Note4Students
From UPSC perspective, the following things are important :
Prelims level: State Finance Commission
Mains level: Paper 2- Conditional grants to incentivise the states for reforms
The article highlights the crucial recommendations made by the 15th Finance Commission and also explains the importance of conditions for grants from the Centre to push the state for reforms.
Crucial recommendations by 15th Finance Commission
- The Fifteenth Finance Commission’s report for the period 2021-22 to 2025-26 outlines some crucial recommendations for state governments.
- These recommendations cover tax devolution, grants from the Centre, and the guidelines for the borrowings that they are permitted to incur over the medium-term.
- The commission has recommended that 41 per cent of the government’s divisible pool of taxes be transferred to state governments.
Horizontal devolution formula
- The horizontal devolution formula specifies each state’s share in the overall pie.
- The 15th FC was required to use the states’ population as per the 2011 Census — a highly contentious change.
- It has also introduced a demographic performance criterion.
- Additionally, it has also introduced a new criterion –tax effort.
- Tax effort is measured by the ratio of the three-year average of per-capita own tax revenues and per-capita gross state domestic product (GSDP).
- The net result of the change in criteria is that the share of 10 states in the divisible pool has declined.
- Karnataka is the biggest loser, while Maharashtra is the biggest gainer.
Grants from the Centre conditioned on reforms in states
- Another major set of the commission’s recommendations pertain to grants from the Centre.
- In a major shift, the 15th FC has sharply increased the proportion of grants whose receipt is conditional on specified reforms being undertaken.
- 57 per cent of the 15th FC-recommended grants accepted so far by the GoI are conditional, relative to just 17 per cent for the 14th FC (including J&K).
What are the conditions
1) Setting up of State Finance Commission (SFC) and applicability of SFC’s recommendations for 5 years only
- Constitution requires state governments to set up State Finance Commissions (SFC).
- The 15th FC has asserted that the mandate of any given SFC is intended to be applicable only for five years.
- It revealed that only 15 states have set up their fifth or sixth SFCs, whereas several states have not moved beyond their second or third SFC.
- Accordingly, a staggering 84 per cent of the Rs 4.4 trillion grants for local bodies recommended by the 15th FC are conditional on the states setting up SFCs for the coming five-year period, and acting on their recommendations by March 2024.
2) Availability of online accounts
- Another entry-level condition for availing grants by rural and urban local bodies pertains to the timely availability of their accounts online from 2021-22 onwards.
3) Notiflying floor rate for property tax
- For the receipt of grants by the urban bodies, states are required to notify a floor rate for property tax by 2021-22, and demonstrate consistent year-wise improvement from 2022-23 onwards.
- This will complement the conditions set previously by SEBI for ULBs to become eligible to raise municipal bonds.
Changes in limit on net borrowings of state governments
- The commission has recommended that the normal limit for net borrowings of state governments be fixed at 4 per cent of GSDP in 2021-22.
- This will ease to 3.5 per cent by 2022-23, thereafter reverting to the erstwhile 3 per cent limit till 2025-26.
- The additional borrowing space of 0.5 per cent of GSDP for states is conditional on the completion of power sector reforms.
Prospect of huge gaps in states’ revenue in the future
- The states’ fiscal arithmetic will alter in 2022-23 with the GST compensation set to cease at the end of June 2022 as things stand today.
- The ensuing drop in grants, combined with the tapering of the front-loaded revenue deficit grants is likely to leave a big gap in some states’ revenues.
Consider the question “What are the conditions laid down by the 15th Finance Commission on the states for the central grants? How these conditions could benefit the states?”
Conclusion
The question is whether this revenue gaps will force the states to move on both the power sector reforms, which have proven challenging in the past, and the municipal reforms, so that their resource availability may be enhanced.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bicameralism
Mains level: Paper 2- Importance of bicameralism
The article discusses the issue of undermining of the upper house by passing the certain bills through voice vote and use of money bill route.
Passing of the Bill by voice vote
- The Karnataka Prevention of Slaughter and Preservation of Cattle Bill was passed by the State’s Legislative Council by voice vote without any division.
- The law was passed by the Council despite the lack of a majority.
- There was no division vote based on actual voting as is usual and as the Opposition members had demanded.
A new legislative precedent
- Similar process was followed to pass the controversial farm laws (by the Rajya Sabha) in September 2020.
- The pandemonium in the House caused by heated interventions by the Opposition was used as a pretext to resort to a voice vote.
- The laws passed with a voice vote seem like a new template for bypassing the constitutionally envisaged legislative process.
- Another process repeatedly used over the last few years to bypass the Upper House of Parliament is the Money Bill route.
- The Aadhaar Bill was passed in this manner.
- Other controversial laws such as those pertaining to electoral bonds, retrospective validation of foreign political contributions and the overhaul of the legal regime relating to tribunals have also been carried out through the Money Bill route.
The Rajya Sabha’s role
- The Lok Sabha is seen as directly representing the will of the people, and the Rajya Sabha as standing in its way.
- The countervailing function of the Upper House is rarely seen as legitimate.
- The Rajya Sabha has historically stopped the ruling party from carrying out even more significant legal changes.
- The Rajya Sabha is imperfect, partly because of constitutional design.
- And partly because obviously undesirable practices, such as members representing States they have no affiliation to, have been allowed to flourish.
Importance of bicameralism
- The very questioning of the monopoly of the Lower House to represent the ‘people’ makes bicameralism desirable, argues legal philosopher Jeremy Waldron.
- In India, the fact that the Rajya Sabha membership is determined by elections to State Assemblies leads to a different principle of representation, often allowing different factors to prevail than those in the Lok Sabha elections.
- John Stuart Mill had warned about a single assembly becoming despotic and overweening, if released from the necessity of considering whether its acts will be concurred in by another constituted authority.
- The other merit of bicameralism is significant in a Westminster system like India, where the Lower House is dominated by the executive.
- The Rajya Sabha holds the potential of a somewhat different legislative relation to the executive, making a robust separation of powers possible.
Consider the question “Examine the importance of bicameralism in India. Why passage of certain bills as money bill is causing controversies?”
Conclusion
The important role played by the upper house needs to be recognised and respected in the legislative processess.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Gross fixed capital formation
Mains level: Paper 3- Year of economic consolidation
The article argues that we are less likely to witness high growth next year rather it is going to be the year of consolidation.
Year of consolidation
- The Economic Survey, the Union budget, and the RBI credit policy attest that the economy is on the recovery path.
- The fourth quarter will register a positive growth rate, and as a consequence, the contraction for the full year will be between 7.5-8 per cent.
- The contraction sets the pace for growth in 2021-22 which is now going to be critical as it is the foundation for the fructification of the budget revenue targets.
- But consider this: GDP in 2019-20 was Rs 146 lakh crore, which has come down to Rs 134 lakh crore in 2020-21.
- Hence, a 10 per cent growth will take the Indian economy to Rs 147 lakh crore — when compared to Rs 145 lakh crore, this reflects modest growth.
- Therefore, expectations should be tempered when we talk of growth next year.
