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Archives: News

  • Innovations in Sciences, IT, Computers, Robotics and Nanotechnology

    Global Partnership on Artificial Intelligence (GPAI)

    India joins Global Partnership on Artificial Intelligence (GPAI) as a founding member to support the responsible and human-centric development and use of AI.

    Practice question for mains:

    Q. Discuss India’s National Strategy for Artificial Intelligence (AI) unveiled by the NITI Aayog.

    About GPAI

    • GPAI is an international and multi-stakeholder initiative to guide the responsible development and use of AI, grounded in human rights, inclusion, diversity, innovation, and economic growth.
    • It is the league of leading economies including India, USA, UK, EU, Australia, Canada, France, Germany, Italy, Japan, Mexico, New Zealand, Republic of Korea, and Singapore.
    • GPAI will be supported by a Secretariat, to be hosted by Organization for Economic Cooperation and Development (OECD) in Paris, as well as by two Centers of Expertise- one each in Montreal and Paris.
    • This is also the first initiative of its type for evolving better understanding of the challenges and opportunities around AI using the experience and diversity of participating countries.
    • In order to achieve this goal, the initiative will look to bridge the gap between theory and practice on AI by supporting cutting-edge research and applied activities on AI-related priorities.

    Aims and Objectives

    • In collaboration with partners and international organizations, GPAI will bring together leading experts from industry, civil society, governments, and academia to collaborate to promote responsible evolution of AI.
    • It will also help evolve methodologies to show how AI can be leveraged to better respond to the present global crisis around COVID-19.

    India and AI

    • It is pertinent to note that India has recently launched the National AI Strategy and National AI Portal.
    • It has also started leveraging AI across various sectors such as education, agriculture, healthcare, e-commerce, finance, telecommunications, etc. with inclusion and empowerment of human being approach by supplementing growth and development.
    • By joining GPAI as a founding member, India will actively participate in the global development of Artificial Intelligence, leveraging upon its experience around the use of digital technologies for inclusive growth.

    Also read:

    https://www.civilsdaily.com/news/op-ed-snap-india-takes-the-first-step-to-building-an-ai-vision/

  • Oil and Gas Sector – HELP, Open Acreage Policy, etc.

    Indian Gas Exchange (IGX): the first nationwide online delivery-based gas trading platform

    India’s first gas exchange — the Indian Gas Exchange (IGX) — was launched by the Ministry of Petroleum. The exchange is expected to facilitate transparent price discovery in natural gas, and facilitate the growth of the share of natural gas in India’s energy basket.

    Note the following things with caution from the newscard:

    • IGX allows only imported LNG and not domestically produced natural gas.

    • India’s import of LNG

    • GAIL

    • Taxation of LNG

    What is IGX?

    • The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade both in the spot market and in the forward market for imported natural gas.
    • It will allow trading across three hubs —Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.
    • Imported Liquefied Natural Gas (LNG) will be regassified and sold to buyers through the exchange, removing the requirement for buyers and sellers to find each other.
    • The exchange also allows much shorter contracts – for delivery on the next day, and up to a month – while ordinarily contracts for natural gas supply are as long as six months to a year.
    • This will mean that buyers do not have to contact multiple dealers to ensure they find a fair price.

    Will domestically produced natural gas also be bought and sold on the exchange?

    • The price of domestically produced natural gas is decided by the government. It will not be sold on the gas exchange.
    • However, following appeals by domestic producers that the prices set by the government are not viable given the cost of exploration and production in India.
    • A new gas policy will include reforms in domestic gas pricing and will move towards more market-oriented pricing.

    Will this make India more import-dependent?

    • Domestic production of gas has been falling over the past two fiscals as current sources of natural gas have become less productive.
    • Domestically produced natural gas currently accounts for less than half the country’s natural gas consumption; imported LNG accounts for the other half.
    • LNG imports are set to become a larger proportion of domestic gas consumption as India moves to increase the proportion of natural gas in the energy basket from 6.2% in 2018 to 15% by 2030.

