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Foreign Policy Watch: India-SAARC Nations

Preparing for SAARC 2.0op-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Revival of SAARC is the need of the hour amid corona crisis.


Context

A tweet by Prime Minister Narendra Modi resulted in the first-ever virtual summit of SAARC leaders on March 15. What has happened to this innovative exercise in health diplomacy since then?

The follow-up after the video-conference of SAARC members

  • Considering that SAARC has been dormant for several years due to regional tensions, it is worth stressing that the fight against COVID-19 has been taken up in right earnest through a series of tangible measures.
  • First, all the eight member-states were represented at the video conference — all at the level of head of state or government, except Pakistan.
  • The Secretary-General of SAARC participated. They readily agreed to work together to contain the virus and shared their experiences and perspectives.
  • SecondIndia’s proposal to launch a COVID-19 Emergency Fund was given positive reception.
  • Within days, all the countries, except Pakistan, contributed to it voluntarily, bringing the total contributions to $18.8 million. Although it is a modest amount, the spirit of readily expressed solidarity behind it matters.
  • Third, the fund has already been operationalised. It is controlled neither by India nor by the Secretariat.
  • It is learnt that each contributing member-state is responsible for approval and disbursement of funds in response to requests received from others.
  • Fourth, in the domain of implementation, India is in the lead, with its initial contribution of $10 million.
  • It has received requests for medical equipment, medicines and other supplies from Bhutan, Nepal, Afghanistan, Maldives, Bangladesh and Sri Lanka.
  • Many requests have already been accepted and action has been taken, whereas others are under implementation.
  • Fifth, a follow-up video-conference of senior health officials was arranged on March 26.
  • The agenda included issues ranging from specific protocols dealing with the screening at entry points and contact tracing to online training capsules for emergency response teams.
  • Technical cooperation: Steps are now underway to nurture technical cooperation through a shared electronic platform as also to arrange an exchange of all useful information among health professionals through more informal means.

Is the fund sufficient to deal with the grave threat?

  • So far, South Asia has not exactly borne the brunt of the pandemic.
  • Of the total confirmed cases in the world that stood at 12,89,380 on April 6 (according to the Johns Hopkins Coronavirus Resources Center), SAARC countries reported only 8,292 cases, representing 0.64%.
  • Reasons of lower spread not known: Whether the low share is due to limited testing, a peculiarity of the strain of the virus, people’s unique immunity, South Asia’s climate, decisive measures by governments, or just good fortune is difficult to say.
  • But it is evident that India’s imaginative diplomacy has leveraged the crisis to create a new mechanism for workable cooperation.
  • It will become stronger if the crisis deepens and if member-states see advantages in working together. Seven of the eight members already do.

Is it the sign of revival of SAARC?

  • To conclude that SAARC is now returning to an active phase on a broad front may, however, be
  • In the backdrop of political capital invested by New Delhi in strengthening BIMSTEC and the urgings it received recently from Nepal and Sri Lanka to resuscitate SAARC, India’s foreign minister said that India had no preference for a specific platform.
  • But India was fully committed to the cause of regional cooperation and connectivity.
  • The challenge facing the region is how to relate to a country which claims to favour regional cooperation, while working against it.
  • Clearly, India has little difficulty in cooperating with like-minded neighbours, as it showed by forging unity in the war against COVID-19.
  • This is diplomatic resilience and leadership at its best.

Conclusion

Given the grave threat posed by the pandemic and other benefits that the multilateral platforms such as SAARC offers Both New Delhi and its friendly neighbours need to start preparing themselves for SAARC 2.0.

WTO and India

Between nationalism and globalismop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Is the globalisation past its peak? what will be the impact of corona crisis on the globalisation?


Context

Although all world leaders have acknowledged the global imperative in dealing with the virus, they have put the nation first without much consideration to the collective action.

The middle path between extreme globalisation and hyper-nationalism

  • ‘Nation first’ approach: Although all world leaders have acknowledged the global imperative in dealing with the virus, they have put the nation first. Are all nations now for themselves? Not so fast.
  • Sovereignty is certainly back. Solidarity is under stress, but not dead. The drift is towards a middle path between extreme globalism and hyper-nationalism.
  • The last few decades have seen the growing awareness of “global problems” like climate change and the need for “global solutions”.
  • Lack of collective action: The corona pandemic certainly adds to that consciousness. But as in the case of climate change, collective action is not easy to come by.

Closing of the borders and the idea of a “borderless world”

  • One of the first steps most governments took during the current crisis was to shut down their borders.
  • The idea of a “borderless world” had gained much acceptance in recent years but is now under serious questioning.
  • For example, how the US, Canada and Europe are outbidding each other in buying medical material from China.
  • They are ready to pay a hefty premium if Chinese suppliers break from an earlier commitment.
  • Nations banning medicines: Meanwhile, many nations, including India, have banned the export of much-needed medicines and equipment to combat the virus.
  • Washington, which initially criticised other countries for limiting exports of essential drugs, has had no option but to go down that path as the toll from coronavirus rose rapidly.
  • Donald Trump is angry with 3M, one of the leading American producers of masks, for exporting to other nations at a time of huge domestic shortfall.
  • The US ban on exports of medical supplies came just days after the G-20 affirmed that its member states “will work to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders”.

Globalisation and related ideas under stress

  • A testing time for two ideas: The problem is not that governments are being hypocritical. They are simply trapped in a crisis that is testing two important assumptions that guided the world in the last three decades.
  • One is that globalisation, with its long and transborder supply chains, generates prosperity through economic efficiency.
  • The second was that economic globalisation based on the dispersal of production will serve the interests of all nations.

Opposition to globalisation in the West

  • The new objections to economic globalisation are not coming from the traditional champions of sovereignty in the East and the South, but the West.
  • It was North America and Europe that had preached the virtues of unhindered economic
  • They also championed the idea of globalism that will transcend national sovereignty in terms of both institutions and values.
  • New converts to nationalism and sovereignty began to appear in the West well before corona crisis.
  • Brexit to take control own borders: Britain walked out of the European Union claiming the need to “take back control” of its borders.
  • Storming the White House against all predictions in 2016, Trump has sought to push Washington away from the trinity of America’s post-war political commitments-to open borders, free trade, and multilateralism.
  • Globalisation and corona crisis: For Trump and his team, the corona crisis is confirmation of the dangers of excessive globalisation.
  • This argument is finding some resonance in Europe.
  • Addressing workers at a factory that makes masks in France, President Emmanuel Macron echoed the same feelings.

Arguments against globalisation

  • An argument against efficiency: The efficiency argument of the globalists has been countered in the West by many who say societies are not merely economic units; they are also political and social communities.
  • The disadvantage to working people: While expansive globalisation has helped generate super-profits for the capital, it has put the working people at an increasing disadvantage.
  • Uneven distribution of benefits: The uneven distribution of the benefits from the dispersal of production and free movement of labour has undermined political support for economic globalisation in the West.
  • Role of China: Reinforcing this downward trend is the belief that China is misusing global economic interdependence for unilateral political advantage.
  • There were indeed strategic consequences to China’s emergence as the world’s factory.
  • After all, China is not a passive territory; it is an ancient civilisation with ambitions of its own.

Future of globalisation and the role of China

  • The peak of expansive globalisation is over: While economic interdependence among nations can’t be eliminated, we might be past the peak of expansive globalisation and hyper-connectivity.
  • Many countries are likely to move to the diversification of external production, short supply chains and stockpiles of essential materials to limit vulnerability during times of crises.
  • China-West relations may change: The palpable anger against China in the US and beyond, for keeping the world in the dark about the spread of the coronavirus, has been magnified by Beijing’s “mask diplomacy” and political triumphalism after it got in control of the situation in Wuhan.
  • This anger is bound to translate into long-term changes in the relations between China and the West and some rearrangement of multilateral mechanisms.

Conclusion

Out of this restructuring new international coalitions are likely to emerge. Even as world leaders put their own respective nations first, they will also explore new forms of solidarity. Like the instinct for self-preservation, solidarity too is part of human nature.

Hunger and Nutrition Issues – GHI, GNI, etc.

Let no one go hungryop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2-How steps government must take to ensure that the stranded labour are not left without food.


Context

The impact of the lockdown, effected from midnight of March 24, has been particularly severe on migrant workers. The state must utilise FCI stock for those who have ration cards and those who don’t.

India’s labour force and impact of lockdown on it

  • Nearly one-fifth of India’s labour force consists of internal migrants.
  • As per the 2011 census, a quarter of the urban population consists of migrants.
  • These tend to be predominantly male, from the less developed northern states, in the lower-income strata, and dependent on daily wages or precarious livelihoods.
  • The impact of the lockdown has been particularly severe on migrant workers.
  • Uncertainty and reverse migration: Due to uncertainty over the duration of the lockdown, and about their own livelihoods and food security, the lockdown has led to massive reverse migration from cities back to villages.
  • Further, due to the absence of train and bus services, many of these workers took to simply walking back.
  • The ground reality of inadequate preparation or insufficient provision means that neither their anxiety nor plight is assuaged.
  • Migrant workers tend to depend on public eating places or community arrangements for food.
  • Under a lockdown, there is simply no choice for them, except to depend on the government’s efforts or charitable organisations.

Utilising the grain stocks with the FCI

  • The government has a large stock of wheat and rice procured over the last three years.
  • Stock in excess of buffer norm: The buffer norm for April 1 is 21.4 million tonnes, against which the country had about 7 million tonnes on March 1: This comprises 27.5 million tonnes of wheat and 50.2 million tonnes of rice.
  • In most districts of India, the Food Corporation of India and state agencies have a storage capacity of more than the three months requirement of the public distribution system.
  • The warehouses are spread across all the districts in every state.
  • The government has already announced that an additional quantity of five kg of foodgrains will be provided, free of cost, to all ration card holders for the next three months.
  • Most of the unorganised labour and families migrating back from their place of work will probably have their ration cards in the villages itself.
  • So, it should not be much of a problem for them to find food during the period of lockdown.

What should the state do to feed those who do not have ration cards

  • For those who do not have ration cards in the villages, it is the right time to use this extra stock of foodgrains.
  • Using school and Anganwadi infrastructure: In villages, primary schools have facilities for cooking mid-day meals for children. Some Anganwadi also have this facility. This infrastructure can be used to provide cooked meals to those who do not have ration cards in the villages.
  • The government can easily offer to meet their requirement of wheat and rice over the next three weeks and panchayats can be asked to meet a part of the expenditure required to purchase vegetables, spices and cooking oil.
  • The village panchayats which take up such a feeding programme must be provided Rs 20 per person per day from State Disaster Relief Fund for the expenditure on vegetables, cooking oil, spices, which are not covered by the PDS.
  • In some villages, the local community may also be willing to help the panchayats to feed such people.
  • Efforts must also be made by the panchayats to raise donations in kind from the local community for rabi pulses like chana (chickpea), masoor (lentil), matar (field pea) which are available in plenty in pulse-growing states.

