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  • Promoting fiscal federalism

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: 101st Constitutional Amendment

    Mains level: Paper 2- Fiscal federalism

    Context

    States are facing financial constraints in the backdrop of lockdown and consequent dwindling revenue collection. The situation also highlights the issues of fiscal federalism in India.

    Issues facing fiscal federalism in India

    1) Issue of 14% compensation

    • As per the Constitution (One Hundred and First Amendment) Act, compensation on account of the implementation of GST will be available for a period of five years.
    • 14% increment assurance: At the time of introducing the Goods and Services Tax (GST) law assured States a 14% increase in their annual revenue for five years (up to July 1, 2020).
    • But the Union government has deviated from the statutory promise and has been insisting that States avail themselves of loans.
    • The future interest liability of these loans should not be placed on the shoulders of the States.
    • Borrowing limits built into loan: Moreover, the borrowing limit of States, as per the Fiscal Responsibility and Budget Management Act, should not be built into these loans.

    2) Conditional increase in borrowing limit

    • Last year, the Union government increased the borrowing ceiling of the States from 3% to 5% for FY 2020-21.
    • But conditions are attached to 1.5% of the 2% of increased ceiling.
    • Attaching conditions for expenditure out of the borrowed amount would clip the wings of the States and goes against the principle of cooperative federalism.

    Way forward

    • Introduce special rate: A special rate could be levied for a specified period in order to raise additional resources to meet the challenges posed by COVID-19 with the approval of the GST Council.
    • As per Section 4(f) of Article 279A, the Union government can consider introducing any special rate to raise additional resources during the pandemic (any natural calamity or disaster).
    • The present GST compensation period will end in 2021-22.
    • Increase the period beyond five years:  Compensation beyond five years requires a constitutional amendment.
    • If this period is not increased, it will create serious financial stress to the States, especially to those which require higher compensation.

    Conclusion

    There is a need for measures on part of the Central government to consolidate fiscal federalism in the aftermath of pandemic and implementation of the GST regime in India.

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    How to exit farming risk trap

    op-ed snap | Agriculture | Mains Paper 3: Issues Related To Farm Subsidies & Msp,PDS, Buffer Stock & Food Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Agriculture reforms to reduce the risk in agriculture in India

    Context

    The farmers’ protest against farm laws brings into focus the factors afflicting agriculture in India.

    Issues of Indian agriculture

    • Some 50 years after the Green Revolution, an all-India agricultural landscape is characterized by relatively low productivity levels that co-exist with high levels of variation in crop yields across our farming districts.
    • Excessive control: Various government agencies have a say on all aspects of the farmer’s livelihood — the latest count includes 13 central and countless state ministries and agencies.
    • These agencies oversee rural property rights, land use, and land ceilings; commodity prices, input subsidies, and taxes, infrastructure, production, credit, marketing and procurement, public distribution, research, education, trade policy, etc.
    • Poor policies: The result has been a mix of arbitrary and conflicting policy interventions by both the central and state government agencies.
    • Poor provision of basic public goods: This, combined with poor and varying levels of provision of basic public goods, including irrigation explains the poor state of Indian agriculture.

    Risk-to-return in agriculture

    • The following figures indicate the median (typical) district-level yield (in tonnes-per-hectare) for four major crops — rice, wheat, maize, and cotton — along with the geographic variability of this yield (risk) across all reporting districts for each year from 1966 to 2018.
    • Combining these two values — median district yield and its geographic variability across all farming districts — provides us a measure of the all-India level of risk-to-return, in percentage terms.

