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  • Western Ghats yield 3 new plant species

    A team of scientists of the Botanical Survey of India (BSI) have reported the discovery of three new plant species from the evergreen forest patches of the southern end of the Western Ghats in Kerala and Tamil Nadu.

    One may get carried away from the heavy botanical names. But UPSC is known for asking ruthless questions.

    Q. Recently, our scientists have discovered new and distinct spices of banana plant which attains a height of about 11 meters and has orange – colored form of pulp. In which part of India has been discovered? (CSP 2016)

    a) Andaman Islands

    b) Anaimalai Forests

    c) Maikala Hills

    d) Tropical rainforest of North-East

    Which are the new species?

    The three new species found are:

    1) Eugenia sphaerocarpa of the Myrtaceae or Rose apple family

    • A good population of Eugenia sphaerocarpa is growing in the Kakkayam area of the Malabar wildlife sanctuary in Kerala above 800 m.
    • The specific epithet ‘sphaerocarpa’ denotes to the large, showy lemon-yellow spherical fruit.
    • The fruits of Eugenia species are known for their palatability and many of them are harvested from the wild with some under cultivation.

    2) Goniothalamus sericeus of the Annonaceae family of custard apple

    • A small number of Goniothalamus sericeus plants has been found in the Kanyakumari wildlife sanctuary in Tamil Nadu.
    • Mature flowers with characteristic greenish-yellow to beige petals are fragrant while the fruits are very showy and an attractive golden yellow in colour.
    • The specific epithet ‘sericeus’ refers to the presence of dense silky hair on the petals.

    3) Memecylon nervosum of the Melastomataceae (Kayamboo or Kaasavu in local parlance) family

    • A small population of Memecylon nervosum was also found at the same sanctuary at an altitude between 700-900 m with more that than 10 sub-populations located along the banks of a perennial rivulet.
    • The species have showy purplish-blue flowers and mauve to purplish-red fruits.
    • The specific epithet ‘nervosum’ alludes to the presence of prominently raised lateral and intramarginal veins on the lower surface of the lamina.

  • [Burning Issue] India-China Skirmish in Ladakh

    “Hindi Chini bhai bhai” – The tale of these brothers is filled with so much action and drama that it can give Bollywood writers a run for money. See, border issues is never easy to resolve, never has been and never will be. Pangong Tso or Doklam – All point to Troubled LAC and an aggressive neighbour, which is a tough combination for India. Let’s dive into this article to learn about the border skirmishes.

    Current Incidents

    On May 5, around 250 Indian and Chinese army personnel clashed with iron rods, sticks, and even resorted to stone-pelting in the Pangong Tso lake area of Ladakh, in which soldiers on both sides sustained injuries. In a separate incident, nearly 150 Indian and Chinese military personnel were engaged in a face-off near Naku La Pass in the Sikkim sector on May 9. At least 10 soldiers from both sides sustained injuries.

    After Chinese accusation of Indian Army’s border transgressions and strong Indian pushback, Ladakh has become a new festering point for the Sino-Indian relations.

    A deeper look into reasons of present tensions

    • The stand-off in Galwan valley, according to reports, was triggered by China moving in troops and equipment to stop construction activity by India.
    • Delhi claims that it was well within India’s side of the LAC. The LAC was thought to be settled in this area which has not seen many incidents in the past, but China now appears to think otherwise.
    • The northern bank of Pangong lake has, however, been a point of contention where there are differing perceptions of the LAC.
    • The Sikkim incident is unexpected as the contours of the LAC are broadly agreed to in this sector.
    • Unofficial reason: The broader context for the tensions appears to be a changing dynamic along the LAC, as India plans to catch-up in improving infrastructure there.

    Some old bruises in border relations

    • India and China do not have a well-defined border, and troop face-offs are common along its 3,500 km Line of Actual Control (LAC), though not a bullet has been fired for four decades.
    • After the 1962 Sino-Indian war, one of the longest standoffs between the Indian and Chinese armies happened at Sumdorongchu (near the Bhutan tri-junction) in 1986, when the troops had an eye-to-eye stalemate.
    • In 2017, at Doklam, near the same Bhutan tri-junction, the troops of India and China were engaged in a 73-day stand-off, triggering fears of a war between the two nuclear-armed neighbours.

    The Gandhi-Deng bargain

      • A year after a military skirmish between India and China in the Sumdorong Chu Valley in Arunachal Pradesh, then PM Rajiv Gandhi visited his counterpart Deng Xiaoping in Beijing to mend ties.
      • The two leaders agreed to establish a forward-looking relationship but border dispute were temporarily set aside.
      • The reason for this pragmatism was rooted in economic and strategic factors: Both China and India needed a stable external environment to promote domestic economic development.
      • China was already a decade into the dramatic economic reforms that Deng had initiated, while Gandhi’s India had also embarked on a similar path.
      • The Gandhi-Deng bargain paved the way for a number of border management agreements (including the 1993 and 1996 agreements related to confidence-building measures.

    Then, Why do face-offs occur so frequently?

    • Basic: Face-off and stand-off situations occur along the LAC in areas where India and China have overlapping claim lines. The LAC has never been demarcated.
    • The boundary in the Sikkim sector is broadly agreed but has not been delineated.
    • Face-offs occur when patrols encounter each other in the contested zones between overlapping claim lines.
    • Protocols agreed to in 2005 and 2013 detail rules of engagement to prevent such incidents, but have not always been adhered to.

    What are the various sectors on the India-China border?

    • The border can be broadly divided into three sectors—Western, Middle and Eastern.
    • The Western sector, which includes Ladakh, is governed by the Johnson Line, making Aksai Chin (controlled by China) in Jammu and Kashmir contested territory for India.
    • The Middle sector, consisting of Uttarakhand and Himachal, is relatively tranquil. Even map exchanges between the two countries have taken place, based on a broad understanding of borders.
    • In the Eastern Sector (where Indian controls territory based on the MacMahon Line), China claims Arunachal Pradesh as part of southern Tibet, while India contests it.
    • The MacMahon Line was drawn at the tripartite 1913-14 Simla Convention attended by British India, Tibet and China; the problem: Tibet is involved and China is not a signatory to this pact.

