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  • Government Budgets

    Ensuring that policy outcome matches the intent

    op-ed snap | Economics | Mains Paper 3: Government Budgeting

    Context

    Policy differences between parties and coalitions arouse heated debates in legislatures and at political rallies. But relatively scant attention is paid to whether the stated policy or enacted law — of any persuasion — delivered the intended outcomes/results.

    Issues with annual budget modalities

    • There are limitations in the structural design of the Union and the state governments of India, which either cause or enable inefficient translation of policy intent to semi-realised outcomes.
    • Nowhere is this more obvious than in the annual budget modalities followed by the Union and state governments.
    • The final accounts (FA) for a financial year are generally presented to the legislative body between 18 and 24 months after that year’s budget is approved, most often as a minor artefact along with the main attraction of the budget for the upcoming year and the minor attraction of the Revised Estimate (RE) for the year in progress.
    • In effect, a small fraction of the attention paid to intent (budget) is paid to the outcome (FA) which is only known many months after the year is over.
    • Governments in India adhere to the archaic cash accounting as opposed to accrual accounting, which is the norm for most companies and governments which introduces some strange incentives and behaviours, especially towards the end of the year.
    • As a result, even the final account is not what it seems, with the possibility that significant funds which have been presented to the legislature as spent are still held in off-balance-sheet accounts not visible to the government’s finance department.

    Way forward: Lessons from Tamil Nadu government

    • This structural limitation was the basis for the initiative to identify and retrieve unutilised funds that the Tamil Nadu government.
    • New procedures and systems will ensure that such moving/parking of funds (especially as the year ends) cannot happen outside of the finance department’s oversight.
    • On another front, the data-integrity project undertaken to support (among other reasons) the crop and jewel loan waiver poll promise has also produced remarkable results.
    • Many instances of ghost pension recipients and free-rice-entitled category of ration card holders and malfeasance in crop and jewel loan sanctioning have come to light.
    • The rectification of such anomalies will save the government a significant amount of funds, but, more importantly, enable fairer societal outcomes.
    • Tamil Nadu is diligently following the five-step approach: Collect and analyse data to develop a deeper understanding, disseminate results into the public domain and generate a public debate, receive feedback from the debate and inputs from experts, use these inputs to design policies and put into execution, constantly seek feedback and course correct when needed.

    Conclusion

    We need the thoughtful design of policies and schemes, and their execution, which are vital to achieving our intended goal of benefiting all citizens in a fair and inclusive manner.

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  • Foreign Policy Watch: India-United States

    Trade and climate, the pivot for India-U.S. ties

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Context

    The fate of the grand strategic ambitions of the Indo-US relationship may depend substantially on how well they collaborate in two areas to which their joint attention is only belatedly turning — climate and trade.

    Importance of climate change and trade to India-US partnership

    • Strategic partnerships capable of re-shaping the international global order cannot be based simply on a negative agenda.
    • Shared concerns about China provide the U.S.-India partnership a much-needed impetus to overcome the awkward efforts for deeper collaboration that have characterised the past few decades.
    • What risks being lost is a reckoning with how interrelated climate and trade are to securing U.S.-India leadership globally, and how their strategic efforts can flounder without sincere commitment to a robust bilateral agenda on both fronts.

    India-US collaboration on climate change and challenges

    • India and the U.S. are collaborating under the Climate and Clean Energy Agenda Partnership.
    • In parallel, there are hopeful signs that they are now prioritising the bilateral trade relationship by rechartering the Trade Policy Forum. 
    • At COP26 in Glasgow India announced a net zero goal for 2070, it has called for western countries to commit to negative emissions targets.
    • Challenges: India’s rhetoric of climate justice is likely to be received poorly by U.S. negotiators, particularly if it aligns with China’s messaging and obstructs efforts to reach concrete results.

    Collaboration on trade

    • The failure of the U.S. and India to articulate a shared vision for a comprehensive trade relationship raises doubts about how serious they are when each spends more time and effort negotiating with other trading partners.
    • Protectionist tendencies infect the politics of both countries these days, and, with a contentious U.S. mid-term election a year away, the political window for achieving problem-solving outcomes and setting a vision on trade for the future is closing fast.

