06 MARCG 2023

Topic 1: Index funds

Context: Global index providers are reviewing some of the stocks’ inclusion in its indices that are replicated by many foreign portfolio managers after the Hindenburg report.

Index funds

• An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.
• Index funds have lower expenses and fees than actively managed funds.
• It follows a passive investment strategy.
• It seek to match the risk and return of the market based on the theory that in the long term, the market will outperform any single investment.

Index funds in India

• While index funds and exchange-traded funds (ETFs) have been in India for about two decades, they have seen an exponential growth in assets since 2015.
• About 16% of the roughly ₹41 lakh crore assets managed by India’s mutual funds are parked in index funds and ETFs.

How are indices made?

• Indices could be based on:
  • different industry sectors,
  • size of companies (small-cap, mid-cap, etc)
  • quantitative parameters like liquidity and trading volumes
• The weightage assigned to each stock in an index may vary based on their market capitalisation or other gauges that index providers adopt.
• They are not regulated by the Securities Exchange Board of India (SEBI).

Proposal of SEBI

• SEBI has proposed to bring the indices under its regulatory purview.
• The decisions of the index makers not only impact volumes, liquidity and price of such stocks but also impact index funds’ returns to investors.
• SEBI has proposed to introduce an accountability mechanism for them.
• The plan includes:
  • mandating SEBI registration for index providers
  • subjecting them to norms pertaining to eligibility criterion, compliance, disclosures and periodic audits
  • Penal action is envisaged by SEBI in case of non-compliance and incorrect disclosures.

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Topic 2: Hallmark Unique Identification (HIUD) number

Context: The sale of gold jewellery will not be allowed without a Hallmark Unique Identification (HUID) number.

What is HUID number?

• HUID number is a six-digit alphanumeric code.
• It is given to every piece of jewellery at the time of hallmarking.
• It is a unique identifier for each gold item.
• The jewellery is stamped with the unique number manually at the Assaying & Hallmarking centre.
• Features:
  • The HUID makes it easy to trace the individual piece of jewellery, and is a guarantee of quality.
  • Registration of jewellers is automatic with no human interference.
• Aim:
  • It is aimed at ensuring the purity of Hallmarked jewellery and check any malpractice.

What is hallmarking?

• Hallmark is a mark on gold jewellery which is affixed by an entity recognised by Bureau of Indian Standards (BIS) to assure its fineness and purity.
• A BIS Hallmark consists of three symbols:
  • the BIS logo,
  • a symbol to indicate the purity and fineness of the jewellery, and
  • the HUID.

• The three categories of hallmarked jewelleryare:
  • 22K916 means that it is a 22 carat gold and the piece of jewellery has 91.6 percent gold.
  • 18K750 means that it is an 18 carat gold and the piece of jewellery has 75 percent gold.
  • 14K585 means that it is a 14 carat gold and the piece of jewellery has 58.5 percent gold.
• Benefits of hallmarking
  • Consumer is aware of the quality of the product.
  • That piece will fetch a higher price when re-sold.
  • Banks are likely to give loans on better terms if the mortgaged jewellery is hallmarked.

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Topic 3: Compensatory Afforestation in India

Context: As part of its international climate change commitments, India has promised to increase its forest and tree cover to ensure that they are able to absorb an additional amount of 2.5 billion to 3 billion tonnes of carbon dioxide equivalent by 2030.

What is Compensatory afforestation?

• The process of planting trees and developing land into a forest area is called afforestation.
• Compensatory Afforestation is the process of indirect afforestation that aim to compensate for the destruction of forest land.
• The objective of compensatory afforestation is to collect adequate compensation from the agency which uses the forest land.
• The compensation is meant for the regeneration of new forest areas or improvement of decaying forest areas
• The CAMPA fund:
• The Compensatory Afforestation Fund Management and Planning Authority (CAMPA) was formed in India with the responsibility for promoting and executing compensatory afforestation.
  • In 2004, Ministry of Environment and Forests constituted Compensatory Afforestation Fund Management and Planning Authority (CAMPA) to overlook and manage the Compensatory Afforestation Fund (CAF) as directed by the SC.
  • The authority was termed as the ‘custodian’ of the fund.
  • Further in 2009, the government ordered that State CAMPAs had to be set up to boost compensatory afforestation at state.
  • Whenever forest land is diverted for non-forest purposes, it is mandatory under the Forest (Conservation) Act, 1980 that an equivalent area of non-forest land has to be taken up for compensatory afforestation.
  • In addition to this, funds for raising the forest are also to be imposed on whomsoever is undertaking the diversion.

