Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fiscal deficits
Mains level: Paper 3- State budgets belies the hopes of public spending led recovery
The article highlights the trends emerging from the State budgets which dashes the hopes of public-spending led economic recovery.
State-level budget trends
- Over the past few weeks, several state governments have presented their budgets for the financial year 2021-22.
- The states, put together, account for a larger share of general government spending than the Centre.
- States’ spending stance is pivotal to the hopes of a government spending-led economic recovery.
5 Broad trends from the state budgets
- The broad state-level budget trends are based on 11 states that account for a little over 60 per cent of India’s GDP.
1) Offsetting the additional spending by Centre
- There is a collapse in states’ revenues and transfers from the Centre.
- Along with it, there is a “reluctance” among some states to borrow more to spend.
- Thus, the aggregate level spending by these states in 2020-21 will end up being lower than what they had budgeted for before the onset of the pandemic.
- The revised estimates peg their total expenditure to decline by around 6 per cent in 2020-21 from their budget estimates.
- If these trends were to hold for the other states as well, then it would imply that the additional spending by the central government, over and above its budget estimate is likely to be offset by the decline in spending by states.
2) From revenue surplus to revenue deficit
- This year, states which typically run revenue surpluses will run revenue deficits.
- The collapse in revenues meant that states that usually borrow to finance capital expenditure have had to borrow to finance their recurring expenditure (revenue expenditure) as well.
- As a consequence, capital spending by states has been cut sharply.
- States, though, expect the situation to reverse in the coming fiscal year, with most projecting a return to revenue surpluses even as the Centre will continue to run revenue deficits.
- This anomaly is unlikely to be resolved unless the root cause of the situation — the nature of the fiscal compact between the Centre and the states — is addressed.
3) Reluctance by states to borrow
- The Centre had raised the ceiling on their market borrowings from 3 to 5 per cent of GSDP.
- Of this 2 percentage point increase in the borrowing limit, part was unconditional while the remaining was subject to fulfilling Centre-mandated reforms.
- As per ICRA’s estimate, 17 states qualified based on the One Nation One Ration Card reforms, 15 qualified based on the ease of doing business reforms, seven partially completed power sector reforms, while six had completed the urban local body reforms.
- But, it is only the low-income states of Bihar, Rajasthan and Madhya Pradesh with already stretched finances that seem to have availed the additional borrowing space.
- The high-income states of Gujarat, Maharashtra and Karnataka, all of whom had greater fiscal headroom going to the crisis, and were better placed to borrow more and spend, have not done so.
4) Aggressive fiscal consolidation
- As is the case with the Centre, states have, remarkably, budgeted for aggressive fiscal consolidation next year.
- The average fiscal deficit across these states is expected to fall by more than 1 percentage point of GSDP, more than twice the decline recommended by the 15th finance commission.
5) Ambitious revenue assumptions
- The aggressive consolidation next year is expected to be achieved not by expenditure compression, as is the case with the Centre, but by significant revenue enhancement.
- However, some revenue assumptions are quite ambitious, to say the least — some states have pegged their GST and VAT collections to grow far in excess of 30 per cent in 2021-22.
- A deterioration in fiscal marksmanship will mean that expenditure in the coming fiscal year will also end up being lower than what has been budgeted for.
Consider the question “The pandemic has upended the States’ fiscal space, which is evident in their budgets. In light of this, examine the trends emerging from the budgets of the States and their implications for the economy.”
Conclusion
Subdued general government spending during these tumultuous years heightens the risks to economic recovery. Considering the possibility of the economy exiting from this period with lower medium-term growth prospects, there is a strong case for greater government spending during these years.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- AI governance
The article highlights the challenges and opportunities offered by the Artificial Intelligence and suggests the ways to deal with them.
AI as a part of our life
- AI is embedded in the recommendations we get on our favourite streaming or shopping site; in GPS mapping technology; in the predictive text that completes our sentences when we try to send an email or complete a web search.
- And the more we use AI, the more data we generate, the smarter it gets.
- In just the last decade, AI has evolved with unprecedented velocity.
How AI could help us
- AI has helped increase crop yields, raised business productivity, improved access to credit and made cancer detection faster and more precise.
- It could contribute more than $15 trillion to the world economy by 2030, adding 14% to global GDP.
- Google has identified over 2,600 use cases of “AI for good” worldwide.
- A study published in Nature reviewing the impact of AI on the Sustainable Development Goals (SDGs) finds that AI may act as an enabler on 134 of all SDG targets.
Concerns with AI
- Yet, the study in Nature also finds that AI can actively hinder 59 — or 35% — of SDG targets.
- AI requires massive computational capacity, which means more power-hungry data centres — and a big carbon footprint.
- AI could compound digital exclusion.
- Many desk jobs will be edged out by AI, such as accountants, financial traders and middle managers.
- Without clear policies on reskilling workers, the promise of new opportunities will in fact create serious new inequalities.
- Investment is likely to shift to countries where AI-related work is already established widening gaps among and within countries.
- AI also presents serious data privacy concerns.
- We shape the algorithms and it is our data AI operate on.
- In 2016, it took less than a day for Microsoft’s Twitter chatbot, “Tay”, to start spewing egregious racist content, based on the material it encountered.
Way forward
- Without ethical guard rails, AI will widen social and economic schisms, amplifying any innate biases.
- Only a “whole of society” approach to AI governance will enable us to develop broad-based ethical principles, cultures and codes of conduct.
- Given the global reach of AI, such a “whole of society” approach must rest on a “whole of world” approach.
- The UN Secretary-General’s Roadmap on Digital Cooperation is a good starting point.
- This approach lays out the need for multi-stakeholder efforts on global cooperation.
- UNESCO has developed a global, comprehensive standard-setting draft Recommendation on the Ethics of Artificial Intelligence to Member States for deliberation and adoption.
- Many countries, including India, are cognisant of the opportunities and the risks, and are striving to strike the right balance between AI promotion and AI governance.
- NITI Aayog’s Responsible AI for All strategy, the culmination of a year-long consultative process, is a case in point.
Consider the question “What are the ways in which Artificial Intelligence in helping humanity? What are the concerns with the promotion and the governance of AI?”
Conclusion
Chellenging part starts where principles meet reality that the ethical issues and conundrums arise in practice, and for which we must be prepared for deep, difficult, multi-stakeholder ethical reflection, analyses and resolve. Only then will AI provide humanity its full promise.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- First Quad summit and its significance
The first-ever Quad summit is an important milestone in the geopolitics of the region. The article highlights its significance.
Significance of the first Quad summit
- The maiden Quadrilateral Security Dialogue summit of the leaders of Australia, India, Japan and the U.S. on March 12 was a defining moment in Asian geopolitics.
- That it was a meeting at the highest political level, occasioned a productive dialogue, and concluded with a substantive joint statement is indicative of its immediate significance.
- If it leads to tangible action and visible cooperation, it will impact the whole region.
Brief background of the Quad
- The Indian Ocean tsunami of 2004 triggered cooperation among the navies and governments of the Quad powers.
- They sought to forge diplomatic cooperation on regional issues in 2006-08.
- But gave up mainly because China objected to it and the hostility to China was not yet a potent enough glue.
- This began to change in 2017 when Beijing’s behaviour turned hostile, climaxing in multiple challenges in 2020.
- This time, U.S. President Joe Biden moved swiftly to host a virtual summit, drawing immediate response from the other three leaders.
5 highlights of the summit
- A more sophisticated approach is being invented, with enhanced emphasis by the U.S. on carrying its allies and strategic partners together.
- The summit’s outcome, therefore, merits close attention for at least five reasons.
1) Compromise over vision of Indo-Pacific
- Past debates over diverse, even differing, visions of the Indo-Pacific are over.
- The joint statement struck a neat compromise:
- To please the U.S. and Japan, it refers to a “free and open” Indo-Pacific, but in the very next sentence it offers an elaboration – “free, open, inclusive, healthy, anchored by democratic values, and unconstrained by coercion” – that amply satisfy India and Australia.
