GS3 Weekly [26th – 31st Jan 2015] [The Undercover group] (Insightsonindia.com)

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth,

development and employment.

Q) The banning of Amazon’s Indian arm selling electronics from warehouses and imposition of

heavy penalties by Kerala government on e-retailers like Flipkart, Jabong is an example of the

burgeoning unregulated e-commerce which calls for a comprehensive policy and regulation of

the e-commerce business in India. Critically comment. (200 Words)

http://www.financialexpress.com/article/industry/companies/e-commerce-taxing-times-for-

flipkart-others-as-kerala-slaps-rs-54-crore-penalty/34637/

http://www.financialexpress.com/article/industry/companies/e-commerce-amazon-flipkart-

rival-cos-fuel-commercial-property-boom-in-india/34465/

Ans: E-commerce in India has been in news for both good and bad reasons. It is really good to

know that Indian e-commerce players have started making their own mark in the e-commerce

sphere.

However, it is equally alarming that e-commerce websites of India are not following the e-

commerce laws of India.

1. E-commerce frauds in India have significantly increased and there is an urgent need to

regulate and punish such e-commerce offences and crimes in India.

2. Myntra, Flipkart and many more e-commerce websites are under regulatory scanner of

Enforcement Directorate (ED) of India for violating Indian laws and policies.

3. Small and medium businesses and entrepreneurs of India are also facing the problem of

predatory pricing undertaken by big e-commerce websites operating in India. With great

financial resources, the e-commerce companies and websites offer products and services that

cannot be offered in normal course of business. As a result, the small businesses cannot sell

their products in the market and they are forced to quit the market. This now leaves only the big

fishes to explore and monopolise the Indian market.

However over regulation can lead to stunting of growth of these new avenues because

1. They are still in its nascent stage of development.

2. They are convenient to the consumers

3. They help in promoting a wide catalogue and the consumer will be better informed and

provides scope for comparison

4. FDI is not allowed in online retail so gives a boost to Indian entrepreneurs

5. It is more transparent for the consumers.

But there is a need on the part of Indian government to look into this unfair practice commonly

adopted by e-commerce websites in India. These practices are resulting in e-commerce frauds,

violation of Indian laws and disturbing the balance of trade, commerce and business in Indian

market. The ambiguity and vacuum in the FDI and e-commerce laws needs to be cleared at the

earliest.

Topic: Science and Technology- developments and their applications and effects in everyday life

Q) Highlight the important features of the Nuclear Liability Act while throwing light on grounds

on which it was criticised both domestically and by foreign suppliers. Add a note on the recent

breakthrough in this regard. (200 Words)

http://www.financialexpress.com/article/industry/barack-obama-arrives-in-india-6-top-

points/34667/

Ans: India's energy is heavily skewed in favour of conventional fossil fuels. To diversify our

energy sources, India made crucial deals with USA, France and Russia with regard to supply of

nuclear reactor and materials. In 2010, India enacted Civil Liability for Nuclear Damage Act

(CLND) to provide compensation to victims in case of nuclear accident through no-fault liability

to operator.

USA suppliers GE and Westinghouse have made objections to financial liability stipulated in

sections 17(b) and 46 of CLND Act saying that these clauses are violating the norms of

International Convention on Supplementary Compensation (CSC) for nuclear damage. Section

17(b) gives operator (NPCIL) right to claim compensation directly from supplier in case of

supplying sub-standard device and faulty nuclear material with no fault from operator. Section

46 makes supplier liable for damages under other Indian laws such as Tort law.

With no cap on liability in terms of time and quantum, suppliers are not able to get insurance as

premium are high and very subjective to assess. Domestic suppliers are not able to take gigantic

risk given the damages claim, Vendors don't want to be harassed by other Indian tort laws

which can impose several criminal charges as well.

To clear the logjam, Washington and New Delhi agreed on civil nuclear deal braving all

challenges. India agreed to provide insurance pool that will indemnify American suppliers in

case of nuclear damage. This deal will deepen the ties between strategically allied countries and

give India much needed energy to drive its economy.

Topic: Effects of liberalization on the economy;

Q) The recent election in Greece is a verdict against the austerity which ruined the country.

