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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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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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Judicial scrutiny of the laws
Mains level: Paper 2- Need for strict scrutiny of the laws by the Parliament
Farmers’ protests against the farm laws and staying of implementation of these laws by the judiciary have once again brought into focus the process followed in the passage of laws by the parliament. This article highlights the importance of parliamentary committees.
Need for introspection on the role of parliament
- The Supreme Court’s order on the farm laws staying their implementation crossed the line of separation between the legislature and judiciary.
- The order should trigger introspection in Parliament.
- Since 2019, the constitutionality of statutes passed by it, like the abrogation of Article 370, the Citizenship Amendment Act and recently the farm laws, has been challenged before the SC.
- The highest lawmaking body should be asking itself whether it rigorously scrutinises the constitutionality of bills.
Three mechanisms to examine the constitutionality
- Parliament has three mechanisms for examining whether a government bill adheres to constitutional principles.
- First, any member of the Parliament can oppose the introduction of a bill by stating that it initiates legislation outside the legislative competence of the Parliament.
- Second, MPs also get an opportunity to discuss a bill’s constitutionality while debating it in the Lok Sabha and Rajya Sabha.
- But on both these occasions, the strength of the argument does not determine the legislative outcome.
- The Parliament’s decision depends on the numbers that the treasury and opposition benches command on the house floor.
- Third, the opportunity for probing a bill’s constitutionality arises when a parliamentary committee is examining it.
Advantages of scrutiny of the bill by parliamentary committee
- The most important opportunity of the above mentioned three opportunities is scrutiny by the parliamentary committee.
- In the past too, the parliamentary committees have subjected the bills to strict scrutiny on the issue of constitutionality.
- For example, the committee examining the land acquisition bill 2011 was concerned about the bill infringing upon the state governments’ power.
- Similarly, during the deliberations on the Citizenship Amendment Bill 2016, the joint committee explicitly asked the government whether the bill would violate the spirit of Articles 14 and 25 of the Constitution.
- The committee process also has the advantage of drawing on constitutional expertise outside of the law ministry.
- The government has also fielded the attorney general to appear before parliamentary committees.
Weakness of parliamentary committee process
- Our parliamentary committee process has a fatal flaw.
- Government bills do not automatically go to committees for examination.
- Ministers get an option to refer their bill to a select committee, they often don’t exercise this option.
- While countries like Sweden and Finland pass their bills through two parliamentary committees.
- One committee looks at the technical aspects of a proposed law, and a specialised committee focuses on a bill’s constitutional validity.
Consider the question “Several laws passed by the government have been challenged before the judiciary on the ground of unconstitutionality. This highlights the importance of strict scrutiny of the bills by the Parliament. In light of this, examine the role played by the parliamentary committees in the scrutiny of the bills.”
Conclusion
Lack of robust scrutiny processes weakens Parliament’s image as the highest legislative institution and encourages judicial encroachment on its powers. After all, lawmaking should not be a mechanical stamping of the government’s legislative proposals but their careful examination by the Parliament.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: How dams exacerbate disasters
Mains level: Paper 3- Role of dams in exacerbating disasters
The article explains the link between the disasters in the Uttarakhand and the construction of dams.
How dams exacerbate disasters
- The use of explosives has repeatedly been questioned for dam construction, and the construction of other infrastructure projects, such as roads, in the fragile Himalayan State.
- Other than this, deforestation takes place when dams are constructed.
- The construction material that is supposed to be dumped on separate land is often dumped into the rivers.
The Chopra Committee report after Kedarnath flood
- The Chopra Committee report of 2014 brings more clarity on how dams exacerbate a disaster such as floods.
- Its report mentions how dams exacerbated the 2013 deluge, mainly as riverbeds were already raised from the disposed muck at the dam construction sites.
- The report presents evidence to prove that dams are not only damaged in floods, they also cause immense damage in downstream areas.
- This is because as floodwaters damage a barrage, they increase the destructive capacity of the water that flows downstream of the barrage.
- In an affidavit submitted on December 5, 2014 in the Supreme Court, the Union Ministry of Environment, Forest and Climate Change acknowledged the adverse impact of dams in the 2013 floods.
