Foreign Policy Watch: India-Pakistan

India’s South Asian opportunity

Note4Students

From UPSC perspective, the following things are important :

Prelims level : RCEP

Mains level : Paper 2- India-Pakistan relations and its impact on the region

India-Pakistan relations weigh down heavily on the SAARC. This affects the economic development of the region. The highlight opportunity for India and Pakistan to separate politics from economics.

Economic integration

  • There is a growing, but unstated, realisation that neither India nor Pakistan can wrest parts of Kashmir that each controls from the other.
  • A fair peace between India and Pakistan is not just good for the two states but for all the nations constituting the South Asian Association for Regional Cooperation (SAARC).
  • While SAARC has facilitated limited collaborations among its members, it has remained a victim of India-Pakistan posturing.
  • World Bank publication titled ‘A Glass Half Full’ conclude that there is explosive value to be derived from South Asian economic integration.
  • An economically transformed and integrated South Asian region could advantageously link up with China’s Belt and Road Initiative and even join the RCEP.

Important role of India

  • Collectively with a population of slightly over 1.9 billion, South Asia has a GDP (PPP) of $12 trillion.
  • However, India’s enjoys an overwhelming ‘size imbalance’ in South Asia.
  • The shares of India in the total land area, population, and real GDP of South Asia in 2016 are 62%, 75%, and 83%, respectively.
  • The two other big countries in South Asia are Pakistan and Bangladesh with shares in regional GDP of only 7.6% and 5.6%, respectively.
  • Given its size and heft, only India can take the lead in transforming a grossly under-performing region like South Asia.

Consider the question “How India-Pakistan relations affects the potential of SAARC? Examine the role both countries can play in the prosperity of the region through economic integration.”

Conclusion

This is the moment for India to think big and act big. But for that to happen, India needs to view peace with Pakistan not as a bilateral matter, but as essential and urgent, all the while viewing it as a chance of a lifetime, to dramatically transform South Asia for the better, no less.

Cyber Security – CERTs, Policy, etc

Why the Personal Data Protection Bill matters

Note4Students

From UPSC perspective, the following things are important :

Prelims level : IT Act 2000

Mains level : Paper 3- Personal Data Protection Bill and related issues

The existing data protection framework based on IT Act 2000 falls short on several counts. The Personal Data Protection Bill seeks to deal with the shortcoming in it. The article explains how the two differs.

Need for new data protection regime

  • The need for a more robust data protection legislation came to the fore in 2017 post the Supreme Court’s landmark judgment in Justice K.S. Puttaswamy (Retd) v. Union of India.
  • In the judgment, the Court called for a data protection law that can effectively protect users’ privacy over their personal data.
  • Consequently, the Committee of Experts was formed under the Chairmanship of Justice (Retd) B.N. Srikrishna to suggest a draft data protection law.
  • The Personal Data Protection Bill, 2019, in its current form, is a revised version of the draft legislative document proposed by the Committee.

Issues with the existing data protection framework

  • The Information Technology Act, 2000 governs how different entities collect and process users’ personal data in India.
  • However, entities could override the protections in the regime by taking users’ consent to processing personal data under broad terms and conditions.
  • This is problematic given that users might not understand the terms and conditions or the implications of giving consent.
  •  Further, the frameworks emphasise data security but do not place enough emphasis on data privacy.
  • As a result, entities could use the data for purposes different to those that the user consented to.
  •  The data protection provisions under the IT Act also do not apply to government agencies.
  • Finally, the regime seems to have become antiquated and inadequate in addressing risks emerging from new developments in data processing technology.

How the new regime under Data Protection Bill 2019 is different

  • First, the Bill seeks to apply the data protection regime to both government and private entities across all sectors.
  • Second, the Bill seeks to emphasise data security and data privacy.
  • While entities will have to maintain security safeguards to protect personal data, they will also have to fulfill a set of data protection obligations and transparency and accountability measures.
  • Third, the Bill seeks to give users a set of rights over their personal data and means to exercise those rights.
  • Fourth, the Bill seeks to create an independent and powerful regulator known as the Data Protection Authority (DPA).
  • The DPA will monitor and regulate data processing activities to ensure their compliance with the regime.

Concerns

  • Under clause 35, the Central government can exempt any government agency from complying with the Bill.
  • Similarly, users could find it difficult to enforce various user protection safeguards (such as rights and remedies) in the Bill.
  • For instance, the Bill threatens legal consequences for users who withdraw their consent for a data processing activity.
  • Additional concerns also emerge for the DPA as an independent effective regulator that can uphold users’ interests.

Consider the question “What are the issues with the present framework in India for data and privacy protection? How the Personal Data Protection Bill seeks to address these issues?”

Conclusion

The Joint Parliamentary Committee that is scrutinising the Bill is expected to submit its final report in the Monsoon Session of Parliament in 2021 Taking this time to make some changes in the Bill targeted towards addressing various concerns in it could make a stronger and more effective data protection regime.

Foreign Policy Watch: India-United States

India and the great power triangle of Russia, China and US

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Russia-China-US dynamic and its impact on India

Relations between Russia, China and the US have not always been the same. The changes in triangular dynamic offers lessons for India. The article deals with this issue.

India’s changing relations with great powers

  • The recent visit of Russian foreign minister Sergei Lavrov to Delhi and Islamabad is among multiple signs of India’s changing relations with the great powers.
  •  At the same time, Delhi’s growing strategic partnerships with the US and Europe have begun to end India’s prolonged alienation from the West.
  • Also, New Delhi’s own relative weight in the international system continues to increase and give greater breadth and depth to India’s foreign policy.

Shifts in triangular relations between Russia, China and America

1) Russia-China relations

  • The leaders of Russia and China — Joseph Stalin and Mao Zedong — signed a formal treaty of alliance in 1950.
  •  Russia invested massively in the economic modernisation of China, and also gave it the technology to become a nuclear weapon power.
  • However, by the 1960s, their relations soured and two were arguing about ideology and a lot else.
  • The Sino-Soviet split had consequences way beyond their bilateral relations.
  • None of them more important than the efforts by both Moscow and Beijing to woo Washington.
  • The break-up between Russia and China also opened space for Delhi against Beijing after the 1962 war in the Himalayas.
  • Under intense American pressure on Russia in the 1980s, Moscow sought to normalise ties with Beijing.
  • Stepping back to the 1960s and 1970s, China strongly objected to Delhi’s partnership with Moscow.

2) Russia-US relations

  • Russia, which today resents India’s growing strategic warmth with the US, has its own long history of collaboration with Washington.
  • Moscow and Washington laid the foundations for nuclear arms control and sought to develop a new framework for shared global leadership.
  • But Delhi was especially concerned about the Nuclear Nonproliferation Treaty system, with all its constraints on India’s atomic options, that Moscow and Washington constructed in the late 1960s.

3) US-China relations

  • Despite fighting Korean War with the US in the early 1950s, China normalised relations with the U.S. in 1971 to counter the perceived threat from Russia.
  • Deng Xiaoping, refused to extend the 1950 security treaty with Russia that expired in 1980.
  • China turned instead, towards building a solid economic partnership with the US and the West that helped accelerate China’s rise as a great power.

Lessons for India

  • The twists and turns in the triangular dynamic between America, Russia and China noted above should remind us that Moscow and Beijing are not going to be “best friends forever”.
  • India has no reason to rule out important changes in the way the US, Russia and China relate to each other in the near and medium-term.
  • In the last few years, India has finally overcome its historic hesitations in partnering with the US.
  • India has also intensified its efforts to engage European powers, especially France.
  • Prime Minister Boris Johnson’s visit to India later this month promises a fresh start in India’s difficult postcolonial ties with Britain.
  • India is also expanding its ties with Asian middle powers like Japan, Korea and Australia.
  • Despite the current differences over Afghanistan and the Indo-Pacific, India and Russia have no reason to throw away their mutually beneficial bilateral partnership.
  • The current troubles with China seem to be an unfortunate exception to the upswing in India’s bilateral ties with global actors.

Consider the question “What are the lessons India can draw from the  twists and turns in the triangular dynamic between America, Russia and China.”

Conclusion

India has successfully managed the past flux in the great power politics; it is even better positioned today to deal with potential changes among the great powers.

Foreign Policy Watch: India-Pakistan

Explaining Pakistan’s flip-flop on trade with India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Resuming India-Pakistan trade ties

The article highlights the key takeaways from Pakistan’s vacillations on resuming the trade ties even in the face of impending economic crisis.

