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Archives: News

  • Foreign Policy Watch: India-China

    Seeking equilibrium with China

    The article analyses the India’s efforts to establish strategic equilibrium with assertive China and how that idea clashes with China’s desire to form an Asian order with itself at the top.

    Strategic equilibrium

    •  External Affairs Minister S Jaishankar articulated that India is seeking strategic equilibrium with an increasingly aggressive China.
    • It is hoped that with China’s growing differences with the U.S. China would pay attention to India’s sensitivities.
    • In achieving equilibrium with China, India has bravely been confronting a face-off in the Himalayas for the past several months.
    • India has been building issue-based alliances with the US and Asian majors like Japan, Korea, Vietnam and Indonesia, and Australia.
    • It has taken initiatives in the direction of economic de-coupling with China in the name of “atmanirbharata”.

    Hierarchical Asian order with China at top

    • China is not interested in equilibrium with any of its Asian neighbours, least of all with India.
    • China’s efforts are clearly to build a hierarchical Asian order, with itself at the top.
    • It is acutely conscious of India’s economic strength, military modernisation and overall capabilities.
    • It knows that India is also far behind on these counts.
    • China is ruthlessly resisting India’s access to global governance bodies, such as the UNSC and NSG.
    • To keep India tied at that level, China is objecting to India’s growing strategic proximity to the US. I
    • It is encircling India strategically and economically through its strategic and economic corridors — BCIM (Bangladesh, China, India and Myanmar), CPEC and the Trans-Himalayan Connectivity Network.
    • It is raising issues like Kashmir at the UN and establishing footprints in the Indian Ocean.

    What should India do

    1. Adjust with China, at least tactically.

    • Such an adjustment could be based on mutual give and take.
    • For India, our first priority could be the resolution of the border dispute.
    • Secondly, since China has offered to mediate between India and Pakistan, it should be asked to prevail over Pakistan to resolve the Kashmir issue.
    • In return for these “takes” India could offer access to Chinese commercial cargos to sea, through the Nathula pass.
    • India could also join China’s BRI on mutually acceptable terms.
    • India may also show its willingness, at least tactically, to join CPEC as both Pakistan and China have asked for, provided, India is allowed to undertake projects in PoK and Balochistan.

    2.India should revisit its Tibet policy, which is a core irritant for China.

    Consider the question “China seeking to establish an Asian order with itself at the top comes in the way of India establishing strategic equilibrium with China. Comment.”

    Conclusion

    It is possible that this “give” and “take” may not be acceptable to China. Even if it does not work out as planned, India would have made a bold diplomatic initiative and a huge tactical move towards thinking through out-of-the-box solutions and displaying that it can undertake risks to pursue its long-term national interests.

  • Foreign Policy Watch: India-United States

    India’s strategic autonomy and its evolution

    The article analyses the evolution of India’s approach to strategic autonomy from the unipolar world dominated by the U.S. to now when the Chinese threat has been looming large.

    Context

    • Addressing a Southeast Asian forum last week, external affairs minister outlined India’s new quest for “strategic autonomy” in its global economic engagement.

    Connection with Atmanirbhar Bharat

    • This new quest for “strategic autonomy” is the natural external complement to new economic strategy, described as “Atmanirbharata” or “self-reliance”.
    • The concept carries so much ideological baggage, its revival by Government inevitably raised many questions
    • Senior ministers and officials of the NDA government sought to reassure India’s partners that Delhi was not marching backwards.
    • When applied to the foreign policy framework, “self-reliance” becomes “strategic autonomy”.

    Evolution of the idea of strategic autonomy

    • America towered over the world after the collapse of the Soviet Union in 1991.
    • India’s past emphasis on strategic autonomy was in the context of the “unipolar moment” [dominated by the U.S.] that emerged after the Cold War.
    • On the one hand, India needed Western capital as well as technology and better access to its markets.
    • On the other hand, Delhi had to protect some of its core national interests from the threats of US intervention.