How to feed those who are stuck in the cities

  • A number of labourers and self-employed: In urban areas, as per the Periodic Labour Force Survey, there were about 6 crore casual labourers and four crore self-employed persons in 2017-18.
  • Even after the reverse migration to villages, there would still be millions of them who are stuck in cities at their place of work.
  • These are people who do not have any savings or source of income which can sustain them during the period of the lockdown. These people living in slums, in the poorer areas of cities, are in need of urgent assistance for food, at least for the next three weeks.
  • The most distressed at present are those stuck in the cities, or who have been walking hundreds of kilometres to reach their homes in small towns and villages.
  • Allocating funds form relief funds: The district collectors should be allocated funds from the State Disaster Relief Fund to provide them with food and open all community buildings en route for them.
  • Engaging various players: The states must engage NGOs, factories and charities including religious organisations to raise funds for meeting the expenditure on milk, eggs, cooking oil and vegetables, and even soaps and sanitisers.
  • More than 67,000 NGOs are registered with the Niti Aayog on their NGO Darpan platform — which was created to bring about a greater partnership between the government and the voluntary sector and to foster transparency, efficiency and accountability.
  • This is the time to use such a platform.
  • The Centre can easily provide free rice and wheat to the NGOs from its stock and the NGOs can provide cooked meals in urban areas for the next three weeks.
  • For one crore individuals, for three weeks, the government needs to provide just about 75,000 tonnes of rice. Since the milling of wheat would be difficult due to the closure of flour mills, only rice can be provided at this stage.

Conclusion

The rabi harvest is expected to be a bumper one. The utilisation of the FCI stock — for not only the ration card holders but also the non-ration cardholders, and for providing food to the poor stuck in urban areas — is the most appropriate use of the foodgrain stock with the government. This is urgent and must be done.

Oil and Gas Sector – HELP, Open Acreage Policy, etc.

Oil in a post-Covid worldop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Oil war in international oil market and implications for India.


Context

In the post-COVID world, India will, once again, confront the challenge of oil and gas supply security. We should, therefore, ask: What will be the landscape of the petroleum sector, post-COVID? And what should India do now to prepare for an uncertain and contingent energy future?

Oil war and the death knell of OPEC

  • The concept of MAD (Mutually Assured Destruction) deterred the nuclear powers during the Cold War. It has had no such effect on the oil powers.
  • Implications of the decision of Saudi Arabia and Russia: At a time when the virus had pushed the global economy into recession, Russia and Saudi Arabia took a set of decisions last month that knocked the economic props from under the oil market.
  • What were the reasons behind the decisions: The Saudis decided to flood the market to hold onto market share and the Russians accepted the consequent decline in prices to push the US shale industry to the wall.
  • Future of OPEC: Both may achieve their objectives but they have sounded the death knell of OPEC and possibly that of the oil industry as well.

Two reasons for the decline in the oil prices

  • Today, the price of oil, at just above $30/bbl , is at its lowest in a decade, and volatile downwards. The average price in 2019 was $64/bbl.
  • The reason is two-fold.
  • One, the Saudis have ramped up production from 9.8mbd (before the March meeting) to in excess of 12 mbd today.
  • Two, there has been an unprecedented COVID-induced crash in demand. This is because of the lockdown of the two main drivers of oil consumption — transportation and industry.
  • It is estimated that oil consumption in the current quarter will fall by approximately 25 mbd.
  • This is almost as much as OPEC’s production.
  • The Saudis and Russia may still come to an understanding that rallies the price.
  • There will be three major implications for the oil-producing countries.

1. Budgetary crisis

  • Every major oil-exporting country will face a budgetary crisis.
  • Qatar has the most robust balance sheet of all OPEC members. But it still needs an oil price of around $40/bbl to balance its books.
  • Algeria has the weakest. It needs an excess of $100/bbl.
  • Saudi Arabia is at the Algerian end of the spectrum requiring a price of around $80/bbl.
  • Abundant foreign reserves: This does not mean these countries are about to go financially belly up. Most of them, the Gulf producers, in particular, have abundant sovereign reserves.
  • But what it does mean is they will be hard-pressed to sustain their social and economic commitments.
  • They will have to cut back on subsidies, raise taxes and the citizens will be required to tighten their belts.
  • What India should do? India should build into its oil supply plans with the likelihood of civil strife in these countries.

2. Reconfiguration of the oil industry will take place

  • Already, at current prices, a large number of companies are finding it difficult to cover their cash costs and have been forced to cut production and shutter operations.
  • At even lower prices, they will become bankrupt.
  • Whatever the final outcome, one fact is clear. Those that survive the carnage will have substantially slimmed balance sheets and reduced valuations.
  • Exxon’s market capitalisation has, for instance, halved over the past month.
  • Implication for India: Against this backdrop, we should drop the expectation of international interest in BPCL. Or for that matter ME investment into India.
  • Ratnagiri refinery: The $40-billion Ratnagiri refinery project by Saudi Aramco and UAE will certainly not see the light of day.
  • We should also expect a drop in the intensity of domestic exploration.

3. Behavioural changes and uncertainties

  • The world, post-COVID will be different from the world pre-COVID. Behaviours will shift and these will deepen uncertainties.
  • “Social distancing” may change the dynamics of “shared mobility”.
  • Teleporting may reduce business travel.
  • Heightened awareness of the porosity of national boundaries may accelerate the push towards decarbonisation? These uncertainties will push the petroleum market deeper into no man’s land.

Way forward for India

  • Whatever be the shape of the post- COVID international petroleum market, India will be dependent on it to secure its domestic energy requirement. The question should, therefore, be asked. What should the decision-makers do today to respond to such a contingent and uncertain future?
  • 1. Increase the strategic reserves: It should fill the oil caverns with strategic reserves. Prices may fall further but rather than bottom fish, it should leverage the availability of capacity to secure discounted supplies.
  • The world has run out of storage capacity and producers may pay premium dollar to find space for their unsold cargoes.
  • 2. Reduce the dependency and risk: India should increase its imports of gas (LNG ) from Australia, Africa and the US.
  • This will reduce the political risks of dependency on oil supplies from the Middle East.
  • Gas is also now economically competitive. The landed price of LNG is low enough to kick-start some of the stranded gas-based power plants.
  • 3. Increase operational efficiency of oil companies: It should unthread the “patchwork quilt of authority” exercised by bureaucrats, regulators and politicians, which today stifles management and operational efficiency of the petroleum companies.
  • 4. Integrated energy policy: India should create an institutional basis for an integrated energy policy. If there is one message we must internalise from COVID, it is the importance of collaboration and coordination.
Innovations in Biotechnology and Medical Sciences

Man versus microbeop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Techniques used for detecting virus: RT-PCR, CRISPR and serological tests.

Mains level : Paper 3- Various techniques used in tests used to detect Covid-19 and their advantages.


Context

The present COVID-19 outbreak has brought to light the old struggle between humans and viruses.

The constant struggle between humans and viruses

  • Hijacking the cell machinery of the host: Microbes, particularly viruses, have only one goal — to find a suitable host and multiply. Viruses, however, do not multiply by themselves. They need the cell machinery of the host for replication.
  • Around two-thirds of all infections in humans are caused by viruses.
  • The current COVID-19 outbreak caused by a coronavirus, SARS-CoV2, has brought this struggle to light once again.
  • Coronavirus has the upper hand now: The virus seems highly successful because it spreads rapidly from human to human and has a lower rate of mortality.
  • Humans have faced new viruses at regular intervals. These include the Ebola, Zika, HIV, the Flu virus H1N1, the Middle East Respiratory Syndrome (MERS), and Severe Acute Respiratory Syndrome (SARS)the latter two are from the coronavirus family.
  • Animal to humans: These viruses have all appeared in the last few decades, having jumped from their animal reservoirs to humans.
  • Many of these viruses have a much higher mortality rate than the SARS-CoV2 that caused COVID-19.
  • Victory would be at huge costs: Like before, humans will come out of the present crisis as winners but that will happen at a huge cost, in every sense of the word.
  • The loss would include untimely loss of human lives, economic losses and a general loss of confidence in the human ability to deal with a tiny unknown enemy.

Steps involved in dealing with the virus

  • It involves dealing with any new viral outbreak is to be able to accurately test, detect and track the spread of the virus, and isolate the infected persons to stop further spread.
  • Knowing the genetic makeup of virus matters: In order to implement the first step, it is important to obtain information on the genetic makeup of the virus, which forms the basis of developing highly specific diagnostic tests.
  • Three types of tests are being used which have different advantages associated with them and are based on different technologies. These are described below-

1. What is the RT-PCR technique?

  • Currently, the most reliable and widely-used test is based on a technique called RT-PCR (Reverse Transcription Time Polymerase Chain Reaction).
  • This test aims to detect the viral RNA, the genetic material of SARS-CoV2.
  • The testing begins with the careful collection of swabs taken from the nose or the back of the throat of the patient and extraction of the viral RNA.
  • However, this extracted viral RNA from the swab is too tiny an amount for direct detection.
  • Amplification: The RT-PCR, through many different reactions that include the conversion of viral RNA to DNA — its amplification and detection — makes it possible to confirm the presence or absence of the virus.
  • The testing kits contain all chemicals and materials required for carrying out the RT-PCR based tests, which are performed by government-approved laboratories such as India’s National Institute of Virology.
  • However, many more testing centres, including those run by private players, have now been allowed to carry out the tests in many countries to bridge the huge demand and supply gap.
  • Why testing matters? It is now clear that countries which were able to scale up the testing of the virus in patients at an early stage were able to control the spread of the disease far better than those which did not.
  • Only viable control measure: Given that there is no cure or vaccine for the control of COVID-19, testing of infected patients much more quickly and tracking their contacts to isolate them till they clear off the virus is currently the only viable control measure.

2. How CRISPR is proving helpful in scaling up the testing?

  • There is good news of a relatively new but powerful technology called CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats).
  • CRISPR is highly specific in directly detecting viral RNA and confirming the presence or absence of the virus.
  • Interestingly, viruses also attack bacteria and the discovery of CRISPR itself was based on understanding how bacteria cut off the viruses.
  • What are the advantages of CRISPR-based test? The CRISPR-based test is quick and circumvents the need for both expert handling as well as PCR machines and can be done at multiple locations in about half an hour.
  • It can also fend off delays and other logistic problems in collection and transportation of test samples.
  • These tests are being validated and readied for approval.
  • Two companies, separately founded by the two scientists who discovered the CRISPR technique, have also announced that they are ready with their CRISPR-based test for validation and approval.
  • Test in 10 minutes: They have claimed that these tests can be performed within 10 minutes and can be conducted by using a paper strip format.
  • Test in 5 minutes: Another company, Abbott Laboratories, has recently announced the approval of their portable test for coronavirus, which the company claims can provide the results in five minutes.
  • Such a point of care test will not only greatly enhance the speed of large-scale testing but will also relieve the tremendous pressure faced by frontline healthcare providers.

3. Serological tests to detect the realistic information on the spread of the virus

  • Why we need serological tests? The above described RT-PCR and the newly developed CRISPR based tests are needed for scaling up the testing.
  • But many individuals infected with the virus do not show symptoms of the disease and recover completely.
  • How to test these cases to gather realistic information on the spread of the virus?
  • Such information will be necessary for designing future control strategies.
  • How serological tests work? This is done with serological tests, which are carried out in blood samples collected from a large population and are based on the detection of antibodies that are produced in response to the viral infection.
  • Advantage of the serological tests: These tests are relatively easier to develop and use, less expensive, and also do not need much sophisticated infrastructure or highly trained manpower.
  • Serological tests for COVID-19 have already been developed by many groups and are already in use.
  • India also plans to carry out serological tests to examine the actual spread of the disease in different parts of the country.

