Category: Burning Issues

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Sustained economic growth is the key to India’s power. Infrastructure without a doubt lies at the heart of this growth story. Infrastructure is inextricably linked to growth by its inherent ability to supports livelihoods, drive businesses, generate employment, and in effect determine the quality of life. Top-quality well managed Infrastructure holds the key to growth and job creation.

Recently, the government has announced an ambitious program of asset monetization. It hopes to earn ₹6 trillion in revenues over a four-year period. At a time when the government’s finances are in bad shape, that is money the government can certainly use. Getting asset monetization right is quite a challenge, though.

The creation of the National Monetization Pipeline (NMP) is the government’s pioneering initiative and a step in the right direction to establish a medium-term pipeline along with a roadmap for “monetization ready” assets.

Covid pandemic and its effect on economic activity in the country

• Need of infrastructure investment: With the COVID taking an unprecedented toll on the economic activity in the country, significantly enhanced level of infrastructure investment is required for reviving growth.
• Sustainable infrastructure systems: Covid has also bought to fore, the need for resilient, sustainable and advanced infrastructure systems.
• Need for Long-term capital: Investing huge sums into creating world class infrastructure will lead to a high trajectory of growth, but this essentially hinges on availability of long-term capital at scale.
  • Financing of infrastructure thus requires a diversified set of alternatives, especially so in economies at the cusp of transformation such as India.
  • Meeting the required scale of infrastructure spending can only be made possible through a re-imagined approach.

In this context, Asset Monetization merits a seat on the table.

What is Asset Monetization?

• In asset monetization, the government parts with its assets — such as roads, coal mines — for a specified period of time in exchange for a lump sum payment.
• At the end of the period, the assets return to the government. Unlike in privatization, no sale of government assets is involved.
• By monetizing assets it has already built, the government can earn revenues to build more infrastructures.
• Asset monetization will happen mainly in three sectors: roads, railways and power.
• Other assets to be monetized include: airports, ports, telecom, stadiums and power transmission.

What is the objective of Asset recycling and monetization?

Asset recycling and monetization serves two critical objectives –

1) Firstly, it unlocks value from public investment in infrastructure, and;

2) Secondly, it taps private sector efficiencies in operations and management of infrastructure.

How it is different from privatization?

• In privatization, there involves sale of public assets to private sector like land, Public Sector Enterprises, etc. But this is not the case with asset monetization.
• Government doesn’t transfer ownership of assets to private entities in asset monetization.
• Asset Monetization at its core, is a distinct shift from ‘privatization’ and ‘slump sale’ of assets to ‘structured partnerships’ with private sector within defined contractual frameworks.
• The driver for Asset Monetization is beyond its fiscal impact.
• It is not just a funding mechanism, but an overall paradigm shift in infrastructure operations, augmentation and maintenance.

Why private sector is important in infrastructure development?

• India has made massive strides in creating a mesh of infrastructure through flagship build-out programmes in recent years.
• For most sectors, this has been driven by the public sector or public funding. Today, India holds one of the largest brownfield stocks of fixed assets in the world.
• However, while public sector can build infrastructure, it is rarely able to run it efficiently. It is a widely accepted fact the private sector has much greater resource efficiencies, when it comes to developing and managing infrastructure.
• Increasingly, therefore, government looks to partner with the private sector as a partner. However, for effective co-working between the public and private sector, PPP models are now demanding a reboot.

India and PPP ecosystem

• India has a robust PPP ecosystem involving institutional mechanisms, model contractual frameworks, regime of standards and financing institutions.
• Concepts such as preservation of ownership with government, transfer back of asset at the end of concession and key Performance Indicators are well engrained in our PPP eco-system.
• However, over the last few years there has been reduced appetite of private sector and debt financiers for Greenfield infrastructure.
• This necessitates innovative mechanisms, structured around mature brownfield assets, for tapping private investment.
• Asset Monetization, therefore strives to tilt the axis from greenfield to brownfield models.
• Increased appetite for brownfield assets is evidenced by the flow of private and institutional capital into sectors such as roads, power and telecom.
• Private sector has very effectively utilized risk managed structures to monetize assets such as toll roads, transmission towers, pipelines and telecom towers thus bringing in a new investor class into India’s Infrastructure.

Recent successful examples of asset monetization:

• From the public sector, NHAI has monetized close to 1,400 km of toll roads through TOT concessions and has raised Rs. 17,000 crore.
• Powergid successfully launched the first ever public sector InvIT monetizing its first batch of transmission assets and raising Rs. 7,700 crore.
• Airports Authority of India successfully monetized 6 brownfield AAI airports through OMDA model raising upfront proceed and private investment towards augmentation of the airports.
• Indian Railways also launched the strategic foray into PPP in station redevelopment and running of passenger trains.

Role of Infrastructure Investment Trusts (InvITs) & Real Estate Investment Trusts (REITs)

• Innovative structured vehicles such as Infrastructure Investment Trusts (InvITs) & Real Estate Investment Trusts (REITs) are a capital market play.
• They are created and operated under the regulatory framework of SEBI and targets pooled long term capital.
• Since the launch of regulations for these vehicles by SEBI in year 2014, India’s private sector has very effectively unlocked its invested equity by employing these vehicles and bringing in capital from global pension and sovereign funds.
• Assets Under Management (AUM) of Rs. 1 lakh crore from the private sector alone, is held by these vehicles.
• Through the Asset Monetization programme, public sector entities will also tap into long term institutional capital and build on the recent success of PowerGrid’s InvIT.
• More importantly, India’s common public can also invest in InvITs and REITs as retail investors.
• These models interest a different investor class comprising of global pension and sovereign wealth funds and also retail investors.
• The SEBI Regulations bring transparency for investors and also efficiency in asset management.

What is National Monetization Pipeline (NMP)?

• The NMP comprises a four-year pipeline of the Central Government’s brownfield infrastructure assets.
• It will serve as a medium-term roadmap for the Asset Monetization initiative of the government, apart from providing visibility for the investors.
• Incidentally, the 2021-22 Union Budget, laid a lot of emphasis on Asset Monetization as a means to raise innovative and alternative financing for infrastructure.
• It has to be noted that the government views asset monetization as a strategy for the augmentation and maintenance of infrastructure, and not just a funding mechanism.

Framework

The framework for core asset monetization has three key imperatives:

• The pipeline has been prepared based on inputs and consultations from respective line ministries and departments, along with the assessment of total asset base available therein.
• Monetization through disinvestment and monetization of non-core assets have not been included in the NMP.
• Further, currently, only assets of central government line ministries and CPSEs in infrastructure sectors have been included.
• Process of coordination and collation of asset pipeline from states is currently ongoing and the same is envisaged to be included in due course.

Estimated Potential

• The aggregate asset pipeline under NMP over the four-year period, FY 2022-2025, is indicatively valued at Rs 6.0 lakh crore.
• The estimated value corresponds to ~14% of the proposed outlay for Centre under NIP (Rs 43 lakh crore). This includes more than 12-line ministries and more than 20 asset classes.
• The sectors included are roads, ports, airports, railways, warehousing, gas & product pipeline, power generation and transmission, mining, telecom, stadium, hospitality and housing.
• The top 5 sectors (by estimated value) capture ~83% of the aggregate pipeline value. These top 5 sectors include: Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%).

Implementation & Monitoring Mechanism

• As an overall strategy, significant share of the asset base will remain with the government.
• The programme is envisaged to be supported through necessary policy and regulatory interventions by the Government in order to ensure an efficient and effective process of asset monetisation.
• These will include streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency, among others.
• Real time monitoring will be undertaken through a separate dashboard.

What are the challenges involved?

• Realizing adequate value: The First and foremost criticism is whether adequate value from the assets will be realized or not.
  • This depends on the quality of the bidding process and whether enough private players are attracted to bid.
• Ensuring sufficient participation from bidders: The only way of ensuring that asset monetization doesn’t lead to cronyism is to make the bidding conditions such that the people eligible to bid are not a small, predetermined set.
  • However, because of the capital intensity of the project, not everybody is going to be able to bid. Even so, you can ensure that there is sufficient participation.
• Execution Risk: There will be execution risk in such a large programme. However, this is exactly why NMP is not adopting a one-size-fits-all approach.
• Issue of Taxpayers’ Money: The taxpayers have already paid for these public assets — and, so, why should they pay again to a private party to use them.
• Suboptimal Contractual Enforcement: A criticism is born out of scepticism about a sub-optimal contractual and judicial framework to make such a plan a success.
• Monopolistic Outlook: A few business houses will corner the bulk of the assets offered under NMP.
• Right and targeted policy planning and implementation: There is a need to systematically adopt these initiatives across varied asset classes and streamline the frameworks and modalities of such alternatives in a programmatic manner which can be readily absorbed, evaluated and replicated.
• Involvement of states: Any of the center’s objectives can’t go in full throttle without apt cooperation from the states. The growth of the states is a precondition for the overall growth of India.

Conclusion

• A well laid out pipeline gives a comprehensive view to investors & developers of brown-field investment avenues in Infrastructure and helps them plan their fund raising and due-diligence activities.
• A diverse and sustained National Monetisation Pipeline (NMP) not only provides visibility to the investors on potential financing opportunities but also driving preparedness of public authorities to structure and launch transactions in a systematic and transparent manner.
• Contribution of States is essential: States are an equal partner in India’s Infrastructure story. India cannot grow faster unless states grow at higher rates and hence there is a need to work closely with states.
  • States, too present a significant potential for leveraging assets such as tolled State Highways, Transmission towers, discoms, bus terminals, sports stadiums and state warehouses to mobilize capital for Infrastructure investment which can have multiplier effects on the state economies.
  • Recognizing the criticality of enhanced capital expenditure, the “Scheme for Special Assistance to States for Capital Expenditure” to boost capital expenditure by state governments reeling under the financial impact of COVID-19 pandemic, is a path breaking measure.
  • Under the Scheme, incentive is provided to the States in the form of 50-year interest free loan.
• In order to give the needed fillip to the monetization initiative, following three aspects need concerted efforts and interventions.
  1. Firstly, a relentless focus on implementation is the key.
  2. Secondly developing brownfield models and frameworks will provide the needed pace.
  3. Lastly, driving states and partnering with them in undertaking monetization in a structured manner.

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The 13th BRICS summit is set to be held on September 9 in digital format under India’s chairmanship. This plurilateral grouping comprising Brazil, Russia, India, China, and South Africa is chaired by turn. India held the chair in 2012 and 2016 too.

The grouping is successful in moving towards the desire objectives for which it has come into existence. But currently, there are many challenges engulfing it. This is high time that it should look forward to resolving them and progress towards its desired objectives.

What is BRICS?

• BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
• The BRICS Leaders’ Summit is convened annually. It does not exist in form of organization, but it is an annual summit between the supreme leaders of five nations.

Inception

• On November 30, 2001, Jim O’Neill, a British economist who was then chairman of Goldman Sachs Asset Management, coined the term ‘BRIC’ to describe the four emerging economies of Brazil, Russia, India, and China.
• He made a case for BRIC on the basis of econometric analyses projecting that the four economies would individually and collectively occupy far greater economic space and become among the world’s largest economies in the next 50 years or so.

How it has formed?

• The grouping was formalized during the first meeting of BRIC Foreign Ministers on the margins of the UNGA in New York in September 2006.
• The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.

Who are the members?

• South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.
• The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
• The importance of BRICS is self-evident: It represents 42% of the world’s population, 30% of the land area, 24% of global GDP and 16% of international trade.
• The five BRICS countries are also members of G-20.

Significant feats of BRICS

 1. Johannesburg Declaration, 2018

• The 2018 summit saw the BRICS leaders come together and discuss various international and regional issues of common concern and adopted the ‘Johannesburg Declaration’ by consensus.
• The leaders jointly reaffirmed their commitment to the principles of mutual respect, sovereign equality, democracy, inclusiveness and strengthened collaboration.
• The BRICS leaders have used the summit to reject the growing unilateralism and instead reiterate their commitment to the strengthening of multilateral institutions, calling for stronger intra-trade within member states.

2. Focus on New Industrial Revolution

• The other big idea emanating from the summit is to help nations to prepare for the Fourth Industrial Revolution.
• Participants embraced it, articulating the need for a new strategy on employment, education and skill development as the digital revolution unfolds.
• The leaders commended the establishment of the BRICS Partnership on New Industrial Revolution (PartNIR).
• It aims to deepen BRICS cooperation in digitalization, industrialization, innovation, inclusiveness and investment and to maximize the opportunities and address the challenges arising from the 4th Industrial Revolution.

3. BRICS Plus

• The BRICS outreach to Africa began at the last summit hosted by South Africa, in 2013. It has picked up momentum now but African leaders want more.
• They need big loans from the New Development Bank (NDB) for their infrastructure projects.
• China introduced the “BRICS Plus” format at the Xiamen summit last year by inviting a few countries from different regions.
• South Africa emulated it, arranging the attendance of top-level representation of five nations of its choice: Argentina, Jamaica, Turkey, Indonesia and Egypt.
• The precise role of “BRICS Plus” countries will take time to evolve but an immediate benefit is the immense opportunities it provides for networking among leaders.

4. Brasilia outcome

• During Brazil’s chairmanship, the grouping reported 30 new outcomes, initiatives and documents.
• The latest summit needed a 73 para-long Brasilia Declaration to spell out the leaders’ shared worldview and spectrum of their work.
• Much to India’s satisfaction, the commitment of BRICS to counterterrorism seems to be getting strengthened.

5. New Development Bank (NDB) projects

• The NDB, the grouping’s flagship achievement, has 44 projects with its lending touching $12.4 billion, in just five years.
• This is not a small gain, but the bank needs to grow as “a global development finance institution”. A move is now afoot to open its membership selectively.
• NDB has opened its regional centers in South Africa and Brazil and will do so in Russia and India in 2020.

