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Type: Explained

  • Minimum Support Prices for Agricultural Produce

    PREMIUM – Subsidies – Good or Bad for India?

    Explained | Agriculture | Mains Paper 3: Agriculture and related issues,Major Crops & Cropping Patterns,PDS, Buffer Stock & Food Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Agricultural subsidies; Policies and Programs by government;

    Mains level: Issue of Subsidies in India; Policies and Programs by Government;

    Why in the News? 

    Issues have been raised by the World Trade Organization (WTO) concerning Agricultural Subsidies in India. Major subsidies in India are on fertilizer, power, credit, output, seed, and export products.

    What is Subsidy?

    • The term subsidy refers to financial assistance in the form of discounts or monetary grants by the Central government to public entities or private institutions. 
    • The objective is to make the products offered by these institutions affordable for public consumption. 
    • The subsidized products are necessary for the larger public good and are a means of supporting the community’s welfare.

     

    Historical Background

    • Post-Independence Era (1947 onwards): The government introduced various subsidies to promote industrialization, agriculture, and social welfare, aiming to reduce poverty and achieve self-sufficiency in key sectors.
    • Green Revolution (1960s): During the 1960s and 1970s, Subsidies on fertilizers, seeds, and credit were provided to farmers to encourage the adoption of new agricultural technologies and boost food production.
    • Liberalization Reforms (1991):  While liberalization led to a reduction in some subsidies and a shift towards market-oriented policies, the government continued to provide support to sectors deemed crucial for social welfare and economic development.

    Types of Subsidies:

    • Food subsidy: The food subsidy’s main objective is to provide essential eatables to a large section of the population living below the poverty line in India. 
      • The major food items supplied to the BPL families (by PDS system) vary as per the region, it includes – Wheat, Rice, Sugar, Milk, Cooking oil, and more.
    • Education subsidy: The Central government extends the education subsidy to eligible students to pursue higher technical and professional education.
    • Export subsidy: To make exports attractive and lend support to the companies, the government offers export subsidies. 
    • Fertilizer subsidy: The fertilizer is provided at a fixed MRP that is below the actual price; the government pays the difference between the actual coat and the MRP.

    (Note: There are various types of subsidies but UPSC usually asks for Agriculture subsidies) 

    Subsidies in Agriculture:

    Direct Subsidies: 

    • Credit Subsidies: Subsidized credit programs offer farmers loans at lower interest rates or with relaxed repayment terms to finance agricultural activities, such as purchasing inputs, machinery, or land.
      • Ex-The Government of India provides interest subvention of 2% and Prompt Repayment Incentive of 3% to the farmers, thus making the credit available at a very subsidized rate of 4% per annum as per Kisan Credit Card.
    • Direct Income Transfers: Governments provide direct cash transfers or income support schemes to farmers to supplement their incomes, improve their financial stability, and alleviate rural poverty. Ex-PM Kisan Samman Nidhi Scheme under which support of Rs.6000/- per year 

    Indirect Subsidies 

    • Fertilizer Subsidies: Governments often provide subsidies on fertilizers to reduce the cost burden on farmers and promote fertilizer use, which enhances crop productivity. Ex- the Union Budget for the fiscal year 2024-25 (FY25) allocated ₹1.64 trillion for fertilizer subsidy.
    • Seed Subsidies: Subsidies on quality seeds help farmers access improved varieties that are disease-resistant, drought-tolerant or have higher yields. Ex- the government provides a subsidy of Rs. 1000/- per quintal or 50% of the cost.
    • Water Subsidies: Subsidized irrigation infrastructure and water supply schemes aim to improve water availability for agricultural purposes, especially in regions facing water scarcity. Ex- Pradhan Mantri Krishi Sinchai Yojana.
    • Minimum Support Prices (MSP): Governments guarantee a minimum price for certain crops to protect farmers from market price fluctuations and ensure stable income. Procurement agencies purchase crops from farmers at MSP, often for staples like wheat, rice, and pulses. Ex- the government of India sets the MSP twice a year for 24 commodities (23 crops + 1 sugarcane).
    • Crop Insurance Subsidies: Subsidies are offered on crop insurance premiums to encourage farmers to enroll in crop insurance schemes, which protect them against yield or revenue losses due to adverse weather, pests, or other risks. Ex- Pradhan Mantri Fasal Bima Yojana (PMFBY)
    • Subsidized Agricultural Machinery: Governments may subsidize the purchase of farm machinery, equipment, and tools to mechanize agricultural operations, increase efficiency, and reduce labor costs. Ex- Sub-mission On Agriculture Mechanization (SMAM scheme)

    Present issues raised by the WTO:

    • Market Distortion: The WTO contends that agricultural subsidies have the potential to disrupt global markets. For instance, subsidies like India’s Minimum Support Price (MSP) may result in the undervaluation of Indian agricultural goods on the international stage. 
    • Trade Barriers: Subsidies can create challenges for foreign producers without subsidies to compete effectively in markets where subsidized goods are sold.
    • Overproduction of certain crops: Subsidies can lead to overproduction of certain crops, which can further distort the market and lead to wastage.
    • Negative Environmental Impact: Overuse of fertilizers and water for irrigation, encouraged by subsidies, can lead to environmental degradation.
    • Inequity: The benefits of subsidies often go to larger farmers rather than small-scale farmers who need them the most.