    What regulatory change is required?

    • Currently, the pipeline infrastructure necessary for the transportation of natural gas is controlled by the companies that own the network.
    • State-owned GAIL owns and operates India’s largest gas pipeline network, spanning over 12,000 km.
    • An independent system operator for natural gas pipelines would help ensure transparent allocation of pipeline usage, and build confidence in the minds of buyers and sellers about neutrality in the allocation of pipeline capacity.
    • Experts have also called for natural gas to be included in the Goods and Services Tax (GST) regime to avoid buyers having to deal with different levies such as VAT across states when purchasing natural gas from the exchange.
  • Nuclear Diplomacy and Disarmament

    SIPRI Report on Nuclear Stockpiles

    All nations that have nuclear weapons continue to modernize their nuclear arsenals, while India and China increased their nuclear warheads in the last one year, according to a latest report by Swedish think tank Stockholm International Peace Research Institute (SIPRI).

    About SIPRI

    • Stockholm International Peace Research Institute (SIPRI) is an international institute based in Sweden, dedicated to research into conflict, armaments, arms control and disarmament.
    • Established in 1966, the Stockholm based SIPRI provides data, analysis and recommendations, based on open sources, to policymakers, researchers, media and the interested public.

    Practice question for Mains:

    Q.“Nuclear disarmament of the world seems a distant dream”. Comment.

    Nuclear arsenals are on rise in ‘thy neighbourhood’

    • China is in the middle of a significant modernization of its nuclear arsenal.
    • It is developing a so-called nuclear triad for the first time, made up of new land and sea-based missiles and nuclear-capable aircraft.
    • China’s nuclear arsenal had gone up from 290 warheads in 2019 to 320 in 2020, while India’s went up from 130-140 in 2019 to 150 in 2020.
    • Pakistan’s arsenal was estimated to be between 150-160 in 2019 and has reached 160 in 2020.
    • Both China and Pakistan continue to have larger nuclear arsenals than India.

    A general decline across the globe

    • Together with the nine nuclear-armed states — the U.S., Russia, the United Kingdom, France, China, India, Pakistan, Israel and North Korea — possessed an estimated 13,400 nuclear weapons at the start of 2020.
    • This marked a decrease from an estimated 13,865 nuclear weapons at the beginning of 2019.
    • The decrease in the overall numbers was largely due to the dismantlement of old nuclear weapons by Russia and the U.S., which together possess over 90% of the global nuclear weapons.

    Major issue in reporting: Low levels of disclosure

    • The availability of reliable information on the status of the nuclear arsenals and capabilities of the nuclear-armed states varied considerably, the report noted.
    • The U.S. had disclosed important information about its stockpile and nuclear capabilities, but in 2019, the administration ended the practice of publicly disclosing the size of its stockpile.
    • The governments of India and Pakistan make statements about some of their missile tests but provide little information about the status or size of their arsenals, the report said.

    New START seems to ‘STOP’ very soon

    • The U.S. and Russia have reduced their nuclear arsenals under the 2010 New Strategic Arms Reduction Treaty (New START) but it will lapse in February 2021 unless both parties agree to prolong it.
    • However, discussions to extend the New START or negotiate a new treaty made no progress with the U.S.’s insistence that China must join any future nuclear arms reduction talks, which China has categorically ruled out.
    • The deadlock over the New START and the collapse of the 1987 Soviet–U.S. Treaty on the Elimination of Intermediate-Range and Shorter-Range Missiles (INF Treaty) in 2019 suggest that the era of bilateral nuclear arms control agreements between Russia and the U.S. might be coming to an end.
    • Russia and the U.S. have already announced extensive plans to replace and modernize their nuclear warheads and delivery systems.
    • Both countries have also given new or expanded roles to nuclear weapons in their military plans and doctrines, which marks a significant reversal of the post-Cold War trend towards the gradual marginalisation of nuclear weapons.

