Note4Students
From UPSC perspective, the following things are important :
Prelims level: Finance Commission
Mains level: Paper 2- Transformation of financial governance of municipalities
Transforming the financial governance of India’s municipalities
- Interim report of the Fifteenth Finance Commission of India (XV FC) indicates that it could fundamentally transform the financial governance of India’s municipalities.
- Final report for FY 2021-22 to FY 2025-26 is expected to be tabled along with the forthcoming Budget 2021-22.
- Building on the track record of previous finance commissions, the XV FC Commission has significantly raised the bar on financial governance of India’s municipalities in the interim report in at least four specific ways.
4 Provisions in the interim report
1) Increase in the outlay for municipalities
- It has set aside Rs 29,000 crore for FY 2020-21 and indicated the intent to raise the share of municipalities in the total grants’ of local bodies including panchayats gradually over the medium term, from the existing 30 per cent to 40 per cent.
- This could result in the outlay over five years being in the range of Rs 1,50,000-Rs 2,00,000 crore compared to Rs 87,000 crore during the XIV FC period.
2) Ensuring financial accountability through conditions
- Two very important entry conditions have been set for any municipality in India to receive FC grants:
- 1) Publication of audited annual accounts.
- 2) Notification of floor rates for property tax.
- These two entry conditions lay strong foundations for financial accountability of municipalities and own revenue enhancement respectively.
- Similarly, the Atmanirbhar Bharat Abhiyan links Rs 50,000 crore of additional borrowing limits for states to reforms in property taxes and user charges for water and sanitation.
- There is also a thrust on municipal bonds and municipal finance reform conditions under AMRUT.
3) Distinguishing between million-plus urban agglomerations, and other cities
- The XV FC has adopted an approach of distinguishing between million-plus urban agglomerations, and other cities.
- This is well-founded, based on the pattern of urbanisation in India, where 53 million-plus urban agglomerations comprising 250-plus municipalities account for approximately 44 per cent of the total urban population.
- The remaining 4,250-plus municipalities comprise 56 per cent of the total urban population.
- Of the remaining 56 per cent, there is a “long tail” of approximately 3,900 municipalities with 33 per cent of the total urban population.
- The XV FC has now provided for 100 per cent outcome-based funding of approximately Rs 9,000 crore to 50 million-plus urban agglomerations (excluding Union Territories) with specific emphasis on air quality, water supply and sanitation and basic grants to the rest of the cities, with 50 per cent of the end-use tied to water supply and sanitation.
- For the first time, there is also an acknowledgement of the metropolitan area as a unified theatre of action to solve complex challenges of air quality, water and sanitation, with implicit emphasis on inter-agency coordination.
4) Common digital platform for municipal accounts
- The report recommends a common digital platform for municipal accounts, a consolidated view of municipal finances and sectoral outlays at the state level, and digital footprint of individual transactions at source, the FC has broken new ground and demonstrated farsightedness.
Role of the state governments
- The ultimate responsibility for municipal finance reforms remains with state governments.
- Constitutional bodies such as the finance commission can, at best, prepare the ground and provide incentives and disincentives.
- We need municipal legislation to reflect progressive and enabling financial governance of our cities through five reform agendas:
- 1) Fiscal decentralisation including strengthening state finance commissions.
- 2) Revenue optimisation to enhance own revenues.
- 3) Fiscal responsibility and budget management to accelerate municipal borrowings.
- 4) Institutional capacities towards an adequately skilled workforce.
- 5) Transparency and citizen participation (for democratic accountability at the neighbourhood level).
- The first step needs to be predictable fiscal transfers from state governments to municipalities and other civic agencies on a formula-based approach as against the present practice of ad hoc, discretionary grants.
- State finance commissions would need to emulate the XV FC and its predecessors, and emerge as credible institutions.
- State governments need to ensure that state finance commissions are constituted on time, resourced right, and their recommendations taken seriously.
Consider the questions “Financial governance of our cities faces several challenges. Discuss the reforms that could transform the financial governance of municipalities”
Conclusion
The state government must act on these reform agenda and ensure the transformation of financial governance of their municipalities.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: PFMS
Mains level: Paper 2- Role of PFMS in improving governance
The article highlights the role played by the Public Financial Management System (PFMS) in promoting the good governance.
About PFMS
- With the objective of bringing in transformational accountability and transparency and to further promote good governance, the Indian government envisioned Public Financial Management System (PFMS).
- PFMS has evolved as an end to end solution for Processing, Monitoring, and reconciling financial flows of Central Govt.
- Today, PFMS has empowered governance to become more responsive, accountable, and transparent.
Mandate of PFMS
- Through Cabinet decision, PFMS has been mandated the following:
- It acts as a financial management platform for all plan schemes and allows for efficient and effective tracking of fund flow to the lowest level of implementation for the planning scheme of the Government.
- It is mandated to provide information on fund utilization leading to better monitoring, review, and decision support system to enhance public accountability in the implementation of plan schemes.
- To result in effectiveness and economy in Public Finance Management through better cash management for Government transparency in public expenditure and real-time information on resource availability and utilization across schemes.
Achievements of PFMS
- PFMS can be credited to the transformation of Direct beneficiary transfers space in financial governance in India.
- An estimated 102 crore DBT transactions were done through PFMS in FY 19-20 amounting to about ₹2.67 lakh crore.
- Through efficient use of technology, PFMS is estimated to have saved about ₹1 lakh crore in direct beneficiary transfers.
4 Factors that could determine the successful evolution of PFMS in future
- Agility in terms of Onboarding/Integrating all Govt. accounts: Only after ensuring significant coverage, the true execution of the concept will take place.
- Effective data management capabilities: PFMS will have to add significant data management capabilities in order to ensure better monitoring/review to deliver on the idea of a decision support system for effective cash management or management of idle float in the system.
- Constantly upgrading: Adaption to rapid changes in technology is another key area that would call for a considerable amount of focus both in terms of gradation and monitoring.
- Collaboration with the banking system: Lastly, one of the most critical factors for the successful execution of PFMS is its integration with the banking systems.
- The Banks and PFMS will have to actively partner to ensure faster coverage/integration of all the Govt. entities.
Consider the question “Governance in India has long been marred with structural challenges like transparency, lack of accountability and sustainable and inclusive growth. In light of this, discuss the role played by the Public Financial Management System in tackling these challenges.”
Conclusion
The PFMS has revolutionized the ways public finances are managed in the country. With constant improvement and increasing coverage, the scope of PFMS is ever-increasing. Going ahead, PFMS will not only be seen as a tool for managing planned expenditure but will also add new meanings to Direct Beneficiary transfers, data-driven cash management, and e-Governance in India.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Terms used in Economic Survey
Mains level: Paper 3- Overview of the Economic Survey 2020-21
The pandemic has been leaving its imprint various aspects of our lives and Economic Survey is no different. This year’s Economic Survey focuses on the recovery path of the economy disrupted by the pandemic. The article takes an overview of the survey and also mentions the missing areas.
Focus on a recovery path
- The Economic Survey analyses the broad trends at the macro level and the profiling of the initiatives across various economic activities.
- This year, the Economic Survey focuses on the recovery path after initial derailment and the losses suffered by the Indian economy due to the pandemic.
- The recovery is expected to follow a V-shaped path.
- The Survey advocates countercyclical fiscal policies based on the premise that growth leads to debt sustainability.
- The Survey brings together various relevant factors that have both a short and long-term impact on the economy and the budget.
- This year’s Survey focuses on enhanced public healthcare spending and demonstrates how effective it has been in slashing out-of-pocket expenditures in the recent past.
- It also shows the brilliant performance under the Pradhan Mantri Jan Arogya Yojana (PM-JAY) and the improved outcomes in states that have implemented the programme.
