Mains level: Paper 3- Trade and settlement of payments in rupee
Context
A number of countries, including India, are now considering the use of other currencies to avoid the U.S. dollar and its hegemonic role in settling international transactions.
Currency hierarchy
For India, currency hierarchy goes back to colonial times when the Indian rupee was virtually linked to the British pound rather than to gold which it earned through exports.
In the post-War period, the neo-colonial currency hierarchy has been clubbed with the continued use, primarily of the U.S. dollar, for the majority of international transactions.
Rupee settlement of trade
In recent times, India has been taking an active interest in having the rupee used for trade and the settlement of payments with other countries, which include Russia, now facing sanctions.
The Reserve Bank of India has recently taken a proactive stand to have rupee settlement of trade (circular dated July 11, 2022).
While options for invoicing in rupees were already legal in terms of Regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016, the current circular aims to operationalise the special Vostro accounts with Russian banks in India, in a bid to promote trade and also gain a better status for the rupee as an international currency.
Opportunities for India
The advantages India is currently seeking in these arrangements include avoidance of transactions in the highly priced dollar which has an exchange value of ₹80, impacting the Indian economy with inflation, capital flight and the drop in foreign exchange reserves by $70 billion since September 2021.
Buying oil with a depreciated ruble, and at discounts, is not only cost-saving but also saves transport time with the use of multi-modal routes using land, sea and air routes.
In addition, India is looking forward to trade expansion in sanctions-affected Russia.
With India having a trade deficit with Russia, which has been around $3.52 billion on average over the last two financial years, India’s opportunities include the possible use, by Russia, of the surpluses in the Vostro rupee account in Russian banks for additional purchases from India.
Past attempts: Attempts to use the rupee for invoicing and trading is, however, not new to India.
A comprehensive bilateral trade and payments agreement was signed by India in 1953 with the Soviet bloc countries.
Challenges
There are quite a few problems that may prevail in implementing the desired rupee payments and avoiding dollar transactions.
Willingness of banks and private parties: Apart from issues that concern an agreed exchange rate between the rupee and the ruble (R-R), two volatile currencies, there is also the question of the willingness of private parties (companies, banks) to accept the rupee for trade and settlements.
If Russia opens its door for exports from India, the ‘R-R’ route may prove attractive for Indian exporters.
Concerns of the US: There are official concerns for reactions, particularly from the U.S., to deals, especially for purchase of the S-400 defence equipment.
Reaction of the Europe: Moreover, the deals between India and Russia, especially on oil, can be considered by the West as ‘indirect back door support’ — as India is importing Russian crude at 30% discount, processing at refineries in Gujarat which include Reliance, and then exporting those to the West.
Trade deficit: There were attempts even before the novel coronavirus pandemic to initiate a clearing account on the BRICS platform.
The quantitative implications indicate a skewed pattern of transactions — with China having most of the trade surplus.
It is a pattern similar to what is happening in India-Russia trade at the moment.
Conclusion
The India-Soviet agreements of the past may provide a clue on how the current ‘R-R’ trade and the problems can be managed by initiating a push for Indian exports to Russia and, of course, avoiding all deals in dollars — benefiting both trade partners and countering, globally, the on-going currency hierarchy.
From UPSC perspective, the following things are important :
Prelims level: Standing Deposit Facility rate
Mains level: Paper 3- Dealing with economically challenging period
Context
In the recent MPC meeting, the policy rate hike was widely expected, more anticipated were the MPC and the RBI Governor’s forward guidance on the trajectory of policy — on both monetary policy and liquidity instruments. So, how do we see monetary policy evolve over the rest of the year and beyond?
Tightening of monetary policy
Repo rate at 5.4 per cent: In its latest meeting, the members of the monetary policy committee voted unanimously to increase the policy repo rate by 50 basis points to 5.4 per cent.
The repo rate was 5.15 per cent in February 2020.
So, in effect, the RBI’s policy has not only been normalised, but has actually tightened compared to the pre-pandemic level.
Even the lower bound of the rate corridor, the Standing Deposit Facility (SDF) rate, at 5.25 per cent is now above the pre-pandemic repo rate.
Forward guidance on stance
The MPS indicated the retaining the policy stance rather than shifting to “neutral”.
This retention of stance might be interpreted as being a bit more hawkish than “neutral”, which implies that rates might be both increased or cut, depending on economic conditions.
Now that policy is largely normalised, the pace of tightening is likely to moderate.
The urgency of aggressive rate hikes and tightening of liquidity has somewhat moderated, although risks remain.
RBI’s research suggests that the “real natural rate” — the rate at which policy is neither loose nor tight – is 0.8-1 per cent.
This operative interest rate is usually the three-month T-bill rate, which in “normal” times averages 10-15 basis points above the repo rate.
Considering that monetary policy is calibrated over a one-year horizon and using the RBI’s inflation forecast of 5 per cent for the first quarter of 2023-24, the “natural” repo rate will be around 5.85 per cent.
Inflation and growth conditions
The RBI’s growth projection for 2022-23 has been retained at 7.2 per cent, with growth frontloaded in the first half.
CPI inflation is still forecast to average 6.7 per cent.
Inflationary pressures are likely to wane in the second half of 2022-23, particularly if the recent drop in industrial metals prices persists over the next few months.
A more or less normal monsoon might help in keeping food prices stable. However, risks remain.
Robust growth prospects: Demand for consumption goods seems to be resilient, enabling some further pass-through of input costs.
Combine this with tight labour markets and rising wage costs in some tech-oriented sectors.
High frequency indicators of economic activity have recovered after some weakness in June.
In addition to resilient demand, there is evidence of a closing of the “output gap”.
Global growth: Global growth and trade are forecast to significantly slow down in 2022 and 2023, largely due to aggressive tightening by G-10 central banks and a slowdown in China.
The IMF predicts global trade volume (both merchandise and services) to slow to 4.1 per cent and 3.2 per cent in 2022 and 2023, down from 10.1 per cent in 2021.
With world growth and trade flows moderating, along with a drop in commodities prices, India’s export growth is likely to be lower than last year.
External financial condition
The current account deficit remains a concern.
India’s external balance sheet remains quite robust, as is evident from various balance of payments and debt metrics, and reportedly low unhedged foreign currency borrowings.
Continued tightening by global central banks, particularly the US Federal Reserve over the rest of 2022, will keep India’s external financial conditions tight and likely limit portfolio capital flows.
However, there are some signs emanating from these central banks that the hitherto front-loaded tightening might moderate going forward.
This will take some pressure off the rupee, though, exchange rate volatility management will remain a part of the overall monetary policy management framework.
Challenge of surplus liquidity
During the earlier phase of policy normalisation and the recent tightening, liquidity management has played an important role in influencing short-term money market interest rates.
The current latent surplus liquidity — the existing funds with banks and the Union government’s unspent revenues parked with RBI — is over Rs 5 lakh crore.
While the extent of liquidity surplus during the Covid months has come down, these levels are still much higher than RBI estimates of non-inflationary levels of surplus, which is around Rs 1.8-2.4 lakh crore.
This will gradually fall with cash withdrawals and some potential RBI dollar sales in the coming months.
Conclusion
The central bank, in coordination with the government, has ensured an orderly evolution of economic conditions during a very complex and challenging environment. The exit process now will also need the same adroit use of policy instruments.
The Reserve Bank of India (RBI) in April 2022 introduced the Standing Deposit Facility (SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75 per cent.
The main purpose of SDF is to reduce the excess liquidity in the system, and control inflation.
In 2018, the amended Section 17 of the RBI Act empowered the Reserve Bank to introduce the SDF – an additional tool for absorbing liquidity without any collateral.
By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.
The SDF is also a financial stability tool in addition to its role in liquidity management.
The SDF replaced the fixed rate reverse repo (FRRR) as the floor of the liquidity adjustment facility corridor.
The SDF rate will be 25 bps below the policy rate (Repo rate), and it will be applicable to overnight deposits at this stage.
It would, however, retain the flexibility to absorb liquidity of longer tenors as and when the need arises, with appropriate pricing.
From UPSC perspective, the following things are important :
Prelims level: WTO waiver
Mains level: Paper 3- Public Stockholding of Food issue at WTO
Context
The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.
Public stockholding issue at WTO
India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.
PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.
Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
The WTO ministerial meeting in June at Geneva did precious little to address this issue.
India’s concerns about the PSH issue have been taken on board.
India’s concerns
For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).
Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
However, there is no mention of price support in the Geneva declaration.
India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.
The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.
However, it is very unlikely that such a request will be acceded to.
As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.
Way forward
Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.
India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.
Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.
Adding newer objectives and shifting goalposts might result in falling between two stools.
Conclusion
Instead of asking for the waiver to export wheat from public stockholding, the laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.