6. Local Currency Bond Fund

• With a successful Contingent Reserve Arrangement in the bag, BRICS governments are set to establish a Local Currency Bond Fund.

7. Business promotion

• The BRICS Business Council held a substantive dialogue to foster cooperation in areas ranging from infrastructure and energy to financial services, regional aviation and digital economy.
• Its cooperation with the NDB is being encouraged. The national trade promotion agencies signed an MoU on cooperation among themselves.
• A BRICS Women Business Alliance was also created, both as a women empowerment measure and as a tool to bring “a distinctive perspective on issues of interest for the business community.”

How relevant is the BRICS in today’s world?

New front against western dominance

• The BRICS is group of countries having total population of approximately 3.6 billion which makes 40% of world population.
• Also, the cumulative economy of the group members aggregate to around 17 trillion in nominal term which is 22% of world economy in current context.
• The relevance of the group increases when it is considered as rival of western dominated institutions of World Bank and IMF.

Future power centers of the world

• India and China are today the fastest growing economies and they are considered as future super power of world.
• The group also has Russia the former USSR as a member which was one of the two super power until 1991 when it was disintegrated for various political and economic reason but still retain the hegemony of western, US led military dominance.

A step towards a more democratic world order

• In subsequent summits since its inception the group has taken various initiatives which have changed the world economic order.
• The group pledged a corpus of $75 billion to IMF on precondition of voting rights reform in June, 2012 which is not only the end of US hegemony in institution but also a start of more democratic world order.

New Development Bank

• During its fifth summit at Durban, South Africa in 2013, the member countries agreed to create a new global financial institution which finally came into existence as New Development Bank in 2015.
• It has a head quarter at Shanghai with initial capital of $50 billion and subsequently increased to $100 billion.
• The bank is today considered as rival of World Bank and the bank’s primary focus is to lend for various development projects in member and other developing countries.

Contingent Reserve Agreement

• To save members from immediate economic shocks the group has also agreed to Contingent Reserve Agreement.
• The agreement provide protection to member countries against global liquidity pressure as all the members are developing economies and prone to increased economical volatility in current globalized scenario and is considered as rival of International Monetary Fund.

A bridge between North and South

• The grouping has gone through a reasonably productive journey. It strove to serve as a bridge between the Global North and Global South.

Assuring global peace and security

• The US unilateral withdrawal from Intermediate-Range Nuclear Forces (INF) Treaty and Iran deal has posed a great security threat to global peace.
• BRICS, being a pillar of fairer polycentric world order, can play a significant role in assuring world peace by playing an active role in dispute resolution based on principle of fairness.

Sustainable and inclusive growth and development

• Structural imbalances caused by the global financial crisis of 2008 and new threats to the global economy posed by trade war and unilateral economic sanctions are yet to be resolved.
• The growing contribution of the BRICS to the world economy and the rising importance of the economic relations between the BRICS and other Emerging Market and Developing Countries (EMDCs) create an opportunity for new initiatives.
• This would better help to support sustainable and inclusive growth and development.

Poverty Reduction

• The BRICS contribution to world poverty reduction has been sizeable.
• Continued BRICS growth remains important for poverty reduction as well as for reducing international inequalities.

Issues in its consolidation

• Common ground for the members was built by ensuring that no bilateral issues were brought up, but the contradictions remained.
• Many economists soon grew tired of “emerging” economies that didn’t reach the goals they had predicted.
• Others saw India’s closer ties with the US after the civil nuclear deal as a sign its bonds with BRICS would weaken.
• Meanwhile, Russia, which had hoped to bolster its own global influence through the group, had been cast out of the G-7 order altogether after its actions in Crimea in 2014.
• China, under Xi Jinping, grew increasingly aggressive, and impatient about the other underperforming economies in the group, as it became the U.S.’s main challenger on the global stage.

Long-term prospects

• China’s decision to launch the trillion-dollar Belt and Road Initiative in 2017 was opposed by India, and even Russia did not join the BRI plan, although it has considerable infrastructure projects with China.
• South Africa’s debt-laden economy and the negative current account have led some to predict an economic collapse in the next decade.
• Brazil’s poor handling during the Covid-19 crisis has ranked it amongst the world’s worst-affected countries, and its recovery is expected to be delayed.
• India’s economic slowdown was a concern even before Covid-19 hit, and government policies like “Aatmanirbhar” were seen as a plan to turn inward.

Issues with BRICS nations

• Concerns about aggressions from Russia in Ukraine and Eastern Europe and China in the South China Sea, the border with India and internally in Hongkong and Xinjiang are clear visible.
• There is creeping authoritarianism in democracies like Brazil and India have made investors question long-term prospects of the group.
• In the market, BRICS has been mocked for being “broken”, while others have suggested it should be expanded to include more emerging economies like Indonesia, Mexico and Turkey, called the “Next-11”.

Importance of BRICS for India

Geo-Politics

• Global geopolitics today represents the case of a tug of war and India finds itself in the middle of it.
• This has made difficult for India to carve a middle path for balancing its strategic interests between the U.S and the Russia-China axis.
• Therefore, BRICS platform provides an opportunity for India to balance Russia-China axis.

Global Economic Order

• BRICS countries shared a common objective of reforming the international financial and monetary system, with a strong desire to build a more just, and balanced international order.
• To this end, BRICS community plays an important role in the G20, in shaping global economic policies and promoting financial stability.

Voice of Developing Nations

• As the western countries are raising challenges on issues ranging from World Trade Organization to climate change, the developing countries are crippling under the onslaught of these policies.
• In recent period, BRICS has emerged as the voice of developing countries, or the global south and playing a significant role in protecting the rights of developing countries.
• Terrorism
• BRICS also provides a platform for India to galvanize its efforts against terrorism and has worked within the grouping to take a strong stand against terrorism and bring about focused consultations on specific aspects relating to terrorism.

Global Grouping

• India is actively pursuing its membership for United Nation Security Council (UNSC) and Nuclear Supplier Group (NSG).
• China forms the major roadblock in pursuing such goals.
• Therefore, BRICS provides an opportunity to actively engage with China and resolve the mutual disputes. It also helps in garnering support of other partner countries.

What are the challenges with the BRICS?

Heterogeneity

• It is claimed by critics that heterogeneity (variable/diverse nature of countries) of the BRICS nations with its diverse interests possess a threat to the viability of the grouping.

China Centric nature of the group

• All the countries in BRICS grouping trade with China more than each other, therefore it is blamed that as a platform to promote China’s interest.
• Balancing trade deficit with China is huge challenge for other partner nations.

Global Model for Governance

• Amidst, global slowdown, trade war and protectionism, the critical challenge for the BRICS consists in the development of a new global model of governance which should not be unipolar but inclusive and constructive.
• The goal should be to avoid a negative scenario of unfolding globalization and to start a complicated merging of the global growing economies without distorting or breaking the single financial and economic continuum of the world.

Not Been Effective

• The five-power combine has succeeded, albeit up to a point.
• However, China’s economic rise has created a serious imbalance within BRICS.
• Also the group has not done enough to assist the Global South to win their optimal support for their agenda.

Contentious issues between India and China

• However, the future of the group seems little gloomy as the two biggest economy India and China of the group are having various contentious issues between them.
• The two countries are often seen as rival on various global forums which degenerate the confidence between each other.
• China is opposed to the entry of India to group like NSG and also a staunch supporter of Pakistan which has a demeaning record fuelling terrorism in India.
• China has also opposed to UN resolution of declaring Masood Azhar a global terrorist who is a mastermind of various terrorist attack in India and globally.
• At the same time India is also opposed to the China’s aggressive policy in South China Sea where various countries like Vietnam, China, Philippines and others in the reason have territorial disputes.

Sanctions on Russia

• In recent times the global slowdown, sanction on Russia since it annexed Crimea and political instability in Brazil has also added burden on BRICS economy.

Priorities/Immediate goals of BRICS

1. Reform of multilateral institutions

• The first is to pursue reform of multilateral institutions ranging from the United Nations, World Bank and the International Monetary Fund to the World Trade Organization and now even the World Health Organization.
• This is not a new goal. BRICS has had very little success so far, although strengthening multilateralism serves as a strong bond as well as a beacon.
• Reform needs global consensus which is hardly feasible in the current climate of strategic contestation between the U.S. and China and the devastation caused by COVID-19 to health, lives and livelihoods.
• BRICS emerged from the desire to challenge dominance (by the U.S.) in the early years of the century. The “counter-dominance instinct and principled commitment to multipolarity in all forms” is “written into the DNA of BRICS.”

2. Resolve to combat terrorism

• Terrorism is an international phenomenon affecting Europe, Africa, Asia and other parts of the world. Tragic developments concerning Afghanistan have helped to focus attention sharply on this overarching theme, stressing the need to bridge the gap between rhetoric and action.
• China, for example, feels little hesitation in supporting clear-cut denunciations of terrorist groups, even as its backing of Pakistan, which is heavily enmeshed with a host of international terrorist groups, remains steadfast.
• In this context, BRICS is attempting to pragmatically shape its counter-terrorism strategy by crafting the BRICS Counter Terrorism Action Plan containing specific measures to fight radicalization, terrorist financing and misuse of the Internet by terrorist groups.
• This plan is expected to be a key deliverable at the forthcoming summit and may hopefully bring some change.

3. Promoting technological and digital solutions for the Sustainable Development Goals

• Digital tools have helped a world adversely hit by the pandemic, and India has been in the forefront of using new technological tools to improve governance.

4. Expanding people-to-people cooperation

• However, enhancing people-to-people cooperation will have to wait for international travel to revive. Interactions through digital means are a poor substitute.

Way Forward

• A close examination of India’s record in BRICS reveals that New Delhi has used its membership to make a substantial contribution to the global financial architecture, while also making efforts to address glaring gaps in areas such as counter-terrorism, the fight against climate change and UNSC reform.
• India is not a free-rider in a system of global governance dominated by the West, and continues to provide a vision of global governance.
• The BRICS needs to expand its agenda for increasing its relevance in the global order. As of now, climate change and development finance, aimed at building infrastructure must dominate its agenda.
• For BRICS to remain relevant over the next decade, each of its members must make a realistic assessment of the initiative’s opportunities and inherent limitations.
• BRICS should promote comprehensive development of all states — both big and small — and enhanced mutually beneficial cooperation among them on the basis of shared interests.
• Democratization of international issues i.e agreements on global agendas should be reached with the widest and equal participation of all stakeholders and be based on universally recognized legal norms.
• The principle of respect for cultural and civilization diversity of the world should be a top priority.
• BRICS nations should strive for peaceful and politico-diplomatic settlement of crisis and conflict in various regions of the world.

Conclusion

BRICS, being one of the pillars of the emerging fairer polycentric world order, plays an important stabilizing role in global affairs. In the storming ocean of world politics, BRICS can contribute significantly in maintaining international stability and ensuring global economic growth, and becoming a united center of the multipolar world.

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India and Sri Lanka have a legacy of intellectual, cultural, religious, and linguistic interaction, and the relationship between the two countries is more than 2500 years old. Trade and investment have grown and there is cooperation in the fields of development, education, culture, and defense.

India’s ‘Neighbourhood First’ policy towards Sri Lanka had resonated with Sri Lanka’s ‘India First’ foreign and security policy in 2020.

However in recent times, due to Chinese intervention, the ties between the two countries have plummeted. The condition is likely to worsen with Sri Lanka declaring a state of emergency in the country.

Brief background of India-SL relations

• India is the only neighbor of Sri Lanka, separated by the Palk Strait; both nations occupy a strategic position in South Asia and have sought to build a common security umbrella in the Indian Ocean.
• There are deep racial and cultural links between the two countries. Both share a maritime border.
• The India- SL relations have been however tested by the Sri Lankan Civil War and by the controversy of Indian intervention during the war.
• In recent years Sri Lanka has moved closer to China, especially in terms of naval agreements.
• India has signed a nuclear energy deal to improve relations and made a nuclear energy pact with Sri Lanka in 2015.

India’s role in the Lankan Civil War

• In the 1970s–1980s, the RAW and the state government of Tamil Nadu were believed to be encouraging the funding and training for the Liberation Tigers of Tamil Eelam (LTTE), a separatist insurgent force.
• In 1987, faced with growing anger amongst its own Tamils, and a flood of refugees India intervened directly in the conflict for the first time.
• This was after the Sri Lankan government attempted to regain control of the northern Jaffna region by means of an economic blockade and military assaults; India supplied food and medicine by air and sea.

Why did India intervene?

• Indian intervention in Sri Lankan civil war became inevitable as that civil war threatened India’s unity, national interest and territorial integrity.

Outcomes

• The peace accord assigned a certain degree of regional autonomy in the Tamil areas with a body controlling the regional council and called for the Tamil militant groups to lay down their arms.
• Further India was to send a peacekeeping force, named the IPKF to Sri Lanka to enforce the disarmament and to watch over the regional council.
• The accord failed over the issue of representations. The result was that the LTTE now found itself engaged in military conflict with the Indian Army.

Areas of cooperation

Economic Relations

• India and Sri Lanka enjoy a vibrant and growing economic and commercial partnership, which has witnessed considerable expansion over the years.
• India and Sri Lanka are member nations of several regional and multilateral organizations such as the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Union and BIMSTEC.
• India is Sri Lanka’s third largest export destination, after the US and UK.
• India-Sri Lanka Free Trade Agreement (ISFTA): More than 60% of Sri Lanka’s exports enjoy the benefits of the agreement, which came into effect in March 2000.
  • Sri Lanka remains among the largest trade partners of India in the SAARC.

