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

    RBI, government must act in coordination during an economically challenging period

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Standing Deposit Facility rate

    Mains level: Paper 3- Dealing with economically challenging period

    Context

    In the recent MPC meeting, the policy rate hike was widely expected, more anticipated were the MPC and the RBI Governor’s forward guidance on the trajectory of policy — on both monetary policy and liquidity instruments. So, how do we see monetary policy evolve over the rest of the year and beyond?

    Tightening of monetary policy

    • Repo rate at 5.4 per cent: In its latest meeting, the members of the monetary policy committee voted unanimously to increase the policy repo rate by 50 basis points to 5.4 per cent.
    • The repo rate was 5.15 per cent in February 2020.
    • So, in effect, the RBI’s policy has not only been normalised, but has actually tightened compared to the pre-pandemic level.
    •  Even the lower bound of the rate corridor, the Standing Deposit Facility (SDF) rate, at 5.25 per cent is now above the pre-pandemic repo rate.

    Forward guidance on stance

    • The MPS indicated the retaining the policy stance rather than shifting to “neutral”.
    • This retention of stance might be interpreted as being a bit more hawkish than “neutral”, which implies that rates might be both increased or cut, depending on economic conditions.
    • Now that policy is largely normalised, the pace of tightening is likely to moderate.
    • The urgency of aggressive rate hikes and tightening of liquidity has somewhat moderated, although risks remain.
    • RBI’s research suggests that the “real natural rate” — the rate at which policy is neither loose nor tight – is 0.8-1 per cent.
    • This operative interest rate is usually the three-month T-bill rate, which in “normal” times averages 10-15 basis points above the repo rate.
    • Considering that monetary policy is calibrated over a one-year horizon and using the RBI’s inflation forecast of 5 per cent for the first quarter of 2023-24, the “natural” repo rate will be around 5.85 per cent.

    Inflation and growth conditions

    • The RBI’s growth projection for 2022-23 has been retained at 7.2 per cent, with growth frontloaded in the first half.
    • CPI inflation is still forecast to average 6.7 per cent.
    • Inflationary pressures are likely to wane in the second half of 2022-23, particularly if the recent drop in industrial metals prices persists over the next few months.
    • A more or less normal monsoon might help in keeping food prices stable. However, risks remain.
    • Robust growth prospects: Demand for consumption goods seems to be resilient, enabling some further pass-through of input costs.
    • Combine this with tight labour markets and rising wage costs in some tech-oriented sectors.
    • High frequency indicators of economic activity have recovered after some weakness in June.
    • In addition to resilient demand, there is evidence of a closing of the “output gap”.
    • Global growth: Global growth and trade are forecast to significantly slow down in 2022 and 2023, largely due to aggressive tightening by G-10 central banks and a slowdown in China.
    • The IMF predicts global trade volume (both merchandise and services) to slow to 4.1 per cent and 3.2 per cent in 2022 and 2023, down from 10.1 per cent in 2021.
    • With world growth and trade flows moderating, along with a drop in commodities prices, India’s export growth is likely to be lower than last year.

    External financial condition

    • The current account deficit remains a concern.
    • India’s external balance sheet remains quite robust, as is evident from various balance of payments and debt metrics, and reportedly low unhedged foreign currency borrowings.
    • Continued tightening by global central banks, particularly the US Federal Reserve over the rest of 2022, will keep India’s external financial conditions tight and likely limit portfolio capital flows.
    • However, there are some signs emanating from these central banks that the hitherto front-loaded tightening might moderate going forward.
    • This will take some pressure off the rupee, though, exchange rate volatility management will remain a part of the overall monetary policy management framework.

    Challenge of surplus liquidity

    • During the earlier phase of policy normalisation and the recent tightening, liquidity management has played an important role in influencing short-term money market interest rates.
    • The current latent surplus liquidity — the existing funds with banks and the Union government’s unspent revenues parked with RBI — is over Rs 5 lakh crore.
    • While the extent of liquidity surplus during the Covid months has come down, these levels are still much higher than RBI estimates of non-inflationary levels of surplus, which is around Rs 1.8-2.4 lakh crore.
    • This will gradually fall with cash withdrawals and some potential RBI dollar sales in the coming months.

    Conclusion

    The central bank, in coordination with the government, has ensured an orderly evolution of economic conditions during a very complex and challenging environment. The exit process now will also need the same adroit use of policy instruments.

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    Back2Basics: Standing Deposit Facility rate

    • The Reserve Bank of India (RBI) in April 2022 introduced the Standing Deposit Facility (SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75 per cent.
    • The main purpose of SDF is to reduce the excess liquidity  in the system, and control inflation.
    • In 2018, the amended Section 17 of the RBI Act empowered the Reserve Bank to introduce the SDF – an additional tool for absorbing liquidity without any collateral.
    • By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.
    • The SDF is also a financial stability tool in addition to its role in liquidity management.
    • The SDF replaced the fixed rate reverse repo (FRRR) as the floor of the liquidity adjustment facility corridor.
    • The SDF rate will be 25 bps below the policy rate (Repo rate), and it will be applicable to overnight deposits at this stage.
    • It would, however, retain the flexibility to absorb liquidity of longer tenors as and when the need arises, with appropriate pricing.

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  • Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

    India’s ‘wheat waiver’ WTO demand is risk-fraught

    op-ed snap | Economics | Mains Paper 3: PDS, Buffer Stock & Food Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: WTO waiver

    Mains level: Paper 3- Public Stockholding of Food issue at WTO

    Context

    The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.

    Public stockholding issue at WTO

    • India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.
    • PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.
    • Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
    • India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
    • Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
    • The WTO ministerial meeting in June at Geneva did precious little to address this issue.
    •  India’s concerns about the PSH issue have been taken on board.

    India’s concerns

    • For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).
    • Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
    • However, there is no mention of price support in the Geneva declaration.
    • India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
    • India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
    • However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
    • Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.
    • The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.
    •  However, it is very unlikely that such a request will be acceded to.
    • As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.

