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  • Retail Inflation climbs to 6.07%

    India’s retail inflation inched up to an eight-month high of 6.07% in February from 6.01% in January, with rural India experiencing a sharper price rise at 6.38%.

    What is Retail Inflation?

    • When we generally talk about retail inflation, it often refers to the rate of inflation based on the consumer price index (CPI).
    • The CPI tracks the change in retail prices of goods and services which households purchase for their daily consumption.
    • The CPI monitors retail prices at a certain level for a particular commodity; price movement of goods and services at rural, urban and all-India levels.
    • The change in the price index over a period of time is referred to as CPI-based inflation, or retail inflation.

    What is Consumer Price Index (CPI)?

    • It is an index measuring retail inflation in the economy by collecting the change in prices of most common goods and services used by consumers.
    • In India, there are four consumer price index numbers, which are calculated, and these are as follows:
      1. CPI for Industrial Workers (IW)
      2. CPI for Agricultural Labourers (AL)
      3. CPI for Rural Labourers (RL) and
      4. CPI for Urban Non-Manual Employees (UNME).
    • While the Ministry of Statistics and Program Implementation collects CPI (UNME) data and compiles it, the remaining three are collected by the Labour Bureau in the Ministry of Labour.
    • The base year for CPI is 2012.
    • To calculate CPI, multiply 100 to the fraction of the cost price of the current period and the base period.

    Significance of CPI

    • Generally, CPI is used as a macroeconomic indicator of inflation, as a tool by the central bank and government for inflation targeting and for inspecting price stability, and as deflator in the national accounts.
    • CPI also helps understand the real value of salaries, wages, and pensions, the purchasing power of the nation’s currency, and regulating rates.
    • CPI, one of the most important statistics to ascertain economic health, is generally based on the weighted average of the prices of commodities.
    • It basically gives an idea of the cost of the standard of living.

     

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  • [Burning Issue] One Nation-One Election

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    Context

    Recently, Chief Election Commissioner in an interview said the Election Commission is ready to hold simultaneous elections on the lines of Prime Minister Narendra Modi’s call for ‘One Nation One Election’.

    What are simultaneous polls?

    • Currently, elections to the state assemblies and the Lok Sabha are held separately — that is whenever the incumbent government’s five-year term ends or whenever it is dissolved due to various reasons.
    • This applies to both the state legislatures and the Lok Sabha. The terms of Legislative Assemblies and the Lok Sabha may not synchronize with one another.
    • For instance, Rajasthan faced elections in late 2018, whereas Tamil Nadu will go to elections only in 2021.
    • But the idea of “One Nation, One Election” envisages a system where elections to all states and the Lok Sabha will have to be held simultaneously.

    Simultaneous polls in India

    • India had concurrent elections for the first two decades.
    • Starting from the first general elections of free India in 1951 and the next three cycles of elections, the country witnessed concurrent Lok Sabha and Assembly elections.
    • Exceptions to these were a few states like Kerala where a mid-term election was held in 1960 on the premature dissolution of the Assembly.
    • In Nagaland and Pondicherry where the Legislative Assembly was created only after the 1962 general elections.

    End of the era

    • The fourth Lok Sabha constituted in 1967 was dissolved prematurely in 1971 ahead of its normal term resulting in a mid-term Lok Sabha election.
    • This was the beginning of the end of simultaneous elections in India.
    • Extension of the term of Lok Sabha during the National Emergency declared in 1975 and the dissolution of Assemblies of some States after the 1977 Lok Sabha election further disturbed this cycle.
    • Currently, there are at least two rounds of Assembly general elections every year.

    Making simultaneous elections a reality

    • Sections 14 and 15 of the Representation of the People Act, 1951, empower the Election Commission to notify elections any time during the last six months of the term of the House and not earlier than that.
    • Therefore, if the terms of the Houses are expiring within a window of three to four months, it would be legally possible to hold elections simultaneously to constitute the new Houses.
    • In other words, to contemplate simultaneous elections, we need, as a starting point, a situation where the Lok Sabha and the Legislative Assemblies of all States and UTs have their terms ending together.

    Synchronizing the terms of the Houses

    • Both the Lok Sabha and Legislative Assemblies (ordinarily) have a term of five years.
    • Article 83 of the Constitution provides for the tenure of Lok Sabha. Identical provisions are present in Article 172(1) regarding the term of the Legislative Assemblies.

    There is no duplication of work in preparing the electoral rolls for the two elections and hence no extra labor or expenditure is involved on this count.

    What is required?

    • This necessarily calls for either extending the terms of several of the Houses or curtailing of terms or a combination of both, that too by two to three years in some cases.
    • For enabling such curtailing or extension of the term, the relevant Articles of the Constitution mentioned above will have to be suitably amended.

    Why Simultaneous Elections?

