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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Capital Expenditure and Fiscal Consolidation

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Basics of Budget

    Mains level: Capital expenditure and fiscal consolidation

    Fiscal

    Context

    • The 2023-24 Union budget will be announced on February 1, followed by the states’ respective budgets. These budgets will set the policy tone for the rest of the year and, as such, are followed closely.

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    Situation of Capex and fiscal consolidation after pandemic

    • Rise in fiscal deficit: The overall fiscal deficit of the government has soared and we believe the next few years will be all about getting it back on track.
    • Rising interest payments: This is important because interest payments on past debt make up a whopping 50 per cent of net tax revenues for the central government, leaving very little room for other spending.
    • less room for social spending: Given the needs of the economy on various fronts like health, education and capex, it is important to lower the interest burden over time. That can only be achieved by fiscal consolidation.

    Analysing the tax revenue and expenditure of central and state Government

    • Central government tax revenues have risen faster than state revenues: Both benefitted as small and informal firms struggled with the lockdowns and lost market share to large firms, which tend to pay more taxes.
    • Disparity in revenue collection: A large chunk of the tax revenues in the early part of the pandemic period came from the “special” duty and surcharge on oil, which went primarily to the central government. To be fair, the central government subsequently cut the duty on oil (in both 2021-22 and 2022-23) and the tax share that went to the states rose somewhat.
    • Capex of centre is more: The Centre has committed to more current expenditure than the states. While it increased across the board during the pandemic, current expenditure rose more for the central government.
    • Higher spending on social schemes: This was led by higher social welfare spending (for instance, on the free food distribution scheme) and, more recently, higher subsidies (for example, fertilisers) in the face of rising commodity prices.
    • States have a moderate capex: The common perception is that states have gone all out on unsustainable current expenditure. But the data shows that it’s just a few states which have spent heavily (for example, Telangana, Assam, West Bengal and Punjab).

    Fiscal

    Analyzing the capex and fiscal deficit of central and state government

    • The central government capex has risen but state capex has contracted: Making a commendable choice, the central government used both its tax bounty as well as its ability to borrow more at a time when banking sector liquidity was loose to raise capex spending, which rose by 1.2 per cent of GDP between 2019-20 and 2021-22.
    • Cut in state capex: On the other hand, the states cut back on capex, which has fallen as a percentage of GDP over the last few years, and continues to be on a weak footing in the current year. In fact, putting the central government’s capex alongside the state and public sector capex shows that the overall public sector thrust is not any stronger than it was back in 2018-19.
    • Centre has breached the fiscal deficit target: The central government’s fiscal deficit has overshot targets while the state deficit is relatively contained. At a budgeted 6.4 per cent of GDP in 2022-23, the central government’s fiscal deficit has risen above the pre-pandemic level of 3.4 per cent in 2018-19, and is well above the 3 per cent medium-term target.
    • Sharp fall in states fiscal deficit target: Even though the state fiscal deficit rose in the first year of the pandemic (from 2.5 per cent of GDP in 2018-19 to 3.8 per cent in 2020-21), it has fallen sharply since (to 2.7 per cent in 2021-22).
    • Low borrowing by states: In fact, state government borrowing is rather low in the current year so far. If this continues, the fiscal deficit could be even lower in 2022-23 (around 2.5 per cent of GDP), which is well under the 3 per cent medium-term target, and bang in line with pre-pandemic levels.

    Fiscal

    What are the challenges?

    • Less consolidation by states: The states have less fiscal consolidation to do than the central government.
    • High quality spending: Both have a common challenge to commit to more capex, which is considered high quality spending as it “crowds in” private investment if done responsibly. And we believe investment is the only sustainable way to increase the capacity of the economy to grow and create jobs.
    • Balancing the capex and fiscal consolidation: For the central government, the challenge is to hold on to its capex push at a time of fiscal consolidation. For the states, the challenge is to start doing more.

    Fiscal

    What should be the way forward?

    • Lowering the fiscal deficit: The central government’s aim is to lower the fiscal deficit by about 2 per cent of GDP over the next three years. About half of this consolidation can come from lowering current expenditure to pre-pandemic levels.
    • Raising the tax revenue through formalization: Continued formalisation of the economy that raises tax revenues (though “organic” formalisation will likely be more sustainable than “forced” formalisation).
    • Disinvestment of PSUs: A bigger push for disinvestment by selling stakes in public-owned companies, and further tax reforms (in terms of direct taxes and the GST).
    • Capex cut is the last option: If these don’t work, the default option will be to cut capex, which is a concern as it has implications for medium-term growth.

    Conclusion

    • Fiscal consolidation and capital expenditure should go hand in hand. More government spending means more infrastructure building and more chances of growth and employment. However, this spending should be done with sound fiscal base.

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  • Historical and Archaeological Findings in News

    India’s experience under colonial rule: A study by Dylan Sullivan and Jason Hickel

    op-ed snap | | Mains Paper 1: Modern Indian History

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Census in colonial rule

    Mains level: Impact of colonial rule

    colonial

    Context

    • A recent study of India’s experience under colonial rule by Dylan Sullivan and Jason Hickel concludes that data from the Census of India reveal that between 1880 and 1920 approximately 100 million Indians died due to British policy in India. Their method is to calculate the excess mortality, being the difference between the actual deaths and the deaths that may be expected.

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    What are assumptions made by their study?

    • Mortality rate before colonial rule: Before colonial rule, the mortality rate of India is unlikely to have been very different from that of contemporary England.
    • Deaths due to colonial policies during the period of 1880-1920: The resulting estimates for excess deaths during 1880-1920 are 50 million in the first case and 160 million in the second one, respectively. The authors settle for the midway figure of approximately 100 million for the deaths caused in India due to colonial policy.
    • Figure is greater than deaths from famine in other countries: For perspective, they point out that this figure is greater than the death from famine in “the Soviet Union, Maoist China, North Korea, Pol Pot’s Cambodia, and Mengistu’s Ethiopia”. In their view, this provides a direct assessment of the consequences of the Raj for India.

