Banking Sector Reforms

SC asks govt to implement ‘interest waiver’ scheme at the earliest

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NPA

Mains level : Paper 3- Implications of Supreme Court order in the loan waiver.

The article examines the implications of the Supreme Court order dealing with the loan waiver and ban on the recognition of the bad loan.

Significance of common man as a depositor

  • India’s Rs 144 lakh crore in bank deposits make our Rs 110 lakh crore in bank loans possible.
  • The “common man” is more likely a depositor than a borrower; banks have 21 crore deposit accounts but only 2.7 crore loan accounts.

Issues with the court order

  • The Supreme Court has weighed in on the waiver scheme and recognition of the bad loan.
  • Waiving interest dues or banning bad loan recognition is economically ignorant because more than 20 per cent of Indians are depositors while less than 2 per cent are borrowers.
  • It has nothing to with economic justice defined as the greatest good for the greatest number.
  • It sabotages economic justice because fiscally funding banking diverts money from education, health and skilling expenditure.
  •  It’s commercially ignorant because any “annualised effective rate” is adjusted for interest payment frequency.
  • Resources are finite with total central government expenditure at Rs 29 lakh crore, scarce as COVID creates a Rs 3 lakh crore GST shortfall and fragile our fiscal deficit may exceed 12 per cent.
  • Also, it is hardly what our Constitution imagined as the role of courts.
  • Our Constitution writers made a distinction between fundamental rights and directive principles was not a lack of ambition but a measured assessment of state capacity, resources and sequencing.
  • The Constitution also envisaged distinct roles for the judiciary, executive and legislature to balance samaj (society), bazaar (markets) and sarkar (government).
  • Courts have become less mindful of these two distinctions.

Cost of credit and availability issue in India

  • One of the reasons for small size of Indian enterprises in the availability and cost of credit in India.
  • India’s credit-to-GDP ratio stands at dismal  50 per cent  — Bihar is 12 per cent and Arunachal is 1 per cent.
  • The MSME lending is stuck at Rs 20 lakh crore — needs to rise to 100 per cent.
  • Despite lower inflation and fiscal discipline, most borrowers don’t get globally competitive interest rates due to high bad loans and financial statement uncertainty.
  • The availability of credit will not rise and cost will not fall till our banking system has strong competition, consistent regulation, effective supervision and non-fiscal sustainability.

Consider the question “How the crisis in the banking sector is different from the crisis in other sectors? Also, examine the issues with the Supreme Court order on the loan waiver and recongnition of bad loan ban?” 

Conclusion

Institutional immunity needs balancing of independence and accountability; rising citizen concern about mandates and appointments should trigger court introspection.

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

AIDS & India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Gains against HIV

The article highlights the achievement in the fight against AIDS. Most significant are the achievements in the prevention of transmission from mother-to-child.

Significant gains

  • As per recently released 2019 HIV estimates by the National AIDS Control Organization (NACO)/Ministry of Health and Family Welfare with the technical support of UNAIDS there has been a 66.1% reduction in new HIV infections among children and a 65.3% reduction in AIDS-related deaths in India over a nine-year period.
  • The number of pregnant women living with HIV has reduced from 31,000 in 2010 to 20,000 in 2019.
  • Overall, antenatal coverage has expanded, and HIV testing has increased over time and within target range.
  • Treatment coverage has also expanded.

Progress in preventing mother to child transmission

  • Under the leadership of NACO, a ‘Fast-Tracking of EMTCT (elimination of mother-to-child transmission) strategy-cum-action plan’ was outlined by June 2019.
  • The plan entailed mobilisation and reinforcement of all national, State and partners’ collective efforts to achieve the EMTCT goal.
  • Additionally, in March 2020, we began efforts to minimise challenges posed by the COVID-19 pandemic.
  • From 2010 to 2019, India made important progress in reducing the HIV impact on children through prevention of mother-to-child transmission of HIV.
  • This was done through education and communication programmes; increased access to HIV services with innovative delivery mechanisms for HIV testing; counselling and care; and treatment and follow-ups.
  • India made HIV testing for all pregnant women free and HIV treatment is offered the same way nationwide without cost to pregnant mothers living with HIV through the national ‘treat all’ policy.
  • For two years UNICEF has worked with the World Health Organization and NACO to identify high burden districts (in terms of density of pregnant women living with HIV) as the last mile towards disease elimination.
  • Since 2002, when the EMTCT of HIV programmes were launched in India, a series of policy, programmatic and implementation strategies were rolled out so that all pregnant women can access free HIV testing and free treatment regimens for life to prevent HIV transmission from mothers to babies.
  • This has been made possible in government health centres and grass-root level workers through village health and nutrition days and other grass-roots events under the National Health Mission.
  • Indeed, the approach being promoted by UNICEF in focusing attention and resources in high burden districts is supported by the HIV strategic information division of NACO and UNAIDS to better understand the locations and populations most HIV affected, so that technical support and HIV services can be directed towards these areas.

Conclusion

Using data-driven and decision-making approaches it is certain that AIDS will no longer be a public health threat for children in India by the end of 2030, if not before.

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

Farm Bills latest step in sequential freeing up of farm sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level : APMC Act

Mains level : Paper 3- Need for agri reforms

The recently passed agri bills seek to expand the choices and opportunities available with the farmers and will help in increasing their income.

Diversified product segment

  • The Minimum Support Price (MSP) evolved as a mechanism to guard farmers against supply and demand shocks in the cereals segment. 
  •  Now, however, farmers and agricultural producers have diversified their product segments, cereals no longer dominate production.
  • In the last decade itself, India has witnessed tremendous change in the GVA composition of the agri-sector.
  • The share of crops has decreased from 65.4% in 2011-12 to 55.3% in 2018-19, projected to further fall to 45.6% in 2024-25.
  •  In the same period, value add of livestock and fishing & aquaculture is steadily increasing, as are the total value outputs of sub-segments like horticulture, milk and meat.
  • With differentiated production strategies that are less reliant on cereals and more on other segments, farmers are accruing better incomes.
  • By diversifying their produce, they are moving away from one-crop risks.

Government schemes and policies

  • Keeping farmers dependent on subsidies and restricted by APMCs, and acts like the Essential Commodities Act wasn’t in the nation’s long-term interests.
  • Recognising this, the government has been making sequential changes in the system.
  • It started with the introduction of the National Agriculture Market (e-NAM) to facilitate online trading of agri-produce.
  • Then PM-KISAN was introduced to provide minimum income support to nine crore marginal farmers, at Rs 6,000 annually.
  • The KISAN credit card with an allotment of a total of Rs 2 lakh crore credit to maintain larger workforces and implements during harvest season is helping farmers plan and organise their harvests better.
  • The Rs 1 lakh crore Agri Infrastructure Fund as part of Atmanirbhar Bharat Abhiyan will help by the creation of agri-infrastructure.

