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Type: op-ed snap

  • Russian Invasion of Ukraine: Global Implications

    India, Europe and the Russian complication

    op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- India's engagement with Europe and factors shaping it

    Context

    The re-election of Emmanuel Macron as the president of France on Sunday has sent a sigh of relief across Europe and North America. Delhi too is pleased with the return of Macron, who laid a strong foundation for India’s strategic partnership with France.

    Why France election matters to the regional and domestic order in Europe

    • Unlike the Soviet Union, which sought to shape European politics though left-wing parties, Russia today influences European politics through right-wing parties.
    • Victory for Marine Le Pen, Macron’s opponent, would have dramatically complicated the geopolitics of Europe.
    • Le Pen, like so many other right-wing leaders in Europe, has close ties to Vladimir Putin.
    • Le Pen’s victory would have not only altered France’s international trajectory, but also shaken the EU to its political core.

    Three factors shaping the transformation of India’s ties with Europe

    • Russia’s threat to the regional and domestic order in Europe is among multiple factors shaping Delhi’s intensifying engagement with Brussels.
    • Three major external factors are facilitating the transformation of India’s ties with Europe.

    1] Russian Question

    • For India, a normal relationship between Russia and the West would have been ideal.
    • But Russia’s confrontation with the West comes during India’s rapidly expanding economic and political ties to Europe and America.
    • Delhi might be sentimental about India’s historic Russian connection but it is not going to sacrifice its growing ties to the West on that altar.
    • Russia’s declining economic weight and growing international isolation begins to simplify India’s choices.
    • During the last few weeks, Delhi has insisted that its silence is not an endorsement of Russian aggression.
    • India’s position has continued to evolve.
    • Delhi’s repeated emphasis on respecting the territorial integrity of states is a repudiation of Russia’s unacceptable aggression.
    • Meanwhile, geographic proximity and economic complementarity have tied Europe even more deeply to Russia.
    • The EU’s annual trade with Russia at around $260 billion is massive in comparison to India’s $10 billion.
    • Putin’s reckless invasion of Ukraine has compelled Europe to embark on a costly effort to disconnect from Russia.
    • The war in Ukraine has certainly presented a major near-term problem that needs to be managed by Delhi and Brussels.

    2] China Question

    •  Moscow has been deepening ties with Beijing for more than two decades triggering many anxieties in Delhi.
    •  In February, Putin travelled to Beijing to announce a partnership “without limits”.
    • India has no option but to manage the consequences of the Russian decision.
    • In the last two decades, China has emerged as a great power and now presents a generational challenge for Indian policymakers.
    • That challenge has been made harder by Putin’s alliance with Xi Jinping.
    • As Delhi strives to retain a reasonable relationship with Moscow, Europe emerges as an important partner in letting India cope with the China challenge.
    •  Thanks to the growing problems of doing business with Xi’s China, Beijing’s geopolitical alliance with Moscow, and the rapid deterioration of Sino-US relations, Brussels is ready to invest serious political capital in building purposeful strategic ties with India.

    3] American Question

    • Until recently it appeared that Europe’s calls for “strategic autonomy” from the US were in sync with India’s own worldview.
    • But the Ukraine crisis has underlined the US’s centrality in securing Europe against Russia.
    • In Asia, Chinese assertiveness has brought back the US as a critical factor in shaping peace and security.
    • Washington wants a strong Europe taking greater responsibility for its own security; it would like Delhi to play a larger role in Asia and become a credible provider of regional security.
    • Above all, America wants India and Europe to build stronger ties with each other.

    Conclusion

    For the first time since independence, India’s interests are now aligning with those of Europe. Together, Delhi and Brussels can help reshape Eurasia as well as the Indo-Pacific.

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  • Zoonotic Diseases: Medical Sciences Involved & Preventive Measures

    Settling India’s COVID-19 mortality data

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Covid-19 mortality data

    Context

    Over the last year, the World Health Organization (WHO) has been busy, in an unprecedented effort, to calculate the global death toll from COVID-19.

