Note4Students
From UPSC perspective, the following things are important :
Prelims level: FDI in India.
Mains level: Paper 3- Implications of growing Chinese investment in India.
This editorial discusses the implications of growing Chinese investment in India. After People’s Bank of China bought 1 per cent stake in HDFC bank, Indian government made prior government approval mandatory for investment from countries sharing border with India. Various aspects of the move are discussed here.
No separating commerce and security in dealing with China
- India’s move to prevent a predatory Chinese hunt for Indian companies comes at a time when the stock market has been badly bruised by the coronavirus.
- It underlines the emerging perception in India that there is no separating commerce and security in dealing with China.
- India’s concerns are similar to those being expressed elsewhere in the world.
- A number of European countries have already moved in that direction.
- In recent years, apprehensions have grown, in both the developing and developed world, that China is targeting their infrastructural, industrial and technological assets for control.
- But many governments were willing to give the benefit of doubt to Beijing.
- That willingness has rapidly eroded in the wake of the corona crisis that has devastated the Western world.
Taking economic advantage of other nation’s misery
- Although few world leaders want to join the US President in publicly attacking China.
- Many of them know that Beijing bears some responsibility for letting a health emergency in one of its cities become a global pandemic.
- That Chinese companies, with access to easy money and strong political support in Beijing, are now taking economic advantage of other nations’ misery has added insult to injury.
- While most leaders are preoccupied with the corona crisis, they are not likely to let Beijing have its way.
- Even in Britain, where the Boris Johnson government is now taking a second look.
- Last week, the British Foreign Secretary, said there will be no going back to “business as usual” with China.
China’s growing influence has been posing challenges for India on various fronts. Its growing footprint on India’s economy is one of such challenges. The UPSC frames question in relation to China from various angles. So, the penetration of China in India economy is also an important aspect from the Mains perspective.
Rethinking the commercial engagement with China
- Beyond the question of accountability for the spread of the coronavirus, many countries are rethinking the very nature of their commercial engagement with China.
- Gaming the system by China: On a host of issues ranging from trade and investment to intellectual property protection, there is an inescapable sense that China has gamed the global system for unilateral gains.
- India late in learning: India certainly has had a longer learning curve than the West in recognising the relationship between commerce and national security.
- Since the early 1990s, Delhi bet that expanding economic cooperation with China will help mitigate political disputes.
- But the differences have only become intractable even as China became stronger economically.
- India gave China an easy pass into the WTO.
- India’s trade deficit: It let cheap imports from China undermine India’s manufacturing sector and run up a massive trade surplus.
- India allowed massive Chinese penetration of its telecom, digital and other advanced sectors only to discover the multiple negative consequences.
- India’s new approach: The last few years have seen a new approach that has seen India oppose China’s Belt and Road Initiative and walk out of the RCEP negotiations citing the trade imbalance with China.
Conclusion
The decision on Chinese FDI can be seen as one of the piece of the puzzle India has to face on the various front. But the puzzle of dealing with a rising China’s strategic economic onslaught will test India for a long time.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- How effective is the democratic system in dealing with the pandemics like Covid-19?
The article deals with the fundamental differences between democratic states and one-party state against the backdrop of response to Covid-19. The second part of the article focuses on post-Covid-19 scenarios like changes in the supply chains and the state of the China’s economy.
Two aspects of Chine’s propaganda campaign
- China, with the lack of transparency inherent in its one-party authoritarian system, contributed to the spread of Covid-19.
- There is a desperate effort on the part of China to erase its culpability in unleashing COVID-19 across the world.
- It has sought to overcome the damaging global public opinion which it has suffered by a subsequent sustained propaganda campaign.
- This has two aspects.
- 1. Highlighting the success: One highlights the success China claims to have achieved in arresting the pandemic within the country through drastic measures on a massive scale.
- Thereby demonstrating the superiority of its authoritarian system.
- This authoritarian system is contrasted with the delayed and often less-than-effective measures taken in democratic European countries and the US in particular.
- 2. Publicity of assistance provided to other countries: The other seeks blanket publicity of much-needed medical equipment and medical teams to assist affected countries.
- The main target is Europe, though assistance to other countries is also given prominence.
- Chinese diplomats are using Twitter, Facebook and other social media platforms to create an image of a benign China providing public goods to a grateful community of beleaguered nations.
- In reporting on India, Chinese media has often highlighted the plight of migrant workers and the frequent violations of social distancing regulations.
- It is true that India has sought and received much-needed medical supplies from China.
What China would like us to believe?
- China wants us to believe that COVID-19 virus did erupt in Wuhan, but it may not have originated in China.
- That there may have been a delay in acknowledging the seriousness of the crisis, but this was due to missteps by the local leadership in Wuhan city and Hubei province.
- Once the gravity of the situation was recognised, Chinese leaders promptly informed the WHO and shared the DNA sequence of the virus with it and other countries.
- The unprecedented measures adopted by Chinese authorities bought valuable time for the rest of the world to get prepared to deal with the pandemic.
- Having achieved notable success in arresting the spread of the virus, valuable assistance is now being provided to affected countries in the spirit of solidarity.
- China’s economy is beginning to recover and this will contribute to the recovery of the global economy.
China has been highlighting its success in dealing with Covid-19 as an achievement of its single-party system. So, it is important to understand why it is not entirely true. And UPSC can frame a question like “To what extent has democratic system helped India in dealing with the corona crisis? “. Following points highlight the advantages of democracy in this regard.
Democracy Vs. One-party system
- Has China demonstrated the superiority of China’s one-party system as compared to democracies? No!
- There is no escaping the fact that COVID-19 may not have become a pandemic if China were a democracy.
- With a free flow of information through an independent media and accountable political leadership, the rest of the world would have been alerted in time.
- There are democracies which have done as well if not better than China without resorting to its sledgehammer tactics.
- Notably, there is Taiwan, which is constantly bullied by China.
- There is South Korea, which has even held parliamentary elections after having brought the pandemic under control.
- Even in India, the government is providing daily updates on the spread of the virus.
- Conclusion: The bottom line is that as a result of being a democracy, we have a better chance of knowing the true dimensions of the crisis.
- With the democracy we have a better chance of being able to obtain constant feedback on people’s reactions and access the best advice from multiple sources.
China’s assistance and resentment against it
- One must acknowledge China’s assistance to affected countries despite reports of defective and low-quality materials.
- But recipients have often been “persuaded” to express fulsome praise for China.
- This accompanying publicity overdrive has caused resentment rather than gratitude
- Then there have been reports from Guangzhou on racial discrimination against stranded African students.
- This has led to a sharp reaction from African countries.
- This will be difficult to live down.
The revival of China’s economy
- There is no doubt that economic activity in China is beginning to revive after a steep drop of 6.8 per cent (year on year) in GDP during the first quarter of 2020.
- Latest estimates are that the Chinese economy is now functioning at about 80 per cent of the level last year, which is impressive.
- Less dependence on export: China’s economy is not as export-dependent as it has been in the past.
- Exports were 5 per cent of GDP in 2018 against 32.6 per cent in 2008.
- But the external economic environment is critical for China’s globalised economy.
- It is a significant node in the most important regional and global supply chains.
Changes in supply chains in the future and opportunity for India
- China’s position as a significant node will be impacted by countries re-shoring production or opting for shorter and closer-to-home supply chains.
- Japan will spend $2.2 billion to assist Japanese companies to shift units from China back to Japan or relocate to South East Asia.
- In 2012, when China-Japan tensions were at a peak, there was a similar move and India was seen as an alternative.
- But that opportunity was lost. Perhaps India has a second chance.
- Decoupling from the US economy: China will suffer from accelerated “decoupling” from the US economy with COVID-19 sharpening the already fraught bilateral relations.
- In a sense, China was already decoupled from the US by denying entry to US tech giants, Google, Facebook, Microsoft and Amazon.
- This even while its own tech multinationals like Huawei and Alibaba have built markets in the West.
- This cannot be sustained.
- The winners in the more digital world which will emerge post-COVID-19 will be the American tech giants, even though the US is politically dysfunctional.
- Democracies sometimes win even if their politics is frustrating.
Conclusion
Rather than express envy of Chinese authoritarianism, Indians should be thankful that we are a democracy. We need more democracy, not less, to overcome the COVID-19 challenge. India should also be ready to grab the opportunities in the post-Covid-19 era in the economic realms.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Social democracy.
Mains level: Paper 2- What were the factors that helped Kerala deal most effectively with the Covid-19 pandemic?
This article is an analysis of Kerala’s success in dealing with the Covid-19. Factors that emerge are-strong emphasis on the social democracy, the participation of civil society and strong social compact between the government and citizenry. We have also covered the same subject in a previous article but focus there was more on the administrative level.
Kerala’s success story
- Kerala was the first State with a recorded case of coronavirus and once led the country in active cases.
- It now ranks 10th of all States and the total number of active cases (in a State that has done the most aggressive testing in India) has been declining for over a week and is now below the number of recovered cases.
- Given Kerala’s population density, deep connections to the global economy and the high international mobility of its citizens, it was primed to be a hotspot.
- Yet not only has the State flattened the curve but it also rolled out a comprehensive ₹20,000 crore economic package before the Centre even declared the lockdown.
Why does Kerala stand out in India and internationally?
- Kerala’s much-heralded success in social development has invited endless theories of its cultural, historical or geographical exceptionalism.
- But taming a pandemic and rapidly building out a massive and tailored safety net is fundamentally about the relation of the state to its citizens.
- From its first Assembly election in 1957, through alternating coalitions of Communist and Congress-led governments, iterated cycles of social mobilisation and state responses have forged what is in effect a robust social democracy.
- The current crisis underscores the comparative advantages of social democracy.
Kerala’s success is built on social democracy in the state. Following are the factors that constitute the social democracy in the state which is helping it fight against the Covid-19 pandemic with considerable success. These factors are also important from the Mains point of view if the question is framed on Kerala’s success story.
How social democracy is practised in Kerala?
- Social democracies are built on an encompassing social pact with a political commitment to providing basic welfare and broad-based opportunity to all citizens.
- In Kerala, the social pact itself emerged from recurrent episodes of popular mobilisation.
- Popular mobilisations include the temple entry movement of the 1930s to the most recent various gender and environmental movements.
- These movements nurtured a strong sense of social citizenship.
- These movements also drove reforms that have incrementally strengthened the legal and institutional capacity for public action.
- Second, the emphasis on rights-based welfare has been driven by and in turn has reinforced a vibrant, organised civil society.
- This civil society demands continuous accountability from front-line state actors.
- Third, this constant demand-side pressure of a highly mobilised civil society and a competitive party system has pressured all governments in Kerala.
- The pressure made governments to deliver public services and to constantly expand the social safety net, in particular a public health system that is the best in India.
- Fourth, that pressure has also fuelled Kerala’s push over the last two decades to empower local government.
- Nowhere in India are local governments as resourced and as capable as in Kerala.
- Finally, all of this ties into the greatest asset of any deep democracy, that is the generalised trust that comes from a State that has a wide and deep institutional surface area.
