SECURE SYNOPSIS: 20 OCTOBER 2017
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.
General Studies – 1;
Topic: Salient features of Indian society; Social empowerment
- The modern polity has recognised certain social principles which are premised on equality. In this context, gender rights form the core of these principles, established as such through SDG Goal 5 – gender equality.
- However, they often conflict with the traditional norms that exist in the society and are deeply entrenched. For example, entry of menstruating women is banned in Sabrimala temple to prevent temple from being “impure”.
- Also, traditional norms also hamper economic development, perpetuates backwardness of communities like lower castes and behavioural stereotypes.
- These stereotypes cannot be tackled comprehensively without confronting them on priority basis.
Impact of such traditions
- They affect mental and physical integrity and hinder the potential of individuals to think and do out of bounds.
- They significantly alter the equality enshrined in the constitution under Article 14 as fundamental right. In particular temple case, women’s right to religion under Article 25 is also being violated.
- The widening gap and inequalities in society make the huaman resource utilization not feasible which thus become roadblock for the nation.
- Disadvantaged persons like women and dalits should be empowered to access their fundamental rights guranteed by the constitution.
- Their human resource development as suggested by Amartya Sen capability approach will be fitting against discriminatory norms.
- The participation of all in faith and community groups should be emphasised. Recently Kerala appointed non-Brahmin priests in temples.
General Studies – 2
Topic: Statutory, regulatory and various quasi-judicial bodies
The Economic Advisory Council to the Prime Minister has been reconstituted as an independent institutional mechanism to advise Prime Minister on issues pertaining to Indian economy as referred to it. Earlier while such groups did serve their purpose up to a point, they also became a potent symbol of the policy paralysis. But the success of its working and mandate would depend on the independence of its mandated functioning.
As the Prime Minister revives the Economic Advisory Council and other advisory structures, transparency is vital, as they were earlier with the promise of minimum government, maximum governance.
Its formation is a major signal that the government is willing to seek professional help.
However there are issues which may plague the institution as follows –
- Excessive political interference
- Unlike constitutional or statutory institutions like RBI and SEBI, the high powered council or committees are prone to political interference in its working.
- Thus, recommendations that stifle popular support are not conceded by the political executive.
2.Lack of data and information
- From its terms of reference, submitting periodic reports to the Prime Minister on macroeconomic developments and issues with implications for economic policy has been omitted. So, unlike the previous EAC, there are unlikely to be any regular reports taking stock of the economy and its growth outlook, at least in the public domain.
- It makes policy advocacy difficult. Therefore, recommendations would be more of a prescription rather than evidence based policy recommendations. Thus, mandates should be empowered with resource support.
3.Absence of secretariat support
- The secretariat support is important in the sense that it ensures required mandate of the committee is having expert support, like as in the case of cabinet secretariat support to cabinet and its committees.
4.Lack of adequate institutional capacity
- Many a times committees like EAC have given responsibility of suggestions on issues out of its institutional capacity, like previous PMEAC was mandated to provide suggestions on J&K development which is a complex issue.
To conclude, the effectiveness of the councils like EAC is contingent on the freedom to its mandates.
Topic: Mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.
Home-based workers are those who are involved in the production of goods or services directly for the market or an employer for remuneration. The work is produced from either their home or at a premise that doesn’t belong to the employer, like a factory or an office.
They number into 37.4 million (according to the National Sample Survey Office statistics for 2011-12).
Home-based workers can further be divided into two categories.
- Self employed
- The self-employed workers who are in-charge of their own businesses, such as home-run tailoring units.
2.Sub contract workers
- Mostly, they tend to be sub-contracted, piece rate workers.
- They source work from vendors and middlemen.
There no policy for home-based workers in India.
Need for a policy for home-based workers
- Unique needs across sectors
- They range from bidi-rollers or embroiderers, embellishing clothing for high-street brands to those engaged in packaging or even in the food industry.
- Each of these categories has unique and distinct needs.
2.Half of the workers are women from marginalised sections
- Approximately half are women who have to balance their household responsibilities along with their work.
- A vast majority of these women come from the marginalised and economically weaker sections of society.
What should be there in the Policy?
- Official recognition of home based employees as workers
- There is a need to recognise home-based workers as ‘workers’ who contribute financially to their families, their community and their country. They have to be seen as economic agents of change.
2.Address needs according to their nature of work
- The policy need to address the various concerns of each category of home-based workers.
- The concerns of self-employed home-based workers revolve around credit, markets and technology.
- While the sub-contracted, piece-rate workers’ issues relate to the need for fair wages, transparency in contracts and rates, regulation of contractors or brands and companies, there is also a need for a dispute resolution mechanism.
3.Provisions for women
- The policy needs to address the need for social security measures, including life insurance, healthcare and disability benefits for all home-based workers while also focusing on maternity and childcare for women.