    Revision of Covid-19 death toll by WHO

    • Globally from an estimated six million reported deaths, WHO now estimates these deaths to be closer to almost triple the number.
    • The new estimates also take into account formerly uncounted deaths, but also deaths resulting from the impact of COVID-19.
    • For example, millions who could not access care, i.e., diagnosis or treatment due to COVID-19 restrictions or from COVID-19 cases overwhelming health services.
    • India’s stand: India is in serious disagreement with the WHO-prepared COVID-19 mortality estimates.
    • The argument being made by India’s health establishment through a public clarification is that this is an overestimation, and the methodology employed is incorrect.

    India’s Covid response

    • India’s COVID-19 response has been replete with delays and denials.
    • For instance, for the longest time that India’s COVID-19 number rose, the health establishment continued to insist that community transmission was not under way.
    • It took months and several lakh cases before they agreed that COVID-19 was finally in community transmission.
    • The devastation of the second wave showed how unprepared we were to combat the deadly Delta variant.
    •  By the time the wave subsided, India’s population was devastated, and helpless, seeing dignity neither in disease nor in death.

    Conclusion

    The figures ratchet up not only issues of administrative but also moral accountability for governments that they have been previously side stepped.

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  • Foreign Policy Watch: India-Sri Lanka

    Finding workable solutions to India-Sri Lanka fisheries issue

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Palk Bay

    Mains level: Paper 2- India-Sri Lanka fisheries issue

    Context

    After a gap of 15 months, the India-Sri Lanka Joint Working Group (JWG) on fisheries held its much-awaited deliberations (in virtual format) on March 25.

    Background of the issue

    • As sections of fishermen from the Palk Bay bordering districts of Tamil Nadu continue to transgress the International Maritime Boundary Line (IMBL), cases of many of them getting arrested and their boats being impounded by the Sri Lankan authorities continue.
    • Apart from poaching in the territorial waters of Sri Lanka, the use of mechanised bottom trawlers is another issue that has become a bone of contention between the fishermen of the two countries; the dispute is not just between the two states.
    • Use of mechanised bottom trawlers: This method of fishing, which was once promoted by the authorities in India, is now seen as being extremely adverse to the marine ecology, and has been acknowledged so by India.
    • The actions of the Tamil Nadu fishermen adversely affect their counterparts in the Northern Province.
    • Reason for transgression: The fishermen of Tamil Nadu experience a genuine problem — the lack of fishing areas consequent to the demarcation of the IMBL in June 1974.
    • If they confine themselves to Indian waters, they find the area available for fishing full of rocks and coral reefs besides being shallow.
    • Under the Tamil Nadu Marine Fishing Regulation Act 1983, mechanised fishing boats can fish only beyond 3 NM from the coast.
    • This explains the trend of the fishermen having to cross the IMBL frequently.

    Way forward

    • Transition to deep-sea fishing: While Indian fishermen can present a road map for their transition to deep sea fishing or alternative methods of fishing, the Sri Lankan side has to take a pragmatic view that the transition cannot happen abruptly.
    • In the meantime, India will have to modify its scheme on deep-sea fishing to accommodate the concerns of its fishermen, especially those from Ramanathapuram district, so that they take to deep-sea fishing without any reservation.
    • Alternative livelihood measures: There is a compelling need for the Central and State governments to implement in Tamil Nadu the Pradhan Mantri Matsya Sampada Yojana in a proactive manner.
    • The scheme, which was flagged off two years ago, covers alternative livelihood measures too including seaweed cultivation, open sea cage cultivation, and sea/ocean ranching.
    • During Mr. Jaishankar’s visit, India had signed a memorandum of understanding with Sri Lanka for the development of fisheries harbours.
    • This can be modified to include a scheme for deep-sea fishing to the fishermen of the North.
    • Joint research on fisheries: . It is a welcome development that the JWG has agreed to have joint research on fisheries, which should be commissioned at the earliest.
    • Institutional mechanism: Simultaneously, the two countries should explore the possibility of establishing a permanent multi-stakeholder institutional mechanism to regulate fishing activity in the region.
    • Using common thread of culture, language and religion: The people of the two countries in general and fisherfolk in particular have common threads of language, culture and religion, all of which can be used purposefully to resolve any dispute.

    Conclusion

    What everyone needs to remember is that the fisheries dispute is not an insurmountable problem. A number of options are available to make the Palk Bay not only free of troubles but also a model for collaborative endeavours in fishing.

