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Type: Explained

  • Freedom of Speech – Defamation, Sedition, etc.

    On ANI’s defamation suit against Wikipedia

    Explained | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Cause of fack information;

    Why in the News?

    The news agency ANI filed a defamation lawsuit against the Wikimedia Foundation, over a description on the site that portrayed the agency as a promoter of government propaganda.

    Why has the news agency ANI filed a lawsuit against the Wikimedia Foundation?

    • ANI has filed a defamation lawsuit against the Wikimedia Foundation over the description of the agency on Wikipedia. The page accused ANI of being a “propaganda tool” for the Indian government, citing sources like The Diplomat, EU DisinfoLab, and The Caravan magazine.
    • ANI claims that these descriptions are defamatory and is seeking ₹2 crore in damages from the Wikimedia Foundation.
    • Wikipedia’s policies emphasize neutrality and reliable sourcing, though it’s often accused of liberal bias. OpIndia claims the site propagates liberal “propaganda” and has criticised the site’s description of the riots for allegedly downplaying attacks by Muslim rioters.
    • Wikipedia has faced government criticism for vandalism, such as on Arshdeep Singh’s page. It lacks a blocking procedure under Indian law, unlike social media platforms.

    What has the Delhi High Court asked the Foundation to reveal?

    • The Delhi High Court ordered the Wikimedia Foundation to provide details about the users who edited ANI’s Wikipedia page. Specifically, the court asks for information about three users involved in the contentious edits.
    • The suit invokes provisions of the Information Technology Act, particularly Section 79, which outlines the responsibilities of intermediaries like Wikipedia.
      • Section 79 provides a framework for the exemption from liability for intermediaries in India regarding third-party content.
    • Justice Navin Chawla has issued a notice to Wikipedia and scheduled the next hearing for August 20, 2024. The court has acknowledged the right of Wikipedia to express opinions but will examine whether the claims made about ANI are backed by facts.

    Will Wikipedia be blocked in India?

    • During the case hearing, the Delhi High Court judge verbally threatened to order the Indian government to block Wikipedia if the Wikimedia Foundation did not comply with its request for user information.
    • Although Wikipedia has faced censorship in countries like China and partial censorship in Russia, it has not yet been blocked in India. However, the current legal proceedings could lead to a similar action if compliance is not met.

    Conclusion: The Indian government should ensure that any legal actions respect user privacy rights while compelling platforms like Wikimedia to cooperate with legitimate legal requests for information, balancing transparency with data protection laws.

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    The role of district agro-met offces in supporting farmers 

    Explained | Agriculture | Mains Paper 3: E-Technology In The Aid Of Farmers

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Challenges to Indian agriculture;

    Why in the News?

    Last week, PTI reported that the India Meteorological Department (IMD) plans to reintroduce District Agro-Meteorology Units (DAMUs) as part of the Gramin Krishi Mausam Sewa (GKMS) scheme.

    Background: In 2018, the IMD set up 199 District Agro-Meteorology Units (DAMUs) in collaboration with the Indian Council of Agricultural Research to provide sub-district level agricultural advisories based on weather data. However, these DAMUs were shut down in March following an order from the IMD.

    What are Agro-Meteorological Advisories?

    • Agro-meteorological advisories provide farmers with critical information about weather conditions that affect agricultural practices. This includes forecasts related to rainfall, temperature, and wind speeds, which are crucial for planning sowing, harvesting, irrigation, and the use of fertilizers and pesticides.
    • These advisories are particularly important for small and marginal farmers, who make up about 80% of India’s farming community and primarily rely on rain-fed agriculture.
    • The advisories are disseminated in local languages, ensuring accessibility. They are shared through various channels, including text messages, WhatsApp groups, newspapers, and direct communication from DAMU staff.
    • By providing timely weather information, these advisories help farmers plan their agricultural activities effectively and ultimately contribute to enhancing crop yields and farmers’ incomes.

    Why Did the Government shut down the District Agro-Met Units (DAMUs)?