From UPSC perspective, the following things are important :
Prelims level: ONDC
Mains level: Paper 3- Online Dispute Resolution
Context
Despite the rapid advancement of digital platforms on the one hand and the pervasiveness of the Internet-enabled phone on the other, small enterprises such as local kirana stores have not gained from this. Online purchases from “near and now” inventory from the local store remain in a digital vacuum.
Online revolution in country
Increased smartphone use: The rise in smartphone use fuelled by affordable data plans has catalysed an online revolution in the country.
Pandemic accelerated digital inclusion: The novel coronavirus pandemic has further accelerated the process of digital inclusion.
It is now not only routine to transact online it is also common to learn online, have medical consultations online, and even resolve disputes online.
Increased scope for innovation in digital space: These realisations have given India the opportunity to disrupt the status quo with its innovative abilities.
Systems such as the Unique Identification Authority of India (UIDAI) and Aadhaar, the Unified Payments Interface (UPI) and the Ayushman Bharat Digital Mission have reengineered markets.
Why mall and medium sided businesses have not benefited from digital revolution?
Despite the rapid advancement of digital platforms small enterprises such as local kirana stores have not gained from this.
Cost of infrastructure: This is because, to sell on numerous platforms, sellers must maintain a separate infrastructure, which only adds costs and limits participation.
Distinct terms and conditions of platforms: The distinct terms and conditions of each platform further limit the sellers’ flexibility.
Consequently, small and medium-sized businesses have lost their freedom to choose and participate in the country’s e-commerce system at their will and on their terms.
Way forward: Open Network for Digital Commerce
The Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India established the Open Network for Digital Commerce (ONDC) to level the playing field by developing open e-commerce and enabling access to small businesses and dealers.
The ONDC began its pilot in five cities in April 2022, i.e., New Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.
Currently, the pilot has expanded to 18 cities, and there are immediate plans to add more cities.
The ONDC network makes it possible for products and services from all participating e-commerce platforms to be displayed in search results across all network apps.
For instance, a consumer shopping for a product on an e-commerce app named “X” would also receive results from e-commerce app named “Y”, if both X and Y integrated their platforms with the ONDC.
Dispute resolution through ODR
Disputes will be the obvious by-product of this e-commerce revolution.
Therefore, it is imperative to support this initiative with a modern-day, cost-effective, timely and high-speed dispute resolution system.
Online Dispute Resolution, or ODR as it is popularly called, has the propensity to work alongside the incumbent setup and deliver quick, affordable and enforceable outcomes.
The ODR is not restricted to the use of legal mechanisms such as mediation, conciliation and arbitration in an online environment but can be tailormade for the specific use case keeping the participants in mind.
ODR commonly involves case management systems, integration of communication technologies such as email, SMS, WhatsApp, Interactive Voice Response, audio/video conferencing.
With appropriate data sets in place, it can also involve advanced automation, the use of technologies such as artificial intelligence and machine learning to enable resolutions at the same time as it would take to initiate a transaction over the network.
Many e-commerce companies have turned to the ODR with the realisation that in order to maximise transactions it is important to ensure a positive dispute resolution experience.
Adoption in India: The ODR is no more a distant dream for India as well.
The National Payments Corporation of India (NPCI) has mandated platforms in the UPI ecosystem to adopt the ODR for complaints and grievances connected to failed transactions.
Ingram, SEBI SCORES (or the Securities and Exchange Board of India SEBI COm plaints REdress System), RBI CMS (or the Reserve Bank of India Complaint Management System), MahaRERA (or the Maharashtra Real Estate Regulatory Authority), MSME Samadhaan (or the Micro Small and Medium Enterprises Delayed Payment Monitoring System), and RTIOnline (or the Right to Information Online) are other examples of ODR systems that are widely used in the country.
Mitigating litigation risks: The ODR will help mitigate litigation risk and provide valuable insights into problems faced by consumers.
Consumers are provided with another choice for effective redress of their grievances, thereby building trust, confidence and brand loyalty.
Advantages of ONDC
Wider choice for consumers: The ONDC achieves the dual objective of wider choice for consumers on the one hand and access to a wider consumer base for sellers on the other.
With India’s e-commerce industry set to reach $200 billion by 2027, this shift from a platform-centric paradigm to democratisation of the nation’s online market will catalyse the inclusion of millions of small business owners and kirana businesses.
Conclusion
A dispute resolution framework that includes a customised ODR process can play a role in the network achieving its steep five-year target of adding $48 billion in gross merchandise value to India’s e-commerce market, a network of 90 crore buyers and 12 crore sellers with the least hiccups.
From UPSC perspective, the following things are important :
Prelims level: Rivers mentioned
Mains level: India-Bangladesh Relations
India and Bangladesh discussed a wide range of River Water Sharing issues related to the major common rivers such as the Ganga, Teesta and several others during the 38th meeting of the Joint River Commission (JRC).
Rivers between India and Bangladesh
Overall, India and Bangladesh have 54 transboundary rivers between them, all of which are part of the drainage system of the Ganga-Brahmaputra-Meghna (GBM) basin.
The Padma (the Ganga), the Jamuna (the Brahmaputra) and the Meghna (the Barak) and their tributaries are integral in maintaining food and water security in Bangladesh.
In most of these cases, Bangladesh is the lower riparian.
This causes concern in Bangladesh that India—being both the upper riparian and first to develop the water resources—can have far more disproportionate control over the rivers.
Compounded by the lack of transparent data regarding trans-boundary rivers, such concern can lead to a more serious conflict between the two otherwise friendly neighbours.
Genesis of the disputes
The issues between India and Bangladesh regarding water resource allotment can be traced to the time Bangladesh was still East Pakistan.
In 1961, India began construction of the Farakka Barrage—which was to be operational by April 1975—to divert a portion of the dry-season flow and increase the navigability of Kolkata port.
When India began its preliminary planning for the project in 1950-51, Pakistan immediately expressed concerns over the potential effect of the project on East Pakistan.
Moves for disputes resolution: Joint River Commission
Soon after the independence of Bangladesh in 1971, the Joint River Commission was formed between India and Bangladesh in 1972.
In a joint declaration issued on 16 May 1974, the PM of Bangladesh and India acknowledged the need for the flow augmentation of the Ganga in the lean season to meet the requirements of both countries.
Often in news: Teesta River Dispute
The Bangladesh government has been insistent on sealing the Teesta Waters Agreement, which has eluded settlement so far.
Teesta River is a 315 km long river that rises in the eastern Himalayas, flows through the Indian states of Sikkim and West Bengal through Bangladesh and enters the Bay of Bengal.
It is a tributary of the Brahmaputra (known as Jamuna in Bangladesh), flowing through India and Bangladesh.
It originates in the Himalayas near Chunthang, Sikkim and flows to the south through West Bengal before entering Bangladesh.
Originally, it continued southward to empty directly into the Padma River but around 1787 the river changed its course to flow eastward to join the Jamuna river.
The Teesta Barrage dam helps to provide irrigation for the plains between the upper Padma and the Jamuna.
What is the dispute about?
The point of contention between India and Bangladesh is mainly the lean season flow in the Teesta draining into Bangladesh.
The river covers nearly the entire floodplains of Sikkim while draining 2,800 sq km of Bangladesh, governing the lives of hundreds of thousands of people.
For West Bengal, Teesta is equally important, considered the lifeline of half-a-dozen districts in North Bengal.
Bangladesh has sought an “equitable” distribution of Teesta waters from India, on the lines of the Ganga Water Treaty of 1996, but to no avail.
The failure to ink a deal had its fallout on the country’s politics, putting the ruling party of PM Sheikh Hasina in a spot.
Q.The hydrological linkages between India and Bangladesh are a product of geography and a matter of shared history. Discuss this statement in line with the Teesta water-sharing dispute.
The deal
Following a half-hearted deal in 1983, when a nearly equal division of water was proposed, the countries hit a roadblock. The transient agreement could not be implemented.
Talks resumed after the Awami League returned to power in 2008 and the former Indian PM Manmohan Singh visited Dhaka in 2011.
In 2015, PM Modi’s visit to Dhaka generated more ebullient lines: deliberations were underway involving all the stakeholders to conclude the agreement as soon as possible.
Issues from the Indian side
It remains an unfinished project and one of the key stakeholders — West Bengal CM is yet to endorse the deal.
Her objection is connected to “global warming. Many of the glaciers on the Teesta basin have retreated.
The importance of the flow and the seasonal variation of this river is felt during the lean season (from October to April/May) as the average flow is about 500 million cubic metres (MCM) per month.
The CM opposed an arrangement in 2011, by which India would get 42.5% and Bangladesh 37.5% of the water during the lean season, and the plan was shelved.
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: agrarian distress
Context
An agricultural labourer died by suicide every 2 hours in 2021: NCRB
The national catastrophe of farmer suicide since the 1990s, often by drinking pesticides is attributed to their inability to repay loans mostly taken from landlords and banks.