    LAC: Why no solution yet?

    • It’s not like nothing has been done!
    • Maps have been exchanged in the Middle Sector, but the exercise fell through in the Western Sector where divergence is the greatest.
    • China has rejected this exercise, viewing it as adding another complication to the on-going boundary negotiations.
    • India’s argument is rather than agree on one LAC, the exercise could help both sides understand the claims of the other, paving the way to regulate activities in contested areas until a final settlement of the boundary dispute.

    Also, Chinese transgressions are frequent: Dragon’s aggressiveness

    • A higher number indicates that the Chinese soldiers are coming to the Indian side more often, and their movements are being observed and recorded by the Indian soldiers.
    • This can be seen as an indicator of increased Chinese assertiveness.
    • Since 73-day Doklam standoff on Sikkim-Bhutan border in 2017 there had been no major standoff.
    • PM Modi and President Xi met in Wuhan, following the Doklam crisis, and passed some instructions.

    Wuhan Coziness turned sour

    • Modi and Xi had met for their first informal summit at Wuhan in April 2018, where the two leaders had issued strategic guidance to their respective militaries.
    • These guidelines aimed to strengthen communication in order to build trust and mutual understanding and enhance predictability and effectiveness in the management of border affairs.
    • They had also directed their militaries to earnestly implement various confidence-building measures agreed upon between the two sides, including the principle of mutual and equal security.
    • But the latest border issues show hollowness of such talks.

    International forces in this bilateral ties

    • In addition to the border dispute, some of the core issues in the Sino-Indian rivalry include Tibet (the presence of the Dalai Lama, the Tibetan government-in-exile), the burgeoning China-Pakistan partnership, and the two countries’ overlapping spheres of influence in Asia.
    • These issues have become more salient in the context of the two countries’ simultaneous but asymmetric rising power.
    • In addition to accruing power domestically, India is also building strong strategic partnerships with China’s other rivals, especially the US and Japan.
    • Meanwhile, a rising China has stabilized its northern borders with Russia and is working to undermine the US primacy in the East Asian maritime (particularly the South China Sea).
    • This basically leaves only one border issue with a rival unresolved: namely, the Sino-Indian border.
    • It is hardly surprising that it is exerting periodic pressure on India along this front—a trend that is only likely to escalate.

    India should not fear. Why?

    To be sure, China’s regional aggression is COVID-proof. From Japan to Malaysia, Vietnam, Philippines and Taiwan, everyone has had to push back against Beijing’s marauding missions.

    1) India can retaliate

    • India, while still under-resourced, is no longer a pushover, having emerged stronger and wiser from the Depsang incident of 2013, when Chinese troops pitched tents to establish their control over the area.
    • India and China are both nuclear-armed countries with strong militaries.
    • India has been building a road along the Galwan River to Daulat Beg Oldie that would improve India’s access to the Karakoram Highway, as well as 61 border roads with a total length of 3,346 km across the Himalayan frontier.
    • The Indian Air Force’s capabilities have improved as well.

    2) China is wooing its people

    • Presently, China is in the midst of its annual “2 Sessions” of the CPCC (Chinese People’s Political Consultative Process) and NPC (National People’s Congress), where the ruling sentiment is how China is being bold and tough.
    • Hong Kong was an example of that sentiment. It is likely the India moves may be related. No softening or reasonableness can be expected from China until the NPC ends.
    • China is, as usual, changing the ground realities to influence a future boundary agreement.

    The ground realities before we think settlement

    • India sees China as occupying 38,000 sq km in Aksai Chin. In the east, China claims as much as 90,000 sq km, extending all across Arunachal Pradesh.
    • A swap was hinted at by China in 1960 and in the early 1980s, which would have essentially formalized the status quo.
    • Both sides have now ruled out the status quo as a settlement, agreeing to meaningful and mutual adjustments.
    • At the same time, the most realistic solution will involve only minor adjustments along the LAC, considering neither side will be willing to part with territory already held.

    Way forward

    • India and China should grasp the current situation as an opportunity to revive the stalled process of clarifying the LAC.
    • Clarifying the LAC may even provide a fresh impetus to the stalled boundary talks between the Special Representatives.
    • Beyond the posturing, both sides know a final settlement will ultimately have to use the LAC as a basis, with only minor adjustments. Only a settlement will end the shadow boxing on the LAC.
    • With both countries in the midst of an unprecedented global pandemic, the time to push for a settlement to a distracting, protracted dispute is now.

    Conclusion

    • The issue is basically the fundamental difference in how both sides view the boundary question.
    • India insists that its relations with China won’t improve until the border dispute is resolved.
    • But China differs here.
    • In some sense, Beijing appears to view an unsettled border as holding some leverage with India, one of the many pressure points it could use to keep India off-guard.
    • But for now, India should resist the Chinese design which could have disastrous consequences for India’s defence and strategic interests. Lastly, Diplomatic channels is always a better option than skirmishes on the borders.

     

     

  • Neglect of demand side

    What should the government focus on first: increasing demand or streamlining the supply side. This question is at the heart of the debate that has been going on after the government announced the stimulus package. This article argues on two lines- Inadequate size of the package and the neglect of the demand side in the package.

    Why stakeholders are not happy with the package?

    • Agriculture sector: There is relief for agriculture in the form of a concessional credit line of Rs 2 trillion, but loans are neither automatic or assured.
    •  Marketing reforms and infrastructure creation are distant promises.
    • MSME sector:  The backbone of the economy that provides 25 per cent of employment, 32 per cent of the GDP and 45 per cent of exports, is unhappy despite the Rs 3 trillion line of credit for loans without collateral.
    • In their experience, lenders are not always supportive in extending loans.
    • While buyers-central and state governments, public sector firms and the private sector- owe them as much as Rs 5 trillion.
    • What is more, most MSMEs just do not have the resources to pay wages or meet fixed costs on electricity, rent or interest during the lockdown period.
    • Corporate sector: There is nothing for the corporate sector in manufacturing or services.
    • The distressed sectors such as airlines, automobiles, hotels, restaurants, and tourism have been ignored.
    • Ironically, there is little for public health, already in a dilapidated state.
    • Even stock markets, characterised by irrational exuberance in the past month, have dropped.

