Mitras Analysis of News : 17-05-2017

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  1. Vulnerabilities in India’s Cyber regime: Ransomware Attack (The Hindu)
  1. New base, new basket (The Hindu, The Indian Express)
  1. India’s desire for gold (The Hindu)
  1. Explained: Why World’s most remote place is most plastic polluted

 

 

Vulnerabilities in India’s Cyber regime: Ransomware Attack (The Hindu)

 Synoptic line: It throws light on the impending threat from attacks such as ransomware. (GS paper III)

Overview

  • The technique of using a computer virus to hold data hostage has been around for decades, gaining more notoriety in recent years. But the massive attack that hasspread around the world recently has taken it to a whole new level.
  • India being on a cusp of digital revolution, face a host of challenges with such cyber threats.

What is Ransom ware (The recent attack)?

  • At its heart, ransomware mimics the age old crime of kidnapping: someone takes something you value, and in order to try to get it back, you have to pay up. For it to work, computers need to be infected with a virus, which is usually accomplished by tricking someone into clicking on a link.
  • Ransomware is malicious code that is used by cybercriminals to launch data kidnapping and lock screen attacks. the victim is usually notified that an exploit has occurred and is given instructions for how to recover from the attack. Payment is often demanded in virtual currency to protect the criminal’s identity.
  • Ransomware malware can be spread through malicious e-mail attachments, infected software apps, infected external storage devices and compromised websites. In a lockscreen attack, the malware may change the victim’s login credentials for a computing device; in a data kidnapping attack, the malware may encrypt files on the infected device as well as other connected network devices.
  • The cyber-attackers, have essentially used chinks in Microsoft’s outdated software to remotely gain access to computers of unsuspecting users.
  • The country’s cyber security agency Computer Emergency Response Team of India (CERT-In) has issued a red-coloured ‘critical alert’ in connection with the WannaCry (Ransomware) attack.
  • Some of the world’s largest institutions and government agencies have been affected so far, including the Russian interior ministry, FedEx in the US and Britain’s National Health Service.
  • However, apart from some isolated patches of incidents, Indian computer systems have largely escaped a global ransomware attack as the government and companies installed security patches to gain an upper hand against the first wave of an unrivalled global cyber attack

Implications of such vulnerability

  • Cyberspace is now referred to as the fifth dimension of warfare. The unique characteristics, namely of anonymity and difficulty of attribution give cyberspace enormous potential for damage and mischief. A well coordinated cyber war can instantly cripple a nation without firing even a single shot.
  • India cannot afford to ignore cyber threats as information systems are an essential part of day to day functioning of government: more so with the Digital India programme which intends to empower its citizen digitally. The success of the Digital India project would depend upon maximum connectivity with minimum cyber security risks.
  • Recent cyber attack had exposed the lack of preparedness among government and private institutions. Only some weeks earlier Microsoft had made available a patch to remove the chinks, something that raises doubts over whether even large institutions are complacent on cyber risks. That governments across the world went on alert after the outbreak of the global ‘epidemic’ is some consolation.
  • While the state of preparedness is a cause for worry, the likely origin of WannaCry forces stakeholders to revisit a long-standing and uneasy question regarding the actions of governments. WannaCry has its origins in a tool developed by the National Security Agency in the U.S. that was dumped online by a group.

Way ahead

  • Cyber resilience is a critical boardroom imperative. The likelihood of operational, financial and reputational damage is growing as criminals exploit organisations’ enhanced attack surface as a result of their online presence, automated operations, and use of social media, mobile devices and cloud devices. Hence, government should formulate a dedicated response doctrine in the wake of increasing cyber attacks.
  • Moreover, cyber threats are only likely to grow, and the world needs to push for global rules on such issues. It is more than obvious now that cyber vulnerabilities have massive global implications.

Question: In the wake of Digital India campaign, what reforms should be initiated by the government to avoid the treats associated with cyber crime?

 

 

New base, new basket (The Hindu, The Indian Express)

Synoptic line: It throws light on how change in base year shows a different and clear picture of macroeconomic indicators, especially in Index of Industrial production (IIP). (GS paper III)

Overview

  • The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation revised the base year of Index of Industrial Production (IIP) and Wholesale Price Index (WPI) to 2011-12 base years, replacing the 2004-05 base years. Analysts believe that though the new series will be able to capture the current state of affairs of the economy by replacing the old basket of goods with a contemporary one.
  • Currently the IIP and WPI take 2004-05 as base year, while the GDP and Consumer Price Index (CPI) data are calculated using the base year of 2011-12. Using the same base year of 2011-12 for all macroeconomic data indicators will ensure that accuracy is maintained in the mapping of economic activity.