    Limitations Faced by Indian Agriculture:

    • Subsidies on few crops: Subsidies like MSP, which are applicable for only a few crops, have led to cereal-centric agriculture with distorted cropping patterns, as farmers tend to grow only those crops for which they are given subsidies.
    • Benefiting only wealthy Farmers: As per the Economic Survey 2018, wealthy farmers benefited over small farmers from the farm subsidies. Thus the objective of giving subsidies is not fulfilled. This is the case frequently witnessed in Punjab and Haryana, where affluent farmers enjoy taxpayer money.
    • Fiscal deficit: Also, the subsidies lead to a substantial financial deficit and burden on the financial exchequer.
    • Cause of pollution: Subsidies for agriculture can foster the overloading of croplands, which leads to erosion and compaction of topsoil, pollution from synthetic fertilizers and pesticides, and release of greenhouse gases, among other adverse effects.

    Way Forward:

    • Diversification of Subsidies: Expand subsidy programs to cover a wider range of crops, including fruits, vegetables, pulses, and other diversified agricultural products, to promote crop diversification and mitigate the cereal-centric focus.
    • Targeted Subsidy Programs: Implement targeted subsidy schemes that prioritize support for small and marginalized farmers, ensuring that subsidies reach those who need them most and reducing the disproportionate benefit to wealthy farmers.
    • Price Stabilization Mechanisms: Develop price stabilization mechanisms beyond MSP, such as futures markets, crop insurance, and warehouse receipt systems, to mitigate price volatility and provide income security to farmers without distorting cropping patterns.

    Prelims PYQ

    In India, markets in agricultural products are regulated under the (UPSC IAS/2015)

    a) Essential Commodities Act, 1955

    b) Agricultural Produce Market Committee Act enacted by States

    c) Agricultural Produce (Grading and Marking) Act, 1937

    d) Food Products Order, 1956 and Meat and Food Products Order, 1973

    Mains PYQ 

    Q How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? (UPSC IAS/2017) 

    Q What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically analyse the agricultural subsidy regime with reference to the distortions created by it (UPSC IAS/2013)

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  • Housing for all – PMAY, etc.

    An overview of the PMAY-U scheme | Explained

    Explained | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters,Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Issues related to the PMAY scheme and the reason behind the failure of the PMAY Scheme

    Why in the News? 

    As the current Union government completes two terms, one of its flagship programs was Housing For All (HfA) by 2022, both in urban and rural areas, planned under the PMAY (Pradhan Mantri Awas Yojana) scheme in 2015.

    About the PMAY scheme:

    The declared objectives of the scheme included rehabilitation of slum dwellers with private developers’ participation; promotion of affordable housing for the weaker sections through Credit Linked Subsidy Schemes (CLSS); affordable housing in partnership with public and private sectors; and subsidy for Beneficiary-led Construction (BLC).

    Issues related to the PMAY Scheme:

    • PMAY-U faltering Performance: The Pradhan Mantri Awas Yojana – Urban (PMAY-U) initiative has been criticized for its faltering performance. Data from the PMAY dashboard suggests a shortfall of around 40 lakh houses from sanctioned and completed segments.
    • ISSR Failure: The in-situ slum redevelopment (ISSR) component, aimed at addressing the largest demand in cities, has been particularly criticized for its failure. Only a small number of houses have been sanctioned under ISSR, falling far short of expectations.
    • The large difference between achievement and need: Despite delivering 80 lakh homes, the PMAY-U program has only addressed about 25.15% of the housing shortage. Even if the remaining sanctioned houses are constructed by the end of 2024, it would only address about 37% of the real need, leaving almost 2.4 crore households without adequate housing.
    • Not fulfilling the promise as per Spending: The housing program, which received significant budgetary allocation (over $29 billion in the last five years), has not been able to fulfill its promise of “Housing for All.” Despite the focus and financial support, the goal remains unfulfilled.

    The reason behind the failure of the PMAY Scheme

    • Challenges in Slum Rehabilitation: Despite efforts, some projects aimed at slum rehabilitation have faced issues, such as vertical growth leading to increased utility costs and unsuitable living spaces, as well as difficulties in acquiring land.
    • Neglecting social housing needs: City development plans, including PMAY, are often influenced by consultants favoring capital-intensive solutions, potentially neglecting social housing needs and community involvement.
    • Less central government’s share: The funding structure of PMAY involves significant contributions from beneficiary households and state governments, with the central government’s share being relatively small.
    • Limited Government Role: The architecture of PMAY places limited responsibility on the government, particularly in providing interest subsidies and cost-sharing with beneficiaries, leading to concerns about addressing the needs of the landless and the poor.

