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  • [Burning Issue] India-Bangladesh Relations in recent times


    Context

    • Bangladesh PM Sheikh Hasina was in Delhi for a four day visit to address the World Economic Forum India summit and has signed series of agreement on various matters.
    • However bilateral relations between the two have witnessed unprecedented tensions over the last few years owing to certain issues.

    An Overview

    • India’s links with Bangladesh are civilization, cultural, social and economic.
    • There is much that unites the two countries – a shared history and common heritage, linguistic and cultural ties, passion for music, literature and the arts.
    • The two nations were strong allies during the Bangladesh Liberation War in 1971.
    • However, they developed different Cold War alliances in the late 1970s and 80s.
    • With the onset of economic liberalization in South Asia, they forged greater bilateral engagement and trade.

    India’s relation with Bangladesh

     

    Connectivity

    • Perhaps on top of the list is connectivity between India’s mainland and the crucial northeast, which is part of India’s “Look East” Policy.
    • The only connection between India’s mainland and the northeast was the Chicken’s Neck – a narrow strip of land that has always been a huge security concern.
    • India and Bangladesh have signed several pacts, so India can actually send goods and passengers over land across Bangladesh, connecting Bengal to Tripura.
    • Chittagong port, too, is now open to Indian vessels and will ease supply of goods, meaning India is much more connected to the northeast than before.

    Security

    • The other part of ensuring the security of the northeast is by ensuring that Bangladesh does not become a shelter for its insurgents.
    • The other big security concern for India is that Bangladesh should not turn into the frontline of radical terror in the southeast.
    • Bangladesh could turn into a launchpad for religious radical terror activities in India.
    • India’s relationship with Bangladesh is also linked to its relationship with China.
    • India did not want Bangladesh to become a pearl in China’s “String of Pearls” strategy to hem in India by using its neighbours.

    Trade and Industry

    • Given Bangladesh’s GDP and economic growth, the Indian industry is taking a serious interest in investing in the country.
    • Bangladesh is India’s biggest trade partner in South Asia.
    • India’s exports to Bangladesh for financial year 2018-19 (April-March) stood at US $ 9.21 bn and imports from Bangladesh for the same period stood at US $ 1.22 bn.
    • India has ensured duty-free access of Bangladeshi goods to Indian market esp. the ready-made garments exports to India.

    Energy Cooperation

    • Energy cooperation between the two sides has also shown a lot of positivity with Indian state Tripura supplying a total of 160 MW of power to Bangladesh in addition to the 500 MW the country is receiving from West Bengal since 2013.

    Defence Cooperation

    • India and Bangladesh share the historical legacy of cooperation and support during the Liberation War of 1971.
    • Various Joint exercises of Army (Exercise Sampriti) and Navy (Exercise Milan) take place between the two countries.

    Issues in the Bilateral Relations

     

    Illegal migration

    • This has always been a primary problem for India since the partition of Bengal.
    • In view of this, recently, the Supreme Court asked the Centre complete the fencing of the India-Bangladesh border soon to check illegal immigration from Bangladesh into Assam.

    Cattle smuggling

    • It is considered to be one of the losses for India of losing its indigenous variety and trade.
    • Cattle haats along the India-Bangladesh border are becoming a source of cattle for smuggling

    Counterfeit currency smuggling

    • Dumping of Fake Indian Currency Notes, recently several duplicate notes have been found along the border, which cripple the Indian Economy severely.

    Joining Belt and Road initiative

    • In 2016 when Chinese President Xi Jinping visited Bangladesh, the smaller country agreed to join the OBOR.
    • China is already investing in a number of infrastructure projects in the country including the deep sea port at Chittagong.
    • It is likely that these projects will now be subsumed under the OBOR project.

    River Water Sharing

    • India and Bangladesh, as good neighbours, have moved forward on other sectors like power, investment and security but the Teesta waters issue remains a big problem due to continuous protest by the Mamata Banerjee led West Bengal government.
    • Bangladesh is unhappy about the lack of resolution on all the common rivers.

    Factors attributing to furtherance of tensions

     

    Repatriation of illegal migrants

    • The National Register of Citizens (NRC) has left out 1.9 million Assamese from the list with a group labelled as “illegal immigrants from Bangladesh” living in Assam post-1971.
    • India plans to seek their repatriation to Bangladesh.
    • Bangladesh remains firm in its stance that no migrants travelled to Assam illegally during the 1971 war of independence and that the controversial NRC risks hurting relations.

    Rohingya Issue

    • The Rohingya issue and India’s remarks in 2017 on the issue have been upsetting for Bangladesh which has been facing the challenge of providing shelter to more than a million refugees fleeing persecution.
    • The recent visit to Dhaka by India’s External Affairs Minister S. Jaishankar (August 19-21), saw a marked departure in India’s position.
    • He had said then: “We agreed that safe, speedy and sustainable return of displaced persons (Rohingyas) is in the national interest of all three countries – Bangladesh, Myanmar, and India.”
    • However, it is China that is mediating when, given its geographical proximity, it is India which is ideally positioned to play a positive role in regional leadership.

    Unresolved river disputes

    • India and Bangladesh have failed to conclude a framework agreement to optimise the use of waters from six rivers including the Manu, Muhuri, Khowai, Gumti, Dharla and Dudhkumar, which has been discussed for several months.
    • No progress was reported on the long pending Teesta water sharing agreement either after the recent visit.

    Indian faults

    • Bangladesh would seem to have comprehensively addressed Indian concerns with regard to support to militant elements in the North-east, for long an area of Indian concern.
    • On its part, India continues to be unable to deliver on Teesta.
    • The Ganga Barrage project in Bangladesh carries economic advantages as well as political overtones, but has not been addressed with suitable despatch by India to enable Bangladesh to obtain external funding.
    • Delay in implementation of the BBIN (Bangladesh, Bhutan, India, Nepal initiative) is inexplicable.
    • Even if India is not chiefly responsible, one may have expected greater attention.

    Still India needs Bangladesh

    South Asian geopolitics

    • Bangladesh has emerged as one of India’s closest partners and second to Bhutan in South Asia.The role of Bangladesh is critical for India’s Act East Policy.
    • India counts on Dhaka’s support in Bangladesh, Bhutan, India and Nepal (BBIN) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) initiatives.
    • These collectively complement New Delhi’s Southeast Asia outreach.

    Connectivity

    • Bangladesh’s location is a strategic wedge between mainland India and NE seven states. Each of these states is land-locked and has shorter route to the sea through Bangladesh.
    • Transit agreement with Bangladesh will spur the socio-economic development of North-East India.

    Countering China

    • Bangladesh uses China card to supplement its bargaining capacity against India.
    • A ‘neutral’ Bangladesh thus ensures containment of an assertive China in this region.

    Fight against terror

    • Bangladesh has emerged as a key element in sub-regional connectivity initiatives with Pakistan refusing to play ball rendering SAARC ineffective.
    • In 2016, when India decided to skip the SAARC Summit in Islamabad following spike in cross-border terror attacks, Bangladesh and Bhutan wasted no time in joining ranks in solidarity with India

    Outcomes of the recent visit by PM Sheikh Hasina

    India and Bangladesh signed seven agreements and also inaugurated three projects to deepen their partnership. The Seven Agreements include:

    1. The use of the Chattogram and Mongla ports in Bangladesh for movement of goods to and from India, particularly from Northeastern India.
    2. Use of Bangladesh’s Feni river for drinking water supply in Tripura.
    3. However, no progress was reported on the long pending Teesta water sharing agreement.
    4. Exchange of data and information to prepare a framework of interim sharing agreements for six rivers — Manu, Muhuri, Khowai and Gomati rivers of Tripura and Dharla river of Bangladesh and Dudhkumar river of West Bengal.
    5. Daudkanti (Bangladesh)-Sonamura (Tripura) inland water trade route to be included under Protocol of the Inland Water Transit and Trade.
    6. Consensus on lifting restrictions on entry and exit from land ports in India for Bangladeshi citizens travelling on valid documents.
    7. Implementation of the Lines of Credit (LoCs) committed by India to Bangladesh.

    New bilateral development projects

    • Import of bulk Liquefied Petroleum Gas (LPG) from Bangladesh
    • Inauguration of Vivekananda Bhaban (students hostel) at Ramakrishna Mission, Dhaka.
    • Inauguration of Bangladesh-India Professional Skill Development Institute (BIPSDI) at the Institution of Diploma Engineers Bangladesh (IDEB), Khulna, Bangladesh.

    Security engagement

    • Both sides noted the progress made in finalization of a MoU on Establishment of Coastal Surveillance Radar System in Bangladesh.

    Way Forward

    • In a neighbourhood where distrust and cynicism prevail over friendship and hope, the relationship between the two countries has given hope for optimism.
    • India-Bangladesh relations have matured in the last decade with development in many areas of cooperation.
    • The shared colonial legacy, history and socio-cultural bonds demand that the political leadership of the two countries inject momentum into India-Bangladesh relations.
    • Sheikh Hasina’s trip to India has helped relations graduate to the next level of strengthening the three Cs: cooperation, coordination, and consolidation.
    • In due course of time rest of the issues will be sorted. But the sooner existing challenges are resolved, the better it is.

     

     



    References

    https://www.civilsdaily.com/india-and-bangladesh-relations/

    https://www.civilsdaily.com/india-bangladesh-relations/

    https://www.drishtiias.com/daily-updates/daily-news-analysis/india-bangladesh

    https://indianexpress.com/article/opinion/columns/india-bangladesh-relations-shiekh-hasina-narendra-modi-6058161/

    https://www.firstpost.com/india/india-bangladesh-sign-seven-pacts-during-sheikh-hasinas-visit-coastal-surveillance-river-water-sharing-improving-connectivity-among-key-takeaways-7464291.html

    https://www.dw.com/en/bangladesh-pm-sheikh-hasina-in-india-to-bolster-trade-connectivity/a-50708175

    https://www.thehindu.com/opinion/op-ed/furthering-this-neighbourhood-friendship/article29577509.ece

  • [Burning Issue] Ban on Single Use Plastics


    Plastic ban delayed

    • A blanket ban though would not take place, contrary to expectations that were raised after the PM mentioned of single-use plastics in his August 15th
    • India would phase out single-use plastics by 2022, PM Modi announced at the 150th birth anniversary of Mahatma Gandhi in Ahmedabad on October 2, 2019.

    Single Use Plastics

    • As the name suggests, single-use plastics (SUPs) are those that are discarded after one-time use.
    • Besides the ubiquitous plastic bags, SUPs include water and flavoured/aerated drinks bottles, takeaway food containers, disposable cutlery, straws, and stirrers, processed food packets and wrappers, cotton bud sticks, etc.
    • Of these, foamed products such as cutlery, plates, and cups are considered the most lethal to the environment.

    Missed the date. Why?

     

    • With several crises on the economic front and fears in the plastic industry due to the proposed ban, the government is not too keen on taking any rushed decision on a blanket ban. This has been for various reasons:

    1) Fear of Job losses

    • Experts and people related to the plastic industry feared severe job losses in the industry due to the proposed ban.
    • There are over 50,000 plastic manufacturing industrial units functional in the country currently, providing employment opportunities to 4 to 5 million people.
    • A blanket ban on single-use plastic could lead to closure of about 10,000 industrial units and over half a million people would be out of jobs.

    2) No definition of single-use plastic yet

    • The major bone of contention remains the fact that there is no central definition of what comprises single-use plastics, which may adversely affect any sort of ban.
    • The PM defined them as plastics which are used only once and then discarded.
    • At times, it is misunderstood to mean only polythene bags. For any ban to be successful, we need a clear definition of single-use.

