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  • How Russia-Ukraine conflict will effect inflation in India

    Context

    With the Russia-Ukraine conflict flaring into a war, global commodity prices, especially that of crude oil and gas, are likely to see a strong surge. This poses a challenge not only for India to contain inflationary pressures but also the world at large.

    The problem of rising inflation

    • At 6 per cent, India’s consumer price index (CPI) inflation crossed the upper limit of RBI’s tolerance band in January 2022.
    • Implications: High inflation inflicts a large “inflation tax” on the general public whose bank savings earn an interest of less than 1 per cent.
    • This is robbing the general public in the name of fuelling growth.
    • India is not impervious to this tendency. Most of the major banks in the country offer interest rates between 3 to 4 per cent to depositors.
    • Both the finance ministry and the RBI are betting on revving up growth, at least for the time being.
    • This is fine as long as they can tame inflation within reasonable limits.
    •  If we want to do justice to the masses on whose deposits the entire banking system hinges, one must ensure positive real rates of interest.

    How to ensure lower rates of inflation

    • Given that food has a weight of more than 45 per cent in CPI in India, understanding the dynamics of food inflation is critical.
    • India imports roughly 60 per cent of its consumption of edible oils, and global prices of edible oils have gone up by more than 50 per cent over the last year.
    • Edible oil inflation in India was touching 35 per cent a few months back.
    • This has come down to 18 per cent after the reduction on import duties.
    • The Union Minister of Commerce has also recently claimed that they have brought down the inflation in pulses by imposing stock limits on traders and by lowering import duties and importing more pulses.
    • The Centre has also imposed stocking limits on domestic oil/oilseed traders. 

    Way forward:  Reform the grain-management-cum-food-subsidy system

    • Stock limit on wheat and rice with FCI:  As on January 1, it is saddled with stocks that are almost four times the buffer stock norms.
    • By unloading the excess grain in the open market, FCI could help in bringing down food inflation substantially as rice and wheat have a high weightage in CPI.
    •  In the name of the poor, India runs one of the largest but perhaps the most inefficient and corrupt public distribution system (PDS) in the world.
    • Stop competitive populism: Every political party promises freebies before elections.
    •  Unless the Election Commission comes down heavily on such promises or a public interest litigation is filed in the Supreme Court to stop this competitive populism, Indian policymaking cannot be growth-oriented.
    • Reduce the population coverage under PDS:  India’s food subsidy policy covers 67 per cent of the population and distributes rice and wheat at more than 90 per cent subsidy under the National Food Security Act of 2013.
    • Raise productivity: This should be combined with taking giant strides to raise productivity and producing more nutritious food while protecting the environment.
    • Focus on R&D in agriculture: It’s well-known agri-R&D gives a much higher return in terms of promoting growth with competitiveness, and reduces poverty by making food cheaper and controlling food inflation

    Conclusion

    It is important to reform the grain-management-cum-food-subsidy system to release precious resources for growth of agriculture.

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  • 28th February 2022| Daily Answer Writing Enhancement(AWE)

    Topics for Today’s questions:

    GS-1     Modern Indian history from about the middle of the eighteenth century until the present – significant events, personalities, issues.

    GS-2      Bilateral, regional and global groupings and agreements involving India and/or affecting  India’s interests.

    GS-3    Conservation, environmental pollution and degradation, environmental impact assessment.

    GS-4    Probity in Governance: Concept of public service; Information sharing and transparency in government, Right to Information, Codes of Ethics, Codes of Conduct, Citizen’s Charters, Work culture, Quality of service delivery, Utilization of public funds, challenges of corruption.

    Question 1) 

    Q.1 Trace the evolution of British policy towards the princely states in India. How did the freedom movement impact the people of these princely states? (15 Marks)

     

    Question 2)

    Q.2 What are the implications of the Ukraine crisis for the West-led global order? Also elaborate on the implications for the Indo-Pacific region.(15 Marks)

    Question 3)

    Q.3 How does plastic waste harm the environment? Suggest the approaches to deal with the problem.

    Question 4)  

    Q.4 What do you understand by social capital? Explain its relationship with good governance. (10 Marks)

     

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  • Natural farming

    Context

    In her budget speech, Finance Minister Nirmala Sitharaman reaffirmed the Centre’s commitment to natural, chemical-free, organic and zero-budget farming.