- That on balance treats people not as subjects or clients, but as rights-bearing citizens.
How the built-in social democracy is helping in dealing with the pandemic?
- A government’s capacity to respond to a cascading crisis such as the COVID-19 pandemic relies on a very fragile chain of –(1)mobilising financial and societal resources, (2)getting state actors to fulfil directives, (3)coordinating across multiple authorities and jurisdictions and maybe, most importantly, (4)getting citizens to comply.
- First, an effective response begins with programmatic decision-making.
- From the moment of the first reported case in Kerala, Chief Minister convened a State response team that coordinated 18 different functional teams.
- The CM held daily press conferences and communicated constantly with the public.
- Kerala’s social compact demanded no less.
- Second, the government was able to leverage a broad and dense health-care system.
- The health-care system, despite the recent growth of private health services, has maintained a robust public presence.
- Kerala’s public health-care workers are also of course highly unionised and organised, and from the outset the government lay emphasis on protecting the health of first responders.
- Third, the government activated an already highly mobilised civil society.
- As the cases multiplied, the government called on two lakh volunteers to go door to door, identifying those at risk and those in need.
- A State embedded in civil society — the women’s empowerment Kudumbasree movement being a case in point.
- Kudumbasree movement was in a good position to co-produce effective interventions, from organising contact tracing to delivering three lakh meals a day through Kudumbasree community kitchens.
- Fourth, you can get the politics right and you can have a great public health-care system, but its effectiveness in a crisis like this will only be as good as the infamous last kilometre.
- And this is where two decades of empowering local governments have clearly paid off.
Conclusion
At a time when India is dealing with this unprecedented crisis, it is important to be reminded that Kerala has managed the crisis with the most resolve, the most compassion and the best results of any large State in India. And that it has done so precisely by building on legacies of egalitarianism, social rights and public trust. Other states and the Central government must learn from Kerala’s experience.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Anti-defection law.
Mains level: Paper 2- What are the solution to the issue of bypassing of the anti-defection law by the political parties?
The article discusses the recent event in Madhya Pradesh where a group of legislature resigned bringing down the government. A most important issue arising out such incidents is circumventing of the laws made to avoid such things from happening. Several such issues along with their solutions are described here.
New method to bypass the anti-defection law
- The political activities in Madhya Pradesh represent a new method of bypassing the anti-defection law and toppling elected governments.
- The government in Karnataka was brought down in July last year in a similar manner with 17 MLAs of the ruling coalition resigning and joining the BJP.
- What method was used? Under this novel method, a set of legislators of the party in power is made to resign from the Assembly to reduce the total strength of the House enough for the opposition party to cross the halfway mark to form the government.
- In the ensuing by-elections, the members who resigned were then fielded as ruling party candidates (most of whom have been re-elected in the case of Karnataka).
- The same practice is likely to be repeated in Madhya Pradesh soon.
A question based on anti-defection law and its implication for healthy debate in the parliament was asked in 2013. And that issues still persist. So, take note of these issues.
Exploiting the loophole in the Tenth Schedule
- This method of mass defection circumvents the provisions of the Tenth Schedule of the Constitution (better known as the anti-defection law)
- What is the Tenth Schedule? The tenth schedule prescribes the grounds for disqualification of legislators: voluntarily giving up party membership and voting or abstaining to vote against party directions.
- Resignation is not mentioned as a ground for disqualification.
- However, the Speaker in Karnataka disqualified them for the rest of the Assembly’s term, thereby barring them from contesting the by-polls.
- While the Supreme Court upheld the disqualification.
- It stuck down the bar from contesting by-polls.
- In Madhya Pradesh, since the Speaker has accepted the resignation of the MLAs, the defectors can in any case contest the by-polls.
Damaging the underpinnings of democracy
- The recurrence of this model of defection signals the exploitation of the inherent weaknesses of the anti-defection law.
- While solo legislators jumping ship might have reduced now, “horse-trading” seems to have gone from retail to wholesale.
- This threatens the underpinnings of India’s electoral democracy since such surreptitious capture of power essentially betrays the people’s mandate in a general election.
Kihoto case is an important case in relation to the anti-defection law.
Time to reframe the anti-defection law
- In this context, it is important to examine whether the anti-defection law fulfils any purpose.
- This law raises fundamental concerns regarding the role of a legislator in a parliamentary democracy.
- Issues with the law: It denies the legislator the right to take a principled position on a policy matter and reduces her to an involuntary supporter of the whims of party bosses.
- Challenge to the constitutionality: The constitutionality of the Tenth Schedule was challenged for violating the Basic Structure of Constitution with regard to parliamentary democracy and free speech.
- Judicial review of the Speaker’s decision: The Supreme Court in Kihoto Hollohan v. Zachillhu (1992) in a 3-2 verdict upheld the law while reserving the right of judicial review of the Speaker’s decision.
What are the shortcomings in the anti-defection law?
- Restriction on the freedom of legislator: The anti-defection law, on the one hand, severely restricts the freedom of a legislator and makes her a slave of party whips.
- Failure in preventing the horse-trading: On the other hand, it has not been able to meet its primary objective of preventing horse-trading and continues to be circumvented to bring down elected governments.
- This calls for reforms that address concerns at both ends of the spectrum.
Following two are the solutions offered here. They are important from Mains point of view. As solutions are often asked for the pressing issues.
Dinesh Goswami Committee and other suggestion
- Restrict the scope of the binding whip: For addressing the first issue, as the Dinesh Goswami Committee also suggested, the scope of the binding whip should be restricted to a vote of confidence.
- For addressing the second issue, it is best to institutionalise the Karnataka Speaker’s decision to bar the defected members from contesting in the ensuing by-poll, if not for a longer period.
- This will disincentivise MLAs from jumping ship.
- These reforms would require a constitutional amendment to the Tenth Schedule, an uphill task under the current circumstances.
Conclusion
We are facing a deeper challenge of the corrosion of India’s parliamentary system, for even in jurisdictions without such anti-defection laws, we do not see “horse-trading” and “resort politics”. Hence, beyond institutional fixes, we also need a popular articulation of an ethical politics that causes the public to shun such political manoeuvres.
Back2Basic: What is the Tenth Schedule?
- The Tenth Schedule was inserted in the Constitution in 1985.
- It lays down the process by which legislators may be disqualified on grounds of defection by the Presiding Officer of a legislature based on a petition by any other member of the House.
- A legislator is deemed to have defected if he either voluntarily gives up the membership of his party or disobeys the directives of the party leadership on a vote.
- This implies that a legislator defying (abstaining or voting against) the party whip on any issue can lose his membership of the House.
- The law applies to both Parliament and state assemblies.
- Exceptions under the law: Legislators may change their party without the risk of disqualification in certain circumstances.
- The law allows a party to merge with or into another party provided that at least two-thirds of its legislators are in favour of the merger.
- In such a scenario, neither the members who decide to merge nor the ones who stay with the original party will face disqualification.
- Is there any time limit to decide on the matter? The law does not specify a time period for the Presiding Officer to decide on a disqualification plea.
- Given that courts can intervene only after the Presiding Officer has decided on the matter, the petitioner seeking disqualification has no option but to wait for this decision to be made.
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From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- What are the factors that helped Kerala deal with Covid-19 successfully compared to the rest of the country?
With figures emerging of Kerala’s success in dealing with the Covid-19, the rest of the nation has lessons to learn from it. This article describes the approach adopted by Kerala, and how various factors like robust health infrastructure, past experience etc. are helping it.
Kerala stands out in India: some figures and facts
- The COVID curve in Kerala is flattening.
- Every day, for a week now, the number of recoveries has exceeded the number of new infections.
- The recovery rate in Kerala is nearly 50 per cent while the all-India average is around 11.
- While the mortality rate among the infected is 5 per cent in Kerala, the all-India average is 3.4 per cent.
- The transmission rate of a primary carrier is 6 while in Kerala it is only 0.4.
With Covid-19, we are in unknown territory in many ways. If Kerala emerges as the success model, the question can be framed from that perspective. So, note down the factors described below that are helping the state in tackling Covid-19 successfully.
Preparing for the next challenge
- Kerala is preparing for the next challenge, the outcome of which will determine the result of the war against COVID.
- Lifting of the lockdown is going to result in an influx of returning migrants from foreign countries and other states.
- Hundreds of thousands would have to be quarantined, tested and, if positive, treated, ensuring there is no secondary spread.
- State authorities have already identified accommodation and other facilities for more than two lakh persons.
- Use of big data analytics: The state is also exploring the possibility of big data analytics to plan a strategy and, if necessary, for reverse quarantining.
- Authorities have access to WHO data covering nearly two-thirds of the state`s population.
- Integrating this data with the information currently being generated, we will be able to map vulnerable sections of the population, simulate scenarios and plan ahead.
- Exit strategy: An exit strategy from the lockdown is being prepared to protect livelihoods and stimulate the economy.
Strength of the public health system of Kerala
- The single most important factor that enabled Kerala to be prepared for the COVID is the strength of the public health system.
- Kerala’s health system is a proud legacy of our past.
- It has had a big push in infrastructure and equipment investment of around Rs 4,000 crore from the Kerala Infrastructure Investment Fund Board.
- Five thousand seven hundred and seventy-five new posts have also been created.
- The Aardram Health Mission was launched with a focus to transform the PHCs into family health centres.
- Distinctive feature: There is also the distinctive flavour of Kerala — mass participation in preventive and palliative healthcare.
- Training to health workers: The morale of health personnel has been exceptionally high.
- Special training, protective gear, scientific duty rotation and, most importantly, societal empathy and solidarity, have all contributed.
Learning from the past experience
- Nipah outbreak experience: The recent experiences of successful containment of the Nipah outbreak and management of the two post-flood health situations have provided a kind of herd immunity to the health workers to crisis situations.
- Covid-19 preparedness: Once news of the Wuhan pandemic came, the Kerala health system scrambled to readiness — the control room was set up, mock drills were organised and the first influx was contained.
- Once migrants from the Gulf and Europe began to return, things began to get out of hand.
- But now this battle has been successfully concluded.
Testing and tracing in Kerala
- A route map of each COVID positive case is prepared and given publicity, alerting everybody who might have been in contact.
- The protocol of cycles of intense test, trace, isolate and treatment has been the norm.
- Kerala has the highest test rate in the country.
- Break the Chain Campaign to promote social distancing has been successful.
- Lockdown by itself is not going to contain the COVID spread. It would continue to multiply within households and dormitories.
- Testing has been woefully insufficient in the national response so far.
Welfare payment in Kerala more than the rest of the country
- In Kerala, 55 lakh elderly and disadvantaged have received Rs 8,500 as welfare payments.
- An equal number of workers have been paid Rs 1,000-3,000 each from the welfare funds.
- Every family has been provided with a food kit.
- Interest-free consumption loan of Rs 2,000 crore has been distributed.
- Besides, nearly 4 lakh meals are distributed every day to the needy from community kitchens set up by local governments.
- Local governments are also duty-bound to monitor the camps of migrant workers, set up new ones and ensure medicine and food to them.
Decentralisation paying off in Kerala
- All the above was not made possible by the state government alone.