U-turn on resuming trade

  • On March 31, Pakistan announced the decision to import cotton, yarn, and sugar from India.
  • However, it took a U-turn on that announcement about resuming trade ties.
  • This highlights the internal differences and the emphasis on politics over economy and trade.
  • It also signifies Pakistan cabinet’s grandstanding, linking the normalisation of ties with India to Jammu and Kashmir.

3 takeaways from the decision

1) Immediate economic needs

  • Pakistan’s decision was to import only three items from India, namely cotton, yarn and sugar.
  • It was based on Pakistan’s immediate economic needs and not designed as a political confidence-building measure to normalise relations with India.
  • For the textile and sugar industries in Pakistan, importing from India is imperative, practical and is the most economic.
  • This is because cotton and sugarcane production declined there by 6.9% and 0.4%, respectively.
  •  By early 2019, the sugar prices started increasing, and in 2020, there was a crisis due to shortage and cost.
  • Importing sugar from India would be cheaper for the consumer market in Pakistan.

2) Politics first

  • The second takeaway is the supremacy of politics over trade and economy, even if the latter is beneficial to the importing country.
  • The interests of its own business community and its export potential have become secondary.
  • However, Pakistan need not be singled out; this is a curse in South Asia, where politics play supreme over trade and economy.
  • The meagre percentage of intra-South Asian Association for Regional Cooperation (SAARC) trade and the failure of SAARC engaging in bilateral or regional trade would underline the above.

3) Emphasis on Jammu and Kashmir issue

  • The third takeaway is the emphasis on Jammu and Kashmir by Pakistan to make any meaningful start in bilateral relations.
  • This goes against what it has been telling the rest of the world that India should begin a dialogue with Pakistan.
  • There were also reports that Pakistan agreeing to re-establish the ceasefire along the Line of Control (LoC) was a part of this new strategy.

Consider the question: “Trade is unlikely to triumph over politics in South Asia; especially in India-Pakistan relations. This is a curse in South Asia, where politics play supreme over trade and economy.” Critically Examine.

Conclusion

Pakistan has been saying that the onus is on India to normalise the process. Perhaps, it is India’s turn to tell Islamabad that it is willing, but without any preconditions, and start with trade.

Foreign Policy Watch: India – EU

Why the Indo-Pacific has assumed significance for Europe after the pandemic

Note4Students

From UPSC perspective, the following things are important :

Prelims level : RCEP

Mains level : Paper 2- Asia-EU engagement

The article highlights Asia’s growing significance in the wake of the pandemic. This is underscored by Europe’s meaningful engagement with Asia which is based on an understanding of the region’s geopolitical and economic significance.

Asia’s rise

  • The pandemic has upended many certainties. But it has reinforced one major trend in global politics: The rise of Asia.
  • The region’s rise has created three Asias.
  • First, there is the familiar Asia of businessopen, dynamic, interconnected.
  • Second, an Asia of geopolitics, with ever-starker nationalisms, territorial conflicts, arms races and Sino-American rivalry.
  • Lastly, we have an Asia of global challenges.
  • These three Asias are also marked by 3 dynamics:
  • 1) Geopolitical rivalries that threaten free trade.
  • 2) The fight against the pandemic is mutating into a systemic competition between democracy and authoritarianism.
  • 3) And frenzied economic growth is fuelling climate change.

European strategy for Indo-Pacific

  • Germany together with France and the Netherlands, have commenced work on a European strategy for the Indo-Pacific.
  • The strategy seeks cooperation with all countries of the region: For open economies and free trade; for the fight against pandemics and climate change; and for an inclusive, rules-based order.
  • Such a European strategy for the Indo-Pacific must take all three Asias into account.
  • Europe is a key trading, technology and investment partner for many countries of the region.
  •  The EU recently concluded groundbreaking free trade agreements with Japan, Singapore and Vietnam that set environmental and social standards.
  • In late 2020, the countries of East and Southeast Asia signed Regional Comprehensive Economic Partnership, encompassing one-third of the global economy.
  • It is time for the EU to swiftly conclude the ongoing negotiations on trade agreements with Australia and New Zealand – and to move forward with negotiations with Indonesia and India.

Reducing dependencies

  • Following the above policies, Europe will also reduce dependency and following the principle of diversification.
  • Together with its Indo-Pacific partners, Europe can set standards for new technologies, human-centred digitisation and sustainable connectivity. 
  • In this endeavour, Europe can draw on its innovative and economic strength as well as its regulatory power.
  • At the EU-India Summit in May, the launch of a connectivity partnership with India will further connect India’s and Europe’s digital economies.

Rising tensions and rules-based Indo-Pacific

  • Meanwhile, tensions are rising in the Asia of geopolitics.
  • New cold wars or even hot conflicts in the Indo-Pacific would be an economic and political nightmare.
  • Europe must, therefore, take a firmer stand against polarisation and more strongly advocate an inclusive, rules-based Indo-Pacific.
  • The strategic partnership concluded between the EU and the Association of Southeast Asian Nations (ASEAN) last December connects us with like-minded middle powers.

Asia of geopolitical challenges

  • Containing geopolitical rivalries in Asia is also a precondition for shaping the future with the Asia of global challenges.
  •  As the biggest emitters of CO2, the US, China, India and the EU will only win the fight against climate change together.
  • The Leaders Summit on Climate that will be hosted by the US next week sets the stage for cooperation.
  • Europe and the countries of the Indo-Pacific need each other also in the fight against the virus.
  • The EU is by far the biggest supporter of the international vaccine platform COVAX, and India as a leading producer of vaccines is the most important COVAX supplier.
  • We will all benefit from this as, without the worldwide vaccination rollout, mutations will keep on setting us back in the fight against the pandemic.
  • Europe will continue to stand up for human rights and democracy in the Indo-Pacific.
  • This was demonstrated with sanctions against those responsible for human rights violations in Xinjiang — and also against Myanmar’s generals.

Conclusion

Europe is ready for a new partnership — a partnership founded on seeking dialogue with the open Asia of business, taming geopolitical rivalry in Asia together and coming up with responses to the world of tomorrow with the Asia of global challenges. This must be the objective of European policy — for and with the Indo-Pacific

Foreign Policy Watch: India-United States

7th Fleet’s patrol in India’s EEZ was an act of impropriety

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Maritime zones under UNCLOS

Mains level : Paper 2- Issues with UNCLOS 1982

The explains the implications of a recent incident in which the US 7th fleet asserted navigation freedom and rights inside India’s Exclusive Economic Zone.

Freedom of navigation operation in India’s EEZ

  • The US 7th fleet recently declared that on 7th April, 2021 USS John Paul Jones asserted navigational rights and freedom inside India’s EEZ, without requesting India’s prior consent.
  • The statement also said that  “India requires prior consent for military exercises or manoeuvres in its EEZ, a claim inconsistent with international law.

Which international law the statement referred to

  • The “international law” being cited by Commander 7th Fleet is a UN Convention which resulted from the third UN Conference on Law of the Seas (UNCLOS 1982).
  • India has ratified the Convention, which came into force in 1994.
  • However, amongst the 168 nations who have either acceded to or ratified UNCLOS 1982, the US is conspicuous by its absence.

Background of the UNCLOS

  • In 1945, the US unilaterally declared its jurisdiction over all natural resources on that nation’s continental shelf. 
  • Taking cue from the US, some states extended their sovereign rights to 200 miles, while others declared territorial limits as they pleased.
  • To bring order to a confusing situation, conferences for codifying laws of the seas were convened by the UN.
  • After negotiations, an agreement was obtained on a set of laws that formalised the following maritime zones:
  • (a) A 12-mile limit on territorial sea;
  • (b) A 24-mile contiguous zone.
  • (c) Amnewly conceived “exclusive economic zone” (EEZ) extending up to 200 miles within which the state would have sole rights over natural resources.
  • The EEZ was said to be unique in that it was neither high seas nor territorial waters.

Issues with the UNCLOS 1982

  • The signatories UNCLOS 1982 have chosen to remain silent on controversial issues with military or security implications and mandated no process for resolution of ambiguities.
  • Resort to the International Tribunal for the Law of the Sea or a Court of Arbitration are amongst the options available.
  • However, many states have expressed a preference for “negotiating in good faith”.
  • The time has, perhaps, come for signatories of UNCLOS 1982 to convene another conference to review laws and resolve issues of contention.