    • Agro-meteorological data was automated: The closure of DAMUs was influenced by claims from the NITI Aayog that agro-meteorological data was automated, which undermined the role of DAMU staff in preparing and disseminating agricultural advisories. This misrepresentation led to recommendations for privatization and monetization of the services previously offered for free.
    • Financial and Administrative Issues: The decision to shut down DAMUs was attributed to ongoing financial challenges, including delayed salary disbursements for DAMU staff, and administrative issues that hampered the program’s effectiveness.
    • Shift Towards Centralization: The government suggested transitioning to a centralized model for weather data collection and advisory services, which could potentially reduce the localized support that DAMUs provided to farmers.

    Way forward: 

    • Re-establish Local Support: Reinstate District Agro-Meteorology Units (DAMUs) to provide localized, targeted weather advisories and support, ensuring that small and marginal farmers receive timely, relevant information.
    • Improve Data Integration and Communication: Enhance the integration of automated weather data with localized advisory services, and streamline communication channels to reach farmers through various platforms effectively.

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  • Road and Highway Safety – National Road Safety Policy, Good Samaritans, etc.

    On the challenges to road safety in India  

    Explained | Economics | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Road safety in India;

    Why in the News?

    The India Status Report on Road Safety 2024 highlights India’s slow progress in reducing road fatalities and stresses the need for tailored approaches to improve road safety.

    What does the ‘India Status Report on Road Safety 2024’ state?

    • The report highlights India’s limited success in reducing road accident fatalities, despite the country’s efforts in other sectors. The report stresses that most Indian States are not on track to meet the UN Decade of Action for Road Safety goal to halve traffic deaths by 2030.
      • It emphasizes the connection between road construction, mobility, and safety,
    • Road traffic injuries remain a significant public health challenge. In 2021, these injuries were the 13th leading cause of death and the 12th leading cause of health loss (measured in Disability-Adjusted Life Years or DALYs).
    • The report reveals significant disparities in road traffic death rates across Indian States, with vulnerable groups such as motorcyclists and truck-involved crashes being particularly high.

    Note: The report used FIR data from six States and audits of State compliance with Supreme Court directives on road safety.

    Which States have the lowest rates of road accident deaths?

    • West Bengal and Bihar have the lowest rates of road accident deaths, with 5.9 per 1,00,000 people in 2021

    What is a crash surveillance system?

    • A crash surveillance system is a national-level database that records detailed data on road accidents, including specific variables like the mode of transport of victims.
    • India lacks such a system, with current data being aggregated from police station records, limiting the depth of analysis and effectiveness of interventions.
    • Implementing this system would enhance road safety management and allow for better evaluation of policy interventions.

    Way forward: 

    • Establish a National Crash Surveillance System: Implement a comprehensive database for road accidents to enable detailed analysis and improve targeted interventions for road safety. This would enhance data accuracy and guide more effective policies.
    • Prioritize State-Specific Road Safety Strategies: Tailor interventions to the unique challenges of each State, focusing on vulnerable road users like motorcyclists and improving safety infrastructure, such as helmet usage, traffic calming, and trauma care facilities.

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  • Waste Management – SWM Rules, EWM Rules, etc

    India generates highest plastic pollution in world 

    Explained | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Paris Agreement (2015);

    Mains level: Plastic pollution;

    Why in the News?

    A study published last week in the journal Nature revealed that India is responsible for contributing one-fifth of the world’s plastic pollution.

    What did the Paris Agreement (2015) and the UN Environmental Assembly (2022) say on plastic pollution? 

    • Paris Agreement (2015): Primarily on climate change, the Paris Agreement doesn’t directly address plastic pollution. However, the agreement encourages countries to reduce emissions and promote sustainable practices. 
    • UN Environmental Assembly (2022): The UNEA agreed in 2022 to develop the first legally binding international treaty on plastic pollution by the end of 2024. Objectives: The treaty aims to curb plastic pollution through measures like phasing out single-use plastics.

