Answers: Mains Marathon – UPSC Mains Current Affairs Questions – September 18, 2018

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Q.1) Our system acts very much like a sponge, drawing up all the good things from the banks of the Ganges and squeezing them down on the banks of the Thames. Analyse the statement in the context of Drain of Indian wealth during British Era.

Answer: The process of drain of wealth took away the resources of India and benefited the British economy. Thus it acted as a sponge absorbing our economy and squeezing them down in Britain.

Drain of wealth:

  1. East India Company used its political power to acquire monopolistic control over Indian trade and handicrafts.
  2. Indian weavers were forced to sell cheap.
  3. Cheap manufactured goods from Britain destroyed Indian handicrafts.
  4. Remittances to England by European employees for supporting their families and education of their children.
  5. Remittances of savings by the employees of the East India Company as they preferred to invest at home.
  6. Remittances for purchasing British goods demanded by British employees as well as purchasing British goods in India.
  7. Government purchase of stores manufactured in Great Britain.
  8. Interest charges on public debt held in Britain (which excluded interest payment on railway loans and other debts incurred for productive works).

 

Q.2) Poverty must be seen as deprivation of basic capabilities rather than merely as less income. Analyse the statement in the context of Financial Inclusion of Indian society.

Answer:

Poverty as deprivation: Poverty can’t be seen solely as lack of income. It is also the consequence of a lack of other resources such as nutrition, health, education, housing, drinking water etc.

  1. Income and capability are strongly influenced by age, gender, social role, location and others of an individual. Handicaps, disabled, illness, and older age person are not able to earn income as well as not convert income to capability.
  2. Distribution within the family raises further complications with the income approach to poverty like sex bias.
  3. Better health care and basic education are not only the factors for improving income and leads to better quality of life but there is also increase a person’s ability to earn an income and be free from income poverty as well.
  4. Social inequality may also make it difficult to achieve efficiency.

Financial Inclusion:

  1. Access to finance is a major constraint to doing business, especially at small- and medium-sized enterprises (SMEs).
  2. Access to finance is positively correlated with economic growth and employment.
  3. Financial Inclusion expands poor people’s access to financial services, increasing their economic opportunities and improving their lives.

But, financial inclusion only helps to lower poverty and income inequality when overall economic conditions empower people to use access to finance for expanding a business or investing in children’s education.

 

Q.3) The falling of the rupee is a mere symptom of deeper malaise that hampers Indian Economy. Ad-hoc steps to check currency decline must not deflect from the deeper problems. Comment

Answer: Indian rupee has been depreciating against the US dollar over the past few weeks. It touched an all-time low of 72.97 per US dollar.

This fall, though is caused by some immediate factors, it also reflects a deeper malaise in the system.

Deeper malaise:

  1. High imports of gold and oil.
  2. Poor performance of the exports.
  3. Surging Fiscal Deficits due to irrational expenditures.
  4. India’s FDI/ FPI policies could not gain investor confidence. We witness an annual outflow of investments when developed economies raise their interest rates.
  5. High dependence on external sources for debt – both commercial and sovereign.

Steps:

  1. Keeping India’s fiscal deficit down and reducing its foreign debt is a necessary condition for future growth.
  2. Exports

a) Currency depreciation could provide some relief to exporters temporarily.

b) Exporters must compete against the best in the world and constantly upgrade technology, management and product quality to remain competitive.

3. NITI 3-year agenda :

a) India must replicate the Chinese strategy by creating Coastal Economic Zones(CEZs) with liberal land conversion rules, tax incentives, financing and infrastructure.

b) Specific sectors like textiles and leather can be strengthened by reforming labour

c) laws, giving tax incentives and putting infrastructure in place.

4. Mid term FTP review :MEIS (Merchandise Exports from India Scheme) incentives for two sub-sectors of Textiles increased from 2% to 4%.

a) Across the board increase of 2% in existing MEIS incentive for exports by MSMEs / labour intensive industries.

 

Q.4) Critically analyse the challenges faced by farmers in context of recent report published by NABARD in its financial inclusion survey.

Answer: Challenges faced by farmers:

  1. All India Rural Financial Inclusion Survey (NAFIS) finds that in 2015-16, 47% of agri-households were in debt.
  2. Only 10.5% agricultural households held a valid KCC.
  3. Agri-households which had a KCC, reported that against an average borrowing limit of Rs 1.39 lakh, amount drawn was Rs 91,000.
  4. 30.3% of agri-households still borrowed money from non-institutional sources like money lenders, relatives and input suppliers etc. Lengthy process for sanction of loans by institutions, demand for collateral security, and short term of (crop) loan were cited as reasons for seeking loans from non-institutional sources.
  5. Out of households which had taken any loan for agricultural operations, only 6.9% reported they had any crop insurance.
  6. Few farmers have insurance for their livestock.

 

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