    Government expenditure in the fiscal stimulus

    • The fiscal stimulus, which can be defined as government expenditure that could stimulate demand, is difficult to separate.
    • This is because the package is neither clear nor transparent about the cost to be borne by the government in each component.
    • Even so, there are 12 estimates by analysts in financial sector institutions, suggesting that the fiscal stimulus is in the range of 0.7 per cent to 1.3 per cent of the GDP.
    • The effective fiscal stimulus, in terms of extra resources provided by the government, is Rs 1.76 trillion, or 0.8 per cent of the GDP.
    • Its contribution to domestic demand will be minuscule, given that private final consumer expenditure in India is about 60 per cent of the GDP.

    Focus of the package: supply side

    • It is clear that the design of this relief package seeks to focus on the supply side.
    • Package emphasises on providing liquidity through lines of credit, where the RBI is providing as much as Rs 8 trillion.
    • Focus is not on the demand side by stepping up government expenditure.
    • This is done with the aim of minimising the cost to the government.
    • The arithmetic is obviously imaginative — as much as Rs 10 trillion of the relief package will have to be financed by sources other than the Centre and the RBI.

    So, let’s understand why focus on supply side is flawed strategy

    • This stress on the supply-side, while neglecting the demand-side, reveals a flawed understanding of economies in crisis.
    • Speed of adjustment: Even in normal circumstances, the speed of adjustment of the supply-side is slow because supply responses take time.
    • Whereas the speed of adjustment on the demand-side is fast as incomes spent raise consumption demand without any time-lag.
    • At present, if there is little or no increase in demand, supply responses will be slower than usual because producers would not wish to pile up inventories of unsold goods.
    • In terms of the chicken-and-egg parable, demand must be revived first to kickstart the economy.
    • For this reason, the fiscal stimulus should have been much larger.

    Excessive concerns over fiscal deficit

    • The decision-makers have been timid, intimidated by the prospect that, because of revenue shortfalls (2 per cent of the GDP or more), the fiscal deficit would be 5.5 per cent of the GDP.
    • Which would have exceeded the budget estimate at 3.5 per cent of the GDP.
    • The conclusion drawn, wrongly, is that there is no fiscal space.
    • The obsessive concern about the fiscal deficit is deeply embedded in government thinking.
    • In this situation, the extra fiscal stimulus should have been Rs 7-9 trillion i.e. 3-4 per cent of the GDP and that would have been modest compared to what other countries have done.

    Monetising the deficit  and issues involved in doing so

    • This enlarged fiscal deficit (3-4 % of GDP) cannot be financed by market borrowing.
    • Such market borrowing would simply drive up interest rates and nip recovery in the bud.
    • It would have to be financed by monetising the deficit — RBI buying government T-bills — printing money, now termed “helicopter money”.
    • Inflation concerns: The idea that monetised deficits will unleash inflation is blind to the reality that, at this juncture, if there is no further intervention by the government, the GDP could contract by 5 per cent in 2020-21, with lingering consequences.
    • In fact, a monetised deficit might be the only way of increasing aggregate demand to revive economic growth.
    • Rating downgrade issue: The worry about a downgrade from credit rating agencies is bizarre.
    • For one, their ethics and integrity have seen steady erosion.
    • Moreover, how many sovereign governments will they downgrade?
    • In fact, we might be better off without the footloose and volatile portfolio investment inflows.

    Consider the question- “Do you agree with the view that the focus of the supply side should be at the heart of any stimulus package announced in the financial crisis? Give reasons in the support of your agreement.”

    Conclusion

    If the government does not accept the necessity or wisdom of expansionary macroeconomic policies, it must set out its alternative plan for recovery. The relief package will not suffice.

  • U.S. set to exit the ‘Open Skies Treaty’ Copy

    The U.S. has given notice that it will exit the Open Skies Treaty (OST) in response to Russia who had allegedly violated the treaty.

    The New START, INF and now the OST …. Be clear about the differences of these treaties. For example- to check if their inception was during cold war era etc.

    Open Skies Treaty (OST)

    • OST is an agreement that allows countries to monitor signatories’ arms development by conducting surveillance flights over each other’s territories.
    • The idea behind the OST was first proposed in the early years of the Cold War by former U.S. President Dwight Eisenhower.
    • It came to existence decades later and was signed in 1992, during the George H.W. Bush presidency and after the Soviet Union had collapsed.
    • The OST came into effect in 2002 under the George W. Bush administration and it allows its 34 signatories to conduct unarmed reconnaissance flights over the territory of treaty countries.

    Issues with the OST

    • The U.S. has used the treaty more intensively than Russia.
    • Between 2002 and 2016, the U.S. flew 196 flights over Russia (in addition to having imagery from other countries) compared to the 71 flights flown by Russia.

    Significance

    • The U.S.’s exit last year from other arms deal the West had signed with Russia — the Intermediate-Range Nuclear Forces (INF) treaty — as well as its imminent departure from the OST has raised the strong possibility that the Trump administration may not renew the New Start Treaty.
    • The New START Treaty was signed by the Obama administration with Russia that caps Russian and U.S. nuclear arsenal. The New Start Treaty is due to expire in February 2021.
    • The Trump administration has been worried that extending New START would negatively impact an arms deal with China and Russia.
    • It is concerned that China’s nuclear stockpile could be doubled if the New Start Treaty continued as is, without including China.

    Back2Basics: New START pact

    • The New Strategic Arms Reduction Treaty (New START) pact limits the number of deployed nuclear warheads, missiles and bombers and is due to expire in 2021 unless renewed.
    • The treaty limits the US and Russia to a maximum of 1,550 deployed nuclear warheads and 700 deployed missiles and bombers, well below Cold War caps.
    • It was signed in 2010 by former US President Barack Obama and then-Russian President Dmitry Medvedev.
    • It is one of the key controls on superpower deployment of nuclear weapons.
    • If it falls, it will be the second nuclear weapons treaty to collapse under the leadership of US President Donald Trump.
    • In February 2019, the US withdrew from the 1987 Intermediate-Range Nuclear Forces Treaty (INF), accusing Moscow of violating the agreement.

