Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Fifth Science Policy
The article elaborates on the various aspect of the 5th Science Policy.
Scientific publication from India and issues with it
- From the report published by the National Science Foundation of the U.S. in December 2019, India was the third-largest publisher of peer-reviewed science and engineering journal articles and conference papers, with 135,788 articles in 2018.
- This milestone was achieved through an average yearly growth rate of 10.73% from 2008, which was greater than China’s 7.81%.
- However, China and the United States had about thrice and twice the number, respectively, of India’s publications.
- Also, the publications from India are not impactful.
- From the report, in the top 1% of the most cited publications from 2016 (called HCA, or Highly Cited Articles), India’s index score of 0.7 is lower than that of the U.S., China and the European Union.
- An index score of 1 or more is considered good.
- The inference for India is that the impact, and hence the citation of publications from India, should improve.
Patents filed by India
- The World Intellectual Property Organization (WIPO) through their Patent Cooperation Treaty (PCT) is the primary channel of filing international patent applications.
- In its report for 2019, WIPO says India filed a modest number of 2,053 patent applications.
- Compared to the 58,990 applications filed by China and 57,840 by the U.S., India has a long way to go.
- The Indian Government put in place the National Intellectual Property Rights (IPR) Policy in 2016 to “stimulate a dynamic, vibrant and balanced intellectual property rights system”.
- One of the objectives is human capital development.
- The mission to foster innovation, replicate it at scale and commercialise it is a work in progress consequent to the policy.
India’s Science Policies
- There have been four science policies till now, after 1947, with the draft of the fifth policy having been released recently.
- India’s first science policy adopted in 1958.
- It led to the establishment of many research institutes and national laboratories, and by 1980.
- The focus in the second science policy, Technology Policy Statement, in 1983, was technological self-reliance and to use technology to benefit all sections of the society.
- The Science and Technology Policy 2003, the first science policy after the economic liberalisation of 1991, aimed to increase investment in research and development and brought it to 0.7%.
- The Scientific and Engineering Research Board (SERB) was established to promote research.
- In 2013, India’s science policy included Innovation in its scope and was called Science, Technology and Innovation Policy.
- The focus was to be one of the top five global scientific leaders, which India achieved.
What 5th science policy seeks to achieve
- The draft of the Science, Technology and Innovation Policy 2020 (STIP2020) has an ambitious vision to “double the number of full-time equivalent (FTE) researchers, Gross Domestic Expenditure on R&D (GERD) and private sector contribution to the GERD every 5 years” .
- It also aims to “position India among the top three scientific superpowers in the next decade”.
- It also defines strategies to improve funding for and participation in research. India’s Gross Domestic Expenditure on R&D (GERD) is currently around 0.6% of GDP.
- This is quite low when compared to the investments by the U.S. and China which are greater than 2% and Israel’s GERD is more than 4%.
- The policy seeks to define strategies that are “decentralized, evidence-informed, bottom-up, experts-driven, and inclusive”.
Solutions to improve funding
- STIP2020 defines solutions to improve funding thus: all States to fund research, multinational corporations to participate in research, fiscal incentives and support for innovation in medium and small scale enterprises.
- The new measures should not become a pretext to absolve the Union and State governments of their primacy in funding research; the government should invest more into research.
Other critical focus areas
- 1) Other critical focal areas ar inclusion of under-represented groups of people in research.
- 2) Support for indigenous knowledge systems.
- 3) Using artificial intelligence.
- 4) Reaching out to the Indian scientific diaspora for collaboration.
- 5) Science diplomacy with partner countries.
- 6) Setting up a strategic technology development fund to give impetus to research.
Conclusion
More specific directives and implementation with a scientific temper without engaging in hyperbole will be key to the policy’s success; and its success is important to us because, as Carl Sagan said, “we can do science, and with it we can improve our lives”.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Dealing with the challenges of Big Tech
The article highlights the challenges in regulating the Big Techs.
Controlling Big Tech
- Recently, the Indian government announced a sweeping array of rules reining-in social media.
- Specifically, social media platforms are required to become “more responsible and more accountable” for the content they carry.
- India is by no means alone in taking steps to regulate at Big Tech.
- The social media companies would argue that they are self-regulating.
- The problem is that their actions are ad hoc, inconsistent and reactive
Issues
- A user can be removed from the platform if his post threatens the “unity, integrity, defence, security or Sovereignty of India, friendly relations with foreign states, or public order, or causes incitement to the commission of any cognisable offence or prevents investigation of any offence or is insulting any foreign States”.
- In other words, the government is giving itself plenty of room to cut Big Tech down to size.
Why the issue needs government intervention: 3 arguments
1) Conflict of interest
- The government intervention rests on the presumption that it is never in the commercial interest of Big Tech to remove offensive speech.
- This is because as such content goes viral more readily, bringing in more eyeballs, more data and more advertising revenue.
- Big Tech proponents would contend that the companies are getting smarter about the risks of allowing such content on their systems and will inevitably find it in their self-interest to pre-emptively kill it.
2) State is the guardian of public interest
- A second argument in favour of government would be as follows: States are the guardians of the public interest.
- In democratic societies, governments are elected to represent the will of the people.
- So if there is a hard choice to be made about curtailing speech or permitting it, it seems only natural to turn to the public guardian.
- The counter to this theory would be that, in practice, even democratically elected governments are far from perfect.
- In fact according to The Economist Intelligence Unit’s Democracy Index, both India (ranked 53rd ) and the US (ranked 25th) are “flawed democracies”.
- In parallel, the argument for Big Tech to be the upholder of the public interest could rest on the theory that well-functioning markets are superior to flawed democracies in optimising social welfare.
- The counter-argument to this view would be that the tech industry is itself deeply flawed.
- There is a lack of sufficient choice of platforms; there are asymmetries in power between the companies and users and Big Tech is amassing data on the citizens and using this information for its own purposes, which makes the disparity even greater.
3) Bargaining power of BigTech
- A third perspective is to acknowledge it doesn’t matter who is the “true” upholder of the public interest.
- For all practical purposes, the outcome of the struggle between Big Government and Big Tech will be determined by relative bargaining power.
- While governments technically have the ability to take entire platforms offline within the borders of their countries, these platforms are now so enormous that their users would revolt.
- This is why we witnessed the audacity, recently, of Google and Facebook, threatening to de-platform Australia.
Consider the question “What are the challenges in the regulation of Big Techs? Suggest ways to deal with these challenges.”.
Conclusion
While governments technically have the ability to take entire platforms offline within the borders of their countries, these platforms are now so enormous that their users would revolt. This is why we witnessed the audacity, recently, of Google and Facebook, threatening to de-platform Australia.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Schedule 10
Mains level: Paper 2- Issues with anti-defection law
The article highlights the shortcomings of the anti-defection law and its failure in ensuring the stability of the government.
Background of anti-defection law
- The anti-defection law was included in the Constitution as the Tenth Schedule in 1985.
- The main purpose was to preserve the stability of governments and insulate them from defections of legislators from the treasury benches.
- The law stated that any Member of Parliament (MP) or that of a State legislature (MLA) would be disqualified from their office if they voted on any motion contrary to the directions issued by their party.
Issues with the anti-defection law
1) Against the concept of representative democracy
- The provisions of the anti-defection law is not limited to confidence motions or money bills.
- It applies to all votes in the House, on every Bill and every other issue.
- It even applies to the Rajya Sabha and Legislative Councils, which have no say in the stability of the government.
- Therefore, an MP (or MLA) has absolutely no freedom to vote their judgement on any issue.
- They have to blindly follow the direction of the party.
- This provision goes against the concept of representative democracy.
2) The act turns legislator to be an agent of the party
- There are two broadly accepted roles of a representative such as an MP.
