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Important Judgements In News

A just verdictop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Extending the gender equality to women in the armed forces.


Context

SC ruling in favour of women officers in the Army is pathbreaking, extends arc of equality.

What is said in the significance of the judgement?

  • The judgement took many constitutional steps further
  • First, the judgement said “engagement of women officers in the Army” has been an “evolutionary process”.
    • It acknowledges that the “physiological features of a woman have no significance to her equal entitlements under the Constitution”.
  • Second, it indicates “a need for change in attitudes and mindsets to recognise the commitment to the values of the Constitution”.
    • The judgement said that reliance on the “inherent physiological differences between men and women” rests on a deeply entrenched stereotypical and constitutionally flawed notion.
    • The above-flawed notion fails to ignore “the solemn constitutional values which every institution in the nation is bound to uphold and facilitate”.
  • Third, this change has to be based on “the right of women officers to equality of opportunity”, which has two “facets”:
    • Non-discrimination on the grounds of sex and-
    • Equality of opportunity for all citizens in employment.
    • State and civil society have to firmly internalise these rights to achieve even the minima of gender justice.
    • Fundamental fallacy: Removal of the “fundamental fallacy” demands non-discrimination and affirmation of the equality of opportunity in public employment. To rule otherwise will constitute “a travesty of justice”.
    • What does this mean for women? This means women now have the same terms of employment as men.
    • No longer will women be forced to retire after 14 years in service, irrespective of their record.
    • They will also have a full pension and other financial benefits.
  • Fourth, Article 14 of the Constitution has been pressed into service as prescribing “a right to rationality” that forbids any “blanket” and “absolute”
    • The burden to justify differentiation on Army: The burden to justify the differentiation between women and men falls “squarely on the Army”, which has to “justify such differentiation with reason”

Judicial consciousness of policy consciousness

  • Achilles’ heel of the judgement: In fact, the brief remark outlining the judicial consciousness of policy limitations may well prove to be the proverbial Achilles’ heel in future courts.
  • One hopes that the stoic and heroic endeavours of the petitioner army officers and their counsel, will not be visited with the constitutional fates in which the judgement is reversed.
    • And this path-breaking judgment will forever vindicate gender equality and justice.

Conclusion

Making gender justice less contingent on the executive’s mood swings is the primary task of the judiciary. Making it immune from judicial re-visitations remains the paramount constitutional duty of all citizens, but more particularly of feminist citizens’ crusade for judicial consistency as a badge for constitutional rights and justice.

Defence Sector – DPP, Missions, Schemes, Security Forces, etc.

May the Force be strengthenedop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Role played by CRPF in the internal security of the country and problems faced by the force.


Context

The functioning of the CRPF needs to be revisited.

Historical background and present status of CRPF

  • Crown Representative Police: In the wake of Independence, a contentious administrative issue was over the retention of CRP (Crown Representative Police).
    • The question over the relevance of the force: As the Constitution designated ‘law and order’ as a State subject, the relevance of having a Central police force was questioned by everyone
    • But Deputy Prime Minister and Home Minister Sardar Vallabhbhai Patel argued vehemently and boldly in favour of it.
  • Present-day relevance of the force
    • From having just two battalions as the CRP, the Central Reserve Police Force (CRPF) has now expanded to being a three-and-a-half lakh-strong force.
    • Consisting of specialist wings like-
    • The Rapid Action Force.
    • The COBRA (Commando Battalion for Resolute Action).
    • The Special Duty Group.
    • Largest Paramilitary force: It is the largest paramilitary force in the world and no other security force of the country has seen expansion at such a rapid rate.
  • Importance of the force
    • Security to the country: Providing integrated security to a diverse country of continental size is not an easy task.
    • Immediate solution situation: Resolving certain conflicts requires immediate solutions for which regular armed forces cannot be deployed.
    • Peacekeeper of the nation: For the reason cited above, we require paramilitary forces, and the CRPF is the most sought-after one because of its flexibility and versatility.
    • The force has earned its place as the ‘peacekeeper of the nation’.

