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  • Coronavirus – Economic Issues

    Super-power rivalries exacerbated by coronavirus pandemic offer India an opportunity

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

    The article discusses three fronts on which actions are required viz- health, economy and geopolitics. How much the global economy is going to be affected? how the US-China rivalry would affect the recovery? what the lack of global coordination means? all such questioned are discussed here.  It also suggests actions that India should take to deal with the crisis.

    Many unknowns than knowns about Covid-19

    • The virus currently has many more unknowns than knowns.
    • We don’t know for sure how it spreads, whether people can get re-infected, whether it is mutating, whether the hot weather kills it, and what the real fatality rate is.
    • We don’t know for sure how far we are from an anti-viral.
    • We know that we are at least 18 months away from having a vaccine that works and is available at scale.
    • Till an anti-viral is found, economic activity will be constrained, and this will affect people, industries and countries in disparate ways.

    The extent of damage to the global economy

    • Loss of ten trillion dollars: The global economy is set to lose close to ten trillion dollars because of the “self-induced coma” it has been put into — to use Paul Krugman’s evocative phrase.
    • Loss of effectiveness of monetary policy: The preceding global financial crisis (GFC) has exhausted the efficacy of monetary tools.
    • In addition, corporates globally are leveraged to the tune of $12 trillion.
    • The slump in demand: The accompanying oil price collapse, beginning due to a spat between producers Saudi Arabia and Russia have been compounded by a precipitous slump in demand.
    • The Chinese economy can’t help as it did during the GFC, as it is hemmed in itself.
    • Even if it could, there is too much global suspicion of China to allow it to do so. So, countries will largely be on their own.

    Tensions between the US and China

    • The tensions between the US and China have escalated into a full-scale superpower crisis after the virus spread.
    • Since 2010, there has been great concern in the US about China’s rise.
    • China’s muscular foreign policy together with its aggressive stance on multiple issues, most importantly on technology and technology standards, has created conflict.
    • The coronavirus is spreading in the US in an election year and smashing its economy.
    • The virus infected over three-quarter of a million people in the country and killed more than 40,000.
    • After this, China could be seen as enemy number one in the US.

    No global coordination

    • No wonder then that at a time when the world yearns for global coordination, there is almost none — in healthcare responses and economic coordination.
    • Multilateral agencies, especially the WHO and UN, suffer a complete loss of credibility.
    • India needs to chart its own course in these turbulent times.
    • If India takes the requisite actions it may come out well.

    Following suggestions are important from the UPSC perspective. The suggestions deals with three fronts-health, economic and geopolitics.

    How India could come out of the crisis?

    • India needs to act at three levels — health, economic and geopolitical.

    1. Actions at the health level

    • The Union Ministry of Health and Family Welfare has done well to stem the spread of the infection.
    • It has sensitised the public, introduced the concept of social distancing and isolation in the most challenging situations.
    • Now it must test at scale and isolate.