Need for structural changes

  • The government recently passed three agri-bills, these are:-
  • 1) The Farmers’ Produce Trade and Commerce Bill.
  • 2) Farmers Agreement on Price Assurance and Farm Services Bill.
  • 3) Essential Commodities (Amendment) Bill.
  • They enable farmers the freedom to diversify their crops and produce, which reduces mono-crop dependence and increases income avenues.
  • They can also now sell their produce anywhere, to the highest bidder across the country.
  • The farmers are no longer are they required to go to the mandis where they are subject to middlemen and layers of bureaucracy.
  • Contract farming enable farmers them to boost the value-add of their products via contracts and assured procurement by the food processing industries.
  • Retaining the MSP system means the government is underwriting the whole network for certain crops to ensure farmers receive assured income for those crops.

Focusing on the export market

  • The passage of agri bills gives India the long-awaited opportunity to orient its agriculture sector towards export markets.
  • By catering to just the Indian economy, the exposure is hardly $3 trillion ; instead, export-orientation caters to an $82 trillion global economy —a 27x expansion.
  • India’s agri exports in 2018 were at $38.5 billion.
  • India can comfortably triple this by providing infrastructure for grading, sorting, and supply chain distribution.

Conclusion

The farm Bills are liberating farmers at a pivotal juncture, the nation and farmers have a generational opportunity here to break out of a 70-year sectoral stagnation and aim bigger.


Source:-

https://www.financialexpress.com/opinion/agri-reforms-farm-bills-latest-step-in-sequential-freeing-up-of-farm-sector/2107611/

Electronic System Design and Manufacturing Sector – M-SIPS, National Policy on Electronics, etc.

Issues in the Phased Manufacturing Policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : PMP and PLI Scheme

Mains level : Paper 3- Issues with Phased Manufacturing Policy

The Production Linked Incentive Scheme, though ambitious in its goal suffers from several fundamental issues. The article discuses such issues.

Background of the Phased Manufacturing Policy

  • The Phased Manufacturing Programme (PMP) incentivised the manufacture of low value accessories initially, and then moved on to the manufacture of higher value components.
  • This was done by increasing the basic customs duty on the imports of these accessories or components.
  • The PMP was implemented with an aim to improve value addition in the country.
  • Recently, 16 firms in the mobile manufacturing sector were approved for the Production Linked Incentive (PLI) scheme to transform India into a major mobile manufacturing hub.
  • The PLI comes on the back of a phased manufacturing programme (PMP) that began in 2016-17.

Issues to consider

1) More imports and less value addition in India

  • Firms such as Apple, Xiaomi, Oppo, and OnePlus have invested in India, but mostly through their contract manufacturers.
  • As a result, production increased from $13.4 billion in 2016-17 to $31.7 billion in 2019-20.
  • But factory-level production data from the Annual Survey of Industries (ASI) shows that more than 85% of the inputs were imported.
  • UN data for India, China, Vietnam, Korea and Singapore (2017-2019), show that except for India, all countries exported more mobile phone parts than imports.
  • More export than import by these countries indicate the presence of facilities that add value to these parts before exporting them.
  • India, on the other hand, imported more than it exported.
  • Therefore, while the PMP policy increased the value of domestic production, improvement in local value addition remains low.
  • The new PLI policy offers an incentive subject to thresholds of incremental investment and sales of manufactured goods.
  • Thus, focus remains on increasing value of domestic production, and not local value addition.

2) Shift from China unlikely

  • India produced around 29 crore units of mobile phones for the year 2018-19; 94% of these were sold in the domestic market.
  • This implies that much of the incremental production and sales under the PLI policy will have to be for the export market.
  • Recently, a study by Ernst & Young showed that if the cost of production of a mobile phone is say 100 (without subsidies), then the effective cost (with subsidies and other benefits) of manufacturing mobile phone in China is 79.55, Vietnam, 89.05, and India (including PLI), 92.51.
  • So, it may be premature to expect a major chunk of mobile manufacturing to shift from China to India.

3) PLI doesn’t strengthen the current export competitiveness

  • India’s mobile phone exports grew from $1.6 billion in 2018-19 to $3.8 billion in 2019-20, but per unit value declined from $91.1 to $87, respectively.
  • This shows that our export competitiveness seems to be in mobiles with lower selling price.
  • However, for foreign firms chosen under the PLI policy, the incentive will be at and above ₹15,000 ($204.65).
  • So, it is clear that the PLI policy does not strengthen our current export competitiveness in mobile phones.

4) Absence of domestic firms

  • Domestic firms have been nearly wiped out from the Indian market.
  • So, their ability to take advantage of the PLI policy and grab a sizeable domestic market share seems difficult.
  • Domestic firms may have the route of exporting cheaper mobile phones to other low-income countries.
  • However, their performance in the last couple of years has not been promising.

5) Importance of supply chain colocation

  • The six component firms that have been given approval under the ‘specified electronic components segment’do not complete the mobile manufacturing ecosystem.
  • For example, when Samsung set up shop in Vietnam, it relied heavily on its Korean suppliers which co-located with it to produce intermediate inputs, so much so that 63 among Samsung’s 67 suppliers then were foreign.
  •  Though Samsung is invested hugely in India, it has not colocated its supply chain in the country.
  • So, the foreign firms chosen under the PLI policy should be encouraged to colocate their supply ecosystems in the country.

6) Complaint at WTO against PMP

  • In September 2019, Chinese Taipei contested the raise in tariffs under the PMP.
  • If the PMP is found to be World Trade Organization (WTO) non-compliant, then we may be flooded with imports of mobile phones.
  • This might make the local assembly of mobile phones unattractive.
  • This will affect the operations of the mobile investments done under the PMP.

Conclusion

The PMP policy, since 2016-17 has barely been helpful in raising domestic value addition in the industry even though value of production expanded considerably.

B2BASICS

Goods and Services Tax (GST)

Federalism, now a partisan internal dialogue

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Federal structure

Mains level : Paper 2- Evolutio of Centre-State relation in India

Against the backdrop of the ongoing tussle between the states and the Centre over the issue of GST compensation, the article analyses the evolution of federalism and power-sharing in India.

GST and federalism

  • At the first sign of stress, the nation unified in a singular system of taxation (GST) turned into a policy of every-state-for-itself.
  • Evidence of seriously miscued revenue estimates without pragmatic tax rate, was accumulating at an alarming pace.
  • The Comptroller and Auditor-General of India (CAG) recently revealed how a cess meant to remedy shortfalls in GST yields, was retained in central government revenues, in violation of all applicable norms.
  • This revelation does little to build trust between the Centre and the States at a time when the States’ facing lack of resource and the central government is advising them to borrow.
  • Some states believe that the onus of borrowing should rest with the central government.

Higher borrowing limit for states with conditions

  • The central government sanctioned a higher borrowing limit for States through the current year.
  • In the bargain, it imposed conditionalities:
  • 1) Enforcing a singular standard for the implementation of policies across a vast and diverse country.
  • 2) Improving India’s ranking as a place for “doing business”.
  • States will have unconditional access to borrowings equivalent to half a percentage point of their gross output.
  • But, subsequently, every tranche of a quarter point will be premised on progress in implementing the “one nation, one ration card” scheme, and improvements in the “ease of doing business”.