    Two seemingly relevant factors in favour of simultaneous elections as opposed to separate elections are:

    1. Effort saving: Simultaneous elections reduce labour, time and expenditure in the conduct of elections; and
    2. Instances of pause in governance are addressed if elections are conducted in one go instead of staggered elections.

    [1] How is effort saving possible?

    • Electoral roll: Polling stations for Lok Sabha and Legislative Assembly elections are the same. So is the electoral roll.
    • Labour: There is no duplication of work in preparing the electoral rolls for the two elections and hence no extra labour or expenditure is involved on this count.
    • Logistics: In the conduct of elections, all logistic arrangements are replicated for the two elections when the same drill can cater to both the elections if held together.
    • Security: This will also mean saving in terms of human resources. Another area of saving in simultaneous elections would be in the deployment of the Central Police Force.

    [2] Governance pause can be avoided

    • Instances of pause in governance is due to the Model Code of Conduct (MCC).
    • MCC is a set of behavior guidelines for candidates and political parties that comes into operation from the date election is announced by the Election Commission.
    • A crucial part of the MCC is the restrictions on the party in power.  If all elections are held together, the restrictions under MCC will be through in one go.

    [3] Help reduce campaign expenses

    • Simultaneous elections can bring considerable savings in the election propaganda campaign expenditure for the political parties.
    • Given that political funding is a major factor in the increasing menace of corruption, the move to reduce campaign expenditure is a welcome initiative.

    [4] Voter turnout

    • A nationwide election could push up the voter turnout since a once-in-five-years event is bound to attract more enthusiastic participation across all sections.
    • Frequent elections can bring in the election-fatigue factor at least among some sections of electors.
    • The simultaneous elections help address the fatigue element and the usually observed urban apathy in voting. Better electors’ participation will further add to the credibility of the election.

    [5] Financial costs of conducting elections

    • The costs of conducting each assembly or parliamentary election are huge and, in some senses, incalculable.
    • Directly budgeted costs are around Rs 300 crore for a state the size of Bihar.
    • But there are other financial costs, and incalculable economic costs.
    • The costs of the millions of man-hours used are not charged to the election budget.
    • The economic costs of lost teaching weeks, delayed public works, badly delivered or undelivered welfare schemes to the poor have never been calculated.

    [6] Visible and invisible costs of repeatedly deploying security forces

    • There are also huge and visible costs of deploying security forces and transporting them, repeatedly.
    • A bigger invisible cost is paid by the nation in terms of diverting these forces from sensitive areas.

    Exceptions to this debate: Local Bodies’ Elections

    • The local bodies’ elections have not been considered for the analysis here.
    • This is for the reason that the elections to local bodies cannot be clubbed with the proposed simultaneous elections for the Lok Sabha.

    Why?

    • The elections to local bodies are conducted under the superintendence, direction, and control of a different constitutional authority, namely, the respective State Election Commission.
    • Holding local bodies’ elections along with the other elections will require the team of the same polling officials to report to and take instructions from two different authorities simultaneously.
    • There is a distinct set of polling stations too for local bodies’ elections.
    • Further, the litigation forum before which these elections can be challenged is different.

    Challenges in ensuring simultaneous elections in India:

    [1] Synchronizing the Houses

    • Bringing the terms of all the Houses to sync with one another necessarily calls for either extending the terms of several of the Houses or curtailing of terms or a combination of both.
    • This may be by two to three years in some cases.
    • For this, relevant Articles of the Constitution will have to be suitably amended.

    [2] Midterm dissolution cannot be controlled

    • Even if the terms of the Houses are in sync as a one-time measure, we will still need an adequate legal safeguard in place to avoid mid-term dissolution and protect the simultaneous elections cycle.
    • This can be a tough task in conventionally fragile states with smaller assemblies with coalitions.

    [3] EVM related expenses

    • One aspect that could offset the savings would be the doubling of expenses on electronic voting machines (EVMs).
    • Considering that the incidental recurring expense in the storage and security of the EVMs will also be a considerable amount.
    • The overall expenditure in holding elections may not see any substantial dip on account of simultaneous elections.

    Arguments against the idea

    • National and state issues are different, and holding simultaneous elections is likely to affect the judgment of voters.
    • Since elections will be held once in five years, it will reduce the government’s accountability to the people. Repeated elections keep legislators on their toes and increases accountability.
    • When an election in a State is postponed until the synchronized phase, President’s rule will have to be imposed in the interim period in that state.
    • This will be a blow to democracy and federalism.

    Way forward

    • We need an adequate legal safeguarding place to avoid mid-term dissolution and protect the simultaneous elections cycle.
    • For maintaining the electoral cycle, some countries have legal provisions to the effect that for a ‘no-confidence motion’.
    • Their proposed resolution also contains a constructive ‘vote of confidence in an alternative government to continue with the tenure.

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  • Geneva Conventions and the Russia-Ukraine War

    As the evidence of casualties in the civilian population continues to mount, the world will increasingly look to the Geneva Conventions in the Russia-Ukraine conflict.