Conclusion

Lockdowns are essential to control the disease but long-term strategies to deal with the disease would be based on the knowledge of its actual spread. The newly-developed point of care tests should be successfully able to bridge the existing gap in the testing of the virus. This will also assist in gearing up facilities to treat the severely sick as well as relieve and protect frontline health providers. Meanwhile, hopefully, efficient drugs therapies and efficacious vaccines against COVID-19 will also be discovered soon.

Government Budgets

States at centreop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Mains level : Paper 3- Financial stress on the states and what centre should do to address the problem.


Context

Concerned over the impact on their revenues, several state governments planned cuts in salaries of government employees.

State finances showing the signs of stress

  • The fiscal crisis stemming from the disruption in economic activity due to the coronavirus is now beginning to show.
  • Concerned over the impact on their revenues, several state governments planned cuts in salaries of government employees.
  • The stress to state finances stems from multiple sources.
  • First, as economic growth falters, their own income streams, for instance, revenues from petroleum products, real estate transactions, will slow down further, as will GST collections, and the amount collected through the compensation cess will not be enough to meet budgeted expectations.
  • Second, as the Centre’s own revenues also slow down, transfers to states will take a hit. It is quite likely that tax devolution to states, which has been budgeted at Rs 7.8 lakh crore in 2020-21, will not materialise.
  • Collectively, state expenditure far outstrips that by the Centre, with revenues falling short, any cutbacks in their spending, at a time when there is a need for a bold fiscal expansion, will further aggravate the economic stress.
  • Need assurance of adequate resource: Thus, states, which are at the frontline of fighting the public health crisis, need to be assured of adequate resources.

Increase in the WMA limit will not address the issue

  • Limit increased by 30%: The Reserve Bank of India decided to increase the ways and means advances (WMA) limit by 30 per cent for state governments.
  • What is WMA? The WMA is a temporary liquidity arrangement with the RBI which helps governments tide over their short-term liquidity woes.
  • A short term measure: While states have been averse to opting for this facility in the past, and the new WMA limits may need to be revised further if the mismatch rises, this is a short-term measure, and does not address the underlying issue of significant revenue slippages.
  • Contradictory impulse: Under the existing fiscal deficit constraint, the collapse in revenues will force states to cut back on spending, imparting a contractionary impulse to the economy.

Way forward

  • The Centre must take several steps to ensure an adequate flow of resources to states.
  • First, it must immediately clear all its pending dues to state governments.
  • Second, while it is cheaper for the Centre to borrow and transfer to states, even though the spreads between state and central government bonds have now widened, making state borrowing more costly, states must be allowed to borrow more.
  • Third, as some state chief ministers have suggested, the fiscal deficit limits imposed on states must be relaxed.
Important Judgements In News

The SC order on migrants labours raises several issuesop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Mains level : Paper 2- The SC order on migrant labour rises several questions dealing with the fundamental rights.


Context

On March 31, the Supreme Court of India (SC), entertaining a writ petition under Article 32, passed an order which raises more questions than it seeks to answer.

What were the issues involved in the writ petition?

  • The writ petition was purportedly filed in the public interest, “for redressal of grievances of migrant workers in different parts of the country”.
  • Directions which are in favour of the Union government: The Court has proceeded to issue several directions which are clearly in favour of the respondent, the Union of India.
  • The following three directions were uncalled for:

What were the directions issued by the Supreme Court?

  • One, that under section 54 of the Disaster Management Act, 2005, persons can be punished with imprisonment, which may extend to one year, or with a fine for making or circulating a false alarm or warning.
  • Disobedience of the order including an advisory by a public servant would result in punishment under section 188 of the IPC.
  • Two, all concerned, that is the state government, public authorities and citizens will faithfully comply with directives, advisory and orders issued by the Union of India in letter and spirit in the interest of public safety.
  • Three, the media should only refer to and publish the official version of the Government of India, publishing a daily bulletin.
  • The SC observations about migrant labourers: After giving substantial reliefs to the Union of India, the SC proceeded to make mere observations about migrant labourers by directing that they should be dealt with “in a humane manner”.
  • And that “trained counsellors, community leaders and volunteers must be engaged along with the police to supervise the welfare activities of migrants”.
  • The SC has virtually absolved the government for its handling of the situation.

What was the basis for issuing orders and issues with it

  • The basis of the directions is a statement made by the Solicitor General of India and some status reports to the effect that “the exodus of migrant labourers was triggered due to panic created by some fake/misleading news and social media”.
  • What is an issue with basis? The SC has proceeded on assumptions and surmises which were untested and unchallenged.
  • What the court should have done? In a matter of such seriousness, the least it should have done was to have appointed an amicus curiae (a friend of the court) to assist it rather than simply accept the self-serving status reports and statements made before it.
  • The Court overlooked the fact that in India, hundreds of millions of people work during the day and are paid at the end of the day and then go and buy their foodstuffs.
  • They have no savings, nor do they have foodgrains stored.
  • It is surprising that the Court, the custodian of fundamental rights, should be oblivious to this reality.

Issue of press freedom

  • Citizens have the right to freedom of speech and expression. Press freedom is a part of this. Citizens have the right to receive information as well.
  • Article 13 (2) of the Constitution says that the state cannot make any law which takes away or abridges the fundamental rights.
  • If Parliament cannot do so, the Supreme Courtthe upholder of the constitutional rights — surely cannot do so.
  • The SC has itself held in M Nagraj (2006): “A right becomes a fundamental right because it has foundational value. The fundamental right is a limitation on the power of the State. A Constitution, and in particular that part of it which protects and which entrenches fundamental rights and freedoms to which all persons in the State are to be entitled, is to be given a generous and purposive construction.”
  • The SC should not have made all media subservient to the government by directing that the former “refer to and publish the official version about the developments”.
  • Such an order could be justified only during an emergency and that too by the executive, subject to challenge before the courts.

Conclusion

The SC has given a carte blanche to the authorities, and citizens appear to have no avenues of redress. Most of all, by condemning the media and social media, holding them responsible for fake news, the SC has done a great disservice to the institution which provides information to citizens and upholds democracy.

Issues related to Economic growth

Opportunity in the Covid-19 crisisop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FRBM Act.

Mains level : Paper 3- Opportunity to bring in reform that could benefit us in the medium term as well.


Context

Coronavirus pandemic offers a trigger to fundamentally strengthen the Indian economy, and protect the vulnerable. This requires cooperation between the Centre and states.

Opportunity to do things good for the medium term

  • Minimising the impact on the vulnerable: The current crisis is so terrible in its toll of life and livelihoods that the need of the hour must be minimising the health, humanitarian and economic costs, especially for the most vulnerable.
  • Rising expenditure may force hard choices: Rising public expenditures to help tens of millions of workers and their families alongside plummeting resources will inevitably force hard choices.
  • Appropriately, much of the policy discussion and the government’s first response have focussed on addressing the immediate imperatives.

This crisis is also an opportunity to do things that are not only good for now but for the medium term as well. Few are discussed below.

1. Revamp macro-fiscal framework

  • Massive fiscal expenditure may require: If the pandemic follows the exponential trajectory seen in other countries, the crisis is going to entail massive fiscal expenditures, perhaps up to 4-5 per cent of GDP, much more than what the government has announced.
  • Macro-fiscal targets have to be exceeded: Consequently, the basic macro-fiscal framework — for example, the Centre’s FRBM target of 3.5 per cent of GDP, and the revenue and deficit estimates for 2020-21 — has been fundamentally overtaken by events.
  • Allow states to exceed deficit targets: The Centre should immediately announce that even the states will be allowed to exceed their fiscal responsibility legislation targets because they will be in the front line of taking action against the pandemic.
  • Opportunity to review the FRBM: The crisis is an opportunity to revisit the entire framework.
  • The focus on unattainable targets, the fact that the FRBM has been honoured only in the breach, and the consequences in terms of loss in budgetary integrity and transparency need serious review, even overhaul.
  • Once the crisis ebbs, India might be looking at overall deficits well in excess of 10 per cent and debt levels much greater than those today. If the starting point is going to be so different, the old goals and targets won’t retain meaning.

2. Remake finance and adopt a data-driven lending model

  • Going into the crisis, India’s corporate and financial sector were under severe stress — the so-called Four Balance Sheet problem.
  • This crisis will, unfortunately, add consumers and small and medium enterprises to that This will be an extremely hard — but critical — problem to address.
  • A takeover of bad loans will be unavoidable: To allow banks to revert to normalcy, a largescale takeover of their bad loans will be unavoidable not least because the current bankruptcy process will be severely inadequate.
  • Opt for the tech. driven lending model: This crisis opens the door for the new lending model proposed by Nandan Nilekani i.e. technology-driven lending.
  • What is Technology-driven lending? It uses data rather than collateral, allowing the 10 million-odd businesses with deep digital footprints (for example, based on GST invoices), to get loans from the thriving ecosystem of new financial players.

3. Complete JAM

  • One of the major achievements of the government was to create the plumbing — Jan Dhan, Aadhaar, and Mobile (JAM)to augment weak state capacity.
  • How JAM is proving helpful in this crisis? The state could now make cash transfers swiftly, with reduced leakages, whether as income support, scholarships or pensions, and potentially eventually implementing a Universal Basic Income.
  • In the current crisis, it is proving to be an important part of the social safety net that is helping to cushion the most adversely affected groups.
  • JAM is not complete yet: But the JAM plumbing is still incomplete because there is a “last mile problem”.
  • Not all those with bank accounts can access money either because of difficult geography or because bank functionaries give incomplete or misleading information.
  • Opportunity to fix the shortcomings: This crisis is an opportunity not just to leverage JAM to enhance cash transfers, but to empower citizens. This will require the government to identify remaining weaknesses on a war footing and fix them.

4. Re-shape Indian agriculture

  • Need to create one market for agriculture: The need to preserve supply chains in agriculture in times of crisis reinforces the need to create one market for agriculture across India.
  • This requires eliminating legislation like the Essential Commodities Act and the panoply of resulting restrictions.
  • Phase-out subsidies and opt for DBT: Second, the crisis has shown the possibilities created by JAM and direct transfers.
  • Phasing out in cycles: Building on PM-Kisan and various state-level schemes, pernicious subsidies, especially for fertilisers and power, could be phased out over 5-6 crop cycles.
  • This could be done through small but frequent increases in fertiliser prices (the technique used to eliminate fuel subsidies).

5. Focus on Make in India

  • The critical source for almost all the essential Active Pharmaceutical Ingredients (API) used to manufacture drugs, the ability also to fight death, is largely made in China.
  • India was once a major producer of such APIs but lost ground to China.
  • Frame intelligent industrial policy: The crisis should be the opportunity to go on war footing to do intelligent industrial policy — incentives, regulatory help, trade policy — that would resurrect India’s manufacturing capability.
  • Previous Make in India attempts have shown lackadaisical results.
  • Focus on the pharmaceutical sector: The crisis creates the momentum to focus the effort on one sector, pharmaceuticals. As a result, the ability to save lives could be Made in India, again.