Problems faced by the CRPF

  • A year after Pulwama attack, it is time for the nation to take a relook at the main agency dealing with conflicts in different territorial zones. The following 3 are the major concerns of the force.
  • 1. Pressure taking its toll: The frequent movements lock, stock and barrel are taking its toll.
    • There are increasing cases of suicides and fratricides.
    • The anguish caused because of prolonged periods of duty away from one’s family members adds to the pressure experienced the soldiers having their fingers constantly on the trigger guard.
  • What is being done or needs to be done to address the problem?
    • 100-days leave: Though the Home Minister recently stated that CRPF jawans would get to spend 100 days with their families every year, considering the present levels of commitment, 100 days of leave is an impossible dream for a soldier.
    • Need to revisit the decision of assigning exclusive operations: An easier way out here would be to revisit the government’s decision on tasking specific Central Paramilitary Forces exclusively with certain operations.
    • It should be compulsory for recruits to all Central Police Forces to be deployed to anti-insurgency roles during their first 15 years of service.
    • They can be shifted, in the next 10 years, to border duties.
    • The last phase of their career should be in static duties.
  • 2. Rehabilitation of retired personnel
    • Care of welfare and morale: As the Force is deployed to the last man, the welfare and morale of the soldiers need to be taken care of.
    • No rehabilitation policy: A large number of personnels are taking voluntary retirement, but there is no rehabilitation policy.
  • What is being done or needs to be done to address the problem?
    • The creation of a Welfare and Rehabilitation Board has not made any impact. Provision of canteen facilities, without tax exemption, hardly gives the soldiers any relief.
    • Another demand that needs to be considered is that of One Rank, One Pension scheme.
  • 3. Leadership issue
    • It is high time the Force develops home-grown leadership.
    • Elements like healthy work culture, ethos and regimentation are very crucial for any armed force and they are best guarded by officers born on the cadre.
  • Steps taken to address the issue
    • The long-overdue Non-Functional Financial Upgradation (NFU) materialised only after the judicial intervention.
    • However, the top leadership- made up of IPS officers on deputation- is reluctant to implement it.

Conclusion

The first anniversary of the Pulwama attacks should enable all stakeholders to devise ways and means to plug the loopholes and address the system failures in a Force that still remains the most formidable in internal security matters.

 

Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

Let’s think afresh about how to govern India’s gig workforceop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- How to govern India's gig economy?


 Context

The gig economy plays to employment patterns in India, where most of the workforce is engaged in “informal” jobs in the “unorganized” sector.

Employment pattern in India

  • Non-contractual employment: A recent study of employment patterns over a 13-year period ended 2017 for the Prime Minister’s Economic Advisory Council finds that non-contractual employment grew by 68 million over the period.
    • And “has been a hero of employment generation growing by about 5% annually“.
    • There were 145 million people in non-contractual employment in 2017-18.
    • Professionals constituted the most rapidly growing occupations, with older, better educated and skilled witnessing higher growth.
  • Unorganised sector growing at much higher rate than organised sector: The study also found that unorganized sector employment grew by 65 million between 2004 and 2017, compared to only 27 million new jobs in the organized sector.
    • What does the asymmetric rate suggests? It suggests that businesses are finding it more convenient to sustain themselves when they are below the radar of the government.
  • Potential for growth of gig economy: As technology and business models take the gig economy across the country and implant it more deeply into the Indian economy, we can expect to see a lot more people find employment through online marketplaces and technology platforms.

Regulation of labour laws and expanding the tax base

  • Social Security Code: In December, the government introduced legislation in Parliament that seeks to consolidate a number of labour laws into a Social Security Code.
    • Who will be covered in the code? The new statute encompasses self-employed professionals, freelancers and platform workers, such as those employed by taxi aggregators and food delivery companies.
  • Widening the tax base: The tax person is not far behind.
    • Recent reports suggest that revenue officials are leaning on platforms and aggregators to get gig workers registered with the goods and services tax (GST) network.
    • Need to reflect on how to govern the gig workforce? While it is just as well that the government is attempting to rationalize labour regulations and expand the country’s tax base, it is important to step back and reflect on how the gig workforce ought to be governed.

The new approach to classification of jobs: Income and volatility

  • Classification on the basis of two fundamental characteristics: If we discard the mental model that has long classified jobs as formal and informal, and look at work afresh, we observe that jobs vary along with two fundamental characteristics:
    • The level of income they generate and-
    • The volatility of this income.
    • Example: A security guard at a company might earn a few thousand rupees a month, but with the assurance of a regular monthly paycheque.
  • More informative way: Instead of the old binary formulation of informal versus formal jobs, it is more informative to see jobs being distributed on a spectrum depending on how much they pay and how volatile the income flows they provide are.
    • Wherever a job lies in this spectrum, the objective of public policy ought to be to ensure a “trimurti”.

Ensuring Trimurti

  • Frist-Providing dignified working conditions: Promoting dignified working conditions include-
    • Ensuring fairness.
    • Respect.
    • Safety.
    • Protection against exploitation and-
    • Arrangements for retirement.
    • Need to ensure the obligation from employers: This means that even as labour laws are rationalized to eliminate outdated and hard-coded regulations, it is necessary to ensure that all employers retain an obligation to promote the dignity of all their employees.
  • Second-Need to lower the barriers: Real wages grow not because the government imposes minimum wages, but when productivity rises.
    • Productivity growth occurs when barriers to trade, investment and travel are lowered.
    • A closed economy cannot be a successful gig economy.
  • Finally-A re-imagined social security system: A re-imagined social security system for the 21st century must tap government, corporate and social contributions for insurance and retirement accounts.
    • Such a multi-contribution system is possible today and the proposed Social Security Code is an opportunity to put in place such a future-proof framework.

How to handle the dispute arising out of the gig economy

  • Start online dispute resolution system: The gig economy is perhaps the best place for India to start its first online automated dispute resolution system.
    • You can’t govern the 21st-century economy with 18th-century technology.