- With focus on basic needs, the Survey has brought back national attention on the fundamental developmental paradigm.
- The idea of analysing inequalities in times of recovery is a reassuring premise to move on with.
Comparison with past Economic Surveys
- If we consider the last two Economic Surveys, the introduction of new concepts and approaches has been quite evident.
- In the Survey for 2018-19, the idea of “nudge” helped provide recognition of the importance of social behaviour change for any policy to succeed.
- This led to the adoption of transformative approach in the Swachh Bharat Mission and Beti Bachao Beti Padhao initiative that integrated behavioural insights.
- Another powerful idea has been using technology to run and monitor welfare schemes.
- The Economic Survey 2019-20 talked overwhelmingly about the importance of wealth creation, entrepreneurship, and financial markets in the economic development.
What the Survey misses
- The Survey should have focussed on a new narrative for trade.
- Apart from explaining the missing value chains and integration with South and Southeast Asia, the survey should have analysed the high cost of tariffs when 38 per cent of our exports are import-dependent.
Consider the question “In the wake of economic disruption caused by the pandemic, India needs a new narrative for trade. However, India faces the challenge of missing value chains and lack of integration with South and Southeast Asia. In light of this, suggest the policies India should adopt as new narrative for trade.“
Conclusion
Besides trade, FDI inflows and the accumulation of foreign exchange reserves has been remarkable this year. It is expected that India will emerge as an important link in the global value chain sector which has been visibly disrupted by the pandemic
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: POCSO Act
Mains level: Paper 2- Interpretation of Section 7 of POCSO Act
In a recent judgement, Section 7 of POCSO Act was interpreted in a controversial way by the Nagpur Bench of the Bombay High Court.
Issue of the definition of sexual assault under POCSO Act
- Recently, the Nagpur Bench of the Bombay High Court held that skin-to-skin contact is essential to constitute the offence defined under Section 7 of the Protection of Children from Sexual Offences Act, 2012 (POCSO Act).
- Section 354 of the Indian Penal Code, 1860, which deals with outraging modesty of women and which provides for a lesser sentence, was held to be applicable in such cases.
- This ruling raises several concerns.
- The National Commission for Protection of Child Rights had asked the Maharashtra government to appeal this decision in the Supreme Court.
- The Supreme Court has currently stayed the acquittal of the accused under this judgement.
Concerns with the judgement
- The Court held that the stringent nature of punishment provided for the offence required stricter proof and serious allegations.
- The court said the punishment should be proportionate to the seriousness of the crime.
- Nevertheless, while adjudging the seriousness of the offence the court has not given consideration to the fact that the victim, a minor, is entitled to greater protection.
- The major concern is that the interpretation of the court seems to defeat the purpose of the POCSO Act.
- Section 7 of POCSO defines sexual assault as “Whoever, with sexual intent touches the vagina, penis, anus or breast of the child or makes the child touch the vagina, penis, anus or breast of such person or any other person, or does any other act with sexual intent which involves physical contact without penetration is said to commit sexual assault.”
- The court has concluded that the touching of the breast without skin-to-skin contact is not similar to the abovementioned acts and, therefore, does not fall within this definition.
- The court seems to have followed a rather pedantic approach to reach this conclusion.
- The fact that the trauma of the child whose breasts were groped through a cloth could be of the same nature and severity as direct touching of the breast is not discussed.
- And if the trauma is the same, the mere existence of cloth should not affect the applicability of the POCSO Act.
Legislative history and object of POCSO Act
- The POCSO Act was enacted with the specific intention of protecting children from sexual assault and sexual harassment.
- It took into consideration the standards prescribed by the Convention on the Rights of the Child adopted by the General Assembly of the United Nations to which the Indian government acceded to on December 11, 1992.
- The Act acknowledges the special vulnerability of children and that special protection, above and beyond that provided in the IPC, is required when the victim is a child.
Conclusion
If such an interpretation is followed, there is a threat that the POCSO Act in itself might become redundant as a wide range of sexually violative activities would be excluded from its ambit due to lack of skin-to-skin contact.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Positive Externality
Mains level: Paper 3- Challenge of Big Tech
The article deals with the issue of checking the misuse of monopoly power by the Big Tech while encouraging their positive externalities.
Worldwide Investigations against Big Tech
- Big Tech firms, especially Facebook and Google have been investigated worldwide, including in the European Union and the United States, on the abuse of monopolistic power.
- Comparisons are drawn with investigations in the U.S. on the telecom industry and the break-up of the AT&T.
- However, there are important differences this time around.
- First, the information good that is being provided by the Internet firms of today, is largely non-rival.
- Second, Internet firms operate globally, therefore, it is often difficult to lay down international rules of obligation and fulfilment.
- Third, while it is debatable whether the goods and services provided by the Internet firms are excludable.
- It is this factor that was leveraged by the Internet firms to provide search, navigation, and social connectivity with no charge to the consumers, and, consequently, making these services non-excludable.
Monetisation model of Big Techs and isseus with it
- Public goods should be provided by governments, but the information goods as described above are being provided by private firms.
- This arrangement poses several problems.
- First, private firms need to have monetisation models to cover the costs of providing their services.
- So, the Internet firms have resorted to personalised advertisements and third-party sharing of the personal data of their users for monetisation purposes.
- Second, the strong network effects present in these Internet platforms warrant increasing the subscriber base and garnering as much market share as possible.
- This results in near-monopoly of some firms in their defined markets.
- These firms may resort to anti-competitive behaviour including acquiring rivals to vertically integrate; erecting entry barriers by refusing to interconnect and inter-operate with competing firms, and leveraging their capital base, thereby engaging in predatory pricing, and driving out competitors.
Positive externalities and consumer surplus
- Network effects create a huge consumer surplus.
- Even without our knowledge, these Internet firms have now become an indispensable part of our lives.
- There are positive externalities as well, for example, Google Maps Application Program Interface (APIs) is being used by almost all logistic transand port companies.
- Facebook APIs are used for advertisement by almost all firms across the industry.
- Google, recently announced that its Search is being expanded to provide accurate and timely information on vaccine distribution to enable quick recovery from the COVID-19 pandemic.
Challenge of regulation
- The question before policymakers is how to regulate these Internet firms from abusing their monopoly power while encouraging the positive externalities and consumer surplus they create.
- It is often very difficult to prove that the firms engage in the abuse of their monopoly power.
- Due to strong network effects, it is not possible to ban or curtail these services.
Way forward
- A traditional view is to subsidise the good that creates positive externalities.
- Governments can provide tax subsidy to these Internet firms in return for their orderly behaviour in the marketplace.
- Governments could explore mandating sharing of Non-Personal Data (NPD) owned by these firms for societal and economic well-being as pointed out in the expert committee on NPD.
- The other way to control any abusive behaviour of the Internet firms is to use the power of public voice.
- The huge public outcry and subsequent government actions have delayed the recent changes to privacy policy relating to the sharing of personal information between WhatsApp and its parent firm, Facebook.
Consider the question “Services provided by the Internet firms have become indispensable part of our life, this leads to the problem of checking their monopoly power while encouraging their positive externalities and consumer surplus. In light of this, discuss the challenges posed by the Big Techs and suggest the ways to deal with them.”
Conclusion
While governments and regulators deal with these dilemmas the Internet firms should adhere to core ethical principles in conducting their businesses as firms that aim at super monopoly profits and are greedy to become powerhouses of the world, often end up in the ditch.
Back2Basics:What is positive externality
- A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction.
- For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more informed and productive citizens.
What is Network Effect
- The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service.
- The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists.
- However, as more users gained access to the Internet, they produced more content, information, and services.