- One is that they are agents of the voters and are expected to vote according to the wishes and for the benefits of their constituents.
- The other is that their duty to their constituents is to exercise their judgement on various issues towards the broader public interest.
- In this, they deliberate with other MPs and find a reasonable way through complex issues.
- The anti-defection law makes the MP neither a delegate of the constituency nor a national legislator but converts them to be just an agent of the party.
3) Broken chain
- The legislator is accountable to voters, and the government is accountable to legislators.
- In India, this chain of accountability has been broken by making legislators accountable primarily to the party.
- This means that anyone from the party having a majority in the legislature is unable to hold the government to account.
- This negates the concept of them having to justify their positions on various issues to the people who elected them to the post.
4) No incentive for MPs to understand policy choices
- If an MP has no freedom to take decisions on policy and legislative proposals, there would be no incentive to put in the effort to understand the different policy choices and their outcomes.
- The MP becomes just another number to be tallied by the party on any vote that it supports or opposes.
5) Weakening of the accountability mechanism
- While introducing the draft Constitution, Dr. B.R. Ambedkar said that the presidential form (such as in the United States) had higher stability but lower accountability.
- This is because the President is elected for four years, and cannot be removed except for proven misdemeanour.
- In the parliamentary form, the government is accountable on a daily basis through questions and motions and can be removed any time it loses the support of the majority of members of the Lok Sabha.
- The drafting committee believed that India needed a government that was accountable, even at the cost of stability.
- The anti-defection bill weakens the accountability mechanism.
6) The act fails to provide stability
- The political system has found ways to topple governments by reducing the total membership through resignations.
- In other instances, the Speaker — usually from the ruling party — has delayed taking a decision on the disqualification.
- The Supreme Court has tried to plug this by ruling that the Speaker has to take the decision in three months, but it is not clear what would happen if a Speaker does not do so.
- The premise that the anti-defection law is needed to punish legislators who betray the mandate given by the voters also seems to be flawed.
- We have seen many of the defectors in States such as Karnataka and Madhya Pradesh being re-elected in the by-polls, which were held due to their disqualification.
Way forward
- The problem arises from the attempt to find a legal solution to what is essentially a political problem.
- If stability of government is an issue due to people defecting from their parties, the answer is for parties to strengthen their internal systems.
- If parties attract members on the basis of ideology, and they have systems for people to rise within the party hierarchy on their capabilities rather than inheritance, there would be a greater exit barrier.
Consider the question “How far has the anti-defection law succeeded in preventing the destabilisation of the governments? Give reasons in support of your argument.”
Conclusion
The anti-defection law has been detrimental to the functioning of our legislatures as deliberative bodies which hold the executive to account on behalf of citizens. It has turned them into fora to endorse the decision of the government on Bills and budgets. And it has not even done the job of preserving the stability of governments. The Tenth Schedule to the Constitution must be repealed.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Regulation of social media
The article examines the issues with Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
Change in the immunity for social media platforms
- With the social media platforms amassing tremendous power, the Government of India and has over time sought to devise a core framework to governs social media.
- This framework known as the “intermediary liability” has been made legally through Section 79 of the Information Technology Act, 2000.
- This framework has been supplemented by operational rules, and the Supreme Court judgment in Shreya Singhal v. Union of India.
- All this legalese essentially provides large technology companies immunity for the content that is transmitted and stored by them.
- Recently, the Government of India announced drastic changes to it through the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.
Issues with the Rules
1) Privacy concern
- The regulations do contain some features that bring accountability to social media platforms.
- For instance, they require that prior to a content takedown, a user should be provided adequate notice.
- However, there are several provisions in the rules that raise privacy concerns.
- Take traceability, where instant messaging platforms which deploy end-to-end encryption that helps keep our conversations private will now effectively be broken.
- This is because now the government may require that each message sent through WhatsApp or any other similar application be tied to the identity of the user.
- When put in the larger context of an environment that is rife with cybersecurity threats, an inconsistent rule of law and the absence of any surveillance oversight, this inspires fear and self-censorship among users.
- The core of the traceability requirement undermines the core value of private conversations.
2) Regulation without clear legal backing
- The rules seek to regulate digital news media portals as well as online video streaming platforms.
- Rules will perform functions similar to those played by the Ministry of Information and Broadcasting for TV regulation.
- For instance, as per Rule 13(4), this also now includes powers of censorship such as apology scrolls, but also blocking of content.
- All of this is being planned to be done without any legislative backing or a clear law made by Parliament.
- A similar problem exists with digital news media portals.
- The purview of the Information Technology Act, 2000, is limited.
- It only extends to the blocking of websites and intermediary liabilities framework, but does not extend to content authors and creators.
- Hence, the Act does not extend to news media despite which it is being stretched to do so by executive fiat.
- The oversight function will be played by a body that is not an autonomous regulator but one composed of high ranking bureaucrats.
- This provides for the discretionary exercise of government powers of censorship over these sectors.
Way forward
- This could have ideally been achieved through more deliberative, parliamentary processes and by examining bodies in other democracies, which face similar challenges.
- For instance, OFCOM, a regulator in the United Kingdom, has been studying and enforcing regulations that promise higher levels of protection for citizens’ rights and consistency in enforcement.
- Instead, the present formulation increases government control that suffers from legality and core design faults.
- It will only increase political control.
Consider the question “What is the purpose of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, and what are the concerns with these rules?”
Conclusion
While every internet user in India needs oversight and accountability from big tech, it should not be at the cost of increasing political control, chilling our voices online and hurting individual privacy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 239A
Mains level: Paper 2- Structural flaws in the composition of legislature of UTs
There are structural flaws in the provisions of the composition of legislature and the relationship between the council of ministers and the Administrator in the UTs.
Pattern in the resignations of MLAs
- Recently, the resignations of MLAs from the Puducherry Assembly led to the fall of government there.
- The same had happened in 2019 in Karnataka.
- Resigning from the membership of the House is every member’s right.
- But according to Article 190 of the Constitution, the resignation should be voluntary or genuine.
- If the Speaker has information to the contrary, he or she is not obliged to accept the resignation.
- But there is by now a familiar pattern to the resignations of Members of the Legislative Assembly.
- Such resignations invariably lead to the fall of the government.
Purpose of providing legislature to UTs
- The Constitution-makers/ Parliament provided a legislature and Council of Ministers to some of the UTs to fulfil the democratic aspirations of the people of these territories.
- There was a realisation that the administration of these territories directly by the President through the administrators under Article 239 does not meet the democratic aspirations of the people.
- The creation of a legislature and a Council of Ministers is logical and in consonance with the policy of the state to promote democracy.
Structural issues with legislature in UTs
1) Nomination of members and issues with it
- A closer look at the relevant provisions in the Constitution reveals that this professed aim has often been sought to be defeated by the Union.
- Article 239A was originally brought in, in 1962, to enable Parliament to create legislatures for the UTs.
- A legislature without a Council of Ministers or a Council of Ministers without a legislature is a conceptual absurdity.
- Similarly, a legislature that is partly elected and partly nominated is another absurdity.
- The issue of nomination of members to the Puducherry Assembly had raised a huge controversy.
- The Government of Union Territories Act provides for a 33-member House for Puducherry of whom three are to be nominated by the Central government.
- So, when the Union government nominated three BJP members to the Assembly without consulting the government, it was challenged in the court.
- Finally, the Supreme Court (K. Lakshminarayanan v. Union of India, 2019) held that the Union government is not required to consult the State government for nominating members to the Assembly and the nominated members have the same right to vote as the elected members.
- There is provision for nomination of members to the Rajya Sabha [Article 80 (i)(a)].
- But clause (3) of the Article specifies the fields from which they will be nominated.