- There will be a revival in economic activity on all ends which will probably bear fruit in 2022-23 — FY 2021-22 will be a year of consolidation.
Policy architecture
- The government has brought in a cogent policy framework right from the time of the Atmanirbhar announcements, culminating in the budget.
- There is a focus on infrastructure as well as providing incentives to investment through the Production Linked Incentive (PLI) scheme.
- Real estate, power and construction saw several policy reforms last year.
- There is a strong capex push by the government and there will more action taken here.
RBI policies
- The RBI has promised to continue accommodative policies, which sends a signal of managing liquidity considering the large borrowing programme of the government of Rs 12.8 lakh crore.
- RBI will carry out more open market operations, and long-term repo operations during the year to ensure that interest rates remain stable.
- However, there will be concern around state government borrowings too, which will exert pressure on the availability of funds.
- Hence, there will be more central bank intervention in the market to ensure that funds are available.
Inflation concerns
- Inflation is a concern as global commodity prices have already started going up and this has led to core inflation rising.
- Given that the monsoon has been good in the last four years, there is a possibility of an adverse season this time which can affect food prices.
- In India, too, we have seen that the price of petrol and diesel is rising sharply.
- Add to this rising manufactured goods inflation witnessed of late, and there is a possibility of inflation rising above the MPC’s tolerance levels.
Lack of consumption growth
- For growth to take place, consumption growth has to be real and rapid.
- Consumption growth has been affected by the absence of commensurate job creation.
- Consumption growth is unlikely too soon as consumption is dependent on job creation.
- Jobs get created when growth is high and hence there is circular reasoning here.
- Income has been affected in 2020 due to the pandemic which has led to job losses as well as salary cuts.
- This has affected the sustainability of the pent-up demand seen in October and November.
Falling investment
- Investment has lagged with gross fixed capital formation falling to a low of 24.2 per cent in 2019-20 from 34.3 per cent in 2011-12.
- Reversing this decline will be challenging because the demand for such projects has slowed down and banks have been wary of lending for infrastructure.
- There is also surplus capacity in industry with the capacity utilisation rate being 63.3 per cent in the second quarter of 2020-21.
- Therefore, private investment will rise only gradually and the onus is on governments to manage their targets.
- Private investment will follow, but at a slower pace and realistically speaking, will fire more in 2022-23 rather than 2021-22.
Consider the question “Growth has to be driven by two engines- consumption and investment. India has been facing challenges on both fronts. In light of this, suggest the measures India needs to adopt to move forward on both fronts.
Conclusion
The year 2021-22 will be one of cautious optimism. Growth will trend upwards, but it has to be interpreted with caution, keeping a check on the consumption while pushing the investment while arresting the inflation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Sexual harassment at workplace
Why the Ramani judgement matters
- The verdict went beyond a mere refusal to convict Ramani for criminal defamation.
- The verdict vindicated Ramani by accepting Ramani’s truth as a defence to the charge of defamation.
- The verdict urged society to “understand that sometimes a victim may for years not speak up due to mental trauma,” and underlined that a woman has a right to speak up about the abuse, even after decades.
- It pointed out that since sexual harassment typically takes place in private, women’s testimonies cannot be dismissed as untrue or defamatory simply because they are unable to provide other witnesses to back their allegations.
- Institutional mechanisms have systemically failed to protect women or provide justice, the verdict reasoned.
- Therefore, survivors are justified in sharing their testimonies on media or social media platforms as a form of self-defence.
Right to dignity
- The Ramani verdict points out that sexual abuse violates the constitutionally recognised rights to dignity (Article 21) and equality (Articles 14 and 15), and that (a man’s) right to reputation cannot be protected at the cost of (a woman’s) right to dignity.
- The Ramani verdict is a huge moral vindication of the #MeToo movement and will serve to deter powerful men from using the defamation law to silence survivors.
Problem of institution
- Sexual harassment is a problem of institutions rather than of individuals alone.
- The world over, employers deploy sexual harassment as a means to discipline and control women workers.
- In India and Bangladesh, at least 60 per cent of garment factory workers experience harassment at work.
- In Guangzhou, China, a survey found that 70 per cent of female factory workers had been sexually harassed at work, and 15 per cent quit their jobs as a result.
- For factory workers, domestic workers, street vendors, sanitation and waste workers, construction workers, sex workers, labour laws or laws against sexual harassment exist only on paper.
Conclusion
The women who spoke were unanimous that individual complaints were not an option, they needed unions to fight collectively. Women workers fighting sexual harassment, need more support and attention.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Regulation of Big tech and challenges
Article highlights the issues with the growing dominance of social media giants and challenges involved in regulating them.
Issues to consider
1) Conflict of interest
- Many of the big tech companies were not, as they claimed, mere platforms.
- This is because they began to curate and generate their own content, creating possible conflicts of interest.
2) Monopoly power
- There is a suspicion that big tech companies were acquiring more monopoly power leading to lack of free competition.
- There is a conjunction of technology and finance here.
- The more companies were valued, the more they needed monopoly rent extraction to be able to justify those valuations.
3) Lack of accountability in algorithms
- There was an irony in an opaque algorithm being the instrument of a free, open and equitable society.
4) Mixed implications for distribution of wealth
- While the companies had immense economic impact, their distributive implications were more mixed.
- They empowered new players, but they also seem to destroy lots of businesses.
- These companies themselves became the symbol of inequality of economic and political power.
5) Lack of accountability and standards in regulating free speech
- Big tech companies set themselves up almost as a sovereign power.
- This was most evident in the way they regulated speech, posing as arbiters of permissible speech without any real accountability or consistency of standards.
- The prospect of a CEO exercising almost untrammelled authority over an elected president only served to highlight the inordinate power these companies could exercise.
6) Effects of big tech on democracy and democratisation
- The social legitimacy of California Libertarianism came from the promise of a new age of democratic empowerment.
- But as democracies became more polarised, free speech more weaponised, and the information order more manipulated, greater suspicion was going to be cast on this model.
- All democracies are grappling with this dilemma.
Big tech in Indian context
- India will justifiably worry about its own economic interests.
- India will be one of the largest bases of internet and data users in the world.
- The argument will be that this should be leveraged to create iconic Indian companies and Indian value addition.
- India can create competition and be more self-reliant in this space.
- Pushing back against big tech is not protectionism, because this pushback is to curb the unfair advantages they use to exploit an open Indian market.
- India can also justifiably point out that in China keeping out tech companies did not make much of a difference to financial flows or investment in other areas.
The real challenge
- It will be important to distinguish between regulations that are solving some real problems created due to Big tech, and regulation that is using this larger context to exercise more control.
- It will be easier to address those issues if the government showed a principled commitment to liberty, commitment to root out crony capitalism, an investment in science and technology commensurate with India’s challenges, and a general regulatory independence and credibility.
Consider the question “What are the challenges posed by the dominance of social media giants? Suggest the measures to deal with these challenges.”