    Lessons from risk-to-return profile

    • One, the large gap in rice and wheat yields that opened up between Punjab and Haryana and the farm districts in the rest of the country remains far from being closed.
    • Limited mobility of ideas: There is severe unevenness in the provision of common goods across districts — irrigation, roads, power, etc.
    • There is also the absence of well-functioning markets for agricultural land, crops, and inputs, the slow labour reform, and the poor quality of education.
    • These two factors have worked to reduce overall resource mobility within and across our farming districts.
    • Most importantly, they have limited the mobility of ideas and technology needed to increase productivity and reduce the variation of yield across districts.
    • Decentralization failed: As a result of lack of mobility, the real promise of a decentralized system — of experimentation, of learning from each other, and the adoption of best practices and policies — has failed to materialize.
    • Distortion due to subsidies: Various input subsidies and minimum price guarantee procurement schemes provided by the state have worked to worsen the overall levels of productivity and the risk in agriculture, generating adverse effects for all of us, through the degradation of our water resources, soil, health, and climate.
    • At the same time, these policies have tightened the trap our farm households find themselves in.
    • Thus, as is evident in the next chart, outside of rice and wheat, the risk-to-return levels are even higher in the case of maize and cotton, including for Punjab.
    • As a result, the farm households of Punjab and Haryana fear both, the loss of state support for rice and wheat and the higher risks implied by a switch to other crops.

    Way forward

    • Minimize risk: The guiding principle for three farm laws must be to create conditions that allow farm households to maximize their income while minimizing the overall level of risk in Indian agriculture.
    • Freedom of choice: Farmers must be made free to determine the best mix of resources, land, inputs, technology, and organizational forms for their farms.
    • More freedom: Farmers, just as entrepreneurs in the non-farm sector, must be allowed to enter and exit agriculture, on their own terms and contract with whomever they wish.
    • Allow entry of corporates: Entry of the large or small private corporates in the Indian agricultural stream will help the Indian farmer, along with the rest of us, move to a low-risk, high-return path of progress.

    Conclusion

    The more we delay the needed reforms, the more difficult it will prove to be for all of us to extract ourselves out of these risk-laden currents of agriculture.

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  • Important Judgements In News

    Supreme Court strikes down part of Constitution Amendment on cooperative societies

    op-ed snap | Polity | Mains Paper 2: Executive & Judiciary,Federalism

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: 97th Amendment

    Mains level: Paper 2- Striking down of the 97th Amendment Act

    Context

    In Union of India vs Rajendra N. Shah, the Supreme Court of India partially struck down the 97th Constitutional Amendment.

    Background of the 97th Constitutional Amendment

    • The 97th Constitutional Amendment came into effect from February 15 2012.
    • The amendment added “cooperative societies” to the protected forms of association under Article 19(1)(c), elevating it to a fundamental right.
    • It also inserted Part IXB in the Constitution which laid down the terms by which cooperative societies would be governed, in more granular detail than was palatable.

    Why was the Amendment struck down?

    • The Constitution can be amended only by the procedure provided in Article 368.
    • The amendment procedure requires a majority of the total strength of each of the Houses of Parliament and two-thirds majority of those present and voting.
    • A proviso to the Article lists out some articles and chapters of the Constitution, which can be amended only by a special procedure.
    • The special procedure requires that the amendment will also have to be ratified by the legislatures of half of the States.
    • It is precisely on the grounds of violation of this additional requirement that the 97th Constitutional Amendment was challenged.
    • The Gujarat High Court struck down the amendment in 2013 on the grounds that it had failed to comply with the requirements under Article 368(2) by virtue of not having been ratified by the States and had also given an additional finding that the 97th Amendment violated the basic structure of the Constitution.
    • The Union Government challenged the Gujarat High Court judgment before the Supreme Court, arguing that the amendment neither directly nor effectively changed the scheme of distribution of powers between the Centre and the States.
    • The court took the example of the 73rd and 74th Amendments which were similar in impact on the legislative power of the States, had been passed by the special procedure involving ratification by State legislatures.
    • Procedural lacuna: The court noted that the procedure had not been followed in this case.
    • The Supreme Court clarified that the does not go into the question of the amendment being violative of the basic structure of the Constitution.
    • The judgment makes a distinction between cooperative societies operating in one State and multi-State cooperative societies and holds that while a ratification by half the State legislatures would have been necessary insofar as it applies to cooperative societies in one State.