    INF Treaty

    • Under the INF treaty, the US and Soviet Union agreed not to develop, produce, possess or deploy any ground-based ballistic and cruise missiles that have a range between 500 and 5,500 km.
    • It exempted the air-launched and sea-based missile systems in the same range.
    • The INF treaty helped address the fears of an imminent nuclear war in Europe.
    • It also built some trust between Washington and Moscow and contributed to the end of the Cold War.

  • [pib] UMANG Mobile App

    To further enhance the initiatives of Digital India Programme, the India Meteorological Department (IMD) services have been brought on the “UMANG App”.

    UPSC may puzzle you by asking a question such as: Which of the following services are included under UMANG App?  It would provide some ambiguous 5-6 options.

    UMANG App

    • The UMANG is an acronym for Unified Mobile Application for New-age Governance.
    • It is an all-in-one single, unified, secure, multi-channel, multi-platform, multi-lingual, multi-service mobile app, powered by a robust back-end platform providing access to high impact services of various organizations.
    • It was in 2017 to bring major government services on a single mobile app, with a larger goal to make the government accessible on the mobile phone of our citizens.
    • About 660 services from 127 departments & 25 states and about 180 utility bill payment services are live and more are in pipeline.
    • UMANG user base has crossed 2.1 Crore including Android, iOS, Web and KaiOS.
    • Citizens can also access their Digilocker from UMANG and give their feedback after availing any service through Rapid Assessment System (RAS) which has been integrated with UMANG.

    Key features

    • Unified Platform: It brings together all government departments and their services on a single platform to provide better and easier services to citizens.
    • Mobile-First Strategy: It aligns all government services with the mobile-first strategy to leverage mobile adoption trends.
    • Integration with Digital India Services: It provides seamless integration with other Digital India Services like Aadhaar, DigiLocker, and PayGov. Any new such service will automatically be integrated with the platform.
    • Uniform Experience: It is designed to enable citizens to discover, download, access, and use all government services easily.
    • Secure and Scalable: It supports Aadhaar-based and other authentication mechanisms for service access. The sensitive profile data is saved in an encrypted format and no one can view this information.

    Benefits for Citizens

    • Single-Point Ubiquitous Access: All government services are available for citizens on a unified platform for easy access through multiple online and offline channels (SMS, email, app, and web).
    • More for Less: Only a single mobile app needs to be installed instead of each app of each department.
    • Convenience: Citizens do not even need to install or update the app again to avail government services if more services are added to the platform.
    • Saving of Time and Money: Citizens can anytime and anywhere avail these services through their mobile phones, desktops, and laptops without any need for visiting the department office and standing in queues.
    • Uniform Experience: All the government services including payment-based transactions provide secure and uniform experience.

  • [pib] Initiatives launched on International Day of Biodiversity

    In a virtual celebration of the International Day for Biological Diversity 2020, Union Minister of Environment, Forest and Climate Change (MoEFCC) has launched key initiatives towards conservation of biodiversity.

    Possible prelim question:

    The ‘Not all Animals Migrate by Choice’ campaign recently seen in news is an initiative by __________.

    About the International Day for Biological Diversity

    • This Day is a United Nations-sanctioned international day for the promotion of biodiversity issues.
    • It is currently held on May 22.
    • The year 2020 is also the “Super Year for Biodiversity”, as the Strategic Plan for Biodiversity with 20 global Aichi targets adopted in 2010 ends in 2020.

    1) Biodiversity Samrakshan Internship Programme

    • The program proposes to engage 20 students with postgraduate degrees for a period of one year through an open, transparent, online competitive process.
    • It has the National Biodiversity Authority (NBA) and the UN Development Programme (UNDP) as a nodal agency.

     2) ‘Not all Animals Migrate by Choice’ campaign

    • It is a United Nations Environment Programme (UNEP) Campaign launched by the Wildlife Crime Control Bureau on Illegal Trafficking of Endangered Species.
    • It aims to curb illegal trade in wildlife which carries the risk of spreading dangerous pandemics.

    Back2Basics: Aichi Targets

    • The ‘Aichi Targets’ were adopted by the Convention on Biological Diversity (CBD) at its Nagoya conference.
    • The short term plan provides a set of 20 ambitious yet achievable targets, collectively known as the Aichi Targets.
    • The IUCN Species Programme provides advice to Parties, other governments and partners on the implementation of the Strategic Plan for Biodiversity and it’s Aichi Biodiversity Targets (2011 – 2020) and is also heavily involved in work towards the Target.

  • What are General Financial Rules (GFR)?

    The union government has notified amendments to General Financial Rules (GFR) to ensure that goods and services valued less than Rs 200 crore are being procured from domestic firms, a move which will benefit MSMEs.

    Possible mains question:

    Q. Discuss how the nationwide lockdown to control the coronavirus outbreak has led to the resurfacing of inherent bottlenecks in India’s MSME Sector.

    What are the General Financial Rules (GFRs)?

    • The GFRs are a compilation of rules and orders of the Government of India to be followed by all while dealing with matters involving public finances.
    • They are instructions that pertain to financial matters.
    • They lay down the general rules applicable to Ministries / Departments, and detailed instructions relating to the procurement of goods.
    • They are issued by the procuring departments broadly in conformity with the general rules while maintaining the flexibility to deal with varied situations.

    Also read:

    [Burning Issues] Fiscal Push for MSME Sector of India (Part I)

  • [Burning Issues] Atmanirbhar Abhiyan Package

     

    Today we decode parts of the “20 lakh crore” Economic Package.

    Fair warning though. It’s a long  journey to walk!

    • The COVID-19 pandemic and the prolonged national lockdown have brought the Indian economy to a standstill.
    • The various announcements made by the Finance Minister concluded the relief measures undertaken in five tranches by the government as part of the economic package announced by PM Modi for ‘Atmanirbhar Bharat’.

    Impacts of COVID-19 on Economy: Broad Picture

    Given an uncertain future for the rest of the year, it can be clearly seen that the Indian economy is contracting.

