Note4Students
From UPSC perspective, the following things are important :
Prelims level: CAD
Mains level: Paper 3- Forex reserves and its significance
Context
The ascending stock of forex reserves has led to the view this will enable the sole devotion of monetary policy to domestic objectives.
Assessing the significance of forex reserves
Let’s look into the experinec of China and India in this regard.
1) Learning from China’s experience
- In 2016, China had a strong external position—current account surplus and more than $3tn forex reserves.
- However, investors’ expectations on renminbi (RMB) value began to shift due to rising concerns about its growth outlook, domestic rate cuts and eventual depreciation, and imminent tightening of US monetary policy, resulting in net capital outflows of $725 billio (bn) over the year.
- This put sustained pressure upon the RMB.
- Eventually, China resorted to capital control measures, which slowed the outflow and supported the RMB in the first half of 2017.
2) India’s own historical record
- India’s own historical record shows that, high or low, forex reserves didn’t prevent investors from reappraising positions.
- India experienced this in case of oil prices (2018) or taper fears (2013).
- The CAD was moderate, at 1.1% and 1.4% of GDP in two quarters to December 2017.
- But as oil prices climbed, current account projections were rapidly revised to 2.5-3% of GDP in less than a quarter seeing the jump in the import bill, lagging exports and continuous outflow of portfolio capital.
- Reserves totalled $424 bn then (end-March 2018); foreign currency assets were $399 billion.
- Against a mere $9 bn capital outflow, the peak-to-trough decline in reserves was $19 bn in April-June 2018, with 5% depreciation of the rupee.
- The sharper, $21 bn fall in mid-April to July 20, 2018 equalled the reserves decline in April-August 2013 taper episode when the rupee depreciated three times more or 15%!
- Forex reserves were much lower in 2013 ($255 bn range) and it had taken only a quarter for the current account gap to widen from 4.0% of GDP in April-June 2012 to 5.4% and a record 6.7% in subsequent two quarters to December 2012!
Key takeaways
- History shows that no level of reserves is a foolproof guarantee for macroeconomic stability or interest rate immunity.
- The important lesson these episodes hold is that repressive attempts do not always convince markets or prevent shifts in expectations and often compel large, abrupt adjustment.
- Investors reassess positions, including global factors, whatever the reserves’ stock.
- The crucial role of reserves is psychological, i.e. market confidence and liquidity insurance that is immediate and unconditional that allows central banks to buy time, whether for a gradual adjustment, soft landing, or as the case may be.
Distortion in bond market and RBI’s role in it
- RBI has been systematically suppressing bond yields, particularly the 10-year benchmark, the reference rate for banks.
- So effective was the repression that the bond market became irrelevant as yields altogether stopped responding to inflation or fiscal developments.
- The 207-basis-point jump in retail inflation in a month in May, which exceeded expectations, caused not even a flicker in the yield premium for example.
- This did not prevent responses elsewhere though – the overnight indexed swap (OIS), which signals future interest rate movements, increased 20-30 basis points at different tenures with fresh inflation risks.
- Clearly, the market reading was inconsistent with RBI’s, whose rigid adherence to a particular level (6% in the case of the old, 10-year bond) was disregarded outright.
- The monetary policy cue was not being accepted, failing to soothe ruffled feathers about inflation.
Risk involved in RBI’s policy
- If the global financial cycle were to suddenly turn, risk-aversion set in, or oil prices shoot up to risky levels, investors will undoubtedly look at actual differentials, not the one set in stone by RBI.
- There will be exchange rate pressures, which RBI can no doubt manage with liberal reserves.
- But the duration and degree of adjustment is not in RBI’s control, identically to the bond market one, where it has infinite capacity to keep local yields where it wants.
- There’s a limit to how much foreign currency it can sell—the $609bn reserve holding is finite.
- Currency depreciation can, therefore, worsen a bad situation as higher inflation pressurises domestic interest rates to rise.
- RBI’s issuance of the new 10-year benchmark bond at 6.10%, which came as a surprise against its previous inflexibility, indicates RBI has internalised the above risks.
- The disparate movements were undermining RBI, whose commitment to continue the accommodative monetary policy as long as necessary to revive and sustain growth has been reassuring.
Conlcusion
When the economy is open, financially integrated and subject to cross-country dynamics, it is more prudent to let market forces play out a bit than persist with a stance that could turn unsustainable despite the high reserves.
Back2Basics: What is Current Account Deficit (CAD) ?
- The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
- The current account includes net income, such as interest and dividends, and transfers, such as foreign aid, although these components make up only a small percentage of the total current account.
- The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments (BOP).
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SCO members
Mains level: Paper 2- Afghanistan after the US withdrawal
Context
A regional conclave of foreign ministers taking place in Dushanbe this week under the banner of the Shanghai Cooperation Organisation (SCO) should give us a sense of the unfolding regional dynamic on Afghanistan.
SCO addressing challenges in Afghanistan
- Geography, membership and capabilities make the SCO an important forum to address the post-American challenges in Afghanistan.
- The SCO was launched 20 years ago by China and Russia to promote inner Asia stability.
- The current members of the SCO are China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Pakistan, and India.
- The SCO has four observer states — Iran, Afghanistan, Mongolia and Belarus.
- The idea of a regional solution to Afghanistan has always had much political appeal.
- But divergent regional strategic perspectives limit the prospects for a sustainable consensus on Afghanistan.
Implications of the US exit for the region
- The quiet satisfaction in Moscow, Beijing, Tehran and Rawalpindi at the US’s exit from Afghanistan, however, is tinged by worries about the long-term implications of Washington’s retreat
- Regional players have to cope with the consequences of the US withdrawal and the resurgence of the Taliban.
- Neither Moscow nor Beijing would want to see Afghanistan becoming the hub of international terror again under the Taliban.
- For China, potential Taliban support to the Xinjiang separatist groups is a major concern.
- Iran can’t ignore the Sunni extremism of the Taliban and its oppressive record in dealing with the Shia, and Persian-speaking minorities.
- Pakistan worries about the danger of the conflict spilling over to the east of the Durand Line, and hostile groups gaining sanctuaries in Afghanistan.
Three factors that drive India’s Afghan policy
- The US exit means a new constraint on Delhi’s ability to operate inside Afghanistan.
- There is also the danger that Afghanistan under the Taliban could also begin to nurture anti-India terror groups.
- If India remains active but patient, many opportunities could open up in the new Afghan phase.
- Three structural conditions will continue to shape India’s Afghan policy.
- One is India’s lack of direct physical access to Afghanistan.
- This underlines the importance of India having effective regional partners.
- Second, it remains to be seen if Pakistan’s partnership with China and the extension of the China Pakistan Economic Corridor into Afghanistan can address Pakistan’s inability to construct a stable and legitimate order in Afghanistan.
- Third, the contradiction between the interests of Afghanistan and Pakistan is an enduring one.
- While many in Pakistan would like to turn Afghanistan into a protectorate, Afghans deeply value their independence.
- All Afghan sovereigns, including the Taliban, will inevitably look for partners to balance Pakistan.
Way forward for India
- India must actively contribute to the SCO deliberations on Afghanistan, but must temper its hopes for a collective regional solution.
- At the same time, Delhi should focus on intensifying its engagement with various Afghan groups, including the Taliban, and finding effective regional partners to secure its interests in a changing Afghanistan.
Conclusion
India should pursue the regional solution to Afghanistan challenge after the US exit while increasing the engagement with the various players in Afghanistan including the Taliban.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-Japan-Italy partnership
Context
Recently, Mr. Draghi, Italy’s Prime Minister described Chinese competitive practices as “unfair” and invited the EU to be franker and more courageous in confronting Beijing on various issues. Against this backdrop, a trilateral partnership between India-Japan-Italy could play important role in the Indo-Pacific region.
India’s growing centrality in Indo-Pacific strategic architecture
- Countries that share similar values and face similar challenges are coming together to create purpose-oriented partnerships.