    Geneva Conventions Guidelines for Wartime

    • These are a set of four treaties, formalized in 1949, and three additional protocols, which codify widely accepted ethical and legal international standards for humanitarian treatment of those impacted by war.
    • The focus of the Conventions is the:
    1. Treatment of non-combatants and prisoners of war, and
    2. Not the use of conventional or biological and chemical weapons

    What are the four Geneva Conventions?

    (1) First Geneva Convention: Health and Medical Issues

    • It protects wounded and sick soldiers on land during war.
    • This convention extends to medical and religious personnel, medical units, and medical transport.
    • It has two annexes containing a draft agreement relating to hospital zones and a model identity card for medical and religious personnel.

    (2) Second Geneva Convention:  Offshore Protection

    • It protects wounded, sick and shipwrecked military personnel at sea during war.
    • This convention also extends to hospital ships and medical transports by sea, with specific commentary on the treatment and protections for their personnel.

    (3) Third Geneva Convention: Treatment of Prisoners of War (PoW)

    It applies to prisoners of war, including a wide range of general protections such as humane treatment, maintenance and equality across prisoners, conditions of captivity, questioning and evacuation of prisoners, transit camps, food, clothing, medicines, hygiene and right to religious, intellectual, and physical activities of prisoners.

    (4) Fourth Geneva Convention: Civilian protection of occupied territory ***

    • It particularly applies to the invasion of Ukraine by Russian military forces.
    • It protects civilians, including those in occupied territory.
    • Comprising 159 articles, it outlines the norms for this critical dimension of conflict.

    Extent of the Fourth Geneva Convention amid the Ukraine-Russia War

    • Along with the Additional Protocols of 1977, the Fourth Convention expounds upon the:
    1. General protection of populations against certain consequences of war
    2. Conduct of hostilities and the status and
    3. Treatment of protected persons
    4. Distinguishing between the situation of foreigners on the territory of one of the parties to the conflict and that of civilians in occupied territory
    • This convention also spells out the obligations of the occupying power vis-à-vis the civilian population and outlines detailed provisions on humanitarian relief for populations in occupied territory.

    Which countries are signatories?

    • The Geneva Conventions have been ratified by 196 states, including all UN member states.
    • The three Protocols have been ratified by 174, 169 and 79 states respectively.

    Russia and these conventions

    • In 2019, perhaps anticipating the possibility of its invading Ukraine in the near future, Russia withdrew its declaration under Article 90 of Protocol 1.
    • By withdrawing this declaration, Russia has pre-emptively left itself with the option to refuse access by any international fact-finding missions to Russian entities.
    • Not withdrawing could have find Russia responsible for violations of the Geneva Conventions standards.
    • Further, the four conventions and first two protocols of the Geneva Conventions were ratified by the Soviet Union, not Russia.
    • Hence there is a risk of the Russian government of the day disavowing any responsibility under the Conventions.

    What would be the steps for potential prosecution under the Conventions?

    • Under Article 8 of the Rome Statute of the ICC, it is the ICC that has jurisdiction in respect of war crimes, in particular “when committed as part of a plan or policy or as part of a large-scale commission of such crimes.”

    To what extent have Geneva Conventions been upheld worldwide in recent years?

    • Amnesty International notes that there has been a blatant disregard for civilian protection and international humanitarian law in armed conflicts where four of the five permanent members of the UN Security Council are parties.
    • Specifically, Amnesty cited:
    1. US-led coalition’s bombing of Raqqa in Syria, which left more than 1,600 civilians dead
    2. Destruction of civilian infrastructure and lives in Aleppo and Idlib by Russian forces
    3. Leading to mass displacement of millions
    4. War in Yemen where the Saudi Arabia and the UAE-led coalition, backed by the West, killed and injured thousands of civilians, fuelling a full-blown humanitarian crisis

     

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  • What is Blockchain Gaming?

    Many Indian gaming companies have expressed their interest in introducing elements of Blockchain technology into their games in the near future.

    What is Blockchain?

    • Blockchain is a decentralised database that stores information.
    • It relies on technology that allows for the storage of identical copies of this information on multiple computers in a network.

    What are blockchain games?

    • To revisit our definition of blockchain games: they are online video games that are developed by integrating blockchain technology into them.
    • It can be diversified into the following components-

    (1) Non-fungible tokens

    • NFTs represent in-game virtual assets that can be owned by players, such as maps, armour or land.
    • These NFTs act as asset tags, identifying ownership of the in-game assets, and are stored on the blockchain.
    • Being on the blockchain allows the player to have a secure record of ownership of the in-game assets and also gives the assets the ability to outlive the game itself.
    • Based on the manner in which the games are designed, it also allows for the in-game assets to be transferred from one game to another.
    • It also creates transparency, since ownership records can independently be verified by any third party as well.
    • In doing so, it makes in-game assets marketable and creates a decentralized market, where they can be bought and sold by people.