    Study quantifying the impact of colonial rule in India

    • Change in national income as a basis to quantify impact of colonial rule is non-existent: Attempts to quantify the impact of colonial rule in India have mostly relied on the change in national income. But reliable income data for the nineteenth century are almost non-existent. Population figures, though, are available from the time of the first Census of India in 1871.
    • Steady rise in mortality rate: The mortality rate in British India is seen to rise steadily after 1881, recording an increase of close to 20% by 1921. As it is unusual for the mortality rate of a country to rise continuously due to natural causes, this suggests that the living conditions worsened during this period.
    • Mortality rate dipped in last census in British India but famine is not recorded: The mortality rate dipped in 1931, which was the last census conducted in British India, but the last famine recorded in the country was yet to come. It took place in Bengal in 1943, in the last five years of the close to two centuries of British colonial rule.

    colonial

    How recurring famines are recorded?

    • British arguments for the empire: Arguments include “English forms of land tenure, the English language, banking, the common law, Protestantism, team sports, the limited state, representative assemblies, and the idea of liberty”, have been advanced by the Harvard historian Niall Ferguson.
    • No mention of the famines: There is no mention of the famines which started almost at the onset of rule by the East India Company in Bengal, the de-industrialisation of India in the nineteenth century, the drain of wealth, or the worsening food security as India’s peasants were forced to grow commercial crops for export so that Britain could balance its trade.
    • Population explosion but the life expectancy increased: The belief that British policy in India caused repeated famines is bolstered by the fact that there has not been a single famine since 1947. This is despite a population explosion following a sharp fall in death rates. The decline in the mortality rate surely signals improved living conditions. The Census shows that in the 1950s, life expectancy at birth of Indians increased by more than it did in the previous seventy years.

    Census as a double-edged sword

    • Worsening gender inequality in India after 1947: It points to a worsening gender inequality in India. A simple indicator of this would be the ratio of females to males in the population. It is believed that in the absence of factors that lower the life chances of women, including foeticide, this ratio would tend to one. The Census of India shows that we have not attained that level in our recorded history, except in pockets within the country.
    • Trend in gender inequality: While this is disturbing in itself what is more so is that this ratio has steadily declined after 1947. After declining for four decades from 1951 it started inching up in 1991. But in 2011, it was yet lower than what it was in 1951.
    • Life expectancy faster for man than women: So, even though life expectancy increased soon after Independence, in the early years at least it increased faster for men than it did for women.

    Conclusion

    • The Census of India not only helps understand the perils of British rule, but also flags the roadblocks lying ahead. As India chants Vasudhaiva Kutumbakam at the G-20, implying that the nations of the world are a family, it behooves us to ensure that all the persons in our own family enjoy the same freedoms.

    Mains Question

    Q. According to the census of the time discuss the impact of colonial rule in India. The Census of India not only helps understand the perils of British rule, but also flags the roadblocks lying ahead. Discuss.

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  • Foreign Policy Watch: India-China

    India-China clash: Why China has opened new front?

    op-ed snap | Security Issues | Mains Paper 3: Border Area Security Challenges

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: India china border areas

    Mains level: Chinese Transgression, India's preparedness and challenges

    China

    Context

    • There has been yet another transgression by Chinese troops across the Line of Actual Control (LAC) between India and China. That it culminated in violence, that it took place this time in the Eastern Sector of their boundary dispute, or that it should take place in the middle of winter should surprise no one. If there is one lesson that can be drawn from India’s experiences with Chinese transgressions over the last decade or so, it is that the Chinese seem to set the pace on the nature and timing of these transgressions.

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    Army’s statement about the clash

    • On December 9, 2022, People’s Liberation Army (PLA) troops contacted the LAC in the Tawang sector, which was contested by own troops in a firm and resolute manner.
    • This face-off led to minor injuries to a few personnel from both sides,” “Both sides immediately disengaged from the area.”

    China

    Events of Chinese transgressions: Need to understand the nature and timing

    • Depsang in Ladakh, 2013: Chinese troops came across the LAC, pitched tents and refused to move for several weeks until New Delhi threatened to cancel the planned visit of Premier Li Keqiang to India. This might have been a diplomatic victory for the Indian government but it also highlighted the inability of the Indian military to bring an end to the standoff or the unwillingness of the government to let the military take the lead in responding.
    • Chumar in Ladakh, Sept, 2014 in the middle of the Xi Jinping’s first visit to India: Chinese intruded at Chumar, also in Ladakh, in the middle of Chinese President Xi Jinping’s first state visit to India. This was in keeping with a reasonably long tradition of Chinese transgressions during important visits but it was also notable for confronting Indian troops in an area where they enjoyed a degree of military advantage.
    • Doklam in 2017: China provoked India with infrastructure development in a third country in Bhutan’s Doklam territory. This was a case of China trying to browbeat an Indian treaty ally.
    • Transgression across multiple locations in 2020 and Galwan valley clash: The Chinese PLA took advantage of Covid-19 and a lack of Indian military alertness to transgress across multiple locations on the LAC in eastern Ladakh. On June 15, 2020 episode when 20 Indian soldiers were killed and several others were injured in violent clashes with the PLA troops in Ladakh’s Galwan Valley.

    Why China has opened new front in Tawang?

    • Status quo along the boundary are no longer going to be limited to the Western Sector: China has traditionally been active in areas close to Ladakh given the significance of the Xinjiang-Tibet region in its domestic narrative. However, with its sights on an ageing Dalai Lama, and the issue of his succession, Beijing will want to bring into focus its claims on Tawang, and the rest of Arunachal Pradesh.
    • Huge investment in infrastructure in eastern sector: China has invested in infrastructure in the Eastern Sector over many years. This includes rail, road, and air connectivity, better telecommunications, as well as improved capacity to station and supply troops and artillery.
    • Centrality of the boundary issue in the India-China relationship: External Affairs Minister S Jaishankar has repeatedly asserted that it is no longer possible to separate the boundary question from the overall relationship and that peace and tranquillity on the LAC is the key to restoring relations. However, China is likely to keep up the pressure on the ground along the LAC, even as they continue to suggest that the two countries look beyond the differences, much like Chinese Foreign Minister Wang Yi’s comments during his March 2022 visit when he claimed that the two sides need to “inject more positive energy” into the relationship.