    Way forward

    • Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.
    • India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.
    • Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
    • Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
    • Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.
    • Adding newer objectives and shifting goalposts might result in falling between two stools.

    Conclusion

    Instead of asking for the waiver to export wheat from public stockholding, the laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.

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  • e-Commerce: The New Boom

    Online Dispute Resolution in new-age digital commerce

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: ONDC

    Mains level: Paper 3- Online Dispute Resolution

    Context

    Despite the rapid advancement of digital platforms on the one hand and the pervasiveness of the Internet-enabled phone on the other, small enterprises such as local kirana stores have not gained from this. Online purchases from “near and now” inventory from the local store remain in a digital vacuum.

    Online revolution in country

    • Increased smartphone use: The rise in smartphone use fuelled by affordable data plans has catalysed an online revolution in the country.
    • Pandemic accelerated digital inclusion: The novel coronavirus pandemic has further accelerated the process of digital inclusion.
    • It is now not only routine to transact online it is also common to learn online, have medical consultations online, and even resolve disputes online.
    • Increased scope for innovation in digital space: These realisations have given India the opportunity to disrupt the status quo with its innovative abilities.
    • Systems such as the Unique Identification Authority of India (UIDAI) and Aadhaar, the Unified Payments Interface (UPI) and the Ayushman Bharat Digital Mission have reengineered markets.

    Why mall and medium sided businesses have not benefited from digital revolution?

    • Despite the rapid advancement of digital platforms small enterprises such as local kirana stores have not gained from this.
    • Cost of infrastructure: This is because, to sell on numerous platforms, sellers must maintain a separate infrastructure, which only adds costs and limits participation.
    • Distinct terms and conditions of platforms: The distinct terms and conditions of each platform further limit the sellers’ flexibility.
    • Consequently, small and medium-sized businesses have lost their freedom to choose and participate in the country’s e-commerce system at their will and on their terms.

    Way forward: Open Network for Digital Commerce

    • The Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India established the Open Network for Digital Commerce (ONDC) to level the playing field by developing open e-commerce and enabling access to small businesses and dealers.
    • The ONDC began its pilot in five cities in April 2022, i.e., New Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.
    • Currently, the pilot has expanded to 18 cities, and there are immediate plans to add more cities.
    • The ONDC network makes it possible for products and services from all participating e-commerce platforms to be displayed in search results across all network apps.
    • For instance, a consumer shopping for a product on an e-commerce app named “X” would also receive results from e-commerce app named “Y”, if both X and Y integrated their platforms with the ONDC.

    Dispute resolution through ODR

    • Disputes will be the obvious by-product of this e-commerce revolution.
    • Therefore, it is imperative to support this initiative with a modern-day, cost-effective, timely and high-speed dispute resolution system.
    • Online Dispute Resolution, or ODR as it is popularly called, has the propensity to work alongside the incumbent setup and deliver quick, affordable and enforceable outcomes.
    • The ODR is not restricted to the use of legal mechanisms such as mediation, conciliation and arbitration in an online environment but can be tailormade for the specific use case keeping the participants in mind.
    • ODR commonly involves case management systems, integration of communication technologies such as email, SMS, WhatsApp, Interactive Voice Response, audio/video conferencing.
    • With appropriate data sets in place, it can also involve advanced automation, the use of technologies such as artificial intelligence and machine learning to enable resolutions at the same time as it would take to initiate a transaction over the network.
    • Many e-commerce companies have turned to the ODR with the realisation that in order to maximise transactions it is important to ensure a positive dispute resolution experience.
    • Adoption in India: The ODR is no more a distant dream for India as well.
    • The National Payments Corporation of India (NPCI) has mandated platforms in the UPI ecosystem to adopt the ODR for complaints and grievances connected to failed transactions.
    •  Ingram, SEBI SCORES (or the Securities and Exchange Board of India SEBI COm plaints REdress System), RBI CMS (or the Reserve Bank of India Complaint Management System), MahaRERA (or the Maharashtra Real Estate Regulatory Authority), MSME Samadhaan (or the Micro Small and Medium Enterprises Delayed Payment Monitoring System), and RTIOnline (or the Right to Information Online) are other examples of ODR systems that are widely used in the country.
    • Mitigating litigation risks: The ODR will help mitigate litigation risk and provide valuable insights into problems faced by consumers.
    • Consumers are provided with another choice for effective redress of their grievances, thereby building trust, confidence and brand loyalty.

    Advantages of ONDC

    • Wider choice for consumers: The ONDC achieves the dual objective of wider choice for consumers on the one hand and access to a wider consumer base for sellers on the other.
    • With India’s e-commerce industry set to reach $200 billion by 2027, this shift from a platform-centric paradigm to democratisation of the nation’s online market will catalyse the inclusion of millions of small business owners and kirana businesses.

    Conclusion

    A dispute resolution framework that includes a customised ODR process can play a role in the network achieving its steep five-year target of adding $48 billion in gross merchandise value to India’s e-commerce market, a network of 90 crore buyers and 12 crore sellers with the least hiccups.

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  • Farmer suicide

    op-ed snap | Agriculture | Mains Paper 3: Agriculture and related issues

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: agrarian distress

    farmer suicideContext

    • An agricultural labourer died by suicide every 2 hours in 2021: NCRB
    • The national catastrophe of farmer suicide since the 1990s, often by drinking pesticides is attributed to their inability to repay loans mostly taken from landlords and banks.

    NCRB Stats on Farmers Suicide

    • Some 5,563 agricultural labourers died by suicide in 2021, according to the latest report of the National Crime Records Bureau (NCRB). The number of suicides increased by nine per cent from 2020 and by around 29 per cent from 2019.