Impact of climate change and threat of earthquakes
- Himalayan glaciers are receding and disintegrating as a result of climate change, and the snow cover in the Himalayas is also thinning.
- Research shows an increase in number and volume of glacial lakes as a result of of increased temperatures.
- For dams, this means rapid increase or decrease in the reservoir water level.
- It also means that the projections on the life of a dam reservoir may not stand due to erratic events, such as floods, that could rapidly fill a reservoir with muck and boulders brought along with the floods.
- In terms of earthquake risk, Uttarakhand lies in Seismic Zone-IV (severe intensity) and Seismic Zone-V (very severe intensity).
- Ignoring this, many dams have been constructed in zones that are under high risk of witnessing severe earthquakes.
Consider the question “Examine the role played by the dams in exacerbating the disasters in the Himalayan states”
Conclusion
It is clear that dams worsen disasters, and for this to be ignored by the State authorities is unfortunate.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- International scrutiny of India's domestic policies and dealing with them
Tweets by international celebrities in support of farmers’ protests and the government’s response to it have brought focus the issue of international scrutiny of India’s policies. The article analyses this issue.
Issue of external criticism of India
- Recently, India has been at the receiving end of international criticism over its dealing with the farmers’ protests against recently passed farm laws.
- But neither the negative international scrutiny nor the Indian nationalist rejection of it are new.
- Mobilising nationalist sentiment and evoking territorial sovereignty in fending off external criticism have been consistent themes in the conduct of independent India’s foreign policy.
- The intensity of international scrutiny has varied over time and space, but they are unlikely to ever disappear.
- As India becomes more connected to the world, there will be more global interest in its internal dynamics.
- At the same time, like all rising powers, India will push back against demands that it must always measure up to external expectations.
Why the Western criticism matters
- Western power to turn sensible sentiments on democracy and human rights into consistent policies is rather limited.
- Also, the issue of human rights has never been the sole factor shaping US foreign policy towards other nations.
- But there is no denying that the Western power to create problems is real.
- There are also implications of needless political arguments with the US over your domestic politics.
- Asian realists also know that it is not difficult to neutralise Western liberal critics by emphasising engagement with others that might have commercial and security interests.
Dealing with the criticism in the U.S. Congress
- In the early 1990s, passing resolutions against India on Punjab and Kashmir in the US Congress was routine.
- But once Delhi began to engage with US Congress and explained the complexity of the issues involved, the tide began to turn.
- The Indian diaspora helped by reaching out to their representatives and pressing them to reconsider their positions.
- Within a decade, supporters of separatism in Punjab and Kashmir could not even move the resolutions in the US Congress.
Domestic polarisation and role of diaspora in international criticism
- India’s problem is not with external criticism, India’s real challenge is the deepening domestic political divide.
- India’s internal conflicts have inevitably enveloped the diaspora.
- Sections of the diaspora that are opposed to Indian policies are actively mobilising the political class in their adopted countries to raise the voice against India.
- They are also building wider coalitions to put the Indian government on the mat.
- If the diaspora in the past helped India overcome some difficult problems with the US, it is the counter mobilisation of the diaspora that is shaping the western criticism of India.
Way forward
- The government’s ability to overcome external criticism depends on rebuilding the national consensus on key policies and healing the multiple social rifts.
- Without a visible and sincere political effort to promote unity at home, internal divisions will get worse and make India more vulnerable to external meddling.
Consider the question “Recently, India has been at the receiving end of the international criticism for its internal issues. What are the reasons for such criticism? Suggest the strategy to deal with such criticisms.”
Conclusion
India’s own experience with Sri Lanka and Nepal underlines how hard it is to persuade other societies to accept Delhi’s preferences on the rights of minorities and federalism. In the end, democracy and pluralism can never be foreigner’s gifts. The struggle to construct and preserve democracies remains an internal one.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Countries bordering Myanmar
Mains level: Paper 2- Coup in Myanmar and India's dilemma in dealing with the situation
The coup in Myanmar poses several challenges for India. For one, it poses a dilemma in India’s dealing with Myanmar’s military. Also, it has implications for the Rohingya issue and containing the insurgency in north-east India.
Implications of the coup in Myanmar
1) Political realignment and role of Aung San Suu Kyi
- Threat of sanctions from the United States and the West in the wake of the recent coup could lead to unique political realignments in Myanmar.
