Note4Students
From UPSC perspective, the following things are important :
Prelims level: UPI
Mains level: Paper 3- Examining the success of UPI
The UPI sets the template for India in its journey toward digitalisation. This article by WhatsApp head Will Cathcart explains the success story of UPI and the future scope to build on its success.
The success story of UPI
- The UPI system set a national open standard for all of India’s banks, more than 155 of which have adopted it.
- UPI is open standard that technology companies can adopt on an equal and level-playing field.
- This means that no one company, foreign or domestic, can write the rules for the other.
- Since its launch, the UPI system has grown to manage a 100 million-strong user base.
- NPCI has also set a goal to increase UPI’s user base to 500 million by 2022, which if achieved, would be a true game-changer for Digital India.
What the success of UPI means
- UPI has set important new frameworks around security and efficiency.
- Because of the strong rules that India has put in place, payment transaction information remains with the banks and within the country.
- And as a platform built on Indian technology and governed by Indian rules, UPI benefits Indians now and holds great potential for further innovation and commerce.
Future scope for UPI
- It is imperative more tech companies are able to leverage the power of UPI to expand the digital ecosystem to accelerate financial inclusion.
- UPI can also anchor a broader suite of fintech applications like micro-pensions, digital insurance products, and flexible loans.
- These are custom solutions created by Indian technology companies, on the public infrastructure of UPI.
- These solutions will first solve large social, business and financial problems in India and then become templates for other countries to deploy.
- COVID-19 has only underscored the importance of these tools that will serve as critical lifelines for small and micro-enterprises and individuals as they look to recover.
Consider the question “Within a short period from its launch the UPI has transformed the payment landscape in India. Examine the factors that contributed to the success of UPI and elaborate on its future scope.”
Conclusion
With courage, ambition, and boundless potential, India can emerge from this pandemic stronger than ever before — a leading democratic digital powerhouse that will lead the world in the 21st century.
B2BASICS
What is Unified Payments Interface (UPI)?
- It was launched in April 2016 and in the last two years, the platform has emerged as a popular choice among users for sending and receiving money.
- UPI is a payment system that allows money transfer between any two bank accounts by using a smartphone.
- UPI allows a customer to pay directly from a bank account to different merchants, both online and offline, without the hassle of typing credit card details, IFSC code, or net banking/wallet passwords.
- It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience.
Original article:
https://indianexpress.com/article/opinion/columns/coronavirus-india-economy-poverty-digital-payment-bhim-upi-6533171/
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Issues in National Education Policy
The article critically examines the various aspects of the National Education Policy 2020 and the issue of flexibility and exams has been analysed closely.
Context of scepticism
- The New Education Policy is a forward-looking framework for transforming Indian education.
- But the past record on implementation of polity raises the concern that the New Education Policy should not turn out to be just “another document”.
- Also, the emphasis in the document on critical thinking and free inquiry is entirely well placed.
- But universities are being intimidated into political and cultural conformity.
- The document lays down objectives; the strategy has yet to come.
Walking the tightrope
- On the language issue it prefers the long-standing recommendation of primary education in the mother tongue.
- But does not categorically recommend curb English.
- On the basic architecture of delivery, policy does not show an inclination towards public or private education both in school and higher education.
School education: Most promising part
- The policy focus on early child development, learning outcomes, different forms of assessment, holistic education, and, recognises the centrality of teacher and teacher education.
- The document recognises that “the very highest priority of the education system will be to achieve universal foundational numeracy and literacy.”
- The suggestions for school education are ambitious, centred on the students, cater to their pedagogical diversity, and take on board the world of knowledge as it is now emerging.
Multidisciplinary education
- The document mentions the word multidisciplinary a bit too much, without explicating what it means.
- One way of thinking about this is not in terms of multiple subjects.
- It is reorienting education from disciplinary content to modes of inquiry that allow students to access a wide variety of disciplines.
Two concerns
1) Flexibility issue
- Under the policy, students might need different exit options.
- But it is unclear if the diploma or early exit options all be made available within a single institution, or different institutions.
- If it is within single institutions, this will be a disaster.
- Because structuring a curriculum for a classroom that has both one-year diploma and four-year degree students takes away from the identity of the institution.
- There is also a risk that without adequate financial support, the exercising of exit options will be determined by the financial circumstances of the student.
