SECURE SYNOPSIS: 09 MAY 2019
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.
Topic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Why this question:
With India currently ranking at 77 in the World Bank’s Ease of Doing Business Index, jumping from 65 place in the 2014-18 periods, Department for Promotion of Industry and Internal Trade (DPIIT) is working towards pushing India to the top 50 countries in the Ease of Doing Business Index. Enforcement of contracts being one of the key dimensions that require focused attention.
Key demands of the question:
The answer must analyse India’s Position on Enforcing contracts with respect to the importance it carries in the economic growth and development of the country.
Directive word
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer:
Introduction
In a few introductory lines explain the background of the context of question.
Body
Discuss the following aspects in the answer:
- Explain that the importance of an effective, efficient and expeditious contract enforcement regime to economic growth and development cannot be overstated. A clear and certain legislative and executive regime backed by an efficient judiciary that fairly and punctually protects property rights, preserves sanctity of contracts, and enforces the rights and liabilities of parties is a prerequisite for business and commerce.
- Explain that India’s Position on Enforcing contracts indicator over the years has shown improvement from 186 in 2014 to 163 in the 2018 report. However, in comparison with its BRICS counterparts and sizeable GDP based market economy, a greater room for improvement is discreetly felt.
- Discuss the Importance of just and efficient contract enforcement by highlighting the pros and cons facing the current system of business.
- Explain Why is India still lagging behind on Enforcing contracts?
- What needs to be done?
Conclusion
Conclude with way forward.
Introduction:
In the World Bank’s ease of doing business ranking 2018, India jumped 23 places from 100 to 77. While improvement has been seen across various parameters, one aspect where India has remained stagnant is in enforcing contracts. The Economic Survey 2017-18 made a compelling argument that addressing pendency, delays and backlogs in the appellate and judicial arenas is the next frontier for improving Ease Of Doing Business (EODB) in the country.
Body:
Current scenario:
- When it comes to the contract enforcement metric, India lags behind at 163 out of 190 nations.
- In India, there is significant disregard for upholding commercial contracts.
- Hardly any state has actually set up the commercial courts which could help in greater contract enforcement.
- Contract enforcement is not just a challenge with other private sector entities but also with the government.
- Government contracts get modified or nullified post contract signing, leading to significant damage to shareholder value. This has especially been observed in the infrastructure sector.
- The issue of overburdened and understaffed judiciary and slow judicial system. Giving some facts, the survey said there is a high level of pendency across six tribunals, estimated at about 1.8 lakh cases. The total backlog in High Courts by the end of 2017, according to the National Judicial Data Grid, was close to 3.5 million cases.
- While the volume of economic cases is smaller than other case categories, their average duration of pendency is arguably the worst of most cases, nearly 4.3 years for five major High Courts, it added.
- As of the quarter ending March 2017, a total of 1.45 lakh appeals were pending with the Commissioner (Appeals), CESTAT, HCs and the SC together, that were valued by the Department at 2.62 lakh crore.
- According to the Ease of Doing Business Index Report, enforcing a contract in India can take 1445 days and 30% of the claim value as cost
Importance of an effective, efficient and expeditious contract enforcement regime:
- Legitimate businesses will find it difficult to operate in environments where there is a lack of contract enforcement.
- Contract enforcement is very important for private enterprise.
- This is also one of the key reasons Indian capital has been regularly investing outside of India.
- It is essential for maintaining business confidence, reducing uncertainty and promoting fair play in the economy.
- Poor contract enforcement tends to increase the risk and reduce the returns (increased legal costs), thus affecting the overall risk to return ratio.
- Businesses don’t engage in economically and socially beneficially activity such as innovation.
- Another effect of a poor contract enforcement mechanisms is the spurt of informal and often illegal channels of dispute resolution.
- Along with biased and poor quality decisions, this also brings undue power into the hands of middlemen and facilitators.
- This, in turn, creates problems such as increased corruption and the undermining of the rule of law.
- Contract enforcement is important for legitimate businesses to flourish in India and to generate jobs and bring in prosperity.
