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  • Highlights of the Inequality Kills Report

    The COVID-19 pandemic has heightened economic inequalities across the world says the Inequality Kills Report.

    Try substantiating this:

     

    Q. Extreme inequality is a form of ‘economic violence’—where structural and systemic policy and political choices are skewed in favor of the richest and the most powerful people. Critically examine.

    What is the “Inequality Kills” Report?

    • “Inequality Kills: The unparalleled action needed to combat unprecedented inequality in the wake of COVID-19” is a report released in January 2022 by Oxfam, a U.K.-based consortium.
    • The report argues for sustained and immediate action to end the pandemic, address global inequality and initiate concerted measures to tackle the climate emergency.
    • The central argument of the report is that inequality is a death sentence for people that are marginalized by social and economic structures and removed from political decision-making.

    Key highlights

    • Billionaire variants: Identifying this process as “the billionaire variant”, the report says that this vertical aggregation of global wealth into the hands of a few is “profoundly dangerous for our world”.
    • Pauperization: 160 million people were rendered poor during the pandemic, while the ten richest people doubled their fortunes since the start of the pandemic.
    • Vaccine apartheid: Holding governments to account the report identifies “vaccine apartheid” (unequal access to vaccines between countries) and the lack of universal vaccination programs in many countries.
    • Inflation: It also demonstrates how emergency government expenditure (estimated at $16 trillion) that was meant to keep economies afloat during this crisis, inflated stock prices.
    • Collective: This resulted in billionaires’ collective wealth increasing by $5 trillion during the pandemic.

    Why does the report say that inequality kills?

    • For the writers of the report inequality is not an abstract theory.
    • Instead, they see it as institutionalized violence against poorer people.
    • Extreme inequality is a form of ‘economic violence’—where structural and systemic policy and political choices that are skewed in favor of the richest and the most powerful people.
    • This results in direct harm to the vast majority of ordinary people worldwide.

    Implications of inequality

    • Crime and violence: The report identifies higher inequality with more crime and violence and less social trust.
    • Impact on marginalized: The brunt of inequality and the violence is borne, for instance, by women across the world, Dalits in India, Black, Native American and Latin persons in the US and indigenous groups in many countries.
    • Victimization of women: Pointing to the example of women, the problem runs a lot deeper as 13 million women have not returned to the workforce and 20 million girls are at risk of losing access to education.

    Way ahead

    The “Inequality Kills” report proposes far-reaching changes to structures of government, economy and policy-making to fight inequality.

    • Vaccine sharing: It urgently asks for “vaccine recipes” to be made open-source so that every qualified vaccine manufacturer can manufacture them.
    • Taxing the opportunists: The report then asks for governments to claw back the wealth from billionaires by administering solidarity taxes higher than 90% especially on the billionaires that have profited during pandemic.
    • Taxation reforms: The report asks for permanent cancellation of tax havens, progressive taxation on corporations and an end to tax dodging by corporations.
    • Welfare: The report then suggests that this regained wealth be redirected towards building income safety nets, universalizing healthcare for everyone, investing in green technologies and democratizing them, and, investing in protecting women from violence.

     

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  • In news: Interstate River Water Disputes Act, 1956

    Karnataka CM has said irrigation projects are bogged down by river water sharing disputes and asked the Centre to ‘revisit the Inter-State River Water Disputes (IWRD) Act since the law is creating more disputes than resolving them’.

    About IWRD Act

    • The IWRD Act, 1956 aims to resolve the water disputes that would arise in the use, control and distribution of an interstate river or river valley.
    • Article 262 of the Indian Constitution provides a role for the Central government in adjudicating conflicts surrounding inter-state rivers that arise among the state/regional governments.
    • This act is confined to states of India and not applicable to union territories.
    • Only concerned state governments are entitled to participate in the tribunal adjudication and non-government entities are not permitted.

    Jurisdictions over Rivers

    • River waters use / harnessing is included in states jurisdiction.
    • However, Union government can make laws on regulation and development of inter-State rivers and river valleys to the extent such water resources are directly under its control when expedient in the public interest.
    • When union government wants to take over a interstate river project under its control by law, it has to take approval of the riparian states’ legislature assemblies before passing such bill in the Parliament per Article 252 of the constitution.
    • When public interest is served, President may also establish an interstate council as per Article 263 to inquire and recommend on the dispute that has arisen between the states of India.