    China

    India’s preparedness and learnings from the incident

    • Indian Army anticipated such kind of transgression in eastern sector: The Indian Army had for long anticipated that the PLA would activate the eastern sector of the LAC, and to that extent, it is evident that steps were taken to beef up military preparedness in the region.
    • Light on what gaps to address: What the incident has effectively achieved though is the lighting up of one more section of the LAC at a time the issues in Ladakh have not yet been settled, from the point of view of India.
    • China appears not want to disengage: After 16 rounds of talks, a disengagement has taken place in eastern Ladakh, but it has not restored the status quo that prevailed in April 2020. China, for its part, appears reluctant to hold any further rounds of talks on the leftover problems in Ladakh, including its play in Depsang and Demchok areas.
    • China is only increasing the economic gap between itself and India: China has only increased the economic gap between itself and India and in the intervening years, not only built up more infrastructure in its border provinces but also tried to integrate these regions much more closely with neighbouring economies such as Pakistan and Nepal through grand projects such as the Belt and Road Initiative and pressuring Thimphu to open formal diplomatic ties with Beijing.

    Way ahead

    • India’s relationship with China has been teetering from bad to worse over the last 32 months since the standoff in Ladakh began, and it seems unlikely to improve unless Beijing’s calculus vis a vis India and the region undergoes a drastic change.
    • While Delhi’s G20 leadership may bring opportunities for engagement with Beijing, what is required first is a clear vision and a grand strategy to deal with the China challenge, instead of reacting to each crisis as it emerges.

    China

    Conclusion

    • With its sights on an ageing Dalai Lama, and the issue of his succession, Beijing will want to bring into focus its claims on Arunachal Pradesh. The border stand-off seems to have been managed for now, but Delhi needs a clear vision, grand strategy to deal with China instead of reacting to each crisis as it emerges.

    Mains question

    Q. There has been yet another transgression by Chinese troops across the Line of Actual Control (LAC) between India and China. Why China has opened new front in eastern sector? Discuss.

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  • Wildlife Conservation Efforts

    Wildlife (Protection) Amendment Bill and the Forests rights

    op-ed snap | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: WPA, FRA, CITES, etc.

    Mains level: Issues with wildlife conservation , forests rights and criminalization laws

    Wildlife

    Context

    • Rajya Sabha passed the Wildlife (Protection) Amendment Bill, 2021. The Lok Sabha had passed the Bill in the Monsoon Session. While aspects of protecting species against wildlife trade in line with international standards have scrutinised by civil society, MPs and the Parliamentary Standing Committee, the impact of the criminal legal framework fostered by the Wildlife Protection Act (WPA) is less known.

    Wildlife

    Wildlife (Protection) Amendment Bill, 2022

    • The latest amendment invests in this conception of protected areas and species by adding to the list of protected species and augmenting the penal repercussions.
    • The Bill amends the Wild Life (Protection) Act, 1972 by increasing the species protected under the law.
    • There are 50 amendments to the Act proposed in the Bill.
    • Substituting the definition of ‘Tiger and other Endangered Species’ to ‘Wild Life’, this Bill includes flora, fauna and aqua under its protection.
    • The Bill also regulates wild life trade as per the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

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    Criminal laws and wildlife conservation in latest amendment

    • Criminal laws remain unchallenged: The need for criminal laws to assist wildlife conservation has remained unchallenged since its conception.
    • Human- animal conflict not interpreted correctly: From regulated hunting to complete prohibition and the creation of ‘Protected Areas (PA)’ where conservation can be undertaken without the interference of local forest-dwelling communities, State and Forest Department control over forests and the casteist underpinnings of conservation would not have been possible without criminal law. In this context, pitting wildlife species against communities as human-animal conflict has eluded the true cost of criminalisation under the WPA.
    • Questionable WPA’s policing framework: The recent move to increase penalties by four times for general violations (from ₹25,000 to ₹1,00,000) and from ₹10,000 to ₹25,000 for animals receiving the most protection should raise questions about the nature of policing that the WPA engenders.

    Wildlife

    Study by the Criminal Justice and Police Accountability Project (CPA Project) in Madhya Pradesh

    • Records found says forest dwellers are majority of accused in wildlife related crimes: found that persons from oppressed caste communities such as Scheduled Tribes and other forest-dwelling communities form the majority of accused persons in wildlife-related crimes.
    • Found that forest department use threat of criminalisation for cooperation: The Forest Department was found to use the threat of criminalisation to force cooperation, apart from devising a system of using community members as informants and drawing on their loyalty by employing them on a daily wage basis.
    • Cases filed not only for serious crimes: Cases that were filed under the WPA did not pertain solely to the comparatively serious offence of hunting; collecting wood, honey, and even mushrooms formed the bulk of prosecution in PAs.
    • Cases files are still pending: Over 95% of the cases filed by the Forest Department are still pending.
    • Most cases filed were for hunting were lesser protected animals: Hunting offences that were primarily filed against Schedule III and IV animals (wild boars) which have lesser protection than tigers and elephants formed over 17.47% of the animals ‘hunted’ between 2016-20. Among the animals hunted the highest, only one in top five belonged to Schedule I (peacock). Surprisingly, fish (only certain species relegated to Schedule I) formed over 8% of the cases filed. A whopping 133 cases pertaining to fishing (incorrectly classified as Schedule V species) were filed in the last decade in Madhya Pradesh.
    • Making FRA subservient to the WPA: Forest rights, individual and collective, as part of the Forest Rights Act (FRA) were put in place to correct the injustice meted out by forest governance laws. These rights recognised forest-dependent livelihoods. But in inviolate PAs, making the FRA subservient to the WPA, thereby impeding its implementation.

    Wildlife

    What is forest rights Act, 2006?