    Climate-trade inter-relationship

    • Climate and trade are interrelated in many ways.
    • If governments, such as India and the U.S., coordinate policies to incentivise sharing of climate-related technologies and align approaches for reducing emissions associated with trade, the climate-trade inter-relationship can be a net positive one.
    • India and the U.S. could find opportunities to align their climate and trade approaches better, starting with a resolution of their disputes in the World Trade Organization (WTO) on solar panels.
    • The two countries could also chart a path that allows trade to flow for transitional energy sources, such as fuel ethanol.
    • Shared strategic interests will be undermined if India and the U.S. cannot jointly map coordinated policies on climate and trade.
    • The most immediate threat could be the possibility of new climate and trade tensions were India to insist that technology is transferred in ways that undermine incentives for innovation in both countries or if the U.S. decides that imports from India be subject to increased tariffs in the form of carbon border adjustment mechanisms or “CBAMs”.

    Conclusion

    Concerted action on both the climate and trade fronts is mutually beneficial and will lend additional strength to the foundation of a true partnership for the coming century.

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  • RBI Notifications

    RBI issues revised Prompt Corrective Action (PCA) framework

    Prelims Only | Economics | Mains Paper 3: Indian Economy

    The RBI has issued a revised Prompt Corrective Action (PCA) framework for banks to enable supervisory intervention at “appropriate time” and also act as a tool for effective market discipline.

    What is the PCA framework?

    • Prompt Corrective Action Framework refers to the central bank’s watchlist of weak banks.
    • The regulator imposes restrictions like curbs on lending on such banks.
    • The PCA Framework applies only to commercial banks and does not cover cooperative banks and non-banking financial companies.

    When was PCA introduced?

    • The RBI’s PCA Framework was introduced in December 2002 as a structured early intervention mechanism along the lines of the US Federal Deposit Insurance Corporation’s PCA framework.
    • The last PCA Framework was issued by the RBI on April 13, 2017, and implemented with respect to banks’ financials as of March 31, 2017.

    Latest PCA norms

    • The revised PCA framework will be effective from January 1, 2022.
    • Capital, asset quality and leverage will be the key areas for monitoring in the revised framework.
    • That apart, RBI has also revised the level of shortfall in total capital adequacy ratio that would push the lender to “risk threshold three” category.

    When exactly does a bank fall into this list?

    • The RBI has specified certain regulatory trigger points with respect to three parameters for the initiation of the process:
    • Capital-to-risk weighted assets ratio (CRAR): It is a measure of a bank’s capital to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.
    • Net Non-Performing Assets (NPA)
    • Return on assets (RoA): It is an indicator of how well a company utilizes its assets in terms of profitability.

    What are the trigger points on capital and how does a breach invite action?

    1. CRAR

    • If CRAR falls to less than 9 percent, the RBI asks banks to submit a capital restoration plan, restricts new businesses and dividend payments.
    • The RBI also orders recapitalisation, restrictions on borrowings from the inter-bank market, reduction of stake in subsidiaries and reduction of exposure to sensitive sectors.
    • Such sectors include the capital markets, real estate or investments in non-statutory liquidity ratio securities.
    • If CRAR is less than 6 percent but equal to or more than 3 percent, the RBI could take additional steps if the bank fails to submit a recapitalisation plan.

    2. NPA levels

    • If net NPAs rise beyond 10 percent but are less than 15 percent, a special drive to reduce bad loans and contain the generation of fresh NPAs begins.
    • The RBI reviews the bank’s loan policy and takes steps to strengthen credit-appraisal skills.

    3.Return on assets

    • If RoA is less than 0.25 percent, restrictions on accessing/renewing costly deposits and CDs kick in and the RBI bars the bank from entering new lines of business.
    • The bank’s borrowings from the inter-bank market, making dividend payments and increasing staff will be restricted.

    Significance of PCA

    • The financial health of a bank: Essentially PCA helps RBI monitor key performance indicators of banks, and taking corrective measures, to restore the financial health of a bank.
    • Averting a crisis: PCA is intended to help alert the regulator as well as investors and depositors if a bank is heading for trouble. The idea is to head off problems before they attain crisis proportions.