6. Establish migrants as full citizens

  • Need to change the place-based benefits to person-based benefits: The plight of migrant workers reinforces the need to move from immobile place-based benefits to mobile person-based benefits, which is possible as the JAM infrastructure is strengthened.
  • Portability of benefits: This will require portability of benefits, including access to the PDS, Ujjwala and Ayushman Bharat.
  • The crisis has highlighted the travails of migrant labour and their second-class status.
  • The large gap between the organised and unorganised sector worker: It reflects a broader chasm between the few securely employed in the organised sector and the vast majority subject to the vicissitudes of the unorganised sector.
  • Differences not just in the levels of income but in their volatility as well as differential access to social insurance (healthcare, pensions) distinguish these two classes.

7. Upgrade Health

  • Weakest state capacity in health and education: State capacity over 70 years in India has been weakest in the areas of education and health.
  • The COVID-19 pandemic must lead to a serious strengthening of the health infrastructure for dealing with pandemics.
  • Set up an apex institution on the lines of US’s CDC: To start with, India needs an apex institution like the US’ Centers for Disease Control with a network across all the states.
  • They should invest in disease surveillance systems, set up diagnostics labs, be able to gather real-time data and analyse them etc.
  • The Taiwan model, which has been so successful in this pandemic, could be studied.
  • More fundamentally, the crisis is a wake-up call to address India’s severe limitations in the provision of basic health.
  • Focus on basic public health: Creating tertiary health facilities must be subservient to strengthening basic public health and early childhood care.

8. Build a National Solidarity Fund

  • The severe downturn in economic activity ahead will savagely hit the informal poor.
  • How would the Solidarity fund be set up? The government should consider a Solidarity Fund with a one-time annual contribution coming from the wealthy and the employees in the organised sector.
  • Contribution to the fund: This contribution can take the form of taxes or elimination of middle-class subsidies identified in the Economic Survey of 2016.
  • The wealthy could contribute via a wealth tax with thresholds set by property values say above Rs 5 crore.
  • Salaried employees in the public and private sectors could contribute via a small, progressive tax on salaries and pensions.
  • Middle-class subsidies that could be eliminated include interest and tax deductions for small savers, favourable taxation of gold and other luxuries.
  • Wealth taxes and elimination of subsidies for the rich should, in any event, be part of the long-run reform agenda to reduce growing inequality.

Conclusion

These examples illustrate how the crisis can be converted to an opportunity to fundamentally strengthen the Indian economy, and protect the vulnerable. A common thread to many of these actions — indeed prerequisites for their success — is cooperation between the Centre and states. Central direction combined with flexibility and nimbleness in the states and local bodies is India’s way through the crisis and beyond.

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

Still no bullseye, in volume and valueop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- India's growing defence export.


Context

Based on the latest estimates released by the Stockholm International Peace Research Institute (SIPRI) in the period between 2009-13 and 2014-18, Indian defence imports fell even as exports increased.

What are the factors responsible for the shift?

  • Make in India initiative: The first is the ‘Make in India’ initiative, as part of which a number of components from Indian private and public sector enterprises have been prioritised by the government.
  • Delay by vendors in supplying equipment: The second set of factors is extraneous to India in the form of delays in supplying equipment by vendors and the outright cancellation of contracts by the Indian government or at least a diminution of existing contracts.

How ‘Make in India’ made the difference?

  • DPP’s measures to build India’s defence industry: Under the ‘Make in India’ initiative, the Defence Procurement Procedure (DPP) lays out the terms, regulations and requirements for defence acquisitions as well as the measures necessary for building India’s defence industry.
  • It created a new procurement category in the revised DPP of 2016 dubbed ‘Buy Indian Indigenously Designed, Developed and Manufactured’ (IDDM).
  • Earmarking projects for MSMEs: The ‘Make’ procedure has undergone simplification “earmarking projects not exceeding ten crores” that are government-funded and ₹3 crores for Micro, Small and Medium Enterprises (MSMEs) that are industry-funded.
  • Technology transfer to private companies: In addition, the government has also introduced provisions in the DPP that make private industry production agencies and partners for technology transfers.
  • The growing share of SMEs in the defence market: Small and Medium Enterprises (SMEs) until 2016 accounted for a 17.5% share of the Indian defence market.
  • According to the government of India data for the financial year 2018-19, the three armed services for their combined capital and revenue expenditures sourced 54% of their defence equipment from Indian industry.
  • Four companies among the top 100: Among arms producers, India has four companies among the top 100 biggest arms producers of the world.
  • It is estimated, according to SIPRI, their combined sales were $7.5 billion in 2017, representing a 6.1% jump from 2016.
  • All four of these companies are public sector enterprises and account for the bulk of the domestic armament demand.
  • The largest Indian arms producers are the Indian ordnance factories and the Hindustan Aeronautics Limited (HAL), which are placed 37th and 38th, respectively, followed by Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL).

Reasons for falling imports

  • Cancellation of contracts: Indian defence acquisitions have also fallen due to the cancellation of big-ticket items. For instance the India-Russia joint venture for the development of the advanced Su-57 stealth Fifth Generation Fighter Aircraft (FGFA).
  • India cancelled involvement in 2018 due to rising dissatisfaction in delays with the project as well as the absence of capabilities that would befit a fifth-generation fighter jet.
  • Reduction in order: In 2015, the Modi government also reduced the size of the original acquisition of 126 Rafale Medium Multi-Role Combat Aircraft (MMRCA) from Dassault to 36 aircraft, which is also responsible for significantly driving down the import bill.
  • Delay by suppliers: That apart, the delays in the supplies of T-90 battle tanks, and Su-30 combat aircraft from Russia and submarines from France, in 2009-13 and 2014-18, also depressed imports.
  • Industrial model at odds with the global trend: India’s defence model faces challenges despite the positive trends generated by ‘Make in India’.
  • SMEs still face stunted growth because India’s defence industrial model is at odds with global trends in that it tends to create disincentives for the private sector.
  • Governments, including the incumbent, have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite ‘Make in India’.
  • Undermining the private sector: This model is highly skewed, undermining the growth of private players and diminishes the strength of research and development.

The rise in Indian defence export

  • Considerable rise between 2012 and 2019: The period between 2012 and 2019 saw Indian defence exports experiencing a considerable jump sourced from Indian public and private sector enterprises.
  • In the last two fiscal years, 2017-18 and 2018-19, exports have witnessed a surge from ₹7,500 crore to ₹11,000 crores, representing a 40% increase in exports.
  • Measures introduced by the government: The sharpest rise in defence export products can be attributed to the measures introduced by the government which in 2014, delisted or removed several products that were restricted from exports.
  • It dispensed with the erstwhile No Objection Certificate (NOC) under the DPP restricting exports of aerospace products, several dual-use items and did away with two-thirds of all products under these heads.
  • According to the Ministry of Commerce and the Industry, Export-Import Data Bank export of defence items in the aerospace category has witnessed an increase in value.
  • Small naval crafts account for the bulk of India’s major defence exports. However, the export of ammunition and arms remain low.
  • As a percentage of total Indian trade, defence-related exports for the fiscal years 2017-18 and 2018-19 were 8 and 0.73%, respectively.

Conclusion

From a volume and value standpoint, Indian defence exports, while showing a promising upward trend, still remain uncompetitive globally. It is likely that Indian defence exports will take several years before they are considered attractive by external buyers. But green shoots are emerging in a sector that has long been devoid of any dynamism and Indian policymakers should make the most of the opportunities this represents.

Issues related to Economic growth

Pull out all the stopsop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : "Natural Disaster" clause in FRBM Act.

Mains level : Paper 3-What should be the policy response of the government to the damage inflicted by the Covid-19 on the economy.


Context

Though there is coherence in India’s response to the Covid-19, still there is more that needs to be done.

Sense of coherence in India’s response

  • Since last week, a sense of coherence is settling over India’s response to the COVID-19 outbreak.
  • The national lockdown, the incomes and credit support, and the three-month debt moratorium announced by the government and the RBI are the needed first steps to contain the outbreak on the one hand and lessen the economic impact on the other hand.

Uncertainty in two important factors

  • Several laundry lists of measures have already been proffered by many, however, these are not of much help.
  • Uncertainty: Given the extreme uncertainty clouding how long and intensely social distancing policies will need to be pursued, the attendant economic impact and, crucially, how quickly and strongly the recovery can take place.
  • 1. The answer to the first depends on how much the outbreak tests the capacity of the already-stretched public health system.
  • Extending the social distancing policy: If the lockdown does not slow the spread of the virus to a rate that the healthcare system can handle, then the social distancing policies, in some form or another, will need to be extended.
  • Destruction of demand: The longer such containment measures last, the larger will be the destruction to (of) demand and the bigger the collapse in output and incomes.
  • 2. Then, there is the question about the pace and strength of the recovery.
  • Much will depend on how much damage the eventual output loss inflicts on households’ and corporates’ balance sheets.
  • Lower consumption: For example, even if a worker starts earning once the lockdown is lifted if one has incurred large debts in the interim, one’s consumption demand will naturally be much lower than before the crisis.
  • The same holds for corporates, both big and small.
  • No help from global demand: What makes the situation worse is that there is not likely to be much help coming from global demand.
  • Growth estimates: It is now expected global growth would decline to 5 per cent (annualised) in 1H20 (first half 2020), considerably more than during the global financial crisis, and rebound only partially in 2H20, leaving global GDP 2.5 percentage points below its pre-crisis level at the end of this year.

How the uncertainty makes policy response calibration difficult?

  • Difficulty in assessing economic damage: Given these extreme uncertainties, it is very hard to assess the economic damage with any degree of conviction.
  • In fact, in last week’s policy review, the Monetary Policy Committee refrained from providing any projections for future growth and inflation, breaking from its normal practice.
  • So, if the outlook is so uncertain, how does one calibrate the policy response?
  • 1. Under-support the economy: One can easily under-support the economy, which could prolong the slowdown.
  • 2. Or over-support the economy, which could end up stoking inflation (as it did in 2010-13 when the massive monetary and fiscal easing during the global financial crisis was not withdrawn quickly) or creating asset price bubbles.

What is the way out in such a situation?

  • Don’t try to calibrate: The way out is not to even try calibrating policies under such extreme uncertainty but to let the size of the support be determined endogenously by the extent and nature of the economic damage.
  • Falling back of first principles: This requires falling back on first principles. We know that the economic damage could be very large.
  • Delay in recovery: We also know that if the damage to households’ and firms’ balance sheets is substantial, then the recovery could be delayed and weakened.
  • Give extensive income support: This calls for extensive income support through existing government Jan Dhan and Mudra accounts to households and SMEs, and temporary tax cuts or deferments to the larger corporates.
  • Tax cuts needed: It also needs substantial cuts in indirect taxes (GST) when social distancing is relaxed.

Problems with RBI measures

  • RBI providing support: The RBI has begun to provide support via its liquidity facility (TLTRO) and regulatory forbearance that allows banks to offer a debt moratorium to their customers for the next three months.
  • But both these measures work through banks.
  • The problem of bank turning risk-averse: Given that banks have turned substantially risk-averse because of the restructuring and bad debt problems of the last few years, the RBI likely needs to start providing liquidity directly to corporates, as recently announced by the US Fed.
  • At the same time, any debt moratorium will reduce profit and, in turn, capital, banks might be reluctant to extend it to all their customers.
  • Accommodate capital shortfall in the bank: Consequently, the RBI also needs to change regulations to accommodate possible shortfalls in bank capital because of the debt moratorium.