Development co-operation

• Line of Credit: India is active in a number of areas of development activity in Sri Lanka. About one-sixth of the total development credit granted by India is made available to Sri Lanka.
• Development Partnership: India’s development partnership with Colombo has always been demand-driven, with projects covering social infrastructure like education, health, housing, access to clean water and sanitation, besides industrial development.
• Concessional financing of about $2 billion has been provided to Sri Lanka through various Indian government-supported Lines of Credit across sectors for railway connectivity, infrastructure, etc.
• Foreign direct investment (FDI) from India amounted to around $ 1.7 billion over the years from 2005 to 2019.
• Fishing Sector: Projects for providing fishing equipment to the fishermen in the East of Sri Lanka and solar energy aided computer education in 25 rural schools in Eastern Sri Lanka are under consideration.
• Healthcare: India has supplied medical equipment to hospitals at Hambantota and Point Pedro, supplied 4 state-of-the-art ambulances to the Central Province etc.
• Tourism: Indian governments have also showed interest in collaborating with their Sri Lankan counterparts on building tourism between the two countries based on shared religious heritage.

Defense and strategic cooperation

• India and Sri Lanka conducts one of the largest joint Military exercises called ‘Mitra Shakti’. Both conducts joint naval exercise called ‘SLINEX’.
• India is the largest provider of defense training program to Sri Lankan soldiers and Defence officials
• India, Sri Lanka, and Maldives have signed trilateral maritime security cooperation in the Indian Ocean region.
  • The cooperation aims at improving surveillance, anti-piracy operations and reducing maritime pollution

Cultural relations

• India and Sri Lanka have a shared legacy of historical, cultural, religious, spiritual and linguistic ties that is more than 2,500 years old.
• In contemporary times, the Cultural Cooperation Agreement signed between the two governments forms the basis for periodic Cultural Exchange Programmes between the two countries.

People-to-people ties

• Buddhism is one of the strongest pillars connecting the two nations and civilizations from the time when the Great Indian Emperor Ashoka sent his children Arhat Mahinda and Their Sangamitta to spread the teachings of Lord Buddha at the request of King Devanampiya Tissa of Sri Lanka.
• Underlining the deep people-to-people connect and shared Buddhist heritage, the venerated relics of Lord Buddha from Kapilawasthu discovered in 1970 in India have been exhibited two times in Sri Lanka.
• India in 2020, announced USD 15 million grant assistance for protection and promotion of Buddhist ties between India and Sri Lanka.
  • It may be utilized for construction/renovation of Buddhist monasteries, education of young monks, strengthening engagement of Buddhist scholars and clergy, development of Buddhist heritage museums, etc.

Plummeting relations

• The ties began to worsen between the two since February, 2021 when Sri Lanka backed out from a tripartite partnership with India and Japan for its East Container Terminal Project at the Colombo Port, citing domestic issues.
  • However, later, the West Coast Terminal was offered under a public private partnership arrangement to Adani Ports and Special Economic Zones Ltd.
• Sri Lanka in a state of economic emergency: Sri Lanka is running out of foreign exchange reserves for essential imports like food. It has recently declared a state of economic emergency.
  • Covid Impact:
    • Sri Lanka increased policy rates after the covid pandemic in response to rising inflation in August 2021 caused by currency depreciation.
    • Tourism sector has suffered since the Easter Sunday terror attacks of 2019, followed by the pandemic.
    • Earnings fell from $3.6 billion in 2019 to $0.7 billion in 2020, even as FDI inflows halved from $1.2 billion to $670 million over the same period.
    • Sri Lanka’s fragile liquidity situation has put it at high risk of debt distress. Its public debt-to-GDP ratio was at 109.7% in 2020, and its gross financing needs remain high at 18% of GDP.
    • Its gross official reserves slipped to $2.8 billion, which is equivalent to just 1.8 months of imports. More than $2.7 billion of foreign currency debt will be due in the next two years.

Major outstanding issues

 Fishing disputes

• There have been several alleged incidents of Sri Lankan Navy personnel firing on Indian fishermen fishing in the Palk Strait, where India and Sri Lanka are only separated by 12 nautical miles.
• The issue started because of Indian fishermen having used mechanized trawlers, which deprived the Sri Lankan fishermen (including Tamils) of their catch and damaged their fishing boats.
• The Sri Lankan government wants India to ban use of mechanized trawlers in the Palk Strait region, and negotiations on this subject are undergoing.
• So far, no concrete agreement has been reached since India favors regulating these trawlers instead of banning them altogether.

Alleged political interference

• A media report from Colombo soon after Rajapaksa’s defeat in the January 8 elections of 2015 had said that an Indian Intelligence official was instrumental in uniting rival political parties — the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP) — against him during the polls.
• In October 2018, President Sirisena alleged that Indian intelligence agencies were plotting his assassination.

Katchatheevu Island

• It is an uninhabited island that India ceded to Sri Lanka in 1974 based on a conditional agreement called “Kachchativu island pact”.
• Later on, Sri Lanka declared Katchatheevu, a sacred land given the presence of a Catholic shrine.
• But Tamil Nadu claimed that Katchatheevu falls under the Indian Territory and Tamil fishermen have traditionally believed that it belongs to them and therefore want to preserve the right to fish there.

China factor

• Sri Lanka has a history of taking independent decisions even if they cause misgivings in India.
• In the period of low profile relationship between the two nations, Sri Lanka apparently started favoring China over India.
• China is Sri Lanka’s largest bilateral creditor: China’s loans to the Sri Lankan public sector amounted to 15% of the central government’s external debt, making China the largest bilateral creditor to the country.
  • Sri Lanka has increasingly relied on Chinese credit to address its foreign debt burden.
• China’s Exports surpasses India: China’s exports to Sri Lanka surpassed those of India in 2020 and stood at $3.8 billion.
  • India’s exports were $3.2 billion.
• Infrastructural Investment by China: Owing to Sri Lanka’s strategic location at the intersection of major shipping routes, China’s investment stands at $12 billion between 2006 and 2019.
  • Unable to service its debt, in 2017, Sri Lanka lost the unviable Hambantota port to China for a 99-year lease.
  • Sri Lanka passed the Colombo Port City Economic Commission Act, which provides for establishing a special economic zone around the port and also a new economic commission, to be funded by China.
  • The Colombo port is crucial for India as it handles 60% of India’s trans-shipment cargo.
• Shifting interests due to economic crisis: Sri Lanka’s economic crisis may further push it to align its policies with Beijing’s interests.
  • This comes at a time when India is already on a diplomatic tightrope with Afghanistan and Myanmar.
  • Other South Asian nations like Bangladesh, Nepal and the Maldives have also been turning to China to finance large-scale infrastructure projects.

Why is Sri Lanka important to India?

• India is Sri Lanka’s closest neighbor. Both sides have built upon a legacy of intellectual, cultural, religious and linguistic interaction.
• Sri Lanka has always been politically and economically important to India given its strategic geographical position in the Indian Ocean. The relationship has been marked by close contacts at all levels.
• Sri Lanka sits at the epicenter of the arc connecting the Persian Gulf to the Strait of Malacca. An island nation with an economy that’s mainly reliant on tourism and tea exports, Sri Lanka’s blessed geography puts it at a crucial juncture of the busy shipping lanes of the Indian Ocean.
• India also has a vital strategic stake in Sri Lanka for its own security interests. An unfriendly Sri Lanka or a Sri Lanka under influence of a power unfriendly to India would strategically discomfit India.
• For the Indian Navy, Sri Lanka is important as the switching of naval fleets from the Bay of Bengal to the Arabian Sea and vice versa requires the fleets to go around the island nation.
• Both countries share a common broad understanding on major issues of international interest and experience common social-political problems relating to community divides.

What does Sri Lanka expect from India?

• The humanitarian work by Indian agencies like supplies of medicines, doctors and providing refuge to more than 3 lakhs IDP’s during the decade-old civil war has created a sense of mutual cooperation among the countries natives.
• SL is one of the leading recipients of India’s Line of Credits.
• India has always rushed for the relief at the first signs of the rains and floods in SL recently. SL still commends the post-tsunami HADR relief operations carried out by India in the end-2004.
• India’s military, intelligence and security establishment has maintained its relations with its Sri Lankan counterpart, and both sides have been on the same page at all times.
• The security environment in the neighborhood will be discussed in light of the 21 April Easter Church bombings, and lessons learned from it.
• India is also the largest provider of defense training programs for Sri Lankan soldiers and Defence officials.

A greater role for India

 Gathering convergence towards SL

• Delhi needs to invest some political capital in resolving problems such as the long-standing dispute over fisheries.
• Beyond its objection to China’s BRI projects, Delhi, either alone or in partnership with like-minded countries like Japan, should offer sustainable terms for infrastructure development.
• Delhi also needs to contribute more to the development of Colombo’s defence and counter-terror capabilities.

Answering the Tamil Question

• The second structural factor shaping India’s relations with Sri Lanka is the Tamil question.
• Delhi has certainly learned the dangers of being drawn too deep into the domestic conflicts of neighboring countries.
• If the new government in Colombo can advance reconciliation with the Tamil minority, it will be easier for India to strengthen ties with the Gotabaya government.

No china factor indeed

• Labeling governments in Sri Lanka as “pro-China” or “pro-India” is irrelevant. It is evident that China’s economic and strategic salience in the subcontinent is not tied to the regime leadership.
• Previous Lankan President Maithripala Sirisena who considered as pro-India came to power criticizing the Chinese projects in Sri Lanka, but within two years into power, it extended full backing to the Chinese projects.

Harnessing the ray of hope

• Our challenges in Sri Lanka will continue, but we are off to a good start with the new government.
• The new president has made repeated statements that his government would like Sri Lanka to be a “neutral country” and that “Sri Lanka won’t do anything that will harm India’s interests.”
• Gotabaya was also critical of the previous government giving Hambantota Port on a 99-year lease to China.
• He went on to add that giving land as investment for developing a hotel or a commercial property was not a problem but the strategically important, economically important harbor, giving that is not acceptable.
• The Rajapaksas have acknowledged that India has not interfered in the recent elections.
• The first visit abroad by Gotabaya Rajapaksa to India has its own symbolic significance, translating into a diplomatic gesture his statement to the EAM that while China is a trade partner, India is a relative.

Way Forward

• Nurturing the Neighborhood First policy with Sri Lanka will therefore be important for India, albeit with due caution, to preserve its strategic interests in the Indian Ocean region.
• Regional platforms like the BIMSTEC, SAARC, SAGAR and the IORA could be leveraged to foster cooperation in common areas of interest like technology-driven agriculture and marine sector development, IT and communication infrastructure, renewable energy, and transport and connectivity.
• Both countries could also cooperate on enhancing private sector investments to create economic resilience.
• This stability in the Indian government should find synergy with the new Sri Lankan president policy which includes “neutrality” and “non-alignment” between major powers.
• Rather than focusing on building the case against China, New Delhi must step up its efforts to show what it is for.
• India can never match Beijing’s economic wherewithal to make a difference to Colombo’s developmental requirements.
• But it can carve out a niche role in some areas and also partner smartly with likeminded strategic partners like Japan to make an economic and strategic difference in Sri Lanka and make use of and leverage India’s soft power.

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Banking is considered to be the “Backbone of a Nation’s Economy”. It is the most leading part of the financial sector of the country as it is responsible for more than 70% of the funds that flow through the financial sector in the country.

Indian banking was more or less turned into a tool of state policy by bank nationalization in 1969. While our 1991 reforms did decentralize the allocation of capital overall, lending India’s economy some efficiency, the Centre retained much of its command of credit flows.

PSU banks are under dual control, with the RBI supervising the banking operations and the Finance Ministry handling ownership issues. Many committees had proposed bringing down the government stake in public banks below 51% — the Narasimham Committee proposed 33% and the P J Nayak Committee suggested below 50%.

Timeline of Structural and Technological Developments in the Banking Sector in India: 1955: SBI Act passed and Imperial Bank of India became State Bank of India 1959: State Bank of India (subsidiary banks) Act passed to create subsidiaries of SBI 1969: The government nationalized 14 major commercial banks 1975: Regional Rural Bank was conceptualized to serve the rural population 1987: HSBC first introduced ATM kiosk in Mumbai 1996: Local Area Banks were set up in the Union Budget to mobilize rural savings. 1991: Licenses given to 11 Private Sector Banks 1994: ICICI bank introduced net banking for retail customers in India 2000: Introduction of ATMs in India through countrywide BANCS network 2006: Cash Deposit Machines first introduced in India by ICICI bank, starting from western India 2008: Mobile banking through Mobile Apps introduced, pioneered by ICICI bank 2010: Cheque Truncation System (CTS) introduced, it eliminated a lot of paper and reduced cheque clearing time to a minimum 2014: Automatic Passbook Printing machines introduced in India 2015: Payments banks were given license to operate in India 2016: Prime Minister announced demonetization of Rs. 1,000/- and Rs. 500/- currency notes, led to a forced yet phenomenal increase in the use of non-cash i.e. electronic payments. 2017: EMV chip cards made mandatory in ATM-cum-Debit cards to enhance security.

Banking System in India

Importance of Private Sector Banks

The private sector banks play a vital role in the Indian economy. They indirectly motivate the public sector banks by offering healthy competition.

• Professional Management: The private sector banks help in introducing a high degree of professional management and marketing concept into banking. It helps the public sector banks as well to develop similar skills and technology.
• Creates Healthy Competition: The private sector banks provide a healthy competition on general efficiency levels in the banking system.
• Attracts Foreign Direct Investment: The private sector banks especially the foreign banks have much influence on the foreign investment in the country.
• Access to Foreign Capital Markets: The foreign banks in the private sector help the Indian companies and the government agencies to meet their financial requirements from international capital markets.
• Innovation in the Banking Sector: The private sector banks are always trying to innovate new product avenues (new schemes, services, etc.) and make the industries achieve expertise in their respective fields by offering quality service and guidance. This helps the public at large and they have a range of options to choose between.
• Introduction of new technology: With innovations comes new technologies in the banking sector and they lead the other banks in various new fields. For example, introduction of computerized operations, credit card business, ATM service, etc

What is the government plan on the Privatization of PSBs?