Why US refused to ratify UNCLOS

  • It was accepted that the seabed beyond the limits of national jurisdiction was not subject to national sovereignty but would be “the common heritage of mankind” .
  • This seems to have been at the root of the US opposition to UNCLOS.
  • It was felt in the US that this concept favoured the under-developed countries thereby denying America the fruits of its technological superiority.
  • The US Senate, therefore, refused to ratify UNCLOS.
  • Amongst the areas of major contention or sharp divergence in the interpretation of rules are:
  • 1) Applicability of the EEZ concept to rocks and islets.
  • 2) The right of innocent passage for foreign warships through territorial seas.
  • 3) Conduct of naval activities in the EEZ and the pursuit of marine scientific research in territorial waters and EEZ.

Containing China

  • China has insulated itself against US intervention, through the progressive development of its “anti-access, area-denial” or A2AD capability.
  • China has accelerated its campaign to achieve control of the South China Sea (SCS).
  • In 2013, China commenced on an intense campaign to build artificial islands in the SCS on top of reefs in the Spratly and Paracel groups.
  • In 2016, China disdainfully rejected the verdict of the UN Court of Arbitration in its dispute with the Philippines.
  • So far, none of the US initiatives including Obama’s abortive US Pivot/Re-balance to Asia, Trump’s Indo-Pacific Strategy and Asia Reassurance Initiative Act, seem to have had the slightest impact on China’s aggressive intent
  • Therefore, it seems pointless for the US Navy to frighten the Maldives or friendly India and it needs to focus on China instead.

Consider the question “What are the different types of maritime zones under the United Nations Convention for the Law of the Sea 1982? What are the flaws in the convention?

Conclusion

In this fraught environment, the ever-expanding, worldwide FONOP campaign needs a careful reappraisal by US policy-makers for effectiveness — lest it alienates friends instead of deterring adversaries.

Rohingya Conflict

India’s refugee Policy & Issues with it

Note4Students

From UPSC perspective, the following things are important :

Prelims level : 1951 Refugee Convention

Mains level : Paper 2- Need for refugee protection policy framework in India

The article highlights the issue of the lack of refugee protection framework in India and suggests enacting domestic law to deal with the issue. 

India’s record on refugee protection

  • India, for the most part, has had a stellar record on the issue of refugee protection.
  • But this moral tradition has come under great stress of late.
  • New Delhi has been one of the largest recipients of refugees in the world in spite of not being a party to the 1951 Refugee Convention and its 1967 Protocol.

Confusion in policies for immigrants and refugees

  • Much of the debate in India is about illegal immigrants, not refugees, the two categories tend to get bunched together.
  • Our policies towards illegal immigrants and refugees is confused is because as per Indian law, both categories of people are viewed as one and the same and are covered under the Foreigners Act, 1946.
  • The act offers a simple definition of a foreigner — “foreigner” means “a person who is not a citizen of India”.
  • There are fundamental differences between illegal immigrants and refugees, but India is legally ill-equipped to deal with them separately due to a lack of legal provisions.
  • Also, India is not a party to the 1951 Refugee Convention and its 1967 Protocol, the key legal documents pertaining to refugee protection.

How absence of policy framework creates problems

  • The absence of legal framework for refugees leads to policy ambiguity whereby India’s refugee policy is guided primarily by ad hocism and ‘political utility’.
  • At the same time, the absence of a legal framework increases the possibility of the domestic politicisation of refugee protection and complicates its geopolitical faultlines.
  • The absence of a clearly laid down refugee protection law also opens the door for geopolitical considerations while deciding to admit refugees or not.
  • For example, India’s decision in the recent case of admitting Myanmarese refugees fleeing to India was influence by the possibility of irking the Generals in Naypyitaw.
  • However, hypothetically speaking, if New Delhi had domestic legislation regarding refugees it could have tempered the expectations of the junta to return the fleeing Myanmarese.

Why India has not signed convention and protocol on refugee protection

  • The definition of refugees in the 1951 convention only pertains to the violation of civil and political rights, but not economic rights, of individuals.
  • If the violation of economic rights were to be included in the definition of a refugee, it would clearly pose a major burden on the developed world.
  • This argument, if used in the South Asian context, could be a problematic proposition for India too.
  • India also need to argue that the North is violating the convention in both letter and spirit, and make its accession conditional on the Western States rolling back the non-entrée (no entry) regime.
  • The non-entrée regime is constituted by a range of legal and administrative measures that include visa restrictions, carrier sanctions, interdictions, third safe-country rule, restrictive interpretations of the definition of ‘refugee’, withdrawal of social welfare benefits to asylum seekers, and widespread practices of detention.”
  • In other words, India must use its exemplary, though less than perfect, history of refugee protection to begin a global conversation on the issue.

Way forward

  • What other options do we have to respond to the refugee situation we are faced with?
  • The answer perhaps lies in a new domestic law aimed at refugees.
  • The CAA, however, is not the answer to this problem primarily because of its deeply discriminatory nature.
  • What is perhaps equally important is that such a domestic refugee law should allow for temporary shelter and work permit for refugees.
  • India must also make a distinction between temporary migrant workers, illegal immigrants and refugees and deal with each of them differently through proper legal and institutional mechanisms.

Consider the question “What are the reasons for India’s not singing 1951 Refugee Convention? What are the options India can explore for refugee protection? 

Conclusion

Our traditional practice of managing these issues with ambiguity and political expediency has become deeply counterproductive: It neither protects the refugees nor helps stop illegal immigration into the country.

Give small savers what is due to them

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issue of linking interest rate on small saving with the G-sec yields

The article highlights the issues with linking small savings interest rates with the yield on G-sec and its resetting on a quarterly basis.

Issue of small savings interest rate

  • For decades, small savings have constituted an important source of household savings, funded development programmes of state governments and offered a safe and secure source of income to senior citizens.
  • Recently, a notification on reducing the interest rates on small savings schemes quickly made headlines and was rescinded after 12 hours.
  • For small savers, the pandemic turned into a triple whammy: Battling job losses, higher food prices and a sharp devaluation in the value of their savings and earnings thereof. 
  • Interest on the Senior Citizens’ Saving Scheme was cut to 7.4 per cent, effective from April 2020, from 8.7 per cent before,
  • This was done despite the Gopinath Committee had recommended the rates should never be revised more than 100 basis points in a single year.

Linking small savings rate to G-sec yields

  • The suggestion to link small savings rates to G-Sec yields was first made in 2001 by Y V Reddy, then deputy governor of RBI.
  • Reddy committee suggested small savings rates should be reset once a year, allowing for a spread of up to 50 basis points.
  • Reddy’s recommendations were reiterated by his successor Rakesh Mohan.
  • The Gopinath Committee,  set up in 2009 gave its report in June 2011 and annual revisions in small savings rates linked to G-sec yields got underway effective April 2012.
  • In 2016, however, the government decided to reset them on a quarterly basis. 

Why link small savings rate to G-sec yields

  • Such linking is premised on the argument that the money collected through these schemes is invested in central and state government securities. 
  • While the yield on the government securities progressively declined over time, small savings rates remained downwardly rigid.
  • This resulted in an asset-liability mismatch that threatened the viability of the NSSF.
  • It is also argued that people’s dependence on small savings schemes had significantly declined since formal banking had rapidly expanded.
  • Moreover, for those who used small savings as safety nets there were other alternatives such as old-age pension and other similar schemes.

Issues with resetting rates on quarterly basis

  • All expert committees that examined the issue had strongly argued against resetting the rates on a quarterly basis.
  • The fear was it could result in unfair rewards for small savers in the event the G-sec yields remain artificially low for a certain period of time.
  • It did happen in the pandemic year when small savings rates faced the steepest cut in five years.
  • The changed policy on small savings is also premised on the belief that markets offer fair outcomes.
  • More often than not, that is not true.
  • The experience of the past year bears it out.
  • While retail inflation spiked, the RBI used every trick in its bag to hold G-sec yields down.

Way forward

  • The government could go back to resetting the rates annually, keeping the revision under 100 basis points and allowing small savings rates a spread of at least 50 basis points, not up to 50 basis points, over and above the G-sec yields.
  • Also, it may revisit the suggestion made by the Rakesh Mohan Committee to use a weighted average of G-sec yields over preceding two years — two-thirds weight for the later year, one-third for the earlier year.

Consider the question “What was the rationale for linking the interest rates on small savings to yield on G-sec? What are the issues with it?

Conclusion

Adopting the changes suggested here may require setting aside a few thousand crores to fill the resultant gap in the NSSF. But it is worth doing.

Internal Security Architecture Shortcomings – Key Forces, NIA, IB, CCTNS, etc.