    Resolution of disputes

    • Dispute resolution is a layered process, as mandated by the ISWD Act.
    • After receiving a complaint from a state, the Union government first tries to mediate. It is only when negotiations fail that the Centre is required to form a tribunal to adjudicate the dispute.
    • If a State Government makes a request regarding any water dispute and the Central Government is of opinion that the water dispute cannot be settled by negotiations, then a Tribunal is constituted.

    Constitution of Tribunal

    • Whenever the riparian states are not able to reach amicable agreements on their own in sharing of an interstate river waters, section 4 of IRWD Act provides for a Tribunal.
    • The tribunal shall not only adjudicate but also investigate the matters referred to it by the central government and forward a report setting out the facts with its decisions.
    • The tribunal responsibility is not limited to adjudication of issues raised by the concerned states and but investigation of other aspects such as water pollution, water quality deterioration, flood control etc.

    Time-frame for dispute resolution

    • The tribunals have been allotted three years to arrive at a final decision, extendable by two years.
    • The 2002 Amendment to the ISWD Act specified a one-year limit on the timeline allowed to carry out the process of dispute resolution.

    Active tribunals in India

    • Ravi & Beas Water Tribunal (1986) – Punjab, Haryana, Rajasthan
    • Krishna Water Disputes Tribunal II (2004) – Karnataka, Telangana, Andra Pradesh, Maharashtra
    • Mahadayi Water Disputes Tribunal (2010) – Goa,Karnataka, Maharashtra
    • Vansadhara Water Disputes Tribunal (2010) – Andra Pradesh & Odisha
    • Mahanadi Water Disputes Tribunal (2018) – Odisha & Chattisgarh

    Need for the IWRD Act

    • Major inter-state river basins: India has 25 major river basins, with most rivers flowing across states.
    • Equitable distribution of water: As river basins are shared resources, a coordinated approach between the states is necessary for the preservation, equitable distribution and sustainable utilization of river water.
    • Hydro-politics: Much recently, interstate rivers in India have become sites of contestations, fuelled by conflicting perceptions of property rights, flawed economic instruments for food security.
    • Sustainability: This has led to a lack of an integrated ecosystems approach, and the prevalence of reductionist hydrology for water resource development.

    Issues with IRWD Act

    • Centre’s dilemma: Since river water falls within the ambit of State Subjects, its governance remains confined to the limits of the state political discourse.
    • Interference of Judiciary: The apex court has limited the role of the tribunals to quantification and allocation of water between riparian states, and its own role is to be an interpreter of the awards and agreements.
    • Colonial award: The history of colonial rule has led to the creation of asymmetries between states, and the present water disputes stem from the reproduction of this imperial and colonial power relation.
    • Structural issues: Various operational characteristics of the tribunals as problematic, since they do not adhere to any established system.
    • Operational issues: For instance, the sittings are not routine, the functioning is outside the regular court system, and day-to-day or week-to-week hearings are few and far in between.

    Why this has become a sensitive topic?

    • Associated ethnicity: At the state level, river water is politically perceived as part of the larger issue of “regional sharing of resources,” which is linked with the ethnic and cultural identity of the state and its people.
    • Matter of autonomy: The political narrative around river disputes is subsumed within the question of regional rights, and any possibility of water sharing is seen as a compromise or infringement on the regional autonomy of a state.
    • Identity politics: Hence, the political narrative around the river disputes jumps to a larger scale of identity politics.

    Way forward

    • For such dispute resolution, all other recourses such as mediation and conciliation must remain viable options.
    • These should operate simultaneously along with adjudication and political consensus among the riparian states.
    • Directly approaching the Supreme Court may result in adversarial outcomes, with the conflict reaching a point of no return.

     

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  • How  do  SDRs  help maintain Balance of Payments (BoP)?

    A recent report by the RBI shows that India received support of $17.86 billion in August 2021 by way of Special Drawing Rights (SDRs) has helped cushion the worsening current account deficit.

    What are Special Drawing Rights (SDRs)?

    • SDRs, created by the IMF in 1969, are an international reserve asset and are meant to supplement countries’ reserves.
    • Adding SDRs to the country’s international reserves makes it more financially resilient.
    • Providing liquidity support to developing and low-income countries allows them to tide over the balance of payments (BOP) situations like the one India has been experiencing due to the pandemic and the one it faced earlier in 1991.
    • SDRs being one of the components of foreign exchange reserves (FER) of a country, an increase in its holdings is reflected in the BOP.