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

    Why reforming the system of free food is necessary

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: NFSA 2013

    Mains level: Paper 3- PDS reforms

    Context

    The release of two new working papers, one from the World Bank and the other from the IMF, has led to a renewed debate on poverty in India.

    A substantial decline in extreme poverty in India

    • Both papers claim that extreme poverty in the country, based on the international definition of $1.90 per capita per day (in purchasing power parity (PPP), has declined substantially.
    • The World Bank paper uses the Consumer Pyramid Household Surveys (CPHS) data to conclude that 10.2 per cent of the country’s population was at extreme poverty levels in 2019.
    • The IMF paper calculates poverty by using the NSO Consumer Expenditure Survey as the base and adjusts it for the direct effect of the massive food grain subsidy given under the National Food Security Act (NFSA, 2013) and PM Garib Kalyan Anna Yojana (PMGKAY) during the pandemic period.
    • It claims that extreme poverty has almost vanished – it was 0.77 per cent in 2019 and 0.86 per cent in 2020.
    • Another estimate of poverty by the NITI Aayog, the multi-dimensional poverty index (MPI), has put Indian poverty at 25 per cent in 2015 based on NFHS data.
    • How MPI is calculated?: This MPI is calculated using twelve key components from areas such as health and nutrition, education and standard of living.

    How much should be the coverage under NFSA, 2013?

    • The offtake of grains under NFSA in FY20 was 56.1 million metric tonnes (MMT).
    • Following the outbreak of Covid-19, the government launched the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in April 2020 to distribute 25 kg cereals per family per month in addition to food transfers under the NFSA.
    •  That catapulted the offtake to 87.5 MMT (under PMGKAY and NFSA) in FY21.
    • The scheme continued in FY22, and the grain offtake touched 93.2 MMT. 

    Issues with the wide coverage

    • A further extension of free food on top of the NFSA allocations was uncalled for.
    • This will strain the fisc, reduce public investments and hamper potential job creation.
    • A look at the size of food freebies will help understand the gravity of this problem.
    • As of April 1, the Food Corporation of India’s wheat and rice stocks stood at 74 MMT against a buffer stock norm of 21 MMT – there is, therefore, an “excess stock” of 53 MMT. 
    • The cost of excess stock: The economic cost of rice, as given by FCI, is Rs 3,7267.6/tonne and that of wheat is Rs 2,6838.4/tonne (2020/21).
    • The value of “excess stocks”, beyond the buffer norm, is, therefore, Rs 1.85 lakh crore — this, despite a total of 72.2 MMT grains distributed for free under the PMGKAY in FY21 and FY22.
    • Ballooning food subsidy: All this results in a ballooning food subsidy for FY 23, it is provisioned at Rs 2.06 lakh crore, for FY 23, it is provisioned at Rs 2.06 lakh crore.
    • But this amount is likely to go beyond Rs 2.8 lakh crore with the continuing distribution of free food under the PMGKAY.
    • This would amount to more than 10 per cent of the Centre’s net tax revenue (after deducting the states’ share).

    Way forward

    • It is all the more important to change the current policy of free food given the massive leakages in the PDS.
    • As per the High-Level Committee on restructuring FCI, leakages were more than 40 per cent based on the NSSO data of 2011.
    • Ground reports suggest that these leakages hover around 30 per cent or so today.
    • Make PDS more targeted: In reforming this system of free food, wisdom lies in going back to the Antyodaya Anna Yojana (AAY).
    • Under AAy, the “antyodaya” households (the most poor category) get more rations (35 kg per household) at a higher subsidy (rice, for instance, at Rs 3/kg and wheat at Rs2/kg).
    • For the remaining below poverty line (BPL) families, the price charged was 50 per cent of the procurement price and for above poverty line families (APL), it was 90 per cent of the procurement price.
    •  This will make PDS more targeted and lead to cost savings.
    • Use of technology: There could be some problems in identifying the poor. However, technology can help overcome this difficulty.
    • Option of cash transfer: This measure should be combined with giving people the option of receiving cash instead of providing grains to targeted beneficiaries.
    • The savings so generated from this reform can be ploughed back as investments in agri-R&D, rural infrastructure (irrigation, roads, markets) and innovations that will help create more jobs and reduce poverty on a sustainable basis.

    Conclusion

    The government needs to bite the bullet and emulate the Vajpayee  government (which had introduced AAY) in using scarce resources more wisely.