What should be the scope and size of the policy support?

  • Support should be based on the extent of the damage: The scope and size of such policy support need to be determined by the extent of the economic damage, and not by perceived limits about what India can afford or those imposed by existing institutional arrangements and practices.
  • It is quite possible that the size of the economic damage ends up requiring support that widens the fiscal deficit substantially.
  • India clearly does not have the fiscal space to provide any material economic support when measured against standard benchmarks of fiscal prudence.
  • Directly funding the budget deficit: The market is on edge, and fears of eventual large government borrowing has spiked long-term interest rates despite large cuts in short-term rates by the RBI, which are likely to delay and weaken the recovery.
  • Any large bond auction by the government, even if it is offset by the RBI through open market operations, is not likely to calm market nerves and bring down lending rates.
  • The government should invoke “natural disaster” clause: What is needed is for the government to invoke the “escape” or the “natural disaster” clause in the fiscal responsibility act (FRBM) that allows the RBI to directly fund the budget deficit without having to go through market auctions.

Conclusion

Such a proposal is likely to raise the hackles of any fiscal conservative and there is the natural question about how rating agencies might react. As long as the government credibly commits to reversing the action as soon as the crisis is over, rating agencies and fiscal conservatives alike will likely treat this kindly, as it is a response to a crisis caused not by poor economic policies, but by an act of nature.

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

The sudden return of quantity planning in the wake of covid-19op-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3-Applying ways suggested by Keynes in times pandemic. of war to deal with the covid-19


Context

We could take a leaf out of a booklet by Keynes in our effort to tackle some of the challenges posed by the covid-19 pandemic.

The Crisis-Keynesian Mode response mode to pandemic

  • What is the war economy? One of the defining features of a war economy is that economic thinking is focused on quantities rather than prices.
  • Much of the ongoing global response to the covid-19 pandemic is still in crisis-Keynesian mode.
  • What is a crisis-Keynesian response: The nation-state has become the income supporter, financier and consumer of last resort.
  • However, there are also clear signs of war economics as well.
  • Signs of war economics: The decision by US President Donald Trump to use America’s Defense Production Act to force General Motors to make ventilators is one resonant example.
  • Just consider some of the key questions that are being asked right now.
  • How many ventilators are available? Are there ample food stocks? Can more hospital beds be made available? How many masks be produced in the next few weeks? Can the production of testing kits be ramped up? It’s all about quantities, quantities, quantities.

Historical background and impact of a shift in economic strategies

  • Impact persists in subsequent decades: Such big shifts in economic strategies are usually not reversed overnight. Decisions taken in response to a particular emergency tend to remain with us in subsequent decades.
  • World War II example: What happened in India during World War II is instructive. Many of the controls that were introduced during that global conflagration formed the basis of the later interventionist state that sought to control who produces how much. Here are a few examples.

1. Quantitative import controls

  • One of the first moves by the colonial state was to impose quantitative import controls in May 1940.
  • There were two reasons why this was done—to conserve foreign exchange as well as ensure that shipping capacity was used to bring in only what was essential to the war economy.

2. Food rationing

  • Food rationing was also introduced during the war years.
  • Over 700 towns were covered by some rationing scheme or the other by the end of the War.
  • The government also brought in measures to buy surplus grain from farmers at administered prices.
  • Various forms of rent control were also instituted. Most of these controls continued after India gained independence.

3. Balance of payment crisis in 1957

  • India was hit by a balance of payments crisis in 1957.
  • The massive investment thrust in the Second Five Year Plan had severely strained the country’s foreign exchange reserves.
  • The Indian government, once again as a temporary measure, imposed stringent controls on imports.
  • Many of these were quantitative in nature. They survived well into the 1980s.
  • In fact, the entire trade policy approach since the 1957 crisis was to minimize imports in a bid to preserve foreign exchange.

Will the government opt for automatic monetisation of the deficit?

  • Money creation by the RBI to fund deficit: There is now a growing consensus that the Indian government will have to fund part of its growing fiscal burden through money creation by the Reserve Bank of India.
  • What about inflationary consequences? The inflationary consequences will be muted—for now—because the velocity of narrow money is most likely set to fall on account of weak demand conditions under a lockdown.
  • Precedence: The automatic monetization of Indian government deficits was part of the policy playbook after the 1950s till it was thankfully discontinued in 1997.
  • The main instrument for that was ad hoc treasury bills.
  • These were introduced in 1954 as a temporary measure to replenish the cash balances the government maintains with the central bank.
  • What was ad hoc treasury bills? Ad hoc treasury bills were not introduced through any formal law but as an arrangement between mid-level bureaucrats in New Delhi and Mumbai (i.e. RBI).
  • What began as a temporary measure to smoothen government cash holdings had become a near-permanent feature of Indian macroeconomic policy by the 1970s.

The uncertain future

  • Longer the war more profound will be the changes: The longer the global battle against the pandemic lasts, the more profound will be the changes across the economic landscape.
  • In an insightful article in Bloomberg, Andy Mukherjee uses the lessons of history to look into the uncertain future.
  • Among the possibilities he mentions are the contrasting ones of an economy run by robots and algorithms but with little labour, or an economy in which labour has clawed back the power it lost in the second age of globalization.

Managing the resources in the time of war

  • Managing the resources: In 1940, John Maynard Keynes wrote a little booklet How To Pay For The War, Keynes essentially argued that the main challenge was not how to finance the war effort, but how to manage real resources to produce the arms that the UK needed to defend herself.
  • Suppression of consumption: He then argued that war production would necessarily involve suppression of consumption, either through higher taxes or some scheme of deferment.

Conclusion

The war against the covid-19 pandemic is very different from the military war that Keynes was thinking about. Yet, his booklet offers useful lessons on how to think about some of our current challenges—and also about what we can expect once the situation returns to normal.

Communicable and Non-communicable diseases – HIV, Malaria, Cancer, Mental Health, etc.

A pandemic in an unequal Indiaop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- How lockdown affects the poor disproportionately and what the state must do mitigate the impact.


Context

The official strategies to deal with the virus place the responsibility on citizens, a majority without privilege, to fight the virus.

The poor disproportionately affected

  • If the COVID-19 pandemic lashes India with severity, it will not be just the middle class who will be affected.
  • India’s impoverished millions are likely to overwhelmingly bear the brunt of the suffering which will ensue.
  • Inequality and impact of a pandemic: The privileged Indian has been comfortable for too long with some of the most unconscionable inequalities in the planet.
  • But with the pandemic, each of these fractures can decimate the survival probabilities and fragile livelihoods of the poor.

Inadequate capacity of the health system  

  • Low investment in public health: India’s investments in public health are among the lowest in the world, and most cities lack any kind of public primary health services.
  • A Jan Swasthya Abhiyan estimate is that a district hospital serving a population of two million may have to serve 20,000 patients, but they are bereft of the beds, personnel and resources to do this. Few have a single ventilator.
  • The poor left with meagre services: India’s rich and middle-classes have opted out of public health completely, leaving the poor with unconscionably meagre services.
  • The irony is that a pandemic has been brought into India by people who can afford plane tickets, but while they will buy private health services, the virus will devastate the poor who they infect and who have little access to health care.

No planning and preparation by the state

  • Official strategies placing responsibility on citizens: Most of the official strategies place the responsibility on the citizen, rather than the state, to fight the pandemic.
  • No preparation by the states: The state did too little in the months it got before the pandemic reached India for expanding greatly its health infrastructure for testing and treatment.
  • This includes planning operations for food and work; security for the poor; for safe transportation of the poor to their homes; and for special protection for the aged, the disabled, children without care and the destitute.

What must be done?

  • 25 day’s minimum wage: For two months, every household in the informal economy, rural and urban, should be given the equivalent of 25 days’ minimum wages a month until the lockdown continues, and for two months beyond this.
  • Pensions must be doubled and home-delivered in cash.
  • There should be free water tankers supplying water in slum shanties throughout the working days.
  • Double the PDS entitlement: Governments must double PDS entitlements, which includes protein-rich pulses, and distribute these free at doorsteps.
  • Provide cooked and packed food: In addition, for homeless children and adults, and single migrants, it is urgent to supply cooked food to all who seek it, and to deliver packed food to the aged and the disabled in their homes using the services of community youth volunteers.
  • Ensure prisons are safe: To ensure jails are safer, all prison undertrial prisoners, except those charged with the gravest crimes, should be released.
  • Likewise, all those convicted for petty crimes. All residents of beggars’ homes, women’s rescue centres and detention centres should be freed forthwith.

Way forward

  • Commit 3% of GDP on health: India must immediately commit 3% of its GDP for public spending on health services, with the focus on free and universal primary and secondary health care.
  • Nationalise private healthcare: Since the need is immediate, authorities should follow the example of Spain and New Zealand and nationalise private health care.
  • An ordinance should be passed immediately that no patient should be turned away or charged in any private hospital for diagnosis or treatment of symptoms which could be of COVID-19.

Conclusion

While one part of the population enjoys work and nutritional security, health insurance and housing of globally acceptable standards, others survive at the edge of unprotected and uncertain work, abysmal housing without clean water and sanitation, and no assured public health care. Can we resolve to correct this in post-COVID India? Can we at least now make the country more kind, just and equal?

Foreign Policy Watch: India-China

The art of China’s legalpoliticop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : IHR- International Health Regulations.

Mains level : Paper 2- India needs to make international law a keystone of its diplomacy.


Context

A resolution has been moved in the US Senate calling on the international community to inquire into the origins of the virus in China’s Wuhan province. Delhi could learn a trick or two from Beijing on how to make international law the keystone of India’s diplomacy, especially in the multilateral domain.

Fixing responsibility for the outbreak on China

  • Compensation demand: Lawyers and activists have begun to sue China in US courts demanding compensation. Politicians are not far behind.
  • The U.S. Senate resolution: A resolution has been moved in the US Senate calling on the international community to inquire into the origins of the virus in China’s Wuhan province, quantify the damage inflicted on the rest of the world, and design a mechanism of reparations from Beijing.
  • Basis of the demand for compensation: The case for China’s culpability is based on the principles of state responsibility and Beijing’s alleged failure to respect the obligation, under the 2005 International Health Regulations (IHR), to notify the world on the outbreak of the epidemic.
  • Is the basis valid? Many international jurists dismiss these claims by citing the principles of sovereign state immunity, the lack of precedent in holding states to account for the spread of infectious disease beyond their borders and the absence of provisions for reparations under the IHR.

The interplay between legality, moralpolitik and geopolitics

  • Gulliver and Lilliputs of the world: On the face of it, China is too much of a Gulliver to be tied down by legal Lilliputs.
  • The Legalpolitik: Before we dismiss international law as not real law, “legalpolitik” can put some real pressure on big nations and contribute to the power play among them.
  • Role of public opinion: As public opinion began to intrude into diplomacy over the last two centuries, legality and moralpolitik have become an integral part of geopolitics.