2) Alignment of approach towards China
- The summit leaders have secured an adequate alignment of their approaches towards China.
- Senior officials gave sufficient hints on this score, reinforced by phrases such as “security challenges” and “the rules-based maritime order in the East and South China Seas” in the joint statement.
- Instead of unidimensional antagonism, the Quad members have preferred a smart blend of competition, cooperation and confrontation.
3) Quad’s commitment development and well being of the region
- The Quad has placed a premium on winning the battle for the hearts and minds of people in the Indo-Pacific region.
- This explains the special initiative to ensure equitable access to COVID-19 vaccines for every person in need in the region from the western Pacific to eastern Africa.
4) Working groups
- The establishment of three working groups on vaccine partnership; climate change; and critical and emerging technologies and their new standards, innovation and supply chains is a welcome step.
- All this should get the four national establishments into serious policy coordination and action mode, creating new capacities.
- The careful choice of themes reflects a deep understanding of the long-term challenge posed by China and has global implications.
5) Quad working together in future
- The March 12 summit will not be a one-off.
- The leaders have agreed to meet in-person later this year, possibly at an international event within the region.
- Foreign ministers will gather at least once a year; other relevant officials, more often.
- Thus, will grow the habits of the Quad working together for a common vision and with agreed modalities for cooperation.
How ASEAN and China will react
- The summit has been watched closely by the ASEAN capitals. A few of them may express cautious welcome.
- Beijing seems rattled but resigned to the Quad’s new momentum.
- The Chinese see it in negative terms, targeting New Delhi in particular.
Consider the question “With the first-ever summit, the Quad is moving towards a strong coalition. In light of this, examine the challenges India faces as it deepes its engagement in the grouping.”
Conclusion
The summit and ‘The Spirit of the Quad’ – the inspired title of the joint statement – represented a giant leap forward. Now is the time to back political commitment with a strong mix of resolve, energy, stamina and the fresh ideas of stakeholders and experts outside of government to fulfil the promise of the Quad.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Replacement level of fertility
Mains level: Paper 1- Population stabilisation
Achieving replacement levels of fertility
- The National Population Policy 2000 affirmed a commitment to achieve replacement levels of fertility (total fertility rate of 2.1) by 2010.
- Ten states — Karnataka, Punjab, Gujarat, Assam, Telangana, Andhra Pradesh, West Bengal, Maharashtra, Tamil Nadu and Kerala — and Jammu and Kashmir, have achieved this goal.
- This fertility decline over half of India has cut across all sections of society — the privileged and the poor, those educated or not, and the high and low caste.
- The National Family Health Survey-4 has shown how TFR has reduced even among illiterate women from all religions in the southern states.
Growing gap between North-South
- The difference between the progressive South and the Central- North is becoming disproportionately skewed.
- UP and Bihar are 23 per cent of India’s population and are projected to grow by over 12 per cent and 20 per cent in the next 15 years.
- Their high TFR pervades all religious groups.
- Action to prevent unwanted pregnancies particularly in these two Hindi belt states is urgently required.
- For decades UP has had a dedicated agency — SIFPSA (State Innovations in Family Planning Services Agency). But its website gives dated information.
- Women in rural UP are still giving birth to four or more children.
- In some districts, the contraceptive prevalence rate is less than 10 per cent.
- In many districts neither Hindus nor Muslims use modern family planning methods.
- In such a scenario, demographics will eclipse economic growth and destroy the gains from a young populace.
- UP’s over-reliance on traditional methods of contraception needs to be swiftly replaced with reliable and easy alternatives.
- Bihar has the highest fertility rate in the country and also the highest outmigration.
Which method should be used
- While national and state policies emphasise male vasectomy, politicians never champion its adoption.
- No other country in the world uses female sterilisation as excessively as India.
- Indonesia and Bangladesh introduced injectables right from the late 1980s but India only did so in 2016.
- Executed properly, one jab renders protection from pregnancy for three months.
- This method needs greater impetus given the helplessness of women who carry the burden of unwanted pregnancies.
Way forward
- Three things are needed:
- 1) Incentivise later marriages and child births.
- 2) Make contraception easy for women.
- 3) Promote women’s labour force participation.
- Some other disturbing nationwide trends must also be counteracted without delay because stabilisation isn’t only about controlling population growth.
- A balanced sex ratio is essential to secure social cohesion.
- The inheritance law favouring women’s rights to ancestral property is far from being implemented.
- And then there is ageing. Paradoxically, it is the Southern states that will face problems in future.
- Having largely redeemed their demographic dividend, the cohort of the elderly will start outstripping the working age population.
- The theoretical possibility that younger people from the Central-Northern states may fill the growing gap in services will need strong political support.
- The freeze on the state-wise allocation of seats in Parliament until 2026 was extended through the Constitutional (84th Amendment) Act, 2002, to serve “as a motivational measure to pursue population stabilisation”.
- This goal has not been achieved.
- In the absence of further extension, it will be politically destabilising.
Consider the question “India’s efforts at populations stabilisation still remains work in progress, as the Northern states fail to achieve the targets. Suggest the ways to deal with the issue.”
Conclusion
The population momentum, if managed properly in the Hindi belt, will remain India’s biggest asset until 2055. By 2040, India will be the undisputed king of human capital.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SCO
Mains level: Paper 3- Changing context of India's strategic autonomy
India is a member of both the Quad and the BRICS. Is not it the contradiction? The article answers this question and maps the transformation of India’s relation with the U.S. over the years.
Is India’s participation in BRICS and Quad contradictory?
- Global Times, the Chinese newspaper last week speculating on the implications of the historic Quad summit for the BRICS.
- In calling the Quad a “negative asset” for the BRICS the Global Times was highlighting what it sees as a contradiction in India’s participation in both the forums.
- The paper argues that India has worsened “India-China and India-Russia relations” and halted progress “in the development of BRICS and SCO”.
- Global Times warns that if India continues to get closer to Washington, India “will eventually lose its strategic autonomy”.
Understanding India’s strategic autonomy
- “Strategic autonomy” is the framework that guided Delhi’s international relations since the Cold War.
- In the early 1990s, strategic autonomy was about creating space for India against the overweening American power.
- Why the space was needed? It was mainly because of the U.S. stance on two important aspects: Kashmir issue and nuclear program.
- President Bill Clinton had questioned the legitimacy of Jammu and Kashmir’s accession to India and declared the US’s intent to resolve Delhi’s Kashmir dispute with Pakistan.
- Washington insisted that rolling back India’s nuclear and missile programmes was a major objective of US foreign policy.
- All that changed over the last three decades.
8 elements of transformation of India’s relations with the U.S and China
- A rising China has emerged as the biggest challenge to India and the US is increasingly an important part of the answer.
- A few elements stand out.
- First, China has become more assertive on the contested boundary, therefore, the support from the US and its Asian allies has been valuable.
- Second, on the Kashmir question, China raises the issue at the UNSC while the US is helping India to block China’s moves.
- Third, on cross-border terrorism, the US puts pressure on Pakistan and China protects Rawalpindi.
- Fourth, the US has facilitated India’s integration with the global nuclear order while Beijing blocks Delhi’s membership of the Nuclear Suppliers Group.
- Fifth, the US backs India’s permanent membership of the UNSC, China does not.
- Sixth, India now sees the trade with China hollowing out India’s manufacturing capability.
- Its objective on diversifying its economy away from China is shared by the US and the Quad partners.
- Seventh, India opposes China’s Belt and Road Initiative as a project that undermines India’s territorial sovereignty and regional primacy.
- India is working with Quad partners to offer alternatives to the BRI.
- Finally, India sees China’s rising military profile in the subcontinent and the Indian Ocean as a problem and is working with Washington to redress the unfolding imbalance in India’s neighbourhood.
