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Type: Op-ed

  • Absence of Roe v Wade won’t just impact the US

    Context

    The leak of an initial draft majority opinion of the US Supreme Court voting to overturn the decision in Roe v Wade has sent shockwaves across liberal and conservative quarters alike, globally.

    Background of the Roe v Wade case

    • Right to abortion: While locating the right of privacy within the guarantee of personal liberty enshrined in the fourteenth amendment of the American constitution, Roe embodies a supervening constitutional right to abortion emanating from this right of privacy.
    • The right to abort was held to be a constitutionally protected right within the right of privacy.
    • Roe, the 1973 outcome of an unmarried woman’s crusade for bodily autonomy, had declared overbroad, and consequently unconstitutional, a provision of the Texas Penal Code which permitted only those abortions that were “procured or attempted by medical advice to save the life of the mother”.
    • The decision simultaneously recognised the state’s interest in protecting the life of the foetus as also the life of the mother. 
    • Roe is not only relevant as a progressive trailblazer for reproductive rights in the United States but is also fundamental to constitutional jurisprudence globally for the interpretative tools it employed.

    Implications of overturning Roe v Wade

    • Political considerations vs judicial responsibility: The overturning of Roe is more than the mere abdication of the judicial responsibility to protect individual rights — it signals a dangerous trend of courts making long-standing determinations of legal rights based on transient political considerations.
    • Incursion into women’s right to abort: It would also mean legitimisation of state incursions into women’s right to abort and consequently their right to bodily autonomy and liberty, in addition to forcing them to move to states with enabling laws to procure abortions, leading to issues of access and affordability of abortions.
    • While the impact of Roe’s absence would most profoundly be felt in the US, it is likely to embolden conservative anti-abortion voices across the world.
    • Limits of judicial activism: It will inevitably also raise fundamental questions on the limits of judicial activism aimed at protecting the rights of persons and classes, which do not find explicit mention within a country’s constitutional framework.
    • Possibility of a conservative approach to abortion cases: In 2021, the abortion laws in India underwent substantial changes, with the introduction of the Medical Termination for Pregnancy (Amendment) Act, 2021 which, in addition to destigmatising pregnancies outside marriage by introducing the nomenclature of “any woman or her partner”, also increased the upper gestational limits within which pregnancies are legally terminable.
    • The Act, however, carries ambiguities and leaves room for both judicial and executive interpretation.
    • As cases of subjective determination arise, the Indian judiciary will be called upon to reconcile the right to privacy recognised in Puttaswamy with the permissible limits of abortion in the Act.

    How does Roe v Wade apply in the Indian context?

    • In KS Puttaswamy v Union of India, Justice Chandrachud referred to Roe and Planned Parenthood while reading the right to privacy into the existing framework of constitutionally protected fundamental rights subject to “just, reasonable and fair” restrictions.
    • Recognising derivative rights: In the lifetime of the Indian Supreme Court, recognising derivative rights within the existing framework of fundamental rights has been regularly witnessed — be it rights during arrest and detention, the right to express one’s sexual and gender identity, or rights against harassment at the workplace, to cite a few.
    • Setback to transformative constitutionalism: In the Indian context, the overturning could be seen as a setback to the celebrated doctrine of transformative constitutionalism, which sees the Indian Constitution as a “living document” that moulds, adapts and responds to changing times and circumstances.

    Conclusion

    The likelihood of the overturning of Roe leading to more conservative approaches to judicial interpretation in abortion rights cases, cannot be ruled out.

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  • The challenge for Middle Powers like India, France and Germany

    Context

    Prime Minister Narendra Modi’s visit to European capitals should help both sides acquire a better understanding of each other’s security concerns. Whether it will fundamentally alter equations remains to be seen.

    New India-EU equation

    • As “Middle Powers”, countries like France, Germany and India should seek policy space for themselves and not be forced into taking positions by the Big Powers — the United States, China and Russia.
    • The EU is understandably concerned about Russian aggressiveness in Europe.
    •  ndia is equally concerned about Chinese aggressiveness in Asia. 
    • Even after Russia has sought to tear down the post-Cold War security structure in Europe, India has stayed the course in its equations both with Russia and the European Union.