    2. Actions at the economic level

    • Indians cannot afford to stay locked much longer.
    • We are too poor and too many of us live on a day-to-day basis — not even on a paycheck to paycheck basis.
    • Economic activity will be subdued in the near-term, but it must be “unlocked”.
    • The current IMF projections suggest that India will have the highest growth rate in the world this year.
    • Oil prices have collapsed, really helping our balance of payments.
    • Our food stocks are plentiful, the rabi crop has been good, and the prognosis for the monsoon is positive.
    • Low inflationary pressure: This, together with the fact that aggregate demand is down, will dampen inflationary impulses.
    • The “new RBI” has acted boldly and strongly.
    • It has taken prompt actions to reduce rates, increase liquidity, adjust prudential norms, allow moratoriums, and protect financial entities.
    • Indian is better placed: The weakened rupee will help our exports and with a debt to GDP ratio of about 73 per cent, along with better growth prospects, India is relatively better placed than several other countries.
    • We should, therefore, not unduly worry about our credit rating. This both allows and actually requires the government to act on the fiscal front.
    • The government needs to implement the following four steps to spur the economy.
    • (1) It should do so by “printing money” given the moderated inflation
    • (2) It needs to provide additional direct benefit transfers of Rs 2,000 every month for three months to Jan Dhan accounts, together with foodgrains release from the FCI, to the tune of around Rs 65,000 crore, to alleviate people’s miseries.
    • (3) It needs to protect MSMEs directly by providing them working capital (with an RBI backstop) and, like in the UK, provide 80 per cent of the salary to employees of the “GST-paying MSMEs” for six months.
    • (4) It needs to launch a massive public works programme outside the Budget as suggested by the chairman of CII’s National Committee of Infrastructure and PPP, Vinayak Chatterjee.
    • This fund should be earmarked for infrastructure and a quarter of its budget should be set aside for strengthening and upgrading primary health centres.
    • The allocation should not be less than Rs 200,000 crore.
    • Push through pending reforms: The government should take advantage of the crisis to push through much needed pending reforms in agriculture-especially those pertaining to APMC), power-pricing and discoms, banks-government ownership at 30 per cent and bad banks.
    • Revenue from private gold: Given the paucity of tax revenues, the government could also consider having the PM making an appeal for private gold from people and temples.
    • It could target 1,000 tonnes of gold worth $30 billion and offer a five per cent tax-free return repayable ($1.5 billion a year) after 10 years, in rupees or gold.

    3. Actions at the geopolitical level

    • India can come out ahead if we act now.
    • Super-power rivalries will create opportunities to replace China as a major supplier to the US and Japan.

    Conclusion

    The battle to deal with the corona disaster has to be fought on many fronts. India must form a strategy and act on various front i.e. health, economic and geopolitical- to be victorious at the end.

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  • Monetary Policy Committee Notifications

    Monetary Policy Committee (MPC) to meet 5x this Fiscal

    | Economics | Mains Paper 3: Indian Economy

    The rate-setting Monetary Policy Committee (MPC) will be meeting five times in FY21, against seven in FY20.

    Monetary Policy tools are all-time favourites of UPSC. Kindly go through the link given in the Back2Basics section.

    Monetary Policy Committee (MPC)

    • The Monetary Policy Committee (MPC) is a committee of the RBI, which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.
    • The RBI Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC to bring more transparency and accountability in fixing India’s Monetary Policy.
    • The policy is published after every meeting with each member explaining his opinions.
    • The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
    • Suggestions for setting up a Monetary policy committee is not new and goes back to 2002 when YV Reddy committee proposed to establish an MPC, then Tarapore committee in 2006, Percy Mistry committee in 2007, Raghuram Rajan committee in 2009 and then Urjit Patel Committee in 2013.

    Composition and Working

    • The committee comprises six members – three officials of the RBI and three external members nominated by the Government of India.
    • The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
    • The Governor of RBI is the chairperson ex officio of the committee.
    • Decisions are taken by a majority with the Governor having the casting vote in case of a tie.
    • They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.

    Back2Basics

    Monetary Policy tools and Money Supply in India

     

    Also read:

    How reverse repo rate became benchmark interest rate in the Indian economy?

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  • Social Media: Prospect and Challenges

    What is ‘Milk Tea Alliance’?

    | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    The ‘Milk Tea Alliance’ is an informal term coined by social media users which are highly trending these days.

    The term though in news without any institutional backing is gaining popularity. It clearly shows the public outrage against Chinese agressiveness in Taiwan and Hong-Kong.

    What is the ‘Milk Tea Alliance’?

    • Thai social media users began calling for the sovereignty of Taiwan and Hong Kong, extending support to the two countries.
    • This spurred social media users from other Southeast Asian countries to join the call, in a rejection of China’s influence in the region for its own diplomatic and economic gains.
    • The ‘Milk Tea Alliance’ is an informal term coined by social media users because in the region, tea is consumed in many nations with milk, with the exception of China.
    • Memes were formed showing flags of the countries in the “Milk Tea Alliance” with China as a lone outsider.

    What started this online war?

    • The online battle started with a Thai twitter post that questioned whether coronavirus had emerged in a laboratory in Wuhan.
    • There were some related tweets by pro-Taiwanese and Hong Kong people.
    • Pro-China social media users then began attacking Thailand for being a “poor” and “backward” nation and also hurled insults at the Thai king and the Thai prime minister.

