Archives: News

Bills/Act/LawsDOMREthicsExplainedHistorical SitesIOCRop-ed snapPIBPlaces in newsPrelims OnlySC JudgementsSchemesSpeciesStatesworld map
June 2025
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
30  

G20 : Economic Cooperation ahead

A new global vision for G20

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: G-20

Mains level: Paper 2- New framework for G20

Context

While India has taken a clear view of the role of the G20, there is concern that the agenda, themes and focus areas which India will set for 2023 lack vision.

What is G-20?

  • Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.
  • Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
  • To tackle the problems or address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
  • In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.
  • The G20 has no permanent staff of its own and its chairmanship rotates annually between nations divided into regional groupings.

Significance of G20 in shaping global order

  • The G20 plays an important role in shaping and strengthening global architecture and governance on all major international economic issues.
  • It recognises that global prosperity is interdependent and economic opportunities and challenges are interlinked.
  • The challenge is to craft new approaches to overcome the acute global discord.

Why we need new model of cooperation

  • Multilateral commitments are faltering: Governance in a world that is steadily becoming more equal needs institutional innovation.
  • This is because the role of the United Nations and the World Trade Organization in securing cooperation between donor and recipient country groups is losing centrality.
  •  There are now three socio-economic systems — the G7, China-Russia, and India and the others — and they will jointly set the global agenda.
  • Strategic competition: Ukraine conflict, rival finance, the expanding influence of the trade and value chains dominated by the U.S. and China, and the reluctance of developing countries to take sides in the strategic competition as they have a real choice requires fresh thinking.
  • Preventing the clash of ideas through reorientation: The primary role of the G20, which accounts for 95% of the world’s patents, 85% of global GDP, 75% of international trade and 65% of the world population, needs to be reoriented to prevent a clash of ideas to the detriment of the global good.
  • The solution lies in a new conceptual model seeking agreement on an agenda limited to principles rather than long negotiated anodyne text.

What should be on agenda when India hosts G20 in 2023

1] Underlining the need for new framework

  • Redefining common concerns: First, the presumed equality that we are all in the same boat, recognised in the case of climate change, needs to be expanded to other areas with a global impact redefining ‘common concerns’.
  • Second, emerging economies are no longer to be considered the source of problems needing external solutions but source of solutions to shared problems.
  • Third, the BRICS provides an appropriate model for governance institutions suitable for the 21st century where a narrow group of states dominated by one power will not shape the agenda.
  • Ensuring adequate food, housing, education, health, water and sanitation and work for all should guide international cooperation.
  • Principles of common but differentiated responsibilities for improving the quality of life of all households can guide deliberations in other fora on problems that seem intractable in multilateralism based on trade and aid.

2] 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.
  •  A forum to exchange experiences on societal benefits and growth as complementary goals would lead to fresh thinking on employment and environment.

3] 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.
  • For global society to reap the fruits of the new set of network technologies, open access software should be offered for more cost-effective service delivery options, good governance and sustainable development.

4] Collaboration in space technology

  • Space is the next frontier for finding solutions to problems of natural resource management ranging from climate change-related natural disasters, supporting agricultural innovation to urban and infrastructure planning.
  • Analysing Earth observation data will require regional and international collaboration through existing centres which have massive computing capacities, machine learning and artificial intelligence.

5] Collaboration in health sector

  • Public health has to learn from the COVID-19 fiasco with infectious diseases representing a market failure.
  • A major global challenge is the rapidly growing antimicrobial resistance which needs new antibiotics and collaboration between existing biotechnology facilities.

6]  Avoiding strategic competition

  • Overriding priority to development suggests avoiding strategic competition.
  • Countries in the region will support building on the 1971 UNGA Declaration designating for all time the Indian Ocean as a zone of peace and non-extension into the region of rivalries and conflicts that are foreign to it.

7] Reviving Global Financial Transaction Tax

  •  A Global Financial Transaction Tax, considered by the G20 in 2011, needs to be revived to be paid to a Green Technology Fund for Least Developed Countries.

Conclusion

Given the significance of G20 for the global order it should lead the way in formulating the new framework based on collaboration in areas such as science and technology, innovation and away from aid and trade.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Foreign Policy Watch: India-Myanmar

India’s response to Sri Lanka and Myanmar crises is a study in contrast

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Crisis in Myanmar and issues with India's response to it

Context

There is a stark contrast contrast between the Indian response to the crisis in Sri Lanka and the dawning civil war in Myanmar.

Crisis in Myanmar

  • According to UN human rights monitors, over 2,000 people have been killed, around 14,000 are in prison, including 90 lawmakers, over 7,00,000 are refugees and half a million internally displaced.
  • Humanitarian aid to coup opponents is blocked.
  • The economy is in free fall.
  • Though the international community has not accepted the junta or its nominees as official representatives of Myanmar, it has not recognised the unity government as the legitimate successor of the pre-coup elected administration either.
  • Its armed wing, the recently-formed People’s Defence Force (PDF), exists in a shadowy limbo.
  • If it is too weak to impose significant costs on the junta, one root cause is the lack of support from neighbours.
  • As against Europe’s military support for Ukraine’s defence, no Asian country has stepped up to support the unity government and PDF.
  • Role of ASEAN:  It is ASEAN which shouldered the responsibility to mediate in Myanmar, whereas India took the initiative with Sri Lanka.
  • But ASEAN has been largely unsuccessful.
  • The five-point consensus that the junta agreed on with the regional grouping included an immediate end to violence and resumption of negotiations between the ousted administration and the Tatmadaw.
  • ASEAN’s reaction has been weak at best.
  • The US, EU, Australia and Canada announced targeted sanctions on the junta, and the EU imposed an embargo on arms sales to the country. ASEAN did not.

India’s response and issues with it

  • The contrast between the Indian response to the crisis in Sri Lanka and the dawning civil war in Myanmar could not be starker.
  • There is no support from the India administration for Mizoram’s aid effort, and apparently there is no Indian policy vis a vis the coup either.
  • Cooperation against cross-border insurgency: Given our land and sea borders with Myanmar, and the troubled history of cross-border insurgencies between our two countries, the India’s inertia is alarming, though not entirely surprising.
  • Successive Indian administrations maintained relations with the junta in the hope that they would cooperate against cross-border Indian armed groups.
  • But these insurgencies have reduced.
  • In fact, over the 10 years of Myanmar’s partial democracy, from 2011 to 2021, cross-border support for Indian insurgents dipped sharply.
  • Direct security interest: In other words, we have a direct security interest in the restoration of our neighbour’s democracy.

Way forward

  • Stringent sanctions: Sanctions that will starve the junta are a first step that Myanmar’s neighbours are yet to try.
  • While ASEAN has the initiative, all Myanmar’s neighbours need to unite on sanctions, especially nations such as Japan, Australia and India that are members of the Quad along with the US.
  • Myanmar ought to have topped the recent Quad summit’s agenda and it is shameful that it did not.
  • It is still not too late to call a virtual emergency meeting of Quad heads of state, along with ASEAN heads of state, to agree to stringent sanctions.

Conclusion

Our neighbourhood is more unstable today than it has been for decades. Four of our bordering countries are in free fall, while China’s grip comes closer to our shores by the hour. Can India afford to fiddle while wildfires ignite around us?

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Foreign Policy Watch: India-Bangladesh

India, Bangladesh, Pakistan: What east can teach west

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- India-Bangladesh ties

Context

The bilateral relationship between India and Bangladesh dominated by endless contentions at the turn of the millennium has transformed into a very productive partnership.