- The flexibility offered through multidisciplinary education is against the principle that different institutions have a different characters and strengths.
- A healthy education system will comprise of a diversity of institutions, not a forced multi-disciplinarity.
2) Issue of exams conundrum
- The document rightly emphasises that focus needs to shift from exams to learning. But it contradicts itself.
- Exams are burdon because of competition and cost in terms of opportunities.
- So the answer to the exam conundrum lies in the structure of opportunity.
- This will require a less unequal society both in terms of access to quality institutions.
- Exams are also necessary because in a low trust system people want objective measures of commensuration.
- So the policy reintroduces exams back into the picture by recommending a national aptitude test.
- But the idea that this will reduce coaching is wishful thinking, as all the evidence from the US and China is showing.
Consider the question “The National Education Policy 2020 moves away from rigidity and offers flexibility in many ways. In light of this examine the flexible dimensions offered in the policy and issues with it.”
Conclusion
The policy is commendable for focussing on the right questions. But the hope is that with this our education policy can be transformed into a treat, not another trick.
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Metropolitan cities of India suffers from various issues. This article analyses such issues and suggests some steps to deal with them.
Inadequate public health infrastructure
- India’s public health expenditure in 2018 was a mere 1.28% of GDP.
- According to the World Bank, India’s out-of-pocket health expenditure was 62.4% in 2017, against the world average of 18.2%.
- Manpower in the health sector is low with India’s doctor-population ratio being 1:1,457 against WHO norm of 1:1,000.
Governance issues
- Factors underlying city governance include spatial planning, municipal capacities, empowered mayors and councils and inter-agency coordination, and ward-level citizen participation.
- Twenty-seven after the 74th Constitutional Amendment Act, these reform agendas continue to be slow in implementation.
- India’s metropolitan cities have weak capacities in finance and staffing.
- Bengaluru’s average percentage of own revenue to total expenditure is 47.9%, Chennai 30.5%, Mumbai 36.1% and Kolkata at 48.4%.
- According to ASICS 2017, Mumbai has the highest number of officers per lakh population at 938 in the country.
- Yet it is abysmally low compared to global cities such as Johannesburg with 2,922 and New York with 5,446 officers per lakh population
Limited powers of mayors
- The leaders steering India’s metropolitan cities are toothless.
- No big metropolitan cities with 10 million-plus population has a directly-elected Mayor.
- Mumbai’s Mayor has a tenure of 2.5 years, Delhi and Bengaluru, a mere one year.
- Mayors do not have full decision-making authority over critical functions of planning, housing, water, environment, fire and emergency services in most cases.
- Our metropolitan cities are far from being local self-governments.
- Parastatal agencies for planning, water and public transport report directly to State governments.
- The State government also largely controls public works and police.
- Globally, metropolitan cities are steered by a directly-elected leader.
- Evolved examples include the Tokyo metropolitan government and recent experimental models such as combined authorities in the United Kingdom and Australia.
Suggestions
- India needs home-grown solutions suited to its context and political realities while imbibing lessons on institutional design from global examples.
- It is time the Central and State governments lead efforts towards a metropolitan governance paradigm.
- The first steps should include empowered Mayors with five-year tenure, decentralised ward level governance, and inter-agency coordination anchored by the city government.
Lack of transparency, accountability and citizen participation
- Transparent cities with institutional platforms encouraging citizen participation improve urban democracy.
- No metropolitan has functional ward committees and area sabhas.
- An absence of citizen participation is worsened by poor transparency in finance and operations.
- As per ASICS 2017, India’s big metropolitan cities on average score 3.04/10 in transparency, accountability and participation.
Significance of smaller cities
- A World Bank report notes that despite the emergence of smaller towns, the underlying character of India’s urbanisation is “metropolitan”.
- Under this metropolitan character, new towns emerge around existing large cities.
- According to a McKinsey report, in 2012, 54 metropolitan cities and their hinterlands accounted for 40% of India’s GDP.
- The report also estimates that by 2025, 69 metropolitan cities, combined with their hinterlands, will generate over half of India’s incremental GDP between 2012 and 2025.
- Despite this, India is yet to begin an active discourse on cohesive metropolitan governance frameworks.
- Studies by the Centre for Policy Research point that India’s spatial feature exhibits the growth of small towns beyond the economics of large agglomerations.
