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

    Dealing with the macroeconomic uncertainties

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Tax buoyancy

    Mains level: Paper 3- Macroeconomic uncertainty and way ahead

    Context

    Macroeconomic uncertainties are mounting.

    Impact of US Fed’s decision

    • Against the backdrop of possible interest rate hikes by the U.S. Federal Reserve and the taper tantrum, there is pressure on the Reserve Bank of India (RBI) to increase its interest rates to prevent capital outflows.
    • The monetary policy corridor is still “accommodative” to support the growth recovery.
    • Globally, central banks have started increasing the interest rates.

    Macroeconomic uncertainties

    1] Inflationary pressure

    •  In India, the wholesale price index (WPI) inflation rose to a record high of 14.32% in November 2021 as per the data released by the Ministry of Commerce and Industry.
    • The consumer price index (CPI) inflation now is 5.03%, though that is still within the comfort zone of the inflation targeting framework envisaged in India’s new monetary framework.
    • The official nominal inflation anchor in India is 4%, with a band of variations of +/- 2. 

    2] Absorbing excess liquidity

    • The RBI Financial Stability Report, published on December 29, 2021, revealed a possible worsening of the gross non-performing asset (GNPA) ratio of scheduled commercial banks — from 6.9% in September 2021 to 9.5% by September 2022.
    • Absorbing the excess liquidity that was injected to stimulate growth as part of the pandemic response is crucial to reversing trends in non performing assets (NPAs).
    • Absorption of excess liquidity was attempted by increasing the cut-off yield rate of variable rate reverse repo (VRRR) to 3.99%, and curtailing the government securities acquisition programme.

    3] Interest rate structure and implications for government borrowing

    •  The call money market rates are below the repo rate.
    • The bond yields are increasing ahead of the Union Budget 2022-23.
    • The rise in bond yields will result in higher borrowing costs for the Government.

    Way forward for fiscal policy

    • Maintain accommodative policy stance: Given these macroeconomic uncertainties, maintaining an accommodative fiscal policy stance in the upcoming Union Budget for FY23 is crucial for a sustainable recovery.
    • Don’t focus on fiscal consolidation: Any attempt at fiscal consolidation at this juncture employing capital expenditure compression rather than a tax buoyancy path can adversely affect economic growth. 
    •  Public investment — infrastructure investment in particular — is a major growth driver through “crowding-in” of private corporate investment.
    • Strengthening investments in the health-care sector is crucial at this juncture as a prolonged lockdown can accentuate the current humanitarian crisis and deepen economic disruptions.
    • When credit-linked economic stimulus has an uneven impact on growth recovery, the significance of fiscal dominance cannot be undermined.
    • Address unemployment: Rising unemployment needs to be addressed through an urgent policy response that strengthens job guarantee programmes.

    Conclusion

    The upcoming Union Budget for 2022-23 should maintain an accommodative fiscal stance in order to support the sustainability of the economic growth process and also for financing human development.

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  • Foreign Policy Watch: India-Myanmar

    Places in the news: Sittwe Port

    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: Sittwe port

    Mains level: Paper 2- Why India should engage with Myanmar

    Context

    Notwithstanding the unfortunate developments since the Tatmadaw took over, a recalibration exercise for developing a robust relationship with Naypyidaw is the need of the hour.

    Need for proactive neighbourhood policy with Myanmar

    • Security and economic interests: India should implement an unbiased and proactive “Neighbourhood First” strategy that facilitates the Act East policy crucial for India’s long-term security and economic interests.
    • Myanmar — regardless of who governs its polity — is not only the decisive lynchpin for India’s Act East policy but critical for the economic development and security of India’s Northeast.
    • China factor: Such a policy should take into account the measures that China has taken to arm the Tatmadaw.

    How to support Myanmar?