- But in the case of nomination to the Puducherry Assembly, no such qualification is laid down either in Article 239A or the Government of Union Territories Act.
- This leaves the field open for the Union government to nominate anyone irrespective of whether he or she is suitable.
- As things stand, the law invites arbitrariness in dealing with the nomination of members to the UT legislature.
2) Administrator’s powers
- The administrator has the right to disagree with the decisions of the Council of Ministers and then refer them to the President for a final decision.
- The President decides on the advice of the Union government.
- So, in effect, it is the Union government which finally determines the disputed issue.
- Although in NCT of Delhi v. Union of India (2019), the Constitution Bench of the Supreme Court had said that the administrator should not misuse this power.
- The bench also said that the Administrator should use it after all methods have failed to reconcile the differences between him/her and the Council of Ministers.
- As a matter of fact, such conflicts between the administrator, who is the nominee of the President, and the elected government is inherent in the constitutional arrangement created for the UTs.
Consider the question “The conflicts between the administrator, who is the nominee of the President and the elected government is inherent in the constitutional arrangement created for the UTs. Comment.”
Conclusion
Experience shows that the UTs having legislatures with ultimate control vested in the central administrator are not workable. So far as the conspiratorial resignation by legislators to bring down their own government is concerned, the political class will have to get the better of the predatory instincts of political parties through constitutional or other means.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: 73rd and 74th Amendments
Mains level: Paper 3- Decentralisation and its relationship with human capital
The article argues for recognising the correlation between human capital and decentralisation in India.
Low human capital indicators
- In the World Bank’s Human Capital Index, the country ranked 116th.
- The National Family Health Survey-5 for 2019-20 shows that malnutrition indicators stagnated or declined in most States.
- The National Achievement Survey 2017 and the Annual Status of Education Report 2018 show poor learning outcomes.
- In addition, there is little convergence across States.
- India spends just 4% of its GDP as public expenditure on human capital:1% and 3% on health and education respectively— one of the lowest among its peers.
Initiatives to address these issues
- Investing in human capital through interventions in nutrition, health, and education is critical for sustainable growth.
- The National Health Policy of 2017 highlighted the need for interventions to address malnutrition.
- On the basis of NITI Aayog’s National Nutrition Strategy, the Poshan Abhiyaan was launched, as part of the Umbrella Integrated Child Development Scheme.
- The latest Union Budget has announced a ‘Mission Poshan 2.0’ and the Samagra Shiksha Abhiyan has been the Centre’s flagship education scheme since 2018.
Relation between decentralisation and human capital
- International experience suggests that one reason why these interventions are not leading to better outcomes may be India’s record with decentralisation.
- Globally, there has been a gradual shift in the distribution of expenditures and revenue towards sub-national governments.
- These trends are backed by studies demonstrating a positive correlation between decentralisation and human capital.
Issues with decentralisation in India
1) Letting states decide the way of empowerment
- The 73rd and 74th Amendments bolstered decentralisation by constitutionally recognising panchayats and municipalities as the third tier.
- The Amendment also added the Eleventh and Twelfth schedules containing the functions of panchayats and municipalities.
- These include education, health and sanitation, and social welfare for panchayats, and public health and socio-economic development planning for municipalities.
- However, the Constitution lets States determine how they are empowered.
- In effect, three tiers of government are envisaged in the Constitution it divides powers between the first two tiers — the Centre and the States
- This has resulted in vast disparities in the roles played by third-tier governments.
2) Centralised nature of fiscal architecture
- While the Constitution assigns the bulk of expenditure responsibilities to States, the Centre has major revenue sources.
- To address this vertical imbalance, the Constitution provides for fiscal transfers through tax devolution and grants-in-aid.
- In addition, the Centre can make ‘grants for any public purpose’ under Article 282 of the Constitution.
- While fiscal transfers that are part of tax devolution are unconditional, transfers under grants-in-aid or Centrally Sponsored Schemes (CSSs) can be conditional.
- Therefore, the increase in the States’ share of tax devolution represents more meaningful decentralisation.
- Despite some shifts towards greater State autonomy in many spheres, the centralised nature of India’s fiscal architecture has persisted.
- Centrally Sponsored Schemes (CSS) have formed a sizeable chunk of intergovernmental fiscal transfers over the years, comprising almost 23% of transfers to States in 2021-22.
- But its outsized role strays from the intentions of the Constitution.
- There are issues in the design of CSSs as well, with the conditions being overly prescriptive and, typically, input-based.
- Against this, international experience reveals that schemes with output-based conditions are more effective.
- Moreover, CSSs typically have a cost-sharing model, thereby pre-empting the States’ fiscal space.
3) Lack of fiscal empowerment
- Third-tier governments are not fiscally empowered.
- The collection of property tax, a major source of revenue for third-tier governments, is under 0.2% of GDP in India, compared to 3% of GDP in some other nations.
- The Constitution envisages State Finance Commissions (SFCs) to make recommendations for matters such as tax devolution and grants-in-aid to the third tier.
- However, many States have not constituted or completed these commissions on time.
Solution
- The Centre should play an enabling role, for instance, encouraging knowledge-sharing between States.
- For States to play a bigger role in human capital interventions, they need adequate fiscal resources.
- To this end, States should rationalise their priorities to focus on human capital development.
- The Centre should refrain from offsetting tax devolution by altering cost-sharing ratios of CSSs and increasing cesses.
- Concomitantly, the heavy reliance on CSSs should be reduced, and tax devolution and grants-in-aid should be the primary sources of vertical fiscal transfers.
- Panchayats and municipalities need to be vested with the functions listed in the Eleventh and Twelfth Schedules.
Consider the question “There is a positive correlation between decentralisation and human capital. This in part explains India’s low human capital indicators. In light of this, examine the issues with the decentralisation in India and suggest the measures to deal with it.”
Conclusion
Leveraging the true potential of our multi-level federal system represents the best way forward towards developing human capital.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FAME
Mains level: Paper 3- Reducing India's energy import dependence
The article discusses the steps taken by the government to improve fuel efficiency standards and the for the transition to clean sources of energy.
Reducing energy import dependence
- Speaking on the increase in petrol and diesel prices, Prime Minister emphasised the need for clean sources of energy.
- Expanding and diversifying energy supply is good, but if India is to reduce its energy import dependence, it must look towards first managing the demand for petroleum products.
- It is worthwhile to reflect on measures taken by the previous governments as well as this government in this context.
Steps taken
National Electric Mobility Mission Plan
- The UPA-2 administration formulated fuel efficiency standards for passenger vehicles that are now in effect.
- It also constituted the National Electric Mobility Mission Plan (NEMMP).
- While well-intended, both these actions fell short in terms of ambition.
- India’s 2022 fuel efficiency standards for passenger cars are nearly 20% less stringent than the European Union’s standards.
- The NEMMP primarily focused on hybrid electric vehicles.
- Most of the incentives under the NEMMP went towards subsidising mild hybrids instead of electric vehicles.
Multiple fuel pathways
- Recently, the government has encouraged multiple fuel pathways in the transport sector including natural gas.
- The Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme now focuses largely on electric vehicles.
- The government has also provided several additional fiscal and non-fiscal incentives to encourage a transition to electric vehicles.
Steps need to be taken
- There are many things that the government can and should do to
- First, the government should formulate a zero-emissions vehicle (ZEV) programme that would require vehicle manufacturers to produce a certain number of electric vehicles.
- At present, the electric mobility initiative in India is driven largely by new entrants in the two- and three-wheeler space.
- A ZEV programme would require all manufacturers to start producing electric vehicles across all market segments.
- The government should also strengthen fuel efficiency requirements for new passenger cars and commercial vehicles.