    3) Poor response from states

    • The 2019 CPCB report remarked that states/UTs were not furnishing information regarding Plastic Waste Management Rules, 2016 in their jurisdiction.
    • This included PW generation records, creating state level advisory body, framing bylaws, marking and labelling of MPLs, plastic manufacturing/recycling units etc.
    • States/UTs were not taking concrete steps to take preventive and regulatory measures envisaged under the rules.

    4) No clarity on policy move

    • Stakeholders in the plastic industry have been also holding meetings with the government seeking clarity in its policy on single-use plastic.
    • Various stakeholders demand that the government should promptly come up with a clear cut policy towards implementation of plastic ban and then it should be carried out in a phased manner.
    • This will also help the industry in understanding its impact and then they might be able to accept it.

    Why is ban needed?

     

    1) Pollution

    • India generated 26,000 tonnes per day (TPD) of plastic waste in 2017-18, the latest year for which data is available, according to the Central Pollution Control Board.
    • Of that, 15,600 TPD, or 60 per cent , was recycled.
    • The rest ended up as litter on roads, in landfills or in streams. Uncollected plastic waste poses a huge threat to species on land and in water.

     2) Non-renewable and non-biodegradable

    • Unlike scrap metal that’s recycled almost entirely, about 90% of the plastic the world has produced so far has been discarded as waste.
    • This is resulting in global environmental and social damage of more than $2.2 trillion every year.

     3) Energy intensive

    • Production of plastic material is very energy intensive.
    • They require a lot of water for their production. Thus using plastic bags is not advisable.

    4) Threat to aquatic life

    • Being non-recyclable, plastic bags end up in the oceans. While they reach, they break up into tiny little pieces and are consumed by wildlife.
    • Thereby leading to health issues or even death. Many animals also get entangled or trapped in plastic bags.

    5) Health hazard

    • Toxic chemicals from plastic bags can damage the blood and tissues.
    • Frequent exposures can lead to cancers, birth defects, impaired immunity, hormone changes, endocrine disruption and other serious ailments.

     

    Phasing out SUPs. How?

     

    1) Baseline and inventory analysis

    • There is a need for a thorough analysis of environmental, social and economic impacts of SUPs.
    • Inventorization studies in order to estimate how much fraction of single use plastics is there in our plastic waste, how much of this fraction comprises packaging waste, cutlery items, carry bags, PET bottles, etc., are to be done.
    • These numbers shall help assess the scale of such waste and look for a clear alternative.
    • There needs to be an initiative at state level to push cities to inventorize their dry waste. Since the composition of our waste has changed drastically with more plastics, it is important that this be done.
    • Only then we can assess the extent of their impact before imposing bans. Such a study has not been done so far and has now become the need of the hour.

    2) Clearly defining of SUPs

    • For this ban to be successful, we need a clear definition of SUPs. Currently, different definitions are used by governments.
    • Single use simply means products that are used once and then discarded. This includes a huge amount of packaging waste, including water bottles and so a clear definition is critical.
    • Any plastic that is made from polymers of HDPE, LDPE, PET, PS, PP, EPS is single use plastics, according to the United Nations.
    • The definition in Australia is that single-use plastic includes shopping bags, cups, straws and packaging.
    • The IEEP’s and European Commission’s definition says single-use plastics can include any disposable plastic item designed to be used only once.
    • Therefore, specific definitions pertaining to the composition, uses and categories of single-use plastics should be framed.

    3) Categorization of plastics

    • There are three elementary steps for successfully banning plastic products. The government first needs to prepare a list of items that cannot be recycled.
    • It must then ascertain what available alternatives can be provided for them.
    • Only if these items are readily available should the ban be implemented. Otherwise, the industry must be provided a “transition period”.

    4) National Action Plan for phasing out SUPs

    • There is a need for a National Action Plan or guidelines that should focus to implement plastic ban in a phase-wise manner in terms of urgency.
    • This means products that have alternatives available should be phased out earlier than those that don’t have alternatives, simultaneously reinforcing R&D funding for different alternatives and eco-friendly products.
    • The phase-wise banning should be developed based on materials, recyclability, availability of alternatives and livelihood security to the informal sector.
    • Keeping this and current post-consumption patterns in mind, a framework indicating range of SUP products needs to be devised to assist the policy makers in ideating, planning and executing the phase-wise SUP ban.

    5) Strengthening waste management systems

    • Imposing a ban on SUPs is only a part and not the whole solution. However, better waste management systems with focus on segregation incentive models can help achieve long-term impacts.
    • If cities segregate waste into three fractions — wet, dry, and domestic hazardous waste — and if municipalities create infrastructure in terms of material recovery facilities or sorting stations, dry waste can be sorted into different fractions.
    • This then has value and a market and will not end up as litter. We need to source segregate.

    6) Recycling

    • Establishing and monitoring domestic recycling units in every state and Union territory, incentivising the recyclers in the unorganised sectors should be promoted.
    • There should be training of low-skilled recyclers, setting up effective grievance redressal mechanisms, life cycle and cost analysis of plastic alternatives should be formulated and explored by the legislative bodies.
    • This is to increase the recycling efficiency in the country and implement effective and sustainable solutions at every stage of banning single-use plastics.

    7) Effective EPR implementation

    • Extended Producer Responsibility (EPR) policy tools and its implementation is still lax in the country.
    • An effective EPR framework, therefore, should be formulated keeping into context the applicability of EPR for certain items like PET, PP or dairy industry.
    • However, EPR implementation for multi-layered plastic (MLP) can still be a constraint considering the vast unorganised industry and present waste management systems.
    • The roadmap can, therefore, let producers implement their EPR obligations utilising the flexibility of brand and geography neutrality.

    8) Discourage small pack MLP sachets

    • Lighter, portable and cost-effective nature of single serve sachets/pouches makes them a major environmental menace as it is one of the major sources of plastic waste and litter, as their collection is economically non-viable.
    • Hence, the production of small packs such as single-use pouches and sachets should be discouraged and a regulation be enforced.
    • Instead Polypropylene packaged items can be brought into the stream to cater to low-income groups and also have a high recyclability.

    9) Reducing plastic content in MLP

    • Ideal packaging materials were tailored by combining different materials with customised functionality to sufficiently protect sensitive food products and thus obtain extended shelf life.
    • Latest feasible techniques and technologies may be employed to cut down the use of multiple polymers/plastics.
    • More research in this area must be done. Use of single polymer/layer recyclable packaging materials should be encouraged.

    Getting started

     

    Making it people’s movement

    • Presently, consumer awareness about negative impacts of littering single-use plastics and available reuse systems and waste management options for all these products are still limited.
    • There is a lack of widespread awareness among citizens about the magnitude of harm caused by single-use plastic as was in the case for Swachhata.
    • Focus must be laid on educating people to take personal responsibility for plastic pollution by choosing to reject, reduce, reuse and recycle plastics.

    Using alternatives

    • Devising feasible alternatives for single-use plastic items and targeting consumers and retailers for better marketing is needed.
    • However, their availability and affordability remain a challenge.
    • Solutions: providing robust infrastructures, strengthening market, innovation and entrepreneurship, subsidy or incentives to consumers at domestic level.
    • For instance, cotton bags sourced from virgin cotton, kulhad cups baked in kilns have a higher environmental footprint than plastics.
    • In the present context, jute and upcycled cloth bags, bamboo and wooden cutlery, leaf-based plates, glass and metal containers etc. are some of the immediate alternatives available.

     

    Way Forward

     

    • With no plastic ban in effect, raising awareness, promoting eco-friendly alternatives and strengthening the recycling mechanism can allow India to handle the plastic problem.
    • While it is clear that a ban is not entirely a solution, the government must move quickly on measures to phase out and finally impose a plastic ban on problematic SUP items.
    • It is clear that we cannot lose the momentum. Thus a phased ban on single-use plastic would help.
    • Government should educate the public and trade bodies to achieve the benefits of the ban.
    • Since long term benefits of plastic bag ban use will benefit the economy and also save taxpayer money can lead to plastic bag cleanup.

     

     



    References:

    https://www.nationalgeographic.com/magazine/2018/06/plastic-planet-waste-pollution-trash-crisis/

    https://theprint.in/india/why-single-use-plastic-ban-missed-gandhi-jayanti-date/300105/

    https://www.bloomberg.com/news/articles/2019-09-30/modi-wants-to-take-away-india-s-plastic-bags-and-spoons

    https://www.civilsdaily.com/news/explained-phasing-out-single-use-plastics-prospects-and-challenges/

  • [Burning Issue] Recent IPCC reports

    About IPCC

    • IPCC  is a scientific government body under the UN established in 1988 by two UN organizations, the WMO and the UNEP and later endorsed by the United Nations General Assembly.
    • The IPCC produces reports that support the United Nations Framework Convention on Climate Change, which is the main international treaty on climate change.
    • IPCC reports cover the scientific, technical and socio-economic information relevant to understanding the scientific basis of risk of human-induced climate change, its potential impacts and options for adaptation and mitigation.
    • Membership of the IPCC is open to all members of the WMO and the UNEP.

    Context

    • With a series of reports, the Intergovernmental Panel on Climate Change (IPCC) has raised several flags related to climate change and calls for urgent action.
    • This is the first time that the IPCC, whose job it is to assess already-published scientific literature to update our knowledge of climate change science, has published such reports.
    • It is part of a series of special reports that IPCC is doing in the run-up to the sixth edition of its main report, blandly called the Assessment Reports that are due around 2022.

    First report: The 1.5℃ Goal

    • Global warming is likely to reach 1.5°C between 2030 and 2052 if it continues to increase at the current rate, said the IPCC report published in Seoul in Oct 2018.

     

     Looking beyond 2°C goal

    • In 2010, international negotiators adopted a goal of limiting warming to 2°C since pre-industrial times. It’s called the 2° goal.
    • In 2015, when the nations of the world agreed to the Paris climate agreement, they set dual goals — 2°C and a more demanding target of 1.5°C from pre-industrial times.
    • The 1.5° was at the urging of vulnerable countries that called 2°C a death sentence.
    • The world has already warmed 1°C since pre-industrial times, so the talk is really about the difference between another half-degree C from now.
    • There is no definitive way to limit global temperature rise to 1.5 above pre-industrial levels.

    What happens at 2°C that does not happen at 1.5°C?

    1. The IPCC report deals with this question in detail. But a number of scientific papers in recent times have projected what could be expected in the 1.5°C scenario.
    2. The studies have looked at the physical impact on the land and ocean, as well as at the socio-economic impact, like health, malnutrition, food security, and employment. Some examples:
    • 5°C could prevent around 3.3 million cases of dengue every year in Latin America and the Caribbean alone
    • an additional 150 million people could be at risk from malaria if the temperature was allowed to increase beyond 2°C
    • the world could have 25 million fewer undernourished people by the end of the century, if the 1.5°C goal was achieved
    • 350 million additional people could be exposed to deadly heatwaves if the warming increased to 2°C as compared to 1.5°C.
    • 5°C could prevent 153 million premature deaths due to air pollution by 2100, as compared to the 2°C scenario.
    • the world could be 3% wealthier by 2100 in a 1.5°C scenario compared to a 2°C scenario.
    • 5°C strategy could create double the number of jobs in the energy sector by 2050.
    • compared to the 1.5°C scenario, extreme weather events such as heavy rainfall and heatwaves are likely to become more severe and frequent, and freshwater supply could fall sharply, in a 2°C world.

    How to reach the 1.5 ℃ target?