• During Union Budget 2020-21 presentations, the government announced a new policy for strategic disinvestment of public sector enterprises. This policy provides a clear roadmap for disinvestment in all non-strategic and strategic sectors.
• The Banking Sector falls under the strategic sector. The government aims to keep a bare minimum presence in the strategic sector.
• In 2019, after a massive consolidation exercise, the no. of PSBs reduced from 28 to 12. Recently the NITI Aayog consolidation plan left 6 PSBs out of the Privatization plan.
• The NITI Aayog suggested privatizing all the PSBs except the SBI, Union Bank, Punjab National Bank, Canara Bank, Indian Bank, and Bank of Baroda.
• Further, the government also decided to perform privatization of two PSBs in the next fiscal year.

Nationalization and Equitable growth

• Nationalization helped in promoting more equitable regional growth, and this is evident from RBI data.
• There were only 1,833 bank branches in rural areas in the country in 1969, which increased to 33,004 by 1995 and continued to grow over the next decades.
• Banking services also reduced the dependence on moneylenders in rural regions.
• Nationalized banking improved the working conditions of employees in the banking sector, as the state ensured higher wages, security of services, and other fringe benefits.
• As an institution, PSBs are vehicles of the Indian economy’s growth and development, and they have become the trustees of people’s savings and confidence.
• The PSBs played a huge role in making the country self-sufficient by supporting the green, blue, and dairy revolutions.
• They have also contributed significantly to infrastructural development.
• The PSBs pioneered the concept of ‘priority sector lending. This provided credit to certain priority sectors which were earlier deprived of credit such as housing, etc.
• The Differential Rate of Interest (DRI) loans are the brainchild of public sector banking. Under this poorest section of people will receive the loan at a very marginal interest rate.
• The PSBs extended loans to women’s self-help groups under various programs. This contributed to women’s empowerment in India.
• PSBs also funded rural infrastructure projects through the Rural Infrastructure Development Fund.
• The PSBs provided access to a formal banking network for all and facilitated financial inclusion in India.
• Democratization of Banking: Before nationalization, banks had been lending 67% of their funds to industry and virtually nothing to agriculture.
  • Also, the commercial banks couldn’t lend money to farmers because they were only present in less than 1% of villages.
  • Farmers were unable to get bank loans just when the Green Revolution was getting underway and they needed credit to buy the expensive inputs required to increase output.
  • Thus, nationalizing banks helped in the democratization of banking services of the masses.

Reasons for Privatizing Public Sector Banks

• Increasing NPAs: RBI data shows that that 9.3 per cent of the industry loan book for private sector banks was stressed by March 2017, as opposed to 28.8 per cent for PSBs.
  • As of end-March 2016, RBI data showed that public sector lenders accounted for over 90 per cent of the Rs. 5.5 lakh crore gross NPAs with banks.
• Poor Lending: PSBs have been criticized for poor lending decisions, inadequate risk controls, and bad governance.
• Previous reform measures have not yielded results: Years of capital injections and governance reforms have not been able to improve the financial position of in public sector banks significantly.
  • Many of them have higher levels of stressed assets than private banks, and also lag the latter on profitability, market capitalization and dividend payment record.
• Aligned with Long Term Goal: Privatization public sector banks will set the ball rolling for a long-term project that envisages only a handful of state-owned banks, with the rest either consolidated with strong banks or privatized.
• Reduces Government Burden: Privatization will free up the government, the majority owner, from continuing to provide equity support to the banks year after year. 
  • The government front-loaded Rs 70,000 crore into government-run banks in September 2019, Rs 80,000 crore in in FY18, and Rs 1.06 lakh crore in FY19 through recapitalization bonds.
  • It will be another step towards reducing the fiscal deficit and financing revenue expenditure through revenue receipts in the long term.
• Rationalization of Banks in Post-COVID Scenario: After the Covid-related regulatory relaxations are lifted, banks are expected to report higher NPAs and loan losses. 
  • This would mean the government would again need to inject equity into weak public sector banks. The government is trying to strengthen the strong banks and also minimize their numbers through privatization.
• Changed Approach to Financial Sector Problems: Privatization and proposal of setting up an asset reconstruction company entirely owned by banks, underline an approach of finding market-led solutions to challenges in the financial sector.
• Private Participation promotes innovation in market: Private Banks’ market share in loans has risen to 36% in 2020 from 21.26% in 2015, while public sector banks’ share has fallen to 59.8% from 74.28%. They have expanded the market share through new innovative products, latest technology, and better services.
• Efficiency, financial prudence and governance: There is a belief that the public sector equates to inefficiency and corruption, while private ownership automatically brings with it efficiency, financial prudence and governance.
  • Also, privatizing a few loss-making PSBs will ensure that market discipline forces them to rectify their strategy, and this will have a ripple effect on other PSBs.
  • Better financial performance is ensured when a strong financial institution is involved as a significant shareholder in privatization.

What factors aggravated NPAs in PSBs?

• During high growth period, FY07 to FY12, corporate groups has invested in mega projects in power, metals and infrastructure. They were funded by domestic banks.
• By FY13, with regulatory hurdles hitting some projects and scams stalling others, many projects failed to take off and these groups landed in a classic debt trap.
• Many companies took on more loans to manage their debts, which eventually turned into NPAs.
• Which in turn took on a five-fold expansion in their aggregate debt from  Rs. 1 lakh crore to Rs. 5.5 lakh crore (present value of NPAs).
• Many PSBs chairman were given high political pressures to sanction loans to the companies which were favorable to politicians.

Factors against Privatization of PSBs

• Undermining Social Welfare: Public banks open branches, ATMs, banking facilities, etc even in the non-profitable rural areas of India or the poorer sides where the possibility of getting big deposits or making money is less.
  • However, Private Banks are not inclined to do so and they may prefer opening such facilities mostly in megacities or urban areas.
  • If the corporate sector is allowed to dominate banking again, profit will become the prime motive rather than the desire to serve the public.
  • The government will have difficulty in providing low-cost financial services to rural and poor sections of society as the private may not like to extend its services to them.
• International Precedent: Most East Asian success stories have been underpinned by financial systems effectively controlled by governments.
  • On the other hand, the governments of western countries, where banking is largely in the hands of the private sector, have had to rescue private banks from bankruptcy.
  • The past history of private sector banks tells the failure. Before 1969, all banks, except the SBI, were in the private sector. Between 1947 and 1969, 559 banks failed.
• This would totally defeat the idea of inclusive banking as it is practiced now and was the guiding principle at the time of the nationalization of banks.
• Public sector banks are created out of public money. These entities are therefore duty-bound to extend all types of services to customers across categories. Privatization will impact this very root purpose.

Way forward

• We need a broad set of actions, some immediate and others over the medium-term and aimed at preventing the recurrence of such crises. Wholesale privatization of PSBs is thus not the answer to a complex problem.
• Overall risk management at PSBs needs to be taken to a higher level. This certainly requires the strengthening of PSB boards. We need to induct more high-quality professionals on PSB boards and compensate them better.
• In the case of banking, what is needed is increased autonomy for state-backed banks and strict regulatory oversight by the banking supervisor.
• The boards of state-backed banks should be independent of political influence.
• Managers should be held accountable for operational performance and there should be constant monitoring of targets, risk assessment, and credit controls.
• The clean-up of bank balance sheets and the overhaul of India’s archaic insolvency law are steps in the right direction, but they will only bear fruit if accompanied by improved governance and regulation.
• The Privatization of PSBs is not going to be easy, as it would involve building consensus amongst various stakeholders, including unions and parliamentarians. Further, Bank privatization, without strengthening regulatory controls and improving governance, won’t prevent fraud or curtail undue exposure to risk.

Conclusion

Privatization of banks is not a remedy to all solutions. With steps like Privatization of Banks, the Government should also focus on comprehensive governance reforms, resolution of NPAs, and creating a free market so that investment can be reinvigorated and wheels of the economy can again get back on track. Even though private sector banks have better balance sheets than PSBs, it is very important to consider that Privatization alone would not solve all of the problems faced by the sector. A better solution than privatization may well be giving PSBs autonomy to reform themselves and function free of political interference.

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“Justice delayed is democracy denied”

—John F Kennedy, US president

Recently, Parliament passed the Tribunal Reforms Bill, 2021, which seeks to lay down terms for service and tenure of members of various tribunals. The new law contained the same provisions as the Tribunal Reforms (Rationalization and Conditions of Service) Ordinance, 2021, which the Supreme Court struck down last month in a 2:1 verdict in Madras Bar Association versus Union of India saying it as unconstitutional as it interferes with the independence of the judiciary. This has triggered a fresh stand-off between the legislature and the judiciary over the powers of and limitations on lawmaking.

What are Tribunals?

• Tribunals are specialist judicial bodies that decide disputes in a particular area of law.
• They are institutions established for discharging judicial or quasi-judicial duties.
• The objective may be to reduce the caseload of the judiciary or to bring in subject expertise for technical matters.

Creation of Tribunals

In 1976, Articles 323A and 323B were inserted in the Constitution of India through the 42nd Amendment.

• Article 323A: This empowered Parliament to constitute administrative Tribunals (both at central and state level) for adjudication of matters related to recruitment and conditions of service of public servants.
• Article 323B: This specified certain subjects (such as taxation and land reforms) for which Parliament or state legislatures may constitute tribunals by enacting a law.
• Article 262: The Indian Constitution provides a role for the Central government in adjudicating conflicts surrounding inter-state rivers that arise among the state/regional governments.
• In 2010, the Supreme Court clarified that the subject matters under Article 323B are not exclusive, and legislatures are empowered to create tribunals on any subject matters under their purview as specified in the Seventh Schedule.

Tribunal Reforms Bill, 2021

(1) Dissolution of Existing Bodies

• The Bill seeks to dissolve certain appellate bodies and transfer their functions to other existing judicial bodies.

(2) Merging of Existing Bodies

• The Finance Act, 2017 merged tribunals based on domain.

(3) Search-cum-selection Committees

• The Chairperson and Members of the Tribunals will be appointed by the central government on the recommendation of a Search-cum-Selection Committee.
• The Committee will consist of:
  1. The Chief Justice of India, or a Supreme Court Judge nominated by him, as the Chairperson (with casting vote).
  2. Two Secretaries nominated by the central governments.
  3. The sitting or a retired Supreme Court Judge, or a retired Chief Justice of a High Court, and
  4. The Secretary of the Ministry under which the Tribunal is constituted (with no voting right).

(4) State Administrative Tribunals

• It will have separate search-cum-selection committees with the Chief Justice of the High Court of the concerned state, as the Chairman (with a casting vote).

(5) Eligibility and Term of Office

• The Bill provides for a four-year term of office (subject to the upper age limit of 70 years for the Chairperson, and 67 years for members).
• Minimum age requirement of 50 years for appointment of a chairperson or a member.

(6) Removal of Tribunal Members

• The central government shall, on the recommendation of the Search-cum-Selection Committee, remove from office any Chairperson or a Member.

To summarize the transfer of functions and other provisions of the Bill, consider the following table:

Transfer of functions of key appellate bodies as proposed under the Bill

Acts	Appellate Body	Proposed Entity
The Cinematograph Act, 1952	Appellate Tribunal	High Court
The Trade Marks Act, 1999	Appellate Board	High Court
The Copyright Act, 1957	Appellate Board	Commercial Court or the Commercial Division of a High Court*
The Customs Act, 1962	Authority for Advance Rulings	High Court
The Patents Act, 1970	Appellate Board	High Court
The Airports Authority of India Act, 1994	Airport Appellate Tribunal	The central government, for disputes arising from the disposal of properties left on airport premises by unauthorized occupants. High Court, for appeals against orders of an eviction officer.
The Control of National Highways (Land and Traffic) Act, 2002	Airport Appellate Tribunal	Civil Court#
The Geographical Indications of Goods (Registration and Protection) Act, 1999	Appellate Board	High Court

Amendments to the Finance Act, 2017:

• The Finance Act, 2017 merged tribunals based on domain.
• It also empowered the central government to notify rules on:

(i) Composition of search-cum-selection committees,

(ii) Qualifications of tribunal members, and

(iii) Their terms and conditions of service (such as their removal and salaries).

• The Bill removes these provisions from the Finance Act, 2017.
• Provisions on the composition of selection committees and term of office have been included in the Bill.
• Qualification of members and other terms and conditions of service will be notified by the central government.

What are the issues raised by the Supreme Court?

(1) Bypassing the usual legislative process

• The government has re-enacted the very same provisions struck down by the Court in the Madras Bar association case (2021).
• There was no discussion over the bill in the Parliament.
• It amounts to “unconstitutional legislative overriding” of the judgment passed by the SC.

(2) Government not following repetitive directions issued by the Court

• The Centre is not following the repeated directions issued by the Court to ensure the proper functioning of the Tribunals.
• The provisions in the ordinance regarding conditions of service and tenure of Tribunal Members and Chairpersons were already struck down by the Supreme Court.

(3) Issue over the Security of Tenure

• The Tribunals Reforms Act, 2021 bars appointments to tribunals of persons below 50 years of age.
• It undermines the length/security of tenure.

(4) Violates the principles of separation of powers and judicial independence

• Central Government can take a decision on the recommendations made by the selection Committee within three months from the date of such recommendations.
• Section 3(7) of the bill mandates the recommendation of a panel of two names by the search-cum selection committee.
• This violates the principles of separation of powers and judicial independence.