    • Recognizing rights of forest dwelling communities: The Forest Rights Act (FRA), 2006 recognizes the rights of the forest dwelling tribal communities and other traditional forest dwellers to forest resources, on which these communities were dependent for a variety of needs, including livelihood, habitation and other socio-cultural needs.
    • Aim to balance rights and protect: It aimed to protect the marginalised socio-economic class of citizens and balance the right to environment with their right to life and livelihood.
    • Individual rights: The Act encompasses Rights of Self-cultivation and Habitation which are usually regarded as Individual rights.
    • Community forest rights: Community Rights as Grazing, Fishing and access to Water bodies in forests, Habitat Rights for PVTGs, Traditional Seasonal Resource access of Nomadic and Pastoral community, access to biodiversity, community right to intellectual property and traditional knowledge, recognition of traditional customary rights and right to protect, regenerate or conserve or manage any community forest resource for sustainable use.

    Conclusion

    • Criminal cases filed by the department are rarely compounded since they are meant to create a ‘deterrent effect’ by instilling fear in communities. Fear is a crucial way in which the department mediates governance in protected areas, and its officials are rarely checked for their power. Unchecked discretionary policing allowed by the WPA and other forest legislations have stunted the emancipatory potential of the FRA. Any further amendments must take stock of wrongful cases (as in the case of fishing) and resultant criminalization of rights and lives of forest dwelling communities.

    Mains question

    Q. Briefly explain the Wildlife (Protection) Amendment Bill, 2022. Illustrate with an example how criminal laws and wildlife conservation are working under the Wildlife Protection Act and Forest Rights Act.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    Urban-rural manufacturing shift: A mixed bag

    op-ed snap | Economics | Mains Paper 3: Indian Economy,Issues relating growth and development, employment

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Urban rural manufacturing shift, advantages and challenges

    manufacturing

    Context

    • There is growing evidence to suggest that the most conspicuous trend in the manufacturing sector in India has been a shift of manufacturing activity and employment from bigger cities to smaller towns and rural areas. This ‘urban-rural manufacturing shift’ has often been interpreted as a mixed bag, as it has its share of advantages that could transform the rural economy, as well as a set of constraints, which could hamper higher growth.

    Recent data by Annual Survey of Industries for 2019-20

    • In terms of capital: The rural segment is a significant contributor to the manufacturing sector’s output. While 42% of factories are in rural areas, 62% of fixed capital is in the rural side.
    • In terms of value addition: In terms of output and value addition, rural factories contributed to exactly half of the total sector.
    • In terms of employment: In terms of employment, it accounted for 44%, but had only a 41% share in the total wages of the sector.

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    Why is this shift of manufacturing away from urban locations to rural?

    • A report on manufacturing shift brought out by World Bank: The movement of manufacturing away from urban locations was brought out by the Work Bank in a report a decade ago, “Is India’s Manufacturing Sector Moving Away from Cities? Policy Research Working Paper, World Bank).
    • Higher urban-rural cost caused this shift: This study investigated the urbanisation of the Indian manufacturing sector by “combining enterprise data from formal and informal sectors and found that manufacturing plants in the formal sector are moving away from urban areas and into rural locations, while the informal sector is moving from rural to urban locations”. Their results suggested that higher urban-rural cost ratios caused this shift.
    • Steady investment in rural areas: This is the result of a steady stream of investments in rural locations over the last two decades.
    • Input costs are relatively less in rural area: Rural areas have generally been more attractive to manufacturing firms because wages, property, and land costs are all lower than in most metropolitan areas.
    • Factory floorspace supply constraints: When locations get more urbanised and congested, the greater these space constraints are.
    • Increased capital intensity of production: The driving force behind such a shift is the continuing displacement of labour by machinery as a result of the continuous capital investments in new production technologies. In cities, factories just cannot be expanded as opposed to rural areas.

    How this trend is a welcome sign?

    • Fulfilling the need of balanced development: Given the size of the Indian economy and the need for balanced regional development, the dispersal of manufacturing activities is a welcome sign.
    • Created an opportunity for small scale industries to survive after liberalization: In the aftermath of trade liberalisation, import competition intensified for many Indian manufacturers, forcing them to look for cheaper methods and locations of production. One way to cut costs was to move some operations from cities to smaller towns, where labour costs are cheaper.
    • Source of livelihood diversification in rural area: The shift in manufacturing activities from urban to rural areas has helped maintain the importance of manufacturing as a source of livelihood diversification in rural India.
    • Make up for loss of employment: This trend helped to make up for the loss of employment in some traditional rural industries. The growth of rural manufacturing, by generating new jobs, thus provides an economic base for the transition out of agriculture

    What are the challenges ahead and a solution to it?

    • While the input cost is less but the cost of capital is high, offsetting the benefits: Though firms reap the benefits of lower costs via lower rents, the cost of capital seems to be higher for firms operating on the rural side. This is evident from the shares in rent and interest paid. The rural segment accounted for only 35% of the total rent paid, while it had 60% of the total interest payments. The benefits reaped from one source seem to be offset by the increased costs on the other front.
    • Skill shortages in rural area: There exists an issue of “skills shortage” in rural areas as manufacturing now needs higher skilled workers to compete in the highly technological global ‘new economy’. Manufacturers who need higher skilled labour find that rural areas cannot supply it in adequate quantities. Manufacturers who depend only on low-wage workers simply cannot sustain their competitive edge for longer periods as this cost advantage vanishes over time.
    • Solution to this issue lies in skill development: This suggests the need for clear solutions to the problems of rural manufacturing and the most important is the provision of more education and skilling for rural workers. A more educated and skilled rural workforce will establish rural areas’ comparative advantage of low wages, higher reliability and productivity and hasten the process of the movement out of agriculture to higher-earning livelihoods

    Conclusion

    • Given the size of the Indian economy and the need for balanced regional development, the dispersal of manufacturing activities is a welcome sign. However, the compulsions of global competition often extend beyond the considerations of low-wage production and depend on the virtues of ‘conducive ecosystems’ for firms to grow.