- An effective contract enforcement mechanism reduces the need to approach redressal mechanisms.
- It leads to healthy risk-taking behaviour in the economy, which is necessary to ensure growth.
Government Initiatives
- The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act was passed.
- This was primarily to address the dispute resolution concerns in India’s business environment.
- It provides a forum with upgraded infrastructure to resolve “commercial disputes”.
Way Forward
- As highlighted by the Economic Survey, addressing such deep-rooted problems will be possible through extensive cooperation between the organs of the government—“cooperative separation of powers”.
- India needs to bring in improvements in ease of “starting a business” and in “contract enforcement” on a war footing.
- Devolution of powers to decentralise the system for faster decision-making.
- The tax department could exercise greater self-restraint by limiting appeals.
- Substantially increasing state expenditure on the judiciary, particularly on modernisation and digitisation
- An effective legal system provides the necessary level playing ground for smaller firms.
- Another major way to increase productivity of judges will be to introduce fully digital systems in the courts.
- It is also important that individuals and businesses also make an effort to learn more about contracts and contract enforceability.
- Poor and costly registration system in India can be dealt with digital signatures and other technology such as blockchain.
Topic: Important aspects of governance, transparency and accountability. Issues relating to development and management of Social Sector.
Why this question:
The article provides for deep analysis of use of socio- economic caste census as a tool to target right beneficiaries in various welfare schemes of the country. One has to analyse the benefits and challenges brought by it.
Key demand of the question:
The answer must appreciate the utility of socio-economic caste census in targeting the beneficiaries across welfare schemes of the country, discuss the associated issues in choosing the right beneficiary in welfare schemes.
Directive:
Elaborate – Give a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
Define what you understand by Socio – economic caste census.
Body:
Body of the answer should discuss the following aspects:
- Discuss if SECC is a better tool to estimate poverty than the BPL method?
- What is the advantage of using SECC in targeting beneficiaries of welfare schemes?
- What are the Drawbacks of SECC? – SECC collates data regarding the caste of the people. This caste related information faces the danger of being misused by political parties for their ulterior motives. SECC data must be regularly updated in order to remove beneficiaries who have overcome their deprivations. This will put a huge burden on the part of the government etc.
- Suggest what should be done?
Conclusion:
A multidimensional approach that incorporates a range of indicators to capture the complexity of poverty is the need of the hour and the SECC seems to be a good tool in the hands of the government in this regard. However, the government should take necessary steps to avoid the misusing of SECC and also to strengthen the SECC.
Introduction:
Socio Economic and Caste Census (SECC) is a comprehensive exercise carried out for both rural and urban India. SECC supplies data to differentiate the socio-economic status of households based on housing, educational status, landholding, differently abled, occupation, possession of assets, SC/ST households, incomes etc. It was conducted by MoRD, Ministry of Urban Development, Ministry of Housing and Urban Poverty Alleviation, The Office of the Registrar General and Census Commissioner and the State Governments.
Body:
Utility of SECC:
- The household data can be utilised by planners of programmes at State, district, Block, Gram Panchayat and village levels.
- BPL data tells us how many are poor and SECC tells us who those poor are. It is more concerned with ensuring the right person gets the benefit.
- The results of the SECC would be used for various other developmental uses in the country.
- It is expected that the database provided by SECC would be used for decentralized governance, planning and development.
- Checks and balances at several levels starting from the enumeration stage, to public scrutiny at the Gram Sabha level.
- It would help in understanding the changes in society and exclude or include well of or deprived caste.
- Without accurate data of thousands of jatis (castes) and upjatis (subcastes), it is difficult to infer the accuracy of the caste based political decisions.
- Some jatis may have managed to pull themselves out poverty and marginalisation, while others may have sunk into it.
- Data on caste can be used to rationalise reservation policies.
- This data will strengthen the democratic system and will help to uplift a particular caste and in future there will hopefully be a casteless society.
Challenges in choosing the beneficiaries:
- Delay in the release of SECC data turned the major issue, due to which states have to rely on BPL data which was highly inadequate for identifying the beneficiaries of NFSA (National Food Security Act), 2013.