Conclusion
We should not assume that just because big tech is being made to kneel, the alternative will be any better.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Making businesses recognise their carbon footprint
The article explains the global trend in investors and lendors are demanding companies to recognise their impact on environment and act on it.
Accountability on climate change: global trend
- There is a wave of investors pushing large corporations from across sectors, to recognise their carbon footprint and take affirmative action.
- Aviva, the British insurance company announced it would divest stock and bond holdings in 30 of the biggest corporate emitters of carbon, if their boards failed to take affirmative action over climate change.
- MPs in the United Kingdom called on the Bank of England to ratchet up environment standards in its pandemic stabilising, corporate bond programme.
- Swedbank AB, Sweden’s biggest mortgage bank, has taken a decision not to provide fresh loans to new oil and gas projects.
Companies realising social and environmental impacts
- Several large and growing companies, especially in Europe, are realising their social and environmental impacts and making it a boardroom agenda even without investor guns on their heads.
- Schneider Electric, the energy management and automation company, has embedded environmental, social and governance (ESG) considerations into every facet of its activities.
- The company climbed from 29th to number 1 rank in the 2021 Global 100 ranking in the Corporate Knights index of the world’s most sustainable companies.
- Only one company from India, Tech Mahindra, has made it to the world’s 100 most sustainable list.
Indian scenario
- Indian institutional lenders and investors are simply not demanding enough on sustainability.
- A majority of Indian companies are only meeting compliance norms set out by various state or city authorities.
- Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts.
Way forward
- SEBI is putting the final touches on the Business Responsibility and Environment Reporting (BRSR) guidelines.
- The new ESG reporting norm will apply to the top 1,000 listed companies on Indian exchanges.
- Under BRSR reporting guidelines, companies will have to declare their R&D spends on improving environmental and social outcomes.
- They will have to disclose energy and water consumed to turnover ratios, and the percentage of recycled or reused input materials, among many other social and governance disclosures such as CSR, employee skilling and gender diversity.
- It’s time for lending institutions and investors to align with SEBI and use their muscle to drive a deeper change.
Consider the question “Indian institutional lenders and investors are not demanding enough on sustainability from the companies. Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts. In light of this, suggest the measures to nudge the businesseses to act on their environmental responsibilities.”
Conclusion
Stepping up green standards to meet Paris Climate Agreement goals cannot be the government’s responsibility alone. Businesses must be part of the movement, or the target of containing global warming to less than 1.5 degrees of pre-industrial levels, will remain elusive.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Catalysing accountability and creative governance in local government
The article explains the innovative approach adopted by the Fifteenth Finance Commission in devolution of funds.
Steep hike in grants
- Local governments are the closest to the people at the grassroots level.
- They provide critical civic amenities such as roads, water and sanitation, and primary education and health.
- With this in view, the Fifteenth Finance Commission (FFC) has recommended grants of Rs 4,36,361 crore from the Union government to local governments for 2021-26.
- This is an increase of 52 per cent over the corresponding grant of Rs 2,87,436 crore by its predecessor for 2015-20.
Innovation in recommendations
1) Scaling of capacities in municipalities
- The Commission has recommended Rs 8,000 crore as performance-based grants for incubation of new cities and Rs 450 crore for shared municipal services.
- This is designed to foster innovations in urban governance to transform our cities with speed and scale.
- There is an urgent need for synergistically combined area-based development to spur economic growth and job creation, and decongesting through the development of satellite townships.
- Separately, the massive scaling of capacities in municipalities, particularly the 4,000-odd smaller ones, cannot be done by building capacities in each one of them, but through institutional and technological innovations, without compromising their autonomy.
- The shared municipal services model, with mobile internet, maps, platform thinking, and outsourced services all taken together, can help us fast-track the creation of municipal capacities at scale.
- This is one of the innovations in the FFC recommendations.
2) Allocation covers all three tiers of panchayats
- Of grants for all local governments with 90 per cent weightage on population and 10 per cent on area remains unchanged from the Fourteenth Finance Commission.
- For panchayats, the FFC allocations cover all the three tiers — village, block, and district — as well as the Excluded Areas in a state exempted from the purview of Part IX and Part IX-A of the Constitution.
- Funds to all three can improve functional coordination and facilitate the creation of assets collectively across smaller jurisdictions.
- This is the second new aspect of the FFC recommendations.
3) Focus on metropolitan governance
- The FFC calls for a focus on urban agglomerations (UAs) that include urban local bodies, census towns and outgrowths.
- In 2011, out of the total urban population of 377 million, 61 per cent lived in UAs.
- The FFC has emphasised the need to focus on the complex challenges of air quality, drinking water supply, sanitation, and solid waste management in the million-plus UAs and cities.
- Thus, for 2021-26, there is a Million-plus Challenge Fund of Rs 38,196 crore that can be accessed by million-plus cities only through adequate improvements in their air quality and meeting service level benchmarks for drinking water supply, sanitation, and solid waste management.
- This focus on metropolitan governance through substantive but 100 per cent outcome-based grants is the third innovation.
- For ULBs other than the million-plus category, the total grants are Rs 82,859 crore.
- The grants to local governments, both urban (less than a million category) and rural, contain a mix of basic, tied as well as performance grants.
4) Entry-level conditions
- The efficiency, smooth functioning and accountability of local bodies have been plagued by:
- (i) lack of readily accessible and timely audited accounts,
- (ii) absence of timely recommendations of State Finance Commissions and suitable actions thereon,
- (iii) inadequate mobilisation of property tax revenues (especially in ULBs).
- Finance Commissions in the past have drawn pointed attention to these issues, but with limited success.
- These entry-level conditions for availing any grants and their applicability to all local governments is the fourth innovation.
Consider the question “Examine the innovative approach adopted by the Fifteenth Finance Commission for the devolution of funds to panchayats and municipal bodies.”
Conclusion
Hopefully, over the next five years, through a partnership among the Union, states, and local governments, in the spirit of cooperative federalism, these recommendations and innovations will catalyse progress in the accountability and effectiveness of local governments in India.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Issues of the informal workforce
The article highlights the vulnerabilities of workers in the informal sector and also highlights the issues in the draft rules in the labour codes.
Context
- The budget referred to the implementation of the four labour codes.
- There is also a provision of Rs 15,700 crore for MSMEs, more than double of this year’s budget estimate.
Impact of pandemic on informal workers
- India’s estimated 450 million informal workers comprise 90 per cent of its total workforce, with 5-10 million workers added annually.
- Nearly 40 per cent of these employed with MSMEs.
- According to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75 per cent were lost in the informal sector.
- The National Human Rights Commission recorded over 2,582 cases of human rights violation as early as April 2020.
Issues with the draft rules in labour code
- The rush to clear the labour codes and form the draft rules shows little to no intent on part of the government to safeguard workers.
- The draft rules envisage wider coverage through the inclusion of informal sector and gig workers, at present the draft rules apply to manufacturing firms with over 299 workers.
- This leaves 71 per cent of manufacturing companies out of its purview.
- The draft rules mandate the registration of all workers (with Aadhaar cards) on the Shram Suvidha Portal to be able to receive any form of social security benefit.
