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GS Paper: GS3

  • Getting India’s military jointness formula right

    Context

    The Chief of Defence Staff General Bipin Rawat’s recent description of the Indian Air Force (IAF) as a supporting arm and the IAF chief Air Chief Marshal R.K.S. Bhadauria’s rebuttal highlights turbulent journey marking the reorganisation process of the armed forces.

    Issues before IAF

    • The IAF is warning against splitting it into packets.
    • Reports suggest that counting even ageing aircraft, the IAF is 25% short on fighter squadrons.
    • A pan service shortage of about 400 pilots, almost 10% of their authorised strength, further aggravates this.
    • Therefore, the IAF has a point when it warns against splitting assets, for, there may be nothing much to split.

    Way forward

    • Confidence building: A common understanding of the nuances of military airpower is the key.
    • With the experience of operating almost every kind of aircraft the IAF operates, the naval leadership understands air power.
    • This applies to the Indian Army too, in its own way.
    • Confidence needs to be developed that rightly staffed apex joint organisations can draw up professional operational plans for air power.
    • Enhancing military education: Confidence building will need some effort in the short term towards enhancing professional military education though, at the staff level.
    • Analysis before implementation: Major reorganisations must strictly follow the sequence of written concepts, their refinement through consultation, simulation or table top war gaming, field evaluation and final analysis before implementation.
    • This would help address command and control, asset adequacy, individual service roles, operational planning under new circumstances and the adequacy of joint structures.
    • Who gets to lead what also matters.
    • The Western Command between the Indian Army and the IAF, the Northern Command with the Indian Army, Maritime Command with the Indian Navy and the Air Defence Command with the IAF may be an acceptable formula.

    Why jointness?

    • With dwindling budgets, a steadily deteriorating security situation and the march of technology, the armed forces understand the need to synergise.

    Challenges

    • Challenges in co-existence: Different services do not co-exist well where they are colocated.
    • Bitter fights over land, buildings, facilities, etc. harms optimal operational synergising.
    • Allocation challenge: Then there is the issue of giving each other the best, or of wanting to be with each other.
    • Lack of operational charter: The Andaman and Nicobar Command suffered from the lack of a substantial operational charter, and the services not positioning appropriate personnel or resources there.
    • Lack of interest in joint tenure: As a joint tenure did not benefit career, no one strove for it.
    • The U.S., when faced with the same problem, made joint tenures mandatory for promotions.

    Steps to be taken

    • Security strategy: We need a comprehensive National Security Strategy to guide the services develop capacities required in their respective domains.
    • Professional education: We need to transform professional education and inter-service employment to nurture genuine respect for others.
    • Mutual resolution of difference: The armed forces must resolve their differences among themselves, as the politicians or bureaucrats cannot do it.
    • Quality staff: Good quality staff, in adequate numbers, at apex joint organisations, will help to reassure individual services and those in the field that they are in safe hands.
    • Tailored approach: There is need for the acceptance of the fact that what works for other countries need not work for us.

    Conclusion

    We may need tailor-made solutions which may need more genuine thinking. For genuine military jointness, a genuine convergence of minds is critical.

  • Implications of EU’s new GHG emissions law for Indian industry

    Context

    On July 14, the European Union introduced new legislation, Fit for 55, to cut its GHG emissions by 55 per cent by 2030 and to net-zero by 2050.

    Implications of Fit for 55

    • Legal backing: It turns the EU’s announcement into law, protecting it from the winds of political change.
    • Opportunity for India: It opens new markets for Indian industry, for example for electric vehicles.
    • CBAM: However, it also introduces a potentially adverse policy called the carbon border adjustment mechanism (CBAM).
    • CBAM is meant to discourage consumers from buying carbon-intensive products and encourage producers to invest in cleaner technologies.

    What is CBAM?

    • The EU has had a carbon emission trading system since 2005.
    • With Fit for 55, the EU’s carbon price is likely to go up.
    • High carbon price will make the EU’s domestic products more expensive than imports from countries that do not have such rules.
    • The new CBAM is meant to level the playing field between domestic and imported products.
    • CBAM will require foreign producers to pay for the carbon emitted while manufacturing their products.
    • The adjustment will be applied to energy-intensive products that are widely traded by the EU, such as iron and steel, aluminium, cement, fertiliser, and electricity.

    Why CBAM is a cause for concern for India?