- In the context of the Indo-Pacific, the challenges posed by China’s assertive initiatives clash with a region lacking multilateral organisations capable of solving problems effectively.
- But as a new pushback against China takes shape and as Indian foreign policy becomes strategically clearer, there is new momentum to initiatives such as the Quad.
India-Italy-Japan trilateral partnership
- Recently, Italy has also begun to signal its intention to enter the Indo-Pacific geography.
- It has done so by seeking to join India and Japan in a trilateral partnership.
- Italy has become more vocal on the risks emanating from China’s strategic competitive initiatives.
- On the Indian side, there is great interest in forging new partnerships with like-minded countries interested in preserving peace and stability in the Indo-Pacific.
- The responsibility of keeping the Indo-Pacific free and open, and working for the welfare of its inhabitants falls on like-minded countries within and beyond the region.
Potential of trilateral partnership
- Their compatible economic systems can contribute to the reorganisation of the global supply chains that is now being reviewed by many players as a natural result of the Chinese mismanagement of the COVID-19 pandemic.
- At the security level, the well-defined India-Japan Indo-Pacific partnership can easily be complemented by Italy.
- At the multilateral level, the three countries share the same values and the same rules-based world view.
The way forward for trilateral cooperation
- The Italian government must formulate a clear Indo-Pacific strategy that must indicate its objectives.
- But Rome must go beyond that in defining and implementing, at the margins of the EU’s common initiatives, its own policy with respect to the Indo-Pacific.
- The India, Italy and Japan trilateral initiative can be a forum to foster and consolidate a strategic relationship between these three countries, and specifically expand India-Italy bilateral relations.
- A trilateral cooperation can be the right forum for India and Italy to learn more from each other’s practices and interests and consolidate a strategic dialogue that should include the economic, the security and the political dimensions.
- To consolidate the trilateral cooperation in this field, the three countries need to define a common economic and strategic agenda.
Conclusion
A clear political will is needed from all sides, and Italy, in particular, should recognise its interests in playing a larger role towards the maintenance of a free and open Indo-Pacific. Robust India-Italy strategic ties can be the first step towards the realisation of this goal.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Arbitrations and issues with it in India
Context
Plagued by delays and rising costs, arbitration in India needs urgent attention. The pandemic has only worsened the situation.
Issues with arbitrations process in India
- Arbitrations in India suffers from rising costs and sluggish proceedings.
- Arbitration proceedings are often dragged on by lawyers on either side filing misconceived applications at various stages of the proceedings.
- Litigants, too, at times contribute to this delay with their stubbornness in not conceding a loss or defeat.
- The courts have narrowed down the scope of judicial interference under Section 34 of the Arbitration and Conciliation Act.
- The very limited recourse for setting aside an arbitral award under the Act invariably means that it will be upheld, even if it appears unfair or illogical.
- The aggrieved party may well be stuck with the award and precluded forever from challenging it.
- Arbitration hearings are generally held in camera, and decisions are usually not publicly accessible, giving rise to doubts about impartiality and fairness.
- Arbitration proceedings have become more complex with time.
- The Supreme Court, in Guru Nanak Foundation v. Rattan Singh and Sons, had expressed disappointment against the procedural delays and tardiness in the resolution of disputes through arbitration.
- Even the clauses providing for fees of the arbitrators and fixed timelines for disposal are often disregarded by the players
- The inevitable consequence of these drawbacks is a slow departure of the biggest litigant, the government, from the arbitration spectrum.
- A sector that is dominated by approvals, protocols and scrutiny, uncertainty about the budget outlay towards arbitrations and unexpected delays in disposal does not inspire confidence and detracts from the sanctity of the process.
Way forward
- Arbitrators have endeavoured to simplify the proceedings by limiting the pleadings, insisting on written arguments, reducing the number of sittings and laying down a schedule for various milestones.
- Some restraint is needed from all quarters to bring its wheels back on the tracks. These are:
- A small check on the arbitral fees and timelines.
- Careful drafting of arbitration clauses.
- Stringent procedural safeguards to curb delays.
- Expeditious disposal of the court proceedings and legislative intent towards all of the above.
Consider the question “What are the issues faced by the arbitration in India? Suggest the measures to deal with these issues.”
Conclusion
Arbitration still has the inherent potential and characteristics to outperform other modes of dispute resolution, but for that to happen, some changes are a must.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Farmer Producer Companies
Mains level: Paper 3- Cooperatives in India and challenges
Context
India now has a Ministry of Cooperation that aims to strengthen the country’s cooperative movement. This is an opportune moment to look at the movement’s history, examine the potential of cooperatives and analyse the challenges they face.
Development of Farmer Producer Companies in India
- India’s significant tryst with dairy cooperatives began in the 1950s with the success of what we know today as Amul.
- The nation took note of this initiative and the National Dairy Development Board was set up in 1965.
- However, the expansion wasn’t working the way it had been envisaged.
- The need for a new model was felt soon as cooperatives outside Anand were not holding regular and proper elections.
- Their accounts were not audited.
- As a result, a committee was set up in the Company Affairs Ministry to allow farmers to set up companies.
- The Farmer Producer Companies (FPCs) would run on the principle of “one share one vote” and the essence of cooperatives would not be diluted.
- The Parliamentary Committee looked into the Bill to give legal backing to FPCs, with this, the Companies Act (Second Amendment), 2002 became law.
Funding the FPCs
- The existing funding vehicles were designed to cater to cooperatives, not FPCs
- Around 2010, the Boston Consulting Group (BCG) had been commissioned to develop a plan for restructuring NABARD.
- As a result, the restructured NABARD had a special window for FPCs.
Community-based cooperatives
- The Cheliya community set up a chain of Hearty Mart “cooperative” supermarkets in villages in Gujrat using the franchise model.
- Just as the network of Charotar Patels that Kurien relied on in the case of Amul —Cheliya community have played a key role in the spread of the model.
- The idea of leveraging the community network was tried in some parts of the country in the context of re-imagining economic infrastructure.
- To deal with the electricity board failures, a distribution company was run on a community basis.
- This model has, in fact, worked in places like Kanpur, even Kerala.
Social cooperatives
- The concept of social cooperatives builds on the idea of communities creating infrastructure by using local material and family labour.
- These can be the village tank, paving the village road — with or without MGNREGA — finishing the last-mile construction of a canal network or even keeping watch on the contractor.
- The pandemic seems to have increased the significance of community effort.
- Reducing vaccine hesitancy, providing food to those waiting outside hospitals and, most importantly, looking after orphaned children are imperatives crying out for the cooperative model.
Way forward for new Ministry of Cooperatives
- Keeping in mind social needs while using resources is a large part of the solution to our current predicament.
- The pandemic will not follow the laws of corporate finance, cooperation has a lot to speak for itself, the new ministry should take this message.
- The new work-from-home model will create several problems as well as offer opportunities.
- The new ministry is a recognition of the needs of our times.
- But it should not be just about pumping in money.
Conclusion
This is the time to design models that help those who help themselves. We will wait expectantly to see how the new ministry works.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Issues with school education in India
Context
Proportion of children attending the government schools has been on the decline. This has several implications.
Issues with school education in India
- A quality, free and regular school education represents our most potent infrastructure of opportunity, a fundamental duty of the state.
- Meritocracy represents the idea that people should advance based on their talents and efforts.
- But India’s meritocracy is sabotaged by flailing government schools.
- The proportion of India’s children attending a government school has now declined to 45 per cent.
- This number is 85 per cent in America, 90 per cent in England, and 95 per cent in Japan.
- India’s 100 per cent plus school enrolment masks challenges; a huge dropout ratio and poor learning outcomes.
- We have too many schools and 4 lakh have less than 50 students (70 per cent of schools in Rajasthan, Karnataka, J&K, and Uttarakhand).
- China has similar total student numbers with 30 per cent of our school numbers.
It is not Government Vs. Private schools
- Demand for better government schools is not an argument against private schools.