- This indicates that while India’s urban vision should focus on its metropolitan cities to reap the benefit of scale, it shouldn’t ignore smaller cities.
Consider the question “Examine the issues in the governance of metropolitan cities. To what extent the limited power of mayors contributes to the issues of the metropolitan cities in India?”
Conclusion
India should use the current pandemic as an opportunity to introspect and reform the way its metropolises are governed.
Back2Basics: ASICS 2017
- The Annual Survey of India’s City-Systems (ASICS) 2017 evaluates quality of governance in cities, covering 23 major cities in India across 20 states based on 89 questions.
- Indian cities scored between 3.0 and 5.1 on 10, with Pune topping the charts for the first time.
- Other cities that came in the top five include Kolkata, Thiruvananthapuram, Bhubaneswar and Surat, with scores in the range of 4.6 to 4.5.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Anti-defection law
Mains level: Issues over Anti-defection law
A political party is trying to win back its defected MLAs in Rajasthan. This has raised a new question- “Does the anti-defection law apply here?”
Try this question for mains:
Q.“Time and again, the courts have spoken out against the Governor acting in the capacity of an all-pervading super-constitutional authority.” Analyse.
What does “merger” mean a/c to Tenth Schedule?
- The Tenth Schedule of the Constitution prohibits defection to protect the stability of governments but does not prohibit mergers.
- Paragraph 4(2) of the Tenth Schedule, dealing with mergers, says that only when two-thirds of the members agree to “merge” the party would they be exempt from disqualification.
- The “merger” referred to in Paragraph 4(2) is seen as a legal fiction, where members are deemed to have merged for the purposes of being exempt from disqualification, rather than a merger in the true sense.
The ‘merger’ Politics
- The political party is arguing that a state unit of a national party cannot be merged without the party being merged at the national level.
- However, the Tenth Schedule identifies this dichotomy between state units and national units.
- As per Paragraph 4(2), “merger” of a party means merger of a legislative party of that House.
- In this case, it would be the Rajasthan Legislative unit of the BSP and not the BSP at the national level.
- Paragraph 1 of the Tenth Schedule which defines terms specified in the context of the anti-defection law states this clearly.
- “Legislature Party” for the purposes of Paragraph 4 (which deals with mergers) means the group consisting of all the members of that House for the time being belonging to that political party in accordance with the said provisions.
Role of Whip
- Every legislative party identifies the party’s whip at the beginning of the Assembly’s term and conveys this to the Speaker.
- A national leader’s direction cannot be considered a whip in the context of the anti-defection law.
On what grounds is the case-based?
- The contention is that the merger is illegal and unconstitutional because, for a national party, such merger has to take place at the national level.
- Supporting this argument, there are two decisions of the Supreme Court: the 2006 Jagjit Singh v State of Haryana, and the 2007 ruling in Rajendra Singh Rana and Ors vs Swami Prasad Maurya.
- In these cases, the SC ruled that the split cannot be recognised primarily because not all these MLAs split at once.
- The key aspect is that these cases deal with splits where when one-third of the members of a legislative party split; they could not attract disqualification as per Paragraph 3 of the Tenth Schedule.
Row over one-third
- In 2003, through the 91st Constitutional Amendment, Paragraph 3 was deleted from the Tenth Schedule.
- The amendment was made as the one-third split rule was grossly misused by parties to engineer divisions and indulge in horse-trading.
- One-third was regarded as an easy target to achieve and the law now exempts defection only when it is at two-thirds (in a merger).
Are there any such precedents?
- In July 2019, 10 of the 15 one party’s MLAs in Goa joined the other taking the ruling party’s tally to 27 in the 40 member House.
- Since they formed two-thirds of the strength of the legislative party unit, they are exempt from disqualification.
- However, the Speaker’s decision not to disqualify them is under challenge before the Supreme Court.
- Similarly in Telangana in 2016, two years after the 12 out of 15 of MLAs joined the ruling party.
- The Speaker recognised the defection as a merger since more than two-thirds had moved.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UNFAO
Mains level: Assurance of Food Security
The Food and Agriculture Organization (FAO) has unveiled a new platform to help accelerate the global reduction in food loss and waste.
Try this PYQ from CSP 2016:
Q. The FAO accords the status of ‘Globally Important Agricultural Heritage System (GIAHS)’ to traditional agricultural systems. What is the overall goal of this initiative?