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  • Coronavirus – Health and Governance Issues

    [pib] ‘COVID India Seva’ platform for citizen engagement on COVID-19

    PIB | Governance | Mains Paper 2: Health & Education

    The Union Ministry of Health & Family Welfare has launched the COVID India Seva platform to establish a direct channel of communication with millions of Indians amid the pandemic.

    We can take this initiative as an example while answering mains questions like – “India’s fight against Coronavirus pandemic is a public movement at large. Discuss.”

    COVID India Seva

    • This initiative is aimed at enabling transparent e-governance delivery in real-time and answering citizen queries swiftly, at scale, especially in crisis situations like the ongoing COVID-19 pandemic.
    • Through this, people can pose queries @CovidIndiaSeva and get them responded to in almost real time.
    • @CovidIndiaSeva works off a dashboard at the backend that helps process large volumes of tweets, converts them into resolvable tickets, and assigns them to the relevant authority for real-time resolution.
    • The dedicated account will be accessible to people be it local or national in their scope.
    • The Ministry will respond to broader queries and public health information. This does not require the public to share personal contact details or health record details.

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  • North-East India – Security and Developmental Issues

    Daporijo Bridge and its significance

    Prelims Only | Enviro & Biodiversity | Mains Paper 3: Geographical Features & Their Location

    A key bridge over the Subansiri River in Arunachal Pradesh close to the Line of Actual Control (LAC) was constructed by the Border Roads Organisation (BRO) in record 27 days.

    North-East has seen the construction of a series of bridges by BRO in recent times post-Doklam standoff. Make a note of all such bridges and the corresponding rivers over which they are built.

     Daporijo Bridge

    • This Bridge is one of the two over River Subansiri which connect Daporji in North Subansiri dist. with rest of state.
    • This and the other bridge at Tamin sustaining more than 600 villages and troops strength of around 3000 personnel manning the LAC which includes disputed Areas of Asaphila and Maza.
    • All supplies, rations, constructional material and medicines pass over this bridge.
    • The new bridge now can withstand 40 tonnes of weight allowing a safe passage for heavier vehicles catering for the requirements of the Indian Army as well as future infrastructure development requirements.

    Significance

    • India has speeded up the construction of critical infrastructure in its northeast in the past half a dozen years including airports, railways and roads with an eye on China that has motorable roads right up to the border.
    • Arunachal Pradesh was the scene of the 1962 India-China border conflict that ended badly for India. China on its parts claims all of the state as “Southern Tibet.”
    • Of the 3488 km long Line of Actual Control with China 1126 lies with Arunachal Pradesh alone.
    • The two countries are yet to demarcate their border with the two sides patrolling the LAC but reporting incursions by the other side since the frontier is not clearly marked.

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  • Festivals, Dances, Theatre, Literature, Art in News

    Festival in news: Thrissur Pooram

    Prelims Only | History | Mains Paper 1: Arts & Culture

    For the first time since its inception, Thrissur Pooram, considered as mother of all poorams in Kerala, has been cancelled earlier this month.

    Note the cultural terms in the newscard. As the name itself suggests the state of celebration, it very unlikely to be asked in the ‘fest-state’ format.  Rather UPSC can ask – “The  terms X, Y, Z …. are associated with which of the following reknown festival?”

    Thrissur Pooram

    • Thrissur Pooram is an annual Hindu festival held in Kerala.
    • It is held at the Vadakkunnathan Temple in Thrissur every year on the Pooram day – the day when the moon rises with the Pooram star in the Malayalam Calendar month of Medam.
    • It is the largest and most famous of all poorams.
    • Thrissur Pooram was the brainchild of Raja Rama Varma, famously known as Sakthan Thampuran, the Maharaja of Cochin (1790–1805).

    Actual course of the festival

    • The Pooram is centred on the Vadakkunnathan Temple, with all these temples sending their processions to pay obeisance to the Shiva, the presiding deity.
    • The Pooram officially begins with a flag hoisting ceremony (Kodiyettam).
    • All the participating temples of Thrissur Pooram are present for the ceremony, and there is a light firework to announce the commencement of the festival.
    • The seventh day of the pooram is the last day. It is also known as “Pakal Pooram”.