- Because, without this market response to demand, the post-1947 policy errors in primary education would have been catastrophic for India’s human capital.
Way forward
- We need the difficult reforms of governance, performance management, and English instruction.
- Governance must shift from control of resources to learning outcomes; learning design, responsiveness, teacher management, community relationships, integrity, fair decision making, and financial sustainability.
- Performance management, currently equated with teacher attendance, needs evaluation of scores, skills, competence and classroom management. Scores need continuous assessments or end-of-year exams.
- The new world of work redefines employability to include the 3Rs of reading, writing, and arithmetic and a fourth R of relationships.
- India’s farm to non-farm transition is not happening to factories but to sales and customer services which need 4R competency and English awareness.
- English instruction is about bilingualism, higher education pathways, and employability.
- Employment outcomes are 50 per cent higher for kids with English familiarity because of higher geographic mobility, sector mobility, role eligibility, and entrance exam ease.
- India’s constitution wrote Education Policy into Lists I (Centre), II (State), and III (concurrent jurisdiction); this fragmentation needs revisiting because it tends to concentrate decisions that should be made locally in Delhi or state capitals.
Conclusion
Government needs urgent measure to addreess the issues which has bearing on its future.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Crime and Criminal Tracking Network and Systems and the National Intelligence Grid
Mains level: Paper 2- Need for a coordinated database of fugitives
Context
India lacks a domestic tracking system for fugitives. That makes it easier for them to evade the criminal justice system.
Challenges at investigation and prosecution level
- Central agencies have developed reasonable expertise in investigation and prosecution because they are focussed only on investigation and prosecution work.
- On the other hand, State police forces (except specialised wings) are engaged in law-and-order work as well as investigations.
- The bulk of the investigation and prosecution work happens at police stations in the States.
- There is a tendency to close investigations once the accused have absconded.
- Some police stations do initiate proceedings for attachment of property and declaration of the accused as proclaimed offenders, but the number of cases where coordinated efforts are made to pursue fugitives – domestically or internationally – are hardly documented.
No system for tracking criminals domestically
- Through Interpol Notices and the sharing of immigration databases of different countries, there exists a system of tracking criminals worldwide.
- However, there is no coordinated system or database for tracking criminals or wanted persons domestically in India.
- In the absence of such a system, it is relatively easy for criminals from one police station/jurisdiction to melt into the population in any other area, almost undetected.
Way forward
- The creation of a nationwide database of wanted persons, which could be accessible for police agencies, the public and others is needed.
- A nation-wide system of ‘Wanted Persons Notices’, similar to Interpol Notices, is required, to help track fugitives domestically.
- The Crime and Criminal Tracking Network and Systems and the National Intelligence Grid are efforts in the right direction/
- Countries like the U.S. have functional inter-State extradition and fugitive tracking systems.
- India needs to set up such dedicated ‘fugitive tracking units’.
- There needs to be enhanced integration between immigration agencies, State police agencies, Interpol-New Delhi, the External Affairs Ministry and Home Ministry and central investigation agencies.
- Sharing India’s ‘wanted’ database or providing access to it to foreign embassies on a reciprocal basis or through treaties or arrangements would also be helpful.
- Signing of more bilateral and multilateral conventions on criminal matters would help plug legal infirmities.
- Signing bilateral agreements on cooperation in policing matters would also help.
- All relevant legal processes and requirements should be incorporated into one consolidated law on international cooperation.
- The entire gamut of activities pertaining to fugitives, from investigation to extradition, needs to be incorporated into a specialised set-up.
Conclusion
In the absence of a coordinated database, criminals can go undetected. What we need is a watertight system that would deter criminals from hoodwinking the law.
Back2Basics: Crime and Criminal Tracking Network and Systems (CCTNS)
- CCTNS aims at creating a comprehensive and integrated system for enhancing the efficiency and effective policing at all levels and especially at the Police Station level.
- It aism at adoption of principles of e-Governance, and creation of a nationwide networked infrastructure for evolution of IT-enabled state of- the-art tracking system around “investigation of crime and detection of criminals” in real time.
- It is is a critical requirement in the context of the present day internal security scenario.
- The scope of CCTNS spans all 35 States and Union Territories and covers all Police Stations (15,000+ in number) and all Higher Police Offices (6,000+ in number) in the country.
- The CCTNS project includes vertical connectivity of police units (linking police units at various levels within the States – police stations, district police offices, state headquarters, SCRB and other police formations – and States, through state headquarters and SCRB, to NCRB at GOI level) as well as horizontal connectivity, linking police functions at State and Central level to external entities.
National Intelligence Grid (NATGRID)
- First conceptualised in 2009, NATGRID seeks to become the one-stop destination for security and intelligence agencies to access database related to immigration entry and exit, banking and telephone details of a suspect on a “secured platform”.
- All State police are mandated to file First Information Reports (FIR) in the CCTNS.
- It is only a repository and the data pertaining to FIRs of a particular police station are a State subject.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 124 and Article 214
Mains level: Paper 2- Collegium system
Context
Judiciary is being challenged, from within and outside. It must shield itself from further erosion of its independence and competence by scrupulously following the law, as declared by the Supreme Court (SC) itself.
How the Collegium helped to secure the independence of judiciary
- In 1993, the SC held the following:
- The process of appointment of Judges to the Supreme Court and the High Courts is an integrated ‘participatory consultative process’.
- The process aims at selecting the best and most suitable persons available for appointment.
- The Collegium consists of the CJI and the four senior-most judges of the SC and high courts.
- It was devised to ensure that the opinion of the Chief Justice of India is not merely his individual opinion, but an opinion formed collectively by a body of men at the apex level in the judiciary.
- By judicial interpretation, the Supreme Court re-interpreting Article 124 and 214 of the Constitution empowered the judiciary to make appointments to the higher judiciary to secure the rule of law.
Threat to the judicial independence
- The framers of the Constitution were alive to the likely erosion of judicial independence.
- On May 23, 1949, K T Shah stated that the Judiciary, which is the main bulwark of civil liberties, should be completely separate from and independent of the Executive, whether by direct or by indirect influence.
- In 2016, the Supreme Court struck down a constitutional amendment for creating the National Judicial Appointments Commission (NJAC).
- The SC strongly disapproved of any role for the political executive in the final selection and appointment of judges.
- The SC said that “reciprocity and feelings of payback to the political executive” would be disastrous to the independence of the judiciary.
Consider the question “How the Collegium system helped the Judiciary secure its independence? What are the issues with it?”
Conclusion
The selection of deserving judges is essential to ensure the independence of the judiciary. The Collegium must do its best in this task.
Back2Basics: About the National Judicial Appointments Commission
- The NJAC or National Judicial Appointments Commission sought to change the system, where judges would have been appointed by a commission where the legislative and the executive would have had a role.
- The NJAC was supposed to comprise of the Chief Justice of India (Chairperson, ex-officio), two other senior judges of the Supreme Court, The Union Minister of Law and Justice, ex-officio and two eminent persons, to be appointed by the Chief Justice of India, Prime Minister of India, and Leader of Opposition in the Lok Sabha.
- The bill was passed by the Lok Sabha on 13 August 2014 and by the Rajya Sabha on 14 August 2014, and became an Act.
- The NJAC replaced the collegium system for the appointment of judges.
- The NJAC Bill and the Constitutional Amendment Bill, was ratified by 16 of the state legislatures in India, and the President gave his assent on 31 December 2014.
- The NJAC Act became effective from April 13, 2015.
- The NJAC enjoyed support from the Supreme Court Bar Association and many legal luminaries but was also challenged by some lawyer associations and groups before the Supreme Court of India through Writ Petitions.
- A three-judge bench of the Supreme Court referred the matter to a Constitution Bench that heard different arguments for over a month.