- To provide modern technology, training in modern farming methods and financial support to local communities of identified GIAHS so as to greatly enhance their agricultural productivity.
- To identify and safeguard eco-friendly traditional farm practices and their associated landscapers, agricultural biodiversity and knowledge systems of the local communities.
- To provide Geographical Indication status to all the varieties of agricultural produce in such identified GIAHS.
Select the correct answer using the code given below.
(a) 1 and 3 only
(b) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
About the Platform
- The Technical Platform on the Measurement and Reduction of Food Loss and Waste brings together information on measurement, reduction, policies, alliances, actions and examples of successful models applied to reduce food loss and waste across the globe.
- The platform will contain information on measurement, reduction policies, alliances, actions and examples of successful models applied to reduce food loss and waste.
- The platform will be officially launched on the first International Day of Awareness of Food Loss and Waste on 29 September 2020.
How will it work?
- The platform is as a gateway to information on food loss and waste from various resources, including the largest online collection of data on what food is lost and wasted.
- Links to related portals from development partners are also provided.
Why need such a portal?
- Food loss and waste is a sign of food systems in distress. Nutritious foods are the most perishable, and hence, the most vulnerable to lose.
- Not only food is being lost, but food safety and nutrition are being compromised as well.
- At least 14 per cent of food is lost (food wastage and food loss together), valued at $400 billion annually.
- In terms of greenhouse gas emissions, the food that is lost is associated with around 1.5 gigatonnes of carbon dioxide equivalent.
- Major losses are seen in roots tubers and oil-bearing crops (25 per cent), fruits and vegetables (22 per cent), and meat and animal products (12 per cent).
- Reducing food loss and waste can bring about many benefits: more food available for the most vulnerable; a reduction in greenhouse gas emissions; less pressure on land and water resources; and increased productivity and economic growth.
Food loss vs food wastage
- There is a difference between food wastage and food losses.
- Food is wasted when it is discarded by consumers or is disposed of in retail due to its inability to meet quality standards.
- Food loss, on the other hand, occurs when it is spoilt or spilt before reaching the final product or retail stage.
- For example, dairy, meat, and fish can go bad in transit because of inadequate refrigerated transport and cold storage facilities.
Back2Basics: Food and Agriculture Organisation (FAO)
Objective: Lead international efforts to defeat hunger
Members: FAO has 194 Member Nations, two associate members and one member organization, the European Union
Headquarters: Rome, Italy
Year Founded: Established in 1945
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Commonwealth of Nations
Mains level: Abolition of modern slavery
The CHRI has released a report on “Eradicating Modern Slavery: An assessment of Commonwealth government progress”.
Try this PYQ from CSP 2012:
Q.Consider the following statements:
- The Commonwealth has no charter, treaty or constitution
- All the territories/countries once under the British Empire (jurisdiction/rule/mandate) automatically joined the Commonwealth as its members
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
About the report
The report was released on the occasion of World Day Against Trafficking in Persons by the Commonwealth Human Rights Initiative (CHRI) and an international anti-slavery organisation Walk Free.
Highlights of the report
- The report assessed the progress made by Commonwealth countries on the promises made in 2018 to end modern slavery by 2030 and achieve the SDGs of ending forced labour, human trafficking and child labour.
- The report found that one-third of the Commonwealth countries had criminalised forced marriage, while 23 had not criminalised commercial sexual exploitation of children.
- Commonwealth countries have made little progress towards their commitment to eradicate modern slavery by 2030.
- One in every 150 people in the Commonwealth is living in conditions of modern slavery.
- Out of 54 countries, only four engage with business to investigate supply chains, and all countries report gaps in victim assistance programs
- None of the Asian countries in the group had implemented laws against forced labour in supply chains.
India is the worst performer
- India had fared the worst in terms of coordination with no national coordinating body or National Action Plan in place.
- India, like all other Commonwealth countries in Asia, had not ratified the International Labour Organization’s 2011 Domestic Workers Convention or the 2014 Forced Labour Protocol.
- The report said India accounted for one-third of all child brides in the world.
- Despite being the largest country in the region, India has the weakest response on national coordination, with no national coordinating body or National Action Plan in place.