India’s approach to BRICS and SCO
- The BRICS was part of India’s strategy in the unipolar moment that dawned at the end of the Cold War.
- India’s current enthusiasm for the Quad is about limiting the dangers of a unipolar Asia dominated by China.
- But India will continue to attach some value — diplomatic if not strategic — to a forum like the BRICS.
- After all, the BRICS forum provides a useful channel of communication between Delhi and Beijing at a very difficult moment in the evolution of their bilateral relations.
- The BRICS is also about India’s enduring partnerships with Russia, Brazil, and South Africa.
- India also values its ties with the Central Asian states in the SCO.
- The BRICS could certainly become a productive forum someday — when Delhi and Beijing mitigate their multiple contentions.
Consider the question “A rising China has emerged as the biggest challenge to India and the US is increasingly an important part of the answer. Examine the elements that support this underlying transformation of India’s relationship with the two countries.”
Conclusion
No amount of words in a BRICS declaration can hide the sharpening contradictions between India and China today. The absence of joint statements did not mask the growing strategic congruence among the Quad nations in recent years.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CERT-In
Mains level: Paper 3- Identifying the cyber threat
The article highlights the threat of a cyber attack on India’s critical infrastructure and suggests the need to take preventive measures.
Targetting the infrastructure
- The U.S.-based cyber security firm, Recorded Future revealed that the past blackout in Mumbai was linked to the cyber attack from China.
- Recorded Future had also found an increase in malware attacks targeting the Indian government, defence organisations and the public sector.
- Also that, coinciding with Chinese incursions in Eastern Ladakh, certain Indian power facilities had been targets of a cyber attack.
- This indicates that India’s key infrastructure facilities, such as the power sector, are now in the crosshairs of a hostile China.
- Indian government agencies, such as the National Critical Information Infrastructure Protection Centre (NCIIPC) and the Indian Computer Emergency Response Team (CERT-In) needs to be on its guard.
Exploiting vulnerabilities
- China’s cyber offensive is directed against many advanced nations as well.
- In attempting this, what China is doing is essentially exploiting to perfection the many vulnerabilities that software companies (essentially those in the West), have deliberately left open (for offensive purposes at an opportune time).
- Exploiting this loophole, and also turning matters on its head, it is companies in the western world that are now at the receiving end of such antics.
- Chinese cyber espionage sets no limitations on targets.
- Towards the end of 2020, and as the world prepared for large-scale deployment of COVID-19 vaccines, their attention was directed to vaccine distribution supply chains around the world.
Way forward
- Nations should beware and be warned about how cyber attacks can bring a nation to its knees.
- This was well demonstrated way back in 2016 through a major attack on Ukraine’s power grid.
- The Ukraine example should be a wake-up call for India and the world, as in the intervening five years, the sophistication of cyber attacks and the kind of malware available have become more advanced.
- India, could well be blindsided by Chinese cyber attacks on critical infrastructure if the latter sets out to do so, unless prophylactic measures are taken in time.
Consider the question “Examine the threat posed by cyber attack on the critical information infrastructure? Suggest the ways to deal with it.”
Conclusion
Cyber’ could well be one of China’s main threat vectors employed against countries that do not fall in line with China’s world view. Drawing up a comprehensive cyber strategy, one that fully acknowledges the extent of the cyber threat from China, has thus become an imperative and immediate necessity.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Nativism in jobs in the state
The article examines the factors contributing to the States pursuing domicile based employment policies.
What is driving states to provide reservation to locals in private jobs
- The Haryana government has recently passed legislation that mandates companies in Haryana to provide jobs to local Haryanvis first.
- The unemployment rate in Haryana is the highest of all States in India, as per data from the Centre for Monitoring Indian Economy, or CMIE.
- The cabinet of the government of Jharkhand approved similar legislation to reserve jobs for Jharkhand residents.
- The Dravida Munnetra Kazhagam (DMK) in Tamil Nadu announced a similar proposal in its manifesto for the upcoming Assembly elections.
- Such moves have attracted criticism from economists and commentators
- Creating more jobs, not on reserving the few available ones’ is the popular refrain.
- Creation of new jobs is not entirely in the control of State governments. It is a complex interplay of multitude of factors.
Factors playing role in job creation
- Job creation is obviously an outcome of the performance of the larger economy.
- Chief Minister of a State in India has limited control over the management of the larger economy and thereby, attract new investors and businesses who can create jobs.
- Businesses need abundant high quality skilled and unskilled labour, land at affordable prices, uninterrupted supply of electricity, water and other such ‘ease of business’ facilities for its expansion.
- State governments in India can theoretically compete with each on these parameters.
- Further, any tax advantages that a particular State can provide vis-à-vis others will increase its attractiveness.
- But, realistically in India, in very few of these parameters can a poorer State compete against a richer State.
Issues faced by the States
- The availability of skilled local labour is a function of many decades of social progress of the State and cannot be retooled immediately.
- After the introduction of the Goods and Services Tax (GST), State governments in India have lost their fiscal autonomy and have no powers to provide any tax concessions to businesses.
- Beyond all these, the most critical factor in the choice of a location for a large business is what economists term as the ‘agglomeration effect’
- Agglomeration effect is the ecosystem of supply chain, talent, good living conditions and so on attracting the other businesses.
- So, a State with an already well-established network of suppliers, people, schools, etc. are at a greater advantage to attract even more businesses.
- It is due to this agglomeration effect that the three richest large States (Maharashtra, Tamil Nadu and Karnataka) are three times richer than the three poorest large States (Bihar, Uttar Pradesh and Madhya Pradesh), in per-capita income, compared to 1.4 times in 1970.
- In the absence of a level playing field and with no fiscal autonomy, it is enormously difficult for developing States in India to attract new investments and create new jobs.
Consider the question “Examine the factors contributing to the nativist tendencies in the employment within the States. Suggest the measures to deal with the issue.”
Conclusion
Until the economic playing fields for the various States are levelled and much greater fiscal freedom provided to the States, “don’t protect but create jobs” will only remain a topic of a hollow lecture and moral sermons.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FEMA
Mains level: Paper 3- Security imperatives of FDI
Relaxation on Chinese FDI
- Last April, India had subjected all Chinese FDI to mandatory government screening.
- The aim was to curb opportunistic takeovers of Indian companies, a concern fuelled by sharp corrections in equity markets in March 2020.
- Several economies including the US, Australia, Canada and Germany faced similar concerns.
- They blocked specific takeover attempts, using special laws for national security screening of inward FDI.
- In the absence of similar legislation, India did not differentiate between investments which raised genuine national security concerns and those that did not.
- This is a crucial shortcoming.
- With market indices now hovering at their peaks, reportedly India may allow Chinese FDI up to 25 per cent in equity under the automatic route.
Regulation of FDI and issues with it
- India regulates foreign investments primarily through FEMA.
- FEMA clearly provides two specific macro-prudential objectives — facilitating external trade and payments; and promoting orderly development and maintenance of foreign exchange markets in India.
- Accordingly, it empowers the central government and the RBI, acting in consultation with each other, to regulate capital account transactions.
- These regulations determine who can invest through the FDI route, in which sector and how much.
- In practice, however, FEMA regulations have often responded to concerns not strictly related to macro-prudential objectives.
- One such concern has been national security.
Need for the law to scrutinise FDI from national security angle
- Shortcoming of FEMA underscores the need for India to emulates its western peers and enact a statute specifically designed for national security screening of strategic FDI.
- Unlike FEMA, this new statute must explicitly lay down legal principles for determining when a foreign acquisition of an Indian company poses genuine national security threats.
- In this regard, a policy paper published by the Peterson Institute for International Economics three types of legitimate threats from foreign acquisitions.
3 Types of threat from foreign acquisitions
1) Dependency on foreign supplier
- The first threat arises if a foreign acquisition renders India dependent on a foreign-controlled supplier of goods or services crucial to the functioning of the Indian economy.