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

    Let’s make the most of dirt-cheap oil

    | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    For the first time in history, oil prices hovered in the negative territory recently. This article discusses how this opportunity can be utilised by India in various ways.

    Oil selling for negative price

    • In a dramatic and unprecedented turn of events on Monday, crude oil began trading in negative territory for the first time since records began.
    • The price on a futures contract for West Texas crude that was due to expire on 21 April crashed to minus $37.63 a barrel.
    • Covid effect: This is a direct result of the market mayhem caused by covid-19, which has resulted in lockdowns around the world, brought economies to a screeching halt, and crushed demand for transport fuel.
    • No space to store oil: Reports say there is so much unused oil in the US that there is no space left to store fresh supplies.
    • Storage costs money. Thus, oil producers had to pay to offload their stock.

    How did we get here?

    • Thanks to the covid-19 pandemic, multiple demand and supply shocks are wrecking economies across the globe and bringing economic activity to a standstill.
    • Assembly lines have halted, supply chains have snapped, commodity prices have fallen, the services sector has ground to a halt, financial markets are in a panic.
    • And the Great Lockdown has depressed various other economic variables and pushed the world into a deep recession.
    • Tensions among suppliers: The sudden fall in oil prices is tied not just to a demand crunch, but also tensions among the world’s major suppliers.
    • Relatively high prices over 2019 had allowed non-traditional players like US shale oil companies to thrive.
    • Meanwhile, Saudi Arabia and Russia, the most influential members of OPEC+, the Organization of Petroleum Exporting Countries that have allied with Russia on and off since 2016, had been in competition to expand their market share.
    • A flashpoint arose in early March, when Moscow refused to agree to OPEC’s desired production cuts to keep prices stable.
    • This prompted a price war with Riyadh, as both attempted to increase market share or put other competitors (particularly US shale) out of business.
    • Though a production cut has since been agreed to between Russia and Saudi Arabia, demand is estimated to have fallen far more than that.
    • Contracts for late 2020 are still going for only around $30 per barrel.
    • As a result, producers such as Kuwait, Oman, Nigeria, and Venezuela will continue to feel the strain.

    How can India maximise potential gains?

    • India imports nearly 80% of the oil it consumes, and so cheap oil is to be taken as an opportunity.
    • Under normal circumstances, such a drastic fall in oil prices would have a big positive effect on the finances of the Union government and the economy in general.
    • The current circumstances, however, are anything but normal.
    • So, India must use this low price opportunity in the following ways.

    The strategic petroleum reserves (SPRs) assumes significance in India’s energy security whenever tension rises in the region from which we import our oil. Take note of the suggestion with respect to SPRs.

    Fill up the strategic petroleum reserves (SPRs)

    • The best way to turn this situation to India’s advantage, therefore, is to grab this chance to fill up the country’s strategic petroleum reserves (SPRs).
    • Like other large consumers, India holds oil inventories for the sake of energy security during a supply cut-off or some other emergency.
    • How much are our SPRs? Our SPRs are estimated at five days’ worth of oil imports, stored in underground salt caverns, and a further 65 days’ worth held by commercial refineries.
    • Current prices provide a perfect opportunity to bolster these reserves in preparation for future shocks.
    • The government-owned agency, Indian Strategic Petroleum Reserves Limited (ISPRL), should now be focused on filling up and utilizing the existing capacity of the country’s underground caverns.
    • In fact, it should be hardwired to consider filling these up each time the price of Brent crude falls below $40.
    • Separately, in the second phase of India’s SPR plans should be fast-tracked.
    • Working with private players: This involves working with private players to design, build, finance, operate, and transfer underground oil tanks.

    Negotiate long term contracts at current prices

    • Commercial refineries, many of which are public-sector enterprises, should strike and renegotiate long-term contracts with suppliers based on current prices.
    • Other firms reliant on oil and subject to the vagaries of oil prices, such as airline companies, should also do likewise.