    India-U.S. Relations: Evolution after the Cold war

    • In the early 1990s, the Clinton Administration strong desire to resolve the Kashmir dispute between India and Pakistan.
    • The Clinton Administration saw the nuclear and Kashmir disputes as one and the same thing.
    • Indian diplomacy for the next two decades tried to change the US policy on both Kashmir and nuclear issues.
    • Under President George W Bush, the US discarded the long-standing temptation to insert itself in the Kashmir dispute.
    • The US also went out of the way to resolve the nuclear dispute with India by changing its domestic laws and international norms on nuclear proliferation.
    • The Obama and Trump Administrations have stayed the course since then.

    China challenge for India

    • On the atomic front, as the US sought to lift the prolonged atomic blockade against India, China sought to block the process.
    • China turned an obstacle to India’s membership of the Nuclear Suppliers Group.
    • China takes up the Kashmir issue regularly in the United Nations Security Council.
    • Today, India’s strategic autonomy is about coping with China’s challenge to India’s territorial integrity and sovereignty.
    •  China today is viewed in Delhi as a major threat to India’s economic development.
    • The bilateral trade deficit reached nearly $55billion in 2019.
    • India pulled out of an Asia-wide free-trade arrangement called the Regional Comprehensive Economic Partnership late last year, sensing the threat posed by China-led economic order.
    • Ladakh aggression forced India to go from a passive commercial withdrawal to an active economic decoupling from China.

    Way forward

    • The logic of strategic autonomy from China nudges India to look for strong security partnerships with the US, Europe, Japan and Australia.
    • On the economic front, India is exploring various forms of collaboration with a broad group of nations that have a shared interest in developing trustworthy global supply chains.

    Consider the question “Delineate the evolution of India’s approach towards the idea of strategic autonomy. How it differs from the past?”

    Conclusion

    Threats to either territorial integrity or economic prosperity are powerful enough on their own to compel drastic changes in any nation’s policies. Coming together, they promise to make strategic autonomy from an assertive China an enduring theme of India’s economic and foreign policies in the years ahead.

  • Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

    Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

    The outlay for the RoDTEP scheme is expected to be “much higher” than the NITI Aayog’s much-curtailed estimate of Rs 10,000 crore a year.

    Overt allocation

    • The central government had envisaged an annual allocation of about Rs 50,000 crore under the RoDTEP scheme to make exports zero-rated.

    Try this PYQ:

    Q. Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)

    (a) China

    (b) India

    (c) Myanmar

    (d) Vietnam

    RoDTEP Scheme

    • RoDTEP is a scheme for the Exporters to make Indian products cost-competitive and create a level playing field for them in the Global Market.
    • It has replaced the current Merchandise Exports from India Scheme, which is not in compliance with WTO norms and rules.
    • The new RoDTEP Scheme is fully WTO compliant scheme.
    • It will reimburse all the taxes/duties/levies being charged at the Central/State/Local level which are not currently refunded under any of the existing schemes but are incurred at the manufacturing and distribution process.

    Back2Basics: Merchandise Exports from India Scheme (MEIS)

    • MEIS was launched with an objective to enhance the export of notified goods manufactured in a country.
    • This scheme came into effect on 1 April 2015 through the Foreign Trade Policy and will be in existence till 2020.
    • MEIS intends to incentivise exports of goods manufactured in India or produced in India.
    • The incentives are for goods widely exported from India, industries producing or manufacturing such goods with a view to making Indian exports competitive.
    • The MEIS covers almost 5000 goods notified for the purpose of the scheme.
  • Tribes in News

    Tribes in news: Bondas

    The COVID-19 pandemic has reached the Bondas, a PVTGs community residing in the hill ranges of Malkangiri district in Odisha.

    Try this PYQ:

    Consider the following statements about Particularly Vulnerable Tribal Groups (PVTGs) in India:

    1. PVTGs reside in 18 States and one Union Territory.
    2. A stagnant or declining population is one of the criteria for determining PVTG status.
    3. There are 95 PVTGs officially notified in the country so far.
    4. Irular and Konda Reddi tribes are included in the list of PVTGs.

    Which of the statements given above are correct?(CSP 2019)

    (a) 1, 2 and 3

    (b) 2, 3 and 4

    (c) 1, 2 and 4

    (d) 1, 3 and 4

    Who are the Bondas?