Federalism in India

  • Aside from the contents and definitions sections, the word “federal” occurs in only one operational article of the Indian Constitution, in reference to the apex judicial body created in colonial times.
  • When this body was transformed into the Supreme Court at the moment the Constitution came into force, the word seemingly lost all operative value.
  • The distribution of powers and responsibilities between various tiers of the governmental system, was achieved without explicit recognition of federalism as a governing principle.
  • In actual operational terms, the relationship of Centre and States followed different paradigms through various phases of politics.
  •  At the time of Independence, the distribution of powers between Centre and States was transformed into an internal discussion of the Congress.

Evolution of power-sharing and politics

  • The “Congress system”, as the political scientist Rajni Kothari called it, was seen at one time to have sufficient internal flexibility and resilience to absorb all factional pressures.
  • The first challenge came from the cultural terrain, compelling a reluctant national leadership to accept linguistic reorganisation of States.
  • And then, as ambitions of nation-building through rapid industrialisation resulted in the possibility of a non-Congress politics.
  • The Congress lost power in a number of key States in 1967.
  • The polity moved into a new phase when politics was about “waves” at the national or state level either in favour of, or against the Congress.
  • From 1989 onwards, politics settled into another distinct phase, when outcomes at the national level were the resultant of very separate State-level results.

Conclusion

Though federal structure could not be free from Centre-State power struggle, that struggle should not come into the development of the nation. In this context, it is the responsibility of the Centre to address the issues facing the state amid pandemic.

Goods and Services Tax (GST)

The federalism test

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Article 293

Mains level : Paper 2- Federalism and GST

The GST has been hailed as the grand bargain and the success story of the federalism. But the economic disruption caused by the pandemic has put it to test. The article deals with the issue of GST compensation.

Compensating the loss of GST revenue: 2 options

  • In the 41st meeting of the GST Council, the Union government had presented the states with two options.
  • The Centre had estimated the states’ total loss of GST revenue at Rs 3 lakh crore, of which, Rs 65,000 crore was expected to accrue from the compensation cess.
  • Of the remaining Rs 2.35 lakh crore, the loss due to the pandemic was estimated at Rs 1.28 lakh crore.
  • The first option was to provide states a special window to borrow Rs 97,000 crore from the RBI, which was later revised to Rs 1.1 lakh crore.
  • Under this option, both the interest payments and the repayments would be made from future collections of the compensation cess.
  • In the second option, the entire shortfall of Rs 2.35 lakh crore could be borrowed from the market and the states would have to bear the interest costs, but the repayments would be adjusted against future collections of the cess.
  • 10 states have rejected both the options and have stated that it is the Centre’s responsibility to compensate the states, and therefore, it should borrow.

Commitment of the Centre

  • The minutes of the 7th and 8th GST Council meeting show that most of the states wanted the Centre to commit on paying compensation from the Consolidated Fund of India (CFI).
  • On that demand the Union Finance Minister had stated that in case the amount in the GST compensation fund falls short of the compensation payable in any bi-monthly period, the GST Council shall decide the mode of raising additional resources including borrowing from the market which could be repaid by the collection of cess in the sixth year or further subsequent years.
  • Thus, there was a clear commitment of the Centre on the issue of compensation and the method of recouping the loss.

Impact on the Centre-State relations

  • The payment of compensation has plunged the Union-state relationship to a new low.
  • First, not recognising the Centre’s commitment will make states wary of any future reforms involving an agreement with the Centre.
  • Second, giving selective press statements to pressurise the states into accepting one or the other option does not infuse confidence.
  • Third, there was a statement by the Union finance ministry officials that the GST Council does not have jurisdiction over-borrowing and borrowing is an individual state and Centre’s decision under Article 293 of the Constitution.
  • If so, why were the two borrowing options presented to the states in the meeting of the Council?

Way forward

  • It is the Centre’s commitment to find the compensation mechanism and borrowing is one of the options — that must be discussed in the Council.
  • Furthermore, if the commitment of the Centre is recognised as admitted by the finance minister in the 7th GST council meeting, the Centre should take the responsibility to borrow.
  • Both interest payments and repayment of the principal liability can be met from future collections from the cess.

Conclusion

This issue is of immense significance for the future of Centre-state relations. But pressuring states on the basis of political strength will have adverse consequences for the country’s federal structure.

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

RBI shifts focus on bond market to transmit policy signals

Note4Students

From UPSC perspective, the following things are important :

Prelims level : LTRO

Mains level : Paper 3- Stance of MPC amid rising inflation

The article analyses the implications of the recently concluded MPC meeting and predicts the trends for the future.

Highlights of the MPC meeting

  • In the October meeting of the monetary policy committee (MPC), repo rate were kept unchanged at 4%, with a continuation of an accommodative stance.
  • It chose to ignore elevated levels of CPI inflation as transitory and maintaining focus on supporting growth.
  • It appears that the MPC would maintain a status quo on rates through this fiscal year.
  • The scope for further easing is anyways limited to 0.50%, as any more easing may affect household financial savings and endanger financial stability.

Ensuring the rate transmission

  • With unchanged repo rates, the focus of the liquidity measures announced by the RBI is to further improve transmission of previous rate cuts across a spectrum of market rates and other instruments.
  • The RBI Governor assured market participants that the large supply of government bonds in the second half along with a likely pick-up in credit demand, would be accommodated through open market purchases of government bonds.

Reducing the cost of borrowing

  • The RBI may have to buy bonds worth 1,000 to 1,500 billion in these operations over 2HFY21 keeping pressure on yields [which affects interest rates].
  • In a related move, to reduce the cost of borrowings for state governments, the RBI for the first time will buy state government bonds, as a special case for this year.

Other measures

  • The extension of enhanced Held to Maturity (HTM) limit of banks on their government bonds portfolio to March 2022.
  • A new on-tap targeted LTRO window was announced, for banks to borrow up to 1,000 billion from the RBI at a floating rate linked to the repo rate, and invest in corporate paper issued by specific sectors and to provide loans to them.
  • In effect, the aim of the central bank is to ensure that lower policy rates determined by the macro-economic fundamentals, are reflected in lower cost of borrowings for the Centre, states and corporates.

Containing inflation

  • Inflation outlook for this fiscal and projections for next year indicate that CPI inflation would ease, from an average of 6.8% in Q2 to 4.5% in Q4 and 4.1% by Q4FY22.
  • Headline inflation is expected to fall, as supply conditions normalize with progressive unlocking and another year of bumper farm output helps pull down food inflation.
  • Higher fuel taxes and import duties are expected to provide an upward push though.
  • Effective supply management will therefore be crucial in controlling food inflation and ensuring that it does not turn persistent and feeds into non-food inflation.

Conclusion

  • The role of monetary policy in the is limited and the RBI focus will remain on improving transmission of policy signals through banking, bond and credit market channels.

Back2Basics: LTRO

  • Long-Term Repo Operation (LTRO) was introduced by the Reserve Bank in February, 2020.
  • Through this policy, the central bank would provide liquidity support to commercial banks for a period of 1 to 3 years at the current repo rate, and would accept government securities as collateral in return.
  • This is in contrast to the other measures it was providing such as Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) which provide cash to banks for a period of 1 to 28 days only.