    No specific allocation in Budget

    • No specific allocations have been made to the Ministry of Agriculture and Farmers Welfare.
    •  In fact, currently-operational schemes such as the Paramparagat Krishi Vikas Yojana and the National Project on Organic Farming did not find any mention in the budget.
    • The Rashtriya Krishi Vikas Yojana, which has received a 4.2-times (year-on-year) larger allocation of Rs 10,433 crore, will earmark some funds for the on-ground implementation of chemical-free farming.

    Suggestions

    • As the ministry plans the fund utilisation under RKVY, here are eight suggestions to scale up chemical-free farming.
    • 1] Focus on rainfed area: focus on promoting natural farming in rainfed areas beyond the Gangetic basin.
    • Home to half of India’s farmers, rainfed regions use only a third of the fertilisers per hectarecompared to the areas where irrigation is prevalent.
    • The shift to chemical-free farming will be easier in these regions. 
    • 2] Crop insurance:  enable automatic enrolment of farmers transitioning to chemical-free farming into the government’s crop insurance scheme, PM Fasal Bima Yojana (PMFBY).
    • 3] Promote microenterprise producing inputs:  promote microenterprises that produce inputs for chemical-free agriculture.
    • An often-cited barrier by farmers in transitioning to chemical-free agriculture is the lack of readily available natural inputs.
    • 4] Leverage NGOs:  leverage NGOs and champion farmers who have been promoting and practising sustainable agriculture across the country.
    • CEEW research estimates that at least five million farmers are already practising some form of sustainable agriculture and hundreds of NGOs are involved in promoting them.
    • 5] Upskill workers: Beyond evolving the curriculum in agricultural universities, upskill the agriculture extension workers on sustainable agriculture practices.
    • 6] Leverage community institution: Sixth, leverage community institutions for awareness generation, inspiration, and social support. In other words, the government should facilitate an ecosystem in which farmers learn from and support each other while making the transition.
    • 7] support monitoring and impact studies: Such assessments would ensure an informed approach to scaling up sustainable agriculture.
    • 8] Millet promotion: Dovetail the ambition on millet promotion with the aim to promote sustainable agriculture.
    • Instead of the two remaining in silos, why not promote chemical-free millets and create awareness about both?

    Conclusion

    India’s food system needs a holistic transformation in demand, production, and supply chains. Let’s hope 2022-23 is the inflection point when we convert intent into action in our journey towards achieving a chemical-free food system.

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  • Plastic waste Management

    Context

    The UN Environment Assembly meeting in February-March 2022 may finalise a way forward for global cooperation on the emissions of plastic waste into the aquatic ecosystems.

    Plastic as a consumption externality

    • Plastics represent an example of a consumption externality, which involves many people, rather than a production externality, which involves one or multiple firms.
    • Why is it challenging to address? Consumption externality is more challenging to address, as it is difficult to differentiate the behaviour of consumers.

    2 Approaches and issues with them

    • Imposing the cost of the harm on all consumers may not yield efficient solutions.
    • As the number of consumers is high, the cost of controlling them is also high.
    • 1] Banning plastic: This approach promotes a sustainable environment, intergenerational equity, saves marine and wildlife ecosystems, and restores soil quality.
    • But it also causes inconvenience for consumers, increases substitution cost, and creates unemployment shocks as it affects the production of plastics, leading to less economic activity, less income generation and finally less employment.
    • 2] Tax on plastic: Other key aspects that may be considered for global cooperation are the options if plastics are banned, the effectiveness of imposing tax and the potential problems with both these approaches.
    • It is difficult to identify the exact tax to be imposed, which may depend on country-specific circumstances.

    Way forward

    1] Command and control approach

    • The environment regulation for plastics may include a ‘command and control’ approach, and fiscal reforms like eco-taxes or subsidies.
    • The efficiency of such a regulation depends on its architecture — how well it is planned, designed and executed. It should be credible, transparent and predictable.

    2] Fiscal reforms like eco-taxes or subsidies

    • Eco-taxes may be imposed in the various stages of production, consumption or disposal of plastics.
    • Pollution due to plastics may happen during the production stage.
    • That is the logic for imposing tax on polluting inputs, as it forces the producer to look for cleaner substitutes.
    • Pollution also occurs during the consumption stage, and thus an eco-tax is recommended to discourage consumption.

