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September 2021
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Foreign Policy Watch: India-China

Hardly the India-China century

Note4Students

From UPSC perspective, the following things are important :

Prelims level : New Development Bank

Mains level : Paper 2- India-China relations

Context

Deng Xiaoping had told then-Indian Prime Minister Rajiv Gandhi in 1988 that the 21st century would be “India and China’s century”, the current Chinese leadership has no patience for such pablum. They believe — indeed believe they know — that it is destined to be China’s century alone.

The policy of side-stepping contentious issues and encouraging bilateral economic relations

  • There have always been political tensions, both over each country’s territorial claims over land controlled by the other, and China’s alliance with Pakistan, and India’s hospitality to the Dalai Lama.
  • But neither country had allowed these tensions to overwhelm them:
  • China had declared that the border dispute could be left to “future generations” to resolve.
  • India had endorsed the “One China” policy, refusing to support Tibetan secessionism while limiting official reverence for the Dalai Lama to his status as a spiritual leader.
  • India actions and statements have usually been designed not to provoke, but to relegate the border problem to the back burner while enabling trade relations with China (now worth close to $100 billion) to flourish.
  • India made it clear that it was unwilling to join in any United States-led “containment” of China.
  • From negligible levels till 1991, trade with China had grown to become one of India’s largest trading relationships. 
  • India engages with China diplomatically in the BRICS  as well as conducting annual summits of RIC (Russia-India-China).
  • India is an enthusiastic partner in the Chinese-led Asian Infrastructure Investment Bank and the New Development Bank (NDB).
  • However, it has become increasingly apparent that the policy of side-stepping contentious issues and encouraging bilateral economic relations has played into Chinese hands.

Chinese strategy in Galwan

  • In the Galwan clash, the Chinese troops seem to have been engaged in a tactical move to advance their positions along areas of the LAC that it covets, in order to threaten Indian positions and interdict patrols.
  • They are threatening India’s construction of roads, bridges and similar infrastructure on undisputed Indian territory, a belated effort to mirror similar Chinese efforts near the LAC in Tibet.
  • They have established a fixed presence in these areas well beyond China’s own ‘Claim Line’.
  • The objective seems to be to extend Chinese troop presence to the intersection of the Galwan river and the Shyok river, which would make the Galwan Valley off bounds to India.
  • The Chinese have constructed permanent structures in the area of their intrusion and issued statements claiming that sovereignty over the Galwan valley has “always belonged” to China.
  • Consolidation of LOC: China’s strategy seems to be to consolidate the LAC where it wants it, so that an eventual border settlement — that takes these new realities into account — will be in its favour.
  • Implications for India:  In the meantime, border incidents keep the Indians off-balance and demonstrate to the world that India is not capable of challenging China, let alone offering security to other nations.

India’s options

  • India has reinforced its military assets on the LAC to prevent deeper incursions for now.
  • And hopes to press the Chinese to restore the status quo ante through either diplomatic or military means.
  • Chinese and Indian officials are currently engaged in diplomatic and military-to-military dialogue to ease tensions, but de-escalation has been stalled for months.
  • Economic options: India has responded with largely symbolic acts of economic retaliation.
  • India has also reimposed tighter limits on Chinese investment in projects such as railways, motorways, public-sector construction projects, and telecoms.

Limits to India’s economic retaliation

  • India is far too dependent on China for vital imports — such as pharmaceuticals, and even the active ingredients to make them, automotive parts and microchips that many fear it will harm India if it acted too strongly against China.
  • Imports from China have become indispensable for India’s exports to the rest of the world.
  • Various manufacturing inputs, industrial equipment and components, and even some technological know-how come from China; eliminating them could have a seriously negative effect on India’s economic growth.
  • And there are limits to the effectiveness of any Indian retaliation: trade with China may seem substantial from an Indian perspective, but it only represents 3% of China’s exports.
  • Drastically reducing it would not be enough to deter Beijing or cause it to change its behaviour.

Consider the question “State of India-China relationship hardly indicate the 21st Century being the “India and China’s century”. In light of this, examine the factors responsible for this and suggest the way forward for India.”

Conclusion

This range of considerations seems to leave only two strategic options. Playing second fiddle to an assertive China or aligning itself with a broader international coalition against Chinese ambitions. Since the first is indigestible for any democracy, is China de facto pushing India into doing something it has always resisted — allying with the West?

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Goods and Services Tax (GST)

Centre and states must strike bargain on GST

Note4Students

From UPSC perspective, the following things are important :

Prelims level : GST

Mains level : Paper 3- Changes needed in GST

Context

After one and a half years of dispute, and with the economy showing signs of recovery, a path forward for the GST finally seems visible. This opportunity needs to be seized to strike the Centre-State bargain.