NCRB Stats on Farmers Suicide
Some 5,563 agricultural labourers died by suicide in 2021, according to the latest report of the National Crime Records Bureau (NCRB). The number of suicides increased by nine per cent from 2020 and by around 29 per cent from 2019.
Causes of Farmers Suicide
Non sustainable cropping: Most of the suicides have occurred in areas of cash crops like cotton and sugarcane, which is high input, high output gambling, not based on the principle of sustained and resilient high yield.
Multiple causes: There is no consensus on what the main causes might be but studies show farmer suicide victims are motivated by more than one cause however the primer reasons being the inability to repay loans.
Combined causes: Major causes reportedly are bankruptcy/indebtedness, problems in the families, crop failure, illness and alcohol/substance abuse.
Faulty measures
Low penetration of irrigation: Irrigation reaches less than half of India’s overall farmland, a picture that has not changed much over the past decade, and more than 60% of our farmers are susceptible to rainfall anomalies.
Dry land farming: Rain-fed farming yields are typically less than half those of irrigated farmland.
High input cost: Though India has caught up with global levels of fertilizer use, this is neither efficient nor environmentally sustainable. Both add to the cost of cultivation.
Slow R&D: Research on high-yielding crops has plateaued after an initial burst during the Green Revolution and farmers have to resort to patented seeds to draw more out of their scanty acres.
Information technology promises to improve weather forecasting, crop identification as well as damage control, soil health monitoring, and mapping of available water resources.
Improvements in marketing and logistics can significantly raise the share that cultivators get of the money people pay for their food.
The govt. is using technology to connect farmers to a nationwide e-market, but the states need to amend their antiquated farm produce marketing laws that have squeezed farmers’ earnings.
An old problem of price signals failing to adjust demand and supply may also need fixing.
For agricultural incomes to rise, reforms, rather than cash transfers, loan waivers and the like, are the way ahead.
Conclusion
Along with subsidies, increased farm profits, the focus should also be on resilience building and problem-solving skills of farming families.
In suicide-prone states, agricultural institutes and scientists should start distributing seeds of resilience, tolerance and contentment among farmers, suggested researchers.
Mains question
Q. Despite agricultural growth Indian farmers are committing suicides Discuss the causes and give dynamic way forward to address the issue.
From UPSC perspective, the following things are important :
Prelims level: various schemes for vulnerable section
Mains level: social security, universal basic income
Context
New evidence from two Kenyan counties shows that universal basic income and other income supplements reduce hunger, illness, and risk exposure during crises.
Countries should consider building universal basic income that can be activated at short notice to help people weather unanticipated shocks.
Why in news?
When the COVID-19 pandemic and the resulting recession pushed 120 million people worldwide into extreme poverty in 2020, many countries relied on social-protection measures to cushion the blow.
What is social protection?
Social protection is concerned with preventing, managing, and overcoming situations that adversely affect people’s well-being.
Social protection programs that assist low-income families, insure against shocks, and break poverty traps offer a potential solution.
Universal basic income meaning
Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status.
The purpose of UBI is to prevent or reduce poverty and increase equality among citizens.
Social securityin India includes a variety of statutory insurances and social grant schemes bundled into a formerly complex and fragmented system run by the Indian government.
These are retirement, healthcare, disability, childcare, gratuity and provident fund and insurance programs.
What is insurance simple words?
An agreement by which a person pays a company and the company promises to pay money if the person becomes injured or dies or to pay for the value of property lost or damaged.
Constitutional mandate
The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state.
Interesting fact
India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country.
Ending poverty: Advocates for UBI say that it could help bring everyone’s income above the poverty line.
Discouraging low wages: UBI would give employees enough security to have bargaining power.
Redistributing wealth: The economic growth of high-income countries is making the rich richer, but having very little effect on the working classes.
Case study / value addition
Namibia
Namibia had a basic income pilot program between 2008 and 2009. Every resident of Otjivero-Omitara was entitled to 100 Namibian dollars ($6.75) every month. The program was funded by donors from around the world.
Findings from the pilot program showed that cases of child malnutrition had dropped significantly while school enrollment went up. Also, social crimes such as theft had significantly dropped.
Induce lethargy: UBI removes the incentive to work, adversely affecting the economy and leading to a labour and skills shortage.
Inequity: Universal basic income would be just that: universal. That means that everyone, regardless of how poor, or rich, they were would get the same amount of money.
Huge Cost: The cost of implementing UBI could be huge. In the United States it’s estimated to be about $3.9 trillion per year.
Motivation to work: One concern is that UBI would incite millions of workers to stop working. If people aren’t working, there is less taxable income.
Some government initiatives
National Pension Scheme for Traders and Self Employed Persons.
Pradhan Mantri Suraksha Bima Yojana.
Employees’ State Insurance Scheme.
Minimum Wages for various employment roles.
National Pension System.
Conclusion
One of the major criticisms of poverty alleviation programs is significant leakages. UBI is seen as a more efficient alternative. Though UBI has many advantages, there are many practical challenges too. The idea should be to save costs with better targeting. This will help create the necessary conditions for higher growth which will decisively lift people out of poverty.
Mains question
Q. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. Do you think they are enough? Discuss in context of rising demand for universal basic income and its pros and cons for ensuring social security.
From UPSC perspective, the following things are important :
Prelims level: Special Marriage Act, 1954
Mains level: Issues with inter-faith marriage
The Supreme Court has dismissed a writ petition challenging the Constitutional validity of certain provisions of the Special Marriage Act, 1954 under which couples seek refuge for inter-faith and inter-caste marriages.
What is Special Marriage Act, 1954?
The Special Marriage Act, 1954 (SMA) was enacted to facilitate the marriage of couples professing different faiths, and preferring a civil wedding.
However, some practical problems arise in registering such marriages.
The law’s features on prior public notice being given and objections for the safety and privacy of those intending to marry across religions.
To overcome this, many settle for marriage under the personal law of one of them, with the other opting for religious conversion.
What does the petition seek?
The Supreme Court dismissed a writ petition challenging the Constitutional validity of certain provisions of the SMA under which couples seek refuge for inter-faith and inter-caste marriages.
The writ petition has called these provisions violative of Article 21, which guarantees the right to privacy.
Under this act, the couples require to give a notice of 30 days before the date of marriage inviting objections from the public.
The provisions contravene Article 14 on prohibition of discrimination on grounds of religion, race, caste and sex as well as Article 15 on right to equality as these requirements are absent in personal laws.
What did the court say?
The SC Bench rejected the writ petition on the grounds that the petitioner was no longer an aggrieved party as she had already solemnised her marriage under SMA.
The petitioner’s lawyers said that they were now deliberating on an alternative approach to initiate this litigation such as through a public interest litigation involving other victims.
Another writ petition is admitted by the Supreme Court in 2020 and the government’s reply to is awaited.
What are the provisions that have been challenged?
Section 5 of the SMA requires couples getting married under it to give a notice to the Marriage Officer 30 days before the date of marriage.
Section 6 requires such a notice to be then entered into the Marriage Notice Book maintained by the Marriage Officer, which can be inspected by any person desirous of inspecting the same.
These notices have to be also affixed at a “conspicuous place” in the office of the Marriage Officer so that anyone can raise an objection to the marriage.
Section 7 provides the process for making an objection such as if either party has a living spouse, is incapable of giving consent due to “unsoundness of mind” or is suffering from mental disorder resulting in the person being unfit for marriage or procreation.
Section 8 specifies the inquiry procedure to be followed after an objection has been submitted.
Why are these provisions contentious?
The provisions throw the personal information of the individuals open to public scrutiny. This may result into vigilantism.
This seriously damages one’s right to have control over her or his personal information and its accessibility.
By making the personal details of the couple accessible to everyone, the very right of the couple to be the decision makers of their marriage is being hampered by the state.
How do these provisions make couples vulnerable?
These public notices have been used by anti-social elements to harass couples getting married.
For many who often marry without their parent’s consent this can be life-threatening.
Many states publicly share the details of couples marrying under SMA on their websites.
Many also complain about the behaviour of the staff at the SDM’s office who often delete or delay applications and dissuade couples from marrying under SMA.
With as many as 11 States passing anti-conversion (or so-called love-jihad) laws, parents and the State are now armed to punish and harass such couples.
From UPSC perspective, the following things are important :
Prelims level: Labour codes
Mains level: Not Much
Addressing to the National Labour Conference, Prime Minister said that the Centre had taken initiatives to abolish laws from “the period of slavery” that reflected a slavery mentality through the Labour Codes.
New Labour Codes
The four codes likely to be implemented in FY23 are:
Code on Wages
Industrial Relations Code
Social Security Code, and
Occupational Safety, Health and Working Conditions Code
Objectives of the Labour Code
The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.
What is the current status of the codes?
The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.
How many labour laws do Indian states have?
The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.
What are the major reforms in these codes?
Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
Four days work: There could also be a permissible four-day work week of 12 hours per day.