    Geographically diversify the SPR holdings

    • This is also an opportune time for the Indian government to geographically diversify its SPR holdings.
    • To lower transport and storage costs, and to diversify risk, Oman or Fujairah in the UAE could be contracted to hold a quantity of oil on India’s behalf.
    • These reserves can be shipped to India when needed.
    • India should also operationalize, modernize and add to its oil tank facilities in Trincomalee, Sri Lanka, which is partially owned by India.

    Conclusion

    The global energy landscape is likely to remain volatile in the near future and oil is likely to remain an important part of India’s energy needs. This is a good time to enhance the country’s energy security.

     

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  • Foreign Policy Watch: India-China

    Global recovery after the Covid-19

    op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests,India & Its Neighborhood – Relations

    This article discusses the various factors with geopolitical significance. These factors would shape the post-pandemic recovery on a global scale. Though these factors have been touched upon in the previous op-eds, they are dealt with in detail here.

    Post-pandemic strategic environment for the recovery

    • It’s the post-pandemic strategic environment that will dictate how soon the world recovers from this unexpected shock.
    • It must start with the international geopolitical angle, with many assumptions.
    • With some clarity in this domain, we can prepare ourselves better for the recovery phase of a near post-war situation.
    • Shortly, even as the world continues to reel under the pandemic threat, there will be more endeavours on enhancing human security through better strategic management of the world.
    • So, what will all that be about? It could be a major conference.
    • Major conference with agenda for revival: The situation is similar to the elusive efforts towards the creation of new world order after the end of the Cold War in 1989.
    • Will the world consider a major conference with the agenda being a revival after the coronavirus?
    • The 2015 Paris Summit of the United Nations, which was convened to save the world from the rapid impact of climate change, could not muster a consensus.
    • Will a potential 2020 “pandemic conference” succeed in getting big powers to jettison their geopolitical ambition?

    China’s role has significance for India. The UPSC asks questions touching the economic or security aspect of China for India. So, the role played by China in the post-pandemic world is important from Mains perspective. Take note of the issues discussed below.

    The US-China rivalry

    • The US-China rivalry will remain the core issue, with several other regions and nations aligning with the one who can bring them short to medium-term advantages.
    • Contingent upon how badly the US is finally affected, its current confused leadership is unlikely to inspire and its efforts at internal stabilisation may compromise US power.
    • A major turn in political fortunes in the US and its bumbling on pandemic management could throw open opportunities for others to exploit.
    • The US will perceive itself far more insecure than it was even after 9/11.

    Accusations over China’s role in the pandemic

    • There is likely to be a huge effort to slander China — accusing it of being the originator of the scourge — and isolate it economically and politically.
    • The allegations on the use of biological warfare are the ones which will cause turbulence in relationships.
    • Ironically, China is also in a unique position to help the world bounce back.
    • Against the backdrop of these accusations regarding culpability, we need to be ready for changes in the norms of international cooperation and behaviour.
    • Cold war situation: A cold war of sorts could well be on the cards for some time, hampering a full recovery.
    • It will be brutal in the cyber world — fake news on social media will prevent international cooperation in crucial fields such as scientific research, patents.
    • And this could perhaps even slow down the ability to prevent the next pandemic.

    The crucial role of the US

    • Subject to the US’s economic capability after the pandemic, the ability to find a consensus to put on hold defence spending for the sake of human security will be the key.
    • But the trust deficit between nations will probably hamper this to a great extent.
    • The key anchor of globalisation — the US-China trade relationship — will change even more.
    • China cannot be replaced by the US as a major industrial producer (even for the US market).
    • Other countries or blocs — ASEAN, Bangladesh and India — will all chip in but that will still not be enough.
    • Nor can any country buy as much grain from the US as China does.
    • So, an economic relationship will continue but will be politically fractured as both parties search for alternatives, which don’t exist on a scale that both of them need.