- As a result, the international community may not have any alternatives than Aung San Suu Kyi when it comes to pursuing the restoration of democracy in the country.
- The democratic credentials of Aung San Suu Kyi, remain deeply diminished today due to her justification of the ill-treatment meted out to the Rohingya,
- Yet the recent events have brought her right back into the centre of the international community’s political calculations in Myanmar.
2) Implications for Rohingya issus
- International community will have to condone the government’s past actions against the Rohingya in order to highlight Suu Kyi as an anchor of democracy in Myanmar.
- The case against Myanmar’s conduct during her government’s tenure at the International Court of Justice (ICJ) will most likely be put on the backburner.
- Increasing global support for Ms. Suu Kyi could potentially negative consequences for the persecuted Rohingya.
3) China factor
- In the short run, the coup stands to hurt the interests of China, India and even the rest of the international community, all of whom were able to do business with Myanmar in their own unique ways.
- For China, the coup has complicated its larger regional economic plans in Myanmar.
- However, the international community’s sharp reactions will likely force the Tatmadaw (Myanmar’s military) to turn to China.
- International sanctions are unlikely to have a major impact on the country’s largely inward-looking junta and its Generals.
- However, it Generals would still expect Beijing to give them
- For China, the coup has complicated its larger regional economic plans in Myanmar.
- On the positive side for Beijing, decisive western sanctions will force the military to get closer to China.
- To that extent, China will be its biggest beneficiary of the February coup by default.
India’s dilemma
- India faces the most challenging dilemma on how to respond to the military coup in Myanmar.
- The dual power centres of the military and the civilian government that existed in Naypyitaw until recently, suited India.
- While India’s national interests clearly lie in dealing with whoever is in power in Myanmar, India would find it difficult to openly support the junta given the strong western and American stance.
- On the other hand, it can ill-afford to offend the junta by actively seeking a restoration of democracy there.
- While Ms. Suu Kyi was getting cozy with Beijing, it was the Myanmar military that had been more circumspect.
India’s concerns
- While a friendless Myanmar junta getting closer to China is a real worry for New Delhi, there are other concerns too.
- For one, Myanmar’s military played a helpful role in helping India contain the north-eastern insurgencies.
- Equally important is the issue of providing succour to the Rohingya in the wake of the military coup in Myanmar.
Consider the question “Developments in Myanmar have several implications for the regional geopolitics. In light of this, examine the challenges India faces from the development in Myanmar.”
Conclusion
India is left with very few clear policy options. And yet, it must continue to maintain relations with the government in power in Myanmar while discreetly pushing for political reconciliation in the country. In the meantime, the focus must be on improving trade, connectivity, and security links between the two sides.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Types of fiscal deficits
Mains level: Paper 3- Paradigm shift in the budget and challenges in realising them
The article deals with the marked departures in this year’s Budget and the challenges in realising the changes.
Three paradigm shifts from past in this the Budget
1)Increased infrastructure spending
- The main theme of the budget is a big thrust on infrastructure spending and public investment.
- If the budgeted numbers are realised, capex would have grown from 1.6 per cent of GDP pre-COVID to 2.5 per cent in two years.
- With India’s investment/GDP ratio falling by 5 percentage points over the last decade, a sustained public investment push — with its large multiplicative effects — is a much-needed impetus to reinvigorate growth and create jobs.
Implications of increased spending
- The certainty sustained public investment is likely to crowdin private investment.
- The certainty of investment-led employment that is likely to reduce household precautionary savings.
- However, higher capex spend is being paid for by disinvestment and privatisation.
- Effectively, non-core public-sector assets that don’t generate positive externalities — and, in fact, potentially distort the sectors they compete in — are expected to be replaced with much-needed physical and social infrastructure.
- This newly created physical and social infrastructure emanate positive externalities and necessarily suffer from under-provisioning by the private sector.
- If successfully executed — this will not be a case of selling the family silver to pay a credit card bill.
- Instead, it will be akin to a productivity-enhancing asset swap on the public sector’s balance sheet.
2) Shift in the way for financing infrastructure
- In stark contrast to the PPP model, infrastructure will now be financed off public sector balance sheets and, once operational and viable, will be monetised so as to recycle proceeds into the next project.