    • India is Europe’s third-largest trading partner, and it does not have its own carbon tax or cap.
    • So, CBAM should be a cause for concern for it.
    • A UNCTAD study predicts that India will lose $1-1.7 billion in exports of energy-intensive products such as steel and aluminium.
    • India’s goods trade with the EU was $74 billion in 2020.

    Way forward for Indian Industry

    • Clean technology partnerships: Indian Industry should enter clean technology partnerships with European industry.
    • Invest in renewables:  Indian companies should invest in more renewable electricity and energy efficiency.
    • Incentivise low-carbon choices: They can adopt science-based targets for emission reduction and internal carbon pricing to incentivise low-carbon choices.
    • Schemes and Government financing: The government can extend the perform-achieve-trade scheme to more industries and provide finance to MSMEs to upgrade to clean technologies.
    • WRI India’s analysis shows that carbon dioxide emissions from the iron and steel industry can be reduced from 900 million tonnes to 500 million tonnes in 2035 through greater electrification, green hydrogen, energy efficiency, and material efficiency.
    • Diversify export: India can try to diversify its exports to other markets and products.

    Consider the question “What is carbon border adjustment mechanism (CBAM) introduced by the EU? What are its implications for Indian industry?” 

    Conclusion

    At present, the CBAM may seem obstructionist. But over the long-term, it can provide regulatory certainty to industry by harmonising carbon prices, and Indian industry can position itself as a strong player in the trade landscape of the future.

    Back2Basics: UNCTAD

    • UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
    • Its headquarters are located in Geneva, Switzerland, and have offices in New York and Addis Ababa.
    • UNCTAD is part of the UN Secretariat.
    • IT report to the UN General Assembly and the Economic and Social Council but have own membership, leadership, and budget.
    • It is also part of the United Nations Development Group.

  • Essential Defence Services Bill, 2021

    The Minister of State for Defence has introduced the Essential Defence Services Bill in the Lok Sabha.

    Essential Defence Services Bill

    • Essentially, the bill is aimed at preventing the staff of the government-owned ordnance factories from going on strike.
    • Around 70,000 people work with the 41 ordnance factories around the country.
    • It is aimed to provide for the maintenance of essential defence services so as to secure the security of the nation and the life and property of the public at large and for matters connected therewith or incidental thereto.

    Why need such a bill?

    • Indian Ordnance Factories is the oldest and largest industrial setup that functions under the Department of Defence Production of the Ministry of Defence.
    • The ordnance factories form an integrated base for indigenous production of defence hardware and equipment, with the primary objective of self-reliance in equipping the armed forces with state-of-the-art battlefield equipment.
    • It is essential that an uninterrupted supply of ordnance items to the armed forces be maintained for the defence preparedness of the country and the ordnance factories continue to function without any disruptions.

    What does it allow the government to do?

    • The Bill empowers the government to declare services mentioned in it as essential defence services the cessation of work of which would prejudicially affect the production of defence equipment or goods.
    • It also prohibits strikes and lockouts in “any industrial establishment or unit engaged in essential defence services”.

    Why does the government feel its need?

    • In June the government announced the corporatization of the Ordnance Factory Board.
    • The OFB was directly under the Department of Defence Production and worked as an arm of the government.
    • The government has claimed that the move is aimed at improving the efficiency and accountability of these factories.
    • The Bill mentioned that there is a threat, though, that the employees of these factories can go on a strike against the decision.

    Also read:

    Ordinance Factory Board corporatization gets Cabinet approval

  • Moon-forming region seen around an exoplanet for the first time

     

    Scientists for the first time have spotted a Moon-forming region around an exo-planet beyond our solar system.

    What are Exoplanets?

    • More than 4,400 planets have been discovered outside our solar system, called exoplanets.
    • Most orbit other stars, but free-floating exoplanets, called rogue planets, orbit the galactic center and are untethered to any star.
    • No circumplanetary discs had been found until now because all the known exoplanets resided in “mature” – fully developed – solar systems, except the two infant gas planets orbiting PDS 70.

    What is the new finding?

    • The researchers have detected a disc of swirling material accumulating around one of two newborn planets.
    • They were seen orbiting a young star called PDS 70, located a relatively close 370 light-years from Earth.
    • It is called a circumplanetary disc, and it is from these those moons are born.
    • The discovery offers a deeper understanding of the formation of planets and moons.