    • Critical requirements: India should find ways to support Naypyidaw for its critical requirements of systems and platforms like UAVs, surveillance systems and communication equipment.
    • Economic engagement: There is a need for dynamic economic engagement with Myanmar, to expedite the completion of the earlier agreement on the operationalisation of the Sittwe port, the establishment of an oil refinery and joint vaccine production facilities at a cost of $6 billion.
    • People-to-people goodwill: India also needs to proactively employ the existing “people-to-people” goodwill and proximate ties between the two armies.
    • Engage with military leadership to stop highhandedness: India has the singular advantage of acceptability from both factions in Myanmar and it is, therefore, imperative that it takes the lead in engaging with the ruling military leadership, to stop the highhandedness.
    • The visit by India’s Foreign Secretary to Myanmar in the last week of December 2021 was significant.
    • It conveyed the message that India, notwithstanding its commitment to democracy, is amenable to conduct business with the country, regardless of who is in the seat of power.

    Conclusion

    It is of the utmost importance for India to positively engage Naypyidaw and stave off attempts to exploit Myanmar by countries inimical to India’s growth. Any ambiguity or delay in India’s constructive engagement with Myanmar would only serve the interests of anti-India forces.

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  • Foreign Policy Watch: India – EU

    India’s challenge in European geopolitics

    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: NATO

    Mains level: Paper 2- India-Europe relations

    Context

    For India, an important strategic priority today is to rebalance the Indo-Pacific. Delhi, however, recognises that this expansive challenge can’t be met by any one power, including the US. A larger European role in securing Asia therefore becomes critical.

    Importance of Russia in balancing China

    • Peace with Russia in Europe might be necessary for America to focus on Asia has been the key motivation behind President Joe Biden’s decision to intensify engagement with Vladimir Putin in the last few months.
    • On the question of Ukraine’s membership of NATO, the US and its European allies have suggested that membership is certainly not imminent; but they are unwilling to say Ukraine will “never” be admitted.

    Contradiction in Europe

    • 1] Europe remains geopolitically unstable: None of the three European settlements of the 20th century — in 1919 after the First World War, in 1945 after the Second World War, and in 1991 after the Cold War — has endured.
    • 2] The difficulty of integrating Russia into a European order: Russia was part of the great power system in Europe through the 18th and 19th centuries.
    • If the 1917 Bolshevik Revolution put Russia and the West at odds with each other, the collapse of the Soviet Union has not resolved the contradiction.
    • 3] Growing tension between the US and Europe: Since the Second World War, Europe has relied on the US for its security.
    • However, Europe has never stopped resenting the American dominance over its geopolitics.
    • The EU’s foreign policy chief, Josep Borrell, has repeatedly objected to the US and Russia deciding the future of Ukraine over European heads.
    • But Russia does not take the EU seriously and is betting on negotiations with the US.
    • 4] Europe still remains a weak security actor:  While the EU has become a powerful economic entity (with its $17 trillion GDP), it remains a weak security actor.
    • Whatever might be the outcome from the gathering conflict over Ukraine, these European contradictions are not going to disappear any time soon.

    Why Europe remains a weak security actor?

    • Dominance of the US and Russia: The ambition to construct a strong geopolitical personality for the EU is hobbled by divisions over the role of Russia and the US in the region.
    • Mutual suspicions: The historically rooted mutual suspicions among European states also plays role.
    • Reluctance to spend on defence: This is compounded by the reluctance to spend more on defence and the inability to develop collective defence arrangements outside of NATO led by the US.

    Suggestions for India

    • The contradictions in Europe demand that Delhi discard its tendency to view the region through the “East versus West” binary.
    • Delhi today could profitably take a leaf out of the book of the Indian national movement.
    • In the late 18th century, as European powers competed for influence in the subcontinent, many Indian princes sought to take advantage of the contradictions between Britain and France.
    • Imperial Germany supported the formation of a nationalist government of India in Kabul in 1915 headed by Raja Mahendra Pratap Singh.
    • Eager to accelerate Indian independence during the Second World War, Netaji turned to Germany and Japan, the world’s newest great power.
    • The sharpening struggle for Indian independence, and more broadly the liberation of Asia between the two World Wars, inevitably involved exploiting the contradictions between different imperial powers.
    •  This was complicated, however, by rapid realignment among the major powers —friends became adversaries and enemies became allies.
    • The Indian and Asian national movements were deeply divided in coping with the shifting great power dynamic.
    • The world enters a similar moment today that could rearrange relations between the US, UK, Europe, Russia, China and Japan.