Coronavirus – Health and Governance Issues

Comptroller and Auditor General (CAG)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : CAG's role

Mains level : Paper 2- Role of CAG in the pandemic

The article highlights the importance of CAG in times of disasters to ensure check and balances.

Context

  • With the nation spending substantial resources to manage the pandemic, the role of Comptroller and Auditor General (CAG) of India has come into prominence.

Opportunity for corruption in pandemic

  • Allegations of siphoning off of funds to purchase the inferior quality at prices higher than those prevailing in the market are made.
  • The opportunity to indulge in corruption exists in disaster management.
  •  Emergency procurement to save lives and reduce sufferings are a chance to obfuscate rules and procedures and can happen in all three tiers of governance.

Role of the CAG

  • If all the major purchases by governments are audited by the CAG, there can be substantial improvement in disaster management.
  • It will usher in better transparency, integrity, honesty, effective service delivery and compliance with rules and procedures and governance.
  • The CAG has issued an order creating a new vertical — health, welfare and rural development, restructuring the office of the Director General of Audit, Central Expenditure.
  • It is necessary that the CAG undertakes performance audits of COVID-19 related procurements, the Central Government Health Scheme (CGHS) and Employee State Insurance (ESI) hospitals.
  •  A beneficiary survey will become part of the audit process to bring out efficacy of service delivery and the availability and quality of drugs.
  • Audit recommendations can contribute improvements in various aspects of disaster preparedness, management and mitigation.

Benefits of audit

  • The statutory responsibility of CAG includes appraising disaster preparedness, ensuring that management, mitigation operations, procedures are complied with, and proper internal controls are in place.
  • Ensuring that there are proper records, documentation, authentic, accurate, reliable and complete information and data.
  • Providing assurance to people’s representatives, tax payers and the public at large that government resources are being used prudentially as per the law and regulations and safeguarded.
  • Providing assurance that risks are assessed, identified and minimised with established disaster management process and procedures.
  • Offering assurance that resources are being used economically efficiently and effectively for achieving the planned objectives and that benefits have gone to the targeted beneficiaries.

Conclusion

All public entities management must be accountable and ensure that resources are managed properly and used in compliance with laws and regulations; programmes are achieving their objectives; and services are being provided efficiently, effectively, and economically.

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

Is Indian economy going through stagflation

Note4Students

From UPSC perspective, the following things are important :

Prelims level : WPI and CPI, MPC inflation targeting framework etc

Mains level : Paper 3- Role of MPC and inflation targeting issue

The article analyses the challenge faced by the Monetary Policy Committee in wake of a pandemic where falling growth is accompanied by the rising inflation.

Dilemma with inflation targetting in pandemic

  • After the RBI’s adoption of a flexible inflation targeting framework from August 2020, it became even more focused on anchoring inflation and inflation expectations than ever before.
  • But the COVID pandemic has created a dilemma for the RBI.
  • Higher-than-anticipated inflation compelled the monetary policy committee (MPC) to hold policy rates despite the contraction in April-June GDP by 23.9 per cent.

 CPI vs. WPI: Which should be focused for inflation targeting?

  • Inflation-targeting framework based on one narrow nominal consumer price index (CPI)  has highlighted the challenges of conducting monetary policy in a severe growth shock scenario.
  • Inflation targeting is particularly challenging if it coincides with a sharp increase in headline CPI inflation as in the current period.
  • The current framework has led to an excessive and obsessive emphasis on point CPI estimates, at the cost of ignoring other indicators.
  • WPI core inflation, which essentially represents the manufacturing sector, is below 1 per cent but this does not find much mention.
  • This is strange because ultimately, the GDP deflator is calculated using both CPI and WPI inflation, with the latter having a greater weight.
  • This should be taken into consideration, while reviewing the existing monetary policy framework.
  • Given the composition of the current CPI basket, RBI’s monetary policy actions can at best impact only 41.35 per cent of the overall items.
  • Food and beverages, fuel items, gold and silver tobacco/intoxicants are items over which the RBI does not have any control.[58.65 per cent of the overall items]

This is a different time

  • In normal times, a sustained increase in food and fuel prices can lead to a generalised increase in prices.
  • But this argument is not valid in the current context where a large number of people have lost their jobs or have seen fall in incomes.
  • In the current context, higher food and fuel prices would lead to reduction in expenditure on discretionary items.
  • So there will be only a relative shift in prices, without any fear of a generalised spiral, as households will not be in any position to demand higher wages to compensate for the increase in prices of food and fuel items.
  • Given the amount of slack in the economy, a scenario of sustained generalised increase in prices seems unlikely over the next 6-9 months.

How to measure the success of inflation targeting

  • The CPI inflation targeting framework has helped to reduce inflation expectations during FY17-FY21 on average (9.3 per cent) compared to the previous period of FY12- FY16 (12.8 per cent).
  • However, the gap between inflation expectations and actual CPI inflation has remained unchanged at 5.1 per cent during these two periods.
  • The success of the inflation-targeting framework should not only be judged by the actual CPI inflation trend, but also in terms of gap between the two.

How RBI performed without inflation targeting framework in the past

  • Even without any formal inflation-targeting framework, India had successfully managed to keep inflation low during FY02-FY06.
  • The RBI’s stance then was based on a multiple-indicator approach to conduct monetary policy.
  • First factor that made it possible was the increase in minimum support prices of food-grains was kept below 3 per cent on average.
  • Second factor was the composition of growth which was better during this period with investment growth surpassing consumption growth by several percentage points.
  • It is for this reason that CPI inflation remained contained at 4 per cent on average during this period even with 7 per cent real GDP growth.

Risk of structural increase in inflation

  • In the current cycle, investment growth is likely to be impacted more severely than consumption growth.
  • Given the acute weakness in the demand side of the economy, persistent problems in the real estate sector, continued deleveraging of the NBFC sector and significant job losses structural increase in inflation is limited.

What should be the policy response

  • The scope for rate cuts remains dim in the near-term.
  • But the RBI to remain active with a host of unconventional measures, which will likely include more proactive bond purchases to ensure that market interest rates do not rise significantly due to fiscal and market borrowing-related concerns.

Conclusion

Given the prevailing unholy mix of growth and inflation, it is tempting to categorise India’s economic situation as one of “stagflation”. But, in our view, it is too early to conclude decisively on this matter, given the fluid nature of things.


Back2Basics: Inflation expectations

  • Inflation expectations are what people expect future inflation to be, and they matter because these expectations actually affect people’s behavior.
  • If people expect inflation to be lower and they act on those beliefs, they could, in fact, cause inflation to be lower.
  • If businesses expect lower inflation, they may raise prices at a slower rate; they don’t want the prices of their items to look too out of line with those of their competitors.
  • If workers expect lower inflation, they may ask for smaller wage increases.
  • The combination of businesses and workers acting in this manner will result in the economy experiencing lower inflation.

 

 

 

Women empowerment issues – Jobs,Reservation and education

What India can learn from Kenya about women’s representation

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Women's representation

Asymmetric representation in India and Kenya has given rise to complex debate in both countries. The article analyses the similarities and difference.