    • As of now, the world is striving to prevent the temperature rise beyond 2 degrees Celsius, in accordance with the stated objective of the Paris Agreement of 2015.
    • To meet that target, the aim is to reduce greenhouse gases by only 20 percent, from 2010 levels, by the year 2030 and achieve a net-zero emission level by the year 2075.
    • Net-zero is achieved when the total emissions are balanced by the amount of absorption or removal of carbon dioxide through natural sinks or technological interventions.

    Only Pathway: Carbon Dioxide Removal (CDR)

    • IPCC has suggested four strategies or pathways to accomplish the 1.5 °C
    • The pathways account separately for contributions of fossil fuel and industry, Bioenergy with Carbon Capture and Storage (BECCS), and removals in the Agriculture, Forestry and Other Land Use (AFOLU).

    P1: Lower energy demand

    • A scenario in which social, business and technological innovations result in lower energy demand up to 2050 while living standards rise, especially in the global South.
    • A down-sized energy system enables the rapid decarbonization of energy supply.
    • Afforestation is the only CDR option considered; neither fossil fuels with CCS nor BECCS are used.

    P2: Sustainable development planning

    • A scenario with a broad focus on sustainability including energy intensity, human development, economic convergence, and international cooperation is needed.
    • It focuses on shifts towards sustainable and healthy consumption patterns, low-carbon technology innovation, and well-managed land systems with limited societal acceptability for BECCS.

    P3: Emission reduction through technological development

    • A middle-of-the-road scenario in which societal as well as technological development follows historical patterns.
    • Emissions reductions are mainly achieved by changing the way in which energy and products are produced, and to a lesser degree by reductions in demand.

    P4: Deployment of BECCS

    • A resource and energy-intensive scenario in which economic growth has led to widespread adoption of greenhouse-gas intensive lifestyles, including high demand for transportation fuels and livestock products.
    • Emissions reductions are mainly achieved through technological means, making strong use of CDR through the deployment of BECCS.

     

    Second report: Focus on the land-climate link

    • Land use and changes in land use have always been an integral part of the conversation on climate change. That is because land acts as both the source as well as a sink of carbon.
    • Activities like agriculture and cattle rearing, for example, are a major source of methane and nitrous oxide, both of which are hundreds of times more dangerous than carbon dioxide as a greenhouse gas.
    • At the same time, soil, trees, plantations, and forests absorb carbon dioxide for the natural process of photosynthesis, thus reducing the overall carbon dioxide content in the atmosphere.
    • This is the reason why large scale land use changes, like deforestation or urbanization, or even a change in cropping pattern, have a direct impact on the overall emissions of greenhouse gases.
    • The report talks about the contribution of land-related activities to global warming — how the different uses of land, like agriculture, industry, forestry, cattle-rearing, and urbanization, was affecting emissions of greenhouse gases.

    Food and its carbon footprint

    • The global food system currently accounts for the majority of emissions from the ‘agriculture, forestry and land use’ (AFOLU) sector.
    • If we include energy emissions from storage, transport, packaging, processing, retail, preparation, and waste, food accounts for 22-35 percent of all anthropogenic emissions.
    • The FAO estimates that food waste accounted for 4.4 gigatonnes and 8 percent of CO2 emissions in 2011, giving lie to the notion that carbon consumption is a driver of human welfare.

    Agricultural emissions

    • The IPCC is clear about the excesses of ‘modern’ agriculture.
    • This is most directly reflected in emissions of nitrous oxide, a greenhouse gas with nearly 300 times the warming potential of carbon dioxide.
    • Nitrous oxide emissions from land have more than doubled since 1961, with cropland soils emitting around three megatonnes each year.
    • The IPCC attributes this to “inefficient nitrogen application (over-application or poorly synchronized with crop demand timings) to soils”.
    • The solution lies in revolutionizing farm-level management, a challenge in developing countries with small land-holdings and limited capital to invest.

    Desertification

    • The United Nations has dedicated this decade to combating desertification, yet the climate benefits of this push are poorly understood.
    • By 2050, between 170 to 270 million people living in drylands will be vulnerable to water stress, drought intensity, and habitat degradation.
    • The report emphasizes, though that “preventing desertification is preferable to attempting to restore degraded land”. That involves preserving the topsoil and soil quality in currently cropped land.

     

    Third report: On Ocean and Cryosphere

    • The latest report, on Ocean and Cryosphere, is the last in a series of three that the IPCC had been asked to produce to assess the impacts of climate change on specific themes.
    • On May 11 this year, the global concentration of carbon dioxide in the atmosphere was measured to have crossed the 415 parts per million (ppm) marks for the first time ever.

    Why oceans?

    • The climate change impact mitigation and adaptation portfolio for the oceans and cryosphere include energy, carbon storage, pollution reduction, coastal vegetation, open ocean production, and ocean acidification, etc.
    • Over the 21st century, the ocean is projected to transition to unprecedented conditions with increased temperatures, further ocean acidification, marine heatwaves and more frequent extreme El Niño and La Niña events.
    • Land and ocean together absorb nearly 50 percent of greenhouse gases emitted every year through natural processes in the carbon cycle.
    • The importance of land, or ocean, as a carbon sink, thus cannot be overstated in the global fight against climate change.

    Highlights of the report

    • The new ocean report noted that the global mean sea level had risen by 16 cm between 1902 and 2015 and that the rate of increase had doubled in the last decade.
    • The sea levels were rising because of the thermal expansion of ocean waters due to rising temperatures as well as due to the melting of glaciers and polar ice.
    • It says that between 2006 and 2015, the Greenland ice sheet lost ice-mass at an average rate of 278 billion tonnes every year, while the Antarctic ice sheet lost a mass of 155 billion tonnes on an average every year.
    • Snow over areas outside of these two regions, like the glaciers in the Himalayas, together lost an average of 220 billion tonnes of ice every year.

    Why so many reports are being published?

    • It is not unusual to see the conversation around climate change picking up during this time of the year.
    • There are several reasons for the sudden rise in attention to the climate debate this year.

    “Now or never” is nearing

    • Last year’s IPCC report on 1.5°C mentioned that humanity had barely 12 years to keep alive the hopes of restricting global temperature rise to within 1.5°C from pre-industrial times.
    • This was contingent not just on immediate aggressive action from countries, but also on the development of technologies that could remove carbon dioxide from the atmosphere.
    • This report has instilled a new sense of urgency in climate conversations.

    Transition year ahead

    • Next year, 2020, happens to be the transition year for the international climate regime, from the Kyoto Protocol to the Paris Agreement.
    • The Kyoto regime has been a major underachiever in reducing greenhouse gas emissions.
    • The Paris Agreement, in so far as it makes it mandatory for every country to initiate actions and not just rich and developed nations as under the Kyoto Protocol, is expected to deliver much better results.

    NDC’s were insufficient

    • As required by the Paris Agreement, every country had already finalized and submitted a climate action plan, called NDCs, in 2015.
    • The assessment of several NDCs has concluded that these actions were not adequate to achieve the global goal of keeping temperature rise within 2°C from pre-industrial times.
    • But the NDCs have to be updated every five years, and the countries are scheduled to do it next year.

    Raising curiosities

    • Those concerned about climate change are hoping that in the light of these reports, and growing fresh evidence, countries will show greater ambition when they update their NDCs next year.
    • The Paris Agreement also provides for a review of all climate actions in 2023 to assess whether the individual actions of countries were adding up to what was required to achieve the goal.
    • Countries can then decide what more needed to be done.

    Way Forward

    • Limiting warming to the lower goal is not impossible but will require unprecedented changes.
    • However, it is being argued now that 2023 might be too late for such an exercise.
    • Therefore, momentum is being built to nudge the countries to announce more ambitious actions before that.
    • The move to get countries to commit to a net-zero target by 2050 is a part of these efforts.
    • It is up to governments to decide whether those unprecedented changes are acted upon.

     



    References

    https://www.downtoearth.org.in/blog/forests/planting-forests-no-panacea-for-the-climate-crisis-ipcc-66093

    https://indianexpress.com/article/opinion/editorials/the-1-5c-challenge-intergovernmental-panel-on-climate-change-report-5392710/

    https://indianexpress.com/article/explained/explained-snippets-for-limiting-global-warming-to-1-5c-the-four-projected-pathways-5392811/

    https://www.downtoearth.org.in/news/climate-change/poor-agri-dietary-practices-have-intensified-climate-change-ipcc-66086

    https://indianexpress.com/article/explained/why-latest-ipcc-report-matters-climate-change-report-6035008/

  • [Burning Issue] Indian Diaspora and the recent engagement


    Context

    • Indian Diaspora is a generic term used for addressing people who have migrated from the territories that are currently within the borders of India.
    • From Google CEO to Nobel laureate scientist Har Gobind Khorana, the list of Indians abroad and their contribution to the world goes endlessly.
    • According to the UN, in 2019 Indians comprised the world’s largest migrant diaspora populations in the world with over 17.5 million Indians (6.4% of global migrants) out of total 272 million migrants worldwide
    • The recent gathering of the Indian-American community in Houston has proved to be a special moment in India’s diaspora diplomacy.

    Historical perspective

    • The incorporation of the British Empire in India can be linked to the existence of modern Indian Diaspora all over the world.
    • Dating back to the nineteenth century, Indian indentured labor was taken over to the British colonies in different parts of the world.
    • In the post World War II period, most of the Indian labor and professionals got scattered and it was a worldwide phenomenon.
    • The reconstruction of Europe after the war was provided by Indians and other South Asians, particularly in the United Kingdom and Netherlands.
    • Most recently, Indians have made their presence visibly felt in professions in countries like the United States, Canada, and Australia.

    Major sections of Indian Diaspora

     

    a. Indians in the Gulf

    • Around 8.5 million Indians live and work in the Gulf countries, one of the largest concentrations of migrants in the world.
    • The geographical and historical proximity of the Arabian Peninsula to India makes it a convenient destination for Indians.
    • Today migrants from across India are working and living in the Gulf countries (Saudi Arabia, UAE, Qatar, Bahrain, Oman, and Kuwait).

    b. Indians in USA

    • The US, the world’s fourth-largest country with four different time zones — saw a 7 percent increase in arrivals from India in July 2019, and that is bound to increase.
    • In recent decades the population has grown substantially, with 2.4 million Indian immigrants resident in the United States as of 2015.
    • This makes the foreign-born from India the second-largest immigrant group in the US after Mexicans.

    Categorizing Indian’s abroad

     

    • Overseas Indians, officially known as Non-resident Indians (NRIs) or Persons of Indian Origin (PIOs), are people of Indian birth, descent or origin who live outside the Republic of India.
    • Overseas Indians are various individuals or ethnic groups associated with India, usually through ancestry, ethnicity, nationality, citizenship or other affiliation and live abroad overseas.
    • According to a Ministry of External Affairs report, there were 30,995,729 NRIs and PIOs residing outside India as of December 2018.

    1. Non-Resident Indian (NRI)

    • Strictly asserting non-resident refers only to the tax status of a person who, as per section 6 of the Income-tax Act of 1961, has not resided in India for a specified period for the purposes of the Act.
    • The rates of income tax are different for persons who are “resident in India” and for NRIs.
    • For the purposes of the IT Act, “residence in India” requires stay in India of at least 182 days in a financial year or 365 days spread out over four consecutive years and at least 60 days in that year.
    • According to the act, any Indian citizen who does not meet the criteria as a “resident of India” is a non-resident of India and is treated as NRI for paying income tax.