- It is the synergy generated by integrating state government plans and programmes with the local governments, the co-operatives, women neighbourhood groups (Kudumbashree) and civil society organisations that make Kerala distinct.
- The floods and the pandemic have given testimony for the potential of democratic decentralisation.
- It is a case of multi-level planning with technical committees and groups working at the state level coordinated by the chief minister.
Conclusion
Though it is too early to declare Kerala as a success story, still there are many lessons to be learned by the rest of the country in its fight against Covid-19.
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From UPSC perspective, the following things are important :
Prelims level: IBC, difference between operational and financial creditor, threshold limit to file insolvency case etc.
Mains level: Paper 3- Purpose and issues with IBC, its various provisions and changes that needs to be made in the wake of Covid-19.
This article argues the suspension of IBC for six months. The issues arising out of suspension like damage to the creditors are also dealt with here. Reading of this article will help us understand the finer details of IBC that are relevant from the UPSC point of view. We have also covered one article from livemint dealing with the same issue, but that article covered the issue in a broader sense.
Who are operational and financial creditors?
- After the lockdown is over, several companies are likely to default on their dues to both operational and financial creditors.
- Who is a financial creditor? The financial creditors include banks and others who have given financial assistance to a company in the form of loans and debentures.
- According to a 2018 amendment to the Insolvency and Bankruptcy Code (IBC) 2017, flat purchasers are also deemed as financial creditors.
- An operational creditor is just about anyone who has to receive money from a company.
- The IBC provides a fast-track mechanism to deal with companies which are unable to repay their creditors and have become financially unviable.
- Section 22 of the Code mandates the appointment of a Resolution Professional (RP) who is expected to miraculously turn around the company in 330 days.
- If this attempt fails, the company goes into liquidation.
The two types of creditors were in the news, so pay attention to these terms.
Increase in threshold limit to file an insolvency petition
- The IBC’s provisions have been extensively used by various creditors whose dues were not paid.
- What was the threshold limit? Initially, the threshold limit was just Rs 1 lakh and the IBC became an effective recovery mechanism for all operational creditors.
- What is the limit now? Just before the lockdown, the finance minister raised the threshold for invoking the insolvency provisions to Rs 1 crore.
- This limit was raised to prevent proceedings being initiated against small and medium enterprises.
Possibility of the domino effect after the lockdown is over
- After the lockdown, several enterprises, large, medium and small, might not be able to pay their dues, at least in the short-term.
- The easiest way for a creditor to recover money is to initiate insolvency proceedings against the debtor company and threaten it with liquidation.
- The shutdown of business after the lockdown could have a domino effect.
- How would the domino effect come into play? If an auto-manufacturer has shut down its operations, the ancillary units will not get their dues.
- This would then lead to non-payment to downstream vendors and service providers as well.
- It might take at least three to four months for the situation to stabilise.
Steps that should be taken to avoid the domino effect
- Moratorium on the IBC: The most important, and immediate, step that needs to be taken is to have a six-month moratorium on the IBC.
- It may be necessary to promulgate an ordinance suspending the prospective operation of Sections 7 and 9 of the IBC so that no fresh petition is filed against a company.
- Impact on creditors: While this could hurt some of the creditors, the damage that could be done to the corporate sector by invoking the IBC is likely to be far greater.
- A distressed creditor is not without a remedy as he can always approach the civil courts for relief, which will not be so severe on a defaulting company.
- If an insolvency petition is filed and the RP appointed, it is difficult to stop the insolvency process.
- The IBC requires a financially-stressed company to be taken over by a financially-sound
- For example, Essar Steel was taken over by ArcelorMittal and Bhushan Steel was taken over by Tata Steel.
- In the current scenario, it will be difficult, if not impossible, for an RP to find a suitable buyer and the only option would be to liquidate the company.
- Using the insolvency process to recover dues is contrary to the IBC’s objectives.
The objective of the IBC is not just insolvency but the reorganisation of companies, maximisation of value of assets and the need to balance the interests of all stakeholders. Pay attention to this point.
How the suspension of the IBC will be beneficial?
- Suspending the IBC for a short period would enable several companies to return to normalcy.
- It will help them function without the constant threat of an insolvency application and its Board of Directors and management being taken over by the RP.
- Moreover, the National Company Law Tribunal benches will simply be unable to take any additional workload.
Conclusion
Suspending the IBC for six months would be a much-needed step to prevent further damage to the economy. It would be in the larger public interest. Indeed, at this critical stage, permitting the legal remedy of insolvency could be the last nail in the coffin of many companies.
Back2Basics: What is the Insolvency and Bankruptcy Code?
- IBC provides for a time-bound process to resolve insolvency.
- When a default in repayment occurs, creditors gain control over debtor’s assets and must take decisions to resolve insolvency.
- Under IBC debtor and creditor both can start ‘recovery’ proceedings against each other.
- Insolvency and Bankruptcy Code 2016 was implemented through an act of Parliament.
- It got Presidential assent in May 2016.
- The law was necessitated due to huge pile-up of non-performing loans of banks and delay in debt resolution.
- Insolvency resolution in India took 4.3 years on an average against other countries such as United Kingdom (1 year) and United States of America (1.5 years), which is sought to be reduced besides facilitating the resolution of big-ticket loan accounts.
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From UPSC perspective, the following things are important :
Prelims level: WHO.
Mains level: Paper 2- How failure of WHO to alert the world in time of Covid-19 pandemic matters for India?
The article elaborates on the role played by China in manipulating WHO to its advantage and to the detriment of the rest of the world. India must take cognisance of the growing Chinese influence at various global platforms and act accordingly.
China’s role in electing Director-General of WHO
- Tedros was Ethiopia’s Minister of Health (2005—2012) and Minister of Foreign Affairs (2012 to 2016).
- In 2017, China catapulted him to lead the WHO as its Director General (DG).
- India, the world’s largest democracy, played second fiddle.
- We will never know who gamed India inside and abroad, but tough questions must be asked.
Pandemic as a wake-up call for India
- Public health is a rights-driven developmental track for any country, especially for India.
- The ministries of foreign, trade, information and broadcasting, home, finance, women and child development, law, infrastructure and industry, among others, should be part of the country’s health equation and decision-making on a daily basis.
- Should the WHO be sitting in on high-level health ministry discussions given what we now know about its allegiance to all things Chinese?
- China, an economic and military behemoth, now seeks the same power in public health.
- India, with its double burden of disease and an uncritical alignment with the WHO, is fertile ground for data and dollars.
Dependence on China for API
- For now, India, like most countries, is at China’s mercy because of years of short-sightedness and corruption in the health sector.
- While it is hailed as the pharmacy of the world and has sent drugs as humanitarian assistance, India relies heavily on raw materials from China.
- Quick thinking and swift action can reverse this.
The above points highlight the implications of Chinese dominance for India. Questions related to China is a recurrent theme in the UPSC papers. Next thing to note here is India’s dependence on China for APIs.
The US’s stand on WHO funding
- Some are blaming US President Donald Trump for contemplating cutting off funding for the WHO and not Tedros, for taking orders from China about the pandemic.
- The war is not between an American President and Tedros.
- It is between Tedros, a global public health head, and his subservience to China.
- That ship of trust, the cornerstone of public health work that the WHO should have been leading, has long set sail.
- Protecting Tedros is important as the WHO needs money to help poor countries with weak health systems.
Last year, UPSC asked about UNESCO when the US and Israel withdrew from it. This year, WHO has been in focus for allegedly towing China’s line.
Issue of funding and spending by the WHO
- War chests are being mobilised to help the WHO help China disburse aid and assistance to dying people and gasping economies.
- The recent announcement by the World Bank to fast track $1.9 billion for health systems to respond to Covid-19 also includes Ethiopia.
- For the first time in its history, the WHO has opened its doors to private funding via a Solidarity fund and China is expected to keep an eye on this.
- To keep track of how the money is spent is a problem.
Conclusion
India must decide if it wants to blindly follow the blind or lead by bringing the WHO back to its original promise. At stake is the country’s economic security of which public health is a key component. India can either be a part of history or pick up the pen even in these times of distress and rewrite it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- The dominance of private health sector in India makes partnership with it a must to deal effectively with any pandemic.
The article delineates five areas in which partnership with the private sector is essential to deal effectively with the epidemic and ensure a whole-of-society response. Ensuring the participation of the private sector has been the recurring theme of many op-eds we have come across after the outbreak.
Significance of private healthcare in India
- According to the WHO, a critical lesson from the 2014-16 West African Ebola epidemic was that both the public and private sector need to work in tandem in responding to large-scale epidemics.
- In the COVID-19 response in India, the private sector has to play an even more important role, as it is the dominant provider of health services in the country.
- The private sector includes the for-profit and not-for-profit segments.
- The dominance of the private sector in India: The NSSO 71st round data on social consumption of health show that private hospitals, clinics and nursing homes provide over 70 per cent of healthcare.
- Data on the nearly 1 crore treatments received under the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB PM-JAY) corroborate this finding.
- AB PM-JAY data shows that over half of all treatments are being availed of from private providers, accounting for over 60 per cent of total disbursements.
UPSC asked about community-level healthcare intervention in 2018. So, pay attention to the significant role played by the private health sector in India.
Following five are the areas in which cooperation with the private sector will be essential-
1 Testing
- Creating a large and accessible testing infrastructure is the first weapon in the armoury.
- Countries like South Korea, Singapore, Germany and Japan have been successful at controlling the spread of COVDID-19 and reducing mortality through early detection and quick containment.
- This has been possible only through widespread testing.
- India has opened testing up to private labs.
- Testing has been included under the AB PM-JAY as well.
- We need to substantially expand testing capacity.
- This cannot happen without the active participation of the private sector.
2 Converting private hospitals into Covid-19-only hospitals
- As the government deepens its containment efforts, the country will need to rapidly surge the numbers of quarantine units, isolation wards and ICU beds in COVID-19-only
- It will also need to ensure increased and continued supply of essential medical products — from testing kits, masks and other PPEs to oxygen and ventilators.
- According to a recent ICMR study, around five per cent of those infected will need intensive care and half of those in intensive care units will need mechanical ventilation.
- These projections translate into large numbers that considerably exceed the capacity of the government health system.
- Private hospitals with adequate infrastructure will need to convert in COVID-19-only hospitals.
- There should be a clear policy framework of designated hospitals, reporting and referral systems and an appropriate payment system.
- With many government facilities being converted into COVID-19-only hospitals, a large number of non-COVID-19 patients will need facilities and providers to take care of their other urgent, critical or continuing healthcare needs.
- The AB PM-JAY has started a process to bring on board more hospitals to respond to such needs.
3 Protecting healthcare workers
- As more private providers join this fight, a major concern that will arise is keeping healthcare workers from becoming infected.
- In addition to being at a high risk of contracting the virus, healthcare workers are also potential carriers.
- Ensuring their protection is of paramount importance.
- Increasing the production: Companies manufacturing essential medical products such as ventilators, masks will need to crank up their production.
- Direct support from banks may be needed to keep production and supply chains going.