- This would lead to Aadhaar-driven exclusion and workers will be unable to register on their own due to lack of information on the Aadhaar registration processes.
- A foreseeable challenge is updating information on the online portal at regular intervals, especially by the migrant or seasonal labour force.
- It is also unclear as to how these benefits will be applicable in the larger scheme of things.
Neglect of informal sector
- The draft rules fail to cater to the growing informal workforce in India.
- The growing informal nature of the workforce and the lack of the state’s accountability makes it a breeding ground for rising inequality.
- The workers face the risk of violations of their human and labour rights, dignity of livelihood, unsafe and unregulated working conditions and lower wages.
Consider the question “Assess the impact of covid pandemic on workers in the informal sector. Also examine the issues with the draft rules in the labour code.”
Conclusion
The Code on Social Security was envisaged as a legal protective measure for a large number of informal workers in India but unless the labour codes are made and implemented keeping in mind the realities of the informal sector workers, it will become impossible to bridge the inequality gap.
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Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 3-
The article argues for consideration of the regional variation in the conditions of farmers and their concerns in the context of recently introduced farm laws.
Argument against diversification
- In Punjab, Haryana and western UP, minimum support price (MSP)-based agriculture has a logic.
- Not all regions must diversify.
- The region has great alluvial soil, good irrigation and almost a century-long tradition of the application of science to agriculture.
- In south Punjab, with less irrigation, and parts of Haryana not covered by the Indira Gandhi Canal, some diversification to pulses, cotton etc. could work but the solid specialisation in this region remains.
Issue of middlemen
- Arhtiyas (middlemen) are important in Indian agricultural markets.
- They are a part of the supply chain in north-west India.
- Here they are not like the middlemen elsewhere.
- They function simply as agents of the procurement agencies.
- This was done by the past government to reduce overhead costs of procurement.
Steps need to be taken
- The e-markets, forwards and farmer-managed companies are not the dominant mode of rural organisations.
- Agriculture is the one good sector in otherwise dismal year.
- So, we need to strengthen it, not feed off on its glory, even outside north-west India.
- We have the largest spread of agricultural markets in the world according to spatial maps.
- But they are not APMCs.
- With weak markets (outside of grains) and without first-stage processing and other infrastructure, the farmer knows he is at the mercy of the trader and comes out on the streets when that is not understood.
Evolution of MSP
- The MSP played a crucial role in the days of compulsory procurement and zonal restrictions.
- Each crop had its own report then.
- Later separate reports were replaced by two reports, one for kharif and another one for rabi, apart from one for sugarcane (an annual crop).
- The 1982 rabi report stated that relative prices and, in that context, MSP had the role of an intervention mechanism when markets failed, outside the compulsory procurement area.
- Later, the concept of transport costs and managerial costs became important.
Way forward
- The Essential Commodities Act should be ditched.
- Good laws are good because progress starts with them, but not all laws are good everywhere.
- A modified version of the laws with a roadmap can be on the agenda — not everywhere, but most places outside the lands of the five rivers.
Conclusion
The amended laws should be considered in the context of regional variation in the country and necessary changes should be made to address the concerns of the farmers.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Finance Commission
Mains level: Paper 2- Recommendations of Fifteenth Finance Commission
The article analyses the various recommendations of the Fifteenth Finance Commission and their impact.
Unique challenges
- Many new and unique demands were placed on the 15th Finance Commission.
- The major challenge being addressing the issue of the 2011 population census evoking a sharp response from the southern states.
- Other issues include the non-lapsable defence fund and the use of certain parameters for performance incentives.
- The Commission was also required to perform the task of assessing and projecting the fiscal roadmap for the Union and state amid an uncertain domestic environment due to shortfall in the GST collection, further accentuated in the year 2020 by the global pandemic.
Key recommendations
The Commission, in its final report, recommended vertical devolution at 41 per cent, adjusting 1 per cent for the erstwhile state of Jammu and Kashmir.
1) Horizontal distribution
- For horizontal distribution, the commission has tried to harmonise the principles of expenditure needs, equity and performance.
- This is achieved by the introduction of efficiency criteria of tax and fiscal efforts and by assigning 12.5 per cent weight to demographic performance.
- Consideration of demographic performance will help in resolving the demographic debate and incentivising states in moving towards the replacement rate of population growth.
2) Principles governing grant-in-aid
- Grants are important as they are more directly targeted and equalise the standards of basic social services to some extent.
- The Commission has recommended a total grant of Rs 10,33,062 crore during 2021-26.
- Grant is broadly characterised into: (a) revenue deficit grants (b) grants for local governments (c) grants for disaster management (d) sector-specific grants and (e) state-specific grants.
- Many of these grants are linked with performance-based criteria, thereby promoting principles of transparency, accountability, and leading to better monitoring of expenditures.
- However, the Commission was asked to examine whether revenue deficit grants should be provided at all to the states.
- Some states stressed that revenue deficit grants have serious disincentives for tax efforts and prudence in expenditure and, hence, these should be discontinued.
- Fiscally stressed states of Kerala, West Bengal and Punjab are regular recipients of these grants due to high debt legacy.
3) Conditional grants to local bodies
- This Commission’s grant for local government is different from that of its predecessors for the set of entry-level conditions:
- (a) Constitution of State Finance Commissions.
- (b) Timely auditing and online availability of accounts for rural local bodies coupled with
- (c) Notifying consistent growth rate for property tax revenue for urban local bodies.
- Secondly, the recommendations are in alignment with the national programmes of Swachch Bharat Mission and Jal Jeewan Mission.
4) Incubation of new cities and urban grants
- It is for the first time that a Finance Commission has recommended Rs 8,000 crore to states for incubation of new cities, granting Rs 1,000 crore each for eight new cities.
- The focus of urban grants for million-plus cities is improvement in air quality and meeting the service level benchmark of solid waste management and sanitation.
5) Grants for health and setting up of disaster mitigation fund
- The commission recommended channelising the health grant of Rs 70,051 crore through local bodies, addressing the gaps in primary health infrastructure.
- The Commission’s recommendation for setting up the state and national level Disaster Risk Mitigation Fund (SDRMF), in line with the provisions of the Disaster Management Act, is both well-timed and necessary.
- For the first time, the Finance Commission has introduced a 10-25 per cent graded cost-sharing basis by the states for the NDRF and NDMF which has not been appreciated by the states.
6) Non-lapsable fund for defence
- The Commission has recommended setting up of a dedicated non-lapsable fund, the Modernisation Fund for Defence and Internal Security (MFDIS).
- Objective of the fund is to bridge the gap between projected budgetary requirements and budget allocation for defence and internal security and to provide greater predictability for enabling critical defence capital expenditure.
- The fund will have four specific sources: (a) Transfers from the Consolidated Fund of India, (b) disinvestment proceeds of DPSEs, (c) proceeds from the monetisation of surplus defence land and (d) proceeds of receipts from defence land likely to be transferred to state governments and for public projects in the future.