    2. Person of Indian Origin (PIO)

    Person of Indian Origin (PIO) means a foreign citizen (except a national of Pakistan, Afghanistan, Bangladesh, China, Iran, Bhutan, Sri Lanka and/or Nepal), who:

    • at any time held an Indian passport OR
    • either of their parents/grandparents/great-grandparents were born and permanently resident in India as defined in GoI Act, 1935 and other territories that became part of India thereafter provided neither was at any time a citizen of any of the aforesaid countries OR
    • is a spouse of a citizen of India or a PIO.

    3. Overseas Citizenship of India (OCI)

    • After multiple efforts by leaders across the Indian political spectrum, a pseudo-citizenship scheme was established, the “Overseas Citizenship of India”, commonly referred to as the OCI card.
    • The Constitution of India does not permit full dual citizenship.
    • The OCI card is effectively a long-term visa, with restrictions on voting rights and government jobs.
    • An OCI is however entitled to some benefits such as a multiple-entry, multi-purpose life-long visa to visit India.
    • They are exempted from police reporting for any length of stay in the country.
    • They are also granted all rights in parity with NRIs except, the right to acquisition of agricultural or plantation properties.

    Significance of Indian diaspora

     

    I. Contribution in freedom struggle

    • Mahatma Gandhi’s struggle for ending institutionalized discrimination against Indians in South Africa became an inspiring legend for enduring sentimentalism about the diaspora in modern India.
    • The diaspora also became a vehicle for promoting the cause of Indian independence among the political elites of major countries.
    • As the independence movement gathered momentum at home, it began to influence many Indian communities abroad.

    II. Diaspora as Cultural extension

    • The act of migration is not just limited to geographical limits; rather it is a cultural extension.
    • Let us take the example of the Sikh community. The Sikhs are one of the largest migrants from India to the UK, Canada and many other countries.
    • They have very well maintained their culture and ethnic existence for decades.

    III. Remittances

    • A remittance is a transfer of money by a foreign worker to an individual in his or her home country.
    • Money sent home by migrants is one of the largest financial inflows to developing countries.
    • A/c to the World Bank, India retained its position as the world’s top recipient of remittances with its diaspora sending a whopping $79 billion back home in 2018.
    • Without these remittances, India’s balance of payment position would have looked worse.
    • India is followed by China (USD 67 billion), Mexico (USD 36 billion), the Philippines (USD 34 billion), and Egypt (USD 29 billion).

    IV. Diaspora as ‘Agents of change’

    • Diaspora acts as ‘agents of change’ facilitating and enhancing investment, accelerating industrial development, and boosting international trade and tourism.
    • Diaspora’s motives to invest in India are long-lasting as many of them wish to establish a long-term base in India.
    • Another tangible long-term advantage in nurturing ties with an active Diaspora is an accelerated technological sector.

    V. Technological development and entrepreneurship

    • Another tangible long-term advantage in nurturing ties with an active diaspora is an accelerated technological sector and increased socio-economic development.
    • Some examples to illustrate this phenomenon are Bengaluru, Gurugram and Hyderabad as thriving IT hubs that not only house multinational companies (MNCs) but also multiple Indian start-ups.
    • The government can further tap this transnational entrepreneurship, including support for entrepreneurs and small businesses in India in the form of knowledge transfers and finances from the diaspora.

    VI. Enhancing India’s global say

    • India’s permanent membership to the UNSC can become a reality with support from the diaspora.
    • According to Article 108 of the Charter, for a UN reform, an affirmative vote from two-thirds of its members and support from the five permanent members is required.
    • India has demonstrated its diplomatic influence with the reappointment of Justice Dalveer Bhandari to the International Court of Justice in November 2017, when it secured two-thirds of the votes at the UN.
    • Apart from political pressures and ministerial and diplomatic level lobbying, India can leverage its diaspora to influence states such as Canada and Mexico to support India’s membership

    Most Importantly,

    VII. Diaspora diplomacy

    • A less tangible but important advantage in having a large immigrant group is “diaspora diplomacy” .
    • Historically, India has benefitted from its diaspora.
    • Two instances stand out: lobbying for the US-India Civilian Nuclear Agreement Bill in 2008 and their remittance inflow.
    • The recent engagement of PM Modi in Houston is a continuation of his extraordinary political investment in engaging the Indian diaspora.
    • It is based on the recognition that a large and very successful diaspora has widened India’s footprint and can contribute to the achievement of India’s domestic and international goals.

    India’s engagement with Diaspora: A policy-wise perspective

    • Many of the themes of India’s contemporary diaspora policy had their origins in the approach of the Indian national movement before independence.
    • Concern for the treatment of Indian indentured labor around the world became an important part of the rise of the national movement in the early 20th century and the formation of its international consciousness.
    • The nationalist backlash against the Indian communities in Africa and Asia in the 1950s and 1960s saw Delhi consciously distance itself from the diasporic communities.
    • As India turned inwards, Delhi also took a dim view of the “brain drain” as many well-trained Indians began to look for opportunities elsewhere.
    • It was only in the late 1980s that Delhi began to rethink its approach to the diaspora.

    Change in recent years

    • PM Rajiv Gandhi was the first to appreciate the potential role diaspora could play in advancing national development and improving India’s ties with the US.
    • As he launched the reform era, P V Narasimha Rao sought investments from the diaspora.

    Vajpayee Era

    • The NDA government that ruled India between 1998 and 2004 had additional ideological and cultural reasons to emphasize the importance of the diaspora.
    • Atal Bihari Vajpayee saw the long-term strategic value of the engagement when he called for a ‘partnership among all children of Mother India so that our country can emerge as a major global player’.
    • He constituted a committee in 2000 under the leadership of L.M. Singhvi, an MP, to suggest a variety of policy initiatives to strengthen the bonds with the overseas Indian communities.
    • The committee’s recommendations led to the initiation of what we now know as Pravasi Bharatiya Divas and the formation of a separate Ministry for Overseas Indians.
    • Other suggestions covered important cultural, educational and social subjects forming the basis of some innovative initiatives like the Know India Programme (KIP) and Study India Programme (SIP) .
    • These have engaged the youth living abroad and the Tracing the Roots Scheme, through which some Indians have been able to trace their roots in India.

    The Modi era

    • With coming to power, PM Modi has discarded the old attitude of reproaching the diaspora, especially that in the West, for abandoning their responsibility to their motherland by leaving its shores.
    • Instead, he has affirmed that India is proud of the diaspora’s achievements around the world.
    • He exhorted them to actively contribute to the acceleration of India’s economic and social development.
    • Modi has also recognized that the connection with the diaspora could be leveraged to influence the political classes of the host nations.
    • Relaxing the visa norms for the overseas communities, improving physical connectivity and the ease of doing business in India have been the policy consequences of Modi’s more intensive outreach to the diaspora.

    Various policy initiatives  

     

    Education

    • NRI seats are reserved in all the medical, engineering and other professional colleges.
    • Other youth-centric outreach programs include scholarships to pursue undergraduate courses in recognized UGC universities in India, as well as Bharat Ko Jano online quizzes.

    Voting rights

    • The Representation of the People (Amendment) Bill 2017 the provision would help non-resident Indians (NRIs) to participate in the electoral process.
    • It extends the facility of ‘proxy voting’ to overseas Indians, on the lines of service voters.

    Know India Program (KIP)

    • It is a flagship initiative for Diaspora engagement which familiarizes Indian-origin youth (18-30 years) with their Indian roots and contemporary India has been refashioned.

    Minimum Referral Wages (MRW).

    • A number of policies were announced keeping in mind the protection of welfare and interest of Indians abroad; for example, the 2014 Minimum Referral Wages (MRW).

    Easing the passport facility

    • The last three years saw the launch of Head Post Offices as passport centers enabling thousands more to apply for a passport.

    Pravasi Bharatiya Divas

    • In the many Pravasi Bharatiya Divas (PBD) that have been organized since he became PM, Modi has been keen on wooing the diaspora.

     

    Engagement comes with responsibilities

     

    • Indian communities abroad are not merely ‘strategic assets’ that Delhi can leverage at will. They also bring significant responsibilities.
    • The diaspora expects that India will stand by them in their hour of need.
    • Indian citizens abroad, who have traveled at their own risk, demand greater protection and support from Delhi when they are caught in difficult situations.
    • On several occasions in recent years, Delhi has had to spend millions of dollars on the protection and evacuation of Indian citizens from crisis zones.
    • These crises have become recurrent thanks to the profound turbulence in the Middle East that is home to one of the largest concentrations of Indians abroad.

    Challenges faced by Diaspora

     

    I. Racial antagonism

    • Rising incidence of hate speech and crimes against Indians by the locals due to racism, communalism emboldened by coming of nationalist and ultra-nationalist governments to power in many countries.

    Protectionism

    • Increasing anti-globalization: Fear of losing jobs and educational opportunities to outsiders has resulted in stricter visa rules in many countries including the USA, Australia, etc.

    Terrorism

    • Sectarian crisis, increasing terrorist activities and war in the Middle East countries (Yemen, Oman, Libya, Syria etc) leave our diaspora vulnerable to attacks.

    Supporting Indians abroad

     

    • India needs both additional resources as well as better systems to deal with the recurring challenges of supporting citizens abroad.

    The resources front

    • There is no escaping the fact that India needs more officers and staff on the ground in its embassies abroad and at headquarters for dealing with the expanding consular work.
    • It makes sense, therefore, to set up a well-staffed permanent mechanism, say a center for consular protection, with representation of all stakeholders under the aegis of the MEA.
    • Three important functions present themselves to this new mechanism. The first relates to information collection and dissemination.
    • The government needs more comprehensive and reliable data on the movement of Indians across national borders.
    • Effective tracking is critical for understanding the broad patterns and changes within them over time, identifying potential problems and offering better services.
    • Delhi must ensure that Indian workers get mandatory briefings on local conditions and risks in their specific destinations as well as their rights vis-a-vis the Indian government.

    Ensuring security abroad

    • The second relates to the codification of India’s rich experience in evacuating Indian citizens abroad.
    • So far there have been 26 Indian evacuation operations between 1947 and 2003.
    • But there has been no real effort within the government to study this experience, draw appropriate lessons and build a more secure foundation for protecting Indian citizens abroad.
    • The new mechanism can draft and circulate to all key departments at the Centre and in relevant states, comprehensive reports on how each crisis was dealt with and the lessons learned.

    Are we overtly relying on our Diaspora?

     

    • PM Modi’s recent visit to the US has showcased some of the emerging problems with India’s diaspora diplomacy.

    I. India’s domestic political fault-lines

    • As in India, so in the US, many liberal sections of the diaspora have become sharply critical of the Modi government.
    • Together, they are having an impact on the leadership of the diaspora, including some US Congress members of Indian origin, as well as the general public discourse within the US on India.

    II. Lack of mainstreaming and consolidation

    • Support of the diaspora is neither automatic nor continuous, and their interests need not be India’s priorities.
    • For example, the Indian community in the US was not vocal enough in criticizing Trump’s proposal to restrict the H-1B visa program that has benefited many Indians.
    • Another challenge is that remittances may not always be used for beneficial purposes.
    • For instance, India faced problems due to foreign funding for extremist movements like the Khalistan movement.
    • Moreover, the diaspora is unfair in expecting India to stand by them at all times of need. This contradictory attitude of the diaspora and the Indian government will need to be worked out.

    III. Getting drawn too deep into the domestic politics of the US

    • The Houston event reflects the growing weight and prestige of the Indian community in the US as well as Trump’s own electoral calculus for the elections next year.
    • While the Indian-American community tends to lean towards the Democratic Party, Trump might be betting that the celebration of the India-US partnership with Modi might let him make a dent in the community.