- Finally, on October 16, a five-judge bench of the Supreme Court declared the 99th Constitutional Amendment Act and the NJAC Act 2014 “unconstitutional and void”.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: State Development Loans
Mains level: Paper 3- Centre needs to help states to tide over the uncertain year
Context
The states are borrowing less than expected in the first quarter of FY 2021-22 despite the negative impact of state-level restrictions, amidst the second Covid wave, on economic activity.
An overview of borrowing by States
- In 2020-21, the gross amount raised through state development loans (SDLs) or bonds had jumped to Rs 8 trillion, up from Rs 6.3 trillion in the previous year.
- The increase was a fallout of the Covid-19 pandemic on state finances.
- In the first quarter of the current financial year i.e. 2021-22, gross issuances of bonds stood at Rs 1.4 trillion.
- This amount is 14 per cent lower than the bonds issued last year (Rs 1.7 trillion).
- This is also around 20 per cent lower than what states had initially indicated they would borrow (Rs 1.8 trillion) through the indicative calendar of market borrowings released by the RBI.
- As a result, state bond issuances have undershot expectations in the first quarter.
Factor’s responsible for lower state borrowing
- Lower state borrowings were a consequence of three major factors.
- First, an additional tax devolution of Rs 450 billion from the Centre in late March.
- This amount was in excess of the Rs 5.5 trillion tax devolution that had been included in the revised estimates for 2020-21.
- Second, record-high GST collections in April which doubled to Rs 1.3 trillion in the first quarter of this year, up from Rs 0.6 trillion in the same period last year.
- Third, receipt of substantial grants from the Centre adding up to Rs 436 billion in April-May related to the recommendations of the Fifteenth Finance Commission.
Factors that could influence the borrowing pattern in the next three quarters
- First, the varying pace of unlocking and the consequent economic revival in states from June onwards may crucially affect state borrowings in the second quarter.
- A faster ramp-up of vaccine administration may help some states, reducing the need to borrow.
- Second, the eventual calendar for raising back-to-back loans by the GoI to compensate states for the loss in their GST revenues could also result in a change in the states’ borrowing schedule.
- Third, the quantum, and timing of tax devolution will also play a role.
Why timing of the Central tax devolution matters for States
- Central tax devolution forms a quarter of states’ combined revenue receipts.
- This revenue stream has contracted by 15 per cent in the first two months of the year, falling to Rs 392 billion each in April-May this year, from Rs 460 billion last year.
- If the Centre continues to devolve to states this amount till February 2022, then a massive Rs 2.4 trillion (36 per cent of the budgeted amount) will be left for devolution in March 2022 — assuming that the devolution for the full year is not revised below the budgeted level.
- From the states’ point of view, this would be rather inefficient from a cash flow perspective.
Conclusion
An early step-up in tax devolution by the central government may provide comfort to the states to accelerate expenditure during another uncertain year, without borrowings being pushed up in the next two quarters.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UAPA
Mains level: Paper 2- Misuse of UAPA and role of judiciary
Context
Father Stan Swamy passed away at a private hospital in Mumbai on July 5. Fr. Swamy was arrested by the National Investigation Agency (NIA), under the Unlawful Activities (Prevention) Act (UAPA).
How Supreme Court judgment leaves the scope for misuse of UAPA
- The Supreme Court’s April 2019 decision in National Investigation Agency vs Zahoor Ahmad Shah Watali on the interpretation of the UAPA has affected all downstream decisions involving the statute.
- This decision has created a new doctrine.
- According to the decision, in considering bail applications under the UAPA, courts must presume every allegation made in the First Information Report to be correct.
- Further, bail can now be obtained only if the accused produces material to contradict the prosecution.
- In other words, the burden rests on the accused to disprove the allegations, which is virtually impossible in most cases.
- The decision has essentially excluded the admissibility of evidence at the stage of bail.
- By doing so, it has effectively excluded the Evidence Act itself, which arguably makes the decision unconstitutional.
- Due to the Supreme Court judgment, High Courts have their hands tied, and must perforce refuse bail, as disproving the case is virtually impossible.
- The Delhi High Court recently granted bail to three young activists arrested under UAPA in a conspiracy relating to the 2020 riots in Delhi.
- The Supreme Court reportedly expressed surprise and gave the direction that the decision will “not to be treated as precedent by any court” to give similar reliefs.
Misuse of the UAPA
- With such high barriers of proof, it is now impossible for an accused to obtain bail, and is in fact a convenient tool to put a person behind bars indefinitely.
- This is being abused by the government, police and prosecution liberally: now, all dissenters are routinely implicated under charges of sedition or criminal conspiracy and under the UAPA.
- In multiple instances, evidence is untenable, sometimes even arguably planted, and generally weak overall.
- But as a consequence of UAPA being applied, the accused cannot even get bail.
Way forward
- If we want to prevent the misuse, the decision in the Watali case must be urgently reversed or diluted, otherwise, we run the risk of personal liberties being compromised very easily.
Conclusion
The provision of the act leaves the scope for misuse and therefore judiciary and legislature need to take steps to provide safeguards to prevent the misuse.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: One nation, one ration card scheme
Mains level: Paper 2- Guidelines for providing relief to migrant workers
Context
The Supreme Court on June 29 pronounced its judgment in the migrant labourers case. The case was initiated last year after the national lockdown was announced on March 24.
Guidelines laid down by the Supreme Court
- Two of the most important components to protect the migrants during this time were the food and travel arrangements insisted on by the court.
- In the orders pronounced in May this year, it laid down that dry ration be provided to migrants who want to return to their homes.
- Further, the court said that identity proof should not be insisted upon by the governments since the labourers might not be able to furnish it.
- Secondly, the court called upon the State governments to arrange transportation for workers who need to return to their homes.
- The Supreme Court fixed July 31 as the deadline for the States to implement the ‘One nation One Ration Card’ scheme.
- Apart from dry ration, the top court also directed the State governments to run community kitchens for migrant workers.
- In the order passed on June 29, the court affirmed the Right to Food under Article 21 of the Constitution.
- In furtherance of this, the court asked the States to formulate their own schemes and issue food grains to migrants.
- The top court recognised the need for direct cash benefit transfer to workers in the unorganised sector.
- But it did not issue any guidelines for the same.
Challenges
- The Supreme Court has given a purposive declaration in the case but the bulk of the judgment seems declaratory rather than mandatory.
- Under the ‘One nation One Ration Card’ scheme, the States are to complete the registration of migrant workers in order to provide dry ration to them.
- But it is unlikely that a standardised system can be developed within the deadline prescribed by the court.
- There are administrative problems in running community kitchens for migrant workers.
- First, migrant workers keep moving in search of employment and it is difficult to cover them all under the scheme.
- Second, many States do not have the necessary infrastructure to run and maintain community kitchens on such a large scale.
- The court asked the States to formulate their own schemes and issue food grains to migrants, but there are no normative data that would allow the States to identify eligible migrants.
Conclusion
In order to efficaciously implement the orders of the court, the State governments need to work with the Centre closely. It is imperative to ensure that government machinery works to its full potential and robust systems are developed to withstand the challenges of the looming third covid wave.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Shift in mental health care system needed
Context
Recently, a High Court suggested that homeless persons with health conditions be branded with a permanent tattoo, when vaccinated against COVID-19.
Issue
- In many countries, persons with severe mental health conditions live in shackles in their homes, in overcrowded hospitals, and even in prison.
- On the other hand, many persons with mental health issues live and even die alone on the streets.
- Three losses dominate the mental health systems narrative: dignity, agency and personhood.
- Issues with the laws: Far-sighted changes in policy and laws have often not taken root and many laws fail to meet international human rights standards.
- Many also do not account for cultural, social and political contexts resulting in moral rhetoric that doesn’t change the scenario of inadequate care.
- There is also the social legacy of the asylum, and of psychiatry and mental illness itself, that guides our imagination in how care is organised.
Way forward: A responsive care system
- We must understand mental health conditions for what they are and for how they are associated with disadvantage.
- These situations are linked, but not always so, therefore, not all distress can be medicalised.
