Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- India's relation with its neighbours and progress on SAARC and BIMSTEC.
Context
India has promoted regional cooperation in South Asia in a spirit of generosity, without insisting on reciprocity.
Relations with Sri Lanka
- Beginning of new chapter in ties: The visit of Sri Lankan Prime Minister Mahinda Rajapaksa to India in February marked the beginning of a new chapter in ties with a friendly neighbour.
- The neighbour with which India has close historical bonds straddling culture, religion, spirituality, art and language.
- Growing convergence against terrorism: More relevantly, there is a growing convergence against terrorism following the Easter attacks in Sri Lanka last April.
- There is deep appreciation in Sri Lanka for the free emergency services provided through 280 ambulances gifted by India, now operational in eight of the country’s nine provinces.
- Prospects for tri-lateral cooperation: There are much better prospects today for tri-lateral cooperation between India, Japan and Sri Lanka in the development of the East Container Terminal at Colombo port and the proposed joint development of the Trincomalee oil storage tanks.
- Indicators of a new warmth in relations:
- Several infrastructure projects.
- Direct flights between Chennai and Jaffna.
- Resumption of ferry services.
- India’s new lines of credit and construction of houses for the internally displaced.
- Homeless and landless people are indicative of a new warmth in relations.
- First visit to India: That both Mahinda Rajapaksa and his brother President Gotabaya chose India as the destination for their first overseas visits after assuming office bodes well.
Relations with Maldives
- First visit by PM Modi: After the general elections last year, PM Modi’s first foreign visit was to the Maldives in June 2019.
- India first: The visit was to establish warm and friendly relations with President Ibrahim Solih, who has done much to promote closer relations with India through his “India First Policy”.
- First visit to India: India was the first country that Solih had visited in December 2018, a far cry from his predecessor’s brazen anti-India slant.
- Soon after assuming office, Solih’s government annulled a controversial 2015 law that was meant to allow foreigners, particularly from China, to arbitrarily own islands.
- Projects worth 180 crores inaugurated: The inauguration during Modi’s visit of two projects worth Rs 180 crore-the Coastal Surveillance Radar System and the Composite Training Center of the Maldivian National Defence Forces-has deep significance for the success of India’s neighbourhood policy.
- $800 million worth lines of credit: India’s offer of lines of credit worth about $800 million and other capacity-building projects for water supply and sewerage are strong planks in our economic ties.
- Terrorism and radicalisation are subjects of common concern.
- DOSTI exercise: The agreement to restart the tri-lateral DOSTI naval exercise as also the tri-lateral NSA-level dialogue between India, Maldives and Sri Lanka lay the ghost of the Yameen era to rest.
Relations with Nepal
- Inauguration of first cross-border petroleum pipeline: In September last year, India and Nepal jointly inaugurated South Asia’s first cross-border petroleum products pipeline from Motihari in India to Amlekhgunj in Nepal.
- Prioritising the rebuilding of houses: India is also prioritising the rebuilding of houses in Gorkha and Nuwakot districts, with “Build Back Better” as the guiding principle in keeping with Modi’s clarion call for a Coalition for Disaster Resilient Infrastructure (CDRI).
- Role played by geography: Geography plays a determining role in creating inter-dependence.
- Even as Nepal, like other South Asian countries, seeks closer ties with China, there is a much better appreciation today that India’s role as a key economic and developmental partner is unique and indispensable.
Relations with Bangladesh
- Model partnership: India’s relations with Bangladesh under Modi and Sheikh Hasina have evolved into a model partnership, consolidated by-
- High-level exchanges.
- Mutual trust and-
- Enhanced cooperation on security matters.
- Border firing incidents: Incidents of border firing, though rare, have an adverse fall-out on public perception and need to be handled with sensitivity.
Relations with Bhutan
- The India-Bhutan friendship runs deep, with growing cooperation in the vital hydro-power sector providing it a fresh impetus.
- Notably, the centrepiece Mangdechhu project (750 MW) was completed on schedule last year.
- RuPay card in Bhutan: The introduction of the RuPay card in Bhutan and elsewhere in the neighbourhood will further cement economic and people-to-people ties.
Relations with Myanmar
- Security cooperation: When India shortly hands over to Myanmar the INS Sindhuvir, a Kilo Class submarine, it will propel security cooperation to a higher pedestal.
- Cross-border strike in Myanmar: Close coordination with Myanmar was evident earlier in the cross-border strike on insurgents by Indian forces in 2015.
Unrealised potential of South Asia
- South Asia–some figures: has 1.8 billion people and a combined GDP of nearly $3.47 trillion, with India’s economy the largest by far.
- South Asia has great potential but has been held back by Pakistan.
- Hindrance for cooperation with Afghanistan: Pakistan has not only denied India and Afghanistan the overland transit route for trade, but has also thwarted Modi’s efforts to place at centre stage the common struggle against poverty, illiteracy and natural disasters.
Cooperation within SAARC: Pakistan has held to ransom cooperation within SAARC by raising extraneous matters, perpetuating terrorism and rejecting the ineluctable logic of intra-South Asian trade, which remains abysmally poor.
- Pakistan opt-out of satellite project: Islamabad decided to opt-out of the SAARC satellite project proposed by India, and it was finally launched in 2017 without Pakistan’s participation.
- Motor Vehicle Agreement: Pakistan also played the role of a spoiler at the 18th SAARC Summit in November 2014, preventing progress on the proposed Motor Vehicle Agreement for the regulation of passenger and cargo vehicular traffic amongst SAARC member states.
- Implications for Afghanistan: Pakistan’s intransigence on connectivity impairs Afghanistan’s ability to link up with other countries in South Asia.
- The air corridor between India and Afghanistan cannot cater to the full potential of trade ties.
- Sustainability of Chabahar port: Recent tensions between the US and Iran have cast a shadow on the sustainability of Chabahar port as an alternative maritime supply route to Afghanistan at a crucial juncture in its history.
- India’s role in Afghanistan: India’s proactive role in recent years in building much-needed infrastructure and capacities in Afghanistan is widely recognised.
- Deepened defence cooperation: Defence cooperation too has deepened under Modi, with India dropping its traditional coyness in such matters.
- Much more may have to be done, though, to help Afghanistan achieve stability through economic prosperity.
- Afghanistan’s true destiny lies with South Asia.
Key aspects of Neighbourhood First Policy
- Response to security challenges: Neighbourhood First involves India’s willingness to respond to security challenges with new grit.
- Humanitarian assistance: It also involves for India to be an enthusiastic responder in providing humanitarian assistance and conducting disaster relief operations in Nepal, Sri Lanka, the Maldives and the extended neighbourhood.
- Developmental assistance: Even more important is the steady progress made by India to expand developmental assistance and improve project execution based on collaborative partnerships.
- India’s developmental assistance to six South Asian countries was over Rs 21,100 crore.
Progress on BIMSTEC
- BIMSTEC, the other regional grouping, has done well.
- Participation in disaster Management Exercise: In February this year, delegates and rescue teams from India, Bangladesh, Nepal, Sri Lanka and Myanmar enthusiastically participated in disaster management exercises conducted at Ramachandi Beach at Puri in Odisha.
- Cross-border electricity grid: The signing of the MoU on BIMSTEC Grid Interconnection at the fourth BIMSTEC Summit, attended by all seven nations in Kathmandu in August 2018, provides a fillip to cross-border electricity trade.
- India’s focus on BIMSTEC and its Act East Policy have served to highlight India’s key role in promoting cooperative growth and development in several parts of South Asia.
Conclusion
In a world increasingly characterised by a “my country first” approach, India has endeavoured to harness the impulse for regional cooperation in a spirit of generosity, without insisting on reciprocity, to realise the motto of Security And Growth For All In The Region (SAGAR).
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Need for India to take a look at its current trade policy.
Context
Trump has made India’s trade headache more acute. But he has also opened up opportunities.
Political polarisation in both countries
- Impeachment attempt: The Democrats in the US have struggled to oust Trump from the White House and rarely find anything they can agree with their President on.
- The deeper political divide in India: While ousting Narendra Modi through a legal process of impeachment is not an option in India, the political divide is even deeper.
- No consensus on foreign policy
- Under Trump, consensus on foreign policy in Washington has broken down.
- In Delhi, the Opposition has never been willing to acknowledge the diplomatic successes of the government.
- But the usually bipartisan support for foreign policy in the strategic community has eroded.
- Many leading voices of the establishment who have a long and distinguished service have become major critics of foreign policy.
Comparison of India’s trade with the US and China
- Trade with the US: In 1995, total two-way trade, including goods and services, between India and the US was $11 billion.
- In 2018, it crossed $140 billion.
- It is reported to be around $150 billion in 2019.
- In trade with the US, India enjoys a surplus of nearly $23 billion.
- A 14-fold increase in trade turnover in 25 years is certainly not something to sneer at.
- Can India and the US do better on trade? Yes, of course.
- Only a few years ago, the two sides were looking at an annual trade target of $500 billion. That looks rather ambitious amidst the current disputes
- Trade with China: India’s China trade too has risen, even more rapidly.
- From a couple of hundred million dollars in the mid-1990s to nearly $90 billion in 2019.
- India has a deficit of nearly $57 billion with China.
Trade disputes between India-US
- Trade has long been a contentious issue between Delhi and Washington.
- There had been enduring tension since the late 1980s between the US demand for-
- Greater market access.
- Intellectual property protection.
- And a host of other demands and India’s own cautious approach to economic liberalisation.
- Rise in pressure under Trump administration: All recent US administrations have applied continuous pressure on India for trade agreements.
- The pressure has significantly risen under President Trump.
- Trade dispute at the centre of the relationship: If his predecessors were willing to cut some slack for India by citing larger political and strategic considerations in the bilateral ties, Trump has put trade disputes at the front and centre of the relationship.
- Officials in the Department of Commerce and the US Trade Representative’s office have adopted extremely aggressive tactics in the negotiation with India.
- Result of a radical reorientation of US trade policy: Trump has undertaken a radical reorientation of US trade policy.
- For Trump, this is a matter of long-standing ideological conviction as well as a political convenience.
- He has bet that the anti-free-trade White working classes in the American rust belt are the key to his re-election.
- No option but to deal with it: Given America’s pole position in the global trading system, you have no option but to deal with it.
- Trump is getting away with his demand for the restructuring of trade relations with key economic partners.
- He has renegotiated the NAFTA with neighbours Canada and Mexico and has compelled China to start reducing the massive trade deficit with the US.
- The difference in India and China’s response to the US: In response to Trump’s pressure, Xi reaffirmed his commitment to economic globalisation and domestic liberalisation and wooed American investors with even greater vigour than before.
- India embracing protectionism: India appears to be sending the opposite signal — of a definitive drift towards protectionism. India’s trade troubles are certainly not limited to the engagement with the US.
Problem with India’s trade policies
- India walking away from RCEP: Delhi walked away at the very last minute from signing the RCEP agreement last year to deep disappointment among its partners including the ASEAN, Australia, Japan and New Zealand.
- The trade deficit with China: One of the main arguments cited by India was the massive trade deficit with China and the potential danger of it widening further under RCEP.
- Failure in negotiations with the EU: The European Union is reluctant so far to restart trade negotiations that ended in great frustration for Brussels some years ago.
- No deal with Australia and New Zealand: Australia and New Zealand have given up.
- Neighbours complaint: India’s immediate neighbours complain that India’s rhetoric on connectivity and regionalism is matched by the multiple non-tariff barriers that continue to constrain commerce across the South Asian frontiers.
- Why so many deals are pending? It is certainly probable, statistically, one in a million, that the fault lies, always, with India’s partners. But one would think there might be a real problem with Delhi’s own trade policies.
