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  • Ukraine crisis is shaping future world order, India needs balanced outlook to its strategic policy

    Context

    Three back-to-back summits in the past fortnight have helped settle the dust on who stands where on the Russian invasion of Ukraine.

    Background of the summits

    • The BRICS summit took place on June 23-24, followed by the G-7 summit (June 26 and 27), and then the North Atlantic Treaty Organization (NATO) Summit in Madrid (June 29).
    • In order to understand what they portend for the future global world order, it is necessary to study the messages sent out by each of these groupings against the backdrop of the situation in Ukraine.
    • Most importantly, how can India, that has hitherto managed a careful balancing act between all the groupings, build a movement out of this moment of deep polarisation in the world?

    Why outcomes of BRICS Summit throws some challenges for the West

    • The fact that India agreed to join the summit showed India’s commitment to BRICS as an alternate grouping of economies spotlighted India’s refusal to shun Russia, and agreement to set aside the two-year stand-off with China in favour of multilateral meetings such as BRICS and the Shanghai Cooperation Organisation (SCO).
    • The BRICS Beijing Declaration was a consensus document, as each member cited differing “National Positions” on the Ukraine issue.
    • Economic initiatives: BRICS’s New Development Bank (NDB), has approved about 17 loans totalling $5 billion for Russian energy and infrastructure projects, the “Contingent Reserve Arrangement” (CRA).
    • A BRICS Payments Task Force (BPTF) for coordination between their central banks for an alternative to the SWIFT payments system, was proposed.
    • Mr. Putin also proposed building a global reserve currency based on a “basket of currencies” and trading in local currencies.
    • Challenges to western sanctions: The BRICS economic initiatives contain several challenges to the western-led sanctions regime against Russia
    • Russia also committed to providing more oil and coal supplies to BRICS countries, which will no doubt raise red flags in the West.
    • The possible admission of countries such as Argentina and Iran that have applied to the BRICS mechanism will also sound alarm in the West.

    G7 Summit and India’s flexibility

    • A day after BRICS, Mr. Modi left for the G-7 Summit in Germany, proof of India’s flexibility in dealing with both sides of the conflict.
    • In a number of statements, the G-7 targetted Russia’s war in Ukraine and China’s economic aggression.
    • Its outreach documents — on “Resilient Democracies” and “Clean and Just Transitions towards Climate Neutrality” — the only ones that India and other invitees signed on to, were devoid of any mentions of either.

    Key takeaways from NATO Summit

    • Reference to China: NATO for the first time, made a reference to “systemic competition” from China as a challenge to NATO “interests, security and values”.
    • Presence of US allies: The presence of the U.S.’s trans-Atlantic and trans-Pacific military allies at one conference sent out a clear message against a perceived Russia-China alliance.
    • US’s growing focus: The launch of another Indo-Pacific coalition — of “Partners in the Blue Pacific” (PBP), i.e., the U.S., the U.K., Australia, New Zealand and Japan, in addition to last year’s Australia-U.K.-U.S. (AUKUS), is another signal of the U.S.’s growing focus on countries that it has military alliances with, against its adversaries.
    • No consideration of Russian sensitivities: Apart from the Indo-Pacific partners at the summit, there were leaders of the five countries that have applied to join NATO.
    • The direct message was that NATO would no longer consider Russian sensitivities on the subject of NATO expansion.

    What is the strategy adopted by India?

    • The outcome of all three summits points to a growing polarisation, even battle lines being drawn, between the Western Atlantic-Pacific axis and the Russia-China combine.
    • Neutral stand on Ukraine crisis: India has adopted a singular strategy, albeit a defensive one, that does not condone Russia for its attacks on Ukraine, but one that does not criticise it either.
    • India has joined China as global economies that have most increased their intake of Russian oil, and where India continues to source fertilizer, cement and other commodities from Russia.
    • Strategic tilt towards the U.S. India is working to diversify its defence purchases from Russia, hostilities with China are high, and a strategic tilt towards the U.S. and Quad partners in the Indo-Pacific is growing.
    • Balancing Act: On the multilateral stage, too, India remains a balancing voice in the room: along with Brazil and South Africa, India ensured that the BRICS Beijing declaration did not carry the Russian position on the Ukraine war or any criticism of the West.
    • While making certain with other partners of the global South that the G-7 outreach documents carried no criticism of Russia and China.

    Way forward for India

    • It is time for New Delhi to seize the moment for leadership in a world that is becoming increasingly uncomfortable with the growing polarisation and the disruption due to the Ukraine war.
    • India is not alone.
    • At the United Nations General Assembly, for example, a majority of 141 countries voted to castigate Russia for its invasion of Ukraine, but much fewer, only 93, voted to oust Russia from the Human Rights Council.
    • This represents a large pool of independently-minded countries that do not see it in their own national interest to blandly choose one side over another.
    • India’s national interests would be better served by building a community of those like-minded countries (from South America to Africa, the Gulf to South Asia and to the Association of Southeast Asian Nations), who cannot afford the hostilities, and want to avoid the possibility of a global war at all costs.
    • In 1955, it was in such a similar moment that India took leadership along with countries such as Indonesia and Egypt at the Asian-African Conference of 29 newly independent nations, at Bandung that eventually led to the Non-Aligned Movement (NAM).