    Back2Basics: INF Treaty

    • Under the INF treaty, the US and Soviet Union agreed not to develop, produce, possess or deploy any ground-based ballistic and cruise missiles that have a range between 500 and 5,500 km.
    • It exempted the air-launched and sea-based missile systems in the same range.
    • The INF treaty helped address the fears of an imminent nuclear war in Europe.
    • It also built some trust between Washington and Moscow and contributed to the end of the Cold War.

    New START Policy

    • The New Strategic Arms Reduction Treaty (New START) pact limits the number of deployed nuclear warheads, missiles and bombers and is due to expire in 2021 unless renewed.
    • The treaty limits the US and Russia to a maximum of 1,550 deployed nuclear warheads and 700 deployed missiles and bombers, well below Cold War caps.
    • It was signed in 2010 by former US President Barack Obama and then-Russian President Dmitry Medvedev.
    • It is one of the key controls on superpower deployment of nuclear weapons.
    • If it falls, it will be the second nuclear weapons treaty to collapse under the leadership of US President Donald Trump.
  • International Space Agencies – Missions and Discoveries

    NASA’s Gateway Lunar Orbiting Outpost

    NASA recently finalised the contract for the initial crew module of the agency’s Gateway lunar orbiting outpost.

    Note the following things about the Lunar Gateway:

    1. Parent Agency and other agencies involved

    2. Missions and celestial bodies to be studied

    3. Difference between Gateway and ISS

    What is NASA’s Gateway Lunar Orbit Outpost?

    • Essentially, the Gateway is a small spaceship that will orbit the Moon, meant for astronaut missions to the Moon and later, for expeditions to Mars.
    • While the project is led by NASA, the Gateway is meant to be developed, serviced, and utilized in collaboration with commercial and international partners: Canada (CSA), Europe (ESA), and Japan (JAXA).
    • The spaceship will have living quarters, laboratories for science and research and docking ports for visiting spacecraft.
    • Once docked to the Gateway, astronauts will be able to stay there for three months at a time, conduct science experiments and take trips to the surface of the Moon.

    Features of the Gateway

    • One of the most unique features of the Gateway is that it can be moved to other orbits around the Moon to conduct more research.
    • The Gateway will act as an airport, where spacecraft bound for the lunar surface of Mars can refuel or replace parts and resupply things like food and oxygen, allowing astronauts to take multiple trips to the Lunar surface and exploration of new locations across the Moon.

    How is it different from ISS?

    • Astronauts will use the Gateway at least once per year and not stay around the year as they do on the International Space Station (ISS).
    • Compared to the ISS, the Gateway is much smaller (the size of a studio apartment), while the ISS is about the size of a six-bedroom house.
  • Wildlife Conservation Efforts

    Species in news: Pangolin

    China accorded the pangolin the highest level of protection and removed the scales of the endangered mammal from its list of approved traditional medicines amid links between wild meat and the transmission of the SARS-CoV-2 virus.

    Practice question for mains:

    Q. What are Zoonotic Diseases? Discuss the hazards of importing zoonotic diseases through wildlife trade.

    About Pangolin

    IUCN status: Endangered

    • India is home to two species of pangolin.
    • While the Chinese Pangolin (Manis pentadactyla) is found in northeastern India, the Indian Pangolin is distributed in other parts of the country as well as Sri Lanka, Bangladesh and Pakistan.
    • Both these species are protected and are listed under the Schedule I Part I of the Wild Life (Protection) Act, 1972 and under Appendix I of the Convention on International Trade in Endangered Species (CITES).
    • Commonly known as ‘scaly anteaters’, the toothless animals are unique, a result of millions of years of evolution.
    • Pangolins evolved scales as a means of protection. When threatened by big carnivores like lions or tigers they usually curl into a ball.
    • The scales defend them against dental attacks from the predators.