- Adopt WHO guidelines: Follow the Guidance on Community Mental Health Services recently launched by the World Health Organization.
- The Guidance, which includes three models from India, addresses the issue from ‘the same side’ as the mental health service user and focuses on the co-production of knowledge and on good practices.
- Drawn from 22 countries, these models balance care and support with rights and participation.
- Open dialogue: The practice of open dialogue, a therapeutic practice that originated in Finland, runs through many programmes in the Guidance.
- This approach trains the therapist in de-escalation of distress and breaks power differentials that allow for free expression.
- Increase investment: With emphasis on social care components such as work force participation, pensions and housing, increased investments in health and social care seem imperative.
- Network of services: For those homeless and who opt not to enter mental health establishments, we can provide a network of services ranging from soup kitchens at vantage points to mobile mental health and social care clinics.
- Small emergency care and recovery centres for those who need crisis support instead of larger hospitals, and long-term inclusive living options in an environment that values diversity and celebrates social mixing, will reframe the archaic narrative of how mental health care is to be provided.
Conclusion
Persons with mental health conditions need a responsive care system that inspires hope and participation without which their lives are empty. We should endeavour to provide them with such a responsive care system.
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From UPSC perspective, the following things are important :
Prelims level: 15th Finance Commission
Mains level: Paper 2- Federalism at the centre stage of politics
Context
- Several issues such as vaccine wars, debates over the Goods and Services Tax (GST), the fracas over West Bengal’s Chief Secretary, and the pushback against controversial regulations in Lakshadweep have once again brought into focus the idea of federalism.
- The Dravida Munnetra Kazhagam, since taking office, has begun to craft an ideological narrative on State rights, by re-introducing the term Union into the public discourse and pushing back against increased fiscal centralisation
Lack of political consensus among States for genuine federalism
- Federalism in India has always had political relevance, but except for the States Reorganisation Act, federalism has rarely been an axis of political mobilisation.
- Fiscal and administrative centralisation persisted despite nearly two decades of coalition governments.
- Rather than deepen federalism, the contingencies of electoral politics have created significant impediments to creating a political consensus for genuine federalism.
Three challenges in deepening federalism among States
1) Tendency to equate federalism as against nationalism
- The grammar of development and nationalism, which has mass electoral appeal is used to undermine federalism.
- Slogans such as ‘one nation, one market’, ‘one nation, one ration card’, ‘one nation, one grid’ symbolise development and nationalism while leaving little space for federalism.
- In this context, federalism as a principle risks being equated with regionalism and a narrow parochialism that is anti-development and anti-national.
2) Lack of federal principles
- Pratap Bhanu Mehta has pointed out that over the decades, federal principles have been bent in all kinds of ways to co-produce a political culture of flexible federalism.
- Federalism in this rendition is reduced to a game of political upmanship and remains restricted to a partisan tussle.
- Claimants of greater federalism often maintain silence on unilateral decisions that affect other States.
- For instance, the downgrading of Jammu and Kashmir into a Union Territory, the notification of the NCT of Delhi (Amendment) Act, 2021 hardly witnessed protests by States that were not directly affected by these.
3) Economic and governance divergence among states
- Across all key indicators, southern (and western) States have outperformed much of northern and eastern India.
- This has resulted in a greater divergence rather than expected convergence with growth.
- This has created a context where collective action amongst States becomes difficult as poorer regions of India contribute far less to the economy but require greater fiscal resources to overcome their economic fragilities.
- These emerging tensions were visible when the 15th Finance Commission (FC) was mandated to use the 2011 Census rather than the established practice of using the 1971 Census.
- This, Southern states feared, risked penalising States that had successfully controlled population growth by reducing their share in the overall resource pool.
- With the impending delimitation exercise due in 2026, these tensions will only increase.
Way forward
- A politics for deepening federalism will need to overcome a nationalist rhetoric that pits federalism against nationalism and development.
- Reclaim fiscal federalism: Weak fiscal management has brought the Union government on the brink of what economist Rathin Roy has called a silent fiscal crisis.
- The Union’s response has been to squeeze revenue from States by increasing cesses.
- Its insistence on giving GST compensation to States as loans (after long delays) and increasing State shares in central schemes.
- Against this backdrop, both sub-nationalist sentiments and the need to reclaim fiscal federalism create a political moment for a principled politics of federalism.
- Sharing burden with poorer States: On the fiscal side, richer States must find a way of sharing the burden with the poorer States.
- An inter-State platform that brings States together in a routine dialogue on matters of fiscal federalism could be the starting point for building trust and a common agenda.
- Overcome isolationist tendency: The politics of regional identity is isolationist by its very nature.
- An effort at collective political action for federalism based on identity concerns will have to overcome this risk.
- Finally, beyond principles, a renewed politics of federalism is also an electoral necessity.
Consider the question “Federalism in India has always had political relevance, but it has rarely been an axis of political mobilisation. What are the factors responsible for this? Suggest the way forward for the states to overcome these factors.”
Conclusion
A renewed politics of federalism would require immense patience and maturity from regional parties. It remains to be seen whether they up to the task.
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From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: China's scramble for Africa and challenges for India
This op-ed analyses the future of India-Africa cooperation in agriculture amid the looming Chinese involvement in African countries.
Agricultural significance of Africa
- With 65% of the world’s uncultivated arable land, employing over 60% of the workforce, and accounting for almost 20% of Sub-Saharan Africa’s GDP, agriculture is critical to Africa’s economy.
China factor behind
- As this relationship enters the post-pandemic world, it is vital to prioritize and channel resources into augmenting partnerships in agriculture.
- This is crucial given its unexplored potential, centrality to global food security, business prospects and to provide credible alternatives to the increasing involvement of Chinese stakeholders in the sector.
Analyzing Chinese engagement
Chinese corporations, small and medium-sized enterprises and entrepreneurs adopt has provided a layered perspective of the sociopolitical, economic and environmental impact of Chinese engagement.
- Trade: China is among Africa’s largest trading partners.
- Credit facility: It is also Africa’s single biggest creditor.
- Infrastructure: Its corporations dominate the region’s infrastructure market and are now entering the agri-infra sector.
- Strategic support: While access to Africa’s natural resources, its untapped markets and support for ‘One China Policy’ are primary drivers of Chinese engagement with the region, there are other factors at play.
China is going strategic in the guise of agriculture
- Increasingly critical to China’s global aspirations, its engagement in African agriculture is taking on a strategic quality.
- Chinese-built industrial parks and economic zones in Africa are attracting low-cost, labour-intensive manufacturing units that are relocating from China.
- Chinese engineers interviewed spoke of how their operations in Africa are important to accumulate global experience in management, risk and capital investments.
- Not only are they willing to overlook short-term profits in order to build a ‘brand China’, but they want to dominate the market in the long term, which includes pushing Chinese standards in host countries.
- Chinese tech companies are laying critical telecommunications infrastructure, venture capital funds are investing in African fintech firms, while other smaller enterprises are expanding across the region.
Agricultural landscape
- While many Chinese entities have been active in Africa’s agriculture for decades now, the nature, form and actors involved have undergone substantial change.
- In Zambia, Chinese firms are introducing agri-tech to combat traditional challenges, such as using drone technology to control the fall armyworm infestation.
- They have set up over Agricultural Technology Demonstration Centers (ATDCS) in the continent where Chinese agronomists work on developing new crop varieties and increasing crop yields.
- This ATDCs partner with local universities, conduct workshops and classes for officials and provide training and lease equipment to small holder farmers.
- Chinese companies with no prior experience in agriculture are setting out to build futuristic ecological parks while others are purchasing large-scale commercial farms.
Inducing their soft power
- The exponential growth in the China-Africa economic ties and the emergence of Beijing as an alternative to traditional western powers have motivated change in perceptions across groups.
- Governments and heads of state are recalibrating approaches, media houses are investing more resources for on-the-ground reporting.