Critically analyse in the light of recent developments in Greece and its impact on EU. (200

Words)

http://www.thehindu.com/todays-paper/tp-opinion/momentous-vote-in-

greece/article6824736.ece

http://www.thehindu.com/todays-paper/tp-international/stick-to-austerity-brussels-warns-

athens/article6824744.ece

http://www.thehindu.com/todays-paper/radical-left-triumphs-in-greece/article6825246.ece

Ans: The 2008 global economic crisis worst hit Greece causing wide spread unemployment.

Greece being a welfare state continued its spending causing its budgetary deficit to soar to

about four times euro-zone's prescribed limit.

To save Greece economy from an imminent collapse IMF & EU offered two massive bailout

packages; one in 2010 worth 110 billion euros and other in 2012 worth 130 billion euros.

the pre-condition for bailout packages were that Greece would significantly cut down the

budgetary deficit by accepting an

austerity measures requiring huge cuts in salaries and other social welfare schemes as well as

much higher tax rates.

Recently an unusual anti-austerity coalition between Syriza (radical leftist) and independent

Greeks (right wing) came to power.

The new government aims to:

1. re-negotiate the terms of international bailout package.

2. secure a write off for Greek's debt by half.

3. give respite to citizen from austerity.

The new govt. in Greece plans to do away with austerity measures. But any failure on the

part of Greece to meet its austerity and debt commitments, will put its place in euro-zone at

risk.

impact on EU:

1. anti-austerity movement led by left-wing parties in different countries of euro-zone will be

strengthened.

2. ECB's massive QE programme to revive EU economy may be given a second thought.

3. overall weakening of EU.

4. Greece may exit EU.

Greece govt. should enter into a dialogue with institutions like EU & IMF and evaluate

all pros and cons before taking any drastic step.

Topic: Science and Technology- developments and their applications and effects in everyday life

Q) Nanotechnology can be used to develop simple, effective, low-cost and environment friendly

techniques of pest control. Discuss. (200 Words)

http://www.business-standard.com/article/opinion/surinder-sud-game-changer-for-pest-

control-115012600790_1.html

Ans: Virtually every technological sector, nanotechnology is causing excitement and concern —

and the prospect of its application to pesticides is no different.

The predominant uses being discussed at present are in antibacterial products. Nanosilver, for

example, could when used as a materials preserver maintain its ability to reduce odor-causing

bacteria longer and require smaller quantities than other silver preservatives.

The potential uses and benefits of nanotechnology are enormous.

These include insect pests management through the formulations of nanomaterials-based

pesticides and insecticides, enhancement of agricultural productivity using bio-conjugated

nanoparticles (encapsulation) for slow release of nutrients and water, nanoparticle-mediated

gene or DNA transfer in plants for the development of insect pest-resistant varieties and use of

nanomaterials for preparation of different kind of biosensors, which would be useful in remote

sensing devices required for precision farming. For controlling pests state-of-the-art

nanotechnology has evolved to hassle-free gel-based carriers for pheromones called nanogels.

Traditional strategies like integrated pest management used in agriculture are insufficient, and

application of chemical pesticides like DDT have adverse effects on animals and human beings

apart from the decline in soil fertility. Therefore, nanotechnology would provide green and

efficient alternatives for the management of insect pests in agriculture without harming the

nature.

But, it is necessary to bring public opinion on the regulatory framework for the use of nano-

technology

Topic: Awareness in the fields of IT, Space, Computers;

Q) What is algorithmic trading? How does increasing adoption of algorithmic trading affect the

stock markets? (200 Words)

http://www.business-standard.com/article/markets/tax-cloud-over-foreign-investors-

algorithmic-trading-115012700570_1.html

http://www.business-standard.com/article/markets/sebi-to-issue-discussion-paper-on-

algorithmic-trading-115012100980_1.html

Ans: In algorithmic trades, the trader feeds a computer programme into the system and allows

that program to put in all his trading orders and execute them too. These are very high speed

transactions which help in securing a deal on the stock market within no time

There are many different types of algo programmes. Some of these programmes sclice the order

into bits and spreads out the orders through the trading session so that the price is not unduly

affected by the order.