    What are the key components of BOP?

    The BOP divides transactions of a country with the rest of the world into two accounts:

    1. Current Account: It consists of net trade of exports and imports of products and services, net earnings on cross-border investments and net transfer payments.
    2. Capital Account: It constitutes a country’s transactions in financial instruments i.e. assets and liabilities constituting of direct investment, portfolio investment, loans, banking capital, and other capital.

    What does the SDR support signify?

    • Pandemic impact: Countries worldwide are going through one of the worst health and economic crises, and India has been no exception.
    • Domestic business underperformance: It is also indicative of the fact that the domestic business environment is failing to attract foreign direct investment.

    Is dependence on SDR a matter of concern?

    A BOP dependent on an SDR-dependent capital account surplus to cushion the country’s widening current account deficit is not a comfortable position to be in.

    • Compulsion for reforms: Importantly, IMF support comes with a baggage of conditions as was the case in 1991—the support came with the condition that India initiates big-ticket economic reforms.
    • Sovereign decisions: Any democratic country would be more comfortable with sovereign rights to design its policy strategy.

    Back2Basics:  Foreign Exchange Reserve

    • Foreign exchange reserves are important assets held by the central bank in foreign currencies as reserves.
    • They are commonly used to support the exchange rate and set monetary policy.
    • In India’s case, foreign reserves include Gold, Dollars, and the IMF’s quota for Special Drawing Rights.
    • Most of the reserves are usually held in US dollars, given the currency’s importance in the international financial and trading system.
    • Some central banks keep reserves in Euros, British pounds, Japanese yen, or Chinese yuan, in addition to their US dollar reserves.

    India’s forex reserves cover:

    1. Foreign Currency Assets (FCAs)
    2. Special Drawing Rights (SDRs)
    3. Gold Reserves
    4. Reserve position with the International Monetary Fund (IMF)

    Significance of these reserves

    • Import support: Holding liquid foreign currency provides a cushion against such effects and provides confidence that there will still be enough foreign exchange to help the country with crucial imports in case of external shocks.
    • USD reserves: All international transactions are settled in US dollars and, therefore, required to support India’s imports.
    • Exchange rate regulation: More importantly, they need to maintain support and confidence for central bank action, whether monetary policy action or any exchange rate intervention to support the domestic currency.
    • Cushion against inflation: It also helps to limit any vulnerability due to sudden disturbances in foreign capital flows, which may arise during a crisis.

    Initiatives taken by the government to increase forex

    • Self reliance: To increase the foreign exchange reserves, the GoI has taken many initiatives like Atmanirbhar Bharat, in which India has to be made a self-reliant nation so that India does not have to import things that India can produce.
    • Duty remission: The government has started schemes like Duty Exemption Scheme, Remission of Duty or Taxes on Export Product (RoDTEP), Nirvik (Niryat Rin Vikas Yojana) scheme, etc.
    • FDI and EoDB: Apart from these schemes, India is one of the top countries that attracted the highest amount of Foreign Direct Investment, thereby improving India’s foreign exchange reserves.

     

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  • How Republic Day tableaux are designed and selected

    Recently, West Bengal’s tableau for the Republic Day parade was rejected without assigning any reasons or justifications.

    Who manages the R-Day Parade?

    • The Defence Ministry is the responsible authority for the Republic Day parade and the celebrations.
    • Around September, it invites all the states, the UTs, Central Government departments, and a few constitutional authorities to participate in the parade through tableaux.

    Managing Tableaux

    • The Defence Ministry shares the basic guidelines about what all the tableaux can or should include.
    • The tableaux of two different states/ UTs cannot be too similar, as the tableaux, together, should showcase the diversity of the country.
    • The tableaux cannot have any writing or use of logos, except for the name of the state/ UT/ department, which should be written in Hindi on the front, English on the back, and a regional language on the sides.
    • The Ministry also asks the participants to use eco-friendly material for the tableaux, and avoid the use of plastic or plastic-based products.

    How are the tableaux selected?