    Division of national and group agenda and its implications for India

    • While Russia’s invasion of Ukraine is the context in which Modi visited Europe and the head of the European Union visited India, the fact is that the agenda at bilateral meetings with individual European countries has generally been very different from the agenda that the EU prefers to focus on.
    • While individual European nations, especially Germany and France, focus on their own strategic and business interests, including defence equipment sales, the EU retains the remit for negotiating trade and investment rules.
    • Problem for India: This division of national and group agendas has often posed a problem for India because individual countries cannot offer bilateral market access in exchange for bilateral defence deals.
    • So the French will sell Rafale jets in the name of strategic partnership but they cannot offer a trade and investment deal that Brussels will not allow Paris to strike with India.
    • While the EU and G7 may now wish to derisk, if not decouple, from aggressively rising China, how much they would be able to do in this regard and what they would be willing to do to help a slowly rising India remains to be seen.

    Way forward

    • For India’s part, it is not clear at the moment how much and what it can unilaterally offer Europe beyond the promise of standing up to China or reducing dependence on Russia.
    • Challenge for the three middle powers lies in combine their “strength and stability” to ensure “peace and tranquillity” in their respective neighbourhoods.
    • If middle powers like Brazil, France, Germany, India, Indonesia, Japan, South Africa and others can work together they may well be able to impose some discipline on the three big powers — China, Russia and the US.

    Conclusion

    At a time when big powers lurking behind in seeking to stabilise and shape the global order middle powers need to act to balance the influence exerted by the big powers.

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  • Inflation control needs another model

    Context

    At the conclusion of the April meeting, the Monetary Policy Committee had already warned that the focus will henceforth be on inflation. Yesterday it raised the repo rate somewhat sooner than was expected by the market.

     Discourse on inflation engaged in by the western central banks

    • Inflation reflects an excess of output over its ‘natural’ level.
    • Inflation targeting refers to the policy of controlling inflation by raising the interest rate over which the central bank has control, i.e. the rate at which it lends to commercial banks, the ‘repo rate’.
    • This, it is argued, will induce firms to stay their investment plans and reduce inventories, lowering production.
    • As economy-wide output declines, becoming equal to the natural level of output, inflation will cease.
    • This story does not just legitimise a policy of output contraction for inflation but sees it as optimal.
    • The natural level of output itself is the productive counterpart of the natural level of employment, the level that obtains in a freely functioning labour market.
    • So, at the natural level of output, the economy is deemed to be at full employment.
    • Salient in the context is the fact that the natural level of output is unobservable.
    • Hence inflation as a reflection of an “overheating” economy is something that must be taken on trust.

    Inflation control in India

    • Not surprisingly for a theory based on an unobservable variable, the proposition that inflation is due to an overheating economy fares poorly when put to a statistical test for India. 
    • There is not a single demonstration of the empirical validity of the model of inflation presented in the RBI report of 2014, which recommended a move to inflation targeting.
    • On the other hand inflation in India can be explained in terms of the movement of the prices of agricultural goods and, to a lesser extent, imported oil.
    • How effective is monetary policy in controlling inflation: The implication of this finding is damaging for the claim that monetary policy can control inflation, for neither the price of agricultural goods nor that of imported oil is under the central bank’s control.
    • The only route by which monetary policy can, in principle, control inflation is by curbing the growth of non-agricultural output, which would in turn lower the growth of demand for agricultural goods.
    • As the demand for agricultural goods slows, so will inflation, but this comes at the cost of output and employment.
    • At least, this is the theory.
    • Whether this takes place in practice depends upon the extent to which changes in the repo rate are transmitted to commercial bank lending rates.

    Way forward

    • Focus on supply of agricultural goods: The implication for the policymaker that inflation is driven by agricultural goods prices, as is the case in India presently, is that the focus should be on increasing the supply of these goods.
    • Growing per capita income in India has shifted the average consumption basket towards foods rich in minerals, such as fruits and vegetables, and protein, such as milk and meat.
    • But the expansion of the supply of these foods has been lower than the growth in demand for them.
    • So a concerted drive to increase the supply of food other than rice and wheat holds the key.
    • Costly food threatens the health of the population, as people economise on their food intake, and holds back the economy, as only a small part of a household’s budget can be spent on non-agricultural goods.

    Conclusion

    Monetary policy manoeuvres, typified by the RBI’s raising of the repo rate is not an efficient solution for agricultural price-driven inflation. Any lasting inflation control would require placing agricultural production on a steady footing, with continuously rising productivity.