Back2Basics: Commonwealth of Nations
- The Commonwealth of Nations is an intergovernmental organisation of 53 member states that are mostly former territories of the British Empire.
- It dates back to the first half of the 20th century with the decolonization of the British Empire through increased self-governance of its territories.
- It was originally created as the British Commonwealth of Nation through the Balfour Declaration at the 1926 Imperial Conference, and formalized by the UK through the Statute of Westminster in 1931.
- The current body was formally constituted by the London Declaration in 1949, which modernized the community, and established the member states as “free and equal”.
- The symbol of this free association is Queen Elizabeth II, who is the Head of the Commonwealth.
- The Queen is head of state of 16 member states, known as the Commonwealth realms, while 32 other members are republics and five others have different monarchs.
- Member has no legal obligations to one another. Instead, they are united by language, history, culture and their shared values of democracy, human rights and the rule of law.
Commonwealth Human Rights Initiative (CHRI)
- It is an independent, non-partisan & nonprofit international NGO which works towards the practical realization of human rights in the countries of the Commonwealth.
- It was founded in 1987 and is headquartered at New Delhi.
- CHRI’s objectives are to promote awareness and adherence to the Commonwealth’s Harare Declaration, to the Universal Declaration of Human Rights, to other internationally recognised human rights instruments.
- The organisation specializes in transparency and accountability issues, with a focus on access to justice and access to information.
- The organisation mainly works in South Asia, East Africa, and Ghana region.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Smog towers
Mains level: Air pollution in Delhi
In January this year, the Supreme Court has directed that two smog towers should be installed in the capital by April on a pilot project basis considering a proposal by the IIT-Bombay.
Try this question from CS Mains 2015:
Q.Mumbai, Delhi and Kolkata are the three mega cities of the country but the air pollution is much more serious problem in Delhi as compared to the other two. Why is this so?
What is a ‘Smog Tower’?
- A smog tower is a structure designed to work as a large-scale air purifier, fitted with multiple layers of filters which trap fine dust particles suspended in the air as it passes through them.
- Air is drawn through fans installed at the top of the tower, passed through filters, and then released near the ground.
- The large-scale filters expected to be installed in the towers in Delhi would use carbon nanofibres as a major component.
- It would be fitted along the peripheries of the towers and the height would be 20 metres.
How does it work?
- The 20-metre (65 feet) high tower will trap particulate matter of all sizes suspended in the air.
- Large-scale air filters shall draw in the air through fans installed at the top before passing it through the filters and releasing it near the ground.
- The filters installed in the tower will use carbon nanofibres as a major component and will be fitted along its peripheries. The tower will focus on reducing particulate matter load.
Has anyone else experimented with a smog tower?
- Yes, smog towers have been experimented with in recent years in cities in the Netherlands, China, South Korea and Poland.
- The first such tower was erected in 2015, in Rotterdam, Netherlands, created by Dutch artist Daan Roosegaarde.
- The towers to be installed in Delhi are to be the result of a collaboration between the IITs at Mumbai and Delhi, and the University of Minnesota.
Why New Delhi?
- Air pollution in the national capital has been an issue of concern for quite some time as Delhi and its suburbs have ranked among the most polluted cities in the world frequently.
- In 2014, the World Health Organisation (WHO) had declared Delhi the most polluted city in the world.
- Pollution levels in Delhi increase dramatically during winter — on some days to nearly 10 times above the limits prescribed by WHO, posing a serious risk to vulnerable and also healthy populations.
- This is large because sources of emissions — construction work, industrial and vehicular pollution — in and around the city remain more or less consistent.
- The situation is aggravated at the start of winter by smoke from stubble-burning in northwestern states, coupled with unfavourable meteorological conditions, such as calm winds, low temperatures, and fewer sunny days.
How effective are smog towers?
- An estimate on air quality shows that a tower would reduce 50% of the particulate matter load in an area of 1 kilometre in the direction of the wind, as well as 200 metres each along the sides of the tower and against the direction of the wind.
- In an open field in calm weather, it can reduce the particulate matter of 10 micrometres (PM10) up to 45%, and PM2.5 levels up to 25% in an area of 20 metres around the tower, as per details on the ENS Clean Air website.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Black Rain
Mains level: Hiroshima and Nagasaki Bombings by US
Ahead of the 75th anniversary of Hiroshima, a Japanese court has recognised 84 survivors of the post-nuclear explosion “black rain” as the atomic bomb survivors. This would enable them to avail free medical benefits.