Difficulty in proving the case against China

  • The cost of a pandemic: Most world leaders know, whether they say it aloud or not, the international costs of the pandemic could have been far lesser if China had acknowledged the spread of the virus from Wuhan early on and informed other countries.
  • It is one thing to know but entirely another to prove it under the law.
  • The pursuit of claims is a waste of time: Most governments believe the pursuit of claims against Beijing is a waste of time.
  • Political heft of China: If Beijing can make the World Health Organisation toe its line and prevent the rest of the world, including US President Donald Trump, from describing COVID-19 as the “China Virus”, it is unlikely to be impressed by a few legal impresarios from the West.
  • Precedence of defying the law: After all, China had dismissed the unanimous verdict of the International Court of Justice in 2016 on Beijing’s territorial claims over the South China Sea.
  • Beijing did not even bother to appear in the case filed by the Philippines.
  • China had simply declared that the ICJ has no jurisdiction in the matter.

The relation between power and law in international relations

  • Power prevails: That power tends to prevail over law is certainly truer in international relations than domestic politics.
  • Law in the domestic domain: In the domestic domain, the state as the highest authority compels citizens to abide by the law, with force if necessary.
  • Law in the international arena: In the international arena, no single actor has a monopoly over the instruments of force.
  • We have multiple sovereigns but no “world government” that can compel deviant states to conform to rules.

Role of the UNSC

  • In theory, the members of the UN Security Council can authorise coercion — in the form of economic sanctions or military force.
  • This, in turn, involves building a consensus among major powers, including the five permanent members of the UNSC who wield a veto.
  • In reality, then, the UNSC can’t act against one of the five permanent members.
  • Beijing, which was so eager to get the UNSC to discuss the situation in Jammu and Kashmir since last August, has simply blocked all suggestions for a discussion on the corona crisis in recent days.

Are laws meaningless in the global arena?

  • Legal narratives have the weight of their own: While outcomes in international conflicts tend to be defined by power, the international discourse on any conflict today is framed in legal terms.
  • Whether it is a conversation between a state and its citizen or among governments or in a country’s outreach to the global society, legal narratives have a weight all of their own.
  • Delhi, for example, has struggled in recent days to counter the global interpretation of its domestic actions.
  • Importance of legal argument: Winning the legal argument, China has learnt from the history of great power relations, is very much part of great power jousting.
  • The negative lessons are from the Soviet Union that dismissed the Western legal arguments during the Cold War as based on the logic of capital and empire.
  • That did not convert many beyond the choir.
  • The positive lessons are from Great Britain and the United States.
  • The enduring Anglo-Saxon hegemony is rooted not just in economic and military power. It has always been underwritten by a powerful legal tradition that shapes the global narrative on most issues.
  • China developing own narrative: As it mounts a massive propaganda offensive against the US on the corona crisis, China’s state lawyers have filed a case in the Wuhan Intermediate People’s Court last week accusing various US government agencies of covering up the origin of the coronavirus.
  • China’s own narrative: It is no longer about China defending against a powerful international narrative; it is developing one of its own.

Conclusions

  • 1. Make international law keystone of diplomacy: India has been at the receiving end of China’s legalpolitik — most recently on the quest for the membership of the Nuclear Suppliers Group and the constitutional changes in Kashmir.
  • Delhi could learn a trick or two from Beijing on how to make international law the keystone of India’s diplomacy, especially in the multilateral domain.
  • 2. Reinvest in the geo-legal arts: If China could emulate US and Britain on leveraging legalpolitik for strategic ends, India should not find it too hard to reinvest in the geo-legal arts that Delhi inherited from the Anglo-Saxons but seems to have lost along the way.
Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

Regulating the Private Health Sector to Eliminate COVID-19op-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Regulation of private sector to deal with the COVID-19.


Context

The current COVID-19 crisis that India is battling has brought into sharp focus the public health system’s inadequacy to cope with it.

Contradictory scenario between public and private healthcare delivery

  • The contrast between public and private: Hospitals with state-of-the-art equipment rivalling five-star hotels in their facilities are mushrooming mostly in cities even as the overburdened public hospitals are valiantly fighting to cope. 
  • Dismal picture in rural areas: As far as the rural areas are concerned, the community health centres and primary health centres and sub-centres present an even more dismal picture in terms of availability of medicine stock, trained para-medical staff, and doctors and nurses.
  • However, it is not as if urban hospitals offer patients excellent care. A common and widely held general misperception is that the private healthcare system is better than the public one.
  • Why private is not always better? Complaints of non-transparent billing, demanding exorbitant sums in advance even in a medical emergency, and cutting corners in services are all too familiar, as are cases of the denial of services.
  • In semi-rural areas and towns, the private sector is not necessarily similar to hospitals in cities.
  • The private hospitals in these areas are small and have basic infrastructure and limited medical and non-medical staff. Unlike the cities, the power and water supply in these areas also constitute a problem to the functioning of these hospitals.

Problems in the public healthcare system

  • Within the public sector health system, there are a number of trends again that add to the dismal picture.
  • A high number of patients: Doctors in the public hospitals deal with an overwhelming number of patients majorly from the poor and marginalised sections.
  • Issue of contractual staff: Health activists have also pointed out that the growing trend of contractual hiring of paramedical and allied staff leads to an insecurity among them, and thus affects overall caregiving to patients.
  • Consequently, the poor patients’ families, frustrated by the lack of infrastructure and services, turn their anger upon the doctors and nurses.
  • What are the implications? The constant vilification of the public hospital staff coupled with starving these hospitals of resources has led to the view that the private hospitals are “much better” despite their exorbitant rates.

State-wise variation in healthcare

  • States subject: Health is a state subject, and it is well known that the health delivery systems are not uniform across states.
  • Kerala a role model: Kerala is often held up as a role model generally, and even now in the manner in which it has dealt with the COVID-19 crisis.
  • The dismal system in North India: As it is, certain states in North India have abysmal healthcare systems, and a couple does not have any testing facilities, the media has reported.

Getting the private sector involved in COVID-19 testing

  • Undoubtedly, at present, the private sector must be involved in screening, tests and treatment for COVID-19.
  • The highly trained professionals in this sector can contribute enormously by helping scale up the testing efforts.
  • Importance of large-scale testing: In South Korea too, it was large-scale testing that was instrumental in reducing mortality rates.
  • The pricing issue: Services across sectors must not be priced differently at a time like this. The media has reported that there is a difference of opinion between the government and private sector on the price of COVID-19 tests flowing from the prices of test kits.
  • Need for the protocol: A clear and non-negotiable protocol for the private sector must be established regarding the present crisis and how the government is going to help financially and otherwise in dealing with it.

Way forward

  • Regulate the testing, screening and treatment facilities: The experience with the government offering subsidies to hospitals, especially in urban areas in terms of land and other concessions, has not borne out desired objectives such as better care for the poor.
  • Taking a cue from this, the testing, screening, and treatment facilities must be regulated in terms of pricing and quality.
  • Focus on strengthening the public health system: The Supreme Court has held healthcare to be a fundamental right under Article 21. The biggest lesson of the current crisis is that political will must focus on strengthening the public health system.

Conclusion

The finance minister has announced a package of `1.7 lakh crore to deal with this catastrophic situation. This is welcome, but long-term resource allocation to invigorate the public health system must be a continual and parallel process.

Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

Things to do, food for thoughtop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Essential Services Maintenance Act.

Mains level : Paper 3- Managing the agriculture and livestock sector.


Context

Amid lockdown, we need an action plan to manage our agriculture, livestock sectors.

Need for an immediate action plan to manage the agriculture and livestock sector

  • The country produces around 52 crore litres of milk daily.
  • There are also 80 crore-odd live poultry, both broilers and layers, at any given time, supplying meat and eggs to consumers.
  • Link with the other producers: These birds and animals, in turn, support the livelihoods of poultry and dairy farmers, as well as those producing maize, soybean, mustard, groundnut, cotton and other coarse grains that are ingredients for livestock feed.
  • It is the government’s responsibility to ensure that farmers are able to keep their animals alive and market the crop that has been, or will be, harvested during the lockdown period.
  • We need an immediate action plan to manage our agriculture and livestock sectors in the interest of both producers and consumers.

Issue of implementation

  • Ensuring free movements: The first thing is to ensure free movement of farm produce, livestock feed and veterinary medicines.
  • Implementing the already taken decision: It is obvious that not all issues can be addressed overnight. But the minimum the government can do is to ensure ground-level implementation of already-taken decisions.
  • The problem of implementation: Many essential services, for instance, were kept out of the purview of the lockdown. Food, feed and agricultural inputs have been specifically notified as essential services.
  • But there are several problems at the level of implementation that are coming to notice.
  • The Centre has issued various directives/notifications, many of them brief and general in nature.
  • Many of these have either not reached the local authorities and police personnel or are not clearly worded. As a result, the smooth movement of essential items has been affected.
  • There are also reports of conflict between the police and citizens, including people involved in the transportation and delivery of food as well as inputs to farms.

Suggestions for improving the implementation issue

  • Issue a single notification: The Centre must issue a single notification relating to food items in a standard format and uniform language so that all ambiguities are removed.
  • This needs to be finalised after consultations with the stakeholders and the state governments can release it to officials working at the grassroots.
  • The focus should be to address the problems arising from restrictions on the transport — between and within states — of agri-produce and inputs related to them.
  • Invoke the ESMA: Another suggestion is that the Essential Services Maintenance Act (ESMA) be invoked for the delivery of all essential services relating to food to prevent disruption of supplies.

Suggestions to prevent post-lockdown chaos

  • What will happen after the lockdown ends? Many plants are now shut or working at low capacity utilisation. Consumption by hotels and other institutions, too, is low. Nor is any export or import happening. But once the lockdown ends, there will be a rush to procure raw material, trucks and rail rakes.
  • Smooth recovery: Smooth recovery from the lockdown is as important as managing supplies during the lockdown.
  • Here are a few suggestions to ensure that the common man does not have to suffer hardships during and after the lockdown:
  • First– Place all food items, agri-inputs, packaging material and transport services under ESMA for a six-month period to prevent profiteering.
  • The MRP that was applicable in February should remain till October.
  • In the case of farm produce, it helps that we are looking at a bumper crop, which makes it all the more necessary to ensure its smooth marketing.
  • Second-Suspend APMC (agricultural produce market committee) laws for the next six months.
  • Traders with APMC licence are bound to act as cartels during rush hour, which will hurt both farmers and consumers.
  • Third-ESMA should apply to all utilities and transport services. State governments can make exemptions on a case to case basis: These exemptions should be subject to public scrutiny under the Right to Information Act.
  • The government should announce the above measures well in advance.

Conclusion

The government must start planning now to prevent post-lockdown chaos, especially profiteering in the event of shortages. Smooth recovery from the lockdown is as important as managing supplies during the lockdown.

 

Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

A smarter supply lineop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Ensuring the food supply lines are not disrupted in the lockdown and ways to ensure it.


Context

The government must ensure that people don’t go hungry and take measures to make sure that people don’t crowd a few outlets, increasing the chances of the virus spreading.