    • That is, it will produce less in 2020-21 than it did in 2019-20. This means the Gross Value Added across sectors — agriculture, industry and services — will fall.
    • As incomes fall, three things will happen.
    • One, individuals will cut down their expenditure. In particular, all discretionary expenditure — be it an additional pack of cigarettes or a new car or a house — will come down sharply.
    • Two, seeing overall demand fall, businesses, which were already not investing, will likely postpone their investments further.
    • Three, the government revenues will take a massive hit. This means that if the government wants to maintain its level of fiscal deficit (the gap between what it earns as revenues and what it spends), it will have to cut its overall expenditure this year.
    • These three types of “expenditures” — by individuals, businesses and government — essentially make up the GDP of India.
    • There is a fourth component called net exports (that is, the net of exports and imports), but with the global demand plummeting as well, this too is unlikely to help matters.

    Atmanirbhar Bharat: With a special package

    • PM has announced a special economic package and gave a clarion call for Self-reliant India.
    • This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10% of India’s GDP.
    • The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others.

    Complete details of the package

    First Tranche: Rs 5,94,550 crore

    • The first set of relief measures announced by Nirmala Sitharaman focused on enabling the Indian economy’s backbone – MSMEs that employ around 11 crore people and have a GDP share of approximately 29 per cent.
    • Out of the 16 announcements made by the minister, six were dedicated to the MSME segment to infuse liquidity.
    • This included Rs 3 lakh crore collateral-free loans and Rs 50,000 crore equity infusions for MSMEs through Fund of Funds.
    • Liquidity relief measures worth Rs 30,000 crore were also announced for NBFCs, HFCs etc. and Rs 90,000 crore for power distribution companies.
    • The minister also advised states and regulatory authorities for extending the registration and completion date of real estate projects under RERA to de-stress developers and ensure completion of projects for home buyers to get their booked houses on time.

    Second tranche – Rs 3,10,000 crore

    • FM’s second tranche of measures catered to migrant workers and street vendors.
    • The minister introduced ‘one nation one ration card’ to allow migrant workers to buy ration from any depot in the country.
    • A special credit facility of Rs 5,000 crore was announced to support around 50 lakh street vendors who will have access to an initial Rs 10,000 working capital.
    • The minister also said that close to Rs 2 lakh crore will be given to farmers through Kisan credit cards while 2.5 crore farmers, including fishermen and animal husbandry farmers, would be able to get institutional credit at a concessional rate.
    • The government allowed states to fund the food and shelter facilities to migrant workers from the disaster response fund that would cost Rs 11,000 crore to the centre.

    Third tranche – Rs 1, 50,000 crore

    • The third tranche of the measures worth Rs 1.5 lakh crore focused on the agriculture and allied sectors including dairy, animal husbandry and fisheries as the government announced steps to strengthen the overall farm sector.
    • Sitharaman announced Rs 1 lakh crore agriculture infrastructure funds for farm-gate infrastructure including using it for setting up cold chains and post-harvest management infrastructure.
    • Other key announcements made by the minister included Rs 20,000 to be provided to fishermen through PM Matsya Sampada Yojana, and Rs 10,000 crore to formalize micro food enterprises.
    • Rs 4,000 crore for herbal cultivation, a Rs 15,000 crore Animal Husbandry Infrastructure Development Fund, Rs 500 crore for bee-keeping related infrastructure development were other packages announced by the minister.

    Fourth and fifth tranches – Rs 48,100 crore

    • The fourth instalment comprised of reforms for sectors including coal, minerals, defence production, air space management, airports, MRO, distribution companies in UTs, space sector, and atomic energy.
    • She announced easing utilization of the Indian air space to reduce air travel cost.
    • The minister also announced the commercial mining in the coal sector and privatizing discoms in metros to streamline their functions for better accountability.

    • The minister allocated an additional Rs 40,000 crore for the MGNREGA for job creation in India’s hinterland. The government had earlier allocated Rs 61,000 crore in the budget for this financial year.
    • She also announced the formulation of a new Public Sector Enterprises Policy that would allow for consolidation of the PSU firms in strategic sectors.
    • Each sector would have up to four such firms while state-owned enterprises will be privatized.

    Is this a new package?

    • The PM did not give the details, but he specified that this calculation of Rs 20 lakh crore includes what the government has already announced and the steps taken by the RBI.
    • This means the total amount of additional money — that is over and above what the government would have spent even in the absence of a COVID crisis — will not be Rs 20 lakh crore. It would be substantially less.
    • PM has included the actions of RBI, India’s central bank, as part of the government’s “fiscal” package, even though only the government controls the fiscal policy and not the RBI (which controls the ‘monetary’ policy).
    • A rough estimate suggests that the RBI’s decisions have provided additional liquidity of Rs 5-6 lakh crore since the start of the Covid-19 crisis.

    What is the approach adopted?

    • The measures taken up are largely in line of –

    1) Giving a strong supply-side push by boosting the availability of capital on easy terms

    2) Keeping income and wage support schemes to the minimum

    3) Empowering constituencies ranging from farmers and workers to businesses

    • Above all, the government seems to be keen on keeping the damage to the fiscal as low as possible.
    • The fiscal impact of the Rs. 20-lakh crore packages is estimated by economists at between 2-3% of GDP.
    • This includes withdrawals from provisions already made in the Budget for this fiscal.

    Idea behind the Atmanirbhar

    • The pillar on which the package rests is liquidity support so that businesses can be revived. This, in turn, is expected to set the economic cycle back in motion.
    • The option of a demand-side stimulus through a resort to deficit financing seems to be reserved for a future date.
    • This could be in case if the infection does not subside or a second wave begins prompting another lockdown.