    Mains Question

    Q. There is growing evidence to suggest that the trend in the manufacturing sector in India has been a shift of manufacturing activity and employment from bigger cities to smaller towns and rural areas. Discuss the reasons for this trend and note down the challenges ahead.

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  • Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

    India-UK Free Trade Agreement (FTA) is good for both countries

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: India: UK FTA and advantages for India

    UK

    Context

    • The ties between India and the UK are often described as a Living Bridge, a dynamic economic force of people, businesses and ideas. As Prime Minister Narendra Modi drives forward plans to make India a developed nation within the next 25 years and the UK forges deeper trade relationships around the globe, our connections are growing stronger every day.

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    Background: How India-UK trade relationship taking shape in recent time?

    • Enhanced trade relationship: India and the UK are two of the largest economies on the planet. Economic relationship between the two is reaching new heights with an enhanced trade partnership.
    • Minimised trade barriers: Both have lowered several trade barriers, pledged to bring down many more and set an ambitious target to double the value of India-UK trade by 2030.
    • Opening up opportunities in UK: Since then, Indian firms, including established businesses and recent startups, have been finding opportunities in the UK.
    • Business and investment in India: British businesses in fields ranging from food to financial services are expanding and investing in India. The car manufacturer, McLaren, which has just opened a showroom in Mumbai, is one example.
    • FTA’s beneficial for future and mutual growth: An India-UK free trade agreement is a natural next step for both, bringing two nations with extraordinary plans for their futures closer still.

    UK

    What are Free trade agreements (FTA)?

    • Free trade agreements are agreements between the two or more countries or trading blocks that primarily agrees to eliminate or reduce customer tariff and non-tariff barriers on substantial trade between them.

    Importance of Free Trade Agreements

    • FTA include multiple trade aspects: FTAs cover a wide array of topics such as tariff reduction impacting the entire manufacturing and the agricultural sector; rules on services trade; digital issues such as data localization; intellectual property rights that may have an impact on the accessibility of drugs; and investment promotion, facilitation, and protection.
    • Great impact on economy and society: Consequently, an FTA has a far-reaching impact on the economy and society. Given this, one legitimately expects transparency and greater scrutiny of the FTA process both during and after the negotiations.

    UK

    How a Free trade agreement with UK will benefit India?

    • Greater market access works both ways: Prime Minister Modi has urged Indian businesses to export their products to the world with “zero-effect, zero-defect”. In other words, high-quality goods with no environmental impact. A free trade agreement between our nations could further help achieve this target. It would help Indian firms to sell to a market that imported almost £820 billion of goods and services from around the world in the last 12 months on record.
    • UK will aid in the ongoing India’s economic progress: The Indian economy’s future is an exciting one, with the prospect of new technologies, growing businesses and better jobs for its citizens. The UK has the skills and experience to aid this progress. A deal that’s right for both could make it cheaper and easier for ambitious Indian businesses to tap into this expertise. It is also only right that the millions of SMEs that power India’s economy benefit from a deal.
    • Investment in one another’s economy will multiply the opportunities: The British cybersecurity solutions firm, Telesoft Technologies, has just said it will pump £10 million into its India subsidiary over the next five years supporting a growing telecoms sector. A free trade agreement that smooths British and Indian firms’ path to invest in one another’s economy would mean such opportunities multiply.
    • FTA can be a force of primary economic growth in uncertain times: A free trade agreement’s value cannot be measured entirely in rupees and pounds. Covid-19’s impact on supply chains, slow global economic growth and volatile markets mean we are living in uncertain times, where free trade could be the primary force of prosperity throughout history. It will help to build the long-term security that people around the world need right now.

    UK

    Conclusion

    • In the economic uncertainty, free trade can be considered as answer to building the long-term security that people around the world need right now. In this, the year of its 75th anniversary since Independence and its G20 Presidency, India is on a path to a new economic future. It would be great to have UK alongside on this journey, as we together can use trade to benefit our citizens and the world.

    Mains question

    Q. Trade between India and UK is on upward trend. Free trade agreement between the two will surely benefit both the countries. How India can take advantage of the FTA between the two?

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  • e-Commerce: The New Boom

    Regulating the Big Techs and competition in the market

    op-ed snap | Polity | Mains Paper 2: E-Governance

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Competition Commission of India

    Mains level: Issues of big techs market dominance, use, store and transfer consumer data

    competition

    Context

    • The Indian anti-trust body, the Competition Commission of India (CCI)’s move, in October, to impose a penalty of ₹1,337.76 crore on Google for abusing its dominant position in the android mobile device ecosystem, has forced us, once again, to rethink the market power of Big Tech companies.

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    Background: Acknowledging the big tech company’s market distorting abilities

    • India did not account for network effect of big techs: When India established the CCI under the Indian Competition Act 2002, it was to protect and promote competition in markets, and prevent practices that hinder competition. However, it did not account for the network effect of Big Tech companies as a force to reckon with.
    • Countries are realised their market dominance and moved to transform competition law: As their market dominance increased rather exponentially, the European Union, the United States, and even Australia realised their market-distorting abilities and moved to transform their competition law.
    • For instance, European union’s Digital market Act: The EU’s Digital Market Act and “gatekeepers” who will enforce rules and regulations ex-ante to foresee anti-competitive practices is an example.