    The growing influence of China

    • China’s recovery is likely to be the fastest.
    • Its ambitious Belt and Road Initiative (BRI) may now go uncontested by the US-led efforts to create alternatives.
    • The Chinese ability to influence politics among smaller nations in Asia and Africa could bring it strategic advantages.
    • But this influence is unlikely to be enough to replace America unless the recession-hit US remains defensively oriented.
    • Potential for conflict: Knowing the US propensity to bounce back, China’s efforts will have to remain energetic and that is where the potential for conflict is likely to rise.
    • Of course, it is not as if the US would abandon its interests for an era of only-inward economic healing.
    • Its eye on the future will remain firmly in place.

    The decline in the credibility of the UN

    • Role of WHO: The UN has lost credibility with the World Health Organisation taking the worst hit any UN agency has suffered in years.
    • Its future is contingent upon how it manages the geopolitical fallout of the pandemic.
    • The sooner it can get the world leaders on board, the better.

    Instability in Iran and Afghanistan

    • The collapse of the economy: Iran has been hit badly and with the US unrelenting on sanctions, its economy could collapse with frightening results as far the Middle East is concerned.
    • The threat for peace in the region: A big nation in instability mode with internal turbulence and leadership challenges could spread greater threats of an undefined kind.
    • The US may abandon Afghanistan with less commitment towards keeping its economy sustainable.
    • Possibility of IS revival: It could be a sure recipe for internal instability, which could see the Islamic State emerge a major player.
    • Russian advantage: Everything in the Middle East points towards Russian advantage and domination.

    Opportunities for India

    • India without recession: Economically hit but probably one of the few nations without a recession, India’s strong central leadership could be a big advantage.
    • International cooperation: Prime Minister Narendra Modi would need to use all his influence to cobble together international cooperation to pull the world from the abyss it could sink into.
    • His credibility is already higher than most international leaders and could spell a leadership role for India not in conflict with China but in cooperation with it.
    • It is India’s established multilateral foreign policy that could eventually come to the assistance of the world.

    Conclusion

    Successful and swift recovery of the world hinges on international cooperation among the nation. This provides India with an opportunity to stitch together international cooperation in dealing with the aftermath of the crisis.

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  • Coronavirus – Health and Governance Issues

    The occasion to revisit the state’s role

    op-ed snap | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

    The role of the state has come in the focus in the corona crisis. This article describes how the dominant role once played by the state declined over time and what implications it has for society. In the next part of the article, need to revisit the political system of the country is emphasised.

    Paradigm shift due to Covid-19

    • We are unlikely to return to pre-coronavirus homeostasis after the war against it is won.
    • No section or sector is going to remain untouched and unaltered by the devastation the novel coronavirus is now unleashing.
    • Its annihilation in the near future is not on the cards.
    • Vaccines are going to be slow in coming; therefore, its taming is not immediate.
    • The second wave of an outbreak is a realistic probability.
    • Unlike the other threats: Unlike other threats to humanity such as global warming and nuclear armageddon, this threat is now, not in the future.
    • It is here simultaneously for everyone, not for someone else and somewhere else; its casualties are around us, not in faraway battlefields or polar regions and coastal areas.
    • No country can rescue another; it is each one fending for itself.

    Possibility of a deep recession in the world

    • If the lockdown continues, the world economy will contract by as much as 6% according to the International Monetary Fund.
    • If it is not extended, the loss of human lives could be of unacceptable proportions.
    • The global community will be fortunate if it does not spiral into depression.
    • Both demand and supply contractions are likely to be severe.
    • They are not going to be short-lived. Political systems, economic architectures and cultural mores are on trial.

    Time to build a new paradigm

    • Work patterns, production and distribution practices are up for
    • Denial and wishing away unpleasant, yet probable, realities by governments, global organisations and public intellectuals will only compound economic, social, political and human costs.
    • Build a new paradigm: We must now be quick in seizing lessons from the present crisis and get ready to embark on measures to build a new paradigm of life, work and governance.

