Indian Express Explained 31/05/2020 | TEMS IAS

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1)Explained: Why UN Command found North and South Korea in violation of armistice agreement at border:- The UN Command, led by the United States, found that North and South Korea were both guilty of violating armistice agreements following a recent incident involving gunfire along the Demilitarised Zone between the two countries.

What is the Armistice agreement :-

The 1953 Korean Armistice Agreement, was a ceasefire though there was no official declaration of the end of the war, and the conflict has continued, without fighting between the parties. The events surrounding the Korean War and the ceasefire are extremely complex and cannot fully be explained without a deep dive into the region’s history and politics and the Second World War.

Many do not realise that South Korea, under President Syngman Rhee, did not sign the armistice. In the absence of an official peace treaty, as is the norm, the two officially remain at war. However, in December 1991, North and South Korea signed a pact where they agreed to refrain from agressions, in a step that would lead to better relations and a potential resolution of the situation. Since the armistice was enforced, there have been several violations of it from both North and South Korea, leading to persistent tensions between the two countries. However, despite this, there have also been a thawing of relations, particularly between South Korea’s present leader Moon Jae-In and North Korea’s Kim Jong Un.

2)Explained: What RBI’s extension of loan moratorium means:-

RBI permitted banks and NBFCs to allow a further 3-month moratorium, i.e from June 1 to August 31, 2020, on the payment of instalments in respect of term loans outstanding as on March 31, 2020. Lenders have also been allowed to convert the accumulated interest into a funded interest term loan to be repaid by March 31, 2021.

Individuals and companies who have availed term loans — such as home loans, car loans, corporate loans and credit card loans — can avail or seek extension of moratorium facility

What is the Meaning of Moratorium:-

A moratorium is a temporary suspension of an activity or a law until future events warrant lifting the suspension or related issues have been resolved. A moratorium may be imposed by a government or by a business.

Moratoriums are often enacted in response to temporary financial hardships. (Both “moratoriums” and “moratoria” are acceptable as plural forms of the word moratorium.) For example, a business that has exceeded its budget might place a moratorium on new hiring until the start of its next fiscal year.

In legal proceedings, a moratorium can be imposed on an activity such as a debt collection process. The moratorium will be lifted when a related issue is resolved.

what it means for Banks :- Banks are likely to take a hit down the line since this is expected to significantly add to their non-performing assets (NPAs) from the second half of 2020-21. Banks are unlikely to face problems for the next three months as regulatory relaxations, will provide them a breather till September in recognising NPAs.

Post September, NPAs are expected to shoot up from the current level of around Rs 10 lakh crore, when these loans come up for repayments.

3) Asia Pacific Economic Cooperation :

  • regional economic forum established in 1989 to leverage the growing interdependence of the Asia-Pacific.
  • Aim: To create greater prosperity for the people of the region by promoting balanced, inclusive, sustainable, innovative and secure growth and by accelerating regional economic integration.
  • Members:  21 members
  • Headquarters: Singapore
  • Indiais not a member of APEC.
  • Bogor Goals: Theseare a set of goals agreed by APEC members in 1994 in Bogor,Indonesia with the aim of free and open trade and investment in the Asia-Pacific by the year 2020.

4) How can India Become Self Reliant :-

Evolution of self reliance in India:

1947-1991:Pre liberalisation era

  1. Steps taken:
    1. Planning commission was established with objectives of growth, self sufficiency, modernization, equity
    2. Green revolution was undertaken which provided self sufficiency in agriculture
    3. Import substitution through tariffs and restrictions reduced competition to Indian industry and developed indigenous capabilities
  2. Failures in achieving self reliance:
    1. Industrial policy, 1956 provided for license permits for establishment and expansion of industries. This was exploited by industrial houses to obstruct entry of innovative new products. This resulted in India losing out on Industrial revolution 3.0 in electronic goods, micro processors, mobile phones, global value chains. Hence Indian industry was characterized by low quality, poor technology and globally uncompetitive.
    2. Reduced competition from foreign imports due to import substitution resulted in stagnation of quality of products.

Post 1991: Liberalization, Privatization, Globalisation

  1. Steps taken:
    1. PSU’s were deemed inefficient and uncompetitive globally. Hence disinvestment and their confinement to core sectors was done.
    2. Industrial licensing confined to select industries such as alcohol, explosives, cigerattes etc. This was to enhance innovation by easing entry of new players
    3. Globalization through offshoring in areas such as IT, BPO. This was done with a view that global companies will bring new technologies to India and there is no need to research them again.
    4. Import substitution was removed by reducing tariffs, removing quantitative restrictions, import licensing. This is to enhance competition and hence innovation and quality
  2. Failure in achieving self reliance:
    1. PSU’s were major contributors to R&D in India. Due to reduced capital investment in these, research and modernization was effected. At the same time, private sector have not invested in R&D. R&D investment is about 1% which is low. This resulted in India becoming importer of technology
    2. FDI has brought technologies but they were guarded by foreign companies through intellectual property. Minimal transfer of technology occured undermining self reliance.
    3. Cheaper imports negatively impacted Indian industry. API in manufacturing of medicines is an example where Chinese imports displaced Indian industry and hence self sufficiency
Lessons from other countries:

China, South Korea, Taiwan, Hongkong, Singapore have invested in education and skill development, planned state investment in R&D, technology, infrastructure and policy support to private companies. This has resulted in development of indigenous capabilities in advanced technologies and manufacturing such as electronic goods, microprocessors, robotics.

China is pursuing super power status through technology by investing in transition from low end manufacturing to advanced manufacturing. Industrial revolution 4.0 technologies such as 5G, quantum computing, robotics and automation, Artificial intelligence are some areas of focus by China.

Steps to achieve the goal of self reliance:
  1. Investment in education and skilling to be raised to 6% of GDP. Sciences need to be strengthened from school level. This will enhance research capabilities in higher education
  2. State funded R&D investment through PSU’s, universities and research institutions like DRDO, ICAR. This has to include basic research. About 3-5% of GDP is state funding for R&D in South Korea, Taiwan, Singapore. This can be a benchmark.
  3. Focus on areas of electric vehicles, photovoltaics, artificial intelligence, robotics, UAVs, biotechnology
  4. Policy framework to promote private sector investment in R&D needs to be taken up. R&D activities can be included as part of Corporate Social Responsibility (CSR) activities.
  5. Promoting industry-academia-research institutions linkages.
  6. Stronger public health system which aids in improving efficiency of the economy and boosts expenditure on education and thus self reliance.

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