    Conclusion

    This is the time to rethink India’s role in reducing the polarisation and bringing the objective and balanced outlook Nehru spoke of, to the forefront of India’s strategic policy.

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  • Making sense of Assam floods

    Context

    This year’s floods in Assam have been merciless. In many parts of the state, both rural and urban, shoals of water drove people from their homes and forced many of them to seek shelter for their livestock.

    Understanding the reasons for massive flood in Assam this year

    • The Bay has a major influence on the monsoon in Northeast India.
    • Two coupled ocean-atmosphere phenomena, one from the distant Pacific, La Niña and another in the tropical Indian Ocean, a negative dipole condition, combined to create high rainfall in the Bay of Bengal.
    • To add to that, a warmer atmosphere because of climate change can hold more moisture leading to intense bouts of rain.
    • Apart from embankment failures, a number of unofficial and media reports suggest that the devastation in the floodplains is also a consequence of the way the dams and reservoirs are operated.
    • This indicates that environmental factors unique to each locality are responsible for the floods.
    • The flooding pattern is usually repeated year-to-year. However, at times, this pattern is disturbed — this year for example.
    • The incidence of such megafloods depends on several variables like unusually high rainfall and the failure of critical embankments.

    Role of floods in the making of the floodplain environment and ecology

    • Rejuvenation of ecosystem: Floods cause disruption and damage but they also generate a bounty of fish and rejuvenate flood-plain ecosystems all along the Brahmaputra, including in the Kaziranga.
    • Landscape: This landscape has been shaped over millions of years with the help of an active monsoonal environment and mighty rivers that carry sediments weathered from the still-rising Himalaya.
    • Every year, the Brahmaputra and its tributaries — which are at the centre of Assam’s environment — transport billions of tonnes of sediment, mainly from the Eastern Himalaya, making the landscape volatile.
    • Flooding helps release waters to surrounding land and distribute sediments and nutrients across the floodplains and wetlands.

    How human presence has influenced floodplains

    • As the human footprint intensified on the floodplains, the landscape was increasingly “developed and engineered”.
    • The engineered and planned landscape has affected the floodplains in two ways: It has undermined their ability to store and absorb water and reduced their capacity to transport sediment.
    • Urban floods: This year’s floods took an especially worrying proportion in several urban areas.
    • Guwahati has historically been a lowland and the city has been uniquely shaped by three hills that accumulate water during the monsoon.
    • Its northern side faces one of the most turbulent rivers in the world.
    • However, extensive swamps, channels and their tributaries worked in tandem to make the place habitable.
    • A transformation, however, took place in the 20th century, especially in the later decades, when these natural features were forced to disappear.
    • From an estimated 11,000 people in 1901, the city now is home to close to 1.1 million people.
    • Such a population increase is bound to have several footfalls and not all of them could have been prevented.
    • What has hit the city hardest is the disappearance of some of its critical environmental features.

    Way forward

    • Human interventions such as dams to “tame” rivers and “stabilise” hydrologically dynamic landscapes and riverscapes should be based on guidelines that account for the environmental conditions in Northeast India, especially the fragile geology, changing rainfall patterns, high seismicity and the risk of landslides.
    • Resilience of people: The rapid transformation in rainfall characteristics and flooding patterns demand building people’s resilience.
    • Reconsider projects: Construction projects that impede the movement of water and sediment across the floodplain must be reconsidered.
    • Use of technology: At the same time, climate-imposed exigencies demand new paradigms of early-warning and response systems and securing livelihoods and economies.

    Conclusion

    Floods have played a key role in Assam’s ecology. But increasing human footprint has affected the ability of flood plains to absorb water and transport sediment.

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  • Aviation sector in India: Issue and Challenges

    What is the issue?

    Policymakers ought to recognise the country’s untapped potential and work towards dismantling the many hurdles.

    What is the significance of aviation sector?

    India is the world’s third-largest market in aviation sector.

    • Aviation is integral to equitable economic growth, for a country to be globally competitive and to change the situation of poverty and unemployment.
    • Passenger airlines and air cargo overcome geography and connect remote areas that are alienated from the mainstream.
    • They can drive investment deep into the country, giving people access to markets.
    • They also boost tourism, which is the largest employment generator in the unorganised sector.

    What is the status of aviation sector in India?

    • Pre-economic reform period– India had only two airlines – Air India and Indian Airlines.
    • Post 1991 reforms– The reforms that opened up the aviation sector in 1991 and ended the licence raj and the monopoly of Indian Airlines and Air India changed the sector.
    • Numerous private sector airlines were given the licence to fly, but Jet Airways and Sahara, survived, resulting in cartelisation.
    • The concept of low cost airlines in India took shape in 2003 which overcame the cost barrier.
    • Sadly, Indian aviation has become ‘the sick man of India’.