    • The selection process is elaborate and time-consuming.
    • The Defence Ministry constitutes an expert committee of distinguished persons from fields like art, culture, painting, sculpture, music, architecture, choreography, etc.

    Process of selection

    (1) Submission of sketches

    • First, the submitted sketches or designs of the proposals are scrutinised by this committee, which can make suggestions for any modifications in the sketch or design.
    • The sketch should be simple, colourful, easy to comprehend and should avoid unnecessary detail.
    • It should be self-explanatory, and should not need any written elaboration.

    (2) Music and Visuals

    • If there is a traditional dance involved with the tableau, it should be a folk dance, and the costumes and musical instruments should be traditional and authentic.
    • The proposal should include a video clipping of the dance.

    (3) 3D Models

    • Once approved, the next stage is for the participants to come up with three-dimensional models for their proposals.
    • These are again examined by the expert committee for final selection, taking in view several criteria.
    • In making the final selection the committee looks at a combination of factors, looking at the visual appeal, impact on the masses, idea/ theme of the tableaux, degree of detail involved.

    Do they have to be of a particular size?

    The Defence Ministry provides each participant with one tractor and one trailer, and the tableau should fit on that.

    • The ministry prohibits use of any additional tractor or trailer, or even any other vehicle to be part of it.
    • However, the participant can replace their ministry-provided tractor or trailer with other vehicles, but the total number should not be more than two vehicles.
    • The tractor has to be camouflaged in harmony with the tableau’s theme, and the ministry stipulates a distance of around six feet between the tractor and the trailer for turning and manoeuvering.
    • The dimensions of the trailer on which the tableau will be placed is 24 feet, 8 inches long; eight feet wide; four feet two inches high; with a load-bearing capacity of 10 tonnes.
    • The tableaux should not be more than 45 feet long, 14 feet wide and 16 feet high from the ground.

    (Republic Day celebrations from this year will start on January 23 instead of January 24 to include the birth anniversary of Netaji Subhas Chandra Bose.)

     

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  • Art-form in news: Kathak

    Kathak legend Pandit Birju Maharaj has recently passed away.

    About Kathak

    • Kathak is one of the eight major forms of Indian classical dance.
    • The origin of Kathak is traditionally attributed to the traveling bards in of ancient northern India known as Kathakars or storytellers.
    • The term Kathak is derived from the Vedic Sanskrit word Katha which means “story”, and Kathakar which means “the one who tells a story”, or “to do with stories”.
    • Wandering Kathakars communicated stories from the great epics and ancient mythology through dance, songs and music.

    Its origin

    • Kathak dancers tell various stories through their hand movements and extensive footwork, their body movements and flexibility but most importantly through their facial expressions.
    • It evolved during the Bhakti movement, particularly by incorporating the childhood and stories of the Hindu god Krishna, as well as independently in the courts of north Indian kingdoms.
    • Kathak is unique in having both Hindu and Muslim gharanas and cultural elements of these gharanas.
    • Kathak performances include Urdu Ghazals and commonly used instruments brought during the Mughal period.

    Major gharanas

    • Kathak is found in three distinct forms, called “gharanas”, named after the cities where the Kathak dance tradition evolved – Jaipur, Banaras and Lucknow.
    • While the Jaipur gharana focuses more on the foot movements, the Banaras and Lucknow gharanas focus more on facial expressions and graceful hand movements.

    Performance details

    • It involves both Nritta (pure dance) and Nritya (expressive dance).
    • Stylistically, the Kathak dance form emphasizes rhythmic foot movements, adorned with small bells (Ghungroo) and the movement harmonized to the music.
    • The legs and torso are generally straight, and the story is told through a developed vocabulary based on the gestures of arms and upper body movement, facial expressions, neck movements, eyes and eyebrow movement, stage movements, bends and turns.
    • The main focus of the dance becomes the eyes and the foot movements.
    • The eyes work as a medium of communication of the story the dancer is trying to communicate. With the eyebrows the dancer gives various facial expressions.
    • A Kathak performance can be solo, duo or team. In a technical performance, the speed and energy the dancers exchange with the audience increases in multiples, that is the tempo doubles or quadruples.

     

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  • Domestic and geopolitical risks India faces in 2022

    Context

    Risks in 2022 could be both domestic and geopolitical, with many precepts that the world has been accustomed to being at risk. Democracy itself could face serious headwinds this year.