Dark Side of the Sino-Africa ties
- Simultaneously, Africa-China relations are becoming complex with a growing, insular diaspora, lopsided trade, looming debt, competition with local businesses and a negative perception accompanied by greater political and socioeconomic interlinkages.
- On occasion, there seems to be a gap between skills transferred in China and the ground realities in Africa.
- In some cases, the technology taught in China is not available locally and in others, there is inability to implement lessons learnt due to the absence of supporting resources.
- Larger commercial farms run by Mandarin-speaking managers and the presence of small-scale Chinese farmers in local markets aggravates socio-cultural stresses.
India’s agricultural engagement
- Diverse portfolios: India-Africa agricultural cooperation currently includes institutional and individual capacity-building initiatives, an extension of soft loans, supply of machinery, acquisition of farmlands and the presence of Indian entrepreneurs in the African agricultural ecosystem.
- Land acquisition: Indian farmers have purchased over 6,00,000 hectares of land for commercial farming in Africa.
- States cooperation: Sub-national actors are providing another model of cooperation in agriculture. Consider the case of the Kerala government trying to meet its requirement for cashew nuts with imports from countries in Africa.
- Civil society: Similar ideas could encourage State governments and civil society organizations to identify opportunities and invest directly.
- Agri-business: There is also promise in incentivizing Indian industries to tap into African agri-business value chains and connecting Indian technology firms and startups with partners in Africa.
- Investment: In the past year, despite the pandemic, the sector witnessed a record increase in investments.
Way forward
- A thorough impact assessment needs to be conducted of the existing capacity-building initiatives in agriculture for India to stand in good stead.
- This could include detailed surveys of participants who have returned to their home countries.
- Country-specific and localized curriculum can be drawn up, making skill development demand-led.
- In all senses, India has consistently chosen well to underline the development partnership to be in line with African priorities.
- It is pertinent, therefore, that we collectively craft a unique modern partnership with Africa.
Conclusion
- While India’s Africa strategy exists independently, it is important to be cognizant of China’s increasing footprint in the region.
- Beijing’s model, if successful here, could be heralded as a replica for the larger global south.
- It is important to note, however, that prominent African voices have emphasized that their own agency is often overlooked in the global discourse on the subject.
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From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Turkey's rising space in geopolitical arena
As a new round of geopolitical jousting begins on India’s north-western frontiers, Delhi must deal with a number of new actors that have carved out a role for themselves in the region.
Overambitious Turkey
- Our focus today is on Turkey’s regional ambitions (particularly in Afghanistan) and their implications for India.
- Ankara is in negotiations with the US on taking charge of the Kabul airport which is critical for an international presence in Afghanistan that is coming under the Taliban’s control.
- Turkey has been running Kabul airport security for a while, but doing so after the US pullout will be quite demanding.
- Taking a longer view, though, Turkey is not a new regional actor in India’s northwest.
Turkey and Afghanistan
- Ankara and Kabul have recently celebrated the centennial of the establishment of diplomatic relations.
- Through this century, Turkey has engaged purposefully with Afghanistan over a wide domain.
- While it joined the NATO military mission in Afghanistan after the ouster of the Taliban at the end of 2001, Turkey avoided any combat role and differentiated itself from the Western powers.
- Ankara has contributed to the training of the Afghan military and police forces.
- It has also undertaken much independent humanitarian and developmental work.
Affinity with Pakistan
- Turkey’s good relations with both Afghanistan and Pakistan have also given space for Ankara to present itself as a mediator between the warring South Asian neighbours.
- Turkey’s “Heart of Asia” conference or the Istanbul Process has been a major diplomatic vehicle for attempted Afghan reconciliation in the last few years.
- Widespread goodwill for Turkey in Afghanistan has now come in handy for the US in managing some elements of the post-withdrawal phase.
- In Pakistan, PM Imran Khan has rallied behind Erdogan’s ambition to seize the leadership of the Islamic world from Saudi Arabia.
- Pakistan’s Army Chief had to step in to limit the damage with Saudi Arabia, which has long been Pakistan’s major economic benefactor.
Challenges for India
- Turkey’s growing role in Afghanistan opens a more difficult phase in relations between Delhi and Ankara.
- India’s opposition to alliances and Turkey’s alignments reflected divergent international orientations of Delhi and Ankara after the Second World War.
- And Turkey’s deepening bilateral military-security cooperation with Pakistan made it even harder for Delhi to take a positive view of Ankara.
- Turkey and Pakistan were part of the Central Treaty Organization (CENTO) that was set up in 1955 by the British.
- Although CENTO eventually wound up in 1979, Turkey and Pakistan remained close partners in a number of regional organizations and international forums like the Organization of Islamic Cooperation.
Pre-Erdogan era Turkey
- The shared secular values between Delhi and Ankara in the pre-Erdogan era were not enough to overcome the strategic differences between the two in the Cold War.
- To make matters more complicated, the positive legacy of the Subcontinent’s solidarity with the Ottoman Empire and the Turkish Republic, emerged out of its ruins in the early 20th century, accrued mostly to Pakistan.
- There were moments — during the tenures of PM Rajiv Gandhi and Mr Vajpayee, when India and Turkey seemed poised for a more productive relationship.
- But those have been rather few and far between.
Turkey’s departure from Secularism
- Meanwhile, Turkey’s Islamist internationalism under Recep Tayyip Erdogan has inevitably led to its deeper alliance with Pakistan, greater meddling in South Asia, and a sharper contraction with India.
- The Pakistani prism through which Delhi has long seen Ankara, however, has prevented it from fully appreciating the growing strategic salience of Turkey.
- Erdogan’s active claim for leadership of the Islamic world has seen a more intensive Turkish political, religious, and cultural outreach to the Subcontinent’s 600 million Muslims.
Self-goals on Kashmir
- Turkey has become the most active international supporter of Pakistan on the Kashmir question.
- Delhi is aware of Erdogan’s hypocrisy on minority rights.
- While pitching for self-determination in Kashmir, Erdogan actively tramples on the rights of its Kurdish minority at home and confronts them across Turkey’s border in Syria and Iraq.
Other ambitions in Asia
- Erdogan was quick to condemn the Bangladesh government’s hanging of a senior extremist leader in 2016.
- But in a reflection of his strategic suppleness, Erdogan also offered strong political support for Dhaka on the Rohingya refugee crisis.
- As Bangladesh emerges as an attractive economy, Ankara is now stepping up its commercial cooperation with Dhaka.
- Turkey, which hosted the Caliphate in the Ottoman era, had natural spiritual resonance among the South Asian Muslims.
Riving the Caliphate
- With the abolition of the Caliphate in 1924, Turkey’s Westernization under Ataturk reduced its religious significance.
- Erdogan’s Islamist politics are about regaining that salience.
- Erdogan’s strategy marks the declining relevance of the old antinomies — between alliances and autonomy, East and West, North and South, Islam and the West, Arabs and the Jews — that so resonate with the traditional Indian foreign policy discourse.
Stance on Israel
- Turkey was the first Muslim-majority nation that established full diplomatic relations with Israel.
- Erdogan now actively mobilizes the Arab and Islamic world against Israel without breaking relations with Tel Aviv.
- Erdogan’s outrage on Israel is about presenting himself as a better champion of Palestine than his Arab rivals.
India’s option against Turkey
- India, which has been at the receiving end of Erdogan’s internationalism, has multiple options in pushing back.
- The recent naval exercise between India and Greece in the Mediterranean offers a small hint of India’s possibilities in Turkey’s neighbourhood.
- Many Arab leaders reject Erdogan’s policies that remind them of Ottoman imperialism.
- They resent Erdogan’s support of groups like the Muslim Brotherhood that seek to overthrow moderate governments in the Middle East.
- There is much that India can do to up its game in the Arab world.
Lessons for India
- The new fluidity in geopolitics in India’s extended neighbourhood to the west.
- Agency for regional powers is growing as the influence of great power weakens.