    What are the barriers in Indian aviation sector?

    • Per capita consumption of air tickets – The number of Indians who buy air tickets in 2019 is 140 million of which 35 million to 40 million frequent flyers form the bulk of ticket buyers.
    • It translates to less than 4% of the population who can afford air travel, placing India just alongside some poorer African countries, in terms of the per capita consumption of air tickets.
    • Factors affecting the growth of aviation sector– The growth of aviation has been affected by
      • Choking regulations
      • Tough entry barriers for new entrants
      • High fuel prices on account of sky high taxes
      • Inefficient public sector airports that pave the way for monopoly airports
    • Frequent and knee-jerk changes point to the absence of a long-term visionary strategic policy for the entire gamut of sectors in aviation.

    How efficient are government schemes in the development of the airline sector?

    • Boosting entrepreneurship- Start-up India initiative was started with the objective of supporting entrepreneurs, building a robust startup ecosystem and transforming India into a country of job creators.
    • Regional connectivity– Ude Desh Ka Aam Naagrik (UDAN) scheme aims to connect small and medium cities with big cities through air service.
    • Low cost airlines– UDAN plans to connect the underserved airports to key airports through flights that will cost Rs 2,500 for per hour flight.
    • Comprehensive development– The National Civil Aviation Policy 2016 aims to take flying to the masses and covers 22 areas of the Civil Aviation sector.

    What reforms are needed?

    • Reforms in all sectors– It is critical to understand that for passenger airlines to grow, there have to be reforms in all areas of aviation – air cargo, airports, aviation fuel taxes and Maintenance, Repair and Overhaul (MRO).
    • Updated laws– India’s Aircraft Act, 1934 and Aircraft Rules, 1937 need to be updated to keep pace with modern technology in aerospace, increasing costs to the industry and ultimately affecting passenger growth.
    • Overhaul DGCA – India’s statutory regulatory authority, the Directorate General of Civil Aviation (DGCA), needs to be modernised, well-staffed, motivated and incentivized.
    • Need for aviation professionals– There need to be aviation professionals in charge rather than the ubiquitous bureaucrat from the Indian Administrative Service.

  • Malnutrition in India

    Context

    More than seven decades after independence, India still suffers from the public health issues such as child malnutrition attributing to 68.2% of under-five child mortality.

    What is malnutrition?

    • Malnutrition refers to deficiencies, excesses or imbalances in a person’s intake of energy and/or nutrients.
    • The term malnutrition covers 2 broad groups of conditions.
    • One is ‘undernutrition’—which includes stunting (low height for age), wasting (low weight for height), underweight (low weight for age) and micronutrient deficiencies or insufficiencies (a lack of important vitamins and minerals).
    • The other is overweight, obesity and diet-related non-communicable diseases (such as heart disease, stroke, diabetes, and cancer).

    Marginal improvement on Stunting and Wasting

    • The National Family Health Survey (NFHS-5) has shown marginal improvement in different nutrition indicators, indicating that the pace of progress is slow.
    • This is despite declining rates of poverty, increased self-sufficiency in food production, and the implementation of a range of government programmes.
    • Children in several States are more undernourished now than they were five years ago.
    • Increased stunting in some states: Stunting is defined as low height-for-age.
    • While there was some reduction in stunting rates (35.5% from 38.4% in NFHS-4) 13 States or Union Territories have seen an increase in stunted children since NFHS-4.
    • This includes Gujarat, Maharashtra, West Bengal and Kerala.
    • Wasting remains stagnant: Wasting is defined as low weight-for-height.
    • Malnutrition trends across NFHS surveys show that wasting, the most visible and life-threatening form of malnutrition, has either risen or has remained stagnant over the years.

    National Nutrition Mission (NNM): Focus on essential nutrition interventions

    • Government appears determined to set it right — with an aggressive push to the National Nutrition Mission (NNM), rebranding it the Prime Minister’s Overarching Scheme for Holistic Nutrition, or POSHAN.
    • Window of opportunity: The Ministry of Women and Child (MWCD) continues to be the nodal Ministry implementing the NNM with a vision to align different ministries to work in tandem on the “window of opportunity” of the first 1,000 days in life (270 days of pregnancy and 730 days; 0-24 months).
    • POSHAN Abhiyaan (now referred as POSHAN 2.0) rightly places a special emphasis on selected high impact essential nutrition interventions, combined with nutrition-sensitive interventions, which indirectly impact mother, infant and young child nutrition, such as improving coverage of maternal-child health services, enhancing women empowerment, availability, and access to improved water, sanitation, and hygiene and enhancing homestead food production for a diversified diet.