    Pangolin in China

    • Pangolin meat is considered a delicacy in China and Vietnam.
    • Their scales which are made of keratin, the same protein present in human nails — are believed to improve lactation, promote blood circulation, and remove blood stasis.
    • These so-called health benefits are so far unproven.

    What makes pangolins the most trafficked animals in the world?

    • Their alleged health benefits in traditional Chinese medicines prompted a booming illicit export of scales from Africa over the past decade.
    • Officials quote trafficking price of Pangolin and its scale anywhere between Rs 30,000 and Rs 1 crore for a single animal.
    • Conservation of pangolins received its first shot in the arm when the 2017 Convention on International Trade in Endangered Species (CITES) enforced an international trade ban.

    How will China’s decision impact pangolin trafficking?

    • The immediate impact would be pangolin scales losing their legitimacy in traditional Chinese medicines. However, the history of the ban on wildlife trade in China is not encouraging.
    • The continued availability of tiger bone wine — believed to cure a host of conditions ranging from dysentery to rheumatism — despite its ban on tiger products in 1993. The price of elephant ivory plummeted by two-thirds after China banned it.
    • India, where the trade largely remains local, has been registering a decline from before China’s ban.
    • The trade-in pangolin scales are already showing a decreasing trend in India and the only trade is the trade-in live animals by unorganised traders, who ask for a few crores for each live animal.
  • Nuclear Diplomacy and Disarmament

    International Atomic Energy Agency (IAEA)

    The UN nuclear watchdog IAEA’s governing body began meeting as a row brews over Iran’s refusal to allow access to two sites where nuclear activity may have occurred in the past.

    Practice question for mains:

    Q. Discuss the role of International Atomic Energy Agency (IAEA) in enhancing nuclear accountability of the world.

    Concerns over Iran

    • The latest row over access comes as a landmark deal between Iran and world powers in 2015 continues to unravel.
    • If IAEA passes a resolution critical of Iran, it would be the first of its kind since 2012.
    • Even though the two sites are not thought to be key to Iran’s current activities, the agency says it needs to know if past activities going back almost two decades have been properly declared and all materials accounted for.

    About IAEA

    • The IAEA is an international organization that seeks to promote the peaceful use of nuclear energy and to inhibit its use for any military purpose, including nuclear weapons.
    • The IAEA has its headquarters in Vienna, Austria. It was established as an autonomous organisation on 29 July 1957.
    • Though established independently of the UN through its own international treaty, the IAEA reports to both the UN General Assembly and UN Security Council.

    Functions of IAEA

    • The IAEA serves as an intergovernmental forum for scientific and technical co-operation in the peaceful use of nuclear technology and nuclear power worldwide.
    • The programs of the IAEA encourage the development of the peaceful applications of nuclear energy, science and technology, provide international safeguards against misuse of nuclear technology and nuclear materials, and promote nuclear safety (including radiation protection) and nuclear security standards and their implementation.
  • International Space Agencies – Missions and Discoveries

    What is the Bose-Einstein Condensate (BEC)?

    Scientists have observed the fifth state of matter in space for the first time, offering unprecedented insight that could help solve some of the quantum universe’s most intractable conundrums.

    Try this question from CSP 2018

    Q. Consider the following phenomena:

    1. Light is affected by gravity.
    2. The Universe is constantly expanding.
    3. Matter warps its surrounding space-time.

    Which of the above is/are the prediction/predictions of Albert Einstein’s General Theory of Relativity, often discussed in media?

    (a) 1 and 2 only

    (b) 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    Bose-Einstein condensates (BECs)

    • Bose-Einstein condensates (BECs) — the existence of which was predicted by Albert Einstein and Indian mathematician Satyendra Nath Bose almost a century ago — are formed when atoms of certain elements are cooled to near absolute zero (0 Kelvin, minus 273.15 Celsius).
    • At this point, the atoms become a single entity with quantum properties, wherein each particle also functions as a wave of matter.
    • BECs straddle the line between the macroscopic world governed by forces such as gravity and the microscopic plane, ruled by quantum mechanics.