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  • Russian Invasion of Ukraine: Global Implications

    India can be the fulcrum of the new global order

    op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Opportunities for India in the wake of Ukraine-Russia conflict

    Context

    As Mahatma Gandhi’s nation, India must be a committed and relentless apostle of peace and non-violence, both at home and in the world.

    How the Russia-Ukraine conflict is reshaping the world order

    • Ever since the fall of the Berlin Wall in 1989, a paradigm of free societies, frictionless borders and open economies evolved to be the governing order in many nations.
    • This catalysed freer movement of people, goods, services and capital across the world.
    • India too has benefited enormously from being an active participant in this interconnected world, with a tripling of trade (as share of GDP) in the last three decades and providing vast numbers of jobs.
    • Such tight inter-dependence among nations will lead to fewer conflicts and promote peace, was the established wisdom.
    • The Russia-Ukraine conflict has dismantled this wisdom.
    • Mutually beneficial to mutually harmful: If inter-connectedness and trade among nations were mutually beneficial, then it follows that its disruption and blockade will be mutually harmful.
    • Global Village was built on the foundation of advanced transportation networks, cemented with the U.S. dollar as the reserve currency and fenced by integrated payment systems.
    • Any disruption to this delicate balance runs the risk of plunging the ‘Global Village’ into disequilibrium and derailing the lives of all.

    Trade opportunity for India

    • Trade with other nations should and will always be an integral cornerstone of India’s economic future.
    • A reversal towards isolationism and protectionism will be foolhardy and calamitous for India.
    • As the western bloc of nations looks to reduce dependence on the Russia-China bloc of nations, it presents newer avenues for India to expand trade.
    • It presents a tremendous opportunity for India to become a large producing nation for the world and a global economic powerhouse.
    • However, to capitalise on these opportunities, India needs free access to these markets, an accepted and established global currency to trade in and seamless trade settlements.

    Suggestions for India

    1] Bilateral currency agreements are unsustainable

    • The American dollar has emerged as the global trade currency, bestowing an ‘exorbitant privilege’ on the dollar.
    • But a forced and hurried dismantling of this order and replacing it with rushed bilateral local currency arrangements can prove to be more detrimental for the global economy in the longer run.
    • We had an Indian rupee-Russian rouble agreement in the late 1970s and 1980s, when we mutually agreed on exchange rates for trading purposes.
    • Now, with India’s robust external sector, a flourishing trading relationship with many nations and tremendous potential to expand trade, such bilateral arrangements are unsustainable, unwieldy, and perilous.

    2] Avoid discounted commodity purchases from Russia

    • In the long run, India stands to gain more from unfettered access to the western bloc markets for Indian exports under the established trading order than from discounted commodities purchased under new bilateral currency arrangements that seek to create a new and parallel global trade structure.
    • It entails a prolonged departure from the established order of dollar-based trade settlement or jeopardises established trading relationships with western bloc markets, it can have longer term implications for India’s export potential.

    3] Non-disruptive geo-economic policy

    • India needs not just a non-aligned doctrine for the looming new world order but also a non-disruptive geo-economic policy that seeks to maintain the current global economic equilibrium.
    •  By the dint of its sheer size and scale, India can be both a large producer and a consumer.
    • To best utilise this opportunity, India needs not just cordial relationships with nations on either side of the new divide but also a stable and established global economic environment.

    4] Social harmony is a must

    • Just as it is in India’s best interests to balance the current geo-economic equilibrium, it is also imperative for India to maintain its domestic social equilibrium.
    • Social harmony is the edifice of economic prosperity.
    • Fanning mutual distrust, hate and anger among citizens, causing social disharmony is a shameful slide to perdition.

    Conclusion

    The reshaping and realignment of the world order will be a unique opportunity for India to reassess its foreign policy, economic policy and geo-political strategy and don the mantle of global leadership.

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  • Anatomy of communal violence in India

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Communal violence in India

    Context

    Communal violence, a complex phenomenon, has been over-simplified to suit a convenient political narrative.