    Consider the question “What are the contradictions in Europe today? How these contradiction can play role in India’s international relations with the European countries?”

    Conclusion

    Greater engagement with Europe and dealing with its multiple contradictions must necessarily be important elements of India’s international relations today.

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  • Higher Education – RUSA, NIRF, HEFA, etc.

    Budgeting for the education emergency

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Expenditure on education in India

    Mains level: Paper 2- Increasing the expenditure on education

    Context

    Faced with an unprecedented education emergency, this is the time to substantially ramp up public spending on education and make it more effective.

    Low allocation for education

    • UNESCO’s 2030 framework for action suggests public education spending levels of between 4% and 6% of GDP and 15%-20% of public expenditure.
    • A recent World Bank study notes that India spent 14.1 % of its budget on education, compared to 18.5% in Vietnam and 20.6% in Indonesia, countries with similar levels of GDP.
    • But since India has a higher share of population under the age of 19 years than these countries, it should actually be allocating a greater share of the budget than these countries.
    • Public spending on education in most States in India was below that of other middle-income countries even before the pandemic.
    • Most major States spent in the range of 2.5% to 3.1% of State income on education, according to the Ministry of Education’s Analysis of Budgeted Expenditure on Education.
    • This compares with the 4.3% of GDP that lower-middle-income countries spent, as a group, between 2010-11 and 2018-19.
    •  In the 2021-22 Budget, the Central government’s allocation for the Education Department was slashed compared to the previous year, even though the size of the overall budget increased.
    • Of the major States and Delhi, eight either reduced or just about maintained their budget allocation for education departments in 2021-22 compared to 2020-21.

    Way forward

    • The vast majority of the 260 million children enrolled in preschool and school, especially in government schools, did not have meaningful structured learning opportunities during the 20 months of school closures.
    • Infusion of resources: The education system now needs not only an infusion of resources for multiple years, but also a strengthened focus on the needs of the poor and disadvantaged children.
    • What it is spent on and how effectively resources are used are important.
    • It is clear what additional resources are required for.
    • The needs include: back-to-school campaigns and re-enrolment drives; expanded nutrition programmes; reorganisation of the curriculum to help children learn language and mathematics in particular, and support their socio-emotional development, especially in early grades; additional learning materials; teacher training and ongoing support; additional education programmes and collection and analysis of data.
    • Focus on teacher training:  How does expenditure on technology compare with the amounts spent on teacher training, which represents just 0.15% of total estimated expenditure on elementary education?
    • Teachers are central to the quality of education, so why does India spend so little on teacher training?

    The opacity of education finance data in India

    • The opacity of education finance data makes it difficult to comprehend this.
    • For instance, the combined Central and State government spending on education was estimated to be 2.8% of GDP in 2018-19, according to the Economic Survey of 2020-21.
    • This figure had remained at the same level since 2014-15.
    • On the other hand, data from the Ministry of Education indicates that public spending on education had reached 4.3% of GDP in the same year, rising from 3.8% of GDP in 2011-12.
    • The difference in the figures is due to the inclusion of expenditure on education by departments other than the Education Department.
    •  Including expenditure on education by, for example, the Ministry of Tribal Affairs, the Ministry of Social Justice and Empowerment (on Anganwadis, scholarships, etc.), the Ministry of Science and Technology (for higher education) is of course legitimate.
    • However, the composition of these expenditures is not readily available.

    Conclusion

    The questions for this Budget should be clear. How much additional funds are being allocated for different levels of education by the principal departments in 2021-22? Are the funds being spent on the specific measures required to address the education emergency facing the children?

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

    A chance to support growth, fiscal consolidation

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Marginal propensity to consume

    Mains level: Paper 3- Growth prospects for Indian economy

    Context

    The adverse effect of the third wave of COVID-19, which is mainly affecting the last quarter of 2021-22, may call for a further downward adjustment in the growth rate to about 9%.