- In theory, this is the appropriate division of public-private risk sharing.
- It combines the public sector’s ability to better mitigate upstream risk while taking advantage of the glut of global liquidity potentially attracted to downstream projects.
3) Shift is towards more conservative and transparent fiscal accounting
- There has been much focus on bringing the Food Corporation of India (FCI) liabilities back on the budget.
- Less appreciated is the conservatism with which tax revenues have been budgeted for.
- Revised estimates peg this year’s gross taxes at 9.9 per cent of GDP.
- But for that to happen, taxes, net of excise, will need to contract by 20 per cent in the last quarter.
- So it’s very likely gross taxes will end up 0.5 per cent of GDP higher this year.
- Not only is this a welcome departure from the past when revenues were consistently over-budgeted, but it sets the base for next year.
- With nominal GDP expected to grow in double digits, it’s likely taxes, net of excise, will experience a higher-than-unitary-elasticity to growth, especially given the increased formalisation that COVID has spawned.
- Tax collections are, therefore, likely to exceed budgeted levels in 2021-22.
- It behooves a very uncertain macroeconomic environment and creates some buffer if crude prices keep rising or other revenues don’t materialise.
- Credible accounting over time will bring down risk premia in bond yields, and paradoxically generate a stimulative impulse.
Three challenges in realising these changes
1) Execution challenge
- The budget’s impact on shaping the macroeconomic narrative will depend on the speed and efficacy of simultaneously building and selling public assets.
- It will be important, for instance, to front-load disinvestment and strategic sales to take advantage of buoyant equity markets before global central banks become more cautious.
- With debt likely to rise to almost 90 per cent of GDP this year, it’s now incumbent on all stakeholders to consistently deliver the 10 per cent nominal GDP growth that’s needed to first stabilise debt at these levels and then bring it down.
- Viewed from this lens, it is a budget where execution is vital.
2) Withdrawal of the policy support at appropriate time
- While fiscal policy is being appropriately counter-cyclical at the moment, it must be equally nimble in the other direction.
- When the recovery gets more entrenched, policy support should be withdrawn with equal speed and alacrity.
3) Role of monetary policy
- With fiscal policy playing a primary role, monetary policy must slowly take a back seat.
- The combination of a more relaxed fiscal path and domestic private sector savings normalising after the COVID surge could result in equilibrium bond market yields rising [fall in the price of bond] — but that is a cost worth incurring for a meaningful public investment push.
- In the near term, the RBI may focus on ensuring this new equilibrium is reached in a non-disruptive manner.
- Given the current slack in the economy, it’s understandable if fiscal and monetary are temporarily complementary.
- But as confidence in the recovery grows, fiscal and monetary must quickly become substitutes — with the RBI progressively normalising liquidity to wardoff financial stability and fiscal dominance concerns — so as to safeguard macroeconomic stability.
Consider the question “This year’s Budget marked many departures from the past Budgets. However, there are several challenges in realising these departures. What are such departures and identify the challenges in realising them?”
Conclusion
The budget must be commended for embarking on important paradigm shifts. But its success, and in turn the sustainability of India’s recovery, will now come down squarely to policy execution and coordination.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IBC 2016
Mains level: Paper 3- Analysing the working of IBC
The article analyses whether or not the Insolvency and Bankruptcy Code is delivering on its objectives.
Criticism of IBC
- The Insolvency and Bankruptcy Code (IBC), 2016 was enacted to resolve the stress of companies.
- However, the corporate insolvency resolution process (CIRP) has been criticised as it rescues only about 25 per cent of companies and leads to liquidation for the rest.
Is IBC delivering on its mandate
Let’s analyse how Insolvency and Bankruptcy Code (IBC) 2016 is working towards value maximising outcomes.
1) It enables the market to attempt to resolve
- The CIRP enables the market to attempt to resolve stress through a resolution plan whereby the company survives.
- When it concludes that there is no feasible resolution plan to rescue the company, the company proceeds for liquidation.
- The market usually rescues a viable company and liquidates an unviable one.
- There are quite a few companies which have negligible assets and/or are defunct when they enter CIRP.