- The total indicative size of the proposed MFDIS over the period 2021-26 is Rs 2,38,354 crore.
- The Union government has accepted this recommendation in principle.
Consider the question “Examine the various principles on which the Fifteenth Finance Commission based the horizontal distribution of states share.”
Conclusion
The report starts with the famous quote of Mahatma Gandhi: “The future depends on what we do in the present”. It would be interesting to see the impact of these overarching and revolutionary recommendations in the times ahead.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Vivad se Vishwas scheme
Mains level: Paper 3- Measures adopted for increasing transparency and compliance in taxation.
Article explains the measures adopted in the Budget 2021-22 for increasing compliance and transparency.
Maintaining the status quo
- COVID-19 has upset fiscal maths around the world.
- It is in this context that the Union budget assumed significance this year.
- The expectations of tax breaks were rife on the presumption that this could boost economic activity.
- Whereas others called for a tax on stock market gains.
- Unyielding to such requests, the budget was based on a pragmatic approach to maintain the status quo.
Why higher tax rates would not help much
- Nearly 60 per cent of corporate taxes are paid by the 0.06 per cent of the companies belonging to the top income bracket.
- On the other hand, among individual taxpayers, only 0.17 per cent report taxable incomes above Rs 25 lakh.
- Therefore, higher taxes would either yield little revenue or adversely affect economic activity.
Need to shift focus to compliance and greater transparency
- For increasing compliance and transparency, significant proposals have been made:
- 1) Limited the window for reopening the case to 3 years.
- 2) The introduction of the requirement for an assessment officer to provide facts on the basis of which he/she re-assesses.
- 3) The faceless Income Tax Appellate Tribunal (ITAT).
- By making the process of assessment faceless the major causes for litigation are addressed.
- The limited window of re-opening cases for small taxpayers and due consideration of risk management strategy and the CAG’s observations in carrying out such assessments marks an improvement in the process.
Dispute resolution mechanism with better interface
- The Vivad se Vishwas scheme was launched in 2020 to address piling litigation and it is reported that collections under this scheme have been Rs 85,000 crore for 1,10,000 taxpayers.
- This is a small fraction as compared to the Rs 4.34 lakh crore in corporate taxes and Rs 4.49 lakh crore in income taxes that are locked in dispute.
- Therefore, a dispute resolution mechanism that allows for better interface between the taxpayer and the department may, in fact, be relatively beneficial.
Consider the question “Examine the reasons for small tax base in India. Examine the measures adopted in the Budget 2021-22 for increasing compliance and transparency.”
Conclusion
The budget estimates suggest that corporate tax and income tax collections are expected to increase by 22 per cent. With an expected growth rate of 14 per cent in nominal GDP, the remaining gains in taxes are presumably expected from higher compliance or realisation of taxes due. Whether this will pan out remains to be seen.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- How governments are dealing with the dominance of social media
The article discusses the issue of growing influence of social media companies and response of the governments.
Issues with the growing influence of social media companies
- In the US the last two general elections in 2016 and 2020 have seen strong charges of political manipulation by social media companies.
- But influence of social media companies is not limited ot elections, it envelops a range of domestic and international issues.
- These issuesincludes: the concentration of economic power, individual rights against the state as well as the corporation, disinformation, the rise of digital geopolitics, and global digital governance.
How governments are responding
- Democratic forces need to consult each other and collaborate in developing new norms for managing the digital world.
- In the US, both the left and right are demanding that digital behemoths like Amazon, Google, Facebook and Twitter are brought under greater control if not broken up.
- Last December, the European Commission proposed new rules to promote competition and fairness in digital markets.
- The EU is likely to approve a Digital Markets Act next year.
- Australia has decreed that Google must work out an arrangement with Australian newspapers to pay for the use of their content.
- The current digital giants, however, are not easily amenable to political attack.
- They are bigger than the biggest we have known.
3 Issues with business practices of social media companies
- Governments are now questioning the sharp business practices of the tech giants especially labour rights, taxes and politics.
- While the tech giants have created a lot of new wealth, some of them have sharply squeezed the labour.
- In California, trade unions are battling against the success of Uber and Lyft to turn employees into “contract workers” to deny them multiple benefits.
- Digital giants have been aggressive tax evaders.
- On the political front recently,Twitter and Facebook shut down President Donald Trump’s accounts.
- European leaders raised important questions about social media’s actions against Trump.
Way forward
- Answer to deal with social media on political front lies in laying down a clear set of obligations and responsibilities for the digital giants.
- This move will help in building digital sovereignty.
- The world’s democracies must get together to discuss global digital governance.
Consider the question “What are the challenges posed by the growing influence of social media companies in the democratic countries?”
Conclusion
As governments push back against big tech, a new challenge presents itself — reining in the growing power of the state in the digital age. The answer lies in democracies modernising their laws to protect freedoms in the era of technological transformation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Finance Commission and its recommendations
Mains level: Paper 2- Fifteenth Finance Commission report and federalism
The article analyses the recommendations of fifteenth Finance Commission and their implications for the federalism in India.
Major recommendations accepted by the government
- Report of the fifteenth Finance Commission (XVFC) was laid before the Parliament.
- The finance minister announced the acceptance of its recommendation of retaining the share of states in central taxes at 42 per cent.
- She also stated that on its recommendation revenue deficit grants of Rs 1.18 lakh crore to the states have been provided for in the budget.
- Some of the recommendations, however, have far-reaching implications on government finances, both of the Centre and the states.
- Keeping in view the extant strategic requirements for national defence in a global context, XVFC has, in its approach, recalibrated the relative shares of the Union and the states in gross revenues receipts.
Issues with the recalibration for national defence
- Recalibration enables the Union to set aside resources for special funding on defence.
- The states have been made to pay Rs 7,000 crore to bridge [the] Centre’s gap between projected budgetary requirements and budget allocation for defence and internal security defence.
- But this is an expenditure that the Centre is obliged to fund.
- For the first time, a finance commission has carved out resources meant for distributable statutory grants and dipped into the states’ revenue share, as against the tax share, in order to finance the Centre’s exclusive expenditure obligation.
- What has been done is not in line with the system envisaged in the Constitution.
- This move will eventually put the fiscal federal system under systemic strain.
- In operational terms, too, this move is a significant departure.
- So far, the Centre has been used to pre-empting resources from the kitty to be distributed among the states but only to finance expenditures in areas earmarked for states.
- This was done through the centrally-sponsored schemes, but at least the states’ money was being used in the states, even if on a discretionary rather than a criteria basis.
- Now, with this move of earmarking and financing of funds for sectors, it is the states’ money that is being used to finance the Centre’s expenditure.
- This is certainly not cooperative federalism.
Changes in horizontal distribution: More weightage to efficiency and performance
- In horizontal distribution, the criteria used by successive finance commissions for devolving taxes across states have always been linked to need — based on equity, tempered by efficiency.
- From 92.5 per cent of funds to a state being devolved based on need and equity, the XVFC has reduced these two components to 75 per cent.
- The remaining 25 per cent are to be devolved on considerations of efficiency and performance.