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  • With repo rate hike, RBI has done what’s necessary

    Context

    The RBI has decided to take the bull by the horns. It has raised the repo rate by 40 basis points and the cash reserve ratio (CRR) by 50 basis points to fight inflation.

    Why major central banks across the world are hiking rates?

    • Across the world, major central banks have of late gone on a rate hike spree, waking up to the realisation of inflationary pressures not being transitory in nature.
    • Record high inflation in the US: The US Fed has been on the offensive battling a 40-year high surge in prices.
    • It has tapered its bond purchase programme drastically while suggesting in no uncertain terms the pace of rate hikes needed to combat inflation.
    • The European Union has been slow to respond but voices are growing to correct the path at the earliest.
    • Banks like the Central Bank of Brazil or the Russian Central Bank have increased the interest rate to double digits.
    • Emerging economies have been doubly hit — the days of easy liquidity are well behind them even as their economic resources remain constrained to support an uneven proportion of population hit by pandemic.
    • Including the RBI’s decision today to push the benchmark rate to align with the current market realities, 21 countries have increased interest rates so far.

    Analysing the RBI’s decision to hike interest rates

    • To this extent, the decision by the RBI to frontload the rate hikes ahead of the Fed decision is again an attempt to stem capital outflows.
    • Accommodative policy stance; The most interesting aspect of the rate hike today is the continuation of the accommodative policy stance.
    • The CRR hike may be just an attempt to build up a war chest on the liquidity front.
    • Liquidity inflows to the financial system could be either policy induced by the central bank for example changes in reserves, open market operations etc or non-policy induced such as foreign exchange reserves, government cash balances, and currency in circulation.
    • Given that non-policy induced liquidity inflows have been recently impacted (outflows of portfolio capital) and given the huge size of the government borrowing programme, the RBI also needs to support the market through some means.
    • Impounding bank reserves through the CRR (Rs 87,000 crore) could give some space to the central bank to conduct open market purchases of bonds from banks and thus inject concomitant liquidity some time in the future if the need so arises.
    •  The CRR rate hike is thus an important tool to possibly manage G-sec yields.

    Inflation dynamics in India

    • The inflationary pressures can be attributed mainly to adverse cost-push factors, coming from supply-side shocks in food and fuel prices.
    • The RBI statement thus cites food inflation as a major source of discomfort.
    • Additionally, nominal rural wages for both agricultural and non-agricultural labourers picked up during the second half 2021-22.
    • However, such wage growth has remained soft.
    • Measures to ameliorate supply-side cost pressures would be thus critical at this juncture, especially in terms of a calibrated reduction of taxes on petrol and diesel.
    • On the policy side, however, it would mean that even after rate hikes, inflation may continue to remain high for some time.
    • The MCLR (Marginal Cost of Funds based Lending Rate) linked loans have a share of around 53 per cent in the overall loan kitty.
    • With the rise in CRR and expected future hikes in the benchmark rates, there would be an increase in MCLR due to a negative carry.

    Conclusion

    The RBI has acted prudently in responding to market forces that could impact India’s growth prospects if inflationary concerns were not addressed now. At the same time, by pledging to remain accommodative to spur, and reinvigorate growth, it has reaffirmed its commitment to being a trusted partner in the growth of the country.

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  • India-Germany relations

    Context

    Prime Minister Narendra Modi’s visit to Berlin for the sixth Indo-German Inter-Governmental Consultations (IGC) is significant for its timing and substantial results.

    Strategic and economic importance of India-German ties

    • The timing of the IGC, which Germany chose not to delay, showed outreach to India and the Indo-Pacific.
    • Impact of pandemic on economy: The pandemic hit German economy and sanctions on Russia will further dent its prospects.
    • The country requires new markets for trade and investment.
    • India is an important partner in this regard due to its sustained economic growth and market size.
    • Ukraine crisis: The Ukraine crisis created an urgency to engage with India as part of Germany’s fledgling Indo-Pacific policy.