    Causes of Farmers Suicide

    • Non sustainable cropping: Most of the suicides have occurred in areas of cash crops like cotton and sugarcane, which is high input, high output gambling, not based on the principle of sustained and resilient high yield.
    • Multiple causes: There is no consensus on what the main causes might be but studies show farmer suicide victims are motivated by more than one cause however the primer reasons being the inability to repay loans.
    • Combined causes: Major causes reportedly are bankruptcy/indebtedness, problems in the families, crop failure, illness and alcohol/substance abuse.

    farmer suicideFaulty measures

    • Low penetration of irrigation: Irrigation reaches less than half of India’s overall farmland, a picture that has not changed much over the past decade, and more than 60% of our farmers are susceptible to rainfall anomalies.
    • Dry land farming: Rain-fed farming yields are typically less than half those of irrigated farmland.
    • High input cost: Though India has caught up with global levels of fertilizer use, this is neither efficient nor environmentally sustainable. Both add to the cost of cultivation.
    • Slow R&D: Research on high-yielding crops has plateaued after an initial burst during the Green Revolution and farmers have to resort to patented seeds to draw more out of their scanty acres.

    farmer suicide7R’ model utility

    It looks at the prevention of farmer suicide

    • Remunerative agriculture,
    • Resilience building,
    • Rational expenditure,
    • Reassurance through connectivity,
    • Righteous conduct,
    • Religious support and
    • Responsible reporting

    farmer suicideWay Forward

    • Information technology promises to improve weather forecasting, crop identification as well as damage control, soil health monitoring, and mapping of available water resources.
    • Improvements in marketing and logistics can significantly raise the share that cultivators get of the money people pay for their food.
    • The govt. is using technology to connect farmers to a nationwide e-market, but the states need to amend their antiquated farm produce marketing laws that have squeezed farmers’ earnings.
    • An old problem of price signals failing to adjust demand and supply may also need fixing.
    • For agricultural incomes to rise, reforms, rather than cash transfers, loan waivers and the like, are the way ahead.

    Conclusion

    • Along with subsidies, increased farm profits, the focus should also be on resilience building and problem-solving skills of farming families.
    • In suicide-prone states, agricultural institutes and scientists should start distributing seeds of resilience, tolerance and contentment among farmers, suggested researchers.

    Mains question

    Q. Despite agricultural growth Indian farmers are committing suicides Discuss the causes and give dynamic way forward to address the issue.

     

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  • Direct Benefits Transfers

    Universal basic income

    op-ed snap | Economics | Mains Paper 2: Schemes For Vulnerable Sections

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: various schemes for vulnerable section

    Mains level: social security, universal basic income

    universal basic income Context

    • New evidence from two Kenyan counties shows that universal basic income  and other income supplements reduce hunger, illness, and risk exposure during crises.
    • Countries should consider building universal basic income that can be activated at short notice to help people weather unanticipated shocks.

    Why in news?

    • When the COVID-19 pandemic and the resulting recession pushed 120 million people worldwide into extreme poverty in 2020, many countries relied on social-protection measures to cushion the blow.

    What is social protection?

    • Social protection is concerned with preventing, managing, and overcoming situations that adversely affect people’s well-being.
    • Social protection programs that assist low-income families, insure against shocks, and break poverty traps offer a potential solution.

    universal basic income Universal basic income meaning

    • Universal basic income (UBI) is a model for providing all citizens of a country or other geographic area with a given sum of money, regardless of their income, resources or employment status.
    • The purpose of UBI is to prevent or reduce poverty and increase equality among citizens.

    What is social security?

    • Social securityin India includes a variety of statutory insurances and social grant schemes bundled into a formerly complex and fragmented system run by the Indian government.
    • These are retirement, healthcare, disability, childcare, gratuity and provident fund and insurance programs.

    What is insurance simple words?

    • An agreement by which a person pays a company and the company promises to pay money if the person becomes injured or dies or to pay for the value of property lost or damaged.

    Constitutional mandate

    • The Directive Principles of State Policy, enshrined in Part IV of the Indian Constitution reflects that India is a welfare state.

    Interesting fact

    India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country.

    What are the benefits of Universal Basic Income?

    • Ending poverty: Advocates for UBI say that it could help bring everyone’s income above the poverty line.
    • Discouraging low wages: UBI would give employees enough security to have bargaining power.
    • Redistributing wealth: The economic growth of high-income countries is making the rich richer, but having very little effect on the working classes.

    Case study / value addition

    Namibia

    Namibia had a basic income pilot program between 2008 and 2009. Every resident of Otjivero-Omitara was entitled to 100 Namibian dollars ($6.75) every month. The program was funded by donors from around the world.

    Findings from the pilot program showed that cases of child malnutrition had dropped significantly while school enrollment went up. Also, social crimes such as theft had significantly dropped.

    universal basic income Negative implications of UBI

    • Induce lethargy: UBI removes the incentive to work, adversely affecting the economy and leading to a labour and skills shortage.
    • Inequity: Universal basic income would be just that: universal. That means that everyone, regardless of how poor, or rich, they were would get the same amount of money.
    • Huge Cost: The cost of implementing UBI could be huge. In the United States it’s estimated to be about $3.9 trillion per year.
    • Motivation to work: One concern is that UBI would incite millions of workers to stop working. If people aren’t working, there is less taxable income.

    Some government initiatives

    • National Pension Scheme for Traders and Self Employed Persons.
    • Pradhan Mantri Suraksha Bima Yojana.
    • Employees’ State Insurance Scheme.
    • Minimum Wages for various employment roles.
    • National Pension System.

    Conclusion

    • One of the major criticisms of poverty alleviation programs is significant leakages. UBI is seen as a more efficient alternative. Though UBI has many advantages, there are many practical challenges too. The idea should be to save costs with better targeting. This will help create the necessary conditions for higher growth which will decisively lift people out of poverty.

    Mains question

    Q. India operates the widest spectrum of social security schemes which cater to the largest number of people than any other country. Do you think they are enough? Discuss in context of rising demand for universal basic income and its pros and cons for ensuring social security.