    India’s syncretic traditions and impact of invasions

    • For aeons, India has had syncretic traditions inspired by the Vedic aphorism, “Ekam sad vipra bahudha vadanti” (there is only one truth and learned persons call it by many names).
    •  Because of this underpinning, Indian society has never insisted on uniformity in any facet of life.
    • This equanimity of Indian society was, however, disrupted by invading creeds.
    • The first such incursion came in 712, when Muhammad bin Qasim vanquished Sindh, and as Chach Nama, a contemporary Arab chronicle states, introduced the practice of treating local Hindus as zimmis, forcing them to pay jizya (a poll tax), as a penalty to live by their beliefs.
    • In the 11th century, Mahmud of Ghazni, while receiving the caliphate honours on his accession to the throne, took a vow to wage jihad every year against Indian idolaters.
    • The fact is, ties between the two communities were seldom cordial.
    • There were intermittent skirmishes, wars and occasional short-lived opportunistic alliances.
    • When Pakistan declared itself an Islamic Republic in 1947, it would have been natural for India to identify itself as a Hindu state.
    • It didn’t, and couldn’t have — because of its Hindu ethos of pluralism.
    • India, is, and will always be, catholic, plural, myriad and a vibrant democracy.

    Conclusion

    It’s relevant to recall what Lester Pearson (14th PM of Canada) said: “Misunderstanding arising from ignorance breeds fear, and fear remains the greatest enemy of peace.”

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  • What is different now in communal violence in India

    op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Communal violence and its implications for society

    Context

    India has a long history of communal violence. Just how similar or different are the recent episodes? And what kind of dangers do they pose to the polity and society?

    What is different this time?

    • Religious processions: It should first be noted that such processions have historically been some of the largest triggers for communal riots.
    • Such processions can be, and have been, intensely political, often morphing from the religious to the communal.
    • Communalism Vs. Religiosity: Communalism in South Asia has always been distinguished from religiosity.
    • Religiosity may be about deeper meanings of life, but communalism is about a coercive assertion of power or a bloody search for retribution, often historically construed and presented.
    • Thus, it is not the coexistence of religious processions and riots that is surprising today.
    • What is different this time? Ram Navami and Hanuman Jayanti are not the principal religious processions touching off riots.
    • Eroding neutrality of state: The second difference that in the past, processions might have caused riots, but the state rarely gave up the principle of neutrality in dealing with them.
    • When a state either explicitly favours a community or looks away when a particular community is hounded, intimidated and attacked, it is no longer a riot, but a pogrom.
    • The rapidly eroding religious neutrality of the government in several states is one of the most alarming political developments.
    • In recent months, there have been spectacles of calls to murder in Dharam Sansads (religious assemblies).
    • Such speech is criminally liable. India’s Constitution prohibits speech that endangers “public order”.
    • In the past, it was invariably hard to find clear evidence of who led the riots.
    • The riot leaders now openly proclaim call for violence.
    • Such leaders are either not punished, or are merely given a slap on the wrist and some of them are even celebrated as heroes and rewarded with high office.
    • New research on vigilantism makes it clear that vigilantism, especially lynchings, cannot flourish unless the state provides impunity to vigilante groups.

    Conclusion

    Even though India has a long history of communal violence the recent episodes of violence are different and pose grave dangers to the polity and society.

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  • Tax Reforms

    Digital Service Tax

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Pillar One

    Mains level: Paper 3- OECD formula for digital tax and its implications for India

    Context

    Over the past four years, 137 countries have engaged intensively with the OECD to find a solution to the tax challenges arising from digitalisation. Like any international agreement, finding a middle ground has been difficult and a series of compromises have been made.

    What makes it difficult to tax the digital economy?

    • Operation across the border: The unique feature of the digital economy is that firms can operate seamlessly across borders and users and their data contribute to their profits.
    • However, this made it harder to tax such an economy.
    • It was not clear how profits were to be pinned down to any jurisdiction.
    • Political issues: Taxing digital economy became a political issue because the largest technology firms are tax residents of developed countries and redefining digital presence as the basis of taxation would potentially allow large markets like India more right to tax.
    • Developing vs. developed countries: Developing countries wanted that profits from digital operations should be fractionally apportioned to markets while developed countries believe that a fraction of residual profit, mainly arising from marketing functions, should be taxed in markets.