    Opportunities for India

    • As Germany does the reassessment of China’s role in world affairs it creates an opportunity for India.
    • The Bundestag will discuss the situation of Uyghurs in China’s Xinjiang on May 7.
    • Any departures from China will bring business engagement to India.
    • Germany and India do not have a traditional strategic partnership.
    • It is a green partnership based on trade, investment, technology, functional collaboration, skill development, and sustainability.
    • There are several initiatives like the Indo-German energy forum, environmental forum, partnership on urban mobility, skill development and science and technology.
    • The biggest gain from the IGC has been the Joint Declaration of Intent (JDI) establishing the Green and Sustainable Development Partnership.
    • This will raise the quality and quantum of the existing partnership between the two countries.
    • Germany is reaching out with new and additional financing of €10 billion to fund green projects in India under public, private and PPP models.
    • To support this, a ministerial segment is being introduced under the IGC.
    • The IGC is the only such format that India has with any country.
    • Another significant development is the JDI on Triangular Development Cooperation for projects in third countries.
    • This will provide avenues to work together in the Indo-Pacific, Africa and beyond.
    • The Indo-German Education Partnership, which the German Bundestag passed in 2016 as a New Passage to India, has borne fruit — from about 4,000 students in 2015, there are nearly 29,000 Indian students in Germany.
    • The Indo-German Science and Technology Centre has made valuable contributions.
    • Now, under the energy partnership, the Green Hydrogen Task Force will develop a Green Hydrogen Roadmap.
    • This will attempt to take R&D to the level of commercialisation.
    • The JDI on migration and mobility is an important step taken during this IGC.

    Conclusion

    A new period is reflecting new priorities in view of crises like the pandemic, the economic downturn and now, Ukraine. The German response to India as evidenced through the IGC has been promising. Both sides may justifiably call it a defining moment in the Indo-German partnership.

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  • India-Denmark relations

    Context

    As Russia, isolated by unprecedented Western sanctions, deepens its alliance with China, Europe has begun to loom larger than ever before in India’s strategic calculus. Prime Minister Narendra Modi’s visit to Berlin, Copenhagen, and Paris this week could give us a glimpse of India’s post-Russian strategic future in Europe.

    Engagement with collective Europe

    • In her visit to Delhi, the president of the European Commission, Ursula von Der Leyn, unveiled the new contours of the EU’s strategic partnership with India by launching the India-Europe Trade and Technology Council. 
    • This week, the focus is on India’s key bilateral partnerships with European majors — Germany and France — as well as a critical northern corner of Europe, the so-called Norden.
    • Having built up a significant engagement with Moscow over the decades, India and Germany are under pressure to disentangle from the Russian connection.
    • Modi and Scholz could also exchange notes on how their long-standing illusions about China came crashing down.
    • Macron’s return to power in France offers a good moment for Modi to imagine the next phase in bilateral relations.
    • For some time now it has been said that France is India’s “new Russia” — Delhi’s most important strategic partner.
    • In recent years, France has emerged as a strong defender of India’s interests in the United Nations Security Council and a regional ally in the vast Indo-Pacific theatre.
    • France has also been a major supplier of advanced arms to India.
    • But Delhi and Paris have been some distance away from demonstrating full possibilities of their defence partnership.
    • There is no doubt that Western Europe has moved from the margins to the centre of India’s foreign and security policies.
    • The crisis in Ukraine, which has shattered the regional order that emerged in 1991, intensifies the imperatives for deeper strategic cooperation between India and its European partners.

    India’s engagement with smaller European countries

    • In Copenhagen, the bilateral talks with Danish leadership are about Delhi finally finding time for the smaller European countries.
    • The Nordic summit hosted by Denmark underlines India’s discovery of the various sub-regions of Europe — from the Baltics to the Balkans and from Iberia to Mittleuropa.
    • The Nordic Five — Denmark, Finland, Iceland, Norway, and Sweden — have a population of barely 25 million but their GDP at $1.8 trillion is greater than that of Russia.
    • Two members of the Nordic five — Sweden and Finland — are now rushing to end their long-standing neutral status and join NATO.
    • The other three — Denmark, Iceland, and Norway — have been founding members of NATO, set up in 1949.
    • Listening to the Nordic leaders might help Delhi appreciate the deeply-held fears about Russia among Moscow’s smaller neighbours.
    • In Copenhagen, Modi would want to build on the unique bilateral green strategic partnership with Denmark.