    Way Forward:

    • Reevaluation of Funding Allocation: The central government should consider increasing its share of funding to ensure adequate resources for housing projects. 
    • Enhanced Focus on Slum Rehabilitation: The government should review and enhance the implementation of the in-situ slum redevelopment (ISSR) component. This may involve better planning, community engagement, and addressing challenges such as land acquisition and vertical growth.
    • Community Participation and Needs Assessment: Incorporating community participation in the planning and implementation of housing projects is crucial 

    Mains PYQ 

    Q Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional fiancé fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion (UPSC IAS/2016)

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  • Electric and Hybrid Cars – FAME, National Electric Mobility Mission, etc.

    How is India planning to boost EV production?

    Explained | Economics | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia,Indigenization Of Technology

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Features of the policy and concerns by private players

    Why in the News? 

    The Union government approved a policy to promote India as a manufacturing hub for Electric Vehicles (EVs).

    Features of the Electric Vehicles policy:

    • Reduction of Import Duty: Import duty on electric vehicles (EVs) imported as Completely Built Units (CBUs) with a minimum CIF value of $35,000 is reduced from 70%-100% to 15% for five years.  
    • Waiver of Duty: A maximum of 40,000 EV imports in five years, with a duty waiver of ₹6,484 crore or proportional to investment (whichever is lower), requires a minimum $800 million investment.
    • Localization Targets: Manufacturers are required to set up manufacturing facilities in India within three years. They must achieve 25% localization by the third year and 50% localization by the fifth year of incentivized operation.
    • Incentives for Setting Up Manufacturing Facilities: The policy incentivizes manufacturers to establish manufacturing facilities in India by offering reduced import duties and waivers, provided they meet certain investment and localization targets.
    • Encouragement of Global EV Makers: The policy aims to encourage global EV makers like Tesla and Chinese EV maker BYD to enter the Indian market by providing favorable conditions for setting up manufacturing facilities and importing EVs.

    Present concerns raised by Private Players in the Market:

    • Impact on Domestic Industry: Tata Motors opposed the reduction of import duties, fearing it would negatively affect the domestic industry. They argued that lowering duties could harm the investment climate.
    • Competitive Disadvantage: Domestic players are concerned that the policy benefits mainly higher-end Original Equipment Manufacturers (OEMs), potentially placing them at a competitive disadvantage in segments below ₹29 lakh.
    • Favoring Global Players: The policy appears to favor global EV players and Indian joint ventures with such players, potentially making it more challenging for purely domestic players to compete effectively.

    Conclusion: The government should engage in dialogue with stakeholders, including domestic players like Tata Motors, to address their concerns and seek their input in shaping the policy framework. Need to implement measures to support domestic players, including providing incentives and support for technology development, innovation, and capacity building.

    Mains question for practice 

    Q Indian Government has recently approved a policy aimed at promoting the country as a manufacturing hub for Electric Vehicles (EVs). Discuss the key features of this policy. Highlight the concerns raised by private players.

    Mains PYQ 

    Q How is efficient and affordable urban mass transport key to the rapid economic development in India? (UPSC IAS/2019)

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  • Human Development Report by UNDP

    Towards a less poor and more equal country

    Explained | | Mains Paper 2: Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Income and wealth inequality as per the World Inequality Lab

    Why in the news? 

    In March, World Inequality Lab, a Global Research Center focused on inequality and public policies, published in a paper titled, ‘Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj’. 

    Income and wealth inequality as per the World Inequality Lab: 

    • Income Inequality: In 2022-23, the top 1% of Indians received 22.6% of the national income, the highest in a century. The top 0.1% earned nearly 10% of the national income. Wealth inequality was also stark, with the top 1% holding 40.1% of the wealth in 2022-23, the highest since 1961.
    • Wealth Inequality Trends: Wealth concentration increased significantly between 1961 and 2023. The top 10% held 65% of the wealth in 2022-23, up from 45% in 1961. The bottom 50% and middle 40% saw declines in their share of wealth.
    • Comparison with Other Countries: India’s wealth inequality, while not as extreme as in Brazil and South Africa, increased threefold between 1961 and 2023. India’s income inequality is among the highest globally, surpassing South Africa, Brazil, and the U.S.
    • Impact of 1991 Economic Reforms: Inequality increased notably after the 1991 economic reforms in India. Growth in China has been broad-based compared to India, resulting in lesser income inequality despite higher growth rates in China.

    Present Dilemma in Human Development:

    • The Human Development Report (HDR) 2023-2024 ranked India 134 out of 193 countries. 
    • India is now the fifth-largest economy but it still ranks lower than Sri Lanka, Bhutan, and Bangladesh in human development. Its economic growth has not translated into growth in human development.