- The errors of omission (excluding those who are poor) and commission (including those who are not poor) are still reported to be there in SECC data.
- There are inconsistencies between the data obtained from SECC 2011 and already existing data from sources like NSSO etc.
- Critics of national food security Act say that providing food security benefit to 75% of the rural household is faulty as according to the SECC 2011 data only 50% of the rural household are deprived.
- Though, experts have appreciated the approach of defining poverty through deprivation, instead of consumption, but there are some data which contradicts the ground For example, the number of manual scavengers are grossly underestimated.
- A district-wise comparison with data from the last census conducted in 2011 and numbers from the more recent National Family Health Survey (NFHS 2015-16) suggests that while there are some common patterns in all three databases, there are considerable differences when it comes to identification of the most backward districts.
Way forward:
A multidimensional approach that incorporates a range of indicators to capture the complexity of poverty is the need of the hour and the SECC seems to be a good tool in the hands of the government in this regard. However, the government should take necessary steps to avoid the misusing of SECC and also to strengthen the SECC..
Topic: Structure, organization and functioning of the Judiciary.
Why this question:
The question is in the context of recent issue surrounding the office of Chief justice of India. The article highlights in what way the handling of charges of sexual allegation against the CJI were against the values of transparency anf fairness.
Demand of the question:
This question seeks to examine the process adopted for handling the charges against the CJI and one needs to evaluate the process critically and the impact it has on other aspects of justice with fairness and transparency.
Directive word:
Critically analyze – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgement.
Structure of the answer:
Introduction
Start with brief introduction of the entire scenario.
Body
Discuss the following points in detail:
- Start with a brief evaluation of the process that was adopted to handle the charges.
- What should have been the ideal procedural safeguards and legal principles to handle such a case.
- Why was there a deviation and whether it is justified?
- What are the flaws in the current method of handling the case? – The constitution of the “in-house” panel was not in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, members other than judges should have constituted the committee instead of an “in-house” panel comprising three judges of the Supreme Court. The panel’s report is not available to the public on reasons of confidentiality.
Conclusion
Conclude that the Apex court is supposed to protect individual rights and adjudicate freely and fairly.
Introduction:
The office of Chief Justice of India heaved a sigh of relief after Justice S.A. Bobde in-house committee had found “no substance” in the sexual harassment allegations levelled by a former Supreme Court staff member against Chief Justice of India Ranjan Gogoi. The Committee has given a clean chit to CJI Gogoi and concluded that there is no substance in the allegations of the complainant.
Body:
The ideal procedural safeguards and legal principles to handle such a case:
- If an average employee in a government department is accused of sexual harassment at the workplace. If at the outset reasonable material is found in favour of the complaint, the accused is suspended from employment pending an inquiry.
- Usually, an independent inquiry will follow which will give both parties an opportunity to present evidence and arguments and to examine and cross-examine witnesses.
- This is considered necessary in administrative law to ensure that the accused does not tamper with evidence or intimidate or influence witnesses.
Flaws in the current method of handling the case:
- The CJI himself constituted an extraordinary hearing in the Supreme Court, along with two other judges, on a non-working day in a case titled “Matter of great public importance touching upon the independence of the judiciary”.
- The constitution of the “in-house” panel was not in compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, a special legislation to curb harassment.
- It did not seem to be of concern that to ensure independence of the inquiry and check for bias, members other than judges should have constituted the committee.
- Nor was not in accordance with any requirements under the existing framework of law.
- Thereafter, the complainant was forced to abstain from the panel, citing various reasons such as the refusal of the panel to allow the presence of her lawyer, refusal to record the proceedings or to inform her of the procedure followed and prohibition on conveying the details of the proceedings to anybody else, including her lawyer.
- The panel continued the proceedings in her absence and then met the CJI.
- The finding of the panel that the allegations are baseless is the final blow in a process that has violated all principles of fairness, due process and impartiality.
- The panel’s report is not available to the public on reasons of confidentiality.
- The public have been kept in the dark, having no access to and no knowledge of what transpired in the proceedings. This has happened at a time when the Right to Information Act, 2005 has revolutionised access to information by the public.