    Key findings of NHFS-5 data

    • Data from the National Family Health Survey (NFHS)-5 2019-21, as compared to NFHS-4 2015-16, reveals a substantial improvement in a period of four to five years in several proxy indicators of women’s empowerment.
    • No progress on nutritional intervention: Alarmingly, during this period, the country has not progressed well in terms of direct nutrition interventions.
    • Preconception nutrition, maternal nutrition, and appropriate infant and child feeding remain to be effectively addressed.
    • India has 20% to 30% undernutrition even in the first six months of life when exclusive breastfeeding is the only nourishment required.
    • Neither maternal nutrition care interventions nor infant and young child feeding practices have shown the desired improvement.

    Suggestions

    • Child undernutrition in the first three months remains high. Creating awareness on EBF, promoting the technique of appropriate holding, latching and manually emptying the breast are crucial for the optimal transfer of breast milk to a baby.
    • Complementary feeding: NFHS-5 also confirms a gap in another nutrition intervention — complementary feeding practices, i.e., complementing semi-solid feeding with continuation of breast milk from six months onwards.
    • The fact that 20% of children in higher socio- economic groups are also stunted indicates poor knowledge in food selection and feeding practices and a child’s ability to swallow mashed feed.
    • Creating awareness: So, creating awareness at the right time with the right tools and techniques regarding special care in the first 1,000 days deserves very high priority.
    • Revisit nodal system for nutrition program: There is a need to revisit the nodal system for nutrition programme existing since 1975, the Integrated Child Development Scheme (ICDS) under the Ministry of Women and Child and examine whether it is the right system for reaching mother-child in the first 1000 days of life.
    • Alternative way to distribute ICDS supplies: There is also a need to explore whether there is an alternative way to distribute the ICDS supplied supplementary nutrition as Take- Home Ration packets through the Public Distribution (PDS) and free the anganwadi workers of the ICDS to undertake timely counselling on appropriate maternal and child feeding practices.

    Conclusion

    It is time to think out of the box, and overcome systemic flaws and our dependence on the antiquated system of the 1970s that is slowing down the processes.

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  • The perils of multilateralism

    Context

    At a time when the world is trying to grapple with the impact of unprecedented problems which arose in the first two decades of the 21st century, the various intergovernmental organisations and groupings, which are undergoing fundamental changes, may not be fertile places for building peace.

    Contradiction in the BRICS

    • The 14th virtual BRICS summit hosted by China (June 23-24) was a clear attempt by China to hijack the grouping, going by a blueprint it has prepared for the new world order.
    • Not a political grouping: BRICS was not meant to be a political grouping when the acronym, BRIC, was coined by Goldman Sachs economist Jim O’Neill in 2001.
    • Economic grouping: Seeing the possibility of developing a non-western global economic system, China welcomed the idea of BRICS as the nucleus of a new economic grouping and invested energy and resources in building it.
    •  Two permanent members of the Security Council together with three aspirants to permanent membership underscored the contradictions in composition.
    • No support for permanent membership: The fundamental question of support for the three countries to secure permanent membership was fossilised on China’s position that the role of the developing countries should be enhanced, implying that there shall be no expansion of the permanent membership of the Security Council.
    • But the grouping focused on possibilities of cooperation among them by developing institutions such as the New Development Bank, the BRICS Contingent Reserve Arrangement and cooperation in certain sectors.
    • India-China relations: The entire fragile framework of limited cooperation was shattered with the bloodshed at Galwan, when China unilaterally sought to alter the situation on the Line of Actual Control (LAC).
    • China showed no enthusiasm to bring India into the Asia-Pacific Economic Cooperation (APEC) even after India met the criteria of a liberalised economy.
    • Expansion for friends: The way China brought in 13 like-minded countries through the back door for a high-level dialogue on global development smacked of unfair means to expand the group with their friends.

    What was achieved by India at G7 meeting

    • India’s presence at G7 meetings are not rare and Germany invited the India to attend the G7 summit in Bavaria.
    • The G7 made its own statement on the Ukraine war on expected lines and India was only involved in other issues such as environment, energy, climate, food security, health, gender equality and democracy.
    • Since it was a war summit, it did not produce any results on other major issues.
    • Curtailing energy supplies from Russia would hurt Germany, France, Japan and others, but they could not get any exemption.
    • India’s gain has been the opportunity it got to interact with world leaders, though it was tinged with the disappointment that India, as a Quad member, did not condemn Russia’s action in Ukraine.

    Conclusion

    Multilateral negotiations will be increasingly difficult in the present chaotic global situation. It is only by working bilaterally with potential allies that India can attain the status of a pole in the new world with steadfast friends and followers.

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  • The extent of poverty

    Context

    There has been an uproar about the working papers of the IMF and World Bank, reporting no or low poverty for India in the pandemic year or just before that.