    Challenges in Implementation

    • Lack of Cohesive Policies: There is often a disconnect between global agreements and national policies, leading to fragmented approaches that fail to address the scale of plastic pollution effectively.
    • Infrastructure Deficiencies: Many countries, particularly in the Global South, lack the necessary infrastructure for waste management, leading to high levels of unmanaged plastic waste. Inadequate public services and resources exacerbate this situation.
    • Economic Dependencies: Countries reliant on plastic production for economic growth may resist regulations aimed at reducing plastic use, complicating the implementation of international agreements.

    Why do we need more research on this issue? 

    • Understanding Environmental Impact: Comprehensive studies are needed to elucidate the sources and impacts of plastic pollution, including its relationship with climate change and public health.
    • Informing Policy Development: Research can guide policymakers in creating effective strategies for reducing plastic waste and improving waste management systems, ensuring that solutions are tailored to specific regional challenges.
    • Health Implications: As microplastics increasingly infiltrate ecosystems and human bodies, understanding their health impacts is critical for public health initiatives and regulatory frameworks.

    Way forward: 

    • Strengthen Global Plastic Reduction Targets: Implement binding international commitments to reduce plastic production, particularly single-use plastics, and promote sustainable alternatives, aligning with climate goals.
    • Improve Waste Management Infrastructure: Prioritize investment in waste management systems, especially in the Global South, to ensure proper collection, recycling, and disposal, reducing unmanaged plastic pollution.

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  • Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

    Policy paralysis, a weakened public health sector

    Explained | Indian Society | Mains Paper 1: Health & Education,Social Empowerment

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Issues in the health sector

    Why in the News?

    Primary care remains underdeveloped, while the private sector has seen significant growth in secondary and tertiary care.

    What are the major necessities in Public Health? 

    • Diseases of Poverty: This includes health issues predominantly affecting the poor and vulnerable populations, such as tuberculosis, malaria, undernutrition, maternal mortality, and illnesses caused by food and water-borne infections like typhoid and diarrheal diseases. 
      • Addressing these needs is critical not only from a health perspective but also as a matter of human rights.
    • Middle-Class Health Concerns: The second category focuses on health issues related to environmental pollution, including air and water quality, waste management, and food safety. 
      • These issues are often exacerbated by inadequate infrastructure and poor market regulations, leading to chronic illnesses and road traffic accidents.
    • Curative Care Needs: The most visible public health needs are those related to curative care, which is divided into three levels: primary, secondary, and tertiary care. 
      • The poor often rely on public primary health care for affordable services, while secondary care remains historically neglected. 
      • Tertiary care is primarily addressed through government schemes like the Pradhan Mantri Jan Arogya Yojana (PMJAY) under Ayushman Bharat, aimed at providing coverage for serious health issues.

    How do the private hospitals become a real beneficiary in present times? 

    • Limited Coverage: India’s health insurance primarily covers only hospitalisation expenses, leaving out outpatient and primary care services. This benefits private hospitals as they can monopolise high-cost medical treatments, while the larger uninsured population faces commercialised care at market rates.
    • Weakening of Public Health Sector: The government’s shift in focus from strengthening public sector health care to outsourcing via insurance schemes like PMJAY indicates a failure to build adequate secondary and tertiary public health services.  

    Threats to Public Healthcare:

    • Neglect of Secondary and Tertiary Care: The inadequate investment in strengthening secondary- and tertiary-level health care in the public sector, leads to a reliance on private hospitals.
    • Transformation of Primary Health Centres (PHCs) and Sub-centres: The conversion of sub-centres and PHCs into Health and Wellness Centres (HWCs) has undermined their original role in preventive and promotive health care.  
    • Loss of Trust in Public Healthcare: Due to overcrowding, poor infrastructure, and inadequate funding, public health institutions are losing credibility. Coupled with the commercial interests of private providers, this creates a dual crisis of access and quality in the healthcare system.
    • Rebranding of Health Centres: The recent renaming of HWCs as “Ayushman Arogya Mandirs” raises concerns about cultural relevance and secularism in public health institutions, especially for non-Hindi-speaking populations, further undermining trust in the system.

