9 PM Daily Brief – December 8, 2020

9 PM DAILY BRIEF

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GS 3

Permitting industrial houses to own banks

Farmers could perish with new farm acts

Coercive and Liberal environmentalism

Authorisation of coronavirus vaccines


9 PM for Preliminary examination

FACTLY


Permitting industrial houses to own banks

Source: Indian Express

Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context: Permitting industrial houses to own banks could undermine economic growth and democracy.

Background

  • Recently, an internal working group of the RBI has made a far-reaching recommendation to permit industrial houses to own and control banks.
  • According to the report, the reason for permitting industrial houses to own and control banks is that industry-owned banks would increase the supply of credit, which is low and growing slowly.
  • However, many believe that this step would be a grievous mistake, and it will be a setback to Indian economic and political development.

Why it is a concern?

  • Against the recommendations of the experts: The report states that majority of the experts were of the opinion that large corporate/industrial houses should not be allowed to promote a bank.
  • The problem of connected lending: This can lead to Over-financing of risky activities, encouraging inefficiency by delaying or prolonging exit and entrenching dominance.
  • Regulation of Connected lending is difficult: It is clear from the experience of Indonesia and most advanced countries that regulating connected lending is impossible and the only solution is to ban corporate-owned banks.
  • Overburdened RBI: RBI has encountered much difficulty in dealing with banking irregularities at Punjab National Bank, Yes Bank, ILFS and Lakshmi Vilas Bank. Regulation and supervision need to be strengthened considerably to deal with the current problems in the banking system before they are burdened with new regulatory tasks.
  • Can delay exiting of inefficient firms: This makes it impossible for more efficient firms to grow and replace them. If industrial houses get direct access to financial resources, their capacity to delay or prevent exit altogether will only increase.
  • Can stimulate growth of Monopolies: Already, The Indian economy already suffers from over-concentration. The COVID-19 crisis is aggravating this picture because those with greater resources will not only more easily survive the crisis and they will be able to take over small, medium and large enterprises that have not had the resilience or resources. In this scenario, if large industrial houses get banking licences, they will become even more powerful.
  • Will dampen rules-based well-regulated market economy: The power acquired by getting banking licences will not just make them stronger than commercial rivals, but even relative to the regulators and government itself. This will aggravate imbalances leading to a vicious cycle of dominance.
  • Affect credit Quality: Indian financial sector reforms have aimed at improving both the quantity and the quality of credit. If India now starts granting banking licences to powerful, politically connected industrial houses, allowing them to determine how credit is allocated, it will effectively abandon the principle of ensuring that credit flows to the most economically efficient users.
  • Alternative options do exist: The other powerful way to promote more good quality credit is to undertake serious reforms of the public sector banks.

Mixing industry and finance will set us on a road full of dangers for growth, public finances, and the future of the country itself.

Farmers could perish with new farm acts

Source- The Indian Express

Syllabus- GS 3- Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing.

Context- Agricultural operations may flourish with new farm acts, but they threaten to lead to the marginalization of the farmers

How farmer’s protest is unique?

  • Farmer’s group come together– 31 farmers’ organizations, which have different ideologies and leanings, are to fight collectively against these Bills.
  • Kept politician out of agitation– The unions came together and formally decided to keep politicians of all parties out of their “struggle”.
  • Even the traders and the arhtiyas, who have been staunch supporters of the Central government, have expressed their anguish against the new farm laws.

Why is the anger so pronounced in Punjab?

  1. Food bowl of India– Punjab has contributed the largest amount of food grain in the central pool.
  2. Un-level field– The Punjab farmers are being asked to diversify their cropping patterns whereas other states like Madhya Pradesh and western Uttar Pradesh are encouraged to produce grains.
  • This resulted in
  1. The procurement system and MSP mechanism is strong in Punjab and Haryana
  • Only 6 per cent of the farmers in India are fully covered by the MSP, and 84 per cent are located in the states of Punjab and Haryana.

Therefore, any disruption to the system, real or perceived, will cause a major upheaval

What are the farmer’s concerns?

  • End of MSP- Their main worry is about a possible withdrawal of the MSP and a dismantling of the public procurement of grains.
  • Promote corporate control– The farmers contend the federal government is making ready to withdraw from the procurement of food grain and hand it over to the company gamers.
  • Small and marginal, would be left at the mercy of the corporates, with reduced collective bargaining capacity.

What is government’s contention?

  • Farmers will get higher prices – These Acts are intended to empower the farmers and ensure doubling of their incomes.
  • The Acts will only increase options for farmers in the output markets, that the MSP-procurement system will continue, and that there is absolutely no plan to dismantle the system.

What are the issues with the new farm Acts?

  • Free market does not have the solutions to improve the well-being of people living on the margins.
  • The assumption that the market shall protect and multiply farmers’ income is misleading.