How will it affect ease of doing business?
Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.
| Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth
Note4Students
From UPSC perspective, the following things are important :
Prelims level: EODB
Mains level: EODB in India
Ease of doing business in India remains low, dragged down by the way contracts are enforced in the country. Recent reforms have improved the business climate somewhat, but there is a long way to go.
What is the Ease of Doing Business index?
It is an index designed by the World Bank to rank 190 economies.
A higher rank (closer to 1) means the country’s regulatory environment is favourable to business operations.
India was ranked 63rd in the overall index in 2020.
World Bank has now discontinued the Doing Business index.
Indicators used
The ranking is calculated on the basis of indicators such as:
Starting a Business
Dealing with Construction Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Minority Investors, Paying Taxes
Trading across Borders
Enforcing Contracts and
Resolving Insolvency
How is ‘Enforcing Contracts’ measured?
In 2020, in the parameter of ‘Enforcing Contracts’, India was ranked 163rd, against 186th in 2015. The parameter considers time, cost and quality of the judicial process.
Time considers the number of days to resolve a commercial dispute in courts;
Cost measures the expenses of attorney, courts and enforcement as a percentage of claim value; and
Quality considers the use of best practices which can promote efficiency and quality i.e., court proceedings, case management, alternative dispute resolution and court automation.
Each of the three indicators have a 33.3% weightage.
How is India doing on this parameter now?
At 163rd position in 2020, the country continues to struggle, with the time taken to resolve a commercial dispute being approximately 1,445 days in the Doing Business Report 2020.
However, as of August 2022, law ministry data shows a marked improvement of close to 50% in days taken to resolve a dispute to 744 days in New Delhi and 626 days in Mumbai.
What are some of the reforms undertaken?
The Department of Justice, the nodal point for ‘Enforcing Contracts’ indicator along with the eCommittee of the Supreme Court, has undertaken a series of reforms.
Some of the steps include the establishment of dedicated commercial courts with monetary jurisdiction up to ₹3 lakh.
There also exists online case filing, e-payment of court fees, electronic case management, special courts for infrastructure project contracts, as well as automatic and random allocation of commercial cases thereby eliminating human intervention.
What further steps are required?
An efficient judiciary instils confidence in investors and signals the commercial viability of transactions.
The number of court hearingsshould be minimized too; often, lawyers have an incentive to stretch out the process.
The judicial system should encourage out-of-court settlements through the respective lawyers as practised in advanced countries.
It is equally important that the judiciary leaves matters relating to economic governance to governments.
| Agriculture | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth
Note4Students
From UPSC perspective, the following things are important :
Prelims level: One Nation One Fertiliser (ONOF)
Mains level: India's fertilizer subsidy
The Ministry of Chemicals and Fertilisers will implement One Nation One Fertiliser (ONOF) by introducing a Single Brand for Fertilisers and Logo under the fertiliser subsidy scheme named “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP).
One Nation One Fertiliser (ONOF)
The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertiliser Companies, State Trading Entities (STEs) and Fertiliser Marketing Entities (FMEs).
Also a logo indicating Fertiliser subsidy scheme namely Pradhanmantri Bhartiya Janurvarak Pariyojna will be used on said fertiliser bags.
Under the scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.
On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown.
What is the government’s argument for introducing this scheme?
The government’s logic for introducing a single ‘Bharat’ brand for all subsidised fertilisers being marketed by companies is as follows:
(1) Subsidies normalization
The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them.
The MRPs of non-urea fertilisers are, on paper, decontrolled.
But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government.
Simply put, there are some 26 fertilisers (inclusive of urea), on which government bears subsidy and also effectively decides the MRPs;
(2) Harmonizing markets
Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell.
This is done through the Fertiliser (Movement) Control Order, 1973.
Under this, the department of fertilisers draws an agreed monthly supply plan on all subsidised fertilisers in consultation with manufacturers and importers.
This supply plan is issued before the 25th of each month for the following month, with the department also regularly monitoring movement to ensure fertiliser availability as per requirement, including remote areas.
(3) Farmers welfare
The government is spending vast sums of money on fertiliser subsidy (the bill is likely to cross Rs 200,000 crore in 2022-23).
By deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.
What can be the drawbacks of the scheme?
It may disincentivise fertiliser companies from undertaking marketing and brand promotion activities.
They will now be reduced to contract manufacturers and importers for the government. Any company’s strength ultimately is its brands and farmer trust built over decades.
Currently, in case of any bag or batch of fertilisers not meeting the required standards, the blame is put on the company. But now, that may be passed on fully to the government.
Politically, the scheme might well boomerang rather than benefit the ruling party.
From UPSC perspective, the following things are important :
Prelims level: NCRB
Mains level: Crime in India
A new edition of ‘Crime in India’, the annual report of the National Crime Records Bureau (NCRB), was released on August 29, for crime-related statistics in 2021.
Why in news?
NCRB reports have been a valuable compilation of statistics over the years on offences ranging from crimes against women to economic and financial crimes.
It has provided honest and credible sets of crime related data in India.
Crime in India: Key highlights
Overall, 2021 saw a 6 per cent decline in the number of crimes registered, as compared to 2020.
The crime rate per lakh population declined from 487.8 in 2020 to 445.9 in 2021.
However, crime statistics do not always tell the full story, and lower crimes reported in an area do not necessarily mean it is safe.
Crimes against women rose 15 per cent in India in 2021 and Delhi is the most unsafe metropolitan city.
Rajasthan reported the highest number of rape cases and Maharashtra topped the list when it comes to most suicides.
Around 1.73 lakh people died in traffic accidents. Uttar Pradesh saw the highest number of deaths (24,711) in traffic accidents.
Of the total 814 cases under the UAPA in India, J&K lodged 289 cases last year, followed by Manipur (157), Assam (95), Jharkhand (86) and Uttar Pradesh (83).
Jharkhand and Maharashtra filed the highest cases of communal riots last year with 100 and 77 cases respectively.
Who publishes the NCRB report?
The NCRB was established in January 1986 with the aim of establishing a body to compile and keep records of data on crime.
It functions under the Union Home Ministry.
Apart from publishing annual reports, its functions include “Collection, coordination and exchange of information on inter-state and international criminals to the respective states”.
NCRB also acts as a “national warehouse” for the fingerprint records of Indian and foreign criminals, and assists in locating interstate criminals through fingerprint search.
How does the NCRB collect information for its report?
The NCRB report contains data received from the 36 states and Union Territories across the country.
Similar data is furnished for 53 metropolitan cities, or those having a population of more than 10 lakh as per the 2011 census, by respective state-level crime records bureaus.
This information is entered by state/UT police at the police station/ district level, and is then validated further at the district level, then the state level, and finally by the NCRB.
Issues with NCRB data
By its own admission, the NCRB says there are limitations to its data.
Since the publication caters to the ‘Principal Offence Rule’ for classification of crime, the actual count of each crime head may go under-reporting.
The Principal Offence Rule states that in a case where multiple offences are registered, only the “most heinous crime”, carrying the most stringent punishment, is considered when counting.
For example, ‘Murder with Rape’ is accounted as ‘Murder’, leading to undercounting of the crime of rape.
Vacancies or a shortage of police officers at the local level may hinder the collection of data.
Also the data record the incidence of registered crime rather than of actual crime.
Antithesis to NCRB data
Reported crimes against women in Delhi rose significantly in the aftermath of the 2012 Nirbhaya Gangrape case.
This is not because the heinous crimes got trivialized.
It may have been a reflection of increased awareness about the need for registering crimes, both among those affected and the police, rather than an actual increase in the incidence of crime against women.
From UPSC perspective, the following things are important :
Prelims level: PARAKH
Mains level: Harmonization of school education in India
The Centre is planning to draw up a benchmark framework ‘PARAKH’ to assess students at the secondary and higher secondary level to bring about “uniformity” across state and central boards.
What is PARAKH?
PARAKH stands for Performance Assessment, Review and Analysis of Knowledge for Holistic Development.
The proposed regulator will act as a constituent unit of the NCERT.
It will also be tasked with holding periodic learning outcome tests like the National Achievement Survey (NAS) and State Achievement Surveys.
The benchmark assessment framework will seek to put an end to the emphasis on rote learning, as envisaged by the National Education Policy (NEP) 2020.
PARAKH, the proposed implementing agency, is also part of the NEP proposal.
Response form States
Most states endorsed the proposal to hold board exams twice a year, including one for helping students improve their scores.
States are also on board regarding a proposal to offer two types of papers on mathematics — a standard exam, and another to test higher level competency.
It will help reduce the fear of maths among students and encourage learning.
Significance of PARAKH
PARAKH will help tackle the problem of students of some state boards being at a disadvantage during college admissions as compared to their peers in CBSE schools.
It will develop and implement “technical standards for the design, conduct, analysis and reporting” of tests at all levels of school education.