Maoist Attack in Sukma

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Challenge of left wing extremism

The article deals with the counterinsurgency strategies to deal with the issues of left wing extremism in India

Threat of left-wing extremism

  • The killing of 22 security personnel by Maoists serves as a grim reminder that left-wing insurgency continues to be one of the biggest internal security threats for the country.
  • In the past few years, Maoist violence seemed to have been on a downward spiral.
  • The figures associated with the key indicators of violence like the number of incidents also support the contention that “insurgency is on the downward spiral”.
  • But the attack should thus serve as a wake-up call to those who had begun to get complacent about the Maoist threat.

Approach in counterinsurgency strategy

  • One school believes that given the Maoist insurgency posturing itself as a “people’s war”, the mandate is for a people-centric approach of “winning hearts and minds”.
  • Others argues that an enemy-centric approach predicated on kinetic operations is best suited for the Maoist insurgency, where the fear of the population seceding from India is remote.
  • The success of the erstwhile state of Andhra Pradesh in curbing the Maoist problem is often attributed to this enemy-centric approach.
  • However, there is robust scholarly work available that shows that the Andhra government based its counterintelligence strategy on a judicious mix of the enemy-centric and population-centric approaches.
  •  Andhra Pradesh had successfully implemented short-gestation-period developmental works in the Maoist-affected rural areas.
  • Moreover, the erstwhile state is also the first state to have a comprehensive surrender-cum-rehabilitation policy.
  • After the 2014 guidelines of the central government were brought out, many states have crafted attractive surrender and rehabilitation policies.
  • Another important question is whether the government should keep the option of talking to Maoists open.
  • The willingness to talk to rebel groups seems to incentivise insurgents and may demonstrate that violence pays.
  • But bringing an end to civil war invariably involves negotiating with the enemy.

Way forward

  • Indian counterinsurgency has to work with a dual objective of defeating the insurgents militarily and fully quell the insurgent impulses.
  • This will need institutional overhauls.
  • In the last decade or so, insurgency-affected states have started to raise special forces on the lines of Greyhounds.
  • These forces are being given rigorous training in “counter-guerrilla” tactics and jungle warfare.
  •  Besides, the jungles around the interstate borders have always been the preferred hiding spaces for the Maoists.
  •  States must do more to synergise their efforts by launching coordinated operations, thereby denying Maoists any space for manoeuvrability.
  • These efforts need to be supplemented by well-crafted development schemes.
  • It is also important to segregate the population from the insurgents both operationally and ideologically.
  • The conflict over the distribution of resources can be mended with economic development.
  • But the bigger challenge would be to create a system where the tribal population feels that the government is representative, not repressive.
  • Opening negotiation channels and policies like surrender and rehabilitation can give such a representative sense to the rebels.

Consider the question “Discuss the causes of left wing extremism in India. Suggest the way forward to deal with the issue.”

Conclusion

The government needs to follow these policies to end the challenge of left wing extremism from India.

Alternative Dispute Resolution Mechanism – NCA, Lok Adalats, etc.

Lok Adalats

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Lok Adalat and their role

Mains level : Paper 2- Importance of Lok Adalats and concerns over speed undermining idea of justice

The article highlights the important role played by the Lok Adalats in dispute resolution and raises concerns over underminig of justice for the sake of speedy disposal.

Background of Lok Adalat

  • The Constitution (42nd Amendment) Act, 1976, inserted Article 39A to ensure “equal justice and free legal aid”.
  • To this end, the Legal Services Authorities Act, 1987, was enacted by Parliament and it came into force in 1995.
  • The Act seeks “to provide free and competent legal services to weaker sections of the society” and to “organise Lok Adalats to secure that the operation of the legal system promotes justice on a basis of equal opportunity”.
  • As an alternative dispute resolution tool, Lok Adalats are regularly organised to help parties reach a compromise.
  • Motor-accident claims, disputes related to public-utility services, cases related to dishonour of cheques, and land, labour and matrimonial disputes (except divorce) are usually taken up by Lok Adalats.

Significance of Lok Adalats

  • As per the National Judicial Data Grid, 16.9% of all cases in district and taluka courts are three to five years old.
  • For High Courts, 20.4% of all cases are five to 10 years old, and over 17% are 10-20 years old.
  • Furthermore, over 66,000 cases are pending before the Supreme Court, over 57 lakh cases before various HCs, and over 3 crore cases are pending before various district and subordinate courts.
  • Moreover, Lok Adalats are economically affordable, as there are no court fees for placing matters before the Lok Adalat; finality of awards, as no further appeal is allowed.
  • As a result, litigants are forced to approach Lok Adalats mainly because it is a party-driven process, allowing them to reach an amicable settlement.

Why Lok Adalats are fast

  • When compared to litigation, and even other dispute resolution devices, such as arbitration and mediation, Lok Adalats offer parties speed of settlement.
  • Cases are disposed of in a single day.
  • The speed is due to procedural flexibility, as there is no strict application of procedural laws such as the Code of Civil Procedure, 1908, and the Indian Evidence Act, 1872.
  • More importantly, the award issued by a Lok Adalat, after the filing of a joint compromise petition, has the status of a civil court decree.

Some figures about cases disposed

  • In 2015 and 2016, ten National Lok Adalats (NLAs) were held each year that disposed of 1,83,09,401 and 1,04,98,453 cases respectively.
  • In 2017 and 2018, the number of NLAs dropped to five, with 54,05,867 and 58,79,691 cases settled respectively.
  • In 2019, four NLAs were organised, and they disposed of 52,93,273 cases.
  • In 2015, the average number of cases settled per NLA was 18,30,940, which came down to 10,81,174 in 2017, but rose to 11,75,939 in 2018, and 13,23,319 cases in 2019.
  • This throws up questions about the efficiency of NLAs.
  • The data show that the average number of cases disposed of per NLA since 2017 has gone up even when the number of NLAs organised each year has reduced.
  • This proves that on average, the system is certainly efficient.

Concerns

  • The Supreme Court, in State of Punjab vs Jalour Singh (2008), held that a Lok Adalat is purely conciliatory and it has no adjudicatory or judicial function.
  • As compromise is its central idea, there is a concern that in the endeavour for speedy disposal of cases, it undermines the idea of justice.
  •  In a majority of cases, litigants are pitted against entities with deep pockets, such as insurance companies, banks, electricity boards, among others.
  •  In many cases, compromises are imposed on the poor who often have no choice but to accept them.
  • Similarly, poor women under the so-called ‘harmony ideology’ of the state are virtually dictated by family courts to compromise matrimonial disputes under a romanticised view of marriage.
  •  Even a disaster like the Bhopal gas tragedy was coercively settled for a paltry sum, with real justice still eluding thousands of victims.

Consider the question “Examine the significance of Lok Adalats as an alternative dispute resolution tool. What are the concerns with speedy disposal of cases by Lok Adalats?”

Conclusion

A just outcome of a legal process is far more important than expeditious disposal, so what we need is concrete and innovative steps in improving the quality of justice rendered by National Lok Adalats.

Internal Security Trends and Incidents

A holistic review of internal security challenge and response to them is needed

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- LWE challenge

The article highlights the issues facing India’s internal security architecture and suggests the restructuring of roles and capacity building to address the challenge.

Recent setback to internal security (IS) capability

  • The COMBING OPERATION by local and central police forces in the Tekulguda region of Bastar went terribly wrong and resulted in the death of 22 security personnel.
  • This tragic incident is a major and embarrassing setback to the IS (internal security) capability of India at many levels and highlights the challenge that LWE (left-wing extremism) continues to pose. 

Strategic inadequacies

  • India has been dealing with three variants of the internal security challenge for decades.
  • These three are: 1) a proxy war and terrorism in Kashmir 2) sub-national separatist movements in the Northeast. 3) the Naxal-Maoist insurgency ( LWE) in the Red Corridor.
  • And these challenges have warranted different responses.
  • The first two strands have been reasonably contained.
  • LWE and the current Maoist movement has its genesis in poor governance, lack of development in the tribal belt and an oppressive/exploitative hierarchy of the state and society.
  •  In November 2005, then PM Manmohan Singh described the LWE challenge as the most serious security threat to India and exhorted the professionals to evolve appropriate responses.