    About the IMF paper

    • The paper by Roy and Weide (2022) for the World Bank explores the possibility of using CMIE (unemployment data) in poverty calculations after correcting for the unrepresentative character of its panel data by modifying the weightages of households for aggregation.
    • These adjustments carried out to remove the non-convergence of the CMIE data with other macro statistics have resulted in a poverty figure of 12 per cent.

    What does the poverty index measure or attempt to capture?

    • Its construction involves complex calculations — to identify a poverty basket of consumption, working out price indices for updation of the poverty line and then applying it to the income or consumption of households for determining their poverty status.
    • Absence of consumption expenditure: The computation becomes far more challenging in the absence of data on consumption expenditure as is the case in India and several developing countries.
    • Intending to provide inputs for policy making, researchers have evolved ingenious methods of estimating the data, using past datasets and those that have not been designed to get robust expenditure estimates.

    Background of poverty line in India

    • A nine-member working group set up by the Planning Commission proposed the poverty line at Rs 20 per capita per month in the early Sixties, loosely ensuring the adequacy of minimum requirements.
    • Poverty line based on calorie needs: Dandekar and Rath (1970) went into detail about minimum calorie needs, based on the average consumption pattern.
    • Issues with calorie based poverty line: During the Eighties and Nineties, it was realised that this linkage is getting blurred due to changes in the consumption pattern, microenvironment for living, etc.
    • Sukhatme argued that the emphasis on calories and nutrition is misplaced as the absorption of nutrients depends on physical health, particularly the presence or absence of gastrointestinal diseases.
    • Water and sanitation facilities were noted as important in determining the poverty line.
    •  It was accepted that the state, through poverty interventions, cannot and should not try to guarantee adequate nutrition to people.
    • Delinking the nutritional norms: The Tendulkar Committee formally announced delinking of nutritional norms from poverty in 2010.

    Extrapolating the consumption expenditure on NSS 2011-12

    • Bhalla, Virmani and Bhasin (2022) in their IMF Working Paper have developed a method of interpolation and extrapolation of the consumption expenditure of the NSS 2011-12 and building a series up to 2019-20.
    • They use the growth rate of private final consumption expenditure (PFCE) but bring in the distributional changes by allowing household consumption to grow as per the nominal per capita income in each state.
    • Takes into account rural-urban price difference: Rural-urban price differences are also introduced through separate poverty lines.
    • The method is reasonable except that it assumes the distributions to remain unchanged both within the rural and urban segments in each state over 2014-20.
    • Also, the growth rates of different commodities in the PFCE are significantly different and hence commodity-wise adjustments can be done to give higher weights to the items of consumption by the poor.
    • Taking into account the role of state: The most significant contribution of the study is its bringing in the differential engagement of the state in the provisioning of the essentials to the poor into poverty calculations.
    • This opens up the possibility of changes in the level of state engagement in poverty estimation, including free gas cylinders, etc.

    Conclusion

    People find the World Bank paper figures pegged at 12% more acceptable not because of the methodology but the magnitude. One does not know whether the poverty estimate would be a bit higher had the adjustments been carried out for a few other parameters and also at the state level.

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  • The inflation tightrope

    Context

    The Indian economy has been hit by inflationary shocks of late.

    Inflation story so far

    • RBI mandate: The inflation target of the Reserve Bank of India is 4 per cent, with a band of 2 per cent on either side.
    • Inflation was at or above the upper threshold of 6 per cent since the beginning of this year.
    • Only after inflation hit 7 per cent did the RBI raise the repo rate.
    • Increase in interest rate: The RBI has raised the cost of borrowing (by 90 basis points so far), with a promise of more to come.
    • Fuel taxes reduced: The central government has cut fuel taxes with alacrity, and has banned the export of certain items.

    Role of monetary authorities

    • Monetary authorities raise interest rates if inflation is above the preferred target, and vice versa.
    • What should be the interest rate? Interest rates should rise more than inflation so the “real” interest rates rise, causing a compression in demand (and a fall in economic activity), which in turn will reduce inflation.
    • The RBI embraced this idea. In 2016, an independent monetary policy committee was constituted.

    Effects of global inflation

    • Some part of inflation is coming from abroad is an added complication.
    • Outflow of fund: There has also been a steady outflow of foreign funds from the stock market.
    • Depreciation of rupee: This could cause the rupee to depreciate, in turn, raising the prices of imported goods thereby adding to the inflationary woes.

    Two ways in which the Indian economy is different

    1] Role of agriculture in Indian economy

    • India’s non-food and non-oil components of the consumer price index CPI are about 47 per cent.
    •  In comparison, for the ECB, it is less than one-third of the CPI.
    • Of course, the RBI has no control over international prices of food and oil, so it must squeeze less than 50 per cent of the domestic economy to lower inflation.
    • The real interest rise works through demand compression.
    • But the problem is on the supply side.
    • Also, as compared to the RBI, the ECB would suffer a lower rise in inflation, and has a larger menu on which to apply demand compression.