    Measures to Improve Human Development:

    • Investment in Education: Ensure access to quality education for all, from primary to higher levels. Focus on improving educational infrastructure, teacher training, and curriculum development.
    • Healthcare Access and Quality: Expand access to affordable and quality healthcare services, including preventive, primary, and specialized care. Invest in healthcare infrastructure, medical personnel, and technology.
    • Poverty Reduction: Implement social welfare programs to provide basic needs such as food, shelter, and clothing to the disadvantaged. Promote inclusive economic growth to create employment opportunities and increase household incomes.

    Conclusion: The Indian government has taken several steps including the creation and organization of women’s self-help groups, sending civil servants to areas with poor levels of human development,  and implementing land reforms. However, a major necessity of raising awareness is through an organic approach.

     

    Mains PYQ 

    Q Despite the consistent experience of high growth, India still goes with the lowest indicators of human development. Examine the issues that make balanced and inclusive development elusive (UPSC IAS/2019)

     

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  • Disasters and Disaster Management – Sendai Framework, Floods, Cyclones, etc.

    A lesson from Taiwan in quake resilience

    Explained | Enviro & Biodiversity | Mains Paper 3: Disaster Management

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: What India can learn from Taiwan?

    Why in the news? 

    On April 3, Taiwan was struck by an earthquake of 7.4 magnitude. This was strongest in last 25 years.

    Reason behind the earthquake in Taiwan

    • In the Taiwan region, the Philippine Sea plate is moving northwest towards the Eurasian plate at a velocity of about 7.8 cm per year, which is faster than the motion of the Indian plate. 
    • Lying 160 km off the coast of China, Taiwan was formed at a convergent boundary of the Philippine and Eurasian plates in the western Pacific Ocean. It is a country of strong earthquakes.

    Why other countries should take lesson from Taiwan in quake resilience?

    • In 1999, the Chi-Chi earthquake of magnitude 7.7 occurred in the central part of Taiwan and impacted the western region. It killed more than 2,430 people and left 11,305 wounded. It caused more than 50,000 buildings to collapse and partially damaged as many.
    • In 2024, Hualien earthquake killed at least 13 people and injured about 1,000. Most of the deaths were caused by earthquake-triggered rockfalls and not by toppled buildings. Despite being of nearly comparable magnitude, the 2024 earthquake has caused minimal damage compared to the 1999 earthquake.

    Taiwan’s earthquake preparedness

    • Advanced Monitoring and Early Warning Systems: Taiwan boasts the most advanced earthquake-monitoring network and early warning systems, allowing for quick detection and alerting of seismic activity.
    • Public Awareness Campaigns and Drills: Widespread awareness campaigns and regular drills on earthquake safety have significantly improved the public’s understanding of earthquake risks and proper safety protocols.
    • Government Regulations and Incentives: The government constantly updates earthquake safety requirements for both new and existing buildings. Additionally, incentives such as subsidies are offered to residents to improve the quake resistance of buildings, encouraging compliance with safety standards.
    • Scientific Judgments for Seismic Risk: Utilizing knowledge of earthquake frequency and severity in different areas, Taiwan is able to make sound scientific judgments regarding seismic risk.
    • Utilization of New Technologies: Taiwan employs cutting-edge technologies such as seismic dampers and base isolation systems to enhance building resilience. For example, Taipei 101, the nation’s iconic building, features a tuned mass damper—a massive steel sphere suspended by cables within the tower—which acts as a pendulum to counteract building motion during earthquakes.

    What India can learn from Taiwan?

    • Importance of Seismic Safety Regulations: India, especially in tectonically unstable regions like the Himalayas, must prioritize seismic safety regulations in all infrastructure projects.  
    • Customized Seismic Codes: Similar to Taiwan, India should develop seismic codes tailored to specific regions based on local earthquake activity, building types, and construction materials. These customized codes can better address the unique seismic risks faced by different parts of the country.
    • Utilization of Traditional Architectural Styles: In some parts of India, traditional architectural styles may possess inherent earthquake resistivity. By rediscovering and encouraging the use of these traditional techniques, India can promote earthquake-resistant building practices that are culturally and environmentally sustainable.
    • Integration of Seismic Zonation Maps: Indian code IS 1893 already specifies seismic designs based on seismic zonation maps. It’s crucial for India to integrate these maps effectively into urban planning and construction practices to ensure that buildings are designed and located in accordance with seismic risk assessments.

    Conclusion

    Earthquakes is natural disasters with unpredictable occurrences, can have devastating effects on society. However, their impact can be mitigated through preventive measures such as early warning systems, construction regulations, and raising awareness about earthquake preparedness.

    Mains PYQ 

    Q Discuss about the vulnerability of India to earthquake related hazards. Give examples including the salient features of major disasters caused by earthquakes in different parts of India during the last three decades.(UPSC IAS/2021)

    Mains question for practice 

    Q Analyzing Taiwan’s earthquake preparedness following the April 3rd 7.4 magnitude earthquake, explore lessons for India’s earthquake resilience strategy.