Compensatory Afforestation in India:

• Data on forests:  
  • In the last 10 years, more than 1,611 square km of forest land has been cleared for infrastructure or industrial projects.
  • Government data also shows that total forest cover had increased by 1,540 square km in the two years between 2019 and 2021.
• Projects and programmes:
  • Green India Mission,
  • National afforestation programme
  • Tree plantation exercises along the highways and railways
  • National rural employment guarantee scheme (MGNREGS)
  • Namami Gange

• CAF Act 2016:
  • Compensatory afforestation was made a legal requirement through the Compensatory Afforestation Fund Act of 2016.
  • It ensures that newer parcels of land are earmarked for developing them as forests.
  • Project developers, public or private, are required to fund the entire afforestation activity on these new lands.
  • Project developers are also asked to pay for the Net Present Value (NPV) of the forests being cleared, based on a calculation decided by an expert committee depending on the quality of forests getting diverted.
• Where the funds will be spent?
  • All this money is meant to be spent solely on increasing, or improving the quality of forest cover in the country.
  • The money is parked in special funds created for this purpose at the Central and state levels.
  • The money is first deposited in the Central fund (CAMPA), from where it gets disbursed to states where the projects are located.
  • The Central fund can keep up to 10 per cent of the total money for spending towards administrative expenses.

Concerns:

• Non-utilization of funds:
  • Government records show that the state governments have not made full utilisation of the funds at their disposal, and even the money approved for this has not been entirely spent.
• Corruption:
  • There have also been allegations of misutilisation or diversion of these funds.

• Non-availability of land:
  • Lack of availability of suitable land remains the biggest problem for compensatory afforestation.
  • The land that is made available for afforestation usually cannot be used for any other purpose, and is often extremely unsuitable for growing plantations.
  • The poor quality of land poses a difficult challenge in most instances.
• Non-contiguous land:
  • While the law mandates at least an equal area of land to be provided for compensatory afforestation, rarely is a contiguous stretch of land made available for this purpose.
  • The total area of land is often distributed over twenty or more different locations.
  • Even if very good plantations were grown, these can never be compared to the kind of forests that often get diverted.
• Widespread monoculture:
  • Often the plantations are monocultures, meaning they contain only one species of plants.
  • A key element of any forest is biodiversity.

Way forward:

• In recent years, India’s commitments to deal with climate change are being dovetailed with domestic policies and regulations in the agriculture and forestry sectors.
• Growing forests are part of India’s voluntary targets under the Paris Agreement on climate change.
• Both private and government agencies are now encouraged to monetise available lands and grow plantations on them.
• These could serve dual purposes — as carbon stocks and as compensatory afforestation.
• This reductive view of forests and food systems works for the benefit of the biggest polluters of the planet.
• Projects that consume good forests can engage states or private entities to undertake paid plantations in distant regions despite no compatibility in terms of the qualities of what is lost and what is to be recreated.
• These ways to compensate for the loss of forests and mitigate climate impacts through afforestation may appear like a win-win formula.
• But their implementability is a huge question.
• Although courts and audit agencies have recognised the failures of CA, the imperative to grow carbon stocks may bring in new support for these afforestation schemes.
• CA will continue to greenwash unworthy projects.

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Topic 4: Scrub typhus

Context: Scrub typhus is a major public health threat in South and Southeast Asia.

Key details:

• As per estimates, nearly one million cases are reported from South and Southeast Asia with 10% mortality.
• India is one of the hotspots with at least 25% of the disease burden.
• A trial carried out in India where patients were received a combination therapy of both doxycycline and azithromycin showed faster resolution of complications compared with patients  who were given monotherapy of either doxycycline or azithromycin.

About scrub typhus:

• Scrub typhus is also known as bush typhus.
• It is caused by bacteria called Orientia tsutsugamushi.
• Scrub typhus is spread to people through bites of infected chiggers (larval mites).
• Most cases of scrub typhus occur in rural areas of Southeast Asia, Indonesia, China, Japan, India, and northern Australia.
• Treatment
  • Scrub typhus should be treated with the antibiotics.
  • No vaccine is available to prevent scrub typhus.