Way forward-

  1. Compensate farmers under WTO compatible blue box- The Centre could allocate subsidies for diversification to commercial crops for the farmers of Punjab.
  • Subsidy could be given for three consecutive years.
  1. To keep the mandi system functional, the APMC Act may be reformed
  • The state governments permitted to collect mandi fee and arhtiyas given handling charges.

Coercive and Liberal environmentalism

Source- The Indian Express

Syllabus- GS 3- Conservation, environmental pollution and degradation, environmental impact assessment.

Context– India’s ability to influence the new geopolitics of climate change will depend a lot on its domestic political resilience in adapting to the new imperatives.

What are China’s climate commitment?

  • China would become carbon net-zero by the year 2060.
  • Also, China now aims to have CO2 emissions peak before 2030.That means China would not allow its greenhouse gas emissions to grow beyond that point.

What is Coercive and liberal environmentalism?

China’s coercive environmentalism

The Chinese government pursues its environmental goals with the authoritarian tools it has available: mandatory targets, mass campaigns, top-down bans, factory closures, forced relocations, and even household trash inspectors who can ticket offenders.

  • Effective state intervention- Enforcing new environmental norms in the last few years has helped China shed the image of being the “bad boy” on climate issues.
  • China has been “codifying” environmental policies into clear rules, regulations and laws.

Joe biden’s environmental polices-

  • Modernizing liberal environmentalism that relies on political consensus in drafting new environmental norms and their effective enforcement as well as the reliance on market-based mechanisms.
  • To enforce environmental regulations which were either diluted or discarded by the Donald Trump administration and enhance the incentives for polluters to compensate for their violation of norms.
  • Climate justice– The recognition that pollution and other ecological problems have a greater impact on the poor and minorities.
  • Special focus on an early end to the worldwide use of coal.
  • Rejoining the Paris Accord to set accelerated timelines for reducing carbon emissions.

However, Coercive and Liberal approaches to managing climate change totally different but they share some important objectives.

  • Both China and the US (along with the West) recognize the urgency of the climate challenge.
  • US and China, both are racing to develop new technologies that will constitute the foundations of the green economic future.
  • Both have zeroed in on industrial policy to achieve their climate objectives.
  • Both understand that climate politics is in the end about rearranging the global order.

What are the challenges ahead of India?

  • The urgency of addressing climate change is likely to intensify in the immediate term with the election of Biden as US President and the prospect of cooperation on climate change between Washington and Beijing.
  • Puts Pressure on India: European Union and 70 other countries (that have relatively low emissions) have committed itself to a net-zero emission status by 2050. The new direction of Chinese and US policies in Environmental Initiatives puts pressure India

Way forward-

India’s real test on climate change is on building a new domestic consensus that can address the economic and political costs associated with an internal adjustment to the prospect of a great global reset.

Authorisation of coronavirus vaccines

Source: THE HINDU

Gs2: Issues Relating to Development and Management of Social Sector/Services relating to Health

Context: Safety and efficacy data for the new vaccine must be known before emergency-use authorisation for vaccines.

Why in news?

  • The Pune-based Serum Institute of India has approached the regulator for nod for its vaccine, Covishield, developed by Oxford University.
  • AstraZeneca, which is carrying out the phase-3 trials of the Oxford vaccine in four countries, is yet to secure a nod from any of the regulatory agencies.
  • AstraZeneca recently gave details of the interim safety and efficacy data involving 131 COVID-19 cases in the phase-3 trials in the U.K. and Brazil. But details of the trials in India are not out yet.

Why fast tracking of vaccine authorization is needed?

  • The unprecedented speed in taking the vaccine from the development stage to approval process in less than a year is remarkable but also necessitated by the toll the virus has taken on lives and livelihoods.
  • To reduce mortality and morbidity.

What are the concerns associated with authorization of vaccines?

  • Regulatory bodies under pressure: to fast-track the entire process.
  • Lack of transparency: Opaqueness about vaccine safety and efficacy does no good in gaining people’s confidence and willingness to get vaccinated.
    • For example, Moderna, Pfizer and AstraZeneca took the extraordinary step of publicly sharing the trial protocol, the time points at which interim analysis of phase-3 trial in India will be carried out for safety and efficacy is unclear.
  • No checks: the U.S. FDA has clearly spelt out at least 50% efficacy and stipulated a median follow-up duration of at least two months after completion of the full vaccination regimen to assess a vaccine’s benefit-risk profile for emergency-use approval. However, no such conditions have been mentioned by the Indian regulatory agency. The phase-3 trial of Covishield began on September 21 and completed the enrolment on November 12.
  • Fear of side effects and vaccine hesitancy: ineffective or unsafe vaccine is worse than not having one.A survey by the London-based Vaccine Confidence Project revealed that though the intent to get vaccinated was 87% in India, 34% respondents were worried about side-effects while 16% were concerned about fast-moving trials.

What needs to be done?

  • Need to engage all stakeholders in a transparent manner at every stage and not by merely sharing guidelines regarding vaccine safety with the States.
  • It is also important that those seeking emergency-use authorisation share the safety and efficacy data immediately.

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