- Religious ideology, like the more secular ones, is a cover for the pursuit of power.
- Finally, Erdogan has carefully modulated his confrontation with major powers by avoiding a breakdown in relations.
Conclusion
- For Erdogan, the choices are not between black and white. That should be a good guide for India’s own relations with Turkey.
- Delhi needs to vigorously challenge Turkey’s positions where it must, seize the opportunities opened by regional resentments against Erdogan’s adventurism, and at the same time prepare for a more intensive bilateral engagement with Ankara.
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From UPSC perspective, the following things are important :
Prelims level: Climate proofing
Mains level: Paper 3- Decentralised model of solar power generation
Power regulatory body in Rajasthan recently ordered discoms to solarise unelectrified public schools. The move has several benefits and therefore can be emulated by the other states as well.
Expanded electricity access in rural areas and shortcomings in it
- Estimates suggest that India has doubled the electrified rural households, from 55% in 2010 to 96% in 2020.
- However, the measure of access to power supply has been the number of households that have been connected to the electricity grid.
- This measure discounts large areas of essential and productive human activities such as public schools and primary health centres.
- And despite greater electrification, power supply is often unreliable in rural areas.
Solar energy: Solution to electrification in remote parts
- To address the above problems, the Rajasthan Electricity Regulatory Commission (RERC) has ordered the State’s discoms to solarise unelectrified public schools.
- The RERC has also suggested installation of batteries to ensure storage of power.
- Apart from enabling education, this ruling would benefit several other crucial aspects of rural life.
- The RERC order also directed discoms to seek corporate social responsibility (CSR) funds for the solarising drive and allows schools ownership of the power systems in a phased manner.
- This removes the burden of infrastructure development expenses on discoms, while also ensuring clean energy for the schools.
- The power that is generated could also be counted towards the discoms’ Renewable Purchase Obligations (RPO).
- Large-scale projects are generally financed by companies that wish to profit from economies of scale.
- They are less interested in investing in rural electricity as it is not as lucrative.
- Large-grid based projects add to the supply of power in urban areas, and therefore, only marginally further greater energy access goals.
The decentralised model of power generation
- While Rajasthan has land mass with vast, sparsely populated tracts available to install solar parks, bulk infrastructure of this scale is susceptible to extreme weather events.
- With climate change increasing the possibility of such events, a decentralised model of power generation would prove to be more climate resilient.
- With battery storage, the susceptibility of grid infrastructure to extreme weather events could be mitigated.
- This is called climate proofing.
- As solar installations become inexpensive and with rapidly advancing battery storage technologies, decentralised solar power generation has become a reality.
Conclusion
The ruling by Rajasthan’s power regulator not only helps in increasing access to electricity, achieving targets of renewable energy but also suggests solutions that other States could emulate.
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From UPSC perspective, the following things are important :
Prelims level: Integrated Theatre Commands
Mains level: Issues over the constitution of ITC
The recent controversy over the alleged marginalization of the Indian Air Force (IAF) in the proposed ‘theaterisation’ of the national security landscape has led to some debates.
IAF concerned over ITC
- The Indian military continues to work in silos, like all governmental agencies in India, and a need was rightly felt and directions issued by PM to bring about jointness.
- The aim is to bring about synergy in operations while economizing through the elimination of duplication and wasteful practices or processes.
- IAF is keen to bring in the requisite reforms to improve the war-fighting capabilities of the Indian military as a whole while also economizing.
Reservations of IAF
- In the current formulation of theatres, the objections from the IAF have essentially been due to air power being seen as an adjunct to the two surface forces.
- IAF veterans feel that the IAF is being divided into penny packets which would seriously degrade the effectiveness of air operations in any future conflict or contingency.
- They feel that the use of air power is found to be sub-optimal under the military ethos of “an order is an order”.
Hurry by the CDS
- Concurrently, such an intellectual exercise would identify duplication, wasteful resources and practices.
- This is what the CDS should have been pursuing before first freezing the structure and then trying to glue the pieces together or hammer square pegs in round holes.
- Only such a strategy can define the types of contingencies the military is expected to address, leading to appropriate military strategies, doctrines and required capabilities.
Why is the IAF right?
- Airpower is the lead element, particularly since the Indian political aim, even in the foreseeable future, is unlikely to be the occupation of new territories.
- A large, manpower-intensive army with unusable armour formations would then also come into focus.
- Even the proposed air defence command conflicts with the domain command in the seamless employment of airpower.
- It is due to the absence of such an intellectual exercise that the IAF does not wish to see its limited resources scattered away in fighting defensive battles by a land force commander with little expertise.
- The Army fails to realise that offensive air power is best not seen, busy keeping the enemy air force pinned down elsewhere as shown in 1971.
The Army-Air Force silo
- Historically, the Indian Army has always kept the IAF out of the information loop and demonstrated a penchant to ‘go it alone’.
- The charge that the IAF joined the party late during Kargil (1999) is also totally baseless and shows a lack of knowledge of events and a failure to learn from historical facts.
- Recorded facts and a dispassionate view would clearly show that the IAF began conducting reconnaissance missions as soon as the Army just made a request for attack helicopters.
- This despite the IAF pointing out the unsuitability of armed helicopters at these altitudes and their vulnerability.
- The use of offensive air power close to the Line of Control also required that the political leadership be kept informed due to possibilities of escalation, something that the Army was unwilling to do.
Echoes from Kargil
- Seen in this light, the Chinese incursion into Eastern Ladakh last year is reminiscent of Kargil.
- While the response has been swift, it is evident that a clear intent to use combat air power, as against 1962, has significantly contributed in deterring China.
- However, such intent and a joint strategy would have been forcefully signalled by the presence of air force representatives in the ongoing negotiations to restore status quo ante.
- The continuing build-up of the infrastructure for the PLA Air Force in Tibet further emphasizes the need for an air-land strategy, with air power as the lead element to deter or defeat the Chinese designs at coercion.
National security strategy should be at the centerstage
- If war is the continuation of politics by other means, then it is essential to first define the political objectives flowing into a national security strategy before any effective use of force can be truly contemplated.
- The failures of the mightiest militaries in Vietnam, Afghanistan, and even our own Indian misadventure in Sri Lanka bear testimony to the lack of clear political objectives and appropriate military strategies.
- It is, therefore, unfortunate that even after over seven decades after Independence, India still does not have a clearly articulated national security strategy.
Address the structural gaps
- Finally, theatre or any lower structure requires an institutionalized higher defence organization, which has been sadly missing.
- This has lead to little regular dialogue between the political and military leadership, except in crises resulting in knee-jerk responses.
- This led to a remark from a scholar-warrior that, “it is ironic that the Cabinet has an Accommodation Committee but not a Defence Committee”.
- In the current proposal, it appears that the CDS, as the permanent chairman of the Chiefs of Staff Committee (CoSC), would also exercise operational control of the theatre/functional commands.
Way forward
- Prudence demands that instead of ramming down such structures without adequate deliberations and discussions with all stakeholders.
- We need to first evolve appropriate military strategies in a nuclear backdrop in concert with the political objectives.
- Thereafter, joint planning and training for all foreseen contingencies, with war-gaming, would automatically indicate the required structures with suitable command, control and communications.
Conclusion
- We must remember that in war there is no prize for the runner-up.
- It is better that such objections and dissenting opinions come out now before the structure is formalized than once it is set in stone.
- The nation would then end up paying a heavy price, with the Air Force carrying the burden and blame for the failures.
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From UPSC perspective, the following things are important :
Prelims level: Operation Flood
Mains level: India's dairy sector
One of India’s largest dairy cooperative societies has just raised its milk prices for consumers by Rs 2/litre and this has become national news.
Sparking off a debate
- Many in the media are debating how this will push up Consumer Price Index causing inflationary pressures, which may soon force the RBI to change its “accommodative stance” on monetary policy.
Why such hues over Milk?
Milk is an important case study for our overall agriculture sector.