(5) Existence of a large number of vacancies in the Tribunals

• Currently, India has 16 tribunals including the National Green Tribunal, the Armed Forces Appellate Tribunal, and the Debt Recovery Tribunal, etc.
• Many of these tribunals suffer from crippling vacancies.
• Existence of large number of vacancies of Members and Chairpersons and the inordinate delay caused in filling them up has resulted in weakening of the tribunals.

(6) Detrimental to the Decision-making Process

• These cases will be transferred to High Courts or commercial civil courts immediately.
• The lack of specialization in regular courts could be detrimental to the decision-making process.

Government is yet to constitute the National Tribunals Commission (NTC)

• Further, the Centre is yet to constitute a National Tribunals Commission (NTC), an independent umbrella body to supervise the functioning of tribunals, appointment of and disciplinary proceedings against members, and to take care of administrative and infrastructural needs of the tribunals.
• The idea of an NTC was first mooted in L. Chandra Kumar v. Union of India (1997).
• Developing an independent oversight body for accountable governance requires a legal framework that protects its independence and impartiality.
• Therefore, the NTC must be established vide a constitutional amendment or be backed by a statute that guarantees it functional, operational and financial independence.
• As the Finance Ministry has been vested with the responsibility for tribunals until the NTC is constituted, it should come up with a transition plan. 

 Advantages of NTC

• The NTC would ideally take on some duties relating to administration and oversight.
• It could set performance standards for the efficiency of tribunals and their own administrative processes.
• It could function as an independent recruitment body to develop and operationalise the procedure for disciplinary proceedings and appointment of tribunal members.
• Giving the NTC the authority to set members’ salaries, allowances, and other service conditions, subject to regulations, would help maintain tribunals’ independence.

Inherent Issues with Indian Judiciary

The Constitution of India, through its Preamble, has guaranteed its citizens ‘ Justice’’—economic, political, and social. But even after 70 years of independence, achieving substantive justice for the vast majority of the citizens has remained a distant dream. In the specific area of the justice delivery system, India is faced with several problems relating to large backlogs and pendency of cases.

Despite the independence of the judiciary from the executive and legislative bodies, the Indian judicial system faces a lot of problems.

The major issues that the system faces are:

1. The pendency of cases.
2. Corruption.
3. Lack of transparency (particularly in the appointment of judges).
4. Under trials of the accused.
5. Lack of information and interaction among people and courts.

1) Pendency of cases

• India’s legal system has the largest backlog of pending cases in the world – as many as 30 million pending cases. Of them, over four million are High Court cases, 65,000 Supreme Court cases.
• This number is continuously increasing and this itself shows the inadequacy of the legal system.
• And also due to this backlog, most of the prisoners in India’s prisons are detainees awaiting trial.
• It is also reported that in Mumbai, India’s financial hub, the courts are burdened with age-old land disputes, which act as a hurdle in the city’s industrial development.

What led to the underperformance of the Indian Judiciary?

The issue of heavy arrears pending in the various courts of the country has been a matter of concern since the time of independence. The primary factors contributing to docket explosion and arrears as highlighted by Justice Malimath Committee report are as follows:

1. Population explosion
2. Litigation explosion
3. Hasty and imperfect drafting of legislation
4. Plurality and accumulation of appeals (Multiple appeals for the same issue)
5. Inadequacy of judge strength
6. Failure to provide adequate forums of appeal against quasi-judicial orders
7. Lack of priority for disposal of old cases (due to the improper constitution of benches)

2) Corruption in the judiciary

• Like any other institution of the Government, the Indian judicial system is also allegedly corrupt.
• There is no system of accountability. The media also do not give a clear picture on account of the fear of contempt.

3) Lack of transparency

• Another problem facing the Indian judicial system is the lack of transparency. It is seen that the Right to Information (RTI) Act is totally out of the ambit of the legal system.
• Thus, in the functioning of the judiciary, the substantial issues like the quality of justice and accountability are not known properly.
• In the recent past, there have been many debates regarding the Collegium system and the new system that the government wanted to introduce for the appointment of judges, the NJAC.

4) Hardships of the undertrials

• Right to a speedy trial is an integral part of the principles of fair trial and is fundamental to the international human rights discourse.
• In Indian jails, most of the prisoners are undertrials, which are confined to the jails until their case comes to a definite conclusion.
• In most of the cases, they end up spending more time in the jail than the actual term that might have had been awarded to them had the case been decided on a time and, assuming, against them.
• Plus, the expenses and pain and agony of defending themselves in courts is worse than serving the actual sentence. Undertrials are not guilty till convicted.

5) No interaction with society

• It is very essential that the judiciary of any country should be an integral part of the society and its interactions with society must be made regular and relevant.
• Lack of faith in a fair and swift judicial system creates a low-trust society.
• The rule of law and trust are central to enable people in large societies, who do not personally know each other, to live together peacefully and collaborate.

The inherent issues can be addressed with some simple measures like:

• For pendency, time-limits should be prescribed for all cases based on priorities. So setting time-standards is essential and it will vary for different cases, and also for different courts depending on their disposal-capacity. Alternative disputes resolution  (ADR) mechanisms should be promoted for out of court settlements.
• To imbibe transparency, a thorough understanding of the principle of independence of the judiciary and ensuring its accountability is the sole prerogative of the Supreme Court itself. The judiciary should come up with its own solution for transparent functioning and judicial appointments.
• To make trials speedy, the judiciary must scrutinize the sensitivity of a particular case before taking up for hearing. Fast track courts must be established for varieties of cases.

Way Forward

• Impartiality, independence, fairness and reasonableness in decision-making are the hallmarks of the judiciary.
• Speedy trial and quick justice are a fundamental right implicit in the guarantee of life and personal liberty enshrined in Article 21 of the Constitution.
• The effort to fast-track the judicial process is in a major policy tangle. The need for a new policy framework and governmental and judicial initiative are need of the hour.
• The executive and judiciary are the two pillars of Indian democracy and their independence is the most important thing for nation to grow and democracy to flourish and live long.
• Tribunals have shown immense potential in the past and to make most out of it, the government should look to strengthen them giving them more powers and resolving the issues faced by them like insufficient staff.
• The rapidly evolving field of “legal tech” enables us to use emerging technologies like digitization, process automation, data and analytics, AI to completely reimaging how a 21st century, the citizen-centric legal system should work.

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What is Samachar Manthan?

Samachar Manthan is our flagship program designed to help you develop a solid command on your newspaper reading and current affairs analyzing skills. We’re are also going to focus on imparting skills required to utilize current affairs. Since it builds your core, it is important for both Prelims and Mains. 

Program inclusion

1. Weekly 3+ hours video lecture

2. High-quality Notes and reference material

3. Membership to Samachar Manthan Habitat club – doubts,  discussion, and mentorship session.

4. Weekly Current Affairs based Mains Test (10 Questions) and Evaluation

5. Current Affairs Monthly Prelims Test package

6. Marathon Revision sessions on Habitat before Prelims and Mains

7. Frequent Google meet Sessions to check on Student’s Preparation status

8. Micro notes to help you make your notes.

Duration of the program:

This program will continue till UPSC Mains 2022

About the faculty leading this program:

Sajal Singh

Sajal sir is known to make Economics and IR as easy as a cakewalk. He scored one of the highest marks in GS in the 2017 UPSC exam. Under his guidance, more than 80 percent of Students qualified for UPSC interview 2020 in Smash mains Program.

Sudhanshu Mishra

Sudhanshu sir has firsthand experience of 3 mains and two interviews of UPSC. He has served in the defense ministry for 10 years with keen interests in regional and global geopolitics and has ample experience of various other competitive exams as well.

CONTACT: hello@civilsdaily.com or +91 8929987787

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India recently announced the launch of the National Hydrogen Mission (NHM) with an aim to cut down carbon emissions and increase the use of renewable sources of energy. The broad objective of the mission is to scale up Green Hydrogen production and utilization and to align India’s efforts with global best practices in technology, policy and regulation. Accordingly, the Government of India has allotted Rs 25 crore in the Union Budget 2021–22 for the research and development in hydrogen energy.

The NHM aims to leverage the country’s landmass and low solar and wind tariffs to produce low-cost green hydrogen and ammonia for export to Japan, South Korea, and Europe. In this regard, there are immense possibilities for India to collaborate with the Gulf Cooperation Council (GCC) countries that have also invested significantly in developing hydrogen as a future source of energy.

What is National Hydrogen Energy Mission?

• Focus: The main aim of the mission is on generation of hydrogen from green power resources and to link India’s growing renewable capacity with the hydrogen economy.
• Goal: India’s ambitious goal of 175 GW by 2022 got an impetus in the 2021-22 budget which allocated Rs. 1500 crore for renewable energy development and NHM.
• Sustainable energy and help in reduce import: The usage of hydrogen will not only help India in achieving its emission goals under the Paris Agreement, but will also reduce import dependency on fossil fuels.
• The mission will include all aspects including research and exploration of areas where hydrogen can be used.

Green Hydrogen Mission is not only essential to decarbonise heavy industries like steel and cement but it will equally clean electric mobility that doesn’t depend on rare minerals to be explored.

What is Hydrogen Energy?

• Hydrogen is an important source of energy since it has zero carbon content and is a non-polluting source of energy in contrast to hydrocarbons that have net carbon content in the range of 75–85 per cent.
• Hydrogen energy is expected to reduce carbon emissions that are set to jump by 1.5 billion tons in 2021.
• It has the highest energy content by weight and lowest energy content by volume.
• As per International Renewable Energy Agency (IRENA), Hydrogen shall make up 6 per cent of total energy consumption by 2050.
• Hydrogen energy is currently at a nascent stage of development, but has considerable potential for aiding the process of energy transition from hydrocarbons to renewable.

Hydrogen as an energy source:

• Hydrogen is the lightest (travels up in the atmosphere and rarely found in purity) and first element on the periodic table.
• Most hydrogen on Earth is bonded to oxygen in water and to carbon in live or dead and/or fossilized biomass. It can be created by splitting water into hydrogen and oxygen.
• At standard temperature and pressure, hydrogen is a nontoxic, nonmetallic, odorless, tasteless, colorless, and highly combustible diatomic gas.
• Hydrogen fuel is a zero-emission fuel when burned with oxygen. It can be used in fuel cells or internal combustion engines. It is also used as a fuel for spacecraft propulsion.
• Hydrogen can be sourced from natural gas, nuclear power, biomass, and renewable power like solar and wind.

Why is India focusing on Hydrogen to fulfill its energy demands?

• The enthusiasm about hydrogen has a simple reason: whether it’s used in a fuel cell or burned to create heat, wherever hydrogen replaces fossil fuels, it slows global warming.
• Inclusion of “Hydrogen” as an energy carrier in the future energy portfolio presents a unique opportunity to address emerging energy vectors, including power to gas, power to power, and power to mobility and even vehicle to grid applications.
• India remains committed to environmental and climate causes with a massive thrust on deploying renewable energy and energy efficiency measures. 
• In the past six years, India has increased its renewable power portfolio from 32 GW to almost 100 GW and is well on track to achieve 450 GW target of renewable energy generating capacity by 2030.
• Diversification of our energy basket would be the key lever enabling this transition. That’s why the emergence of hydrogen at the centre stage is a welcome development.

How Hydrogen can be produced?

• Commercially viable Hydrogen can be produced from –

1. Hydrocarbons including natural gas, oil and coal through processes like steam methane reforming, partial oxidation and coal gasification

2. Renewables like water, sunlight and wind through electrolysis and photolysis and other thermo-chemical processes.

• The current global demand for hydrogen is 70 million metric tons per year, more than 76 per cent of which is being produced from natural gas, 23 per cent comes from coal and the remaining is produced from electrolysis of water.

• Storage: Hydrogen can be stored in cryo-compressed tanks in gaseous form apart from being kept in liquefied and solid state.

Primarily uses

• Presently, Hydrogen is mostly used in industry sector including those dealing with oil refining, ammonia production, methanol production and steel production.
• It has huge potential in transportation sector as a direct replacement to fossil fuels.
• Shipping and aviation have limited low-carbon fuel options available and represent an opportunity for hydrogen-based fuels.

What Is Grey, Blue, And Green Of Hydrogen?

• Hydrogen has been color-coded based on the source of production and the emphasis is on the use of Green Hydrogen as it helps in reducing the emissions of greenhouse gases and increases the share of renewables in total energy consumption.

Grey Hydrogen

• The most common form of hydrogen, it’s created from fossil fuels and the process releases carbon dioxide which is not captured.
• There is also a gasification process which uses coal as a feedstock, creating brown hydrogen, which also releases carbon dioxide and can be put in the same category as grey.

Blue Hydrogen

• Blue hydrogen uses the same process as grey, except this time the carbon is captured and stored. This makes it much more environmentally friendly, but comes with added technical challenges and a big increase in cost.
• Carbon capture and storage (CCS) has been around a while, with the technology being used by heavy industry and power generation companies burning fossil fuels.
• The technology can capture up to 90% of the CO2 produced, so it isn’t perfect but clearly a massive improvement.

Green Hydrogen

Green hydrogen will be a unique energy vector that can enable deep decarbonization of many sectors such as transportation, industry, and power. One of the most common methods of generating green hydrogen is by electrolysis of pure water through electrolyzers.

We will discuss it in detail as it is very important for today’s world to rely on such a source of energy which can redefine the GHGs emission and sustainable use of energy resources while keeping global warming in check.

How is green hydrogen produced?

• In a world struggling to address the issue of climate change and growing carbon footprint, green hydrogen is being heralded as the future of energy.
• Unlike gray hydrogen, green hydrogen is fully renewable in both its source material and its energy supply. 
• For source material, green hydrogen today is typically generated from water through a process known as electrolysis, which uses an electric current to split water into its component molecules of hydrogen and oxygen. 
• This is done using a device called an electrolyzer, which utilizes a cathode and an anode (positively and negatively charged electrodes). 
• This process produces only oxygen – or steam – as a byproduct. 
• As for energy supply, to qualify as “green hydrogen,” the source of electricity used for electrolysis must derive from renewable power, such as wind or solar energy.
• Currently the production of green hydrogen is two or three times more expensive than blue hydrogen.