Need for the package to compensate losses

  • Welfare package: The government has announced relief measures. Last week, the Finance Minister announced a welfare package of Rs 1.7 lakh crore.
  • This is too small to cope with the onslaught of the virus.
  • How much a comprehensive package would cost? A package to compensate all losses, including business losses, should amount to at least Rs 5 to 6 lakh crore, if not more.
  • How will the government find funds for this package?
  • Funds accrued as a result of oil price crash: The windfall gains that have accrued to it as a result of the crash in crude oil prices could come in handy.
  • Diver all the subsidies and development funds: The government could divert all subsidies and some development funds to fund this package and ask the country’s corporate leaders to help with funds.
  • Issue clarion call for voluntary donation: The prime minister could even issue a clarion call to those with a fixed income (say above Rs 50,000/month) to voluntarily donate at least 10 per cent of their salaries to fund the battle against the virus.

Focus on supply lines of food and ways to achieve it

  • Why good food supply line matters? The government must do to ensure that people don’t go hungry and the measures it must take to make sure people don’t crowd a few outlets, increasing the chances of the virus spreading.
  • The government has announced that the beneficiaries of the public distribution system can avail three months’ ration at one go.
  • The challenge of delivery: The challenge is to ensure that fair price shops deliver the provisions in an orderly manner and their supply lines remain intact.
  • Home delivery option: Home (street) delivery of these provisions, to avoid crowding, is a good option.
  • Roping in civil society: This is also an occasion to rope in civil society. NGOs, resident welfare associations, religious organisations and paramilitary forces can be engaged for orderly and safe distribution of food — both pre-cooked and fresh.
  • NGOs with experience in food preparation and distribution, such as Akshaya Patra, could guide local authorities.
  • People involved in this endeavour should be provided with safety gears.
  • The challenge of supplying perishables:  These perishables-like fruits, vegetables and milk- must be sold in a packaged form in mobile vans. The weekly markets need to be temporarily suspended lest they spread the virus.
  • Vegetable vendors can work with civil society organisations as well as e-commerce players to do this job in a safe manner.
  • Retail distribution lines: Retail distribution lines need to be seamlessly linked to wholesale supply lines.
  • Buffer stocks: The government godowns are overflowing with wheat and rice — about 77 million metric tonnes (MMT) on March 1, against a buffer stock norm of 21.4 MMT on April 1.
  • How to manage rabi season procurement? Procurement operations for rabi crops are around the corner.
  • Training and safety measures: The FCI and other procuring agencies need to be trained about safety measures and supplied safety gear.
  • Providing incentives to farmers for staggered selling: Farmers could be given Rs 50/quintal per month as an incentive to stagger bringing their produce to the market — say after May 10.
  • They will also need to be screened, given training and equipped with safety gear.

Challenge of mandi operations for fresh produce in large mandis

  • This pertains to mandi operations for fresh produce in large APMC mandis like Azadpur in Delhi and Vashi near Mumbai.
  • These mandis are usually overflowing with fruits and vegetables and the labour force at these centres usually handles the produce without safety gears.
  • The challenge of screening and providing safety kits to these workers is doubly daunting. The country is not fully prepared in this respect.
  • The safety of workers in mandis — and other workers who handle agricultural produce — should be accorded as much priority as the safety of frontline health warriors.
  • Suspend the APMC Act: We should also use this opportunity to suspend the APMC Act and encourage NGOs, civil society and corporate houses to directly procure from farmers.

Issue of poultry and maize farmers

  • Sharp fall in poultry items: In such times, prices of essential food items are known to shoot up. But in India, prices of food items like chicken meat and eggs have registered a sharp fall.
  • In Delhi’s Gazipur Mandi, for example, the price of broiler chicken has fallen from Rs 55/kg in January 2020 to Rs 24/kg in March.
  • This has also pushed the maize prices down as poultry is largely fed packaged maize.
  • The government may have to think of compensating poultry and maize farmers in due course.

Conclusion

When things settle, it will be worth knowing how the virus spread from Wuhan to Iran, Italy, Washington, India and other parts of the world. Which organisation or nation failed to blow the whistle and alert the world in time? Was it China’s failure? Or that of WHO? Or was it the failure of all governments around the world to respond quickly to the outbreak? We need better global governance for pandemics to avert the next crisis.

Judicial Reforms

Ayyappa and the Courtop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Mains level : Paper 2- Need for reforms in the administrative functioning of the Supreme Court.


Context

In the several cases with potential significance, there was no effective hearing at the interim stages which created fait accompli. And which results in the status quo cementing itself.

The Sabarimala case and ‘balance of convenience’ principle

  • Review petition pending: Millions of disciples have protested the Court’s 2018 verdict where gender equality was held to trump the tenets of the faith and rejoiced at the November 2019 order of the Chief Justice’s bench granting their cause a fresh lease of life.
  • As things stand, their review petitions are kept pending until the questions of law are determined.
  • Please to enter the temple declined: In December 2019, fervent pleas on behalf of certain women devotees to enter the temple were declined, although the 2018 verdict continued to hold the field.
  • Why declining the plea for entry matters? This was justified by the Court on a “balance of convenience”, thereby laying down a new principle for not directing the implementation of its own judgement.

Pendency of Article 370 challenge case hearing

  • Nine judge bench: This year it was decided to put together the nine-judge bench to hear the cases on an urgent basis.
  • Kashmir case on the backburner: But with two judges from the ongoing Kashmir/Article 370 challenges also a part of the Sabarimala case, it would mean that the Kashmir issues would be put on the back burner in the middle of its hearing.
  • This is despite the advocates representing the right of women’s entry stating that they had no objection to the Kashmir cases being heard first.
  • Then, barely a day into the hearing, a strain of swine flu reached some of the members of the Bench, leading to a postponement of hearings till the middle of March.
  • Now, with a fierce pandemic enveloping the globe, the case is adjourned indefinitely.

Criticism of administrative functioning of the SC

  • Over the last few months, the Supreme Court has been besieged by criticism of its administrative functioning.
  • Delay in the hearing of important cases: Cases that have customarily been heard with alacrity, like those concerning personal liberty, law and order and criminal investigation, have been posted after long intervals with the Government being granted the luxury of time to respond.
  • No effective hearing in cases with immediacy: Where immediacy is pre-eminent so that fait accompli may not be created, as with the validity of the Kashmir notifications, the CAA and the electoral bonds, there have been no effective hearings at the interim stage.
  • Thus, the status quo slowly cements itself.

Reason for problems in administrative functions of the SC

  • Dual role played by the CJI: Since the early years of the judiciary, one person has been given the onerous dual charge of heading both the administrative and judicial functions of the court.
  • As a result, apart from sitting every day, reading briefs, hearing arguments and delivering detailed judgements, the Chief Justice has to also act as the final authority for all service-related matters of the Court’s 2,500 employees, issue office orders to streamline the registry.
  • The CJI also supervise measures for security and infrastructure, chair committees, correspond with and entertain judicial delegations, attend symposia, delegate subject matters among colleagues, constitute benches of varying strengths and interview candidates for the various courts.
  • In the old days, when the burden of cases was modest, these tasks would not have been challenging.
  • But in the present time, not only are they overwhelming, but they also bring in their wake a host of attacks on the person who occupies that high office.

Need for the Chief Executive Officer in the SC

  • Administrative functioning of the SC: In all the administrative tasks, the Chief Justice is assisted by a team of registrars, who are headed by the secretary-general.
  • As they are junior judicial officers, they neither have the training nor the complete independence to take steps towards course correction.
  • The requirement of CEO: This is why the Supreme Court sorely requires a chief executive officer – an independent professional who is equipped with the day-to-day management of the Court and is not beholden to the judges in any way.
  • How it will help? The CEO will be charged with the entire mission of running the Court so that the judges can concentrate on what they are trained and experienced to do – adjudicate.
  • Operational autonomy: The CEO will, of course, have to be given adequate operational autonomy and be answerable to a committee of the Court, comprising judges and bar representatives, thereby providing for a professional process, much like in the corporate sphere.
  • With this, the judges will at least be spared the charges that they have had to withstand over the last few years.

Conclusion

It is only for politicians to concern themselves with public opinion, not for judges. They are weaponised by the Constitution to serve the cause of justice, and in this, as per Article 144, all civil and judicial authorities are enjoined to cooperate. Just a few blows of the gavel to any misadventures would be sufficient to send the message loud and clear: That the Court offers no sanctuary to the executive knaves.

Communicable and Non-communicable diseases – HIV, Malaria, Cancer, Mental Health, etc.

After the lockdownop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- The lockdown hits the poor hardest and how it could have been avoided?


Context

Lockdown announcement has not been matched by national strategy — on containing fallout for poor.

Two arguments advanced against lockdown

  • India’s decision to lock down was necessary. Two arguments are being advanced against it.
  • The first argument: India is a poor economy, with millions at the margins of subsistence, who cannot bear the consequences of a lockdown. The density and living conditions in India make social distancing difficult in many cases.
  • The second argument: It is that the extent of community transmission does not justify such drastic measures.

What are the justifications for the lockdown?

  • The only hope: Precisely because millions in India are vulnerable and will not later have the possibilities of quarantining or medical care, the only hope we have of securing their lives is to slow down the spread of the virus as much as possible.
  • And the only shot you have at it is when community transmission is possibly still at manageable levels.
  • There is, therefore, a bit of bad faith in using the poor as the basis for expressing scepticism at the need for a lockdown. That is the most insidious form of privilege.
  • The risks of any catastrophic spread will be even more incalculable for the poor.

Underscoring the importance of federalism and decentralisation

  • States responding in innovative ways: One of the more encouraging things has been the way in which several state governments like Punjab, Odisha, Kerala, Delhi and others have come into their own, innovating under difficult circumstances.
  • Role of panchayat and local officials: The much-neglected panchayat and local officials are key nodes in keeping track of possible cases and the creation of quarantining infrastructure.
  • Role of frontline workers: It would also be churlish not to acknowledge the ways in which most of the frontline workers of the state are responding, learning and innovating in this situation.
  • Federalism and decentralisation: If anything, this crisis is bringing home the importance of both federalism and decentralisation as central to a resilient governance architecture.

The preparation and follow-up of the lockdown

  • But the national preparation and follow-up to take full advantage of the lockdown do not inspire full confidence.
  • Lack of strategy: The announcement of the lockdown has not been matched by a commensurate national strategy.
  • This is manifest, in the early signals on the following two important aspects:
  • Containing the economic fallout for the poor.
  • Building up the health infrastructure.
  • It is, admittedly, early days; but the signs are not good.

Economic fallout for the poor

  • Focus is not on the poor: In the entire framing of the problem, the poor have been at best an afterthought, at worst expendable damage.
  • Steps taken not adequate: Steps like health insurance cover for frontline workers, increased food rations, are welcome steps. But a crisis of this magnitude required assurance to the most vulnerable that no stops will be pulled to secure their futures.
  • Instead, what you got was incrementalism of the worst kind, masquerading as a big commitment.
  • Low cash transfer: The cash transfers, in particular, through different schemes, are shockingly low.
  • Need for the unprecedented social security support: This crisis is one of the rare instances where economists and even bankers, from across the political spectrum, have rallied around the intellectual argument for unprecedented levels of social security support.
  • So the government’s “support by stealth” strategy is even more mystifying.
  • Impact of lockdown on migrant labour: The magnitude of the crisis unleashed for migrant labour could have been avoided with a little forethought.
  • What could have been done? Early announcement of cash transfers, shelter and food availability, would have obviated the need for migration.