Conclusion

While ensuring the application of the labour code to the gig economy and bringing them in the tax net the government also ensure the conducive environment for the gig economy to flourish and contribute significantly in the growth of the country.

 

 

Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

How countries play the tariff gameop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- How could higher import tariffs affect the Indian economy?


 Context

It is important to have a stable tariff policy which would help to link effectively to global value chains.

Why countries levy tariff?

  • The tariff is a tax levied on an imported good at the border.
  • Countries use tariffs to-
    • Provide easy market access or restrict them to protect domestic industry.
    • It also serves the purpose of revenue collection and-
    • To achieve some strategic objectives by giving/denying tariff concessions to countries.

Harmonised System in international trade

  • What is it? Goods are classified at 2, 4, 6, 8 digits and some countries have even up to 10 digits, depending upon the level of trade potential of a country.
  • WCO’s system of codes: The classification of these codes is streamlined under an international coding system called ‘Harmonized System’ (HS) under World Customs Organization (WCO) to which 138 countries are contracting parties and about 200 customs authorities are signatories.
  • India’s national tariff lines are about 11,000 at HS 8-digit.

Historic background of the tariffs

  • Colonial-era: During the colonial era tariffs were heavily used to protect the domestic industry, enjoy unbridled access to the colonized markets and raise tariffs against competitors.
  • Adam Smith’s advocacy of free trade: Adam Smith in 18th Century challenged this idea of regimented trade with his advocacy of free trade that was convincingly brought out in his seminal work ‘Wealth of Nations’.
  • Theory of comparative advantage: Further, in the 19th Century, David Ricardo, building on this concept, propagated the ‘theory of comparative advantage’.
    • The theory proposes that nations should remain focused on their specific areas of competence and allowed to trade freely with other countries.
    • This theory is against import substitution and considers raising tariffs as a drag on economic growth.
  • What proponents of high tariff said? Proponents of high tariffs assert that-
    • Developed countries dominated global markets for decades with high tariffs, developing countries should continue to enjoy differential tariff treatment until they catch up with the rest.

How countries calibrate tariffs?

  • Each country calibrates its tariffs taking into account its-
    • Domestic production.
    • Demand and
    • Sensitivities.
  • Typically, tariff structures of a manufacturing country reveal a pattern:
    • Low tariffs on raw materials and intermediate goods in the range of 0-5%.
    • Slightly higher tariffs for finished goods in the range of 7-10%.
    • Higher tariffs for agriculture products at above 15%, sometimes up to bound rates as allowed under WTO.
    • As agriculture lines are politically sensitive, most countries zealously guard them with high tariffs.

Export-import linkage and effects of high tariffs

  • How tariffs could harm export competitiveness: Availability of cheaper raw materials and intermediate products support making of competitively priced finished goods for export markets.
    • The challenge for an entrepreneur is to find these cheaper inputs.
    • If these inputs are not available domestically at competitive rates, they look to source them from outside.
    • But as high tariffs act as barriers to sourcing cheaper inputs, they undermine export competitiveness of a product.
  • Implications for MSMEs
    • For MSMEs (micro, small and medium enterprises), this dependency linkage is even more critical, without which they might close down their operations under threat of persistent losses or low returns.
    • Impact on jobs and economy: This would have consequential impact on jobs, income and consumer choices in an economy.
  • Inefficiency and corruption at entry points: High tariffs could breed inefficiency and corruption at the entry points as it leaves much scope for discretion at the hands of officials, circumvention through under/over-invoicing and violation of rules of origin.
  • Impairing demand: Overtime, high tariffs run the risks of impairing demand and paralyzing domestic manufacturing.
  • Maintaining judicious balance: Leveraging tariffs for benchmarking domestic prices is not an uncommon practice in any country.
    • But maintaining a judicious balance between the interests of primary producers and user industries is imperative, given that there exists an intimate link between imports and exports.

India and Global Value Chain (GVC)

  • 80% trade through More than 80% of the global trade runs through Global Value Chains (GVCs) which have evolved extensively in various regions of the world.
    • Low tariffs help GVCs to thrive, essentially for the purpose of sourcing and accessing foreign markets.
  • Why stable tariff policy is important for India?
    • For India to emerge as a global hub for “networked products” and make every district an ‘export hub’ for a specific item, as envisaged in this year’s Budget, it is important to have a stable and predictable tariff policy which would help to link effectively to GVCs.
    • For investors: From an investor’s point of view a stable tariff policy is a huge motivation.

Free-trade agreements and hope of getting market access

  • Market access: The assumption that tariff concessions under bilateral free trade agreements (FTAs) would help get market access is misplaced.
    • Why the assumption is misplaced? In reality, this may not happen as same concessions can be offered by a country to other trading partners in a trade arrangement or throw open to all countries on an MFN (most favoured nation) basis.
    • Inverted duties situation: Gradual tariff liberalization is a natural progression and failing to do so could result in a situation of inverted duties where finished products end up being cheaper than raw materials and intermediate goods
    • Thus, calling for tariff correction in course of time.