    Way forward: 

    • Strengthen Public Healthcare Infrastructure: Invest in enhancing secondary and tertiary care facilities in the public sector to reduce dependence on private hospitals.  
    • Integrate Health Insurance and Primary Care: Expand health insurance coverage to include outpatient and primary care services, and ensure that public health centers retain their focus on preventive and promotive care.  

    Mains PYQ:

    Q Public health system has limitation in providing universal health coverage. Do you think that private sector can help in bridging the gap? What other viable alternatives do you suggest? (UPSC IAS/2015)

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  • Cyclones

    On uncommon cyclones in the Arabian Sea

    Explained | Geography | Mains Paper 3: Disaster Management

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Tropical and temperate cyclone;

    Mains level: Impact of climate change on cyclone;

    Why in the News?

    A rare August cyclone, named ‘Asna’, currently positioned off the Kutch coast is even more remarkable for having originated over land.

    Why was there a lot of excitement over Asna?

    • “Asna” is notable because it’s the first cyclone in August in the North Indian Ocean since 1981. August is typically not part of the cyclone season in this region.
    • The cyclone began as a land-born depression that intensified as it moved over the warm waters of the Arabian Sea. It formed from a rare strong low-pressure system that grew unusually powerful over land.
    • Asna’s formation is linked to the broader context of rapid warming over the Arabian Sea, influenced by climate change. The northward shift of the low-level jet stream due to warming over West Asia contributed to its development.

    Why does the North Indian Ocean have two cyclone seasons?

    The North Indian Ocean has two distinct cyclone seasons due to the unique monsoonal circulation patterns in the region:

    • Pre-monsoon season (March-May): The Arabian Sea warms rapidly during this time as the sun crosses over to the Northern Hemisphere. The Bay of Bengal is relatively warmer and begins producing atmospheric convection and rainfall. This leads to cyclogenesis in both the Arabian Sea and the Bay of Bengal.
    • Post-monsoon season (October-December): This is the northeast monsoon season for India. The Arabian Sea cools due to the strong southwesterly winds and mixing of cold subsurface waters. However, the Bay of Bengal remains favourable for cyclogenesis. The post-monsoon season is the major cyclone season in the North Indian Ocean

    How is climate change affecting the region?

    • Warming of the Indian Ocean: Climate change is amplifying the warming of the Indian Ocean, with more heat being transferred from the Pacific Ocean and Southern Ocean. This increases the overall sea surface temperature (SST), crucial for cyclone formation.
    • Monsoon and cyclones: The warming affects the monsoon patterns and has the potential to change cyclone intensity. More heat and moisture from the warming seas lead to more energy available for cyclones.
    • Impact on global ocean circulation: The warming of the Indian Ocean is also affecting global ocean currents, impacting heat uptake by the Pacific Ocean and water sinking in the North Atlantic. The Indian Ocean is playing a central role in global climate change processes.

    Way forward: 

    • Strengthening Early Warning Systems: Enhance real-time monitoring and forecasting of cyclones, particularly in the pre- and post-monsoon seasons, using satellite data and advanced models.
    • Building Climate Resilience: Implement climate adaptation strategies, especially for coastal communities, by improving infrastructure and disaster preparedness to cope with increasing cyclone intensity due to climate change.

    Mains PYQ:

    Q Discuss the meaning of colour-coded weather warnings for cyclone prone areas given by India Meteorological Department. (UPSC IAS/2022)

     

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  • Swachh Bharat Mission

    Swachh Bharat Mission averted 70,000 infant deaths a year

    Explained | Governance | Mains Paper 2: Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Effectiveness of Swachh Bharat Mission;

    Why in the News?

    A new study published in the peer-reviewed “journal Nature” has found that the construction of toilets under the government’s “Swachh Bharat Mission” helped prevent approximately 60,000 to 70,000 infant deaths annually between 2011 and 2020.