    Growth in FY 2021-22

    •  As per the NSO’s advance estimates, at the end of 2021-22, the magnitude of GDP in real terms is estimated at INR₹147.5-lakh crore that is only a shade higher than INR₹145.7-lakh crore in 2019-20.
    • Thus, due to the three waves of COVID-19 that India has experienced, two years of real growth in economic activities have been wiped out. 
    • As per the advance estimates, the gross fixed capital formation (GFCF) relative to GDP at current prices stands at 29.6% in 2021-22.
    • Capacity utilisation in India continues to have considerable slack.
    • Private final consumption expenditure (PFCE) also shows a low growth of 6.9% in 2021-22.
    • Any pick-up in demand would continue to be constrained by low-income growth in sectors characterised by a high marginal propensity to consume (MPC) such as the trade, transport, et al. sector and the Micro, Small and Medium Enterprise (MSME) sector more broadly.
    • It may thus be prudent to expect a real GDP growth in the range of 6%-7%.
    • Growth in 2022-23 would also continue to be constrained by supply-side bottlenecks and high prices of global crude and primary products.
    • Growth in 2022-23 would depend on the basic determinants such as the saving and investment rates in the economy.

    Suggestions

    • Extend GST compensation period: The GST compensation provision would also come to an end in June 2022.
    • This would cause a major revenue shock at least for some States such as Tamil Nadu, Kerala and Andhra Pradesh.
    • While this matter may be considered by the GST Council, the compensation arrangement should be extended by two years in some modified form.
    • With respect to non-tax receipts, the scope of the National Monetization Pipeline (NMP) may be extended to cover monetisation of government-owned land assets.
    • Disinvestment initiatives may have to be accelerated.
    • Expenditure prioritisation in 2022-23 should focus on reviving both consumption and investment demand.
    • Urban counterpart to MGNREGA: Since consumption demand remains weak, some fiscal support in the form of an urban counterpart to Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may be considered.

    Focusing on fiscal consolidation

    • It would be appropriate now to consider a graduated return to fiscal consolidation while using fiscal policy to lay the base for faster growth in the years to come.
    • The Fifteenth Finance Commission had suggested a fiscal consolidation path where the Centre’s fiscal deficit was benchmarked at 5.5% of GDP for 2022-23.
    • In their pessimistic scenario, it was kept at 6% of GDP. 
    • It may be prudent to limit the reduction in fiscal deficit-GDP ratio to about 1% point of GDP in 2022-23.
    • This would imply a fiscal deficit in the range of 5.5%-6% of GDP.
    • From here on, a stepwise reduction of 0.5% points per year would enable a level of about 4% of GDP by 2025-26.
    • By this time, as suggested by the Fifteenth Finance Commission, a high-powered inter-governmental group should be constituted to re-examine the sustainability parameters of debt and fiscal deficit of the central and state governments.

    Conclusion

    Expenditure prioritisation in 2022-23 should focus on reviving both consumption and investment demand while aiming for the gradual return to the fiscal consolidation.

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  • Internal Security Trends and Incidents

    Why India needs a single agency to guard its borders

    op-ed snap | Security Issues | Mains Paper 3: Various Security Forces, Agencies & Their Mandates

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CAPF

    Mains level: Paper 3- Issues with multiple agencies guarding borders

    Context

    Recent developments warrant a comprehensive review of border management to ensure the all-weather security of our borders.

    What makes India’s border management difficult?

    • India shares land borders with Pakistan, China, Nepal, Bhutan, Bangladesh and Myanmar, which stretch approximately 15,106 km.
    • In addition, we have an approximately 3,323 km-long LoC with Pakistan, which further extends to the rechristened 110 km stretch of “Actual Ground Position Line” (AGPL) dividing the Siachen glacier region.
    • Further east, we have the 3,488 km LAC with China.
    • We share maritime boundaries with Sri Lanka, Maldives, Bangladesh, Pakistan, Myanmar and Indonesia; we have a 7,683 km coastline and an approximately 2 million sq km exclusive economic zone (EEZ).
    • This makes India’s task more complex than most other countries.