Conclusion
- New opportunity: Trump has certainly made India’s trade headache more acute. But he has also opened up opportunities.
- His trade war on China has put pressure on the global supply chains centred around China.
- India not the beneficiary of the US-China trade war: Many companies are moving their production out of China, but only a few are turning towards India.
- While Delhi has talked the talk on taking advantage of the US-China trade war, it is yet to get its act together.
- No opposition against protectionism at home: What makes Delhi’s devaluation of trade as a key instrument of economic growth potentially irreversible is the fact that there is little domestic political opposition to it.
- Time to take a hard look at trade policy: For now, though, India’s partnership with the US might not only survive the current trade tensions but advance during Trump’s visit.
- There is so much happening elsewhere in the relationship — especially in the defence and security domain.
- But the time has come for Delhi to take a hard look at its current trade policy that threatens to undermine India’s regional and international prospects.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Understanding the implications of China's rise for the security of India.
Context
The country needs a clearly articulated white paper on its defence needs which sets out its strategic concerns.
India’s defence deals in the pipeline
- The first lot of Rafale fighter jets are expected shortly.
- The final deal on the 200 Kamov Ka-226 light utility helicopters from Russia is in advanced stages and expected to be signed soon.
- In October 2018, India and Russia had signed a $5.4-billion mega-deal for the S-400 Triumf Air Defence System.
- Under contemplation today are yet another set of high-value U.S. defence deals, including additional purchases of P-8I Maritime Reconnaissance Aircraft and Apache Attack Helicopters.
- NASAMS-II: Speculation is rife that India and the U.S. would sign a deal for the National Advanced Surface to Air Missile System (NASAMS-II).
- Which is intended as part of a multi-layered missile shield to protect Delhi.
- The U.S. side is also hoping for two more mega defence deals, worth $3.5-billion to be signed for 24 MH-60 Romeo Multi-Mission Helicopters for the Navy and an additional six AH-64E Apache Attack Helicopters for the Army.
Need for the white paper
- Given India’s rising global profile, and with two major adversaries on its borders, India needs to be fully prepared.
- A missing piece: What is lacking in the defence jigsaw puzzle is a well-considered and clearly articulated white paper on India’s defence needs.
- The white paper would deal with?
- It sets out its strategic concerns.
- How it is positioning itself to meet these challenges.
- The putative costs of meeting the country’s defence needs.
- Explain the Pakistan threat: In the case of Pakistan, the threat motif is, no doubt, obvious.
- India’s political and defence establishment are on record that India can easily defeat Pakistan, even if a “weaker” Pakistan possesses “nuclear teeth”.
- What is needed? A great deal of effort is called for to-
- Explain to the public, the true nature of the threat posed by Pakistan.
- And why India is so confident of beating back the Pakistani challenge.
- Explaining the China threat: Meeting the military, strategic and economic challenge from China is an entirely different matter.
- Understanding the nature of the threat: China is not Pakistan.
- While China and Pakistan may have established an axis to keep India in check, explaining the nature of the threat posed by China to India is a complex task that needs to be undertaken with care and caution.
The China threat
- Is China an existential threat for India?: There are many experts who express doubts as to whether China intends today to pursue its 19th Century agenda, or revert to its belief in ‘Tian Xia’.
- Undoubtedly China aims to be a great power and an assertive one at that.
- India’s defence planners should, however, carefully assess whether there are degrees of “assertiveness” in China’s behavioural patterns.
- There is little doubt that regarding its claim to areas falling within the ‘nine-dash lines’ (the first island chain), China is unwilling to make compromises.
- Whether this applies to other regions of Asia and the Indo-Pacific, calls for an in-depth study.
- The analysis is needed: It would be premature for India without undertaking such an analysis, to adhere to a common perception that China is intent on enforcing a Sino-centric world order in which India and other countries would necessarily have to play a secondary role.
- What after analysis? If after undertaking such an “analysis”, it appears that China does not pose a direct threat to India’s existence, strategic and military planners need to come up with a different set of alternatives.
- Western influence over thinking about China: In recent years, much of India’s strategic thinking regarding China’s aggressive behaviour has been coloured by that of the U.S. and the West.
- Though it is a proven fact that China has not used lethal military force abroad since the 1980s.
- Concerns over BRI: China’s Belt and Road Initiative (BRI) does convey an impression that China seeks to put itself at the centre of the world.
- The speed with which many of the steps to progress the BRI are being taken again conveys an impression that China is intent on shrinking the physical and psychological distance between Europe and East Asia.
- No intention of confrontation: This does not, however, necessarily mean that China is preparing to confront individual countries in Asia, such as India, which do not subscribe to the BRI.
What would the white paper explain?
- Answer to whether China is a threat to India? A defence white paper would provide a more definitive answer to such issues.
- A detailed exercise to assess whether China is indeed a threat, rather than a challenge, to India should prove invaluable.
- It is possible that a detailed study may indicate that China understands that there are limits to its strength and capabilities.
- China’s weaknesses: Several instances of late have shown the frailties in China’s policies –Hong Kong, Taiwan, and even Xinjiang are instances that indicate that China has its own Achilles heel.
- Consequently, China may not be ready, for quite some time at least, to seek a direct confrontation with India.
- Conflict or furthering the influence? A defence white paper may also indicate that rather than a “conflict-prone” role, China is more intent on an “influence-peddling” one.
- This is important from India’s point of view.
- Converting economic heft into strategic influence: Already there is one school of thought that believes that Beijing is better at converting its economic heft into strategic influence, rather than employing force beyond certain prescribed areas.
- Coming to understanding over the respective sphere of influence: If the above view is espoused by a defence white paper then, despite the vexed border dispute between India and China, the two countries could try and arrive at a subliminal understanding about respective spheres of influence.
- What is India’s major concern? Today, one of India’s major concerns is that China is attempting to intrude into its sphere of influence in South Asia, and the first and second concentric circles of India’s interest areas, such as Afghanistan and parts of West Asia.
- The peaceful co-existence: The defence white paper might well provide a strategic paradigm, in which India and China agree to peacefully co-exist in many areas, leaving aside conflict zones of critical importance to either, thus ensuring a more durable peace between them.
- Is geo-economics is the primary arena of competition: One other outcome that the defence white paper could attempt is: whether China views geo-economics as the primary arena of competition today.
- Avenue for cooperation: China has invested heavily in artificial intelligence, robotics and biotechnology, and perhaps, India needs to recognise that rather than blacklisting Chinese technology Tech firms, (which could prove counter-productive) there exist avenues for cooperation, paving the way for better state-to-state relations.
Conclusion
The defence white paper needs to underscore that a country’s domestic politics are an important pointer to a stable foreign policy. There could be different schools of thoughts within a nation, but equilibrium needs to be maintained if it is not to adversely impact a nation’s foreign policy imperatives. An impression that the country is facing internal strains could encourage an adversary, to exploit our weaknesses. This is a critical point that the defence white paper needs to lay stress on.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Adoption of innovation in improving the healthcare system in India.
Context
India needs to tap the potential of the health-care start-ups in India and make the necessary provision to deal with the problems in the adoption of innovations in health-care.
Expanding the supply side
- Need to increase the hospital empanelled: As the scale of this scheme grows, a key area of focus is-
- To expand the secondary and tertiary hospitals empanelled under PM-JAY and
- To ensure their quality and capacity while keeping the costs down.
- The ratio of doctors and beds: At present, there is one government bed for every 1,844 patients and one doctor for every 11,082 patients.
- 3% hospitalisation under the scheme: In the coming years, considering 3% hospitalisation of PM-JAY-covered beneficiaries, the scheme is likely to provide treatment to 1.5 crore patients annually.
- This means physical and human infrastructure capacity would need to be augmented vastly.
- Need for more beds: Conservative estimates suggest that we would need more than 150,000 additional beds, especially in Tier-2 and -3 cities.
- Long-term strategy: While a comprehensive long-term strategy will focus on expanding hospital and human resources infrastructure, an effective near-term approach is needed to improve efficiencies and bridge gaps within the existing supply and likely demand.
- Mainstreaming innovation: A strong, yet under-tapped lever for accelerating health system efficiency and bridging these gaps is mainstreaming innovation in the Indian health system.
Transformative solutions
- India’s burgeoning entrepreneurial spirit combined with a systematic push for the development of a start-up ecosystem has led to a plethora of innovations in health care.
- It is estimated that there are more than 4,000 health-care technology start-ups in India.
- How do start-ups help? Today, start-ups are working to bring-
- Innovative technologies and business models that leapfrog infrastructure.
- Human resources.
- Cost-effectiveness and efficiency challenges in Tier-2 and -3 cities.
- How other innovations could help?
- Artificial Intelligence platforms that aid in rapid radiology diagnoses in low resource settings.
- Tele-ICU platforms to bridge the gap in high-skilled critical care personnel.
- Centralised drone delivery of blood, medicines and vaccines to reach remote locations cost-effectively and reliably are all no longer just theoretical ideas.
- Time to implement transformative solutions: It is high time for transformative solutions to make their way into our hospitals, especially in Tier-2 and -3 cities, to turbocharge the way health care is delivered at scale.
Challenges in mainstreaming healthcare innovations
- Lack of uniform regulatory standards: One challenge is non-uniform regulatory and validation standards.
- Regulations evolving in India: Regulatory requirements, specifically for biomedical start-ups, are still evolving in India.
- As a result, hospitals often rely on foreign regulatory certifications such as FDA and CE, especially for riskier devices and instruments.
- Government to overhaul standards: The government is now pushing ahead to overhaul Indian med-tech regulatory standards and product standards which will help bridge this trust-deficit.
- Difficulty in the promotion of start-ups: Another problem in promoting start-ups is the operational liquidity crunch due to a long gestation period.
- Health-care start-ups spend long periods of time in the early development of their product, especially where potential clinical risks are concerned.
- Long gestation period: The process of testing the idea and working prototype, receiving certifications, performing clinical and commercial validations, and raising funds, in a low-trust and unstructured environment makes the gestational period unusually long thereby limiting the operational liquidity of the start-up.
- Lack of framework to adopt innovation: Another hurdle is the lack of incentives and adequate frameworks to grade and adopt innovations.
- Health-care providers and clinicians, given limited bandwidth, often lack the incentives, operational capacity, and frameworks necessary to consider and adopt innovations.
- This leads to limited traction for start-ups promoting innovative solutions.
- Procurement challenges: Start-ups also face procurement challenges in both public and private procurement.
- They lack the financial capacity to deal with lengthy tenders and the roundabout process of price discovery.
- Private procurement is complicated by the presence of a fragmented customer base and limited systematic channels for distribution.
Way forward
- Identify promising market-ready products: To accelerate the process of mainstreaming innovations within the hospital system in India-
- We need to focus on identifying promising market-ready health-care innovations that are ready to be tested and deployed at scale.
- Facilitate standard operational validation studies: There is a need to-
- Facilitate standardised operational validation studies that are required for market adoption.
- To help ease out the start-up procurement process such that these solutions can be adopted with confidence.
- This, in effect, will serve the entire ecosystem of health-care innovators by opening up health-care markets for all.
- Need to develop an interface between hospital and start-ups: A strong theme in mature health-care systems in other parts of the world is a vibrant and seamless interface between hospitals and health-care start-ups.
- Through Ayushman Bharat, India has the unique opportunity to develop a robust ecosystem where-
- Hospitals actively engage with health-care start-ups by providing access to testbeds, communicating their needs effectively and adopting promising innovations.
- Start-ups as collaborators: Start-ups can be effective collaborators for the most pressing health-care delivery challenges faced by hospitals.