- Two-wheelers, which consume nearly two-third of the petrol used in India, are not subject to any fuel efficiency standards.
- Adopting stringent fuel efficiency standards and a ZEV programme by 2024 can result in India’s petroleum demand peaking by 2030.
- The FAME should be extended not only to all passenger cars and commercial vehicles but also to agricultural tractors.
Conclusion
As the economy recovers from the pandemic, the demand for petroleum products will rise, as will prices. But the government can save money for the consumer while enhancing long-term energy security by wielding the regulatory tools at its disposal.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Primary surplus
Mains level: Paper 3- Change in government's fiscal policy stance
The article examines the changes in government’s fiscal policy stance which supports the debt-financing and apparent contradiction displayed by increased excise duty.
Increase in excise duty
- Well before India began to globalise there was a time when each Union Budget announced sales tax increases on tobacco products.
- The rise in tax was expected to be a shot in the arm for the revenue-starved government of our poor country.
- India is less poor now, having risen to the rank of an emerging market economy.
- Yet, COVID-19 has wreaked havoc.
- As opposed to a Budget estimate of 3.5% for fiscal deficit, the revised estimates show a 2.7 times larger deficit of 9.5% for FY 2020-21.
- A comparison of the government’s revised Budget estimates with the original Budget estimates reveals a fall in receipts from every source of taxation except excise.
- The revised Budget shows a rise of ₹94,000 crore on account of excise duties alone.
- Presumably, the increase comes from the much-debated excise duty increases on petroleum and diesel.
- The excise duty rise will hardly compensate for the huge falls in other tax revenues.
- The larger excise duty collection is not large enough to have significantly reduced the inflated fiscal deficit figure.
Implications of hike in excise duty
- Given the nature of the products on which the excise duty has gone up, prices of commodities will rise in general.
- With annual output shrinking by an estimated 7.7%, it is straightforward to conclude that unemployment has risen significantly.
- The accompanying price rise will be the unemployed persons’ worst nightmare.
- The result will be severe inequality.
Change in economic policy framework
- The Economic Survey 2020-21 considers Olivier Blanchard’s prescription that a fiscal deficit automatically transformed to government debt.
- Such debts along with their servicing liabilities have a tendency to magnify over the years where present borrowings keep increasing to repay past borrowings and service charges.
- This leaves little room for growth-enhancing expenditure and reduces a government’s creditworthiness in the eyes of lenders.
- Debt-financed fiscal spending could well be a driver of growth.
- It can improve the standard of living of the entire population, without necessarily removing inequality.
- A government’s fiscal expenditure, Professor Blanchard points out, has stronger multiplier effects during recessions than during booms
- The inequality, however, could well be benignant, for even though the rich will grow richer, the poor will escape out of poverty.
Condition for debt-financed fiscal spending
- Debt or the fiscal deficit constitutes the government’s spendable resources.
- What will prevent the government from sinking into a debt trap?
- Professor Blanchard shows that the debt-to-GDP ratio can be prevented from exploding if the rate of growth of GDP happens to be higher than the sovereign rate of interest.
- This is the case in developed economies.
- In such economies, debt financed government expenditure will create a positive primary surplus out of which interest payments can be made to keep the debt-GDP ratio under control.
- There will, of course, be a maximum value that this ratio can attain, a value that is higher the larger is the excess of the growth rate over the interest rate.
Contradiction in fiscal policy and fiscal regime
- According to the Economic Survey, India’s average interest rate and growth rate over the last 25 years (leaving out FY 2020-21) have been 8.8% and 12.8% respectively.
- Hence, Professor Blanchard’s condition is satisfied.
- This, of course, is not to support excise duty increases, for it goes against the very principle of the Blanchard argument.
- Therefore, there appears to be a contradiction between the government’s announced fiscal policy stance and the fiscal regime it is actually running.
Consider the question”The Economic Survey 2020-2021 calls for the debt-financed fiscal spending. Do you think that this view is suitable for India economy? What are the risks involved?”
Conclusion
The government must consider the implications of increased excise on the economy and should focus on removing the contradiction in its fiscal policy and fiscal regime.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Animal Husbandry Infrastructure Development Fund (AHIDF)
Mains level: Paper 3- Animal Husbandry Infrastructure Development Fund (AHIDF)
Importance of animal husbandary and dairy sector
- As an allied industry of agriculture, the animal husbandry and dairy sector collectively employs more than 100 million people.
- Since the bulk of establishments in this sector is concentrated in rural India, the socio-economic relevance of this sector cannot be overstated.
- the Central government unveiled a string of measures to cushion the economy, as a part of which the Animal Husbandry Infrastructure Development Fund (AHIDF) was announced.
More about AHIDF
- The AHIDF has been set up with an outlay of ₹15,000 crore.
- As per the provisions of AHIDF, a project will be eligible for a loan amount that covers up to 90% of the estimated cost –
- There will be interest subvention of 3% for all eligible entities.
- Applicants can submit the proposal with a complete Detailed Project Report through the Udyami Mitra Portal.
- The fund includes a diverse set of stakeholders such as FPOs, private dairy players, individual entrepreneurs, and non-profits within its ambit.
Strengthening dairy value chain
- There is a pressing need to enhance chilling infrastructure at collection centres by setting up bulk milk coolers.
- If the infrastructure needs for milk processing and distribution are included, then the overall potential investment opportunity is to the tune of ₹1,40,000 crore across the dairy value chain.
- There is also considerable potential to increase the productivity of cattle, especially by enhancing the quality of animal feed.
- With this in mind, the AHIDF has been designed to support the establishment of animal feed plants of varying capacities.
- The infrastructure gap of 10-18 MMT in the production and supply of affordable compound cattle feed translates into an investment potential of around ₹5,000 crore.
Boosting the poultry industry
- There are not only economic but nutritional benefits to boosting the poultry segment’s output, efficiency and quality.
- India is the fourth largest chicken meat producer and the second largest egg producer in the world.
- India is well-positioned to help mitigate rampant malnutrition given that chicken meat provides the cheapest source of protein per unit.
- With eggs being introduced as part of the mid-day meal within several anganwadis in the country, an upgradation in poultry infrastructure would be closely intertwined with social justice outcomes too.
- Macro benefits regarding climate change and employment are linked to this sector.
- Enhanced infrastructure can make processing units more energy-efficient and help mitigate their carbon footprint.
Consider the question ” As an allied industry of agriculture, the animal husbandry and dairy sector are important for rural area and the socio-economic relevance of this sector cannot be overstated. In light of this, examine the role Animal Husbandry Infrastructure Development Fund (AHIDF) could play in transforming rural economy.”
Conclusion
The AHIDF also has the potential to create over 30 lakh jobs, even as it overhauls domestic infrastructure towards giving greater prominence to India’s dairy and livestock products in the global value chain.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India's relations with Taiwan
The article underscores the centrality of Taiwan in the realms of semiconductor production and how that dominant spills over in geopolitics.
Silicon shield of Taiwan
- Taiwan’s security situation has been worsening amidst mounting economic, political and military pressure from China.
- Any Chinese attack on Taiwan that disrupts the flow of semiconductors would produce significant challenges not only for the US but also China that relies on semiconductor supplies from Taiwan.
- That factor appears to be preventing the crisis from boiling over into a full-scale war that could draw the US and Japan into it.
- It is Taiwan’s so-called “silicon shield”.
Taiwan’s dominance in semiconductor industry
- Taiwan is the world’s leading producer of semiconductors and other electronic components.
- The Taiwan Semiconductor Manufacturing Company (TSMC) has more than 55 per cent of the global market share in the production of high-end custom-made chips.
- Of the two rival companies that have survived, US-based Intel is in trouble and Korea’s Samsung has challenges of its own.