    Multiple agencies securing borders

    • Complexity is accentuated by the fact that along with the army, we have multiple other security agencies — the Central Armed Police Force (CAPF) and the Paramilitary Forces (PMF) — sharing the responsibility.
    • While the army is deployed along the LoC and AGPL, the Border Security Force (BSF) looks after the international border with Pakistan and Bangladesh.
    • Guarding the LAC has been assigned to the Indo-Tibetan Border Police (ITBP) and Assam Rifles.
    • The Sashastra Seema Bal (SSB) is responsible for guarding the borders with Nepal and Bhutan.
    • The Assam Rifles looks after our border with Myanmar.
    • In a nutshell, in addition to the army, we have four agencies guarding borders with six neighbours.
    • Conversely, maritime borders are guarded by a single agency — the Coast Guard.

    Need for review of the border management

    • There is a lack of a coherent policy on training, planning and the conduct of guarding operations among various outfits.
    • Overall coordination is also affected.
    • Our adversary on the western border has often escalated violations by resorting to the prolonged use of military resources.
    • Chinese provocations along the LAC are military operations.
    • Clearly, the peace-time scenario is now by and large militarised.

    Way forward

    • Single security agency: In this scenario, India needs a single security agency adequately equipped, suitably armed and trained in advanced military drills and sub-unit tactics to guard our borders.
    • Manpower from Army: Further, to augment the battle efficiency, a fixed percentage of manpower, including the officer cadre, should be drawn on deputation from the army.
    • Paramilitary force under Ministry of Defence: To ensure the desired training and operational standards, this single security agency should be designated as a paramilitary force under the Ministry of Defence and operate under the army.
    • Mergers: The ITBP and the SSB should be fully merged into the new outfit; the BSF and CRPF still have important internal security duties and can be partially merged.
    • The reorganised Assam Rifles too should retain its role of conducting counter-insurgency operations and act as a reserve for the army for conventional operations.
    • Most countries have raised specialised and dedicated armed bodies for border security.
    •  Iran has the Border Guard Command, Italy has the Border Police Service, Russia has created a Border Guard Service, whereas in the US, it is under Homeland Security.
    • Most of these countries, based on threat perception and for better combat cohesion, have placed these organisations under the command of the armed forces.

    Conclusion

    India should adopt a single agency with adequate resources and training to deal with the evolving challenges.

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  • Keeping the spirit of federalism alive

    op-ed snap | Polity | Mains Paper 2: Federalism

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Federal system

    Mains level: Paper 2- Federal character of India polity

    Context

    Conscious recognition of the federal character of our polity is essential to protect our national character.

    Federal spirit and ideas in Indian Constitution

    • Conscious of the differential needs of the populations of different states, the drafters of the Constitution made provisions for an equitable share of powers and responsibilities among different levels of governments. 
    • The lists in the 7th Schedule of the Constitution — Union, state and concurrent — are an example of this division, wherein each level of government has its own sphere, enabling context-sensitive decision-making.
    • Local self-government: Later, institutions for local self government were added through the 73rd and 74th amendments, which strengthened grass roots democracy.
    • Division of responsibility: Article 246 and Article 243 G provide for this division of responsibilities.
    • Finance Commission: Article 280 provided for the constitution of Finance Commission to define the financial relationship and terms between the Union and states.
    • Inter-State Council: Article 263 provided for the establishment of an Inter-State Council for smooth transition of business between the Union and states and resolution of disputes.
    • The inter-state tribunals, the National Development Council and other informal bodies have served as vehicles of consultations between the Union, states and UTs.
    • Rajya Sabha: Apart from these institutions and the Rajya Sabha, the Constitution makers also left much scope for consultative and deliberative bodies so as to strengthen the spirit of cooperation and federalism.