Conclusion
The dream of an accessible, affordable and high-quality health-care system for all, will be achieved when we work in alignment to complement each other and jointly undertake the mission of creating an Ayushman Bharat.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Designation of India as developed country by the US and its implications for India-Strategy to counter the impact.
Context
The United States’s annual exercise of designating developing, and least developed countries has assumed importance for India this year: it has been dropped from the list of developing countries.
‘Developing’ or ‘developed’ country designation by the US
- Last week, the United States officially designated developing and least-developed countries for the purposes of implementing the countervailing measures.
- The division is provided by the Agreement on Subsidies and Countervailing Measures (ASCM) of the World Trade Organisation (WTO).
- Why the designation matters?
- The higher level of subsidies allowed: According to the ASCM, developing countries are allowed to grant higher levels of subsidies as compared to the developed countries before countervailing duties (CVD) can be imposed.
- What are the limits? The maximum limit of the subsidy is-
- For developed country: Limit is maximum 1% of the import value of the investigated product.
- For developing country: Limit is a maximum 2% of the import value of the investigated product.
- If the limit is breached the importing country can impose a countervailing duty on the product.
India as a target by the US
- Provision of self-designation: Under the WTO rules, any country can “self-designate” itself as a developing country.
- No criteria specified by the WTO: The WTO does not lay down any specific criteria for making a distinction between a developed and a developing country member, unlike in the World Bank where per capita incomes are used to classify countries.
- Arbitrary criteria used to designate India: Despite this clearly laid down criterion in the WTO rules, the United States Trade Representative (USTR) employed an arbitrary methodology that took into consideration-
- “Economic, trade, and other factors, including the level of economic development of a country (based on a review of the country’s per capita GNI) and a country’s share of world trade” to exclude India from list of designated developing countries.
- Second such instance after denying GSP: Excluding India from the lists of developing countries for the purposes of using countervailing measures or denying benefits of GSP are but two of the more recent initiatives that the U.S. has taken to challenge India’s status as a developing country in the WTO.
What would the impact on India?
- Loss of Special and Differential Treatment (S&DT): India would lose the ability to use the special and differential treatment (S&DT) to which every developing country member of the WTO has a right.
- What is S&DT? In short, S&DT lessens the burden of adjustment that developing countries have to make while acceding to the various agreements under the WTO.
- How S&DT benefited India?S&DT has been particularly beneficial for India in two critical areas: one, implementation of the disciplines on agricultural subsidies and, two, opening up the markets for both agricultural and non-agricultural products.
- Limits on subsidies: The WTO Agreement on Agriculture(AoA) provides an elaborate discipline on subsidies.
- Subsidies are classified into three categories, but two of these are virtually outside the discipline since the WTO does not limit spending on these categories of subsidies.
- Limits on price support measures: The discipline exists in case of price support measures (minimum support price) and input subsidies which is the more common form of subsidies for most developing countries, including in India.
- Limits on spending on prices support measures: For developing countries, spending on price support measures and input subsidies taken together cannot exceed 10% of the total value of agricultural production.
- In contrast, developed countries are allowed to spend only 5% of their value of agricultural production.
Shifting to DBT
- Why shifting to DBT necessary? India is a major user of price support measures and input subsidies.
- And given the constraints imposed by the AoA, the government has spoken about its intention to move into the system of direct benefit transfer (DBT) for supporting farmers.
- No limit on spending through DBT: A shift to DBT is attractive for India since there are no limits on spending, unlike in case of price support measures and input subsidies.
- Rework subsidies’ programme: Faced with on-going farm distress, the government has had to rework its subsidies’ programme in order to extend greater benefits, especially to small and marginal farmers.
- Challenges in the implementation of DBT
- Implementation of DBT in agriculture has several insurmountable problems.
- Difficulty in identifying the beneficiary: Targeting potential beneficiaries of DBT seems difficult at this juncture for a number of reasons, including inadequate records of ownership of agricultural land on the one hand, and the presence of agricultural labour and tenants on the other.
- This implies that in the foreseeable future, India would continue to depend on price support measures and input subsidies.
- How it matters: Given this scenario, the government needs the policy space to provide adequate levels of subsidies to a crisis-ridden agricultural sector.
- And therefore it is imperative that continues to enjoy the benefits as a developing country member of the WTO.
Issue of tariffs
- The issue of market access, or the use of import tariffs, is one of the important trade policy instruments.
- Provision of no reciprocal tariff cuts: It has some key provisions on S&DT, which the developing countries can benefit from. The most important among these is the undertaking from the developed countries that they would not demand reciprocal tariff cuts.
- Over the past two years, the government of India has been extensively using import tariffs for protecting Indian businesses from import competition.
- With the increasing use of tariffs, almost across the board, India’s average tariffs have increased from about 13% in 2017-18 to above 17% at present.
- Why it matters? Developed country members of the WTO have generally maintained very low levels of tariffs, and, therefore, India’s interests of maintaining a reasonable level of tariff protection would be well served through its continued access to S&DT, by remaining as a developing country member of the WTO.
Conclusion
With the changing stance of the US towards India, the government must ensure its international trade and agriculture at home is not adversely impacted.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Changing India-US relation dynamics in the new global order.
Context
Delhi needs to unlearn some of the assumptions about US policy as it prepares to host Trump next week. While the diaspora is important and could be of some value in dealing with Trump, it can’t override the deeper forces animating American politics.
Changing America under Trump
- Restriction on immigration: Trump’s America wants the Americans to come home but is shutting the door on unrestricted immigration from the rest of the world.
- Domestic critics say America has been a nation of immigrants and Trump is wrong to keep them out.
- Why the restriction on immigrants? But Trump has much support among the working people who know-
- Immigration keeps wages low.
- Helps the capitalist class and-
- Disrupts the familiar cultural and social landscape.
- Some want America out
- Some chancelleries in the world demand that America must go home.
- The president of the Philippines wants to end Manila’s century-old relationship with the US military.
- Iran wants America out of the Gulf.
- Russia and China would like to see the US forces out of Europe and Asia respectively.
- The world is paying serious attention to the possibility of Yankee going home.
Downsizing of the US role and how the world is responding?
- Downsizing
- In the Gulf, Trump wants the Asian powers to police the vital sea lines of communication.
- In Europe and Asia, he wants the allies to do more for their own security.
- How the world is responding?
- Europe’s response In Europe, France and Germany are now talking about creating new defence capabilities for the European Union amidst the prospect for American security retrenchment.
- How the Asian countries are responding? In Asia, Japan is debating a larger security role.
- In the Gulf, America’s Arab allies are scrambling to diversify their security dependence.
America First policy
- What is America First policy? The idea of downsizing America’s role, along with the rejection of free trade and open borders, is at the very heart of Trump’s America First policy.
- Resistance to the policy: To be sure there is deep resistance in the US to these ideas that run counter to America’s post-war internationalism.
- Wall Street on the East Coast and Silicon Valley on the West Coast along with the old foreign and security policy establishment in Washington all oppose Trump’s America First focus.
- Widespread support to the policy: Trump’s message, however, resonates across the political divide in the US.
- Many candidates for the presidential nomination of the Democratic Party agree with Trump’s goal of ending America’s “endless wars” in the Middle East.
- Many in the working classes, who traditionally supported the Democrats, believe Trump is right in arguing that free trade has hollowed out American industry and eliminated manufacturing jobs.
How the changes matter for India?
- Prepare for the changes: America is at an inflection point; India needs to come to terms with the profound changes unfolding in the US.
- No intervention policy: The Indian political classes castigated the US for excessive interventions in the affairs of other nations.
- Trump now says such interventions are counterproductive and all nations must strengthen their sovereignty.
- Critical of globalisation: Indians criticised the US for imposing globalisation on others; the US President is now one of the biggest critics of globalisation.
- Trump’s America is not the one we have known.
- India’s sensitivity to the US domestic politics: As India broadened its engagement with America in the last two decades, Delhi has become more sensitive to the US domestic political dynamics.
- In getting the US to ease off on Kashmir and nuclear issues, Delhi had to look beyond the foreign policy establishment to generate better US appreciation of India’s concerns and interests.
- Indian diaspora: One of the instruments that came in handy was the mobilisation of the Indian diaspora, it emerged as a key factor in elevating the bilateral relationship in the 21st century.
- While the diaspora is important and could be of some value in dealing with Trump, it can’t override the deeper forces animating American politics.
Conclusion
Delhi’s success with the US will depend on the kind of strategic imagination it can display on trade cooperation, securing Afghanistan after America’s withdrawal, stabilising the Gulf and developing a new global compact on migration that is sensitive to domestic political considerations and yet contributes to the collective economic development.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- The ambitious target of $5 trillion economy.
Context
The Indian government has set itself a big target, namely, that the Indian economy will have an aggregate income or gross domestic product (GDP) of $5 trillion by 2024-25.
Lack of clarity
- There is little effort to take it beyond a slogan.
- When it comes to targets and aims pertaining to the economy, it is important to have-
- The officials and advisers go beyond the headline.
- To lay out the details and the road-map for the target.
- Matter for investors: For international observers and particularly investors, not to see these details creates doubts about professionalism.
What growth rate is required to reach that target?
- How long will it take to achieve the target at the present growth rate?
- In 2018-19, India’s GDP was $2.75 trillion.
- India’s latest official growth rate happens to be 5 per cent.
- Target will be reached in 2032-33: Continue in the same fashion to compute the size of the GDP and it becomes clear that the target of $5 trillion will be reached not in 2024-25, but in 2032-33.
- What is the required rate? Set the target as $5 trillion dollars for 2024-25 the required rate turns out to be 10.48 per cent or, approximately, 10.5 per cent.
Why 10.5 rate is an ambitious target?
- The only example of any nation growing for six consecutive years at an average annual rate of over 10.5 per cent was China from 2003 to 2009.
- Can India achieve this rate?
- From 1947 till now, India’s economy grew at over 10 per cent only twice — in 1988-89 and 2007-8.
- Of these, the first may be dismissed because the previous year the economy had grown very slowly, by 3.5 per cent.
- What we can learn from the past growth rate?
- The only example to learn from: The only example from which we can learn is the remarkable growth in 2007-8, made all the more remarkable by the fact that India had been growing well for several years, starting from 2003.
- And from 2005, India was actually growing over 9 per cent.
- What factors played the role in high growth?
- This was a period of professional fiscal policy and steady effort at building infrastructure.
- India’s economy was making big news in the international media and investment poured in.
- India’s investment-to-GDP rate climbed to an all-time record of 39 per cent.
- Current investment-to-GDP ratio: Our investment-to-GDP ratio has crashed to 30 per cent and this takes time to re-build.
- If we can get back to a growth rate of 7 per cent we will be lucky.
Can inflation make the target achievable?
- Combination of real growth and inflation can make it possible: Virtually all serious commentators agree that in purely real terms, the $5-trillion target is unreachable.
- But maybe we can make it by a combination of real growth and inflation.
- How the combination will work? One way India can get to the target is if alongside say 7 per cent growth, India has inflation of say 3.5 per cent.
- Then India’s nominal GDP growth rate will be 10.5 per cent.
- Why the inflation argument is flawed?
- The five trillion target is in dollar terms.
- Inflation will lead to depreciation: Typically, if India has higher inflation than the US, the rupee would depreciate vis-à-vis the dollar to account for that.
- For the sake of pure arithmetic, assume US inflation is zero, India’s inflation is 10 per cent, and India’s real growth rate is 0.
- In that case, in rupee terms, India’s economy will grow by 10 per cent. But how much will India’s economy grow in dollar terms?
- The answer is zero.
- Why is it so? This is because the rupee will typically depreciate by 10 per cent to match the inflation differential, and so the larger GDP of India in rupee terms, when converted to dollars will show no growth.
- The other possibility of achieving the target?