PARAKH will eventually become the national single-window source for all assessment related information and expertise, with a mandate to support learning assessment in all forms, both nationally and where applicable, internationally.
From UPSC perspective, the following things are important :
Prelims level: particulars of G20
Mains level: global governance
Context
India’s presidency of the G20 grouping next year arguably the sole remaining effective forum for global governance presents an enormous opportunity to accelerate sustainable growth within India, in the emerging world, and beyond.
Stability: The Group was formed with an aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
Fiscal responsibilities: The forum aims to pre-empt balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
Universal Support: The forum seeks to address issues that go beyond the responsibilities of any one organisation.
Indian business and industry is becoming a noteworthy competitor globally.
The country’s domestic economy is starting to pick up, thanks to structural economic reforms.
The central government is economically stronger, and the states are starting to learn about economic independence, making them more aligned with their global counterparts.
Punchline
It is said that “those who hold the pen, write the rules”.
The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance.
Issues and Challenges
India need to have a clear global financial agenda.
The country should also have the capacity to lead the G20 year intellectually, financially, managerially and administratively.
Geopolitically, India is more internationally engaged but less so geoeconomically.
Its narrow focus is on the World Bank, IMF, WTO and foreign investment issues.
But India has much to contribute on issues like reconfiguration of global financial regulations, design of a new framework for trade in services and the digital economy and establishing better cross-border standards for transparency in financial flows.
To make its G20 year a success, India has to address organisational challenges, where the country has an infrastructure, management and intellectual gap.
What could India bring to the table?
Mediation: Firstly, it remains pertinent for the world that escalating tensions between Russia and Ukraine come to a halt. Maintaining its balanced stance, India needs to neutralise this situation by introducing peace talks between the two nations.
Open trade: It’s about time for India to raise its voice in support of a transparent New Economic Order and building a prosperous and just world. Unreasonable bans on certain commodities from various countries limits commerce between states when trade liberty exists.
Collaboration around science and technology: The global agenda has been tilted towards investment, whereas science and technology are the driving force for economic diversification, sustainably urbanising the world, and ushering the hydrogen economy and new crop varieties as the answer to both human well-being and global climate change.
Redefining digital access as universal service: Harnessing the potential of the digital-information-technology revolution requires redefining digital access as a “universal service” that goes beyond physical connectivity to sharing specific opportunities available.
Conclusion
India’s presidency must leave the grouping with the agility and energy to respond to new realities, and it must create a future-ready multilateralism through a novel and robust institutional architecture.
Mains question
Q. It is said that “those who hold the pen, write the rules”. The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance. Discuss in the context of India’s presidency of G20 summit with challenges and opportunities ahead.
From UPSC perspective, the following things are important :
Prelims level: Cryptocurrency
Mains level: Money laundering
Money laundering is one of the key charges made by the Enforcement Directorate (ED) against crypto exchange WazirX.
Also a leader in Maharashtra has made ridiculous claim after ED inquiry that he has made Rs.15 Lakh by investing only Rs.5000 in crypto.
Are Blockchains traceable?
Transactions on a blockchain are always traceable.
Most courts and law enforcement bodies around the world have recognized their immutable nature and accept blockchain records as legal proof of transaction histories.
However, crypto transactions can sometimes happen “off-chain”, or other methods can be used to obfuscate the flow of funds.
Moreover, blockchains are like conveyor belts, which facilitate the flow of crypto from one wallet to another.
The identity of the person who holds that wallet has to be ascertained by the wallet service provider and this is often not done to protect user privacy.
How do they hide transaction trails?
One of the most common methods used by hackers and criminals, is called mixing or tumbler.
As each crypto token is traceable, tumblers break down multiple tokens from different blockchains and mix them.
They then transfer the original amount to the owner, but through multiple transactions and from multiple wallets, obfuscating the trail.
Illicit users also transfer traceable tokens to privacy-centric blockchains such as Monero, which hide wallet addresses and particulars.
There are also over-the-counter brokers who accept payments in any form, including cash, and transfer the equivalent amount in crypto to a user’s wallet.
What has ED accused Binance and WazirX of?
Among other things, the ED claims that WazirX’s holding company is offering “contradictory and ambiguous answers” about crypto-to-crypto transactions made on WazirX.
The ED said WazirX had failed to provide data and show transactions on its blockchain for purchases made by numerous under-investigation fintech firms.
How do off-chain transactions work?
When users withdraw crypto from an exchange, they enter a wallet address and the tokens are transferred, with a record being maintained on the blockchain.
However, they also have to pay a gas fee, which is used to pay miners on the blockchain.
To avoid this fee, two platforms can integrate with each other and allow users to transfer crypto without using the blockchain.
Such transactions can raise questions regarding the tracing of money, as the records aren’t maintained on the blockchain.
How can exchanges prevent laundering?
Exchanges could adopt a resolution on KYC data and maintain transaction logs for eight to 10 years on a blockchain, said industry stakeholders.
The use of KYC-compliant wallets could help add a layer of traceability.
However, KYC norms for wallets held on platforms outside India can differ from those in India.
Some blockchain research firms are also working on machine learning-based tools that can flag illicit accounts.
Back2Basics: Cryptocurrency
Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions.
It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments.
Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions.
When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today.
Much of the interest in cryptocurrencies is to trade for profit, with speculators at times driving prices skyward.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.
Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future.
Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
From UPSC perspective, the following things are important :
Prelims level: hambantota, trinconmalee projects
Mains level: indo srilanka bilateral relations
Context
The present economic crisis in Sri Lanka has pushed it closer to India for immediate relief.
Reasons for the Crisis
The first wave of the pandemic in 2020 offered early and sure signs of distress.
In-migration: Thousands of Sri Lankan laborers in West Asian countries were left stranded and returned jobless.
Shut-down: Garment factories and tea estates could not function, as infections raged in clusters. Tourism sector to saw a big dip.
Domestic job losses: Thousands of youth lost their jobs in cities as establishments abruptly sacked them or shut down.
Forex decline: It meant that all key foreign exchange earning sectors, such as exports and remittances, along with tourism, were brutally hit.
Reasons behind crisis
The Easter bomb blasts of April 2019 in churches in Colombo resulting in 253 casualties,consequently, dropped the number of tourists sharply leading to a decline in foreign exchange reserves.
The newly led government by Gotabaya Rajapaksa in 2019 promised lower tax rates and wide-ranging SoPs for farmers during their campaign.
No strategy: The lack of a comprehensive strategy to respond to the crisis then was coupled with certain policy decisions last year.
Ill-advised policies: It included the government’s abrupt switch to organic farming —widely deemed “ill-advised”, further aggravated the problem.
Food hoarding: The government declared emergency regulations for the distribution of essential food items. It put wide import restrictions to save dollars which in turn led to consequent market irregularities and reported hoarding.
Continuous borrowing: Fears of a sovereign default rose by the end of 2021, with the country’s foreign reserves plummeting to $1.6 billion, and deadlines for repaying external loans looming.
Brief background of India-SL relations
India is the only neighbor of Sri Lanka, separated by the Palk Strait; both nations occupy a strategic position in South Asia and have sought to build a common security umbrella in the Indian Ocean.
There are deep racial and cultural links between the two countries. Both share a maritime border.
The India- SL relations have been however tested by the Sri Lankan Civil War and by the controversy of Indian intervention during the war.
In recent years Sri Lanka has moved closer to China, especially in terms of naval agreements.
India has signed a nuclear energy deal to improve relations and made a nuclear energy pact with Sri Lanka in 2015.
India’s role in the Lankan Civil War
In the 1970s–1980s, the RAW and the state government of Tamil Nadu were believed to be encouraging the funding and training for the Liberation Tigers of Tamil Eelam (LTTE), a separatist insurgent force.
In 1987, faced with growing anger amongst its own Tamils, and a flood of refugees India intervened directly in the conflict for the first time.
This was after the Sri Lankan government attempted to regain control of the northern Jaffna region by means of an economic blockade and military assaults; India supplied food and medicine by air and sea.
Why did India intervene?
Indian intervention in Sri Lankan civil war became inevitable as that civil war threatened India’s unity, national interest and territorial integrity.
Outcomes
The peace accord assigned a certain degree of regional autonomy in the Tamil areas with a body controlling the regional council and called for the Tamil militant groups to lay down their arms.
Further India was to send a peacekeeping force, named the IPKF to Sri Lanka to enforce the disarmament and to watch over the regional council.
The accord failed over the issue of representations. The result was that the LTTE now found itself engaged in military conflict with the Indian Army.
Areas of cooperation
(1) Political Relations
Regular Exchange: Political relations between the two countries have been marked by high-level exchanges of visits at regular intervals.
Bilateral Cooperation: A joint statement covering all areas of bilateral cooperation, titled ‘MitratvaMaga’ was issued following the Virtual Summit of 2020.