Travesty of Justice:
- The institution of the judiciary has a strong counter-majoritarian character. It is considered neutral — free from self-interests.
- It is supposed to protect individual rights and adjudicate freely and fairly.
- But the current episode points to a larger problem in Indian democracy: the emergence of judicial oligarchy.
- Critics opine that in this particular case, the main question was whether the Supreme Court would live up to the standards of fairness it expects of all authorities while inquiring into a former woman employee’s complaint of sexual harassment and victimisation against the Chief Justice of India, Ranjan Gogoi.
- An allegation against a sitting judge is inquired into by three other judges of the court, the accused is exonerated, the panel report is made available only to the CJI and the seniormost judge of the court, and this secrecy is justified by relying on a judgment of the Supreme Court itself.
Way forward:
- Given the public interest in the fair administration of justice vis-à-vis the highest judicial officer, the Committee cannot remain under the cover of confidentiality.
- The independence of the judiciary and constitutional protections given to judges do not transform into an immunity shield.
- The report must at the very least be provided to the complainant. The reliance on Indira Jaising v. Supreme Court of India & Anr is entirely misplaced as that judgement was in context of the discretion of the CJI to release a ‘preliminary inquiry’ that was considered as ‘ad hoc and not final’ under the ‘in-house procedure’ against judges of a High Court.
- In view of the importance of the in-house procedure, it is essential to bring it into public domain.
- The Registry of the Supreme Court of India should be accordingly directed, to place the same on the official website of the Supreme Court of India.
- Raising questions is the very essence of democracy – whether it is against the Chief Justice of India, the prime minister, the commissioner of police, the president of the Bar Council of India or of each other as citizens of this country.
- The larger institutional questions raised must be addressed by appropriate modifications to the in-house procedure, including providing for the constitution of and a permanent non-partisan body for cases where the CJI and Judges of the Supreme Court are accused of sexual harassment.
- This must comprise a procedure that is sensitive to the power imbalance between judges and ordinary persons and other concerns of victims of sexual harassment.
Conclusion:
The decision by the ‘in-house committee’ is an egregious instance of a hallowed institution abusing its own greatness by letting its power speaks, and not the compassion for which it is renowned. The judges must not reduce the institution of Supreme Court to a private club where certain interests are privileged at the cost of judicial integrity. The Chief Justice of India is not above the law.
Topic : Effect of policies and politics of developed and developing countries on India’s interests. Conservation, environmental pollution and degradation, environmental impact assessment.
Why this question:
The article discusses in detail the economic costs associated with the biodiversity. It highlights the findings of the global assessment report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) which states that human beings have so rapaciously exploited nature, and that species belonging to a quarter of all studied animal and plant groups on earth are gravely threatened.
Key demand of the question:
The question expects one to analyse the need for Biodiversity assessments that must be factored into all economic activity.
Directive word:
Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
Begin with significance of conservation of biodiversity for sustenance of economy.
Body:
- Discussion should include the following aspects –
- Highlight the nature and scale of benefits that we, as a society,
derive from biodiversity.
- Discuss that it is important that public goods, including those supplied by nature, are reflected in decision making. It is also important to ensure that the benefits of policies which protect biodiversity are at least commensurate with the costs of such policies.
- Explain why benefits of biodiversity far exceed the costs of current levels of biodiversity protection.
- Elaborate how a high level of biodiversity also ensures that we are
- supplied with the ‘ecosystem services’ that are essential to the sustainability of our standard of living and to our survival.
- Re assert on significance of the biodiversity conservation to economic aspects.
Conclusion:
Conclude with a way ahead.
Introduction:
The overwhelming message from the global assessment report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) is that human beings have so rapaciously exploited nature, and that species belonging to a quarter of all studied animal and plant groups on earth are gravely threatened. Biodiversity not only encompasses the ecological processes as we can see them, but also holds the key to the evolutionary processes that sustain life and the cultural relationships that nurture the spirit.