- What if the dollar loses value? But this should immediately make it clear that there is another way of getting to the target.
- This can happen if the US dollar loses value.
- We can then get to the target of $5 trillion because that will mean less in real terms.
Conclusion
There are two routes to achieve the target of $5 trillion: A huge policy initiative to boost real growth or the luck of dollar depreciation. The luck of dollar would mean nothing for us in the real term so the best course of action for the government is to seek the first option and try to achieve it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3-Reforms in foodgrain management, the PDS and the fertiliser subsidy.
Context
Union budget missed the opportunity to undertake reforms in the grain management system and food security act.
The massive reduction in food subsidy and its implications
- Subsidy slashed by 75,552 crores: The revised estimates (RE) for food subsidy for 2019-20 have been slashed by a whopping Rs 75,552 crore -from the budgeted estimate (BE) of Rs 1,84,220 crore to Rs 1,08,668 crore (RE).
- For the next fiscal year, the budget estimate has been kept at Rs 1,15,570 crore.
- No major reforms in grain management system: One wonders whether any major reforms have been undertaken in the grain management system or in the National Food Security Act such that this massive reduction in budget estimates is feasible. But no such reforms are undertaken.
- The Food Corporation of India (FCI) has been asked to borrow more from myriad sources, but most importantly from the National Small Savings Fund (NSSF).
- An item that should have been in the budget, is now getting reflected as outstanding dues of FCI.
- Implications of the move–postponing of the crisis: In order to gauge how much is the effective food subsidy in the country, the budget numbers are becoming totally irrelevant.
- One needs to add the actual subsidy numbers reflected in the budget to the outstanding dues of FCI.
- Effective food subsidy: If one adds the due, the effective food subsidy turns out to be Rs 3,57,688 crore.
- By not provisioning for it fully in the budget, and not undertaking any reforms in the foodgrain management system or the NFSA, the government is only postponing the crisis.
Need to bring down the coverage: The Economic Survey
- Bringing down the coverage at 20 %: While the Economic Survey clearly states that the coverage under NFSA needs to be revisited, and brought down to say 20 per cent of the population.
- The budget did not bite this bullet.
- Cost of procurement to go up: The expected cost of rice to FCI in 2020-21 is going to be about Rs 37/kg, and for wheat it will be Rs 27/kg.
- The issue price, that covers 67 per cent of the population, is just Rs 3/kg and Rs 2/kg respectively.
Excessive stock with the FCI
- Actual stock in excess of buffer stocks: Compared to a buffer stock norm of 4 million tonnes, actual stocks with FCI (including unmilled paddy) were 3.5 times higher.
- It speaks of a colossal waste of scarce resources, especially when tax revenues have been sluggish.
- Stocks likely to increase further: Given that Skymet has predicted that the coming wheat crop is going to be one of the best in many years-the stocks is likely to touch 113 million tonnes.
- With procurement prices being above global prices, the chances of wheat exports are bleak unless there is a subsidy for exports.
- And that will be challenged in the WTO.
- The FCI may run out of stock capacity: So, one should expect a piling up of grains stocks with a record procurement of wheat.
- FCI may run out of storage capacity. Stock levels may touch 85-90 million tonnes, or even more, by July 1, 2020.
Fundamental questions
- First: Is the government ignorant of the impending crisis of plenty?
- Second: Does it realise that the policy of procurement prices (50 per cent above cost A2+FL), without looking at the demand side, is likely to create more troubles for the government?
- Third: Does the government have any plan to reform the public distribution system under NFSA?
Way forward
- Reforms in foodgrain management: Reforms in foodgrain management have to start with reforming the PDS system.
- With moving gradually moving away from grains to cash transfers.
- Think over implementing the Shanta Kumar Committee reports recommendations.
- Stop open-ended procurement in Punjab-Haryana belt: The policy of procurement prices, with open-ended procurement in the Punjab-Haryana belt, is doing more damage by depleting the water table and not letting crop diversification take place.
- This is very unfortunate as the “dead loss” in grain management runs to more than Rs 1,00,000 crore.
- Rationalise the fertiliser subsidy: The other part related to this is the fertiliser subsidy, which is largely used in wheat and rice.
- The budget estimates for 2020-21 show a reduction in the subsidy, while dues of the fertiliser industry keep on piling.
- The fertiliser industry estimates that by April 2020, the dues will be roughly Rs 60,000 crore.
- Demoralised fertiliser industry: While FCI has been asked to borrow, the fertiliser industry does not have that type of window.
- It is feeling totally demoralised.
- No private player wants to come and invest in this sector.
Conclusion
Instead of postponing the crisis by compelling the FCI to borrow, the government need to reform the foodgrain management system, rationalise the fertiliser subsidy and limit the coverage under the NFSA.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- India-US relation in changing circumstances.
Context
US president’s visit comes when a mutually beneficial framework of bilateral relationship stands disrupted.
Significance previous U.S. President’s visits
- The Clinton visit: The Clinton visit occurred against the backdrop of a new assessment within the American strategic community of India’s potential role in the post-Cold War era and against the backdrop of the rise of China.
- Recognition of India’s nuclear power: He implicitly recognising India’s nuclear power status.
- Kashmir issue: He suggested that the line of control (LoC) between India and Pakistan should be viewed as the international border so as to bury the “Kashmir issue” forever and-
- Visas for Indians: increasing entry visas for Indians that has since contributed to the emergence of a sizeable community of Indian Americans.
- As a counter to China: It was suggested that the rise of democratic India would be in the interests of the US and so the latter ought to be supportive of the former.
- The Bush visit:
- Political context: The rise of China and of radical Islam and jihadi terrorism provided the geopolitical context.
- Economic context: The growth of an increasingly open Indian economy provided the economic context.
- Cooperation in civil nuclear energy: Influenced by this new thinking, President George Bush took the next steps in strategic partnership and led the initiative to promote cooperation in the field of civil nuclear energy that also explicitly recognised India as a nuclear weapons power.
- As heads of state, Clinton and Bush altered US-India bilateral relations in a fundamental way.
- The Obama visit:
- P2P relation: His second visit was more a recognition of the growing importance of people-to-people (P2P) relations and
- Defence sales to India: The visit also aimed at promoting defence sales to India.
- During the nuclear deal negotiations, US Congresspersons would often suggest that it was a “123 for 126” deal — that is, they would vote in favour of the 123 agreement in Congress in the hope that India would buy 126 fighter jets from the US.
- That hope remains as yet unfulfilled, with the French getting the Rafale deal and no decision taken on the purchase of US fighter jets.
America First policy of Trump
- The credit for laying the foundation for a new and supportive post-Cold War relationship between the US and India goes singularly to President Bush.
- Disruption with the arrival of Trump: The mutually beneficial framework that Bush helped create to promote the bilateral relationship has been rudely disrupted by the arrival of Donald Trump in Washington DC.
- End of GSP: Trump’s “America First” policy offers no space for offering India “special and differential” treatment on any front, least of all trade.
- Status of the Indian economy from the US perspective: With per capita annual national income of US $60,000, Trump’s America has no qualms declaring India, with a per capita annual average national income of US $2,000 a “developed economy” not deserving of any leniency in trade policy.
- Clubbing together with China: To club China, a $15-trillion economy, with a $3-trillion India on the trade front is not just stupid but an affront to Indian sensibilities.
What are the hopes and what could be the outcomes of the visit?
- No bi-partisan support to India’s rise: It has to be recognised that neither Democratic liberals nor Republican conservatives are any longer willing to be supportive of the Bush-Rice paradigm that views India’s rise in benign and mutually beneficial terms.
- Inward-orientation in both the countries: Today the relationship seems caught in the pincers between the inward-orientation of rightwing nationalists in both nations.
- No hope of change: There is no reason as yet to believe that this unfortunate state of affairs will be altered by the Trump visit next week.
- Stand on Pakistan or Kashmir: Trump has also moved away from the Clinton-Bush framework on India-Pakistan relations and moved closer to approach of wanting to insert the US into the equation on Kashmir.
- Appeasement of Pakistan: Trump’s motives are no different from those that initially drove Obama-namely, to appease Pakistan in the hope of securing a peaceful exit from Afghanistan.
- Expect differences to persist: At best, India can hope to limit the damage Trump may do to strategic stability in the region.
- Visa and investment: There will be much talk about US investments in India and increased visas for Indians going to the US.
- Corporate interests: Both are driven largely by US corporate interests.
- Given the direction of the Modi government’s trade policy, one cannot expect any dramatic concessions being made.
- Defence purchases: The best India can do for the US is to buy more defence equipment and ease up on some trade restrictions.
- Defence sales to India are an essentially commercial activity and much of it can go on even in the absence of strategic convergence and shared geopolitical perspectives.
- Brain-drain and need to focus on education: Much is made of Indian Americans heading US multinationals and the Great Indian Diaspora in the US.
- Outmigration of talent: The continued neglect of education in India is increasing the outmigration of talent, offering the US a reservoir of talent.
- Drain on national resources: While the Indian elite celebrates this out-migration, the fact is that it is a drain on national resources.
Conclusion
In sum, with the supportive Bush-Rice doctrine defining the post-Cold War US-India partnership virtually abandoned, and the new Trump doctrine treating India as a “developed” economy, demanding parity on trade, bilateral relations have become uncertain and testy. To hide the lack of substance in the relationship the Trump visit will focus on the hype and Prime Minister Modi has perfected the art of diplomacy as mass entertainment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- India's preparedness to deal with epidemics.
Context
With multiple cities in China under a public health lockdown, global supply chains of various essential products and consumer goods are likely to be affected. This should be particularly worrisome for India, which has a roughly $93 billion total trade and about $57 billion trade imbalance with China.
Cause of worry turned into a reality
- Public health experts have worried most about an animal virus-
- That gets into humans.
- Causes human-to-human transmission.
- Has high infectivity and a range of clinical severity.
- With no human immunity, no diagnostic tests, drugs or vaccines.
- An emerging virus, called the 2019 novel coronavirus (2019-nCoV), appears to be just that.
- With the World Health Organisation declaring it a Public Health Emergency of International Concern (PHEIC), this outbreak is now a pandemic.
What is coronavirus
- Group of animal virus: Coronaviruses are a group of animal viruses identified by their crown-like (corona) appearance under a microscope.
- SAARS connection: The 2019-nCoV belongs to this group of viruses, six of which, including the 2003 Severe Acute Respiratory Syndrome (SARS) and the 2012 Middle East Respiratory Syndrome (MERS) viruses, were earlier known to cause disease in humans.
- Genetic similarity with other viruses: Genetic sequencing of the virus from five patients showed it to be 5 per cent identical to the SARS virus.
- Bats as hosts: Since the SARS outbreak in 2003, scientists have discovered a large number of SARS-related coronaviruses from their natural hosts-bats.
- Previous studies have shown some of these bat coronaviruses to have the potential to infect humans.
- Genetic sequencing showed it to human coronavirus to be over 96 per cent identical to a bat coronavirus.
- Thus, 2019-nCoV clearly originated from bats, jumped into humans either directly or through an intermediate host, and adapted itself to human-to-human transmission.
- Bats are a particularly rich reservoir for viruses with the potential to infect humans.
- Examples of these include viruses such as Hanta, Rabies, Nipah, Ebola and Marburg viruses, and others that have caused high levels of mortality and morbidity in humans.
- India has 117 species and 100 sub-species of bats, but we know little about the viruses they harbour and their disease potential.
India’s response
- India’s response includes-
- Surveillance of arriving passengers at airports.
- Awareness drives in the border states.
- Designation of hospitals with isolation wards and the availability of protective gear (e.g. masks) to health workers.