4 The private sector has to support the ecosystem driving health system
- The private sector will need to vigorously support the large ecosystem that drives the health system as the lockdown and ongoing epidemic restrict movement and normal economic activities.
- Activities such as the production of essential drugs and medical products, logistics to maintain smooth supply need to not only continue but also accelerate.
- Support for community activities such as night shelters and community kitchens will need to be strengthened.
5 Collaborate to share knowledge on the epidemic
- An adequate stage-wise response to the pandemic and its economic, social and political aftermath will require the rapid filling of the many knowledge gaps.
- Government, private and not-for-profit research institutions need to collaborate to understand the nature of transmission of the virus.
- They must understand the factors that slow its spread, the most at-risk communities, or the optimal quarantine period.
In 2015, UPSC asked whether the private health sector could help bridge the gap in providing universal health coverage. A question can be asked based on the same theme but in reference to dealing with the pandemic.
Conclusion
The fight against COVID-19 is not a race to a hilltop. It involves the continuous management of an evolving public health crisis that threatens to spawn economic and social crises. These multiple dimensions will require a whole-of-society approach that goes beyond the government alone.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Need for the stimulus and relief package to in the wake of Covid-19 and issues involved in its size.
D. Subbarao in this article discusses how the government is facing the hard choice of choosing between saving lives and saving the economy. On the government’s response on economic front he argues that the government, unlike the rich countries should keep an upper limit on its spending because of the dangers involved in unrestricted spending.
Why the dilemma is sharpest for India?
- This dilemma is arguably the sharpest for India.
- Because of our high population density and poor medical infrastructure, any laxity in prevention can result in a huge health disaster.
- On the other hand, an extended lockdown will force millions into the margins of subsistence, push small and large firms alike into bankruptcy, seriously impair financial stability and land us in a humanitarian and economic disaster.
Why is the relief package criticised as too little?
- After the lockdown, the government announced a relief package amounting to 0.8 per cent of GDP, that’s been criticised as being too little.
- From a study of a sample of countries, the latest issue of The Economist reports that India’s lockdown has been the most stringent while its fiscal relief package is the smallest in proportion to GDP.
What could be the reasons for a cautious approach in the relief package?
- A possible explanation for the government’s timid fiscal response may be the fear of spooking the market.
- For years, every economist and analyst has been warning the government of the dire consequences of fiscal irresponsibility.
- And that warning message must have been so hardwired into the government’s collective mind that it was unable to get over the mental overhang.
We should be aware of the reasons from the macroeconomic point of view that force the government to limit its fiscal deficit. In this case, India government is exercising the caution owing to the same constraints.
Uncertainties in the crisis
- Uncertainty is a defining feature of every crisis.
- During the global financial crisis, a big uncertainty around the world was about how much risk there was in the system, where it lay and who was bearing it.
- The uncertainty of the corona crisis is much deeper.
- There are far too many known unknowns not to speak of unknown unknowns.
- Uncertainties in corona crisis: We just don’t know enough about the effectiveness of the lockdowns, the age and gender profile of susceptibility to the virus.
- We also don’t know about the process of recovery, the tipping point if any for mass immunity, whether the virus will attack in waves.
- And most importantly, when we might have a vaccine and a cure.
- Governments are, for the large part, having to fly blind.
Issues over relief and stimulus package
- There are many issues to be decided and planned on the way forward.
- A big issue will be an expenditure plan for relief during the crisis and stimulus after some normalcy is restored.
- Borrow more spend more: Even the most ardent fiscal hawks are now agreed that the government needs to abandon its fiscal reticence, and borrow more and spend more.
- Even the most extreme monetary purists are agreed that the RBI should fund the government borrowing by printing money.
- Even the staunchest advocates of financial stability are agreed that more regulatory forbearance is necessary.
- And virtually everyone is agreed on where additional spending should be directed.
Debate on how much additionally the government should borrow
- There is disagreement on how much additionally the government should borrow.
- There are two opposing views in this regard, which are discussed below.
- 1. Fiscal risk without preset fiscal deficit: One view is that the government should err on the side of taking a fiscal risk without any preset fiscal deficit number.
- It should simply determine what needs to be done and borrow to that extent, acting as if there were no fiscal constraint at all.
- In other words, act as per the diktat of the now famous three words — “whatever it takes”.
- 2. Set a limit: An opposing view is “whatever it takes” is not an option for India.
- Many analysts have estimated that just the loss of revenue due to the economic shutdown will take the combined fiscal deficit of the Centre and states beyond 10 per cent of GDP.
- The borrow and spend programme will be in addition to the above loss.
- Unlike rich countries, we can’t afford to ignore the risks of fiscal excess of that magnitude, no matter the compelling circumstances.
- What are the risks involved? There will be a heavy price to pay down the road by way of inflation and exchange rate volatility.
From the UPSC point of view you must pay attention to the both the arguments made here, question can be asked in UPSC based on the suggestions and their pros and cons. Both the arguments cited above have their merits and demerits.
Way forward
- It’s important to keep in mind that we have resources and capability in the near future should there be another wave of the virus later in the year.
- It will be advisable for the government to fix an upper bound for fiscal deficit and operate within that. For now, the borrow and spend programme should be restricted to 2 per cent of GDP.
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From UPSC perspective, the following things are important :
Prelims level: Aarogya Setu App.
Mains level: Paper 3- Using technology for tackling the Covid-19.
The article argues for the greater adoption of technology in tracing the Covid-19. Taking a cue from the success of JAM and UPI, recently launched app Aarogya Setu could also be the next game-changer in the fight against the pandemic. However, there are several challenges that are also discussed here.
Success story of domestic digital platforms
- The success of two domestic digital payment platforms offers us an opportunity to show how the tracing of COVID-19 cases can be done at scale and with greater speed.
- The JAM (Jan Dhan-Aadhaar-Mobile) trinity for DBTs (Direct Benefit Transfers) and UPI (Unified Payments Interface) have made India a technology leader in money transfers.
- The JAM has lent efficiency to the transfer of funds to the needy.
- It was drafted into action recently to channel payments to the more vulnerable who need help in dealing with the adverse economic consequences of the lockdown.
- The UPI is emerging as a transaction vehicle of choice for all retail payments.
- In March, 148 banks were on the UPI platform, helping process over 120 crore transactions worth over Rs 2 lakh crore.
The success story of the UPI and JAM is important from the UPSC point of view. Riding on the success of these two, the Aarogya Setu could also become the third and help in the fight against the epidemic. So, we should be aware of the basics of its working and problems the app could face.
How the Aarogya Setu works?
- Widespread adoption is required: The success of India’s Aarogya Setu mobile application will depend on its widespread adoption.
- Based on bluetooth technology: The app relies on bluetooth technology to map and deconstruct the contact history of individuals who may have come in contact with potential carriers of the coronavirus.
- Exchange of information between apps: If two individuals are at the same place at the same time, their apps can exchange information-up to a maximum distance of about 15 feet.
- Exchange of the above information is without the server knowing anything about it.
- The app notifies users and authorities of individuals who are at risk.
- Privacy safeguards: Some privacy safeguards have been put in place to ensure that individuals do not share personally identifiable information with each other but only with authorities — that too, in select cases.
- A confidence-building measure would be to release the code for public scrutiny with the aim of further bolstering privacy standards.
What are the possible challenges in the success of Aarogya Setu?
- The distribution of the detection framework necessitates a rethink, beyond an app.
- Issues with app download in India: Nandan Nilekani has underlined that app downloads in India are perhaps the most expensive compared to any other developed or fast-developing nation.
- Despite the falling cost of data, Indian users consider several factors before downloading an app such as required storage space, the potential impact on battery and data usage.
- Given India’s open internet, several publishers from across industries and geographies are vying for smartphone real estate.
- Challenge involved: In such a situation, drawing attention to particular use-cases i.e. Aarogya Setu-howsoever urgent-is challenging.
Following are the suggestions to overcome the shortcoming of the Aarogya Setu. Though they are for Aarogya Setu, we can apply these in other situations in which mobile technology bases app is used by the government in the larger public interest such as rescue operation or warnings in case of disaster.
So, what could be the alternate strategy?
- The alternative strategy involves using the reach of the other famous apps (for ex. Paytm) to do what we want to do i.e. tracing by delinking.
- Delinking involves separating the technology we want to use for tracing (the backend) from the channels (the front end).
- A fine-tuned backend can be pushed to, and used by, publishers (other apps) who already have the reach.
- Similarity with UPI: This is akin to the UPI being used by several banks and technology firms for payment.
- The government did build its frontend in the form of the BHIM (Bharat Interface for Money) app but mostly for signalling purposes.
- In the current context, the government can consider using its own app for tracing and for additional use-cases such as passes and approvals for movement when the lockdown is gradually eased out.
- It could even host other health-related features.
- Expanding its ambit and making it a conduit like JAM will likely increase the incentive for people to embrace it.
Limitations of using GPS and Bluetooth for tracing in India
- Another area where improvisations are called for is the tooling for tracking.
- While reports have indicated that the developers are using bluetooth for tracing and are also capturing GPS coordinates, both users and device manufacturers limit their usage of these technologies in favour of other optimisations.
- Users are concerned with both data and battery usage while device manufacturers kill background jobs even if the publishers have sought and secured permissions from users.
- These tendencies are pronounced on Android, the dominant mobile operating system in India.
- What are the other options? In such a scenario, developers ought to think about using other techniques.
- For instance, using cell tower data and WiFi identifiers to bolster tracing efforts.
- This is especially important in a context where only a third of our population has smartphones and even fewer people have devices with bluetooth capability.
- Even the recently announced Google-Apple partnership may not have meaningful results in this setting.
Conclusion
With the potential ramifications of COVID-19’s spread in India and across the globe, the nation’s recent history of technological successes and a government committed to agile governance, the pandemic presents an opportunity for the country to show its people and the world how technology is a force of good.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 1- Closing the the gap between urban and rural in India using knowledge-eratechnology.
This article puts forward the idea of using knowledge-era technology to minimise the difference between rural and urban areas. In the first part, it elaborates the reasons and circumstances that led to the neglect of rural areas and development in urban areas. In the next part, the idea of using knowledge-era technologies to close the gaps between rural and urban areas is explored.
Why Urbanisation is spreading and how it led to the neglect of rural areas?
- Better opportunities: The tendency to migrate to urban areas has been a natural consequence of better opportunities that got created there — in contrast to life in rural areas becoming increasingly unsustainable.
- Centralisation: The industrial-era dynamics that led to centralisation in support of mass production or massive scale-up was clearly a major one.
- This, in turn, also led to the concentration of higher education/capacity building processes to urban centres where there was job growth, quite to the detriment of the much larger rural area.
- Problems in education and training: The education and training environment became myopic, essentially meeting the manning requirements to run systems created by others.
- Our education with its inherent problems led to little confidence in creating one’s own systems to address needs independent of others.
- Demographic dividend: India’s importance grew primarily because of her demographic dividend and the large market that her people constituted and not because of the systems and technologies.
- Neglect of rural India: Rural India suffered severe neglect in the process, probably as a result of poor job opportunities there and education having lost its role as an enabler of local development.