    IV. Fear of Political Polarization

    • While addressing the diaspora, India should be careful about not crossing some red lines.
    • China, for example, is getting into trouble in many countries for turning its relationship with the diaspora into an active intervention in the domestic politics of the host nation.
    • Given the current polarization of US domestic politics and the profound hostility towards Trump among the Democrats, Delhi has to be careful not to be seen as tilting in favor of one side.

    V. Diaspora as a threat

    • It must be remembered that having a strong diaspora does not always translate to benefits for the home country.
    • India has had problems with negative campaigning and foreign funding, coming from abroad, for separatist movements like the Khalistan movement.
    • In the backdrop of Canadian PM Justin Trudeau’s visit to India in February 2018, multiple media outlets carried articles on the strongest support for the Khalistan movement.
    • The Indian government, while continuing to engage with the diaspora as a part of its foreign policy, will have to be cautious of these sensitive issues that may impact the security of the state.

    Way Forward

     

    • From being a largely inconsequential country after Independence, in part due to its active Non-Alignment Policy, India is today seen as a strong nation headed by a strong leader.
    • India has enjoyed being viewed more favorably by the world since 2014, and the diaspora can further these perceptions.
    • As much of India’s foreign policy aims to translate partnerships to benefits for key projects like Swachh Bharat, Clean Ganga, Make In India, Digital India, and Skill India, the diaspora has plenty of scope to contribute.
    • The diaspora can step up and act as Indian ‘ambassadors’, as it is insufficient and ineffective for a country or its missions abroad to rely only on press releases to change public opinion.
    • The diaspora can provide the requisite strategic impulse, which makes it all the more important to unlock their potential.
    • While they certainly do not determine policy, they can effectively shape it and act as “bridge-builders” between their home and adopted countries.
    • The present government is right in their focus on the diaspora as they are a strategic asset to India.

     

     



     

    References:

    https://www.orfonline.org/research/the-diaspora-and-indias-growth-story/

    https://archive.india.gov.in/overseas/diaspora/nri.php

    https://www.nriol.com/indiandiaspora/

    https://www.livemint.com/politics/news/the-rise-of-the-nri-the-influential-non-voter-1551311249773.html

    https://indianexpress.com/article/opinion/columns/the-howdy-moment-narendra-modi-donald-trump-india-us-6014808/

  • [Burning Issue] Corporate Tax Reduction


    Context

    • Finance Ministry has recently announced a reduction in the base corporate tax rate to 22% from 30% as part of stimulus measures to reverse slowing economic growth.
    • The effective tax rate for domestic corporates, inclusive of surcharges, will fall from 34.94% to 25.17% if they stop availing any other tax sops.
    • For new manufacturing firms set up after October 1, 2019 and commencing operations by March 31, 2023, the effective tax rate will fall from 29.1% to 17%.

    Corporate Tax: Background

    • Indian taxation system is divided into two types: One is Direct Taxes and other is Indirect Taxes.
    • Talking about direct taxes, it is levied on the income that different types of business entities earn in a financial year.
    • There are different types of taxpayers registered with Income tax department and they pay taxes at different rates.
    • An individual and a company being a taxpayer are not taxed at the same rate. Therefore, Direct Taxes are again subdivided as:

    Income Tax

    • This tax is paid by the taxpayers other than companies registered under company law in India on the income earned by them.
    • They are taxed on the basis of slabs at different rates.

    Corporate Tax

    • This tax is paid by the companies registered under company law in India on the net profit that it makes from businesses.
    • It is taxed at a specific rate as prescribed by the income tax act subject to the changes in the rates every year by the IT department.

    Corporate Tax in India

    • Domestic as well as foreign companies are liable to pay corporate tax under the Income-tax Act.
    • While a domestic company is taxed on its universal income, a foreign company is only taxed on the income earned within India i.e. is being accrued or received in India.
    • For the purpose of calculation of taxes under Income tax act, the types of companies can be defined as under:
    1. Domestic Company is one which is registered under the Companies Act of India and also includes the company registered in the foreign countries having control and management wholly situated in India. A domestic company includes private as well as public companies.
    2. Foreign Company is one which is not registered under the companies act of India and has control & management located outside India.

    Why has the government slashed Corporate Tax?

    • The corporate tax cut is part of a series of steps taken by the government to tackle the slowdown in economic growth, which has dropped for five consecutive quarters to 5% in the June quarter.
    • The most immediate reason behind the tax cut may be the displeasure that various corporate houses have shown against the government’s policies.
    • Many investors, for instance, were spooked by the additional taxes on them that were announced by the government during the budget in July and began pulling money out of the country.
    • The government hopes that the new, lower tax rates will attract more investments into the country and help revive the domestic manufacturing sector which has seen lackluster growth.

    Why Corporate Tax?

    • The corporate tax rate is a major determinant of how investors allocate capital across various economies.
    • So there is constant pressure on governments across the world to offer the lowest tax rates in order to attract investors.
    • Tax cuts, by putting more money in the hands of the private sector, can offer people more incentive to produce and contribute to the economy.

    Impact of the rate cut

    • The present cut in taxes can make India more competitive on the global stage by making Indian corporate tax rates comparable to that of rates in East Asia.
    • The tax cut, however, is expected to cause a yearly revenue loss of ₹1.45 lakh crore to the government which is struggling to meet its fiscal deficit target.
    • At the same time, if it manages to sufficiently revive the economy, the present tax cut can help boost tax collections and compensate for the loss of revenue.

    I. Relief to big companies

    • Big companies got a relief of close to 10 percentage points in the effective tax rate including cess and surcharge.

    II. Enhanced competitiveness

    • India was earlier at disadvantage because of a couple of factors and on top of it was the high corporate tax rate.
    • After this cut, base corporate tax rate in India has become competitive and should help boost investment.
    • This reduction was a long-pending demand of Indian firms. India is likely to attract investors looking to move out of China.

    III. Enhanced EoDB

    • Singapore with 17 per cent tax rate, and Vietnam, Thailand, Cambodia and Taiwan with 20 per cent base tax rates are the only countries offering lower rates than India
    • India is now much better than China in terms of rate, transparency, and tax administration so companies can now look at India for setting up new units.

    Criticisms of the move

    • Some see the present tax cut simply as a concession to corporate houses rather than as a structural reform that could boost the wider economy.
    • They believe that the current economic slowdown is due to the problem of insufficient demand which cannot be addressed just through tax cuts and instead advocate greater government spending to boost the economy.
    • Others, however, argue that lackluster demand faced by sectors like automobiles is merely a symptom of supply-side shocks such as the GST that have affected various businesses and caused job losses.
    • If so, tax cuts and other supply-side reforms can indeed help the economy recover from its slump.
    • Towards deficit

    • The lower tax collection could affect the government’s fiscal glide path.
    • With a minor blip in 2016-17, combined fiscal deficit of Centre and states was nearing the 6 per cent of GDP target.
    • A hole of 0.7 per cent of GDP due to tax cuts could compel them to borrow more, and disturb the bond market.

    Way Ahead

    • Investor confidence in the past, it is worth noting, has been affected by retrospective changes to the law made by governments in the past.
    • The government will need to enact along with these tax cuts other structural reforms that reduce entry barriers in the economy and make the marketplace more competitive.
    • The government could, for instance, extend the tax cuts to smaller businesses.
    • The benefits of the present tax cut will also depend on whether the government sticks to its promises in the long run.

     

     



    References

    https://cleartax.in/s/corporate-tax

    https://economictimes.indiatimes.com/definition/corporation-tax

    https://www.thehindu.com/business/Economy/the-hindu-explains-what-corporate-tax-cut-means-for-the-indian-economy/article29470498.ece

    https://www.bloombergquint.com/business/corporate-tax-cuts-assessing-the-multiplier-impact-on-economic-growth

    https://timesofindia.indiatimes.com/business/india-business/corporate-tax-cut-makes-india-an-investment-destination-to-attract-foreign-firms-to-set-up-units-finance-minister/articleshow/71246730.cms

    https://www.livemint.com/opinion/columns/opinion-the-fm-should-extend-the-tax-nudge-to-personal-income-tax-too-1568982792517.html

  • [Burning Issue] India’s Space Programme


    Introduction

    • Modern space research in India is traced to the 1920s, when scientist S. K. Mitra conducted a series of experiments leading to the sounding of the ionosphere by applying ground-based radio methods in Kolkata.
    • Later, Indian scientists like C.V. Raman and Meghnad Saha contributed to scientific principles applicable in space sciences.
    • However, it was the period after 1945 that saw important developments being made in coordinated space research in India.
    • Organized space research in India was spearheaded by two scientists: Vikram Sarabhai—founder of the Physical Research Laboratory at Ahmedabad—and Homi Bhabha, who established the Tata Institute of Fundamental Research in 1945.

    Vision

    • The Indian space program is driven by the vision of Vikram Sarabhai, considered the father of the Indian space program.
    • Throughout the years, ISRO has upheld its mission of bringing space to the service of the common man, to the service of the Nation.
    • In the process, it has become one of the six largest space agencies in the world.

    Making of ISRO

    • India’s space program began with a vision to harness space technology for national development while pursuing space science research and planetary exploration
    • In this view, the Indian National Committee for Space Research (INCOSPAR) was established in the tenure of PM Nehru under the Department of Atomic Energy (DAE) in 1962.
    • INCOSPAR grew and became ISRO in 1969, also under the DAE. This was done keeping in view the urge of scientist Vikram Sarabhai recognizing the need in space research.
    • In 1972, GoI set up a Space Commission and the Department of Space (DOS) bringing ISRO under the DOS.
    • The establishment of ISRO thus institutionalized space research activities in India. It is managed by the DOS, which reports to the PM of India.

    Applications of India’s space asset

    India’s space mission can be broadly categorized into the following categories:

    1. Launch vehicle fleet like PSLV, GSLV etc,
    2. Satellite programs ex. INSAT,
    3. Satellite Navigation program ex. IRNSSS and NAVIC
    4. Extraterrestrial exploration like Chandrayaan, Mars Orbiter Mission
    5. Human Spaceflight Programme viz. Gaganyaan

    Telecommunication

    • India uses its satellite communication network – one of the largest in the world – for applications such as land management, water resources management, natural disaster forecasting, radio networking, weather forecasting, etc.
    • Business, administrative services, and schemes such as the National Informatics Centre (NIC) are direct beneficiaries of applied satellite technology

    Military

    • Integrated Space Cell, under the Integrated Defence Staff of the Ministry of Defence, has been set up to utilize more effectively the country’s space-based assets for military purposes and to look into threats to these assets.
    • This command leverages space technology including satellites.

    Telemedicine

    • ISRO has applied its technology for telemedicine, directly connecting patients in rural areas to medical professionals in urban locations via satellites.
    • Since high-quality healthcare is not universally available in some of the remote areas of India, the patients in remote areas are diagnosed and analyzed by doctors in urban centers in real-time via video conferencing.

    Biodiversity Information System

    • ISRO has also helped implement India’s Biodiversity Information System, completed in October 2002.
    • Based on intensive field sampling and mapping using satellite remote sensing and geospatial modeling tools, maps have been made of vegetation cover on a 1: 250,000 scale.

    Significant feats

    Disaster Management Support (DMS)

    • ISRO’s technologies and applications have always proved useful during natural calamities.
    • In 2016, ISRO’s support on this front was significant during the Uttarakhand Forest Fires and floods in the north-eastern states of Manipur and Assam.

    Reusable Launch Vehicle – Technology Demonstrator (RLV-TD)

    • RLV-TD was successfully flight-tested on May 23, 2016.
    • Critical technologies such as reusable thermal protection system, re-entry mission management, guidance & control along with autonomous navigation were tested during the flight.