- SOP: There are clear operating procedures for sample collection and its transport to the National Institute of Virology, Pune, which is the nodal testing centre.
- A self-declaration mechanism is in place and a 24×7 telephone helpline has been set up.
- Two areas of concern
- 1. Promotion of untested medicines: There is mixed messaging promoting AYUSH products that are untested and of questionable efficacy.
- 2. India- a hot zone of zoonotic pathogens: India has been a “hot zone” for the emergence of new zoonotic (animal-derived) pathogens for over a decade.
- But we continue to lack the capacity to quickly identify, isolate and characterise a novel pathogen.
- Example of China: China is a good example of how investments in research and public health will allow it to take a lead on developing diagnostic tests, vaccines and drugs for this new virus. We must do the same and prepare for the future.
- Disruption in global supply chains and concerns for India
- With multiple cities in China under a public health lockdown, global supply chains of various essential products and consumer goods are likely to be affected.
- This should be particularly worrisome for India, which has a roughly $93 billion total trade and about $57 billion trade imbalance with China.
- Disruption in medicine supply: The Indian pharmaceuticals industry imports about 85 per cent of its active pharmaceutical ingredients from China.
- Any disruption in this supply chain would adversely affect the availability of medicines in India, which would be required in an outbreak situation.
- Need to support local pharma. industry: India must, therefore, take steps to correct this imbalance and support the local pharmaceuticals industry in reducing its dependence on China
Possible scenarios
- Public health experts estimate that the epidemic will peak in three months.
- From here on, there are a few possible scenarios, but which of these would play out is hard to guess.
- 1st possibility: There could be very large numbers of cases and global spread of the virus with a low CFR of 0.1-0.5 per cent, like the bad flu. Or the same with increased CFR, which would lead to significant mortality.
- 2nd possibility: It is also possible that the outbreak spiralled in China due to a combination of factors not present elsewhere, such as population density, food habits and the Chinese New Year, which sees large population movements.
- It is also possible that the pandemic may not sustain outside China and die out like the 2003 SARS outbreak.
- Whatever be the case, surveillance and sensible public health measures will be needed over the next few months.
Conclusion
India escaped the 2003 SARS and 2012 MERS outbreaks largely unscathed. This may still be the case with 2019-nCoV, but the laws of probability are likely to catch up soon. It would help to invest, build capacity and be ready.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Types of the GST returns.
Mains level: Paper 3- How the GST has performed and ways to improve it.
Context
Even as the 31-month-old GST evolves, the debate on its success rages on. Many have argued that GST is losing its sheen and needs a complete overhaul while others contend that the new tax system is on course and the trials and tribulations were not unexpected.
Analysis of GST collection
- 39% increase over the average of the base year 2015-16: The average monthly GST collection for the period August 2017 to January 2020 stands at Rs 97,188 crore which is an impressive 39 per cent increase over the average monthly collection of subsumed taxes in the base year 2015-16, at around Rs 70,000 crore.
- The average growth rate of 9.7% per year: This is an average growth rate of 9.7 per cent over the almost 4-year period post-2015-16 and a compounded growth rate of 8.55 per cent.
- Though less than 14% but not insignificant: This compounded growth rate is not insignificant even though it is just about 0.61 times the very ambitious 14 per cent rate of growth promised to the states before GST rollout.
- Perception of infectiveness due to ambitious 14% promise: The average growth rate of the collection in 18 non-special category states (accounting for the bulk of the revenue) during the 3-year period immediately preceding GST stood at around 8.9 per cent.
- Thus, if the perception about the effectiveness of GST has not been very encouraging, it is only in the context of the very ambitious 14 per cent compounded annual growth rate promised to the states.
Reasons for tepid growth in GST collections
- The overall economic situation in the country: The revenue performance of GST during the current fiscal year is not out of sync with the overall economic situation in the country.
- The growth rate in tax yield at 4.69 %: Accordingly, during the 10-month period ending January 2020, the growth rate in tax yield was 4.69 per cent.
- The relatively tepid growth was primarily due to a negative growth of 4.03 per cent in September-October 2019.
- After the dip in September-October 2019, GST collections rebounded and this is a reminder that one need not write GST off in a hurry.
- Complacency in the states due to 14% promise: Complacency in the states on account of assured 14 per cent growth cannot be ruled out.
- States were jolted with the delay in compensation for August-September 2019 and resorted to vigorous monitoring of compliance and action against toxic and unverified credits, circular trading and tax evasion which had resulted in unmatched credit claims of around Rs 50,000 crore.
Two suggestions as corrective measures
- The GST Council deliberated on the recent trends in revenue collection and was cognizant of the need for corrective measures. Two options were suggested. One was the “big bang” approach-
- Big Bang approach: It involves an overhaul of-
- The legal framework.
- Processes and systems and-
- Re-writing GST almost de novo.
- A steady-state approach: A “steady-state” approach involved-
- Incremental reforms.
- Solving problems as they arise.
- Plugging loopholes.
- Improving the compliance environment through increased monitoring with better tools.
- The Council chose the second approach and the signs are already showing.
The steps taken-
- Red flag reports: The GSTN has developed red flag reports based on GSTR-1, auto-generated GSTR-2A, GSTR-3B and the national e-way bill system.
- These reports identify non-filers so that action can be taken against active taxpayers who defaulted in filing returns.
- Till November 2019, around 6 lakh dealers had defaulted in furnishing one or more returns from July 2017 involving estimated tax liabilities of around Rs 25,000 crore.
- Increase in the filing: An SOP has been developed for proceeding against such return defaulters and this has helped increase the percentage of filing which has contributed to revenue.
- Making Aadhaar mandatory: To further the ease of doing business, it was decided to grant registration without physical verification and a system of deemed registration was put in place.
- Spot verification has unearthed non-existent dealers and led to the cancellation of around 1 million entities.
- It has now been decided to mandate Aadhaar authentication for taking new registration and thereafter the existing registered taxpayer population would have to undergo Aadhaar authentication in a phased manner.
- Use of analytical tools: Advanced analytic tools are being used to unravel complex networks of firms created just for generating credit and these analyses are being strengthened through machine learning and AI.
- An all-India offence/enforcement database is being built.
- System of data exchange with other agencies: In order to identify dealers posing a “hazard” to revenue and do a 360-degree profile of risky taxpayers, a system of regular data exchange with banks, CBDT, ED, RoC and other agencies is being put in place.
- Fraudsters will find it almost impossible to game the system.
- The new return system set to roll from April 1 is expected to curb incidences of unmatched turnovers and utilisation of un-validated.
- System of e-invoicing: In order to validate and improve the quality and fidelity of invoice reporting and return filing, a system of e-invoicing is proposed to be implemented in a phased manner beginning April 1.
- This will begin with taxpayers with turnovers exceeding Rs 500 crore and will auto-populate e-way bill generation and filing of Anx-1 in the new return system apart from validating credit flow from taxpayers.
Conclusion
These measures will effect qualitative improvement to the compliance eco-system which will not only lead to an improvement in the collection but will also make life easier for taxpayers and tax authorities alike.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Globalisation and its impact on Climate Change, Lessons from Nordic Model.
Context
Social inequalities and the grim problems of stark and continuing poverty are at the epicentre of the new world.
The ugly face of capitalism and growing inequalities
- The concentration of the health: The latest Oxfam Report presented at Davos points out that 2,153 billionaires have more wealth than 4.6 billion people.
- Rising poverty: The emergence of billionaires and oligarchs in different parts of the world coincides with increased poverty among the already poor people, especially children.
- Concept of stakeholder’s capitalism: These realities make observers question the tenability of stakeholder capitalism as a concept.
- Faults in the capitalism on display in 2008: The ugliest face of this capitalism was visible during the 2007-2008 economic crisis, first in the U.S. and thereafter across the European Union.
- At that time, it appeared as if the global economy was on the verge of collapse.
Intensification of energy use and sustainability
- The relation between growth and energy: One of the chief characteristics of economic development is the intensification of energy use.
- There is an unprecedented concentration of high energy density in all economic development strategies.
- Use of non-renewable sources: The bulk of the energy continues to be generated from non-renewable sources.
- Developing world capturing energy-generating sources: The developed world’s, and China’s, central objective is to capture energy-generating resources from across continents and put them to use to push GDP growth to greater heights.
- In the process, sustainability is becoming a casualty.
- Higher waste generation: The higher the use of energy, the larger the amount of waste generated. Entropy, like time, is always unidirectional, it only goes forward.
Disposal of e-waste
- High energy consumption and disposal of waste: Egregious consumption of energy by the developed world has been accompanied by the disposal of residual products (‘e-waste’) on the shores of many African and Asian countries.
- Impact on the developing world: As a result of the disposal, the poor in the developing world are, unwittingly, drawn and exposed to toxic, hazardous materials like lead, cadmium and arsenic.
- Hence, the ‘globalisation’ phenomenon has turned out to be nothing other than the exploitation of the developing world, with most countries being treated as a source of cheap labour and critical raw material.
Unfairness involved in the Globalisation
- Increasing consumption in the developing world: Countries in the developed world, and China, are ferociously using up finite raw materials without care or concern for the welfare of present and future generations.
- Bright and the dark side of the development: Certainly, there has been significant technological progress which has brought about a revolution in the fields of healthcare and communications, but there is also a dark side to this.
- System loaded in the favour of the rich: High expenses and Intellectual Property Rights load the system further in favour of the rich.
- Pernicious system of carbon credit: To demonstrate how unfair the system is, one can look at the pernicious plan to set up a carbon credit system.
- Under this, countries with high energy consumption trends can simply offset their consumption patterns by purchasing carbon credits, the unutilised carbon footprint, from poor developing countries.
Understanding the Nordic Economic Model
- ‘Nordic Economic Model’: It pertains to the remarkable achievements of the Scandinavian countries comprising Denmark, Finland, Iceland, Sweden, Norway, and allied territories. They also have-
- Large public sector enterprises.
- Extensive and generous universal welfare systems.
- High levels of taxation.
- And considerable state involvement in promoting and upholding welfare states.
- Among the happiest countries: UN reports also indicate that the Nordic countries are the happiest countries in the world. The U.S., in contrast, is in 19th place.
- The total population of the Nordic countries is estimated at almost 27 million people.
- Among the richest countries: These nations are among the richest in the world when measured in terms of GDP per capita.
Enlightened Global Order
- Taking the Nordic model as a template, there are some ingredients that could be part of a new ‘enlightened global order’.
- What does the Global Order include? These should include-
- Effective welfare safety nets for all.
- Corruption-free governance.
- A fundamental right to tuition-free education including higher education.
- And a fundamental right to good medical care.
- Shutting of tax havens.
- Tax structure: In Nordic countries, personal and corporate income tax rates are very high, especially on the very rich. If a just, new world order is to arise, taxes everywhere should go up.
- Holding companies responsible: When it comes to the corporate sector, there are some new perspectives.
- Changing the parameters of profit: In traditional business accounting, ‘bottom line’ refers to the financial year’s profit or loss earned or incurred by the company on pure financial parameters.
- The four ‘Ps’: Following vigorous debates, a new format has emerged under which a company’s performance is measured through four ‘Ps’.
- The first is ‘P’ for ‘profit’.
- The second ‘P’ is for people — how the company’s actions impact not only employees but society as a whole.
- The third ‘P’ is for the planet — are the company’s actions and plans sensitive to the environment?
- The fourth ‘P’ is for purpose, which means the companies and individuals must develop a larger purpose than ‘business as usual’. They must ask: what is the larger purpose of the company, apart from generating profits?
- Using performance in terms of four ‘P’s: Using big data and text analytics, a company’s performance can be measured in terms of all the four ‘P’s and a corporate entity can be thus held accountable. Market capitalisation need not be the only way to measure the value of a company.