Also some of these identifies anomalies between the price of an asset in different exchanges or

markets and cashes in on these differences

These algos though harmless, can be used for underhand activities as well like bluff trades so

that other programmes reveal their intended trades.

Effects of algo trades on stock markets :

1. Market volatility : increase in thr unhedgable risk and thus a decrease in risk-adjusted returns

Ex: Flash Crash of 2010,USA

Knight capital case,2012

2. Increase in liquidity

3. These trades have an unfair advantage because they put in the trade before other investors

become aware of it. Thus adversely affecting other investors .

4. Some of them also bombard the stock exchanges with multiple orders thus swamping the

system

On the Indian NSE these trades account for about 45% of the equity derivative market.

Regulators worldwide are finding means to regulate these trades. However, they are hard to

regulate as these trades have grown so big in number that they cannot be banned without

causing serious harm to market’s liquidity and price discovery process.

Topic: Conservation, environmental pollution and degradation;

Q) The departure of the Indo-US climate talks from ‘equity’ and ‘common but differentiated

responsibilities’ is an attempt to evade historical responsibility by USA. Critically analyse. (200

Words)

http://www.business-standard.com/article/current-affairs/us-india-bonhomie-missing-on-

climate-change-115012800025_1.html

http://indianexpress.com/article/india/india-others/to-stop-climate-change-india-must-act/

Ans: Kyoto Protocol, Lima talks And Paris convention 2015 All aimed at Cooperation and

Sustainable development and Mitigating ,adapting the climate change . For this to happen GCF

fund was announced which will help DC/LDC in mitigation and adaption through funding ,tech-

transfer from Developed Economies on principle of "historical Reasons"

~It was Also stated that Climate change is world issues thus common responsibility however

Developed states will have greater responsibility thus was Coined CBDR.

Recent India-US talks which concluded gave immense jubilation in the other issues however it

did not fructify in the climate talks Despite India Changing of Stance

1. India even Agreed US proposal of Phasing out HFC under Montreal protocol[ on

Depletion of Ozone layer] which could have been used as negotiating cards ahead in

Paris 2015

2. $100bn GCF fund which required further fund as committed , Still US Non committal on

Climate talks before e Paris 2015 is sign of US will not be giving more funds as promised

3. There was commitment of $2bn on Investment on renewable ,however it is unclear

whether the same will be used in Importing technology or

4. A low level Committal on Partnering given R&D activities.

Given NATO troops going back and Emerging US economy, India being highest US Arms importer

it was expected that US will show some committal on it however it sidelined and dropped the

text of climate change from talks, despite the India willingness to partner US for Climate talks.

Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on

industrial growth;

Q) The revenue-sharing contract which seeks to replace the New Exploration Licensing Policy

production-sharing contract regime for oil and gas exploration in India with a revenue-sharing

model, reveals an attitude of extreme suspicion towards the private investor. Critically

analyse. (200 Words)

http://indianexpress.com/article/opinion/columns/still-slipping-on-oil/99/

Ans: Government has decided to move from the Production Sharing Contract in which the

explorer recovers his expenditure first before sharing the profits with the government to

Revenue Sharing Contract where the explorer shares revenue with the government from the

first day itself. This was also suggested by Rangarajan Committee.

This step is being taken due to various criticism in the PSC method which includes:-

1)Inflating the exploration expenditure added with under reporting of production to maximize

the profits by the private sector that too for a longer time. Reliance was criticized on the same

grounds for its exploration in KG Basin.

2)Less revenues for the government.

3)No continuous supply of oil and gas during the times of low oil prices.

4)The method was also criticized by Ashok Chawla committee on pricing of natural resources of

favoring the private sector at the cost of government.CAG report too highlighted about some

irregularities.

Government adopting the RSC shows its inability to regulate/monitor the private companies

accounts.Also making the private sector to put money in an escrow account under PSC shows

the suspicion of the government towards the private sector and its intention to secure its

revenues.But the government's move overlooks its impact on the exploration by the private

companies which will not have the motivation to take new projects because of the high risks

and expenditure involved.