How GST performed so far

  •  The contributors are many but the critical one has been simply a lack of revenues.
  • Initially, the GST performed well, with collections soaring to Rs 11.8 lakh crore in the first full year of implementation in 2018-19.
  • But in 2019-20, the growth rate decelerated sharply. And in 2020-21, collections actually fell.
  • As future collections became uncertain, a gap opened up between the amount that the Centre felt it could afford to promise and the minimum that the states felt they needed and were entitled to.
  • More recently, however, confidence in GST has improved.
  • Collections have revived, averaging Rs 1.1 lakh crore in the first five months of the current fiscal year, exceeding even pre-pandemic levels.

What explains the weak revenue performance of the GST?

  • Slowing economy: The GST’s past performance now seems much better than it once did.
  • We now know that after 2018-19, nominal GDP growth slowed from 10.5 per cent in 2018-19 to 7.8 per cent the next year and -3 per cent in 2020-21.
  • Effective rate cuts: The RBI has pointed out, the effective tax rate has fallen by nearly 3 percentage points because of rate cutting in 2019, in which both the Centre and states were complicit.
  • Thus the weak revenue performance of the GST now seems attributable to wider economic difficulties and policy actions, rather than problems with the tax itself.

Necessary changes: Opportunity for striking bargain for Centre and States

1) Principle of compensation must be re-cast: Create revenue buffer

  • As the GST was a new tax, so states were guaranteed against the teething troubles that would inevitably arise for the next five years.
  • Five years on, this logic is less compelling.
  • The GST as tax reform has reached maturity, well understood by producers, consumers, and tax officials.
  • At the same time, the last few years have exposed the vulnerability of the states to shocks such as Covid-19 pandemic.
  • Way forward: To prevent this situation from recurring, the authorities should create a revenue buffer that could be tapped in a time of need.
  • In sum, there is a bargain waiting to be struck: The states give up their demand for an extension of the compensation mechanism, while the Centre offers a new counter-cyclical buffer.
  • As the figure shows, in good economic times, GST revenues will be robust but it is against downturns that states need protection.
  • The shift to revenue insurance, in turn, should allow the compensation cess to be abolished. 

2) The GST structure needs to be simplified and rationalised

  • The GST structure needs to be simplified and rationalised, as recommended by the Fifteenth Finance Commission and the Revenue Neutral Rate report.
  • New rate structure: A new structure should have one low rate (between 8 and 10 per cent), one standard rate (between 16 and 18 per cent) and one rate for all demerit goods.
  • The single rate on demerit goods also requires eliminating the cesses with all their complexity.

3) The GST Council’s working needs changes

  • Consensus-based decision making in GST Council can be sustained only if there is a shared sense of participatory and inclusive governance. 
  • Nearly two decades ago, when the VAT was being introduced, Yashwant Sinha established a culture of consensual discussions on indirect taxes.
  • He did this by requiring the Empowered Committee of State Finance Ministers to be headed by a finance minister from an Opposition-run state government.
  • The spirit of this idea could be translated to the GST Council.

Consider the question “Inherent importance of GST and its significance for the cooperative federalism underline the necessity for the Centre and the States to strike the win-win bargain. In light of this, examine the issues with the GST and suggest the way forward to deal with these issuef.”

Conclusion

Cooperative federalism is not a gesture or one-off outcome. It is, above all, a disposition, resulting from quotidian democratic practice. By rehabilitating cooperative federalism’s finest achievement — the GST — the Centre and states can help restore India’s broader economic prospects.

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Higher Education – RUSA, NIRF, HEFA, etc.

NEET

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Issues with the NEET

The Tamil Nadu Assembly has passed a bill exempting the State from the National Eligibility-cum-Entrance Test (NEET) for admission to undergraduate (UG) medical courses.

About NEET

The NEET has replaced the formerly All India Pre-Medical Test (AIPMT).

It is an all-India pre-medical entrance test for students who wish to pursue undergraduate medical (MBBS), dental (BDS) and AYUSH (BAMS, BUMS, BHMS, etc.) courses.

The exam is conducted by National Testing Agency (NTA).

TN law: Permanent Exemption for NEET

  • The Bill exempts medical aspirants in Tamil Nadu from taking NEET examination for admission to UG degree courses in Indian medicine, dentistry and homeopathy.
  • Instead, it seeks to provide admission to such courses on the basis of marks obtained in the qualifying examination, through “Normalization methods”.
  • The aim of the Bill is to ensure “social justice, uphold equality and equal opportunity, protect all vulnerable student communities from being discriminated”.
  • It seeks to bring vulnerable student communities to the “mainstream of medical and dental education and in turn ensure a robust public health care across the state, particularly the rural areas”.