     

     

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  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Labour Codes

    op-ed snap | Economics | Mains Paper 2: Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Labour codes

    Mains level: Not Much

    Addressing to the National Labour Conference, Prime Minister said that the Centre had taken initiatives to abolish laws from “the period of slavery” that reflected a slavery mentality through the Labour Codes.

    New Labour Codes

    The four codes likely to be implemented in FY23 are:

    1. Code on Wages
    2. Industrial Relations Code
    3. Social Security Code, and
    4. Occupational Safety, Health and Working Conditions Code

    Objectives of the Labour Code

    • The new labor codes are aimed at facilitating ease of doing business in the country and seek to replace 29 cumbersome laws.
    • The objective is to encompass over 500 million organized and unorganized sector workers—90% of the workforce which has been outside labour laws.
    • The idea is to ensure that they receive wage security, social security and health security, gender equality in terms of remuneration, a minimum floor wage, make the lives of inter-state migrant workers easier.

    What is the current status of the codes?

    • The central government has completed the process of finalizing the draft rules, state governments are in the process of drafting the same.
    • With labor being a concurrent subject, states are in the process of pre-publishing draft rules for these reforms.

    How many labour laws do Indian states have?

    • The simplification of 29 labour laws into the four labour codes is expected be a watershed moment for labour reforms.
    • India currently has a web of multiple labour legislations, over 40 central laws and 100 state laws involving labour.
    • The Second National Commission on Labour (2002) recommended simplification to bring about transparency and uniformity.

    What are the major reforms in these codes?

    • Social security benefits: With organized sector workers being approximately 10% of the total workforce, the new codes may ensure that social security benefits are for all.
    • Take-home salary: As per the proposed labour codes, total allowances such as house rent, leave, travel etc. are to be capped at 50% of the salary, while basic pay should account for the remaining 50%.
    • Four days work: There could also be a permissible four-day work week of 12 hours per day.

    How will it affect ease of doing business?

    • Labour productivity: It is likely to improve with both employees and employers developing a sense of being partners in wealth creation.
    • Labour reform: A transparent environment in terms of workers’ compensation, clear definition of employee rights and employer duties.
    • Compliance un-burdening: Simplified labour codes making compliance easier are likely to attract investments.
    • Formalization of the economy: With more workers in the organized sector, leakage in terms of direct as well as indirect taxes may be plugged.

    Also read

    [Burning Issue] New Labour Laws

     

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  • G20 : Economic Cooperation ahead

    G20 presidency opportunities for India’s growth and prosperity

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: particulars of G20

    Mains level: global governance

    G20 Context

    • India’s presidency of the G20 grouping next year arguably the sole remaining effective forum for global governance presents an enormous opportunity to accelerate sustainable growth within India, in the emerging world, and beyond.

    About G20

    • Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.

    Features

    • Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
    • To tackle the problems or the address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
    • In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.

    Objectives

    • Stability: The Group was formed with an aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
    • Fiscal responsibilities: The forum aims to pre-empt balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
    • Universal Support: The forum seeks to address issues that go beyond the responsibilities of any one organisation.

    G20Is India ready for G20 leadership?

    • At some levels, India is ready.
    • Indian business and industry is becoming a noteworthy competitor globally.
    • The country’s domestic economy is starting to pick up, thanks to structural economic reforms.
    • The central government is economically stronger, and the states are starting to learn about economic independence, making them more aligned with their global counterparts.

    Punchline

    It is said that “those who hold the pen, write the rules”.

    The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance.

    Issues and Challenges

    • India need to have a clear global financial agenda.
    • The country should also have the capacity to lead the G20 year intellectually, financially, managerially and administratively.
    • Geopolitically, India is more internationally engaged but less so geoeconomically.
    • Its narrow focus is on the World Bank, IMF, WTO and foreign investment issues.
    • But India has much to contribute on issues like reconfiguration of global financial regulations, design of a new framework for trade in services and the digital economy and establishing better cross-border standards for transparency in financial flows.
    • To make its G20 year a success, India has to address organisational challenges, where the country has an infrastructure, management and intellectual gap.

    G20What could India bring to the table?

    • Mediation: Firstly, it remains pertinent for the world that escalating tensions between Russia and Ukraine come to a halt. Maintaining its balanced stance, India needs to neutralise this situation by introducing peace talks between the two nations.
    • Open trade: It’s about time for India to raise its voice in support of a transparent New Economic Order and building a prosperous and just world. Unreasonable bans on certain commodities from various countries limits commerce between states when trade liberty exists.
    • Collaboration around science and technology: The global agenda has been tilted towards investment, whereas science and technology are the driving force for economic diversification, sustainably urbanising the world, and ushering the hydrogen economy and new crop varieties as the answer to both human well-being and global climate change.
    • Redefining digital access as universal service: Harnessing the potential of the digital-information-technology revolution requires redefining digital access as a “universal service” that goes beyond physical connectivity to sharing specific opportunities available.

    Conclusion

    • India’s presidency must leave the grouping with the agility and energy to respond to new realities, and it must create a future-ready multilateralism through a novel and robust institutional architecture.

    Mains question

    Q. It is said that “those who hold the pen, write the rules”. The time has come for India to both hold the pen and write the rules for a more equitable global economics and governance. Discuss in the context of India’s presidency of G20 summit with challenges and opportunities ahead.

     

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  • Foreign Policy Watch: India-Sri Lanka

    India-Srilanka Relations

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: hambantota, trinconmalee projects

    Mains level: indo srilanka bilateral relations

     

    Context

    The present economic crisis in Sri Lanka has pushed it closer to India for immediate relief.

    Reasons for the Crisis

    The first wave of the pandemic in 2020 offered early and sure signs of distress.

    • In-migration: Thousands of Sri Lankan laborers in West Asian countries were left stranded and returned jobless.
    • Shut-down: Garment factories and tea estates could not function, as infections raged in clusters. Tourism sector to saw a big dip.
    • Domestic job losses: Thousands of youth lost their jobs in cities as establishments abruptly sacked them or shut down.
    • Forex decline: It meant that all key foreign exchange earning sectors, such as exports and remittances, along with tourism, were brutally hit.