    Steps against the spirit of federalism

    • The Planning Commission has been scrapped.
    • The Inter-State Council has met only once in the last seven years while the National Development Council has not met at all. 
    •  The tenure of the 15th Finance Commission was mired in controversy and many states expressed apprehensions about devolution.
    • The GST has already taken away much of the autonomy available to states and has made the country’s indirect tax regime unitary in nature.
    • Article 370 was removed without consulting the state legislature.
    • Parliament legislated on “agriculture”, entry no. 14 in the state list, to enact the three contentious farm laws, overstepping its jurisdiction and imposing a law on the states.
    •  The New Education Policy has been flagged as encroaching on the federal nature of the polity.
    •  The BSF’s jurisdiction was extended in Assam, West Bengal and Punjab without any consultation with the concerned states.
    • The constitutional office of governor has come under scrutiny several times for encroaching on the powers of state executive and legislature.

    Conclusion

    It should be underlined that Article 1 of our Constitution declares that “India that is Bharat is a union of states”, and that devolution of powers is necessary in such a setting.

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  • Civil Services Reforms

    Drop the IAS cadre rules amendments

    op-ed snap | Governance | Mains Paper 2: Civil Service

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: All India Services

    Mains level: Paper 2- Amendments to IAS Cadre rules

    Context

    The Central Government has proposed four amendments to Rule 6(1) of the IAS (Cadre) Rules, 1954 dealing with deputation, and has sought the views of State governments before January 25, 2022.

    Historical background of All India Services

    • It was Sardar Patel who had championed the creation of the Indian Administrative Service (IAS) and the Indian Police Service (IPS) as “All India Services” (AIS) whose members would be recruited and appointed by the Centre and allotted to various States, and who could serve both under the State and the Centre.
    • Speaking to the Constituent Assembly on October 10, 1949, Patel said, “The Union will go, you will not have a united India if you have not a good All India Service which has the independence to speak out its mind, which has a sense of security….”.

    Central deputation of All India Service officers

    • Consultative process: AIS officers are made available for central deputation through a consultative process involving the Centre, the States and the officers concerned.
    • The Centre would choose officers only from among those “on offer” from the States.
    • Concurrence of the State government: The existing Rule 6(1) states that a cadre officer may be deputed to the Central Government (or to another State or a PSU) only with the concurrence of the State Government concerned.
    • However, it has a proviso which states that in case of any disagreement, the matter shall be decided by the Central Government.
    • Unfortunately, both the Centre and the States have at times flouted these healthy conventions for political considerations.

    The politicisation of the deputation process

    • In May 2021, the Centre unilaterally issued orders for the central deputation of the Chief Secretary of West Bengal just before his last day in service.
    • Some States used to vindictively withhold the names of some of the officers who had opted for central deputation or delay their relief after they were picked up by the Centre.
    • The proposed amendment to rule: The Central Government has proposed four amendments to Rule 6(1) of the IAS (Cadre) Rules, 1954 dealing with deputation.

    Two of the four proposed amendments are disconcerting

    • 1] Providing a fixed number of IAS officers for central deputation: One is a new proviso making it mandatory for the State government to provide a certain fixed number of IAS officers for central deputation every year. 
    • The proposed amendment more or less compels a State government to offer IAS officers for central deputation even when these officers themselves may not wish to go on central deputation.
    • Reasons for shortage of  IAS officers: Poor working conditions in junior-level posts, an opaque and arbitrary system of empanelment for senior-level posts, and lack of security of tenure at all levels are the real reasons for the shortage of IAS officers, which the Centre should address.
    • 2] Requiring states to release the officer: The other is a proviso that requires the State government to release such officers whose services may be sought by the Central Government in specific situations.
    • Based on experiences of the recent past, State governments have a justified apprehension that this proviso may be misused for political considerations. 

    Issues with the proposed amendments

    • The contemplated changes have grave implications for the independence, security and morale of IAS officers.
    • Infringement of rights of States: States are right in perceiving the proposed amendments as a serious infringement of their rights to deploy IAS officers as they deem best, especially when the cutting edge of policy implementation is mostly at the State level.
    • States may prefer officers of the State Civil Services to handle as many posts as possible.
    • . In course of time, the IAS will lose its sheen, and the best and the brightest candidates will no longer opt for the IAS.
    • Against cooperative federalism: In S.R. Bommai vs Union of India (1994), the Supreme Court held that “States have an independent constitutional existence and they have as important a role to play in the political, social, educational and cultural life of the people as the Union. They are neither satellites nor agents of the Centre”.