How can green hydrogen be used?

Hydrogen can be used in broadly two ways. It can be burnt to produce heat or fed into a fuel cell to make electricity.

• fuel-cell hydrogen electric cars and trucks
• container ships powered by liquid ammonia made from hydrogen
• “green steel” refineries burning hydrogen as a heat source rather than coal
• hydrogen-powered electricity turbines that can generate electricity at times of peak demand to help firm the electricity grid
• H-CNG can be used as a as a substitute for natural gas for cooking and heating in homes and automotive.

What makes Hydrogen one of the best options in disguise?

1. Its availability

2. Its efficiency: The energy in 2.2 pounds (1 kilogram) of hydrogen gas contains about the same as the energy in 1 gallon (6.2 pounds, 2.8 kilograms) of gasoline.

3. Its characteristics of a clean fuel: The only byproduct or emission that results from the usage of hydrogen fuel is water.

2H2 (g) + O2 (g) → 2H2O (g) + energy

With a wide range of methods to produce and use Hydrogen as a fuel, it thereby allows the impetus to a circular economy.

What are the challenges in producing Green Hydrogen?

India’s transition towards a green hydrogen economy (GHE) can only happen once certain key issues are addressed.

1. Supply chain issues: GHE hinges upon the creation of a supply chain, starting from the manufacture of electrolysers to the production of green hydrogen, using electricity from a renewable energy source.
2. Technology: Green hydrogen needs electrolysers to be built on a scale larger than we’ve yet seen.
3. Transportation and Storage: Either very high pressures or very high temperatures are required, both with their own technical difficulties. It is hazardous because of its low ignition energy and high combustion energy.
4. Risk to use as a fuel: Automotive fuels are highly inflammable, but a vehicle laden with hydrogen is likely to be more vulnerable in case of a major accident.
5. Cost: To become competitive, the price per kilogram of green hydrogen has to reduce to a benchmark of $2/kg. At these prices, green hydrogen can compete with natural gas.
6. Electricity: Creating green hydrogen needs a huge amount of electricity, which means an enormous increase in the amount of wind and solar power to meet global targets.
7. Lack of proper infrastructure, only 500 Hydrogen stations exist globally.
8. Only countable manufacturers are involved as market players in this technology.
9. Integration with other energy vectors using information and communication infrastructure.
10. Low user acceptance and social awareness.
11. Developing after-sales service for hydrogen technology.

Hydrogen Energy in India

• At present, bulk of the global energy consumption comes from hydrocarbons.
• Government as well as non-government funding agencies are engaged in R&D projects pertaining to hydrogen production, storage, utilisation, power generation and for transport applications.
• National Hydrogen Energy Board formed in 2003and in 2006 the Ministry of New and Renewable Energy laid out the National Hydrogen Energy Road Map identifying transport and power generation as two major green energy initiatives.
• By 2050 India intends to produce three-fourths of its hydrogen from renewable resources.
• R&D projects in India focus on improving the efficiency of water-splitting reaction, and finding newer materials, catalysts and electrodes to accelerate the reaction. 

What are the policy challenges?

• Economic sustainability: One of the biggest challenges faced by the industry for using hydrogen commercially is the economic sustainability of extracting green or blue hydrogen.
• Technological challenges: The technology used in production and use of hydrogen like Carbon Capture and Storage (CCS) and hydrogen fuel cell technology are at nascent stage.
• Cost Factor: These technologies are expensive which in turn increases the cost of production of hydrogen and will require a lot of investment which in turn add fiscal pressure on government.
• Higher Maintenance costs: Maintenance costs for fuel cells post-completion of a plant can be costly.
• Commercial sector’s role is crucial: The commercial usage of hydrogen as a fuel and in industries requires mammoth investment in R&D of such technology and infrastructure for production, storage, transportation and demand creation for hydrogen.
• Need for legal and administrative adherence, certification mechanisms, recommendations, and regulations for different components of the system.

Way forward

• India’s National Hydrogen Mission is a futuristic vision that can help the country not only cut down its carbon emissions but also diversify its energy basket and reduce external reliance.
• Hydrogen energy is at a nascent stage of development but has significant potential for realizing the energy transition in India.
• Having missed out on many technology-led innovations in the past, hydrogen presents India with the opportunity to lead the change. The parts of the puzzle just need to be put together.
• Green hydrogen has the potential to decarbonise the sectors, which currently have the largest carbon footprint in the world.
• With the capability to provide a zero-emission fuel, green hydrogen is well placed to be integrated into the transport sector and replace the use of coal and coke in the industrial sector.
• India’s transition towards a green hydrogen economy can be a testament to the world on the achievement of energy security, without compromising the goal of sustainable development.
• The GoI, therefore, must strongly pursue the objective of creating a GHE to make India a global manufacturing hub of green hydrogen and place itself at the top of the green hydrogen export market.

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The National Policy on Education was framed in 1986 and modified in 1992. Since then several changes have taken place that calls for a revision of the Policy.

The National Education Policy (NEP), 2020 is the first education policy of the 21st century and replaces the thirty-four-year-old National Policy on Education (NPE), 1986. Built on the foundational pillars of Access, Equity, Quality, Affordability, and Accountability, this policy is aligned to the 2030 Agenda for Sustainable Development and aims to transform India into a vibrant knowledge society and global knowledge superpower by making both school and college education more holistic, flexible, multidisciplinary, suited to 21st century needs and aimed at bringing out the unique capabilities of each student.

Backgrounder: Education Policies in India

Education Policy lays particular emphasis on the development of the creative potential of each individual. It is based on the principle that education must develop not only cognitive capacities -both the ‘foundational capacities’ of literacy and numeracy and ‘higher-order’ cognitive capacities, such as critical thinking and problem-solving — but also social, ethical, and emotional capacities and dispositions.

The implementation of previous policies on education has focused largely on issues of access and equity. The unfinished agenda of the National Policy on Education 1986, modified in 1992 (NPE 1986/92), is appropriately dealt with in this Policy. A major development since the last Policy of 1986/92 has been the Right of Children to Free and Compulsory Education Act 2009 which laid down legal underpinnings for achieving universal elementary education.

Evolution of Education Policy in India

1. University Education Commission (1948-49)
2. Secondary Education Commission (1952-53)
3. Education Commission (1964-66) under Dr D. S. Kothari
4. National Policy on Education, 1968
5. 42nd Constitutional Amendment, 1976- Education in Concurrent List
6. National Policy on Education (NPE), 1986
7. NPE 1986 Modified in 1992 (Programme of Action, 1992)
8. S.R. Subrahmanyam Committee Report (May 27, 2016)
9. K. Kasturirangan Committee Report (May 31, 2019)

Some of the major path-breaking policies and their features:

Earlier major Educational Policies (Year)	Key Features
1968	Based on the report and recommendations of the Kothari Commission (1964–1966)India’s first National Policy which called for a “radical restructuring” and proposed equal educational opportunities gave the “three-language formula” to be implemented in secondary education
1986	Introduced under Rajiv Gandhi’s Prime Ministership, expected to spend 6% of GDP on education for the 1st timeIt called for “special emphasis on the removal of disparities and to equalize educational opportunity” It called for a “child-centered approach” in primary education and launched “Operation Blackboard“Also called for the creation of the “rural university” model, based on the philosophy of Mahatma Gandhi
1992	1986 Policy modified in 1992 by the P.V. Narasimha Rao government laid down a Three – Exam Scheme: JEE/AIEEE/State EEE (Engineering Entrance Exam)

The National Education Policy, 2020

• It marks the fourth major policy initiative in education since Independence.
• The last one has undertaken a good 34 years ago and modified in 1992.
• Based on two committee reports and extensive nationwide consultations, NEP 2020 is sweeping in its vision and seeks to address the entire gamut of education from preschool to doctoral studies, and from professional degrees to vocational training.

Salient features of the NEP 2020

School Education

(1) Ensuring Universal Access at all levels of school education

• Ensuring universal access: NEP 2020 emphasizes on ensuring universal access to school education at all levels- preschool to secondary.
• Bring back dropouts into the mainstream: Infrastructure support, innovative education centers to bring back dropouts into the mainstream, tracking of students and their learning levels, facilitating multiple pathways to learning involving both formal and non-formal education modes, association of counselors or well-trained social workers with schools, open learning for classes 3,5 and 8 through NIOS and State Open Schools, secondary education programs equivalent to Grades 10 and 12, vocational courses, adult literacy and life-enrichment programs are some of the proposed ways for achieving this.
• About 2 crore out of school children will be brought back into main stream under NEP 2020.

(2) Early Childhood Care & Education with new Curricular and Pedagogical Structure

• Emphasis on Early Childhood Care and Education: The 10+2 structure of school curricula is to be replaced by a 5+3+3+4 curricular structure corresponding to ages 3-8, 8-11, 11-14, and 14-18 years respectively.  
• This will bring the hitherto uncovered age group of 3-6 years under school curriculum, which has been recognized globally as the crucial stage for development of mental faculties of a child.
• The new system will have 12 years of schooling with three years of Anganwadi/ pre schooling.
• NCERT will develop a National Curricular and Pedagogical Framework for Early Childhood Care and Education (NCPFECCE) for children up to the age of 8.
• The planning and implementation of ECCE will be carried out jointly by the Ministries of HRD, Women and Child Development (WCD), Health and Family Welfare (HFW), and Tribal Affairs.

(3) Attaining Foundational Literacy and Numeracy

• National Mission on Foundational Literacy and Numeracy: Recognizing Foundational Literacy and Numeracy as an urgent and necessary prerequisite to learning, NEP 2020 calls for setting up of a National Mission on Foundational Literacy and Numeracy by MHRD.
• States will prepare an implementation plan for attaining universal foundational literacy and numeracy in all primary schools for all learners by grade 3 by 2025.
• A National Book Promotion Policy is to be formulated.

(4) Reforms in school curricula and pedagogy

• Aim: It aims for holistic development of learners by equipping them with the key 21st century skills, reduction in curricular content to enhance essential learning and critical thinking and greater focus on experiential learning.
• Increased flexibility and choice of subjects with students: There will be no rigid separations between arts and sciences, between curricular and extra-curricular activities, between vocational and academic streams.
• Vocational education will start in schools from the 6th grade, and will include internships.
• National Curricular Framework for School Education, NCFSE 2020-21 will be developed by the NCERT.

(5) Multilingualism and the power of language

• Emphasis on mother tongue as the medium of instruction: The policy has emphasized mother tongue/local language/regional language as the medium of instruction at least till Grade 5, but preferably till Grade 8 and beyond.

• Convenience of optional language:
• Sanskrit to be offered at all levels of school and higher education as an option for students, including in the three-language formula.
• Other classical languages and literatures of India also to be available as options. No language will be imposed on any student.
• Students to participate in a fun project/activity on ‘The Languages of India’, sometime in Grades 6-8, such as, under the ‘Ek Bharat Shrestha Bharat’ initiative.
• Several foreign languages will also be offered at the secondary level.
• Indian Sign Language (ISL) will be standardized across the country, and National and State curriculum materials developed, for use by students with hearing impairment.

(6) Assessment Reforms

• Shift from summative assessment to regular and formative assessment which is more competency-based, promotes learning and development, and tests higher-order skills, such as analysis, critical thinking, and conceptual clarity.
• Revamping Board Exams: Board exams for Grades 10 and 12 will be continued, but redesigned with holistic development as the aim.
• A new National Assessment Centre, PARAKH (Performance Assessment, Review, and Analysis of Knowledge for Holistic Development), will be set up as a standard-setting body .

(7) Equitable and Inclusive Education

• Ensuring complete coverage: NEP 2020 aims to ensure that no child loses any opportunity to learn and excel because of the circumstances of birth or background.
• Special emphasis on Socially and Economically Disadvantaged Groups (SEDGs) which include gender, socio-cultural, and geographical identities and disabilities.  
• Setting up of Gender Inclusion Fund and also Special Education Zones for disadvantaged regions and groups.
• Enabling disables: Children with disabilities will be enabled to fully participate in the regular schooling process from the foundational stage to higher education.
• It will be done withwith support of educators with cross disability training, resource centers, accommodations, assistive devices, appropriate technology-based tools and other support mechanisms tailored to suit their needs.
• Bal Bhavans: Every state/district will be encouraged to establish “Bal Bhavans” as a special daytime boarding school, to participate in art-related, career-related, and play-related activities.
• Free school infrastructure can be used as Samajik Chetna Kendras.

(8) Robust Teacher Recruitment and Career Path

• Robust, transparent processes for teachers’ recruitment: Teachers will be recruited through robust, transparent processes.
• Merit based promotions with a mechanism for multi-source periodic performance appraisals and available progression paths to become educational administrators or teacher educators.
• National Professional Standards for Teachers (NPST) will be developed by the National Council for Teacher Education by 2022, in consultation with NCERT, SCERTs, teachers and expert organizations from across levels and regions.

(9) School Governance

• Schools can be organized into complexes or clusters which will be the basic unit of governance and ensure availability of all resources including infrastructure, academic libraries and a strong professional teacher community.

(10) Standard-setting and Accreditation for School Education

• NEP 2020 envisages clear, separate systems for policy making, regulation, operations and academic matters.  States/UTs will set up independent State School Standards Authority (SSSA).
• The SCERT will develop a School Quality Assessment and Accreditation Framework (SQAAF) through consultations with all stakeholders.