- The development and improvement of websites attracted more users to connect and do business with each other.
- As the Internet experienced increases in traffic, it offered more value, leading to a network effect.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: New Monetary Framework
Mains level: Paper 3- Economic recovery and challenges ahead
Ahead of the Budget, the article discusses the status of Indian economy and suggests the measures to be adopted in the budget to speed up the recovery.
Estimates of damages and signs of economic recovery
- The first advance estimates of national income published on January 7 project a contraction of 7.7% for real GDP.
- The Q2 GDP estimates published by the National Statistical Office had suggested an economic recovery in India.
- An improvement in the rate of contraction from 23.9% in Q1 to 7.5% in Q2 was seen as the beginning of a sustained recovery.
- The Ministry of Finance, in its Monthly Economic Review highlighted it as signifying a ‘V’ shaped recovery and as a reflection of the resilience and robustness of the Indian economy.
- The Monetary Policy Statement of the Reserve Bank of India (RBI) released on December 4, 2020 also projects positive growth in the remaining quarters of the financial year.
State of the economy before pandemic
- Growth rate of the economy had collapsed from 8.2% in Q4 of 2017-18 to a mere 3.1% in Q4 of 2019-20, sliding continuously for eight quarters.
- The policy stance against this backdrop was premised on the hope that private corporate investment will pick up momentum sooner than later.
- The RBI did the heavy lifting through five consecutive lowering of repo rate along with liquidity infusion programmes.
- However, monetary-fiscal linkages are crucial to catalyse the demand.
Crucial role played by the RBI
- While being cautious of inflation, the RBI has decided to continue the accommodative stance in its latest monetary policy to support growth.
- The CPI inflation after crossing 7% has cooled off to 4.6% in December.
- Still, the real interest rates remain very low.
- The efficacy of the new monetary framework (NMF) — the agreement between the RBI and Government of India in February 2016 to adopt inflation targeting in India — will be reviewed in March 2021, and we flag the need for revising the framework.
- The RBI is continuing its liquidity infusion programmes including the on-tap Targeted Long Term Repo Operations (TLTRO).
- This programme announced on October 9, 2020 for five stressed sectors has been extended to 26 stressed sectors notified under the Emergency Credit Line Guarantee Scheme (ECLGS 2.0).
- The RBI is also continuing its ‘operation twist’ with Open Market Operations (OMO) of ₹10,000 crore scheduled for December 17, 2020.
- Nevertheless, the RBI Governor has rightly pointed out that the signs of recovery are far from being broad-based.
Stimulus for targeted state intervention
- According to the International Monetary Fund’s Fiscal Monitor Database of Country Fiscal Measures, the fiscal stimulus for India is 1.8% of GDP.
- The IMF, in its Fiscal Monitor, highlights the need to scale up public investment to ensure successful reopening, boost growth and prepare economies for the future.
- What we need is stimulus not based on “business cycle” but from the perspective of much needed targeted state interventions in public health, education, agriculture and physical infrastructure, and to redress widening inequalities.
- As private final consumption expenditure is sluggish, contracting 26.7% and 11% in Q1 and Q2, respectively, a “fiscal dominance” is expected in India for sustained economic recovery.
- However, India cannot afford fiscal stimulus at the rates of advanced economies, due to a lack of fiscal space.
Way forward
- Plummeting private corporate investment in India is a matter of concern.
- The fear of financial crowding out emanating from high fiscal deficit is misplaced in the context of India.
- Economic recovery will be determined by the degree of containment of the pandemic and the sustained macroeconomic policies.
- Any abrupt withdrawal of ongoing economic policy support, both by the monetary and fiscal authorities, will be detrimental to growth in times of the pandemic.
- The fiscal rules at the national and subnational government levels need to be made flexible.
Consider the question “Recovery of Indian economy battered by the pandemic has not been complete. Suggest the fiscal measure to be adopted by the government to speed up the recovery.”
Conclusion
The fiscal stimulus needs to continue in FY 2021-22 to speed up India’s recovery along with the measures suggested above.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 21, 48A, 51A(g)
Mains level: Paper 2- Constitutional values and climate change
The article highlights how climate change impacts the constitutional values and promises by affecting the vulnerable disproportionately and suggest the distinctly Indian paradigm of development.
How democratic values are threatened by climate change
- Over the last seven decades, India has made distinct progress, but many core development challenges persist and we are yet to fulfill our constitutional promise.
- Climate change will only exacerbate existing inequalities through a range of cascading and coinciding crises.
- These words from the Preamble — justice, liberty, equality, and fraternity — serve as reminders of the daunting path to achieving social democracy, especially in a warming world.
- B R Ambedkar had said that to maintain democracy not merely in form, but also in fact it was essential not to be content with mere political democracy but to strive for social democracy as well.
How climate change affects democratic values
- Climate change is profoundly unjust.
- It will increasingly impinge upon our freedom of movement, and that it could deny equality of status and opportunity to millions of disadvantaged citizens like the forest-dwelling communities who have contributed least to the crisis and yet stand to be hit the hardest.
- The evidence is clear that unless we rapidly move to reduce planet-warming greenhouse gas emissions, vast swathes of India could be inhospitable due to floods, droughts, heatwaves, and increasingly erratic and unpredictable monsoon rains.
Call for action against climate change
- The fraternity can particularly serve as a call to action for the powerful to direct their resources towards shaping India’s response to climate change and “assuring the dignity of the individual”, as framed in the Preamble.
- Indian business and philanthropy can play a key role in building resilience by encouraging innovation, complementing the role of the state, and securing citizens’ legislated rights.
- Climate philanthropy can help develop and pilot new solutions and inspire ambitious political action.
- A plethora of opportunities are currently on the margins but could become mainstream drivers for the three key pillars of jobs, growth, and sustainability.
- A distinctly Indian, climate-friendly development paradigm powered by clean energy could play an integral role in fostering social and economic justice by uplifting millions of Indians.
- Our nation’s welfare depends on healing the broken relationship between a broken economy and a broken ecology.
Constitutional mandate to protect the environment
- The right to life enshrined in Article 21 is increasingly interpreted as a right to environment.
- When this is read together with Articles 48A and 51A(g), there is a clear constitutional mandate to protect the environment that will only grow more important in the coming decades for citizens and the executive, legislature, and judiciary.
- Central to these considerations is the need for a uniquely Indian climate narrative, one that is both by and for Indians.
Consider the question “Our constitutional values must guide us to a distinctly Indian, climate-friendly development paradigm to fulfil the constitutional commitment to its citizens. Comment.”
Conclusion
India can build its own pathway to become a climate leader aiming to secure a future where both people and nature can thrive. Much of this work can be rooted in the constitutional framework that binds together millions of Indians despite their myriad differences — a framework that is progressive in scope and ambitious in vision.
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Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 2- India's agenda at the UNSC in its 2 year stint
The article highlights India’s challenges at the UNSC in its 2 year stint.
India’s agenda at the UNSC
- India’s two-year non-permanent stint at the UNSC should be viewed as a once-in-a-decade opportunity to clearly identify and pursue its national interests regionally and globally.
- India’s entry into the UNSC coincides with the emergence of a new world order.
- Under new world order, there is systemic uncertainty, little care for global commons, absence of global leadership, the steady division of the world into rival blocs, pursuit of narrow national interests.
- Efforts by Biden administration in the United States may go on to ameliorate some of the harsh impact of this global order.
- The UNSC has also reached a point wherein its very relevance is in serious doubt.
- India too is no longer an ardent believer in the fantastical claims about a perfect world at harmony with itself, nor is it a timid observer in global geopolitics.
- India’s pursuit of its interests at the UNSC should, therefore, reflect its material and geopolitical limitations, and its energies should be focused on a clearly identified agenda.