- For this threat to be credible, it needs to be further established that the industry in which the acquisition is supposed to take place is tightly concentrated, the number of close substitutes limited, and the switching costs are high.
2) Technology transfer
- The second threat emanates from a proposed acquisition transferring a technology or an expertise to a foreign-controlled entity that might be deployed by that entity or a foreign government in a manner harmful to India’s national interests.
- The credibility of this threat again depends on whether the market for such technology or expertise is tightly concentrated or if they are readily available elsewhere.
3) Threat of infiltration, surveillance or sabotage
- The third threat arises if a proposed acquisition allows insertion of some potential capability for infiltration, surveillance or sabotage via human or non-human agents into the provision of goods or services crucial to the functioning of Indian economy.
- This threat is particularly credible when the target company supplies crucial goods or services to the Indian government, its military or even critical infrastructure units and the switching costs are high.
Way forward
- The above stated 3 types of threats could provide conceptual clarity in the new statute could make national security assessments objective, transparent and amenable to the rule of law.
- On procedure, the statute must empower only the finance minister to reject certain strategic foreign acquisitions on national security grounds.
- Both the power and accountability mechanisms should be hardcoded into the statute itself, as is the case in some mature parliamentary democracies.
- For instance, the Australian Foreign Acquisitions and Takeovers Act, 1975 empowers the treasurer to block certain foreign acquisitions on national security grounds.
- Similarly, the Investment Canada Act, 1985 empowers a minister to reject certain foreign acquisitions.
Consider the question “India needs to recognise the national security threat emanating from strategic FDI. This requires identifying threats. In lights of this, examine the types of threats and suggest the ways to deal with it.”
Conclusion
Overall, India’s tryst with Chinese FDI underscores the importance of identifying specific national security threats emanating from strategic FDI and addressing them objectively. This is too sensitive a matter to be left to capital controls under FEMA. A dedicated statute for national security screening of inward FDI would be best suited for handling such issues.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India's growing security footprints in West Asia
The article examines the factors that are leading to a growing footprint of Asian economies in West Asia.
Growing interest of Asian Economies in West Asia
- This month, a contingent of the Indian Air Force participated in a multi-nation exercise hosted by the United Arab Emirates (UAE) named Desert Flag (March 3-27).
- Other than India and the UAE, Bahrain, France, Saudi Arabia, South Korea and the United States are also participating.
- While joint exercises in West Asia between Arab states and their western counterparts is common, the 2021 edition’s involvement of contingents from India and South Korea.
- This showcases the growing interests of Asian economies.
- As net importers of crude oil, these Asian economies rely heavily on the West Asian states for their supplies,
- And, by association, Asian economies have increased stakes in the safety and security of the region from the perspective of political and economic stability.
- And more importantly, in the protection of vital sea lanes in areas such as the Strait of Hormuz, the Gulf of Aden and the Red Sea stretching out into the Arabian Sea and the wider Indian Ocean.
Declining U.S. influence
- In April 2020, Saudi Arabia was India’s top supplier of oil followed by Iraq.
- For South Korea, in late 2019, it was also Saudi Arabia as the top supplier.
- The participation of both India and South Korea in these exercises in the Persian Gulf is reflective of these trends and growing concerns in Asian capitals over an eroding U.S. security blanket in the region.
Tension in Iran-U.S. relations
- Both India and South Korea have found themselves caught in regional tensions as the pressure on Iran to restart the 2015 nuclear agreement (Joint Comprehensive Plan of Action, or JCPOA) increases.
- Both India and South Korea have faced carbon-copy consequences over the past decade as the West first negotiated with Iran, and later tried to manage the fallout of the JCPOA collapse.
India’s role in protecting it’s energy interests
- The idea of Asian nations having to band together to protect their energy interests in West Asia is not new.
- Former Indian diplomats have even suggested an idea equitable to an ‘importers OPEC’ led by Asian states which today have a much larger stake in West Asia’s oil than the West.
- The Indian Navy has made multiple port calls from the UAE and Kuwait to Iran and Qatar in recent years.
- In 2020, India had also planned its first bilateral naval exercise with Saudi Arabia.
Consider the question “Examine the factors responsible for India’s growing security footprint in West Asia and how India is achieving its objectives?”
Conclusion
Regional states will become more responsible for their own security, and as Asian economies become stronger stakeholders, their geopolitics will become more visible across this geography.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- India's manufacturing capacity
The article highlights how India could offer the solution to the tactical issue faced by the Quad: matching China’s manufacturing capacity.
Strategic case for the Quad
- The strategic case for the Quadrilateral Security Dialogue, better known as the Quad, has always been sound.
- A rising China, with its authoritarian one-party system, is a challenge to the democratic order.
- The strategic case for the Quad has, however, always faced a tactical hurdle.
- China was the factory of the world.
- It had become an almost indispensable cog in the global supply chain owing to its low-cost manufacturing prowess at a mass scale.
- How could any grouping hope to challenge China’s power-play dynamics while at the same time being dependent on its factories to sustain its economies?
Two recent development that changed the dynamic
- Two recent developments have completely changed the dynamic.
- First, Australia returned to the Malabar Naval exercises in 2020, after 13 years.
- Second, on March 12, the first summit-level meet of the Quad — comprising the US, India, Japan and Australia — is scheduled to take place.
Rise in India’s manufacturing ability
- What has changed between 2007 and 2020 that Quad 2.0 has become viable is the globally visible rise in India’s manufacturing ability.
- Consider the following examples.
1) PPE Kit manufacturing
- First, the success in PPE kits.
- At the beginning of the COVID-19 pandemic, India was manufacturing zero PPE kits.
- India not just created an overnight world-class manufacturing capacity to meet its own needs but also started exporting PPE kits.
2) Vaccine Maitri
- Second, the soft power of Vaccine Maitri.
- The developed countries are scrambling to secure vaccines for their domestic population.
- India is not only vaccinating its own people faster than any other country but is also exporting millions of vaccines to countries in need.
- From Canada to Pakistan and from the Caribbean Islands to Brazil — Made in India vaccines have been a life vest across the globe.
3) India’s private industry
- Third, the enterprise of India’s private industry — a hallmark of the deepening manufacturing base.
- As a recent New York Times report noted, when it came to syringes — without which the vaccines were useless — the global scramble again led to Indian manufactures.
- Hindustan Syringes alone has ramped up its manufacturing capacity to almost 6,000 syringes a minute.
4) Precision high-end manufacturing
- The PLI scheme launched for electronics’ manufacturing evinced unprecedented global interest with 22 top companies, including the top manufactures for Apple and Samsung mobile phones.
- Over the next five years, a manufacturing capacity of over $150 billion and exports of $100 billion have been tied up through this scheme.
5) Figher plane manufacturing
- Fifth, the success of India’s fourth-generation fighter jet programme and the orders placed by the Indian Air Force for 83 Tejas jets.
- India’s success is one more milestone in its journey towards emerging as a global manufacturing destination.
Policy changes to make India manufacturing destination
- Concurrently, India has been reforming its economic policies to make it even more attractive as a manufacturing destination.
- India has the lowest tax rate anywhere in the world — 15 per cent for new manufacturing units.
- FDI norms have been relaxed across the board and automatic approval processes instituted for FDI even up to 100 per cent.
- Privatisation of PSUs is now an established process.
- Labour laws have been finally reformed and compliance burdens significantly eased.
- Taxation is now faceless, thus ending the spectre of rent-seeking.
- A well-functioning, world-class bankruptcy law is in place. Interest rates are low.
- And India’s digital infrastructure rivals the best in the world and in many cases beats it.
Consider the question “India’s growing prowess as the manufacturing hub could provide the Quad tactical basis by replacing China. Comment.“
Conclusion
The only arrow that was missing in the quiver of the Quad has now been attained. The strategic case for the Quad was never in doubt. The dependence on China’s factories is what kept the grouping of democracies from emerging. India has raised its hand to solve that problem.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Improving the colleges
The article highlights the important role students can play in improving the quality of colleges and institution in India.