Body:
Benefits of Biodiversity conservation:
- Nature provides ecosystem services which are vital for food production, for clean air and water, provision of fuel for millions, absorption of carbon in the atmosphere, and climate moderation.
- Conservation of biological diversity leads to conservation of essential ecological diversity to preserve the continuity of food chains.
- The genetic diversity of plants and animals is preserved.
- It ensures the sustainable utilisation of life support systems on earth.
- It provides a vast knowledge of potential use to the scientific community.
- A reservoir of wild animals and plants is preserved, thus enabling them to be introduced, if need be, in the surrounding areas.
- Biological diversity provides immediate benefits to the society such as recreation and tourism.
- Biodiversity conservation serves as an insurance policy for the future.
However, the modern day economy does not often include the above benefits in productivity estimates. The result of such skewed policies, as the IPBES estimates, is that the global rate of species extinction is at least tens to hundreds of times higher today than the average rate over the past 10 million years, and it is accelerating alarmingly.
Threats to Biodiversity:
- Ecological economists have for years pointed to the extreme harm that humanity as a whole is courting by modifying terrestrial, marine and freshwater ecosystems to suit immediate needs, such as rising agricultural and food output and extracting materials that aid ever-increasing consumption.
- Expanding agriculture by cutting down forests has raised food volumes, and mining feeds many industries, but these have severely affected other functions such as water availability, pollination, maintenance of wild variants of domesticated plants and climate regulation.
- Losses from pollution are usually not factored into claims of economic progress made by countries, but as the IPBES assessment points out, marine plastic pollution has increased tenfold since 1980, affecting at least 267 species, including 86% of marine turtles, 44% of seabirds and 43% of marine mammals.
Impacts of biodiversity on economic activities of a country:
- Agriculture, forestry and fisheries products, stable natural hydrological cycles, fertile soils, a balanced climate and numerous other vital ecosystem services depend upon the conservation of biological diversity.
- Food production relies on biodiversity for a variety of food plants, pollination, pest control, nutrient provision, genetic diversity, and disease prevention and control. Both medicinal plants and manufactured pharmaceuticals rely on biodiversity.
- Decreased biodiversity can lead to increased transmission of diseases to humans and increased healthcare costs.
- The outdoor tourism industry relies on biodiversity to create and maintain that which tourists come to see, as does the multi-billion dollar fishing and hunting industry.
- Amidst continuing loss of natural habitat and biodiversity, it is necessary to examine the benefit:cost ratio of investments in habitat conservation.
- Evidence has been accumulating that shows habitat conservation generates more economic benefits than does habitat conversion
Way forward:
- About 9% of 6,190 domesticated breeds of mammals used for food and agriculture had gone extinct by 2016, and another 1,000 may disappear permanently.
- Viewed against a shrinking base of wild varieties of farmed plants and animals, all countries have cause for alarm.
- They are rapidly emptying their genetic resource kit.
- Reversing course is a dire necessity to stave off disaster.
- This can be done by incorporating biodiversity impacts into all economic activity, recognising that irreparably breaking the web of life will impoverish and endanger people everywhere.
Topic: Government Budgeting.
Why this question:
The article brings to us the findings of the report Stockholm International Peace Research Institute (SIPRI) that finds that the Total world military expenditure rose to $1,822 billion in 2018, representing an increase of 2.6% from 2017. Thus it is important from exam point of view to analyse the impact of these findings.
Key demand of the question:
The answer must provide for a detailed analysis of the findings and the impact it has on world countries and peace.
Directive word:
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer
Introduction:
write a few introductory lines highlight the facts of the report.
Body:
Answers must discuss the following aspects:
- Comment upon the findings of the report, discuss its relevance.
- World military spending in 2018 represented 2.1% of global gross domestic product (GDP) or $239 per person. In 2018 the USA and China accounted for half of the world’s military spending.
- Analyse what is the trend like – discus how the spending boom is driven, above all, by the contest between America and China for primacy in Asia.