    Germany and India’s engagement with Russia

    • Berlin is tied far more deeply to Russia than India.
    • Germany’s annual trade with Russia is about $60 billion while India’s is at $10 bn.
    • Germany relies heavily on Russian natural gas, while Russian arms dominate India’s weaponry.
    • Irrespective of their Russian preferences, Germany and India have no option but to live with circumstances over which they have no control.
    • Opportunity for India: Making India an attractive new destination for German capital, now under pressure to reduce its exposure to Russian and Chinese markets, should be the highest priority for PM Modi.
    • Germany is one of India’s oldest economic partners, but the full potential of the commercial relationship has never been realised.
    • If there ever was a moment to think big about the future of German trade and investment in India, it is now.

    Conclusion

    A new paradigm is beckoning India — strong commercial and security partnerships with Europe that stand on their own merit and bring the many synergies between them into active play.

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  • The supply bottlenecks causing power shortages

    Context

    The power sector in India is going through a crisis. Peak shortages in some states have reached double digits.

    Chronology of the crisis

    • First, with summer approaching before time, power demand has shot up to record levels.
    • The second reason for the rise in power demand is that the economy is recovering, and demand from the industrial sector is going up.
    • All things put together, power demand crossed 207 GW on April 29, which is about 14 per cent higher than what it was a year ago.
    • Experts feel that the peak demand may even touch 215 GW in the coming months.

    Coal shortage crisis

    • On average, coal stocks available are only good enough for about eight days’ generation against a norm of 24 days.
    • In some plants, the stocks available are just about enough to run the plant for a day or two more.
    • Part of the problem of poor coal stock is also rumoured to be on account of the non-payment of dues of coal companies.
    • But this is not the major cause of the shortage.

    Reasons for coal shortage and fall in generation

    • The fall in coal stock in power stations is because of two main reasons.
    • 1] Rise in international price of coal: The first is that due to a rise in the international price of coal on account of the Ukraine crisis, all plants that were importing coal have either stopped generating completely or are generating at much lower levels.
    • We have a sizeable generating capacity based on imported coal, estimated at about 16 GW to 17 GW.
    • All these plants after stopping imports are now looking for domestic coal, creating pressure on domestic coal.
    • 2] Non-availability of rakes with Indian railways for transporting coal: Though about 22 MT of coal may be available in power stations, if one includes the stocks available with mining companies, the figure is well over 70 MT.
    • So, it is all a question of transporting the coal to the power stations.
    • 3] Fall in generation from gas-based plants: To make matters worse, generation from gas-based plants has also fallen due to high gas prices in the world market.
    • 4] Impact on hydro generation: Reservoirs, too, are drying up due to intense heat which will adversely affect hydro generation.

    Transportation problem faced by Indian railways

    • The railways have about 2,500 rakes which can be used for coal transportation.
    • With a turn-around time of about four-and-a-half days which goes up to nine days for coastal regions, the railways can provide only about 525 rakes on any single day. 
    • Of this, about 100 rakes are used for transporting imported coal and therefore, only about 425 rakes are available on a daily basis for transporting domestic coal.
    • But only 380 rakes were being provided in the first half of April this year, though efforts are on to increase this to about 415 rakes.
    • The railways prefer to transport coal over short distances in order to save on the turn-around time.
    • There is also the issue of availability of tracks since they are being used on a back-to-back basis.
    • Thus production has to be enhanced so that the replenishment rate is higher than consumption.
    • Unless we do that, the total stock of coal in the country will deplete further and it will no longer be a mere transportation problem as it is now, but a general lack of supply of coal.

    Conclusion

    This is the right time to enhance coal production and build adequate stocks because once the monsoon sets in, production will fall.

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  • LIC

    Context

    LIC is now at a transformational moment. Its listing on the bourses should lift LIC to be a part of the elite corporate community in India.

    Insurance sector in India

    • Opening of the insurance sector: A milestone in the history of India’s insurance industry was the opening of the sector for private participation in the year 2000 and this caused widespread concern that LIC will find the competition tough and could very well be marginalised.
    • Today, there are 24 private players in the life insurance space and many of them have foreign collaborations.
    • LIC has steadily grown in the past six decades and today with over 290 million policyholders and an asset value of ₹38 lakh crore ($520 billion), it ranks as one of the largest insurance companies in the world.
    • Yet, LIC remains a colossus capturing 75% of the life insurance business in the country.
    • Its claim settlement at 99.87% is far above the industry average of 84%.