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Topic 5. India’s labour force and national income data

Context: Two recent sets of data released by the National Sample Survey Office (NSSO) and the National Statistical Office (NSO) offer insights into the process of structural transformation in the Indian economy, especially in relation to the agriculture and manufacturing sectors.

Key details:

• What is structural transformation?
  • Structural transformation is a compositional shift that entails the transfer of surplus labour from agriculture to sectors where productivity (output per worker) and average incomes are higher — particularly manufacturing and modern services.
• The NSSO’s latest annual Periodic Labour Force Survey (PLFS) report for 2021-22 (July-June) shows the farm sector’s share in the country’s employed labour force at 45.5%.
  • That’s down from 46.5% in 2020-21, but still higher than the 2018-19 low of 42.5%.
• What is PLFS?

• National Sample Survey Office (NSSO) launched Periodic Labour Force Survey (PLFS) in 2017.
• Aims:
  • to estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the ‘Current Weekly Status’ (CWS).
  • to estimate employment and unemployment indicators in both ‘Usual Status’ and CWS in both rural and urban areas annually.

Key findings of the report:

• Stalled transformation
  • The share of agriculture in the total workforce over a longer time period fell from 64.6% in 1993-94 to 42.5% in 2018-19.

• The biggest decline, from 58.5% to 48.9%, happened between 2004-05 and 2011-12.
• During this seven-year period, the workforce engaged in farming registered, for the first time in India’s history, a fall even in absolute terms — from 268.6 million to 231.9 million.
• The share of the labour force employed in manufacturing peaked at 12.6% in 2011-12.
• Since 2011-12, this structural transformation has slowed, with the share of agriculture in employment not falling fast enough and rising after 2018-19.
• The share of manufacturing has dropped behind even that of construction and trade, hotels & restaurants.
• The construction sector has now become the second-largest employer after agriculture.
• Manufacturing has been relegated to the fourth spot.

Output vs. Value added

• Output is the gross value of production by an industry or sector.
• For the economy, it would mean the total value of all goods and services produced during a financial year.
• Since the producer merely adds value to the inputs that he uses, economists consider gross value added (GVA), and not gross value of output (GVO), as a measure of aggregate production.

GVA is GVO at current prices minus the value of intermediate consumption

• Value addition is the highest in agriculture.
• Value addition is the lowest, at just over a fifth, for manufacturing.
• Reason:
  • Purchased inputs are very little in agriculture, unlike manufacturing.
  • The value produced comes mostly from the land rather than the seeds, fertilisers, pesticides, diesel and electricity that farmers consume.

Link with employment

• Agriculture:
  • High value-addition is a key reason why agriculture is able to employ so many people.
  • The sector’s share in GVO was only 11.4% in 2021-22.
  • The share of GVA rose to 19%.
• Manufacturing:
  • Its share in overall GVO was as high as 35.4%, while being just 15.8% relative to GVA.

Way forward:

• Even taking into account high value-addition, agricultural sector generating 19% of income cannot support 45% of the country’s population.
• The GVA-GVO ratio is not a measure of productivity.
• Productivity is a function of output per worker or per unit of land which is low in agriculture compared to modern manufacturing and services.
• It explains why the average farmer earns less than his urban counterpart.
• To earn more, the farmer’s productivity has to go up, which means producing more on the same land with fewer hands.
• There’s no escaping the fact that India has too many people in agriculture.
• They need to be enabled to find employment in other sectors, which will, in turn, raise agriculture’s productivity.

About NSSO and NSO The National Sample Survey(NSS) is responsible for conduct of large scale sample surveys in diverse fields on All India basis.Primarily data are collected through nation-wide household surveys on various socio-economic subjects, Annual Survey of Industries (ASI), etc.Besides these surveys, NSS collects data on rural and urban prices. The NSS has four Divisions:Survey Design and Research Division (SDRD):This Division, located at Kolkata, is responsible for technical planning of surveys.Field Operations Division (FOD):The Division, with its headquarters at Delhi is responsible for the collection of primary data for the surveys undertaken by NSS.Data Processing Division (DPD):The Division, with its headquarters at Kolkata is responsible for sample selection, software development, processing, validation and tabulation of the data collected through surveys.Survey Coordination Division (SCD):This Division, located at New Delhi, coordinates all the activities of different Divisions of NSS.It also brings out the bi-annual journal of NSS, titled “Sarvekshana.In 2019 the National Sample Survey Office (NSSO) merged with the Central Statistical Office (CSO) to form the National Statistical Office (NSO).NSO was first envisaged by Rangarajan Commission.It comes under the statistical wing of the Ministry of Statistics and Programme Implementation (MoSPI).