Contrast between India’s relations with Bangladesh and Pakistan

  • The persistence of cross-border terrorism, the conflict over Kashmir, the militarisation of the frontier, little connectivity, poor trade relations and no formal inter-governmental negotiations paint a bleak picture of the India-Pak border.
  • The inability of successive generations of Indian and Pakistani leaders to bring a closure to Partition in the west makes the talk of a “100-year war” credible.
  • The only trend that can counter this pessimism is the good news from India’s eastern frontier with Bangladesh.
  • In contrast to the talk of a 100-year war between India and Pakistan, India and Bangladesh have proclaimed a “sonali adhyay” or “golden chapter” in bilateral relations.
  • While the unresolved land and maritime territorial disputes constitute one of the main problems in India’s relations with Pakistan, their resolution with Bangladesh transformed the context of bilateral relations.
  • For both Delhi and Dhaka, the reinvention of the bilateral relationship has been one of the most significant successes of their recent foreign policies

Rebuilding the Bangladesh-India ties after 2010

  • The work on rebuilding ties began in earnest in 2010, when Sheikh Hasina came to India after taking charge of Bangladesh as prime minister for the second time in 2009.
  • Addressing bilateral problems: Both sides embarked on an extraordinary effort to address most bilateral problems—including border settlement, river water sharing, cross-border terrorism, market access to Bangladeshi goods, and connectivity.
  • The land boundary deal got parliamentary approval in 2015 in India.
  • India also accepted the award of the Permanent Court of Arbitration in The Hague on settling the maritime boundary dispute between Delhi and Dhaka. 
  • Security cooperation: Cooperation on cross-border terrorism that began a couple of years earlier helped build much-needed political trust between the two national security establishments.
  • Connectivity: On the connectivity front, we have seen a substantive movement towards reopening the border that was largely shut down after the 1965 war between India and Pakistan.
  • Trans-boundary bus services, reopening of railway lines, and the revitalisation of waterways are restoring connectivity in the eastern subcontinent that was severed.
  • Bilateral trade: Bilateral trade volumes have grown by leaps and bounds in recent years touching nearly $16 billion last year.
  • Bangladesh is one of India’s top export markets.
  •  India and Bangladesh have also developed inter-connected power grids facilitating Dhaka’s purchase of power from India.
  • It currently buys about 1200 MW of power from India and an additional 1500 MW is in the pipeline.
  • Development of the northeastern India: Today the northeastern states have realised the immense benefits of deeper economic engagement with Bangladesh — none of them more important than ending the geographic isolation of the region.
  • Assam today is at the forefront of imagining a bolder agenda for deepening economic ties with Bangladesh.
  • Peace and prosperity in the region: For India, the expansive partnership with Bangladesh has significantly eased its security challenges and laid the basis for peace and prosperity in the eastern subcontinent.
  • For Bangladesh, discarding the temptation to balance India and embark on a cooperative strategy has allowed Dhaka to focus on its economic growth and lift itself in the regional and global hierarchy.

Way forward

  • Consolidating the gains: Rather than regret the unfortunate dynamic on the western frontier and bemoan Pakistan’s reluctance to let the SAARC become a vehicle for regional cooperation, Delhi should focus on consolidating the “golden moment” in the east.
  • The issues that need resolution are protecting the rights of minorities, sharing the waters of more than 50 rivers, promoting cross-border investments, managing one of the longest borders in the world, facilitating trade and preventing illegal migration, countering forces of religious extremism, promoting maritime security in the Bay of Bengal, expanding defence cooperation, and mitigating climate change in the shared regional environment to name a few.
  • Solving problems and tending to the relationship must necessarily be a continuous effort rather than episodic.

Conclusion

Nor can Delhi and Dhaka take each other for granted and let domestic politics overwhelm the logic of bilateral cooperation. The 75th anniversary of independence offers Delhi and Dhaka a special opportunity to elevate the ambition for their bilateral partnership.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

Macrovariable projections in uncertain times

op-ed snap | Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Stagflation

Mains level: Paper 3- Challenges in projection of economic macrovariables

Context

The Fed has raised its benchmark interest rate again by a whopping 0.75%. The Reserve Bank of India has also been forced to raise interest rates further but also take other steps.

Two challenges for policymakers

  • Decisions in the Monetary Policy Committee (MPC) meeting are based on what the members of the MPC see as the likely course of the economy in the months ahead.
  • But, the trajectory of the world economy, and its likely impact on the Indian economy, is imponderable.
  • So, Indian policymakers would face two crucial problems.
  • 1] Uncertainty due to war and Covid-19: First, the main uncertainty is due to Russia’s war on Ukraine and the resultant economic sanctions on Russia, as well as the zero-COVID-19 policy in China that repeatedly implements lockdowns leading to global supply bottlenecks.
  • 2] Uncertainty in data: Policy has to base itself on data.
  • If it is deficient, it introduces additional uncertainty, making projections for the future difficult and causing policies to fail.
  • This will compound the problem that results from the global uncertainty.

Role of uncertainties related to Covid and Ukraine war

  • Since early 2020, the SARS-COV-2 virus has caused global uncertainty.
  •  In a globalised interdependent world, production was hit resulting in price rise (inflation) and loss of real incomes.
  • This has resulted in decline in demand and, in a vicious cycle, a further slowing down of the economy.
  • As prices have risen globally and economies slowed down, many countries have faced stagflation.
  • Decline in uncertainty: The uncertainty due to the novel coronavirus has declined in spite of waves of attack persisting because the impact of new virus mutants of the virus is milder and there is also immunity due to vaccination.
  • However, China is an exception with its zero-COVID policy.
  •  It has been implementing strict lockdowns in the last six months, even when only a few cases of the disease have been detected.

The uncertainties due to Ukraine conflict

  • The war in Ukraine and western sanctions on Russia have caused huge uncertainty since February 2022 (when Russia invaded Ukraine) and displaced the disease-related uncertainty, i.e., COVID-19.
  • The reason is that the war is a proxy war between two powerful capitalist blocs.
  • There is needless continuing suffering of the people of Ukraine, with a bombardment of cities, and this could escalate.
  • The war and the sanctions have already affected the world economy and the Europeans in particular.
  • The U.S. economy has entered technical recession with two quarters of GDP decline.
  • As supplies of critical items supplied by Russia and Ukraine have been hit, prices have soared.
  • Europe, the United States and India have experienced or are experiencing high inflation.
  • The biggest disruption is in energy supplies from Russia, impacting production.
  • The availability of food, fertilizers, metals, etc., have been hit as Ukraine and Russia are important sources.
  • To weaken Russia, sanctions may be imposed on countries that carry out trade with it.
  • Many Indian entities may face the heat since India has increased its imports from Russia, which undermines sanctions.
  • China may also face sanctions since it has increased trade with Russia and is backing it.

Data related uncertainties

  • Indian policymakers also face data-related issues.
  • It is not only available with a big lag on most macroeconomic variables but for many variables, data are either not available or has huge errors.
  • Errors in data: Policymakers rely on high frequency data to proxy for actual data.
  • For example, very little data are available for quarterly GDP data which is used to calculate the growth rate of the economy.
  • First, except for agriculture, unorganised sector data is not available.
  • Second, for the organised sector, very limited data are available.
  • Third, projections from the previous year or proxies are used — both these introduce errors when there are repeated shocks to the economy, such as the pandemic and now the war.
  • Issues with price data: Price data too are problematic.
  • The services sector is under-represented.
  • Prices of many services have risen and expenditures on them have increased dramatically, thus changing their weight in the consumption basket.
  • Common CPI: Further, the consumer price index is common for the upper classes and the poor.
  •  Earlier, there was a different index for various categories of people, which reflected the differential impact of inflation on people.
  • This gave a truer picture of the economy and peoples’ distress.

Conclusion

Indian policymakers face the unenviable task of predicting the course of the economy for the next few months and even the year (or years) ahead because of the shocks and faulty and inadequate data. The problem is compounded by international factors.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Foreign Policy Watch: India-China

China’s problem with top US senator visiting Taiwan

| International Relations | Mains Paper 2: Important International Institutions
Note4Students

From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: US meddling in China-Tawian friction

The Speaker of the House of Representatives, Nancy Pelosi, landed in Taiwan, ignoring Chinese threats and a warning by President Xi Jinping to “not play with fire”.

Why in news?

  • Pelosi’s visit to Taiwan is the highest-level visit by an American official to the island in a quarter century.
  • The senior US politician has been critical of China on multiple fronts over the decades.

US defiance of One China Policy

  • The US has maintained a ‘One China’ policy since the 1970s, under which it recognises Taiwan as a part of China.
  • But it has unofficial ties with Taiwan as well — a strategy that is known as strategic or deliberate ambiguity.
  • Beijing considers Taiwan a part of China, threatens it frequently, and has not ruled out taking the island by military force at any time.

Why does China have a problem with Pelosi visiting Taiwan?

  • For China, the presence of a senior American figure in Taiwan would indicate some kind of US support for Taiwan’s independence.
  • This move severely undermined China’s perception of sovereignty and territorial integrity.