Revenue Generation through tariffs

  • Why it is not a good idea? The domestic consumers ultimately end up absorbing import duties as they get passed onto products they consume.
  • Taxing own people: This is akin to taxing one’s own people in an indirect way by making them pay more for a product than in other markets.
  • Revenue generation from enhanced activities: For these reasons, the idea of revenue collection from import duties is losing steam, and instead, revenue generation from enhanced economic activity is gaining wider acceptance as a dynamic process.

Conclusion

Increasing tariffs on the import can end up hurting the economy than benefitting it in the long run, so the government must reconsider the policy of tariff increase.

 

Foreign Policy Watch: India-Bangladesh

Bangladesh fares betterop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2-Bangladesh-India relations issue-illegal migrants, relations after passage of CAA.


Content

In the last decade, on a range of social development indicators, Bangladesh has fared better than India. So it is highly unlikely that Bangladeshis would want to leave their cherished homeland for India.

Comparison with Bangladesh on the development indicators

  • Growth rate: This year Bangladesh’s economic growth rate has surpassed India.
  • Social development indicators: In the last decade, on a range of social development indicators, from infant mortality to immunisation, Bangladesh has fared better.
  • India lagging behind the neighbours in quality of life: Undoubtedly, since economic liberalisation, Indians have grown much richer than Bangladeshis, but in terms of quality of life our neighbour largely outshines us.
    • India trails across several (not all) composite indices from the latest Global Hunger Index to the Gender Development Index.
    • Even on the 2019 World Happiness Index, Bangladeshis score better.
    • While, technically, on the Human Development Index, Bangladesh scores marginally less, this is largely because the index merges income and non-income parameters.

How India’s neighbour forged ahead in social development?

  • Dissolving the inequality and bridging the social and gender distances: In the case of Bangladesh, the most prominent factor has been-
    • Removing inequality: The country’s ability to dissolve inequalities through sustained investment in public services and-
    • Bridging the social distance: The bridging of social and gender distances.
  • Development in Healthcare: Till the Eighties, Indians lived longer than most South Asians.
    • But now, despite being poorer, an average Bangladeshi female child at birth can expect to live for four years more.
    • Fewer Bangladeshi children also die before their fifth birthday.
    • Community clinics: The formula for this success has been relatively simple. Since 2009, the government has constructed well-stocked “community clinics” in every third village.
    • Home delivery of medicines: For four decades, committed cadres of government health workers have delivered medicines and family planning to women in the comfort of their homes.
  • Achievement in Education: On the education front, even though India has a demographic dividend, Bangladesh has achieved a marginal advantage in youth literacy.
    • Further, across income quintiles, Bangladeshi girls have higher educational attainments than boys.
    • Free textbooks: The government provides free textbooks in the government, non-government (NGO) and madrassa-run schools promptly at the start of the academic year, without the chronic delays which plague India.
    • The greater proportion of expenditure on educations: Economist Jean Drèze has aptly described India as amongst the world champions in social underspending. In contrast, Bangladesh despite being a poorer neighbour since the Nineties has spent a greater proportion of government expenditure on education and healthcare.
    • The fruits of these sustained investments have reaped rich dividends.
  • Nutrition: On the nutrition front too, Bangladesh fares better.
    • Thirty-three per cent of Bangladeshi children are underweight compared to India’s 36 per cent as per the demographic health surveys.
    • Similarly, a greater proportion of Indian children are also stunted.
    • Further, the inequality between wealth quintiles is starker in India.
    • A few years ago, the Bangladeshi government, with the help of NGOs, hired a unique cadre of “Pushti Apas” (nutrition sisters) who went door-to-door in their social endeavours.
    • Unlike the Indian Poshan Abhiyan’s focus on vegetarian foods, they did not shy away from teaching mothers to feed growing infants a balanced diet with mashed fish, meat and eggs.
  • Sanitation: Even at the turn of the millennium, at least 80 per cent of Bangladeshi homes had toilets, even if rudimentary.
    • By 2016, 96 per cent of households and 80 per cent of schools in had proper sanitation.
    • Apart from the typical Islamic emphasis on hygiene, local governments not only provide cement rings for free to poor families but they also regularly spread messages through community group discussions, mosques, mass media and schools.
    • Local entrepreneurs have also ensured that with the innovation of plastic pans, the cheapest toilets cost less than Chinese mobile phones.
  • Women empowerment: Bangladeshi women are also increasingly assertive.
    • The 2006 World Bank Survey on Gender Norms found a growing trend of “educational hypogamy”.
    • In sharp contrast to India’s decline, Bangladeshi women also have higher labour force participation.

Contrast

  • In comparison, India is grappling with the worst unemployment levels in 45 years and sinking economic growth rates. Government ministers should pull up their own socks, instead. Berating our neighbours with the false bogey of illegal immigrants, in light of the Citizenship Amendment Act, is nothing but an unjustifiable distraction. Instead, it would be far wiser for the Indian government to humbly learn the recipe of South Asian success to improve the lives of citizens from the impressive “Shonar Bangla”.
Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

Missed callop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- AGR issue and its impact on the telecom sector of the country.


