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Type: op-ed snap

  • Foreign Policy Watch: India-Africa

    Crafting a unique partnership with Africa

    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: China's scramble for Africa and challenges for India

    This op-ed analyses the future of India-Africa cooperation in agriculture amid the looming Chinese involvement in African countries.

    Agricultural significance of Africa

    • With 65% of the world’s uncultivated arable land, employing over 60% of the workforce, and accounting for almost 20% of Sub-Saharan Africa’s GDP, agriculture is critical to Africa’s economy.

    China factor behind

    • As this relationship enters the post-pandemic world, it is vital to prioritize and channel resources into augmenting partnerships in agriculture.
    • This is crucial given its unexplored potential, centrality to global food security, business prospects and to provide credible alternatives to the increasing involvement of Chinese stakeholders in the sector.

    Analyzing Chinese engagement

    Chinese corporations, small and medium-sized enterprises and entrepreneurs adopt has provided a layered perspective of the sociopolitical, economic and environmental impact of Chinese engagement.

    • Trade: China is among Africa’s largest trading partners.
    • Credit facility: It is also Africa’s single biggest creditor.
    • Infrastructure: Its corporations dominate the region’s infrastructure market and are now entering the agri-infra sector.
    • Strategic support: While access to Africa’s natural resources, its untapped markets and support for ‘One China Policy’ are primary drivers of Chinese engagement with the region, there are other factors at play.

    China is going strategic in the guise of agriculture

    • Increasingly critical to China’s global aspirations, its engagement in African agriculture is taking on a strategic quality.
    • Chinese-built industrial parks and economic zones in Africa are attracting low-cost, labour-intensive manufacturing units that are relocating from China.
    • Chinese engineers interviewed spoke of how their operations in Africa are important to accumulate global experience in management, risk and capital investments.
    • Not only are they willing to overlook short-term profits in order to build a ‘brand China’, but they want to dominate the market in the long term, which includes pushing Chinese standards in host countries.
    • Chinese tech companies are laying critical telecommunications infrastructure, venture capital funds are investing in African fintech firms, while other smaller enterprises are expanding across the region.

    Agricultural landscape

    • While many Chinese entities have been active in Africa’s agriculture for decades now, the nature, form and actors involved have undergone substantial change.
    • In Zambia, Chinese firms are introducing agri-tech to combat traditional challenges, such as using drone technology to control the fall armyworm infestation.
    • They have set up over Agricultural Technology Demonstration Centers (ATDCS) in the continent where Chinese agronomists work on developing new crop varieties and increasing crop yields.
    • This ATDCs partner with local universities, conduct workshops and classes for officials and provide training and lease equipment to small holder farmers.
    • Chinese companies with no prior experience in agriculture are setting out to build futuristic ecological parks while others are purchasing large-scale commercial farms.

    Inducing their soft power

    • The exponential growth in the China-Africa economic ties and the emergence of Beijing as an alternative to traditional western powers have motivated change in perceptions across groups.
    • Governments and heads of state are recalibrating approaches, media houses are investing more resources for on-the-ground reporting.

    Dark Side of the Sino-Africa ties

    • Simultaneously, Africa-China relations are becoming complex with a growing, insular diaspora, lopsided trade, looming debt, competition with local businesses and a negative perception accompanied by greater political and socioeconomic interlinkages.
    • On occasion, there seems to be a gap between skills transferred in China and the ground realities in Africa.
    • In some cases, the technology taught in China is not available locally and in others, there is inability to implement lessons learnt due to the absence of supporting resources.
    • Larger commercial farms run by Mandarin-speaking managers and the presence of small-scale Chinese farmers in local markets aggravates socio-cultural stresses.

    India’s agricultural engagement

    • Diverse portfolios: India-Africa agricultural cooperation currently includes institutional and individual capacity-building initiatives, an extension of soft loans, supply of machinery, acquisition of farmlands and the presence of Indian entrepreneurs in the African agricultural ecosystem.
    • Land acquisition: Indian farmers have purchased over 6,00,000 hectares of land for commercial farming in Africa.
    • States cooperation: Sub-national actors are providing another model of cooperation in agriculture. Consider the case of the Kerala government trying to meet its requirement for cashew nuts with imports from countries in Africa.
    • Civil society: Similar ideas could encourage State governments and civil society organizations to identify opportunities and invest directly.
    • Agri-business: There is also promise in incentivizing Indian industries to tap into African agri-business value chains and connecting Indian technology firms and startups with partners in Africa.
    • Investment: In the past year, despite the pandemic, the sector witnessed a record increase in investments.