    Reasons behind crisis

    • The Easter bomb blasts of April 2019 in churches in Colombo resulting in 253 casualties,consequently, dropped the number of tourists sharply leading to a decline in foreign exchange reserves.
    • The newly led government by Gotabaya Rajapaksa in 2019 promised lower tax rates and wide-ranging SoPs for farmers during their campaign.
    • No strategy: The lack of a comprehensive strategy to respond to the crisis then was coupled with certain policy decisions last year.
    • Ill-advised policies: It included the government’s abrupt switch to organic farming —widely deemed “ill-advised”, further aggravated the problem.
    • Food hoarding: The government declared emergency regulations for the distribution of essential food items. It put wide import restrictions to save dollars which in turn led to consequent market irregularities and reported hoarding.
    • Continuous borrowing: Fears of a sovereign default rose by the end of 2021, with the country’s foreign reserves plummeting to $1.6 billion, and deadlines for repaying external loans looming.

    Brief background of India-SL relations

    • India is the only neighbor of Sri Lanka, separated by the Palk Strait; both nations occupy a strategic position in South Asia and have sought to build a common security umbrella in the Indian Ocean.
    • There are deep racial and cultural links between the two countries. Both share a maritime border.
    • The India- SL relations have been however tested by the Sri Lankan Civil War and by the controversy of Indian intervention during the war.
    • In recent years Sri Lanka has moved closer to China, especially in terms of naval agreements.
    • India has signed a nuclear energy deal to improve relations and made a nuclear energy pact with Sri Lanka in 2015.

    India’s role in the Lankan Civil War

    • In the 1970s–1980s, the RAW and the state government of Tamil Nadu were believed to be encouraging the funding and training for the Liberation Tigers of Tamil Eelam (LTTE), a separatist insurgent force.
    • In 1987, faced with growing anger amongst its own Tamils, and a flood of refugees India intervened directly in the conflict for the first time.
    • This was after the Sri Lankan government attempted to regain control of the northern Jaffna region by means of an economic blockade and military assaults; India supplied food and medicine by air and sea.

    Why did India intervene?

    • Indian intervention in Sri Lankan civil war became inevitable as that civil war threatened India’s unity, national interest and territorial integrity.

    Outcomes

    • The peace accord assigned a certain degree of regional autonomy in the Tamil areas with a body controlling the regional council and called for the Tamil militant groups to lay down their arms.
    • Further India was to send a peacekeeping force, named the IPKF to Sri Lanka to enforce the disarmament and to watch over the regional council.
    • The accord failed over the issue of representations. The result was that the LTTE now found itself engaged in military conflict with the Indian Army.

    Areas of cooperation

    (1) Political Relations

    • Regular Exchange: Political relations between the two countries have been marked by high-level exchanges of visits at regular intervals.
    • Bilateral Cooperation: A joint statement covering all areas of bilateral cooperation, titled ‘MitratvaMaga’ was issued following the Virtual Summit of 2020.

    (2) Commercial Relations

    • ISFTA: The India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade in areas such as infrastructure, connectivity, transportation, housing, health, livelihood and rehabilitation, education, and industrial development.
    • Trading Partner: India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC.
      • In 2020, India was Sri Lanka’s 2nd largest trading partner with the bilateral merchandise trade amounting to about USD $ 3.6 billion.
    • India and Sri Lanka are member nations of several regional and multilateral organizations such as the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Unionand BIMSTEC.
    • India is Sri Lanka’s third-largest export destination, after the US and UK.
    • Exports: Sri Lankan exports to India have increased substantially since 2000 when ISLFTA came into force.
    • FDI: India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka. According to BoI, FDI from India amounted to about US$ 1.7 billion during the period 2005 to 2019.

    (3) Development Cooperation

    • Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion.
      • Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
    • The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
    • Emergency Ambulance Service: The Service which was initially launched in July 2016 is now expanded to all the Provinces.
      • At a total cost of more than USD 22.5 million, close to 300 ambulances were provided by GOI under this project.
    • Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
    • Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.

    (4) Projects under Lines of Credit

    • Sectors: 11 Lines of credit (LOC) have been extended to Sri Lanka by the Export Import Bank of India in the last 15 years.
      • Important sectors under these LOCs include: Railway, transport, connectivity, defense, solar.
    • Infrastructure: Some important Projects completed are- supply of defense equipments; up-gradation of the railway line from Colombo to Matara; track laying by IRCON on Omanthai-Pallai sector; reconstruction of the Railway line; signaling and telecommunication system; supply of engine kits for buses, diesel locomotives railways, DMUs, Carrier and fuel tank wagons etc.
    • Rehabilitation: A project for the rehabilitation of the Kankesanthurai harbor is being executed under a LOC of USD 45.27 million, bringing immense economic benefits to the Northern region of Sri Lanka.
    • Solar Energy: A US$ 100 million LoC for undertaking solar projects in Sri Lanka has been signed for rooftop solar units for Government buildings, rooftop solar units for low-income families and a floating solar power plant.
    • Security: In 2019, a LOC of USD 400 million for development and infrastructure projects and USD 50 million for security and counter-terrorism were announced.
      • These LOC Agreements are currently under discussion.

    (5) Cultural relations

    • India and Sri Lanka have a shared legacy of historical, cultural, religious, spiritual and linguistic ties that is more than 2,500 years old.
    • In contemporary times, the Cultural Cooperation Agreement signed by the Government of India and the Government forms the basis for periodic Cultural Exchange Programmes between the two countries.