Issue of women’s representation in Parliament

  • Many political promises have been made in seven decades of the working of the Indian Constitution regarding 33 per cent reservation in Parliament.
  • But the two bills, introduced in 1996 and 2010, have been allowed to lapse.

What are the hurdles?

  • Every political party endorses the idea but the battle within political classes has been over “quota within a quota”.
  • Some have argued that ways should be found to ensure that this reservation should contain 33 per cent reservation within for SC and ST women.
  • Some have championed a systemic practice of reservation at the stage of distributing party tickets.
  • Some continue to fight for underprivileged and rural women.
  • Some maintain that a constitutional convention mandating increased representation for women by parties will be more appropriate than a constitutional amendment.

Comparison with Kenya

  • While both fall short in equitable representation, Kenya has secured about 22 per cent women in the present National Assembly.
  • India peaked to its highest number in the 2019 elections with 62 women (around 14.58 per cent),out of a total of 542 Lok Sabha seats.
  • In the Kenyan Senate women number only 21 (or 31 per cent) of the 67-member House are female; in the Indian Rajya Sabha women comprise 25 out of 243 elected members.
  •  In both societies, women’s representation has always been “pyramidical”, most women remain below the constitutional radar at the bottom, even when a few scale national heights.
  • Asymmetric representation in both societies has generated a long and complex debate concerning women’s representation.

Difference in constitutional histories and judicial actions

  • India has nothing like the two-thirds rule in Kenya’s new constitution.
  • Kenya’s Constitution requires that not more than two-thirds of the members of elective or appointive bodies shall be of the same gender.
  • But the 2010 constitutional norm of a “two-thirds gender rule”, buttressed by the requirement that the electoral system shall comply with this rule has been breached.
  • The judicial orders (from 2012) giving various timeframes to enact legislation to implement gender parity have found Parliament unresponsive.
  •  The stage was thus set for the exercise of constitutional power and function by the chief justice to advise the president to dissolve Parliament.
  • This was a great victory for the Kenyan women.

Conclusion

Indian sisterhood can yearn wistfully, but valiantly, for another Vishakha moment in the demosprudential leadership of the nation by the apex court.

Foreign Policy Watch: India-China

Confusion on what the Quad is and its future

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Quad countries

Mains level : Paper 2- Non-alignment and Quad

The article analyses the basics of India’s foreign policy and its implications for the Quad.

Context

  • There is confusion on what the Quad is and its future in India’s international relations.
  • Sustaining that confusion is the proposition that India is abandoning non-alignment in favour of a military alliance with the US in order to counter the China threat.

4 Question on Quad’s future and India’s role

1) What is the nature of alliance?

  • Alliances involve written commitments to come to the defence of the other against a third party.
  • Working of alliance varies according to the distribution of power within the members of an alliance and the changing nature of the external threat.
  • Alliances come in multiple shapes and forms — they could be bilateral or multilateral, formal or informal and for the long-term or near term.
  • Alliances feature in India’s ancient strategic wisdom and contemporary domestic politics in India.
  • Yet, when it comes to India’s foreign policy, alliances are seen as a taboo.
  • Part of the problem is that India’s image of alliances is frozen in the moment when India became independent.
  • After the Second World War, a newly independent India did not want to be tied down by alliances of the Cold War.
  • That notion is seen as central to Indian worldview.

2) Does India forge alliances?

  • Contrary to conventional wisdom, India has experimented with alliances of different kinds.
  • During the First World War, some nationalists aligned with Imperial Germany to set up the first Indian government-in-exile in Kabul.
  • In the Second World War, Subhas Chandra Bose joined forces with Imperial Japan to set up a provisional government.
  • Policy of non-alignment among the great powers also did not rule out alliances in a different context.
  • For example, when Bhutan, Nepal and Sikkim turned to Delhi for protection amidst Maoist China’s advance into Tibet during 1949-50, Nehru signed security treaties with them.
  • India turned to the US for military support to cope with the Chinese aggression in 1962.
  • Indira Gandhi signed a security cooperation agreement with the Soviet Union in 1971 to cope with the crisis in East Pakistan.
  • Then, as now, there was much anxiety in Delhi about India abandoning non-alignment.
  • India does do alliances but the question is when, under what conditions and on what terms.

3)  Is the US offering India an alliance against China?

  • The current political discourse in Washington is hostile to alliance-making.
  • President Donald Trump does not miss an opportunity to trash US alliances.
  • In any case, formal commitments do not always translate into reality during times of war.
  • Even within the long-standing US military alliances with Japan and the Philippines, there is much legal quibbling over what exactly is the US’s obligation against, say, Chinese aggression.
  • In case of the Quad, it is quite clear that Washington is not offering a military alliance, nor is Delhi asking for one.
  • Because it knows India has to fight its own wars.
  • Both countries, however, are interested in building issue-based coalitions in pursuit of shared interests.

4) Instrumental nature of alliance

  • Agreements for security cooperation are made in a specific context and against a particular threat.
  • When those circumstances change, security treaties are not worth the paper they are written.
  • Consider India’s security treaties with Nepal, Bangladesh and Russia.
  • The 1950 Treaty was designed to protect Nepal against the Chinese threat.
  • Now, Nepali communists have long argued that the Treaty is a symbol of Indian hegemony.
  • India’s 1972 security treaty with Bangladesh did not survive the 1975 assassination of the nation’s founder, Mujibur Rahman.
  • India’s own enthusiasm for the 1971 treaty with Moscow waned within a decade.
  • Today Beijing is Moscow’s strongest international partner, a reality that has a bearing on India’s strategic partnership with Russia.

What India can learn from China about alliances

  • Mao aligned with the Soviet Union after in 1949 and fought the Korean War against the US during 1950-53.
  • He broke from Russia in the early 1960s and moved closer to the US in the 1970s.
  • Mao, who denounced US alliances in Asia, was happy to justify them if they were directed at Russia.
  • He also welcomed Washington’s alliance with Tokyo as a useful means to prevent the return of Japanese nationalism and militarism.
  • Having benefited from the partnership with the US, China is trying to push America out of Asia and establish its own regional primacy.
  • Delhi could learn from Beijing in not letting the theological debates about alliances cloud its judgements about the extraordinary economic and security challenges India confronts today.

Conclusion

The infructuous obsession with non-alignment diverts Delhi’s policy attention away from the urgent task of rapidly expanding India’s national capabilities in partnership with like-minded partners.

Insolvency and Bankruptcy Code

Need for streamlining the Insolvency and Bankruptcy Code

Note4Students

From UPSC perspective, the following things are important :

Prelims level : IBC

Mains level : Paper 3- Impact of IBC

The article analyses the impact of Insolvency and Bankruptcy Code (IBC) on the insolvency resolution and on Indian economy.