    Role of state in focus once again

    • The enlarged economic role of the state in the aftermath of the Second World War came under major assault since the 1980s.
    • Leaders who asked ‘where is society?’ rode to power on the promise of cutting down the government’s role.
    • Systems that were alternatives to capitalism fell out of favour.
    • Entrepreneurs heading unicorns and ‘soonicorns’ have become the new demigods.
    • Minimum governance became the mantra.
    • India too without much consideration joined this creed.
    • Role of state in focus: But COVID-19 is beginning to challenge the political economy of this creed.
    • Very soon the full scores of the performance of state and non-state actors in the COVID-19 stress test will be available across the globe.
    • The Indian state will also have to give answers as far as its report card is concerned.

    How the state’s role declined in India?

    • India embarked on the path of reducing the role of the state, initially, with such caveats as ‘safety net’ and ‘reform with a human face’.
    • Gradually, those caveats fell by the wayside.
    • The Indian state’s role in health care, education, creation and maintenance of infrastructure and delivery of welfare has shrunk or become nominal, half-hearted, inefficient, and dysfunctional.
    • Of course, it is true that it did not give a great account of itself in these sectors even before the 1991 departure.
    • Disappointment with the dismal performance in its economic and administrative functions in the backdrop of a changing global ideological ecosystem encouraged a sharp de facto downsizing of the Indian state’s role.
    • Acceptance among the upper section of society: Its retreat from vital functions and abdication of its social responsibility have gained acceptance and legitimacy among the articulate upwardly mobile.
    • While retreat and abdication found influential and forceful evangelists, the selective retreat had few advocates.
    • This departure, however, was not vigorously interrogated.
    • Supporters of the departure, on the other hand, had little engagement in giving shape to the new policy.
    • Nor did they worry about calibrating the architecture of the emerging role for the state.
    • As a result, ‘private sector’ became the new holy cow in place of the ‘state sector’.
    • What made matters worse is the culture of a simplistic and shallow discourse of public policy that took hold in civil society.
    • It mindlessly privileges the agenda of corporates. It transacts in the idiom of stock exchanges and international rating agencies.

    Who is affected due to declined role of the state?

    • Today, those who bear the brunt of the consequences of shrunken and unresponsive state are the farmer and farm labour, the migrant worker, the unemployed, those in the unorganised sector, the rural poor, and the small entrepreneur.
    • They are paying the highest price for the necessary but unbearable lockdown.
    • They are either stranded far away from home or confined to their homes with no work and incomes, unsupported by the state.
    • Underfunded public health systems are unable to serve them.
    • But the dominant strand of public discourse is out of its depth. It has no time for these concerns.
    • Worse, this discourse can be gamed from time to time.
    • And the alternative discourse is too feeble to draw the attention of the government to the grave implications of COVID-19 for the weak in our society.

    State’s responsibility towards the marginalised

    • The state’s first responsibility is marginalised.
    • The marginalised are also the crucial part of our economy. They lubricate its wheels and generate demand.
    • Demand-side needs to be revived: Announcing stimulus packages that address the supply side alone without beefing up the demand side will be self-defeating to corporates.
    • Prioritising the needs of corporate entities will lead to convulsions in our body politic in the wake of COVID-19.
    • The state is in danger of forfeiting legitimacy if it does not ensure the survival and revival of the marginalised sections.

    From the Mains perspective,  following points are important to highlight the importance of the state’s role in ensuring the welfare of society and why there is a need to revisit the current system owing to certain problems in it.

    Time to revisit the political economy of the Indian state and its role

    • The country should begin a vigorous discourse on redefining every aspect of its involvement in our collective political, economic and social life.
    • The relation between the state and economy, its role in allocating resources and addressing questions of inequality, its duty to provide basic human needs, the extent of the market’s role in providing services such as health, education, civic amenities needs to be revisited.
    • The responsibility of the state and private enterprise towards deprived sections need urgent attention.
    • Re-examining the political structure: We should re-examine the efficacy of our political structures too.
    • The equation between citizens and government and what its implications are for individual freedom, privacy and national security.
    • Also, the equation between the legislature and executive needs to be re-visited.
    • Financial powers: The balance of administrative and financial power between provinces and the union on the one hand and provinces and local bodies on the other should be reconsidered.
    • Election of the representatives: The way we elect our representatives to legislatures must also come under the lens.
    • The issue of weakened local authorities and enfeebled legislatures need attention.
    • For, they are at the coalface, delivering the state to the citizen.
    • The way legislatures are elected and governments are made and unmade must be scrutinised.
    • Our outrage at the power of big money in our electoral system has not arrested its growth.
    • The role of serving and retired members of higher judiciary ought to be a part of the debate.
    • We had an opportunity for intensive debate when the Justice Venkatachaliah Commission submitted its report in 2002 to review the working of the Constitution.