Brief history of China-Taiwan Tensions

  • Taiwan is an island about 160 km off the coast of southeastern China, opposite the Chinese cities of Fuzhou, Quanzhou, and Xiamen.
  • It was administered by the imperial Qing dynasty, but its control passed to the Japanese in 1895.
  • After the defeat of Japan in World War II, the island passed back into Chinese hands.
  • After the communists led by Mao Zedong won the civil war in mainland China, Chiang Kai-shek, the leader of the nationalist Kuomintang party, fled to Taiwan in 1949.
  • Chiang Kai-shek set up the government of the Republic of China on the island, and remained President until 1975.
  • Beijing has never recognised the existence of Taiwan as an independent political entity, arguing that it was always a Chinese province.

Taiwanese stance

  • Taiwan says that the modern Chinese state was only formed after the revolution of 1911.
  • It was not a part of that state or of the People’s Republic of China that was established after the communist revolution.
  • While the political tensions have continued, China and Taiwan have had economic ties.
  • Many migrants from Taiwan work in China, and China has investments in Taiwan.
  • No doubt, cultural ties are indispensable.
  • In recent years, Taiwan’s government has said only the island’s 23 million people have the right to decide their future and that it will defend itself when attacked.
  • Since 2016, Taiwan has elected a party that leans towards independence.

How does the world, and US, view Taiwan?

  • The UN does NOT recognise Taiwan as a separate country; in fact, only 13 countries around the world — mainly in South America, the Caribbean, Oceania, and the Vatican — do.
  • In June, President Biden said that the US would defend Taiwan if it was invaded, but it was clarified soon afterward but America does not support Taiwan’s independence.
  • While the US has no formal ties with Taipei, it remains Taiwan’s most important international backer and arms supplier.

 

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Foreign Policy Watch: India-Bangladesh

India-Bangladesh River Disputes

| International Relations | Mains Paper 2: India & Its Neighborhood - Relations
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Read the attached story

Mains level: India-Bangladesh

India and Bangladesh are likely to ink at least one major river agreement later this month.

It is gauged that India has agreed to offer Bangladesh a package on river waters-related deals that will be considered a significant advancement in terms of sharing of river resources with Dhaka.

Why in news?

  • There is a strong possibility that an agreement on the River Kushiyara that flows from Assam into Bangladesh is part of one such agreement.
  • This river got its fame in recent Assam floods.
  • Water sharing is considered a sensitive subject given the fact that it often takes political meaning.

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.

Why does this deal matters?

  • India and Bangladesh have resolved border problems through the Land Boundary Agreement of 2015.
  • However, both nations have locked horns over the sharing of multiple rivers that define the borders and impact lives and livelihoods on both sides.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Climate Change Impact on India and World – International Reports, Key Observations, etc.

What is causing Arctic Amplification?

| Enviro & Biodiversity | Mains Paper 1: Important Geophysical Phenomena
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Arctic Amplification

Mains level: Climate Change

Finnish researchers have found that the Arctic is heating four times faster than the rest of the planet.

Arctic is warming faster

  • The warming is concentrated in the Eurasian part of the Arctic, where the Barents Sea north of Russia and Norway is warming at an alarming rate — seven times faster than the global average.
  • Other studies indicate that the Arctic amplification is four times the global rate.

What is Arctic Amplification?

  • Global warming has hastened due to anthropogenic forces or human activities since pre-industrial times and has increased the planet’s average temperature by 1.1 degrees Celsius.
  • While changes are witnessed across the planet, any change in the surface air temperature and the net radiation balance tend to produce larger changes at the north and south poles.
  • This phenomenon is known as polar amplification; these changes are more pronounced at the northern latitudes and are known as the Arctic amplification.

What causes amplification?

  • Among the many global warming-driven causes for this amplification, the ice-albedo feedback, lapse rate feedback, water vapour feedback and ocean heat transport are the primary causes.
  • Sea ice and snow have high albedo (measure of reflectivity of the surface), implying that they are capable of reflecting most of the solar radiation as opposed to water and land.
  • In the Arctic’s case, global warming is resulting in diminishing sea ice.
  • As the sea ice melts, the Arctic Ocean will be more capable of absorbing solar radiation, thereby driving the amplification.
  • The rate at which the temperature drops with elevation i.e. lapse rate decreases with warming.
  • Studies show that the ice-albedo feedback and the lapse rate feedback are responsible for 40% and 15% of polar amplification respectively.

What do the previous studies say?

  • The extent of Arctic amplification is debated, as studies show various rates of amplification against the global rate.
  • Studies have shown that the Arctic was warming at twice the global rate prior to the beginning of the 21st century.
  • Already the Arctic surface air temperature has likely increased by more than double the global average over the last two decades.

What are the consequences of Arctic warming?

  • The causes and consequences of Arctic amplification are cyclical — what might be a cause can be a consequence too.
  • The Greenland ice sheet is melting at an alarming rate, and the rate of accumulation of sea ice has been remarkably low since 2000.
  • This is also marked by young and thinner ice replacing the old and thicker ice sheets.
  • Greenlandic ice sheet holds the second largest amount of ice, after Antarctica, and therefore it is crucial for maintaining the sea level.
  • In 2019, this was the single biggest cause for the rise in the sea level, about 1.5 metres.

Visible impacts

  • If the sheet melts completely, the sea level would rise by seven metres, capable of subsuming island countries and major coastal cities.
  • The warming of the Arctic Ocean and the seas in the region, the acidification of water, changes in the salinity levels, are impacting the biodiversity, including the marine species and the dependent species.
  • The warming is also increasing the incidence of rainfall which is affecting the availability and accessibility of lichens to the reindeer.
  • The Arctic amplification is causing widespread starvation and death among the Arctic fauna.
  • The permafrost in the Arctic is thawing and in turn releasing carbon and methane which are among the major greenhouse gases responsible for global warming.
  • Experts fear that the thaw and the melt will also release the long-dormant bacteria and viruses that were trapped in the permafrost and can potentially give rise to diseases.

What is the impact on India?

  • In recent years, scientists have pondered over the impact the changing Arctic can have on the monsoons in the subcontinent.
  • The link between the two is growing in importance due to the extreme weather events the country faces, and the heavy reliance on rainfall for water and food security.
  • A study says that reduced sea ice in the Barents-Kara sea region can lead to extreme rainfall events in the latter half of the monsoons — in September and October.
  • The changes in the atmospheric circulation due to diminishing sea ice combined with the warm temperatures in the Arabian Sea contribute to enhanced moisture and drive extreme rainfall events.

Steps taken by India

  • In 2014, India deployed IndARC, India’s first moored-underwater observatory in the Kongsfjorden fjord, Svalbard.
  • It aims to monitor the impact of the changes in the Arctic Ocean on tropical processes such as the monsoons.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

India as a ‘developed’ country: where we are, and the challenges ahead

| Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: GDP, GNI

Mains level: India's roadmap for development

In his Independence Day address, PM asked Indians to embrace the “Panch Pran” — five vows — by 2047 when the country celebrates 100 years of independence.

What are the Panch Prans?

  • Calling it the ‘panch pran‘ — the five resolutions to help India become a developed nation in the next 25 years — PM said:
  1. Every Indian should focus on developing the country;
  2. 100 per cent freedom from slavery (100% Azadi from Ghulami);
  3. Taking pride in Indian heritage;
  4. Ensuring importance is given to unity and integrity and
  5. Every citizen should be responsible

What is a “developed” country?

  • Different global bodies and agencies classify countries differently.
  • The ‘World Economic Situation and Prospects’ of the United Nations classifies countries into three broad categories: developed economies, economies in transition, and developing economies.
  • The idea is “to reflect basic economic country conditions”, and the categories “are not strictly aligned with the regional classifications”.
  • So, it isn’t as though all European countries are “developed”, and all Asian ones are “developing”.
  • To categorise countries by economic conditions, the United Nations uses the World Bank’s categorisation, based on Gross National Income (GNI) per capita (in current US dollars).

Issues with such categorization

  • But the UN’s nomenclature of “developed” and “developing” is being used less and less, and is often contested.
  • Former US President Donald Trump had criticised the categorisation of China as a “developing” country, which allowed it to enjoy some benefits in the World Trade Organization.
  • If China is a “developing” country, then the US should also be “made” one, Donald Trump once said.

But why is the United Nations classification contested?