     Challenges to democracy

    • The world has recently seen the rise of authoritarian rulers in many countries.
    • What is worrisome is that democratic tenets which have been under attack in recent years appear set to face more onslaughts this year.
    • The United States, which was widely viewed as a major bulwark for democracy, appears to have developed certain pathological infirmities.

    Geopolitical challenges and risks

    [1] Disruption by China

    • The role of China is possibly the most disrupting one, given the challenge it poses to the existing international order.
    • Militarily, China is openly challenging U.S. supremacy in many areas, including ‘state-of-the-art weaponry’ such as hyper-sonic technology.
    • China is now threatening Taiwan, which could well become one of the flashpoints of conflict in 2022.
    • The dip in China’s economic profile in the past year and more could also lead to new tensions in the Asia-Pacific region in 2022.

    [2] Russia-Ukraine conflict

    • The other major risk of a war in 2022, stems from the ongoing conflict between Russia and Ukraine — the latter being backed by the U.S. and North Atlantic Treaty Organization (NATO) forces.
    • During the past three decades, NATO has expanded its reach almost a 1,000 miles to the east in violation of an earlier tacit understanding.
    • Russia appears determined that Ukraine should be the ‘last frontier’ and, if need be, ensure this through military force.
    • The situation has grave possibilities and could result in a series of cyclical outcomes with considerable damage potential.

    [3] Instability in the vast region

    • Unrest in Kazakhstan: The current unrest in Kazakhstan, which till recently was one of the more stable Central Asian nations, is perhaps symptomatic of what is in store.
    • Recent events in Kazakhstan demonstrates a sharper cleavage between the U.S.-led West and its principal opponents, Russia and China.
    • This is not a good sign for the world already wracked by a series of coups or internecine strife as in Ethiopia, Libya and certain regions of West Asia and North Africa.

    [4] Return of Taliban and security implications for India

    • Shift in balance of power: Of particular significance to India is that the Taliban’s return to power in Afghanistan has led to a material shift in the balance of power in India’s periphery.
    • Developments in Afghanistan have fuelled the ambitions of quite a few ‘anti-state militant groups’ across the region.
    • Even in Pakistan, the Tehrik-e-Taliban Pakistan (TTP) has become energised and is enlarging its sphere of action to other parts of Asia, notably Kazakhstan.
    • This will have an unsettling effect across large parts of Asia.
    • New evidence suggests that on India’s eastern flank, viz. Indonesia, a resurgence of radical Islamist activities is taking place.
    • The Jemaah Islamiyah has reportedly become more active in Indonesia.

    [5] India’s border issue with China

    • The most serious issue that India confronts today is how to deal with a China that has become more confrontational.
    • India’s membership of the Quad still rankles as far as China’s psyche is concerned, and during 2022, may well result in China embarking on new adventurist actions at many more points on the Sino-Indian border compelling India to react.
    • Additionally, India will need to determine how best to respond to China’s provocations.
    • Strengthen military posture: India would need to strengthen its military posture, both as a means to deter China and also to convince India’s neighbours that it can stand up to China.

    Challenges ahead for India

    • Challenge in Central Asia: Diplomatically, in 2022, India may find itself vulnerable in dealing with the turmoils which have occurred in two areas of strategic interest to it, viz. Central Asia and West Asia.
    • Challenge in West Asia: In West Asia, the challenge for India is how to manage its membership of the Second Quad (India, Israel, the United Arab Emirates and the U.S.) with the conflicting interests of different players in the region.
    • Limits to balancing: There is a limit to the kind of balancing act that India can perform, whether it be with regard to buying S-400 missile systems from Russia, risking potential sanctions from Washington under Countering America’s Adversaries Through Sanctions Act (CAATSA) or manoeuvering between the Arab States, Israel, Iran and the U.S. in West Asia.

    Conclusion

    Facing a host of unprecedented challenges, India’s leaders and diplomats must not only take stock of the dangers that exist but also be ready on how to manage the risks that are well evident.

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  • India-Japan friendship can help global peace, prosperity

    Context

    The year 2022 marks the 70th anniversary of the establishment of diplomatic relations between Japan and India.