Why TN is against NEET?

  • Non-representative: TN opposes because NEET undermined the diverse societal representation in MBBS and higher medical studies.
  • Disfavors the poor: It has favored mainly the affordable and affluent sections of the society and thwarting the dreams of underprivileged social groups.
  • Exams for the elite: It considers NEET not a fair or equitable method of admission since it favored the rich and elite sections of society.
  • Healthcare concerns: If continued, the rural and urban poor may not be able to pursue medical courses.

Can any state legislate against NEET?

  • Admissions to medical courses are traceable to entry 25 of List III (Concurrent List), Schedule VII of the Constitution.
  • Therefore, the State can also enact a law regarding admission and amend any Central law on admission procedures.

Views of the stakeholders appointed by TN

  • A majority of stakeholders were not in favor of the NEET requirement.
  • NEET only worked against underprivileged government school students, and had profited coaching centres and affluent students.
  • NEET had not provided any special mechanism for testing the knowledge and aptitude of the students.
  • The higher secondary examination of the State board itself was an ample basis for the selection of students for MBBS seats.

A move inspired by a SC Judgement

  • This thinking of the State may be due to the observation made by the Supreme Court in the selection process of postgraduate (PG) courses in medicine.
  • The Medical Council of India (MCI) had prescribed certain regulations providing reservations for in-service candidates.
  • The Supreme Court struck down regulation 9(c) made by the MCI on the ground of the exercise of power beyond its statute.

Not a similar case

  • It must be remembered that the Supreme Court was only dealing with a regulation framed by the MCI.
  • The requirement of NEET being a basic requirement for PG and UG medical courses has now been statutorily incorporated under Section 10D of the Indian Medical Council (IMC) Act.
  • When the Tamil Nadu government issued an order in 2017 providing for the reservation of 85% of the seats for students passed out from the State board it was struck down by the Madras High Court.
  • The introduction of internal reservation for government school students is under challenge before the Madras High Court. Similarly, NEET as a requirement is also pending in the Supreme Court.
  • Unless these two issues are decided, NEET cannot be removed by a State amendment.

The bill cannot be passed

  • The present move to pass a fresh Bill on the same lines is most likely to meet the same fate.
  • The President refused to give his assent to this bill.
  • It is significant that no other State in India has sought an exemption from NEET and, therefore, exempting Tamil Nadu alone may not be possible.
  • Even among the seats allotted to the State, there is no bar for students from other States from competing or selecting colleges in Tamil Nadu.

The bigger question

  • The question is not whether the State government can amend a law falling under the Concurrent List.
  • The question is whether the State government can exempt Section 10D of the IMC Act, which is a parliamentary law that falls under the Central List (Entry 66).
  • Moreover, the Supreme Court has also upheld NEET as a requirement.
  • Mere statistics highlighting that a majority of the stakeholders do not want NEET in Tamil Nadu is not an answer for exempting the examination.

Again, it is State and Centre are at crossroads

  • Normally, a Bill requires assent from the Governor to become a law. Stalin’s contention is that this Bill deals with education, which is a Concurrent List subject.
  • Admissions to medical courses fall under Entry 25 of List III, Schedule VII of the Constitution, and therefore the state is competent to regulate the same.
  • Yet, as far as matters relating to the determination of standards for higher education are concerned, the central government has the power to amend a clause or repeal an Act.
  • So, just the passing of the Bill doesn’t enable the students to get exempted from writing NEET.
  • Already, Union Higher Education Secretary Amit Khare has held that if any State wants to opt out of the exam, it has to seek permission from the Supreme Court.

Options for Tamil Nadu

  • Data is necessary only when there is power to legislate on the subject concerned.
  • Since the Bill, which will become an Act only after the President’s nod, will come into effect only from the next academic year, the battle for and against the NEET requirement will continue in courts.
  • Hopefully, the courts will determine the legality and have a definite solution to the question of medical admissions within the next year.
  • Till such time, students who wrote NEET will fill the seats under the State quota.

Way forward: Preventing Commercialization of Medical Education

  • The time may also have come to examine whether NEET has met its purposes of improving standards and curbing commercialization and profiteering.
  • Under current norms, one quite low on the merit rank can still buy a medical seat in a private college, while those ranked higher but only good enough to get a government quota seat in a private institution can be priced out of the system.
  • The Centre should do something other than considering an exemption to Tamil Nadu.
  • It has to conceive a better system that will allow a fair admission process while preserving inter se merit and preventing rampant commercialization.

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Indian Ocean Power Competition

AUKUS Partnership for Indo-Pacific

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AUKUS, Quad

Mains level : Maritime cooperations for Indo-Pacific

The Biden administration has announced a new trilateral security partnership for the Indo-Pacific, between Australia, the U.K., and the U.S. (AUKUS).