- Discuss the combination of factors that explain the increased military spending:
- Foreign policy objectives
- Real or perceived threats
- Armed conflict and policies to contribute to multilateral peacekeeping operations
- Availability of economic resources – refers to rapidly developing nations like China and India that have seen their economies boom in recent years. In addition, high and rising world market prices for minerals and fossil fuels (at least until recently) have also enabled some nations to spend more on their militaries.
- Conclude with significance of the report and what needs to be done?
Conclusion –
Conclude with way forward.
Introduction:
According to new data from the SIPRI, total world military expenditure rose to $1.8 trillion in 2018, representing an increase of 2.6 % from 2017. The five biggest spenders in 2018 were the United States, China, Saudi Arabia, India and France, which together accounted for 60% of global military spending. World military spending in 2018 represented 2.1% of global gross domestic product (GDP) or $239 per person.
Body:
The factors driving such a boom:
- Physical and psychological security threats: These threats are more than just ordinary especially in case of India, a country located in a dangerous neighbourhood and facing both internal and external threats. Example: The West’s “alarm” over emerging Chinese and Russian systems
- Comprehensive national security: It helps a nation attain its aspirations, and robust security is a subset of that. Military security involves the development of such capability to deter potential adversaries from undertaking inimical activities that may result in forms of adventurism or even proxy interference in a nation’s affairs.
- Potential Military Capability: A country’s defence spending represents the most direct way of measuring its potential military capability. In terms of gauging relative military strength, the size of defence budgets can be compared between countries over a set period of time.
- Geography: It is also is a factor. Countries in Northern Europe aside from Britain, France and Germany can afford to invest less in their militaries knowing that blocs and alliances such as the EU and NATO will ensure their collective security. That’s less true in Saudi Arabia, some say, which faces extremist threats from nearby wars in Syria, Iraq and Afghanistan, and Iranian-backed enemies like Hezbollah in Lebanon and the Houthis in Yemen.
Challenges posed by such extravagant spending:
- The increase would have to be on the capital side of the defence budget.
- Salaries, pensions and other operating expenses have full fund allocation with little scope to absorb extra funds.
- Raising the defence capital expenditure would leave the government with very little money for infrastructure and asset creation.
- As most defence equipment is procured from foreign countries, an increased capital budget would increase the defence import bill, and add to the current account deficit.
- This will require either an increase in the current tax rates, or a widening of the tax base.
- Both are difficult to achieve in the short term.
- It will thus not be feasible to substantially augment government’s non-borrowing revenues
Way forward for India:
- The lack of a national security strategy, a national strategic culture and a transformational approach towards its military capability prevent it from obtaining optimum benefit from its defence expenditure.
- Decisions must be timely and procedures for acquisition are fast-tracked. Also, financial support should be sufficient with systems which do not call for a lapse of financial resources, once allotted.
- Management of expenditure also needs a complete revamp. Amid the focus on prevention of potential corruption, limited leakages could still be acceptable if timeliness of delivery is achieved even as more efficient procedures are implemented.
- Optimise the existing defence allocations, rather than seek a quantum jump in funds
Conclusion:
A country’s high expenditures on its military doesn’t ensure a perceived high quality of life. The debate regarding how a government should balance military spending and domestic services dates back at least a century. The real issue is what is an “adequate” amount of military spending, given that every extra dollar spent above the necessary level is a clear loss for the economy as a whole. In a democracy, that issue is debated by publicly elected officials and changes year to year.
Topic: Government Budgeting
Indian Polity by Lakshmikant
Why this question:
The question is straightforward and aims to analyse the evolution of budgetary process in India and functions and key principles of budgeting in India.
Key demand of the question:
Analyse in detail the key functions and Principles of Budgeting in India and its evolution.
Directive word:
Elucidate – Give a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.
Structure of the answer:
Introduction:
In a few introductory lines comment on the significance and uniqueness of the Budgetary process in India.
Body:
In brief discuss –
- Discuss the historical evolution of budgetary process in India since the British times.
- Discuss the key functions of a government budget – Public Policy Document, Instrument of Economic Development, public policy document, Instrument of Budgetary Control, Instrument of Accountability etc.
- What are the important principles like – principle of annularity, rule of lapse, fiscal discipline, inclusiveness, accuracy etc.