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  • Juvenile Justice (JJ) Act

    SC allows termination of pregnancy of minor rape survivor

    Explained | Polity | Mains Paper 2: Executive & Judiciary,Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Medical Termination of Pregnancy (MTP) Act 2020 and Article 142

    Mains level: Distinctive features of Article 142

    Why in the news? 

    The Supreme Court on Monday used its extraordinary powers under Article 142 of the Constitution to do “complete justice” to permit the medical termination of pregnancy of a 14- year-old rape.Her pregnancy is nearing 30 weeks. The minor became aware of her condition only at a very late stage.

    Article 142

    • Article 142 of the Indian Constitution grants extraordinary powers to the Supreme Court of India to deliver complete justice. It empowers the Supreme Court to pass any order or issue any writ necessary for doing “complete justice” in any cause or matter pending before it, even if the case does not fall directly within its jurisdiction. 

    Distinctive features of Article 142:

    • Extraordinary Powers: Article 142 grants the Supreme Court of India extraordinary powers to deliver complete justice. These powers are exceptional and not restricted by the ordinary limitations of jurisdiction or procedure.
    • Wide Discretion: The provision grants the Supreme Court wide discretion in passing orders or issuing writs to achieve complete justice.  
    • Non-obstante Clause: Article 142 begins with a non-obstante clause, which means that the powers conferred by this article prevail over any other provision of the Constitution or law. This underscores the supremacy of the Supreme Court’s authority in exercising these powers.
    • Judicial Activism: Article 142 is often invoked to enable the judiciary to intervene in matters where existing laws or legal provisions are inadequate or where there are gaps in the law. This enables the court to play an active role in shaping legal principles and addressing societal concerns.

    Medical Termination of Pregnancy (MTP) Act 2020

    • Gestation Limits: The Act allows for the termination of pregnancy up to 20 weeks with the opinion of one registered medical practitioner.
    • For termination between 20 to 24 weeks, the opinion of two registered medical practitioners is required.
    • The upper gestation limit has been increased from 20 to 24 weeks for special categories of women, including survivors of rape, victims of incest, differently-abled women, and minors.
    • Medical Board: In cases of substantial foetal abnormalities diagnosed by a Medical Board, the upper gestation limit does not apply.
    • The Medical Board consists of a gynaecologist, a paediatrician, a radiologist or sonologist, and other notified members.
    • Privacy Protection: The Act ensures the protection of privacy for women who have terminated their pregnancy. The name and other details of the woman are not to be revealed except to authorized individuals.

    Conclusion: 

    Need to take Measures to prevent rape in society by providing education on consent, promoting gender equality, ensuring swift and awareness about severe punishment for perpetrators, enhancing support for survivors, and fostering a culture of respect.

    Mains PYQ

    Q ‘Constitutional Morality’ is rooted in the Constitution itself and is founded on its essential facets. Explain the doctrine of ‘Constitutional Morality’ with the help of relevant judicial decisions.

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  • Foreign Policy Watch: India-Iran

    What Iran-Israel conflict means for Middle East and India

    Explained | International Relations | Mains Paper 2: Indian Diaspora

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Bordering countries of israel and Iran

    Mains level: Impact of the Iran-Israel conflict on India

    Why in the news?

    The turmoil resulting from the Iran-Israel conflict poses a threat to the security of the extensive Indian diaspora residing in the Gulf region, with an added risk of piracy and hostage situations.

    The conflict between Israel and Iran:

    • Historical Context: The roots of the conflict can be traced back to the Islamic Revolution in 1979 when Iran rejected Israel’s existence and vowed to undermine it. Iran has supported anti-Israeli militant groups like Hezbollah and Hamas and pursued a nuclear program, which Israel sees as a threat
    • Recent Escalation: Recent events, such as the unprecedented missile and drone assault on Israel originating from Iran, have raised concerns about a potential all-out war between the two nations. Israel successfully intercepted most of the attacks, but the implications of this escalation are significant
    • Israel’s Response Options: Israel faces decisions on how to respond to Iran, with options including retaliation by proxy, assassinations, cyberattacks, or direct attacks. Each option carries risks of escalation and broader regional consequences
    • The nuclear issue: The long history of animosity and confrontation between the sides has now erupted in direct attacks. Israel is believed to be nuclear-capable and Iran’s desired programmes for nuclear capability have been in the spotlight

    Impact of the Iran-Israel conflict on India:

    • Economic Interests: India has significant economic ties in the Middle East, including trade, investment, and energy imports. Any escalation of conflict in the region threatens India’s economic interests, potentially leading to disruptions in trade routes and increased oil prices.
    • Security of Indian Diaspora: The Middle East hosts a large Indian diaspora, particularly in the Gulf region. Turmoil and conflict pose risks to their safety and security, with concerns about piracy, hostage-taking, and general instability.
    • Instability in Global south Governance : India recognizes the importance of stability in the Middle East for global south governance and stability. Instability in the region affects not only regional dynamics but also has broader implications for international security and cooperation.