  • It can be argued that the UN classification is not very accurate and, as such, has limited analytical value.
  • Only the top three mentioned in chart 3 alongside — the US, the UK and Norway — fall in the developed country category.
  • Today, there are 31 developed countries according to the UN in all.
  • All the rest — except 17 “economies in transition” — are designated as “developing” countries, even though in terms of proportion, China’s per capita income is closer to Norway’s than Somalia’s.
  • China’s per capita income is 26 times that of Somalia’s while Norway’s is just about seven times that of China’s.
  • Then there are countries — such as Ukraine, with a per capita GNI of $4,120 (a third of China’s) — that are designated as “economies in transition”.

Where does India stand?

  • As chart 2 shows, India is currently far behind both the so-called developed countries, as well as some developing countries.
  • Often, the discourse is on the absolute level of GDP (gross domestic product).
  • On that metric, India is one of the biggest economies of the world — even though the US and China remain far ahead.
  • However, to be classified as a “developed” country, the average income of a country’s people matters more.
  • And on per capita income, India is behind even Bangladesh.
  • China’s per capita income is 5.5 times that of India, and the UK’s is almost 33 times.

India’s progress

  • India has made a secular improvement on HDI metrics.
  • For instance, the life expectancy at birth (one of the sub-metrics of HDI) in India has gone from around 40 years in 1947 to around 70 years now.
  • India has also taken giant strides in education enrolment at all three levels — primary, secondary, and tertiary.

What is the distance left to cover?

  • When compared to the developed countries or China, India has a fair distance to cover.
  • Even though India is the world’s third-largest economy in purchasing power parity (PPP) terms, most Indians are still relatively poor compared to people in other middle income or rich countries.
  • Ten per cent of Indians, at most, have consumption levels above the commonly used threshold of $10 (PPP) per day expenditures for the global middle class.
  • Other metrics, such as the food share of consumption, suggest that even rich households in India would have to see a substantial expansion of their total consumption to reach levels of poor households in rich countries.

How much can India achieve by 2047?

  • One way to make this assessment is to look at how long other countries took to get there.
  • For instance, in per capita income terms, Norway was at India’s current level 56 years ago — in the year 1966.
  • Comparing India to China is more useful. China reached that mark in 2007.
  • Theoretically then, if India were to grow as fast as China did between 2007 and 2022, then, broadly speaking, it will take India another 15 years to be where China is now.
  • But then, China’s current per capita income was achieved by the developed countries several decades earlier — the UK in 1987, the US and Norway in 1979.

Where does India lag?

  • India’s current HDI score (0.64) is much lower than what any of the developed countries had even in 1980.
  • China reached the 0.64 level in 2004, and took another 13 year to reach the 0.75 level — that, incidentally, is the level at which the UK was in 1980.

What can India achieve by 2047?

  • The World Bank’s 2018 report had made a mention of what India could achieve by 2047.
  • By 2047 — the centenary of its independence — at least half its citizens could join the ranks of the global middle class.
  • By most definitions, this will mean that households have access to better education and health care, clean water, improved sanitation, reliable electricity, a safe environment, affordable housing, and enough discretionary income to spend on leisure pursuits.

Way forward

  • Fulfilling these aspirations requires income well above the extreme poverty line, as well as vastly improved public service delivery.
  • To see this in perspective, note that at the last count, as of 2013, India had 218 million people living in extreme poverty — which made India home to the poorest people in the world.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Financial Inclusion in India and Its Challenges

Centre restores Modified Interest Subvention Scheme (MISS)

Prelims Only | Economics | Mains Paper 3: Inclusive Growth & Issues
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Modified Interest Subvention Scheme (MISS)

Mains level: Not Much

The Union Cabinet has decided to restore the interest subvention on short-term agriculture loans to 1.5% for all financial institutions, including cooperative banks.

What is the news?

  • The Union Cabinet has approved to restore Interest Subvention on short term agriculture loans to 1.5% for all financial institutions.
  • Thus, Interest Subvention of 1.5% will be provided to lending institutions for the financial year 2022-23 to 2024-25 for lending short term agri-loans upto Rs 3 lakh to the farmers.

What is MISS?

  • Kisan Credit Card scheme was introduced for farmers, to empower them to purchase agriculture products and services on credit at any time.
  • To ensure that the farmers have to pay a minimal interest rate to the bank, the GoI introduced Interest Subvention Scheme (ISS), now renamed as Modified Interest Subvention Scheme (MISS).
  • It aims to provide short term credit to farmers at subsidized interest rates.

Features of MISS

  • Under this scheme, short term agriculture loan upto Rs. 3.00 lakh is available to farmers engaged in Agriculture and other allied activities including Animal Husbandry, Dairying, Poultry, fisheries etc. at the rate of 7% p.a.
  • An additional 3% subvention (Prompt Repayment Incentive – PRI) is also given to the farmers for prompt and timely repayment of loans.
  • Therefore, if a farmer repays his loan on time, he gets credit at the rate of 4% p.a.
  • For enabling this facility to the farmers, GoI provides Interest Subvention (IS) to the Financial Institutions offering this scheme.
  • This support is 100% funded by the Centre, it is also the second largest scheme of DA&FW as per budget outlay and coverage of beneficiaries.

Benefits of MISS

  • Ensuring hassle-free credit availability at cheaper rate to farmers has been the top priority of GoI.
  • Increase in Interest Subvention will ensure sustainability of credit flow in the agriculture sector as well as ensure financial health and viability of the lending institutions.
  • Banks will be able to absorb increase in cost of funds and will be encouraged to grant loans to farmers for short term agriculture requirements and enable more farmers to get the benefit of agriculture credit.
  • This will also lead to generation of employment since short term agri-loans are provided for all activities including Animal Husbandry, Dairying, Poultry, fisheries.
  • Farmers will continue to avail short term agriculture credit at interest rate of 4% per annum while repaying the loan in time.

Who gets the subvention?

  • The lending institutions include- Public Sector Banks, Private Sector Bank, Small Finance Banks, Regional Rural Banks, Cooperative Banks and Computerized PACS directly ceded with commercial banks.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

RBI Notifications

Curbing inflation in tomatoes, onions and potatoes requires streamlining their value chains

op-ed snap | Economics | Mains Paper 3: Agriculture and related issues,Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: CPI basket in India

Mains level: Paper 3- Inflation challenge

Context

The higher the weight of food in the overall CPI, the more difficult it is for the monetary policy squeeze alone to contain inflation.

Inflation challenge in Indian economy

  • Under the FRBM Act, The RBI has the unenviable task of keeping inflation within the 4+/-2 per cent range.
  • But lately, despite its best efforts, inflation has remained defiant and above its tolerance band.
  • The RBI’s major policy tool, the repo rate has already been hiked by 90 basis points, raising it to 4.9 per cent in June.
  • It is likely to rise to at least 5.5 per cent, if not more, over the course of this financial year.
  • But this will not be enough to tame inflation due to the nature and structure of inflation in India.

How India’s CPI basket is different

  • The CPI basket in India comprises of 299 commodities grouped into six major categories.
  •  The food and beverages group has a weight of 45.86 per cent (with food at 39.06 per cent, prepared meals at 5.55 per cent and non-alcoholic beverages at 1.26 per cent).
  • High weight of food in overall CPI: It is this overwhelmingly high weight of food in overall CPI, based on the consumer expenditure survey (CES) data of 2011-12, that distinguishes Indian inflation from many other developed countries where the food weight is much smaller.
  • It is much lower in Germany (8.5 per cent), the UK (9.3 per cent), the US (13.42 per cent), Canada (15.94 per cent), France (16.49 per cent), Australia (16.8 per cent), China (19.9 per cent), and Japan (26.3 per cent). Even developing nations like South Africa (17.24 per cent), Brazil (25.5 per cent), and Pakistan (34.83 per cent) have lesser weightage of food in overall CPI than India.
  •  The higher the weight of food in the overall CPI, the more difficult it is for the monetary policy squeeze alone to contain inflation.

Tomato inflation

  • Interestingly, of the 299 commodities that comprise CPI, the highest contributor to overall inflation was tomatoes at 8.9 per cent.
  • Inflation in tomatoes was stupendously high at 158.8 per cent (year-on-year).
  • One of the prime reasons was the low base effect as inflation in June 2021 was minus 14.4 per cent.
  • Due to low price realisation last year, this year tomato farmers shifted acreage to other crops.
  • On top of that, some tomato growing areas got flooded, while many others faced heat waves that further depressed tomato supplies.
  •  It is for this reason a scheme called TOP (Tomatoes, Onions, and Potatoes) and allocated Rs 500 crore to streamline their value chains.
  •  But the scheme went to the Ministry of Food Processing, and was expanded to TOTAL by including several other vegetables.
  • Without having a champion, like Verghese Kurien was for milk, this scheme (from TOP to TOTAL) got diffused in focus and has not shown any visible impact in improving the value chains of vegetables.
  • Way forward: The real solution to tomato inflation may lie beyond the ambit of the RBI.
  • Processing: It requires linking tomato value chains to processing of at least 10 per cent of tomato production into tomato paste and puree during bumper years and using them when fresh tomato prices spike.
  • Reduce GST: Further, to enhance the affordability of processed tomatoes, its GST rates need to be reduced from 12 per cent to 5 per cent.
  • This would also help farmers to stabilise their incomes and avoid the typical cobweb problem they face in case of perishables.