    (6) People-to-people ties: Buddhism

    • Buddhism is one of the strongest pillars connecting the two nations and civilizations from the time when Emperor Ashoka sent his children Arhat Mahinda and Sangamitta to spread the teachings of Lord Buddha at the request of King Devanampiya Tissa of Sri Lanka.
    • Underlining the deep people-to-people connect and shared Buddhist heritage, the venerated relics of Lord Buddha from Kapilawasthu discovered in 1970 in India have been exhibited two times in Sri Lanka.
    • India in 2020, announced USD 15 million grant assistance for the protection and promotion of Buddhist ties between India and Sri Lanka.
      • It may be utilized for the construction/renovation of Buddhist monasteries, education of young monks, strengthening engagement of Buddhist scholars and clergy, development of Buddhist heritage museums, etc.
    • Transport- In July 2020, the GoI declared the Kushinagar Airport in India, the place of Lord Buddha’s Mahaparinibbana, as an international airport, to allow Buddhist pilgrims from around the world to visit the revered site associated with Lord Buddha with ease.
    • The Swami Vivekananda Cultural Centre (SVCC)– since its inception in 1998, is actively promoting awareness of Indian culture by offering classes in Bharatnatyam, Kathak, Hindustani and Carnatic vocal, Violin, Sitar, Tabla, Hindi and Yoga.

    (7) Tourism

    • e-Visa- Tourism also forms an important link between India and Sri Lanka. GoI formally launched the e-Tourist Visa (eTV) scheme for Sri Lankan tourists on 14 April 2015.
    • Visa Fee- Subsequently, in a goodwill gesture, the visa fee for eTV was sharply reduced. In 2019, out of the total 1.91 million tourists, 355,000 tourists arrived from India.
    • Sri Lankan tourists too are among the top ten sources for the Indian tourism market.
    • Visa on arrival- On 24 July 2019 Sri Lanka included India in the free visa on arrival scheme and commenced the scheme on 1 August 2019.

    Plummeting relations

    • The ties began to worsen between the two since February, 2021 when Sri Lanka backed out from a tripartite partnership with India and Japan for its East Container Terminal Project at the Colombo Port, citing domestic issues.
      • However, later, the West Coast Terminal was offered under a public private partnership arrangement to Adani Ports and Special Economic Zones Ltd.
    • Sri Lanka in a state of economic emergency: Sri Lanka is running out of foreign exchange reserves for essential imports like food. It has recently declared a state of economic emergency.
    • Covid Impact:
      • Sri Lanka increased policy rates after the covid pandemic in response to rising inflation in August 2021 caused by currency depreciation.
      • Tourism sector has suffered since the Easter Sunday terror attacks of 2019, followed by the pandemic.
      • Earnings fell from $3.6 billion in 2019 to $0.7 billion in 2020, even as FDI inflows halved from $1.2 billion to $670 million over the same period.
      • Sri Lanka’s fragile liquidity situation has put it at high risk of debt distress. Its public debt-to-GDP ratio was at 109.7% in 2020, and its gross financing needs remain high at 18% of GDP.
      • Its gross official reserves slipped to $2.8 billion, which is equivalent to just 1.8 months of imports. More than $2.7 billion of foreign currency debt will be due in the next two years.

    Major outstanding issues

    1. Fishing disputes
    • There have been several alleged incidents of Sri Lankan Navy personnel firing on Indian fishermen fishing in the Palk Strait, where India and Sri Lanka are only separated by 12 nautical miles.
    • The issue started because of Indian fishermen having used mechanized trawlers, which deprived the Sri Lankan fishermen (including Tamils) of their catch and damaged their fishing boats.
    • The Sri Lankan government wants India to ban use of mechanized trawlers in the Palk Strait region, and negotiations on this subject are undergoing.
    • So far, no concrete agreement has been reached since India favors regulating these trawlers instead of banning them altogether.
    2.Alleged political interference
    • A media report from Colombo soon after Rajapaksa’s defeat in the January 8 elections of 2015 had said that an Indian Intelligence official was instrumental in uniting rival political parties — the Sri Lanka Freedom Party (SLFP) and the United National Party (UNP) — against him during the polls.
    • In October 2018, President Sirisena alleged that Indian intelligence agencies were plotting his assassination.
    3.Katchatheevu Island
    • It is an uninhabited island that India ceded to Sri Lanka in 1974 based on a conditional agreement called “Kachchativu island pact”.
    • Later on, Sri Lanka declared Katchatheevu, a sacred land given the presence of a Catholic shrine.
    • But Tamil Nadu claimed that Katchatheevu falls under the Indian Territory and Tamil fishermen have traditionally believed that it belongs to them and therefore want to preserve the right to fish there.
    4.China factor
    • Sri Lanka has a history of taking independent decisions even if they cause misgivings in India.
    • In the period of low profile relationship between the two nations, Sri Lanka apparently started favoring China over India.
    • China is Sri Lanka’s largest bilateral creditor: China’s loans to the Sri Lankan public sector amounted to 15% of the central government’s external debt, making China the largest bilateral creditor to the country.
      • Sri Lanka has increasingly relied on Chinese credit to address its foreign debt burden.
    • China’s Exports surpasses India: China’s exports to Sri Lanka surpassed those of India in 2020 and stood at $3.8 billion.
      • India’s exports were $3.2 billion.
    • Infrastructural Investment by China: Owing to Sri Lanka’s strategic location at the intersection of major shipping routes, China’s investment stands at $12 billion between 2006 and 2019.
      • Unable to service its debt, in 2017, Sri Lanka lost the unviable Hambantota port to China for a 99-year lease.
      • Sri Lanka passed the Colombo Port City Economic Commission Act, which provides for establishing a special economic zone around the port and also a new economic commission, to be funded by China.
      • The Colombo port is crucial for India as it handles 60% of India’s trans-shipment cargo.

    Why is Sri Lanka important to India?