Need for restructuring

  • One of the recommendations of the Kargil Review Committee (KRC) report was the restructuring of the role and the tasks of the para-military forces particularly with reference to command and control and leadership functions.
  • This critical component of restructuring the leadership of the central police forces (in this case the CRPF and BSF) has not been addressed, much less redressed.
  • By training, the police officer is expected to be a competent Superintendent and to maintain law and order.
  • This is not the skill-set that is relevant when an officer has to “command” and lead his men into insurgency operations.
  • In the current scenario, barring a few exceptions, many of the senior police officers (IPS cadre) who are introduced into the central police forces at senior ranks have little or no platoon/battalion experience. 

Consider the question “What are the factors making Left Wing Extremism such a persistent internal security problem for India? Suggest the measure to improve the internal security architecture in India.”

Conclusion

The political leadership of the country needs to act and complete the task of restructuring and capacity building to address India’s internal security challenge.

Electoral Reforms In India

Need to remove the secrecy around the electoral bonds

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Various aspects related to the electoral bond scheme

Mains level : Paper 2- Issues with the electoral bond scheme and alternatives to it

The article highlights the issues with the electoral bond scheme and suggests an alternatives.

Secrecy in donations

  • Before the electoral bond scheme, every transaction of more than Rs 20,000 was reported to the Election Commission.
  • Now even Rs 20 crore or Rs 200 crore could be donated anonymously. 
  • Why should donors want secrecy? To hide return favours, like contracts, licences and bank loans.
  • Both the RBI and ECI, standing up to their mandates, had registered their strong protest.

How electoral bond scheme led to changes in provisions of other Acts

  • To make way for electoral bonds amendments were introduced in the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of the People Act and Foreign Contribution Regulations Act.
  • There were three serious changes which did not receive the deserved attention.

1) Limit of 7.5 per cent removed

  • First, the limit of 7.5 per cent of its profits which a company could donate was not just increased but completely done away with by amending section 182 of the Companies Act, 2013.
  • Thus a company could donate 100 per cent of its profits to a political party.
  • Even a loss-making company could make political donations.
  • This is a sure step to legitimise and legalise crony capitalism.

2) Requirement of resolution removed

  • The requirements for a resolution by the board of directors for a company to make donations to political parties and to declare the political donations in the profit and loss accounts were also removed.
  • This would allow keeping the donations secret not only from the public but the owners of the company, the shareholders — ironically, all in the name of transparency.

3) Secrecy in contribution from foreign source

  • Section 29B of the Representation of the People Act, 1951 prohibits all political parties from accepting any contribution from a “foreign source.”
  • Section 3 of the 2010 Foreign Contribution (Regulation) Act bars candidates, legislative members, political parties and party officeholders from accepting foreign contributions.
  • When the High Court of Delhi in 2014 found Congress and BJP having accepted foreign funds in violation of the FCRA 1976, the government passed a retroactive amendment through a 2016 Finance Bill which repealed the 1976 Act and replaced it with the modified 2010 statute.
  • If any foreign country is financing our elections, it will now be a protected secret.

Way forward

  • The Supreme Court’s concern about the possibility of misuse of funds is very pertinent.
  • The EC has been demanding that a law be passed to make political parties liable to get their accounts audited by an auditor from a panel suggested by the CAG or EC.
  • If the government don’t want to abolish the electoral bond scheme it should just make changes to it to disclose the donor and the recipient.
  • Another alternative is to do away with private fund collection altogether and replace it with public funding of political parties.
  • This is not likely to be more than Rs 10,000 crore every five years, if we were to go by the entire collection all the parties make together.
  • Another feasible option is to establish a National Election Fund to which all donations could be directed.
  • This would take care of the imaginary fear of political reprisal of the donors. 

Consider the question “What were the changes introduced in various Acts for the introduction of the electoral bond scheme? What are the issues with these changes?”

Conclusion

We must not forget the finance minister’s opening statement in the 2017 Budget speech that “without transparency of political funding, free and fair elections are not possible”.

Government Budgets

A post-Covid fiscal framework for India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Provisions of the FRBM Act

Mains level : Paper 3- Issues with the FRBM and alternative framework

The article highlights the failure of FRBM Act to contain India’s rising debt and suggests an alternative framework.

Issues with the FRBM Act

  • Economic disruption caused by the COVID has prompted calls for a relook atthe Fiscal Responsibility and Budget Management Act (FRBM).
  • The introduction of the FRBM in 2003 reflected the belief that setting strict limits on fiscal deficits, both for the centre and the states, was the solution.
  • But this framework didn’t work.
  • Apart from the initial period, when growth was booming, the deficit targets were largely honoured in the breach, leaving the primary balance [Revenue-Non-intrest expenditure] essentially unchanged (Figure 2, phase 2).

Debt has increased to record levels

  • India’s general government debt has soared.
  • It is now close to 90 per cent of GDP — the highest independent India has ever seen.
  • The debt ratio will come down naturally as GDP normalises.
  • Even so, on current policies, it is likely to exceed 80 per cent for the foreseeable future.

Would such a high level of debt be sustainable?

  • Briefly, sustainability depends on two key factors:
  • 1) The primary balance (PB), revenue less non-interest expenditures.
  • 2) The difference between the cost of borrowing and the nominal growth rate (r-g).[interest-growth differential]
  • Debt does not explode when the primary balance is greater than the interest-growth differential.
  • In India’s case, PB has been negative as the government has run primary deficits.
  • But this has been counterbalanced over the past decade by favourable differentials, as interest rates have been lower than growth.
  • Hence, the broadly stable debt ratio.
  • This equilibrium has now been upset by the sudden increase in debt.
  • If the interest-growth differential consequently turns unfavourable, as occurred during the previous period of high debt in the early 2000s (Figure 2, phase 1), then debt sustainability could only be preserved by shifting the primary balance into surplus.
  • And this would not be easy.

Why shifting primary balance intro surplus is not easy

  • Primary deficit of the Centre and states combined is typically about 3 per cent of GDP. [say PB is -3% of GDP]
  • So, shifting the primary balance into a modest surplus [i.e. turning PB from -ve to +ve] would require an adjustment of 4 percentage points of GDP.
  • But non-interest expenditure is only roughly 20 per cent of GDP.
  • If tax increases were ruled out, then a sudden adjustment would require non-interest spending to be cut by no less than 20 per cent (4 divided by 20 times 100).[20% of 20 is 4]
  • Clearly, this would be politically impossible.
  • But this would render India susceptible to panic and possibly even crises.
  • The government needs to eliminate the tension, undertaking a pre-emptive consolidation to prevent the need for a sudden adjustment.

Strategy based on 4 principles

  • The government should start by defining a clear objective, based not on arbitrary targets but on sound first principles: It should aim to ensure debt sustainability.
  • To this end, the government could adopt a strategy based on four principles.

1) Abandon multiple fiscal criteria

  • The current FRBM sets targets for the overall deficit, the revenue deficit and debt.
  • Such multiple criteria impede the objective of ensuring sustainability since the targets can conflict with each other,
  • This creates confusion about which one to follow and thereby obfuscating accountability.

2) Don’t get fixated on specific number

  • Around the world, countries are realising that deficit targets of 3 per cent of GDP and debt targets of 60 per cent of GDP lack proper economic grounding.
  • In India’s case, they take no account of the country’s own fiscal arithmetic or its strong political will to repay its debt.
  • Any specific target, no matter how well-grounded, encouraging governments to transfer spending off-budget such as with the “oil bonds” in the mid-2000s and subsidies more recently.

3) Focus on one measure for guiding fiscal policy

  • In this regard, Arvind Subramanian and Josh Felmanwe propose targeting the primary balance.
  • This concept is new to India and will take time for the public to absorb and accept.
  • But it is inherently simple and has the eminent virtue that it is closely linked to meeting the overall objective of ensuring debt sustainability.

4) Don’t set yearly target for the primary balance

  • The Centre should not set out yearly targets for the primary balance.
  • Instead, it should announce a plan to improve the primary balance gradually, by say half a percentage point of GDP per year on average.
  • Doing so will make it clear that it will accelerate consolidation when times are good, moderate it when times are less buoyant, and end it when a small surplus has been achieved.
  • This strategy is simple and easy to communicate; it is gradual and hence feasible.

Consider the question “Despite the FRBM framework India’s debt level have touched a historic high. In light of this, examine the reasons for the failure of FRBM in controlling the debt level and suggest the way forward to make India’s debt level sustainable.”

Conclusion

COVID has upended India’s public finances. It is time to learn from past experience and adapt. Adopting a simple new fiscal framework based on the primary balance could be the way forward.