Improving the colleges
- The global QS ranking is out and India has 12 universities and institutions in the top-100 in particular subjects.
- We have many colleges offering higher education but typically they are not very good.
- Today, with a huge number of students going to college, education is tied strongly to career prospects.
- If studying and thinking harder do not lead to even a decent chance of career improvement, it is natural for most students to lose academic ambition.
Career prospects in various colleges
- For admission in IIT, many work extremely hard to secure admission, but then lose motivation and drift towards near-certain graduation.
- IIT admission is a value signal to future employers who do not see much relevance in the actual syllabus.
- The entry wall is high, the exit wall is low, and the four-year syllabus is an obstacle course between the student and an employer with whom eye contact was made from atop the entry wall itself.
- Students of varied subjects thus remain uninterested in their core syllabi.
- Lower-ranked colleges may attract a slightly different mix of employment prospects, some in core areas.
- In many colleges, both good and bad ones, high grades correlate only loosely with career outcomes.
Improving the college
- Very few jobs actually require the highest quality education — the best academic and research jobs.
- In such a system, it may not be worthwhile or even practical for a mediocre college to unilaterally improve itself.
- Having improved, it remains to convince society that it deserves to displace the pre-eminent colleges at the top.
- For lower-ranking colleges to improve itself, its students must first see useful value in a better education.
- That requires system-wide growth in opportunity.
How to achieve system-wide growth in opportunity
- Such growth cannot be legislated from above. It must occur organically, from below.
- There are several stakeholders involved in such transition.
- 1) At the top are policymakers.
- Policymakers are trying and have achieved many things.
- In recent years, however, our demographics have caught up with us.
- We have more than 650 million people under age 25.
- No other country is close. We need more than policies.
- 2) Next is industry. It faces a learning curve for technology.
- Countries that wish to lead must develop their own technology, even at high cost.
- Indian industry can often choose between importing slightly older technology from outside or developing things in-house.
- A slow growth in the latter has begun and may pull our college system upward over time.
- 3) Our next stakeholders are college teachers.
- For a college to flourish, it needs many students who compete to enroll.
- Our entrance exams for good engineering colleges are hard.
- Our nationally renowned degree colleges which admit based on board marks are frequently forced to set very high cutoffs.
- The need for more engineering colleges, for many students who are clearly good enough, has led to the creation of several private colleges that teach well in large volumes.
- Quality of teachers’ is improving.
- College teachers improve as their employers aim higher, and as their students bring more into the classroom.
- 4) Finally, we have students. If students demand better instruction, colleges will sooner or later supply it.
Way forward for students
- Students must aim to relate their learning to society.
- They must see their learning not as an obstacle course but as an initiation into a process that yields tangible long-term value.
- Indian society does not merely have people looking for work.
- It also has work looking for people: Work in food, health, design, manufacturing, transport, safety, garbage, water, energy, farming, and a hundred other things that we can do better.
- Room for improvement is plentiful, though the market models may not be efficient or mature yet.
- The walls between our classrooms and our lives must be broken, if our colleges are to flourish.
- In recent decades, India has also attracted much work from overseas. Growth in that direction may well be sustained.
Consider the question “India has many colleges and institutions offering higher education but few could get the spot in the list of top global institutes. Examine the factors responsible for this. Suggest the measures to deal with this issue.”
Conclusion
Such change, driven by student aspirations, will be organic, bottom-up, and unstoppable.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Section 69A of IT Act
Mains level: Paper 2- Issues with the IT Rules 2021
The article argues that IT Rules 2021 far exceeds the rulemaking power granted under Section 69A of the IT Act.
Censoring online video streaming
- Online video streaming platforms have marked a new dawn for the Indian entertainment industry.
- The spectre of government regulation and criminalisation haunts this fledgling industry.
- There have been various efforts to censor online video streaming platforms by petitioning the courts for a long time.
- At least 23 petitions were being heard by different high courts on the issue of regulation of online video streaming platforms.
- The grievances range from wounded religious sentiments to moral outrage against depictions of sexuality but the common thread that unites them is a desire to control what other citizens may watch in the privacy of their homes.
- In addition to petitions seeking heavy-handed regulation, criminal proceedings have been initiated against employees of companies like Netflix and Amazon Prime.
- While such FIRs may be in the context of specific films or shows, they cause substantial harassment and threaten the personal liberty of content creators and company executives.
IT Rules 2021 exceeds the rulemaking power under Section 69A of IT Act
- The imposition of any kind of criminal liability under the IT Rules 2021 would far exceed the central government’s rule-making power under Section 69A of the IT Act.
- The existing three-tier regulatory mechanism and content classification system prescribed under the rules are also unconstitutional for the same reason.
- The following three issues need to be considered while considering the IT Rules 2021.
- First, the powers under Section 69A can be exercised only in the interest of the sovereignty, defence, security of the State, friendly relations with foreign States or public order or for preventing incitement etc.
- The implication is that the powers under Section 69A cannot be used to regulate online content which may be obscene or sexually explicit.
- Second, Section 69A states that the central government may direct “any agency of the Government or intermediary” to block access to online content but online video streaming platforms do not fall into either of these two categories.
- Companies like Netflix and Amazon Prime commission or license the films and shows available on their platforms, and they are not an “intermediary” under the IT Act.
- Third, Section 69A only grants the central government the power to “block for access by the public or cause to be blocked for access by the public any information generated, transmitted, received, stored or hosted in any computer resource.”
- However, the range of powers granted under the IT Rules 2021 is much broader and includes requiring an apology or disclaimer, re-classification of content and deletion or modification of content.
- As a result, the IT Rules 2021 significantly expand the scope of powers available under Section 69A.
Issues with the three-tier regulatory framework
- The three-tier regulatory framework created under the rules suffers from the substantive problem of lack of independence.
- The third tier, which is the Inter-Departmental Committee, comprises entirely of bureaucrats and there is no guaranteed representation from the judiciary or civil society.
- The Review Committee constituted under Rule 419A of the Indian Telegraph Rules, 1951 also solely consists of officials belonging to the executive branch.
Way forward
- The solution is to start afresh with publication of a white paper which clearly outlines the harms that are sought to be addressed through regulation of online video streaming platforms and meaningful public consultation which is not limited to industry representatives.
- If regulation is still deemed to be necessary, then it must be implemented through legislation that is debated in Parliament instead of relying upon Section 69A of the IT Act.
Consider the question “The IT Rules 2021 have been criticised for exceeding the rulemaking power under Section 69A of the IT Act. Examine the scope of the criticism.”
Conclusion
Many of the changes that the central government seeks to implement through the IT Rules 2021 may be well-intentioned and desirable. However, constitutional due process cannot be sacrificed at the altar of expediency
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FPOs
Mains level: Paper 3- Improving FPOs
The article analyses the role farmers produce organisations (FPOs) can play in improving the bargaining power of the small farmers and also suggest ways to improve FPOs.
Declining size of farm holdings
- The average farm size in India declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16.
- The share of small and marginal farmers increased from 70 per cent in 1980-81 to 86 per cent in 2015-16.
- At the state level, the average size of farm holdings in 2015-16 ranged from 3.62 ha in Punjab, 2.73 in Rajasthan and 2.22 in Haryana to 0.75 in Tamil Nadu, 0.73 in Uttar Pradesh, 0.39 in Bihar and 0.18 in Kerala.
Encouraging FPOs to help small farmers
- Small farmers face several challenges in getting access to inputs and marketing facilities.
- In the last decade, the Centre has encouraged farmer producer organisations (FPOs) to help farmers.
- Since 2011, it has intensively promoted FPOs under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments and NGOs.
- The membership of an FPO ranges from 100 to over 1,000 farmers.