     Equalisation levy and DST issue

    • The divergence in developed and developing countries as explained above compelled countries to implement unilateral measures.
    • India was the first country to implement a gross equalisation levy on turnover.
    • This is not covered by tax treaties.
    • So, while the income tax act does not apply to the levy, credit is available for the tax paid by the company in its home country.
    • Similarly, several other countries have announced or implemented a digital services tax (DST).
    • In 2021, India expanded the scope of the equalisation levy.
    • The US initiated the US Trade Representative investigations which found DST to be discriminatory, and then announced retaliatory tariffs.

    Two-pillar approach and issues with its adoption

    • The DSTs encouraged the US to actively participate in finding a consensus-based solution.
    • As talks progressed, the OECD announced that the issue of allocation of taxing rights would be actively considered and adopted a two-pillar approach.
    • Pillar One approach: The first pillar was to define the rules for taxing digital companies.
    • Sovereignty issue: Pillar One was to go beyond digital companies and apply to large companies with annual revenue over € 20 billion. To ensure certainty to taxpayers, the solution will require excessive global coordination.
    • Whether this will undermine sovereignty, remains to be seen.
    • Therefore, it is important to consider if the consensus approach is worth pursuing.
    • EL may still apply to companies not covered by OECD proposal: In fact, the EL may apply to companies that are not covered by the OECD proposal, leaving one to wonder whether it will truly address the tax challenges from digitalisation. 
    • Complications: Corporations that argue in favour of simplicity must also consider the potential benefits from an EL like tax that sets aside the complications of attributing profits to complex functions.
    • The OECD approach creates a fiction of reallocation, where the profits reallocated through Pillar One could in fact be compensated for by taxing back global profits taxed below 15 per cent.

    Conclusion

    As per Pillar One proposal, DSTs will be removed once the OECD approach is ratified in 2023. It is imperative therefore that countries assess the price of compromise.

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  • Freebies model of Governance

    op-ed snap | Governance | Mains Paper 2: Federalism,Ministries & Departments Of The Government

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Merit goods vs public goods

    Mains level: Paper 2- Issues with competitive freebie politics

    Context

    Against the backdrop of promises of freebies in Punjab, this article deals with the harm caused by such freebies to the economy, life quality and social cohesion in the long run.

    Macroeconomic stability of the Union and the States

    • India is a Union of states. It is not a confederation of states.
    • The Union is indestructible.
    • The Union, therefore, is integral to both the Centre and the states.
    • The strength of the Centre lies in the strength of the states.
    • Therefore, the macroeconomic stability of the Union is contingent on the macroeconomic stability of both the Centre and states.

    The complex issue of freebies

    • There is great ambiguity in what “freebies” mean.
    • Merit goods Vs. Public goods: We need to distinguish between the concept of merit goods and public goods on which expenditure outlays have overall benefits.
    • Examples of this are the strengthening and deepening of the public distribution system, employment guarantee schemes, support to education and enhanced outlays for health, particularly during the pandemic.
    • All over the world, these are considered to be desirable expenditures.
    • Freebies could be expensive? It’s not about how cheap the freebies are but how expensive they are for the economy, life quality and social cohesion in the long run.

    Issues with the culture of competitive freebie politics

    1] It affects macroeconomic stability

    • Freebies undercut the basic framework of macroeconomic stability.
    • The politics of freebies distorts expenditure priorities.
    • Outlays are being concentrated on subsidies of one kind or the other.
    • Illustratively, in the case of Punjab, while estimates vary, some have speculated that the promise of freebies might cost around Rs 17,000 crore.
    • As we know, the debt-to-GDP ratio of Punjab is already at 53.3 per cent for 2021-22, which would worsen on account of these new measures.

    2] Distortion of expenditure priorities

    • Take, for instance, the change to the new contributory pension scheme from the old scheme, which had a fixed return.
    • Rajasthan announced that it would revert to the old pension scheme.
    • This decision is regressive as the move away from the old scheme was based on the fact that it was inherently inequitable.
    • The pension and salary revenues of Rajasthan amount to 56 per cent of its tax and non-tax revenues.
    • Thus, 6 per cent of the population, which is made up of civil servants, stands to benefit from 56 per cent of the state’s revenues.
    • Intergenerational inequality: This is fraught with dangers not only of intergenerational inequality, but also affects the broader principles of equity and morality.

    3] Increases social inequality

    • The issue of intergenerational equity leads to greater social inequalities because of expenditure priorities being distorted away from growth-enhancing items.