    Focus of the finding: Formation of disc

    • In our solar system, the impressive rings of Saturn, a planet around which more than 80 moons orbit, represent a relic of a primordial moon-forming disc.
    • The orange-colored star PDS 70, roughly the same mass as our Sun, is about 5 million years old– a blink of the eye in cosmic time.
    • The two planets are even younger. Both planets are similar (although larger) to Jupiter, a gas giant.
    • It was around one of the two planets, called PDS 70c, that a Moon-forming disc was observed.

    Observing birth of a moon: Core Accretion

    • Stars burst to life within clouds of interstellar gas and dust scattered throughout galaxies.
    • Leftover material spinning around a new star then coalesces into planets, and circumplanetary discs surrounding some planets similarly yield moons.
    • The dominant mechanism thought to underpin planet formation is called “core accretion”.
    • In this scenario, small dust grains, coated in ice, gradually grow to larger and larger sizes through successive collisions with other grains.
    • This continues until the grains have grown to a size of a planetary core, at which point the young planet has a strong enough gravitational potential to accrete gas which will form its atmosphere.
    • Some nascent planets attract a disc of material around them, with the same process that gives rise to planets around a star leading to the formation of moons around planets.
    • The disc around PDS 70c, with a diameter about equal to the distance of the Earth to the sun, possesses enough mass to produce up to three moons the size of Earth’s moon.

  • Special Economic Zones

    Key Highlights of the report

    • If India is to become a US $5 trillion economy by 2025, then the current environment of manufacturing competitiveness and services has to undergo a basic paradigm shift.
    • The report notes that the success seen by services sectors like IT and ITES (IT enabled services) has to be promoted in other services sector like health care, financial services, legal, repair and design services.

  • India’s FAANG moment has arrived

    Context

    In the US, the Big Tech FAANG five are Facebook, Apple, Amazon, Netflix and Google (now Alphabet).  Today, in India, Zomato’s stock market debut is a big occasion for India that could pave the path for other online successes.

    Significance for economy

    • It is the first among a host of domestic unicorns to have taken the IPO road, heralding a watershed moment.
    • Boost for startups: It is also also a big leap for our country as a whole, which today boasts of the third largest start-up ecosystem in the world.
    • Creation of online ecosystem: The response to Zomato’s initial public offer (IPO) gave us interesting insights into the robustness of the online economy in a pandemic-stricken world.
    • Help creation of tech-giants: It could alter the composition as well as perception of markets, giving Indian investors a feel of new-generation, tech-heavy, assets-light and agile entrepreneurial growth stories, woven around the consumer internet ecosystem in India.
    • Attracting FDI: With global liquidity at unprecedented levels and tech being the toast of the season, we could be looking at FDI inflows in unforeseen proportion in days to come.
    • The ascent of new-age enterprises like Zomato and Paytm on the Stock Market, followed by likes of Oyo, Ola, Swiggy, Byju’s and even Flipkart could signal the emergence of India’s own FAANG family.

    What sets the tech startups apart?

    • Their reliance on big data and leveraging of ever-evolving technology, while sustaining a two-way connection with clients set them apart.
    • The ‘stickiness’ and the ‘connect’ built over the years through carefully fabricated social layers puts them in the league of giant social media influencers.
    • During the last few decades, two distinctive traits that have the potential to push the boundaries of limitations are the creation of a large talent pool and India’s prowess in software and data (including AI/ML) technology, both on a global scale.

    Conclusion

    As we celebrate 30 years of economic reforms, today’s debut, at least for the markets and the economy, may well be called India’s re-tryst with destiny.

  • Challenging China

    Context

    The Chinese are about to extend their geographical advantage by building a new high-speed rail from Chengdu, running close by and parallel to the Arunachal border, up to Lhasa.

    Manpower and Defence Budget: Comparison with China

    • The Indian army, according to diverse sources, numbers between 12,50,000 and 14,00,000 officers and men.
    • Chinese PLA actually has only 9,75,000 officers and men.
    •  They have downsized their army.
    • China is an aspiring world power that spends $252 billion on its defence budget, as compared to $72.9 billion that India spends.
    • Both countries limit their budget to around 2 per cent of their GDP, which in China’s case is five times our size.

    Why does India need to reduce manpower in defense?