    Why are BECs important?

    • Scientists believe BECs contain vital clues to mysterious phenomena such as dark energy — the unknown energy thought to be behind the Universe’s accelerating expansion.
    • But BECs are extremely fragile. The slightest interaction with the external world is enough to warm them past their condensation threshold.
    • This makes them nearly impossible for scientists to study on Earth, where gravity interferes with the magnetic fields required to hold them in place for observation.

    Studying BECs

    • NASA scientists unveiled the first results from BEC experiments aboard the International Space Station (ISS), where particles can be manipulated free from Earthly constraints.
    • The microgravity onboard the ISS allowed them to create BECs from rubidium — a soft metal similar to potassium — on a far shallower trap than on Earth.
    • Microgravity at ISS allows confining atoms with much weaker forces. Microgravity also allowed the atoms to be manipulated by weaker magnetic fields, speeding their cooling and allowing clearer imaging.
    • Creating the fifth state of matter, especially within the physical confines of a space station, is no mean feat for NASA.
  • Important Judgements In News

    The need for an anti-discrimination law

    India has a unique distinction of being a democracy without comprehensive legislation to back the constitutional right of equality. This lack of legislation gives rise to certain issues. Every time the case of discrimination is brought the discriminating party claims that he is at liberty to do so. Not only this, in a certain case, the Supreme Court also endorsed such restrictive interpretation. All this points to the need for the comprehensive legislation.

    Indirect and unintended discrimination

    • More than 70 years after Independence, our society remains rife with structural discrimination.
    • These prejudices, which pervade every aspect of life, from access to basic goods, to education and employment, are sometimes manifest.
    • But, on other occasions, the discrimination is indirect and even unintended. 
    • The forms that it takes were perhaps best explained by the U.S. Supreme Court’s ruling in Griggs vs. Duke Power Co. (1971).
    • There, the court held that an energy company had fallen foul of the U.S. Civil Rights Act of 1964 — which made racial discrimination in private workplaces illegal.
    • The company had insisted on a superfluous written test by applicants for its better entry-level jobs.
    • Although, on the face of it, this requirement was race-neutral, in practice it allowed the company to victimise African-Americans.
    • In a memorable judgment, invoking an Aesop fable, Chief Justice Burger wrote that “tests or criteria for employment or promotion may not provide equality of opportunity merely in the sense of the fabled offer of milk to the stork and the fox.”
    • On the contrary, the law, he said, resorting again to the fable, “provided that the vessel in which the milk is proffered be one all seekers can use.”
    • That is, that it wasn’t merely “overt discrimination” that was illegal but also “practices that are fair in form, but discriminatory in operation”.

    Let’s look into 2 cases in India

    1. Madhu vs. Northern Railway

    • The verdict in Griggs was notably applied in the Delhi High Court’s 2018 judgment in Madhu vs. Northern Railway.
    • There, the Railways had denied free medical treatment to the wife and daughter of an employee which they would otherwise have been entitled to under the rules.
    • The Railways contended that the employee had “disowned” his family and had had their names struck off his medical card.
    • The court held that to make essential benefits such as medical services subject to a declaration by an employee might be “facially neutral”, but it produced a disparate impact, particularly on women and children.
    • But while this case concerned discrimination by the state, entry barriers to goods such as housing, schools and employment tend to function in the realm of private contracts.

    Is Article 15 applicable in private contracts?

    •  The Constitution is markedly vocal on this too.
    • Article 15(2) stipulates that citizens shall not on grounds only of religion, race, caste, sex, or place of birth be denied access to shops, public restaurants, hotels and places of public entertainment.
    • Yet, on occasion, this right, which applies horizontally, inter se individuals, comes into conflict with the rights of persons to associate with others, often to the exclusion of certain groups.