Way forward

  • So, monetary policy alone may not be as effective in the Indian case.
  • Revise CPI: India desperately needs to revise its CPI with the latest consumption survey weights.
  • Our parliamentarians must recognise the limitations that the RBI faces in taming inflation.

Conclusion

The upshot of all this is that the nature and structure of inflation in India is different than in developed countries.

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Tax Reforms

Centre raises thresholds for prosecution under Customs Act

Prelims Only | Economics | Mains Paper 3: Money-Laundering & Its Prevention
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Custom Duty

Mains level: Customs frauds

The government has raised the thresholds for prosecutions and arrests under the Customs Act to ₹50 lakh from ₹20 lakh for smuggling and illegal imports of goods in baggage, and from ₹1 crore to ₹2 crore for cases involving commercial fraud.

What is Custom Duty?

  • Customs duty refers to the tax imposed on goods when they are transported across international borders.
  • In simple terms, it is the tax that is levied on import and export of goods.
  • Custom duty in India is defined under the Customs Act, 1962, and all matters related to it fall under the Central Board of Excise & Customs (CBEC).
  • The government uses this duty to raise its revenues, safeguard domestic industries, and regulate movement of goods.
  • The rate of Customs duty varies depending on where the goods were made and what they were made of.

Types of custom duty

  • Basic Customs Duty (BCD): It is the duty imposed on the value of the goods at a specific rate at a specified rate of ad-valorem basis.
  • Countervailing Duty (CVD): It is imposed by the Central Government when a country is paying the subsidy to the exporters who are exporting goods to India.
  • Additional Customs Duty or Special CVD: It is imposed to bring imports on an equal track with the goods produced or manufactured in India.
  • Protective Duty: To protect interests of Indian industry
  • Safeguard Duty: It is imposed to safeguard the interest of our local domestic industries. It is calculated on the basis of loss suffered by our local industries.
  • Anti-dumping Duty: Manufacturers from abroad may export goods at very low prices compared to prices in the domestic market. In order to avoid such dumping, ADD is levied.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Foreign Policy Watch: India – EU

India-UK Relations

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Free trade agreement

Mains level: Bilateral ties, Strategic partnership

Context

  • The year 2022 is significant for both India and the UK as our country commemorates the 75th anniversary of its Independence and the two celebrate 75 years of bilateral ties.
  • India-UK relations were elevated to a Comprehensive Strategic Partnership in 2021, based on a shared commitment towards democracy, fundamental freedoms and multilateralism.

Background of the India-UK ties

  • Partnership: The historical legacy has its own imprint on the relationship. But what is truly remarkable is the broad range of partnerships that have evolved between the two countries, transcending trade, investment and strategic affairs.
  • Close ties: This broader partnership between the world’s fifth and sixth largest economies has its foundations on three critical aspects: education, common law system and the increasingly influential role and impact of the Indian diaspora in the UK.
  • Shared values: The India-UK partnership is based on shared values, respect for the rule of law and common law, and institutional integrity protected by democratic institutions in the both the countries.

What progress has been made in the India-UK relationship?

1.Economic: During 2019-20, trade between the two countries stood at US$ 15.45 billion with the balance in favor of India. Between April 2021-February 2022, Indian exports to the UK stood at US$ 9.4 billion (2.5% of India’s exports). The imports in the corresponding period were US$ 6.59 billion (1.2% of India’s imports). There is a scope for significant improvement. Both countries expect that the bilateral trade can reach US$ 100 billion by 2030.

2.Defense and Security: India and the UK signed the Defence and International Security Partnership (DISP) in November 2015. It provides a strategic roadmap and direction to the evolving India-UK Defence Relations. At present some 70 companies in the UK supply goods for aircraft and related equipment besides supporting platforms like the Jaguar, Mirage and Kiran aircraft.

3.Indian Diaspora: Around 1.5 million people of Indian origin live in Britain. Indian diaspora are making significant contributions to the British Society. This includes 15 Members of Parliament, three members in Cabinet, and two in high office as Finance and Home Ministers.

4.Education: The UK-India Education and Research Initiative (UKIERI) was launched in 2005. A new ‘UKEIRI Mobility Programme: Study in India’ was also launched in 2019. Under this Britain’s universities collaborate with Indian partners and send UK students to India.

5.Health: The successful partnership between Oxford University, AstraZeneca and SII on COVID-19 vaccine demonstrated the potential of Indian and UK expertise working together to solve international challenges. The two sides are also working on pandemic preparedness, Antimicrobial Resistance (AMR), digital health, Ayurveda and alternative medicines, as well as health worker mobility.

What is the significance of India-UK Relationship?

1.Regional and global issues of mutual interest: A healthy relationship between the two is imperative for enhancing cooperation in the Indo-Pacific, Afghanistan, UNSC, G20 and Commonwealth. For instance, India welcomed the UK’s accession in the Indo-Pacific Ocean’s Initiative under the Maritime Security pillar.

2.Tackling Climate Change: The cooperation between them can be helpful to achieve the goals of the Paris Agreement and in implementing the Glasgow Climate Pact. For instance, the countries have agreed to work for early operationalisation of the Global Green Grids-One Sun One World One Grid Initiative (OSOWOG) under ISA. They are also working on the IRIS platform under CDRI which was jointly launched by India and UK at COP26.

3.Supporting 3rd World Countries: Through the Global Innovation Partnership, India and UK have agreed to co-finance up to £ 75 million to support the transfer and scale up of climate smart sustainable innovations to third countries. The novel GIP Fund created under this Partnership will also aim to raise additional £ 100 million from the market to support Indian innovations.

3.Strategic Considerations: India can engage with the UK to counter China’s rise in the Indian Ocean Region. The UK on other hand can use India as an alternative destination to China and its companies can invest in India as part of China plus one strategy. It is the business strategy to avoid investing only in China and diversify business into other countries.

Challenges in India-UK relations

1.BREXIT

  • Impact on Diaspora– Many members of Indian Diaspora in Britain had voted against BREXIT because it is likely that Indian IT Professional in Britain will face tough competition when UK will open up its border for more skilled migration.
  • Impact on Indian Companies in UK– A hard Brexit would inevitably impact more than 800 Indian companies in UK in crucial sectors of British economy Indian. But data has shown that companies are increasing investments in the UK and creating many thousands of new jobs. This demonstrates that, Brexit or no Brexit, India supports Britain.
  • Impact on India-EU Relations –With €72.5 billion worth of India-EU trade and €19.4 billion of India UK trade at stake, all partners needed to think through this issue carefully in the business and commercial context. Brexit seems to be a challenge to the India EU strategic partnership but India would need to learn to manage its relations with the EU without UK
  • Impact on Trade–Forging a Free Trade Agreement with India will not be a priority for UK as it leaves EU. Instead, Britain would initially focus on tackling existing barriers to trade. But India should grab the opportunity to fill the trade gap in UK, post-Brexit.

2.Visas and Immigration

  • Illegal Migration: There are more than 1 lakh illegal Indian immigrants in UK. Britain has started putting pressure on Indian government to ensure that Indians who have no right to remain in UK be sent back to India
  • Latest Measures: On the other hand, a white paper on post-Brexit visas and immigration strategy has been unveiled. It is expected to benefit Indian students and professionals, with a focus on skills rather than country of origin. An annual cap of 20,700 on the number of skilled work visas issued will also be removed.

3.Terrorism

  • In the context of Brexit, unlike the United States’ contemporary view, India continues to be hyphenated with Pakistan in London’s outlook.
  • India states the fact that bilateral relations went beyond the economic realm to issues such as security and terrorism were not being heeded in Britain, despite continuous efforts by India over the past decades.

