, including storing and contracting of the produce, where he would eventually be beholden to the large players, including monopolies, are prospects that a farmer detests even though he is aware that the middleman is not a saint.

Exclusive  arbitration body for financial disputes

Source: The Hindu Business line

GS3: Issues related to planning, Mobilization of resources, Growth, Development, Employment

Context: India needs a special arbitration body for financial disputes.

Why financial institutions resort to litigation instead of arbitration for settling disputes?

  • Courts are more powerful: Litigation, offers a more potent forum for recovery of money and resolving financial disputes as the judges are vested with stronger powers than an arbitrator. such as interim measures, summary judgments, warrants for non-appearance, etc., which are not available in arbitration.
  • Creates more pressure on defaulter: In addition, the public nature of disputes in courts allows the banks to create pressure on the defaulters to discharge their debts as public disclosure hinders their future investment prospects.

Why settling financial disputes through courts is disadvantageous?

  • Judges lack technical knowledge: The judges in these jurisdictions are not competent enough to understand complex transactions and financial instruments. After 2009-09 financial crisis, the financial institutes felt a need for adjudicators who possess a deep knowledge of finance and an understanding of complex transactions.
  • Litigation negatively impacts economy as a whole: Moreover, financial disputes of large size often lead to public distress, resulting in negative impacting listed stocks which could consequently lead to collapse of economies, if big financial institutions are involved.

What is the advantage of resorting to arbitration over litigation?

  • Confidentiality: Arbitration maintains privacy of proceedings and ensures that the adjudicator is a person with expertise in finance
  • Relatively Easy enforcement: It is easier to enforce an arbitral award as opposed to a court judgment which can be appealed multiple times.

Why India needs a special arbitration body?

  • No special body for financial arbitration exists in India and such arbitrations continue to be adjudicated by retired judges, who are generalists and do not possess a specialized knowledge of finance and financial markets.
  • Considering the rise of financial disputes in India, including defaults by some of the biggest Indian corporations such as Anil Ambani’s Reliance Group, Vijay Mallya’s Kingfisher and Nirav Modi’s Firestar Diamonds, there is a need for providing a specialised institution to deal with financial arbitrations.

What we can Learn from the International experience?

  • In America, the Financial Industry Regulatory Authority (FINRA) provides assistance and advice for dispute resolution involving securities.
  • Similarly, The Panel of Recognised Market Experts in Finance (P.R.I.M.E. Finance) was set up in The Hague, Netherlands, in 2012 for providing a panel of arbitrators specialising in banking and finance, offering arbitration rules tailor-made for financial arbitrations and providing financial experts for assistance during such arbitrations.
  • The Institute of Chartered Accountants of India (ICAI) is one such institution which possesses a body of some of the most prominent financial experts in India. Perhaps, the government should create a panel in consultation with the ICAI for facilitation of financial arbitrations.

 

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