- First, milk is our biggest agri-commodity in terms of value, greater than paddy (rice), wheat, and sugarcane combined.
- Second, India is the largest producer of milk in the world with an estimated production of about 208 million tonnes in 2020-21, way above its closest competitor, the US, whose milk production hovers around 100 million tonnes.
- Third, our dairy sector is dominated by smallholders with an average herd size of 4-5 animals.
- Fourth, and this is important, there is no minimum support price (MSP) for milk. It is more like a contract between the company and the farmers.
How is the milk price determined?
- The price of milk is largely determined by the overall forces of demand and supply.
- Increasing costs of production enter through the supply side, but the demand side cannot be ignored.
- As a result of all this, the overall growth in the dairy sector for the last 20 years has been between 4-5 per cent per annum, and lately, it has accelerated to even 6 per cent.
Concerns of dairy farmers
- For dairy farmers, this increase in milk prices is not commensurate to the increase in their feed and other costs, and they feel that their margins are getting squeezed.
- They also feel that this price still does not count their logistics cost.
Transformation since Op Flood
- It is well known that “Operation Flood” (OF) that started in the 1970s transformed this sector.
- The institutional innovation of a cooperative model, steered by Verghese Kurien, changed the structure of this sector.
- However, even after five decades, cooperatives processed only 10 per cent of the overall milk production.
- India needed the double-engine force of the organised private sector to process another 10 per cent.
- The doors for the private sector were opened partially with the 1991 reforms, but fully in 2002-03 under the leadership of Vajpayee, when the dairy sector was completely de-licenced.
Rise of dairypreneurs
- Many start-ups “dairypreneurs” have come in promising a farm-to-home experience of milk.
- There is one company that delivers fresh milk at the consumer’s doorstep and gives quality testing kits at home.
- These have digitized cattle health, milk production, milk procurement, milk testing, and cold chain management.
Effective breeding
- Sexed semen technology helps in predetermining the sex of offspring by sorting X and Y chromosomes from the natural sperm mix.
- This can solve the problem of unwanted bulls on Indian roads.
- Although the current cost of sexed sorted semen is high, Maharashtra has taken a bold step in subsidizing it for artificial insemination.
Way forward
- The upshot of all this is that let prices be determined by market forces, with marginal support from the government or cooperatives in times of extreme.
- The major focus should be on innovations to cut down costs, raise productivity, ensure food safety, and be globally competitive.
- That will help both farmers and consumers alike.
- The cooperatives did a great job during OF, and are still doing that, but the private sector entering this sector in a big way has opened the gates of creativity and competition.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: BITs
Mains level: Paper 3- Honouring the adverse international judicial ruling in dispute with investors
The article highlights the lack of immediate compliance by the Indian government in awards involving foreign investors.
Why honouring award is important
- An important factor that propels investors to invest in foreign lands is that the host state will honour contracts and enforce awards even when it loses.
- But when the host state refuses to do so, it shakes investors’ confidence in the host state’s credibility towards the rule of law, and escalates the regulatory risk enormously.
- To an extent, this has been India’s story over the last few years
- Last year, India lost two high-profile bilateral investment treaty (BIT) disputes to two leading global corporations — Vodafone and Cairn Energy — on retrospective taxation.
- India has challenged both the awards at the courts of the seat of arbitration.
- As India drags its feet on the issue of compliance, it harms India’s reputation in dealing with foreign investors.
Antrix-Devas agreement cancellation dispute
- The other set of high-profile BIT disputes involve the cancellation of an agreement between Antrix, a commercial arm of the Indian Space Research Organisation, and Devas Multimedia.
- This annulment led to three legal disputes — a commercial arbitration between Antrix and Devas Multimedia at the International Chambers of Commerce (ICC), and two BIT arbitrations brought by the Mauritius investors and German investors.
- India lost all three disputes.
- The ICC arbitration tribunal ordered Antrix to pay $1.2 billion to Devas after a U.S. court confirmed the award earlier this year.
- After the ICC award, Indian agencies started investigating Devas accusing it of corruption and fraud.
- Last month, the National Company Law Tribunal (NCLT) ordered the liquidation of Devas on the ground that the affairs of the company were being carried on fraudulently.
- This has led to Devas issuing a notice of intention to initiate a new BIT arbitration against India, sowing the seeds for complex legal battles again.
Implications for investment in India
- A closer reading of these cases reveals that whenever India loses a case to a foreign investor, immediate compliance rarely happens.
- Instead, efforts are made to delay the compliance as much as possible.
- While these efforts may be legal, it sends out a deleterious message to foreign investors.
- It shows a recalcitrant attitude towards adverse judicial rulings.
- This may not help India in attracting global corporations to its shores to ‘make for the world’.
Consider the question “What are the factors that are leading to more Indian business disputes being settled elsewhere? What are the implications of delay by the government in honouring the awards of the disputes?”
Conclusion
As India aspire to be the global destination of FDI, it needs to burnish its image on the dispute resolution front by honouring the awards.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- How India can avoid the middle income trap
The article suggests focusing on improving productivity and thereby the manufacturing sector to avoid the middle-income trap.
What is the middle-income trap and why it matters for India
- This trap was first conceived by World Bank economists.
- They found that of the 101 developing economies that could be classified as ‘middle income’ in 1960, only 13 managed to become rich nations by 2008.
- There is little consensus on why some countries succeed in making the transition to high-income status.
- But a distinctive attribute of those that succeed in the transition to high income is productivity improvement.
- India could use its demographic dividend to avoid this predicament and achieve the critical velocity needed to move into the high-income bracket.
How can India avoid the middle-income trap
1) Improve productivity
- Re-allocation of labour from low-productivity agriculture to high-productivity sectors, such as manufacturing, has been a primary channel through which today’s advanced economies raised their living standards.
- In India, growth in labour productivity has consistently declined over the past decade.
- The annual growth rate of output per worker has dipped from 7.9% in 2010 to 3.5% in 2019, as per International Labour Organization estimates.
- This was also a period of low growth in India’s manufacturing sector.
- In 2020-21, it accounted for only 14.5% of India’s gross value added, down from 17.4% in 2011-12.
- An essential first step in improving productivity would be strengthening this sector.
2) Strengthen manufacturing sector
- Industrial labour relations is among the most critical elements to revitalize India’s manufacturing sector especially in the context of labour productivity.
- These labour laws created incentives for firms to remain small and uncompetitive, thereby affecting productivity.
- The new code, once implemented, would increase the threshold relating to layoffs and retrenchment in industrial establishments to 300 workers.
- Other countries, such as China, Vietnam and Bangladesh, with whom India competes for foreign investment and export markets do not require the approval of administrative or judicial bodies for dismissals.
- Therefore, in spite of recent reforms, India’s labour laws stay rigid in comparison with those of its competitor countries.
3) Technology intensive manufacturing
- Engendering innovation in higher value-added, tech-intensive activities is important for economies before they reach that juncture.
- If exports are taken as a proxy for the manufacturing capabilities and competitiveness of an economy, the present status of tech-intensive manufacturing in India leaves a lot to be desired.
- As per World Bank data, high-tech exports accounted for only 10.3% of India’s manufacturing exports in 2019.
- Rival countries had a much higher share of the same: 31% in China, 13% in Brazil, 40% in Vietnam and 24% in Thailand.
- Low R&D spending in India, ranging from a mere 0.64% to 0.86% of gross domestic product over the past two decades, has held the country back.
Steps to improve tech-intensive manufacturing
- The government has introduced a production-linked incentive scheme to ensure a greater share of local value addition.
- While this would attract foreign investments in tech-intensive manufacturing, there is also a need for greater incentives for R&D investments by firms in India.
- A first step in this direction could be reinstating the tax exemption on R&D under Section 35 (2AB), even for companies opting for the lower corporate tax rate of 22%.
Conclusion
We need appropriate interventions to improve productivity—both economy-wide and within the sector. And we must do it now.
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