    Role of LIC in skilling and women’s employment

    • LIC created large scale employment for women right from its inception in 1956. 
    • Thousands of women became LIC agents in the 1950s and 60s, when job opportunities were scarce.
    • There was no entry barrier in terms of age or fixed time for work.
    • Education requirement was a mere high school pass.
    • Many of these women were housewives who could earn an extra income by selling LIC policies.
    • This was a period before the arrival of digital technologies and mobile phones.
    • Skill development program: LIC’s training programme with its mix of online education and real-life case studies offer the best model for India’s skill development programmes.
    •  LIC’s relevance comes from its track record of creating vast number of employment opportunities for ordinary Indians, male and female, urban and rural.

    Policies focused on savings

    • In a country of vast poverty and low income, LIC recognised from the beginning that it cannot sell insurance as a risk cover on premature death.
    • It, therefore, devised policies focussing on savings and the need for children’s education and daughter’s marriage which are fundamentals to family values in India.
    • These policies also ensured that a part of the premium paid was returned at regular intervals before the maturity period, providing liquidity for emergencies.
    • They simultaneously covered risk caused by death.
    • People-centric approach: While the private players concentrated on technology-driven marketing, LIC’s approach was significantly people-centric.
    • When Pradhan Mantri Jan Dhan Yojana was launched for financial inclusion of over 300 million of the rural population on August 15, 2014, LIC was already there with its policies covering a rural population of 200 million.

    Conclusion

    The nation must not forget the fact that LIC was built on sweat and tears, pain and sacrifice of ordinary Indians. It is these democratic credentials that remain LIC’s most valuable asset.

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  • India must use markets to decarbonise

    Context

    Climate change is bound to impact human lives and the global economy at an exceptionally high scale in the not-so-distant future. The solution to the problem calls for government intervention.

    Carbon intensive nature of India’s energy ecosystem

    • After China and the United States, India, which releases 2.44 billion tonnes of carbon dioxide annually, is the third-largest emitter of this GHG, making it a key player in emissions reduction.
    •  The International Energy Agency’s (IEA) World Energy Outlook 2017 Report estimates that India will account for nearly one-fourth of the global energy demand by 2040.
    • As per the IEA’s India Energy Outlook 2021 Report, India’s energy system is highly dependent on fossil fuels — coal, oil and bioenergy — that supply about 90 per cent of the country’s demand.
    • Low electrification: About 38 per cent of primary energy is consumed for power generation, implying that the level of electrification is still low in the country.
    • Power generation is highly dependent on coal — about 78 per cent of it comes from this fossil fuel — and, transportation is almost entirely dependent on oil.
    • The Indian energy ecosystem is, thus, highly carbon-intensive.

    Climate change as a feature of market failure

    • Market failure due to climate change: Economic activities by consumers (driving or air-conditioning, for instance) and by producers (such as electricity generation and manufacturing) cause emissions, leading to pollution and global warming.
    • Negative externalities: These negative externalities, causing outcomes that are not efficient, are not reflected in the costs incurred by consumers or producers.
    • The true costs to the consumers, producers and society are not reflected in the market interactions.
    • This leads to an uncontrolled rise in emissions and also breeds apathy towards mitigation efforts.

    Way forward

    • Government intervention: Achieving economic growth sustainably requires a strategy for reducing carbon emissions aggressively while also focusing on efficiency, equity, fairness and behavioural aspects.
    • The solution to the problem of market failure calls for government intervention.
    • Limits of emission: The most natural option of government intervention for reducing emissions is by fixing limits of emissions through regulation, taking into consideration the Nationally Determined Contribution targets set by the country under the Paris Agreement.
    • Experts have shown that the wrongly set emission levels could lead to cost-inefficient outcomes.
    • It makes it difficult for the regulator to obtain the information about each firm’s abatement-cost and damage-cost schedules in advance.
    • Therefore, setting emission targets and regulating emissions through command and control might be good only during the initial phase of the mitigation strategy.
    • Why Carbon tax is a better option? The carbon tax is a better option than regulating the pre-fixed levels of emissions.
    • The marginal cost of abatement rises as the firms keep on reducing the emissions further, and the firm will stop reducing emissions and choose to pay tax at the point when the cost of abatement becomes higher than the rate of tax.
    • This option will lead to near-efficient outcomes.
    •  The trading scheme will bring in higher efficiency as the price of certificates will be determined by allowing firms facing low and high abatement costs to compete in the free market as per their own abatement and damage cost schedules.
    •  The emissions trading scheme will determine the optimal and cost-efficient levels of emissions reduction by providing a choice to the firms to either mitigate or trade — the net effect of this will be a reduction in emissions.
    • The low abatement-cost firms will keep reducing emissions as they would profit by trading the certificates.
    • Equity in energy access: The issue of equity in energy access must be addressed by channelling the revenues generated from carbon pricing to households and firms impacted by the carbon trading and carbon tax — these could be through incentives or lump-sum transfers.