    Increasing control of the Union government

    • Union government has been acquiring incrementally greater control of cooperative societies over the years.
    • Cooperative banks have been brought under the purview of the Reserve Bank of India.
    • Union Government recently established Union Ministry for Cooperation.

    Issues with Central control over cooperative sector

    • Domain of States: The idea that the cooperative sector ought to be controlled at the State level and not at the central or Union level goes back all the way to the Government of India Act, 1919 which placed cooperatives in the provincial list.
    • Part of State list: Entry 32 of the State List in the Seventh Schedule of the Constitution confer power on the State legislatures to make laws pertaining to incorporation, regulation and the winding up of cooperative societies.
    • The cooperative sector has always been in the domain of the States or provinces.
    • Different organising principles: The organising principles and mechanism of these cooperatives differ from area to area and depend on the industry or crop which forms the fulcrum of the cooperative.
    • Homogeneity nor require: Homogeneity in this area would only result in the creation of round holes in which square pegs no longer fit.
    • They also would not really serve to break the control some political interests have taken over cooperatives.

    Conclusion

    It is best that the Government takes this judgment in the right spirit and stays away from further meddling in the cooperative sector, notwithstanding the creation of the new Ministry.

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

    Unlocking recovery

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Inflation

    Mains level: Paper 3- Economic recovery

    Context

    Many developed countries are poised for strong growth. This will compel their respective central banks to begin normalizing the extremely loose monetary policies. This will require a reorientation of India’s stimulus strategy.

    Global growth momentum

    • On the global front, the growth momentum has been strong, particularly in the US and China, although recent data suggest this has peaked or is even stalling.
    • Post the perceived hawkishness of the last US Federal Reserve policy meeting, the traded interest rate of the benchmark US 10-year treasury bond fell to below 1.3 percent.
    • The falling rate reflects disquiet about the durability of the recovery once the fiscal stimulus starts waning.
    • China recently announced a 0.5 percent cut in the required reserves ratio for banks.
    • Europe’s recovery had begun to inch up, but members of the European Central Bank have begun to push back on market expectations of early tapering.
    • However, some smaller global central banks have started normalizing their respective Quantitative Easing programs.

    Growth momentum in India

    • The encouraging aspect of the recovery is the resilience of many mid-and large-turnover companies in the face of the debilitating public health crisis
    • In India, there are signs that the recovery momentum began to strengthen from mid-June, and of demand accelerating, despite capacity utilization in many industries below thresholds needed for the next round of private investments.
    • In line with the market consensus, we think that 2021-22 growth is likely to be in the 9-10 percent range.
    • Tax collections, another indicator of activity, even if a bit skewed, support this view.
    • A revival of retail consumer demand is critical for sustaining the recovery. Reports from industry associations suggest a somewhat mixed picture.
    • Demand emanating from rural geographies is important for sustaining recovery.
    • Demand for work under MGNREGA suggests continuing stress.
    • Monsoons will be a big contributor.
    • The sowing of Kharif crops stalled in late June but is predicted to pick up again in mid-July.
    • Renewed government intervention is required.

    Factors deciding the trajectory of recovery

    • Inflation: Rising inflation could force a monetary policy normalization faster than presently anticipated.
    • Global recovery: Effects global central banks’ policy tightening will only add to the difficulty of balancing a policy-induced increase in interest rates, moderating financial markets volatility, and maintaining growth incentives.
    • Access to credit: Access to credit remains a crucial input in the recovery matrix, particularly for small and micro-enterprises.
    • The Union government’s Emergency Credit Line Guarantee Scheme (ECLGS) has reportedly been very effective in stabilizing the solvency (and cash flows) of micro and small businesses.