Factors determining India’s agenda at the UNSC
1) Rivalry with China
- India’s tenure at the UNSC comes in the wake of its growing military rivalry with China.
- China’s opposition to having India chair the Counter-Terrorism Committee (CTC) in 2022 was a precursor to the things to come ahead.
- The next two years will be key to ensure checking further Chinese incursions along the Line of Actual Control and building up enough infrastructure and mobilising sufficient forces in the forward areas.
2) Relations with Russia
- Greater Indian alignment with the West at the UNSC, an unavoidable outcome, could, however, widen the growing gulf between Russia and India.
- It might not be possible for India to sit on the fence anymore.
- Fence sitting would bring more harm than goodwill in an international system where battlelines are sharpening by the day.
3) Terrorism issue
- Terror is likely to be a major focus for India at the UNSC.
- External Affairs Minister’s statement at the UNSC Ministerial Meeting on the 20th Anniversary of Security Council Resolution 1373 and the establishment of the Counter Terrorism Committee has set the stage for New Delhi’s approach on the issue.
- India recently assumed the chair of the Taliban sanctions committee which assumes significance given the fast-moving developments in Afghanistan.
- India must formulate its policy towards terrorism with far more diplomatic finesse and political nuance especially given that it is chairing the Taliban sanctions committee while courting the very same Taliban.
4) Coalition of like-minded states and setting the agenda for next decade
- India should use the forum and its engagement there to build coalitions among like-minded states and set out its priorities for the next decade — from climate change to non-proliferation.
- India should use its bargaining power at the UNSC to pursue its national interests in other forums and domains as well.
- India’s UNSC strategy should involve shaping the narrative and global policy engagement vis-à-vis — the Indo-Pacific.
- Given India’s centrality in the Indo-Pacific region and the growing global interest in the concept, New Delhi would do well to take it upon itself to shape the narrative around it.
- In doing so, it should, through the UNSC and other means, court Moscow once again and assuage its concerns about the Indo-Pacific.
Way forward
- India’s pursuit of its national interest at UNSC must also be tempered by the sobering fact that the UNSC is unlikely to admit new members any time soon, if ever at all.
- A glance at the recent debates on UNSC reforms and the state of the international system today should tell us that bending over backwards to please the big five to gain entry into the UNSC will not make a difference.
Consider the question “What agenda should India pursue at the UNSC in its two year non-permanent stint? What are the challenges in pursuing such agenda?”
Conclusion
India must focus its energies on what it can achieve during the short period that it would be in the UNSC rather than what it wishes happened.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Thought partnership for informed policymaking
Thought partnership between government and the external players can aid in informed policymaking. The article deals with these issues and suggest forging of more of such partnerships.
Government working together with external partners
- Policymaking requires multiple rounds of consultations and co-working with different entities, including collaboration between the government and external partners.
- Over the last few years, there has been increasing evidence of the government and external partners working together on complex policy problems.
- The government has formalized the induction of private individuals into the system by opening up lateral entry.
- Several central government ministries and entities, such as NITI Aayog, routinely recruit private individuals as consultants, officers on special duty, or young professionals.
- Given the staggering vacancies in the central government, such support is critical since civil servants are generally overburdened and under-resourced.
What is thought partnership and how it works
- Thought partnerships are a structured mechanism for private entities to lend relevant strategic expertise to the government on policy design, evaluation, and implementation.
- It is also not always feasible for the government itself to fund projects involving private partners, more so when such projects are unconventional thought partnerships.
- Several domestic and international philanthropies and impact investing firms are already investing in critical sectors in developing countries including India.
- However, much of this funding goes into supporting projects or interventions that work in limited, contextual settings rather than systemic or sectoral transformation programs.
- It is here that philanthropies and impact investing firms can make a huge difference.
Past thought partnerships
- In 2005, the Ashok Lahiri Committee report stated that there was not enough knowledge about external capital flows and controls in India.
- The committee’s recommendation resulted in the establishment of the National Institute of Public Finance and Policy, Department of Economic Affairs research program.
- The program led to the creation of a rich body of world-class research on capital controls and flows in India that was used to inform government policy on the matter.
- In 2015, the Ministry of Corporate Affairs constituted a research secretariat headed by the Vidhi Centre for Legal Policy, to support the Companies Law Committee to make “informed decisions”.
- The National Institute of Financial Management is working with the Department of Economic Affairs to provide legal research and technical assistance on Indian and foreign financial markets, policy analysis, formulation as well as the conduct of impact assessment studies on decisions taken by the Securities and Exchange Board of India.
Consider the question “What is thought partnership and how it could help in making informed policymaking? What are the challenges in forging thought partnerships?”
Conclusion
It is in the public interest that more thought partnerships are forged and funded to channel external expertise and skills towards finding scalable solutions to the pressing policy challenges the country faces.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sagarmala
Mains level: Paper 3- India's shipping industry and challenges
The article deals with the problems faced by India’s shipping sector and suggests the measures to improve the shipping sector.
Importance of shipping for economic growth
- The major economies of the world have always realized the potential of shipping as a contributor to economic growth.
- For instance, control of the seas is a key component of China’s Belt and Road Initiative (BRI).
- However, geographically, China is not as blessed as India, yet, seven of the top 10 container ports in the world are in China, according to the World Shipping Council.
- What aided China’s growth are strong merchant marine and infrastructure to carry and handle merchandise all over the world.
Lack of carrying capacity
- All the shipping infrastructure in peninsular India only helps foreign shipping liners.
- India has concentrated only on short-term solutions.
- Foreign ship owners carry our inbound and outbound cargo. This is the case in container shipping too.
- As a country, we have still not optimized our carrying capacity.
- Much of foreign currency is drained as transshipment and handling costs every day.
- Due to this, members of our maritime business community have also preferred to be agents for foreign ship owners or container liners rather than becoming ship owners or container liners themselves.
- As a result, there is a wide gap between carrying capacity and multi-folded cargo growth in the country.
Way forward
1) Regional cargo-specific ports
- Instead of creating regional cargo-specific ports in peninsular India, we allowed similar infrastructural developments in multiple cargo-handling ports.
- As a result, Indian ports compete for the same cargo.
- We need to make our major ports cargo-specific, develop infrastructure on a par with global standards, and connect them with the hinterlands as well as international sea routes, they will automatically become transshipment hubs.
- We need to only concentrate on developing the contributing ports to serve the regional transshipment hubs for which improving small-ship coastal operations is mandatory.
2) Sagarmala
- Sagarmala aims are port-led industrialization, development of world-class logistics institutions, and coastal community development.
- Sagarmala will help in increasing domestic carrying capacity.
- Shipbuilding, repair, and ownership are not preferred businesses in India and the small ship-owning community in India also prefer foreign registry instead of domestic registration.
- If this has to change, there needs to be a change in the mindset of the authorities and the maritime business community.
- ‘Make in India’ will result in multi-folded cargo growth in the country, we need ships to cater to domestic and international trade.
- Short sea and river voyages should be encouraged.
- Shipbuilding and owning should be encouraged by the Ministry.
- The National Shipping Board is an independent advisory body for the Ministry of Shipping, where the Directorate General of Shipping (DGS) is a member.
- The NSB should be able to question the functioning of the DGS, which is responsible for promoting carrying capacity in the country.
- Coastal communities should be made ship owners.
- This will initiate the carriage of cargo by shallow drafted small ships through coast and inland waterways.
- Sagarmala should concentrate on consolidating the strength of the coastal youth and make them contribute to the nation’s economy with pride.
Consider the question “How shipping contributes to the economic prosperity of a country? Suggest the steps need to be taken to develop its shipping sector.”