Context

As the dust settles after the Union budget and the Supreme Court’s decision to not provide relief to telcos from their licence fee liabilities, it is an appropriate moment to step back and examine how we got here.

The issue over the definition of AGR (Aggregate Gross Revenue)

  • What is AGR issue: Since the New Telecom Policy of 1999 (NTP 1999), operators were required to pay a percentage of their AGR to the government as licence fees instead of a one-time licence fee.
    • License fee based on earnings: This was done in exchange for moving operators from fixed licence fee-based on irrationally exuberant bids they had made in the mid-nineties-to a regime that determined licence fee based on revenue earned, thereby de-risking the obligation.
    • Why it matters? What constitutes AGR is important for the purpose of the computing licence fee and thousands of crore are dependent on this.
  • Consequences of ambiguity over the definition of AGR: Bundling – a pervasive phenomenon in most telecom markets have not taken off in India.
    • What is bundling? Product bundling is a marketing strategy that involves offering several products and/or services for sale as one combined product.
    • The fear is that handset sales will also come under the purview of AGR. Handsets, it could still be argued are part of the service offering.
    • Dividend on earning is considered as the part of AGR: Interest and dividend earnings on investments have also been included in AGR.

Unfair practices and cancellation of licences by the court

  • Controversy over conversion charges: In 2003, “limited” mobility service was converted into a fully mobile service with a one-time payment of Rs 1,658 crore as “conversion” charges, generating controversy. It was labelled as a “back door entry” to full mobility.
  • Disguising international calls as domestic: Around the same time, the DoT used to levy a fee of Rs 4.75 per minute on international calls known as “access deficit charge” (ADC) to fund universal coverage. It is well known that an operator disguised international calls as domestic to bypass ADC.
  • Showing call revenue as internet services revenue: For some time, internet services attracted lower or no licence fee and it became expedient for operators to indulge in license fee “arbitrage” by showing more revenue from internet services.
  • Inflating subscriber numbers: Another manoeuvre was to inflate subscriber numbers to gain access to scarce spectrum in the days when fresh spectrum was administratively assigned based on subscriber numbers.
  • First come first serve policy: Finally, the shameful spectacle was the battle fought by operators to jump the queue to deposit earnest money for gaining rights over the spectrum that was oddly sought to be assigned by a method called “first come first served” and whose definition itself was quite elastic.
  • Cancellation of licence by the Court: Thereafter, in the litigation that inevitably followed, the Court cancelled 122 telecom licences and mandated allocation of spectrum by auction.

Conclusion

  • Erosion of trust between the public and private sector in general and in the telecom sector, in particular, has been a negative externality of the reform process.
  • Restoration of trust between public and private sector is necessary: In this context, the appeal made by the finance minister during her budget speech for the restoration of “vishwaas” between the public and private sectors and between citizens and government is critical
Corruption Challenges – Lokpal, POCA, etc

Six years on, Lokpal is a non-starterop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Institution of Lokpal is yet prove its efficacy to deal with the corruption. What are the reasons for not starting function as stated in the law.


Context

More than six years after the Lokpal law received the President’s assent, the institution of the Lokpal is yet to play any significant role in tackling corruption in the country.

Delay in appointment

  • Five-year delay in appointment: For more than five years, the chairperson and members of the Lokpal were not appointed.
    • LoP issue: The government claimed that since no one could be recognised as the Leader of the Opposition (LoP) after the 2014 general election, the committee responsible for selecting members of the Lokpal could not be constituted.
    • This malady could have been easily remedied by either recognising the leader of the single largest party in Opposition in the Lok Sabha as the LoP, or by amendment as was done for the selection committee of the CBI Director.
    • However, neither recourse was taken.

Truncated appointment committee

  • Special invitee: The leader of the largest Opposition party in the Lok Sabha was invited for meetings of the selection committee as a ‘special invitee’.
    • Which he declined on grounds that it was mere tokenism.

Non-starter

  • More than 10 months later, however, evidence suggests that the Lokpal is a non-starter.
  • No rules prescribing the form: Till date, the government has not made rules prescribing the form for filing complaints to the Lokpal.
  • No rules regarding asset disclosure: The Central government has also failed to formulate rules regarding asset disclosure by public servants.
  • In order to ensure independent and credible action on allegations of corruption, the Lokpal was empowered under the law to set up its own inquiry wing headed by a Director of Inquiry and its own prosecution wing headed by a Director of Prosecution.
  • The Inquiry and prosecution wing not set up yet: The inquiry and prosecution wings of the anti-corruption ombudsman are yet to be set up.
    • The Lokpal has also not appointed the Director of Inquiry or Prosecution.
    • Regulations for inquiry and investigation not made: Regulations which the Lokpal was obligated to make under the law are yet to be made, including those specifying the manner and procedure of conducting preliminary inquiry and investigation.
  • Legal veracity of the decisions uncertain: Since necessary procedures to operationalise the law are yet to be put in place, the legal veracity of the decisions of the Lokpal could potentially be challenged in a court of law.