    Competition Commission of India

    • CCI is the competition regulator in India.
    • It is a statutory body responsible for enforcing The Competition Act, 2002 and promoting competition throughout India and preventing activities that have an appreciable adverse effect on competition in India.
    • It was established on 14 October 2003. It became fully functional in May 2009.

    competition

    Big techs and the Market dominance issue

    • Market dominance is natural but gets hazy when its abused: In any free economy, market dominance is natural but things get hazy when it is abused to prevent competition.
    • Google’s case: As the CCI says, the intent of Google’s business was to make users on its platforms abide by its revenue-earning service, i.e., an online search to directly affect the sale of their online advertising services. Thus, network effects, along with a status quo bias, created significant entry barriers for competitors to enter or operate in the markets concerned.
    • Fundamental role of pricing and as a determinant of competition: Predatory pricing entails the lowering of prices that forces other firms to be out competed. Amazon and Flipkart were accused of deep discounting and creating in-house brands to compete with local sellers. Only recently, the CCI raided their offices in an anti-competition probe, leading to Amazon being forced to cut its ties with Cloudtail.
    • Consumers consent has no value: A crucial aspect of self-preferencing beyond the search algorithms is the bundling of services, especially with pre-installed apps, where the manufacturers eliminate competition without the consumer’s consent. Apple is facing heat in the U.S. and Europe over pre-installed apps after Russia forced Apple to provide third-party apps at the time of installation.

    competition

    Use of data, issue of consumer protection

    • Big techs self-asserted right to use, store and transfer consumers data: While the data economy has evolved, we have not dealt with its regulation as effectively. There is sensitive data stored on these platforms (financial records, phone location, and medical history). Big corporations have asserted ownership of the right to use or transfer this data without restriction.
    • Data greed as a motivation: While one might attribute it to efficiency barriers, the greed for data is a motivation. Further, the storage and collection of women’s and children’s data need to be dealt with more cautiously to build a safe digital place.
    • Market distortions lead to data monopoly and poor quality of services: Market distortion can also lead to poorer quality of services, data monopoly, and stifle innovation.

    Steps to ensure a level playing field and consumer protection in the age of digital transformation?

    • Urgent to need to prevent market failures and mitigate possible anti-competitive act: While the competition laws address that anomaly, they are too slow to respond in complex technical sectors. By the time an order is passed, the dominant player has gained an edge — as in the case of Google. Thus, in this context, there is an urgent need for ex-ante legislation to prevent market failures and mitigate possible anti-competitive conduct.
    • Harmony of the competition law and e-commerce rule: For a consumer, there is a need to establish harmony of the Competition law with the new Consumer Protection Act 2020 and e-commerce rules. The new law should include a mechanism to ensure fair compensation for consumers who face the brunt of the anti-competitive practices of the Big Techs. This should ensure that the penalties and restrictions being imposed on companies also ensure proportionate compensation for consumer losses.
    • Ensure a level playing field for local sellers: Pricing plays a fundamental role in defining the position of any digital platform in the marketplace. It is essential to establish an ex-ante framework to ensure a level playing field for local sellers. The Government’s Open Network for Digital Commerce (ONDC) platform is a reliable option for these small players.
    • New laws and provisions for digital marketplace: There is an urgent need to contextualise the law to the digital marketplace and devise new provisions with adequate ex-ante legislation. The EU has already noted this need through the Digital Markets Act. It is time that similar legislation is adopted in India.

    competition

    Prelims shot: What is “ONDC”?

    • Open Network for Digital Commerce (ONDC) seeks to promote open networks, which are developed using the open-source methodology.
    • The project is aimed at curbing “digital monopolies”.
    • This is a step in the direction of making e-commerce processes open-source, thus creating a platform that can be utilized by all online retailers.
    • They will encourage the usage of standardized open specifications and open network protocols, which are not dependent on any particular platform or customized one.

    Conclusion

    • Witnessing the big tech’s ability of market distortion, data monopoly and market dominance, Country’s competition laws need to be vigilant through an ex-ante framework to ensure highest consumer protection. With India now on the cusp of a digital transformation, it is essential that the country a level-playing field to ensure a fair opportunity for new-age start-ups and Micro, Small and Medium Enterprises.

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  • Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

    Curbing individualism in public health

    op-ed snap | Governance | Mains Paper 2: Health & Education

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Issues in public health management

    public

    Context

    • A failure to examine and interpret public health problems from a population perspective is leading to ineffective and unsustainable solutions as far as complex public health problems are concerned. There is a strong tendency in public health to prioritise individual-oriented interventions over societal oriented population-based approaches, also known as individualism in public health.

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    What are the problems in public health approach?

    • Micronutrient supplementation at Individualistic level instead sustainable approach at public level: Problems such as undernutrition, for which individualist solutions such as micronutrient supplementation and food fortification have been proposed as solutions in lieu of sustainable approaches such as a strengthening of the Public Distribution System, supplementary nutrition programmes, and the health services.
    • Diagnosis and treatment than the solutions that modify health behaviours: Similar is the case with chronic disease control, wherein early diagnosis and treatment is the most popular solution, with little scope for solutions that can modify health behaviours (through organised community action).

    Recent evidences that show individualism is preferred over population-based approach

    1. Pradhan Mantri Jan Arogya Yojana (PMJAY): A nationwide publicly-funded insurance scheme, the Pradhan Mantri Jan Arogya Yojana (PMJAY) falls under Ayushman Bharat. It is the largest health insurance scheme in the country covering hospitalisation expenses for a family for ₹5 lakh a year. The goal is to ensure ‘free’ curative care services for all kinds of hospitalisation services so that there is no financial burden to the beneficiary.
    • Approach needed: What is not talked about in the entire scheme is the need for hospitalisation services per year for any population.
    • Approach preferred: Instead, every individual is given an assurance that if there is a need for hospitalisation expenses, the scheme will cover the expenses, highlighting the risk/probability of every individual facing hospitalisation in a year.
    • Individualistic response: This is an individualistic response to the problem of hospitalisation expenditure faced by populations. This becomes obvious when one examines the data on annual hospitalisation across populations.
    1. vaccination for COVID-19 unlike other vaccinations: It was evident that a COVID-19 vaccine cannot prevent people from getting the disease but only reduce hospitalisation and deaths in the event of contracting COVID-19.
    • Approach needed: To effectively manage COVID-19, what was needed was to have primary, secondary, and tertiary health-care facilities to manage the above proportion of cases. This is what a population-based approach to epidemic would be focusing on.
    • Approach preferred: Instead, by focusing on a vaccination programme for the entire population, it is again an assurance and a promise to every individual that even if you get COVID-19, you will not need hospitalisation and not die. Even after the entire crisis, not much is talked about in terms of the grossly inadequate health-care infrastructure to ensure the necessary primary, secondary and tertiary care services for COVID-19 patients, in turn leading to many casualties.
    • Individualistic response: The entire focus has been on the success story that every individual is protected from hospitalisation and death achieved through vaccine coverage. Most of the deaths due to COVID-19 are a reflection of the failure to offer ventilator and ICU support services to the 1%-2% in desperate need of it. Curative care provisioning is never planned at an individual level as epidemiologically, every individual will not necessarily need curative care every time. The morbidity profile of a population across age groups is an important criterion used to plan the curative care needs of a population.