Measures that will improve investment

1)  IBC: transforming insolvency resolution

  • IBC replaced inefficient bankruptcy law regime and has transformed insolvency resolution in India.
  • The IBC has focused on time-bound resolution, rather than liquidation.
  • IBC acts as an empowering tool to support companies falling within its ambit.
  • It has successfully instilled confidence in the corporate resolution methodology.
  • It has allowed credit to flow more freely to and within India while promoting investor and investee confidence.
  • The IBC is both flexible and dynamic, which makes it impactful, given how forward thinking the concept of an omnibus legislation of its nature actually is.
  • Through the Insolvency and Bankruptcy Board of India (IBBI), it has established an unprecedented organisation that both regulates and develops insolvency policy, and assesses market realities.

Impact of IBC

  •  According to the Resolving Insolvency Index, India’s ranking improved to 52 in 2019 from 108 in 2018.
  • Further, the recovery rate improved nearly threefold from 26.5% in 2018 to 71.6% in 2019
  • The overall time taken in recovery also improved nearly three times, coming down from 4.3 years in 2018 to 1.6 years in 2019.

2) Decriminalisation of minor offences

  • Criminal penalties including imprisonment for minor offences act as major deterrents for investors.
  • The Government of India is also working toward decriminalisation of minor offences.
  • This will significantly reduce the risk of imprisonment for actions or omissions that are not necessarily fraudulent or an outcome of mala fide intent.

3) Other legislative measures

  • Together with the IBC, following 3 reforms suggests major and multi-dimensional effort by the government.
  • 1) The rolling out of the commercial courts.
  • 2) Commercial divisions and the Commercial Appellate Divisions Act, 2015, to allow district court-level commercial courts.
  • 3) Removal of over 1,500 obsolete and archaic laws.

Way forward

  • There could perhaps be a look at institutionalising the introduction of a pre-packed insolvency resolution process.
  • This will also help resolve matters expeditiously, outside of the formal court system, and allow resolution even during the COVID-19 altered reality.

Consider the question “Examine the impact of Insolvency and Bankruptcy Code (IBC) on the insolvency resolution procedure and suggest the further improvements in the IBC.”

Conclusion

The IBC has provided a major stimulus to ease of doing business, enhanced investor confidence, and helped encourage entrepreneurship while also providing support to MSMEs. Its further streamlining and strengthening will surely instil greater confidence in both foreign and domestic investors as they look at India as an attractive investment destination.

B2BASICS

Police Reforms – SC directives, NPC, other committees reports

A demarcation in the interest of public order

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Separation of role of District Magistrate and Police Commissioner

The article analyses how could the duel role assigned to an official leads to the problems in certain situations and so suggest the separation of the roles.

Context

  • Delhi Police, having magisterial powers under the Criminal Procedure Code to take preventive action has been criticised for failing to maintain public order and prevent riots in Delhi.

Issue with delegation: Confusion powers with the role

  • The distinction between independent actions, for which no political clearance is needed, by the District Magistrate to maintain public order and by the police to investigate crime and make arrests, was ignored.
  • Maintaining public order requires the District Magistrate to make hard choices but there can be no justification for lack of effective police action.
  • The District Magistrate is expected to consider protest as legitimate.
  • In Delhi, the police did not distinguish between wider political support and violence caused by a few.

Distinction between “law and order” and “public order”

  • The Supreme Court has made a distinction between law and order, relating to individual crime, and public order.
  • Law and order consists of the analysis made by police of the situation in an area and their commitment to firm action and penalties under criminal law.
  • Public order is a duty imposed on the District Magistrate to assess whether it is necessary to rush to the spot where law and order has been breached to prevent violence.
  • The District Magistrate’s role is important in exceptional situations — for example, to prevent a breach of peace at a particular place.
  • If an official is allotted a dual role, this could lead to the displacement of one goal in favour of the other.

Supreme Court’s guidelines

  • The Supreme Court has formulated certain guidelines and rules when it comes to these distinct duties.
  • 1) In Ram Manohar Lohia vs. State of Bihar, in 1965, the Supreme Court held that in the case of ‘public order’, the community or the public at large have to be affected by a particular action as it “embraces more of the community than ‘law and order’, which affects only a few individuals”.
  • 2) In the Madhu Limaye case, the Bench reiterated that “the emergency must be sudden and the consequences sufficiently grave” for imposition of restrictions.
  • 3) In Anuradha Bhasin vs. Union of India, the Supreme Court held that prohibitive orders should not prevent legitimate expression of opinion or grievance or exercise of democratic rights.
  • The Supreme Court has also specifically recognised the importance of the assessment of the role of the District Magistrate, distinct from that of the police.

Way forward

  • Judicial review of roles and proportionality of decisions for maintaining public order requires a policy rethink.
  • Prevention through grievance redress and reliance on the least blunt instruments are critical for legitimacy.
  • The National Police Commission also recognises the coordinating role of the District Magistrate, having more leverage than the police.

Conclusion

The role of the District Magistrate needs to be clearly differentiated from the role of the Police Commissioner.

Foreign Policy Watch: India-SAARC Nations

Challenges India faces in managing relations in neighbourhood

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- India and relations with its neighbours

The article analyses the inherent challenges India faces in managing good relations with its neighbours.

Duality challenge

  • Even for the Britishers, it was an unceasing struggle to sustain its primacy in the region.
  • The notion of regional primacy certainly persisted in the Nehru era.
  • Primacy was hard to sustain after Independence even within the immediate neighbourhood.

Five reasons stand out

1) Partition of the subcontinent

  • The problems generated by the great division of the Subcontinent on religious lines continue to animate the region.
  • Partition created the challenges of settling boundaries, sharing river-waters, protecting the rights of minorities, and easing the flow of goods and people.
  • The burden of the Subcontinent’s history is not easily discarded.

2) Unification of China

  • The unification of China amidst the Partition of India had profoundly transformed the geopolitical condition of India.
  • Beyond the bilateral territorial dispute in the Himalayas, the emergence of a large and purposeful state on India’s frontiers was going to be a problem given the ease with which it could constrain Delhi within the Subcontinent.

3) India’s choice in favour of de-globalisation

  • Independent India’s conscious choice in favour of de-globalisation led to a steady dissipation of commercial connectivity with the neighbours.
  •  India’s economic reorientation since the 1990s and the rediscovery of regionalism did open possibilities for reconnecting with its neighbours.
  • Delhi today is acutely aware of the need to revive regional connectivity.
  • There is much progress in recent years — note, for example, the recent launch of a ferry service to the Maldives or the reopening of inland waterways with Bangladesh.
  • Integrating India’s regional economic and foreign policy remains a major challenge-Consider the recent fiasco of onion exports to Bangladesh.

4) Rise of political agency in the neighbourhood

  • India ignores the rise of political agency among neighbourhood elites and mass politics that they need to manage.
  • Their imperatives don’t always coincide with those of Delhi.
  • It is unlikely that Delhi can completely insure itself against the intra-elite conflicts in the neighbourhood.

5) Influence of domestic politics on foreign policy

  • Can India persistently champion Tamil minority rights in Sri Lanka without incurring any costs with the Sinhala majority?
  • But asking that question takes us to India’s own domestic politics.
  • Can Delhi ignore sentiments in India’s Tamil Nadu in making its Sri Lanka policy?
  • Indian Prime Minister did not attend the Colombo Commonwealth Summit in 2013 because of the Tamil minority issue.
  • The Teesta Waters agreement was not concluded due to political reasons.