- This is the lowest weightage for equity, making the XVFC transfers potentially the least progressive ever.
Structural changes not taken into account
- The Finance Commission has not even made any serious effort to review the existing scheme of transfers in light of the changed federal landscape.
- The existing criteria for the devolution have evolved in, and for, a production-based tax system.
- The XVFC should have reformulated the distributional criteria for a consumption-based tax system [GST].
- The structural change from production to consumption will make a significant difference to distribution as well as the need, nature and distribution of equalising grants.
- This is the same manner in which the revenue deficit grants have been carried forward.
- Ideally, the “gap-filling” approach should have been redesigned in light of the compensation law providing a minimum-guaranteed revenue of 14 per cent to every state.
Consider the question “For the first time, a finance commission has carved out resources meant for distributable statutory grants and dipped into the states’ revenue share, as against the tax share, in order to finance the Centre’s exclusive expenditure obligation. What are the issues with this move?”
Conclusion
The Fifteenth Finance Commission report is not aligned with the new landscape of federalism and does not address the key issues.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Agri-marketing reforms and water accounting to solve the problems of agriculture
China and Israel offer two important lessons for India to transform its agriculture: agri-market reforms and water accounting.
Lessons from Israel and China
- India, China and Israel — started off their new political journey in late 1940s, but today China’s per capita income in dollar terms is almost five times that of India, and Israel’s almost 20 times higher than India.
- China produces three times more agri-output than India from a smaller arable area.
- China started off its economic reforms in 1978 by taking up agriculture first.
- It dismantled its commune system of land holdings and liberated agri-markets that allowed farmers to get much higher prices.
- As a result, in 1978-84, farmers’ incomes in China increased by almost 14 per cent per annum, more than doubling in six years.
- Israel cultivates high-value crops for exports (citrus fruits, dates, olives) by using every drop of water and recycling urban waste water for agriculture, by de-salinisation of sea waters.
- Water accounting in Israel is something exemplary.
Need for agri-reform in India
- The average holding size in China was just 0.9 ha in 2016-18, smaller than India’s 1.08 ha in 2015-16.
- So there is no doubt that small holders can do wonders, if they are given the right incentives, good infrastructure and research support, and the right institutional framework to operate.
- In India, the 1991 reforms did not include agriculture.
- Indian agri-food policies remained more consumer-oriented with a view to protect the poor.
- Export controls, stocking limits on traders, movement restrictions, etc all continued at the hint of any price rise.
- The net result of all this was farmers’ incomes remained low and so did those of landless agri-labourers.
Way forward
- India needs to change its policy framework from being subsidy-led to investment-driven, from being consumer-oriented to producer-oriented, and from being supply-oriented to demand-driven by linking farms with factories and foreign markets, and, finally, from being business as usual to an innovations-centred system.
- Until India breaks away from the policy of free power for agriculture, there would be no incentive for farmers to save water.
- In a state like Punjab where almost 80 per cent of blocks are over-exploited or critical, meaning the withdrawal of water is much more than the recharge.
- Highly subsidised urea and open-ended procurement have become a deadly cocktail that are eating away the natural wealth of Punjab.
- Out-of-box thinking is needed to break this regressive cycle for a brighter future for Punjab, for our own children.
Consider the question “What are the implications of subsidy oriented policies for Indian agriculture.”
Conclusion
Lessons from China and Israel suggest that India need reform in agri-food policies and water accounting to address several issues plaguing agriculture.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: RTE, New Education Policy
Mains level: Paper 2- Impact of pandemic on education of the poor
The article highlights the issue of the decrease in allocation for education and two ways in which the government seeks to plug this gap.
Decrease in allocation to education: Two paradoxical axes
- The government allocated Rs 6,000 crore less on education in Budget 2021 as compared to last year.
- It’s strange that this year’s budget makes no reference to the pandemic and the multiple challenges it has thrown up for the poor.
- Parents who depend on the lowest rung of free government schools are the ones who need maximum state support.
- More recently, the state’s position with regard to the provision of education in general and budgetary allocations to education in particular hinges on two paradoxical axes.
1) Supporting community volunteer
- On one axis, is its appreciation of the commitment and passion of the community volunteers to reach out to children who may not be learning for multiple reasons.
- Acknowledging the contribution of such people, the NEP proposes ideas of “peer-tutoring and trained volunteers” to support teachers to impart foundational literacy and numeracy skills to children in need of such skills.
- While such efforts need to be applauded, they cannot be regarded as substitutes of the formal state apparatus.
- Such a view also de-legitimises the teaching profession-associated qualifications and the training mandated by the state for people to become teachers.
- Salaries and working conditions of the local community, most of whom are unemployed youth and women, are often compromised.
- This is exploitation and needless to say, it also impacts the quality of education for the poor.
2) Public-Private partnership and issues with it
- On the second axis, is the position advocating partnerships between public and private bodies.
- Not that the involvement of private individuals/organisations/schools in education is anything new in India.
- However, in the past, private schools catered to the relatively better-off but now the poor are being targeted for profit.
- This narrative is based on two sources: Poor learning outcomes of children, particularly those studying in government schools as reported by large scale assessment surveys, and large-scale absenteeism/dereliction of duty on the part of government school teachers.
- Reasons for these are attributed to government school teachers having no accountability.
- NEP 2020 also states that the non-governmental philanthropic organisations will be supported to build schools and alternative models of education will be encouraged by making their requirements for schools as mandated in the RTE less restrictive.
- This is clearly problematic but convenient as the justification underlying this position is that one needs to shift focus from inputs to outputs.
- This also indicate that schools can do with lesser financial resources, and compromised inputs may not necessarily lead to compromised outputs.
- The nature of the partnership between public and private has also changed from the private supporting the public to private jostling for space with the public, even replacing them.
- It’s a win-win situation for both — the state gets to spend less and private players make profit.
Consider the question “Examine the impact of a covid pandemic on the education of the poor. Suggest the measure need to be taken by the government to mitigate the impact.”
Conclusion
While money may not ensure quality education, lack of adequate resources will only deepen the social divide between people.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Floods in Uttarakhand and its mitigation
The article explains the relationship between development activities in Uttarakhand and the devastating floods.
Cause of recent flash flood in Uttarakhand
- According to Planet Labs, ice along with frozen mud and rocks fell down from a high mountain inside the Nanda Devi Sanctuary, from a height of 5,600 m to 3,300 m.
- This created an artificial lake within the sanctuary in Rontigad, a tributary of Rishi Ganga.
- Within eight hours, this lake burst open and its water, laden with mud and stones, rushed through the Rishi Ganga gorge which opens near Reni.
- Studies say that the current winter season has seen little rain and snow, with temperatures being highest in the last six decades.
- So, the effects of chemical weathering were much more active in the higher Himalayas.
- There is a possibility of more such events this year.
Factors responsible
1) Development with no regard for the environment
- As a mountain system, the Himalayas have had earthquakes, avalanches, landslides, soil erosion, forest fires and floods, and these are its natural expressions, parts of its being.