    Consider the questions “What are the proposed amendments to IAS Rule 1954? What are the concerns with the proposed changes?”

    Conclusion

    In a federal setup, it is inevitable that differences and disputes would arise between the Centre and the States. But all such quarrels should be resolved in the spirit of cooperative federalism and keeping the larger national interest in mind.

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  • Foreign Policy Watch: India-Russia

    What Russia really wants

    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: NATO

    Mains level: Paper 2- Disruption in Central Asia and role of Russia

    Context

    Vladimir Putin, who annexed Crimea in 2014 has now mobilised some 100,000 troops on the Ukraine border.

    How insecurity and history plays role in Russia’s actions

    • Russia, the world’s largest country by land mass, lacks natural borders except the Arctic Ocean in the north and the Pacific in the far east.
    • Its vast land borders stretch from northern Europe to Central and north east Asia.
    • The country’s heartland that runs from St. Petersburg through Moscow to the Volga region lies on plains and is vulnerable to attacks.
    • In the last two centuries, Russia saw two devastating invasions from the west — the 1812 attack by Napoleonic France and the 1941 attack by Nazi Germany. 
    • After the Second World War, Russia re-established its control over the rim land in Eastern Europe and Central Asia, which it hoped would protect its heartland.
    • But the disintegration of the Soviet Union threw its security calculations into disarray, deepening its historical insecurity.

    NATO’s expansion after disintegration of the Soviet Union

    • When the Soviet Union collapsed, Russia lost over three million square kilometres of sovereign territory.
    •  In the last months of the Soviet Union, the West promised that the North Atlantic Treaty Organization (NATO) would not “expand an inch to the east”.
    • The United States and the United Kingdom repeated the pledge after the collapse of the Soviet Union.
    • But despite the promises, NATO continued expansion.
    • In March 1999, in the first enlargement since the end of the Cold War, the Czech Republic, Hungary and Poland (all were members of the Soviet-led Warsaw Pact) joined NATO.
    • Five years later, seven more countries — including the three Baltic countries of Estonia, Latvia and Lithuania, all of which share borders with Russia — were taken into the alliance.
    • Russia felt threatened but was not able to respond.
    • But in 2008, when the U.S. promised membership to Georgia and Ukraine in the Bucharest summit, Russia, which was coming out of the post-Soviet retreat, responded forcefully.

    How Russia see NATO expansion as threat to its dominance on Black Sea

    • Turkey, Bulgaria and Romania, all Black Sea basin countries, are NATO members.
    • Ukraine and Georgia are the other countries that share the Black Sea coast, besides Russia.
    • Russia was already feeling squeezed on the Black Sea front, its gateway to the Mediterranean Sea.
    • If Ukraine and Georgia also join NATO, Russia fears that its dominance over the Black Sea would come to an end.
    • So, in 2008, Mr. Putin sent troops to Georgia over the separatist conflict in South Ossetia and Abkhazia.
    • In 2014, when the Kremlin-friendly regime of Ukraine was toppled by pro-western protesters, he moved to annex the Crimean peninsula, expanding Russia’s Black Sea coast, thereby protecting its fleet based in Sevastopol in Crimea.

    Restoring the rim land

    • In recent years, Mr. Putin has tried to turn every crisis in the former Soviet region into a geopolitical opportunity.
    • South Ossetia and Abkhazia, the self-proclaimed republics that broke away from Georgia, are controlled by Russia-backed forces.
    •  In 2020, when protests erupted in Belarus after a controversial presidential election, Mr. Putin sent assistance to the country to restore order.
    • In the same year, Russia sent thousands of “peacekeepers” to end the war between Armenia and Azerbaijan.
    • Earlier this year, Belarus leader Alexander Lukashenko, with Mr. Putin’s backing, manufactured a migrant crisis on the Polish border of the European Union.
    • This month, when violent unrest broke out in Kazakhstan, the largest and wealthiest country in Central Asia, its leader turned to Russia for help.