In a country like India where 2/3rd of the oil and gas blocks remains

undiscovered/underdeveloped moving to RSC is not a good idea as in such blocks PSC is

preferred because of the high investment and risk involved.Instead government could have

opted for the continuation of the older method along with strengthening regulations and

monitoring over such projects and streamlining the blockades like redtapism,weak contracts etc

in order to ensures adequate revenues along with continuous oil and gas supply.

Topic: Inclusive growth and issues arising from it;

Q) A World Bank report underscored the role of urbanisation and private sector participation as

being critical to mitigating socio-economic disadvantages. Discuss. What are reasons behind

growing inequality in South Asia and suggest measures to bridge them? (200 Words)

http://www.thehindu.com/opinion/editorial/the-dynamics-of-

inequality/article6831125.ece?homepage=true

Ans: Higher rate of urbanization means large scale migration of rural people to the cities in the

search of better livelihood. But the process of urbanization increases when manufacturing and

other job-creating industries start growing to expand. Such expansion is largely depends upon

the availability of resources and its effective utilization and such desirable things lack in South

Asian countries. However, the private investment or entry in this sphere might boost the

expansion rapidly.

The growing inequalities in South Asian nations are largely due to:

- Low per capita income of the countries

-Weak human development

- Rampant corruption and policy hurdles

- Stereotyped attitudes

- Political insecurity

- Inefficient distribution of resources

- Lack of proper job-creating industries

- Higher dependency on agriculture and traditional way of production

To bridge the gap following steps can be initiated:

- capital generation with the support if private investors

- Rapid development of infrastructural facilities and integration of remote market

- Effective institutions for resource mobilization and augmentation of income of the people

- Removing policy hurdles and creating a transparent and accountable system

Ignoring jobless growth

- Control of inflation and Endeavour to increase real income of the people

- Use of high technological inputs on production process to stay in competitive global market.

Topic: Effects of liberalization on the economy, changes in industrial policy and their effects on

industrial growth;

Q) If GAAR is not implemented properly it may result in “tax terrorism”. Examine how and its

impact on Indian’s economy and ease of doing business? (200 Words)

http://www.thehindu.com/todays-paper/tp-opinion/sending-the-right-

signal/article6836457.ece

http://www.business-standard.com/article/opinion/letters-a-transparent-tax-regime-

115012901515_1.html

http://www.business-standard.com/article/economy-policy/tax-law-uncertainty-remains-a-

concern-for-foreign-investors-115012900300_1.html

Ans: The idea of GAAR became popular in the backdrop of Vodafone tax case.. GAAR is general

anti avoidance rules made to prevent intentional tax avoidance by manipulating tax laws. It

empowers the Income Tax dept. to investigate any deal or joint ventures which involves huge

capital. however the announcement of GAAR created havoc in Capital market and is believed

might lead to tax terrorism.. Main reasons were:

1. The arbitrary method to investigate any commercial deal.

2. Due to the possibility of retrospective taxation

3. Vagueness of tax laws might be used against a particular company. eg recent Vodafone case

of transfer pricing . Under GAAR they have much more power.

Impact on economy:

1. Less investment by foreign companies so less growth.

2. Reduced employment

3. Poor service delivery as less competition.

Impact on ease of doing business:

1. GAAR will weaken the investors’ faith in stability of Indian tax regime.

2. Cost benefit analysis favors delay in implementation unless properly detailed and acceptable

norms are formed.

3. One big case like Vodafone may have ripple effect on investor's confidence.

As Shome panel recommended we should delay its implementation for now and should strive

toward a stable and predictable tax regime, avoid retrospective taxation and work to provide a

transparent business environment in Indian economy.

Topic: Conservation, environmental pollution and degradation;

Q) What are the various generation of bio-fuels? Why are the previous generation bio-fuels

seen as threat to food security? How do 3rd generation bio-fuels manage to address those

problems? (200 Words)

http://www.business-standard.com/article/economy-policy/punjab-govt-plans-to-set-up-asia-s-

first-bio-ethanol-refinery-115012901477_1.html

Ans: A biofuel is any hydrocarbon fuel that is produced from organic matter in a short period of

time. This is in contrasts with fossil fuels, which take millions of years to form and with other

types of fuel which are not based on hydrocarbons like nuclear fuels.