Police Reforms – SC directives, NPC, other committees reports

Why police reform recommendations have not been implemented

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 2- Implementation of the SC recommendations in Prakash Singh case

The article discusses the status of implementation of the Supreme Court directives in the Prakash Singh case by the States.

Background of the Prakash Sing judgement

  • Over the years, the National Police Commission made several recommendations for reform of the police force.
  • But many of these were not implemented effectively.
  • In 1996, two retired Directors General of Police, Prakash Singh and N. K. Singh, filed a public interest litigation (PIL) to know whether those recommendations had ever been implemented.
  • A decade later in 2006 that the Court delivered its verdict in what is popularly referred to as the Prakash Singh case.
  • In Prakash Singh v. Union of India, the SC relied on the eight reports of the National Police Commission (1979-1981) appointed by the Union.

Following are some of the recommendations and provision and status of their implementations.

Selection and minimum tenure of DGP

  • The provision regarding the selection of and minimum tenure for the DGP post has had partial if any, effect.
  • Corruption, politicking, and patronage-seeking at the top is so endemic that this provision has lost its sting.
  • The Security Commission consisting of the Home Minister, the Leader of the Opposition, the Chief Secretary, the DGP and five independent members is likewise ineffective.
  • How can one have at the apex of the reform system for the police those who have a vested interest in not reforming the police?

Separation between investigation and prosecution wings

  • The Commission’s recommendation that there ought to be a separation between the investigation and prosecution wings, as is the system in many developed countries, required immediate enforcement by the judiciary.
  • Doing so will help weed out the corruption in criminal investigations would get a second look by the prosecutorial wing.
  • But, for that, it would require that this department be placed not under the Home Minister, but under the Ministry of Law and Justice.
  • This was never done.

The Police Complaint Authority

  • Obviously, for police criminality, one cannot expect the police or the home department to take action against themselves.
  • An independent body was necessary.
  • The commission recommended that there should be a PCA at the state level, headed by a retired judge of the SC or high court chosen out of a panel of names proposed by the chief justice of the state.
  • A similar structure was envisaged for the PCA at the district level.
  • In addition, the PCAs would be assisted by members selected by the state from panels prepared by the State Human Rights Commission, Lokayuktas and the State Public Service Commissions.
  • The most important part of this decision was that the recommendations of the PCA would be binding on the state.
  • However, affidavits filed in the SC showed that not a single state or UT has implemented the PCA provision.
  • States have not constituted panels and appointed officials as chairpersons in the place of retired judges.
  • In many states, the name Police Complaints Authority has been changed.
  • For example, in Tripura and Mizoram, it is called The Police Accountability Commission, diverting attention away from the fact that the commission is for entertaining complaints against police persons.

Consider the question “What are the Supreme Court directives for police reform in the Prakash Singh vs. Union of India case? To what extent states have implemented these directives?” 

Conclusion

On police reform, the recommendations exist, the SC order has been made but the Union remains defiant. Perhaps, now, after the Maharashtra fiasco, the SC may decide that this case pending for eight years merits listing.


Back2Basics: The SC directives in the Prakash Singh case

1) Limit Political Control

  • Constitute a State Security Commission to:
  • Ensure that the state government does not exercise unwarranted influence or pressure on the police.
  • Lay down broad policy guidelines.
  • Evaluate the performance of the state police.

2) Appointment based on merit

  • Ensure that the Director General of Police is appointed through a meritbased, transparent process, and secures a minimum tenure of 2 years.

3) Fix minimum tenure

  • Ensure that other police officers on operational duties (including Superintendents of Police in charge of a district and Station House Officers in charge of a police station) are also provided a minimum tenure of 2 years.

4) Separate police functions

  • Separate the functions of investigation and maintaining law and order.

5) Set up fair and transparent systems

  • Set up a Police Establishment Board to decide and make recommendations on transfers, postings, promotions and other service-related matters of police officers of and below the rank of Deputy Superintendent of Police.

6) Establish a Police Complaints Authority in each state

  • At the state level, there should be a Police Complaints Authority to look into public complaints against police officers of and above the rank of Superintendent of Police in cases of serious misconduct, including custodial death, grievous hurt or rape in police custody.

7) Set up a selection commission

  • A National Security Commission needs to be set up at the union level to prepare a panel for selection and placement of chiefs of the Central Police Organizations with a minimum tenure of 2 years.

Women empowerment issues – Jobs,Reservation and education

Address the silent crisis of India’s gender deficit

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Gender Gap Report

Mains level : Paper 2- Gender discrimination

The recently released Gener Gap Report paints a grim picture for India. The deal with this issue.

Where India Stands

  • The World Economic Forum’s (WEF) Global Gender Gap Report 2021 was released last week.
  • The report lays bare our silent crisis of gender inequality, aggravated by the covid pandemic.
  • India has slipped 28 places to 140th position among 156 countries on the WEF’s Global Gender Gap Index.
  • The country is now 37.5% short of an ideal situation of equality, by its index, last year it was a 33.2% deficit on the whole.
  • Back in 2006, we were almost 40% short, but even the slight progress made over the past 15 years has been highly uneven.
  • Gains were made on the education and political empowerment of women, we slid sharply on health and economic parameters.

Factors to consider

  • Though pandemic has been responsible for the decline to a significant extent, many of our deficiencies are pre-covid.
  • Some of the drop in India’s international rank over the past two years, for example, has to do with regression in the field of political power.
  • The proportion of women ministers more than halved to 9.1% of the total, though our count of female Parliamentarians did not budge from its long stagnancy.
  • Our performance over the past decade-and-a-half has been poor on women’s economic opportunities and participation.
  • Indian workforce has been turning more predominantly male.
  • Senior managerial positions in the corporate sector have not seen sufficient female appointees.
  • At the aggregate level, our income disparity is glaring.
  • Women earn only a fifth of men, which puts India among the world’s worst 10 on this indicator.
  • We fare worse on women’s health and survival, with India beaten to the last rank only by China.

Why proportionally fewer Indian women in jobs?

  • One explanation is that sociocultural attitudes go against women going out to work, unless the family lacks sustenance, and deprivation has been in decline for decades.
  • Another is that families prefer educated mothers to invest time in teaching their kids.
  • Both these motives are said to be influenced by upward income mobility and a quest for better lives.
  • Yet, the covid setback to both family incomes and gender progress would suggest the reasons are mostly attitudinal.

Way forward

  • If the reasons are attitudinal, tax incentives and other schemes are unlikely to get women taking up more jobs.
  • What we need are new forms of social persuasion, which must go with credible assurances of gender equity in every sphere.

Conclusion

A country’s economic progress is inextricably linked to empowered women. So, India needs to act on the silent crisis of India’s gender deficit to move up the economic ladder.

Why engagement with NATO should be part of India’s new European orientation

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NATO

Mains level : Paper 3- Why India should engage NATO

India has jettisoned many of its foreing policy shibboleths of late, however, avoiding NATO is not one of them. The article suggests engaging NATO to be in sync with the changing geopolitics.

Why India avoided engagement with NATO in the past

  • India’s real problem is not with NATO, but with Delhi’s difficulty in thinking strategically about Europe.
  • Through the colonial era, Calcutta and Delhi viewed Europe through British eyes.
  • After Independence, Delhi tended to see Europe through the Russian lens.
  • The fall of the Berlin Wall and the collapse of the Soviet Union demanded a fresh approach to Europe.
  • But Delhi could not devote the kind of strategic attention that Europe demanded.
  • The bureaucratisation of the engagement between Delhi and Brussels and the lack of high-level political interest prevented India from taking full advantage of a re-emerging Europe.
  • In the last few years, Delhi has begun to develop an independent European framework, but has some distance to go in consolidating it.

Ending political neglect of Europe

  • India has certainly sought to end prolonged political neglect of Europe.
  • The deepening maritime partnership with France since 2018 is an example.
  • Joining the Franco-German Alliance for Multilateralism in 2019 is another.
  • India’s first summit with Nordic nations in 2018 was a recognition that Europe is not a monolith but a continent of sub-regions.
  • India’s engagement with Central Europe’s Visegrad Four also highlighted the fact that Europe is not monolith.