    Historical background of India-Japan relationship

    • We have a long history of people-to-people exchanges that can be traced back to the sixth century.
    • Buddhism was brought to Japan and, in 752.
    • During Meiji Restoration in the late 19th Century — Japan needed natural resources to modernise its industry.
    • Many Japanese travelled to India to purchase cotton, iron ore, etc.
    • Formal relations between Japan and India began in 1952.
    • After the Second World War, instead of signing the multilateral San Francisco Peace Treaty, India opted for concluding a bilateral peace treaty with Japan, considering that honour and equality should be ensured for Japan to rejoin the international community.
    • But even before the establishment of diplomatic relations, the goodwill between the people of the two countries was deeply rooted through business, academic and cultural exchanges.
    • After 70 years of multi-layered exchanges, the relationship between our two countries grew into a “Special Strategic and Global Partnership”. 

    Future possibilities

    [1] As democratic countries, contribute to global peace and prosperity

    • As democratic countries in Asia, India and Japan can cooperate to contribute to global peace and prosperity.
    • We share political, economic and strategic interests based on the firm foundations of common values and traditions.
    • We are continuing our efforts to build a rules-based free and open international order.

    [2] Cooperation in security

    • There are a plethora of fields that we can cooperate in security issues including cyber security, outer space and economic security.

    [3] Augmenting economic relations

    •  For long, Japan has been the largest ODA (Official Development Assistance) donor to India.
    • One of the most recent and ongoing examples of our collaboration is the Mumbai-Ahmedabad High-Speed Rail project.
    • Japan is also one of the largest investors in India.
    • Both countries have also promoted economic cooperation in other countries to enhance social infrastructure and connectivity.
    • Our economic partnership can further strengthen the economy of the Indo-Pacific, as well as the world economy.

    [4] Cultural exchange

    • Cultural exchanges including literature, movies, music, sports and academics are essential for our relations, enabling a better understanding.

    Consider the question “The year 2022 marks the 70th anniversary of the establishment of diplomatic relations between Japan and India. The future offers enormous possibilities for the partnership. In context of this, examine the future possibilities the two countries can explore.” 

    Conclusion

    India-Japan ties will continue to flourish. Our long history substantiates that.

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    Meiji Restoration in Japan

    • In Japanese history, the political revolution in 1868 that brought about the final demise of the Tokugawa shogunate (military government)—thus ending the Edo (Tokugawa) period (1603–1867)—and, at least nominally, returned control of the country to direct imperial rule under Mutsuhito (the emperor Meiji).
    • In a wider context, however, the Meiji Restoration of 1868 came to be identified with the subsequent era of major political, economic, and social change—the Meiji period (1868–1912)—that brought about the modernization and Westernization of the country.

  • How predatory pricing is affecting distributors and traders

    Context

    Consumer goods distributors in Maharashtra has been protesting against Colgate’s alleged unfair treatment of traditional distributors vis-à-vis B2B (Business-to-Business) technology companies such as Reliance’s JioMart, Udaan and others.

    The disruption caused by B2B companies

    • Nearly half-a-million of India’s distributors pick up goods from consumer companies such as Colgate and deliver them to 13 million small local stores located in 7,00,000 villages and towns across the country through a web of millions of traders and other intermediaries.
    • Enter the new age technology B2B companies.
    • They have developed technologies to connect directly to the kirana store through a mobile phone app, bypassing the intermediaries.
    • They supply goods to the local store for lower prices than the charged by the distributor.
    • Unable to match such prices and facing the peril of losing business, India’s distributors claim these are unfair practices and want manufacturers such as to stop supplying goods to the technology companies.

    Issue of disruption caused by the pricing power and predatory pricing

    • Creative destruction: New innovations disrupting an existing process and rendering incumbents futile is generally a healthy process of ‘creative destruction’, as the Austrian economist, Joseph Schumpeter, postulated.
    • But this disruption in India is driven not entirely by technology innovation but also through pricing power.
    • These technology companies bear the loss on the products they sell to the local store.
    • Further, they offer extensive credit terms and working capital to the local stores.
    • In other words, these technology companies rely not just on their mobile phone app innovation but also steep price discounting and cheaper financing to win customers.
    • Evidently, these companies use the money to not only build new technologies but also to undercut competitors and steal market share. 
    • This practice, called predatory pricing, is illegal in most countries including India.
    • These companies are supplied with funds from foreign venture capital firms, which in turn are largely funded by American pension funds and university endowments.
    • The flip side is that India’s millions of distributors and intermediaries have no access to such finance.
    • These small companies are cut off from the endless stream of free foreign money that gushes into new age ‘startups’ and established large corporates.