Conclusion
Shipping plays an important role in the economic development of a country. India needs to focus on developing it to achieve the economic prosperity.
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From UPSC perspective, the following things are important :
Prelims level: Monetary policy measures
Mains level: Paper 3- Dealing with the excess liquidity
The article highlights the challenge in dealing with the excess liquidity in the economy after the central banks injected liquidity by persuing unorthodox policies.
Overview of policies adopted during 2008 financial crisis
- Days after the crash of Lehman Brothers, the United States Congress approved an emergency bailout package of $700 billion in September 2008.
- The amount was used to buy off mortgage-backed securities from banks, hedge funds and pension funds to avert further Lehman-type bankruptcies.
- As a result, fresh money was injected into the banking system for it to resume normal credit operations and clean up balance sheets.
- Subsequent actions of the US government and Federal Reserve blurred the distinction between fiscal and monetary policy.
- ‘Quantitative easing’ was a term coined to describe unorthodox measures like a central bank buying off mortgages and loans, and thus taking credit risk onto its balance sheet.
- So, quantitative easing was pursued by all the major central banks of the developed world.
- Central banks embarked upon an aggressive money-printing spree. Assets on their books ballooned.
Monetary response during pandemic subsequent liquidity glut
- During the pandemic year more than a decade after the 2008 crisis, the West’s monetary spigots have been opened even more.
- A liquidity glut has ensued.
- While the rate of monetary expansion over this period has been healthy, neither employment nor economic output grew by even a fraction of that rate.
- Central bank finds itself in the maze.
RBI in a similar situation
- The Reserve Bank of India (RBI) too finds itself in a similar predicament, where the way out of its liquidity glut is hazy.
- Due to purchases of foreign exchange externally and of government bonds domestically, RBI’s balance sheet has ballooned by more 30% by August last year.
- RBI has injected liquidity through long-term repo operations, which essentially provide long-term money at low overnight rates.
- The Indian central bank has also provided implicit liquidity support to mutual funds.
- However, the RBI has not quite ventured into taking credit risk onto its books, nor has it signalled a readiness to buy toxic assets.
Liquidity glut and challenges associated with it
- As a result of India’s liquidity glut, money is flowing in and out of the central bank to the tune of ₹7 trillion on a daily basis.
- This has resulted in an anomaly: market lending rates have gone below RBI’s reverse repo rate, which is supposed to be the de facto floor.
- Cheap money encourages to do foolish and risky things, which, if done widely and voluminously enough, can spell disaster for financial stability.
- But, any hint of reducing the rate of money expansion threatens to cause panic and burst the bubble it blew.
- So, when RBI tentatively tried to move market rates higher by announcing a reverse repo auction,the market reaction was one of panic all the same, and there was a spike in interest rates.
- This caused the central bank to rethink its strategy.
- To calm nervous bond traders, the governor has categorically said that liquidity support will continue as long as necessary.
Way forward
- We need to plan an exit from the current glut.
- One way out could be loan ₹5 trillion to the central government against shares of public sector undertakings, at a low rate of 3% for a period of five years to fund its huge deficit.
- That will bypass markets and not cause any disruption to interest rates.
Consider the question “Why the challenges posed by liquidity glut caused by the unorthodox policies adopted by the central bank in the aftermath of the pandemic? What are the challenges in reducing the liquidity?”
Conclusion
Whatever the way out of this whirlpool of liquidity, it’s not going to be easy.
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From UPSC perspective, the following things are important :
Prelims level: Agriculture Census
Mains level: Paper 3- Exclusion of small and marginal farmers from agri-credit
India’s agriculture credit increased by 500% in the last decade, however, this increase in the credit has not been reflected in the condition of the farmers. The article deals with the issues with the agri-credit in India.
Impact of credit on agriculture
- Providing credit to small farmers at a reasonable rate has been the agenda of the Centre, the States, and the Reserve Bank of India (RBI) for decades.
- However, the volume of credit has improved over the decades, its quality and impact on agriculture have only deteriorated.
- In 2011-12, the target was ₹4.75-lakh crore; now, agri-credit has reached the target of ₹15-lakh crore in 2020-21 with an allocated subsidy of ₹21,175 crores.
- Agricultural credit has become less efficient in delivering agricultural growth.
Issues with agri-credit: small farmers left-out
- In the last 10 years, agriculture credit increased by 500% but has not reached even 20% of the 12.56 crore small and marginal farmers.
- 95% of tractors and other agri-implements sold in the country are being financed by non-banking financial companies, or NBFCs, at an 18% rate of interest.
- The RBI has also questioned agricultural households with up to two hectares getting only about 15% of the subsidized outstanding loan from institutional sources (bank, co-operative society).
- As per the Agriculture Census, 2015-16, the total number of small and marginal farmers’ households in the country stood at 12.56 crore which makes up 86.1% of the total holdings.
- As in the Situation Assessment Survey of Agricultural Households by the National Sample Survey Office (NSSO), the share of institutional loans rises with an increase in land possessed.
- This shows that the bulk of subsidized agri-credit is grabbed by big farmers and agri-business companies.
What are the reasons
- A loose definition of agri-credit has led to the leakage of loans at subsidized rates to large companies in agri-business.
- The RBI had set a cap that out of a bank’s overall adjusted net bank credit, 18% must go to the agriculture sector, and within this, 8% must go to small and marginal farmers and 4.5% for indirect loans, bank advances routinely breach the limit.
- A review by the RBI’s internal working group in 2019 found that in some States, credit disbursal to the farm sector was higher than their agriculture gross domestic product (GDP) and the ratio of crop loans disbursed to input requirement was very unevenly distributed.
- This shows the diversion of credit for non-agriculture purposes.
- One reason for this diversion is that subsidized credit disbursed at a 4%-7% rate of interest is being refinanced to small farmers, and in the open market at a rate of interest of up to 36%.
Way forward
- The way forward is to empower small and marginal farmers by ‘giving them direct income support on a per hectare basis rather than hugely subsidizing credit.
- Streamlining the agri-credit system to facilitate higher crop loans to farmer producer organizations, or the FPOs of small farmers against commodity stocks can be a win-win model to spur agriculture growth’.
- With mobile phone penetration among agricultural households in India being as high as 89.1%, efforts to improve institutional credit delivery through technology-driven solutions can reduce the extent of the financial exclusion of agricultural households
- There is a need to reforming the land leasing framework and creating a national-level agency to build consensus among States and the Centre concerning agriculture credit reforms.
Consider the question “Growth in the agriculture sector in India has not been commensurate with the growth in the agriculture credit. What are the reasons for this disparity? Suggest the measures to deal with the challenges in agri-credit delivery.”
Conclusion
Improving the access to credit at a reasonable rate will help in increasing their income but to do that reforms in credit delivery is the need of the hour.
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From UPSC perspective, the following things are important :
Prelims level: The principle of purpose limitation
Mains level: Paper 2- WhatsApp privacy policy update and issue of privacy
Privacy policy update by the WhatsApp recently led to widespread protest from the user forcing company to put the update on hold. If India had made Personal Protection Bill into the law, the privacy policy update would have been illegal. The article deals with this issue.
About WhatsApp
- WhatsApp’s unique blend of text, audio, and voice messaging and calling platform.
- In November 2014, WhatsApp adopted the Signal protocol for end-to-end encryption after its acquisition by Facebook.
- WhatsApp has two billion users worldwide, of which 400 million are in India, the largest in any country.
What the privacy policy update is about
- The updated policy seeks consent from users to allow the platform to share their data with Facebook and its companies,
- It means that WhatsApp would share transaction data, mobile device information, IP addresses, and other metadata on how users interact with businesses on WhatsApp.