- Except for earthquakes, humans have directly contributed towards aggravating all the other phenomena.
- The Ravi Chopra committee formed by the SC recommended closure of all the 24 hydro projects in question by Wildlife Institute of India.
- The SC also formed another committee to look at the impact of the Chaardham road project.
- Road and hydro projects are being operated in the Himalayas with practically no rigorous research on the ecological history of the area, cost-benefit analysis and many other aspects including displacement of communities, destruction of biodiversity, agricultural land, pastures as well as the cultural heritage of the area.
Dilution of Environmental Impact Assessment rules
- Earlier, while independent experts carried out the Environmental Impact Assessment (EIA), today it is assigned to a government agency, which does the work for other government departments.
- Furthermore, during the lockdown, the government changed the EIA rules and diluted labour laws (most of the workers in both the affected projects belong to unorganised sector) in the name of pandemic measures.
2) Climate change
- Another factor which cannot be overlooked is that of climate change.
- Studies have suggested that the pace of this change is faster in mountains and fastest in the Himalayas.
- While earthquakes and weathering work at their own pace, climate change can contribute towards altering their natural speed.
Need for studying the 2013 calamity
- We can look back at the terrible calamity of 2013, and see how it washed away the encroachments in river areas-dams, barrages, tunnels, buildings, roads.
- The communities paid a much heavier price than what they received in compensation.
- Further, the 2013 calamity has to be studied and understood in all the other regions and river valleys of Uttarakhand, Western Nepal and Himachal.
- It was not specific to Kedarnath, although much of the focus was directed there.
- Till date, we don’t have any white paper on this calamity.
- The India Meteorological Department failed in its prediction and wrongly announced at the end of the first week of June that the monsoon will reach Uttarakhand by June 27-28.
- It reached on June 16-17 with 300-400 per cent more rain, a record never heard of before.
- 24 big and small hydro projects were destroyed.
- The muck created by these projects was also the cause of their destruction.
- The road debris, always dumped in rivers, was another cause.
- The smaller rivers were more aggressive in 2013.
Consider the question “What are the factors responsible for the devastating floods in the Uttarakhand? Suggest the measures for disaster mitigation.”
Conclusion
The Himalayas have been giving us life through water, fertile soil, biodiversity, wilderness and a feel of spirituality. We cannot and should not try to control or dictate the Himalayas.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IT Act
Mains level: Paper 2- Section 69A of IT Act and issues with it
What is the faceoff about
- Recently, Indian government issued direction to Twitter, ordering it to shut down user accounts connected with farmers’ protests.
- The government has to exercise powers under Section 69A of the Information Technology Act to block user accounts critical of the farm bills.
- The accounts which were sought to be censored are back online.
- This is due to Twitter’s evident refusal to comply with the directions after a constitutional appraisal.
- It has, as per press statements, cited the doctrine of proportionality in its defence.
Concerns with the directive
- This direction presents a clear breach of fundamental rights but also reveals a complex relationship between the government and large platforms on the understanding of the Constitution of India.
- The specific legal order issued is secret.
- This brings into focus the condition of secrecy that is threshold objection to multiple strands of our fundamental rights.
- It conflicts against the rights of the users who are denied reasons for the censorship.
- Secrecy also undermines the public’s right to receive information, which is a core component of the fundamental freedom to speech and expression.
- This is an anti-democratic practice that results in an unchecked growth of irrational censorship but also leads to speculation that fractures trust.
- The other glaring deficiency is the complete absence of any prior show-cause notice to the actual users of these accounts by the government.
- This is contrary to the principles of natural justice.
- This again goes back to the vagueness and the design faults in the process of how directions under Section 69A are issued.
Constitutionality of Section 69A of IT Act
- The secrecy clause represents a failure on the part of the Union executive, which framed the process for blocking websites in 2009.
- he Supreme Court also failed to substantively examine the clause.
- This is despite the opportunity offered by its celebrated judgment Shreya Singhal v. Union of India, when it struck down Section 66A of the IT Act as unconstitutional.
- At the same time, the court stated in Shreya Singhal, that an aggrieved party could approach a court for remedy if their website or user account was blocked under Section 69A.
- More recently, the court, when adjudicating the constitutional permissibility of the telecommunications shutdown in Jammu and Kashmir by its judgment in Anuradha Bhasin v. Union of India directed pro-active publication of all orders for internet shutdowns.
- After this, a decent argument may be made that directions for blocking now need to be made public.
- However, several state governments are actively refusing compliance on the publication of orders on internet shutdowns.
Consider the question “Use of Section 69 of the IT Act to suspend the account of the users on a social media platform has raised concern. Examine these concerns.”
Conclusion
The episode leaves a sense of confusion and wonder about why our own government formed under the Constitution may be failing to fulfil its obligations when strangers who trade in our data for profit are seemingly more eager.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Glacial burst
Mains level: Paper 3- Floods in Uttarakhand and steps need to be taken to deal with such disasters
The article discusses the factors that could explain the cause of the recent flash floods in Uttarakhand and suggest the immediate steps to deal with such disasters.
What makes Uttarakhand vulnerable
- Days after a glacier burst in the Chamoli district of Uttarakhand caused flash floods, the scientific community is still struggling to understand what triggered the disaster.
- Uttarakhand is located in the midst of young and unstable mountains and is subject to intense rainfall.
- For years experts have voiced their fears about an impending disaster due to climate change, rapid and indiscriminate construction activities, and the subsequent ecological destruction in the region.
- Studies have shown that widespread settlements, farming, cattle grazing and other anthropogenic activities could destroy the natural barriers that control avalanches and floods, thereby enhancing the possibilities of a glacial lake outburst flood.
- The Hindu Kush Himalaya Assessment Report (2019) had pointed out that one-third of the Hindu Kush Himalaya’s glaciers would melt by 2100 and potentially destabilise the river regime in Asia, even if all the countries in the region fulfilled their commitments under the Paris Agreement.
Possible causes of the current glacial outburst
- The current glacier burst was loosely attributed to erosion, a build-up of water pressure, an avalanche of snow or rocks, landslides or an earthquake under the ice.
- A rock mass, weakened from years of freezing and thawing of snow, may have led to the creation of a weak zone and fractures leading to a collapse that resulted in flash floods.
Issue of construction activity
- Experts and activists have incessantly asked for scrutiny into the construction of hydroelectric power projects in Uttarakhand.
- There have also been allegations about the use of explosives in the construction of dams and other infrastructure.
- In 2014, an expert committee led by Dr Ravi Chopra, instituted to assess the role of dams in exacerbating floods, provided hard evidence on how haphazard construction of dams was causing irreversible damage to the region.
7 Immediate steps
- 1) Investing in resilience planning, especially in flood prevention and rapid response.
- 2) Climate proofing the infrastructure such as by applying road stabilisation technologies for fragile road networks and strengthening existing structures like bridges, culverts and tunnels.
- 3) Strengthening embankments with adequate scientific know-how
- 4) Reassessing development of hydropower and other public infrastructure.
- 5) Investing in robust monitoring and early warning system.