    (2) Cryptocurrency

    • Cryptocurrency, such as tokens based on the Ethereum blockchain, may be used for the purchase of in-game assets.
    • These in-game purchases usually enable gamers to buy items like extra lives, coins and so on directly from the game.

    (3) Gaming coins

    • Gaming coins, such as Axie Infinity (ACS) and Enjin Coin (ENJ), are in-game cryptocurrency which may be acquired and then used for the purchase of in-game assets.
    • These gaming coins may be purchased from crypto exchanges (and eventually be traded on these crypto exchanges as well) or, in certain cases, be acquired as winnings in games that have adopted the ‘play-to-earn’ model.
    • In such games, gamers are rewarded for dedicating their time and skill to play the game with gaming coins and in-game assets.

    Need to regulate such games

    • By making in-game assets available for purchase, developers and publishers stand to earn revenue from the sale of such assets.
    • They may also embed certain rules when implementing the code for in-game assets such that a fee is paid to them every time a certain action is taken,
    • It also involves transfers of assets from one player to another.
    • It needs to be ensured that if it is permissible to offer such games in the Indian Territory and also offers protection in the form of intellectual property rights.
    • Other concerns, such as privacy and cyber security, along with how financial regulations would apply to blockchain games, would also need to be addressed.

    Regulatory aspects in India

    Most of the gaming laws were brought into effect prior to the internet era and, therefore, only contemplate regulation of gaming activities taking place in physical premises.

    (A) Legality Check

    • Since blockchain is merely the underlying technology, there is no express regulation in India.
    • It would, however, be relevant to explore the legality of the games from the lens of existing Indian gaming regulation.
    • Most Indian states regulate gaming on the basis of a distinction in law between ‘games of skill’ and ‘games of chance’.
    • Staking money or property on the outcome of a ‘game of chance’ is prohibited and subjects the guilty parties to criminal sanctions.
    • However, placing any stakes on the outcome of a ‘game of skill’ is not illegal per se and may be permissible.
    • As per two seminal judgments of the Supreme Court on this aspect, the Supreme Court recognized that no game is purely a ‘game of skill’ and almost all games have an element of chance.

    (B) Dominant Element Test

    • As such, a ‘dominant element’ test is to be utilized to determine whether chance or skill is the dominating element in determining the result of the game.
    • This ‘dominant element’ may be determined by examining whether factors such as superior knowledge, training, experience, expertise or attention of a player have a material impact on the outcome of the game.
    • While the outcomes of any ‘games of skill’ are affected by these factors, outcomes of ‘games of chance’ are premised on luck and are largely independent of the skills of the players involved.

    (C) Gaming house regulations

    • The Delhi District Court has, in the past, held that a gaming portal would be covered within the definition of a ‘common gaming house’.
    • This would be subjected to conditions where the gaming developers were to take commission / earn revenue from the game offered.
    • This is because such portals merely seek to replace the brick and mortar common gaming houses that Indian law currently envisages and has outlawed.

    Where does blockchain gaming lie within this framework?

    • There is currently a lacuna in gaming law and there are lingering question marks on its interpretation and applicability to online gaming.
    • As the law currently stands, each blockchain game must first pass muster as a ‘game of skill’, as against a ‘game of chance’, to legally be made available in most Indian states.
    • In the past, the Supreme Court has rejected the notion of video games being ‘games of skill’.

    Possible protections available to blockchain games

    (a) Patents:

    • For a blockchain game or any of its elements to be patented in India if it meets the requirements of novelty, involving an inventive step, and industrial application.
    • In terms of Section 3(k) of the Patent Act, 1970, computer programs are per se not inventions and hence, cannot be patented.
    • However, judicial pronouncements in the past have clarified that if an invention has a technical contribution or a technical effect and is not merely a computer program per se, then it would be patentable.

    (b) Trademarks:

    • A trademark is used as an identifying mark to determine the source of a particular good or service, and is obtained to protect the goodwill and reputation of the brand.
    • Any distinguishing mark in a blockchain game or NFT that would allow consumers to identify the source of that particular game or NFT may be trademarked.

    (c) Copyrights:

    • In India, artistic work, musical work, cinematographic films, dramatic works, sound recordings and computer software are capable being of being protected under copyright law.
    • Although there is no specific provision in the Copyright Act that deals with video games, copyright protection of video games may be sought under the category of ‘multimedia products’.
    • Similar to the position with trademarks, the process of obtaining a copyright for a blockchain game would be the same as any other online video game.