    2. Zoroastrian Cooperative Housing Society vs District Registrar Co-operative Societies (Urban) and Others

    • This is why every time a case of discrimination is brought, the party that discriminates claims that he possesses a liberty to do so, that he must be free to act according to his own sense of conscience.
    • The Supreme Court in 2005 endorsed one such restrictive bond, when it ruled in favour of a bye-law of a Parsi housing society that prohibited the sale of the property to non-Parsis.
    • This right to forbid such a sale, the Court ruled, was intrinsic in the Parsis’ fundamental right to associate with each other.
    • But in holding thus, the judgment, as Gautam Bhatia points out in his book, The Transformative Constitution, not only conflated the freedom to contract with the constitutional freedom to associate but also overlooked altogether Article 15(2).

    Let’s look into the scope of Article 15(2)

    • At first blush, Article 15(2) might appear to be somewhat limited in scope.
    • But the word “shops” used in it is meant to be read widely.
    • A study of the Constituent Assembly’s debates on the clause’s framing shows us that the founders explicitly intended to place restrictions on any economic activity that sought to exclude specific groups.
    • For example, when a person refuses to lease her property to another based on the customer’s faith, such a refusal would run directly counter to the guarantee of equality.

    India: A country with no legislative backing to the fundamental right to equality

    • India is unique among democracies in that a constitutional right to equality is not supported by comprehensive legislation.
    • In South Africa, for example, a constitutional guarantee is augmented by an all-encompassing law which prohibits unfair discrimination not only by the government but also by private organisations and individuals.

    Consider the question “Discrimination partakes different forms. And due to lack of any legislation backing the Right to Equality, this right is just as capable of being threatened by acts of private individuals as they are by the state.” In light of this, discuss the need for an act backing the Right to Equality and right against discrimination.”

    Conclusion

    Any reasonable conception of justice would demand that we look beyond the intentions of our actions, and at the engrained structures of society.  To that end, the idea of enacting a law that will help ameliorate our ways of life, that will help reverse our deep-rooted culture of discrimination, is worth thinking about.

  • Skilling India – Skill India Mission,PMKVY, NSDC, etc.

    Skill University

    This article highlights the utility of skill education in India. There are several benefits in its adoption. But it would require several regulatory changes. So, what are these changes?Read to know…

    3 issues with our university education

    •  The differential lockdown outcomes for skilled and unskilled workers highlight our university system’s pre-existing conditions. These are-
    • 1) Broken employability promises.
    • 2) Poor employer connectivity.
    • 3) Poor return on private investment that frustrate parents and students.

    4 ways in which skill university differs from traditional university

    • A skill university differs from a traditional university in four ways.
    • 1) It prays to the one god of employers; for governance, faculty, curriculum, and pedagogy.
    • 2) It has four classrooms; on-campus, on-line, on-site, and on-the-job.
    • 3) It offers modularity between four qualifications; certificates, diplomas, advanced diplomas, and degrees.
    • 4) And it has four sources of financing — employers, students, CSR, and loans though employers contribute more than 95 per cent of the costs.
    • Fro example,  in the case of Gujrat government’s skill university, 97 per cent of the university’s budget comes from employers.

    5 ways in which the universities are broken globally

    • First is broken promises.
    • The world produced more graduates in the last 35 years than 700 years before.
    • Second is broken financing.
    • More than 50 per cent of $1.5 trillion in student debt was expected to default even before the COVID pandemic.
    • Indian bank education loans have high NPAs.
    • The third is broken inclusiveness.
    • The system works for privileged urban males studying full-time, but today’s students are likely to be female, poor, older, rural, or studying part-time.
    • Fourth is broken flexibility.
    • Employed learners will cross traditional learners in three years, but they need on-demand, on-the-go, always-on, rolling admissions, continuous assessment, and qualification modularity.
    • And finally is broken openness. 
    • Google knowing everything makes learning how to learn a key 21st-century skill.
    • Yet too many universities are stuck in knowing.