    4]  It affects the environment

    • When we talk of freebies, it is in the context of providing, for example, free power, or a certain quantum of free power, water and other kinds of consumption goods.
    • This distracts outlays from environmental and sustainable growth, renewable energy and more efficient public transport systems.

    5]  The distortion of agricultural priorities

    • The depleting supply of groundwater is an important issue to consider when speaking of freebies pertaining to free consumption goods and resources.

    6] Effect on the future of manufacturing

    • Lower the quality of competitiveness: Freebies lower the quality and competitiveness of the manufacturing sector by detracting from efficient and competitive infrastructure enabling high-factor efficiencies in the manufacturing sector.

    7] Subnational bankruptcy

    • Freebies bring into question market differentiation between profligate and non-profligate states and whether we can have a recourse mechanism for subnational bankruptcy.

    Way forward

    • The race to the bottom implies government deregulation of markets and business.
    • We must strive instead for a race to efficiency through laboratories of democracy and sanguine federalism where states use their authority to harness innovative ideas and solutions to common problems which other states can emulate.

    Consider the question “What are the challenges in dealing with the competitive freebies politics? What are its drawbacks?”

    Conclusion

    The economics of freebies is invariably wrong. It is a race to the bottom. Indeed, it is not the road to efficiency or prosperity, but a quick passport to fiscal disaster.

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  • Delhi Full Statehood Issue

    The Delhi MCA Act and the spirit of federalism

    op-ed snap | Polity | Mains Paper 2: Panchayats & Local Bodies,Parliament & State Legislatures

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 239AA

    Mains level: Paper 2- Delhi statehood issue

    Context

    Recently, both Houses of Parliament passed the Delhi Municipal Corporation (Amendment) Act, 2022, to unify the trifurcated Delhi Municipal Corporations.

    Background of the trifurcation

    • The split-up was first proposed in the 1987 Balakrishnan Committee Report which was bolstered in the 2001 Virendra Prakash Committee Report.
    • The proposal finally took shape in 2011 and the law to trifurcate was enacted.
    • A seven-member Delhi Legislative Assembly Panel was set up in 2001 to study the recommendations and suggest modalities.
    • Trifurcation in 2011: The proposal finally took shape in 2011 and the law to trifurcate was enacted.

    Changes introduced by the amendment

    • The law provides that the power to determine the number of wards, extent of each ward, reservation of seats, number of seats of the Corporation, etc. will now be vested in the Central government. 
    • The number of seats of councillors in the Municipal Corporations of Delhi is also to be decided now by the Central government.
    • By exercising that very power, the number of councillors to the Municipal Corporations of Delhi has been reduced from 272 to 250.
    • The Central government has also taken over powers from the State to decide on matters such as ‘salary and allowances, leave of absence of the Commissioner, the sanctioning of consolidation of loans by a corporation, and sanctioning suits for compensation against the Commissioner for the loss or waste or misapplication of municipal fund or property

    Issues with the changes made

    • The Central government’s line is that the amendment has been passed as in Article 239AA of the Constitution, which is a provision that provides for special status to Delhi.
    • No consultation with Delhi govt.-The large-scale changes by the Central government has been done without any consultation with the Delhi government.
    • Not in line with  Part IXA of the Constitution:  Part IXA specifically states that it will be the Legislature of the State that will be empowered to make laws concerning representation to the municipalities.
    • Part IXA is a specific law while Article 239AA is general law: The argument of the Centre that Article 239AA can be applied over and above Part IXA of the Constitution does not hold good as the latter is a specific law that will override the general law relatable to Article 239AA.
    • Against the federalism: In State of NCT of Delhi vs Union of India judgment the Supreme Court held, “The Constitution has mandated a federal balance wherein independence of a certain required degree is assured to the State Governments.”
    • It was made clear that the aid and the advice of the State government of Delhi would bind the decision of the Lieutenant General in matters where the State government has the power to legislate.
    • No doubt, the amendment to the Delhi Municipal Corporation Act, 1957 will lead to further litigation on the aspect of a sharing of powers between the State of NCT of Delhi and the Central government.

    Conclusion

    The interference of the Centre in matters such as municipal issues strikes a blow against federalism and the celebrated Indian model of decentralisation.

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