- Cases of abuse and violence go unregistered because of fear of loss of work and, therefore, a loss in income. Here, the onus is on the state to provide ample protection for women workers from the potential violence from middlemen.
- Since there are no lobbies or strong interest groups looking out for home-based workers, their interests and issues often go ignored.
- Any policy for home-based workers must ensure the involvement and participation of multiple government departments/ministries. The use of inter-sectoral committees chaired at the appropriate level would be an advisable option.
- Programmes like Make in India, Skill India, Digital India, Smart Cities, Pradhan Mantri Awas Yojna, Pradhan Mantri Mudra Yojana, Jan Dhan Yojana, the Draft Labour Code on Social Security and Welfare seems to benefit the home-based worker.
General Studies – 3
Topic: Issues related to direct and indirect farm subsidies and minimum support prices
Competitive Market affects the demand and supply in an economy positively in various ways.
- It increases the rates to ensure monetary flow to suppliers (farmers)
- Competition ensures quality in production.
- Low wastage and Less hoarding.
Impact of regulation
- Regulation and competition in the market affect price volatility.
- Essential Commodities Act with stock limits on traders rule out the possibility of the private sector mopping up more than the normal marketed surplus, forcing prices to go down.
- When there is a glut, there is a disproportionate price spread between retail and farm. This is particularly true in the case of vegetables.
- Price spikes are also sometimes created by cartels of traders, especially at the local level. The reason for such price fluctuations is poor market integration across regions/states over time.
Agricultural reforms in recent times has had to deal with MSP in case of pulses and other cereals. MSP ensures that the farmer is paid a minimum price for production regardless of whether the produce is sold in the market or not.
Arguments in favor
- Free Trade – Less regulation by the Government allows free trade between the Producers and the Consumers.
- Less hoarding, illegal storage and other unfair trade practices
- Price volatility leads to increase in monetary surplus in times of market boom in hands of farmers.
- Less involvement of middle-men and private players who have been seen to derive unfair profits.
- Inflation – Food being a primary product can easily succumb to economic inflation if allowed free trade.
- It may increase the instances of lower demand and thus marginalizes poor farmers.
- Remove various restrictions under the APMC Act
- Facilitate private sector participation and investment in agri markets
- Promote storage
- Link the processing industry to the farm through contract farming
Follow up solutions for the states
- Adopt a model APMC Act.
- Allow direct purchase by the private sector
- Set up mandis in the private sector
- Allow farmers to sell directly to consumers
- Ensure a single trading license
- Allow electronic trading
- Take fruits and vegetables out of the purview of the APMC Act.
- The failure to establish a competitive market is forcing farmers to ask for higher MSP and expand procurement to all crops to make MSP effective.
- The Government in India has relied on Surplus Storage and Price Regulation in market, which has helped curtail price volatility when even when the rest of the world was reeling under the same.
- Initiatives like E-NAM, farmerzone have helped the Farmers.
- Even though today the whole Agricultural Sector cannot be made freely competitive, sectors like Horticulture, Floriculture, certain commodities besides cereal may be allowed free trade eventually.
General Studies – 4
Topic: Corporate governance
Why Corporate governance needed?
- Many Indian companies are groaning under the weight of excess debt.
- Few of the expensive acquisitions made in the previous decade have paid off for shareholders. Most corporate boards have maintained a studied silence about these issues.
- The problems in the Indian economy right now are as much about corporate governance as they are about the vagaries of the business cycle.
- N R Narayana Murthy has repeatedly hit out against the ugly, iniquitous side of Indian capitalism
- A paper by the French economist Thomas Piketty and his colleague Lucas Chancel noted that the top 1% of income earners in India now control close to 22% of the total income
Uday Kotak committee recommendations
Composition of board and role
- The panel recognises that a large number of listed Indian firms are controlled by a single promoter or a set of persons acting in concert where lines of control, influence and information do not necessarily stay within formal corporate structures
- Flaws in board structures have been in evidence whenever gatekeepers have failed to do their job. In its report on Kingfisher, the Serious Fraud Investigation Office (SFIO) made scathing remarks on the board of directors, which included a former chief of the Securities and Exchange Board of India and a former Finance Secretary. The independent directors who were part of the audit committee did not question Kingfisher’s accounting policy and changes in methodology, and were unaware of their impact on profitability and financials
- The failed software service firm Satyam, too, had a heavyweight board
- Number of directors
- The committee notes that since the board has a significant role in the functioning of a listed company, it should have an appropriate number of directors.
- It has recommended that a listed company should have a minimum of six directors, at least one independent woman director, and a minimum 50% of the directors should be non-executive.
- The role of independent directors on the board is extremely important as they protect the interest of all stakeholders, especially the small investors. The committee has laid down the path for greater presence and role of independent directors.
- No board meeting can be conducted without the presence of an independent director.
- The committee has recommended that at least half of the board members should be independent directors.
- It has also suggested measures so that independent directors inducted in the board are truly independent.