    Significance of self-efficiency and self-reliance

    • Global supply chains have been disrupted and all nations have become preoccupied with meeting their own challenges.
    • The importance of local manufacturing, local market and local supply chains was realized during the pandemic time. All our demands during the crisis were met ‘locally’.
    • Now, it was a ripe time to be vocal about the local products and help these local products become global.
    • For instance, the supply chain and global manufacturing controlled by Chinese economy got disrupted due to COVID. Thus there is a need to become self-reliant for essential goods and service like N95 masks, ventilators etc.
    • Restrictions on travel and mobility have meant tight controls over the flow of goods, services and labour across international, state and district borders.
    • The international economic order is changing; the possibility of greater economic cooperation is diminishing. So the emphasis should be on the need to leverage India’s inner potential.
    • The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves the creation of a helping hand to the whole world.
    • This is neither an economic nationalism or a rejection of globalization, but a call for a new form of globalization — from profit-driven to people-centric which takes into account the needs of labours, vulnerable and have nots.

    Positives of the package

    In the numbers provided, the government has tried to project a ‘maximum bang for minimum buck’ approach.

    Most support measures have translated into forms of regulatory relief, broader liquidity support or are reflected in its contingent liabilities, rather than in the form of explicit budgetary support.

    It seems the Union government has very craftily used the COVID-19 pandemic crisis to plough through long pending, deep-rooted structural reforms. That should be welcomed.

    Other welcome moves

    • The government has done well in increasing the budget for MGNREGA by two-thirds, adding another Rs. 40,000 crore.
    • With migrants now returning to their villages, MGNREGA can be leveraged to keep them occupied with meaningful work.
    • The demand of States for higher borrowings limit has also been granted but with clear reform milestones that they have to meet.
    • The government has also used the opportunity to unleash some much-needed reforms in agriculture marketing.
    • The measures also include –

    1) opening up more sectors for private participation

    2) enhancing foreign direct investment in defence

    3) corporatizing the monolith Ordnance Factory Board, and so on

    On contract farming

    • ‘The Centre is considering introducing a law on contract farming under the Contract Act of 1872 to enable farmers to directly engage with processors, aggregators, large retailers and exporters in a fair and transparent manner.
    • It would allow private players to invest in inputs and technology in the agricultural sector.

    Criticisms of the package

    • Yet, many have openly questioned the ability of this economic package to either provide adequate immediate relief to the most distressed sections of the economy or indeed stem the rapid decline in India’s GDP growth.
    • There are multiple fronts where this package is seen as inadequate. Let us discuss that-

    1) Old demand met with conditions

    • The package contains several generic announcements which should ideally, has been a part of a normal economic agenda.
    • The industry has been demanding a package to the tune of 7% to 8% of India’s GDP of over $2.8 trillion since a long time.
    • There was nothing unusual given that similar packages have been announced by other countries to mitigate the damage done to their economies.
    • So, a package of the size of almost 10% of the GDP was offered like a masterstroke but without coming clear on the source of funding and oversight provision.

    2) Bluff over MSMEs

    • Since MSMEs have been the hardest hit, being the main employers of industrial workers, their plight is grim.
    • It is small businesses that give traction to entrepreneurial activities in the unorganised sector where migrants from rural India mostly work.
    • The redefinition of MSMEs has been long-pending and cannot be called a reform.
    • There is nothing for the States to look forward to that can serve the immediate purpose.

    3) No stakeholders consulted

    • Ideally, after the first round of an insufficient package, the government should have begun consultations with parliamentarians, states and industry representatives to prepare a well-thought-out relief package.
    • States which have been at the forefront of the war against COVID-19 have not been given the required funds to help them cope with the public health emergency.
    • They have however shouldered the high influx of returning migrant labourers from industrial locations.

    4) Job losses unaddressed

    • India’s great middle class, which is also suffering, has found no solace either; nor is it likely that they will get anything substantial from this package.
    • A large number of workers in the organised sector are facing heavy pay cuts, job losses, a sharp fall in income, and uncertainty.
    • The expansion of MGNREGA, has a negative aspect, as it could impact labour availability, as rural migrants may not rush back for jobs (construction, transport most impacted).

    5) Farmers’ plight ignored

    • The package nowhere mentions resuming normal procurement operations.
    • Farmers are finding it difficult to get the minimum support price (MSP) for their produce; a majority of them are in debt and face many obstacles.
    • Many APMCs are shut with no signs to begin normal operations. Middlemen and Adhatiyas are plunging in to purchase the produces far below the MSP.

    6) Migrant workers ignored

    • The first national lockdown was announced in the most dramatic manner late in the evening and without adequate notice.
    • This created panic among migrants and painful displacement began which could have been avoided by offering the industry a timely financial package on the eleventh hour.
    • Economic desperation might leave poor workers with no choice but to return to work. But many of them are truly worried about getting infected.
    • Though Shramik Express trains were flagged off from certain destinations to take back migrant workers to their home States, but there was another shock — the charges levied by the Indian Railways.
    • Now India faces the loss of lives and livelihoods against the backdrop of the ruling dispensation’s apathy towards the poor and the disadvantaged.

    7) Healthcare needs more attention

    • Our healthcare delivery system in most States is extremely fragile.
    • One wonders, for instance, whether Bihar can handle the consequences if the virus begins to spread with the return of millions of migrant workers back to the State.
    • Many other States also face a similar plight given the poor state of primary healthcare facilities.
    • The pandemic has exposed a hard truth: most private healthcare providers seem to be incapable of and unwilling to help even during a national crisis.

    8) Undue pressure on Banks

    • Indian MSMEs have little access to risk capital, and hence raise it from banks, calling it loans. RBI has lent billions to banks to refinance those loans.
    • It will never get its money back. The FM has, for the first time, showing some awareness of the problem.
    • But the solution is weird. GoI will facilitate— whatever that means — provision of Rs 20,000 crore as subordinate debt. That is debt that does not have to be paid until all other loans have been repaid.
    • In other words, banks will be asked to give loans with an informal guarantee that they are gifts unless the bankrupt firm starts making huge profits someday.

    9) Broader reforms lack the spark

    • India’s self-reliance package to match global stimulus numbers is perhaps the driver for the claim of a large package (USD 280bn, 10% of GDP).
    • India does not have fiscal buffers hence a large fiscal stimulus would have been a bold bet – as that could have impacted ratings and currency, if not executed properly.
    • Not much was discussed on land, labour reforms, tax rationalization or on any coherent plan to invite foreign manufacturing.
    • The government’s defence indigenization plan is not new and has been poorly executed in the past and that is also the case with commercial mining for coal.