    Way forward

    • Expansion of subvention scheme: The expansion of subvention (ECLGS) is probably the most effective template to incentivize credit flows, leveraging on the government’s balance sheet to take on the first loss risks.
    • At the same time, capex proposals of the Centre and states should gradually draw in private sector capex.
    • Policy intervention to create a level field: Corporate health has improved, with lower debt on balance sheets.
    • Adoption of technology is widespread; this will boost productivity and competitiveness.
    • But these factors reinforce trends in consolidation and market power.
    • It will require policy interventions to create a more level playing field for smaller companies, which is crucial for job creation.

    Conclusion

    Policy support will thus need to adapt from the “revive” to the “thrive” phase, to place India on a sustained 7 percent-plus growth path.

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  • Indian Air Force Updates

    Theatre Command under Chief of Defence Staff is not a good idea

    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: CDS

    Mains level: Paper 3- Issues with creation of theatre commands

    Context

    The government is reportedly planning to re-organise the military into a theatre command under the chief of defence staff (CDS) in which the assets of the Air Force will be split into four and distributed among four operational theatres.

    Background of the creation of CDS

    • In 2012, the Naresh Chandra Committee suggested the creation of a CDS, which would take on overall functions of the chairman, chiefs of committee as well as the responsibilities pertaining to centralised planning, induction, training, intelligence and logistics. 
    • Operations, according to the committee’s suggestion, would continue to be managed by the respective chiefs of staff.
    • However, sometime in 2016-17, this idea was modified to organise the operational assets of the three services into four theatre commands, all of which are now proposed to be brought under the CDS.

    Issues with creating theatre command by dividing Air Force

    • Professional leadership is critical in support elements: The Air Chief’s professional leadership of the Air Force is crucial to orchestrate a variety of support elements like aerial tankers, AWACS (Airborne Warning And Control Systems), AEW, Heliborne support and UAVs in an “offensive operation”.
    • Lack of in-dept understanding: A land theatre command, if given power over the air elements, may not have the confidence to launch such a mission because of the lack of in-depth understanding of the organisational complexity and the risks involved.
    • Dilution of assets may harm effectiveness: Dilution of the combat assets of the Air Force, a 30-squadron force consisting of five or six types of aircraft, might severely affect mission-effectiveness.
    • Role of CDS: It is extremely doubtful if the CDS can cope with the enhanced responsibilities that include operations, albeit through the theatre commanders.
    • That would leave only training, maintenance, and support under the chiefs of staff — a gross under-utilisation of the operational leadership built over 40 years.
    • Resource limitations: Forming a separate air defence command for the air defence of the entire nation seems an impractical idea considering our resource limitations.
    • Current arrangement functioned effortlessly: The current arrangement of a decentralised air defence organisation managed by Air Force geographical commands has functioned faultlessly.
    •  Flexibility: The existing structures afford better flexibility.
    • There will be significant expenditure to construct the operational infrastructure of the theatre commands.
    • Timing: We are trying to effect changes at a time the military is deployed actively.
    • The Chinese have dug in hard, and we do not yet know their strategy.
    • To divide the Air Force into four units at this moment is inadvisable.

    Way forward

    • White paper: There is no white paper on the advantages of the theatre commands or one listing the merits of the CDS donning the mantle of the operational head of the entire military operation.
    • So, a white paper on these aspects could clear the air over the utilities of such moves.
    • Joint planning is a must, but operations are best undertaken by individual services who know what other services are doing and when.

    Conclusion

    Splitting the asset of the Air Force would result in dilution of its power and is not advisable at the current juncture.

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

    Revival of Construction sector

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: GVA

    Mains level: Paper 3- Limits of relying on high-growth sectors

    Context

    The latest estimates of the fourth quarter of financial year 2020-21 (January-March) brought some relief, for policymakers.