The structure of the biofuel itself does not change between generations, but rather the source

from which the fuel is derived changes.

a) First Generation Biofuels were directly using the food crops like wheat and sugar for making

ethanol and oil seeds for bio diesel by conventional method of fermentation. These fuels

emitted more greenhouse gases.

b) Second Generation Biofuels used non-food crops and feedstock instead of food crops as used

in first generation. Wood, grass, seed crops, organic waste are used in fuel preparation.

c) Third Generation Biofuels use specially engineered Algae whose biomass is used to convert

into biofuels. The greenhouse gas emission here will be low in comparison to others.

Since first generation completely depends on food directly; high volume of food grains were

directed away from food market and used in the energy market. As every country is energy

starved and good remuneration for farmers awaited everyone was attracted to production of

raw materials for biofuels causing damages to the food security aims.

The third generation biofuels have advantages like:

a) Cost: The Algae are cultured to act as a low-cost alternative. It gives high-energy and entirely

renewable feedstock.

b) Energy: The Algae will have the potential to produce more energy per acre than conventional

crops.

c) Eco-Friendly: Algae can also be grown using land and water which are unsuitable for food

production, therefore reducing the strain on already depleted water sources

d) Range: In Algae based biofuels is that the fuel manufactured can be used for a wide range of

fuels such as diesel, petrol and jet fuel.

However Algae, even when grown in waste water, requires large amounts of water, nitrogen

and phosphorus to grow. Also it requires large amount of fertilizers increasing GHG emissions

and hence will be much costlier.

The fourth generation biofuel may in future reduce the greenhouse emission. It is a ray of hope

for mankind which could be nurtured further by sustainable development thus to secure a

better future for upcoming generations.

Topic: mobilization of resources, growth, development and employment.

Q) “The alleged increment in tax rate would not be able to make smoking tobacco a less

affordable product because of its obvious loopholes in the differential treatment of different

tobacco products or different tiers of the same product.” Comment (200 Words)

http://www.epw.in/commentary/tobacco-taxation.html

Ans: Income increases in a rapidly growing country like India can lead to more than

proportionate increases in cigarette consumption.

Tobacco taxation is paramount to a successful strategy that promotes public health, reducing

tobacco consumption, while generating government revenues

The taxation of tobacco products in India is complicated by following reasons and hence not

efficient-

1. a myriad of tax structures,loopholes and exemptions, -like diff rates for hand-rolled and

machine -made bidis,filter/non-filter cigarettes

2. different collection systems and other challenges of tax administration.

3. Undertaxation for most commonly used tobacco products like bidis

4. 30% of GVA from tobacco products is generated in informal sector and thereby outside the

tax web and other regulatory mechanism.

5. Luxury taxes imposed on tobacco products by some states like UP,AP and west bengal were

struck down by supreme court in 2005

6. Taxes are imposed per-1000-sticks basis which reflects very poorly in per stick cost

7. Share of tax in retail price of cigarettes, far low than World Bank’s 2/3rd yardstick

8. Considering the rate of inflation,the 72% increase in taxes on tobacco products translates to

not more than 58%

To achieve the broader objective of restricting consumption through tax policy,

1. extending excise duty on tobacco products to those manufactured and sold in the

unorganized sector

2. ensuring that excises across tobacco products are consistent and do not encourage

substitution

3. ensuring that tobacco products as a group are taxed higher relative to other consumption

good

4. setting up a simple and enforceable system to tax and to minimize revenue leakages

5. Earmarking some of the revenues from increased tobacco taxes to support a comprehensive

tobacco control programme will lead to even larger reductions in tobacco use

Ex : In the United States, for example, several states have used cigarette tax revenues to finance

tobacco-related health programmes

Thus a critical review of the tobacco taxation policy needs to be made and the loopholes need

to be sealed to achieve the desired objectives of MPOWER as proposed by WHO .