    2] Exchange rate and its effect on output

    • Until the 1970s, the accepted wisdom was that an economy had to achieve both internal balance and external balance.
    • Internal balance consisted of full employment and low inflation using monetary and fiscal policies.
    • Over time, the internal balance has come to mean, from a policy perspective, low inflation, since “the market” will ensure full employment.
    • External balance required a balanced current account over some horizon (“don’t get too much into foreign debt”), by using, for example, the exchange rate.
    • For the OECD countries, the external balance was not a constraint any longer, since they had made their currencies fully convertible, and international capital flows were unrestricted.
    • But this is not the case with India.
    • If it were so, no one would be interested in discussing the country’s foreign exchange reserves, because these could be generated instantaneously by exchanging the domestic currency for foreign exchange.

    India’s foreign reserves and its impact on competitiveness of Indian products

    • Until 2020, India had seen massive portfolio capital inflows when OECD interest rates were low, and its current account deficits were financed by foreign reserves.
    • But portfolio inflows can, and do, reverse themselves.
    • FII inflows also contribute to India’s lack of competitiveness.
    • The RBI bought foreign exchange (with rupees).
    • But fearing this would stoke inflation, it sold government bonds, and removed the excess liquidity.
    • This “sterilised intervention” saw the RBI’s foreign exchange assets going up, matched by a reduced holding of government bonds.
    • Thus, India’s foreign exchange reserves were not its “own”— there were liabilities against it.
    • India’s Dutch Disease: The RBI could have let the rupee appreciate or have accumulated foreign reserves.
    • It chose an intermediate solution — a mix of an appreciation and accumulation of reserves.
    • The appreciation caused by inflows reduced international competitiveness for Indian products.
    • In effect, we had our own episode of the “Dutch Disease”.

    Way forward

    • As the RBI raises interest rates, outflows will possibly slow down with the rupee appreciating.
    • That is not good for external balance.
    •  It is easy to see that inflation targeting could be at odds with external balance.

    Conclusion

    If inflation does prove stubborn, and fighting inflation is all that the authorities in India worry about, we could see an external crisis.

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    Back2Basics: What is Dutch Disease?

    • Dutch disease is an economic term for the negative consequences that can arise from a spike in the value of a nation’s currency.
    • It is primarily associated with the new discovery or exploitation of a valuable natural resource and the unexpected repercussions that such a discovery can have on the overall economy of a nation.
    • Symptoms include a rising currency value leading to a drop in exports and a loss of jobs to other countries.

  • Why rice and wheat bans aren’t the answer to inflation

    Context

    There are reports suggesting that the government is mulling a ban on rice exports to tame inflation.

    Background

    • This is surely not the first time an attempt is being made to ban wheat and rice exports.
    • It was also done in 2007-08, in the wake of the global financial crisis.
    • Perhaps government will also impose stocking limits on traders for a host of commodities, suspend futures trading in food items, and even conduct income tax raids on traders of food.

    Issues in India’s rice export strategy

    • Highest ever volume: India exported the highest-ever volume of 21 million metric tonnes (MMT) of rice in 2021-22 (FY22) in a global market of about 51.3 MMT, which amounts to about 41 per cent of global exports.
    • Reduces price: Such large volumes of rice exports brought down global prices of rice by about 23 per cent in March (YoY), when all other cereal prices, be it wheat or maize, were going up substantially in global markets.
    • In fact, in FY22, the unit value of exports of common rice was just $354/tonne, which was lower than the minimum support price (MSP) of rice.
    • Below MSP buying or leakage from PMGKAY: This meant that rice exporters were either buying rice (paddy) from farmers and millers at below the MSP or that quite a substantial part of rice was given free under the PM Garib Kalyan Ann Yojana (PMGKAY) was being siphoned away for exports at prices below MSP.
    • Artificial competitive advantage: Free electricity for irrigation in several states, most notably Punjab, and highly subsidised fertilisers, especially urea, create an artificial competitive advantage for Indian rice in global markets.
    • Suggestion: This is a perfect case for “optimal export tax” — not a ban — on rice exports.
    • If we can’t raise the domestic price of urea, which is long overdue, we should at least recover a part of the urea subsidy from rice exports by imposing an optimal export tax.

    Why export ban on wheat and rice is not a solution

    • Small contribution of cereals in inflation: In May, the consumer price index (CPI) inflation was 7.04 per cent (YoY). The cereals group as a whole contributed only 6.6 per cent to this inflation.
    • Within that, wheat, other than through PDS, contributed just 3.11 per cent and non-PDS rice contributed 1.59 per cent.
    • So, by imposing a ban on wheat and rice exports, India can’t tame its inflation as more than 95 per cent of CPI inflation is due to other items.
    • Interestingly, inflation in vegetables contributed 14.4 per cent to CPI inflation, which is more than three times the contribution of rice and wheat combined. And within vegetables, tomatoes alone contributed 7.01 per cent.
    • What all this indicates is that agri-trade policies need to be more stable and predictable, rather than a result of knee-jerk reactions.
    • Irresponsible behaviour: Export bans on food items also show somewhat irresponsible behaviour at the global level, unless there is some major calamity in the country concerned.
    • The recently concluded WTO ministerial meeting as well as the G-7 meet expressed concerns about food security in vulnerable nations.