Opacity on the health infrastructure side

  • Issue of testing: Opacity is often a consequence of scarcity. And nowhere is this more manifest than in our discussion of testing.
  • Underutilisation of capacity: Everyone understands that India has the scarce testing capacity, though it seems it is also under-utilising what it has.
  • No clear testing strategy: The government is procuring more testing kits. But what is worrying is that there seems to be no publicly articulated statement of what exactly our testing strategy is, given the scarce resources.
  • But there is still no sense of how we plan to put a testing strategy in place (not just numbers of tests, but where can they be optimally deployed), that will minimise the need for future lockdowns.
  • What objectives is it trying to meet? There is more than a whiff of suspicion that there is a view that more testing might spread more panic.
  • Or it might put more pressure on the health care system than it can handle.
  • India has never understood that health expenditure is not an expenditure; it is an investment.
  • Building up of health infrastructure: The success of the lockdown strategy is premised on an unprecedentedly vigorous building up of health infrastructure to fight the pandemic.
  • There is a commitment by the Centre to infuse an extra Rs 15,000 crore in this sector. Some steps are being taken in building up capabilities, including ramping up production of ventilators and masks.
  • Need for warlike mobilisation: This is an area where India needs almost a warlike mobilisation, to make sure we have enough testing, tracking, frontline workers, logistics and equipment in place to make sure that the duration of a lockdown is minimised or a repeat is not necessary.
  • The creation of this kind of infrastructure will pay huge dividends even in non-pandemic times.

Conclusion

The prime minister is constantly asking the citizens to mobilise, and most of them respond. But it about time the state mobilises: On an economic stimulus that is truly meaningful and health infrastructure push that inspires confidence.

RBI Notifications

What the RBI has done op-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Banking rates and markets instrument.

Mains level : Paper 3- Steps taken by the RBI to revive growth and provide stability to economy.


Context

The RBI’s Governor’s ‘bazooka’ announcement earlier today has seen the usually conservative institution and its head pull out the big guns in word and action.

Four steps taken by the RBI

  • One, increase the liquidity in the system.
  • Two, make sure the lower policy rate is transmitted. Steps one and two are linked.
  • Three, give a three-month window for a payback on all term loans.
  • Four, take steps to reduce volatility and provide stability.
  • Big cut in repo rate: He announced a big cut in the repo rate by 75 basis points (100 basis points make a per cent, so three-quarters of a percentage point) to 4.4%.
  • What is the repo rate? Repo rate is the rate at which the banks borrow from the RBI. Banks give ‘eligible securities’ they hold for cash that RBI gives as an overnight loan.
  • Banks pay the repo rate as interest for this borrowing.

First two steps of the RBI: Increasing liquidity and ensuring policy rate transmission

  • Why lower repo rate matters? When the repo rate is high, banks find it costly to borrow and in turn raise the price of loans to their borrowers.
  • Reducing interest for the system: A low repo rate has the overall effect of reducing interest rates for the system. Lower rates make it easier for entrepreneurs to take loans for working capital and for households for homes, vehicles and so on.
  • Issue of policy rate transmission: Previous rate cuts have not been ‘transmitted’ by the banks who have not reduced lending rates and have preferred to keep money with the RBI at the ‘reverse repo rate’.
  • What is reverse repo rate? This is the rate at which banks lend to the RBI.

How RBI is ensuring transmission now?

  • The RBI has now reduced the reverse repo rate by 90 basis points to 4%.
  • This cut in reverse rape sharper than the one on the repo rate to encourage banks to borrow from the RBI rather than lend to it.
  • How reverse repo rate matters? Banks have preferred to deposit money with the RBI rather than lend it out with an average daily amount of ₹3 trillion being kept with the RBI.
  • A reduction of the reverse repo to 4% makes it unattractive to banks to park it with the RBI and banks will be nudged to lend.
  • Why bank lending matters for business? Bank lending provides the needed oxygen to businesses for their working capital and longer-term loans.
  • Read this as a measure to help banks take the decision to lend rather than play it safe by keeping money with the RBI.

How lock-down slows down the economy?

  • Rush to safety for money: If people are in a lock-down, the wheels of the economy begin to grind down and there is a rush to safety for money in the system.
  • Freezing of the markets market: Investors begin to redeem their shares, bonds and mutual funds. These redemptions cause a fire sale of assets. Finally, when there are no buyers, markets begin to freeze.

What are the measures taken by RBI to stabilise the market?

  • To keep the wheels of the markets well-oiled with cash, the RBI has made ₹3.74 trillion available. This it has done using four weapons.
  • The first measure: It has used targeted long-term repo operations.
  • RBI will lend money to banks (a total of ₹1 trillion) that can be invested in bonds and other forms of lending instruments.
  • What is a hold-to-maturity way? Under the hold-to-maturity way, the portfolio is valued not on the market price but on what the price should be given the rate of interest of the bond, the holding period and the rating of the bond.
  • Basically, it allows trades to happen at a price that is not confused with the current pandemic in the market.
  • The second measure: The RBI reduced the cash reserve ratio (CRR) by a full percentage point down to 3% for a year.
  • The CRR is the percentage of demand and time deposits banks have to keep with the RBI.
  • Why CRR and not SLR was reduced? There is another 18.25% of deposits that is also not used for lending under the Statutory Liquidity Ratio (SLR), further reducing the money banks have to lend.
  • RBI has reduced the CRR to 3%, freeing up ₹1.37 trillion for banks to lend. CRR has been chosen rather than SLR because this increases ‘primary liquidity’ with the banks a bit better.
  • Not only is there CRR rate down, banks now need to maintain 80% of the limit on a daily basis instead of 90% till June 26, 2020.
  • The third measure: ₹1.37 trillion will be made available under the emergency lending window called the marginal standing facility (MSF).
  • Banks will now be able to borrow 3% of their deposits under this window, up from the current 2%. Basically, RBI is willing to lend more than before.
  • How much more? ₹1.37 trillion under this window.

The third step of the RBI: Regulatory forbearance

  • What is the regulatory forbearance?

    What this means is that as economic activity grinds to a slowdown, people will not be able to pay back the loans they have taken for no fault of theirs.

  • This could be businesses with loans, households with EMIs on home loans and others with what are called ‘term loans’.
  • RBI will allow a moratorium of three months for loan repayment.
  • This is a relief especially for small entrepreneurs who have been forced to shut shop and for employees whose incomes have stopped since their place of work is shut.
  • It is good that the RBI has looked at the retail part of the market along with the corporate sector for once.
  • Working capital loans don’t come under the ‘term loan’ category, and these borrowers can defer paying interest for three months till June 2020.

The fourth step of the RBI: Measures to reduce volatility in the exchange rate

  • Fourth is a measure to reduce the volatility of the price of the rupee in international markets by allowing banks to deal in off-shore non-deliverable rupee derivative markets.
  • It looks like reform using the crisis to bring about this long-awaited change.

Conclusion

We don’t know if measures taken by the RBI and the government are enough. But what is comforting is that the government and the RBI are working in tandem to deal with this giant killer of a virus.

Communicable and Non-communicable diseases – HIV, Malaria, Cancer, Mental Health, etc.

Let’s use follower’s advantageop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Learning from the experience of South Korea in designing the policies to deal with coronavirus.


Context

How this coronavirus pandemic threat will pan out no one knows but what we do know is that the intensity of the challenge and its impact on our well-being will depend greatly on how we reach out to ordinary people, and the policies we implement.

Historical perspective and comparison

  • Compared to the fatality numbers of some earlier pandemics, such as the Asian flu, 1957-58 (1.1 million dead) and Hong Kong Flu, 1968 (2 million dead), the fatality numbers of the current coronavirus pandemic are, as yet, nowhere near.
  • One of the most comprehensive studies on the pandemic, by the Imperial College of London, shows that the “case fatality rate”, or fatality among those who get coronavirus is 0.9 per cent — this means a 99.1 per cent survival rate among the people who get it.
  • What makes this pandemic special is that it is happening in the age of digital connectivity and greater scientific knowledge than we have ever had.
  • We can inform people quickly and take big steps to contain it.
  • But this also has a danger we have never faced.
  • Policy actions can have a mega backlash on the economy.
  • We are in uncharted territory — never before have we taken the kind of collective action against a pandemic as we are doing now.

Time to collectively confront our common humanitarian challenge

  • Using the experience of South Korea: There is some evidence from history, and from the country that has been the most successful in dealing with this pandemic —South Korea.
  • The country’s success has saved lives, protected the economy from undue damage, boosted the popularity of the Korean President Moon Jae-In across political divides and raised the global standing of South Korea.
  • France’s President Emmanuel Macron and Sweden’s Prime Minister Stefan Lofven have consulted Moon Jae-In for advice.
  • We have some evidence and estimates about the kind of damage this pandemic can do.
  • China’s industrial production in January-February 2020 declined by 5 per cent compared to a year ago.
  • Goldman Sachs has estimated that the US’s GDP growth could decline 24 per cent for the second quarter this year.
  • Data are coming in on recent US unemployment claims climbing by 30 per cent.
  • This is clearly time to put political differences aside, and collectively confront our common humanitarian challenge.

Designing policy to deal with the pandemic

  • Economic implications: In designing policy, it is important to realise that all interventions to contain the pandemic have economic implications.
  • Some people react to this by saying that our first priority is to save lives, not the economy. This is a mistake. The two are not separate matters.
  • A poorly-executed policy can damage the economy and this can end up taking more lives than the original problem.
  • Examples of policy doing damage to lives: We have examples of the damage policies can do from history. In 1958, Mao Zedong initiated the Great Leap Forward to boost China’s production. This unleashed the biggest famine in modern times, which resulted in 20 to 40 million deaths.
  • The Bengal Famine of 1943 occurred with no decline in food production but there were disruptions in supply chains from the farms to those who needed food.
  • The death toll was two to three million. Such evidence from the past warns us that policies not designed well can cause more deaths than the pandemic itself.

Three lessons from South Korea

  • We already have three lessons from Korea, which are being widely discussed in newspapers and the media around the world.
  • First, you need strong leadership.
  • Second, it is critically important to have trust between society and government. There is only that much you can do if people do not cooperate.
  • Third, the need is for nuanced policies, with the government having the courage to make course correction as it goes along.

Way forward

  • First, trust can be a casualty with the lockdown. There are reports of the police wielding the baton too quickly on ordinary vendors, small grocers and sellers. They need to explain to people so that they begin to actually cooperate, instead of complying only when under observation. That is the key difference between a trusting society and a trustless one.
  • The government cannot be a substitute for the private firms: To believe that small traders and private firms can be substituted by the government is the mistake Communist China made in the 1960s and 1970s, before the arrival of Deng Xiaoping.
  • An example of the importance of specialised knowledge — this applies to the US as well — pertains to the role of cash grants to the poor. Such grants work well in normal times but may need to be supplemented with the direct support of food and medical services.

Conclusion

Some say that the Korea analogy is of no use to us because it is a relatively small country. It is true that everything will not apply here. But on the other hand, Korea and Hubei province of China are very comparable. Korea’s population is 52 million, Hubei’s is 58 million. The number of people who died of the virus in Korea is 126. The figure for Hubei is 3,160. Korea, of course, had the follower’s advantage since the virus struck there later. But we too have that advantage.