    Future roadmap

    • The Finance Ministry had announced in late-2021 that The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 would seek to prohibit all private cryptocurrencies.
    • If the legislature does indeed successfully, then, to the extent that existing blockchain games rely on cryptocurrencies, they would be considered illegal in India.
    • Independent of this, the Budget announced that the income from the transfer of any ‘virtual digital assets’ (which include cryptocurrency and non-fungible tokens) would be subject to income tax at the rate of 30%.
    • Policy pronouncements of this nature would need to be carefully considered by publishers of blockchain games while designing their pricing models.

     

     

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  • What is ‘Most Favoured Nation’ Status?

    The United States, the European Union, Britain, Canada and Japan are to move jointly to revoke Russia’s “most favoured nation” (MFN) status over its invasion of Ukraine.

    What is MFN status?

    • The World Trade Organization’s 164 members commit to treating other members equally so they can all benefit from each other’s lowest tariffs, highest import quotas and fewest trade barriers.
    • This principle of non-discrimination is known as most favoured nation (MFN) treatment.
    • There are some exceptions, such as when members strike bilateral trade agreements or when members offer developing countries special access to their markets.
    • For countries outside the WTO, such as Iran, North Korea, Syria or Russian ally Belarus, WTO members can impose whatever trade measures they wish without flouting global trading rules.

    Removal of MFN status

    • There is no formal procedure for suspending MFN treatment and it is not clear whether members are obliged to inform the WTO if they do so.
    • India suspended Pakistan’s MFN status in 2019 after a suicide attack by a Pakistan-sponsored group.
    • Pakistan never applied MFN status to India.

    What does losing MFN status mean?

    • Revoking Russia’s MFN status sends a strong signal that the US and its Western allies do not consider Russia a economic partner in any way, but it does not in itself change conditions for trade.
    • It does formally allow the Western allies to increase import tariffs or impose quotas on Russian goods, or even ban them, and to restrict services out of the country.
    • They could also overlook Russian intellectual property rights.
    • Ahead of MFN status removal, the United States had already announced a ban on imports of Russian oil and gas.

     

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  • What is Vibrant Village Programme?

    The Union government plans to open the villages along the Chinese border for tourists under the Vibrant Village programme announced in the Union Budget 2022-23.

    Vibrant Village Programme

    • The program aims to improve infrastructure in villages along India’s border with China.
    • Infrastructure will be improved in states like Uttarakhand, Himachal Pradesh, and Arunachal Pradesh.
    • Under the programme, residential and tourist centres will be constructed.
    • It will also provide for improvement in road connectivity and development of decentralized renewable energy sources.
    • Apart from that, direct access of Doordarshan and education related channels will be provided. Support will be provided for livelihood.

    Key focus areas

    • It focuses livelihood generation, road connectivity, housing, rural infrastructure, renewable energy, television and broadband connections.
    • This objective will be met by strengthening infrastructure across villages located near the Line of Actual Control (LAC).

    Why need such scheme?

    • The programme is a counter to China’s model villages but the name has been carefully chosen so as to not cause any consternation in the neighbouring country.
    • China has established new villages along the LAC in the past few years particularly across the Arunachal Pradesh border.
    • While China has been settling new residents in border areas, villages on the Indian side of the frontier have seen unprecedented out-migration.

     

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  • [Sansad TV] Perspective: Self-Reliance in Defence

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    Context

    • The Ministry of Defence has been allocated a total budget of Rs 5.25 lakh crore for Financial Year 2022-23.
    • It focuses on modernisation of Defence Services and Defence Security Infrastructure development including the Border Road Infrastructure and Coastal Security Infrastructure.

    In this article, we will discuss and analyse as to how this budgetary allocation will lead to India becoming self-reliant in Defence sector and what more needs to be done.

    India’s defence outlay this year

    • The total allocation under Capital Outlay of the Defence Services has been increased from Rs 86,740 crore in 2013-14 to 1.52 lakh crore in 2022-23.

    What makes it special?

    • 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in the previous year.
    • This indicates the Government’s commitment to reducing imports and promoting Atmanirbharta in equipment for the Armed Forces.
    • While Defence R&D will be opened up for industry, start-ups and academia, Private industry will also be encouraged to take up design and development of military platforms and equipment.

    Why the fuss over self-reliance?

    1) Reducing import dependence

    • India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, which accounted for 12% of the total imports during the period, says 2019 SIPRI report.
    • Pakistan stood at the 11th position, accounting for 2.7% of all global imports.
    • Such higher import dependency leads to increase in the fiscal deficit.

    2) Security Imperative

    • Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
    • Indigenization is needed in order to avert the threats associated with the frequent ceasefire violations like that of the Uri, Pathankot and Pulwama attacks.
    • India is surrounded by porous borders and hostile neighbours need to be self-sufficient and self-reliant in defence production.

    3) Economic boost

    • Indigenization in defence can help create a large industry which also includes small manufacturers.
    • Example: USA has a strong defence industry with companies like Lockheed martin contributing to economic growth as well.