    Way forward

    • A thorough impact assessment needs to be conducted of the existing capacity-building initiatives in agriculture for India to stand in good stead.
    • This could include detailed surveys of participants who have returned to their home countries.
    • Country-specific and localized curriculum can be drawn up, making skill development demand-led.
    • In all senses, India has consistently chosen well to underline the development partnership to be in line with African priorities.
    • It is pertinent, therefore, that we collectively craft a unique modern partnership with Africa.

    Conclusion

    • While India’s Africa strategy exists independently, it is important to be cognizant of China’s increasing footprint in the region.
    • Beijing’s model, if successful here, could be heralded as a replica for the larger global south.
    • It is important to note, however, that prominent African voices have emphasized that their own agency is often overlooked in the global discourse on the subject.

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  • Foreign Policy Watch: India-Middle East

    India-Turkey relations

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Turkey's rising space in geopolitical arena

    As a new round of geopolitical jousting begins on India’s north-western frontiers, Delhi must deal with a number of new actors that have carved out a role for themselves in the region.

    Overambitious Turkey

    • Our focus today is on Turkey’s regional ambitions (particularly in Afghanistan) and their implications for India.
    • Ankara is in negotiations with the US on taking charge of the Kabul airport which is critical for an international presence in Afghanistan that is coming under the Taliban’s control.
    • Turkey has been running Kabul airport security for a while, but doing so after the US pullout will be quite demanding.
    • Taking a longer view, though, Turkey is not a new regional actor in India’s northwest.

    Turkey and Afghanistan

    • Ankara and Kabul have recently celebrated the centennial of the establishment of diplomatic relations.
    • Through this century, Turkey has engaged purposefully with Afghanistan over a wide domain.
    • While it joined the NATO military mission in Afghanistan after the ouster of the Taliban at the end of 2001, Turkey avoided any combat role and differentiated itself from the Western powers.
    • Ankara has contributed to the training of the Afghan military and police forces.
    • It has also undertaken much independent humanitarian and developmental work.

    Affinity with Pakistan

    • Turkey’s good relations with both Afghanistan and Pakistan have also given space for Ankara to present itself as a mediator between the warring South Asian neighbours.
    • Turkey’s “Heart of Asia” conference or the Istanbul Process has been a major diplomatic vehicle for attempted Afghan reconciliation in the last few years.
    • Widespread goodwill for Turkey in Afghanistan has now come in handy for the US in managing some elements of the post-withdrawal phase.
    • In Pakistan, PM Imran Khan has rallied behind Erdogan’s ambition to seize the leadership of the Islamic world from Saudi Arabia.
    • Pakistan’s Army Chief had to step in to limit the damage with Saudi Arabia, which has long been Pakistan’s major economic benefactor.

    Challenges for India

    • Turkey’s growing role in Afghanistan opens a more difficult phase in relations between Delhi and Ankara.
    • India’s opposition to alliances and Turkey’s alignments reflected divergent international orientations of Delhi and Ankara after the Second World War.
    • And Turkey’s deepening bilateral military-security cooperation with Pakistan made it even harder for Delhi to take a positive view of Ankara.
    • Turkey and Pakistan were part of the Central Treaty Organization (CENTO) that was set up in 1955 by the British.
    • Although CENTO eventually wound up in 1979, Turkey and Pakistan remained close partners in a number of regional organizations and international forums like the Organization of Islamic Cooperation.

    Pre-Erdogan era Turkey

    • The shared secular values between Delhi and Ankara in the pre-Erdogan era were not enough to overcome the strategic differences between the two in the Cold War.
    • To make matters more complicated, the positive legacy of the Subcontinent’s solidarity with the Ottoman Empire and the Turkish Republic, emerged out of its ruins in the early 20th century, accrued mostly to Pakistan.
    • There were moments — during the tenures of PM Rajiv Gandhi and Mr Vajpayee, when India and Turkey seemed poised for a more productive relationship.
    • But those have been rather few and far between.