    • The Bondas are Munda ethnic group who live in the isolated hill regions of the Malkangiri district of southwestern Odisha near the junction of the three states of Odisha, Chhattisgarh, and Andhra Pradesh.
    • They are a scheduled tribe of India and are also known as the Remo (meaning “people” in the Bonda language).
    • The tribe is one of the oldest and most primitive in mainland India; their culture has changed little for more than a thousand years.
    • Their isolation and known aggressiveness continue to preserve their culture despite the pressures of an expanding Indian population.

    Back2Basics: Particularly Vulnerable Tribal Groups (PVTGs)

    • There are certain tribal communities who have declining or stagnant population, low level of literacy, pre-agricultural level of technology and are economically backward.
    • They generally inhabit remote localities having poor infrastructure and administrative support.
    • These groups are among the most vulnerable section of our society as they are few in numbers, have not attained any significant level of social and economic development.
    • 75 such groups have been identified and categorized as Particularly Vulnerable Tribal Groups (PVTGs).
  • Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

    [pib] National Food Security Act, 2013

    The Department of Food &Public Distribution has issued directions to States/UTs to include all eligible disabled persons under the National Food Security (NFS) Act 2013.

    Try this question:

    Q.In the ongoing crisis, maintaining the level of food security has become one of the most essential needs. In light of the above statement, critically examine the priority areas for maintaining food security in the country. Suggest measures to make accessibility and availability of food easier for all.

    National Food Security (NFS) Act

    • The NFS Act, 2013 aims to provide subsidized food grains to approximately two-thirds of India’s 1.2 billion people.
    • It was signed into law on 12 September 2013, retroactive to 5 July 2013.
    • It converts into legal entitlements for existing food security programmes of the GoI.
    • It includes the Midday Meal Scheme, Integrated Child Development Services (ICDS) scheme and the Public Distribution System (PDS).
    • Further, the NFSA 2013 recognizes maternity entitlements.
    • The Midday Meal Scheme and the ICDS are universal in nature whereas the PDS will reach about two-thirds of the population (75% in rural areas and 50% in urban areas).
    • Under the provisions of the bill, beneficiaries of the PDS are entitled to 5 kilograms per person per month of cereals at the following prices:
    1. Rice at ₹3 per kg
    2. Wheat at ₹2 per kg
    3. Coarse grains (millet) at ₹1 per kg.
    • Pregnant women, lactating mothers, and certain categories of children are eligible for daily free cereals.

    Implementation

    • Section 38 of the Act mandates that the Central Government may from time to time give directions to the State Governments for effective implementation of the provisions of the Act.
  • Roads, Highways, Cargo, Air-Cargo and Logistics infrastructure – Bharatmala, LEEP, SetuBharatam, etc.

    River Ropeway over Brahmaputra

     India’s ‘longest’ river ropeway across the Brahmaputra River was unveiled in Guwahati.

    Navigate to this page for more readings on Brahmaputra River systems:

    Brahmaputra River System

    Brahmaputra Ropeway

    • The 1.82 km bi-cable jig-back ropeway connects the southern bank of the Brahmaputra and a hillock behind the Doul Govinda temple in North Guwahati on the other.
    • It passes over the mid-river Peacock Island that houses Umananda, a medieval Shiva temple.
    • It thus cuts travel time between the two banks to 8 minutes.
    • The current travel options between the two banks are by ferry (30 minutes or more, depending on current and season) or by road through a bridge that usually takes over an hour in the traffic.
  • Foreign Policy Watch: India-Nepal

    Thinking through the Nepal policy

    Unilateral actions by Nepal

    • Minor dispute involving territory around the Kalapani springs, was expanded to claim a large wedge of Indian territory towards the east, measuring nearly 400 square kilometres.
    • The expanded claim was incorporated into Nepal through a constitutional amendment and a revised official map.