    3] Estimating the social cost at the local and global level

    • Social cost should be evaluated differently in the local/regional and global contexts.
    • While health and hygiene are predominant considerations in the former case, climate change is the predominant consideration in the latter.
    • Ideally, eco-tax rates on plastics ought to be equal to the marginal social cost arising from the negative externality associated with production, consumption or disposal of goods and services.

    Comprehensive policy measures

    • Comprehensive policy measures against plastics may generally involve three complementary activities:
    • 1] The removal of existing taxes and subsidies that have a negative environmental impact.
    • 2] Taking into account the different types or grades of plastics.
    • 3] Restructuring existing taxes in an environmentally friendly manner.
    • Other suggestions include: Promoting multiple use of plastics through better waste management,
    • Educating the public on the harmful use of plastics,
    • Providing subsidy for research and development activity for substitute development.
    • Appropriate disposal mechanisms and waste management and use of waste for constructive usage like roads.

    Conclusion

    The key aspects that may be considered for global cooperation are the options if plastics are banned, the effectiveness of imposing tax and the potential problems with both these approaches.

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  • Need for integrated approach to power sector

    Context

    Electricity and development sectors need a more integrated approach to achieve the vision set forth in instruments such as the Union Budget that guide policy implementation at other administrative levels.

    Reduction in allocation

    • While the health sector witnessed a 16% increase in estimated Budget allocations from last year, medical and public health spending was reduced by 45% for 2022-23.
    • Budget estimates demonstrate intent, but the proof of the pudding lies in the actual expenditure which reiterates the need for greater attention to be paid to our health and education sectors.
    •  While the health sector was allocated ₹74,602 crore in 2021-22, the Government exceeded its spending by over ₹5,000 crore more (₹80,026 crore) on health, signalling a spike in demand, likely propelled by the ongoing COVID-19 pandemic.
    • Given this scenario, a less than ₹1,000 crore increase in the Budget Estimate (₹86,606 crore) in 2022-23 when compared with last year’s Revised Estimates (₹85,915 crore) appears incongruent with the Government’s aim of providing quality public health care at scale.

    Role of reliable energy

    • It is widely recognised that the availability of reliable electricity supply can improve the delivery of health and education services.
    •  74% of the targets of the Sustainable Development Goals are interlinked with universal access to reliable energy.
    •  Its reliability in terms of the number of hours that electricity is available steadily without any voltage fluctuations also plays a significant role in delivering services.
    •  Sometimes, multiple policies can complement each other to achieve the larger sectoral objectives.
    • For example, in Assam, the Energy Vision document that lays out the electricity and development outcomes is to be applied in tandem with the Solar Energy Policy 2017 that operationalises this vision via an action plan.

    Reasons for lack of integration of electrification in the development sector

    • The lack of integration of electrification requirements in development sector policy documents may be partly due to lack of information about electricity and development linkages, poor coordination mechanisms between the sectors and departments, and poor access to appropriate finance.
    • Even while electricity is considered, it is to the limited extent of being a one-time civil infrastructure activity rather than a continuous feature necessary for the day-to-day operations of these services.

    Way forward

    •  To successfully integrate electricity provisioning and maintenance, policy frameworks should include innovative coordination and financing mechanisms.
    • These mechanisms, while developing clear compliance mandates, must also allow sufficient room for flexibility to respond to local contexts.
    • Providing reliable electricity for health centres and schools should be the responsibility of centralised decision-making entities at the State or national level.
    • As India has witnessed with other cross-sectoral and centralised statistical, planning, and implementation data governance, diverse contexts must support oversight mechanisms that ensure data credibility.
    • Finance is largely unavailable to ensure reliable electricity supply to schools and health facilities.
    • Some directives, such as those governing the use of untied funds, need to be more flexible in allowing these facilities to prioritise providing reliable and sustainable electricity.

    Conclusion

    A successful policy outcome might be dependent on several invisible aspects that do not get the attention and funding necessary to aid in successful policy delivery. Electricity is one of them.