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  • India launches Infrastructure for the Resilient Island States (IRIS)

    | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    The PM has launched the Initiative for the Resilient Island States (IRIS) for developing infrastructure of small island nations.

    What is IRIS?

    • The Small Island Developing States or SIDS face the biggest threat from climate change.
    • To mitigate this, India’s space agency ISRO will build a special data window for them to provide them timely information about cyclones, coral-reef monitoring, coast-line monitoring etc. through satellite.
    • IRIS will be a part of the India-UK Coalition for Disaster Resilient infrastructure (CDRI).

    About CDRI

    • The CDRI is an international coalition of countries, UN agencies, multilateral development banks, the private sector etc. that aim to promote disaster-resilient infrastructure.
    • Its objective is to promote research and knowledge sharing in the fields of infrastructure risk management, standards, financing, and recovery mechanisms.
    • It was launched by the Indian PM Modi at the 2019 UN Climate Action Summit in September 2019.

    Focus areas

    • CDRI’s initial focus is on developing disaster-resilience in ecological, social, and economic infrastructure.
    • It aims to achieve substantial changes in member countries’ policy frameworks and future infrastructure investments, along with a major decrease in the economic losses suffered due to disasters.

    Try this PYQ:
    Q.Consider the following statements:
    Climate and Clean Air Coalition (CCAC) to Reduce Short Lived Climate Pollutants is a unique initiative of G20 group of countries
    The CCAC focuses on methane, black carbon and hydrofluorocarbons.
    Which of the above statements is/are correct?
    (a) 1 only
    (b) 2 only
    (c) Both 1 and 2
    (d) Neither 1 nor 2

    Post your answers here.

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  • Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

    In news: National Commission for Scheduled Castes (NCSC)

    | Polity | Mains Paper 2: Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    The National Commission for Scheduled Castes (NCSC) will examine the complaint of a decorated Narcotics Control Bureau (NCB) officer against caste-based allegations by a Maharashtra minister.

    About National Commission for Scheduled Castes

    • NCSC is a constitutional body under Article 338 of the Indian Constitution.
    • It functions under the jurisdiction of Ministry of Social Justice and Empowerment.
    • It was established with a view to provide safeguards against the exploitation of Scheduled Castes.
    • It aims to promote and protect their social, educational, economic and cultural interests, special provisions were made in the Constitution.

    How were they established?

    • The original constitution provided for the appointment of a Special Officer under Article 338.
    • The special officer was designated as the Commissioner for Scheduled Castes and Scheduled Tribes.
    • The 65th Constitutional Amendment Act 1990, amended Article 338 of the Constitution to introduce a joint NC for SCs and STs.
    • Later by 89th Amendment, NC for Scheduled Castes (NCSC) and NC for Scheduled Tribes (NCST) were separated by creating a new Article 338-A.

    Functions

    • To investigate and monitor all matters relating to the safeguards provided for the SCs
    • To inquire into specific complaints with respect to the deprivation of rights and safeguards of the Scheduled Castes
    • To participate and advise on the planning process of socio-economic development of the SCs
    • To evaluate the progress of their development under the Union and any State
    • To present to the President, annually and at such other times as the Commission may deem fit, reports upon the working of those safeguards
    • To make in such reports recommendations as to the measures that should be taken by the Union or any State
    • To discharge such other functions as the President may, subject to the provisions of any law made by Parliament, by rule specify

    Note: National Commission for Backward Castes is also a constitutional body too. According to article 340, President shall establish a commission to examine the condition of social and backward class.

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  • Giant Magellan Telescope (GMT)

    Prelims Only | Science Tech | Mains Paper 3: S&T – Applications In Everyday Life

    In Chile’s dry Atacama Desert, stargazers are scanning the clear night skies to detect the existence of life on other planets and study so-called ‘dark energy’. Central to the race to peer into distant worlds is the GMT.

    Giant Magellan Telescope (GMT)

    ⦁ The GMT is a ground-based extremely large telescope under construction.
    ⦁ It is US-led in partnership with Australia, Brazil, and South Korea, with Chile as the host country.
    ⦁ It will consist of seven 8.4 m (27.6 ft) diameter primary segments, that will observe optical and near infrared (320–25000 nm) light.
    ⦁ It will have the resolving power of a 24.5 m (80.4 ft) primary mirror and collecting area equivalent to a 22.0 m (72.2 ft) one which is about 368 square meters.
    ⦁ It is expected to have a resolving power 10 times greater than the Hubble Space Telescope.