4.Totalization agreement

  • The UK government has also made it mandatory for people to pay a health care surcharge as part of their immigration application.
  • When employees are there for a short term as part of their work, it is important that they get to keep their hard-earned money rather than giving UK thousands of pounds of free money as social security taxes.
  • Therefore, it is important for UK and India to sign the totalization agreement at the earliest.
  • The totalization agreement with the UK would have exempted Indian professionals who are working for a certain period of time in the UK from paying those social security taxes if they are paying such taxes in India.

Way forward

  • The historical baggage also needs to be addressed cooperatively to diminish the possibility of hindrance in future cooperation.
  • The India-United Kingdom are dynamic democracies and the world’s leading economies with impressive advancements in human resources, manufacturing, innovation, research, education, space, defence, green technologies, and clean energy, among other areas.
  • This relationship can be utilized for the betterment of the fields and more collaborations should be undertaken.

Conclusion

  • As we celebrate the historic collaboration between the UK and India in producing the Covishield vaccine, and look forward to the much-awaited signing of the bilateral Free Trade Agreement, we should not lose sight of the tremendous power that transnational university-wide collaborations can leverage in the accord. Education, research and knowledge partnership ought to become the centre-piece of the India-UK relationship at 75, as we move forward.

Mains question

Q.Analyse India-UK bilateral relations with scope of upscaling and challenges they need to overcome .

 

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Deciding the terms of debate on freebies, subsidies and compensation

op-ed snap | Governance | Mains Paper 2: Government Scheme/Policies
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Debate on subsidies

Context

The Reserve Bank of India, in a report published in June, linked the precarious state of state finances to “freebies”, particularly power subsidies, and last week, the Supreme Court, waded into the debate, recommending the creation of an expert body to examine the matter.

Political, economic and institutional context

  • The determination of what is a good or bad freebie is and always will be a political choice.
  • A constructive debate must necessarily locate itself in the underlying political, economic and institutional context in which these so-called freebies are a feature of our electoral politics.
  • In the Public Interest Litigation filed in the Supreme Court, the petitioner has argued that “irrational freebies… is analogous to bribery”.
  • Commodification of electoral process: The problem with this framing is that it commodifies the electoral process and strips voters of their agency.
  • Voters, in this framing, are passive, unsophisticated actors who can be bought and therefore there is a need to be vigilant.
  • The honourable court had gone a step further, arguing for an expert, independent body, rather than Parliament, to tackle the issue.
  • This is judicial overreach and it privileges “experts” over legitimate democratic negotiation and strikes at the core of the political bargain.
  • Politics is central to welfare, not experts.

Economic context

  • In that spirit, a debate on the merits and demerits of freebies is important but this debate cannot be divorced from the economic context.
  • India’s structural transformation, particularly since 1991, has been slow and unique.
  • Despite abundant low-skilled labour, our growth trajectory has mostly skipped manufacturing, growing instead on the back of a far smaller, high-skilled services sector.
  • Consequently, as economist Amit Basole has shown the bulk of jobs our economy generated even in its peak growth years were in the largely informal, low value add construction sector.
  • The distributional consequences of this have been significant.
  • Under-employment and low inter-generational mobility have been persistent features of the Indian economy resulting in deep inequalities.
  • Growth lifted a large population out of poverty.
  • However, as the World Bank data show, most of those who escaped poverty between 2005-2012 moved into the vulnerable group — one income shock away from falling below the poverty line.
  • Somewhat reassuringly, democracy created pressure on our politics to respond to these economic failures.
  • It is in this context that the demand for so-called freebies has found legitimate place in our democracy.

Challenges

  • While democratic pressures led to the halting creation of limited social protection in the form of PDS and MGNREGA, they did not translate into investments in core public and merit goods — health and education being the most critical.
  • It is these accumulated failures that have created the new political logic that we confront today.
  • A logic where welfare freebies are being offered to compensate citizens for what economic growth has failed to do.

Conclusion

The answer does not lie in rapping state governments on the knuckles for being profligate. It lies in building a renewed democratic consensus on our economic and institutional growth path.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Women empowerment issues – Jobs,Reservation and education

How to bring Indian women into the workforce?

| Indian Society | Mains Paper 3: Issues relating growth and development, employment
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Labour force participation rate (LFPR)

Mains level: Women's partificaption in workforce

Fewer than one in five Indian women are in the labour force. Four out of five are neither working nor looking for work.

Why in news?

  • India has one of the world’s lowest female labour force participation rates (LFPR).
  • This means the productive potential of half of the population goes unutilized.

Why women’s LFPR is so low in India?

  • There are many reasons:
  1. A lack of demand for women workers;
  2. Poor working conditions including low wages,
  3. Safety concerns and exploitation;
  4. Girls studying longer; migration;
  5. Nuclearization of families where there are fewer women to share domestic responsibilities; and
  6. Middle-income effect is where women stop working because the household has enough income.
  • The root of much of this is deep-set patriarchy and neglect for women’s claim to their equal place in a man’s world.

Why enhancing women’s LFPR is critical?

  • Research and experience highlight that when women have money, they spend it on the well-being of their families.
  • From Brazil’s Bolsa Familia to the Pradhan Mantri Garib Kalyan package for women with Jan Dhan accounts, policymakers have tried to reap the benefits of putting money in women’s hands.
  • One way to do this is to ensure that more women have jobs, higher wages, and equal pay.

What is needed to improve women’s employment?

  • Persistent effort must be directed toward community sensitization to root out patriarchal social norms.
  • In addition to enforcing existing regulations like minimum wages, there must be supportive ancillary policies including childcare; secure transport; lighting; safety at work; and quotas in hiring, corporate boards, and politics  to  foster  more  women  in  leadership.

What obstacles do we confront?

  • Correcting asymmetries of power is hard, especially when it entails changing convention.
  • Men who are blind to their privilege, or will be forced to share their privileges, will resist change.
  • Engendered discrimination results in a lack of labour market demand for women workers.
  • This is visible in policies such as honorariums instead of wages for Anganwadi and Asha workers.
  • It is also evident from over-reliance on home-based work for women, on and offline, instead of doing the hard work to ensure equal opportunity, outcomes, and real choice.

What happens if we don’t act?

  • A concerted effort to advance gender equity must be a central priority over the next 25 years.
  • Evidence shows that economic disempowerment of women can result in losses of 10% of GDP in industrialized economies and over 30% in South Asia and in the Middle East and North Africa.
  • India’s GDP could grow by nearly ₹3 trillion if women were brought into the labour market and given access to formal, ‘decent’ work opportunities.

Way forward

  • If we improve women’s labour force participation, not only do we harness the massive productive potential of half of the population, but their earnings will yield enormous dividends for the future of the country and economy.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

Govt incurs revenue loss of ₹1.84 lakh crore

| Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Public Estimates Committee

Mains level: Revenue loss to govt

The opposition has questioned the government over the corporate tax cut that led to a revenue loss of ₹1.84 lakh crore to the public exchequer as per a report of the Parliamentary Committee on Estimates.

Why in news?

  • The Public Estimates Committee found such a huge revenue loss for the government.
  • The middle class was charged at a peak tax rate of 30% against 22% for the corporates. Quiet antithetical!
  • The centre on the other hand has repeatedly claimed that the corporate tax cut would help increase tax collection.

What is Corporate Tax?

  • Domestic as well as foreign companies are liable to pay corporate tax under the Income-tax Act.
  • While a domestic company is taxed on its universal income, a foreign company is only taxed on the income earned within India i.e. is being accrued or received in India.
  • For the purpose of calculation of taxes under Income tax act, the types of companies can be defined as under:
  1. Domestic Company is one which is registered under the Companies Act of India and also includes the company registered in the foreign countries having control and management wholly situated in India. A domestic company includes private as well as public companies.
  2. Foreign Company is one which is not registered under the company’s act of India and has control & management located outside India.

Why has the government slashed Corporate Tax?

  • The corporate tax cut is part of a series of steps taken by the government to tackle the slowdown in economic growth since the start of pandemic.
  • The most immediate reason behind the tax cut may be the displeasure that various corporate houses have shown against the government’s policies.
  • Many investors, for instance, were spooked by the additional taxes on them that were announced by the government during the budget in July and began pulling money out of the country.
  • The government hoped that the new, lower tax rates will attract more investments into the country and help revive the domestic manufacturing sector which has seen lackluster growth.

Why Corporate Tax?