- The dissenting views of independent directors should be published for decisions taken with respect to capital investments, acquisitions, related-party transactions and breach of risk prudence in any manner
3.Separating management from shareholding
- In this emerging age of rapid technological advancement and growing complexities around business corporations, the custodial model of governance warrants a code of minimum qualification/experience for any individual being appointed managing director.
- The legacy succession of young family members from the promoter group carries several negative repercussions.
- It would be advisable to begin by at least sensitizing promoters to the need to separate management from shareholding. Defining minimum criterion for being eligible for top managerial positions for companies with a certain size and scale of market capitalization is also important.
- The committee has recommended the separation of roles of chairperson and managing director, and the chairperson should be a non-executive director.
4.Board meetings and agenda
- The committee has suggested that the number of board meetings in a year should be increased from four to five and aspects such as succession planning, strategy and broad evaluation should be discussed at least once a year.
- This seems to have been inspired by recent boardroom battles, but it’s not clear if one more board meeting would actually help avoid such problems.
- The board should declare its accountability on key business parameters (present and future) at the beginning of the year to shareholders to instill objectivity in board performance
- In some of India’s widely held public listed firms, run by professionals with no controlling set of shareholders in sight, there is no succession planning, and the top deck earns compensation packages grossly disproportionate to that of average employees’. That raises questions about the quality of the mandatory annual board scrutiny of CEOs, based on key performance metrics.
- In a severe indictment of the boards of a couple of private banks, a massive divergence was found in the size of bad loans recognised by the banks and the RBI; two banks where the regulator flagged such divergences had a common auditor.
- In many countries, the drive has been led by activist shareholders; in India, the most powerful institutional shareholder — the government-owned LIC, which invests over Rs 50,000 crore on average in Indian firms annually — rarely rocks the boat.
- Access to information
- It has recommended that disclosures by companies to stock exchanges and on their own websites should be in a format that allows investors to find information with ease.
- It also recommended that companies explain significant changes in select financial ratios in the annual report.
- Additionally, the committee has recommended that all listed companies should publish cash flow statements on a half-yearly basis.
- All this will help the common investors—who normally don’t have access to financial databases—understand and track companies with relative ease.
- Elaborate information to include subsidiary companies—and, in the case of multiple businesses in one company, elaborate business-wise capital deployment along with explanations for changes along prescribed lines proposed in the report.
- Financial indicators should be supplemented with some non-financial lead indicators to allow investors to make better assessments.
- The Kotak committee sees a case for creating deterrence to ensure this, and recommends greater powers for accounting watchdog Institute of Chartered Accountants of India. ICAI has been unenthusiastic, saying this was outside the committee’s scope — however, a committee on corporate governance headed by Naresh Chandra, too, had, over a decade ago, stressed on the quality of audits, and recommended independent quality review boards.
- The reliability of financial statements is extremely important, and this makes the role of auditors crucial.
- The committee is of the view that if an audit firm leaves before the expiry of its term, the company should give reasons for this as it could be a cause of concern for investors.
- It has also recommended that Sebi should have the power to act against auditors if the need arises.
Topic: Public/Civil service values and Ethics in Public administration:
- Integrity is generally a personal choice to hold oneself to consistent moral and ethical standards, is regarded by many as the honesty and truthfulness or accuracy of one’s actions even under duress.
- Productivity refers to being efficient at work.
- Productivity’s focus is on achieving ends in stipulated time whereas Integrity’s focus is on right means.
Supplementary to each other
- Integrity and productivity can be supplementary when they are applied to achieve ends through right means.
- Ambedkar was pushing for equal rights for all sections of society, particularly for the disadvantaged section, but he balanced integrity and productivity fairly without any bias and thus gave us all the rights in the Constitution of India.
Conflicting to each other
- Whereas, they can be conflicting when ends gain primacy over means i.e. productivity over integrity or when means gains primacy over ends i.e. integrity over productivity.
- For eg., to control population, China went for one child policy. Though it achieved its goals and thus, productivity but in the process lost its integrity of upholding people’s privacy which is very integral to a human.
Significance in governance
- Governace is supposed to be both practical and principled since every decision can affect life in multiple ways and may affect millions.
- There is always a tension between getting work done & right process ,both are important since the former is important for smooth running of the system while latter upholds purity of the system and prevents decay in long run.
- Civil servants regularly face conditions in which the they are in an ethical dilemma over which value to give more priority. Decision can be best decided by looking at both short term and longterm consequences and principles of transparency,responsibility and pursuing the middle way. Civil servants are supposed to be efficient, though they are to to be so while upholding certain values and certain rules of conduct since they are both leaders and representatives of the state.
- But focussing on integrity alone may not bring quick results while focussing on productivity alone may corrupt the system.
- Therefore, a right balance of integrity and productivity is needed in one’s actions to bring in changes from the root level which induces behavioural change, instead of superficial change.