- Such sharing would be done with the user being notified before the start of a chat if the business uses Facebook to store and analyze data and the user would have the option of blocking the business.
- The update would defy the principle of purpose limitation that has been the yardstick of addressing privacy concerns at a global level.
What is the principle of purpose limitation
- The Indian government has also sent a strong note to WhatsApp, seeking the company’s response to 14 queries.
- This note has sent a clear message to WhatsApp to not subject Indian users to greater information security risks and vulnerabilities with the consolidation of data from WhatsApp and Facebook.
- In the note, the government referred to the principle of purpose limitation provisions in the Personal Data Protection Bill (PDPB) currently being discussed by a joint select committee.
- Had the bill been passed by now, WhatsApp’s move would have been illegal.
- Provisions in the bill required that every data intermediary has to take explicit permission from the user whose data would be harvested.
- Even the method of data classification into sensitive personal data and critical data has been defined and their processing possibilities mentioned in the bill.
Way forward
- The government should make the Personal Data Protection Bill into law so that such restrictive practices can never be introduced in the first place.
- It is due to such law, WhatsApp did make an exception for its users in the European Union.
- The Competition Commission of India should take note that this is a classic case of an organization using its near-monopolistic power to push through something that is not in the consumer interest.
Consider the question “What is the principle of purpose limitation in the Personal Data Protection Bill? How it can help user protect its privacy?”
Conclusion
As Digital India expands and brings in more users from the current base of 70 crores, and more take to social media for communications and business, they must be ensured a safer digital space, given that most wouldn’t be aware of the reach of the data being generated.
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From UPSC perspective, the following things are important :
Prelims level: Difference between SECC and Census
Mains level: Paper 2- SECC and Census data
The article suggests the ways to make the most of the data collected through Census and the SECC.
Census and issues with it
- The synchronous decennial Census has evolved over time and has been used by the government, policymakers, academics, and others.
- Though Census is both a data collection effort and a technique of governance, it is criticized for not being useful enough for a detailed and comprehensive understanding of a complex society.
- There is a lack of depth in the Census where some issues are concerned.
The debate around full-scale Caste Census
- Since Independence, aggregated Census data on the Scheduled Castes and Scheduled Tribes on certain parameters such as education have been collected.
- There is a growing demand for a full-scale caste census to capture contemporary Indian society and to understand and remedy inequalities.
- While others believe that this large administrative exercise of capturing caste and its complexities is not only difficult but also socially untenable.
- There have been concerns that counting caste may help solidify or harden identities, or that caste may be context-specific, and thus difficult to measure.
- The other concern is whether an institution such as a caste can even be captured completely by the Census.
Socio-Economic Caste Census: how it is different from Census
- Following debate over full-scale caste census, the Socio-Economic and Caste Census (SECC) was conducted in 2011.
- The SECC, which collected the first figures on caste in Census operations since 1931, is the largest exercise of the enumeration of caste.
- Questions remain on whether the SECC is able to cover the effects of caste as an aspect of Indian social structure.
- This was a distinct exercise from the Census of 2011.
- The Census and the SECC have different purposes.
- Since the Census falls under the Census Act of 1948, all data are considered confidential, whereas the SECC data is open for use by Government departments to grant and/or restrict benefits to households.
- The Census thus provides a portrait of the Indian population, while the SECC is a tool to identify beneficiaries of state support.
Way forward
- What is needed is a discussion on the caste data that already exists, how it has been used and understood by the government.
- Linking and syncing aggregated Census data to other large datasets such as the National Sample Surveys or the National Family Health Surveys that cover issues that the Census exercises do not, such as maternal health, would be significant for a more comprehensive analysis.
- This linking of the Census with the National Sample Survey data has been suggested in the past by scholars such as Mamta Murthi and colleagues.
- Census operations across the world are going through significant changes, employing methods that are precise, faster, and cost-effective, involving coordination between different data sources.
- Care must however be taken to ensure that digital alternatives and linking of data sources involving Census operations are inclusive and non-discriminatory, especially given the sensitive nature of the data being collected.
- Delay in the release of data needs to be reduced.
- There needs to be a closer and continuous engagement between functionaries of the Census and SECC, along with academics and other stakeholders concerned.
Consider the question “How Socio-Economic and Caste Census is different from the Census? How linking and syncing of these data with other databases could help in the governance?”
Conclusion
Data collected through both the exercises serve an important purpose in the governance of the country, however, there is scope to widen the use of data if the steps suggested here are implemented.
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From UPSC perspective, the following things are important :
Prelims level: Article 14 and selection of prosecution
Mains level: Paper 2- Selective prosecution and its impact on personal liberty
The article examines the issue of selective prosecution and Indian judiciary’s approach toward it. It also highlights the importance of recent Goswami case.
Selective prosecution: Form of abuse of state power
- Recently the case involving bail application of a T.V. anchor brought to the fore issue of selective prosecution.
- The illegal selection of accused based on grounds prohibited by the Constitution is called “selective prosecution”.
- In case of selective prosecution, the police and enforcement agencies selectively target political and ideological opponents of the ruling dispensation to interrogate, humiliate, harass, arrest, torture and imprison.
- It is one of the oldest, most pernicious and widespread forms of abuse of state power.
How it is illegal: Two independent legal issues
1) Exercise of prosecutorial discretion
- The applicable legal standard is that while the police and prosecutors in common law jurisdictions enjoy vast discretion in deciding who they may pursue and who they may spare.
- However, the choice of accused must not be based on grounds that violate Constitutional rights, including the Article 14 right to equal protection of the law.
- The accused should not be selected, either explicitly or covertly, on constitutionally prohibited grounds.
2) Merit of the case filed
- When the choice of accused runs contrary to the Constitution, the entire criminal proceeding is vitiated, irrespective of the determination of the second issue, viz., whether the accused are convicted or acquitted on the charges brought against them.
- Once the proceedings fail under the first issue, there is no legal basis to proceed to the second issue., i.e., trial on the merits of the case.
- The theory is that the Constitution cannot be violated to uphold the law — such an approach would spell doom for the Constitution.
- The selective prosecution claim must be adjudicated as a threshold issue, with the prosecution being quashed at the outset of the criminal case if the claim is justified.
- In the context of this discussion, the constitutionally prohibited ground we are confronting in India is the political or ideological affiliation of the accused.
- It is an arbitrary ground that violates the Article 14 guarantee of equal protection of the law.
Approach of judiciary
- Our courts have not recognised selective prosecution as an independent claim.
- This is because courts assume that lawfulness of prosecution can only be taken up after the trial, if the accused is acquitted.
- The 2018 Report of the Law Commission on ‘Wrongful Prosecution (Miscarriage of Justice): Legal Remedies’ discusses remedies for wrongful prosecution available only if and after the accused is acquitted.
- Remedy after acquittal comes far too late, well after a brutal and long drawn out criminal justice process that upends the lives of the victims.
- Also, the right against selective prosecution cannot be extinguished by conviction.
- Separate from post-acquittal actions for wrongful prosecution (which will still be available), the claim of selective prosecution is a threshold issue that is required to be adjudicated at the outset of criminal proceedings even during the investigation stage irrespective of the merit of the charges.
Importance of Goswami case
- The case provides a much needed and long awaited legal opening to strengthen the recognition and use of the selective prosecution claim in India to counter politically coloured prosecution.
- The judgment says, “Courts should be alive to the needof ensuring that the law does not become a ruse for targeted harassment ”.
- The Goswami judgment also quotes the 2018 Supreme Court holding in Romila Thapar v. Union of India that, “[T]he basic entitlement of every citizen who is faced with allegations of criminal wrongdoing is that the investigative process should be fair. This is an integral component of the guarantee against arbitrariness under Article 14 and of the right to life and personal liberty under Article 21.”