(2) Commercial Relations
ISFTA: The India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade in areas such as infrastructure, connectivity, transportation, housing, health, livelihood and rehabilitation, education, and industrial development.
Trading Partner: India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC.
In 2020, India was Sri Lanka’s 2nd largest trading partner with the bilateral merchandise trade amounting to about USD $ 3.6 billion.
India and Sri Lanka are member nations of several regional and multilateral organizations such as the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Unionand BIMSTEC.
India is Sri Lanka’s third-largest export destination, after the US and UK.
Exports: Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force.
FDI: India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to BoI, FDI from India amounted to about US$ 1.7 billion during the period 2005 to 2019.
(3) Development Cooperation
Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion.
Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
Emergency Ambulance Service: The Service which was initially launched in July 2016 is now expanded to all the Provinces.
At a total cost of more than USD 22.5 million, close to 300 ambulances were provided by GOI under this project.
Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.
(4) Projects under Lines of Credit
Sectors: 11 Lines of credit (LOC) have been extended to Sri Lanka by the Export Import Bank of India in the last 15 years.
Important sectors under these LOCs include: Railway, transport, connectivity, defense, solar.
Infrastructure: Some important Projects completed are- supply of defense equipments; up-gradation of the railway line from Colombo to Matara; track laying by IRCON on Omanthai-Pallai sector; reconstruction of the Railway line; signaling and telecommunication system; supply of engine kits for buses, diesel locomotives railways, DMUs, Carrier and fuel tank wagons etc.
Rehabilitation: A project for the rehabilitation of the Kankesanthurai harbor is being executed under a LOC of USD 45.27 million, bringing immense economic benefits to the Northern region of Sri Lanka.
Solar Energy: A US$ 100 million LoC for undertaking solar projects in Sri Lanka has been signed for rooftop solar units for Government buildings, rooftop solar units for low-income families and a floating solar power plant.
Security: In 2019, a LOC of USD 400 million for development and infrastructure projects and USD 50 million for security and counter-terrorism were announced.
These LOC Agreements are currently under discussion.
(5) Cultural relations
India and Sri Lanka have a shared legacy of historical, cultural, religious, spiritual and linguistic ties that is more than 2,500 years old.
In contemporary times, the Cultural Cooperation Agreement signed by the Government of India and the Government forms the basis for periodic Cultural Exchange Programmes between the two countries.
(6) People-to-people ties: Buddhism
Buddhism is one of the strongest pillars connecting the two nations and civilizations from the time when Emperor Ashoka sent his children Arhat Mahinda and Sangamitta to spread the teachings of Lord Buddha at the request of King Devanampiya Tissa of Sri Lanka.
Underlining the deep people-to-people connect and shared Buddhist heritage, the venerated relics of Lord Buddha from Kapilawasthu discovered in 1970 in India have been exhibited two times in Sri Lanka.
India in 2020, announced USD 15 million grant assistance for the protection and promotion of Buddhist ties between India and Sri Lanka.
It may be utilized for the construction/renovation of Buddhist monasteries, education of young monks, strengthening engagement of Buddhist scholars and clergy, development of Buddhist heritage museums, etc.
Transport- In July 2020, the GoI declared the Kushinagar Airport in India, the place of Lord Buddha’s Mahaparinibbana, as an international airport, to allow Buddhist pilgrims from around the world to visit the revered site associated with Lord Buddha with ease.
The Swami Vivekananda Cultural Centre (SVCC)– since its inception in 1998, is actively promoting awareness of Indian culture by offering classes in Bharatnatyam, Kathak, Hindustani and Carnatic vocal, Violin, Sitar, Tabla, Hindi and Yoga.
(7) Tourism
e-Visa- Tourism also forms an important link between India and Sri Lanka. GoI formally launched the e-Tourist Visa (eTV) scheme for Sri Lankan tourists on 14 April 2015.
Visa Fee- Subsequently, in a goodwill gesture, the visa fee for eTV was sharply reduced. In 2019, out of the total 1.91 million tourists, 355,000 tourists arrived from India.
Sri Lankan tourists too are among the top ten sources for the Indian tourism market.
Visa on arrival- On 24 July 2019 Sri Lanka included India in the free visa on arrival scheme and commenced the scheme on 1 August 2019.
Plummeting relations
The ties began to worsen between the two since February, 2021 when Sri Lanka backed out from a tripartite partnership with India and Japan for its East Container Terminal Project at the Colombo Port, citing domestic issues.
However, later, the West Coast Terminal was offered under a public private partnership arrangement to Adani Ports and Special Economic Zones Ltd.
Sri Lanka in a state of economic emergency: Sri Lanka is running out of foreign exchange reserves for essential imports like food. It has recently declared a state of economic emergency.
Covid Impact:
Sri Lanka increased policy rates after the covid pandemic in response to rising inflation in August 2021 caused by currency depreciation.
Tourism sector has suffered since the Easter Sunday terror attacks of 2019, followed by the pandemic.
Earnings fell from $3.6 billion in 2019 to $0.7 billion in 2020, even as FDI inflows halved from $1.2 billion to $670 million over the same period.
Sri Lanka’s fragile liquidity situation has put it at high risk of debt distress. Its public debt-to-GDP ratio was at 109.7% in 2020, and its gross financing needs remain high at 18% of GDP.
Its gross official reserves slipped to $2.8 billion, which is equivalent to just 1.8 months of imports. More than $2.7 billion of foreign currency debt will be due in the next two years.
Major outstanding issues
1. Fishing disputes
There have been several alleged incidents of Sri Lankan Navy personnel firing on Indian fishermen fishing in the Palk Strait, where India and Sri Lanka are only separated by 12 nautical miles.
The issue started because of Indian fishermen having used mechanized trawlers, which deprived the Sri Lankan fishermen (including Tamils) of their catch and damaged their fishing boats.
The Sri Lankan government wants India to ban use of mechanized trawlers in the Palk Strait region, and negotiations on this subject are undergoing.
So far, no concrete agreement has been reached since India favors regulating these trawlers instead of banning them altogether.
2.Alleged political interference
A media report from Colombo soon after Rajapaksa’s defeat in the January 8 elections of 2015 had said that an Indian Intelligence official was instrumental in uniting rival political parties — the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP) — against him during the polls.
In October 2018, President Sirisena alleged that Indian intelligence agencies were plotting his assassination.
3.Katchatheevu Island
It is an uninhabited island that India ceded to Sri Lanka in 1974 based on a conditional agreement called “Kachchativu island pact”.
Later on, Sri Lanka declared Katchatheevu, a sacred land given the presence of a Catholic shrine.
But Tamil Nadu claimed that Katchatheevu falls under the Indian Territory and Tamil fishermen have traditionally believed that it belongs to them and therefore want to preserve the right to fish there.
4.China factor
Sri Lanka has a history of taking independent decisions even if they cause misgivings in India.
In the period of low profile relationship between the two nations, Sri Lanka apparently started favoring China over India.
China is Sri Lanka’s largest bilateral creditor: China’s loans to the Sri Lankan public sector amounted to 15% of the central government’s external debt, making China the largest bilateral creditor to the country.
Sri Lanka has increasingly relied on Chinese credit to address its foreign debt burden.
China’s Exports surpasses India: China’s exports to Sri Lanka surpassed those of India in 2020 and stood at $3.8 billion.
India’s exports were $3.2 billion.
Infrastructural Investment by China: Owing to Sri Lanka’s strategic location at the intersection of major shipping routes, China’s investment stands at $12 billion between 2006 and 2019.
Unable to service its debt, in 2017, Sri Lanka lost the unviable Hambantota port to China for a 99-year lease.
Sri Lanka passed the Colombo Port City Economic Commission Act, which provides for establishing a special economic zone around the port and also a new economic commission, to be funded by China.
The Colombo port is crucial for India as it handles 60% of India’s trans-shipment cargo.
Why is Sri Lanka important to India?
India is Sri Lanka’s closest neighbor. Both sides have built upon a legacy of intellectual, cultural, religious and linguistic interaction.
Sri Lanka has always been politically and economically important to India given its strategic geographical position in the Indian Ocean. The relationship has been marked by close contacts at all levels.
Sri Lanka sits at the epicenter of the arc connecting the Persian Gulf to the Strait of Malacca. An island nation with an economy that’s mainly reliant on tourism and tea exports, Sri Lanka’s blessed geography puts it at a crucial juncture of the busy shipping lanes of the Indian Ocean.
India also has a vital strategic stake in Sri Lanka for its own security interests. An unfriendly Sri Lanka or a Sri Lanka under influence of a power unfriendly to India would strategically discomfit India.
For the Indian Navy, Sri Lanka is important as the switching of naval fleets from the Bay of Bengal to the Arabian Sea and vice versa requires the fleets to go around the island nation.
Both countries share a common broad understanding on major issues of international interest and experience common social-political problems relating to community divides.
How India has helped to boost Sri Lanka’s economy
Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion. Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.