- The ongoing support for FPOs is mainly in the following two forms:
- 1) A grant of matching equity (cash infusion of up to Rs 10 lakh) to registered FPOs.
- 2) A credit guarantee cover to lending institutions (maximum guarantee cover 85 per cent of loans not exceeding Rs 100 lakh).
- The budget for 2018-19 announced supporting measures for FPOs including a five-year tax exemption.
- The budget for 2019-20 talked of setting up 10,000 more FPOs in the next five years.
- Some studies show that we need more than one lakh FPOs for a large country like India while we currently have less than 10,000.
Looking at the performance of FPOs in last decade
- Experience shows a mixed performance of FPOs in the last decade.
- Some estimates show that 30 per cent of these are operating viably while 20 per cent are struggling to survive.
- The remaining 50 per cent are still in the initial phase of mobilisation and business planning.
- NABARD has undertaken a field study on the benefits of FPOs in Punjab and Madhya Pradesh.
- The study shows that in nascent FPOs, the proportion of farmer members contributing to FPOs activities is 20-30 per cent while for the emerging and mature FPOs it is higher at about 40-50 per cent.
- A study by International Food Policy Research Institute (IFPRI) has undertaken a comparative study of FPOs in Maharashtra and Bihar.
- In Maharashtra, some of the FPOs have organically evolved (OFPOs) when farmers have taken the lead to adopt market-oriented practices, develop cost-effective solutions in production and marketing.
- In the case of Bihar, almost all FPOs have been promoted (PFPOs).
Challenges
- Studies of NABARD show that there are some important challenges for building sustainable FPOs.
- Some of these are lack of technical skills, inadequate professional management, weak financials, inadequate access to credit, lack of risk mitigation mechanism and inadequate access to market and infrastructure.
Focusing on 3 issues for the improvement of FPOs
1) Getting credit
- Issues such as working capital, marketing, infrastructure have to be addressed while scaling up FPOs.
- Banks must have structured products for lending to FPOs.
- These organisations lack professional management and, therefore, need capacity building.
2) Linking with input companies
- FPOs have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc.
- They need a lot of data on markets and prices and other information and competency in information technology.
3) Augmenting the size of land
- The FPOs can be used to augment the size of the land by focusing on grouping contiguous tracts of land as far as possible — they should not be a mere grouping of individuals.
- Women farmers also can be encouraged to group cultivate for getting better returns.
- FPOs can also encourage consolidation of holdings.
Consider the question “How FPOs can play an important part in helping the small farmers by improving their bargaining power? What are the challenges faced by the FPOs?”
Conclusion
The FPOs have to be encouraged by policy makers and other stakeholders apart from scaling up throughout the country to benefit particularly the small holders.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Regulatory constraints faced by the farmers
Enabling the Business of Agriculture (EBA) 2019, published by the World Bank highlights the constraints faced by farmers. The article highlights the key findings of the publication.
Constraints in carrying out farming activity
- Debates around the farm laws have brought to light the issue of developing a sound regulatory framework to promote India’s agricultural growth.
- The fact remains that farmers, mainly smallholders, across India continue to face various constraints.
- They include constraints in accessing agricultural inputs, markets, finance, human resources, and information, which are critical for increasing farmers’ competitiveness.
- A recent publication by the World Bank titled Enabling the Business of Agriculture (EBA) 2019 measures the extent to which government regulatory systems in 101 countries worldwide make it easier for their farmers to operate agricultural activities.
- These indicators measure the strength of a country’s agricultural regulatory environment pertaining to market integration and entrepreneurship in agriculture.
- Among 101 countries covered, India ranked 49 on the EBA aggregate score.
Key takeaways from EBA for India
- India lags behind its close competitors in world agriculture, namely China, Brazil, and Russia.
- Compared to these three countries, India has the weakest performance on five out of eight indicators.
- They are registering fertilizer and machinery, securing water, sustaining livestock, and protecting plant health indicators.
- Registering fertilizer and machinery indicators measure domestic laws and regulations that provide farmers access to fertilizer and agricultural machinery.
- The regulatory processes that help farmers make appropriate decisions regarding the level of investment in irrigation are measured by securing water indicator.
- Sustaining livestock indicator captures the quality of regulations affecting farmers’ access to livestock farming inputs.
- The quality of legislation on phytosanitary standards (SPS) is captured through the protecting plant health indicator.
Need to develop a suitable regulatory system
- Governments can play a critical role in this regard by enacting laws and regulations.
- Such laws and regulations can influence farmers’ access to agricultural inputs, cost of production, agricultural markets and value chains, the competitiveness of farmers, and private investment in the farming sector.
- The regulatory system that governs irrigation management is essential for reducing the variability of farm output, prices, and incomes, minimising vulnerability to natural shocks, and incentivising the production of riskier and high returns crops.
- Gaining access to the global agricultural value chain requires a sound regulatory framework on SPS.
India’s strong areas
- The comparative score of India on supplying seed, trading food, and accessing finance indicators is high.
- Supplying seed indicator evaluates laws and regulations that ensure timely release of seed to farmers.
- The trading food indicator assesses laws and regulations that facilitate exporting of farm products by farmers.
- The regulatory framework on the use of warehouse receipts is assessed using accessing finance indicator.
- A robust warehouse receipts system enables the farmers to obtain the credit needed to invest in agriculture.
Opportunity for India
- The future of world agriculture and food production is expected to increasingly depend on middle-income countries such as China, India, Brazil, and Indonesia.
- To make the best use of this great opportunity, India needs to put in place an agricultural regulatory system that would make it easier for its farmers to conduct agricultural activities.
Consider the question “Farmers, mainly smallholders, across India continue to face various constraints in carrying out farming activities. What are the implications of such constraints? What role government can play in removing these constraints?”
Conclusion
The EBA project results reveal that, compared to its close competitors, the strength of India’s agricultural regulatory environment is weak on the whole and with respect to key performance indicators.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Quad
Mains level: Paper 2- Relevance of the Quad
As India deepens its engagement with the Quad, it must consider several aspects related to such engagement. The article deals with this issue.
Background of India’s engagement with Quad
- India’s engagement with the Quad goes back to China’s expanding footprint in South Asia and the Indian Ocean Region over the last few years.
- China’s ambitious Belt and Road Initiative rang alarm bells in India as the projects were viewed as encroachments into India’s strategic space.
- The U.S.’s focus on the west Pacific due to aggressive Chinese maritime activity gradually pulled India into the ambit of the Indo-Pacific that views the western Pacific and the Indian Ocean as an integrated geopolitical space.
- Besides the U.S. navy, India expanded its maritime ties with other regional states, the most high-profile of the interactions being the Quad.
Core structural problems with Quad
- The Quad has a core structural problem as well in that it pivots around the U.S.
- The Quad riles China as a hostile grouping, but hardly serves the security interests of its members.
- The U.S. views China’s rise as a threat to the world order it has led since the Second World War.
- Despite rhetoric relating to the promotion of a ‘rules-based’ world order, the Quad neither shares a strategic vision nor is it animated by a shared agenda.
- This is obvious not only from its inability to deter China in the west Pacific, but also by its members’ anxiety to maintain close ties with China.
Implications for India
- By affiliating with the U.S.-led maritime coalition, India ignored the principal areas of its security concerns which is an undemarcated 3,500-km land border with China.
- From April 2020, Indian and Chinese forces had their latest border face-off in Ladakh, abruptly ending a long period of productive relations.
- In retrospect, this confrontation appears to be China’s sharp response to the steady shift in India’s regional posture in favour of an alignment with the U.S. and its allies against China.
- The stand-off at Ladakh has been a bitter experience for India: it has affirmed the limits of India-U.S. security ties, the folly of Indian involvement in the Quad.
- The stand-off has also underscored need to focus national attention and resources in areas of abiding interest for India — the border, the neighbours and the Indian Ocean.
Lessons for India
- Ladakh also offers some valuable lessons for India.
- One, the rebuilding of ties with China will have to be a priority concern.