    Interpreting the construction sector GVA increase

    • The construction sector showed a 15 per cent increase in gross value added (GVA) in the last quarter, which is nearly double the growth experienced by the sector in the previous year (7.7 per cent).
    • Sign of better times: The buoyant growth of this sector has been hailed by policymakers not just as a sign of better times to come,
    • Addressing distress: Growth in the construction sector is also considered as the capacity of the economy to address the distress that households have faced in the past year.
    • Addressing needs of workforce: The Chief Economic Advisor pointed to the high growth rates in construction possibly to indicate that growth would address the needs of the beleaguered workforce.
    • The Union budget 2021 has also allocated a considerable sum towards infrastructure and construction in the hopes of the sector playing a catalysing role.

    Issues with relying on the growth of high-employment sector

    • No strong correlation: While GVA and/or GDP are considered as indicators of economic health, it has been argued in detail how it may not be prudent to rely on these alone as measures of economic welfare.
    • In particular, mere growth in a sector may not necessarily translate into benefits for its workers.
    • In the last quarter of 2019-2020, when construction GVA grew at nearly 8 per cent, employment in the same sector grew by 3 per cent based on our estimates from CMIE-CPHS.
    • Fallback employment option: The fact that employment grew in this sector even during a crisis year is largely because of the fact that the construction sector emerged as a fallback employment option for many displaced workers.
    • During “normal” times, the sector typically employs only about 10-15 per cent of India’s total workforce.
    • Even if this sector were to expand in line with its GVA growth, it will not be able to provide employment beyond a certain level.
    • Employment alone is not enough: Moreover, employment alone is not enough.
    • Earnings for an average daily wage worker in the sector have actually declined this year.
    • Again, the overall economic growth in GVA in the sector has not been passed on to the workers.

    Way forward

    • Any relief effort that relies solely on economic growth as a means to uplift workers will be sorely inadequate as we see from the experience of workers in construction.
    • The need of the hour is to go beyond relying on sectoral growth as a means of delivering relief to workers.
    • Direct transfers of cash and food are also needed, as is livelihood support through employment guarantee programmes.

    Conclusion

    While boosting growth of high-employment sectors is one strategy to adopt, this has its limitations. The capacity of a sector is limited in terms of the number of workers that it can absorb, and the extent to which growth can benefit workers.

    Back2Basics: What is GVA?

    • Gross value added (GVA) is an economic productivity metric that measures the contribution of a corporate subsidiary, company, or municipality to an economy, producer, sector, or region.
    • GVA is essentially a measure of the “net” value of output — deducting the cost of any input that went into its production from its total value.
    • GVA thus adjusts gross domestic product (GDP) by the impact of subsidies and taxes (tariffs) on products.

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  • Foreign Policy Watch: India-United States

    The convergence and lag in Indo-US partnership

    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: Not much

    Mains level: Paper 2- Paradox in debate over relations with the US

    Context

    As the Indian leadership reviews US ties this week with the visiting Secretary of State, Antony Blinken, a paradox stands out.

    Deepening Indo-US ties

    • India and the US have come a long way since the 1990s.
    • There is growing political and security cooperation, expanding economic engagement, widening interface between the two societies, and the intensifying footprint of the Indian diaspora in the US.
    • Convergence of interests: That ambition, in turn, is based on the unprecedented convergence of Indian and American national interests.
    • Agenda for cooperation: The two countries have already agreed on an ambitious agenda for bilateral, regional and global cooperation.

    Debate in India over Indo-US relation: A paradox

    • The discourse within India’s strategic community continues to be anxious.
    • Some of the questions that animate the media and political classes have not changed since the 1990s.
    • Issues in the debate: Debate focuses on US’s stand on the Kashmir issue, democracy and human rights and its impact on India-US relations.
    • Contradictory fears: There are also contradictory fears such as whether the US extend full support in coping with China.
    • While we expect the US to give guarantees on supporting us, we insist that India will never enter into an alliance with the US.
    • Small state syndrome in India: As India’s relative weight in the international system continues to grow, it creates much room for give and take between India and the US.
    • Yet, a small state syndrome continues to grip the foreign policy elite.
    • The situation is similar on the economic front.
    • Although India is now the sixth-largest economy in the world, there is unending concern about the US imposing globalisation on India.
    • Even as India’s salience for solutions to climate change has increased, India’s debate remains deeply defensive.

