Mitras Analysis of News : 15-6-2017

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1.Threats of big data (The Hindu)

2.The hazards of a dominating and ever present public sector (Live Mint) 

 

1.Threats of big data (The Hindu)

 Synoptic line: It throws light on the implications of big data over national security and steps needed to built a robust digital infrastructure. (GS paper III)

Overview

  • According to an Internet and Mobile Association of India report, India has around 400 million Internet users. This number took a decade to reach 100 million from 10 million, three years to reach 200 million and just another year to reach 300 million. The Internet is essentially a data ecosystem where every node is engaged in generation, transmission, consumption and storage of data.
  • But the situation is such that while we are generating such high volumes of data—most of which is of the “identifier” type that is used to identify a person, a thing or an entity in the ecosystem—we do not have in place measures that safeguard the privacy of this data, nor regulate data retention by platforms collecting it.

Big Data Collection

  • Corporations have always been interested in understanding consumer behaviour and been collecting data about users using their products or service. What is unique about Big Data Technology (BDT) is the scale at which this data collection can take place.
  • For instance, Google has stored petabytes of information about billions of people and their online browsing habits. Similarly, Facebook and Amazon have collected information about social networks.
  • In addition to using this data to improve products or services that these corporations offer, the stored data is available also to highest bidders and governments of nations where these companies are based.

Impending dangers

  • One major problem with collecting and storing such vast amounts of data overseas is the ability of owners of such data stores to violate the privacy of people.
  • Even if the primary collectors of data may not engage in this behaviour, foreign governments or rogue multinationals could clandestinely access these vast pools of personal data in order to affect policies of a nation.
  • Such knowledge could prove toxic and detrimental in the hands of unscrupulous elements or hostile foreign governments.
  • The other major problem is the potential drain of economic wealth of a nation. Currently, the corporations collecting such vast amounts of data are all based in developed countries, mostly in the U.S. Most emerging economies, including India, have neither the knowledge nor the favourable environment for businesses that collect data on such a vast scale. The advertising revenue that is currently earned by local newspapers or other media companies would eventually start to flow outside the country to overseas multinationals. A measure of this effect can already be seen in a way that consumer dollars are being redistributed across the spectrum of U.S. businesses touching them.

Things to be done by India

  • China has apparently understood this dynamic and taken measures to counter this threat. It has encouraged the formation of large Internet companies such as Baidu and Alibaba and deterred Google and others from having major market share in China by using informal trade restraints and anti-monopoly rules against them.
  • India may not be able to emulate China in this way, but we could take other countermeasures to preserve our digital economy independence. The heart of building companies using BDT is their ability to build sophisticated super-large data centres. By providing appropriate subsidies such as cheap power and real estate, and cheap network bandwidth to those data centres, one would encourage our industries to be able to build and retain data within our boundaries.
  • In the short term, we should also create a policy framework that encourages overseas multinationals such as Google and Amazon to build large data centres in India and to retain the bulk of raw data collected in India within our national geographical boundaries.
  • Moreover, we should also build research and development activities in Big Data Science and data centre technology at our academic and research institutions that allow for better understanding of the way in which BDT can be limited to reduce the risk of deductive disclosure at an individual level.
  • This will require developing software and training for individuals on how to protect their privacy and for organisations and government officials to put in place strict firewalls, data backup and secure erasure procedures.

Way ahead

  • Moreover, along with building digital infrastructure, our government also needs align our technology laws with the evolving Internet landscape. User privacy concerns and secure designing should be integrated in the charters of respective standard-setting organizations.
  • There needs to be active user education that makes them aware of their choices. Lengthy and complex privacy policies that practically hand over control of user data to the platforms collecting it need to be replaced with ones that are user friendly in draft and execution. Policy documents that address these concerns need to be widely discussed and debated in the public domain.

Question: What type of infrastructure and structural frameworks are needed to make India as a big data economy ? 

 

2.The hazards of a dominating and ever present public sector (Live Mint)

 Synoptic line: It throws light on the dangers of a large public sector in India. (GS paper III)

Overview

  • After the attainment of independence and the advent of Planning, there has been a progressive expansion in the scope of the Public Sector. The passage of Industrial Policy Resolution of 1956 and the adoption of the Socialist Pattern of Society as our national goal, further led to deliberate enlargement of the role of public sector.
  • Even though the public sector is going in a correct path, some problems and short comings are there which needs immediate attention.

Stress in public sector

  • Between 2009 and 2016, the market value of the Maharatna companies—so-called “crown jewels” of the public sector—declined by 33% at a time when the Nifty index grew by 9%. Between 2010 and 2014, the market value of private sector banks rose by about $30 billion, while the market value of public sector banks (PSBs) fell by about $30 billion.
  • of the contributing factors in this crisis (in the context of public sector banks) is the inability of private asset reconstruction companies (ARCs) to play a meaningful role, in spite of enabling regulations and support from the central bank. While lawyers attribute the dismal performance of ARCs to a barrage of legal issues, bankers point to one crucial factor: inadequate capital due to lack of interest among private investors.
  • To address this “buy-side” problem, there has been intense discussion around one solution: the bad bank. Proponents of this solution point to the success of bad banks in China. In 1999, China set up four centrally controlled asset management companies, or bad banks, to swallow toxic assets from banks. Today, China’s bad banks are “thriving as alternative lenders, evolving from bad-debt managers into some of the country’s largest financial conglomerates.
  • According to recent reports, the government is planning to provide operational flexibility to central public sector enterprises (CPSEs) to take over stressed assets and turn them around. To facilitate the takeover of stalled projects, the cabinet secretariat will coordinate between various CPSEs under different administrative ministries and banks. While this would help unburden the banking sector quickly, it may not be an effective solution, given the state of India’s public sector.

Way ahead

  • The takeover of stressed assets by CPSEs also contradicts one of the core principles of government. Government initially focused on three Ds: democracy, demand and demographic dividend. In 2015, government added a fourth D—deregularization which is about reducing the government’s footprint in business.
  • The proposed solution will achieve exactly the opposite. Transferring stressed assets from PSBs to CPSEs will neither be efficient nor effective, since the burden will remain on the government and taxpayers. Also, the turnaround of stressed assets will be attempted by CPSE managers instead of turnaround specialists from the private sector.
  • Instead, the government should revisit the idea of setting up a bad bank, transferring stressed assets to its balance sheet at fair valuations and then securitizing the assets to distribute risk among a diverse group of investors. On 11 June, finance minister Arun Jaitley kept the conversation alive by saying that the finance ministry was still debating the creation of a bad bank. Whether the government sets up a bad bank or not, one thing is clear: India needs a smaller public sector, not larger.

Question:  The government’s plan to empower public sector enterprises to take over stressed assets is a dangerous one. Critically analyse.

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