    Conclusion

    The opportunity that COVID-19 provides should not be squandered and must be utilised to have a fresh look at the various issues regarding our social, economic and political life. And states responsibility towards marginalised.

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

    What explains crude oil prices falling below the $0 mark?

    | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Context

    • Recently US oil markets created history when prices of West Texas Intermediate (WTI), the best quality of crude oil in the world, fell to “minus” $40.32 a barrel in New York.
    • Not only is this the lowest crude oil price ever known the previous lowest was immediately after World War II — but also well below the zero-mark.
    • At this price, the seller would be paying the buyer of crude oil $40 for each barrel that is bought.

    Crude oil price dynamics are undergoing dramatic changes this year. The ongoing pandemic has worsened the situation further. India has ample  opportunities to get benefited from the ongoing situation.

    But how can that be? How did prices fall below zero in the first place? Let us see:

    Global fall in crude oil prices

    • The first thing to understand is that, even before the Covid-19 induced global lockdown, crude oil prices had been falling over the past few months.
    • The reason was straightforward. The price of a commodity falls when supply is more than demand.
    • The global oil pricing is by no stretch an example of a well-functioning competitive market. In fact, it’s seamless operations crucially depend on oil exporters acting in consort.

    OPEC+ failure (earlier)

    • Historically, the OPEC, lead by Saudi Arabia, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand), used to work as a cartel and fix prices in a favourable band.
    • It could bring down prices by increasing oil production and raise prices by cutting production.
    • In the recent past, the OPEC has been working with Russia, as OPEC+, to fix the global prices and supply.
    • This happy accord came to an end as Saudi Arabia and Russia disagreed over the production cuts required to keep prices stable.
    • As a result, OPEC undercutting each other on price while continuing to produce the same quantities of oil.

    What it costs to a country for cutting production

    • The production cut was made worse with the growing spread of Coronavirus, which, in turn, was sharply reducing economic activity and the demand for oil.
    • It must be understood that cutting production or completely shutting down an oil well is a difficult decision because restarting it is both costly and cumbersome.
    • Moreover, if one country cuts production, it risks losing market share if others do not follow suit.

    Demand-supply mismatch got worse

    • By the time the Saudi Arabia and Russia discord was sorted out last week, under pressure from US President, it was possibly too late.
    • Oil-exporting countries decided to cut production by 6 million barrels a day — the highest production cuts — and yet the demand for oil was shrinking by 9 to 10 million barrels a day.
    • This meant that the supply-demand mismatch continued to worsen right through March and April.
    • According to reports, all possible the mismatch resulted in almost all storage capacity being exhausted.

    What led to negative oil prices: Immediate causes

    • The contracts fir this month for WTI, the American crude oil variant, was due to expire. As the deadline came near, prices started plummeting. This was for two broad reasons.
    • There were many oil producers who wanted to get rid of their oil even at unbelievably low prices instead of choosing the other option shutting production.
    • The space to store the oil too got exhausted. Trains and ships, which were typically used to transport oil, too, were used up just for storing oil.
    • They figured that it would be more costly for them to accept the oil delivery, pay for its transportation and then pay for storing it, especially when there is no storage available than to simply take a hit on the contract price.

    Future prospects

    • It is important to note that it was the WTI price for May in the US markets that went so low.
    • Crude Oil prices elsewhere fell but by not so much. Moreover, at least for now, oil prices are pegged at around $20 a barrel.
    • It is likely that this was a one-off event and will not happen as producers are forced to cut back production further.
    • But one cannot rule out such a repeat, with COVID-19 continuing to spread, demand is falling every day.
    • In the end, it would be the demand-supply mismatch (adjusted for how much can be stored away) that will decide the fate of oil prices.

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