Conclusion
Much work is yet to be done to uplift the global economic order, but the important point is that new tools are now emerging. What is required is a global consensus and the will to make the planet more sustainable, so that all individuals can live with justice and equality, ensuring that not a single child is hungry or seriously unwell because of poverty or lack of affordable medical help.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Inclusive growth and need to focus on gender budgeting in India.
Context
When it came to allocating funds, the budget relegates women’s economic participation to secondary importance.
The current status of women in India
- Lack of Equality: India continues to struggle to provide its women with equal opportunity.
- A low score on international measures: On international measures of gender equality.
- India scores low on women’s overall health and survival and ability to access economic opportunities.
- Why it matters? Since the woman’s economic engagement is related to her own and her family’s well-being, the continuing decline in rural women’s labour force participation is a cause for concern, and both affects and reflects these worrying gender gaps.
Why female labour force participation matters beyond social cause?
- Source of economic growth: Ignoring India’s declining female labour force participation at a time of economic distress is a mistake.
- Not just a social cause: Involving women in the economy is not a social cause — it is a source of efficiency gains and economic growth.
- Missing out on many things: In a country where young women’s education is now at par with men’s, ignoring that half of the population isn’t participating equally in the economy means we are missing out on many things, like-
- Innovation.
- Entrepreneurship.
- And productivity gains.
- Large potential to increase in GDP: The large potential increases in GDP that could accrue to India and countries around the world, if they could only close their labour force gender gaps, are often cited.
- 60% increase in GDP: A report by McKinsey Global Institute suggests that if women participated in the Indian economy at the level men do, annual GDP could be increased by 60 per cent above its projected GDP by 2025.
- Underlying conclusion: The underlying conclusion is that women’s potential to contribute to GDP is huge.
- Gain larger than any other region: The same analysis also suggested that India’s potential GDP gains through achieving economic gender parity were larger than gains in any of the other regions they studied.
How can the state be responsive to women?
It can be ensured in the following two ways-
- 1.MGNREGA-Important focus: An important focus could be a smarter policy and gender-intentional implementation.
- A key example comes from MGNREGA, a programme whose official policy has long been to pay individual workers in their own bank accounts.
- It is observed that this policy was typically not implemented and that women’s wages were usually being paid into the bank account of the woman’s husband.
- Why paying wages in women’s account matters?
- Giving women digital control of her wage:
- This seemingly small change — giving a woman digital control of her wages — had a big impact.
- Working women more outside their home: Women who received digital accounts plus training worked more outside their homes, not only for MGNREGA but also in private employment.
- Higher economic engagement and lessening patriarchy
- Importantly, women from especially conservative households reported higher economic engagement and an improved ability to move about their communities unaccompanied.
- Lessening of patriarchal norms: Surveys conducted showed that the payment in account also began to influence restrictive patriarchal norms.
- 2.Need to move beyond MGNREGA
- Ease of doing business and reform in labour market reforms: Continuing to improve ease of doing business and addressing rigid labour market regulations can also draw more women into high-potential sectors.
- Such as those supported under Assemble in India.
- Potential in manufacturing: Rural women’s relative participation in manufacturing has grown compared to men’s, and manufacturing stands out as a promising means to pull young women, in particular, into the economy.
- Potential in SMEs: Ensuring better support to small and medium-sized enterprises can help new businesses.
Conclusion
- Attune schemes to the aspiration of women: Ensuring that these programmes are attuned to the needs and aspirations of women is not expensive. But it makes a much difference.
- Review of policy and programme: It requires a review of individual policies and programme implementation.
- Increase the funding: The government needs to increase funding to programmes targeting women. Until then, the policy can build on the fact that pulling women into the economy isn’t just a function of budget allocations or social sector programmes. It’s also a matter of thoughtful policy design and political will.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Applying digital revolution to transform governance.
Context
Data-based governance can assist in reducing traffic congestion, as illustrated by a pilot study in Hyderabad.
How the Digital revolution is transforming lives
- Seamless and efficient interaction: The digital revolution has made interactions between humans and machines, and among citizens, governments and businesses, seamless and efficient.
- Helping efficient delivery of services: Today, e-governance enables and empowers citizens to directly engage with the state, thereby eliminating barriers in the delivery of public services.
- The next wave of transformation: The next wave of transformation in digital governance is at the intersection of data and the public good.
- Data as a strategic asset: The key to this transformation lies in incorporating data as a strategic asset in all aspects of-
- Policy.
- Planning.
- Service delivery and-
- Operations of the government.
Transportation system improvement by leveraging Digital revolution
- Loss caused by the congestion
- Congestion caused an estimated $24 billion to the four metro cities in India in 2018.
- Given the limited land resources available, the key to solving congestion lies in improving the efficiency of existing transportation systems.
- How can Digital revolution help tackle the problem?
- An efficient transportation system would help ease congestion, reduce travel time and cost, and provide greater convenience.
- How it will work? Data from multiple sources such as-
- CCTV cameras.
- Automatic traffic
- Map services and-
- Transportation service providers could be used.
- Results of the previous studies
- London example: A study by Transport for London estimates that its open data initiative on sharing of real-time transit data has helped add £130 million a year to London’s economy by improving productivity and efficiency.
- Results from China: In China, an artificial intelligence-based traffic management platform developed by Alibaba has helped improve average speeds by 15%.
Hyderabad Open Transit Data portal
- Hyderabad Open Transit Data, launched by Open Data Telangana, is the country’s first data portal.
- What does it do? It publishes datasets on bus stops, bus routes, metro routes, metro stations, schedules, fares, and frequency of public transit services.
- The objective of the portal: The objective is to empower start-ups and developers to create useful mobility applications.
- The datasets were built after an intensive exercise carried out by the Open Data Team and Telangana State Road Transport Corporation to collect, verify and digitise the data.
- Collaboration with the private sector: Hyderabad has also begun collaborating with the private sector to improve traffic infrastructure.
- MoU with Ola Mobility Institute: One such partnership followed a Memorandum of Understanding signed between the Telangana government and Ola Mobility Institute.
- Monitoring the quality of roads in the city: Under this collaboration, Ola has developed a tool, Ola City Sense, to provide data-based insights that can monitor the quality of Hyderabad’s roads and identify bad quality patches.
- Other areas in which the data is used: The information thus given is useful not only for carrying out road repairs, it also helps officials take initiatives to improve road safety, monitor quality of construction, and study the role of bad roads in causing congestion.
- A pilot project to prioritisation of repairs: A pilot was implemented in a municipal zone to gauge the efficacy of the data in supporting road monitoring and prioritisation of repairs.
- The early results of this pilot project were encouraging. The dashboard helped city officials plan the pre-monsoon repair work and budget for repairs last year.
Conclusion
- The willingness of the government to apply data-based insights: The Hyderabad project and the pilot demonstrated the willingness of government departments to apply data-based insights for better decision making.
- This could also serve as a model for other cities to emulate.
- Making the departments data-centric: The Hyderabad example also shows that governments can make their departments data-centric by-
- Institutionalising data collection.
- Building technology platforms.
- And helping the departments develop the capacity to handle the insights generated from the data.
- Smart cities as a starting point: Command and control centres under the ‘smart cities’ initiative can be an ideal starting point.
- Data security and privacy: Such interventions, however, also need to address genuine concerns around data security and privacy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Bharatiya Poshan Krishi Kosh
Mains level: Paper 2- Despite having many schemes to address the malnutrition the problems still looms large, why?
Context
There are well-equipped schemes to address the malnutrition, plugging the policy gaps is the problem.
Nutrition and hunger in India
- Global Hunger Index rank 102: A few months ago, the Global Hunger Index, reported that India suffers from “serious” hunger, ranked 102 out of 117 countries.
- Only one-tenth of children getting proper diet: Just a tenth of children between six to 23 months are fed a minimum acceptable diet.
- Urgency reflected in the budget: The urgency around nutrition was reflected in the Union Finance Minister’s Budget speech, as she referred to the “unprecedented” scale of developments under the scheme for Holistic Nutrition, or POSHAN Abhiyaan, the National Nutrition Mission with efforts to track the status of 10 crore households.
- The Economic Survey notes that “Food is not just an end in itself but also an essential ingredient in the growth of human capital and therefore important for national wealth creation”.
- How malnutrition affects? Malnutrition affects cognitive ability, workforce days and health, impacting as much as 16% of GDP (World Food Programme and World Bank).
Addressing Nutrition through Agriculture
- Multiple dimension of malnutrition: There are multiple dimensions of malnutrition that include-
- Calorific deficiency.
- Protein hunger.
- Micronutrient deficiency.
- Addressing the issue through Agriculture: An important approach to address nutrition is through agriculture.
- The Bharatiya Poshan Krishi Kosh which was launched in 2019 is a recent attempt to bridge this gap.
- The krishi kosh was launched by Ministry of Women and Child Development along with Bill & Melinda Gates Foundation (BMGF).
- Existing schemes can well address India’s malnutrition dilemma. Following is the analysis of budgetary allocation and expenditure in the previous year.
First- Calorific deficiency
- The Integrated Child Development Services (ICDS) scheme provides a package of services including-
- Supplementary nutrition.
- Nutrition and health education.
- Health check-ups and
- Referral services addressing children, pregnant and lactating mothers and adolescent girls, key groups to address community malnutrition, and which also tackle calorific deficiency and beyond.
- Underutilisation of funds: For 2019-20, the allotment was ₹27,584.37 crore but revised estimates are ₹24,954.50 crore, which points to an underutilisation of resources.
- Which area needs the emphasis: The allocation this year is marginally higher, but clearly, the emphasis needs to be on implementation.
- Mid-Day Meal Scheme: Another pathway to address hunger is the Mid-Day Meal Scheme, to enhance the nutrition of schoolchildren.
- Here too, the issue is not with allocation but with expenditure.
- The 2019-20 Budget allocation was ₹11,000 crore and revised estimates are only ₹9,912 crores.
Second-Protein Hunger
- Contribution of pulses: Pulses are a major contributor to address protein hunger.
- Underutilisation of funds: A scheme for State and Union Territories aims to reach pulses into welfare schemes (Mid-Day Meal, Public Distribution System, ICDS) has revised estimates standing at just ₹370 crores against ₹800 crore allocation in the 2019-20 Budget.
Third-micronutrient deficiency
- Horticulture Mission: The Horticulture Mission can be one of the ways to address micronutrient deficiency effectively, but here too implementation is low.
- Revised estimates for 2019-20 stand at ₹1,583.50 crores against an allocation of ₹2,225 crores.
- National Millet Mission: In 2018-19, the Government of India launched a national millet mission which included renaming millets as “nutri-cereals” also launching a Year of Millets in 2018-19 to promote nutritious cereals in a campaign mode across the country.
- This could have been further emphasised in the Budget as well as in the National Food Security Mission (NFSM) which includes millets.
- Under-utilisation of funds: The NFSM strains to implement the allocation of ₹2,000 crores during 2019-20, as revised expenditures stand at ₹1,776.90 crore.
- Need to sustain the momentum: As millets have the potential to address micronutrient deficiencies, the momentum given to these cereals needs to be sustained.
POSHAN Abhiyan and issues involved
- 72% expenditure on technology: The National Nutrition Mission which is a major initiative to address malnutrition, had 72% of total expenditure going into “Information and Communication Technology.
- Misplaced focus: The focus of the bulk of the funding has been on technology, whereas, actually, it is a convergence that is crucial to address nutrition.
- Under-utilisation of funds: Only 34% of funds released by the Government of India were spent from FY 2017-18 to FY 2019-20 till November 30, 2019.