    • Expensive:  A major portion of the budget is spent on manpower, 81 percent of the army budget goes into manpower and maintenance. Gradually, manpower is going to get increasingly expensive.
    • Also, our strategic options get constrained because the army gets 61 percent of the defense budget.
    • We need to downsize the army by 2,00,000 men over five years through retirement and reduced recruitment.
    • The reduction in manpower will save approximately Rs 30,000 crore, which can be equally divided between the three services.

    Way forward: Bigger role to navy and air force

    • We can achieve better conventional deterrence against China by giving bigger roles to the navy and air force.
    • The first step is to accept that we are an asymmetric power and leverage the RMA (Revolution in Military Affairs) so that numerical inferiority is of no consequence.
    • They are invulnerable on land, and their only strategic weakness is their reliance on the Indian Ocean SLOCs (sea lines of communications) for 70 percent of their imported oil.
    • The only guarantee of Chinese non-aggression and good behavior is a well-crafted threat to their oil tankers and a complete naval mastery of the escalation that is bound to follow.
    • India can also leverage the QUAD resources in various ways such as information.
    • Build up the Car Nicobar airfield into a full-fledged airbase.
    • We could negotiate with Oman for the use of the old RAF airbase at Masirah to dominate the Gulf of Hormuz and threaten the Chinese base at Djibouti.

    Conclusion

    China cannot be countered by throwing expensive manpower at the problem, but only by shifting the battlespace to advantageous geography, by a united navy and air force effort, while a technically advanced army holds the Himalayan border.

  • What is Gross Environment Product?

    The Uttarakhand government recently announced it will initiate valuation of its natural resources in the form of ‘Gross Environment Product’ (GEP), said to be along the lines of Gross Domestic Product (GDP).

    Why such a move?

    • The idea of the valuation of the components of the environment is not new.
    • But it got impetus following rapid degradation of ecosystems, which led to adverse impacts on more than 60 percent of services we get from the ecosystems.

    What is Gross Environment Product (GEP)?

    • GEP is the measure of ecosystem services of any area.
    • It reflects the aggregated annual value of goods and services provided by ecosystems (forests, water bodies, oceans, etc.) to people in a given region, such as at district levels, state, and country.
    • It entails the establishment of a natural capital accounting framework by integrating ecological benefits into common measures of economic growth such as GDP.
    • It summarizes the value of ecosystem services in a single monetary metric.

    Evolution of GEP

    • The term “ecosystem services” was coined in 1981 to attract academics towards this aspect.
    • Ecosystem services represent the benefits humans get: Forests, lakes, and grasslands; timber and dyed; carbon sequestration and nutrient cycling; soil formation and productivity; and tourism.
    • The definition is still in the process of evolution. The concept received attention and now is part of global knowledge.

    Advantages offered

    • GEP can be applied as a scientific basis for Eco-Compensation and public financial transfers.
    • For example, Finance Commission’s revenue-sharing formula between the Union and the states including forest cover as a determining factor in a state’s share.
    • GEP can be applied to measure the status of ecosystem services, which is an important indicator of sustainable development.
    • It is also a critical indicator for measuring the progress of Eco-civilization.
    • Its implementation can help assess the impact of anthropological pressure on our ecosystem and natural resources- air, water, soil, forests.

    The Himalayan context

    • The Himalayas contribute substantially to the sustainability of the Gangetic Plains where 500 million people live.
    • The Union government incorporated the value of ecosystem services of its states in national accounting.
    • According to the recommendation of the 12th and 13th Finance Commissions, grants were transferred to forest-rich states in amounts corresponding to their forest covers.
    • However, considering only the forest cover in transferring funds to states is inadequate.

  • [pib] Periodic Labour Force Survey (2019 –2020)

    The Periodic Labour Force Survey (PLFS) Annual Report for July, 2019 to June 2020 was recently released by the National Statistical Office (NSO).

    Periodic Labour Force Survey

    • Considering the importance of the availability of labor force data at more frequent time intervals, National Statistical Office (NSO) launched PLFS in April 2017.
    • The objective of PLFS is primarily twofold:
    1. to estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the Current Weekly Status (CWS).
    2. to estimate employment and unemployment indicators in both ‘Usual Status’ and CWS in both rural and urban areas annually.