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Topic 6. Diseases caused by Pigeons

Context: Recently, the Thane Municipal Corporation (TMC) in Maharashtra put up several posters warning people against feeding pigeons in order to spread public awareness about hypersensitive pneumonia, a lung disease which is contracted by living near pigeons.

Key details:

• Pigeons may lead to various kinds of lung diseases, ranging from respiratory allergies to serious infections which include:
  • Pneumonia-Psittacosis, which is a bacterial infection and may result in death in 15 per cent of those affected by it if untreated.
  • Histoplasmosis, which is a fungal infection with high mortality rates.
  • Cryptococcal infections may lead to pulmonary or meningeal infections in some people with an immunocompromised host.
  • Hypersensitivity Pneumonitis in people who were either pigeon breeders, had companion birds, or lived in areas where there is a heavy pigeon population.
    • Pigeon Breeder’s Disease is a common cause of Hypersensitivity Pneumonitis.
• Causes for the spread:
  • Being in the proximity of birds including pigeons can lead to diseases.
  • The breathable antigen arising from the bird droppings and feathers goes into the lung and leads to an immunological reaction, which damages the lung.

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Topic 7. SWAMIH investment fund

Context: The Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I has raised Rs 15,530 crore so far.

About the fund:

• What is it?
  • The Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund is a social impact fund specifically formed for completing stressed and stalled residential projects.
• Aim:
  • to provide priority debt financing for the completion of stressed, brownfield and Real Estate Regulatory Authority (RERA)-registered residential projects that fall in the affordable, mid-income housing category.
• Implementation authority:
  • The Fund is sponsored by the Ministry of Finance and is managed by SBICAP Ventures Ltd., a State Bank Group company.

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Topic 8. Lokayukta

Context: Ahead of the Assembly Elections in Karnataka, the Lokayukta has seized over Rs 8 crore of unaccounted cash from the residence and office of an MLA.

What is the Lokayukta?

• Lokayukta is an anti-corruption ombudsman organisation in the states of India.
• The Lokpal and Lokayuktas Act, 2013 paved the way for establishment of the institution of Lokpal at the centre; and Lokayuktas at the state levels.
• Aim:
  • to inquire into allegations of corruption against public functionaries, and for related matters.
• The Act provides opportunity and freedom to the states to decide upon the contours of the Lokayukta mechanism in their own states.
• At the state level, there is no uniformity in case of the jurisdiction of Lokayukta.

Evolution:

• First Administrative Reforms Commission (ARC) :
  • The first ARC recommended the setting up of two special authorities designated as “Lokpal” and “Lokayukta” for the redressal of citizens’ grievances.
  • The two institutions were to be setup on the pattern of the institution of Ombudsman in Scandinavian countries, and the Parliamentary Commissioner for Investigation in New Zealand.
  • The Lokayukta is created as a statutory authority with a fixed tenure to enable it to discharge its functions independently and impartially.
  • The person appointed is usually a former High Court Chief Justice or former Supreme Court Judge.
  • The state of Maharashtra created the institution of lokayukta in 1972, followed by Rajasthan (1973), Uttar Pradesh (1975), Madhya Pradesh etc.
  • In few states, there is a provision for Lokayukta and Up-Lokayukta (for instance in Maharashtra and Rajasthan).
• The Second Administrative Reforms Commission (SARC):
  • It has recommended that the Lokayukta should be a multi-member body consisting of:
    • a Judicial Member as the Chairperson,
    • an eminent jurist or eminent  administrator as member and
    • the Head of the State Vigilance Commission as an ex-officio member.
  • The Chairperson of the Lokayukta should be selected from a panel of the retired Supreme Court Judges or retired Chief Justice of the High Court, by a committee consisting of:
    • the Chief Minister,
    • Chief Justice of the High Court and
    • Leader of the Opposition in the Legislative Assembly of the State.
  • The Lokayukta should have its own independent machinery for investigation of cases.