    Factors responsible paradox

    • Missing the big picture: The narrow focus on the bilateral precludes an assessment of the larger forces shaping American domestic and international politics.
    • That, in turn, limits the appreciation of new possibilities for the bilateral relationship.
    • Underinvestment in American studies: The problem is reinforced by India’s under-investment in public understanding of American society.
    • Russia and China have put large resources in American studies at their universities and think tanks.
    • The Indian government and private sector will hopefully address this gap in the not-too-distant future.

    Policy shifts unfolding in the US

    • Domestic economic policies: If the economic policy drift in the last four decades was to the right, Biden is moving left on the relationship between the state and the market — on raising taxes, increasing public spending and addressing the problem of sharp economic inequality.
    • Economic policy and globalisation: Biden has also joined Trump in questioning America’s uncritical economic globalisation of the past.
    • If Trump talked of putting America First, Biden wants to make sure that America’s foreign and economic policies serve the US middle class.
    • Foreign policy: Biden has concluded that four decades of America’s uncritical engagement with China must be reconstituted into a policy that faces up to the many challenges that Beijing presents to the US.
    •  Biden is also focused on renewing the traditional US alliances to present a united front against China.
    • He is also seeking to overcome Washington’s hostility to Russia by resetting ties with Moscow.

    Question of democracy and human rights

    • Democracy is very much part of America’s founding ideology.
    • But living up to that ideal at home and abroad has not been easy for the United States over the last two centuries.
    • Delhi and Washington will also have much to discuss on the challenges that new surveillance technologies and big tech monopolies pose to democratic governance.
    • The exclusive American focus on democracy promotion has been rare, costly and unsuccessful.
    • India’s own experience at spreading democracy in its neighbourhood is quite similar.
    • But that discussion is only one part of the expansive new agenda — from Afghanistan to Indo-Pacific, reforming global economic institutions to addressing climate change, and vaccine diplomacy to governing new technologies that beckon India and the United States.

    Conclusion

    As they intensify the bilateral cooperation, the two sides will hopefully turn the Indo-US partnership from a perennial curiosity to a quotidian affair.

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  • Getting India’s military jointness formula right

    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: The Andaman and Nicobar Command

    Mains level: Paper 3- Jointness in armed forces

    Context

    The Chief of Defence Staff General Bipin Rawat’s recent description of the Indian Air Force (IAF) as a supporting arm and the IAF chief Air Chief Marshal R.K.S. Bhadauria’s rebuttal highlights turbulent journey marking the reorganisation process of the armed forces.

    Issues before IAF

    • The IAF is warning against splitting it into packets.
    • Reports suggest that counting even ageing aircraft, the IAF is 25% short on fighter squadrons.
    • A pan service shortage of about 400 pilots, almost 10% of their authorised strength, further aggravates this.
    • Therefore, the IAF has a point when it warns against splitting assets, for, there may be nothing much to split.

    Way forward

    • Confidence building: A common understanding of the nuances of military airpower is the key.
    • With the experience of operating almost every kind of aircraft the IAF operates, the naval leadership understands air power.
    • This applies to the Indian Army too, in its own way.
    • Confidence needs to be developed that rightly staffed apex joint organisations can draw up professional operational plans for air power.
    • Enhancing military education: Confidence building will need some effort in the short term towards enhancing professional military education though, at the staff level.
    • Analysis before implementation: Major reorganisations must strictly follow the sequence of written concepts, their refinement through consultation, simulation or table top war gaming, field evaluation and final analysis before implementation.
    • This would help address command and control, asset adequacy, individual service roles, operational planning under new circumstances and the adequacy of joint structures.
    • Who gets to lead what also matters.
    • The Western Command between the Indian Army and the IAF, the Northern Command with the Indian Army, Maritime Command with the Indian Navy and the Air Defence Command with the IAF may be an acceptable formula.