- However, the country is learning to create systems and technologies to address her needs. The exercise is, by and large, urban-centric.
UPSC asked about the quality of urban life in 2014, and the trends of labour migration in 2015. This article touched upon both of these themes.
Using the knowledge-era technology to close the urban-rural gap
- We are now in the knowledge era.
- And knowledge-era technologies, in contrast to industrial-era technologies, promote democratisation (social media, for example) and facilitate decentralisation (work from home).
- It should thus be possible for an adequately educated and trained youth residing in a rural domain to support a significant part of the manufacturing and service needs of urban areas.
- Just as an urban youth can support a significant part of the knowledge and application needs in rural areas.
- With technologies like additive manufacture, internet of things, and artificial intelligence, well-trained people can address needs in both urban and rural areas from wherever they are.
- Thus, the knowledge era should, in principle, become a significant income leveller between the urban and rural domains, with a large rise in the overall national income.
- As we focus on capacity building of rural youth, the opportunities in rural areas should, in principle, become higher than those in urban areas since the rural segment can now benefit from all three sectors of the economy- agriculture, manufacturing and services.
The idea of “cillage”
- In the knowledge era, with emphasis on capability and capacity building of rural youth in terms of holistic education, appropriate technology and enhanced livelihood, there is a possibility for a more balanced distribution of income as well as population.
- This would, however, need knowledge bridges to be built between cities and villages, and the creation of an ecosystem which has been conceptualised as a “cillage” — a synergistic combination of city and village.
- Bridging the knowledge gap between a city and a village would also bridge the income gap between the two.
- This will also lead to a faster bridging of the gap between the average individual income in India and that in industrially advanced countries.
- Democratisation promoted by knowledge technologies, if properly leveraged, can in principle reduce disparities, which, unfortunately, are on the rise today.
How to realise the idea of cillage?
- Integrated and holistic approach: Developing a “cillage” ecosystem would need a rooted and integrated approach to holistic education and research, technology development and management, as well as technology-enabled rural livelihood enhancement.
- It would take a while for the rural youth to become empowered enough to convert the challenges into opportunities in rural areas.
- The emergence of a new-age society is an inevitability.
- How soon the rural domain can embrace it and how concurrently, comprehensively that can happen, is the real challenge.
- That will decide whether India will gain in the knowledge era or lag as it did in the industrial era.
Look at one more question from 2015-“Smart cities in India cannot sustain without smart villages. Discuss this statement in the backdrop of rural-urban integration”. The ideas discussed here in this article help us to deal with such questions.
Can Covid-19 speed up the realisation of cillage?
- The process could also be seen as the migration of a set of experiences and skills to villages.
- We can look at this as a potential two-way bridge for a new relationship between cities and villages.
- It will be the bridge in which not all need to return to cities, but can rather meet the needs of cities as well as villages by remaining in villages.
- Several initiatives will be needed to realise such a possibility.
- Facilitating a number of new skills, technologies and support systems that can further leverage current capabilities of these people for starting a new enterprise would be important.
- Immediate arrangements to facilitate their livelihood, and leveraging their present capabilities could help retain at least some of these people in villages.
- It could trigger a faster movement towards an inevitable long-term equilibrium.
- Going forward, we should take knowledge activities to a higher level so that the products and services created by these people become more competitive.
- Looking at disruptive technologies for exploiting local opportunities should follow.
Conclusion
Given that the new normal after Covid-19 would, in any case, be quite different, the right course would be to channelise the stimulus caused by this crisis towards accelerating the shift to a new normal. This will not only help a more dispersed population, but will also reduce disparities and lead to faster growth of the economy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- With the presence of sleeper cell in India and ability of IS to co-opt a local affiliate makes the IS a major security challenge for India.
IS has shown its ability to strike by regrouping and co-opting local affiliates be it the case of Ester Sunday attack in Sri Lanka or a recent attack on a Gurudwara in Afghanistan. For India, the presence of sleeper cells and their links with the Islamic jihad group has internal security implications. We have covered an op-ed dealing with the Gurudwara attack and discussed the futility of the US-Taliban peace deal.
Security threat of IS to India and South Asia
- In the immediate aftermath of 9/11, there was speculation about the degree to which al-Qaeda had been able to make inroads in India.
- In recent years, the focus has shifted to the IS.
- The creation of an IS-Khorasan (IS-K) in early 2015 with a visible presence in Afghanistan-Pakistan, seemed to suggest that the group is now targeting South Asia.
- The recent terror attack on a gurdwara in Kabul (March 25) was also claimed by the IS. The IS released a photograph of one of a resident of Kasargod in Kerala
- According to India’s leading terrorism think-tank SATP (South Asia Terrorism Portal), 99 persons from India were confirmed to have joined the IS in Iraq, Syria and Afghanistan.
Question about the ” Over-ground worker” of the terrorist organisation was asked by the UPSC in 2019.
Close intelligence cooperation within and beyond South Asia
- Last October, the NIA disclosed that it had arrested 127 IS sympathisers from across India since 2014, and the highest number of 33 were from Tamil Nadu.
- The arrests by NIA were made throughout the country and not from a specific region.
- This degree of spread is testimony to the close watch the Indian security agencies are maintaining concerning the IS.
- One may conjecture that close intelligence cooperation has been established within and beyond South Asia.
- The pattern that now obtains is that countries like Sri Lanka, Bangladesh and Afghanistan have their own internal surveillance in place to monitor the activities of the IS-K.
Ability of IS to regroup and ally with a domestic affiliate
- The IS has demonstrated a proclivity to re-group by co-opting or merging with credible domestic affiliates, even if they are little-known.
- In Afghanistan, the IS-K has sought to position itself favourably in the factional tussle, and the Kabul gurdwara attack is seen as part of this murderous strategy.
- Pakistan connection: Islamic terror groups in the Af-Pak region are deemed to be as credible as the support that they receive from the deep-state in Pakistan.
- It is pertinent that the main accused in the Kabul gurdwara attack is Aslam Faroqi, a Pakistani national.
Conclusion
The ability of IS to co-opt a local affiliate makes it a credible threat for India where there is a significant presence of the sleeper cells. In the light of that threat India and the other affected nations will have to strive individually and collectively to foil such nefarious designs.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- What factors led to the failure of global world order in dealing with Covid-19, what would be the impact of Covid19 on the globalisation?
Theme of this article is the failure of the world order in mounting a collective fight against the epidemic that has become the global problem. Role of WHO has also come under the scanner. Functioning and reluctance of UNSC to discuss the pandemic have raised questions over its relevance. The issue of China’s growing influence and implications for the rest of the world are being discussed. In the past week, some newspaper articles have covered the same issue for instance-“The deep void in global leadership” in the Hindu.
Failure of the world order and global institutions
- The contemporary global order and institutions were a hegemonic exercise meant to deal with isolated political and military crises and not serve humanity at large.
- COVID-19 has exposed this as well as the worst nativist tendencies of the global leadership in the face of a major crisis.
- That the United Nations Security Council took so long to meet (that too inconclusively) to discuss the pandemic is a ringing testimony to the UN’s insignificance.
The above para. indicates that global order we are living in was made for entirely different purpose i.e. to maintain the peace and they are not capable to deal with the Covid-19 like challenges. So, from UPSC mains point of view you must take note of this.
Failure of regional groupings
- Regional institutions haven’t fared any better.
- Prime Minister Narendra Modi’s SAARC initiative, curiously resurrecting a practically dead institution, was short-lived.
- The EU, the most progressive post-national regional arrangement, stood clueless when the virus spread like wildfire in Europe.
- Its member states turned inward for solutions: self-help, not regional coordination, was their first instinct. Brussels is the loser.
What these failures indicate?
- These failures are indicative of a deeper malaise: the global institutional framework is unrepresentative, a pawn in the hands of the great powers, cash-strapped, and its agenda is focused on high-table security issues.
- The global institutional architecture of the 1940s cannot help humanity face the challenges of the 2020s.
- What can be the solutions? Nothing less than a new social contract between states and the international system can save our future.
Here we come across the reasons for the failure of the world order and institutions. UPSC has asked questions related to UNESCO in 2019, who knows next could be the WHO.
Factors that will help China come out stronger from the pandemic
- Reports indicate that China has now managed the outbreak of COVID-19, and its industrial production is recovering even as that of every other country is taking a hit.
- The oil price slump will make its recovery even faster.
- When the greatest military power found itself in denial mode and the members of the EU were looking after their own interests, China appeared to use its manufacturing power to its geopolitical advantage.
- Beijing has offered medical aid and expertise to those in need; it has increased cooperation with its arch-rival Japan.
- This will aid Beijing’s claims to global leadership, push Huawei 5G trials as a side bargain, and showcase how the Belt and Road Initiative is the future of global connectivity.
- COVID-19 will further push the international system into a world with Chinese characteristics.
As China comes to dominate the emerging world order, we must pay attention to things related to China. Here, we can note down the factors that could help China emerge out stronger from the corona crisis.
Implications for globalisation: the rise of protectionism and hypernationalism
- Neoliberal economic globalisation will have taken a major beating in the wake of the pandemic.
- Economists are warning of a global recession.
- How the world reacted? The first instinct of every major economy was to close borders, look inwards and
- The pre-existing structural weakness of the global order and the COVID-19 shock will further feed states’ protectionist tendencies fueled by hypernationalism.
- A more inclusive global political and economic order is unlikely any time soon, if ever.
- Instead, as former National Security Adviser Shivshankar Menon warns, “we are headed for a poorer, meaner, and smaller world.”
- How this epidemic impact big corporations? The ability of big corporations to dictate the production, stocks, supply chains and backup plans will be limited by increased state intervention to avoid unpredictable supply sources, avoid geopolitically sensitive zones, and national demands for emergency reserves.
- The profits of big corporations will reduce, and the demand for stability will increase.
- Will the world after Covid-19 be more balance? State intervention in economic matters and protectionism are the easy way out, and that’s precisely what states will do once the crisis is over.
- It would be a return of the ‘Licence Raj’ through the backdoor, not a push for inclusive and responsible globalisation with its associated political benefits.
It is clear now that post-Covid-19 world would be different from the world we know today. Globalisation would take a significant beating. And globalisation is important topic from mains point of view. So, pay close attention to the points mentioned here.
Will post-Covid-19 world lead to some positive controls?
- Rise of state-led models: With the severe beating that globalisation has taken, state-led models of globalisation and economic development would be preferred over (big) corporates-led globalisation.
- Will this enable some positive controls over the inherent deficiencies of globalisation? We will have to wait and see.
- The relation between capitalists and the states: But the more important question is whether the state has any incentive to take on big capital.
- Given the symbiotic relationship between the state and big capital, states have become used to protecting the interests of their corporations, often at the cost of the general public.
- States preferred capital over health: Consider, for instance, that the first response of many Western states was to protect their capital markets than be concerned about public health.
Rise of racism in post-Covid-19 world
- Yet another undesirable outcome of the pandemic would be a spike in various forms of discrimination.
- Globally, societies could become more self-seeking and inward-looking leading to further pushback against liberal policies regarding migration and refugees.