Ways forward

  • Timely responses to problems.
  • Preventing small issues from becoming big.
  • Aligning Delhi’s regional economic policy with India’s natural geographic advantages .
  • These are some important elements of any successful management of India’s perennial neighbourhood challenges.

Conclusion

There are no easy answers to the regional difficulties that trouble all governments in Delhi. The source of the problem lies in the deeply interconnected nature of South Asian societies administered by multiple sovereigns.

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

Reform is about giving farmers choice

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agriculture reforms

The article analyses the regional variation in the problems and issues of the farmer and how it has implications for the reforms in agriculture.

An issue of estimating the number of farmers in India

  • Almost 111 million are registered for the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan).
  • Other than some categories being barred from PM-Kisan benefits, not every eligible farmer has necessarily registered for PM-Kisan.
  • The last Agriculture Census in 2015-16 gave us 146 million holdings.
  • If the agricultural landholding is conditional on being a farmer, apart from a possible further increase since 2015-16, 146 million is possibly the upper bound.
  • Every definition of “farmer” is not contingent on the ownership of land.
  • The Protection of Plant Varieties and Farmers’ Rights Act of 2001 is an example where status as a farmer depends on cultivating land (or supervising cultivation), not owning it.
  • That issue was also flagged by the National Commission on Farmers, such as in the Draft National Policy for Farmers (2006), where “farmers” included agricultural labourers, sharecroppers, tenants and so on.

Issues with making landholding prerequisite for being a farmer

  • The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms (2009) noted that “the Survey and Settlement Operations in the Permanently Settled Areas have not been taken up and where they have been taken up, for instance in Bihar, they tend to never conclude”
  • The last extensive survey and settlement in India was conducted two to three decades prior to Independence.
  • Post-Independence, some states have not undertaken a revisional survey and settlement so far.
  • There have been improvements since 2009 and the Department of Land Resources has a Digital India Land Records Modernisation Programme (DILRMP).
  • Punjab and Haryana rank 16th and 18th respectively in Records and Services Index (LRSI).
  • Gujarat, West Bengal and Tripura score high on this Index (over 90 per cent).

Variation across the States

  • If land records are in this condition, some farmers will conceivably be excluded from the farmer definition.
  • With diverse and heterogenous agriculture, all farmers will not have identical views.
  •  2015-16 Agricultural Census tells us that most operational holdings are in UP, Bihar, Maharashtra and MP, in that order.
  • The highest operated areas are in Rajasthan, Maharashtra, UP and MP, in that order.
  • 86.1 per cent of holdings are small and marginal (less than 2 hectares) and only 0.6 per cent are large (more than 10 hectares).

Conclusion

The face of Indian agriculture has changed and is no longer what it was in the Green Revolution days, centred on Punjab, Haryana and western UP. Farmers, and governments, in Bihar and Kerala, don’t want APMCs, nor do UP, MP, Gujarat and Karnataka. There is no evidence that this has made those farmers worse off.

Coronavirus – Economic Issues

Case for principles of sound public policy

Context

  • Due to extreme uncertainty, several adventurous prescriptions have been put forth.

Following are 4 unconventional measures and issues with them are discussed here.

1) Shoud we change the Inflation targeting regime?

  • Monetary policy committee (MPC) concluding that elevated inflation has constrained it from easing policy rates further.
  • One way out of this is for the government to relax the inflation-targeting framework.
  • This would involve greater tolerance for higher levels of inflation or by extending the period over which the MPC has to meet its inflation target.
  • Others have suggested shifting from headline to core-inflation as the nominal anchor of monetary policy or incorporating other indicators such as nominal GDP explicitly into the framework.
  • The more extreme ones talk about doing away with the inflation targeting framework altogether.

Why changing the inflation targeting regime will not be helpful

  • There is a strong argument for the MPC to look beyond the current spike in inflation and ease rates further.
  • But disagreements with either the rationale or the stance of the committee members must not be construed as disagreements with the framework.
  • Raising the tolerance threshold may sound appealing now, but it will inject a degree of uncertainty and unpredictability in monetary policy.
  • Considering that anchoring expectations around the inflation target takes time, frequent revisions are unlikely to help stabilise household expectations.
  • While explicitly signalling  will be one of deviating from a rule-based framework.

2) What we shift to Multiple Indicator Structure?

  • Such a move would bring back the situation of the pre-MPC days.
  • In pre-MPC days there was far greater uncertainty over monetary policy.
  • In pre-MPC days there was no clarity over the indicator that was dictating the stance of the RBI governor or which indicator would be given preference, and when.
  • Such proposals go against the rationale for shifting to such a framework in the first place — an inflation targeting regime.
  • Inflationg targeting regime is a well-defined anchor, is meant to facilitate greater transparency and accountability from the central bank.

Way forward

  • There must be a concerted attempt to push for more external voices in the MPC.
  • In the UK, a non-voting treasury representative sits with the MPC to discuss policy issues.

3) Should central bank effectively financing the Centre’s capital expenditure on a regular basis?

  •  This is problematic at many levels.
  • First, notwithstanding problems in estimating potential output, monetisation, even in the rarest of rare cases, should be the last resort.
  • Such an arrangement, risks tilting the balance of power in favour of the government.
  • Any government, owing to its short-term political imperatives, is likely to be seduced by the apparent simplicity of this idea.
  • Second, giving a central bank a degree of control over the government’s expenditure priorities is not a prudent approach.
  • Whatever be their policy inclinations and expenditure priorities, elected representatives have to face voters.
  • Why should unelected technocrats be in charge of determining the expenditure priorities of the government?
  • Such proposals blur the lines between fiscal and monetary policy and may lead to what some call the fiscalisation of monetary policy.

4) Should government pledge its shares in companies?

  • This raises questions. Should a sovereign pledge assets to borrow in the local currency?
  • In 1991, India had pledged gold for a foreign currency-denominated loan not a local currency loan.
  • So why the collateral? And what happens if the value of the shares pledged falls below that of the loan?

Conclusion

Some unconventional measures may well be needed at the current juncture. But discarding the principles of sound public policy, though it sounds appealing, could end up doing more harm than good.

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

Lessons from Bihar’s abolition of its APMC system for farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agri marketing and related issue

The article analyses the results of complete abolition of APMC in Bihar in the context of current protest against the agri bills.

Context

  • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 has been a source of anger among farmers.
  • By allowing unregulated trading areas beyond APMC mandis, the law seeks to remove intermediaries from agricultural trade and raise price realization for farmers.

Excessive politicization of APMCs

  • APMC’s excessive politicization has resulted in cartelization and price-fixing.
  • For this reason, there have been several attempts at reforming their functioning.
  • Easier licensing norms, the removal of entry and exit barriers and computerization and transparency have been introduced in most APMC markets.
  • However, the Bihar government decided to abolish the APMC system altogether in 2006.