    Future course of action

    • India should be willing to engage in talks with Nepal on all aspects of India-Nepal relations.
    • But any talks on the Kalapani issue should be limited to the area which was the original subject for negotiations and Susta.
    • Borders which have been accepted by both sides for more than 100 years and which have also been reflected on their official maps cannot be unilaterally altered by one side coming up with archival material which has surfaced in the meantime.
    • This would make national boundaries unstable and shifting, and create avoidable controversies between countries as is the case now between India and Nepal.

    Some historical background

    • The Treaty of Sugauli of 1816 sets the Kali river as the boundary between the two countries.
    • There was no map attached to the treaty.
    • Nepal is now claiming that the main tributary of the Kalapani river rises east of the Lipu Lekh pass from the Limpiyadhura ridgeline and hence should serve as the border.
    • Even if the lengthiest tributary may be one principle for a riverine boundary, it is not the only one.
    • There are many boundaries which do not follow any geographical principle at all but are the result of historical circumstances, mutual agreement and legal recognition.
    • British surveys of the region consistently showed the India-Nepal border heading due north of Kalapani springs.
    • This alignment never changed in subsequent years and was also reflected in Nepali official maps.
    • It has been argued by Nepal that it was the East India Company and successor governments “cartographic chicanery” to shift the source of the Kali river towards the east.
    • But Nepali government never contested such actions.
    • In 1969, the then Prime Minister of Nepal demanded that India military personnel manning 17 villages along the Nepal-Tibet border since the early 1950s be withdrawn.
    • If Lipu Lekh and Kalapani were on Nepali territory then why were they omitted from the list?
    • The Chinese, at least since 1954, have accepted Lipu Lekh Pass as being in Indian territory.
    • In the Nepal-China boundary agreement of 1960, the starting point of the boundary is clearly designated at a point just west of the Tinker Pass.

    Consider the question “Nepal’s newfound aspiration has led to the introduction of friction in India-Nepal ties, what is needed is recognition of each others’ concerns. Comment.”

    Conclusion

    For India, more than the exemplary inter-state relationship, it is the unique people-to-people relations between India and Nepal; and, fortunately, inter-state relations have been unable to undermine the dense affinities that bind our peoples together. While India should reject the Nepali state’s ill-conceived territorial claims, it should do everything to nurture the invaluable asset it has in the goodwill of the people of Nepal.

  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    The missing large in MSMEs

    MSMEs in India has huge untapped potential. This article suggest the ways to tap it and make the MSMEs major contributor to India’s growth.

    What is an issue with MSMEs

    • Despite MSME contributing 20% of the GDP and employing about 110 million workers,  we have failed to make bold policy-moves to make it more productive and competitive.
    •  MSMEs are not becoming ‘larger’ and more dynamic, with 99% of the estimated 60 million being micro-enterprises with limited aspirations.
    • At the core of this lack of competitiveness is a structural issue.

    Addressing the structural challenges

    Size

    • Consider  India’s largest textile cluster vs Bangladesh’s largest.
    • More than 70% of the units in Tirupur are micro-enterprises with less than 10 employees while only 20% of the units in Narayanganj in Bangladesh have less than 10 employees.
    • This factor makes the cluster in Bangladesh more competitive and helping Bangladesh’s exports grow faster than India’s.
    • Though  Bangladesh has other advantages also, but this structural difference is critical.

    Relation between size and productivity

    • Productivity data from manufacturing MSMEs in OECD show that the productivity of medium firms (50-250 people) could be as much as 80-100% higher than that of micro firms (<9 employees).
    • Growth in scale allows them to invest in people to improve skills, in better technology & processes, and in innovation.
    • The most-competitive of them grow from their small beginnings to become world-beaters.
    • This push to grow and improve capabilities and productivity is central to dynamism of any country’s industrial structure.
    • This dynamism of micro-enterprises has been one of the less-reported policy levers behind China’s rise as an industrial powerhouse.

    What stops MSMEs in India from growing?

    • Our policy-legacy of highly restrictive asset-based definition which has only recently been relaxed, coupled with a mindset, and, policies, to support the ‘small is beautiful’ narrative.
    • Overly complex regulatory regime doesn’t differentiate enterprises on their scale, other than the really tiny ones, in terms of compliance needs.
    • For example, if a unit has more than six employees, the trade union law becomes applicable, If a unit has more than 10 employees, the Factories Act is applicable.
    • Small enterprises thus face the same multitude of regulatory requirements as larger ones, and end up having compliance costs account for a higher percentage of revenue.
    • For the tiny/micro units, there is simply no incentive to grow and enter the formal economy.

