UPSC Mains Daily Answer Writing (01-11-2022)

UPSC Mains Daily Answer Writing

Questions

Q1. Recently, the government has asked all ports to prepare a master plan in order to become 'mega ports' by 2047. In light of this, discuss the challenges faced by ports and suggest remedial measures in order to propel India's blue economy. (150 words) 10 marks

Q2. Digital lending ecosystem has gained currency in the recent past. Explain the concept, enumerate the recent RBI regulations which seek to address concerns related to digital lending.         (15 marks)


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Model Solutions

Q1. Recently, the government has asked all ports to prepare a master plan in order to become 'mega ports' by 2047. In light of this, discuss the challenges faced by ports and suggest remedial measures in order to propel India's blue economy. (150 words) 10 marks

Model Structure
Introduction:

  • A mega port can be called ‘mega’ because of three factors: the cargo volume it handles, the economic value it represents, or the land and water surface utilized, or any combination of them.
  • Having mega ports helps develop the ‘blue economy’. To achieve this, the government is working to make all ports as mega ports by 2047.

Main body:

  • Major hurdles faced by the port sector in India:
    • Low capacity: Despite handling 90% of cargo by volume and 70% by value, the traffic handled at ports is far less than their capacity.
      • For example, the capacity of 13 major ports is more than 1500 million tonnes per annum (MTPA) in 2021, but traffic handled at these ports was to the tune of around 670 MT during 2020-21.
    • Physical infrastructure: Indian ports are plugged with issues like low productivity, high turnover and pre-berthing time, and high freight costs.
    • Digital infrastructure: There is absence of a common online portal with end-to-end stakeholder coverage.
    • Logistical bottlenecks: The lack of expressway connectivity between major ports as well as industrial clusters, and high fuel cost make hinterland transportation inefficient and slow.
    • Labor issues: local labor being hired, which is often unskilled and operates inefficiently, thereby affecting the overall productivity and cargo traffic volumes handled.
    • Lack of competitiveness: Due to high taxation and high compliance burden, the operational costs of Indian vessels are high.
    • Investment issues: 100% FDI and 10-year tax holiday to enterprises engaged in maintenance and operation of ports.
      • A cumulative FDI of only US$ 1.63 billion was received from April 2000 to March 2021.
  • Following measures can be adopted:
    • The government needs to open up the dredging sector to attract more players, particularly international players.
      • To increase and maintain draft depth at ports to attract large vessels and enable them to become hub ports.
    • There is a need to expedite the completion of various projects under the Sagarmala programme.
      • Especially those aimed at improving port connectivity, setting up coastal economic zones (CEZs), and establishing new ports.
    • A comprehensive programme to reduce the cost of movement of goods behind the borders from hinterland to ports needs to be undertaken.
    • There is a need for a common digital platform, which brings all stakeholders on a single platform proposed as the ‘National Portal for Cargo Facilitation (NPCF).
    • The government and other stakeholders should enhance the use of technology.
      • Like big data, Artificial Intelligence etc. in ports and, wherever feasible, draw lessons from successful global ports such as Rotterdam, Felixstowe, and Singapore to improve efficiency.

Conclusion:

  • Liberalization of the sector is extremely crucial to build flexibility and agility—procedural, operational and financial.
  • To constantly compete with the rest of the world, it is crucial that the terminal and equipment operators, ship owners, exporters and importers all work cohesively to meet the evolving demands of the sector.

Additional Information:

  • Blue economy- According to the World Bank refers to sustainable use of ocean resources for economic growth, improved livelihood and jobs, and ocean ecosystem health.

Q2. Digital lending ecosystem has gained currency in the recent past. Explain the concept, enumerate the recent RBI regulations which seek to address concerns related to digital lending. (15 marks)

Model Structure
Introduction:

  • Digital lending means lending by using technology through online platforms or mobile applications. For customer specific preferences and needs, automation and algorithms are used which enables better authentication, speedy decision making and disbursements.

Main Body:

  • Digital lending is facilitated by Lending Service Providers (LSPs) who work with Non-Banking Financial Companies and neo-banks to disburse credit. India is a huge market for financial technologies and has grown nearly 10 times in the last decade.
  • It ensures easy credit for those small borrowers who find it difficult to get it from mainstream banking channels. These customers lack any documented credit history and features like this have led to some issues like-
    • Lack of regulatory and disclosure norms makes it difficult to assess operational legitimacy of service providers. There are many illegal lending apps available in playstore having less than 1000 crore capital.
    • To capture the market and due to lack of options for these users, LSPs are involved in unabated lending practices beyond repayment capacity of borrowers.
    • Issues related to mis-selling by use of false information, data privacy, unfair business conduct puts people with lack of digital literacy at disadvantage.
    • Huge interest rates and unethical recovery practices makes it a vicious cycle which further exploits the poor already at a disadvantage.
  • In this scenario, RBI introduced some new regulations like-
    • Dividing digital lenders into 3 groups for targeted regulation and timely corrective actions.
    • Allowing lending only by those entities that are regulated by RBI or have legal permission to operate according to the law.
    • All loans and repayment proceedings must be done directly between the bank account holder and the loaning entity thus eliminating LSP’s.
    • For better feedback mechanism and resolution framework, entities must appoint a grievance redressal officer. In case grievance is not addressed in 30 days, RBI’s Integrated Ombudsman Scheme will come into the picture.
    • Lenders must go through due diligence before partnering with an LSP for digital lending. They must also be transparent about fees and charges related to loans.
    • Data privacy is also given importance and only ‘need-based‘ must be collected that too with previous consent of the borrower.

Conclusion:

  • Digital lending is the future considering the rise in internet penetration and use of online medium of payments. For a holistic development, borrowers’ interest is as important as ease of doing business.
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