    Conclusion

    The socio-economic impact of decarbonising the economy and the way humans live would be crucial in setting our priorities. We have limited time and our resources are scarce.

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  • Placing semicon diplomacy at the heart of India’s foreign policy

    Context

    The current decade presents a unique opportunity to India. . India must seize this opportunity and become an attractive alternative destination for semiconductor manufacturing.

    Importance of semiconductors

    • Semiconductor chips are the lifeblood of the modern information age.
    • The semiconductor is the cornerstone of all electronic products.
    • They enable electronic products to compute and control actions that simplify our lives.
    • These semiconductor chips are the drivers for ICT development and one of the key reasons for the current flattening of the world

    Global cooperation driven by semiconductors

    • The manufacturing cycle of a semiconductor chip from sand to a finished product, sees it change hands approximately 70 times across international borders.
    • Concentrated in few geographies: The semiconductor manufacturing capacities are concentrated in a few geographies.
    • Nearly all leading edge (sub 10nm) semiconductor manufacturing capacity is limited to Taiwan and South Korea, with nearly 92 per cent located in the former.
    • Further, 75 per cent of the semiconductor manufacturing capacity is concentrated in East Asia and China.

    Opportunity for India

    • Companies are looking to diversify their supply chain and for alternatives to their bases in China.
    • The chip shortages due to Covid-19 have hit automakers with a revenue loss of $110 bn in 2021.
    • The Russia-Ukraine conflict and its implications for raw material supplies for the semiconductor value chain has also poised chipmakers to invest in strengthening the semicon supply chain.
    • India must seize this opportunity and become an attractive alternative destination for semiconductor manufacturing.
    • The way ahead is conceptualising a semicon diplomacy action plan.
    • Placing semicon diplomacy at the heart of India’s foreign policy is essential both strategically and economically.
    • The multiplier effect on the economy: The establishment of the value chain for semiconductors would ensure a multiplier effect on the entire economy. 
    • National security implications: Semiconductors are used in critical infrastructures such as communication, power transmission etc., that have implications for national security. 
    • Reducing the BoP: Domestic production would be saving forex and reducing the balance of payments, especially vis a vis China.

    Way forward: Leveraging Semicon diplomacy

    • One of the ways of leveraging semicon diplomacy is increasing multilateral and bilateral cooperation.
    • Role of Quad: A key institution with immense potential in this regard is the Quad.
    • Australia, being rich in raw materials required for semiconductors, can be an important supplier to fill in India’s deficits.
    • The US and Japan can be leveraged for capacity building and their advanced semiconductor technology in logic and memory segments.
    • Pivot India’s Act East Policy: Considering that the semiconductor manufacturing and testing bases are heavily concentrated in East Asia, the Act East policy provides an opportunity to connect and strengthen ties with key players in the region.
    • Technological exchanges with ASEAN: Frequent technological exchanges between a regional bloc like ASEAN via tracks in forums like the East Asia Summit and the ASEAN regional forum will be beneficial.
    • Collective growth: Attaining self-sufficiency in semiconductor manufacturing can mean collective growth of the South Asian region.
    • India needs to harness its strengths, such as the strong presence of global EMS players, diaspora, world-class design ecosystem, demographic dividend, and use it as a pedestal for global partnerships and outreach.

    Conclusion

    India’s concept of self-reliance is not an individualistic endeavour but one that encourages growth and prosperity of all, in the spirit of Vasudhaiva Kutumbakam, meaning the entire world is one family. Similarly, we don’t have an option but to be self-reliant in semiconductors.

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