The Lokpal Act of 2013:

• The Act provides for the creation of a ‘Lokpal’ headed by a Chairperson, who is or has been a Chief Justice of India, a judge of the Supreme Court, or an eminent person fulfilling the specified eligibility criteria.
• The Lokpal should consist of a maximum of 8 members, of which 50% shall be judicial members, provided that at least 50% belong to the SCs, STs, OBCs, minorities, or women.
• The Act extends to whole of India, and is applicable to “public servants” within and outside India.
• Amendment:
  • The Lokpal and Lokayuktas Act, 2013 was in 2016.
  • One of the provisions states that in case of the absence of leader of the opposition party, the leader of the single largest party of the opposition in the Lok Sabha/ Legislative Assembly would be the member of the selection committee
  • To further ensure transparency, the public servants will have to make declaration of their assets and liabilities.
• Issues with the Act:

• No protection to whistleblowers:
• There is nothing regarding their composition, powers etc.
  • States are free to define how their own Lokayuktas would be appointed, how they would work and under what circumstances they would serve.
• There are no provisions related to Citizen’s charter.
• There are no adequate provisions to appeal against the Lokayukta, as it cannot conduct inquiry against itself.

Organisational structure:

• There are four functional wings:
  • Administrative and Enquiry Section
  • Legal Section
  • Special Police Establishment (SPE)
  • Technical Cell

Appointment:

• The Lokayukta is appointed by the Governor.
• The Governor, generally, consults the Chief Justice of the State High Court, and Leader of Opposition in the State Legislative Assembly.

Qualification and Term of Office

• Judicial qualifications are prescribed in the States of Uttar Pradesh, Himachal Pradesh, Andhra Pradesh, Gujarat, Odisha and Karnataka.
• No specific qualifications are prescribed in the states of Bihar, Maharashtra and Rajasthan.
• The term of office fixed for Lokayukta in majority of states, is of five years duration or 70 years of age, whichever is earlier.
•  The Lokayukta is not eligible for reappointment for a second term.

Powers and Functions:

• Supervisory powers to give direction regarding matters referred for preliminary inquiry or investigation;
• Power of Search and seizure;
• Power of civil court in certain cases;
• Power to utilise services of officers of the State Government;
• Power of provisional attachment of assets;
• Power related to confiscation of assets, proceeds, receipts and benefits arisen or procured by means of corruption, in special circumstances;
• Power to recommend transfer or suspension of public servant connected with allegation of corruption;
• Power to give directions to prevent destruction of records during preliminary inquiry; and
• Power to delegate.

Issues and concerns:

• Sometimes genuine complaints by affected citizens made to the state Lokayuktas are rejected for want of jurisdiction, anonymity and triviality.
• Lokayuktas complain that they do not get sufficient information from the government departments, and State investigating agencies.
  • As a result, complaints filed with Lokayuktas are not cleared expeditiously and thus, citizens do not get speedy justice.
• One of the pertinent problems relating to its function is hindered by the single institution of Lokayukta looking after the complaints of corruption as well as dealing with maladministration issues, which negatively impacts its efficient functioning.

Way forward:

Recommendations to the Government of India:

• Make Lokayukta the nodal agency for receiving all corruption complaints;
• Accord Lokayukta jurisdiction over State-level probe agencies;
• Bring bureaucrats under the ambit of the Lokayuktas;
• Accord powers of search and seizure, and powers to initiate contempt proceedings;
• Provide administrative and financial autonomy to the Lokayukta for better functioning;
• Bring Non-Governmental Organisations (NGOs), funded by the government, under the Lokayukta’s jurisdiction.

Other recommendations:

• Former ministers and civil servants should also be covered in the legislations.
• The Chief Minister should invariably come within the jurisdiction of the Lokayukta.
• Lokayuktas should have power to start inquiries, suo moto.
• Lokayuktas should have their own independent investigation agencies.
• References made by the Lokayukta to the government should be accorded top priority by government officials.
• A committee on the Lokayukta’s should be setup to monitor the follow up of the proper implementation of the recommendations.

Conclusion:

• The entire debate on setting up a strong and robust Lokayukta is based on the touchstone of transparency and probity in public life.
• Best practices in public administration will be realised, only when the integrity in public services is maintained.