    Diplomatic solution for this conflict:

    •  India advocates for diplomatic solutions to conflicts in the Middle East and supports initiatives for peace and stability, including the two-state solution for the Israel-Palestine conflict. India’s historical and cultural ties with the region position it as a potential mediator and facilitator for dialogue.

    Way forward:

    • Restraint and De-escalation: Call upon both parties to exercise restraint and avoid actions that could escalate the conflict further.  
    • Regional Cooperation: Encourage regional actors, including neighboring countries  to work together to promote stability and security in the Middle East.  
    • International Support: Seek support from the international community, including major powers and multilateral organizations, to pressure Iran and Israel to pursue peaceful resolutions.

    Mains PYQ:

    Q How will I2U2 (India, Israel, UAE and USA) grouping transform India’s position in global politics?

    Mains question for practice:

    Q The turmoil resulting from the Iran-Israel conflict poses a threat to the security of the  Indian diaspora residing in the Gulf region. Discuss the Impact of the Iran-Israel conflict on India and suggest the solution.

     

     

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  • Finance Commission – Issues related to devolution of resources

    Premium- Indian Federalism as a Mad Hatter’s Tea Party

    Explained | Polity | Mains Paper 2: Federalism

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 1, Article 3; Finance Commission; NITI Aayog; Federal Ssytem; Emergency Provisions;

    Mains level: Issues related to Federalism in India;

    Why in the News? 

    In recent times, the Central government has exerted significant political and financial control over the regional states.

    What is Federalism?

    • Federalism is a system of government in which power is divided and shared between a central authority (usually a national government) and constituent political units (such as states or provinces). 
    • Both levels of government have their spheres of authority, and they coexist within the same political framework.

     

    Indian Federalism:

    • India opted for a federal form of government because of linguistic and regional diversity. It has dual objectives, to safeguard and promote the unity, and to accommodate regional diversity.
    • However, Indian Federalism has been described as quasi-federal since it contains major federation and union features (Article 1 says, “India that is ‘Bharat’, shall be the Union of the states”).
    • The central government has more authority, especially in fiscal matters (due to which it is sometimes called “asymmetrical federalism”).
    • Federalism is part of the basic structure which cannot be altered or destroyed under the constituent powers of the Parliament without undergoing judicial review by the Supreme Court.

    Federal Features

    Non-federal features

    The Present Political Federal Issues in India:

    • Centralization of Power: Certain propositions laid down in the Supreme Court’s judgment, have upheld the prospects of Federalism in India
      • For example, the abrogation of Article 370 concerning Jammu and Kashmir’s special status by the central government without adequate consultation with the state government was seen as a move towards the Centralization of power.
    • Reorganization of States: The provision under Article 3 of the Constitution states that the President shall refer the Bill for the reorganization of any State to the legislature of the State concerned to elicit its opinion. 
      • The recent SC’s verdict that dismissed the challenges to the abrogation of Article 370 led to a serious undermining of federalism and the rights of the elected State legislatures.
    • Lack of clarity in Division of Powers: Although the subjects are enlisted in the Seventh Schedule and Emergency Provisions of the Constitution, the distribution of power between the Central government and the states lacks clarity and equity. 
      • For example, internal security assumes utmost importance with the Maoist challenge and cross-border terrorism, which threaten all the states across the country.
      • The Constitution does not refer either to ‘security’ or ‘internal security’ anywhere. However, it mentions five related terms namely ‘pubic order’ (List II, Entry 2), ‘war’ (Article 352), ‘external aggression’ (Article 352), ‘armed rebellion’ (Article 352), and ‘internal disturbance’ (Article 355).
      • Further, the imposition of President’s Rule in states under Article 356 has been recently criticized for being used arbitrarily by the central government.
    • Unequal Representation in Rajya Sabha: The representation of states in Parliament and other federal institutions does not accurately reflect their population, size, or contributions. Some states are over-represented while others are under-represented.
      • For example, the allocation of 80 Lok Sabha seats to Uttar Pradesh and only one to Sikkim results in unequal representation, impacting resource distribution and decision-making.
    • Simultaneous Elections: Measures discussed and recommended like the “One Nation One Election” undermined India’s federal structure and conflated the different priorities voters had for National, State, and “Panchayati raj” institutions, degrading each one’s different sphere of responsibility. 

    The Present Fiscal Federal issues in India:

    • Fiscal Divisible Pool: The states often face financial constraints due to their dependence on the central government for funds. The unequal distribution of resources can exacerbate disparities among states. 
      • For example, states like Bihar and Uttar Pradesh receive more funds from the central government under various schemes. However, recently the Kerala government faced serious financial crunches due to a lack of funds.
    • Implementation of Goods and Services Tax (GST): GST’s implementation has raised issues related to fiscal autonomy. States have voiced concerns about the loss of their taxation powers and uncertainties regarding compensation from the central government for revenue losses.