Why India should engage NATO

  • During the Cold War, India’s refusal was premised on its non-alignment.
  • That argument had little justification once the Cold War ended during 1989-91.
  • An India-NATO dialogue would simply mean having regular contact with a military alliance, most of whose members are well-established partners of India.
  • If Delhi is eager to draw a reluctant Russia into discussions on the Indo-Pacific, it makes little sense in avoiding engagement with NATO.
  • If Delhi does military exercises with China and Pakistan — under the rubric of the Shanghai Cooperation Organisation (SCO), why should talking to NATO be anathema?
  • To play any role in the Indo-Pacific, Europe and NATO need partners like India, Australia and Japan.
  • Delhi, in turn, knows that no single power can produce stability and security in the Indo-Pacific.
  • India’s enthusiasm for the Quad is a recognition of the need to build coalitions.
  • A sustained dialogue between India and NATO could facilitate productive exchanges in a range of areas, including terrorism, changing geopolitics; the evolving nature of military conflict, the role of emerging military technologies, and new military doctrines.
  • More broadly, an institutionalised engagement with NATO should make it easier for Delhi to deal with the military establishments of its 30 member states.
  • On a bilateral front, each of the members has much to offer in strengthening India’s national capabilities.

What about Russia

  • Russia has not made a secret of its allergy to the Quad and Delhi’s growing closeness with Washington.
  • Putting NATO into that mix is unlikely to make much difference.
  • Delhi, in turn, can’t be happy with the deepening ties between Moscow and Beijing.
  • As mature states, India and Russia know they have to insulate their bilateral relationship from the larger structural trends buffeting the world today.
  • Meanwhile, both Russia and China have intensive bilateral engagement with Europe.

Consider the question “India has to end its prolonged political neglect of Europe and engage a major European institution like NATO. In light of this, examine the factors restraining India’s engagement with the Europe.

Conclusion

India’s continued reluctance to engage a major European institution like NATO will be a stunning case of strategic self-denial and we should avoid it.

Capital Markets: Challenges and Developments

Understanding the issues with bond market in India

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Issues with bond market in India and its effect on cost of borrowing of the government

What explains the Indian government borrowing at a higher interest rate than the interest rates for a home loan? The answer lies in the structural shortage in demand for government bonds. 

How the government’s cost of borrowing matter

  • Interest on government debt is a transfer from taxpayers to savers who own government bonds.
  • As the government bondholders are primarily domestic, interest paid by the government is just a transfer from one hand to the other within the economy.
  • However, the government’s cost of borrowing does matter.
  • The large increase in interest costs limits the government’s ability to spend elsewhere.
  • But more importantly, this rate also affects the cost of borrowing for large parts of the economy.

Understanding the term premium and credit spread

  • The RBI sets the repo rate, which is the short-term risk-free rate.
  • That is, the loan must be repaid in a few days and there is almost no risk of default.
  • The rate at which the government borrows is the long-term risk-free rate.
  • But the lender wants higher returns given the longer duration of the loan.
  • The difference between the repo rate and government’s borrowing cost, say on a 10-year loan, is called the term premium.
  • When a private firm takes a 10-year loan, it would have some credit risk too, which means a credit spread is added to the 10-year risk-free rate.

Challenge posed by term premium

  • From an average rate of 73 basis points since 2011 (one basis point is one-hundredth of a per cent), and 120 basis points in 2018 and 2019, the 10-year term premium is currently 215 basis points.
  • In other words, the interest rate for a 10-year period borrowing is 2.15 per cent higher than the current repo rate.

How this is related to dysfunction in bond market in India

  • Financial markets are forward-looking, and as the collective expression of the views of thousands of participants, efficient ones can occasionally “predict” what comes next.
  • But the Indian bond market is not one such: The view some hold, that the rise in term premium reflects future rate hikes by the monetary policy committee (MPC), is mistaken.
  • The Indian bond market is still too illiquid and not diverse enough to predict future trends.
  • Even though some pandemic-driven measures are being withdrawn, the MPC continues to be accommodative, and for several months at least, headline inflation is unlikely to force an abrupt change.
  • In any case, the spurt in yields after the budget points to the causality being fiscal instead of inflation-related.
  • But even the fiscal rationale seems weak.
  • The Centre’s tax collection for FY2020-21 has been substantially ahead of target, and state governments have also borrowed Rs 60,000 crore less than expected.
  •  Also, the14 states, accounting for three-fourths of all state deficits, have budgeted FY2021-22 deficits at 3.3 per cent, far lower than the 4 per cent average expected earlier.
  • Just these factors suggest that total bonds issued by the central and state governments should be lower than what the market had feared before the union budget was presented.
  • And yet, government borrowing costs have not returned to pre-budget levels.
  • This reflects dysfunction in the market.
  • Why else would a government be borrowing at a higher cost than a mortgage on a house?

What is the reason for dysfunction in bond market

  • Dysfunction can be traced to residential mortgages being among the most competitive of loan categories.
  • On the other hand, there is a structural shortage in demand for government bonds.
  • In such a market where there is a structural shortage in demand the marginal buyer holds all the cards, and as any buyer would, demands higher returns.
  • Over 15 years,  the share of banks in the ownership of outstanding central government bonds has fallen from 53 per cent to 40 per cent now.
  • But no alternative buyer of size has emerged to fill the space vacated.
  • The RBI sometimes buys bonds to inject money into the economy, but of late this space has been used to buy dollars to save the rupee from appreciation.

Solutions

  • The solution to the problem of bond market may lie in getting new types of buyers.
  • The RBI opening up direct purchases by retail investors is a step in this direction, though it may not become meaningful for a few years.
  • That leaves us with tapping foreign savings.
  • The limit on share of government bonds that foreign portfolio investors (FPIs) can buy has been raised steadily.
  • But without Indian bonds being included in global bond indices, these flows may not be meaningful, and would be volatile, as they have been over the past year.
  • To enable inclusion in bond indices, the RBI and the government have earmarked special-category bonds which are fully accessible (FAR) by foreign investors.
  • The FTSE putting India on a watch-list for “potential future inclusion” in the Emerging Markets Government Bonds Index is a step forward, and, one hopes, triggers similar actions by other index providers.

Consider the question “How the lack of retailness in the bond market affects the cost of borrowing of the government as well as the private borrowers? Suggest the measures to deal with the issues.”

Conclusion

The issues with bond markets in India highlights the urgency to find new buyers for government bond as it has implications not just for the government’s own fiscal space, but also for the cost of borrowing in the economy.

e-Commerce: The New Boom

E-commerce policy is needed for speedy, inclusive growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Significance of e-commerce sector for India

The article highlights the untapped potential of the e-commerce sector in the transformation of the Indian economy and suggests factors to take into account in the new e-commerce policy.

How pandemic contributed to the growth of e-commerce

  • A celebrated McKinsey study has revealed that we have covered a ‘decade in days’ in the adoption of digital during the pandemic.
  • Behavioural changes have been witnessed in most areas like work, learning, health, travel, entertainment, etc.
  • But the biggest surge has been in e-commerce, both in goods and services.

Significance of the sector for India

  • E-commerce is one of India’s fastest-growing sectors, for attracting FDI and creating jobs, and providing a pan-India market for lakhs of SMEs, and facilitating exports.
  • India has a vibrant retail sector, bubbling with energy and a bright future.
  • E-commerce can rope in lakhs of MSMEs in cross-border trade and multiply turnover and revenues enormously.
  • Its role in facilitation of exports with linkages and access to overseas markets can also help inject competitiveness in our products and creating a lot of jobs and market opportunities, adding to inclusive growth.

Issues faced by the sector

  • The digital interface during e-commerce processes with multiple agencies has resulted in a plethora of compliances.
  • These compliances include Income Tax Act 1961, Information Technology Act 2000, Consumer Protection Act 2019, FEMA Act 2000, Competition Act 2002, Companies Act 2013, Anti-Piracy Law, GSTN, DGFT, etc.
  • In addition, handling, generation and protection of humongous data is a major issue under data protection laws.
  • At times, there are requirements of compliances with various local and state laws, and during exports, adherence to foreign laws, many of which could be quite complex and rigorous.

E-commerce policy to aid Inclusive growth

  • Inclusive growth being an important objective of the proposed e-commerce/FDI policy, it should recognise and support new business models in both product and service segments.
  • The policy should be aimed at improving consumer experience and providing gainful employment to regular and gig workers with improved earnings.
  • India, in fact, is the first country to extend protections to workers including the new-age gig and platform workers, which is being viewed with interest globally.
  • With the passage of the Code on Social Security 2020, policymakers have focused on financial and social security associated with employment to contemporary socio-economic realities.
  • The role of platform workers amidst the pandemic has presented a strong case to attribute a more robust responsibility to platform aggregator companies and the State.
  • This has cemented their role as public infrastructures who also sustain demand-driven aggregators and e-commerce platforms.
  • This role of the platform workers may help in higher productivity and more sustainable employment, when many of them could potentially become mini-entrepreneurs.
  • This, however, would need to be facilitated by concerned public and private institutions as also the multiple regulators in the e-commerce ecosystem.
  • In an online services market place and to provide full support to regular and gig professionals rendering services on the platform, it must be imperative on the service platform to build their capacity through training, technology and access to high-quality consumables and tools.