Impact of recent Economic crisis on India
Export:
Sri Lanka’s share in India’s total exports has declined from 2.16 percent in FY15 to just 1.3 percent in the first 10 months of FY22.
Shipping:
If the current situation in the island nation persists, it could cause a major disruption to the normal functioning of the Colombo Port.
This would be detrimental to India’s interest.
The port handles over 30 percent of India’s container traffic and 60 percent of its trans-shipment.
Investments:
India has had a substantial investment in Sri Lanka in areas including real estate, manufacturing, and petroleum refining. They all might be adversely affected if the crisis continued.
Migration:
Also, the continuing Sri Lankan crisis could compel many Sri Lankans to leave for India for their survival.
Already, scores of them have fled from the island nation to India.
Opportunities for India for deeper engagement
Dairy sector: Sri Lanka imports a considerable quantity of milk powder. On average, Colombo annually imports dairy products worth $315 million. . India can help Sri Lanka develop its dairy sector.
Poultry sector: In this area, through its host of agricultural universities, India can share its knowledge on ways to increase both production and productivity.
Energy sector: Considering how the problem on the energy front exploded into a major political crisis in Sri Lanka, India’s participation in energy projects will be desirable.
Education sector: School education is another area where India’s presence could be more felt. India can expand its scheme of establishing smart classrooms and modern computer labs to cover all those institutions teaching children of hill country Tamils, the most underprivileged section in society.
Challenges
Possibility of greater economic collaboration: Whether this bonhomie can lead to greater economic collaboration between Sri Lanka and south India, not necessarily Tamil Nadu alone, given the historical baggage, is anybody’s guess.
Baggage of history: Some sections of the Sinhalese still hold the view that India had been a threat to them and it can still be a threat to them.
Modest investment in development: Despite India’s open willingness to take part in the development of Sri Lanka after the civil war, the scale of its involvement has been modest.
Incomplete projects due to lack of political will: After the cancellation of the tripartite agreement, India was later provided with projects such as the West Container Terminal, the Trincomalee oil tank farm and a couple of renewable projects, there were several proposals that envisaged India’s participation but did not see the light of day.
Way forward
Infrastructure development: Even now, there is enormous scope for collaboration between the two countries in the area of infrastructure development.
Cross-border energy trade: The economic crisis has revived talk of linking Sri Lanka’s electricity grid with that of India.
Facilitating people-to-people interaction: The apprehension in the minds of sections of the Sinhalese majority about India being a threat can be dispelled only by facilitating greater people-to-people interaction, including pilgrimages by monks and other sections of society to places of Buddhist importance not only in north India but also in the south (Andhra Pradesh).
No china factor indeed: Labeling governments in Sri Lanka as “pro-China” or “pro-India” is irrelevant. It is evident that China’s economic and strategic salience in the subcontinent is not tied to the regime leadership. Previous Lankan President Maithripala Sirisena who considered as pro-India came to power criticizing the Chinese projects in Sri Lanka, but within two years into power, it extended full backing to the Chinese projects.
Conclusion
Given the history of bilateral ties, instances such as the Hambantota controversy are bound to arise. But what should not be glossed over is that a politically and economically stable Sri Lanka will be in India’s interest too.
Mains question
Q. There is no such thing as charity in international politics. Critically analyse this statement showing how India can reap benefits of economic cooperation with Sri Lanka.
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Social security,Populist measures.
Context
‘Revdi Culture’ (sweet) or Govt’s Basic Responsibility? What Prioritising Welfare Is Really About
While hearing a petition demanding the de-recognition of political parties that promise “irrational freebies” to voters, the Supreme Court recently drew attention to the substantial fiscal cost of freebies.
What are freebies?
A freebie is any public policy intervention that will have a long-term impact on production as well as productivity.
Any public policy intervention that doesn’t support medium-term to long-term production and productivity may be termed as a freebie.
The term Freebies is not new; rather it is a prevalent culture in Indian politics (in the name of socialism).
The political parties are always trying to outdo each other in luring the Indian voters with
Examples of freebies
Promise of Rs 15 lakh in our bank accounts
Free TV, Laptops
Free electricity
Loan waivers
Offering free public transport ride to all women in Delhi
Why are such policies popular among the public?
Failure of economic policies: The answer lies in the utter failure of our economic policies to create decent livelihood for a vast majority of Indians.
Quest for decent livelihood: The already low income had to be reoriented towards spending a disproportionately higher amount on education and health, from which, the state increasingly withdrew.
Prevailing unemployment: Employment surveys have shown that employment growth initially slowed down from the 1990s, and then has turned negative over the past few years.
Increased cost of living: Real income growth of the marginal sections has actually slowed down since 1991 reforms.
Increased consumerism: The poor today also spend on things which appear to be luxuries; cellphones and data-packs are two such examples which are shown as signs of India’s increased affluence.
Thin line between freebie and public welfare
Using freebies to lure voters is not good.
Voter’s greediness may lead to a problem in choosing a good leader.
When we don’t have a good leader then democracy will be a mockery.
Negative implications
Never ending trail: The continuity of freebies is another major disadvantage as parties keep on coming up with lucrative offers to lure more number of votes to minimize the risk of losing in the elections.
Burden on exchequer: People forget that such benefits are been given at the cost of exchequer and from the tax paid.
Ultimate loss of poors: The politicians and middlemen wipe away the benefits and the poor have to suffer as they are deprived from their share of benefits which was to be achieved out of the money.
Inflationary practice: Such distribution freebie commodity largely disrupts demand-supply dynamics.
Lethargy in population: Freebies actually have the tendency to turn the nation’s population into: Lethargy and devoid of entrepreneurship.
Rational elements in freebies
Social investment:Aid to the poor is seen as a wasteful expenditure. But low interest rates for corporates to get cheap loans or the ‘sop’ of cutting corporate taxes are never criticized.
Socialistic policy:This attitude comes from decades of operating within the dominant discourse of market capitalism.
Election manifesto: Proponents of such policies would argue that poll promises are essential for voters to know what the party would do if it comes to power and have the chance to weigh options.
Why they need to stop?
Winning election and good governance are two different things. The role of freebies to avail good governance is definitely questionable.
The social, political and economic consequences of freebies are very short-lived in nature.
There are many freebies and subsidies schemes available in many States but we still find starvation deaths, lack of electricity, poor education and health service.
Hence the sorrow of the masses of India cannot be solved by freebies or by incentives.
Conclusion
There is nothing wrong in having a policy-led elaborate social security programme that seeks to help the poor get out of poverty.
But such a programme needs well thought out preparation and cannot be conjured up just before an election.
Mains question
Q. Do you think freebies are justified under the name of social security? Critically evaluate the rising freebie culture in India with its negative implications.
From UPSC perspective, the following things are important :
Prelims level: International solar alliance.
Mains level: Energy security.
Context
Tesla and SpaceX CEO Elon Musk has said that civilisation will be mostly solar-powered in the future, a world without Sun will turn into a dark ice ball as the Earth gets all of its energy from it.
Definition of solar energy
Solar energy is radiant light and heat from the Sun that is harnessed using a range of technologies such as solar power to generate electricity, solar thermal energy, and solar architecture.
India’s solar target.
Target: India is targeting about 500 GW by 2030, of renewable energy deployment, out of which ~280 GW is expected from solar PV. This necessitates the deployment of nearly 30 GW of solar capacity every year until 2030.
Commitment: Solar power is a major prong of India’s commitment to address global warming according to the terms of the Paris Agreement, as well as achieving net zero, or no net carbon emissions, by 2070.
International solar alliance and India’s pledge
Climate action commitment: It symbolizes about the sincerity of the developing nations towards their concern about climate change and to switch to a low-carbon growth path.
Clean energy: India’s pledge to the Paris summit offered to bring 40% of its electricity generation capacity from non-fossil sources (renewable, large hydro, and nuclear) by 2030.
Global electrification: India has pledged to let solar energy reach to the most unconnected villages and communities and also towards creating a clean planet.
Global cooperation: It is based on world cooperation irrespective of global boundaries.
India’s Soft power: For India, possible additional benefits from the alliance can be a strengthening of ties with the major African countries and increasing goodwill for India among them.
Some Interesting facts
Solar power is the most abundant energy source on earth.
Solar is the cheapest source of energy in the world.
Solar electricity has been around since 1839.
Solar panels can produce power without direct sunlight.
Challenges before solar future
High Imports: Indian solar deployment or installation companies depend heavily on imports. It currently imports 100% of silicon wafers and around 80% of cells even at the current deployment levels.
Field deployment: Also, out of the 15 GW of module manufacturing capacity, only 3-4 GW of modules are technologically competitive and worthy of deployment in grid-based projects.
Land issue: Land, the most expensive part of solar projects, is scarce in India — and Indian industry has no choice but to move towards newer and superior technologies as part of expansion plans.