- Implications for world trade: New questions are likely to be asked about the source of goods. More stringent imposition of phytosanitary measures by advanced states on products emanating from the less developed countries might become the new normal.
- Lockdowns and travel restrictions could potentially legitimise the rhetoric around border walls in more conservative countries.
- Tragically, therefore, while one answer to global pandemics is political globalisation, COVID-19 might further limit it.
Conclusion
The world order needs to wake up to new reality take measures to avoid the above listed undesired fallouts that could emerge in the post-Covid-19 world, and before that there is an urgent need for the global coalition to deal with the pandemic.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- What are the issues in agri-marketing and suggestions to deal with them.
This article discusses the impact of lockdown on farmers and how the disruption of the supply chain is adding to their difficulties in selling their produce in the markets.
In the last two weeks or so, we have been reading about farmers and issues around the agri-marketing supply chain. If you have been following the story on Agriculture Marketing Reforms, you would remember us talking about it in the op-ed titled “A smarter supply line”
There are 6 suggestions to overhaul our agri-marketing system. These are-
1. Abolish/reframe the APMC Act
- There is an urgent need for abolishing or reframing the APMC Act and encourage direct buying of agri-produce from farmers/farmer producer organisations (FPOs).
- The companies, processors, organised retailers, exporters, consumer groups, that buy directly from FPOs need not pay any market fee as they do not avail the facilities of APMC yards.
APMC Act restrict the farmers from selling their produce outside the market yard, so in the present context of Covid-19 this is a counterproductive restrictions. UPSC asked question on in in 2014.
2. The warehouses can also be designated as markets.
- The warehouse receipt system can be scaled up.
- The private sector should be encouraged to open mandis with modern infrastructure, capping commissions.
3. The futures trading should be encouraged by allowing banking finance to hedge for commodity price risks.
A futures contract is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, encouraging this would help farmers assurance of price and help in making decion for the sowing based on price signal from he markets.
4. Promote e-NAM through proper assaying and grading the produce and setting up dispute settlement mechanism; rope in major logistics players for delivery of goods.
5. Avoiding rush in the markets: Procurement must be staggered through coupons and incentives that give farmers an additional bonus for bringing the produce to the market after May 10, or so.
6. The amount provided under PM Kisan should be increased from Rs 6,000 to at least Rs 10,000 per farming family to partially compensate them for their losses.
Way forward
- Besides these, Prime Minister would benefit by taking a leaf out of the book of President Donald Trump. Modi should lead from the front by holding daily press briefings and announce a country-wide relief package amounting to around 8-10 per cent of GDP.
- Whatever the causes of this disaster are, it is clear that the WHO failed in its duty to raise the alarm in time. India must ask for fundamental reforms in the UN System, including the WHO, making it more transparent, competent, and accountable.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fiscal deficit. Monetisation of deficit.
Mains level: Paper 3-Suggest the option to get the resources for dealing with the corona pandemic.
Context
Everyone is agreed that the whole world is hurtling towards an unprecedented economic recession. India, already facing a massive slowdown, is going to get hurt perhaps more than the others, because our economic immune system is already weak.
Three things that we must do in the present situation
- The first is containing the spread of the virus.
- Apart from the manpower, medicines, protective equipment for frontline workers and other methods, it will need massive resources to tackle it.
- Second, the poor are already suffering in more ways than one, including the daily wage earners. They will have to be taken care of, again needing massive resources.
- Third, economic activity will have to be revived as soon as conditions return to normal or near-normal, for which businesses will have to be helped, again needing massive resources; both in terms of revenue foregone and actual cash outgo.
- The question, therefore, on everyone’s mind is how much money will be needed for all this and where will it come from?
- What the government and the RBI have done so far is clearly awfully inadequate. Other countries have done much more. India can be no exception.
Where will the government will get resources?
- Partly from market and partly form RBI: Broadly speaking, resources will come partly through market borrowings and partly from the RBI.
- Manmohan Singh had decided in 1994 that in future the government of India would not monetise its deficit; in other words, would not borrow from the RBI but go to the money market and borrow from there.
- Borrow from the RBI: In these unprecedented times, we may take leave from that very sound principle, which all governments have followed religiously since then, and borrow from the RBI.
- What does it mean? This means printing of more currency notes with all its attendant problems including inflation.
- Government of India will have to take the steps necessary to tackle the after-effects to the extent possible. It must ensure that the supply chains work smoothly.
How will the money be spent?
- The Important role of states: The states will have to play a very important role in this, as much of the work will have to be done by them.
- Responsibility of finance commission: Since the finance commission continues to be in existence and has a clear idea of the state finances, it should be immediately tasked with the responsibility of discussing this matter with the state governments and making its recommendations available within a period of one month.
- The task force under the finance minister could work out the needs of businesses and the government of India both in the short as well as the medium term.
- Spending money properly and efficiently: It should not be wasted and each rupee spent creates its own multiplier effect.
- Our system leaves much to be desired. And the moment it is known that funding is not a constraint, the system can go berserk.
- We must guard against that and ensure that rules are in place, specially at the field level to ensure the proper use of resources.
Role of banks, financial institutions and MGNREGA
- The banks and other financial institutions will have to be provided with resources to help the private sector, especially the agricultural and MSME sectors.
- In the rural areas, we must ensure that durable assets are created out of the funds made available.
- The rules governing the MGNREGA scheme should be tweaked to the extent necessary in order to ensure that more material than labour is used wherever necessary.
Conclusion
India should and can come out of the present crisis with as little damage as possible if we tackle it together. We cannot control what happens in other countries, but we can surely learn from them and adopt their best practices. We must also play our role in defining the new global order because the world is more intertwined now than ever before.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: WHO's role.
Mains level: Paper 2- How BRICS with India and China as its members poses challenges in its success?
Context
As the major global institutions — from the WHO to the WTO — are experiencing unprecedented turmoil India needs to be pragmatic and fleet-footed.
Reorientation of India’s multilateral strategy
- As many international institutions, including the World Health Organisation and the United Nations Security Council, come under great stress in the corona crisis, Delhi’s multilateral strategy is going through a rapid reorientation.
- Realists in Delhi recognise that India’s engagement with the UN is not about the pursuit of some higher ideological calling, but the navigation of hardball geopolitics.
China’s growing influence and implications for India
- China’s role on Kashmir question: China repeatedly pressed the UN to discuss the Kashmir question after Delhi changed the constitutional status of the region last August.
- China avoiding discussion on Covid crisis: But through last month, as the rotating chair of the UNSC, China blocked any discussion of the Covid crisis.
- Beijing insisted that the crisis was not a matter of international peace and security that the UNSC ought to bother itself with.
- A mere internal administrative change in Kashmir, Beijing continues to insist, is a grave threat to international peace and security.
- With its veto power, Beijing can simply prevent the UNSC from doing anything against China.
Why the credibility of the UN and WHO bureaucracy is under cloud?
- Secretary-General Antonio Guterres, jumped quickly into the Indo-Pak arguments over Kashmir, and raised concerns over India’s Citizenship Amendment Act and the National Register of Citizens.
- Guterres went on an extended visit to Pakistan in February and made an ostentatious public offer to mediate between Delhi and Islamabad on Kashmir.
- But when it comes to China’s role in the spread of the coronavirus, Guterres can’t seem to find the words.
- The situation at the WHO is a lot worse.
- The Director-General of WHO, Tedros Adhanom Ghebreyesus warns against the dangers of “politicising” the Covid crisis.
- Many in Europe and the US think that is exactly what Tedros has done at the WHO in the last few months.
- Breakdown of the multilateral system: What we are witnessing is the breakdown of the multilateral system that emerged from the ashes of the Second World War amidst the deepening contestation between the world’s foremost powers — the US and China.
NEW MULTILATERALISM adopted by India
- India’s new multilateralism — as a pragmatic response to external change — involves downplaying some past associations and strengthening new partnerships.
- Take, for example, two innovations India has made since the end of the Cold War.
- One was the BRICS forum with Brazil, Russia, China and South Africa and the other was the so-called Quad — a coalition of democracies with Australia, Japan and the US.
- Actions of BRICS members with respect to India: As India reorders its multilateral priorities amid the corona crisis, the BRICS forum is losing some of its salience and the Quad is gaining traction.
- Preventing discussion on COVID crisis: Two of India’s partners in BRICS — Russia and South Africa — had reportedly backed the efforts of a third, China, to prevent a discussion of the COVID crisis in the UNSC.
- If Delhi were sitting in the UNSC right now as a non-permanent member, it would have had every interest in pressing for a discussion of the COVID crisis that has severely damaged India’s economic and social prospects.
- Meanwhile, India is in regular consultations on managing the corona crisis with the “Quad Plus” grouping that draws in South Korea, Vietnam and New Zealand.
- Neither the BRICS nor the Quad square with the conventional narrative on India’s multilateralism that was dominated in the past by the Non-Aligned Movement (NAM) and the G-77.
- As circumstances change, India is finding new international partners to secure its interests.
Context which gave rise to BRICS
- It started out as a triangular coalition with Russia and China in the mid-1990s.
- India’s interest in the RIC was borne out of fear of the unipolar moment and Russia’s relentless efforts to draw it into a “strategic triangle” that would resist “American hegemony”.
- In the early 1990s, Delhi was rather wary of the Bill Clinton Administration’s plans to relieve India of its nuclear and missile programmes.
- What made matters worse was the Clinton Administration’s formulation that “Kashmir is the world’s most dangerous nuclear flashpoint”.
- This was not just a description; it was accompanied by a prescription for Delhi: Resolve the Kashmir question by sitting down with Pakistan and the Hurriyat.
- If Delhi needs any help, Washington will be happy to chip in.
- Balancing the US pressure: Going into a political tent with Russia and China seemed a sensible bet to ward off American pressures on the nuclear and Kashmir questions.
Two decades after BRICS-Changes in circumstances
- Two decades later, we are in a very different place.
- Take the same two issues — Kashmir and the nuclear programme — that drove India into the BRICS.
- China’s role on Kashmir issue: It is Beijing that wants the UNSC to take up the Kashmir question, and it is Paris and Washington that are preventing it.
- NSG membership blocked by China: China has also resolutely blocked India’s effort to become a full member of the global nuclear order by joining the Nuclear Suppliers Group.
- On the nuclear front too, it was France and the US that helped India break the nuclear blockade.
- Shielding of Pakistan by China: China shields Pakistan from international pressures to end cross-border terrorism.
- And it is India’s partners in the West and the Muslim world that are helping Delhi cope better with violent extremism.
India’s engagement with Europe
- India has also discovered the new possibilities for engaging Europe in the multilateral arena.
- Europe as an important partner: If India’s definition of multilateralism — Afro-Asian solidarity — immediately after Independence was defined in opposition to colonial Europe, Delhi now sees Europe as a valuable partner in rearranging the global order.
- India has joined the “alliance for multilateralism” initiated by Germany and supported by its European partners.
Conclusion
India needs all the pragmatism it can muster to pursue its interests in a world where all the major global institutions — from the WHO to the WTO — are experiencing unprecedented turmoil and are heading towards an inevitable restructuring.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Stimulus package on the lines of package declared by developed countries is necessary for Indian economy to deal with the pandemic.