Base year

  • Base-year is the year used for comparison for the level of a particular economic index. The arbitrary level of 100 is selected so that percentage changes can easily be depicted.
  • The Eight Core Industries comprise nearly 38 % of the weight of items included in the Index of Industrial Production (IIP). These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.

Problems in IIP with old base year

  • The Index of Industrial Production (IIP) is a critical economic indicator, the aim of the IIP is to capture the direction and the trend of industrial production in the country, not the absolute value of industrial production in different sectors such as manufacturing, mining and power, giving a broad outlook on the output of various types of goods like basic, consumer and capital goods. It helps gauge economic progress and investments in the economy.
  • The base year remains unchanged since 2004-05, due t this IIP has been failing in serving this purpose. The reason being that it was measuring industrial output using baskets of production items and producing entities that had remained unchanged.

ANNUAL SURVEY OF INDUSTRIES (ASI)

  • The Annual Survey of Industries (ASI) is the principal source of industrial statistics in India.
  • It provides information about the composition and structure of organised manufacturing sector comprising activities related to manufacturing processes, repair services, gas and water supply and cold storage.
  • The Survey is conducted annually under the statutory provisions of the Collection of Statistics Act 2008

New dynamics to IIP

  • The revision is aimed at capturing the changes that have taken place in the industrial sector since 2004-05. New products have been included in the items basket like renewable energy, offshore platforms, typewriters, sewing machines, tape recorders, pencils and organic pigments that were dropped while framing the 2004-05 base-year index. A larger number of factories are expected to make the IIP more representative and those that have lost their relevance deleted.
  • The updated IIP offers new insights, the most important being, the average industrial output growth of the last five years (2011-12 to 2016-17) in the old IIP is 1.38%, and in the updated series it is 3.8%.
  • On the manufacturing front, the average five-year growth has improved to 4.04% against 0.94% in the old IIP. However, Demonetisation has devitalized the sector growth.
  • However, the output growth of the infrastructure and construction sector has slowed down from 5.7% in 2013-14 to 3.8% in 2016-17 despite the government’s sustained push to the infrastructure sector, including through substantial increases in targeted public spending.
  • The Seventh Pay Commission award to Central government employees and pensioners last year seems to have spurred consumption, the main driver of growth in the economy. Consumer durables grew 6.2% and non-durables 9% in 2016-17.

Challenges

  • The Base change is essentially done to change the basket of goods and this change in IIP series would make it closer to the current production structure; however, volatility in itself is mostly a real life problem and not a statistical problem. Capital goods, one of the components of IIP, are volatile in nature. Changing the base year series would not help much in this case.
  • Though the new IIP series would address the issues that arise on the difference in composition with the GDP series. But some divergence would continue owing to the construction of the indices as IIP recording volumes and GVA focusing on value addition.
  • The IIP’s coverage by design is limited to the organized sector. The disruption in the unorganized sector is expected to get measured in the ASI.

Way ahead

  • It is widely acknowledged that the IIP numbers are an important input while estimating the GDP. Given the fact that now the IIP numbers have been revised, it is possible that the GDP numbers too could be revised upwards.
  • Instead of the periodic baskets revisions, a permanent standing arrangement will make sure that the IIP remains representative. There is need of monitoring and mapping of the index with the changes taking place in the economy.

Note- related issue covered in Explained “Revision of IIP and WPI base year” (date = 15-05-2017)

Question– What are the implications of changing the base year on growth estimates?

 

India’s desire for gold (The Hindu)

Synoptic line: It throws light on the obsession of India with gold and how it is harmful for the economy. (GS paper III)

Overview

  • India is the world’s biggest gold importer, soaking up a third of the world’s supply every year. Gold is the country’s biggest foreign purchase after oil.
  • Such a consumption of gold is hurting Indian economy on Balance of payments front.

Economics of gold (What’s the problem)?