    Way forward

    • Efficient value chain and processing facilities: In commodities like vegetables, most of which are largely perishable, we need to build efficient value chains and link these to processing facilities.
    • The same would go for onions, which often bring tears to kitchen budgets when prices shoot up.
    • A switch to dehydrated onion flakes and onion powder would be the answer.
    • Our food processing industry, especially in perishable products, is way behind the curve compared to several Southeast Asian nations.

    Conclusion

    If India wants to be a globally responsible player, it should avoid sudden and abrupt bans and, if need be, filter them through transparent export taxes to recover its large subsidies on power and fertilisers.

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  • Custodial deaths

    Context

    The recent spate of custodial deaths in Tamil Nadu has yet again highlighted the methods used by the police during interrogation.

    Custodial deaths in India

    • It is not uncommon knowledge that the police, when they grow increasingly frustrated with the trajectory of their interrogation, sometimes resort to torture and violence which could lead to the death of the suspect.
    • Custodial deaths are common despite enormous time and money being spent on training police personnel to embrace scientific methods of investigation.
    • This is because police personnel are humans from different backgrounds and with different perspectives.

    Use of technology by law enforcement agencies

    • There is no doubt that technology can help avert police custodial deaths. For example, body cameras could hold officers liable.
    • Deception detection tests (DDTs), which deploy technologies such as polygraph, narco-analysis and brain mapping, could be valuable in learning information that is known only to a criminal regarding a crime.
    • Among the DDTs, the Brain Fingerprinting System (BFS) is an innovative technology that several police forces contemplate adding to their investigative tools.
    • The technique helps investigative agencies uncover clues in complicated cases.
    • With informed consent, however, any information or material discovered during the BFS tests can be part of the evidence.
    • Police departments are increasingly using robots for surveillance and bomb detection.
    • Many departments now want robotic interrogators for interrogating suspects.
    • Use of robots: Police departments are increasingly using robots for surveillance and bomb detection.
    • Use of robots for interrogation: Many departments now want robotic interrogators for interrogating suspects.
    • Many experts today believe that robots can meet or exceed the capabilities of the human interrogator, partially because humans are inclined to respond to robots in ways that they do to humans.
    • Robots equipped with AI and sensor technology can build a rapport with the suspects, utilise persuasive techniques like flattery, shame and coercion, and strategically use body language.
    • Use of AI/ML: Artificial Intelligence (AI) and Machine Learning (ML) are emerging as tool of interrogations. AI can detect human emotions and predict behaviour.
    • Therefore, these are also options.
    • ML can in real-time alert superiors when police are meting out inhumane treatment to suspects.

    Issues with the use of technologies

    • Informed consent: In 2010, the Supreme Court, in Selvi v. State of Karnataka, rendered the BFS evidence inadmissible.
    • The court observed that the state could not perform narco analysis, polygraph, and brain-mapping tests on any individual without their consent.
    • High cost of technology: As the BFS is high-end technology, it is expensive and unavailable in several States.
    • There is a lot of concern about AI or robot interrogations, both legally and ethically.
    • Risk of bias: There exists the risk of bias, the peril of automated interrogation tactics, the threat of ML algorithms targeting individuals and communities, and the hazard of its misuse for surveillance.

    Way forward

    • Multi-pronged strategy: What we need is the formulation of a multi-pronged strategy by the decision-makers encompassing legal enactments, technology, accountability, training and community relations.
    • Onus of proof on police: The Law Commission of India’s proposition in 2003 to change the Evidence Act to place the onus of proof on the police for not having tortured suspects is important in this regard.
    • Strict implementation of D.K. Basu case guidelines: Besides, stringent action must be taken against personnel who breach the commandments issued by the apex court in D.K. Basu v. State of West Bengal (1997).
    • Law against custodial torture: The draft bill on the Prevention of Torture, 2017, which has not seen the day, needs to be revived.

    Conclusion

    While the technology available to the police and law-enforcement agencies is constantly improving, it is a restricted tool that can’t eradicate custodial deaths. While it might provide comfort and transparency, it can never address the underlying issues that lead to these situations.

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    Back2Basics:  Supreme Court judgement in DK Basu case

    • The DK Basu judgment since 1987 is crucial in dealing with issue of custodial deaths.
    • The judgement has origin from a letter complaint in 1986, which was converted into PIL.
    • 4 crucial and comprehensive judgments — in 1996, twice in 2001 and in 2015 — lay down over 20 commandments, forming the complete structure of this judgement.