    4) Employment generation

    • Defence manufacturing will lead to the generation of satellites industries that in turn will pave the way for a generation of employment opportunities.
    • As per government estimates, a reduction in 20-25% in defence-related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India.

    It was the military-industrial set-up of Germany that enabled it to launch its offensive practically against the entire western world both in World War I and World War II.

    Issues retarding defence exports

    1. Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
    2. Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
    3. Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
    4. Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
    5. ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
    6. Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
    7. Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
    8. FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
    9. R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
    10. Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.

    Steps taken to boost indigenous production

    • Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
    • Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
    • Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
    • Indigenization lists: On the domestic front, to boost indigenous manufacturing, the Government had issued two “positive indigenization lists” consisting of 209 items that cannot be imported.
    • Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.

    Policy initiatives: Defence Production and Export Promotion Policy, 2020

    The DPEPP 2020 is envisaged as overarching guiding document of MoD to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.

    The policy has laid out the following goals and objectives:

    1. To achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.
    2. To develop a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
    3. To reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development.
    4. To promote the export of defence products and become part of the global defence value chains.
    5. To create an environment that encourages R&D rewards innovation creates Indian IP ownership and promotes a robust and self-reliant defence industry.

    The Policy brings out multiple strategies under the following focus areas:

    1. Procurement Reforms
    2. Indigenization & Support to MSMEs/Startups
    3. Optimize Resource Allocation
    4. Investment Promotion, FDI & Ease of Doing Business
    5. Innovation and R&D
    6. DPSUs and OFB
    7. Quality Assurance & Testing Infrastructure
    8. Export Promotion

    Way forward

    • The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
    • A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
    • DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
    • The definition of indigenisation itself needs to privilege technology over value or volume.

  • Issues with high gold demand

    Context

    Gold’s appeal as a safe haven is only rising: as tensions escalate in Ukraine, its price is approaching records.

    Factors explaining demand for gold in India

    • India is the world’s second-largest market for the yellow metal, behind China, though it produces almost none at home.
    • This is partly driven by tradition.
    • Brides are given jewellery as part of their dowry and it is deemed auspicious to buy bullion around certain religious festivals.
    • It is a handy store of undeclared wealth, too, often stashed in wardrobes or under the mattress.
    • But the pandemic has also affirmed an investment advice passed on over generations: park savings in gold as a rainy-day fund.

    Concerns with such a high demand

    • Vast gold imports can destabilise the economy.
    • During the 2013 “taper tantrum”, when India’s foreign-exchange reserves were lower than they are now, a rush of gold imports helped push the current-account deficit to 4.8% of GDP and fuelled worries of a currency crisis.
    • Savings stashed away as idle gold could be put to more productive use elsewhere. 
    • Indian households hold 22,500 tonnes of the physical metal—five times the stock in America’s bullion depository .

    Policy measures by the government

    • Import duties hover around 10%, even after cuts in last year’s budget aimed at keeping smuggling in check.
    • The central bank has ramped up issuance of sovereign gold bonds, which are denominated in grams of gold.
    • Of the 86 tonnes’ worth issued since 2015, about 60% were sold after the pandemic began.
    • And the gold monetisation scheme, which allows households to hand gold over to a bank and earn interest, was revamped last year to reduce limits on the size of deposits.
    • Lockdowns inadvertently helped the state’s agenda.
    • Mobile payments platforms like PhonePe and Google Pay reported rising appetite for digital gold, which is sold online and stored by the seller.
    • Money also rushed into gold exchange-traded funds (ETFs).
    • Their assets hit 184bn rupees ($2.5bn) in December, a 30% rise in a year.

    Conclusion

    Still, only a sliver of the population, mostly well-off urban types and millennials, invest in complex financial products. A large part of India’s demand for physical gold comes from rural areas, where it seems in no danger of losing its lustre.

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  • [Burning Issue] The Tobacco Pandemic

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    Context

    Tobacco is a silent killer in our midst that kills an estimated 1.35 million Indians every year.

    Status of Tobacco Consumption in India

    • According to the Global Youth Tobacco Survey, India has the second-largest number (268 million) of tobacco users in the world and of these 13 lakh die every year from tobacco-related diseases.
    • Ten lakh deaths are due to smoking, with over 2,00,000 due to second-hand smoke exposure, and over 35,000 are due to smokeless tobacco use.
    • About 27 crore people above the age of 15 years and 8.5% of school-going children in the age group 13-15 years use tobacco in some form in India.
    • India bears an annual economic burden of over ₹1,77,340 crore on account of tobacco use.
    • Tobacco use is known to be a major risk factor for several non-communicable diseases such as cancer, cardiovascular disease, diabetes, and chronic lung diseases.
    • Nearly 27% of all cancers in India are due to tobacco usage.