- There will be no generation of data without the semiconductors.
- It might be more accurate to say that “semiconductors are the new oil” and their production is increasingly dominated by Taiwan and the TMSC.
Geopolitics over Taiwan
- As its economic heft and political salience rose in the 21st century, China has ratcheted up pressure on countries that have diplomatic relations with Taiwan.
- China has also compelled international organisations to push Taiwan out of their activities, even when Taiwan had much to contribute.
- Amidst the deterioration of US-China relations in recent years, President Donald Trump was far more supportive of Taiwan than his recent predecessors.
- The Biden team has also signalled continuity with Trump’s Taiwan policies.
- All indications are that Washington will continue to seek some technological decoupling and diversification of sensitive supplies away from China.
- Taiwan will inevitably be the key element in the American quest for resilient supply chains in the digital domain.
Opportunity for India
- Taiwan’s position as a semiconductor superpower opens the door for more intensive strategic-economic cooperation between Delhi and Taipei.
- Part of the problem is that India’s strategic community continues to view Taiwan as an adjunct to India’s “One-China policy”.
- India’s policy oscillates between keeping needless distance with Taipei when ties with Beijing are warm and remembering it when Sino-Indian ties enter a freeze.
- This changed in the early 1990s, when it began to engage with Taiwan, but the policy remained a restricted one.
- In the last few years, though, there has been a steady expansion of bilateral engagement.
- Trade has increased from about $1 billion in 2001 to about $7 billion in 2018.
- India has made a special effort to woo Taiwanese companies that are moving some of their production away from China.
- India is yet to tap into the full range of commercial and technological opportunities possibilities with Taiwan.
- This is particularly true of semiconductor production.
Way forward
- Delhi must begin to deal with Taiwan as a weighty entity in its own right that offers so much to advance India’s prosperity.
- Delhi does not have to discard its “One-China policy” to recognise that Taiwan is once again becoming the lightning rod in US-China tensions.
Consider the question “India needs to explore the opportunities in relationship with Taiwan even as it pursues and sticks to its One China policy. Comment.
Conclusion
As Taiwan becomes the world’s most dangerous flashpoint, the geopolitical consequences for Asia are real. Although Delhi has embraced the Indo-Pacific maritime construct, it is yet to come to terms with Taiwan’s critical role in shaping the strategic future of Asia’s waters.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: State Finance Commission
Mains level: Paper 2- Conditional grants to incentivise the states for reforms
The article highlights the crucial recommendations made by the 15th Finance Commission and also explains the importance of conditions for grants from the Centre to push the state for reforms.
Crucial recommendations by 15th Finance Commission
- The Fifteenth Finance Commission’s report for the period 2021-22 to 2025-26 outlines some crucial recommendations for state governments.
- These recommendations cover tax devolution, grants from the Centre, and the guidelines for the borrowings that they are permitted to incur over the medium-term.
- The commission has recommended that 41 per cent of the government’s divisible pool of taxes be transferred to state governments.
Horizontal devolution formula
- The horizontal devolution formula specifies each state’s share in the overall pie.
- The 15th FC was required to use the states’ population as per the 2011 Census — a highly contentious change.
- It has also introduced a demographic performance criterion.
- Additionally, it has also introduced a new criterion –tax effort.
- Tax effort is measured by the ratio of the three-year average of per-capita own tax revenues and per-capita gross state domestic product (GSDP).
- The net result of the change in criteria is that the share of 10 states in the divisible pool has declined.
- Karnataka is the biggest loser, while Maharashtra is the biggest gainer.
Grants from the Centre conditioned on reforms in states
- Another major set of the commission’s recommendations pertain to grants from the Centre.
- In a major shift, the 15th FC has sharply increased the proportion of grants whose receipt is conditional on specified reforms being undertaken.
- 57 per cent of the 15th FC-recommended grants accepted so far by the GoI are conditional, relative to just 17 per cent for the 14th FC (including J&K).
What are the conditions
1) Setting up of State Finance Commission (SFC) and applicability of SFC’s recommendations for 5 years only
- Constitution requires state governments to set up State Finance Commissions (SFC).
- The 15th FC has asserted that the mandate of any given SFC is intended to be applicable only for five years.
- It revealed that only 15 states have set up their fifth or sixth SFCs, whereas several states have not moved beyond their second or third SFC.
- Accordingly, a staggering 84 per cent of the Rs 4.4 trillion grants for local bodies recommended by the 15th FC are conditional on the states setting up SFCs for the coming five-year period, and acting on their recommendations by March 2024.
2) Availability of online accounts
- Another entry-level condition for availing grants by rural and urban local bodies pertains to the timely availability of their accounts online from 2021-22 onwards.
3) Notiflying floor rate for property tax
- For the receipt of grants by the urban bodies, states are required to notify a floor rate for property tax by 2021-22, and demonstrate consistent year-wise improvement from 2022-23 onwards.
- This will complement the conditions set previously by SEBI for ULBs to become eligible to raise municipal bonds.
Changes in limit on net borrowings of state governments
- The commission has recommended that the normal limit for net borrowings of state governments be fixed at 4 per cent of GSDP in 2021-22.
- This will ease to 3.5 per cent by 2022-23, thereafter reverting to the erstwhile 3 per cent limit till 2025-26.
- The additional borrowing space of 0.5 per cent of GSDP for states is conditional on the completion of power sector reforms.
Prospect of huge gaps in states’ revenue in the future
- The states’ fiscal arithmetic will alter in 2022-23 with the GST compensation set to cease at the end of June 2022 as things stand today.
- The ensuing drop in grants, combined with the tapering of the front-loaded revenue deficit grants is likely to leave a big gap in some states’ revenues.
Consider the question “What are the conditions laid down by the 15th Finance Commission on the states for the central grants? How these conditions could benefit the states?”
Conclusion
The question is whether this revenue gaps will force the states to move on both the power sector reforms, which have proven challenging in the past, and the municipal reforms, so that their resource availability may be enhanced.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bicameralism
Mains level: Paper 2- Importance of bicameralism
The article discusses the issue of undermining of the upper house by passing the certain bills through voice vote and use of money bill route.
Passing of the Bill by voice vote
- The Karnataka Prevention of Slaughter and Preservation of Cattle Bill was passed by the State’s Legislative Council by voice vote without any division.
- The law was passed by the Council despite the lack of a majority.
- There was no division vote based on actual voting as is usual and as the Opposition members had demanded.
A new legislative precedent
- Similar process was followed to pass the controversial farm laws (by the Rajya Sabha) in September 2020.
- The pandemonium in the House caused by heated interventions by the Opposition was used as a pretext to resort to a voice vote.
- The laws passed with a voice vote seem like a new template for bypassing the constitutionally envisaged legislative process.
- Another process repeatedly used over the last few years to bypass the Upper House of Parliament is the Money Bill route.
- The Aadhaar Bill was passed in this manner.
- Other controversial laws such as those pertaining to electoral bonds, retrospective validation of foreign political contributions and the overhaul of the legal regime relating to tribunals have also been carried out through the Money Bill route.
The Rajya Sabha’s role
- The Lok Sabha is seen as directly representing the will of the people, and the Rajya Sabha as standing in its way.
- The countervailing function of the Upper House is rarely seen as legitimate.
- The Rajya Sabha has historically stopped the ruling party from carrying out even more significant legal changes.
- The Rajya Sabha is imperfect, partly because of constitutional design.
- And partly because obviously undesirable practices, such as members representing States they have no affiliation to, have been allowed to flourish.
Importance of bicameralism
- The very questioning of the monopoly of the Lower House to represent the ‘people’ makes bicameralism desirable, argues legal philosopher Jeremy Waldron.