    Launch of Cartosat series

    • On June 22, 2016, ISRO put into orbit, India’s Cartosat (Cartosat-2C) earth observation satellite along with 19 other satellites using Polar Satellite Launch Vehicle (PSLV-C34) in a single mission.
    • Cartosat series of satellites will be used for various strategic and civilian applications. It includes Geographical Information System (GIS), Land Information System (LIS), utility management and precision studies.
    • The satellite which has been called ‘India’s eyes in the sky’ by experts due to its high surveillance and monitoring capabilities will assist the other military satellites in the Cartosat series.

    104 satellites launch

    • India created history by successfully launching 104 satellites on a single mission, overtaking the previous record of 37 satellites launched by Russia in 2014.
    • PSLV-C37 successfully carried and deployed a record of 104 satellites in sun-synchronous orbits.

    Towards Scramjet Engine Technology

    • On August 28, 2016, ISRO successfully conducted its first experimental mission of the Scramjet Engine at SDSRC, Sriharikota.
    • The flight testing of the Scramjet Engine made India the fourth country to demonstrate such capabilities.
    • The technology is expected to radically change the future space transportation systems by ISRO.
    • A fully functional Scramjet Engine is expected to reduce the launch costs by half and minimize the chance of engine failure.

    Important missions

    I. Mars Orbiter Mission (MOM)

    • The Mars Orbiter Mission (MOM) – launched on November 05, 2013 and successfully inserted into Mars orbit on September 24, 2014, has various achievements to its credit.
    • It is the first interplanetary mission realized by India and the first Indian spacecraft to incorporate full-scale onboard autonomy to overcome the long distances and the communication gaps due to non-visibility periods.
    • Marking India’s first venture into the interplanetary space, MOM will explore and observe Mars surface features, morphology, mineralogy and the Martian atmosphere.
    • Further, a specific search for methane in the Martian atmosphere will provide information about the possibility or the past existence of life on the planet.

    II. Chandrayaan Mission

    • Chandrayaan Mission-I in 2008 – discovered the presence of water on the surface of the Moon and turned a new chapter in the world’s understanding of Moon.
    • Chandrayaan-2 which consisted of an Orbiter, Lander and Rover, was all equipped with scientific instruments to study the moon.
    • However, a part of the mission failed as the Vikram lander crash-landed on the lunar surface.

    III. Solar Mission

    • Aditya-L1 is India’s first dedicated scientific mission to study the sun.
    • It is meant to observe only the solar corona- the outer layers of the Sun, extending to thousands of km above the disc (photosphere).

    IV. Gaganyaan Mission

    • The human spaceflight program will provide a unique micro-gravity platform in space for conducting experiments and testbed for future technologies.
    • The program is expected to give impetus to economic activities within the country in terms of employment generation, human resource development, and enhanced industrial capabilities.
    • Human Spaceflight capability will enable India to participate as a collaborating partner in future Global space exploration initiatives with long term national benefits.

    Developments so far

    • ISRO has completed the development of launch vehicle GSLV Mk-III which has the necessary payload capability to launch a 3-member crew module in low earth orbit.
    • It has also tested the crew escape system which is an essential technology for human space flight.
    • Elements of the life support system and Space suit also have been realized and tested.
    • In addition, the orbital & re-entry mission and recovery operations have been flight demonstrated in Space Capsule Re-entry experiment (SRE) mission.

    VI. Building own Space station

    • India plans to build a space station as a follow-up programme of the Gaganyaan mission.
    • ISRO chairman K. Sivan has said that India will not join the International Space Station program and will instead build a 20-tonne space station on its own.

    Criticisms of Space Programmes

    • For long, India is known to be making investments in the space arena for social, scientific and security purposes. However many fundamentalists see investment in space as a waste of money.
    • All previous missions of ISRO are about race for planetary resources. Unfortunately, it has not planned for any missions to asteroids, an ideal bed for mineral mining.
    • After Chandrayaan 2 failure there is a danger that future ambitious missions could also end up only as a ‘feel-good program’ with Gaganyaan coming ahead.

    A wise investment

    • Ironically, one of India’s current challenges is the trickling down effect of investments in technology by the ISRO.
    • Many people myopic vision questioned the relevance of space activities in a newly independent nation which was finding it difficult to feed its population.
    • Any space exploration mission undertaken by a developing country like India is likely to prompt the argument that such investments need to be redirected in areas that need immediate intervention (ex. education, health).
    • One of the simplest ways of resolving this debate is to concretely showcase how technologies developed for space missions like Chandrayaan 2 find their way into the daily lives of citizens.
    • However former President APJ Abdul Kalam opined that if Indians were to play a meaningful role in the community of nations, they must be second to none in the application of advanced technologies to their real-life problems.

    Why we must explore?

    • Curiosity and exploration are vital to the human spirit and accepting the challenge of going deeper into space is the way ahead.
    • The intangible desire to explore and challenge the boundaries of what we know and where we have been has provided benefits to our society for centuries.
    • Human space exploration helps to address fundamental questions about our place in the Universe and the history of our solar system.
    • Through addressing the challenges related to human space exploration we expand technology, create new industries, and help to foster a peaceful connection with other nations.

    Way Forward

    • Future readiness is the key to maintaining an edge in technology and ISRO endeavors to optimize and enhance its technologies as the needs and ambitions of the country evolve.
    • Thus, ISRO is moving forward with the development of heavy lift launchers, human spaceflight projects, reusable launch vehicles, semi-cryogenic engines, single and two stage to orbit (SSTO and TSTO) vehicles, development and use of composite materials for space applications, etc.

     



    References

    https://en.wikipedia.org/wiki/Indian_Space_Research_Organisation#Applications

    http://www.arthapedia.in/index.php?title=Space_Programme_in_India

    https://www.thehindu.com/opinion/lead/expanding-indias-share-in-global-space-economy/article28286469.ece

    https://www.financialexpress.com/lifestyle/science/future-of-space-programme-why-india-needs-to-build-its-own-space-station/1590324/

    https://www.livemint.com/Opinion/jKaufXMBRvrTDZ9oSoH4NL/Isro-A-world-class-Make-in-India-example.html

    https://www.dailyo.in/politics/isro-space-research-chandrayaan-antrix/story/1/25922.html

    https://www.firstpost.com/tech/science/chandrayaan-2-what-isro-must-do-to-make-benefits-of-the-moon-mission-accessible-to-the-common-man-7053791.html

    https://hindustan360.in/the-name-isro-and-global-launch-pad-for-socio-economic-development-hindustan360/

    https://debatewise.org/debates/137-space-exploration-is-a-waste-of-money/#yes2

    https://www.extremetech.com/extreme/268062-5-reasons-space-exploration-is-more-important-than-ever

  • [Burning Issue] India-Russia Relations

    Context

    • Despite the Russia-India-China triangle reconciling on a shared vision and responsibility for the future of Eurasia, watchfulness resurfaces behind the curtains.
    • Unveiling the Russian edition of India’s ‘Look East, Act East’ policy, PM Modi pledged to extend a $1 billion Line of Credit to Russia’s Far East region (RFE).

    History of the duo

    • The relations between Russia and India are an important and privileged strategic partnership.
    • The relationship began with a visit by Indian PM Jawaharlal Nehru to the Soviet Union in June 1955.
    • During the Cold War, India and the Soviet Union (USSR) had a strong strategic, military, economic and diplomatic relationship.
    • After the collapse of the USSR, Russia inherited its close relationship with India resulted in the special relationship.

    The Partnership

    • Traditionally, the Indo-Russian strategic partnership has been built on five major components: politics, defence, civil nuclear energy, anti-terrorism co-operation and space.
    1. Strategic Relations
    • India is the second-largest market for the Russian defence industry.
      In 2017, approximately 68% of the Indian Military’s hardware import came from Russia, making Russia the chief supplier of defence equipment.
    • The co-operation is not limited to a buyer-seller relationship but includes joint research and development, training, service to service contacts, including joint exercises.
    • It has risen above a buyer-seller relationship with the joint ventures projects to develop and produce the
    • Fifth Generation Fighter Aircraft (FGFA) and the Multirole Transport Aircraft.
      In October 2018, India inked the historic agreement worth US$5.43 billion with Russia to procure four S-400 Triumf surface-to-air missile defence system, the most powerful missile defence system in the world ignoring America’s CAATSA act.

    2. Economic Relations

    • Bilateral trade between both countries is concentrated in key value-chain sectors.
    • These sectors include highly diversified segments such as machinery, electronics, aerospace, automobile, commercial shipping, chemicals, pharmaceuticals etc.
    • Both countries set a target of reaching US$30 billion in bilateral trade by 2025.

    3. North-South Transport Corridor

    • The North-South Transport Corridor is the ship, rail, and road route for moving freight between India, Russia, Iran, Europe and Central Asia.
    • The route primarily involves moving freight from India, Iran, Azerbaijan and Russia via ship, rail and road.
    • The objective of the corridor is to increase trade connectivity between major cities such as Mumbai, Moscow, Tehran, Baku, Bandar Abbas, Astrakhan, Bandar Anzali etc.

    4. Energy Sector

    • Energy sector is an important area in Indo-Russian bilateral relations.
    • In 2001, ONGC-Videsh acquired stakes in the Sakhalin-I oil and gas project in the Russian Federation and has invested about US $1.7 billion in the project.
    • Kudankulam Nuclear Power Project with two units of 1000 MW each is a good example of Indo-Russian nuclear energy co-operation.
    • Both sides are considering the possibilities of building a hydrocarbon pipeline system, connecting the Russian Federation with India.

    5. Space Sector

    • Historically, there has been a long history of cooperation between the Soviet Union and India in space. Ex. Aryabhatta, India’s first satellite.
    • In Nov 2007, the two countries have signed an agreement on joint lunar exploration.
    • Chandrayaan-2 was a joint lunar exploration mission proposed by the ISRO and the Russian Federal Space Agency (RKA).
    • Both are collaborating for the scheduled Gaganyaan Mission.

    Recent trends in bilateral ties

    • Despite the best efforts divergences are growing in this bilateral relationship as the underlying structural changes in the international environment are pulling the two nations apart.
    • Even in the past, the duo have tried to ground their bilateral relations in the wider realities of changing global balance of power.
    • Now with the US under Trump upending the rules of global governance, there is renewed concern in the three capitals that their foreign policies need greater coordination, if only to preserve their equities in the global order.
    • India, of course, has a long-standing relationship with Russia but that is undergoing a shift in light of rapidly evolving geopolitical realities.

    Bilateral divergence

    • While the top leadership of the two nations have continued to engage with each other, divergences have been cropping up with disturbing regularity.
    • For India, what should be concerning is Russia’s increasing tilt towards Pakistan as it seeks to curry favour with China.
    • Moscow had historically supported New Delhi at the United Nations Security Council by repeatedly vetoing resolutions on the Kashmir issue.
    1. Military-defense Complex
    • Russia is the dominant supplier of arms to India, with the historic military and defense ties between the two countries continuing to serve as one of the cornerstones of the India-Russia relationship.
    • Strains are becoming apparent as India moves further along the path of military indigenization and import diversification.
    • India’s procurement from the US and France has also been seen as a heated divergence between the two.
    • This was a result of the unreliability of Russian supplies, as manifested in late arrivals, defective parts, and perennial conflicts overpricing and warranties.