Consider the question “Examine the role e-commerce can play in India’s pursuit of inclusive growth? What are the issues faced by the sector in India?” 

Conclusion

We are in for exciting times, as we enter this decade, rightly called the ‘Techade’; 2020 has accelerated technology infusion in all segments of life and activity. The world is looking at India with expectations and we owe it to our nation.


Source: https://www.financialexpress.com/opinion/e-commerce-policy-needed-for-speedy-inclusive-growth/2226729/

Goods and Services Tax (GST)

Should Petroleum be brought within the ambit of GST?

Note4Students

From UPSC perspective, the following things are important :

Prelims level : GST

Mains level : Paper 3- Inclusion of petrol and diesel in GST

The article deals with the issues of demand for the inclusion of fuel oils in the GST regime and its implications for the revenue of the states and the Centre.

How much tax we pay on petrol and diesel

  • The Union and state levies put together account for roughly 55 per cent and 52 per cent of the retail price of petrol and diesel respectively.
  • These work out to around 135 per cent and 116 per cent of the base prices of the two products respectively.
  • The central levy on petrol and diesel works out to around 36 per cent of the retail price while the state component is around 20 per cent (diesel) to 28 per cent (petrol).
  • Of the total central levies on petrol and diesel, Rs 1.40 per litre and Rs 1.80 per litre is the basic excise duty for the two fuels, and Rs 11 per litre and Rs 18 per litre is the special additional excise duty.
  • Both these components form part of the divisible pool of taxes i.e. 42 per cent of which (approximately Rs 52,000 crore) goes to the states.
  • The remaining portion of Rs 18 per litre in both cases is the Road and Infrastructure Cess and Rs 2.50 per litre and Rs 4 per litre is the Agriculture Infrastructure and Development Cess which are retained by the Centre.

How other countries tax fuel oils

  • Being demerit goods, fuel oils and liquor are almost universally subject to a dual levy by countries that implement any kind of VAT or GST.
  • The levy is a mix of GST at a fixed percentage of the price which qualifies for credit in the value chain and a fixed amount or percentage of the price which is not creditable and is thus outside GST.
  • Punitive taxes of this order are levied primarily to discourage consumption of environmentally degrading fossil fuels and to garner revenues to fund infrastructure, while the creditable component enables offsetting of taxes on basically capital inputs.
  • These products are subjected to a plethora of levies like VAT, excise duty, storage levies, security levies and environmental taxes in the EU and the total incidence of such taxes ranges from around 45 per cent to 60 per cent.
  • The US is an exception in these matters since it imposes taxes at rates as low as around 15 per cent.

Including fuel oils in the GST regime

  • the 122nd Constitution Amendment Bill in 2014 for GST adopted the delayed choice approach.
  • Under the delayed-choice approach, petroleum products would be subjected to GST with effect from such date as the council may recommend.
  • Accordingly, sections 9(2) and 5(2) of the CGST/SGST Act and the IGST Act respectively, explicitly provide for levy of GST on these products with effect from such date as the Council may recommend.
  • Thus, bringing the aforesaid petro-products under GST is not within the reach of the central government alone.

How much will be the loss of revenue

  • A 28 per cent levy of GST on the base price would fetch around Rs 5.40 per litre on petrol and around Rs 5.45 on diesel to the central and each of the state governments.
  • Contrast the above with the current yield of Rs 32.90 per litre on petrol and Rs 31.80 per litre on diesel to the Centre alone and an average of around Rs 20 per litre and Rs 15 per litre on petrol and diesel, respectively, to each of the states.
  • This, however, would bring down the prices of petrol and diesel to around Rs 55 per litre.
  • This would translate into a revenue loss of around Rs 3 lakh crore on account of petrol and around Rs 1.1 lakh crore on account of diesel to the Centre and the states, at current volumes.

Consider the question “What are the various levies contributing to the prices of petrol and diesel in India? Examine the rationale for the heavy taxing of these products in India.”

Conclusion

Clearly, bringing petro-products under GST would not lower fuel oil prices by itself, unless the Union and the state governments are willing to take deep cuts in their revenues.

Primary and Secondary Education – RTE, Education Policy, SEQI, RMSA, Committee Reports, etc.

Time to undo the RTE bias against private non-minority institutions

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Article 21A and Right to educations Act

Mains level : Paper 2- Time to remove the exemption granted to minority institutions from RTE

The article highlights the issues with the exemption of aided and non-aided minority institutions from the Right to Education Act.

Is RTE enforceable against individuals?

  • Most fundamental rights are enforceable against the state, not against private individuals.
  • Certain rights, however, are horizontally enforceable too, that is, they can be enforced against individuals.
  • The Right to Free and Compulsory Education Act or RTE falls in the latter category.
  • The right to education was initially mentioned in Article 45 as a part of the Directive Principles.

Evolution of Article 21A

  • The Supreme Court in 1992 held in Mohini Jain v. State of Karnataka that the right to education was a part of the right to life recognised in Article 21.
  • The next year, the court in Unnikrishnan JP v. State of Andhra Pradesh held that the state was duty-bound to provide education to children up to the age of 14 within its economic capacity.
  • The court also acknowledged that private educational institutions, including minority institutions, would have to play a role alongside government schools.
  • The right to education was finally given the status of a fundamental right by the 86th constitutional amendment in the year 2002 by the addition of Article 21A in the Constitution.
  • The Supreme Court held in P. A. Inamdar case that there shall be no reservation in private institutions and that minority and non-minority institutions would not be treated differently.

Impact of 93rd amendment

  • In 2005, the Constitution was amended by the 93rd amendment to include Clause(5) to Article 15 which dealt with the fundamental right against discrimination.
  • The clause permitted the state to provide for advancement of “backward” classes by ensuring their admission in institutions, including private institutions.
  • The clause, however, excluded both aided and unaided minority educational institutions thus overruling the Supreme Court’s judgment in P.A. Inamdar case.

Discrimination in RTE

  • When the RTE Act was subsequently enacted in 2009, it did not directly discriminate between students studying in minority and non-minority institutions.
  • Subsequently, the provision of 25 per cent reservation in private institutions was however challenged in Society for Unaided Private Schools of Rajasthan v. Union of India where the court upheld the validity of the legislation exempting only unaided minority schools from its purview.
  • In response to the judgment, the RTE Act was amended in 2012 to mention that its provisions were subject to Articles 29 and 30 which protect the administrative rights of minority educational institutions.
  • So, the onus on private unaided schools was much higher than that on government schools, while even aided minority schools were exempt.
  • But the constitutional provision enabling the RTE Act, that is, Article 21, does not make any discrimination between minority and non-minority institutions.

Issues

  • The above provisions of RTE made it violative of Article 14 and also economically unviable for many private schools.
  •  Not only has RTE unreasonably differentiated between minority and non-minority schools without any explicable basis, there is also no rational nexus between the object of universal education sought to be achieved by this act and the step of excluding minority schools from its purview.
  • Given the doctrine of harmonious construction of fundamental rights, it is unclear why the court granted complete immunity to minority institutions when several provisions of RTE would not interfere with their administrative rights.
  • RTE has provisions such as prevention of physical/mental cruelty towards students as well as quality checks on pedagogical and teacher standards which children studying in minority institutions should not be deprived of and to that extent be discriminated against.

Way forward

  • The Kerala High Court held in Sobha George v. State of Kerala that Section 16 of RTE, which forbids non-promotion till the completion of elementary education, will be applicable to minority schools as well. 
  • The bench said that the courts must examine whether provisions such as Section 16 of RTE are statutory rights or fundamental rights expressed in a statutory form.
  • If the latter, then the Pramati case judgement will not be fully available to minority institutions.
  • The Supreme Court should take inspiration from the prudent decision delivered by the Kerala High Court and overrule its own judgment delivered in the Pramati Educational Society.

Consider the question “What are the issues with the exemption of aided and non-aided minority institution from the RTE Act.”

Conclusion

RTE as legislation may be well-intentioned, but the time has come to relook at the discriminatory nature of RTE against private non-minority institutions, and to that extent, undo the damage done by 93rd Amendment and the subsequent SC judgments.