- India need to dilute its focus on the Indo-Pacific and the Quad and accept that the borders and the Indian Ocean are where its crucial interests lie.
- Two, the Ladakh experience has highlighted certain deficiencies at home:
- It hardly needs reiteration that India’s capacities can only be built by a united people committed to the national cause.
- Finally, foreign policy cannot be a part-time concern of the national leadership; in terms of priority and attention, it should be on a par with domestic affairs.
Consider the question “Examine the factors that India should consider as it seeks to deepen its engagement in the Quad.”
Conclusion
As the global scenario gets more complex and India’s ambitions increase, a cohesive strategic vision would give substance and drive to India’s pursuit of its interests over the long term.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-US relations
The India-US ties have advanced by leaps and bounds. Yet, there is a persistent underestimation of India’s capacity to rework its great power relations. The article deals with this issue.
Expanding partnership
- India-US relations have been on a steady upward trajectory over the last three decades.
- This partnership withstood significant political transitions in both countries and managed to overcome many difficult barriers.
- The US is now India’s most comprehensive partner.
- The Russia relationship is long on defence but short on commerce.
- India’s commercial ties with China are large, but tilted heavily in Beijing’s favour.
- Collective Europe is big on commerce but small on security cooperation.
- The US has a sizeable presence in both economic and security dimensions and the political common ground with India has steadily expanded.
So, why persistent doubt in India about the US partnership
- One part of it is the ingrained ideological bias in the dominant foreign policy elite.
- Delhi’s stilted debate on the US is, unfortunately, reinforced by the sad absence of investment in institutional capabilities to study American politics, economics and international relations.
Issues with our assessment of relations with India
- There is an enduring reluctance of India’s foreign policy community to either acknowledge or accept the unfolding transformation of India’s ties with the US.
- There is also continuing underestimation of India’s capacity to rework its great power relations to meet India’s changing interests and circumstances.
- It was widely held that the Indo-Pacific and the Quad will become footnotes in Biden’s foreign policy.
- This in turn was based on the bet that Biden is likely to embrace China rather than confront it in the manner that Trump did.
- All these assumptions turned out to be inaccurate.
- Concern for democracy and human rights has always been part of US foreign policy ideology.
- But no state, not even a revolutionary one, can run its foreign policy on a single-point agenda.
Underestimating India’s agency to shape the partnership
- Even as it continuously misjudged the US, the Indian foreign policy elite has not appreciated India’s agency to shape the relationship with America.
- The conviction that Delhi is perennially under US pressure to accept policies harmful for itself further distorts the discourse in the media and among the chattering classes.
- The evidence from the 1990s — one of India’s most vulnerable moments after Independence — should have corrected this misperception.
- The traditional discourse finds it hard to come to terms with the twin factors shaping India’s new approach.
- One is the significant increase in India’s material capabilities.
- India’s aggregate GDP increased ten-fold between 1990 ($270 billion) and 2020 (about $2,700 billion).
- Equally important is the new political will in Delhi.
Consider the question “There is a continuing underestimation of Delhi’s capacity to rework its great power relations with the US to meet India’s changing interests and circumstances. Critically examine.”
Conclusion
The new India no longer wrings its hands in dealing with the US; it relishes the large room for strategic bargaining with America. Even more important, Delhi is no longer a reluctant partner to Washington.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3-Privatisation of banks in India and debate around it
The article highlights the different aspects that need to be considered while contemplating the idea of privatisation of public banks.
Opposite trends in India and the US
- While the United States epitomises the private banking model, a nationwide public banking movement is coming into vogue.
- In contrast, India seems to be quickly warming to the idea of bank privatisation.
Public or the private?
- The development view sees government presence in the banking sector as a means to overcome market failures in the early stages of economic development.
- The government-owned banks can improve welfare by allocating scarce capital to socially productive uses.
- The stellar success of Indian PSBs in implementing the PMJDY while missing the mark on creating high-quality credit highlights a critical divide between the asset and the liability side of a bank.
- Banks provide two functions at a fundamental level: Payments and deposit-taking on the liability side and credit creation on the asset side.
- The payment services function, a hallmark of financial inclusion, is similar to a utility business — banks can provide this service, a public good, at a low cost universally.
- The lending side, in contrast, is all about the optimal allocation of resources through better credit evaluation and monitoring of borrowers.
- Private banks are more likely to have the right set of incentives and expertise in doing so.
- It comes as no surprise that the PSBs in India are better at providing the public good functions, whereas private banks seem better suited for credit allocation.
- However, the political view argues that vested interests can influence the lending apparatus to achieve political goals.
- This results in distortion of credit allocation and reduce allocative efficiency in government-owned banking systems.
Reasons for privatisation of banks
- Evidences shows that government ownership in the banking sector leads to lower levels of financial development and growth
- This led to waves of banking sector privatisations that swept emerging markets in the 1990s.
- Cross-country evidence suggests that bank privatisations improved both bank efficiency and profitability.
How public banks performed in India
- Public sector Banks (PSBs) dominate Indian banking, controlling over 60 per cent of banking assets.
- The private-credit to GDP ratio, a key measure of credit flow, stands at 50 per cent, much lower than international benchmarks — in China it is150 and in South Korea it is 150 per cent.
- India’s Gross NPA ratio was 8.2 per cent in March 2020, with striking differences across PSBs (10.3 per cent) and private banks (5.5 per cent).
- The end result is much lower PSB profitability compared to private banks.
- The rationale for privatisation stems from these considerations.
Way forward
- The optimal mix of the banking system across public and private boils down to what you need out of your banking system.
- When the wedge between social and private benefits is large, as with financial inclusion, there is a strong case for public banks.
- At this stage, inefficiency in capital allocation seems to be a bigger issue for the Indian banking sector, whereas, in the US, the debate is centred around the public goods aspects of banking.
Consider the question “What are the factors India needs to consider as it reverses the course of history by privatising the public banks?”
Conclusion
At this stage, inefficiency in capital allocation seems to be a bigger issue for the Indian banking sector, whereas, in the US, the debate is centred around the public goods aspects of banking.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ujjwala Yojana
Mains level: Paper 2- Impact of increasing prices of subsidised LPG on PMUY
Price increase of subsidised LPG
- Subsidised LPG prices have increased by a massive 50% in this financial year alone.
- This would have a significant impact on the government’s flagship scheme, the Pradhan Mantri Ujjwala Yojana (PMUY).
- Since 2016, PMUY has provided LPG connections to 80 million poor households to reduce women’s drudgery and indoor air pollution.
- Providing an upfront connection subsidy of ₹1,600, PMUY helped expand LPG coverage to more than 85% of households.
Challenges
- Large-scale primary surveys by the Council on Energy, Environment and Water (CEEW) suggest that, on average, recent PMUY beneficiaries consumed only about half the LPG compared to long-standing regular consumers.
- Limited uptake of LPG among poor households has two main reasons.
- First, the effective price of LPG is not affordable for such households, despite the subsidy.
- Second, many rural consumers have access to freely available biomass, making it difficult for LPG to displace it.
- Beyond causing indoor air pollution, biomass use for cooking contributes up to 30% to the ambient PM2.5 at the national level, more than the contribution of transport, crop residue or coal burning.
Impact of price rise
- The recent increases in the subsidised LPG price have made it more difficult for the poor to sustain LPG use.
- As the pandemic set in, the LPG subsidised price began to rise, even when global LPG prices plummeted.
- Now with LPG prices rising globally, a 50% reduction in the LPG subsidy budget for FY22 (versus FY21) does not bode well.
- The information about LPG price build-up and subsidy has become more difficult to obtain in recent years.
Way forward
- The central government tread should balance between LPG subsidies and sustained clean fuel consumption in poorer households by better targeting of subsidy.
- One approach for such targeting is to rely on the existing LPG consumption patterns of consumers.