    Socio-Economic Burden of ‘Tobacco’

    • In India, over 1.3 million deaths are attributable to tobacco use every year amounting to 3500 deaths per day, imposing a lot of avoidable socio-economic burden.
    • In addition to the death and diseases it causes, tobacco also impacts the economic development of the country.
    • Smokers face a 40-50% higher risk of developing severe disease deaths from Covid-19.
    • As per the WHO study titled “Economic Costs of Diseases and Deaths Attributable to Tobacco Use in India”, it has been estimated that the economic burden of diseases and deaths attributable to use of tobacco in India was as high as approx 1% of GDP.

    Measures towards tobacco control in India

    • India adopted the tobacco control provisions under WHO Framework Convention on Tobacco Control (WHO FCTC).
    • Cigarettes and Other Tobacco Products Act (COTPA), 2003:
      • It replaced the Cigarettes Act of 1975 (largely limited to statutory warnings- ‘Cigarette Smoking is Injurious to Health’ to be displayed on cigarette packs and advertisements. It did not include non-cigarettes).
      • The 2003 Act also included cigars, bidis, cheroots, pipe tobacco, hookah, chewing tobacco, pan masala, and gutka.
    • Promulgation of the Prohibition of Electronic Cigarettes Ordinance, 2019: Which prohibits Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement of e-Cigarettes.
    • National Tobacco Quitline Services (NTQLS): Tobacco Quitline Services have the potential to reach a large number of tobacco users with the sole objective to provide telephone-based information, advice, support, and referrals for tobacco cessation.
    • mCessation Programme: It is an initiative using mobile technology for tobacco cessation.
      • India launched mCessation using text messages in 2016 as part of the government’s Digital India initiative.

    How do the price and taxation of tobacco matter?

    • Although not a communicable disease like SARS-CoV-2, the tobacco epidemic — as the World Health Organisation characterizes it — has some definitive solutions that can reduce the death toll.
    • Research from many countries around the world including India shows that a price increase induces people to quit or reduce tobacco use as well as discourages non-users from getting into the habit of tobacco use.
    • There is overwhelming consensus within the research community that taxation is one of the most cost-effective measures to reduce the demand for tobacco products.
    • There has been no significant tax increase on any tobacco product for four years in a row.
    • This is quite unlike the pre-GST years where the Union government and many State governments used to effect regular tax increases on tobacco products.
    • As peer-reviewed studies show, the lack of tax increase over these years has made all tobacco products increasingly more affordable.
    • The absence of a tax increase on tobacco has the potential to reverse the reduction in tobacco use prevalence that India saw during the last decade and now push more people into harm’s way.
    •  It would also mean foregone tax revenues for the Government.
    • High and increasing tax rates provide a profitable opportunity for tax evasion and encourage growth in illegal trade.

    What is the Taxation Scenario of Tobacco in India?

    • Ever since the introduction of the Goods and Services Tax (GST) legislation in 2017, there has been no significant tax increase on any tobacco product.
    • There was only a minor increase in the National Calamity Contingent Duty (NCCD) during the Union Budget 2020-21 which only had the effect of increasing cigarette prices by roughly 5%.
    • The Union Budget 2022-23 was an excellent but lost opportunity for the Government of India to buck this trend and significantly increase either excise duties or NCCDs.
    • No significant tax increase on any tobacco product for four years in a row has made all tobacco products increasingly more affordable.
    • More affordable tobacco products could attract new users especially among the youth.
    • It would also mean foregone tax revenues for the Government especially at a time when the Government of India is looking forward to increasing the share of public spending on health

    The decline in Tobacco Consumption

    • The prevalence of tobacco use has decreased by six percentage points from 34.6% in 2009-10 to 28.6% in 2016-17.
    • Under the National Health Policy 2017, India has set an ambitious target of reducing tobacco use by 30% by 2025.

    WHO Framework Convention on Tobacco Control

    • Governments adopt and implement the tobacco control provisions of the WHO Framework Convention on Tobacco Control (WHO FCTC).
    • It is the first international treaty negotiated under the auspices of the WHO.
    • It was adopted by the World Health Assembly (apex decision making body of WHO) on 21st May 2003 and entered into force on 27th February 2005.
    • It was developed in response to the globalization of the tobacco epidemic and is an evidence-based treaty that reaffirms the right of all people to the highest standard of health.
    • The FCTC’s measures to combat tobacco use include:
    1. Price and tax measures.
    2. Large, graphic warnings on tobacco packages.
    3. 100% smoke-free public spaces.
    4. A ban on tobacco marketing.
    5. Support for smokers who want to quit.
    6. Prevention of tobacco industry interference.

    Way Forward

    (1) Opportunities in Budget

    • The government should take a considerate view of public health and significantly increase excise taxes — either basic excise duty or National Calamity Contingent Duty (NCCD) — on all tobacco products.
    • Fixing an excise tax of at least ₹1 per stick of bidis while aiming for a significant increase in the excise tax of cigarettes and smokeless tobacco products.
    • Taxation should achieve a significant reduction in the affordability of tobacco products to reduce tobacco use prevalence and facilitate India’s march towards sustainable development goals.