Context
The lockdown and other movement restrictions, backed by scientific and political consensus on their inevitability, have directly led to a dramatic slowdown in economic activity across the board. What is its impact on the Indian economy? This question calls for an urgent answer.
The methodology used to estimate the impact
- We provide an initial, quantitative response, using a methodology that is based on the technique of input-output (IO) models, first elaborated by the economist Wassily Leontief.
- How the model works: Such models provide detailed sector-wise information of output and consumption in different sectors of the economy and their inter-linkages, along with the sum total of wages, profits, savings, and expenditures in each sector and by each section of final consumers (households, government, etc.).
- Crucially, it pays attention to intermediate consumption, namely consumption by some sectors of the output of other sectors (as well as consumption within their own sector).
- Advantage of the model: The key advantage of such a model is that it allows the calculation of the impact of any change in any sector in both direct and indirect terms, which has made this model somewhat ubiquitous in the computation of the economic impact of disasters.
- This also renders it well-suited to estimating the economic consequences of COVID-19.
- Regrettably, the last officially published IO table for India was for the year 2007-2008.
- In our estimates, we use the IO tables for India published by the World Input-Output Database for the year 2014 that updates the IO tables for individual countries using time series of national income statistics.
- To calculate the impact of the lockdown, there are four different scenarios of the number of workdays lost in different sectors.
- How daily output loss is calculated? Assuming that the estimated annual output is distributed uniformly across the year, it is possible to calculate the daily output and therefore the daily output loss.
- The direct and indirect impacts of the lockdown are then estimated using IO multipliers which are assumed to be constant.
- We then calculate the percentage decline in the national gross domestic product (GDP) of 2019-2020 that this impact amounts to.
What is the impact on various sectors?
- Loss at 7% to 33% of GDP: Model (see table) shows that the loss of GDP ranges from ₹17 lakh crore (7% of GDP) in the most conservative scenario, where the average number of output days lost is only 13, to ₹73 lakh crore (33% of GDP) in the most impactful scenario, where the number of days of lost output averages 67.
- In intermediate scenarios of 27 and 47 days of lost output, the GDP decline is ₹29 lakh crore (13% of GDP) and ₹51 lakh crore (23% of GDP), respectively.
- OECD estimate: These estimates also accord well with other estimates, such as those of the OECD that suggest a 20% loss to GDP for India.
- Impact of varying lockdown period: Even assuming that sectors will have varying lockdown periods, all sectors face serious losses due to their
- If we take the scenario where a prolonged lockdown happens, averaging about 47 days across sectors, we find that the mining sector faces the largest drop of 42% in value-added despite that sector itself being shut down for, say, 35 days.
- The electricity sector sees a 29% fall in value-added, even though it faces no shut down per se.
- Losses are expected across all sectors in terms of both wage compensation and the availability of working capital.
Incorporation of feedback effect in estimates
- The linear character of our estimates, intrinsic to IO analysis, does not allow incorporation of feedback effects and assumes that output commences where it left off without further constraints.
- An attempt has been made to correct for this by using a varying number of days of output loss across sectors, but this is quite possibly inadequate to capture the continuing economic impact.
- We are faced today with a unique situation where both supply and demand have collapsed in several sectors.
- Impact on agriculture: In some sectors such as agriculture, the impact may manifest in the delayed fashion, if the anti-COVID-19 measures, or the pandemic itself, affects agricultural operations in the next the kharif season, even if, as reports suggest, much of this year’s rabi has been successfully harvested.
- The shortfall in export not accounted for: Given the database, we are using and the initial character of our analyses we have also not explicitly accounted for possible shortfalls in exports due to lack of demand elsewhere in the world, as well as the unavailability of intermediate imported goods that are crucial for the Indian economy.
- Nor are we able to adequately separate the impact on the informal sector, that is partially aggregated with the formal sector in the database that we are using and partially unaccounted for due to lack of data.
Need for the huge stimulus package
- The most striking feature of even this simple calculation is the all-round pervasive impact on the economy of the anti-COVID-19 measures that we are currently undertaking and that are likely to continue in modified form for a short period.
- Measures such as debt relief, postponement of revenue and tax collections, immediate relief in cash and kind to the poor, and revamping and scaling up public distribution are all undoubtedly necessary but far from sufficient.
- Our numbers suggest that the resort to huge stimulus packages that developed countries have already started putting in place is by no means mistaken.
Way forward
- Package for all the sectors of the economy: We need to compensate and pump cash into the hands of not only wage workers in the formal and informal sectors, and also into the livelihood activities of the informal sector.
- But businesses too need to be primed with handouts in the case of small and medium enterprises, and with a variety of concessions even in the case of larger businesses.
- It is critical to preserve the productive capacities of the Indian economy across the board. The annual budget of the current year, already passed, clearly cannot cope with such a massive effort and needs to be revisited by suitable parliamentary measures.
- Caring too much about fiscal deficit will not be helpful: Redistributing expenditure, seeking to keep the fiscal deficit “under control” as it were, through measures such as cutting back on government salaries, are unlikely to be helpful.
- Apart from sending the wrong signal to private sector employers, who have so far been exhorted to maintain salaries and wages during the lockdown, it is quite likely to lead to further reduction in demand since the government is the biggest employer in the country.
- Ensure the key role of the state: Finally, one must note that the current crisis is not a transformatory moment for the Indian economy, even if the scale of the impact and recovery process will undoubtedly push the economy in new directions.
- But “greening” the economy or more radical transformative measures are not particularly relevant in its current state.
- What is needed is ensuring the key role of the state to lift up an economy that is in danger of being brought to its knees, and to restore some semblance of its normal rhythm, by an unprecedented scale of state investment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2-In fight against covid-19 epidemic we must follow the principles of international laws and treaty obligations.
Context
Amid the many developments in the wake of Covid-19 pandemic one of the facets that is also discussed is-How to read international law in the context of the pointers to the future?
Constitutional duty regarding international laws
- Respect for the norms and standards of international law is among the paramount constitutional duties of the state under Article 51 of the Constitution.
- The duty is regardless of the quibbles on whether the language here refers only to treaty/obligations or also to customary international law.
- International norms remain relevant: Despite US President Donald Trump’s recent threat of actions against the WHO, international norms, standards, and doctrines remain relevant to making national policy and law.
Possibility of discussion over pandemic at UNSC
- The difference between the United Nations as a site of normative discursivity and as a site of doing global power politics is sadly manifest even now in the accelerated pace of the pandemic.
- Discussion extremely unlikely: President Trump’s insistence on calling it a “Chinese virus” renders it extremely unlikely that the pandemic will be discussed during the current monthly presidency of the UN Security Council by China.
- Possibility of veto: The threat of veto by China and Russia will always loom large whenever the matter is placed for discussion.
Role of the UN in the codification of law
- The UN is also a site of systems of norm enunciation.
- Along with the International Law Commission, it is responsible for the progressive codification of law.
- The UN system has developed lawmaking and framework treaties as well as provided auspices for systems of “soft” law that may eventually become the binding law.
- There are three types of international laws which are described below.
1. The fundamental overriding principle of international laws
- Jus cogens: Some of the norms of international law are robust and deeply relevant. For example, the peremptory jus cogens — a few fundamental, overriding principles of international law such as crimes against humanity, genocide, and human trafficking apply to all states.
- And Article 53 of the Vienna Convention on the Law of Treaties goes so far as to declare that a “treaty is void if, at the time of its conclusion, it conflicts with a peremptory norm of general international law”.
- And even when ingredients of genocide remain difficult to prove, the International Court of Justice (ICJ) has held, in 2007, that states have a duty to prevent and punish acts and omissions that eventually furnish elements for the commission of crime of genocide.
- Erga omnes: There also exist erga omnes rules prescribing specifically-determined obligations which states owe to the international community as a whole.
- This was enunciated by the ICJ in 1970 for four situations — the outlawing of acts of aggression; the outlawing of genocide; protection from slavery; and protection from racial discrimination.
- A great significance of this judicial dictum is that it lays down obligations which transcend consensual relations among states.
- In addition, there are three other sets of international law obligations.
- These are primarily derived from the no-harm principles crystallised in the International Law Commission’s 2001 Draft Articles on the Prevention of Transboundary Harm (DAPTH) and the Paris Framework Agreement on Climate Change, 2015.
- The DAPTH has carefully developed norms of due diligence, stressing all the way that these may be adapted to contextual exigencies.
- But due diligence obligations certainly extend beyond local and national boundaries, especially because the environmental problems have a transboundary impact.
- Each state is obliged to observe these standards in the fight against COVID-19 as a matter of international law.
2. International laws dealing with core human right measures
- No law or policy to combat epidemics or pandemic can go against the rights of migrant workers, internally displaced peoples, and refugees and asylum seekers.
- Respect for the inherent dignity of individuals in combating COVID-19 and for the rights of equal health for all, non-discrimination, and the norms of human dignity further reinforce accountability and the transparency of state and other social actors.
- Panicky and sadist policing, including shoot-a- sight orders in collective exodus situations, and militaristic responses to food riots de-justify health lockouts and curfews.
3. International humanitarian law
- The third set of obligations arises out of international humanitarian law. The Biological and Toxin Weapons Convention (BTWC) is pertinent here.
- India did not subscribe to any conspiracy or racist theory about the origins of COVID-19 — in fact, India’s foreign minister rightly affirmed the BTWC obligations on March 26 (on the 40th anniversary of that Convention).
- Surely, this global and non-discriminatory disarmament convention deserves applause because it outlaws a whole range of weapons of mass destruction.
- India has, and rightly so, called for “high priority” to “full and effective implementation by all states parties”.
Conclusion
The starting point of a determined fight against COVID-19 has to be a full-throated repudiation of an ancient Latin maxim, inter arma enim silent leges (in times of war, the law falls silent). Combating this fearsome pandemic calls for re-dedication to nested international law obligations and frameworks.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3-Options that government explore to finance the package announced in the wake of corona epidemic.
Context
The priority for India is to ensure that it overcomes the COVID-19 pandemic and kick-starts GDP growth.
Financing strategy for the 1.7 lakh crores package
- Rather than fix the weaknesses in the macroeconomy: a high fiscal deficit of 7.49% and government indebtedness that was 69% of GDP in 2019, the government wants to overcome the pandemic.
- When COVID-19 cases began to increase, the Government of India (GoI) swung into action by announcing a 21-day national lockdown and a ₹1.7-lakh crore (approximately $22.59 billion) rescue package.
- Financing strategy: Available in the state disaster relief fund is ₹60,000 crore, comprising ₹30,000 crore of the outstanding balance and the Central government’s allocation of a similar amount for FY2021.
- Hence, the GoI needs to raise an additional ₹1.1-lakh crore,e., 65% of the rescue package outlay.
- Its financing strategy should be to raise long-term funds at cost-effective rates, with flexible repayment terms that allow it to take tactical advantage of market movements.
- Following are some of the options that the government can explore to raise the required amount.