    Why jointness?

    • With dwindling budgets, a steadily deteriorating security situation and the march of technology, the armed forces understand the need to synergise.

    Challenges

    • Challenges in co-existence: Different services do not co-exist well where they are colocated.
    • Bitter fights over land, buildings, facilities, etc. harms optimal operational synergising.
    • Allocation challenge: Then there is the issue of giving each other the best, or of wanting to be with each other.
    • Lack of operational charter: The Andaman and Nicobar Command suffered from the lack of a substantial operational charter, and the services not positioning appropriate personnel or resources there.
    • Lack of interest in joint tenure: As a joint tenure did not benefit career, no one strove for it.
    • The U.S., when faced with the same problem, made joint tenures mandatory for promotions.

    Steps to be taken

    • Security strategy: We need a comprehensive National Security Strategy to guide the services develop capacities required in their respective domains.
    • Professional education: We need to transform professional education and inter-service employment to nurture genuine respect for others.
    • Mutual resolution of difference: The armed forces must resolve their differences among themselves, as the politicians or bureaucrats cannot do it.
    • Quality staff: Good quality staff, in adequate numbers, at apex joint organisations, will help to reassure individual services and those in the field that they are in safe hands.
    • Tailored approach: There is need for the acceptance of the fact that what works for other countries need not work for us.

    Conclusion

    We may need tailor-made solutions which may need more genuine thinking. For genuine military jointness, a genuine convergence of minds is critical.

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  • Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

    Implications of EU’s new GHG emissions law for Indian industry

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CBAM

    Mains level: Paper 3- Way forward for Indian industry after the introduction of CBAM

    Context

    On July 14, the European Union introduced new legislation, Fit for 55, to cut its GHG emissions by 55 per cent by 2030 and to net-zero by 2050.

    Implications of Fit for 55

    • Legal backing: It turns the EU’s announcement into law, protecting it from the winds of political change.
    • Opportunity for India: It opens new markets for Indian industry, for example for electric vehicles.
    • CBAM: However, it also introduces a potentially adverse policy called the carbon border adjustment mechanism (CBAM).
    • CBAM is meant to discourage consumers from buying carbon-intensive products and encourage producers to invest in cleaner technologies.

    What is CBAM?

    • The EU has had a carbon emission trading system since 2005.
    • With Fit for 55, the EU’s carbon price is likely to go up.
    • High carbon price will make the EU’s domestic products more expensive than imports from countries that do not have such rules.
    • The new CBAM is meant to level the playing field between domestic and imported products.
    • CBAM will require foreign producers to pay for the carbon emitted while manufacturing their products.
    • The adjustment will be applied to energy-intensive products that are widely traded by the EU, such as iron and steel, aluminium, cement, fertiliser, and electricity.

    Why CBAM is a cause for concern for India?

    • India is Europe’s third-largest trading partner, and it does not have its own carbon tax or cap.
    • So, CBAM should be a cause for concern for it.
    • A UNCTAD study predicts that India will lose $1-1.7 billion in exports of energy-intensive products such as steel and aluminium.
    • India’s goods trade with the EU was $74 billion in 2020.

    Way forward for Indian Industry

    • Clean technology partnerships: Indian Industry should enter clean technology partnerships with European industry.
    • Invest in renewables:  Indian companies should invest in more renewable electricity and energy efficiency.
    • Incentivise low-carbon choices: They can adopt science-based targets for emission reduction and internal carbon pricing to incentivise low-carbon choices.
    • Schemes and Government financing: The government can extend the perform-achieve-trade scheme to more industries and provide finance to MSMEs to upgrade to clean technologies.
    • WRI India’s analysis shows that carbon dioxide emissions from the iron and steel industry can be reduced from 900 million tonnes to 500 million tonnes in 2035 through greater electrification, green hydrogen, energy efficiency, and material efficiency.
    • Diversify export: India can try to diversify its exports to other markets and products.