    Key Highlights of the Report:

    • Impact of SBM: The study revealed that districts with over 30% toilet coverage under SBM experienced reductions of 5.3 in the Infant Mortality Rate and 6.8 in the Under Five Mortality Rate per thousand live births.
      • Over 9.5 crore toilets being built across the country since 2014;
      • 564,658 villages being declared Open Defecation Free (ODF);
      • 30 States/UT’s being 100% covered with individual household latrines (as of 2019).
    • Unique Approach of SBM: The approach of combining toilet construction with substantial investments in IEC (Information, Education, and Communication) and community engagement represents a marked departure from traditional efforts in India.
    • Novel Evidence of Impact: The study provides novel evidence of reductions in infant and child mortality following SBM’s comprehensive national sanitation program, indicating its transformative role in improving public health outcomes.
    • Asian Enigma: The report touches on the “Asian Enigma,” which highlights persistently high levels of undernutrition and stunting among children despite sufficient food availability, linking it to poor sanitation practices and open defecation.

     

    Successful Journey since Inception (2014-present):

    • Phase I (2014): The SBM 1.0  aimed to make urban centers open-defecation-free and improve sanitation infrastructure, particularly toilets.
        • The mission targeted constructing household, community, and public toilets, converting insanitary latrines, and improving solid-waste management.
    • Phase II (2020): The SBM 2.0 commenced in 2020, and is expected to run till 2025-26. It aims to sustain the achievements of phase I and ensure that treatment of both liquid and solid waste is achieved through the help of technology and private sector engagement.
    • This will focus on making Indian cities garbage-free by improving scientific waste management systems.

    Way forward: 

    • Global Model for Sanitation: India’s national sanitation campaign under SBM could serve as a model for other low- and middle-income countries where sanitation remains a major public health challenge.
    • Focus on Behavioral Change: Alongside infrastructure development, efforts are needed to sustain behavioural changes to eliminate open defecation.
    • Expand Sanitation Infrastructure in Rural Areas: Prioritize extending sanitation coverage and scientific waste management systems to underserved rural regions, building on the success of SBM to reduce mortality further and improve public health.

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  • Capital Markets: Challenges and Developments

    House Panel includes SEBI review in agenda, likely to summon Buch 

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Market Economy; SEBI; Public Accounts Committee (PAC)

    Mains level: Market Economy; Issues related to regulatory bodies;

    Why in the News?

    The Public Accounts Committee (PAC) has included a review of SEBI’s performance, amid political controversy surrounding chairperson Madhabi Puri Buch following Hindenburg Research’s allegations.

    What are the allegations against SEBI?  

    • Conflict of Interest: SEBI chairperson Madhabi Puri Buch faces conflict of interest allegations due to her past ICICI Bank role amid Adani investigations.
    • Toxic Work Environment: Reports have surfaced from approximately 500 SEBI employees claiming that the work culture at the regulatory body is “toxic and fearful.” This has led to demands for an impartial inquiry into the alleged workplace issues and the overall management of SEBI.
    • Response to Allegations: Buch and SEBI have denied wrongdoing, asserting that all necessary disclosures and recusal norms have been followed diligently.

    Significance and Functions of the Public Accounts Committee (PAC)

    The PAC was introduced in 1921 after its first mention in the Government of India Act, 1919 (Montford Reforms).

    • Oversight Role: The PAC serves as a parliamentary watchdog for government spending, ensuring accountability and transparency in the use of public funds. It plays a crucial role in auditing the revenue and expenditure of the government.
    • Review of Regulatory Bodies: The PAC has the authority to review the performance of regulatory bodies established by the Act of Parliament.
    • Suo-motu subjects: The PAC can select subjects for in-depth examination beyond the standard audit reports, allowing it to address pressing issues that may arise in the public interest, such as the allegations against SEBI’s chairperson.
    • Advisory Role: While the PAC can make recommendations based on its findings, it does not have the authority to enforce compliance. Its recommendations are advisory in nature.