Analysing the impact of abolition of APMC in Bihar

  • It was hoped that abolition would ensure better prices for farmers of the state and attract large sums of private investment.
  • Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns and administrative buildings, weighbridges, and processing as well as grading units.
  •  With no revenue to maintain it, that infrastructure is now in a dilapidated condition.
  •  A study by the National Council for Applied Economic Research reported increased volatility in grain prices after 2006.
  • Most of the farmers surveyed reported high storage costs at private warehouses.
  • Farmers this year in Bihar received lower price for maize compared to the farmers in states with APMC.

Lessons from Bihar

  • The Bihar experiment has important lessons for future marketing reforms in agriculture.
  • The benefits of these reforms will only accrue to farmers if they are accompanied by private investment in creating the physical infrastructure and institutional mechanisms needed to allow for greater participation of farmers.
  • The record of states on attracting private investment isn’t much better.

Conclusion

By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.

Foreign Policy Watch: India-China

India needs a China plan

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- India-China relations

The article discusses the issue of dealing with China in the aftermath of clashes on the border.

Understanding the importance of Tibet

  • Tibet is the roof of the world, with vast mineral and natural resources.
  • The mighty rivers that emanate from its expansive glaciers — such as the Brahmaputra, the Yangtse, the Yellow river, the Mekong, the Salween and the Indus — together with thousands of their tributaries have nurtured civilisations in peripheral countries for centuries.
  • The Kailash Mansarovar is centered in this region.
  • In an act of naked aggression, China occupied Tibet in 1959.
  • A buffer was eliminated, and the de facto boundary of China became contiguous to that of India.
  • That boundary was deliberately left undemarcated to enable further expansion.

Understanding China’s stand

  • China has land borders with 14 neighbours covering an estimated 22,100 kilometres.
  • Post-independence, and as its economic status increased, so did its military muscle.
  • China embarked on claims based on perceived imbalances of treaties forced on countries when they were weak.
  • Some of these have since been resolved after bloody clashes such as with Russia and Vietnam, while others have been resolved using a combination of lucrative offers.
  • Russia accepted half of China’s claim, Kazakhstan was given lucrative economic deals, Kyrgyzstan retained 70% of the land, ceding just 30%, and so on.

Way forward

  • The road ahead will have to be evolved and based on a study of the manner in which China has negotiated its boundary disputes with 12 of its neighbours.
  • Under the prevailing circumstances, it has become imperative to form a group of experts.
  • This group will plan and prepare, short-, medium- and long-term goals to achieve them within a suggested time frame.

 Conclusion

Let us play down the rhetoric and adopt a pragmatic approach. It can no longer be a part-time issue to be addressed only when a crisis occurs. The crisis is upon us now.

Women empowerment issues – Jobs,Reservation and education

Weighing in on the efficacy of female leadership

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Women's Reservation

The article analyses the issue of women representation and leadership.

Role of female leaders in pandemic

  • Germany, Taiwan and New Zealand have women heading their governments.
  • Three countries seem to have managed the pandemic much better than their neighbours.
  • A detailed recent study by researchers in the United States reports that States which have female governors had fewer COVID-19 related deaths.
  •  The authors of the study conclude that women leaders are more effective than their male counterparts in times of crises.

Role of women as pradhans in gram panchayats

  • Women leaders perform significantly better than men in implementing policies that promote the interests of women.
  • This was demonstrated in study conducted by Nobel Laureate Esther Duflo and co-author Raghabendra Chattopadhyay.
  • They used the system of mandated reservations of pradhans in gram panchayats to test the effectiveness of female leadership.
  • Study concluded that pradhans invested more in rural infrastructure that served better the needs of their own gender.
  • This is also an important goal from the perspective of gender equality.

Underrepresentation of women in politics

  •  Female members make up only about 10% of the total ministerial strength in India.
  • The underrepresentation of female Ministers in India is also reflected in the fact that there is only one female Chief Minister.
  • Despite this, women constitute just over 14% of the total strength of the Lok Sabha.
  • This gives us the dismal rank of 143 out of 192 countries for which data are reported by the Inter-Parliamentary Union.

State of Women’s Reservation Bill

  • Women running for elections face numerous challenges, it is essential to create a level-playing field through appropriate legal measures.
  • Attempts have also been made to extend quotas for women in the Lok Sabha and State Assemblies through a Women’s Reservation Bill.
  •  Male members from several parties opposed the Bill on various pretexts.
  • Although the Rajya Sabha did pass the bill in 2010, the Lok Sabha and the State legislatures are yet to give their approval.
  • 24 years that have passed since it was first presented in the Lok Sabha.

Way forward

  • Political parties can sidestep the logjam in Parliament by reserving say a third of party nominations for women.

Conclusion

There is substantial evidence showing that increased female representation in policy making goes a long way in improving perceptions about female effectiveness in leadership roles. This decreases the bias among voters against women candidates, and results in a subsequent increase in the percentage of female politicians contesting and winning elections.

Coronavirus – Health and Governance Issues

Uniting South Asian region to combat Covid

Note4Students

From UPSC perspective, the following things are important :

Prelims level : SAARC

Mains level : Paper 2- South Asian countries' response to pandemic

The article analyses how South Asia is dealing with the pandemic and the need for coordinated action by the countries across the region.

Varying response across the region

  • Governments in South Asian countries have responded in varying degrees to counter the health and economic crises.
  • India resumed its economic activities on a limited scale following a strict lockdown.
  • Bangladesh, Nepal, Pakistan and Sri Lanka did the same after an extended lockdown.
  • Bhutan and the Maldives have managed to largely contain community transmission and avoid prolonged lockdowns due to a higher testing rate.
  • This is consistent with the hypothesis that countries that have conducted more tests have been more successful in containing the pandemic.

Low mortality in the region

  • Unlike other regions, South Asian countries are experiencing a lower mortality rate despite having a higher infection rate.
  • However, epidemiological studies and the World Health Organization’s reviews have been sceptical about the data reliability.

Effectiveness of state responses

  • India, Pakistan, Bangladesh, and the Maldives have unveiled stimulus packages.
  • The rest of the countries are yet to announce any concrete support for their low income and lower-middle income population still suffering from the economic fallout of the crisis.
  • In late March, India announced a $22.5 billion relief package to ensure food security and cash transfers to save the livelihoods of an estimated 800 million people living in poverty.
  • The Reserve Bank of India (RBI) slashed the repo and reverse repo rate to create liquidity for businesses.
  • In early April, Bangladesh announced a stimulus package worth about $8 billion in addition to an earlier $595 million incentive package for export-oriented industries.
  • Although countries like India and Bangladesh announced financial and material stimulus packages, distribution concerns remain unaddressed.

United response by SAAR

  • The region need to look beyond narrow geopolitical rivalry and come together to work towards a well-coordinated response mechanism.
  • A SAARC COVID-19 fund was created following Indian Prime Minister Narendra Modi’s call to South Asian leaders.
  • Bbut governments are yet to decide on its modus operandi.
  • The region could leverage its existing institutional framework under the umbrella of SAARC to effectively respond to the crisis.
  • For instance, SAARC Food Banks could be activated to tackle the imminent regional food crisis, and the SAARC Finance Forum can be activated to formulate a regional economic policy response.

Conclusion

Faced with an unprecedented crisis, this is the right time for the leaders of the region to come together and take on the challenge collectively.