- Provide households exhibiting low consumption or a decline in LPG consumption over time with greater subsidy per cylinder to sustain health gains.
- Further, the subsidy levels could be dynamic with different slabs reflecting the previous year’s consumption.
- Alongside, the de-duplication efforts must continue to avoid subsidy leakages.
Consider the question “What is the social impact of the Ujjwala Yojana (PMUY)? What are the challenges in its success.”
Conclusion
In the post-pandemic rebuilding, the continued support to the economically poor for sustaining LPG use is not merely a fiscal subsidy but also a social investment to free-up women’s productive time and reduce India’s public health burden.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: National Digital Health Mission
Mains level: Paper 2- Issues to consider in digitising health infrastructure
As India seeks to create digital health infrastructure, it must consider several issues.
Integrated digital health infrastructure
- The National Digital Health Mission aims to develop the backbone needed for the integrated digital health infrastructure of India.
- This can help not only with diagnostics and management of health episodes, but also with broader public health monitoring, socio-economic studies, epidemiology, research, prioritising resource allocation and policy interventions.
- However, before we start designing databases and APIs and drafting laws, we must be mindful of certain considerations for design choices and policies to achieve the desired social objectives.
Factors to be considered
1) Carefully developing pathway to public good
- There must be a careful examination of how exactly digitisation may facilitate better diagnosis and management, and an understanding of the data structures required for effective epidemiology.
- We must articulate how we may use digitisation and data to understand and alleviate health problems such as malnutrition and child stunting.
- We need the precise data we require to better understand crucial maternal- and childcare-related problems.
2) Balancing between public good and individual rights
- The potential tensions between public good and individual rights must be examined, as must the suitable ways to navigate them.
- Moreover, for the balancing to be sound and for determining the level of due diligence required, it is imperative to clearly define the operational standards for privacy management.
- Conflating privacy with security, as is typical in careless approaches, will invariably lead to problematic solutions.
- In fact, most attempts at building health data infrastructures worldwide — including in the UK, Sweden, Australia, the US and several other countries — have led to serious privacy-related controversies and have not yet been completely successful.
3) Managing the sector specific identities
- Even if we define and use a sector-specific identity, the question of when and how to link it with that of other sectors remains.
- For example, with banking or insurance for financial transactions, or with welfare and education for transactions and analytics.
- Indiscriminate linking may break silos and create a digital panopticon, whereas not linking at all will result in not realising the full powers of data analytics and inference.
4) Working out the operational requirement of data infrastructure
- We need to work out the operational requirements of the data infrastructure in ways that are informed by, and consonant with, the previous points.
- In other words, the design of the operationalisation elements must follow the deliberations on above points, and not run ahead of them.
- This requires identifying the diverse data sources and their complexity — which may include immunisation records, birth and death records, informal health care workers, dispensaries etc.
- It also requires an understanding of their frequency of generation, error models, access rights, interoperability, sharing and other operational requirements.
- There also are the complex issues of research and non-profit uses of data, and of data economics for private sector medical research.
5) Issue of due process
- Finally, “due process” has always been a weak point in India, particularly for technological interventions.
- Building an effective system that can engender people’s trust not only requires managing the floor of the Parliament and passing a just and proportional law, but also building a transparent process of design and refinement through openness and public consultations.
- In particular, technologists and technocrats should take care to not define “public good” as what they can conveniently deliver, and instead understand what is actually required.
- While we can understand the urge to move forward quickly, given the urgent need to improve health outcomes in the country, deliberate care is needed.
Consider the question “While seeking to develop digital health infrastructure through the National Digital Health Mission, we should be mindful of certain considerations for design choices and policies to achieve the desired social objectives. Comment.”
Conclusion
Developing a comprehensive understanding of the considerations related to health data infrastructure may also inform the general concerns of e-governance and administrative digitisation in India, which have not been all smooth sailing.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Indian economy's growth rate
India’s growth numbers reveal a different story when seen through the quarter-on-quarter growth lense. The article deals with this issue.
Weakness of India’s GDP statistics
- The CSO press release for 4Q20 stated that India grew 0.4 per cent on a year-ago basis.
- That is, relative to the level of GDP four quarters before.
- Many heaved a sigh of relief at growth turning positive after two-quarters of negative year-ago: -24.4 per cent in 2Q20 and -7.3 per cent in 3Q20 and declared that growth would accelerate from hereon.
- Nothing could be further from the truth.
- To know whether the economy will accelerate or decelerate, one needs to know its current speed.
- To do that, one needs to compute the quarter-on-quarter growth as almost all large economies do.
- This is a central weakness of India’s GDP statistics, exemplified by last week’s 4Q20 print.
Challenges in measuring quarter-on-quarter growth
- These computations are not easy, because each quarter has its own characteristics or, as economists call it, “seasonality”
- Seasonality naturally increases or decreases activity in that period.
- Think of quarters with festivals or with harvests versus those without them.
- The modern economy is more complicated as its seasonal patterns change when its structure does.
- To compare two quarters, these changes to seasonality need to be excluded from the data.
- Statisticians have been working on this issue for more than a century and, over the last two decades.
- As a result, many official statistical bodies (such as the US Census Bureau) have made deseasonalising methods freely available.
Understanding the issue through example
- If the level of 1Q20 GDP is set at 100, then the quarterly growth rates imply that it fell to 75, rising to 91.1 in the following quarter and then to 96.3 last quarter.
- Now assume that the level of GDP remains constant for the next five quarters, that is, there is no growth in the economy until the end of fiscal year 2021-22.
- This would mechanically put the full-year growth in 2021-22 at 7.2 per cent simply because of the low average level of GDP in the previous year.
- If the speed of the economy were to remain at its current pace of 5.7 per cent, then the annual growth in 2021-22 would be an astonishing 28.7 per cent.
- Any annual growth projection for next year that is less than this necessarily implies a slowdown from the current pace.
So, what is Indian economy’s current growth rate
- J.P. Morgan uses one of the above mentioned deseasonalising technique.
- The derived quarterly path is the following: In 1Q20, India’s economy grew 3.7 per cent over the previous quarter, in 2Q20 the economy contracted 25 per cent and then recovered 21.5 per cent in 3Q20 and ended the last quarter at 5.7 per cent.
- Put differently, growth slowed to 5.7 per cent last quarter — the latest reading of the economy’s “current” speed.
Putting in context the projected nominal growth
- The budget documents suggest that the government’s projected nominal growth for 2021-22 is 14.5 per cent.
- This implies a real growth rate of around 11 per cent assuming inflation averages 3.5 per cent.
- The implied average quarterly pace, consistent with an 11 per cent annual growth, is just 1 per cent.
- The year-on-year quarterly numbers will keep rising giving the false assurance of a strengthening recovery when in reality the level of income would rise only at a grinding pace.
Reasons behind the deceleration
- India’s growth drivers had already slowed dramatically prior to the pandemic, the pandemic likely exacerbated them.
- With listed companies posting strong profit growth in 3Q and 4Q, much of the decline in overall income has fallen on households and MSMEs.
- This is likely to have not only worsened income inequality, but also severely impaired their balance sheets, making it that much more difficult to access credit in the coming quarters.
- While industry has recovered to 98 per cent of its pre-pandemic level, the service sector remains substantially below.
- Thus, much of the continued high unemployment (as reported by private surveys) is in services.
- This is likely to have disproportionately increased women’s unemployment, thereby widening the gender gap.
- Last quarter, central government spending rose 12 per cent, but overall public expenditure contracted 1 per cent, implying a sharp contraction at the state level.
Consider the question “Why quarter-on-quarter growth rates reveal a true picture of India’s growth rate as compared to year-on-year rates? What are the challenges in dealing with the quarter-on-quarter data?”
Conclusion
Neither fiscal policy nor monetary policy are designed to reverse these widening economic imbalances. This makes it hard to see India’s growth engines firing on all cylinders, despite the rollout of vaccines and the anticipated surge in US growth.
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