- Reassert the significance in development and growth of the country
Conclusion:
Conclude with reassertion of importance of such processes.
Introduction:
A budget is a statement containing a forecast of revenues and expenditures for a period of time, usually a year. It is a comprehensive plan of action designed to achieve the policy objectives set by the government for the coming year. Under Article 112 of the Indian Constitution, a statement of estimated receipts and expenditure of the government of Indian has to be laid before parliament in respect of every financial year which runs from 1st April to 31st March.
Body:
Key functions of Budgeting in India:
- Forecasting: this entails making at calculated attempt into knowing what the future holds. Forecasting may not be perfect as evidence has shown but it is better to have a forecast to work with than not having any as this will help you get prepared.
- Planning: planning depends on forecast that has been made in the past to make decision about the future. The estimated data generated by forecasting are used to make plans. Government agencies, for example health authorities use forecast from estimated population to plan on the number of health centers to open in a community and the number of beds and other health equipment that will be put in that hospital.
- Management: Budgeting is an executive or managerial function. As an effective tool of management, budgeting involves planning, coordination, control, evaluation, reporting and review. Many of the budgetary innovations such as: functional classification, performance measurement through norms and standards, accounting classification to correspond to functional classification, costing and performance audit and use of quantitative techniques.
- Control: Control essentially implies a hierarchy of responsibility, embracing the entire range of executive agencies, for the money collected and expenditure, within the framework of overall accountability to the legislature. In a democracy, control assumes new dimensions and gives rise to exceedingly difficult problems.
- Public Policy Document: The budget serves as a public policy document expressed in money and is an embodiment of implied policy objective in monetary terms.
- Redistribution of Wealth: The most important function of budget is redistribution of wealth. However, that needs proper integration of revenue and expenditure side.
- Instrument of accountability: Budget is an instrument to make elected legislators accountable to people. It also upholds the economic, social and cultural rights of the people.
Principles of Budgeting in India:
- Principle of Annuality: This implies that a budget is prepared every year on annual basis. Annuality in budget formation is a widespread phenomena. In some countries of OECD, yearly budgets are now framed within a multi-year framework.
- Rule of Lapse: Principle of Annuality also implies that the money left unspent in a year must also lapse to the public treasury and government should not be able to spend it unless it is re-sanctioned in next year’s budget. This is called Rule of Lapse and is useful as an effective tool of financial control.
- Fiscal Discipline: Budget should be balanced and should be able to display congruence between the income and expenditure. This is known as Fiscal Discipline and it adheres to the Keynesian School of Thought. Fiscal discipline helps to eliminate fiscal deficits and offset fiscal surplus.
- Inclusiveness: Budget should be comprehensive and inclusive of diverse budget estimates. An inclusive budget includes all government revenue and expenditures and helps evaluating the much required trade-offs between different policy options.
- Accuracy: Budget figures are essentially predictions of the amount of money to be generated in the forthcoming year and its expenditure.
- Transparency and Accountability: Budget transparency and accountability are two of the eight basic indicators of good governance as propounded by United Nations.
Evolution of Budgeting:
- Broadly, the evolution of budgeting has passed through three stages.
- Firstly, the budgeting system was a sub-system of the British administration. The financial objectives were subordinate to the limited objectives of the colonial power. Control of expenditure and accountability were the hallmarks of this period.
- Secondly, with the attainment of Independence, the developmental priorities of the nation superseded the limited objectives of the British Raj.
- In the third phase, a planning- orientation has been sought to be imparted to the budgetary exercises.
- These three phases correspond to the systems known as incremental budgeting, performance budgeting and zero base budgeting respectively.
Conclusion:
The budget is an expression of the government’s public policy. It informs the public as to how the government plans to earn and sell. But, most importantly, the budget reflects the government’s balance sheet. In a large democracy like India, budgets take on a life of their own as it has a widespread impact on numerous areas. Hence, it is imperative to have knowledge about what it stands for and its importance.
Topic: Disaster and disaster management. Issues relating to planning, mobilization of resources, growth.