    What the data on population hospitalization suggests?

    • Episode of hospitalization a year: Data from the National Sample Survey Organisation (75th round) show that on an average, only 3% of the total population in India had an episode of hospitalisation in a year (from 1% for Assam to 4% for Goa and 10% for Kerala the need also a function of availability). The proportion hovers around 3%-5% across most Indian States.
    • Population based healthcare planning is necessary: This is population-based health-care planning. Instead, giving an assurance to every individual without ensuring the necessary health-care services to the population is not really helping in a crisis.

    Determinants of individualistic approach

    • Misconception in philosophy of public health: The dominance of biomedical knowledge and philosophy in the field of public health with a misconception that what is done at an individual level, when done at a population level, becomes public health. This is despite the contrasting philosophy and approaches of clinical medicine and public health and the evidence that support the latter and must be based on population characteristics and economic resources.
    • Visibility impact and mistake of judging a population’s characteristics: Health effects are more visible and appear convincing at the individual level, wherein improvements at the population level will be clear only after population-level analysis; this needs a certain level of expertise and orientation about society an important skill required for public health practitioners.
    • Market’s role and the effect of consumerism in public health practice: The beneficiaries for a programme become the maximum when 100% of the population is targeted. Instead of making efforts to supply evidence of the actual prevalence of public health problems, market forces would prefer to cast a wide net and cover 100% of beneficiaries. Propagating individualism has always been a characteristic feature of a consumerist society as every individual can then be a potential ‘customer’ in the face of risk and susceptibility.

    public

    Conclusion

    • The need of the hour is population-level planning, which means, population as a single unit needs to be considered. All forms of individualistic approaches in public health need to be resisted to safeguard its original principles of practice, viz. population, prevention, and social justice.

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  • Karnataka-Maharashtra border Dispute: Is it just a political tool?

    op-ed snap | Polity | Mains Paper 2: Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: provisions and powers related to State formation or alteration of state boundaries

    Mains level: Inter-state boundary disputes

    border

    Context

    • The eruption of strong language chauvinism on the border of Karnataka and Maharashtra is neither sudden nor primarily linguistic. The number of speakers of both of Marathi and Kannada languages has been overwhelmingly large. If it is not language, is it the sudden memory of a badly mangled territorial border that has irked people?

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    What is the dispute in short?

    • A petition filed by the Maharashtra government, challenging some provisions of the State Reorganisation Act, 1956 and demanding 865 villages from five districts of Karnataka. The five districts are Belagavi, Karwar, Vijayapura, Kalaburagi and Bidar.,
    • In Karnataka, tensions are high, especially in Belagavi district, which borders Maharashtra

    border

    When did the dispute begin?

    • Since the State Reorganisation Act passed in 1956: Maharashtra and Karnataka have sparred over the inclusion of some towns and villages along the state border ever since the State Reorganisation Act was passed by the Parliament in 1956. The Act was based on the findings of the Justice Fazal Ali Commission, which was appointed in 1953 and submitted its report two years later.
    • Erstwhile Mysore renamed and formed State of Karnataka and the differences erupted: On November 1, 1956, Mysore state later renamed Karnataka was formed, and differences between the state and the neighbouring Bombay state later Maharashtra erupted.
    • View of Maharashtra: Maharashtra was of the view that the northwestern district of Karnataka, Belagavi, should be part of the state, leading to a decade-long violent agitation and formation of Maharashtra Ekikaran Samithi (MES), which still holds sway in parts of the district and the eponymous city

    border

    What was the Centre’s response?

    • Union government ste up a Commission in 1966: Amid protests and pressure from Maharashtra, the Union government set up a commission under retired Supreme Court judge Justice Meharchand Mahajan on October 25, 1966. S Nijalingappa was the karnataka Chief minister then and VP Nayak was his Maharashtra counterpart.
    • Report come up with a settlement on merging of towns and villages: The report was expected to be a binding document for both states and put an end to the dispute. The commission submitted its report in August 1967, where it recommended merging 264 towns and villages of Karnataka (including Nippani, Nandgad and Khanapur) with Maharashtra, and 247 villages of Maharashtra (including South Solapur and Akkalkot) with Karnataka.
    • Report tabled in 1970 but no implementation took place as it became a poll issue: Though the report was tabled in 1970 in the Parliament, it was not taken up for discussion. Without the implementation of the recommendations, demands of Marathi-speaking regions to be part of Maharashtra and Kannada-speaking regions to be part of Karnataka continued to grow. MES made it a poll issue in many parts of Belagavi and won successive elections from constituencies in the district.

    Bilingualism: an essential element of the culture of the area

    • Extended families on both sides: The castes and communities on both sides of the disputed border have their extended families spread on either side of it.
    • Harmonious Cultural exchange: All of the harmoniums and sitars played by the greatest among Karnataka’s singers have been made in Maharashtra’s Miraj town for the last 120 years.
    • Influence of Bhakti movement on one another: In the past, the bhajans of Tukaram have made their way into the hearts of the Kannada speakers with as much ease as did the vachanas of Basaveshwar’s saint-followers into the minds of Marathi speakers.
    • Influence of one another’s language: Thousands of Marathi words are of Kannada origin and a similar number of words in Kannada have assimilated the Indo-Aryan roots through Marathi.

    Critique: Dispute is more of a political tool

    • Dispute is visible but not in the essence: The dispute is in the name of language, but it is not linguistic in essence. It is in the name of a border, but it is not territorial in essence.
    • The dispute is becoming more of a political demand: People know that the area will see disturbance when politicians want to unleash it. Appealing to language chauvinism acquires an instrumentalist-political demand.
    • Diverting the discontent: The truth is, neither the language nor the people along the state border are an issue for them, as they should be. What matters to the political war-lords is to find a way of diverting the discontent, no matter what harm it brings to the harmony of communities in the area.