    2. Cultural Vacuum

    • On an everyday level, while India films and yoga are popular in Russia, no parallel exposure to any aspect of Russian popular culture exists among Indians.
    • This is the most woefully neglected aspect of their relationship, suffering on both sides from lack of funding and, no less important, a shortage of political will.
    • Another aspect of ties is tourism which could be much more vigorous between the two countries than present India’s US affinity

    3. India-US ties

    • India’s engagement with the US addresses its core concerns regarding regional security.
    • The signing of the long-awaited Communications Compatibility and Security Agreement (COMCASA) is set to elevate the bilateral defence partnership and give India access to advanced U.S. defence systems.
    • Another successful deliverable for India is Washington’s solidarity on the issue of terrorism expressed during the talks.
    • The two sides “called on Pakistan to ensure that the territory under its control is not used to launch terrorist attacks on other countries.
    • However, a closer engagement with the U.S. is a challenge for India, as this relationship is not likely to be a partnership of equals, for the foreseeable future.

    Russia needs India as:

    • A market for its goods to bypass Western sanctions imposed after its power push in Ukraine.
    • The forthcoming Transatlantic Trade and Investment partnership driven by the US will also force Russia to eye markets beyond Europe. India is a natural partner.
    • Despite its renewed friendship with China, Russia will soon find itself in competition with it as Beijing regards itself as the new G2 along with the US.
    • India can help provide the multi-polarity that Russia fiercely seeks.

    India needs Russia because

    • It can meet its abundant energy requirements at a cost-effective price.
    • Despite expanding its defence purchases from the US, Israel and Europe, India still needs to collaborate with Russia to master future technology including for space.
    • It improves India’s bargaining power when it negotiates arms sales with the West.
    • Russia can be a major market for Indian industry such as pharmaceuticals, manufactured goods, dairy
    • Products, bovine meat and frozen seafood.
    • Geopolitically, Russia continues to be a balancing force against any designs China and Pakistan may have in our region.
    • India is interested in expanding the level of trade between the two countries.
    • An area of special interest for India is the exploration of hydrocarbon reserves along the coast of Russia’s Far East where India has decided to extend a $1 billion Line of Credit.
    • This interest is seen as India’s attempts to not only keep a traditional friend close but to ensure some space in the current clinch between Russia and China.
    • This act will be a powerful catalyzer to boost more fruitful cooperation between the two nations on a number of areas.
    • New Delhi needs Moscow’s support in the former’s bid for a permanent seat on the UN Security Council

    Recent Development:

    • The Plenary Session of the 5th Eastern Economic Forum (EEF) was recently held in Vladivostok, Russia.

    Eastern Economic Forum (EEF)

    • The EEF was established by a decree of the President of the Russian Federation, Vladimir Putin, in 2015.
    • It aimed for supporting the economic development of Russia’s Far East, and to expand international cooperation in the Asia-Pacific region.
    • The recently held EEF Summit on September 2019 at the Far Eastern Federal University is the fifth in its history.
    • Among the participants in the Summit are India, Malaysia, Japan, Australia, and South Korea.
    • The Summits have roundtable conferences, panel sessions, business breakfasts, besides business dialogues and bilateral talks and agreements.

    Achievements of EEF

    • In the last five years, as many as 17 different countries have invested in the Far East, according to the EEF website.
    • These include regional and global heavyweights like China, Japan, South Korea, Australia, New Zealand, and Vietnam.
    • As a result, 20 advanced special economic zones and five free ports have been put in place.
    • A total of 1,780 new investment projects, worth over 3.8 trillion rubles, and 230 new enterprises have become functional, the EEF website says.

    India’s interest in the EEF

    • PM Modi has described the EEF as a “historic opportunity” to give new impetus to the cooperation between India and Russia.
    • He has said that the relationship between the two countries has “special chemistry, special ease”, even pointing out that Siberian cranes migrate to “my home state Gujarat”.

    Line Of Credit for Russia’s Far East

    • Speaking at the Eastern Economic Forum in Vladivostok, Prime Minister Mr Modi made the announcement of extending a $1 billion Line of Credit to Russia’s Far East region (RFE).
    • It expected to help finance Indian business projects in the region, will be the “take-off point for Act Far East”, and will further strengthen bilateral ties.

    Image result for a billion for russia

    How Far East is game-changer?

    • The Far East has the potential to become an anchor in deepening India-Russia cooperation; more so considering that New Delhi has expanded the scope of its ‘Act East policy’ to also include Moscow.
    • The area has the potential to strengthen India-Russia economic partnership in areas like energy, tourism, agriculture, diamond mining and alternative energy.

    Extending to Act Far East Policy

    • The PM recalled that India was the first country in the world to open a consulate in Vladivostok, and underlined the age and depth of the country’s relations with the Far East.
    • Engaging closely with East Asia was in line with India’s policy goal of “Act East”.
    • PM also unveiled the “Act Far East” policy to boost India’s engagement with Russia’s Far East region.
    • This will also give a new dimension to our economic diplomacy.

    Sea route from Chennai to Vladivostok

    • During PM’s visit to Vladivostok this week, an MoU was signed to open a full-fledged maritime route between Russia’s eastern port city and Chennai on India’s eastern seaboard.
    • Located on the Golden Horn Bay north of North Korea and a short distance from Russia’s border with China, Vladivostok is the largest port on Russia’s Pacific coast, and home to the Pacific Fleet of the Russian Navy.
    • It is the eastern railhead of the legendary Trans Siberian Railway, which connects the far east of Russia to the capital Moscow, and further west to the countries of Europe.
    • At Vladivostok’s massive port, shipping and commercial fishing are the main commercial activities.
    • Automobiles are a major item of import at the port, from where they are often transported further inland.

    To Chennai, by sea

    • An ocean liner travelling from Vladivostok to Chennai would sail southward on the Sea of Japan past the Korean peninsula, Taiwan and the Philippines in the South China Sea, past Singapore and through the Strait of Malacca.
    • It will emerge into the Bay of Bengal and then cut across through the Andaman and Nicobar archipelago to Chennai.
    • This sea route covers a distance of approximately 5,600 nautical miles or about 10,300 km.
    • A large container ship travelling at the normal cruising speed of 20-25 knots, or 37-46 km/hour, should be able to cover the distance in 10-12 days.
    • At suboptimal “slow steaming” speeds of 18-20 knots (33-37 km/hour), at which long-distance vessels sometimes travel to in order to save fuel, it might take slightly longer — 12-13 days.

    Image result for india russia relations civilsdaily

    Need for a reset

    • For India, the prism is different as it has to manage the negative externalities emerging from the rise of China in its vicinity.
    • China-Pakistan nexus is proving difficult to contain as India gets ready to face a two-front challenge.
    • China refuses to recognise Indian global power aspirations and has not yielded on key Indian security demands.
    • As a result, while Russia may find cooperation with China as a perfectly legitimate response to its problems with the West, India does not have that luxury.
    • Meanwhile India’s concerns are timely addressed by Russia its stated policy supports India receiving a permanent seat on the United Nations Security Council.

    What needs to be done?

    • First and foremost, judging from a track record of multiple agreements and MoUs that have not led to tangible results.
    • The recent comprehensive U.S.-India Strategic 2+2 Dialogue is a model to follow.
    • There should be more meetings at the highest state level, regular annual reports on the progress of the working groups, and reinvigorated interactions.
    • India’s cores strength is that it follows an independent foreign policy
    • On its long way to become a global power, it will likely have to follow a zigzag course, balancing between American demands, long-term friendship with Russia and its own strategic necessities.
    • It will sign defence pacts and conduct military drills with both the U.S. and Russia in an attempt to seize maximum opportunities from its relations with global powers.

    Just relying on sentimentalism of the past won’t work anymore as new challenges confront India and Russia and the global geostrategic environment undergoes a profound reordering. Otherwise, putting all eggs in one basket might create overdependence on one partner and ultimately not serve Indian interests well.

     

    References

    https://www.civilsdaily.com/india-russia-relations/https://www.orfonline.org/research/russia-and-india-difficult-times-ahead/
    https://www.thehindu.com/opinion/lead/looming-challenges-to-indias-standing/article28429662.ece
    http://www.jsia.edu.in/wp-content/uploads/2019/03/katherine-re-energizing_0.pdf
    https://www.thehindu.com/opinion/editorial/bear-hug-on-india-strengthening-relations-with-
    russia/article29355066.ece
    https://www.civilsdaily.com/news/eastern-economic-forum/

    https://idsa.in/idsacomments/the-arithmetic-of-india-u.s.-relations-azakharov-170918

  • [Burning Issue] Merger of Public Sector Bank


    Context

    • The Centre announced a mega amalgamation plan, the third in a row, that merged ten public sector banks into four larger entities.
    • With these series of mergers, the number of state-owned banks is down to 12 from 27.

    Bank Merger

    • A merger is simply the combining of two business entities to form a larger one but with no explicit change in ownership.
    • This is in contrast to an acquisition where one business entity takes ownership control over another by paying for the ownership privilege in cash, stock, or other means.
    • In the case of state-owned banks that are being merged now, where the government is the majority shareholder, there will be no change in ownership but merely a restructuring of how these banks are organised.
    • Mergers of banks began in India in the 1960s in order to bail out the weaker banks and protect the customer interests.

    Why merger?

    • There are various reasons cited by the government for its decision to merge state-owned banks.
    • One of them is that large banks will be able to lend more money and help revive the slowing economy.
    • The government also believes that increased credit growth is essential in order to achieve its target of growing India into a $5-trillion economy in the next few years.
    • It is also of the view that the merger will lead to increased operational efficiency that will help these banks lower their costs, thus enabling them to lower their lending rates.
    • State-owned banks have been reeling under a bad loan crisis for years now.
    • Although the government has not projected the present merger as a measure to tackle bad loans, bank mergers in the past have been carried out simply to bail out struggling banks.
    • However the government, after consultations, decided that amalgamation is the “best route” to achieve banking sector scale and to support the target of achieving a $5 trillion economic size for India in five years.

    Logic behind the move

    • For years, expert committees starting from the M Narasimham Committee have recommended that India should have fewer but bigger and better-managed banks to ensure optimal use of capital, efficiency, wider reach and greater profitability.
    • The logic is that rather than having several of its own banks competing for the same pie (in terms of deposits or loans) in the same narrow geographies, leading to each one incurring costs, it would make sense to have large-sized banks.
    • It has also been argued that such an entity will then be able to respond better to emerging market trends or shifts and compete more with private banks.
    • The proposed big banks would be able to compete globally and improve their operational efficiency once they lower their cost of lending and improve lending.
    • But none of India’s banks including the largest, SBI, figures in the list of the top 50 global banks. So that may be a long way away.

    Will the move help make banks stronger?

    • The banks that have been merged by the government exhibit varying financial strength.
    • It remains to be seen whether the operational benefits that the government believes will come about through the merger will compensate for the deterioration in the financials of the stronger banks.
    • Critics doubt whether the government has any similar incentive to look for synergies that can boost the profits of its banks.
    • Given this, it seems unlikely that state-owned banks will be able to become more efficient after the merger by getting rid of redundant labour.

    How does it help the government?

    • For over decades starting from 1992, the government as the biggest shareholder of over 25 banks had to provide capital for them.
    • To grow and lend more, the banks often need a higher amount of capital to set aside also for loans that could go bad.
    • With the government not willing to lower its equity holdings and with a large slice of the capital being set aside to cover for bad loans, the burden of infusing capital rests on the majority shareholder.
    • This means marking a large amount of money almost every year during the last few years in the Budget for capital infusion at many banks at a time when there is a huge demand for social sector.
    • By reducing the number of banks to a manageable count, the government hopes that the demands for such capital infusion will be lower progressively with increased efficiencies and with more well capitalised banks.
    • It will also help that the government can focus now on fewer banks than in the past.

    Pros of the merger

    Some of the pros of the mergers are:

    • a large capital base would equip the merged entities to disburse a larger number of loans and of higher magnitude,
    • operational efficiency will reduce costs,
    • the need for recapitalization from the government will reduce, and
    • better adoption of technology.