    How SEBI can improve its regulation considering recent challenges? (Way forward) 

    • Enhanced Disclosure Regulations: SEBI has already made progress with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2023, but further refinement is needed.
      • It should focus on clarifying the scope of disclosures required from companies, particularly regarding financial irregularities and conflicts of interest.
    • Bolstering Whistleblower Protections: SEBI should strengthen its whistleblower protection framework to encourage the reporting of internal issues or malpractices, ensuring accountability and protection for informants.
    • Improving Internal Governance and Work Culture: SEBI can address concerns about a toxic work environment by conducting independent reviews of its internal governance, improving employee welfare, and fostering a transparent, positive work culture.
    • Collaborating with Global Regulatory Bodies: SEBI can work more closely with global financial regulators to align with international best practices and enhance cross-border market oversight, ensuring that India’s markets remain resilient and transparent.

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  • Tourism Sector

    A tourism policy ill-suited for Jammu and Kashmir  

    Explained | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Note4Students

    From UPSC perspective, the following things are important:

    Mains level: Impact of Tourism policy on Himalayan areas;

    Why in the News?

    Kashmir’s fragile environment faces severe damage from urbanization, commercialization, and climate change, underscoring the urgent need for a resilient and sustainable tourism model.

    Aims and Objectives of J&K Tourism Policy

    • Promoting all forms of Tourism: The policy aims to promote traditional recreational tourism as well as adventure, pilgrimage, spiritual, and health tourism. This diversification can attract a wider range of tourists.
    • Sustainable Practices: The policy emphasizes the need for sustainable tourism practices that minimize environmental degradation, conserve water, and protect biodiversity.
    • Infrastructure Development: It seeks to improve infrastructure, including hotels, roads, and recreational facilities, to accommodate the growing number of tourists.
    • Community Engagement: The policy aims to include local communities in tourism planning and decision-making processes, promoting their involvement in conservation efforts and sustainable practices.
    • Diversification of Tourism: By promoting various forms of tourism, such as eco-tourism, adventure tourism, and cultural tourism, the policy aims to reduce over-reliance on traditional tourist spots and distribute tourist footfall more evenly across the region.

    What are the effects of the new Policy? 

    Positive Impacts  Negative Impacts:
    • Increased Tourist Influx: Since the announcement of the New Tourism policy in 2020, over 40 million tourists have visited Kashmir.
    • Increase in Employment: The policy helps to generate employment of approximately 50,000 people per year, which can significantly boost the local economy.
    • Promotes Culture and Festivals: The policy promotes city-wise events and festivals with a pre-defined calendar to attract tourists.
    • Boosting Exports and Collaborations: The policy helps the handicraft industry, which was earlier limited to select destinations, to directly export and collaborate both nationally and internationally.
    • Environmental Stress: The rapid increase in tourist activities has led to significant ecological disturbances, including deforestation, waste accumulation, and pollution of water bodies.
    • Increase in Infra-strain: It also resulted in encroachment on natural habitats and increased pressure on local resources, such as water and electricity.
    • Climate Change Impact: The region is experiencing accelerated effects of climate change, including glacial depletion and erratic weather patterns, which threaten agricultural sustainability and water availability.

    Major Challenge: Fragility of the Region

    • Natural Disasters: Jammu and Kashmir is prone to natural disasters such as earthquakes, floods, and landslides, which can be exacerbated by unchecked commercialization and environmental degradation.
    • Ecological Sensitivity: The region’s delicate ecosystems are highly vulnerable to the impacts of tourism and urbanization, necessitating careful management to prevent irreversible damage.
    • Resource Depletion: The increased demand for water and energy resources is leading to the depletion of aquifers and heightened reliance on hydroelectric projects, which disrupt local aquatic ecosystems.