    10) Ignoring demand stimulus

    • The problem with this approach is that there is now a desperate need for demand stimulus; the government has focussed on supply-side push.
    • A strategy to drive consumption may have worked better under prevailing conditions.
    • The options could have been suspending GST for a couple of months or at least cutting rates temporarily, combined with a liquidity boost.

    What needs to be done at this immediate hour?

    1) Food and cash transfers first

    • The immediate need is to provide free food and cash transfers to those rendered incomeless.
    • Putting money in the hands of the poor is the best stimulus to economic revival, as it creates effective demand and in local markets.
    • Hence, an immediate programme of food and cash transfers must command the highest priority.

    2) Revamp MGNREGA work

    • Millions of migrant workers have endured immense hardships to trudge back home, and are unlikely to return to towns in the foreseeable future.
    • Employment has to be provided to them where they are, for which the MGNREGS must be expanded greatly and revamped with wage arrears paid immediately.
    • And permissible work must include not just agricultural and construction work, but work in rural enterprises and in care activities too.
    • The revamped MGNREGS could cover wage bills of rural enterprises started by panchayats, along with those of existing rural enterprises, until they can stand on their own feet.

    3) The urban focus

    • In urban areas, it was absolutely essential to revive the MSMEs.
    • Simultaneously, the vast numbers of workers who have stayed on in towns have to be provided with employment and income after our proposed cash transfers run out.
    • The best way to overcome both problems would be to introduce an Urban Employment Guarantee Programme, to serve diverse groups of the urban unemployed, including the educated unemployed.
    • Urban local bodies must take charge of this programme and would need to be revamped for this purpose.

    4) The ‘care’ economy

    • The pandemic has underscored the extreme importance of a public health-care system, and the folly of privatization of essential services.
    • The post-pandemic period must see significant increases in public expenditure on education and health, especially primary and secondary health including for the urban and rural poor.
    • The “care economy” provides immense scope for increasing employment. Vacancies in public employment, especially in such activities, must be immediately filled.
    • Anganwadi and Accredited Social Health Activists/workers who provide essential services to the population, including during this pandemic, are paid a pittance and treated with extreme unfairness.

    5) Increasing revenue

    • All the tasks mentioned in the package could be financed by printing money. But in the medium term, public revenues must be increased.
    • This is not because there is a shortage of real resources which, therefore, has to take from other existing uses through taxation.
    • Rather, since much-unutilized capacity exists in the economy, the shortage is not of real resources; the government has to just get command over them.
    • A combination of wealth and inheritance taxation and getting multinational companies to pay the same effective rate as local companies through a system of unitary taxation will garner substantial public revenue.

    6) Looping in foreign capital

    • It would be argued that this might cause large financial outflows, which the country can ill-afford.
    • Contrarily, even foreign capital is more likely to be attracted to a growing economy than one in sharp decline because of a lack of stimulus.
    • Also, a fresh issue of special drawing rights by the IMF (which India has surprisingly opposed along with the United States) would provide additional external resources.

    Conclusion

    • The coronavirus disease pandemic has offered India a valuable lesson on the importance of self-reliance and self-sufficiency that we must aspire to attain the twin goals.
    • Self-reliance will prepare the country for tough competition in the global supply chain, and it is important that the country wins this competition.
    • It will not only increase efficiency in various sectors but also ensure quality.
    • In sum, the package has several notable features not all of which are COVID-19 relief. But, the government has clearly refused to borrow and spend more on boosting demand.
    • If the strategy of boosting supply works, it is fine. However, if it does not work on expected lines, the government will be faced with a bigger problem down the line.

    Way Forward

    • Several bold reforms are needed to make the country self-reliant so that the impact of crisis such as COVID can be negated in future.
    • These reforms include supply chain reforms for agriculture, rational tax system, simple and clear laws, capable human resource and a strong financial system.
    • These reforms will promote business, attract investment, and further strengthen Make in India.
    • Local Governments should be playing a key role in supporting the government’s outreach in vast belts of rural India to spread awareness about the coronavirus disease.
    • Local governments can undertake door-to-door campaigns; stitched masks; made hand sanitisers for local populations; and provided support to the local administrative and security machinery in both providing basic services to residents and enforcing the lockdown.

    Try this:

    Q. The palpable unsustainability of the earlier globalisation surfaced after the COVID outbreak means that growth in India in the coming days will have to be sustained by the home market. Examine.

     

    References

    https://www.hindustantimes.com/india-news/stimulus-package-a-lost-opportunity-bernstein/story-dedaae4OQjenIjk9oLjm7H.html

    https://indianexpress.com/article/explained/explainspeaking-why-the-atmanirbhar-bharat-abhiyan-economic-package-is-being-criticised-6414905/

    https://www.thehindu.com/opinion/op-ed/where-is-health-in-the-stimulus-package/article31609611.ece

    https://www.thehindu.com/news/national/coronavirus-package-will-migrant-workers-benefit-from-the-centres-measures/article31603590.ece

    https://www.thehindu.com/opinion/editorial/a-matter-of-relief-on-economic-stimulus-package/article31617547.ece

    https://www.financialexpress.com/economy/breakup-of-the-rs-20-lakh-crore-economic-stimulus-package-by-fm-sitharaman/1961843/

    https://thewire.in/political-economy/modis-stimulus-package-is-a-gigantic-confidence-trick-played-on-the-people-of-india

    https://economictimes.indiatimes.com/news/economy/policy/why-india-needs-to-go-vocal-for-local-stores/articleshow/75812730.cms?from=mdr

    https://www.thehindu.com/opinion/editorial/local-motif-the-hindu-editorial-on-modis-call-for-self-reliance/article31577225.ece

  • Ensuring MGNREGA lives up to its potential

    With migrant workers returning home, work demand under MGNREGA is bound to rise. Sensing that the government increased the allocation to MGNREGA. This article suggests some steps to make the MGNREGA more effective in catering to this surge in the wake of the pandemic. Some issues that plague the scheme are also examined at the end. So, what are the suggestion? and what are the issues? Read to know….