- In India, the fact that the Rajya Sabha membership is determined by elections to State Assemblies leads to a different principle of representation, often allowing different factors to prevail than those in the Lok Sabha elections.
- John Stuart Mill had warned about a single assembly becoming despotic and overweening, if released from the necessity of considering whether its acts will be concurred in by another constituted authority.
- The other merit of bicameralism is significant in a Westminster system like India, where the Lower House is dominated by the executive.
- The Rajya Sabha holds the potential of a somewhat different legislative relation to the executive, making a robust separation of powers possible.
Consider the question “Examine the importance of bicameralism in India. Why passage of certain bills as money bill is causing controversies?”
Conclusion
The important role played by the upper house needs to be recognised and respected in the legislative processess.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Gross fixed capital formation
Mains level: Paper 3- Year of economic consolidation
The article argues that we are less likely to witness high growth next year rather it is going to be the year of consolidation.
Year of consolidation
- The Economic Survey, the Union budget, and the RBI credit policy attest that the economy is on the recovery path.
- The fourth quarter will register a positive growth rate, and as a consequence, the contraction for the full year will be between 7.5-8 per cent.
- The contraction sets the pace for growth in 2021-22 which is now going to be critical as it is the foundation for the fructification of the budget revenue targets.
- But consider this: GDP in 2019-20 was Rs 146 lakh crore, which has come down to Rs 134 lakh crore in 2020-21.
- Hence, a 10 per cent growth will take the Indian economy to Rs 147 lakh crore — when compared to Rs 145 lakh crore, this reflects modest growth.
- Therefore, expectations should be tempered when we talk of growth next year.
- There will be a revival in economic activity on all ends which will probably bear fruit in 2022-23 — FY 2021-22 will be a year of consolidation.
Policy architecture
- The government has brought in a cogent policy framework right from the time of the Atmanirbhar announcements, culminating in the budget.
- There is a focus on infrastructure as well as providing incentives to investment through the Production Linked Incentive (PLI) scheme.
- Real estate, power and construction saw several policy reforms last year.
- There is a strong capex push by the government and there will more action taken here.
RBI policies
- The RBI has promised to continue accommodative policies, which sends a signal of managing liquidity considering the large borrowing programme of the government of Rs 12.8 lakh crore.
- RBI will carry out more open market operations, and long-term repo operations during the year to ensure that interest rates remain stable.
- However, there will be concern around state government borrowings too, which will exert pressure on the availability of funds.
- Hence, there will be more central bank intervention in the market to ensure that funds are available.
Inflation concerns
- Inflation is a concern as global commodity prices have already started going up and this has led to core inflation rising.
- Given that the monsoon has been good in the last four years, there is a possibility of an adverse season this time which can affect food prices.
- In India, too, we have seen that the price of petrol and diesel is rising sharply.
- Add to this rising manufactured goods inflation witnessed of late, and there is a possibility of inflation rising above the MPC’s tolerance levels.
Lack of consumption growth
- For growth to take place, consumption growth has to be real and rapid.
- Consumption growth has been affected by the absence of commensurate job creation.
- Consumption growth is unlikely too soon as consumption is dependent on job creation.
- Jobs get created when growth is high and hence there is circular reasoning here.
- Income has been affected in 2020 due to the pandemic which has led to job losses as well as salary cuts.
- This has affected the sustainability of the pent-up demand seen in October and November.
Falling investment
- Investment has lagged with gross fixed capital formation falling to a low of 24.2 per cent in 2019-20 from 34.3 per cent in 2011-12.
- Reversing this decline will be challenging because the demand for such projects has slowed down and banks have been wary of lending for infrastructure.
- There is also surplus capacity in industry with the capacity utilisation rate being 63.3 per cent in the second quarter of 2020-21.
- Therefore, private investment will rise only gradually and the onus is on governments to manage their targets.
- Private investment will follow, but at a slower pace and realistically speaking, will fire more in 2022-23 rather than 2021-22.
Consider the question “Growth has to be driven by two engines- consumption and investment. India has been facing challenges on both fronts. In light of this, suggest the measures India needs to adopt to move forward on both fronts.
Conclusion
The year 2021-22 will be one of cautious optimism. Growth will trend upwards, but it has to be interpreted with caution, keeping a check on the consumption while pushing the investment while arresting the inflation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Sexual harassment at workplace
Why the Ramani judgement matters
- The verdict went beyond a mere refusal to convict Ramani for criminal defamation.
- The verdict vindicated Ramani by accepting Ramani’s truth as a defence to the charge of defamation.
- The verdict urged society to “understand that sometimes a victim may for years not speak up due to mental trauma,” and underlined that a woman has a right to speak up about the abuse, even after decades.
- It pointed out that since sexual harassment typically takes place in private, women’s testimonies cannot be dismissed as untrue or defamatory simply because they are unable to provide other witnesses to back their allegations.
- Institutional mechanisms have systemically failed to protect women or provide justice, the verdict reasoned.
- Therefore, survivors are justified in sharing their testimonies on media or social media platforms as a form of self-defence.
Right to dignity
- The Ramani verdict points out that sexual abuse violates the constitutionally recognised rights to dignity (Article 21) and equality (Articles 14 and 15), and that (a man’s) right to reputation cannot be protected at the cost of (a woman’s) right to dignity.
- The Ramani verdict is a huge moral vindication of the #MeToo movement and will serve to deter powerful men from using the defamation law to silence survivors.
Problem of institution
- Sexual harassment is a problem of institutions rather than of individuals alone.
- The world over, employers deploy sexual harassment as a means to discipline and control women workers.
- In India and Bangladesh, at least 60 per cent of garment factory workers experience harassment at work.
- In Guangzhou, China, a survey found that 70 per cent of female factory workers had been sexually harassed at work, and 15 per cent quit their jobs as a result.
- For factory workers, domestic workers, street vendors, sanitation and waste workers, construction workers, sex workers, labour laws or laws against sexual harassment exist only on paper.
Conclusion
The women who spoke were unanimous that individual complaints were not an option, they needed unions to fight collectively. Women workers fighting sexual harassment, need more support and attention.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Regulation of Big tech and challenges
Article highlights the issues with the growing dominance of social media giants and challenges involved in regulating them.
Issues to consider
1) Conflict of interest
- Many of the big tech companies were not, as they claimed, mere platforms.
- This is because they began to curate and generate their own content, creating possible conflicts of interest.
2) Monopoly power
- There is a suspicion that big tech companies were acquiring more monopoly power leading to lack of free competition.
- There is a conjunction of technology and finance here.
- The more companies were valued, the more they needed monopoly rent extraction to be able to justify those valuations.
3) Lack of accountability in algorithms
- There was an irony in an opaque algorithm being the instrument of a free, open and equitable society.
4) Mixed implications for distribution of wealth
- While the companies had immense economic impact, their distributive implications were more mixed.
- They empowered new players, but they also seem to destroy lots of businesses.
- These companies themselves became the symbol of inequality of economic and political power.
5) Lack of accountability and standards in regulating free speech
- Big tech companies set themselves up almost as a sovereign power.
- This was most evident in the way they regulated speech, posing as arbiters of permissible speech without any real accountability or consistency of standards.
- The prospect of a CEO exercising almost untrammelled authority over an elected president only served to highlight the inordinate power these companies could exercise.
6) Effects of big tech on democracy and democratisation
- The social legitimacy of California Libertarianism came from the promise of a new age of democratic empowerment.
- But as democracies became more polarised, free speech more weaponised, and the information order more manipulated, greater suspicion was going to be cast on this model.
- All democracies are grappling with this dilemma.
Big tech in Indian context
- India will justifiably worry about its own economic interests.
- India will be one of the largest bases of internet and data users in the world.