    Bodies related to the Federal System in India:

    • The Inter-State Council: It was constituted under Article 263 of the Constitution, and serves as a constitutional entity aimed at fostering coordination and collaboration between the Central government and the states regarding shared interests and issues of significance.  
    • The Finance Commission: It is a Constitutional Body established under Article 280 of the Constitution to recommend the distribution of revenues between the Centre and the states.
    • The NITI Aayog: Established in 2015 to replace the Planning Commission. It fosters cooperative federalism by involving states in policy formulation and implementation.

    Committee Recommendation:

    • Sarkaria Commission (1983):
        • Balanced Distribution of Powers: Recommended a balanced distribution of powers between the central government and states, ensuring that each level of government has adequate authority to perform its functions.
        • Cooperative Federalism: Emphasized the need for cooperative federalism, where the central and state governments work together in the spirit of partnership and collaboration.
    • Punchhi Commission (2007):
      • Strengthening Inter-State Council: Recommended strengthening the Inter-State Council, an institution tasked with promoting cooperation among states and between the center and states.
      • Revisiting Center-State Relations: Suggested revisiting and updating the provisions related to center-state relations to address contemporary challenges and promote cooperative federalism.

     

    Way Forward: The Centre cannot afford to ignore the importance of states to effectively respond to the Federal issues:

    • Empowerment of State Governments: Strengthen the powers and autonomy of state governments in decision-making processes, allowing them greater authority over issues within their jurisdiction, and revenue management is necessary.
    • Promoting Co-operative Federalism: Enhance the effectiveness of the Inter-State Council as a forum for dialogue and cooperation between the Centre and states on matters of common interest, ensuring meaningful participation of state leaders in decision-making processes.
    • Need a Balanced Approach: First, the government needs to review and make necessary amendments to clarify the distribution of powers, ensuring a more balanced and transparent framework for political governance.  Second, implement a balanced system of grants where states with weaker fiscal capacities receive adequate support to address developmental disparities.
    • Bringing Clarity: Clearly define revenue-sharing boundaries and internal security mechanisms between the Centre and states to ensure equitable distribution of resources.

    Prelims PYQ 

    Q) Which one of the following is not a feature of Indian federalism? (UPSC IAS/2017)

    1. a) There is an independent judiciary in India.
    2. b) Powers have been clearly divided between the Centre and the States.
    3. c) The federating units have been given unequal representation in the Rajya Sabha.
    4. d) It is the result of an agreement among the federating units.

     

    Q) Consider the following statements: (UPSC IAS/2020)

    1) The Consititution of India defines its ‘basic structure’ in terms of federalism, secularism, fundamental rights and democracy.

    2) The Constitution of India provides for ‘judical review to safeguard the citizens’ liberties and to preserve the ideals on which the Constitution is based.

    Which of the Statement given above is/are correct?

    1. a) 1 only
    2. b) 2 only
    3. c) Both 1 and 2
    4. d) Neither 1 nor 2

    Mains PYQ 

    Q1 How far do you think cooperation, competition and confrontation have shaped the nature of federation in India? Cite some recent examples to validate your answer. (UPSC IAS/2020) 

    Q2 The concept of cooperative federalism has been increasingly emphasised in recent years. Highlight the drawbacks in the existing structure and the extent to which cooperative federalism would answer the shortcomings.

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

    What is the outlook on the global economy? | Explained

    Explained | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Global Financial Stability Report

    Mains level: What does it mean for India?

    Why in the news? 

    The International Monetary Fund (IMF) released its latest Global Financial Stability Report warning about the risks to the Global Financial System.

    What is the IMF’s worry about Inflation?

    • Premature Investor Enthusiasm: The IMF believes that investors may be overly optimistic about the end of high inflation and the subsequent lowering of interest rates by central banks. This enthusiasm could be premature.
    • Stalled Inflation: The IMF highlights that inflation may have stalled in some major advanced and emerging economies. Core inflation in the most recent three months has been higher than in the previous three months, indicating a potential slowdown in the decline of inflation.
    • Geopolitical Risks: The IMF warns that geopolitical risks, such as ongoing conflicts in West Asia and Ukraine, could disrupt aggregate supply and lead to higher prices. This could counteract efforts to lower inflation and deter central banks from lowering interest rates.
    • Potential Impact on Central Bank Action: The IMF suggests that if these risks persist, central banks may delay or refrain from lowering interest rates as expected by investors, which could have consequences for asset prices and investor losses.

    How it will impact the Indian Market?