Higher Education

(1) Increase GER to 50 % by 2035

• NEP 2020 aims to increase the Gross Enrolment Ratio in higher education including vocational education from 26.3% (2018) to 50% by 2035. 3.5 Crore new seats will be added to Higher education institutions.

(2) Holistic Multidisciplinary Education

• Broad based multi-disciplinary, holistic UG education with flexible curricula, creative combinations of subjects, integration of vocational education and multiple entry and exit points with appropriate certification.
• An Academic Bank of Credit is to be established for digitally storing academic credits earned from different HEIs so that these can be transferred and counted towards final degree earned.
• Multidisciplinary Education and Research Universities (MERUs), at par with IITs, IIMs, to be set up as models of best multidisciplinary education of global standards in the country.
• The National Research Foundation will be created as an apex body for fostering a strong research culture and building research capacity across higher education.

(3) Regulation

• Higher Education Commission of India (HECI) will be set up as a single overarching umbrella body the for entire higher education, excluding medical and legal education.
• It will function through faceless intervention through technology, & will have powers to penalize HEIs not conforming to norms and standards.
• Public and private higher education institutions will be governed by the same set of norms for regulation, accreditation and academic standards.

(4) Rationalized Institutional Architecture

• Higher education institutions will be transformed into large, well resourced, vibrant multidisciplinary institutions providing high quality teaching, research, and community engagement.
• The definition of university will allow a spectrum of institutions that range from Research-intensive Universities to Teaching-intensive Universities and Autonomous degree-granting Colleges. 
• Affiliation of colleges is to be phased out in 15 years and a stage-wise mechanism is to be established for granting graded autonomy to colleges.

(5) Motivated, Energized, and Capable Faculty

• Recommendations for motivating, energizing, and building capacity of faculty thorugh clearly defined, independent, transparent recruitment.
• Freedom to design curricula/pedagogy, incentivizing excellence, movement into institutional leadership.

(6) Teacher Education

• National Curriculum Framework for Teacher Education, NCFTE 2021: A new and comprehensive framework will be formulated by the NCTE in consultation with NCERT.
• By 2030, the minimum degree qualification for teaching will be a 4-year integrated B.Ed. degree.

(7) Mentoring Mission

• A National Mission for Mentoring will be established, with a large pool of outstanding senior/retired faculty – including those with the ability to teach in Indian languages – who would be willing to provide short and long-term mentoring/professional support to university/college teachers.

(8) Financial support for students

• Efforts will be made to incentivize the merit of students belonging to SC, ST, OBC, and other SEDGs.
• The National Scholarship Portal will be expanded to support, foster, and track the progress of students receiving scholarships.
• Private HEIs will be encouraged to offer larger numbers of free ships and scholarships to their students.

(9) Open and Distance Learning

• Measures such as online courses and digital repositories, funding for research, improved student services, credit-based recognition of MOOCs, etc., will be taken to ensure it is at par with the highest quality in-class programmes.

(10) Online Education and Digital Education

• A dedicated unit for building of digital infrastructure, digital content and capacity building will be created in the MHRD to look after the e-education needs of both school and higher education.

(11) Technology in education

• National Educational Technology Forum (NETF): An autonomous body will be created to provide a platform for the free exchange of ideas on the use of technology to enhance learning, assessment, planning, and administration.

(12) Professional Education

• All professional education will be an integral part of the higher education system.
• Stand-alone technical universities, health science universities, legal and agricultural universities etc will aim to become multi-disciplinary institutions.

(13) Adult Education

• Policy aims to achieve 100% youth and adult literacy.

(14) Financing Education

• The Centre and the States will work together to increase the public investment in Education sector to reach 6% of GDP at the earliest.

Positive Aspects of Higher Education in Regional Language

• Subject-Specific Improvement: Several studies in India and other Asian countries suggest a positive impact on learning outcomes for students using a regional medium rather than the English medium.
• Performance in science and math, in particular, has been found to be better among students studying in their native language compared to English.
• Higher Rates of Participation: Studying in the native language results in higher attendance, motivation and increased confidence for speaking up among students and improved parental involvement and support in studies due to familiarity with the mother tongue.
• Additional Benefits for the Less-Advantaged: This is especially relevant for students who are first-generation learners (the first one in their entire generation to go to school and receive an education) or the ones coming from rural areas, who may feel intimidated by unfamiliar concepts in an alien language.
• Increase in Gross-Enrollment Ratio (GER): This will help provide quality teaching to more students and thus increase Gross Enrolment Ratio (GER) in higher education.
• Promotes Linguistic Diversity: It will also promote the strength, usage, and vibrancy of all Indian languages.
• It would also help prevent language-based discrimination.

Issues with the policy

1) Lack of integration

• In both the thinking, and in the document, there are lags, such as the integration of technology and pedagogy.
• There are big gaps such as lifelong learning, which should have been a key element of upgrading to emerging sciences.

2) Language barrier

• There is much in the document ripe for debate – such as language. The NEP seeks to enable home language learning up to class five, in order to improve learning outcomes.
• Sure, early comprehension of concepts is better in the home language and is critical for future progress. If the foundations are not sound, learning suffers, even with the best of teaching and infrastructure.
• But it is also true that a core goal of education is social and economic mobility, and the language of mobility in India is English.

3) Multilingualism debate

• Home language succeeds in places where the ecosystem extends all the way through higher education and into employment. Without such an ecosystem in place, this may not be good enough.
• The NEP speaks of multilingualism and that must be emphasised. Most classes in India are de facto bilingual.
• Some states are blissfully considering this policy as a futile attempt to impose Hindi.

4) Lack of funds

• According to Economic Survey 2019-2020, the public spending (by the Centre and the State) on education was 3.1% of the GDP.
• A shift in the cost structure of education is inevitable.
• While funding at 6% of GDP remains doubtful, it is possible that parts of the transformation are achievable at a lower cost for greater scale.

5) A move in haste

• The country is grappled with months of COVID-induced lockdowns.
• The policy had to have parliamentary discussions; it should have undergone a decent parliamentary debate and deliberations considering diverse opinions.

6) Overambitious

• All aforesaid policy moves require enormous resources. An ambitious target of public spending at 6% of GDP has been set.
• This is certainly a tall order, given the current tax-to-GDP ratio and competing claims on the national exchequer of healthcare, national security and other key sectors.
• The exchequer itself is choked meeting the current expenditure.

7) Pedagogical limitations

• The document talks about flexibility, choice, experimentation. In higher education, the document recognizes that there is a diversity of pedagogical needs.
• If it is a mandated option within single institutions, this will be a disaster, since structuring a curriculum for a classroom that has both one-year diploma students and four-year degree students’ takes away from the identity of the institution.

8) Institutional limitations

• A healthy education system will comprise of a diversity of institutions, not a forced multi-disciplinarily one.
• Students should have a choice for different kinds of institutions.
• The policy risks creating a new kind of institutional isomorphism mandated from the Centre.

9) Issues with examinations

• Exams are neurotic experiences because of competition; the consequences of a slight slip in performance are huge in terms of opportunities.
• So the answer to the exam conundrum lies in the structure of opportunity. India is far from that condition.
• This will require a less unequal society both in terms of access to quality institutions, and income differentials consequent upon access to those institutions.

 Way Forward

This ambitious policy has a cost to be paid and the rest of the things dwell on its implementation in letter and spirit.

• Implementation of the spirit and intent of the Policy is the most critical matter.
• It is important to implement the policy initiatives in a phased manner, as each policy point has several steps, each of which requires the previous step to be implemented successfully.
• Prioritization will be important in ensuring optimal sequencing of policy points, and that the most critical and urgent actions are taken up first, thereby enabling a strong base.
• Next, comprehensiveness in implementation will be key; as this Policy is interconnected and holistic, only a full-fledged implementation, and not a piecemeal one, will ensure that the desired objectives are achieved.
• Since education is a concurrent subject, it will need careful planning, joint monitoring, and collaborative implementation between the Centre and States.
• Timely infusion of requisite resources – human, infrastructural, and financial – at the Central and State levels will be crucial for the satisfactory execution of the Policy.
• Finally, careful analysis and review of the linkages between multiple parallel implementation steps will be necessary in order to ensure effective dovetailing of all initiatives.

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The government of India recently unveiled a four-year (FY 2022-25) National Monetization Pipeline (NMP) worth an estimated Rs 6 lakh crore. It aims to unlock value in brownfield projects by engaging the private sector, transferring to them revenue rights and not ownership in the projects, and using the funds so generated for infrastructure creation across the country.

The NMP has been announced to provide a clear framework for monetization and give potential investors a ready list of assets to generate investment interest.

What is monetization?

• In a monetization transaction, the government is basically transferring revenue rights to private parties for a specified transaction period in return for upfront money, a revenue share, and commitment of investments in the assets.
• Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are the key structures used to monetize assets in the roads and power sectors.
• These are also listed on stock exchanges, providing investors liquidity through secondary markets as well.
• While these are a structured financing vehicle, other monetization models on PPP (Public Private Partnership) basis include:
  1. Operate Maintain Transfer (OMT),
  2. Toll Operate Transfer (TOT), and
  3. Operations, Maintenance & Development (OMD).
• OMT and TOT have been used in highways sector while OMD is being deployed in case of airports.

Global Instances

• The monetisation of assets is not a new concept. A number of countries including the United States, Australia, Canada, France and China have effectively utilized this policy.

Indian Scenario

• In India, the concept was suggested by a committee led by Vijay Kelkar on the roadmap for fiscal consolidation in 2012.
• The committee had suggested that the government start monetization as a key instrument to raise resources for development.
• It asked the government to use these resources for financing infrastructure needs

What is the difference between Greenfield and Brownfield projects?

• Greenfield and brownfield investments are two types of foreign direct investment.
• With greenfield investing, a company will build its own, brand new facilities from the ground up.
• Brownfield investment happens when a company purchases or leases an existing facility.
• In a greenfield investment, parent company opens a subsidiary in another country. Instead of buying an existing facility in that country, the company begins a new venture by constructing new facilities in that country.
• Brownfield investments, an entity purchases or leases an existing facility to begin new production.
• Companies may consider this approach a great time and money saver since there is no need to go through the motions of building a brand new building.

‘Infrastructure creation’

• Unlike privatization, which seeks to sell state-owned companies to the private sector, or disinvestment, in which shares of public sector units are sold to non-state firms or individuals, the National Monetisation Pipeline seeks to do something else.
• The NMP is talking about brownfield assets where investment has already been made, which are either languishing, not fully monetized or remaining underutilized.
• So, by bringing in private participation, monetization gets better, and the resource can be put it into further infrastructure creation. The idea is also known as “asset recycling”.
• Essentially, the government gives over operational duties and revenue rights to a private operator for assets like roads, power transmission lines, stadiums, warehouses and more.
• This allows government to build an ambitious infrastructure plan, without adding to existing government debt.
• A key aspect of this approach is that the government is not handing over ownership of the underlying asset.

Unlocking capital

Another difference from other privatization efforts, which often focus on loss-making public sector units, the effort here is to pick ones that aren’t necessarily struggling, on the assumption that the private sector can unlock efficiencies that the government cannot.

By keeping ownership and only transferring revenue rights for a set period of time, the government is essentially taking a fresh look at Public-Private Partnership model, commonly known as PPP.

What is the government’s plan?

• Roads, railways and power sector assets will comprise over 66% of the total estimated value of the assets to be monetized.
• The remaining upcoming sectors include telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.
• In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh crore are envisaged for rollout in the current financial year.
• The NMP will run co-terminus with the National Infrastructure Pipeline of Rs 100 lakh crore announced in December 2019.

What is the National Infrastructure Pipeline (NIP)? NIP includes economic and social infrastructure projects. During the fiscals 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India. It has outlined plans to invest more than ₹102 lakh crore on infrastructure projects by 2024-25, with the Centre, States and the private sector to share the capital expenditure in a 39:39:22 formula.

• The estimated amount to be raised through monetization is around 14% of the proposed outlay for the Centre of Rs 43 lakh crore under NIP.
• NMP aims to provide a medium term roadmap of the programme for public asset owners; along with visibility on potential assets to the private sector.
• An empowered committee has been constituted to implement and monitor the Asset Monetization programme. The Core Group of Secretaries on Asset Monetization (CGAM) will be headed by the Cabinet Secretary.
• Real time monitoring will be undertaken through the asset monetization dashboard. The government will closely monitor the NMP progress, with yearly targets and a monthly review by an empowered committee 
•  The top 5 sectors (by estimated value) capture ~83% of the aggregate pipeline value. These include: Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%)

What is the list of assets?

• The assets on the NMP list include:
  1. 26,700 km of roads, railway stations, train operations and tracks,
  2. 2,8608 Ckt km worth of power transmission lines,
  3. 6 GW of hydroelectric and solar power assets,
  4. 2.86 lakh km of fiber assets and 14,917 towers in the telecom sector,
  5. 8,154 km of natural gas pipelines and
  6. 3,930 km of petroleum product pipelines.
• In the roads sector, the government has already monetized 1,400 km of national highways worth Rs 17,000 crore. Another five assets have been monetised through a PowerGrid InvIT raising Rs 7,700 crore.
• Also, 15 railway stations, 25 airports and the stake of central government in existing airports and 160 coal mining projects, 31 projects in 9 major ports, 210 lakh MT of warehousing assets, 2 national stadiums and 2 regional centres, will be up for monetization.
• Redevelopment of various government colonies and hospitality assets including ITDC hotels is expected to generate Rs 15,000 crore.

What are the merits of the NMP?