Conclusion

The failure to operationalise the Lokpal in an effective manner lays bare the lack of will of the government. It took nearly half a century for the Lokpal law to be enacted from the time the need for the oversight institution was first articulated. The government must act to have an effective, independent and empowered Lokpal.

Important Judgements In News

Reservation as right: on Supreme Court judgmentop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Reservations in jobs flowing from enabling provisions of the Constitution.

Mains level : Paper 2- Provision for the vulnerable section of the society, Role and importance of affirmative action in the development of the weaker section.


Context

The recent Supreme Court judgment, that there is no fundamental right to claim reservation in promotions, has caused some political alarm.

Received wisdom in affirmative action jurisprudence

  • Presence of sound legal framework for a reservation: The received wisdom in affirmative action jurisprudence is that a series of Constitution amendments and judgments have created a sound legal framework for reservation in public employment, subject to the fulfilment of certain constitutional requirements.
  • Solidification of reservation as an entitlement: It is also accepted that the framework has solidified into an entitlement for the backward classes, including the SCs and STs.

What does the judgement mean?

  • Reservations are not rights: The latest judgment is a reminder that affirmative action programmes allowed in the Constitution flow from “enabling provisions” and are not rights as such.
  • Not a new legal position: This legal position is not new. Major judgments- these include those by Constitution Benches-note that Article 16(4), on the reservation in posts, is enabling in nature.
  • The state is not bound to provide reservation: In other words, the state is not bound to provide reservations. But if the state provides reservations, it must satisfy the following two criteria-
    • For the backward class: It must be in favour of sections that are backward.
    • Inadequately represented: And inadequately represented in the services based on quantifiable data.
  • What happened in the Uttarakhand case? The Court set aside the Uttarakhand High Court order directing data collection on the adequacy or inadequacy of representation of SC/ST candidates in the State’s services.
    • What was the reasoning? Its reasoning is that once there is a decision not to extend reservation — in this case, in promotions — to the section, the question whether its representation in the services is inadequate is irrelevant.

Question of government obligation

  • The idea in consonance with the Constitution: The idea that reservation is not a right may be in consonance with the Constitution allowing it as an option.
  • The larger question of the government obligation: But a larger question looms is there no government obligation to continue with affirmative action if-
    • The social situation that keeps some sections backwards.
    • And at the receiving end of discrimination persists?

Why reservation matters for equality?

  • Reservation as a faced of equality-the SC: Reservation is no more seen by the Supreme Court as an exception to the equality rule; rather, it is a facet of equality.
  • Completion of equality norm: The terms “proportionate equality” and “substantive equality” have been used to show that the equality norm acquires completion only when the marginalised are given a legal leg-up.

What may be the consequences of this judgement?

  • Possibility of the unequal system: Some may even read into this an inescapable state obligation to extend reservation to those who need it, lest its absence renders the entire system unequal.
  • Possibility of perceptible imbalance: For instance, if no quotas are implemented and no study on backwardness and extent of representation is done, it may result in a perceptible imbalance in social representation in public services.

Conclusion

Ensuring adequate representation to disadvantaged sections is a state obligation and the state must play its role in ensuring their representation by appropriate legislation.

 

Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

India’s rerun of its protectionist folly mars the liberalization eraop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- India's changing stance towards liberalisation.


Context

The latest budget’s import tariff hikes signal that a three-decade commitment to trade openness has been all but abandoned.

Detrimental effects of protectionism

  • In brief, both economic theory and a vast weight of evidence point to the detrimental effects of protectionism. These are-
    • Fostering inefficiency: Far from jump-starting the domestic industry, tariffs, quotas and other trade restrictions foster inefficiency among domestic firms that survive only because of
    • And do not become more productive under it, as the government’s threat to withdraw the protection is never credible.
    • The consumer is the ultimate loser: Meanwhile, upstream industries suffer higher than necessary input costs.
    • Consumers of final goods end up footing the bill.
    • Governments earn some tariff revenue, but never enough to warrant the distortion costs to the economy.
  • Tariff inversion: The tariff “spikes” cause greater distortion than a revenue-equivalent uniform tariff, and may lead to the problem of tariff “inversion”.
    • What is tariff inversion? A situation in which intermediate goods are taxed more heavily than final goods, thus paradoxically further disadvantaging, rather than aiding, domestic producers of final goods.
  • Rent-seeking by domestic industries: Tariffs worsens rent-seeking by domestic industries-
    • Protectionism increases lobbying: A force which would be muted in a world where tariffs are locked at a uniform level by statute, and, as a result, industries individually have less of an incentive to lobby for tariffs that are to be applied economy-wide rather than only for their own benefit.
    • Economists Arvind Panagariya and Dani Rodrik had formalized this intuition many years ago, and it matches both common sense and observation.
    • The apparently random list of sectors that would benefit from tariff increases in the recent budget-strongly suggests the possibility of rent-seeking behaviour.

Conclusion

Ample experience of import substitution in economies across the emerging world and over many decades, including in India until 1991, attest to the fact that protectionism, especially abetted by rent-seeking behaviour, is like a rabbit-hole: once inside, one keeps going deeper and deeper, and egress is difficult at best.

Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

The high cost of raising trade wallsop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Various Free Trade Agreements.

Mains level : Paper 3- Should India prefer bilateral trade agreements over multilateral agreements and what are the issues involved in this approach.


Context

India’s international trade posture appeared to turn protectionist in the past week, with two indicators the government sent out.

What were the two indicators?

  • The first-Signal sent out in the Budget: The first indicator, which played out live on television was contained in the Union Budget.
    • Laying out the Budget for the year, the finance minister made several references to the problems with free trade and preferential trade agreements (FTAs and PTAs).
    • Raise in tariffs, changes in the act: The Budget raised tariffs on the import of more than 50 items and changed the Customs Act provisions substantially to penalise imports suspected to originate from third countries.
  • The second- India declined negotiations: The other indicator was that India declined to attend a meeting of trade negotiators in Bali that was discussing the next step in the Association of Southeast Asian Nations (ASEAN)-led Regional Comprehensive Economic Partnership (RCEP) trade agreement.

Issues with the Free Trade Agreement

  • What the FM told Parliament: It has been observed that imports under Free Trade Agreements (FTAs) are on the rise.
    • Undue claims of FTA benefits have posed a threat to the domestic industry.
    • Such imports require stringent checks, adding that the government will ensure that all FTAs are aligned to the conscious direction of our policy.
  • What could be the consequences of the Govt. policy?
    • Discouragement to imports: While the Govt. motive may be to protect Indian markets from dumping-primarily by Chinese goods-
    • The consequence of the changes will be to put Indian importers on notice and discourage imports in general.
    • Even as the government reserves the right to modify or cancel preferential tariffs and ban the import or export of any goods that it deems fit.

The rise in the trade deficit and decision to walk out of FTA

  • The trade deficit with FTA partners: The government’s problem with FTAs was a key theme in its decision to walk out of the RCEP negotiations (of 16 countries) the rise in trade deficits with FTA partners.
  • Review of all agreements: The government says it will now review all those agreements and wants to “correct asymmetry” in negotiations with new partners. The agreement that would be reviewed includes-
    • TAs signed with the 10-nation ASEAN grouping (FTA).
    • Japan (Comprehensive Economic Partnership Agreement, or CEPA).
    • And South Korea (CEPA).

Why it would not be easy to negotiate bilateral treaties

  • The bilateral agreement would not be a priority for other countries: If India makes a complete break with RCEP, negotiating the bilateral trade agreements (TAs) will not be a priority for the other countries until RCEP is done.
    • The process of legal scrubbing is likely to take most of the year, and any talks with India will probably only follow that.
    • Difficulty in getting better deal: It is also hard to see any of them being able to offer India a better deal bilaterally once they are bound into the multilateral RCEP agreement.

India’s pending talks on bilateral treaties

  • Negotiations of CECA with Australia: The case of the Comprehensive Economic Cooperation Agreement (CECA) being negotiated with Australia, will be a difficult task, not the least due to its history.
    • India and Australia began CECA talks in 2011.
    • However, talks hit a dead-end in September 2015. With the focus on RCEP, no progress has been made since then.
  • Negotiations of FTA with the UK: A similar scenario awaits the announcement of the India-United Kingdom FTA talks.
    • It is unlikely that the U.K. will actually be able to talk until next year after terms for the K.’s full withdrawal from the European Union (EU) are completed.
  • Negotiation of BTIA with the EU: Bilateral Trade and Investment Agreement (BTIA) negotiation are also unlikely to make headway until the UK’s complete withdrawal from the EU.
    • Both sides will have to decide how to revive from where they left off in 2013.
    • Why the negotiations are pending? Making the negotiations harder is the government’s decision to scrap all bilateral investment treaties with 57 countries including EU nations, and bringing in a new Bilateral Investment treaty (BIT) model in 2015.
    • Only Kyrgyzstan, Belarus and most recently Brazil have agreed to sign a new investment treaty based on that model.
  • The US-India trade issue: Finally, there is the much-anticipated resolution of U.S.-India trade issues ahead of the visit of U.S. President.
    • The talks in that visit could also include talks on an FTA.
    • At present, there have only been some non-paper talks on the issue.
    • And given that the U.S. has expressed deep misgivings about India’s BIT model, these talks will also take several years to come to fruition.