- Many of these are beyond rescue for a variety of reasons, including creative destruction, and their continuation is a cost to the economy.
- In such cases, the code enables liquidation to release available resources to alternate uses.
- It is welcome, as it releases the assets as well as the entrepreneur stuck up in an unviable company, which is a key objective of the code.
2) Look at the total asset value not the number of companies
- In terms of absolute numbers, 25 per cent of companies were rescued and 75 per cent proceeded for liquidation.
- In value terms, however, 75 per cent of the assets were rescued and 25 per cent of assets proceeded for liquidation.
- Of the companies sent for liquidation, 75 per cent were either sick or defunct, and of the companies rescued, 25 per cent were either sick or defunct.
3) Look at the overall impact, not just final numbers
- Third, the stress that a company suffers is like an illness which can be treated by a variety of options.
- Normally, recovery is better if diagnosis and treatment start early.
- Likewise, the health of the company deteriorates if the resolution process is delayed.
- The percentage of rescue at this later stage may not be significant.
- The credible threat of CIRP that a company may change hands has redefined the debtor-creditor relationship.
- Faced with the possibility of the CIRP, a debtor makes all-out efforts to prevent the stress, or resolve it much before it translates into a default, or settles the default.
- Even after an application is filed, a debtor continues efforts to resolve the financial stress midway through settlement, review, mediation, or withdrawal to avoid the consequences of CIRP.
- The number of companies that recover before filing the application as a percentage of those that get starts the insolvency process would give the fair idea about the efficacy of the IBC.
Consider the question “The IBC has often been criticised for liquidating the companies rather than rescuing them. Do you agree with this criticism? Give reasons in support of your argument.”
Conclusion
Liquidation or rescue is an outcome of the market forces; the law is only an enabler giving choices and nudging a company towards value maximising outcomes. The “invisible hands” of the market works towards the best outcome, which we should respect and accept.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NAIP
Mains level: Paper 3- Use of technology to increase milk production in India
The article highlights the issues facing the dairy sector and explains the utility of IVF technology for crossbreeding.
Importance of dairy sector
- The dairy sector assumes significance on account two reasons:
- 1) It has to do with the socio-cultural affinity towards cows and dairy products in large parts of the country.
- 2) As an industry, it employs more than 70 million farmers.
- Need of the hour is for us to identify ways in which we can enhance the return on investment for our farmers.
India’s journey from milk deficit country to one of surplus
- Initiated in 1970, Operation Flood transformed India into one of the largest milk producers.
- The per capita availability of milk in 2018-19 was 394 grams per day as against the world average of 302 grams.
- Today with an annual production of 187.75 million tonnes India accounts for about 22% of the world’s milk production.
- However, India is yet to join the ranks of major milk exporting nations, as much of what we produce is directed towards meeting domestic demands.
Making India milk exporting nation
- Indigenous cows produce 3.01kgs of milk per cow per day, while the yield of exotic crossbred cows is 7.95kgs.
- Crossbreeding has taken off in a big way because of the advancements in reproductive technologies like In vitro fertilization (IVF), embryo transfer process, and artificial insemination.
- Out of these processes, IVF and artificial insemination have proven to be the most popular and effective methods.
- The NAIP (Nationwide Artificial Insemination Programme) Phase-I was launched in September 2019.
- Every animal in the programme was assigned a 12-digit unique identification number under the Pashu Aadhar scheme.
- NAIP Phase-II was initiated on 1 August 2020 with an allocation of ₹1,090 crore in 604 districts covering 50,000 animals per district and is on track to be completed by the 31 May 2021.
- Under the programme, 9.06 crore artificial inseminations will be performed and is expected to lead to the birth of 1.5 crore high yielding female calves.
- Consequently, 18 million tonnes of additional milk will be produced as average productivity will be enhanced from 1,861kg per animal per year to 3,000kg per animal per year.
- Artificial insemination (AI) technology has been the most used method in India, but its success hinges upon accuracy in heat detection and timely insemination.
- And this is where In Vitro Fertilization (IVF) technology will prove to be more effective.
Conclusion
In keeping with our ethos of ‘Jai Kisan, Jai Vigyan’ the marriage of rural farming with the latest innovations in technology will usher in unprecedented transformation in our dairy industry.
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