    • India is Sri Lanka’s closest neighbor. Both sides have built upon a legacy of intellectual, cultural, religious and linguistic interaction.
    • Sri Lanka has always been politically and economically important to India given its strategic geographical position in the Indian Ocean. The relationship has been marked by close contacts at all levels.
    • Sri Lanka sits at the epicenter of the arc connecting the Persian Gulf to the Strait of Malacca. An island nation with an economy that’s mainly reliant on tourism and tea exports, Sri Lanka’s blessed geography puts it at a crucial juncture of the busy shipping lanes of the Indian Ocean.
    • India also has a vital strategic stake in Sri Lanka for its own security interests. An unfriendly Sri Lanka or a Sri Lanka under influence of a power unfriendly to India would strategically discomfit India.
    • For the Indian Navy, Sri Lanka is important as the switching of naval fleets from the Bay of Bengal to the Arabian Sea and vice versa requires the fleets to go around the island nation.
    • Both countries share a common broad understanding on major issues of international interest and experience common social-political problems relating to community divides.

    How India has helped to boost Sri Lanka’s economy

    • Grants: The overall commitment by GOI is to the tune of more than USD 3.5 billion. Demand-driven and people-centric nature of India’s development partnership with Sri Lanka have been the cornerstone of this relationship.
    • The Indian Housing Project: India has so far committed to construct close to 62,500 houses in Sri Lanka, making it one of the largest projects undertaken by GoI abroad.
    • Other Projects: India is also involved in projects for renovation of Palaly Airport, Kankesanthurai Harbor, construction of a Cultural Centre in Jaffna, interconnection of electricity grids between the two countries, construction of a 150-bed hospital in Dickoya and setting up a coal power plant in Sampur as a joint venture between National Thermal Power Corporation (NTPC) and Ceylon Electricity Board (CEB).
    • Latest Development: India-SL agreed for joint development of Trincomalee Oil Tank farmed in 2022 after 35 years of wait.

    sri lanka

    Impact of recent Economic crisis on India

    • Export:
      • Sri Lanka’s share in India’s total exports has declined from 2.16 percent in FY15 to just 1.3 percent in the first 10 months of FY22.
    • Shipping:
      • If the current situation in the island nation persists, it could cause a major disruption to the normal functioning of the Colombo Port.
      • This would be detrimental to India’s interest.
      • The port handles over 30 percent of India’s container traffic and 60 percent of its trans-shipment.
    • Investments:
      • India has had a substantial investment in Sri Lanka in areas including real estate, manufacturing, and petroleum refining. They all might be adversely affected if the crisis continued.
    • Migration:
      • Also, the continuing Sri Lankan crisis could compel many Sri Lankans to leave for India for their survival.
      • Already, scores of them have fled from the island nation to India.

    Opportunities for India for deeper engagement

    • Dairy sector: Sri Lanka imports a considerable quantity of milk powder. On average, Colombo annually imports dairy products worth $315 million. . India can help Sri Lanka develop its dairy sector.
    • Poultry sector: In this area, through its host of agricultural universities, India can share its knowledge on ways to increase both production and productivity.
    • Energy sector: Considering how the problem on the energy front exploded into a major political crisis in Sri Lanka, India’s participation in energy projects will be desirable.
    • Education sector: School education is another area where India’s presence could be more felt. India can expand its scheme of establishing smart classrooms and modern computer labs to cover all those institutions teaching children of hill country Tamils, the most underprivileged section in society.

    sri lanka

    Challenges

    • Possibility of greater economic collaboration: Whether this bonhomie can lead to greater economic collaboration between Sri Lanka and south India, not necessarily Tamil Nadu alone, given the historical baggage, is anybody’s guess.
    • Baggage of history: Some sections of the Sinhalese still hold the view that India had been a threat to them and it can still be a threat to them.
    • Modest investment in development: Despite India’s open willingness to take part in the development of Sri Lanka after the civil war, the scale of its involvement has been modest.
    • Incomplete projects due to lack of political will: After the cancellation of the tripartite agreement, India was later provided with projects such as the West Container Terminal, the Trincomalee oil tank farm and a couple of renewable projects, there were several proposals that envisaged India’s participation but did not see the light of day.

    Way forward

    • Infrastructure development: Even now, there is enormous scope for collaboration between the two countries in the area of infrastructure development.
    • Cross-border energy trade: The economic crisis has revived talk of linking Sri Lanka’s electricity grid with that of India.
    • Facilitating people-to-people interaction: The apprehension in the minds of sections of the Sinhalese majority about India being a threat can be dispelled only by facilitating greater people-to-people interaction, including pilgrimages by monks and other sections of  society to places of Buddhist importance not only in north India but also in the south (Andhra Pradesh).
    • No china factor indeed: Labeling governments in Sri Lanka as “pro-China” or “pro-India” is irrelevant. It is evident that China’s economic and strategic salience in the subcontinent is not tied to the regime leadership. Previous Lankan President Maithripala Sirisena who considered as pro-India came to power criticizing the Chinese projects in Sri Lanka, but within two years into power, it extended full backing to the Chinese projects.

    Conclusion

    • Given the history of bilateral ties, instances such as the Hambantota controversy are bound to arise. But what should not be glossed over is that a politically and economically stable Sri Lanka will be in India’s interest too.

    Mains question 

    Q. There is no such thing as charity in international politics. Critically analyse this statement showing how India can reap benefits of economic cooperation with Sri Lanka.

     

     

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  • Issues related to Economic growth

    Thin line between freebies and public welfare

    op-ed snap | Governance | Mains Paper 2: Government Scheme/Policies

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NA

    Mains level: Social security,Populist measures.

    Context

    • ‘Revdi Culture’ (sweet) or Govt’s Basic Responsibility? What Prioritising Welfare Is Really About
    • While hearing a petition demanding the de-recognition of political parties that promise “irrational freebies” to voters, the Supreme Court recently drew attention to the substantial fiscal cost of freebies.

    What are freebies?

    • A freebie is any public policy intervention that will have a long-term impact on production as well as productivity.
    • Any public policy intervention that doesn’t support medium-term to long-term production and productivity may be termed as a freebie.
    • The term Freebies is not new; rather it is a prevalent culture in Indian politics (in the name of socialism).
    • The political parties are always trying to outdo each other in luring the Indian voters with

    Examples of freebies

    • Promise of Rs 15 lakh in our bank accounts
    • Free TV, Laptops
    • Free electricity
    • Loan waivers
    • Offering free public transport ride to all women in Delhi

    Why are such policies popular among the public?