Why India should rethink its stand on FTA

  • First-Prospect of no dispute settlement mechanism: The decline of multilateralism, accelerated by the retrenchment of the U.S. and China’s intransigence have all meant the World Trade Organization (WTO) has lost steam as a world arbiter.
    • This leaves states that are not part of arrangements without a safety net on dispute settlement mechanisms.
  • The second-trade deficit of other countries with India: The government has invoked the massive $57-billion trade deficit with China to explain protectionist measures, but it forgets its own trade surpluses with smaller economies.
    • Particularly in the neighbourhood, where Indian exports form more than 80% of total trade with Nepal, Bangladesh, Bhutan and Sri Lanka, respectively.
  • Third- The rise of regional agreements: It is clear that most of the world is now divided into regional FTAs, for example-
    • The North American Free Trade Agreement (NAFTA) for North America.
    • The Southern Common Market (MERCOSUR for its Spanish initials) for South America.
    • The EU, the Eurasian Economic Union (Russia and neighbours).
    • The African Continental Free Trade Agreement (AfCFTA).
    • The Gulf Cooperation Council (GCC) FTA in West Asia.
    • And now the biggest of them all, RCEP, which minus India, represents a third of the world’s population and just under a third of its GDP.
  • Fourth- Finally, the trend across the world does not favour trade in services the way it does in goods.
    • India’s strength in the services sector and its demand for more mobility for Indian employees, is thus becoming another sticky point in FTA negotiations.

Conclusion

India’s demographic might is certainly attractive for international investors, but only if that vast market has purchasing power and is not riven by social unrest and instability. India’s demographic might is certainly attractive for international investors, but only if that vast market has purchasing power and is not riven by social unrest and instability.

 

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Listening to the call of the informalop-ed of the day

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Pros and cons of formalising the informal sector, policy changes needed to support the informal sector


Context

Attempt to formalise the informal sector would not necessarily benefit it as two recent papers reveal.

What do the research papers reveal?

  • The first paper-No strong evidence that formalisation improves business outcomes.
    • Published by the National Bureau of Economic Research, economist Seema Jayachandran argues that there is no strong evidence from studies conducted in many developing countries that formalisation improves business outcomes.
  • The second article-Formalisation an evolutionary process:
    • In the second article, a background paper for the International Labour Organisation (ILO), economist Santosh Mehrotra calls formalisation an evolutionary process.
    • During this evolutionary process small, informal enterprises learn the capabilities required to operate in a more formal, global economy.
    • He says they cannot be forced to formalise.

The formalisation trap

  • Why does the state want to formalise?
    • Easy monitoring and taxation: The state finds it easier to monitor and to tax the firms that adopt its version of formality.
    • Reduced last-mile cost for banks: Formality can reduce the last-mile costs for banks also.
  • Problem with the imposed formalisation
    • The added cost outweighs benefits: Ms Jayachandran’s study reveals that most of the formalities imposed from above, add to the costs of the firms that outweigh the benefits of inappropriate formalisation.

How informal sector improves themselves?

  • Association with their peers: Small entrepreneurs gain from forming effective associations with their peers.
  • Mentoring: They also benefit greatly from ‘mentoring’.
  • On job skill development: Skills of small entrepreneurs and their employees are best developed on-the-job.
    • This is because they cannot afford the loss of income by taking time off for training.
  • Soft skills to form associations and manage enterprises, matter as much for the success of the enterprises as ‘hard’ resources of finance and facilities.

Problems with connecting to global supply chains-

  • There is a desire to connect small firms in India more firmly with global supply chains.
    • Search for lover cost source supply: Mehrotra points out that the primary motivation of multinational companies for expanding their global supply chains is to tap into lower-cost sources of supply.
    • Supply chains compete with each other.
    • When wages and costs increase in their source countries, they look for other lower-cost sources.
    • Informal-the lowest labour cost firms: The lowest labour cost firms at the end of supply chains are generally informal.
    • Thus, the push by the state to formalise firms is countered by the supply chain’s drive to lower its costs.

Way forward

  • India’s jobs, incomes, and growth challenges necessitate a reorientation of policies towards the informal sector.
  • First-The government and its policy advisers must stop trying to reduce its size.
    • The development of an economy, from agriculture to the production of more complex products in the industry, is a process of learning.
    • Informal enterprises provide the transition space for people who have insufficient skills and assets to join the formal sector.
  • Second-Policymakers must learn to support informal enterprises on their own terms.
    • Merely making it easy for MNCs and large companies to invest will not increase the growth of the economy.
  • Third-Find ways to speed up the process of learning.
    • Policymakers must learn how to speed up the process of learning within informal enterprises by developing their ‘soft’ skills.
    • Large schemes to provide enterprises with hard resources such as money and buildings, which the government finds easier to organise, are necessary but inadequate for the growth of small enterprises.
  • Fourth-Networks and clusters of small enterprises must be strengthened.
    • They improve the efficiency of small firms by enabling sharing of resources.
    • More clout to negotiate: They give them more clout to improve the terms of trade in their favour within supply chains.
    • Reduced last-mile cost: They reduce the ‘last mile costs’ for agencies and providers of finance and other inputs to reach scattered and tiny enterprises.
  • Fifth-The drumbeat for labour reforms must be changed.
    • The laws should be simplified, and their administration improved. And, their thrust should be to improve the conditions of workers.
  • Finally- The social security framework for all citizens must be strengthened.
    • Health insurance and the availability of health services must be improved.
    • And disability benefits and old-age pensions must be enhanced.
    • The purpose of ‘labour reforms’ must be changed to provide safety nets, rather than make the workers’ lives even more precarious with misdirected attempts to increase flexibility.