Try this question from CSP 2011:
Q.Acid rain is caused by the pollution of the environment by:
(a) Carbon dioxide and nitrogen
(b) Carbon monoxide and carbon dioxide
(c) Ozone and carbon dioxide
(d) Nitrous oxide and Sulphur dioxide
What is Black Rain?
- An estimated 69 per cent of the buildings in Hiroshima were destroyed by the atomic bomb.
- The debris and soot from this, mixed with the radioactive fallout from the bomb, raised high into the atmosphere in the form of a mushroom cloud.
- This material combined with the vapour in the atmosphere and came down as dark drops of liquid that have been called black rain.
- Survivors of the black rain described it as consisting of large, greasy drops that are much heavier than normal raindrops.
- It is full of highly radioactive material, and studies have shown that exposure to it can result in serious illnesses.
What was its effect?
- A study conducted in the year 1945 itself showed that black rain had come down as far as 29 km away from ground zero.
- The rain contaminated everything it came in contact with, and dead fish were reported floating in water bodies and severely ill cattle were seen lying in the fields.
- It has caused acute radiation symptoms (ARS) in many who were exposed to it, with reports of people suffering from nausea and diarrhoea for weeks.
- Other ARS include fever, sore throat and loss of hair. Over time, many people who were exposed to black rain have developed cancer.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Finance Commission
Mains level: Finance Commission, Its evolving role in fiscal federalism
The High-Level Group on Agricultural Exports set up by the Fifteenth Finance Commission has submitted its report to the Commission.
Try this PYQ from CSP 2019
Q.In India, which of the following reviews the independent regulators in sectors like telecommunications, insurance, electricity, etc.?
- Ad Hoc Committees set up by the Parliament
- Parliamentary Department Related Standing Committees
- Finance Commission
- Financial Sector Legislative Reforms Commission
- NITI Aayog
Select the correct answer using the code given below.
(a) 1 and 2
(b) 1, 3 and 4
(c) 3, 4 and 5
(d) 2 and 5
Why focus on Agri-exports?
- India’s agricultural export has the potential to grow from USD 40 billion to USD 70 billion in a few years.
- The estimated investment in agricultural export could be in the tune to USD 8-10 billion across inputs, infrastructure, and processing and demand enablers.
- Additional exports are likely to create an estimated 7-10 million jobs.
- It will lead to higher farm productivity and farmer income.
Highlights of the report
(A) The HLEG has made its recommendations, major among which are:
- Focus on 22 crop value chains – demand-driven approach.
- Solve Value Chain Clusters (VCC) holistically with a focus on value addition.
- Create a State-led export plan with participation from stakeholders.
- Private Sector should play an anchor role.
- The centre should be an enabler.
- The robust institutional mechanism to fund and support implementation.
(B) State-led Agri Exports
The Group has recommended a State-led Export Plan – a business plan for a crop value chain cluster. It will lay out the opportunity, initiatives and investment required to meet the desired value chain export aspiration.
The Group has also said that for its success, the following factors needed to be considered:-
- Plans should be collaboratively prepared with private sector players and Commodity Boards.
- Leveraging of state plan guide and value chain deep dives.
- The private sector should play an anchor role in driving outcomes and execution.
- The centre should enable state-led plans.
- Institutional governance should be promoted across the state and centre.
- Funding through the convergence of existing schemes, Finance Commission allocation and private sector investment.
Back2Basics: Finance Commission (FC)
- The FC is a constitutionally mandated body that decides, among other things, the sharing of taxes between the Centre and the states.
- Article 280 (1) requires the President to constitute, “within two years from the commencement of this Constitution.
- And thereafter constitute FC at the expiration of every fifth year or at such earlier time as the President considers necessary.
- An FC “which shall consist of a Chairman and four other members”.
Divisible Pool of Taxes
- Under Article 280(3) (a) the FC must make recommendations to the President “as the distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds”.
- Accordingly, the FC determines a formula for tax-sharing between the states, which is a weighted sum of the states’ population, area, forest cover, tax capacity, tax effort and demographic performance, with the weights expressed in percentages.
- This crucial role of the Commission makes it instrumental in the implementation of fiscal federalism.
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