    Conclusion

    • Almost two decades after the petition, its maintainability remains challenged. Karnataka has resorted to Article 3 of the Indian Constitution to argue that the Supreme Court does not have the jurisdiction to decide the borders of states, and only Parliament has the power to do so. Maharashtra has referred to Article 131 of the Constitution, which says that the Supreme Court has jurisdiction in cases related to disputes between the Union government and states.

    Mains Question

    Q. There seems the cultural, traditional and lingual exchange in the border areas of the states in India. Despite of the cultural amity, disputes resurface time ang again. Discuss with a case of Maharashtra Karnataka border dispute.

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  • Modern Indian History-Events and Personalities

    Is it Jawaharlal Nehru’s fault?

    op-ed snap | | Mains Paper 1: Modern Indian History

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Integration of Princely states

    Nehru

    Context

    • Jawaharlal Nehru has recently come under criticism for declining to accept the Kashmir Maharaja’s initial offer to accede to India in September 1947, several weeks before the tribal invasion. Even great statesmen make occasional mistakes and Nehru was no exception. However, a careful examination of the historical background shows that Prime Minister Nehru cannot be faulted in this case.

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    Background: Jammu and Kashmir’s Maharaja Hari Singh and his stand on accession

    • Stand against accession with either India or Pakistan: Maharaja Hari Singh of Jammu and Kashmir was one of the few princely rulers who had held out against accession to either India and Pakistan before the partition of British India.
    • Lord Mountbatten visit and assurance: a couple of months prior to the partition, the Viceroy, Lord Mountbatten, visited Srinagar in an attempt to persuade the Maharaja to opt for one or the other of the two states, offering him an assurance from Sardar Patel that India would raise no objection if the ruler were to opt for Pakistan.
    • Maharaja evaded discussion and hopes for an independent state: The Maharaja entertained his guest in regal style but evaded any discussion on the political issue, pleading a stomach ailment. Hari Singh evidently hoped that, with the lapse of British paramountcy, he would become the ruler of an independent and sovereign state.

    How Maharaja’s hope of a sovereign state got dashed?

    • Uprising assisted by Pakistan: An uprising in Poonch assisted by Pakistani elements.
    • Economic sanctions by Pakistan: an undeclared economic embargo imposed by the Pakistani authorities. Since Kashmir’s main trade exchanges in those days were with Pakistan, the unofficial embargo resulted in great hardship.

    How Maharaja revised his position on accession?

    • Decided to talk on terms of accession and a message to Nehru: Maharaja asked Justice Mehr Chand Mahajan, his prime minister-designate, to convey to Nehru the terms on which he was prepared to accede to India.
    • Nehru urging Maharaja to induct Sheikh Abdullah into state government: Nehru had been urging the Maharaja to induct Sheikh Abdullah, the leader of the secular National Conference, into the state government in order to ensure popular support for the administration.
    • Reluctant to have immediate administrative reforms Maharaja refused: The Maharaja was not agreeable to introducing immediate reforms in the administration of the state. The Maharaja indicated that he was not prepared to do so, at least at this stage.
    • Nehru reiterated to associate Abdullah with the governance of the state: When Mahajan conveyed these terms to Nehru in the third week of September, the latter reiterated that Abdullah should be freed from prison and associated with the governance of the state.

    Nehru

    Why did Nehru insist on bringing Sheikh Abdullah into the administration?

    • He anticipated the armed intervention by Pakistan and armed rebellion: Nehru anticipated armed intervention by Pakistan in Kashmir and foresaw that this could be repulsed only by a government that enjoyed popular support.
    • A letter to Sardar patel before a month before tribal invasion: He set out his views in a letter to Sardar Patel on September 27, 1947, nearly a month before the tribal invasion. This remarkable letter has not received the attention it deserves.
    • Anticipating the demand of the time, he confirmed his way: Nehru, therefore, concluded that the only acceptable course was for the Maharaja to seek the cooperation of Sheikh Abdullah and the National Conference while acceding to India. This was the only effective way of countering Pakistani designs.

    Interesting: Nehru’s letter to Sardar Patel a month before tribal invasion assisted by Pakistan

    • “The Muslim League in the Punjab and the NWFP are making preparations to enter Kashmir in considerable numbers. The approach of winter is going to cut off Kashmir from the rest of India,” he wrote. “I understand that the Pakistan strategy is to infiltrate into Kashmir now and to take some major action as soon as Kashmir is more or less isolated because of the coming winter. I rather doubt if the Maharaja and the State forces can meet the situation by themselves without some popular help… Obviously the only major group that can side with them is the National Conference under Sheikh Abdullah’s leadership.”

    Nehru

    Rest is the story of accession

    • Nehru’s assessment confirmed and Maharaja agreed to his advice: Nehru’s assessment of Pakistan’s plans to invade Kashmir were confirmed within three weeks. It was only at this stage that the Maharaja heeded Nehru’s advice. He inducted Sheikh Abdullah into the government and acceded to India. This had momentous consequences for the defence of Kashmir against the invaders.
    • Resistance against Pakistani invaders: The normal administrative machinery had broken down and responsibility for maintaining law and order had been taken over by National Conference volunteers. Abdullah and his followers organised the popular resistance against the Pakistani invaders.
    • Advance of raiders and then Indian troops were airlifted to assist and protect the state: With the advance of the raiders towards Srinagar, the Maharaja’s administration had virtually collapsed. By the time Indian troops were airlifted to Srinagar on October 27, 1947, the Maharaja had departed to Jammu for safety. The first batches of Indian troops who had been airlifted to Srinagar had arrived without transport vehicles.

    Conclusion

    • Far from being a blunder, Jawaharlal Nehru’s insistence on linking accession to the installation of a popular government in Jammu and Kashmir bears testimony to his foresight and statesmanship.

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