    Limitations

    The cons of the amalgamation are:

    • it would be tough to manage issues pertaining to human resources,
    • having only a few large, inter-linked banks can expose the broader economy to enhanced financial risks, and
    • the local identity of small banks will be lost, leading to ramifications in the social and cultural space that are often not recognised or understood.

    Implications of the merger

    Bad Loans

    • The merger of banks per se will not lead to a decrease in the absolute size of bad loans in their books.
    • The size of bad loans in bank books can drop only if banks manage to improve the recovery of these loans, or if these loans are written off their balance sheets.
    • The bad loan recovery process remains slow due to the inefficient judicial system in the country and banks have been unwilling to aggressively write off bad loans since that would require recognising greater losses.

    Structural problems

    • The present merger, many believe, also does not address the issue of political interference in the management of state-owned banks that is at the root of the bad loan crisis.
    • The stated purpose of the nationalization of banks in 1969 was to use bank credit to fund the various development goals of the government.
    • Towards this end, over the years, various state-owned banks have been forced to extend loans under political pressure even though such loans did not always make business sense.
    • This is in contrast to private banks that are allowed to operate simply as pure businesses seeking profits.

    Funding for growth

    • Finally, when it comes to funding the growth needs of the economy, large banks may be able to lend more money than smaller banks due to the size of their capital base.
    • However, some argue that large banks may not really be essential when it comes to funding big-ticket business projects.
    • In the past, several smaller banks have come together to extend large loans. Further, companies themselves might prefer to seek funds from multiple sources.

    Critical opinion on merger

    • The merging of healthy banks with weak banks may not really improve the health of the banking system as a whole.
    • In fact, many believe, by diluting the management of strong banks, forced mergers may lead to a significant deterioration in the overall health of the banking system.
    • Last but not least, if the managers of efficient banks are punished for their good performance by being asked to share the burden of weaker banks, many fear that there will be fewer incentives for managers to manage well.
    • This can further negatively affect the long-term performance of state-owned banks.

    More thrust is on RBI

    • The RBI keeps monitoring large institutions whose potential failure can impact other institutions or banks and the financial sector, and which could have a contagion effect and erode confidence in other banks.
    • A case in point is the recent instance of IL&FS Group, which defaulted on repayments hitting many lenders and investors.
    • The creation of more large-sized banks will mean the RBI will have to improve its supervisory and monitoring processes to address increased risks.

     

    Conclusion

    • The finance minister has quoted that the proposed big banks would be able to compete globally and improve their operational efficiency once they lower their cost of lending and improve lending.
    •  But none of India’s banks including the largest, SBI, figures in the list of the top 50 global banks. So that may be a long way away.
    • While the announced consolidation of PSU banks is a credit positive as it enables the consolidated entities to meaningfully improve scale of operations and help their competitive position.
    • At the same time, there will not be any immediate improvement in their credit metrics as all of them have relatively weak solvency profiles.

     

     



    References

    https://www.civilsdaily.com/news/explained-mergers-of-public-sector-banks/

    https://www.thehindu.com/business/Industry/how-will-mergers-affect-public-banks/article29363041.ece

    https://www.moneycontrol.com/news/business/mergers-acquisitions/digging-deeper-the-big-bank-merger-what-why-and-what-next-4411711.html

    https://www.deccanherald.com/specials/sunday-spotlight/the-big-bank-theory-759842.html

  • [Burning Issue] Slowdown of Indian Economy


    Context

    • India’s real (or inflation-adjusted) GDP grew at 5 per cent in the June 2019 quarter of financial year 2019-20 (Q1FY20), the slowest growth in six years (25 quarters).

    • With GDP growth falling consecutively for the fifth time, India has slipped to fourth position globally in terms of real growth rates.
    • The Indian economy is now behind China, the Philippines and Indonesia as it recorded 5 per cent growth in the first quarter of FY20, the slowest in last 25 quarters.
    • This is only the second instance since December 1999 that the GDP growth rate has fallen for five straight quarters.

    Dissecting India’s slowdown

    • Growth is a function of consumption, investment, government demand, and net exports.
    • A slowdown in consumption demand, decline in manufacturing, inability of the Insolvency and Bankruptcy Code (IBC) to resolve cases in a time-bound manner, and rising global trade tension and its adverse impact on exports are some of the factors affecting India’s growth.
    • Two of the government’s most famed economic reforms–demonetization and GST implementation–have been identified as major factors behind the slump in growth in many reports and surveys.
    • Medium and Small Scale Enterprises (MSMEs), the backbone of multiple Indian sectors, are still suffering from the combined consequences of both the reforms.

    Key indicators signifying slowdown

    Agriculture sector

    • The agriculture sector is in distress; the rural economy is struggling from very low inflation resulting in stagnant income.
    • Urban wages are either stagnant or decreasing due to less demand but more supply of unskilled labour.
    • Price of agricultural products is stagnant, resulting in farm distress and fall in income and consequent fall in purchasing power—which is directly related to lack of demand.

    Domestic car sales

    • During April to June 2019, car sales fell by 23.3% in comparison to the same period in 2018.
    • This is the biggest contraction in quarterly sales since 2004.
    • A slowdown in car sales negatively impacts everyone from tyre manufacturers to steel manufacturers to steering manufacturers etc., when it comes to the backward linkages that car manufacturers have.
    • As far as forward linkages are concerned, many auto dealerships are shutting down or shrinking.

    Housing sales

    • As per a report, India’s top 30 cities had 1.28 million unsold housing units as of March 2019, a jump of 7% from March 2018, when the number was at 1.2 million.
    • This means that builders are building new houses at a faster pace than people are buying them.
    • The real estate sector has forward and backward linkages with 250 ancillary industries.
    • So, when the real estate sector does well, many other sectors, right from steel and cement to furnishings, paints, etc., do well too.
    • The fact that real estate prices haven’t gone up in years makes people feel less wealthy and as a result spend less.

    FMCG companies

    • The volume growth or the number packs sold, of fast-moving consumer goods (FMCG) companies has slowed down over the last one year.
    • If we look at Hindustan Unilever Ltd, the volume growth between April and June 2019 was at 5%. It was 12% during the same period last year. There are other examples as well.
    • Dabur India posted a volume growth of 6% during April and June 2019, against 21% last year. Britannia was down to 6% against 13% last year.
    • Indeed, this is worrying, given that people seem to be going slow on making everyday purchases.

    Final consumption of finished steel

    • Creation of any new physical infrastructure requires steel.
    • Hence, a faster increase in steel consumption than in the past shows increased investment activity than in the past.
    • The consumption of finished steel grew by 6.6% between April and June 2019, in comparison to the same period during the last year, when it had grown by 8.8%.
    • This was the slowest in two years.

    New investment projects

    • The value of new projects announced during April to June 2019 fell by 79.5% year on year. This is the highest fall since September 2004.
    • In absolute terms, the value of new investment projects announced during April to June 2019 stood at ₹71,337 crore, the lowest since September 2004.
    • This is a great indicator of the fact that businesses really do not have faith in the economic future of India, irrespective of what they say in the public domain.
    • The investment projects completed fell by 48% in comparison to the last year.

    Expenditure and net exports

    • Government expenditure tends to form around 10-11% of the Indian economy.
    • In the last two fiscal years, the growth in government expenditure was at 19.1% and 13.2%, the highest since the financial crisis years of 2008-09 and 2009-10.
    • Looking at 2019-20 fiscal to drive economic growth, the government needs to spend more and for that the tax growth is important.

    Net exports

    • This figure for April to June 2019 stood at ‘-$46 billion’. This was almost similar to the net exports for April to June 2018 at -$46.6 billion.
    • This is primarily because both exports and imports during the period were at almost similar levels as last year.
    • Given this, there hasn’t been any increased economic activity on the exports front either.

    Investors Confidence

    • Investment, unlike consumption, satisfies no immediate want.
    • The businessman putting his money today is basically taking a bet on the future, when it would start yielding returns. Such bets are a function of the “state of confidence” at the time of investment.
    • A good indicator of “state of confidence” is new investment proposals.
    • Their value fell from Rs 20 lakh crore in 2015-16, to Rs 16.2 lakh crore, Rs 11.4 lakh crore and Rs 10 lakh crore in the following three fiscals.

    Measures for reviving growth

    • Sectoral collapse has happened because of poor business decisions in banking, real estate, construction and lately in NBFCs/housing finance companies (HFCs).
    • Now all these sectors are looking for stimulus packages to bail them out from their mistakes.

    Consolidation of PSBs

    • The current initiatives are either short-term measures or long-term reforms. The consolidation of Public Sector Banks (PSBs) falls into the latter category.
    • It will not turnaround the banking sector, ease the credit flow or even improve the transmission of interest cuts — the three most important problems contributing to the slowdown.
    • It is a structural reform much needed, long overdue and may reduce the recapitalization requirements.
    • It will change the credit evaluation, disbursement and monitoring of loans, which is the core problem in PSBs.

    Easing tax slabs

    • To kick-start the consumption cycle money has to go into the common man’s pocket.
    • This can happen by reducing income tax for the lowest slab, as recommended by the Direct Tax Code report.
    • It can be done by making GST filing quarterly for MSMEs with less than Rs 10 crore turnovers to ensure they survive the slowdown.
    • The GST Council can look at reducing rate slabs and reduce the overall burden on corporates.

    Boosting lendings

    • In a first sign of government addressing the economic woes, Finance Minister announced the removal of the surcharge on capital gains on shares for both foreign and domestic investors.
    • It provided an upfront Rs 70,000-crore equity infusion into public sector banks to boost lending, and unveiled measures to push automobile sales.
    • The surcharge of 3 per cent and 7 per cent on those earning between Rs 2 crore and Rs 5 crore, and over Rs 5 crore respectively had been announced as part of the Budget proposals.

     

    These immediate steps can help revive the economic growth:

    • Give auto sector incentives to invest and shift to electric vehicles
    • Incentives to auto sector employees to upskill on electric vehicles
    • Reduce the GST slab rates
    • Adopt the Direct Tax Code, cut income tax for the bottom slab
    • Improve credit flow to both consumer and industry
    • Change the credit culture in public sector banks
    • Stimulus should drive investment, upskilling for displaced employees
    • Factor market reforms, including bringing the cost of land down.

     

    Way Forward

    • Battling the economic slowdown may require a slew of complex steps over the next few months, but the first and the most difficult step for the government is to acknowledge the slowdown.
    • It should consult economic experts, some of whom have been urging the government to focus on boosting investments, which could help in reviving consumer demand and increase the output of key sectors.
    • The government’s primary goal should be setting the basics right instead of going ahead with a “band-aid” patchwork.
    • So, the only immediate solution for India seems to be to boost consumption through a stimulus given directly to people, in the classical Keynesian mould.
    • Of course, such a stimulus should be combined with reforms to boost business morale and confidence.

     

     



    References:

    https://economictimes.indiatimes.com/news/economy/policy/quick-ways-out-of-slowdown-10-things-government-can-do/articleshow/70934072.cms

    https://www.livemint.com/news/india/15-ways-to-define-india-s-slowdown-1565715613762.html

    https://indianexpress.com/article/explained/explained-in-economic-slowdown-a-back-story-about-falling-investor-confidence-5936308/

    https://www.indiatoday.in/news-analysis/story/why-this-economic-slowdown-is-serious-1580824-2019-08-14

    https://www.hindustantimes.com/opinion/state-of-indian-economy-decoding-the-5-problem/story-UfwoflzpqXTrYmIaOpENGL.html