    Problems created by predatory pricing

    • While consumers may benefit from lower prices, the livelihoods of millions of distributors, traders and their families suffer.
    • To be sure, this is not just an India problem but a global one.
    •  Social media companies such as Facebook give away their products for free and e-commerce companies such as Amazon sell at lower prices, benefiting consumers enormously, but also causing immense social strife and disharmony.
    • But in India’s case, there is an added complexity of foreign capital flows.
    • Access to this capital is only available to a tiny proportion of Indian businesses but threatens the livelihoods of millions of Indian families, as in the case of distributors, causing massive income and social disparities.
    • This unequal access to capital creates leads to anti-competitive behaviour.

    Consider the question “What is predatory pricing? What are the issues created by predatory pricing?”

    Conclusion

    To be clear, this is not a Luddite argument against e-commerce or technological innovations. The issue is about illegal predatory pricing and abuse of pricing power by startups and big corporates through preferential access to easy foreign money.

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  • Opportunity for agri-reforms in Punjab

    Context

    It is no secret that Punjab, once the frontrunner of Indian agriculture, is struggling to retain its dynamism.

    Need to diversify

    • While Punjab ranked at the top of major Indian states in terms of per capita income during 1967-68 to 2002-03, it has slipped below the 13th position.
    • Punjab’s agricultural growth rate, at 5.7 per cent, was more than double the country’s average of 2.3 per cent during 1971-72 to 1985-86.
    • This has reversed between 2005 and 2019 with Punjab at 1.9 per cent and India at 3.7 per cent.
    • Agriculture least diversified state: With almost 85 per cent of the gross cropped area under wheat and rice, agriculture is least diversified in the state. 
    • Mandi transactions cost about 8.5 per cent of the MSP, the highest in the country, making Punjab wheat and rice less competitive.

    What explains low diversification in agriculture?

    • Policies: Guaranteed MSP for wheat and paddy, backed by assured procurement, free power and highly subsidised fertilisers, has disincentivised diversification.
    • Political economy: The political economy around wheat and rice is so intense that any effort to address its distortionary impact is met with fierce opposition by vested interest groups.

    How to recalibrate Punjab agriculture towards higher, sustainable growth?

    • Augment livestock and milk processing: While fruits and vegetables account for 7.4 per cent of the value of the output of agriculture and allied sectors, livestock accounts for 31.5 per cent and fisheries less than 1 per cent.
    • The state has the highest per capita availability of milk but it can process less than 20 per cent of it.
    •  Promoting mega parks for value addition in fruits and vegetables, milk, and other livestock products through medium and small enterprises will strengthen its competitiveness.
    • Strengthen market for seed potato: It is also a significant player in seed potato and with the right package of practices, traceability systems, and infrastructure, the market for Punjab seed potato can be strengthened.
    • Scaling up alternative marketing channel: Alternative marketing channels for fruits and vegetables such as direct marketing, contract farming, and exports have been in place but these models need to be scaled up with the right ecosystem.
    • Shift to demand-driven agriculture: Punjab needs to switch from supply-driven agriculture to demand-driven agriculture.
    • The demand for fisheries, poultry, dairy, and fruits and vegetables is increasing way faster than the demand for wheat and rice.
    • Rationalise mandi charges:  Rationalising mandi charges to not more than 3 per cent will attract private sector investments in building efficient value chains.
    • Rationalise subsidies: Time-bound incentives in the form of freight subsidies for exporters of high-value agri-produce, tax exemptions for the processing of perishable commodities for value chain players would be more rational than the overloaded subsidies of urea and free power.
    • Use technology and start-up revolution: Punjab should leverage the start-up revolution that is unfolding in India, and use technology to ensure optimal utilisation of resources, expand markets, and augment farmers’ income.
    • Geo-tagging of farms can address concerns related to long-term leasing of land that is critical for large-scale investments and enable vibrant agricultural land markets.
    • Innovations in supply chain management, be it automated grain silos or state-of-art herd management will not only optimise the use of resources but also bring in traceability of farms and animals, early monitoring and prevention of disease outbreaks, and contain value chain losses.

    How to manage financial resources?