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  • 28th February 2022 | Prelims Daily with Previous Year Questions

    [WpProQuiz 913]

    [WpProQuiz_toplist 913]

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  • 26th February 2022 | Prelims Daily with Previous Year Questions

    [WpProQuiz 912]

    [WpProQuiz_toplist 912]

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  • The anatomy of India’s Ukraine dilemma

    Context

    Late last week, India abstained from a United Nations Security Council (UNSC) resolution which called for condemning the Russian military action against Ukraine.

    Understanding India’s position on the Ukraine issue

    •  New Delhi has taken a subtle pro-Moscow position on the question of Russian attacks against Ukraine.
    • A geopolitical necessity: India’s Russia tilt should be seen not just as a product of its time-tested friendship with Moscow but also as a geopolitical necessity.
    • There are understandable reasons for India’s (subtle) pro-Russia position: an aggressive Russia is a problem for the U.S. and the West, not for India.
    •  North Atlantic Treaty Organization (NATO) expansion is Russia’s problem, not India’s.
    • China problem: India’s problem is China, and it needs both the U.S./the West and Russia to deal with the “China problem”.
    • Neighbouring China as the rising superpower and Russia as its strategic ally challenging the U.S.-led global order at a time when China has time and again acted on its aggressive intentions vis-à-vis India, and when India is closest to the U.S. than ever before in its history, throws up a unique and unprecedented challenge for India.
    • There is an emerging dualism in contemporary Indian strategic Weltanschauung: the predicament of a continental space that is reeling under immense pressure from China, Pakistan and Taliban-led Afghanistan adding to its strategic claustrophobia; and, the emergence of a maritime sphere which presents an opportunity to break out of the same.

    Why India needs to balance relations with Russia and the US

    • Relations with Russia to manage continental challenges: New Delhi needs Moscow’s assistance to manage its continental difficulties be it through defence supplies, helping it ‘return’ to central Asia, working together at the Shanghai Cooperation Organization (SCO) or exploring opportunities for collaboration in Afghanistan.
    • Relations with US to manage maritime challenges: When it comes to the vast maritime sphere, the Indo-Pacific to be precise, Russia is not of great consequence to India.
    • That is where its American and western partners come into play. India is simply not in a position to address the China challenge in the maritime space without the active support of American and western navies and, of course, the Quad.
    • This unavoidable dualism in the contemporary Indian strategic landscape necessitates that India balances the two sides.

    Implications of war on Ukraine for India

    • 1] It will embolden China: Russian action in Ukraine dismissing the concerns of the rest of the international community including the U.S. will no doubt embolden China and its territorial ambitions.
    • 2] Sanctions on Russia will impact India’s defence cooperation: The new sanctions regime may have implications for India’s defence cooperation with Moscow.
    • 3] Russia-China axis: The longer the standoff lasts, the closer China and Russia could become, which certainly does not help India.
    • 4] Focus will move away from Indo-Pacific: The more severe the U.S.-Russia rivalry becomes, the less focus there would be on the Indo-Pacific and China, which is where India’s interests lie.

    Foreign policy challenge for India

    • Position of geopolitical vulnerability: India’s responses to the Russian aggression on Ukraine underline the fact that India is operating from a position of geopolitical vulnerability.
    • Going forward, India’s ability to be a “swing state”, “major power” or a “leading power” stands diminished.
    • There will be more middle-of-the-road behaviour from New Delhi rather than resolute positions on global strategic developments.
    • Interests over principles: India’s position also shows the unmistakable indication that when it comes to geopolitics, New Delhi will choose interests over principles.
    • A careful reading of India’s statements and positions taken over the past few days also demonstrates a certain amount of discomfort in having to choose interests over principles.
    • There is perhaps a realisation in New Delhi that a dog-eat-dog world, where rules and good behaviour do not matter, does not help India in the long run either.
    • Mastering the art of balancing extremes: Going forward, if tensions between Russia and the West persist, balancing extremes will be a key feature of Indian diplomacy.
    • Even though New Delhi abstained from voting on it (thereby siding with Moscow), it made its unhappiness about the Russian action clear in the written note.
    • Sticking to the principle of strategic autonomy: New Delhi’s response to the recent crisis, especially its “explanation of vote” at the UNSC indicates a careful recourse to the principle of strategic autonomy: India will make caveated statements and will not be pressured by either party.

    Conclusion

    India’s indirect support to the Russian position is not a product of Russian pressure but the result of a desire to safeguard its own interests.

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