• Resource Efficiency: Resources are scarce with the government. Proper and effective channelization of them is very important. NMP leads to optimum utilization of government assets.
• Keeping Fiscal Deficit at check: The revenue accrued by leasing out these assets to private sector will help fund new capital expenditure without pressuring government finances.
• Streamlining the Process: Monetization of assets is not new, but the government has finally organized it in baskets, set targets, identified impediments, and put in place a framework. 
• Mobilizing Private Capital: Since the assets are de-risked as it is brownfield projects, it will help in mobilizing private capital (both domestic & foreign). Global investors have revealed that they are keen to participate in projects to be monetized through a transparent/competitive bidding process.
• Less Resistance from the opposition: The plan involves leasing to private sector without transferring ownership or resorting to fire sale of assets. Therefore, it is going to face less resistance from the opposition.

• Cooperative Federalism: To encourage states to pursue monetization, the Central government has already set aside Rs 5,000 crore as incentive. 
  • If a state government divests its stake in a PSU, the Centre will provide a 100 per cent matching value of the divestment to the state. 
  • If a state lists a public sector undertaking in the stock markets, the Central government will give it 50 per cent of that amount raised through listing. 
  • If a state monetizes an asset, it will receive 33% of the amount raised from monetization from the Centre.
• Promoting Public-Private Partnership: The end objective of NMP is to enable ‘Infrastructure Creation through Monetization’ wherein the public and private sector collaborate, each excelling in their core areas of competence, so as to deliver socio-economic growth and quality of life to the country’s citizens.

What are the challenges associated?

(1) Lack of identifiable revenue streams in various assets and low interest among investors in national highways below four lanes.

• Monetization potential of toll road assets is limited by the percentage of stretches having four-lane and above configuration.

(2) Level of capacity utilization in gas and petroleum pipeline networks and regulated tariffs in power sector assets

(3) Dispute resolution mechanism

(4) Uncertainty of proper execution of the plan

(5) Slow pace of privatization in government companies including Air India and BPCL, and less-than-encouraging bids in the recently launched PPP initiative in trains, indicate that attracting private investors’ interest is not that easy.

(6) Asset-specific challenges such as the presence of an identifiable revenue stream. This is specifically relevant to the railway sector, which has seen limited PPP success as a mode of project delivery.

• Konkan Railway, for instance, has multiple stakeholders, including state governments, which own stake in the entity. Creating an effective monetization transaction structure could be a bit challenging in this case.

Way Forward

• Execution is the Key: While the government has tried to address many challenges, owing to infrastructure development in the NMP framework, execution of the plan remains key to its success.
• Dedicated and effective Dispute Redressal Mechanism: Looking at the track record of previous efforts of government to lure the investors and history of long pending cases in courts, there is a need for an efficient dispute resolution mechanism.
• Key to success lies in Multi-stakeholder approach: The success of the infrastructure expansion plan would depend on other stakeholders playing their due role. The role of State governments is going to be very important.

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On India’s 75th Independence Day, Prime Minister Narendra Modi announced that the Centre will launch ‘PM Gati Shakti Master Plan’, a Rs. 100 lakh-crore project for developing ‘holistic infrastructure’ and to and give an integrated pathway to country’s economy.

What are the focus areas of the project?

• Gati Shakti will be a National Infrastructure Master Plan for our country
• Leveling up local manufacturers: The Gati Shakti plan will help raise the global profile of local manufacturers and help them compete with their counterparts worldwide.
• Economic zones: It also raises possibilities of new future economic zones. India needs to increase both manufacturing and exports.
• Infrastructure development: Infrastructure development has the ability to create a multiplier effect with every rupee invested, yielding much higher returns.
• Employment opportunity: To act as a source of employment opportunities for the youth in future.

Why need such a plan?

• The push for infrastructure is in line with the government’s efforts to step up capital expenditure in infrastructure to promote economic growth.
• Infrastructure development has the ability to create a multiplier effect with every rupee invested, yielding much higher returns.
• A similar plan, called the National Infrastructure Pipeline was previously announced.

Let us learn about the National Infrastructure Pipeline in short.

What is the National Infrastructure Pipeline (NIP)?

• NIP includes economic and social infrastructure projects.
• During the fiscals 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India.
• It has outlined plans to invest more than ₹102 lakh crore on infrastructure projects by 2024-25, with the Centre, States and the private sector to share the capital expenditure in a 39:39:22 formula.

What are the key benefits of NIP?

• Economic: Well-planned NIP will enable more infra projects, grow businesses, create jobs, improve ease of living, and provide equitable access to infrastructure for all, making growth more inclusive.
• Government: Well-developed infrastructure enhances the level of economic activity, creates additional fiscal space by improving the revenue base of the government, and ensures the quality of expenditure focused in productive areas.
• Developers: Provides a better view of project supply, provides time to be better prepared for project bidding, reduces aggressive bids/ failure in project delivery, ensures enhanced access to sources of finance as a result of increased investor confidence.
• Banks/financial institutions (F1s)/investors: Builds investor confidence as identified projects are likely to be better prepared, exposures less likely to suffer stress given active project monitoring, thereby less likelihood of NPAs.

Why the infra sector is given more emphasis these days?

• Pandemic induces Slowdown: Slowdown due to the pandemic is a good time to catch up on infrastructure capacity and increase the expenditure.
• Multiplier effect on job creation and economy: Infrastructure spending is a critical component of the fiscal stimulus as it has multiplier effects on the economy and job creation.
• Inclusive Growth: Quality infrastructure is important not only for faster economic growth but also to ensure inclusive growth and uplifting standard of living of people.
• Easy access for essential Social Services: Lack of adequate infrastructure not only holds a lack of economic development, but it also causes additional costs in terms of time, effort and money of the people for accessing essential social services.

What are the recent projects included in the Infrastructural planning?

• Sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to around 71% of the projected investments.
• The projects will also be spread across sectors such as irrigation, mobility, education, health, water and the digital sector.

What are the key infrastructure sectors which have a massive role in India’s economic development?

(1) Green Infrastructure:

• Green infrastructure refers to natural or semi-natural ecosystems that provide water resource management by introducing the natural water cycle into urban environments.
• It provides effective measures to manage urban flooding, water supply and quantity regulation, at the same time generating multiple environmental benefits.
• India will benefit if investments are steered towards green-infrastructure projects.
• Green bonds can provide a long-term source of debt capital for renewable infrastructure projects.
• Germany is one country that has been a nest for the innovation and application of green technologies. This can provide a useful lesson for India.
• By reducing local temperatures and shading building surfaces, green infrastructure reduces the cooling demand of buildings, thus cutting energy needs.

(2) Logistics Sector:

• The logistics sector needs to be improved because of its impact on improving competitiveness in the economy.
• Improving logistics sector has huge implication on exports and it is estimated that a 10% decrease in indirect logistics cost can increase 5-8% of exports.
• The Indian logistics sector provides livelihood to 22 million-plus people and improving the sector would facilitate a 10% decrease in indirect logistics cost, leading to a growth of 5-8% in exports.
• The worth of Indian logistics market would be around US$ 215 billion in next two years compared to about US$ 160 billion currently. Today, the Indian logistics sector is a sunshine industry and is going through a phase of transformation.
• key objectives for logistics in India, to be achieved in the next five years:
  1. Creating a single point of reference for all logistics and trade facilitation matters in the country which will also function as a knowledge and information sharing platform
  2. Driving logistics cost as a % of GDP down from estimated current levels of 13-14% to 10% in line with best-in-class global standards and incentivize the sector to become more efficient by promoting integrated development of logistics

(3) Social Infrastructure:

• Social services include, education, sports, art and culture; medical and public health, family welfare, water supply and sanitation, housing; urban development; welfare of Schedule Castes (SCs), Schedule Tribes (STs) and Other Backward Castes (OBCs), labor and labor welfare; social security and welfare, nutrition, relief on account of natural calamities etc. Expenditure on ‘Education’ pertains to expenditure on ‘Education, Sports, Arts and Culture’.
• India is committed to achieve these SDGs and a strong social infrastructure is key to achieve them.
• The government has been focusing on provisioning of assets such as schools, institutes of higher learning, hospitals, access to sanitation, water supply, road connectivity, affordable housing, skills and livelihood opportunities.
• This gains significance given the fact that India is home to the world’s youngest population as half of its population is below the age of 25.
• It has also been estimated that demographic advantage in India is available for five decades from 2005-06 to 2055-56, longer than any other country in the world. This demographic advantage can be reaped only if education, skilling and employment opportunities are provided to the young population.
• Being a developing economy “there is not enough fiscal space” to increase expenditure on critical social infrastructure.
• India has made significant progress in quantitative indicators such as enrolment levels and physical infrastructure like construction of school buildings, drinking water facilities, toilet, etc.
• India has been successful in achieving gender parity in the school sector and in higher education it is moving towards a better gender parity.
• Growing expenditure on health is burdening the public in general and is one of the highest in South Asian countries as per Economic Survey 2020-21.

(4) Ports:

• The major economies of the world have always realized the potential of shipping as a contributor to economic growth. For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI).
• The entire shipping infrastructure in peninsular India only helps foreign shipping liners. Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too.
• India has unrealized potential in shipping, with 7,500 km of coastline and 14,500 km of navigable or potentially navigable waterways.
• More than one billion tonnes of cargo was handled across over 200 ports in India in 2015 with maritime logistics accounting for 90 per cent of international trade by volume and 72 per cent by value.
• As a country, we have still not optimized our carrying capacity. Much of foreign currency is drained as transshipment and handling costs every day.
• As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.
• India needs to revamp institutional and regulatory environment around ports.
• Corporatization of ports is one way of achieving efficient and world class ports by the conversion of major port trusts into truly commercial organizations.
• In terms of infrastructure, it is important to maintain draft to serve bigger vessels, ensure mechanization of ports through introduction of new equipment and procedures, build new facilities, upgrade existing facilities and automate systems/procedures.

(5) Transport infrastructure

• India’s population growth and economic development requires improved transport infrastructure, including through investments in roads, railways, and aviation, shipping and inland waterways.
• A key goal of India’s suite of regulatory reforms is to attract more foreign investment into the sector, including through new investment vehicles and innovative financial instruments. By 2030, transport is expected to attract over 60 per cent of infrastructure investment in India.
• We need sound public transport infrastructure because if we do not have proper infrastructure we cannot have urbanization.
• The Government of India has a range of projects to improve road infrastructure-
  • The National Highways Development Projects, which require investments of up to USD170 billion
  • The Bharatmala project, stretching from India’s western to eastern land borders which is unique and unprecedented in terms of its size and design.
  • The Northeast Express Highway (1,300 km express highway in northeast India).
• Technologically sound projects which are engineering marvels such as the Dhola-Sadiya Bridge, Chenani Nashri Tunnel and Bogi-Beel bridge and world-class expressways such as the Eastern Peripheral Expressway and Western Peripheral Expressway are the recent key achievement showing India’s technological readiness in the sector.

(6) RAIL

• India’s railways play a major role in affordable transport of passengers and cargo across the country
• It is one of the largest networks in the world with 7,216 stations; 92,000 km of track and 1.3 million employees.
• Indian railways carried eight billion passengers and transported over one billion tonnes of freight in 2017–18
• However, most major corridors are facing severe capacity constraints and there are safety issues.
• The Ministry of Railways plans to improve and expand the rail network, renew the train fleet, and improve passenger safety.
• It plans to invest up to $170 billion over the next five years, with the largest proportion aimed at network expansion and decongestion, and safety.64 Investments are also planned for station redevelopment and the dedicated freight corridor between Delhi and Mumbai.
• The Government of India is seeking greater private investment through:
  • Allowing 100 per cent FDI in railways for construction, operation and maintenance of suburban corridor projects, high-speed train projects, railway electrification and signaling, among others.
  • Encouraging the development of new investment vehicles such as the Railways of India Development Fund to attract long term investment from global institutional investors.

What are the major constraints in the implementation of infrastructural projects?

The major implementation constraints that will be faced possibly in future are:

• Revenue shortfall: Slippage in revenue estimates may not be ruled out on account of the realization of lower than anticipated increases in nominal GDP growth, direct tax buoyancy, and disinvestment targets.
• Lesser funds with States: The Union government has accepted the 15th Finance Commission report recommendation, according to which vertical share of tax devolution from the center to states has been reduced 42% to 41%.
• Increasing Fiscal Deficit: Infrastructure development in India will be funded by fiscal stimulus. This can be reflected as the Centre has indicated taking the fiscal deficit to 4.5% of GDP by 2025-26.
  • However, the rising fiscal deficit can cause macro-economic stability issues like high inflation, crowding out, a downgrade of international ratings, etc.
• Structural Problems: Due to the lengthy processes in land acquisition and payment of compensation, the rate of implementation of projects is very slow on global standards.
  • Getting approvals are very difficult in terms of land access, environmental clearances; impending litigation in court delays the infrastructure projects.
  • Time and cost overruns due to delays in project implementation and procedural
  • Delays and lesser traffic growth than expected to increase the riskiness of the projects
  • Stalled or languishing projects and a shortfall in funds for maintenance

Conclusion

• Infrastructure development is the key to economic growth and well-being of the country’s people, as it will propel economic growth, improve quality of life contribute to GDP nationally.
• It is seen that investments in infrastructure equal to 1% of GDP will result in GDP growth of at least 2% as infrastructure has a “multiplier effect” on economic growth across sectors.
• Capacity creation and expansion in important segments like roads and highways, power, railways, renewable sector, ports, airports, metros etc, is a must for delivering impressive results.
• Over the period, formalization of the economy has taken place and any growth now onwards once projects like Gati Shakti Master Plan, NIP is in place will be more sustainable, rather than a boom-and-bust process.
• Therefore, massive infrastructure development is a sure way of achieving the government’s $5 trillion economy target.
• This is will give a boost to several sectors, create new jobs directly and indirectly, and eventually boost the commercial market, thereby propelling the country’s economic growth.
• Huge fiscal stimulus, provided by the government in the Budget 2021 is a step in the right direction. However, it needs to address structural and macroeconomic stability concerns, emanating from high public expenditure.

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