- The argument will be that this should be leveraged to create iconic Indian companies and Indian value addition.
- India can create competition and be more self-reliant in this space.
- Pushing back against big tech is not protectionism, because this pushback is to curb the unfair advantages they use to exploit an open Indian market.
- India can also justifiably point out that in China keeping out tech companies did not make much of a difference to financial flows or investment in other areas.
The real challenge
- It will be important to distinguish between regulations that are solving some real problems created due to Big tech, and regulation that is using this larger context to exercise more control.
- It will be easier to address those issues if the government showed a principled commitment to liberty, commitment to root out crony capitalism, an investment in science and technology commensurate with India’s challenges, and a general regulatory independence and credibility.
Consider the question “What are the challenges posed by the dominance of social media giants? Suggest the measures to deal with these challenges.”
Conclusion
We should not assume that just because big tech is being made to kneel, the alternative will be any better.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Making businesses recognise their carbon footprint
The article explains the global trend in investors and lendors are demanding companies to recognise their impact on environment and act on it.
Accountability on climate change: global trend
- There is a wave of investors pushing large corporations from across sectors, to recognise their carbon footprint and take affirmative action.
- Aviva, the British insurance company announced it would divest stock and bond holdings in 30 of the biggest corporate emitters of carbon, if their boards failed to take affirmative action over climate change.
- MPs in the United Kingdom called on the Bank of England to ratchet up environment standards in its pandemic stabilising, corporate bond programme.
- Swedbank AB, Sweden’s biggest mortgage bank, has taken a decision not to provide fresh loans to new oil and gas projects.
Companies realising social and environmental impacts
- Several large and growing companies, especially in Europe, are realising their social and environmental impacts and making it a boardroom agenda even without investor guns on their heads.
- Schneider Electric, the energy management and automation company, has embedded environmental, social and governance (ESG) considerations into every facet of its activities.
- The company climbed from 29th to number 1 rank in the 2021 Global 100 ranking in the Corporate Knights index of the world’s most sustainable companies.
- Only one company from India, Tech Mahindra, has made it to the world’s 100 most sustainable list.
Indian scenario
- Indian institutional lenders and investors are simply not demanding enough on sustainability.
- A majority of Indian companies are only meeting compliance norms set out by various state or city authorities.
- Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts.
Way forward
- SEBI is putting the final touches on the Business Responsibility and Environment Reporting (BRSR) guidelines.
- The new ESG reporting norm will apply to the top 1,000 listed companies on Indian exchanges.
- Under BRSR reporting guidelines, companies will have to declare their R&D spends on improving environmental and social outcomes.
- They will have to disclose energy and water consumed to turnover ratios, and the percentage of recycled or reused input materials, among many other social and governance disclosures such as CSR, employee skilling and gender diversity.
- It’s time for lending institutions and investors to align with SEBI and use their muscle to drive a deeper change.
Consider the question “Indian institutional lenders and investors are not demanding enough on sustainability from the companies. Rarely do they go beyond rule-based compliances and implement environment, social and governance or ESG goals with purpose and passion like their European counterparts. In light of this, suggest the measures to nudge the businesseses to act on their environmental responsibilities.”
Conclusion
Stepping up green standards to meet Paris Climate Agreement goals cannot be the government’s responsibility alone. Businesses must be part of the movement, or the target of containing global warming to less than 1.5 degrees of pre-industrial levels, will remain elusive.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Catalysing accountability and creative governance in local government
The article explains the innovative approach adopted by the Fifteenth Finance Commission in devolution of funds.
Steep hike in grants
- Local governments are the closest to the people at the grassroots level.
- They provide critical civic amenities such as roads, water and sanitation, and primary education and health.
- With this in view, the Fifteenth Finance Commission (FFC) has recommended grants of Rs 4,36,361 crore from the Union government to local governments for 2021-26.
- This is an increase of 52 per cent over the corresponding grant of Rs 2,87,436 crore by its predecessor for 2015-20.
Innovation in recommendations
1) Scaling of capacities in municipalities
- The Commission has recommended Rs 8,000 crore as performance-based grants for incubation of new cities and Rs 450 crore for shared municipal services.
- This is designed to foster innovations in urban governance to transform our cities with speed and scale.
- There is an urgent need for synergistically combined area-based development to spur economic growth and job creation, and decongesting through the development of satellite townships.
- Separately, the massive scaling of capacities in municipalities, particularly the 4,000-odd smaller ones, cannot be done by building capacities in each one of them, but through institutional and technological innovations, without compromising their autonomy.
- The shared municipal services model, with mobile internet, maps, platform thinking, and outsourced services all taken together, can help us fast-track the creation of municipal capacities at scale.
- This is one of the innovations in the FFC recommendations.
2) Allocation covers all three tiers of panchayats
- Of grants for all local governments with 90 per cent weightage on population and 10 per cent on area remains unchanged from the Fourteenth Finance Commission.
- For panchayats, the FFC allocations cover all the three tiers — village, block, and district — as well as the Excluded Areas in a state exempted from the purview of Part IX and Part IX-A of the Constitution.
- Funds to all three can improve functional coordination and facilitate the creation of assets collectively across smaller jurisdictions.
- This is the second new aspect of the FFC recommendations.
3) Focus on metropolitan governance
- The FFC calls for a focus on urban agglomerations (UAs) that include urban local bodies, census towns and outgrowths.
- In 2011, out of the total urban population of 377 million, 61 per cent lived in UAs.
- The FFC has emphasised the need to focus on the complex challenges of air quality, drinking water supply, sanitation, and solid waste management in the million-plus UAs and cities.
- Thus, for 2021-26, there is a Million-plus Challenge Fund of Rs 38,196 crore that can be accessed by million-plus cities only through adequate improvements in their air quality and meeting service level benchmarks for drinking water supply, sanitation, and solid waste management.
- This focus on metropolitan governance through substantive but 100 per cent outcome-based grants is the third innovation.
- For ULBs other than the million-plus category, the total grants are Rs 82,859 crore.
- The grants to local governments, both urban (less than a million category) and rural, contain a mix of basic, tied as well as performance grants.
4) Entry-level conditions
- The efficiency, smooth functioning and accountability of local bodies have been plagued by:
- (i) lack of readily accessible and timely audited accounts,
- (ii) absence of timely recommendations of State Finance Commissions and suitable actions thereon,
- (iii) inadequate mobilisation of property tax revenues (especially in ULBs).
- Finance Commissions in the past have drawn pointed attention to these issues, but with limited success.
- These entry-level conditions for availing any grants and their applicability to all local governments is the fourth innovation.
Consider the question “Examine the innovative approach adopted by the Fifteenth Finance Commission for the devolution of funds to panchayats and municipal bodies.”
Conclusion
Hopefully, over the next five years, through a partnership among the Union, states, and local governments, in the spirit of cooperative federalism, these recommendations and innovations will catalyse progress in the accountability and effectiveness of local governments in India.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Issues of the informal workforce
The article highlights the vulnerabilities of workers in the informal sector and also highlights the issues in the draft rules in the labour codes.
Context
- The budget referred to the implementation of the four labour codes.
- There is also a provision of Rs 15,700 crore for MSMEs, more than double of this year’s budget estimate.
Impact of pandemic on informal workers
- India’s estimated 450 million informal workers comprise 90 per cent of its total workforce, with 5-10 million workers added annually.
- Nearly 40 per cent of these employed with MSMEs.
- According to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75 per cent were lost in the informal sector.
- The National Human Rights Commission recorded over 2,582 cases of human rights violation as early as April 2020.
Issues with the draft rules in labour code
- The rush to clear the labour codes and form the draft rules shows little to no intent on part of the government to safeguard workers.