What is AUKUS?

  • AUKUS, as the partnership is being called, will strive over the next 18 months to equip Australia with nuclear propulsion technology.
  • As part of this, Australia will acquire nuclear-powered submarines with help from the UK and the US.
  • It will also involve a new architecture of meetings and engagements between the three countries, as well as cooperation across emerging technologies (applied AI, quantum technologies and undersea capabilities).
  • Australia’s nuclear-powered submarines, when they deploy, will be armed with conventional weapons only and not nuclear weapons.

Why such an alliance?

  • Tensions have been high between Australia and an increasingly assertive China, its largest trade partner.
  • Australia banned Chinese telecom giant Huawei in 2108 and its PM called for an investigation into the origins of COVID-19 last year.
  • China retaliated by imposing tariffs on or capping Australian exports.

Not to substitute Quad or others

  • This alliance does not and will not supersede or outrank existing arrangements in the Indo-Pacific region such as the Quad, which the US and Australia form with India and Japan, and ASEAN.
  • AUKUS will complement these groups and others.

Significance

  • There has been only one other time that the US has shared as “extremely sensitive” submarine propulsion technology — more than 60 years ago, back in 1958, with Great Britain.
  • The US is working to move past the 20-year war in Afghanistan and the chaotic U.S. exit from Kabul.
  • The Biden Administration has put countering China at the center of his economic and national security efforts, describing it as the biggest challenge of this era.

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Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

Four-year moratorium for AGR dues

Note4Students

From UPSC perspective, the following things are important :

Prelims level : AGR

Mains level : Stress in the telecom sector

In big bang reforms, the Union Cabinet approved a relief package for the telecom sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100% foreign investment through the automatic route.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 per cent and 8 per cent respectively.

Why is AGR important?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why do telcos need to pay out large amounts?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 crore.
  • However, the actual payout can go up to ₹1.4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

Is there stress in the sector?

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

Issue of lower tariff

  • Currently, telecom tariffs are among the lowest globally, driven down due to intense competition following the entry of Reliance in the sector.
  • The TRAI examines the merits of a “minimum charge” that operators may charge for voice and data services.

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Coastal Zones Management and Regulations

Tarballs on Mumbai Coast

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Tarballs

Mains level : Oil spills and the threats posed

A beach in South Mumbai, saw black oil-emanating balls lying on the shore.

What are Tarballs?

  • Tarballs are dark-coloured, sticky balls of oil that form when crude oil floats on the ocean surface.
  • Tarballs are formed by weathering of crude oil in marine environments.
  • They are transported from the open sea to the shores by sea currents and waves.
  • Tarballs are usually coin-sized and are found strewn on the beaches. Some of the balls are as big as a basketball while others are smaller globules.
  • However, over the years, they have become as big as basketballs and can weigh as much as 6-7 kgs.

How are tarballs formed?

  • Wind and waves tear the oil slick into smaller patches that are scattered over a much wider area.
  • Various physical, chemical and biological processes (weathering) change the appearance of the oil.

Why are tarballs found on the beaches during the monsoon?

  • It is suspected that the oil comes from the large cargo ships in the deep sea and gets pushed to the shore as tarballs during monsoon due to wind speed and direction.
  • All the oil spilt in the Arabian sea eventually gets deposited on the western coast in the form of tarballs in the monsoon season when wind speed and circulation pattern favour transportation of these tarballs.

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Historical and Archaeological Findings in News

[pib] Hybodont Shark fossils found in Jaisalmer

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Hybodont Shark

Mains level : Not Much

In a rare discovery, teeth of new species of Hybodont shark of Jurassic age have been reported for the first time from Jaisalmer by a team of officers from the Geological Survey of India (GSI).

Hybodont Shark

  • Hybodonts, an extinct group of sharks, was a dominant group of fishes in both marine and fluvial environments during the Triassic and early Jurassic time.
  • However, hybodont sharks started to decline in marine environments from the Middle Jurassic onwards until they formed a relatively minor component of open-marine shark assemblages.
  • They finally became extinct at the end of the Cretaceous time 65 million years ago.

Significance of the fossil

  • The newly discovered crushing teeth from Jaisalmer represents a new species named by the research team as Strophodusjaisalmerensis.
  • These sharks have been reported for the first time from the Jurassic rocks (approximately, between 160 and 168 million years old) of the Jaisalmer region of Rajasthan.
  • The genus Strophodus has been identified for the first time from the Indian subcontinent and is only the third such record from Asia, the other two being from Japan and Thailand.
  • It opens a new window for further research in the domain of vertebrate fossils.

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Back2Basics: Geological time-scale