    Policy intervention needed

    1) Getting MSMEs into formal credit system

    • To do this, we need to adopt an approaches that can help banks and NBFCs move away from asset-backed lending, towards some form of cash-flow-based lending.
    • Small retailers are outside the formal credit system, unable to invest, modernise and grow, given they lack fixed ‘assets’.
    • But, all of them are linked to, and sell, brands of well-known, large companies.
    • If banks and NBFCs work with these companies and use anonymised data on sales and credit-performance to develop credit-scores for lending to them?
    • Similar innovative ways could help cover other micro-unit segments.

    2) Simplified tax and regulatory regime

    • The second policy intervention needed is to de-average and implement a simplified tax and regulatory regime for MSMEs.
    • This would also reduce the cost of compliance.

    3) Development of digital platform

    • The third intervention, appropriate for digital era, is to develop a comprehensive ‘digital platform’ for the sector.
    • This will call for a mandatory, unique identifier for all.
    • The platform will have to be linked to different relevant databases.

    Consider the question “MSMEs in India continues to play an important role in India’s development yet it suffers from structural challenges which hinders it from fueling India’s growth. In light of this, examine the challenges MSMEs faces and suggest the policy interventions.” 

    Conclusion

    As India launches the Atmanirbhar Bharat Abhiyan to reignite growth of the economy for a post-COVID world, building such a globally-competitive MSME has to become one of the initiative’s core pillars. Only then can our industry improve and sustain its global competitiveness.


    Source-

    https://www.financialexpress.com/opinion/the-missing-large-in-msmes-a-globally-competitive-indian-mittelstand-is-the-need-of-the-hour/2063155/

  • Goods and Services Tax (GST)

    How GST created single market

    The article analyses the instrumental role played by the GST in transforming nation into a single market dismantling the barriers across the states.

    Reduced tax burden on consumers

    • In the pre-GST era, the total of VAT, excise, CST and their cascading effect led to 31 per cent as tax payable, on an average, for a consumer.
    • In its first two years, as the collections improved, the GST Council kept reducing the tax burden on consumers.
    • Most items have been brought in the 18 per cent, 12 per cent or even 5 per cent category.
    •  Most items of daily common use are in the zero to 5 per cent slab.
    • An analysis by the Reserve Bank of India (RBI) observes that since the roll out of GST, the rate changes have brought down the GST incidence from 14 per cent to 11.6 per cent.
    • This explains the revenue loss stated above. The consumer pays less tax now under the GST.

    Flexibility and increased compliance

    • Taxation threshold for goods was increased to Rs 40 lakh.
    • The composition limit was increased from Rs 75 lakh to Rs 1.5 crore.
    • For manufacturers, composition tax rate was lowered from 2 per cent to 1 per cent.
    • The composition scheme was extended to services as well.
    • Special lower rates without Input Tax Credit (ITC) were prescribed for construction and restaurants.
    • As per an RBI calculation, the weighted GST rate at present is 11.6 per cent.
    • The revenue-neutral rate determined at the time of GST introduction by its own committee was 15.3 per cent.

    Widened tax base

    • Today, there are 1.2 crore GST assessees compared to 65 lakh at the time of introduction of the tax regime.
    • The average revenue collected per month for the nine months (July-March) in 2017-18 was Rs 89,700 crore in  2018-19 it rose by 10 per cent to Rs 97,100 crore.
    • In FY 2019-20, the revenue per month was Rs 1,02,000 crore.
    • This steady increase was despite the various concessions and rate reductions mentioned above.

     Simplification

    • GST is an IT-enabled platform.
    • Accounting and billing software is provided free to the small taxpayers.
    • Those with nil return to file can do so with an SMS.
    • Since the registration is completely online, the refund process is also fully automated.
    • The Centre is the only refund disbursal authority and no physical interface is required.