    How do geopolitical circumstances favour Russia?

    • The U.S.’s ignominious withdrawal from Afghanistan has left the Central Asian republics deeper in the Russian embrace.
    • Europe is very much dependent on Russian gas, which limits its response.
    • For years, the West, the winner of the Cold War, discounted Mr. Putin.
    • Having failed to defeat the Taliban in Afghanistan, NATO is unlikely to pick a war with Russia over Ukraine.

    Conclusion

    By destabilising Georgia and Ukraine and re-establishing Russia’s hold in Belarus, Caucasus and Central Asia, Moscow has effectively stalled NATO’s further expansion into its backyard.

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  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    The mobile phone sector has lessons for India’s economy

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: PLI scheme

    Mains level: Paper 3- Lessons from the success of mobile manufacturing

    Context

    The mobile phones and room air conditioners (RAC) sectors in recent times have shown us the formulae for expansion of the manufacturing sector and growing exports.

    How did India expand its mobile manufacturing base?

    • We were one of the largest consumers of mobile phones in 2014.
    • In 2014-15, our mobile phone imports exceeded $8 billion.
    • Our electronics imports were threatening to exceed our oil imports.
    • Steps taken by govt: The government took many steps like 100 per cent automatic FDI,
    • levy of import duties to protect local manufacturers,
    • the Phased Manufacturing Plan (PMP),
    • manufacturing clusters (EMC 2.0) and
    • the Production Linked Incentive (PLI) scheme.
    • They have attracted investments, created lakhs of jobs, and have moved us from being a net importer to a net exporter.
    • Our mobile phone manufacturing value has jumped more than eight times from Rs 0.27 trillion in 2013-14 to Rs 2.2 trillion in 2020-21.
    • We have surpassed the US and South Korea to become the second-largest manufacturer globally.

    Steps need to be taken

    •  Our mobile phone exports are primarily limited to feature phones and low-value smartphones.
    • India must aim for a significant increase in exports from the current $4 billion.
    • China exports $200 billion, and Vietnam exports $60 billion worth of mobile phones.
    • The PLI scheme aims to achieve the same by allocating incentives of Rs 410 billion for the mobile phone category over the next five years.
    • Low value addition: Our value addition in mobile phone manufacturing is currently limited to 15-20 per cent versus more than 40 per cent in China.
    •  The scheme for promoting the manufacturing of electronic components and semiconductors (SPECS) is a step in the right direction.
    • We must focus on setting up a fabrication plant to manufacture semiconductor chips to facilitate complete vertical integration.

    The Room AC sector story

    •  We imported RACs worth Rs 41 billion in 2017-18.
    • The government initiated multiple measures such as the PMP scheme, banning the import of refrigerant-filled ACs, increasing the import duty on RACs and critical components, and the PLI scheme.
    • From 2017-18, RAC imports have declined by 56 per cent to Rs 18 billion in 2020-21.
    • Our import of RACs has shifted from China to an FTA country like Thailand, where import duty isn’t applicable.
    • A judicious mix of protection (levy of import duty/banning of finished goods) and incentives (PMP, PLI scheme, 100 per cent FDI) has developed local manufacturing, created jobs, and turned a trade surplus.

    Way forward

    • We missed the manufacturing/export bus in the 1980s.
    • We did excel in services like software to become back office to the world. With China+1 becoming a geopolitical imperative, it is an opportune time for us to expand the manufacturing sector and improve our export market share.
    • To achieve our true potential we need close coordination and seamless working between central, state, and local governments, the rule of law, improvements in infrastructure, especially logistics and flexible labour laws.

    Conclusion

    Many of our peers are ahead of us in ease of doing business, but none of them has a large domestic market like us. The automobile and generic pharma sector in the past and the mobile phone/RAC sectors recently have shown that we know the formulae.

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