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    Bakc2Basics: Hubble Space Telescope

    ⦁ The Hubble Space Telescope is a space telescope that was launched into low Earth orbit in 1990 and remains in operation.
    ⦁ It was not the first space telescope, but it is one of the largest and most versatile, renowned both as a vital research tool and as a public relations boon for astronomy.
    ⦁ It is said to be the “most significant advance in astronomy since Galileo’s telescope.
    ⦁ It captures images of deep space playing a major role in helping astronomers understand the universe by observing the most distant stars, galaxies and planets.

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  • [pib] Manipuri Basanta Raasa

    PIB | History | Mains Paper 1: Arts & Culture

    As part of the celebrations of Azadi Ka Amrit Mahotsav, a celebration of Destination North East India, dance and music of Manipur was organised.

    Manipuri Raas Leela

    • The Raas Leela, also referred to as Manipuri Dance, is one of the major Indian classical dance forms, originating from the state of Manipur.
    • The dance form is based on Hindu Vaishnavism themes, and exquisite performances of love-inspired dance drama of Radha-Krishna called Raas Leela.

    Notable features

    • It is marked by a performance that is graceful, fluid, sinuous with greater emphasis on hand and upper body gestures.
    • It is accompanied with devotional music created with many instruments, with the beat set by cymbals (kartal or manjira) and double-headed drum (pung or Manipuri mrdanga) of sankirtan.
    • The dance drama choreography shares the plays and stories of Vaishnavite Padavalis, that also inspired the major Gaudiya Vaishnava-related performance arts found in Assam and West Bengal.

    Try this PYQ from CSP 2017:
    With reference to Manipuri Sankirtana, consider the following statements:
    It is a song and dance performance.
    Cymbals are the only musical instruments used in the performance.
    It is performed to narrate the life and deeds of Lord Krishna.
    Which of the statements given above is/are correct?
    (a) 1, 2 and 3.
    (b) 1 and 3 only
    (c) 2 and 3 only
    (d) 1 only

    Post your answers here.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Mixed signals on growth-inflation dynamics

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Context

    We are now at that point in the cycle where all central banks — the RBI, the US Fed, the European Central Bank, Bank of England and others — have begun to signal, a process of normalisation from the unprecedented loose monetary policy stimulus post the onset of the pandemic in early 2020.

    Recovery momentum

    • Surveys and data prints are now signalling that the recovery momentum in the first half of 2021 is decelerating in many countries, although the direction and momentum may vary.
    • The RBI Governor notes that “the external environment, which had been supportive of aggregate demand over the past few months, may lose momentum for a variety of reasons”.
    • China — its policy and economy — is the most salient risk for a sustained global recovery.
    • The Chinese authorities’ seeming determination to push ahead with structural reforms, de-carbonising initiatives, and curbs on real estate appear designed to sacrifice some short-term growth for medium-term efficiencies, and reduce financial risks and inequality.
    • Inflation in almost all major economies continues to remain high.
    • The US Personal Consumption Expenditure (PCE) survey measure of core inflation is running over 4 per cent.
    • The story is similar in Europe.

    Assessing India’s growth recovery

    • India’s growth–inflation dynamics are also becoming favourable, but are still subject to multiple risks.
    • In assessing India’s growth recovery, a risk of the global economy going into “stagflation”, going by US signals seems to be that if at all, it is likely to be mild.
    • The recovery of economic activity continues, although the high-frequency indicators we track suggest that the momentum observed in July and August has moderated.
    • Electricity consumption growth is also down from August levels, but part of this can be explained by both cooler, rainy weather, as well as coal shortage related cutbacks in many electricity-intensive manufacturing.
    • The residential real estate is reportedly doing exceptionally well, with low-interest rates on home loans, cuts in stamp duty and registration charges, and indeed behavioural shifts towards own home ownerships with hybrid and work from home shifts.
    • Even the commercial real estate sector is reviving.
    • The Union government also has large unspent cash balances, which can be judiciously deployed to boost both capex and consumption.
    • The overall inflation trajectory suggests a gradual glide path towards the 4 per cent target by March 2023 or a bit beyond.
    • There are risks of overshooting this forecast trajectory, despite a benign outlook on food prices.
    • This emanates from global metals, minerals, crude oil prices, and from supply bottlenecks persisting till well into 2022.