    • Strong Fund Flows: Emerging markets like India have experienced strong inflows of foreign capital, driven by optimism surrounding potential interest rate cuts by central banks.
    • Vulnerability: If central banks in Western countries signal a prolonged period of high interest rates, investors may withdraw funds from emerging markets like India, putting pressure on their currencies.
    • Depreciation of the Indian Rupee: The Indian rupee has already been depreciating, reaching a new low against the U.S. dollar. This trend could continue if capital outflows accelerate.
      • In response to currency depreciation and capital outflows, the RBI may intervene by curbing liquidity and raising interest rates. However, this could slow down the economy.
    • Potential Effects on Financial System: A severe outflow of capital could have implications for India’s financial system, potentially exacerbating the depreciation of the rupee and causing instability.

    Private Credit Market Scenario:

    • The private credit market globally grew to $2.1 trillion last year, indicating its significant size and importance in the financial landscape.
    • The IMF is concerned about the unregulated private credit market, where non-bank financial institutions lend to corporate borrowers. Troubles in this market could potentially affect the broader financial system.
    • India has also witnessed the growth of a small private credit market, particularly with the rise of Alternative Investment Funds (AIFs).

    Conclusion: The IMF’s concerns over premature investor optimism on inflation and risks from geopolitical tensions highlight potential challenges for India’s financial stability. Vigilance over capital flows and regulation of the private credit market are essential safeguards.

    Mains PYQ:

    Q The World Bank and the IMF, collectively known as the Bretton Woods Institutions, are the two inter-governmental pillars supporting the structure of the world’s economic and financial order. Superficially, the World Bank and the IMF exhibit many common characteristics, yet their role, functions and mandate are distinctly different. Elucidate.

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  • Capital Markets: Challenges and Developments

    What are the new Green Credit Programme rules? | Explained

    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: Green Credit Programme;

    Mains level: Sustainable Growth; GCP stoked controversy;

    Why in the news? 

    On April 12, the Environment Ministry issued further guidelines on its Green Credit Programme (GCP)

    What is the Green Credit Programme?

    • The Green Credit Programme is a new market-based instrument in India designed to incentivize individuals, industries, and local bodies for their voluntary environmental actions across different sectors.
    • It is included under the government’s ‘Lifestyle for Environment’ or ‘LiFE’ movement and is a domestic voluntary market mechanism where green credit serves as a singular unit of credit provided for each specified activity.

    Features of the Green Credit Programme:

    • Open-Platform: Participants, including individuals, organizations, and both public and private companies, can invest in these environmental initiatives and receive ‘green credits’ in return. These credits are earned based on the environmental impact of the invested activities.
      • Public sector companies such as Indian Oil, Power Grid Corporation of India, National Thermal Power Corporation, Oil India, Coal India, and National Hydropower Corporation have reportedly registered to invest in the GCP.
    • Set with Priority: The Ministry has prescribed rules for the first initiative under the GCP, focusing on afforestation. Participants can pay for afforestation projects in degraded forest and wasteland areas, with tree planting conducted by State forest departments.
      • The Indian Council of Forestry Research and Education (ICFRE), an autonomous body of the Environment Ministry, is responsible for administering the GCP. They define methodologies to calculate green credits and manage a trading platform for credit exchange.
    • Regional Participation: Thirteen state forest departments have offered 387 land parcels totaling nearly 10,983 hectares of degraded forest land for afforestation projects under the GCP.
    • Enhanced Decision-Making: Successful participants will receive estimates of the costs involved in their chosen afforestation projects, facilitating informed decision-making and planning.

    Why has the GCP stoked controversy?

    • Commodification of Environmental Conservation: Critics argue that the GCP turns environmental conservation into a commodity, potentially undermining the spirit of India’s forest conservation laws.
    • Forest Diversion Concerns: The GCP’s provision for companies to “exchange” green credits for complying with compensatory afforestation requirements raises concerns that it could be exploited by industries seeking to ease forest diversion requirements, particularly in sectors like mining and infrastructure.
    • Ecological Impact: Planting trees as a part of afforestation efforts does not guarantee ecosystem improvement. India’s diverse forest types require specific approaches, and planting the wrong types of trees could lead to the proliferation of invasive species or disrupt sustainable ecosystems.
    • Monoculture Threat: There’s a risk that the GCP may promote the replacement of natural forests with invasive monocultures, potentially harming biodiversity and ecological balance.
    • Carbon Trading Controversy: The GCP allows green credits resulting from carbon storage (e.g., tree planting) to be used for carbon trading. However, the methodology for equating these activities is unclear, raising doubts about the effectiveness and legitimacy of such carbon trading schemes.

    Conclusion: The Green Credit Programme in India, faces criticism for potentially commodifying conservation, raising forest diversion concerns, posing ecological risks like monoculture, and lacking clarity in carbon trading methodologies. So there is a need for rigorous oversight and adaptation.

    Mains PYQ 

    Q Explain the purpose of the Green Grid Initiative launched at World Leaders Summit of the COP26 UN Climate Change Conference in Glasgow in November, 2021. When was this idea first floated in the International Solar Alliance (ISA)?

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