    • Rationalise urea subsidy: It should rationalise its fertiliser subsidy regime by moving towards cash transfers on a per hectare basis and free up fertiliser prices.
    • Include urea in nutrient-based subsidy scheme: If that’s not possible, then urea should be included in the nutrient-based subsidy scheme.
    • Bring soluble fertiliser under subsidy: Bring soluble fertilisers under subsidy, which will enhance fertiliser use efficiency through fertigation.
    • This will also help reap environmental gains.
    • Rationalise food subsidy: Food subsidy can also be rationalised through direct cash transfers replacing PDS, as Punjab is a grain surplus state.

    Conclusion

    Both environmental and financial sustainability concerns related to business-as-usual farming in Punjab call for a rebooting strategy.

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  • India to seal a Free Trade Agreement (FTA) with UK

    India and the United Kingdom have launched formal Free Trade Agreement (FTA) negotiations with the aim of concluding an early harvest trade agreement over the next few months.

    What is a Free Trade Agreement (FTA)?

    • A FTA is a pact between two or more nations to reduce barriers to imports and exports among them.
    • Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
    • The concept of free trade is the opposite of trade protectionism or economic isolationism.

    Key benefits offered by FTA

    • Reduction or elimination of tariffs on qualified: For example, a country that normally charges a tariff of 12% of the value of the incoming product will rationalize or eliminate that tariff.
    • Intellectual Property Protection: Protection and enforcement of intellectual property rights in the FTA partner country is upheld.
    • Product Standards: FTA enhances the ability for domestic exporters to participate in the development of product standards in the FTA partner country.
    • Fair treatment for investors: FTA provides treatment as favourably as the FTA partner country gives equal treatment for investments from the partner country.
    • Elimination of monopolies: With FTAs, global monopolies are eliminated due to increased competition.

    How many FTAs does India have?

    • India has signed it’s first Free Trade Agreement (FTA) with Sri Lanka in 1998.
    • Likewise, India had FTAs with: Nepal, Bhutan, Thailand, Singapore, ASEAN, Japan and Malaysia.
    • The discussion is going for an FTA with Australia.
    • India has signed Preferential Trade Agreements such as:
    1. Asia Pacific Trade Agreement (APTA) with Bangladesh, China, India, Lao PDR, Republic of Korea, and Sri Lanka
    2. Global System of Trade Preferences (GSTP)
    3. India – MERCOSUR PTA etc. with South American countries

    Back2Basics: Types of Trade Agreements

    (1) Free Trade Agreement – discussed above

    (2) Preferential Trade Agreement

    • In this type of agreement, two or more partners give preferential right of entry to certain products.
    • This is done by reducing duties on an agreed number of tariff lines.
    • Here a positive list is maintained i.e. the list of the products on which the two partners have agreed to provide preferential access.
    • Tariff may even be reduced to zero for some products even in a PTA.
    • India signed a PTA with Afghanistan.

    (3) Comprehensive Economic Partnership Agreement

    • Partnership agreement or cooperation agreement are more comprehensive than an FTA.
    • CECA/CEPA also looks into the regulatory aspect of trade and encompasses and agreement covering the regulatory issues.
    • CECA has the widest coverage. CEPA covers negotiation on the trade in services and investment, and other areas of economic partnership.
    • It may even consider negotiation on areas such as trade facilitation and customs cooperation, competition, and IPR.
    • India has signed CEPAs with South Korea and Japan.

    (4) Comprehensive Economic Cooperation Agreement

    • CECA generally cover negotiation on trade tariff and Tariff rate quotas (TRQs) rates only.
    • It is not as comprehensive as CEPA.
    • India has signed CECA with Malaysia.

    (5) Framework Agreement

    • Framework agreement primarily defines the scope and provisions of orientation of the potential agreement between the trading partners.
    • It provides for some new area of discussions and set the period for future liberalisation.
    • India has previously signed framework agreements with the ASEAN, Japan etc.

    (6) Early Harvest Scheme

    • An Early Harvest Scheme (EHS) is a precursor to an FTA/CECA/CEPA between two trading partners. For example, early harvest scheme of RCEP has been rolled out.
    • At this stage, the negotiating countries identify certain products for tariff liberalization pending the conclusion of actual FTA negotiations.
    • An Early Harvest Scheme is thus a step towards enhanced engagement and confidence building.

     

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