    Consider the question “What is carbon border adjustment mechanism (CBAM) introduced by the EU? What are its implications for Indian industry?” 

    Conclusion

    At present, the CBAM may seem obstructionist. But over the long-term, it can provide regulatory certainty to industry by harmonising carbon prices, and Indian industry can position itself as a strong player in the trade landscape of the future.

    Back2Basics: UNCTAD

    • UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
    • Its headquarters are located in Geneva, Switzerland, and have offices in New York and Addis Ababa.
    • UNCTAD is part of the UN Secretariat.
    • IT report to the UN General Assembly and the Economic and Social Council but have own membership, leadership, and budget.
    • It is also part of the United Nations Development Group.

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  • Foreign Policy Watch: India-SAARC Nations

    SAARC

    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: SAARC countries

    Mains level: Paper 2- Relevance of SAARC

    Context

    Despite the framework SAARC provides for cooperation amongst South Asian nations, it has remained sidelined and dormant since its 18th summit of 2014 in Kathmandu. No alternative capable of bringing together South Asian countries for mutually beneficial diplomacy has emerged.

    Common challenges facing South Asia

    • The region is beset with unsettled territorial disputes, as well as trans-border criminal and subversive activities and cross-border terrorism.
    • The region also remains a theatre for ethnic, cultural, and religious tensions and rivalries besides a current rise in ultra-nationalism
    • Nuclear-armed neighbours India and Pakistan are at loggerheads.
    • US military withdrawal from Afghanistan has fuelled fears of intensification of these trends.

    Significance of SAARC

    • As the largest regional cooperation organisation, SAARC’s importance in stabilising and effectively transforming the region is becoming increasingly self-evident.
    • SAARC is needed as institutional scaffolding to allow for the diplomacy and coordination that is needed between member-states in order to adequately address the numerous threats and challenges the region faces.
    • Though SAARC’s charter prohibits bilateral issues at formal forums, SAARC summits provide a unique, informal window — the retreat — for leaders to meet without aides and chart future courses of action.
    • The coming together of leaders, even at the height of tensions, in a region laden with congenital suspicions, misunderstandings, and hostility is a significant strength of SAARC that cannot be overlooked.
    • In March last year, Indian Prime Minister Narendra Modi seized the Covid-19 crisis and utilised SAARC’s seal to convene a video conference of SAARC leaders.
    • Such capacity to bring member-states together shows the potential power of SAARC.

    What role SAARC can play in Afghanistan

    • Commitment to get rid of terrorism: The third SAARC summit in 1987 adopted a Regional Convention on Suppression of Terrorism and updated it in 2004 with the signing of an additional protocol.
    • These instruments demonstrate the collective commitment to rid the region of terror and promote regional peace, stability, and prosperity.
    • Using the network of institutions: In 36 years of existence, SAARC has developed a dense network of institutions, linkages, and mechanisms.
    • SAARC members are among the top troop-contributing countries to UN peacekeeping missions.
    • Joint peacekeeping force: With the US withdrawal from Afghanistan, a joint peacekeeping force from the SAARC region under the UN aegis could be explored to fill the power vacuum that would otherwise be filled by terrorist and extremist forces.

    Consider the question “What role SAARC can play in stabilising the region after the US withdrawal from Afghanistan? Is SAARC still relevant for the region?”

    Conclusion

    Allowing SAARC to become dysfunctional and irrelevant greatly distorts our ability to address the realities and mounting challenges facing SAARC nations.

    Back2Basics: About SAARC

    •  In 1985, at the height of the Cold War, leaders of South Asian nations — namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka — created a regional forum.
    • The South Asian Association for Regional Cooperation (SAARC) was established with the goal of contributing “to mutual trust, understanding and appreciation of one another’s problems.”
    • Afghanistan was admitted as a member in 2007.

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