- Limiting the possibility of an increase in the allocation: With underspending, allocations for subsequent years will also be affected, limiting the possibility of increasing budgets and the focus on nutrition schemes.
Agriculture-nutrition link
- The agriculture-nutrition link is another piece of the puzzle.
- Link not explicitly mentioned: While agriculture dominated the initial Budget speech, the link between agriculture and nutrition was not explicit.
- Why the link is important: The link is important because about three-fifths of rural households are agricultural in India (National Sample Survey Office, 70th round)
- The malnutrition rates, particularly in rural areas are high (National Family Health Survey-4).
- Need for greater emphasis: Agriculture-nutrition linkage schemes have the potential for greater impact and need greater emphasis.
Way forward
- Focus: Focus on nutrition-related interventions, beyond digitisation.
- Bring all departments in one place: Intensify the convergence component of POSHAN Abhiyaan, using the platform to bring all departments in one place to address nutrition.
- Nutrition based activities by farmer-producer: Direct the announcement to form 10,000 farmer producer organisations with an allocation of ₹500 crores to nutrition-based activities.
- Youth schemes: Promotion of youth schemes to be directed to nutrition-agriculture link activities in rural areas.
- Emphasis on fund allocation: Give explicit emphasis and fund allocation to agriculture-nutrition linked schemes.
- Early disbursement and utilisation of funds: Ensure early disbursement of funds and optimum utilisation of schemes linked to nutrition.
Conclusion
Nutrition goes beyond just food, with economic, health, water sanitation, gender perspectives and social norms contributing to better nutrition. This is why the implementation of multiple schemes can contribute to better nutrition.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Trade deal with the US, issues involved.
Context
When Prime Minister Narendra Modi welcomes U.S. President Donald Trump to India this month the two leaders are expected to sign a first-ever trade agreement.
What will be on the agenda of the trade deal?
- GSP issues: The restoration of India’s Generalised System of Preferences benefits,
- Pricing of medical devices.
- And agriculture trade are all important.
- Incremental outcomes: If the two sides continue efforts to achieve incremental outcomes, the start of negotiations on a comprehensive free trade agreement (FTA) could even be a credible scenario. Presently, this is not the case.
What could be the incremental outcomes?
- The most obvious candidates are-
- Intellectual property rights (IPR).
- IPR has historically been an area of contention between the two, but discussions on IPR have progressed well in recent years.
- Digital trade.
- Both are grappling with the appropriate scope and approach for regulating electronic commerce issues in this digital age.
- Ideally, there should be room to seriously consider better ways to encourage skilled professionals to work in the other’s economy.
- Progress on the investment
There are already some shared interests in the area of investment.
- For example, India invests in the U.S. and continues to seek U.S. investment in India.
- FDI issue: Foreign direct investment (FDI), this is an important moment to do more to encourage it than simply welcoming it.
- Need to negotiate o investment: Ideally, the two sides should move ahead to negotiate an agreement on investment matters that can provide greater transparency, predictability, and regulatory certainty to investors from the other country.
- Negotiation on FDI off the table: It appears that the traditional approach through which countries pursue commitments on FDI, bilateral investment treaties, or ‘BITs’ (bilateral investment treaties) is off the table.
- The Trump administration has put a hold on negotiating additional BITs and appears to be suspicious of how well they balance U.S. interests.
- The Indian government is similarly sceptical of BITs, having cancelled all existing ones soon after it came into office.
Need for the new approach on the investment issues
- Until they resume their work on BITs, the two sides may find common ground in devising a new approach to investment issue.
- What the new approach involve?
- Taking cues from their respective FTAs: A starting point should be to review what they have done in their recent FTAs.
- Abandonment of investor-state dispute settlement: The recently concluded U.S.-Mexico-Canada Agreement contains a novel approach on investment notably its abandonment of investor-state dispute settlement with respect to the U.S. and Canada.
- Similarly, the Regional Comprehensive Economic Partnership, which India had been negotiating with ASEAN, Australia, China, Japan, Korea, and New Zealand, does not include investor-state dispute settlement.
- While India chose not to join the Regional Comprehensive Economic Partnership when it was concluded at the end of last year, it appears to have been on board with the FTA’s investment provisions.
- Where the agreement focus as of now? For now, however, both countries should focus on what is doable. A U.S.-India investment agreement could focus on-
- Fair treatment for investors from the other country.
- Regulatory transparency and predictability.
- And approaches for resolving concerns short of investor-state dispute settlements.
- At a later stage: At a later stage-
- Most likely when the two are prepared to negotiate a more comprehensive bilateral FTA, they can go further on investment matters.
Conclusion
A new, hybrid approach on investment would be a substantial step in the right direction. It will be critical to sustaining momentum coming out of a first trade deal when the two leaders meet in Delhi. If India and the U.S. fail this test, the trade relationship is more likely to languish than blossom.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Why fiscal stimulus is not the elixir as it is made out to be?
Context
In the run-up to the budget, there was enormous pressure on the finance minister to launch a fiscal stimulus so as to pump-prime the economy. That she did not succumb to the temptation is a big relief.
Why fiscal stimulus is unwarranted?
- There is already considerable stimulus in the system.
- Excessive fiscal deficit: To her credit, the finance minister took a step towards transparency by admitting to off-balance-sheet borrowings of 0.8 per cent of GDP for both the current and next fiscal year.
- Acknowledging that the fiscal deficit would actually be higher at 4.6 per cent and 4.3 per cent of GDP respectively. This is already excessive.
- Unrealistic projection of revenue growth: Add to this the unrealistic projections of revenue growth and disinvestment proceeds for next year and we have a potentially unsustainable fiscal situation.
- Any stimulus on top of this would have been clearly
Possibility of undermining the RBI’s efforts
Fiscal pressure could harm the RBI’s efforts to revive the economy in the following ways-
- Harming long term investment rates: Fiscal pressures will undermine the Reserve Bank of India’s struggle to revive investment by bringing down long-term interest rates.
- Rating downgrades: It could result in a sovereign rating downgrade and jeopardise efforts to attract foreign capital.
- Increase in inflationary pressure: It can stoke inflationary pressures, something we cannot afford when inflation is above the RBI’s target rate.
- Pressure on the external sector: And most importantly, it can lead to pressures on the external sector.
- Past experiences: The balance of payments crisis of 1991 and the near crisis of 2013 in the wake of taper tantrums were, at their heart, a consequence of extended fiscal profligacy.
Counter-arguments of the supporters of the stimulus and fallacies in it
- Low Debt-to-GDP ratio: It is argued that our debt-to-GDP ratio is low in international terms.
- Misleading comparison: The data don’t bear this out. In any case, our experience, as well as research, shows that international comparisons of debt-to-GDP ratios, without reference to other parameters, are misleading.
- Debt in domestic currency: It is also argued that we do not need to worry because our debt is mostly in domestic currency unlike that of many emerging economies.
- The fallacy in this argument: Our debt in the domestic market didn’t protect us from previous crises, and there is no reason to believe that it will protect us from the next one, especially as our foreign debt is proportionally higher than before.
- Robust foreign exchange reserves: It is argued that our foreign exchange reserves are robust and a balance of payments crisis is improbable. Such complacency is misplaced.
- Fallacy- No forex is large enough in bad times: We should not forget the lesson that in good times any amount of forex reserves looks like it is too large, but in bad times no amount of reserves is large enough.
Quality of fiscal consolidation
- Quality a cause for concern: As much as the headline fiscal deficit numbers are a cause for concern, the underlying quality of fiscal consolidation is a bigger concern.
- Increasing revenue deficit: Conveniently off the radar, the revenue deficit, far from coming down, is actually going up.
- Two-third borrowing to finance revenue expenditure: This year, more than two-thirds of what the government is borrowing is going to finance current expenditures like salaries, pensions, interest payments and subsidies.
- That ratio will rise to three-quarters next year.
- Crowding out of the expenditure: This debt-financed revenue expenditure is simply unsustainable as it will increasingly crowd out capital expenditure.
- Red flags on the state finances.
- Another dimension of the quality of fiscal consolidation is the combined fiscal position of states which is, in fact, the big elephant in the room.
- Together, states spend one-and-a-half times more than the Centre.
- Larger development impact than Centre: Studies show that how efficiently states spend their money has a much greater development impact as compared to the Centre.
- Red flags by the RBI on states finances: The states are not doing a good job. In its latest annual report on state finances, the RBI raised several red flags on state finances-
- states’ increasing weakness in their own revenue generation.
- Their unsustainable debt burdens.
- And their tendency to retrench capital expenditures in order to accommodate fiscal shocks such as farm loan waivers, power sector loans under UDAY and a host of income transfer schemes.
- Consequences in the market: The market will penalise mismanagement of public finances; it does not care who is responsible — the Centre or states — for an unsustainable fiscal stance.
Conclusion
- The fear of one-off fiscal stimulus becoming permanent: By far the biggest fear about a fiscal stimulus is that it is tempting to plunge into a spending programme saying it is a one-off and will be withdrawn when the pressure eases. Experience shows that it is very difficult to bail out. It is good that the finance minster avoided doing any such thing.
- As Milton Friedman famously said, there is nothing more permanent than a temporary government programme.
- Need to kick-start the private investment: What the economy needs for a sustained turnaround is kick-starting private investment.
- Implementation of reforms: A necessary condition for inspiring investor confidence is the implementation of structural and governance reforms. This will be a long-haul.
- That the budget did not launch the journey is a big disappointment. But, at least, the budget did not make a bad situation worse by embarking on fiscal adventurism.
- It’s better, as Keynes said, to be roughly right than precisely wrong.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Will allowing participation of private sector in the public healthcare system beneficial for India?
Context
In India, multiple policy pronouncements over the last few years have expressed an implicit intent to emulate certain features of the U.S. health system which is one of the most prodigal health systems, and it is a well-known reality that it is infamously poor-performing.
Emulating the U.S. health system in India and problems in this approach
- Implicit intent to emulate the U.S. system: In India, multiple policy pronouncements over the last few years have expressed an implicit intent to emulate certain features of the U.S. health system like-
- Enhance private initiative.
- And uphold the insurance route as the way to go for health care.
- AB-NHPS scheme: These are being largely envisaged while riding on the back of the Ayushman Bharat-National Health Protection Scheme (AB-NHPS).
- AB-NHPS aims to provide insurance cover to nearly 50 crores poor Indians.
- The mechanism to check insurance frauds: The AB-NHPS affirmed strong mechanisms to check insurance fraud which was commonplace in its precursor programme, the Rashtriya Swasthya Bima Yojana (RSBY).
- New of fraud in AB-NHPS: Recently, 171 hospitals were reported to have been de-empanelled from the AB-NHPS on charges of fraud.
- How are the frauds in AB-NHPS sought to be tackled? The response to these has been envisaged through an unprecedented bolstering of administratively-heavy and technology-driven mechanisms.
- Anti-fraud units: National- and state anti-fraud units have been established and partnerships with fraud control companies conceived.
- One would ask this question: what is wrong in all of this?
- What is wrong with this approach? Let us return to the U.S. once again.
- Administrative intensive: Multiple layers of complex arrangements and concomitant complex regulatory provisions have made the U.S. system one of the most administratively and technologically intensive systems in the world.
- 50% spending going for the wages: More than 50% of health-care spending in the U.S. in 2010 went into health worker’s wages, with a large chunk of the growth in health-care labour taking place in the form of non-clinical workers.
- Very little going into improving health: What this entails is that for every penny spent on health care, very little goes into actually improving health.
What are the concerns in emulating the U.S. system?
- Sub-satisfactory operations at the large cost: The new system necessitates-
- A battery of new structures.
- Personnel cadres.
- Data systems.
- And working arrangements only in order to sub-satisfactorily operate an insurance scheme that would cover less than half the population.