    Acknowledgement of the importance of MGNREGA

    • The government made an allocation of an additional Rs 40,000 crore as part of the stimulus package.
    • This is an acknowledgement of the importance of MGNREGA.
    • The most important part of MGNREGA’s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it.
    • This demand-based trigger enables the self-selection of workers and gives them an assurance of at least 100 days of wage employment.

    Let’s put allocation in context of World Bank recommendations

    • Since 2012, an average of 18 per cent of the annual budgetary allocation for MGNREGA has been spent on clearing pending liabilities from the previous years.
    • Even this financial year began with pending wage and material liabilities of Rs 16,045 crore.
    • An allocation of Rs 1 lakh crore for FY 2020-21 would mean that approximately Rs 84,000 crore is available for employment generation this year.
    • This will still be the highest allocation for MGNREGA in any year since the passage of the law.
    • However, the allocation, which amounts to 0.47 per cent of the GDP continues to be much lower than the World Bank recommendations of 1.7 per cent for the optimal functioning of the programme.

    Some immediate steps to ensure the MGNREGA lives up to its potential

    • First, state governments must ensure that public works are opened in every village.
    • Workers turning up at the worksite should be provided work immediately, without imposing on them the requirement of demanding work in advance.
    • Second, local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.
    • Third, at the worksite, adequate facilities such as soap, water, and masks for workers must be provided free of cost. For reasons of health safety, MGNREGA tools should not be shared between workers.
    • The government should provide a tool allowance to all workers — some states are already providing such an allowance.
    • Fourth, procedures for implementing MGNREGA must be simplified but not diluted.
    • The pandemic has demonstrated the importance of decentralised governance.
    • Gram panchayats and elected representatives need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.
    • Fifth, as per a study by the RBI, more than half the districts in the country are under-banked.
    • The density of bank branches in rural India is even more sparse.
    • At this time, payments need to not only reach bank accounts on time, but cash needs to reach the workers easily and efficiently.
    • The limited coverage of bank infrastructure in rural areas must not be made a hurdle.
    • Attempts to distribute wages in cash, sans biometric authentication, must be rolled out.
    • Sixth, there needs to be flexibility in the kinds of work to be undertaken, while ensuring that the community and the workers are the primary beneficiaries.

    Issuse with MGNREGA

    • Over the last few years, MGNREGA had begun to face an existential crisis.
    • Successive governments capped its financial resources, and turning it into a supply-based programme.
    • Workers had begun to lose interest in working under it because of the inordinate delays in wage payments.
    • With very little autonomy, gram panchayats had begun to find implementation cumbersome.
    • Barring a few exceptions, state governments were only interested in running the programme to the extent funds were made available from the Centre.
    • Allocating work on demand, and not having enough funds to pay wages on time was bound to cause great distress amongst the workers and eventually for the state too.
    • As a result, state governments had begun to implement MGNREGA like a supply-driven scheme, instead of running it like a demand-based guarantee backed by law.

    Consider the question “With migrant workers returning to villages in the wake of corona pandemic, demand for work is likely to increase. In light of this, discuss the utility of MGNREGA and challenges it may face.”

    Conclusion

    With nearly eight crore migrant workers returning to their villages, and with an additional allocation for the year, this could be a moment for the true revival of MGNREGA. A revival led by workers themselves.

    Mahatma Gandhi National Rural Employment Guarantee Act, 2005

    • The Act aims at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage employment in a financial year to a rural household whose adult members (at least 18 years of age) volunteer to do unskilled work.
    • The central government bears the full cost of unskilled labour, and 75% of the cost of material (the rest is borne by the states).
    • It is a demand-driven, social security and labour law that aims to enforce the ‘right to work’.
    • Ministry of Rural Development (MRD), Government of India in association with state governments, monitors the implementation of the scheme.

  • Rising incidences of Chinese Transgressions

    As tensions remain high between Indian and Chinese soldiers, the number of recorded Chinese transgressions across the disputed India-China border surged by 75 per cent in Ladakh in 2019, and the Chinese forays into Indian Territory in the first four months of the current year have also witnessed an increase compared to the same period last year.

    Chinese Transgression:

      • The border between India and China is not fully demarcated and the Line of Actual Control (LAC) is neither clarified nor confirmed by the two countries.
      • This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.
      • Observation Methods: Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.
      • Official data shows that 80% of Chinese transgressions across the LAC since 2015 have taken place in four locations of which three are in eastern Ladakh in the western sector.
        • These areas of eastern Ladakh are Pangong Tso, Trig Heights and Burtse.
        • The fourth area is the Dichu Area/Madan Ridge area (Arunachal Pradesh) of the Eastern sector.

    •  Implications of Increased Number of Transgressions:

      • It is an indicator of increased Chinese assertiveness.
      • Even if there are no major incidents, it should not be taken lightly.
      • So far, there has been no major standoff between the two sides after the 73-day Doklam standoff on Sikkim-Bhutan border in 2017.

    Concerns

    • India is worried about the tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.
    • The increased transgressions lead to more tensions between both countries which are already struggling to contain the Covid-19 pandemic.
    • Nepal’s recent behaviour on the Mansarovar Link Road raising the border map issue also raises Indian concerns.
    • The constant accusations on each other also cause tensions and disrupt the peace on borders.
      • Recently, Chinese media accused India of building defence facilities in the Galwan Valley region of the contested Aksai Chin area.
    • India and China are both nuclear-armed countries with strong militaries and the constant border conflicts are not a desirable thing.

    Way Forward

    • In the Wuhan and Mahabalipuram summits, both China and India had reaffirmed that they will make efforts to ensure peace and tranquility in the border areas.
    • On 1st April, 2020 India and China completed their 70 years of diplomatic relations.
    • Both countries have resolved border issues peacefully in the past four decades which gives the hope that the tensions will subside soon.
    • Establishment of peace between the two big powers of such an important geopolitical region is essential for their own growth and development as well as for maintenance of global peace.

    Practice question for mains:

    Q. Clear demarcation of the national borders is the need of the hour. Discuss.