- 6) Establishing implementable policies and regulatory guidelines to restrict detrimental human activities, including responsible eco- and religious tourism policies.
- 7) Investing in training and capacity building to educate and empower local communities to prevent and manage risks effectively.
Consider the question “What are the factors that make Uttarakhand vulnerable to natural disasters? Suggest the measures to prevent and deal with the disasters”
Conclusion
India needs to urgently rise up to the challenge by applying innovative and inclusive solutions that support nature and marginalised communities, to restore and rebuild a resilient future for Uttarakhand.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Foreign policy challenges India faces
The article explains the various choices India faces in the geopolitical landscape shaped by emergence of two Asian giants.
New challenges and hard choices on geopolitical front
- As it moves to becoming the third largest economy in the world, India needs to have a clear-eyed world view and strategy as it makes hard choices.
- It needs to reject the developing country regional mindset that has shaped India’s national aims and foreign policy.
- We have a “special and privileged strategic partnership” with Russia which provides more than three-quarter of India’s military equipment and a “comprehensive global strategic partnership” with the U.S.
- India’s relationship with the U.S.-led Quadrilateral Security Dialogue (Quad), where the others are military allies, has rightly been cautious, as U.S. President Joe Biden sees China as a ‘strategic competitor’ rather than a ‘strategic rival’.
- Realism dictates that India does not need to compromise on its strategic autonomy.
- India faces two sides of the China conundrum: Defining engagement with its neighbour which is consolidating an expanding BRI while remaining involved with the strategic, security and technological concerns of the U.S.
China’s dominance in financial sphere
- In the financial sphere, there is the real possibility of the Chinese renminbi becoming a global reserve currency or e-yuan becoming the digital payments currency.
- China is the world’s largest trading economy.
- It could soon become the world’s largest economy.
- China has stitched together an investment agreement with the EU and with most of Asia.
- Relative attractiveness will determine when the dollar goes the way of the sterling and the guilder.
- China, facing technological sanctions from the U.S., may well put in the hard work to make this happen soon.
China: Partner, competitor, and economic rival
- Some form of the EU’s China policy of seeing the emerging superpower as a partner, competitor, and economic rival depending on the policy area in question is going to be the global norm.
- This broad perspective is also reflected in India’s participation in both the Shanghai Cooperation Organisation, designed to resist the spread of Western interests, and in the U.S.-led Quad, with its anti-China stance.
- Within the United Nations, India’s interests have greater congruence with China’s interests rather than the U.S.’s and the EU’s.
- Sharing the COVID-19 vaccine with other countries distinguishes India, and China, from the rest.
India’s engagement with the U.S.
- The congruence between India and the U.S. lies in the U.S.’s declared strategic objective of promoting an integrated economic development model in the Indo-Pacific as a credible alternative to the BRI, but with a caveat.
- Instead of an alternate development model, India should move the Quad towards supplementing the infrastructure push of the BRI in line with other strategic concerns in the region.
- For example, developing their scientific, technological capacity and digital economy, based on India’s digital stack and financial resources of other Quad members, will resonate with Asia and Africa.
India’s role in global governance
- Another area where India can play a ‘bridging role’ is global governance.
- President Xi Jinping’s “community with shared future for mankind”, and Prime Minister Narendra Modi’s “climate justice” and asking how long India will be excluded from the UN Security Council, challenge the frame of the liberal order without providing specific alternatives.
- With respect to digital data, India has recently expressed that there must be reciprocity in data sharing, and this is the kind of ‘big idea’ for sharing prosperity that will gain traction with other countries.
India’s growing influence
- India’s recent policies are gaining influence at the expense of China and the West, and both know this trend will accelerate.
- The steps to a $5 trillion economy, shift to indigenous capital military equipment, and a new Science, Technology and Innovation Policy underline impact, capacity and interests.
- ASEAN remains keen India re-join its trade pact to balance China.
- It is being recognised that India’s software development prowess could shape a sustainable post-industrial state different to the U.S. and China model.
Consider the question “Examine how India’s foreing policy priorities and its role in global governance is shaped by China’s rise.”
Conclusion
As in the historical past, Asia is big enough for both Asian giants to have complementary roles, share prosperity and be independent of each other and of the West.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: National Rail Plan in the Budget
Mains level: Paper 3- National Rail Plan
The Budget unveiled the National Rail Plan 2030.
Key provision in the Budget for railways
- First, there is a National Rail Plan (NRP) for 2030.
- Second, the Western dedicated freight corridor (DFC) and the Eastern DFC will be commissioned by June 2022.
- Parts of DFC will be in public-private partnership (PPP) mode.
- Third, there will be an East Coast corridor (Kharagpur to Vijaywada), an East-West corridor (Bhusaval to Kharagpur/Dankuni) and a North-South corridor (Itarsi to Vijayawada).
- Fourth, all broad-gauge routes will be electrified by December 2023.
- Fifth, there will be safety and passenger amenity measures.
National Rail Plan provisions
- The NRP is meant to increase the share of railways in freight, rectifying the pre-Independence and post-Independence bias
- It also aims to develop capacity that will cater to demand in 2050.
- It provides for mapping of the existing railway network on a GIS platform.
- The primary value addition of the NRP is an analysis of the existing network, with expected additions (such as the National Infrastructure Pipeline) also built in.
- NRP bases decision making on objective criteria.
Pricing and cross-subsidy issue
- In 2018-19, as per the NRP, India’s operating ratio (OR) was 0.59 for freight and 1.92 for passenger traffic.
- The problem is low passenger fares and artificially high freight rates required to cross-subsidise those.
- This is not the complete picture since normally, freight and passenger trains share common sections of track and passenger trains are given preference over goods trains in getting a path (route from point A to point B).
- Therefore, the average speed of a freight train is 24 km/hour — average speed is a surrogate indicator.
- A superior indicator is transit time — the time taken for a consignment to reach from one point to another.
Need for decreasing the cost and increasing the average speed
- Indian Railways has a system of HDN and HUN identification for the present network.
- HDNs are high-density routes.
- HUNs are highly-used networks with multiple origins and destinations and no clear single haul corridor.
- HUNs are primarily for passengers.
- For freight, HDNs are important.
- HDNs and HUNs carry 80 per cent of the traffic and there are sections where capacity utilisation is more than 100 per cent.
- With traffic increasing, capacity utilisation will worsen.
- If the intention is to increase rail share in the total freight carried to 44 per cent, the average speed must increase and costs must decline.
- With the Western and Eastern DFCs, both should happen.
Consider the question “What are the factors responsible for preventing the railways from realising its contribution in the development of the country. How far will the National Rail Plan help railways deal with these factors?”
Conclusion
The implementation of the NRP will help railways deal with the issues faced by it.
Back2Basics: Operating Ratio
- The operating ratio shows the efficiency of a company’s management by comparing the total operating expense of a company to net sales.
- An operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating expenses are becoming an increasingly smaller percentage of net sales.
OR = (Operating Expenses + Cost of Goods Sold)/ Net sales
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