    Need for a Resilient Tourism Model (Way Forward)

    • Sustainable Tourism Practices: There is an urgent need to adopt a resilient and sustainable tourism model that prioritizes eco-friendly practices, waste reduction, and conservation of natural resources.
    • Community Involvement: Engaging local communities in tourism planning and decision-making is crucial for fostering sustainable practices and ensuring that the benefits of tourism are shared equitably.
    • Infrastructure Resilience: Developing infrastructure that can withstand extreme weather events and diversifying tourism offerings beyond peak seasons will help mitigate the impacts of climate change.
    • Policy Integration: A cohesive approach that integrates sustainable tourism policies with broader economic and environmental strategies is essential for preserving the region’s natural beauty while supporting local economies.

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  • Finance Commission – Issues related to devolution of resources

    What is Vertical Fiscal Imbalance? 

    Explained | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Finance Commission

    Mains level: Vertical Fiscal Imbalance (VFI) in India;

    Why in the News?

    The financial relationship between the Union and State governments in India is imbalanced, similar to other nations with a federal constitutional structure.

    What is Vertical Fiscal Imbalance (VFI)?

    Vertical fiscal imbalance (VFI) refers to the mismatch between the revenue-raising powers and expenditure responsibilities of different levels of government (between the Center and state) within a country.

    Why should Vertical Fiscal Imbalance (VFI) be reduced?

    • Decentralization of Expenditure: States are responsible for 61% of the revenue expenditure, focusing on crucial sectors like health, education, and infrastructure, but they generate only 38% of the revenue.
      • This imbalance creates a dependency on central transfers, limiting the States’ fiscal autonomy.
    • Need Efficiency in Spending: Reducing VFI would provide states with more resources, allowing them to respond better to local needs and improve governance efficiency.
    • Need to strengthen Fiscal Federalism: A reduction in VFI promotes a healthier system of cooperative federalism, ensuring that states have adequate resources to carry out their constitutional responsibilities and meet the demands of their populations.
    • Need Preparedness for crises: VFI becomes more pronounced during crises (e.g., COVID-19), leading to fiscal stress for States. A more balanced fiscal arrangement ensures better crisis management at the sub-national level.

    Present Scenario of VFI and Tax Devolution in India

    • VFI Extent: The 15th Finance Commission noted that despite States‘ heavy spending responsibilities, their revenue-raising powers are limited.
    • Tax Devolution Rates: The 14th and 15th FC recommended devolving 42% and 41%, however, estimates suggest that an average share of 48.94% was necessary between 2015-2023 to eliminate the VFI.
    • Exclusion of Cesses and Surcharges: The exclusion of cesses and surcharges from the divisible pool of taxes shortens the net proceeds. States argue this limits the resources available to them to meet their expenditure responsibilities.
    • Fiscal Responsibility: Despite the constraints, states have largely adhered to borrowing limits under fiscal responsibility legislation. However, states still struggle to meet their expenditure responsibilities, highlighting the need for greater financial support from the Centre.
    Note: The Sixteenth Finance Commission was constituted on December 31 2023 with Dr. Arvind Panagariya as the Chairman. The 16th FC has been requested to make its report available by the 31st day of October 2025 covering 5 years commencing on the 1st day of April, 2026.

     

    What should be the role objective of the 16th FC?

    • Increase Tax Devolution: Many States demand that tax devolution from the Union’s net proceeds should be raised to 50%. The 16th Finance Commission must consider raising the devolution rate to around 49% to address the VFI and ensure sufficient untied funds for States.
    • Address Cesses and Surcharges: The 16th Finance Commission should evaluate the exclusion of cesses and surcharges from the divisible pool.
    • Empower States with Fiscal Autonomy: The Commission’s objective should be to empower States with greater fiscal autonomy by ensuring adequate resources for them to perform their constitutional duties without undue dependence on the Centre.
    • Support Local Priorities: The Commission should aim to provide States with untied resources, enabling them to cater to jurisdictional needs and set priorities that align with their specific developmental challenges, ensuring a more responsive governance system.

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