    Agriculture sector under GST

    • Concessions are extended to the agriculture sector under GST, agricultural inputs such as fertilisers, machinery have seen a considerable reduction in rates.
    • Other inputs such as cattle/poultry/aquatic feeds are kept at the nil rate.
    • Agricultural produce such as vegetables, fruits, flowers and foodgrains are exempt from GST.
    • Dairy products — milk, curd, lassi, buttermilk and minor forest produce such as lac, shellac and sisal leaves are also exempt.
    • Silk cocoon, raw silk, wool, jute fibre are nil rated.
    • In the pre-GST era, many of these were in the 5 per cent slab.
    • Service inputs to agriculture are similarly treated.
    • Before the introduction of GST, many such items were taxed at a standard rate of 15 per cent.

    MSME  under GST

    • Micro, small and medium enterprises (MSMEs) have consistently received sensitive treatment under the GST regime.
    • Items that have large employment creating activities, rough diamond/precious stone sorting and polishing for example, have seen a GST reduction from 3 per cent to 0.25 per cent.
    • Services rendered by MSMEs have also received such sensitive treatment.

    Concerns

    • Tax reduction in some cases has led to an inversion of duty structure.
    • Manufactured goods in lower slabs have suffered due to inversion in the duty structure.
    • With lockdowns and consequential deferrals in tax payments, compensation payments to the states is a concern that the Council has taken cognisance of.

    Consider the question “Elaborate on how the GST has been benefiting the various stakeholders and helped in transforming India into a single market?” 

    Conclusion

    The states have shown maturity and understanding. The spirit of collective responsibility and statesman-like thinking have kept mutual trust and confidence high. The much talked about cooperative federalism is actually in action in the GST Council.

  • Judicial Reforms

    Office of the Attorney General and its role in contempt cases

    Attorney General of India has refused consent to a plea to initiate criminal contempt action against an actor for “scandalizing” the Supreme Court.

    Note important power, functions and limitations of AGI. A bluff can be created with the dicey statements in the prelims.

    What is the case for prior approval in Contempt Cases?

    • The prior consent in writing of the Attorney General is required for the Supreme Court to initiate criminal contempt action in a case a/c to the Contempt of Court Act, 1971.
    • AGI consent in a form of check on the much-debated suo-motu power of criminal contempt.

    Attorney General of India (AGI)

    • The AGI is the Indian government’s chief legal advisor and is a primary lawyer in the Supreme Court of India.
    • They can be said to be the advocate from the government’s side.
    • They are appointed by the President of India on the advice of Union Cabinet under Article 76(1) of the Constitution and holds office during the pleasure of the President.
    • They must be a person qualified to be appointed as a Judge of the Supreme Court ( i.e. a judge of some high court for five years or an advocate of some high court for ten years or an eminent jurist, in the opinion of the President and must be a citizen of India.).

    Functions and duties

    • The AGI is necessary for advising the Government of India on legal matters referred to them.
    • They also perform other legal duties assigned to them by the President.
    • The AGI has the right of audience in all Courts in India as well as the right to participate in the proceedings of the Parliament, though not to vote.
    • The AGI appears on behalf of Government of India in all cases (including suits, appeals and other proceedings) in the Supreme Court in which GoI is concerned.
    • They also represent the Government of India in any reference made by the President to the Supreme Court under Article 143 of the Constitution.
    • The AG is assisted by a Solicitor General and four Additional Solicitors General.

    Powers

    • The AG can accept briefs but cannot appear against the Government.
    • They cannot defend an accused in the criminal proceedings and accept the directorship of a company without the permission of the Government.
    • The AG is to be consulted only in legal matters of real importance and only after the Ministry of Law has been consulted.
    • All references to the AG are made by the Law Ministry.

    Limitations

    The AG:

    • should not advise or hold a brief against the Government of India
    • should not defend accused persons in criminal cases without the permission of the government of India
    • should not accept appointment as a director in any company without the permission of the government

    Global precedence

    • Unlike the Attorney General of the United States, the AGI does not have any executive authority.
    • Those functions are performed by the Law Minister of India.
    • Also, the AG is not a government servant and is not debarred from private legal practice.

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