  • The corporate tax rate is a major determinant of how investors allocate capital across various economies.
  • So there is constant pressure on governments across the world to offer the lowest tax rates in order to attract investors.
  • Tax cuts, by putting more money in the hands of the private sector, can offer people more incentive to produce and contribute to the economy.

Impact of the rate cut

  • The present cut in taxes can make India more competitive on the global stage by making Indian corporate tax rates comparable to that of rates in East Asia.
  • At the same time, if it manages to sufficiently revive the economy, the present tax cut can help boost tax collections and compensate for the loss of revenue.
  1. Relief to big companies
  • Big companies got a relief of close to 10 percentage points in the effective tax rate including cess and surcharge.
  1. Enhanced competitiveness
  • India was earlier at disadvantage because of a couple of factors and on top of it was the high corporate tax rate.
  • After this cut, base corporate tax rate in India has become competitive and should help boost investment.

III. Enhanced EoDB

  • Singapore with 17 per cent tax rate, and Vietnam, Thailand, Cambodia and Taiwan with 20 per cent base tax rates are the only countries offering lower rates than India
  • India is now much better than China in terms of rate, transparency, and tax administration so companies can now look at India for setting up new units.

Criticisms of the move

  • Some see the present tax cut simply as a concession to corporate houses rather than as a structural reform that could boost the wider economy.
  • They believe that the current economic slowdown is due to the problem of insufficient demand which cannot be addressed just through tax cuts and instead advocate greater government spending to boost the economy.
  • Others, however, argue that lacklustre demand faced by sectors like automobiles is merely a symptom of supply-side shocks such as the GST that have affected various businesses and caused job losses.
  • If so, tax cuts and other supply-side reforms can indeed help the economy recover from its slump.

Back2Basics: Public Estimates Committee

  • The Committee on Estimates constituted for the first time in 1950, is a Parliamentary Committee consisting of 30 members, elected every year by the Lok Sabha from amongst its Members.
  • The Chairperson of the Committee is appointed by the Speaker from amongst its members.
  • A Minister cannot be elected as a member of the Committee and if a member after selection to the Committee is appointed a Minister, the member ceases to be a Member of the Committee from the date of such appointment.

Term of Office

  • The term of office of the Committee is one year.

Functions

  • The functions of the Estimates Committee are:
  1. to report what economies, improvements in organisation, efficiency or administrative reform, consistent with the policy underlying the estimates may be effected;
  2. to suggest alternative policies in order to bring about efficiency and economy in administration;
  3. to examine whether the money is well laid out within the limits of the policy implied in the estimates; and
  4. to suggest the form in which the estimates shall be presented to Parliament.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

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

Ethanol Blending

| Economics | : Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Ethanol blended petrol (EBP) Program

Mains level: E-vehicles, Green technologies

Prime Minister has announced that India has achieved its target of blending 10% sugarcane-extracted ethanol in petrol, ahead of schedule.

What is ethanol blending?

  • Blending ethanol with petrol to burn less fossil fuel while running vehicles is called ethanol blending.
  • Ethanol is an agricultural by-product which is mainly obtained from the processing of sugar from sugarcane, but also from other sources such as rice husk or maize.
  • Currently, 10% of the petrol that powers your vehicle is ethanol.
  • Though we have had an E10 — or 10% ethanol as policy for a while, it is only this year that we have achieved that proportion.
  • India’s aim is to increase this ratio to 20% originally by 2030 but in 2021, when NITI Aayog put out the ethanol roadmap, that deadline was advanced to 2025.

Why need ethanol blending?

  • Ethanol blending will help bring down our share of oil imports (almost 85%) on which we spend a considerable amount of our precious foreign exchange.
  • Secondly, more ethanol output would help increase farmers’ incomes.
  • India’s net import of petroleum was 185 million tonnes at a cost of $55 billion in 2020-21.
  • A successful ethanol blending programme can save the country $4 billion per annum.

What are first-generation and second-generation ethanols?

  • With an aim to augment ethanol supplies, the government has allowed procurement of ethanol produced from other sources besides molasses — which is first-generation ethanol or 1G.
  • Other than molasses, ethanol can be extracted from materials such as rice straw, wheat straw, corn cobs, corn stover, bagasse, bamboo and woody biomass, which are second-generation ethanol sources or 2G.
  • While inaugurating the Indian Oil Corporation’s (IOC) 2G ethanol plant last week, PM referred to not only the prospect of higher farmer income but also dwelt upon the advantages of farmers selling the residual stubble — left behind after rice is harvested — to help make biofuels.
  • This means lesser stubble burning and therefore, lesser air pollution.

How have other countries fared?

  • Though the U.S., China, Canada and Brazil all have ethanol blending programmes, as a developing country, Brazil stands out.
  • It had legislated that the ethanol content in petrol should be in the 18-27.5% range, and it finally touched the 27% target in 2021.

How does it impact the auto industry?

  • At the time of the NITI Aayog report in June last year, the industry had committed to the government to make all vehicles E20 material compliant by 2023.
  • This meant that the petrol points, plastics, rubber, steel and other components in vehicles would need to be compliant to hold/store fuel that is 20% ethanol.
  • Without such a change, rusting is an obvious impediment.

Are there other alternatives?

  • Auto industry prefer the use of biofuels as the next step, compared to other options such as electric vehicles (EV), hydrogen power and compressed natural gas.
  • This is mainly because biofuels demand the least incremental investment for manufacturers.
  • Even though the industry is recovering from the economic losses bought on by the pandemic, it is bound to make some change to comply with India’s promise for net-zero emissions by 2070.

What are the challenges before the industry when it comes to 20% ethanol blended fuel?

  • Key challenge is the optimisation of engines for higher ethanol blends and the conduct of durability studies on engines and field trials before introducing E20 compliant vehicles.
  • Storage is going to be the main concern, for if E10 supply has to continue in tandem with E20 supply, storage would have to be separate which then raises costs.

Sources for ethanol in India

The plan was to divert its excess sugar production to produce ethanol, 3.5 million tonnes in 2021-22 and 6 million tonnes the next year, in addition to grains like rice, corn, and barley.

  • Using surplus rice: The government’s food department revealed its plans to divert 17 million tonnes of surplus rice from its food stocks of 90 million tonnes to produce ethanol.
  • Sugarcane: This is in addition to the 2 million tonnes of sugar which is already being diverted to produce ethanol.

How would this benefit the country?

  • Cost saving: A successful biofuels programme can save India $4 billion or about ₹30,000 crore every year by lowering import of petroleum products.
  • Emission cut: Ethanol is also less polluting and offers equivalent efficiency at a lower cost than petrol.
  • Biofuel’s policy boost: Rising production of grains and sugarcane and feasibility of making vehicles compliant to ethanol-blended fuel makes its biofuels policy a strategic requirement.
  • Early rollout: Towards this, govt has put in place interest subsidies for distilleries to expand capacity while auto firms have agreed to make compatible vehicles.

What are the unintended effects of the policy?

  • Unsustainability of cash-crops: Increasing reliance on biofuels can push farmers to grow more water-intensive crops like sugarcane and rice.
  • Huge water requirement: Currently use 70% of the available irrigation water, negating some positive impact on the environment of using more ethanol.
  • Food and nutrition security: The move could impact India’s hunger situation by limiting the coverage of the food security schemes.
  • Food inflation: Diversion of mass consumption grains can also push food prices up.

How will it impact crop diversification?

  • Monotonous crops: Although the biofuels policy stresses on using less water-consuming crops, farmers prefer to grow more sugarcane and rice due to price support schemes.
  • Water stress: Growing more of them can lead to an adverse impact in water-stressed areas in states.

What about food security?

  • It is unethical to use edible grains to produce ethanol in a country where hunger is rampant.
  • India is already a poor performer in Global Hunger Index.
  • Although about 80 crore people are now receiving subsidized food grains, calculations show that over 10 crore eligible households are still excluded.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Uniform Civil Code: Triple Talaq debate, Polygamy issue, etc.

Practice of talaq-e-hasan not so improper: Supreme Court

Prelims Only | Indian Society | Mains Paper 1: Role Of Women & Women Organization
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Talaq-e-hasan

Mains level: Triple talaq and related issue

The Supreme Court has prima facie observed that the Muslim personal law practice of talaq-e-hasan is “not so improper”.

What is Talaq-e-hasan?

  • Talaq-e-hasan is a form of divorce by which a Muslim man can divorce his wife by pronouncing talaq once every month over a three-month period.

Why did the apex court say this?