    • Failure of economic policies: The answer lies in the utter failure of our economic policies to create decent livelihood for a vast majority of Indians.
    • Quest for decent livelihood: The already low income had to be reoriented towards spending a disproportionately higher amount on education and health, from which, the state increasingly withdrew.
    • Prevailing unemployment:  Employment surveys have shown that employment growth initially slowed down from the 1990s, and then has turned negative over the past few years.
    • Increased cost of living: Real income growth of the marginal sections has actually slowed down since 1991 reforms.
    • Increased consumerism: The poor today also spend on things which appear to be luxuries; cellphones and data-packs are two such examples which are shown as signs of India’s increased affluence.

    Thin line between freebie and public welfare

    • Using freebies to lure voters is not good.
    • Voter’s greediness may lead to a problem in choosing a good leader.
    • When we don’t have a good leader then democracy will be a mockery.

    Negative implications

    • Never ending trail: The continuity of freebies is another major disadvantage as parties keep on coming up with lucrative offers to lure more number of votes to minimize the risk of losing in the elections.
    • Burden on exchequer: People forget that such benefits are been given at the cost of exchequer and from the tax paid.
    • Ultimate loss of poors: The politicians and middlemen wipe away the benefits and the poor have to suffer as they are deprived from their share of benefits which was to be achieved out of the money.
    • Inflationary practice: Such distribution freebie commodity largely disrupts demand-supply dynamics.
    • Lethargy in population: Freebies actually have the tendency to turn the nation’s population into: Lethargy and devoid of entrepreneurship.

    Rational elements in freebies

    • Social investment: Aid to the poor is seen as a wasteful expenditure. But low interest rates for corporates to get cheap loans or the ‘sop’ of cutting corporate taxes are never criticized.
    • Socialistic policy: This attitude comes from decades of operating within the dominant discourse of market capitalism.
    • Election manifesto: Proponents of such policies would argue that poll promises are essential for voters to know what the party would do if it comes to power and have the chance to weigh options.

    Why they need to stop?

    • Winning election and good governance are two different things. The role of freebies to avail good governance is definitely questionable.
    • The social, political and economic consequences of freebies are very short-lived in nature.
    • There are many freebies and subsidies schemes available in many States but we still find starvation deaths, lack of electricity, poor education and health service.
    • Hence the sorrow of the masses of India cannot be solved by freebies or by incentives.

    Conclusion

    • There is nothing wrong in having a policy-led elaborate social security programme that seeks to help the poor get out of poverty.
    • But such a programme needs well thought out preparation and cannot be conjured up just before an election.

    Mains question

    Q. Do you think freebies are justified under the name of social security? Critically evaluate the rising freebie culture in India with its negative implications.

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  • Solar Energy – JNNSM, Solar Cities, Solar Pumps, etc.

    Solar energy & India

    op-ed snap | Economics | Mains Paper 3: Achievements Of Indians In S&T,Awareness in various sc and tech fields

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: International solar alliance.

    Mains level: Energy security.

     

    Context

    • Tesla and SpaceX CEO Elon Musk has said that civilisation will be mostly solar-powered in the future, a world without Sun will turn into a dark ice ball as the Earth gets all of its energy from it.

    Definition of solar energy

    • Solar energy is radiant light and heat from the Sun that is harnessed using a range of technologies such as solar power to generate electricity, solar thermal energy, and solar architecture.

    India’s solar target.

    • Target: India is targeting about 500 GW by 2030, of renewable energy deployment, out of which ~280 GW is expected from solar PV. This necessitates the deployment of nearly 30 GW of solar capacity every year until 2030.
    • Commitment: Solar power is a major prong of India’s commitment to address global warming according to the terms of the Paris Agreement, as well as achieving net zero, or no net carbon emissions, by 2070.

    International solar alliance and India’s pledge

    • Climate action commitment: It symbolizes about the sincerity of the developing nations towards their concern about climate change and to switch to a low-carbon growth path.
    • Clean energy: India’s pledge to the Paris summit offered to bring 40% of its electricity generation capacity from non-fossil sources (renewable, large hydro, and nuclear) by 2030.
    • Global electrification: India has pledged to let solar energy reach to the most unconnected villages and communities and also towards creating a clean planet.
    • Global cooperation: It is based on world cooperation irrespective of global boundaries.
    • India’s Soft power: For India, possible additional benefits from the alliance can be a strengthening of ties with the major African countries and increasing goodwill for India among them.

    Some Interesting facts

    Solar power is the most abundant energy source on earth.

    Solar is the cheapest source of energy in the world.

    Solar electricity has been around since 1839.

    Solar panels can produce power without direct sunlight.

    Challenges before solar future

    • High Imports: Indian solar deployment or installation companies depend heavily on imports. It currently imports 100% of silicon wafers and around 80% of cells even at the current deployment levels.
    • Field deployment: Also, out of the 15 GW of module manufacturing capacity, only 3-4 GW of modules are technologically competitive and worthy of deployment in grid-based projects.
    • Land issue: Land, the most expensive part of solar projects, is scarce in India — and Indian industry has no choice but to move towards newer and superior technologies as part of expansion plans.
    • Lack of investment: India has hardly invested in this sector which can help the industry to try and test the technologies in a cost-effective manner.

    Way forward

    • Supportive policies and innovative technological approaches are needed for the sector to achieve its potential.
    • Indian policymakers need to plan for rooftop solar plus storage, rather than rooftop solar alone with the grid as storage (net / gross metering).
    • The declining cost of storage solutions, along with that of rooftop solar solutions, is likely to change the future of the Indian power sector.

    Conclusion

    • In the foreseeable future, one can witness a just and equitable energy order if solar energy, along with other forms of renewable energy, can be harnessed more positively.

    Mains question

    Q. Fossil fuels have a 60% share in India’s total energy mix in this context discuss solar future for India with challenges for the same.

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