    Details of judgment:

    First 11 commandments in 1996, focused on vital processual safeguards:

    • All officials must carry name tags and full identification, arrest memo must be prepared, containing all details regarding time and place of arrest, attested by one family member or respectable member of the locality.
    • The location of arrest must be intimated to one family or next friend, details notified to the nearest legal aid organisation and arrestee must be made known of DK Basu judgement.
    • All such compliances must be recorded in the police register, arrestee must get periodical medical examination, inspection memo must be signed by arrestee also and all such information must be centralised in a central police control room.
    • Breach to be culpable with severe departmental action and additionally contempt also, and this would all be in addition to, not substitution of, any existing remedy.
    • All of the above preventive and punitive measures could go with, and were not alternatives to, full civil monetary damage claims for constitutional tort.

    8 other intermediate orders till 2015:

    • Precise detailed compliance reports of above orders to be submitted by all states and UT and any delayed responses to be  looked into by special sub-committees appointed by state human rights body.
    • Also where no SHRC existed, the chief justice of the high courts to monitor it administratively.
    • It emphasised that existing powers for magisterial inquiries under the CrPC were lackadaisical and must be completed in four months, unless sessions court judges recorded reasons for extension.
    • It also directed SHRCs to be set up expeditiously in each part of India.

    The third and last phase of judgment ended in 2015:

    • Stern directions were given to set up SHRCs and also fill up large vacancies in existing bodies.
    • The power of setting up human rights courts under Section 30 of the NHRC Act was directed to be operationalised.
    • All prisons had to have CCTVs within one year.
    • Non-official visitors would do surprise checks on prisons and police stations.
    • Prosecutions and departmental action to be made unhesitatingly mandated.

  • After Ukraine, the new energy disorder

    Context

    Our long-standing “friend“ (Russia) is now in the bad books of our other friends (the US and Europe) and in a deepening relationship with our adversary (China). The Gulf countries are crucial for our energy security but Russia has replaced them as our principal supplier

    How Ukraine war is changing the energy policies

    • Six months back before the start of the Ukrainian conflict, there was a deepening sense that fossil fuels and the industry built around them were in terminal decline.
    • After the Ukraine war began, the petroleum market is tight and prices are ratcheting up.
    • Oil prices are close to $120/bbl and gas prices have jumped 500 per cent year on year in Europe.
    • The regulatory constraints on petroleum exploration and distribution infrastructure have been eased and several countries have removed the output limits on thermal power generation and reopened the coal mines that were closed.
    • The share prices of the oil majors are trading at multi-year highs.

    Three issues that influences India’s energy policy

    1] Long term implications of buying oil from Russia

    • India is now a major purchaser of Russian crude.
    • Last month, it reportedly purchased an average of 1.2 mbd.
    • If this figure is correct, Russia is now our largest provider of crude oil surpassing Saudi Arabia and Iraq.
    • The reason for this ramp-up is the price discount offered by Russia.
    • The decision is driven by good economics and energy security.
    • The Western world does not, however, see it this way.
    •  The question does arise: What might be the medium to longer-term implications of our “support” to Russia on relations with Capitol Hill, the UK and the European Commission?

    2] Increased economic and energy ties of Russia and China

    •  Russia and China have, for long, shared the view that the US is their biggest security threat.
    • China also increased the purchase of Russian oil and gas.
    • This tightened economic and energy embrace has implications for India.
    • Several questions will need to be addressed.
    • Russia’s role in India-China conflict: How might a post-Ukraine weakened Russia that is in hock to China respond to India in the event matters deteriorate on our border with China?
    • Will they be reliable providers of crude oil, military equipment, minerals, and metals essential for our green transition?
    • Will they be politically autonomous or client states?

    3] Important role of the Gulf states

    • The Ukrainian crisis has forced a presidential u-turn. Later this month, President Biden will visit Saudi Arabia.
    • Several other European leaders will also beat a path to the Gulf, all in the hope of extracting a promise of higher production to lower oil prices and some to negotiate gas supply deals.
    • India needs the Gulf producers for supply security. But it also wants oil prices to come down.
    •  The position of these producers in the reordered post-Ukraine energy landscape is, therefore, of relevance.
    • Will they respond positively to the courtship of Russia/China, move back into the Western fold, or stay outside both orbits, neutral and opportunistic?
    • The answer will bear on India’s energy security.

    Way forward

    • Integrated energy policy: What we need is a mechanism for the development and execution of an integrated energy policy.
    • This is because currently there is no executive authority responsible for energy.
    • There are ministries responsible for components of energy policy but no formal mechanism for aligning their separate approaches.
    • The Ukraine war has disrupted the existing energy order.
    • The new energy (dis) order has created fissures that impact our national security, economic growth, trade, clean energy supply lines, transfer of technology and international relations.
    • We cannot, therefore, afford to continue with our existing siloed approach.

    Conclusion

    The Ukrainian crisis has radically altered the contours of the global energy landscape and created a tangle of relationships and issues for India. To smoothen this tangle and address the issues India should adopt “a whole of the system” approach to energy policy.

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