Consider the question “How selective prosecution could threten the liberty of person? How Indian judiciary approaches the issue of selective prosecution and what are the issue with the approach adopted by the judiciary?”
Conclusion
To strengthen the protection of civil liberty, equality and democracy, it is time our courts — at all levels — recognise selective prosecution as a threshold constitutional defence against the abuse of police and prosecutorial power.
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From UPSC perspective, the following things are important :
Prelims level: OECD
Mains level: Paper 3- Issue of negative support given to farmers as per OECD methodoloy
As per the OECD methodology, Indian farmers received negative support of Rs. 1.62-lakh crore in 2019, which implies that the government is taxing the farmers. But there are pitfalls in the methodology. The article explaines them.
The issue of support given to the farmers
- Many media reports, based on data by the Organisation for Economic Co-operation and Development (OECD), have stated that the support provided to Indian agriculture is extremely low or negative, and, therefore, net taxed.
- The OECD has estimated that Indian farmers received negative support to the extent of minus ₹2.36-lakh crore and minus ₹1.62-lakh crore in 2010 and 2019, respectively.
- Surprisingly, the negative support of minus ₹1.62-lakh crore as estimated by the OECD was higher than the total budgetary allocation of the Ministry of Agriculture at ₹1.09-lakh crore in 2019.
Issues with the OECD estimates
- Expenditure on the PM-KISAN, the National Food Security Mission, crop insurance, input subsidies such as fertilizer and electricity, are some of the measures covered under the 2019 OECD estimates.
- However, the expenditure related to the operation of minimum support price and general services is not covered by it.
- Despite the overall negative support, the expenditure of the Central and State governments on agriculture has increased substantially since 2000.
- This support increased from ₹1.61-lakh crore to ₹3-lakh crore, between 2015 to 2019, registering 85% growth.
- The massive negative market price support to the producers of different products has resulted in the total negative producer support, overshadowing the increase in the budgetary support over the years.
Market Price Support as per OECD methodology
- The market price support of a commodity is calculated by multiplying its total production with the gap between the domestic price and international prices in a relevant year.
- This methodology assumes that in case there is no government intervention in the agriculture market, then the domestic and international price of a product will converge, resulting in no gap in prices.
Why there is a focus on the price gap in OECD methodology
- The OECD assumes government interventions lead to a gap between the international and domestic prices.
- However, even if the government does not implement any program, the gap can still arise due to domestic and international factors.
- Changes in supply and demand conditions in the domestic and international market due to shocks, depressed international prices due to subsidies given by other countries, among other factors, can generate a gap.
3 Consequence of OECD’s Market Price Support methodology
- 1) If the domestic price for a product is less than its international price, then support for that product would be negative.
- 2) A negative market price support for a product in one year can turn into huge positive support in another year on account of the relative movement of domestic and international prices.
- 3) Even if in a particular year, the government does not provide any additional support compared to a previous year, the level of support calculated by the OECD can change.
- This will arise if there is a change in either the gap between the domestic price and international price for a commodity, or its production, in the two years.
- Given the unpredictability in the inherent data, the total support can move from huge negative to huge positive.
Concerns for India
- For India, the negative support as a percentage of the total value of agriculture production has substantially reduced in recent years.
- It is possible that support to Indian farmers in the near future becomes one of the highest in the world due to pitfalls in the OECD methodology.
- This might set alarm bells ringing, particularly in the developed countries, which may aggressively question India’s support measures.
Consider the question “As per the OECD methodology, net support provided by Indian government to its farmers is negative for the year 2019. However, India’s expenditure on agriculture is consistently rising. What explains this conundrum? What are the concerns for India in the price support method of OECD?”
Conclusion
Rather than being swayed by the OECD numbers suggesting negative support, farmers, policymakers, and other stakeholders need to understand the pitfalls and limitations in the underlying methodology. This will help in providing a more correct perception of the level of support to agriculture in India.
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From UPSC perspective, the following things are important :
Prelims level: SERC
Mains level: Paper 3- The Electricity (Rights of Consumers) Rules, 2020
The article examines the various provisions of the Electricity (Rights of Consumers) Rules, 2020 and analyses whether or not these Rules will empower the consumers.
Empowering electricity consumers
- The Electricity (Rights of Consumers) Rules, 2020 was promulgated in December to deal with the problems faced by the consumers.
- The enactment of consumer-centric rules does spark public debate that brings the rights of consumers to the fore.
- the Rules lay an emphasis on national minimum standards for the performance parameters of DISCOMs. without urban-rural distinction.
- They also reiterate the need for automatically compensating consumers.
Let’s analyse the changes introduced by the new Rule and issues with them
Supply quality issue
- Many States have not been able to provide quality supply, especially to rural and small electricity consumers.
- Provisions similar to made in the new Rule already exist in the Standards of Performance (SoP) regulations of various State Electricity Regulatory Commissions (SERCs).
- It is not because of a lack of rules or regulations that quality supply is not provided; rather, it is on account of a lack of accountability systems to enforce them.
- Unfortunately, neither these rules nor past efforts address these accountability concerns.
- Guarantee of round the clock supply is a provision that the Rules emphasise, which might be missing in State regulations.
- It is difficult to enforce since the availability of power supply is inadequately monitored even at 11 kV feeders, let alone at the consumer location.
- This highlights not only the need for implementation of existing provisions in letter and spirit but also amending them with strong accountability provisions.
Weakening of existing provision
- The Rules, in few cases, dilute progressive mechanisms that exist in State regulations.
- For example, the Rules say that faulty meters should be tested within 30 days of receipt of a complaint.
- Compared to this, regulations t in Andhra Pradesh, Bihar, and Madhya Pradesh, respectively, say that such testing needs to be conducted within seven days.
- A similar observation can be drawn from the suggested composition of the Consumer Grievance Redressal Forum.
- The Rules say that the forum — constituted to remedy complaints against DISCOMs should be headed by a senior officer of the company.
- This is a regressive provision that would reduce the number of cases that are decided in favour of consumers.
Lack of clarity on net-metering
- The Rules guarantee net metering for a solar rooftop unit less than 10 kW.
- However, there is no clarity if those above 10 kW can also avail net metering.
- This could lead to a change in regulations in many States based on their own interpretations.
- The possible litigation that follows would be detrimental to investments in rooftop solar units, and would discourage medium and large consumers to opt for an environment-friendly, cost-effective option.
Way forward
- SERCs should assess the SoP reports of DISCOMs and revise their regulations more frequently.
- SERCs should organise public processes to help consumers raise their concerns.
- DISCOMs could be directed to ensure automatic metering at least at the 11 kV feeder level, making this data available online.
- The Forum of Regulators — a central collective of SERCs — could come up with updated model SoP regulations.
- Central agencies have taken proactive efforts to ensure regular tariff revision.
- They could also support independent surveys and nudge State agencies to enforce existing SoP regulations.
- The central government could disburse funds for financial assistance programmes based on audited SoP reports.
Consider the question”What are the problems faced by the electricity consumers in India? Will the Electricity (Rights of Consumers) Rules, 2020 help consumers to deal with the existing issues?”
Conclusion
The governments, DISCOMs and regulators need to work jointly and demonstrate the commitment and the will power to implement existing regulations. It is not yet late to recognise this and initiate concerted efforts to truly empower consumers.
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From UPSC perspective, the following things are important :
Prelims level: Equalisation levy
Mains level: Paper 3- Digital Service Tax as an interim solution to the challenge of taxing digital companies doing business internationally
Business models of digital companies challenge the conventional basis of taxation in which the fixed place of business formed the basis. Digital Service Tax could provide a basis to deal with the challenge. The article deals with this issue.