  • Gold is an integral part of our lives in India. On the global front, India is the largest consumer of gold. India accounts for more than 30 per cent of the global gold market. However, the domestic production of gold in India is minimal. India meets the high demand of gold from its domestic consumers by importing it.
  • Though the universal acceptance, liquidity and safe haven against economic or political turmoil makes gold lucrative, it does not add much of a value to the economy.
  • Most of the gold bought by us Indians is used for consumption purpose in the form of jewellery. Even from the investment perspective, majority of the Indians still prefer the traditional way of holding it in the physical form.
  • Long-drawn-out effort to tackle the desire for gold does not seem to be bearing fruit. In March, the jump driven by jewellery demand was even higher as gold imports stood at $4.17 billion, compared to $974 million a year earlier. This suggests that Indian demand for gold is robust and that policymakers will have to continue worrying about its impact on the country’s trade deficit for a long time to come.
  • The jump in gold demand is particularly significant given the many steps taken to reduce it in recent years. For instance, the demonetisation of high-value currency notes last November coincided with India’s gold demand dropping to a seven-year low of 675 tonnes during 2016, according to the World Gold Council.
  • Earlier, as part of his efforts to push Indians to decrease their gold purchases, govt. had introduced the gold monetisation scheme that aimed to reduce gold imports by using deposits to increase domestic supply. But, as of early 2017, the amount of gold that had been deposited under the scheme was less than 1% of overall gold demand in 2016.

An analysis of such a trend

  • Such a trend has led to concerns about savings being wasted on a dormant metal instead of being invested in productive business activities.
  • People are even more relying on gold as metal’s predominant utility as a hedge against inflation, which protects the average investor lacking sophisticated financial wisdom from a depreciating rupee, cannot be ignored. Ironically, the Centre’s sudden demonetisation decision has possibly undermined confidence in the rupee as a store of value, adding to the yellow metal’s attractiveness.

Way ahead

  • Gold’s lure cannot be explained only as a reserve for illicit wealth or tax evasion. Access to better and more formal financial market instruments remains a pipe dream for the majority in a country where talk of financial inclusion remains at the level of opening a basic bank account. Any significant strides on this front will require structural reform of the financial sector that encourages more competition to spur financial innovation and access.

Question What are the merits of bringing more effective schemes to curb gold usage in India. How govt. should move in this regard?

 

Explained

Why World’s most remote place is most plastic polluted (GS paper III)

Introduction

  • One of the world’s most remote places, an uninhabited coral atoll, is also one of its most polluted.
  • Henderson Island, a tiny landmass in the eastern South Pacific, has been found by marine scientists to have the highest density of anthropogenic debris recorded anywhere in the world, with 99.8% of the pollution plastic.

Why such a case

  • Nearly 38m pieces of plastic were estimated to be on Henderson by researchers. The majority of the debris – approximately 68% – was not even visible, with as many as 4,500 items per square metre buried to a depth of 10cm. About 13,000 new items were washing up daily.
  • The largest of the four islands of the Pitcairn Island group, Henderson Island is a Unesco World Heritage Listed site and one of the few atolls in the world whose ecology has been practically untouched by humans.
  • The island exhibits remarkable biological diversity given it covers only 3,700 hectares, with 10 endemic species of plant and four land bird species. Its isolation had, until recently, afforded it protection from most human activities.
  • The researchers say the density of trash was the highest recorded anywhere in the world, despite Henderson Island’s extreme remoteness. The island is located about halfway between New Zealand and Chile.

South Pacific gyre 

  • The Southern Pacific Gyreis part of the Earth’s system of rotating ocean currents, bounded by the Equator to the north, Australia to the west, the Antarctic Circumpolar Current to the south, and South America to the east.
  • The centre of the South Pacific Gyre is the site on Earth farthest from any continents and productive ocean regions and is regarded as Earth’s largest oceanic desert.
  • The island sits near the center of the South Pacific Gyre ocean current, which means litter from South America or from Australia or New Zealand directly reaches the island. Moreover, debris dropped by fishing boats culminates at the island.

 A huge catastrophe

  • What has happened on Henderson Island shows there is no escaping plastic pollution even in the most distant parts of our oceans,” said Jennifer Lavers, researcher at University of Tasmania in Australia. “Far from being the pristine ‘deserted island’ that people might imagine of such a remote place, Henderson Island is a shocking but typical example of how plastic debris is affecting the environment on a global scale.
  • Research has shown that more than 200 species are known to be at risk from eating plastic, and 55 per cent of the world’s seabirds, including two species found on Henderson Island, are at risk from marine debris

Question Anthropogenic forces are unleashing huge impacts on ocean ecology. What can be the move to curtail conserve the ocean ecology in its pristine form?

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