    Let’s look into the regulatory changes needed for the Skill University

    • Skill universities are a scalable, sustainable, and affordable vehicle to massify higher education by innovations in finance.
    • But they need regulatory change.

    Following are the 3 types of regulatory changes needed

    1. Changes needed in the  UGC Act of 1956

    •  Clause 8.2.6 needs to be rewritten to equalise four classrooms -online, on-site, on-campus, and on-job-and section 22 (3) to recognise apprenticeship linked degree programmes.
    • The UGC Teacher Regulations of 2018 need rewriting: Clause 3.3.(I),(II) to redefine the qualifications, roles and numbers of teachers required, and clause 4 to recognise industry experience as a teaching qualification.
    • The UGC Online Regulations 2018 need to be rewritten: Clause 4(2) and 7(2)(3) to allow innovation, flexibility, credit frameworks, and relevance in online curriculums.
    • Clause 7(2)(2) to allow universities to work with any technology platforms.

    2. Changes needed in NAAC IQAC regulations

    • Criteria 1 and 1.2.2 to include work-based learning and work integrated learning.
    • Criteria 1.1.3 to include life skills and proctored/evaluated internships.
    • Criteria 2 and 2.3.1 to integrate online learning with university programmes.
    • Criteria 2 and 2.4.1, 3 and 6 need to be modified to recognise teachers with industry experience, and include industry-based research.
    • Criteria 4 and 4.1.2 to include industry workplaces and online classrooms as campus extensions.
    • Criteria 5 and 5.2.1 needs to be rewritten to incorporate apprenticeships.

    3. Changes needed in Apprenticeship Act of 1961

    • Clause 2, 8, 9, 21 and 23 of The Apprenticeship Act of 1961 also needs to be modified to allow and lift the licence raj for degree-linked apprentices and recognise skills universities.

    Consider the question “Skill universities, which would go a long way in increasing the employability in India are need of the hour. In light of this, examine the issues that the skill education faces and suggest the changes our education system needs to impart the proper skill education.”

    Conclusion

    Covid crisis has amplified the problems with our education system. So, the adoption of skill universities will help us improve the skill of our youth and achieve more inclusive employment, employability and education.

  • Finance Commission – Issues related to devolution of resources

    Need for fiscal decentralisation

    Covid pandemic has turned the fiscal health of states from bad to worse. This article highlights the role of the Finance Commission as a neutral arbiter in the Centre-state relation in achieving the delicate balance. It has highlighted certain issues that the commission has to consider when it submits its report. So, what are those issues? Read to know…

    Disruption in fiscal consolidation and impact on Centre-state relations

    • Due to COVID, there is a  collapse in general government revenues and the consequent rise in the deficit levels.
    • It has disrupted the glide path of fiscal consolidation.
    • But it has also deepened the faultlines in Centre-state fiscal relations. 
    • The Centre is trying to claw back the fiscal space ceded to the states and assert its dominance over the country’s fiscal architecture.
    • This coupled with the fiscal constraints exposed by the pandemic have made it harder to maintain the delicate balance needed to manage the contesting claims of the Centre and the states

    Why the 15th Finance Commission report is critical for decentralisation

    • It will be ironic if the ongoing health crisis that has ended up exposing the limitations of a centralised approach, ends up reversing the trend towards fiscal decentralisation.
    • The Commission’s report will be critical on two counts:
    • First, it will determine how India’s fiscal architecture is reshaped.
    • Second, how Centre-state relations are reset as the country attempts to recover from the COVID-19 shock.

    1. Will the burden of reducing debt/gdp  fall equally on Centre and state?

    • The glide path of fiscal consolidation laid out by the FRBM review committee had envisaged bringing down general government debt to 60 per cent of GDP by 2022.
    • This is unlikely to materialise now.
    • Factoring in the additional borrowings, the debt-to-GDP ratio may well be over 80 per cent this year.
    • Thus the fiscal consolidation roadmap will have to be reworked.
    •  As per its terms of reference, the Finance Commission will lay out the new path to be followed by both Centre and states.
    • But the question is: Will the burden of debt reduction fall equally upon the Centre and states?
    • Or will the Commission allow the Centre to have greater leeway when it comes to fiscal consolidation?