Equalisation levy and issues with it
- Equalisation levy seeks to tax payments made for online advertising services to a non-resident business by residents in India.
- India is amongst the first to have implemented such levy.
- It is predominantly applicable to US companies since the market for digital services is dominated by US-based firms.
- Any company that has a permanent residence in India is excluded since it is already subject to tax in India.
- In March 2020, India expanded the scope of the existing equalisation levy to a range of digital services that includes e-commerce platforms.
- Such levy can result in over-taxation since the company will not be able to claim any credit for tax paid on Indian sales.
- Such an approach is often viewed as contrary to the ethos of international agreements.
Issue of taxation of digital companies
- The agenda to reform international tax law so that digital companies are taxed where economic activities are carried out was formally framed within the OECD’s base erosion and profit shifting programme.
- Worried they might cede their right to tax incomes, many countries have either proposed or implemented a digital services tax (DST).
- However, the proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order.
- Countries such as India which provide large markets for digital corporations seek a greater right to tax incomes.
- The core problem that the international tax reform seeks to address is that digital corporations, unlike their brick-and-mortar counterparts, can operate in a market without a physical presence.
- The current basis for taxing in a particular jurisdiction is a notion of fixed place of business.
Way forward
- To overcome the challenge, countries suggested that a new basis to tax, say, the number of users in a country.
- The EU and India were among the advocates of this approach.
- In 2018, India introduced the test for significant economic presence in the Income Tax Act.
- However, the proposal of a revised nexus was not supported widely.
- Moreover, to give effect to a new system would require bilateral renegotiation of tax treaties that supersede domestic tax laws.
- Meanwhile, the OECD continued to work to find commonalities among a range of solutions.
- In its current form, the solution is too complex to administer and proposes to allocate residual profit — a term that has no economic definition.
- It would also require political consensus on multiple issues, including sensitive matters such as setting up of an alternative dispute resolution process comparable to arbitration.
- This can increase the compliance burden.
- The US has expressed its preference to apply this measure on a safe harbour basis, which can limit the companies to which it may be applicable.
Consider the question “Digital corporations can operate in a market without a physical presence. The current basis for taxing in a particular jurisdiction is a notion of fixed place of business. In light of this, examine the challenges in taxing the digital companies and how India is dealing with such a challenge?”
Conclusion
As countries calibrate their response to competing demands for sovereignty to tax, DST is an interim alternative outside tax treaties. It possesses the advantage of taxing incomes that currently escape tax and creates space to negotiate a final, overarching solution to this conundrum.
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From UPSC perspective, the following things are important :
Prelims level: Article 254 of Indian Constitution
Mains level: Paper 2- RERA and its benefits to the consumers
The article highlights the various provision of RERA and its overall impact on the sector.
How it changed the real estate sector
- Real Estate (Regulation and Development) Act (RERA) was enacted in 2016 and it had been in the works for more than a decade.
- RERA has infused governance in a hitherto unregulated sector.
- Along with demonetization and GST, it has, to a large extent, cleansed the real estate sector of black money.
- It has transformational provisions, conscientiously addressing issues that have been a constant bane for the sector.
Important provisions of RERA
- The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project is registered with the regulatory authority.
- This provision ended the practice of selling on the basis of deceitful advertisements.
- Promoters are required to maintain “project-based separate bank accounts” to prevent fund diversion.
- The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices.
- The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.
- These and many other provisions have empowered consumers, rectifying the power asymmetry prevalent in the sector.
How RERA is an effort in cooperative federalism
- Though the Act has been piloted by the Central government, the rules are to be notified by state governments.
- The regulatory authorities and the appellate tribunals are also to be appointed by them.
- The regulatory authorities are required to manage the day-to-day operations, resolve disputes, and run an active and informative website for project information.
- Since RERA came into full force, 34 states and Union territories have notified the rules, 30 states and Union territories have set up real estate regulatory authorities and 26 have set up appellate tribunals.
- The operationalization of a web-portal for project information, which is at the heart of ensuring full project transparency, has been operationalized by 26 regulatory authorities.
- Around 60,000 projects and 45,723 real estate agents have been registered with regulatory authorities.
- Twenty-two independent judicial officers have been appointed to redress consumer disputes, and 59,649 complaints have been disposed-off.
Consider the question “What were the various problems faced by the consumers in real estate sector? How various provisions in RERA helped in the protection of consumers’ interests?”
Conclusion
RERA is to the real estate sector what SEBI is to the securities market. It helped consumers from the various malpractices in the real estate sector.
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India-Nepal Joint Commission meeting took place at a time when Nepal in going through a political turmoil. The article examines the issues discussed in the meeting and how its implications for the bilateral relations between the two countries.
India-Nepal joint commission meeting amid political chaos in Nepal
- Recently, the Minister for Foreign Affairs of Nepal visited New Delhi for the sixth meeting of the India-Nepal Joint Commission.
- Nepal’s Prime Minister dissolved the House of Representatives in late December 2020, the move was termed ‘unconstitutional’ by the experts and the country’s Supreme Court is hearing writ petitions against the move.
- As a unique characteristic, Nepal’s internal political fundamentals continue to shape its foreign policy choices.
- In such a scenario, any inbound or outbound delegation is seen from a different prism.
Issues discussed in the meeting
1) Progress on the development partnership front
- On the development partnership front, the expansion of the Motihari-Amlekhganj petroleum products pipelines to Chitwan and the establishment of a new pipeline on the eastern side connecting Siliguri to Jhapa in Nepal formed a part of the discussions.
- The operating procedures for commencement of train services of the first passenger railway line between India and Nepal from Jaynagar to Kurtha via Janakpurhave have been discussed.
- Other cross-border rail connectivity projects, including a possible Raxaul-Kathmandu broad gauge railway line, were also discussed.
- The joint hydropower projects, including the proposed Pancheshwar Multipurpose Project, should get positive momentum following this round of meetings.
2) Facilitating the cross-border movement of people
- The recently inaugurated Integrated Check Posts (ICPs) at Birgunj and Biratnagar have helped in the seamless movement of people and trade between the two countries.
- The construction of a third integrated check post at Nepalgunj has already commenced, while the new integrated check post at Bhairahwa would begin shortly.
- Since Nepal relies on India’s seaports in a big way for trading, and goods are transported by road, the integrated check posts are expected to ease trade and transit.
3) Border issue
- Nepali side’s demand to include the boundary in the Joint Commission Meeting.
- However, India made it clear to find a fresh mechanism to resolve any such crucial long-pending issue.
4) New direction to bilateral ties
- India’s support for two more cultural heritage projects in Nepal, namely, the Pashupatinath Riverfront Development and the Bhandarkhal Garden Restoration in Patan Durbar is significant.
- Nepal expressed support for India’s permanent membership of an expanded UN Security Council (UNSC) to reflect the changed balance of power.
- The next meeting of the Joint Commission in Nepal should be crucial in giving a new direction to the bilateral ties, keeping a balance between change and continuity.
India’s deepening engagement with all sections
- There is growing disenchantment among the Nepali masses over the increased centralization of power, failure of the Provincial System in addressing the developmental issues, misuse of Presidential authority, and unprecedented corruption.
- While the unusual developments are taking place in Nepal, there are many who still think that India is comfortable with some changes as its Nepal policy is heading very clearly towards a deeper engagement with all sections.
Consider the question “How India-Nepal ties are affected by the internal political fundamentals in Nepal? What approach should be adopted by India in dealing with Nepal?”
Conclusion
Nepal cannot afford to enter into another round of political instability, and those who have commanding authority to spearhead India-Nepal bilateral relations must give a humane consideration to it. At the crossroads, Nepal needs action and to come to terms with realities.
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