    (2) Role of GST Council

    • There is absolutely no public health rationale why a product as harmful as a bidi does not have a cess levied on it under the GST or why the specific cess applied on cigarettes has remained unchanged for four years in the face of increasing inflation.
    • GST Council meetings must strive to keep public health ahead of the interests of the tobacco industry and significantly increase either the GST rates or the GST compensation cess rates applied on all tobacco products.
    • The aim should be to arrest the increasing affordability of tobacco products in India and also rationalise tobacco taxation under the GST.

    (3) Tobacco Control Laws

    • It is scientifically established that if a person is kept away from tobacco till the age of 21 and above, there is a very high probability that he/she will remain tobacco-free for the rest of their life.
    • The experts have urged the government to increase the legal age of sale of tobacco products from 18 to 21 by amending the Cigarettes and Other Tobacco Products Act (COTPA), 2003.
    • Also, imposing a comprehensive ban on tobacco advertising and banning sale of single sticks of cigarettes/bidis would go a long way in preventing children and youth from initiating tobacco use.
    • At least 14 countries (Ethiopia, Guam, Honduras, Japan, Kuwait, Mongolia, Palau, Philippines, Samoa, Singapore, Sri Lanka, Thailand, Uganda, and the U.S.) have now increased the minimum age to 21 for buying tobacco products.
    • At least 86 countries have banned the sale of single stick cigarettes to control their easy accessibility and affordability to youth.

    (4) Educating Children

    • The role of teachers is most crucial in creating awareness among children and their parents about harm due to tobacco use and for shaping the attitude of children in this regard.
    • The more and the sooner awareness is created among children about harms due to tobacco use, the better will be the outcomes in terms of reduction in the prevalence of tobacco use among children and consequently among adults.
    • Harmful effects of tobacco use should be incorporated in school curricula at various levels starting right from the primary school level.

    Conclusion

    The aim should be to arrest the increasing affordability of tobacco products in India and also rationalize tobacco taxation under the GST.

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  • Manual Scavenging and its prevalence in India

    Three laborers in Mumbai, allegedly hired for manual scavenging, died after inhaling toxic fumes in a septic tank.

    What is Manual Scavenging?

    • Manual scavenging is the practice of removing human excreta by hand from sewers or septic tanks.
    • India banned the practice under the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 (PEMSR).
    • The Act bans the use of any individual for manually cleaning, carrying, disposing of or otherwise handling in any manner, human excreta till its disposal.
    • In 2013, the definition of manual scavengers was also broadened to include people employed to clean septic tanks, ditches, or railway tracks.
    • The Act recognizes manual scavenging as a “dehumanizing practice,” and cites a need to “correct the historical injustice and indignity suffered by the manual scavengers.”

    Why is it still prevalent in India?

    • Low awareness: Manual scavenging is mostly done by the marginalized section of the society and they are generally not aware about their rights.
    • Enforcement issues: The lack of enforcement of the Act and exploitation of unskilled labourers are the reasons why the practice is still prevalent in India.
    • High cost of automated: The Mumbai civic body charges anywhere between Rs 20,000 and Rs 30,000 to clean septic tanks.
    • Cheaper availability: The unskilled labourers, meanwhile, are much cheaper to hire and contractors illegally employ them at a daily wage of Rs 300-500.
    • Caste dynamics: Caste hierarchy still exists and it reinforces the caste’s relation with occupation. Almost all the manual scavengers belong to lower castes.

    Various policy initiatives

    • Prohibition of Employment as Manual Scavengers and their Rehabilitation (Amendment) Bill, 2020: It proposes to completely mechanise sewer cleaning, introduce ways for ‘on-site’ protection and provide compensation to manual scavengers in case of sewer deaths.
    • Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013: Superseding the 1993 Act, the 2013 Act goes beyond prohibitions on dry latrines, and outlaws all manual excrement cleaning of insanitary latrines, open drains, or pits.
    • Rashtriya Garima Abhiyan: It started national wide march “Maila Mukti Yatra” for total eradication of manual scavenging from 30th November 2012 from Bhopal.
    • Prevention of Atrocities Act: In 1989, the Prevention of Atrocities Act became an integrated guard for sanitation workers since majority of the manual scavengers belonged to the Scheduled Caste.
    • Compensation: As per the Prohibition of Employment of Manual Scavengers and their Rehabilitation (PEMSR) Act, 2013 and the Supreme Court’s decision in the Safai Karamchari Andolan vs Union of India case, a compensation of Rs 10 lakh is awarded to the victims family.

    Way forward

    • Regular surveys and social audits must be conducted against the involvement of manual scavengers by public and local authorities.
    • There must be proper identification and capacity building of manual scavengers for alternate sources of livelihood.
    • Creating awareness about the legal protection of manual scavengers is necessary.

     

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