1. GDP-linked bonds
- The GoI may issue listed, Indian rupee-denominated, 25-year GDP-linked bonds that are callable from, say, the fifth year.
- What GDP-linked means? The coupon (interest) on a GDP-linked bond is correlated to the GDP growth rate and is subject to a cap.
- The issuer, the GoI, is liable to pay a lower coupon during years of slower growth and vice-versa.
- The callable feature from the fifth year till maturity allows the GoI to effect partial repayments during high growth years and when it earns non-recurring revenues such as proceeds from disinvestment of public sector enterprises (PSEs).
- The listing of bonds provides investors with an exit option.
- Examples from the world: Costa Rica, Bulgaria and Bosnia-Herzegovina issued the first pure GDP-linked bonds in the 1990s.
- Argentina and Greece issued warrant-like instruments similar to GDP-linked bonds in 2005 and 2012 respectively. India could learn from their experience.
- Timely GDP data is a prerequisite: Publishing reliable and timely GDP data is a prerequisite for the successful issue of GDP-linked bonds, which the GoI may use to part-finance the COVID-19 rescue package and to diversify its borrowing sources.
2. Streamlining PSEs
- The 15 largest non-financial central PSEs (CPSEs) in the S&P BSE CPSE index contributed approximately 75% of the GoI’s ₹48,256.41 crore dividend income from PSEs in FY2020.
- The Union Budget projected PSE dividends to increase by 25% to ₹65,746.96 crore in FY2021.
- This milestone is unlikely to be achieved in the current environment.
- The 15 CPSEs have accumulated sizeable non-core assets including financial investments, loans, cash and bank deposits in excess of their operating requirements, and real estate.
- The return on these assets (excluding real estate) is around 200 basis points lower than the returns on their core businesses.
- These CPSEs owe the government ₹25,904 crore as of end-March 2019.
- These non-core assets must be monetised to repay statutory dues and upstream dividends to GoI.
- Formation of HOLDCO: While loans and excess cash and bank deposits may be monetised within three months, streamlining investments and selling real estate is a time-consuming process.
- It is imperative for the GoI to form a PSE and public sector bank holding company (‘Holdco’) along the lines of Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional Berhad.
- The Holdco will enable PSEs to monetise their non-core assets at remunerative prices, maximise their enterprise value and focus on their core businesses.
- The ₹30,168 crore loans that CPSEs have extended to employees, vendors and associates may be securitised or refinanced, with CPSEs guaranteeing loans extended to weak counterparties.
- Excess liquidity with PSEs: It is essential that businesses maintain liquidity, especially during a downturn. However, the outstanding cash and bank deposits of the 15 CPSEs (₹64,253 crore) is in excess of their operating requirements.
- CPSEs must determine the cash they require to meet, say, six months of operating expenses and use the excess cash to repay statutory dues and upstream dividends to the GoI.
- Banks must extend to CPSEs committed lines of credit that the latter may draw down during exigencies.
- Financial investments of PSEs be transferred to HOLDCO: The 15 CPSEs have accumulated ₹93,562 crore financial investments comprising listed and unlisted debt, equity and mutual fund units.
- These exclude investments in associates and joint ventures.
- The CPSEs ought to transfer these investments to Holdco, which can manage the portfolio and transfer the returns to the original investors.
- Real estate holdings of PSEs: One important non-core asset, whose value is likely to exceed the combined value of other non-core assets, is the real estate holdings of PSEs.
- In September 2018, the GoI identified properties of nine PSEs (Air India, Pawan Hans, Hindustan Fluorocarbons, Hindustan Newsprint, Bharat Pumps & Compressors, Scooters India, Bridge and Roof Co, Hindustan Prefab, and Projects & Development India) to be divested.
- The GoI must mandate all PSEs and government departments to transfer their non-core properties to Holdco, which can opportunistically sell these properties and transfer the proceeds to the owners.
Refrain from asking RBI to pay more dividend
- The Reserve Bank of India (RBI) has allocated ₹1 lakh crore to carry out long-term repo operations in tranches and has reduced the repo rates by 75 basis points to 4.4% to help banks augment their liquidity in the wake of the pandemic.
- Recognising the RBI’s liquidity requirements, the GoI must refrain from asking the RBI to pay more dividends that it can viably pay.
- During the five years ending on June 30, 2019, the RBI paid the GoI 100% of its net disposable income, with its FY2019 dividends more than trebling to ₹1.76 lakh crore from ₹50,000 crore in FY2018.
- The Bimal Jalan panel constituted in 2019 to review the RBI’s economic capital framework opined that the RBI may pay interim dividends only under exceptional circumstances and that unrealised gains in the valuation of RBI’s assets ought to be used as risk buffers against market risks and may not be paid as dividends.
Conclusion
The Bimal Jalan panel recommendation must be adhered to in letter and spirit. The GoI may finance the COVID-19 rescue package by issuing GDP-linked bonds, tapping PSEs’ excess liquidity and monetising non-core assets.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Federal system.
Mains level: Paper 2-Why it is said that there is a paradox in the federal system of India? Covid-19 has highlighted the need for decentralisation in India.
Context
Even as States have taken up positions of leadership in the pandemic response, federal limitations are becoming hurdles.
State governments at the position of leadership
- In the fight against the pandemic, one of the striking features of governance has been the signal role played by State Chief Ministers across India.
- Proactive measures: Even before the Union government invoked the Disaster Management Act, 2005, many State governments triggered the Epidemic Diseases Act, 1897, and installed a series of measures to combat what was then an oncoming onslaught of COVID-19.
- These actions have not always been perfect. Some of them have even disproportionately trenched upon basic civil liberties.
- But, by and large, they have been tailored to the reality faced on the ground by the respective governments.
- Policies to address local concerns: States such as Maharashtra, Kerala, Tamil Nadu, Rajasthan, and Karnataka have shaped their policies to address their direct, local concerns.
- They have communicated these decisions to the public with clarity and consideration, helping, in the process, to lay out a broad framework for the nation.
- Not just the laboratories of democracy: In doing so, they have acted not merely as “laboratories of democracy”, to paraphrase the former U.S. Supreme Court Justice Louis Brandeis, but also as founts of reasoned authority.
Federal arrangements placing limitations on the states
- Equally, though, as much as State governments have taken up positions of leadership, they have repeatedly found themselves throttled by the limitations of the extant federal arrangement.
- The Centre for Policy Research has pointed out at least three specific limitations.
- Funds and structuring own package: The inability of States to access funds and thereby structure their own welfare packages.
- Curbs imposed by PFMS: The curbs imposed by a public finance management system (PFMS) that is mired in officialdom.
- This has prevented States from easily and swiftly making payments for the purchase of health-care apparatus such as ventilators and personal protective equipment.
- Disruption of supply chains: Three, the colossal disruption of supply chains not only of essential goods and services but also of other systems of production and distribution, which has placed States in a position of grave economic uncertainty.
- Need to decentralise: As these limitations demonstrate an urgent need to decentralise administration, where States — and local bodies acting through such governments — are allowed greater managerial freedom.
- Under such a model, the Union government will command less but coordinate more.
Indian federalism-two distinct levels
- There are varying accounts of what Indian federalism truly demands.
- Two levels: What is manifest from a reading of the Constitution is that it creates two distinct levels of government: one at the Centre and the other at each of the States.
- The Seventh Schedule to the Constitution divides responsibilities between these two layers.
- The Union government is tasked with matters of national importance, such as foreign affairs, defence, and airways.
- But the responsibilities vested with the States are no less important. Issues concerning public health and sanitation, agriculture, public order, and police, among other things, have each been assigned to State governments.
- In these domains, the States’ power is plenary.
- This federal architecture is fortified by a bicameral Parliament.
- Significantly, this bicameralism is not achieved through a simple demarcation of two separate houses, but through a creation of two distinct chambers that choose their members differently-
- A House of the People [Lok Sabha] comprising directly elected representatives and a Council of States [Rajya Sabha] comprising members elected by the legislatures of the States.
Financial autonomy of the states
- Ensuring financial autonomy: In formulating this scheme of equal partnership, the framers were also conscious of a need to make States financially autonomous.
- No overlap: To that end, when they divided the power to tax between the two layers of government they took care to ensure that the authority of the Union and the States did not overlap.
- Therefore, while the Centre, for example, was accorded the power to tax all income other than agricultural income and to levy indirect taxes in the form of customs and excise duties, the sole power to tax the sale of goods and the entry of goods into a State was vested in the State governments.
- The underlying rationale was simple: States had to be guaranteed fiscal dominion to enable them to mould their policies according to the needs of their people.
History of paradox in federal system of India
- Despite this plainly drawn arrangement, the history of our constitutional practice has been something of a paradox.
- It is invariably at the level of the States that real development has fructified.
- But the Union has repeatedly displayed a desire to treat States, as the Supreme Court said in R. Bommai v. Union of India, as mere “appendages of the Centre”.
- Time and again, efforts have been made to centralise financial and administrative power, to take away from the States their ability to act independently and freely.
- Following five examples demonstrated that the point made here.
1 Matters of finance-what was expected in theory did not realise
- Consider the widely hailed decision to accept the 14th Finance Commission’s recommendation for an increase in the share of the States in total tax revenues from 32% to 42%.
- While, in theory, this ought to have enabled the States to significantly increase their own spending, in reality, as a paper authored by Amar Nath H.K. and Alka Singh of the National Institute of Public Finance and Policy suggests, this has not happened.
- What went wrong? Gains made by the States, as the paper underlines, have been entirely offset by a simultaneous decline in share of grants and by a concomitant increase in the States’ own contribution towards expenditures on centrally sponsored schemes.
2. Goods and Service Tax
- The decline in the sovereignty of the states: Notably, the creation of a Goods and Services Tax regime, which far from achieving its core purpose of uniformity has rendered nugatory the internal sovereignty vested in the States.
- By striking at the Constitution’s federal edifice, it has made the very survival of the States dependent on the grace of the Union.
- The tension today is so palpable that a number of the States are reported to have written to the Union Finance Ministry.
- More than four months’ worth of Goods and Services Tax compensation to the States — reportedly totalling about a sum of ₹40,000 crore — remains unreleased.
3. Passing a bill as a money bill
- The Union government’s centralising instinct, though, has not been restricted to matters of finance.
- It has also introduced a slew of legislation as money bills, in a bid to bypass the Rajya Sabha’s sanction, even though these laws scarcely fit the constitutional definition.
4. Role of the Governors
- Similarly, the role of the Governors has been weaponised to consolidate political power.
5. Article 370
- But perhaps most egregious among the moves made is the gutting of Article 370 and the division of Jammu and Kashmir into two Union Territories.
- It was done without securing consent from the State Legislative Assembly.
Conclusion
Perhaps a crisis of the kind that COVID-19 has wrought will show us that India needs greater decentralisation of power; that administration through a single central executive unit is unsuited to its diverse and heterogeneous polity. We cannot continue to regard the intricate niceties of our federal structure as a nettlesome trifle. In seeing it thus, we are reducing the promise of Article 1 of the Constitution, of an India that is a Union of States, to an illusory dream.
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