    2. Will the conditional extension of borrowing limit be formalised?

    •  Recently, the Centre eased the states’ budget constraint, allowing them to borrow more this year.
    • But this extra borrowing was conditional upon states implementing reforms in line with the Centre’s priorities.
    • Despite protests, most states are likely to comply with the conditions, to varying degrees.
    • But the issue is: As the hit from the ongoing crisis spreads over multiple years, state governments may want to maintain their expansionary fiscal stance next year as well.
    • Then, will the Finance Commission, in line with its terms of reference, go along with the Centre’s stance and recommend imposing conditions on additional borrowing and formalise this arrangement?
    • It is difficult to see such an arrangement being rolled back once formalised.

    3. GST compensation cess

    • The GST council, in which the Centre effectively has a veto, is yet to clearly spell out its views on the extension of the compensation cess to offset states losses beyond the five-year period.
    • The Commission will have to weigh in on this too.
    • At this time the Centre is struggling to fulfil its promise of assuring states their GST revenues.
    • In such situation, will the Commission argue in favour of extending the compensation period, as states desire, but, perhaps, lowering the assured 14 per cent growth in compensation and linking it to nominal GDP growth?
    • As GST revenue accounts for a significant share of states’ income, how this plays out will also have a bearing on their ability to bring down their debt levels.

    4. Issue of tax devolution

    • In some sense, accepting the recommendations of the 14th Finance Commission was a fait accompli.
    • The terms of reference of the 15th Finance Commission points to the present government’s desire to claw back the fiscal space offered to the states.
    • But is clawing back fiscal space now a prudent approach?
    • A cash-strapped Centre will surely welcome greater say over the diminished resources.
    • And there a strong argument for the Centre to have far greater fiscal space than it currently enjoys.
    • This is partly because the fiscal multiplier of central government capital spending is greater than that by the states.
    • But also the nature of politics may well push in that direction.
    • Centralisation of political power may well lead to demands for centralisation of resources.
    • However, surely fiscal space can be created by a review of the Centre’s own spending programme.

    Need to relook at the Centre’s expenditure priorities

    • Over the past decades, there has been a substantial increase in the Centre’s spending on items on the state and concurrent list.
    •  This shift has occurred even as grants by the Centre to states exceed the former’s revenue deficit.
    • This, as some have pointed out, effectively means that the Centre is borrowing to transfer to states.
    • Surely, a relook at the Centre’s expenditure priorities would create greater fiscal space for it.

    What the Finance Commission can do?

    • Any attempt to shift the uneasy balance in favour of the Centre will strengthen the argument that this government’s talk of cooperative federalism serves as a useful mask to hide its centralising tendencies.
    • As a neutral arbiter of Centre-state relations, the Finance Commission should seek to maintain the delicate balance in deciding on contesting claims.
    • This may well require giveaways especially if states are to be incentivised to push through legislation on items on the state and concurrent list.
    • The fiscal stress at various levels of the government necessitates a realistic assessment of the country’s macro-economic situation, the preparation of a medium-term roadmap, as well as careful calibration of the framework that governs Centre-state relations.
    • At this critical juncture, the Finance Commission should present the broad contours of the roadmap.
    • Though it could request for another year’s extension to present its full five-year report citing the prevailing uncertainty.

    Consider the question “COVID pandemic has put the States in the dire fiscal position. What we need is more of the fiscal decentralisation now.” In light of this, along with other factors, elaborate on the role 15th Finance Commission could play in this regard.

    Conclusion

    Finance Commission has to play an important role in achieving the delicate balance in the conflicting domain of finance by addressing the concerns of both the players.

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