Why this question:
The question is intended to evaluate the need for disaster management in terms of the policies directed and aimed at insuring the regions prone and often affected by disasters like that of Odisha which was recently effected by cyclone Fani causing devastation of the State in terms of loss of life, economy, biodiversity etc.
Key demand of the question:
The answer must discuss the importance of insurance with respect to effective disaster management.
Directive word:
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer:
Introduction:
In a few introductory lines appreciate the need for Insurance aspect in disaster management.
Body:
- Explain what are Catastrophe bonds? – A typical CAT or cat bonds has a maturity of three years during which the period should be a tightly defined disaster. CAT is like junk bonds in terms of riskiness and hence the high yield expected.
- Discuss in what way insurance-linked securities with increasing frequency of natural calamities can help and provide better management aspects post disaster to restore life and economy of a region to its normalcy.
- Suggest solutions and lessons from countries across the world using such principles in Disaster management.
Conclusion:
Conclude with way forward.
Introduction:
A catastrophe bond (Cat bond) is a high-yield debt instrument designed to raise money for companies in the insurance industry in the event of a devastating natural disaster. A CAT bond allows the issuer to receive funding from the bond only if specific conditions occur such as an earthquake or floods. CAT bonds have short maturities not exceeding three to five years. The primary investors in these securities are hedge funds, pension funds, and other institutional investors.
Body:
Need for Insurance aspect in disaster management:
- The economic cost of disasters averages $250 billion to $300 billion annually, according to the 2015 United Nations Global Assessment Report on Disaster Risk Reduction.
- Considering that only about 30% of the damage from natural disasters are insured, such losses can impose severe financial burden on governments.
- In developing countries, governments may have to divert state funds, including those earmarked for development projects, to disaster relief and rebuilding efforts.
- The catastrophe bonds, a debt instrument allows governments to tap the capital market and raise money from investors willing to bet against the likelihood of a disaster occurring in a particular place during a particular time period.
It is high time that such instruments are introduced in India so that relief and reconstruction work in areas affected by natural disasters goes on unimpeded and are no stalled for only want of capital. Rebuilding from floods will only become more costly for taxpayers in the years ahead. Many analysts expect large, unpredictable storms to become more frequent as seas get warmer.
Features of Catastrophe Bond:
- CAT bonds have short maturities not exceeding three to five years.
- The primary investors in these securities are hedge funds, pension funds, and other institutional investors.
- Catastrophe bonds are used by property and casualty insurers as well as reinsurance companies to transfer risk to investors.
- These bonds provide insurance and reinsurance companies with another method to defer risk associated with underwriting policies.
- In return, institutional investors receive a higher interest rate than most fixed-income securities over the life of the bond, which could have a maturity of up to five years.
- CAT bonds are only paid to the insurance company if a triggering event happens.
Advantages and Disadvantages:
The upside
- Cat bonds can be an effective tool to address the risk of loss and damage from climate change because it allows vulnerable countries to raise capital that can be disbursed quickly in the event of a catastrophe.
- This is because cat bonds can be structured to allow payouts as soon as pre-defined trigger events occur.
- Cat bonds can also provide multi-year coverage to the issuing governments.
The downside
- There are challenges for the more widespread use of cat bonds because of their high transaction costs, long structuring period that can take months, and strict terms and conditions compared with traditional risk financing, such as insurance.
- In addition, cat bonds do not always meet countries’ needs, as governments may prefer longer term protection, while investors tend to prefer shorter term bonds.
- Another obstacle is that cat bonds are usually available only to institutional investors, limiting their market reach.
Way forward:
- There is no reason why governments themselves cannot issue CAT.
- For example, Odisha is prone to periodic cyclone with the recent Fani cyclone wrecking havoc on properties though, thanks to high preparedness, loss of human lives was minimal.
- Odisha government itself can take the initiative and issue Odisha and cyclone-specific CAT.
- A longer duration bond would be beneficial to it i.e., instead of a three-year bond if it issues a five-year bond, the chances of cyclone hitting coastal Odisha is higher and hence the success of the exercise (loss mitigation) greater.