- The draft rules envisage wider coverage through the inclusion of informal sector and gig workers, at present the draft rules apply to manufacturing firms with over 299 workers.
- This leaves 71 per cent of manufacturing companies out of its purview.
- The draft rules mandate the registration of all workers (with Aadhaar cards) on the Shram Suvidha Portal to be able to receive any form of social security benefit.
- This would lead to Aadhaar-driven exclusion and workers will be unable to register on their own due to lack of information on the Aadhaar registration processes.
- A foreseeable challenge is updating information on the online portal at regular intervals, especially by the migrant or seasonal labour force.
- It is also unclear as to how these benefits will be applicable in the larger scheme of things.
Neglect of informal sector
- The draft rules fail to cater to the growing informal workforce in India.
- The growing informal nature of the workforce and the lack of the state’s accountability makes it a breeding ground for rising inequality.
- The workers face the risk of violations of their human and labour rights, dignity of livelihood, unsafe and unregulated working conditions and lower wages.
Consider the question “Assess the impact of covid pandemic on workers in the informal sector. Also examine the issues with the draft rules in the labour code.”
Conclusion
The Code on Social Security was envisaged as a legal protective measure for a large number of informal workers in India but unless the labour codes are made and implemented keeping in mind the realities of the informal sector workers, it will become impossible to bridge the inequality gap.
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Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 3-
The article argues for consideration of the regional variation in the conditions of farmers and their concerns in the context of recently introduced farm laws.
Argument against diversification
- In Punjab, Haryana and western UP, minimum support price (MSP)-based agriculture has a logic.
- Not all regions must diversify.
- The region has great alluvial soil, good irrigation and almost a century-long tradition of the application of science to agriculture.
- In south Punjab, with less irrigation, and parts of Haryana not covered by the Indira Gandhi Canal, some diversification to pulses, cotton etc. could work but the solid specialisation in this region remains.
Issue of middlemen
- Arhtiyas (middlemen) are important in Indian agricultural markets.
- They are a part of the supply chain in north-west India.
- Here they are not like the middlemen elsewhere.
- They function simply as agents of the procurement agencies.
- This was done by the past government to reduce overhead costs of procurement.
Steps need to be taken
- The e-markets, forwards and farmer-managed companies are not the dominant mode of rural organisations.
- Agriculture is the one good sector in otherwise dismal year.
- So, we need to strengthen it, not feed off on its glory, even outside north-west India.
- We have the largest spread of agricultural markets in the world according to spatial maps.
- But they are not APMCs.
- With weak markets (outside of grains) and without first-stage processing and other infrastructure, the farmer knows he is at the mercy of the trader and comes out on the streets when that is not understood.
Evolution of MSP
- The MSP played a crucial role in the days of compulsory procurement and zonal restrictions.
- Each crop had its own report then.
- Later separate reports were replaced by two reports, one for kharif and another one for rabi, apart from one for sugarcane (an annual crop).
- The 1982 rabi report stated that relative prices and, in that context, MSP had the role of an intervention mechanism when markets failed, outside the compulsory procurement area.
- Later, the concept of transport costs and managerial costs became important.
Way forward
- The Essential Commodities Act should be ditched.
- Good laws are good because progress starts with them, but not all laws are good everywhere.
- A modified version of the laws with a roadmap can be on the agenda — not everywhere, but most places outside the lands of the five rivers.
Conclusion
The amended laws should be considered in the context of regional variation in the country and necessary changes should be made to address the concerns of the farmers.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Finance Commission
Mains level: Paper 2- Recommendations of Fifteenth Finance Commission
The article analyses the various recommendations of the Fifteenth Finance Commission and their impact.
Unique challenges
- Many new and unique demands were placed on the 15th Finance Commission.
- The major challenge being addressing the issue of the 2011 population census evoking a sharp response from the southern states.
- Other issues include the non-lapsable defence fund and the use of certain parameters for performance incentives.
- The Commission was also required to perform the task of assessing and projecting the fiscal roadmap for the Union and state amid an uncertain domestic environment due to shortfall in the GST collection, further accentuated in the year 2020 by the global pandemic.
Key recommendations
The Commission, in its final report, recommended vertical devolution at 41 per cent, adjusting 1 per cent for the erstwhile state of Jammu and Kashmir.
1) Horizontal distribution
- For horizontal distribution, the commission has tried to harmonise the principles of expenditure needs, equity and performance.
- This is achieved by the introduction of efficiency criteria of tax and fiscal efforts and by assigning 12.5 per cent weight to demographic performance.
- Consideration of demographic performance will help in resolving the demographic debate and incentivising states in moving towards the replacement rate of population growth.
2) Principles governing grant-in-aid
- Grants are important as they are more directly targeted and equalise the standards of basic social services to some extent.
- The Commission has recommended a total grant of Rs 10,33,062 crore during 2021-26.
- Grant is broadly characterised into: (a) revenue deficit grants (b) grants for local governments (c) grants for disaster management (d) sector-specific grants and (e) state-specific grants.
- Many of these grants are linked with performance-based criteria, thereby promoting principles of transparency, accountability, and leading to better monitoring of expenditures.
- However, the Commission was asked to examine whether revenue deficit grants should be provided at all to the states.
- Some states stressed that revenue deficit grants have serious disincentives for tax efforts and prudence in expenditure and, hence, these should be discontinued.
- Fiscally stressed states of Kerala, West Bengal and Punjab are regular recipients of these grants due to high debt legacy.
3) Conditional grants to local bodies
- This Commission’s grant for local government is different from that of its predecessors for the set of entry-level conditions:
- (a) Constitution of State Finance Commissions.
- (b) Timely auditing and online availability of accounts for rural local bodies coupled with
- (c) Notifying consistent growth rate for property tax revenue for urban local bodies.
- Secondly, the recommendations are in alignment with the national programmes of Swachch Bharat Mission and Jal Jeewan Mission.
4) Incubation of new cities and urban grants
- It is for the first time that a Finance Commission has recommended Rs 8,000 crore to states for incubation of new cities, granting Rs 1,000 crore each for eight new cities.
- The focus of urban grants for million-plus cities is improvement in air quality and meeting the service level benchmark of solid waste management and sanitation.
5) Grants for health and setting up of disaster mitigation fund
- The commission recommended channelising the health grant of Rs 70,051 crore through local bodies, addressing the gaps in primary health infrastructure.
- The Commission’s recommendation for setting up the state and national level Disaster Risk Mitigation Fund (SDRMF), in line with the provisions of the Disaster Management Act, is both well-timed and necessary.
- For the first time, the Finance Commission has introduced a 10-25 per cent graded cost-sharing basis by the states for the NDRF and NDMF which has not been appreciated by the states.
6) Non-lapsable fund for defence
- The Commission has recommended setting up of a dedicated non-lapsable fund, the Modernisation Fund for Defence and Internal Security (MFDIS).
- Objective of the fund is to bridge the gap between projected budgetary requirements and budget allocation for defence and internal security and to provide greater predictability for enabling critical defence capital expenditure.
- The fund will have four specific sources: (a) Transfers from the Consolidated Fund of India, (b) disinvestment proceeds of DPSEs, (c) proceeds from the monetisation of surplus defence land and (d) proceeds of receipts from defence land likely to be transferred to state governments and for public projects in the future.
- The total indicative size of the proposed MFDIS over the period 2021-26 is Rs 2,38,354 crore.
- The Union government has accepted this recommendation in principle.
Consider the question “Examine the various principles on which the Fifteenth Finance Commission based the horizontal distribution of states share.”
Conclusion
The report starts with the famous quote of Mahatma Gandhi: “The future depends on what we do in the present”. It would be interesting to see the impact of these overarching and revolutionary recommendations in the times ahead.
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