    Conclusion

    In summary, the growth–inflation signals remain mixed. Multiple episodes of global spillovers in the past couple of decades have taught us that imminent normalisation will have implications for all emerging markets.

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  • Important Judgements In News

    The Supreme Court is walking the talk on citizens’ rights

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary

    Context

    When the bench of the Chief Justice of India passed an order appointing a committee in the Pegasus matter, it served the interest of every Indian.

    What led to the appointment of committee by the Supreme Court

    • Pegasus has allegedly been used against politicians and individuals across the globe, including against politicians, journalists and other private individuals in India.
    • The issue rocked Parliament, but the government was not willing to share any information pertaining to the software or its use, citing national security as a reason.
    • The alleged victims of the software turned to the Supreme Court, and prayed for setting up of an independent enquiry.
    • The government, on being called upon by the Supreme Court, cited national security, contending that any information it let out would become a matter of public debate, which could be used by terror groups to hamper national security.
    • Its unrelenting stand left the court with no option but to take a call on whether to blindly accept the government’s refusal to share no information whatsoever, or lean in favour of a citizen’s right to privacy, a fundamental right guaranteed under the Constitution.
    • The Supreme Court chose the latter course.

    Balancing the fundamental rights  nad judicial review with national security

    • The Supreme Court has observed that “the state cannot get a free pass every time the spectre of national security is raised”.
    • It goes on to say that national security “cannot be the bugbear that the judiciary shies away from, by virtue of its mere mentioning. Although this court should be circumspect in encroaching upon the domain of national security, no omnibus prohibition can be called for against judicial review”.

    Conclusion

    The Pegasus order upholding the individual’s right to a life of dignity and privacy, is music to the ears of those who believe in constitutional values and rule of law.
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  • Climate Change Negotiations – UNFCCC, COP, Other Conventions and Protocols

    India offers ‘Panchamrita’ Strategy for Climate Conundrum at Glasgow

    IOCR | Enviro & Biodiversity | Mains Paper 1: Important Geophysical Phenomena

    PM Modi has proposed a five-fold strategy called the ‘Panchamrita’ for India to play its part in helping the world get closer to 1.5 degrees Celsius on the first day of the global climate meeting in Glasgow.

    What is Panchamrita?

    • ‘Panchamrita’ is a traditional method of mixing five natural foods — milk, ghee, curd, honey and jaggery. These are used in Hindu and Jain worship rituals. It is also used as a technique in Ayurveda.
    • The PM euphemistically termed his scheme as ‘Panchamrita’ meaning the ‘five ambrosia’.
    • Under Panchamrita’, India will:
    1. Get its non-fossil energy capacity to 500 gigawatts by 2030
    2. Meet 50 per cent of its energy requirements till 2030 with renewable energy
    3. Reduce its projected carbon emission by one billion tonnes by 2030
    4. Reduce the carbon intensity of its economy by 45 per cent by 2030
    5. Achieve net zero by 2070

    Key takeaways of PM’s speech

    (a) Commitment for climate action

    • India consists of 17 per cent of the world’s population but contribute only five per cent of emissions.
    • Yet, it has left no stone unturned in doing our bit to fight climate change.
    • At Paris, India was making promises not to the world but to itself and 1.3 billion Indians, PM said.

    (b) Climate finance

    • The 2015 Paris CoP where the Paris Agreement was signed was not a summit but a sentiment.
    • The promises made till now on climate finance were useless.
    • When we all are increasing our ambitions on climate action, the world’s ambition could not stay the same on climate finance as was agreed at the time of Paris.

    (c) India’s track record

    • India was fourth as far as installed renewable energy capacity was concerned.
    • The Indian Railways has pledged to make itself net-zero by 2030. This will result in an annual 60 million tonnes reduction in emissions.
    • India initiated the International Solar Alliance for solar energy.
    • It has also set up the coalition for disaster resilient infrastructure for climate adaptation.

     

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