  • The SC Bench said a Muslim woman has the option to divorce by the process of khula by returning the dower (mahr) or something else that she received from her husband or without returning anything.
  • This can be as per agreed by the spouses or Qadi’s (court) decree depending on the circumstances.

Petitioner’s contention

  • The petitioner argued that talaq-e-hasan and other forms of unilateral extra-judicial divorce is an evil plague similar to sati.
  • Talaq-e-hasan is arbitrary, irrational and contrary to Articles 14, 15, 21 and 25 and international conventions on civil rights and human rights, the petition submitted.
  • There should be a gender neutral, religion neutral, uniform grounds of divorce and uniform procedure of divorce for all citizens, it read.
  • The petitioner argued that the practice in question was “neither harmonious with the modern principles of human rights and gender equality nor an integral part of Islamic faith”.
  • The practice discriminates against Muslim women as they cannot resort to it against their husbands.

Why in news?

  • The apex court, while striking down triple talaq in the Shayara Bano case, did not address the issue of talaq-e-hasan.
  • The unilateral practice of divorce was is definitely defies morality.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Wildlife Conservation Efforts

African cheetahs still stuck in transit

Prelims Only | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Asiatic Cheetah

Mains level: Not Much

India’s ambitious project to translocate African cheetahs has missed an unofficial deadline of August 15.

Asiatic Cheetah

  • Cheetah, the world’s fastest land animal was declared extinct in India in 1952.
  • The Asiatic cheetah is classified as a “critically endangered” species by the IUCN Red List, and is believed to survive only in Iran.
  • It was expected to be re-introduced into the country after the Supreme Court lifted curbs for its re-introduction.

Distribution of cheetahs in India

  • Historically, Asiatic cheetahs had a very wide distribution in India.
  • There are authentic reports of their occurrence from as far north as Punjab to Tirunelveli district in southern Tamil Nadu, from Gujarat and Rajasthan in the west to Bengal in the east.
  • Most of the records are from a belt extending from Gujarat passing through Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Jharkhand and Odisha.
  • There is also a cluster of reports from southern Maharashtra extending to parts of Karnataka, Telangana, Kerala and Tamil Nadu.
  • The distribution range of the cheetah was wide and spread all over the subcontinent. They occurred in substantial numbers.
  • The cheetah’s habitat was also diverse, favouring the more open habitats: scrub forests, dry grasslands, savannahs and other arid and semi-arid open habitats.

What caused the extinction of cheetahs in India?

  • The major reasons for the extinction of the Asiatic cheetah in India:
  1. Reduced fecundity and high infant mortality in the wild
  2. Inability to breed in captivity
  3. Sport hunting and
  4. Bounty killings
  • It is reported that the Mughal Emperor Akbar had kept 1,000 cheetahs in his menagerie and collected as many as 9,000 cats during his half-century reign from 1556 to 1605.
  • The cheetah numbers were fast depleting by the end of the 18th century even though their prey base and habitat survived till much later.
  • It is recorded that the last cheetahs were shot in India in 1947, but there are credible reports of sightings of the cat till about 1967.

Conservation objectives for their re-introduction

  • Based on the available evidence it is difficult to conclude that the decision to introduce the African cheetah in India is based on science.
  • Science is being used as a legitimising tool for what seems to be a politically influenced conservation goal.
  • This also in turn sidelines conservation priorities, an order of the Supreme Court, socio-economic constraints and academic rigour.
  • The issue calls for an open and informed debate.

Issues in re-introduction

  • Experts find it difficult whether the African cheetahs would find the sanctuary a favorable climate as far as the abundance of prey is concerned.
  • The habitat of cheetahs is needed to support a genetically viable population.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Railway Reforms

Super Vasuki: India’s longest train

Prelims Only | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Super Vasuki

Mains level: Not Much

The Railways conducted a test run of its longest freight train, Super Vasuki, with 295 loaded wagons carrying over 27,000 tonnes of coal.

Super Vasuki

  • The 3.5-km-long freight train covered the distance of about 267 km between Korba in Chhattisgarh and Rajnandgaon in Nagpur.
  • It was run by the South East Central Railway (SECR).
  • The Railways plans to use this arrangement (longer freight trains) more frequently, especially to transport coal in peak demand season to prevent fuel shortages in power stations.

Feats achieved

  • This is the longest and heaviest freight train ever run by the Indian Railways.
  • The train takes about four minutes to cross a station.
  • The amount of coal carried by Super Vasuki is enough to fire 3,000 MW of power plant for one full day.
  • This is three times the capacity of existing railway rakes (90 cars with 100 tonnes in each) that carry about 9,000 tonnes of coal in one journey.

 

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Finance Commission – Issues related to devolution of resources

fiscal federalism in India

op-ed snap | Polity | Mains Paper 2: Federalism
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Finance Commission

Mains level: Paper 2- Issues with fiscal federalism in India

Context

The centralisation of fiscal powers in India has been blamed for the poor fiscal health of the states.

Centralisation of fiscal powers: A background

  • Jawaharlal Nehru believed that socio-economic inequities could be addressed through the planning process.
  • A degree of centralisation in fiscal power was required to address the concerns of socio-economic and regional disparities.
  • As a result asymmetric federalism is inherent to the Indian Constitution.
  • India was never truly federal — it was a ‘holding together federalism’ in contrast to the ‘coming together federalism,’ in which smaller independent entities come together to form a federation (as in the United States of America).
  • In fact, the Government of India Act 1935 was more federal in nature than the Constitution adopted on January 26, 1950 as the first offered more power to its provincial governments.
  • Historically, India’s fiscal transfer worked through two pillars, i.e., the Planning Commission and the Finance Commission. 
  • But the waning of planning since the 1990s, and its abolition in 2014, led to the Finance Commission becoming a major means of fiscal transfer as the commission itself broadened its scope of sharing all taxes since 2000 from its original design of just two taxes — income tax and Union excise duties.
  •  Today, the Finance Commission became a politicised institution with arbitrariness and inherent bias towards the Union government.
  • Tamil Nadu government constituted a committee under Justice P.V. Rajamannar in 1969, the first of its kind by a State government, to look at Centre-State fiscal relations and recommend more transfers and taxation powers for regional governments.

Declining fiscal capacity of the states

  • 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.
  • 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.
  • While the expenditure of the States has been shooting up, their revenues did not.
  • 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.

Implications of fiscal centralisation in India

  • Use of non-divisive cess: Even the increased share of devolution, mooted by the Fourteenth Finance Commission, from 32% to 42%, was subverted by raising non-divisive cess and surcharges that go directly into the Union kitty.
  •  This non-divisive pool in the Centre’s gross tax revenues shot up to 15.7% in 2020 from 9.43% in 2012, shrinking the divisible pool of resources for transfers to 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.
  • They spend about 25% to 40% as matching grants at the expense of their priorities.
  • These schemes, driven by the one-size-fits-all approach, are given precedence over State schemes, undermining the electorally mandated democratic politics of States.
  • In fact, it is the schemes conceived by States that have proved to be beneficial to the people and that have contributed to social development.
  • Driven by democratic impulses, States have been successful in innovating schemes that were adopted at the national level.
  • The diversion of a State’s own funds to centrally sponsored schemes, thereby depleting resources for its own schemes, violates constitutional provision.
  • Deepening inequality: The World Inequality Report estimates ‘that the ratio of private wealth to national income increased from 290% in 1980 to 555% in 2020, one of the fastest such increases in the world.
  • The poorest half of the population has less than 6% of the wealth while the top 10% nearly grab two-third of it’.
  • India’s tax-GDP ratio has been one of the lowest in the world — 17% of which is well below the average ratios of emerging market economies and OECD countries’ about 21% and 34%, respectively.
  • Its income tax base has been very narrow.
  • Indirect tax still accounts for about 56% of total taxes.
  • Instead of strengthening direct taxation, the Union government slashed corporate tax from 35% to 25% in 2019 and went on to monetise its public sector assets to finance infrastructure.

Conclusion

In sum, India’s fiscal federalism driven by political centralisation has deepened socio-economic inequality, belying the dreams of the founding fathers who saw a cure for such inequities in planning. It has not altered inter-state disparities either.

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

JOIN THE COMMUNITY

Join us across Social Media platforms.

💥UPSC 2026, 2027 UAP Mentorship - June Batch Starts
Talk To Mentor
💥UPSC 2026, 2027 UAP Mentorship - June Batch Starts
Talk To Mentor