    Various dimensions of the survey

    The PLFS gives estimates of Key employment and unemployment Indicators:

    • Labour Force Participation Rate (LFPR): LFPR is defined as the percentage of persons in the labor force (i.e. working or seeking or available for work) in the population.
    • Worker Population Ratio (WPR): WPR is defined as the percentage of employed persons in the population.
    • Unemployment Rate (UR): UR is defined as the percentage of persons unemployed among the persons in the labor force.
    • Activity Status- Usual Status: When the activity status is determined on the basis of the reference period of the last 365 days preceding the date of the survey, it is known as the usual activity status of the person.
    • Activity Status- Current Weekly Status (CWS): The activity status determined on the basis of a reference period of the last 7 days preceding the date of the survey is known as the CWS of the person.

    Highlights of the third report

    • The Labour force participation ratio has increased to 40.1% in 2019-20 from 37.5% and 36.9%, respectively, in the last two years.
    • Worker population rate improved to 38.2% in 2019-20 compared with 35.3% in 2018-19 and 34.7% in 2017-18.
    • The unemployment rate fell to 4.8% in 2019-20. In 2018-19, it stood at 5.8% and 6.1% in 2017-18.

  • Challenges in withdrawing stimulus measures

    Context

    Economic-policy discussions increasingly revolve around the question of when and how quickly central banks should pull back the uber-stimulus measures implemented last year in response to the pandemic.

    Why withdrawal is challenging?

    • Uncertainties: Both parts of the question (when and how) call for finely balanced judgment to account for uncertainties that are in play.
    • Policy changes by major central banks can have far-reaching implications for economic and financial well-being, affecting not just those directly involved but also the many nations.
    • To answer the question, an assessment of three current issues is required:
    • The labor market.
    • The surge in inflation.
    • The risk of not being able to recover quickly in the event of a policy mistake.

    Let’s look into these three issues

    1) Labour market puzzle

    • Despite massive demand, the labor market is unable to match unemployed workers to jobs.
    • The situation is particularly stark in the US.
    • Job data for April show that there are a record number of job openings in the US—more than nine million—labor-force participation remains stubbornly low, and unemployment high, compared to pre-pandemic levels.
    • The labor market’s persistent malfunctioning—particularly employers’ struggle to find employees—is likely to lead to higher wage growth, a possibility that fuels concern about the second issue-inflation.

    2) Inflation: Is it transitory or long-lasting?

    • There is a view that the current uptick in inflation will sharply reverse itself.
    • As the year progresses, it is expected that the base effect will wash out together with the supply and demand mismatches.
    • However, there is a possibility of supply bottlenecks, changes in supply chains, and lasting inventory management challenges.

    3) Policy challenges: To act or not to act

    • Policymakers must be mindful of the risks associated with any given course of action—including inaction.
    • In the face of such uncertainty, it is wise to ask not just what could go wrong but also what the consequences of a policy mistake would be.
    • Under the current conditions, a wrong move could have far-reaching, lasting effects.
    • Those favoring a continuation of loose monetary policies argue that central bankers still have tools to overcome inflation should it persist.
    • But as the opponents are quick to point out, those tools have become increasingly ineffective and difficult to calibrate.
    • The risk of inaction (or inertia) in this case may be larger than that of acting early.

    Options with systemically important central banks

    • In the case of the US, economic growth is buoyant, fiscal policy is also extremely expansionary, and businesses and households alike have significant accumulated savings that they will now be spending down.
    • The conditions are now ripe for the Fed to start reducing—gradually and carefully—its bond-buying program from its current rate of $120 billion per month.
    • The European Central Bank, however, is in a different position.
    • While eurozone growth is picking up, the level of financial support is not as strong as in the US, and the private-sector recovery is not as advanced.
    • The hardest case to call in the UK.
    • With growth, fiscal support, and the private sector’s prospects more finely balanced.
    • Other central bankers around the world also have an important role to play.
    • Central bankers elsewhere should be running their own scenario analyses and formulating appropriate response plans.

    Conclusion

    There is nothing wrong with hoping that three systemically important central banks will get to their destination smoothly. But the journey is far from over, and the risk of someone slipping is not negligible.

    Back2Basics: Labour force participation rate

    • The labor force participation rate is a measure of an economy’s active workforce.
    • The formula for the number is the sum of all workers who are employed or actively seeking employment divided by the total noninstitutionalized, civilian working-age population.
    • Used in conjunction with the unemployment numbers, it offers some perspective into the state of the economy.

    Source:

    https://www.financialexpress.com/opinion/withdrawal-symptoms-central-banking-fast-and-slow/2295940/