Topic: Conservation, environmental pollution and degradation;

Q) Coal remains the main fossil fuel for power generation in India. What are the health impacts

of air pollution from these coal-fired power plants? Also assess the success of current

environment regulatory framework for coal power plants in India. (200 Words)

http://www.epw.in/system/files/Regulating%20Air%20Pollution%20from%20Coal%20Fired%20

Power%20Plants%20in%20India.pdf

Ans: India is the world's second largest coal burner after China, generating 210 GW of electricity

a year, mostly from coal.

Health Impacts:

1. Millions of cases of asthma, respiratory distress and heart disease

2. NCEP analysis estimates incremental changes in the ambient pollutant concentrations due to

the presence of coal-fired power plants. Specially, the Indo-Gangetic plain, with states of Bihar,

West Bengal, Jharkhand, Odisha, and Chhattisgarh harbour the largest coal mines in the country.

3. Adverse impacts are especially severe for the elderly, children

4. Morethan, 100,000 people died prematurely in 2011-12 due to emissions from thermal

power stations

Needs for improvements in current laws:

1. The environment clearance procedures require self assessment for only 10km radius of the

TPPs; whilst the impacts are observed at much greater distances, considering the minimum

stack height for a 500MW TPP is 275m.

2. Immediate introduction of emission standards for SO2, NOx, and Mercury for all the coal-fired

TPPs. This should be applied also retrospectively to all the operational power plants, in order

avail all the possible benefits.

3. Introduction of protocols to continuously monitor emissions at all stacks and make the data

available to pollution control authorities, civil society, and the public, for further analysis and

verification of the emission loads.

4. Regulating emissions at the plant level by mandating FGD operations for all the existing, the

newly commissioned, and the planned TPPs in India.

Topic: Science and Technology- developments and their applications and effects in everyday life

Q) India and USA recently committed to multi-sectoral actions to counter the emergence and

spread of Anti-Microbial Resistance (AMR) and cooperation in training of health workers in

preparedness for threats of infectious diseases. What is AMR? Why is it seen as a threat and

what action can be taken to counter its effects? (200 Words)

http://www.downtoearth.org.in/content/america-right-partner-india-deal-antimicrobial-

resistance

http://www.downtoearth.org.in/content/why-antibiotic-resistance-getting-worse-india Ans: Antimicrobial resistance (AMR) is the ability of microorganisms that cause disease to

withstand attack by antimicrobial medicines. From drugs used to treat common bacterial

infections, to the complex combinations now fighting HIV infection, resistance is increasingly

being detected and is spreading rapidly.

Repeated exposure to antibiotic can make microbes resistant to it. Microbes that are resistant

to multiple antibiotics are called Multi Drug Resistant or Super bug. Drug Resistant organisms

may acquire resistance to First Line antibiotic, thereby necessitating the Second Line antibiotic

and in over usage may even use and failure of Third Line antibiotic.

During the recent visit of the US president, MoU were signed for joint cooperation to find a cure

for Cancer and Ebola, along with measures to counter AMR.

Threat from Anti-Microbial Resistance:

a) Disease Resistance: AMR will not allow any treatment of any diseases by the antibacterial

drugs due to Superbugs development. Its effect can be seen in the increase in incidents of XDR

TB (Extremely Drug Resistant Tuberculosis), as compared to the normal TB, which can be cured

with easily available medicines.

b) Economic Burden: New varieties of disease will come in picture which will take huge toll on

economy and life. In countries like India cannot benefit from demographic dividend.

c) Global Threat: Also, greater globalization leading to more travel favors the spread of AMR

across countries and continents. So, AMR has become a global public health concern.

For countering AMR we need to reduce the use of antibiotics. Some of the ways are:

a) Use: As per the WHO report 2014. People should only use prescribed Antibiotic for full period

of prescription and not share antibiotic. Awareness among people regarding AMR is necessary.

b) Prescription: Health workers and pharmacist must only issue antibiotic when prescribed and

prescribing only in required situation.

c) Research and Cooperation: Research on new drugs should be carried out in a speedy manner.

International cooperation to fight together and check this menace is prerequisite.

d) Regulation: Strict and comprehensive legislation for limiting use of antibacterial in livestock

which are the cause of transfer of superbugs or resistance microorganisms in humans.