- Disregarding the death spiral that policy-driven over-reliance on private health care could lead to considerable costs which would not primarily contribute to improving health outcomes.
- Ethical concerns over unnecessary spending: While a besottedness with cutting-edge technology and state-of-the-art systems can help garner eyes and promote businesses, each unnecessary penny incurred this way raises significant ethical concerns.
- Problems of inadequate funding
- Funding sufficient only for a quarter of beneficiary: Gupta and Roy have shown how the allocation for the AB-NHPS for 2019-20 would have covered less than a quarter of the targeted beneficiaries.
- Paltry increase in allocations: For 2020-21, there has been a paltry increase in health-care sector allocation (5.7% above 2019-20 RE), while the allocation for the AB-NHPS is unchanged.
- It is very possible that the AB-NHPS continues to remain insufficiently funded and incapable of extending considerable financial risk protection to the poor.
- Diversion of limited funds to wasteful areas
- Attractive on face: Embracing the complexities associated with robust regulation of the insurance programme and making the requisite technological and administrative investments appear attractive and commendable on the face.
- Diversion of limited fund: However, these complexities entail diverting highly limited resources towards wasteful and dispensable high-end areas.
- These funds could have been set aside for much more pressing and productive domains, such as public hospitals and health centres.
- Improvements in these areas would have strongly reflected in terms of tangibly better health outcomes.
- AB-NHPS reinforcing contradictions: Rather, the AB-NHPS appears attuned to reinforcing a stark contradiction wherein trailblazing but unproductive high-end structures thrive alongside decrepit but potentially fructuos basic structures.
Conclusion
The fanfare with which AB-NHPS was launched, can hide the pressing concerns which lie underneath. The government must ensure that every penny spent on improving healthcare is used in the most optimal way and ensure that India’s AB-NHPS won’t end up the US healthcare way.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Coronavirus threat and its implications for India and the rest of the world.
Context
The coronavirus epidemic poses a challenge to China’s place in global affairs, its political leadership.
The possible implications of coronavirus crisis
- The Chines leadership might not be able to escape the blame: If the epidemic turns into a pandemic, as some analysts bet, China’s all-powerful leader Xi Jinping might not be able to escape the blame.
- And will likely come under considerable political pressure.
- It could also turn into a systemic threat: Some also speculate that the backlash against the government’s mishandling of the crisis could turn into a systemic threat against the dominance of the Chinese Communist Party.
- Speculations as perennial hope among China’s critics: Sceptics, however, dismiss above speculation as merely reflecting the perennial hope among Beijing’s harshest critics who can’t wait to see a China without the CCP.
- Realist’s stand: Realists point to the massive mobilisation of state power by President Xi in limiting the spread of the virus.
Handling of the crisis by China
- Initial faltering response: To be sure, there were major failures in the initial faltering response to the crisis.
- Cover-up attempts from the lower level: The attempts at the lower levels to cover-up or underplays the crisis and the inadequate appreciation at the higher levels of the potential consequences are common to all large bureaucracies. The party-state in China is not an exception.
- Praise for handling the crisis: China’s handling of the crisis had drawn much respect, grudging or otherwise, from the international community.
- Whether it is the lockdown of Hubei province and its capital Wuhan, from where the virus began to spread.
- Or in deploying thousands of doctors and health workers in the province and building massive hospitals for treating the infected.
- Possibility of some political impact: Yet, there is no question that a crisis of this magnitude -will have some political impact.
- The party-state is certainly having some difficulty in containing the public outrage against the initial failures.
- Efforts to shield top leadership from blame: The CCP, however, is bound to shield the supreme leader from any damaging criticism and in fact, celebrate a triumph in containing the spread through a determined effort.
- Responsibility will be affixed on provincial officials in Hubei and a purge of some kind may have already begun.
Addressing the economic consequences of the crisis
- International dimension: Nearly two decades after the SARS epidemic -China is now a much larger economy and its interdependence with the world has only deepened.
- This interdependence, in turn, lends a strong international dimension to China’s crisis.
- Optimist’s hope of future uptick: Optimists hope that a sharp drop in economic activity in the current quarter will be followed by a steep uptick in growth in the next when the virus is contained and normalcy returns.
- Pessimist’s fear of economic disruption: Pessimists suggest that the economic disruption — in terms of the impact on internal and external trade and the breakdown of the global supply chains- could have lasting effects.
- Reinforcing the disruption: Some suspect that the disruption could reinforce the slowdown driven by a number of other internal and external factors including the trade war with the US.
China’s response to the rest of the world
- Channelling of resentment against the West: Some in the West hope that a prolonged economic crisis might turn the people against the CCP. For now, though, Beijing is channelling the resentment against the West.
- Terming evacuation as an over-reaction: Beijing has criticised the advisories from various countries against travel to China and the cancellation of flights as over-reaction.
- Lukewarm response to evacuation efforts: China has also been lukewarm to efforts of various countries to evacuate their citizens from Wuhan and Hubei.
- India evacuated students: India has managed to convince Beijing to let India airlift its students from Wuhan.
- Pakistan has declared that it will not evacuate its students as a gesture of political solidarity with China in a time of crisis.
- South Asian neighbour’s response: Many of India’s other South Asian neighbours are torn between the reluctance to offend Chinese sentiment and the mounting domestic pressures to bring students back.
- Cooperation with the US: While being critical of the US travel restrictions against China, Beijing has certainly been open to cooperation with the US in dealing with the crisis.
- India’s offer to help other countries in evacuation: The external affairs minister Subrahmanyam Jaishankar said last week that India has been willing to bring back students from all the neighbouring countries.
- Balancing between Delhi and Beijing: The logic of balancing between Delhi and Beijing has prevented most of the smaller neighbours from requesting Indian assistance.
- The Maldives has been the only exception.
- The response of the East and Southeast Asia: Beyond South Asia, many countries in East and Southeast Asia have been hesitant to be seen as rushing to cut themselves from China.
- What is making these countries hesitant: Deep economic interdependence and massive flows of Chinese tourists led to much dithering among the East Asian countries in their early responses to the crisis.
Conclusion
India must explore all potential cooperative engagement with Beijing as well as its other international partners on pandemics-an important but the under-addressed challenge for national, regional and international security.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Shortcomings in the Medical Termination of Pregnancy Act 1971 and need of the more progressive abortion law in the country.
Context
The Medical Termination of Pregnancy Bill doesn’t do enough to secure women’s choices and interests.
Deaths due to unsafe abortion and previous attempts to legislate
- Deaths due to unsafe abortions: Recent reports have shown that more than 10 women die every day due to unsafe abortions in India.
- And backward abortion laws only contribute to women seeking illegal and unsafe options.
- The Cabinet has recently approved the Medical Termination of Pregnancy (Amendment) Bill, 2020 (MTP Bill, 2020) which will soon be tabled in Parliament.
- It seeks to amend the Medical Termination of Pregnancy Act, 1971 (MTP Act) and follows the MTP Bills of 2014, 2017 and 2018, all of which previously lapsed in Parliament.
Provisions of the current law
- Foetus-age based division: The MTP Act divides its regulatory framework for allowing abortions into categories, according to the gestational age of the foetus.
- Up to 12 weeks: Under Section 3, for foetuses that are aged up to 12 weeks-
- Only one medical practitioner’s opinion is required to the effect that the continuance of the pregnancy would pose a risk to the life of the mother or cause grave injury to her physical or mental health.
- Or there is a substantial risk that if the child is born, it would suffer from such physical or mental abnormalities as to be seriously handicapped.
- Between 12 weeks and 20 weeks: But if the foetus is aged between 12 weeks and 20 weeks-
- At least two medical practitioners’ opinions conforming to either of the two conditions are required.
- What beyond 20 weeks? Beyond 20 weeks, termination may be carried out where it is necessary to save the life of the pregnant woman.
- Definition of grave injury: The MTP Act also specifies that ‘grave injury’ may be explained as
- The anguish caused by a pregnancy arising out of rape, or the anguish caused by an unwanted pregnancy arising out of the failure of a contraceptive used by a married woman or her husband.
What are the issues with the current law?
- Several issues arise from the current framework under the MTP Act.
- First-Lac of autonomy of women: At all stages of the pregnancy, the healthcare providers, rather than the women seeking an abortion, have the final say on whether the abortion can be carried out.
- It is true that factors such as failure of contraceptives or grave injury are not required to be proved under the MTP Act.
- However, to get the pregnancy terminated solely based on her will, the woman may be compelled to lie or plead with the doctor.
- Thus, at present, pregnant women lack autonomy in making the decision to terminate their pregnancy and have to bear additional mental stress, as well as the financial burden of getting a doctor’s approval.
- On request abortion in 67 countries: Indian’s law is unlike the abortion laws in 67 countries, including Iceland, France, Canada, South Africa and Uruguay, where a woman can get an abortion ‘on request’ with or without a specific gestational limit (which is usually 12 weeks).
- Second-Prejudice against unmarried women: The MTP Act embodies a clear prejudice against unmarried women.
- According to ‘Explanation 2’ provided under Section 3(2) of the Act, where a pregnancy occurs due to failure of any birth control device or method used by any “married woman or her husband”, the anguish caused is presumed to constitute a “grave injury” to the mental health of the pregnant woman.
- While the applicability of this provision to unmarried women is contested, there is always the danger of a more restrictive interpretation, especially when the final decision rests with the doctor and not the woman herself.
- Third-Restriction of 20 weeks’ limit: Due to advancements in science, foetal abnormalities can now be detected even after 20 weeks.
- Danger to mother’s life only condition after 20 weeks: The MTP Act presently allows abortion post 20 weeks only where it is necessary to save the life of the mother.
- Problem with this restriction: The above restriction means that even if a substantial foetal abnormality is detected and the mother doesn’t want to bear life-long caregiving responsibilities and the mental agony associated with it, the law gives her no recourse unless there is a prospect of her death.
What does the bill fail to address?
- While the MTP Bill, 2020, is a step in the right direction, it still fails to address most of the problems with the MTP
- First, it doesn’t allow abortion on request at any point after the pregnancy.
- Second, it doesn’t take a step towards removing the prejudice against unmarried women by amending the relevant provision.
- And finally, it enhances the gestational limit for legal abortion from 20 to 24 weeks only for specific categories of women such as survivors of rape, victims of incest, and minors.
- This means that a woman who does not fall into these categories would not be able to seek an abortion beyond 20 weeks, even if she suffers from a grave physical or mental injury due to the pregnancy.
What are the provisions for the case of foetal abnormality in the bill?
- Limit irrelevant if the foetal abnormality is diagnosed by the Medical Board: The Bill does make the upper gestational limit irrelevant in procuring an abortion if there are substantial foetal abnormalities diagnosed by the Medical Board.
- This means that even if there is no threat to the mother’s life, she would be able to procure an abortion as soon as a substantial foetal abnormality comes to light.
- While this is an important step and would have in the past helped many women who fought long battles in Court without recourse.
- Rules against unnecessary delays: It is crucial that this provision is accompanied by appropriate rules for the Medical Boards that guard against unnecessary delays, which only increase the risks associated with a late abortion.
Conclusion
- Recognition of women’s right: The Supreme Court has recognised women’s right to make reproductive choices and their decision to abort as a dimension of their personal liberty (in X v. Union of India,2017) and as falling within the realm of the fundamental right to privacy (in K.S. Puttaswamy v. Union of India, 2017). Yet, current abortion laws fail to allow the exercise of this right.
- The bill does not do enough: While it is hoped that MTP Bill, 2020 will not lapse in Parliament like its predecessors, it is evident that it does not do enough to secure women’s interests, and there is still a long road ahead for progressive abortion laws.
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