Lack of investment: India has hardly invested in this sector which can help the industry to try and test the technologies in a cost-effective manner.
Way forward
Supportive policies and innovative technological approaches are needed for the sector to achieve its potential.
Indian policymakers need to plan for rooftop solar plus storage, rather than rooftop solar alone with the grid as storage (net / gross metering).
The declining cost of storage solutions, along with that of rooftop solar solutions, is likely to change the future of the Indian power sector.
Conclusion
In the foreseeable future, one can witness a just and equitable energy order if solar energy, along with other forms of renewable energy, can be harnessed more positively.
Mains question
Q.Fossil fuels have a 60% share in India’s total energy mix in this context discuss solar future for India with challenges for the same.
From UPSC perspective, the following things are important :
Prelims level: Finance commission
Mains level: Fiscal federalism
Context
The centralisation of fiscal powers in India has been blamed for the poor fiscal health of the states.
Why in news?
Chief Ministers expressed their concern about dwindling State revenues in a NITI Aayog meeting chaired by the Prime Minister.
They sought a higher share in the divisible pool of taxes and an extension of GST compensation, both of which have long remained a bone of contention between the Union government and the States.
Need for financial devolution
To strengthen democracy at grass root level with more revenue resources for better service delivery.
To increase accountability to people so performance can be realized as direct contact with people.
What is divisible pool of taxes?
The divisible pool is that portion of gross tax revenue which is distributed between the Centre and the States. The divisible pool consists of all taxes, except surcharges and cess levied for specific purpose, net of collection charges.
What is fiscal federalism?
Fiscal federalism refers to how federal, state, and local governments share funding and administrative responsibilities within our federal system. The funding for these programs comes from taxes and fees.
Poor state of state finances
Stagnant revenue: Since States cannot raise tax revenue because of curtailed indirect tax rights — subsumed in GST, except for petroleum products, electricity and alcohol — the revenue has been stagnant at 6% of GDP in the past decade.
Distorted expenditure: While States lost their capacity to generate revenue by surrendering their rights in the wake of the Goods and Services Tax (GST) regime, their expenditure pattern too was distorted by the Union’s intrusion, particularly through its centrally sponsored schemes.
Decline in share: The ability of States to finance current expenditures from their own revenues has declined from 69% in 1955-56 to less than 38% in 2019-20.
Stress on finance: States’ financial health had taken a turn for the worse with the implementation of the Ujwal DISCOM Assurance Yojana, farm loan waivers, as also the slowdown in growth in 2019- 20.
Key fact to remember
Finance Commission keeps tax devolution for states at 41% in FY22
How fiscal centralisation impacts on states?
Cut in the corporate tax: The recent drastic cut in corporate tax, with its adverse impact on the divisible pool, and ending GST compensation to States have had huge consequences.
States paying high interest rates: States are forced to pay differential interest — about 10% against 7% — by the Union for market borrowings.
Centrally sponsored schemes curbing autonomy: There are 131 centrally sponsored schemes, with a few dozen of them accounting for 90% of the allocation, and States required to share a part of the cost.
Suggestions for strong fiscal federalism
Creation of federal institution: We need to create another institution in the form of a GST state secretariat that can bring together senior officers from the Centre and states in an institutional forum registered under the Society Act.
State Finance Commissions: should be accorded the same status as the Union Finance Commission and the 3Fs of democratic decentralization (funds, functions, and functionaries) should be implemented properly.
Robust GST regime: Transparency, simplification and rationalisation of GST will help states to recover soon.
Way Forward
Relook on various exemptions to rationalise the taxes/levies
Augmentation of Tax Administration Structure
Technology-based Tax Administration may also be further expanded to cover even utility charges like water, street lights, sanitation charges, etc.
Conclusion
It is important now to rethink the design and structure of a genuine fiscal partnership, which should not merely be a race to garner more resources, but a creative attempt to move towards a vibrant Indian value chain that can catapult India’s growth rate closer to the quest for double-digit growth.
Mains question
Q. Why it is important now to rethink the design and structure of a genuine fiscal partnership? Discuss this in context of Skewed divisible pool and state of fiscal federalism in India.
op-ed snap | Enviro & Biodiversity | Mains Paper 3: Effects Of Globalization On Indian Society,Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Minimalism as way of life
Context
The COVID-19 pandemic brought shifts in consumer behaviour. The world witnessed a shrinkage of demand. But post-pandemic recovery and suppressed consumerism is now leading to ‘revenge shopping’.
What is consumerism?
Consumerism is a social and economic order that encourages the acquisition of goods and services in ever-increasing amounts.
What is minimalism?
Minimalism is owning fewer possessions. It is intentionally living with only the things we really need those items that support our purpose. Removing the distraction of excess possessions to focus more on those things that matter most.
What Is Revenge Shopping?
Revenge shopping occurs when a customer who previously could not get access to certain goods or services for a period of time suddenly has access. It can also occur when customers have been deprived of other events or happenings.
The symptoms of excessive consumerism
You buy more than you planned: if you set out with a plan of what you need to purchase but consistently come back with more than you anticipated, then you’re falling in the consumerist trap.
You run out of storage space for your stuff: sometimes it can’t be helped if you live in a tight area or you’re disorganised. But suppose you’re in a reasonable situation and things you bring in don’t have an allocated home. In that case, you’re likely living excessively.
You rely too much on return policies: returning an item is useful. Particularly if you need to test a product for the intended purpose, be it sizing for clothes or a tool for a building project. However, suppose you’re depending on returns for purchases. In that instance, you’re not sure you need it, or if you can’t afford it, then you’re probably suffering from too much consumerism.
You routinely seek approval for your purchases: getting feedback on purchases can be reassuring, especially if you’re indecisive. Yet, there’s a difference between picking someone’s brain before buying and looking to justify your purchase after the fact. If you’re seeking post-acquisition approval, you probably don’t need the item.
You mistakenly buy things you already have: not much to say here. If you’re getting things only to realise you already have it, then you’re probably deep in a consumerist cycle.
You buy things on credit: if you’re strategic and disciplined, you can buy things on credit cards to acquire points and benefits. However, if you’re like the majority of us, then you’re vulnerable to buying things you can’t afford.
You constantly go over your budget: sometimes, you miss-forecast how much you need to spend each month. But if you set a realistic budget and find that you’re still going over, then you’re probably consuming excessively.
You regret your purchases: the most obvious sign that you have a shopping habit is you regret things you bought. Buyer’s remorse is an overwhelming feeling and one we want to avoid.
Negatives of consumerism
Causes more pollution: Consumerism as a system can have devastating effects on the environment.
A major contributor to resource depletion: The second main negative of consumerism is resource depletion. Simply put, resource depletion refers to the idea that human beings are using up the resources on the earth as an ever increasing rate such that we will ‘deplete’ or completely use up some resources.
Leads companies to develop low quality products: Modern companies practice a technique called ‘planned obsolescence’. In general, planned obsolescence is best understood as products that are designed to fail. Modern companies do this to encourage consumers to repurchase a product over and over again.
Does not necessarily lead to increased happiness beyond a certain point: The main negative aspect of consumerism is that it does not necessarily lead to higher levels of happiness for people.
Global inequality: The huge rise in resource consumption in wealthier countries has led to an ever widening gap between the rich and the poor. As the age old saying goes, “the rich get richer and the poor get poorer.”
What can we do?
Extend the lifespan of your things: Repairing your things is not only an effective way to reduce your consumption, but it’s also beneficial to the environment.
Reframe shopping as a skill: When you focus on the role the thing you’re buying will play in the overall experience instead of the experience of shopping itself, you’ll be able to shift away from a consumerist mind-set.
Do the deathbed test: Not to get too dark, but if you were hypothetically on your deathbed today, and you were reflecting on your life, what would be your fondest memories? The quality of our lives is generally measured by moments of “that was a good time”, not “that thing I had was awesome”.
Borrow or rent instead of buy: A simple method for getting your consumerism under control is to rent or borrow items instead of buying them.
Practice minimalism: What’s the ultimate alternative to consumerism? Minimalism. A minimalist is someone who naturally rejects consumerism and sees value in having fewer things over more things. Minimalism is a powerful philosophy that impacts how you view material things, your relationships, commitments, and digital inventory.
Conclusion:
The M.K. Gandhi once said: “The Earth provides-enough to satisfy everyone’s needs but not any one’s greed.” We shall find that Gandhian call to curtailment of wants is relevant in the rapidly depleting natural resources, bio-diversity and eco-system and its contemporary relevance
Mains question
Q. What do you understand by the term consumerism? Discuss importance of minimalism as there is rise in revenge shopping in post covid19 era.
Context 
Faulty measures 
7R’ model utility
Context 
Universal basic income meaning
Negative implications of UBI
Context 
What could India bring to the table?
Context
Context 
Context
Context 
What Is Revenge Shopping?
The symptoms of excessive consumerism
Negatives of consumerism