    Turkey’s departure from Secularism

    • Meanwhile, Turkey’s Islamist internationalism under Recep Tayyip Erdogan has inevitably led to its deeper alliance with Pakistan, greater meddling in South Asia, and a sharper contraction with India.
    • The Pakistani prism through which Delhi has long seen Ankara, however, has prevented it from fully appreciating the growing strategic salience of Turkey.
    • Erdogan’s active claim for leadership of the Islamic world has seen a more intensive Turkish political, religious, and cultural outreach to the Subcontinent’s 600 million Muslims.

    Self-goals on Kashmir

    • Turkey has become the most active international supporter of Pakistan on the Kashmir question.
    • Delhi is aware of Erdogan’s hypocrisy on minority rights.
    • While pitching for self-determination in Kashmir, Erdogan actively tramples on the rights of its Kurdish minority at home and confronts them across Turkey’s border in Syria and Iraq.

    Other ambitions in Asia

    • Erdogan was quick to condemn the Bangladesh government’s hanging of a senior extremist leader in 2016.
    • But in a reflection of his strategic suppleness, Erdogan also offered strong political support for Dhaka on the Rohingya refugee crisis.
    • As Bangladesh emerges as an attractive economy, Ankara is now stepping up its commercial cooperation with Dhaka.
    • Turkey, which hosted the Caliphate in the Ottoman era, had natural spiritual resonance among the South Asian Muslims.

    Riving the Caliphate

    • With the abolition of the Caliphate in 1924, Turkey’s Westernization under Ataturk reduced its religious significance.
    • Erdogan’s Islamist politics are about regaining that salience.
    • Erdogan’s strategy marks the declining relevance of the old antinomies — between alliances and autonomy, East and West, North and South, Islam and the West, Arabs and the Jews — that so resonate with the traditional Indian foreign policy discourse.

    Stance on Israel

    • Turkey was the first Muslim-majority nation that established full diplomatic relations with Israel.
    • Erdogan now actively mobilizes the Arab and Islamic world against Israel without breaking relations with Tel Aviv.
    • Erdogan’s outrage on Israel is about presenting himself as a better champion of Palestine than his Arab rivals.

    India’s option against Turkey

    • India, which has been at the receiving end of Erdogan’s internationalism, has multiple options in pushing back.
    • The recent naval exercise between India and Greece in the Mediterranean offers a small hint of India’s possibilities in Turkey’s neighbourhood.
    • Many Arab leaders reject Erdogan’s policies that remind them of Ottoman imperialism.
    • They resent Erdogan’s support of groups like the Muslim Brotherhood that seek to overthrow moderate governments in the Middle East.
    • There is much that India can do to up its game in the Arab world.

    Lessons for India

    • The new fluidity in geopolitics in India’s extended neighbourhood to the west.
    • Agency for regional powers is growing as the influence of great power weakens.
    • Religious ideology, like the more secular ones, is a cover for the pursuit of power.
    • Finally, Erdogan has carefully modulated his confrontation with major powers by avoiding a breakdown in relations.

    Conclusion

    • For Erdogan, the choices are not between black and white. That should be a good guide for India’s own relations with Turkey.
    • Delhi needs to vigorously challenge Turkey’s positions where it must, seize the opportunities opened by regional resentments against Erdogan’s adventurism, and at the same time prepare for a more intensive bilateral engagement with Ankara.

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  • Solar Energy – JNNSM, Solar Cities, Solar Pumps, etc.

    Rajasthan’s rural power solution that other states can emulate

    op-ed snap | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Climate proofing

    Mains level: Paper 3- Decentralised model of solar power generation

    Power regulatory body in Rajasthan recently ordered discoms to solarise unelectrified public schools. The move has several benefits and therefore can be emulated by the other states as well. 

    Expanded electricity access in rural areas and shortcomings in it

    • Estimates suggest that India has doubled the electrified rural households, from 55% in 2010 to 96% in 2020.
    • However, the measure of access to power supply has been the number of households that have been connected to the electricity grid.
    • This measure discounts large areas of essential and productive human activities such as public schools and primary health centres.
    • And despite greater electrification, power supply is often unreliable in rural areas.

    Solar energy: Solution to electrification in remote parts

    • To address the above problems, the Rajasthan Electricity Regulatory Commission (RERC) has ordered the State’s discoms to solarise unelectrified public schools.
    • The RERC has also suggested installation of batteries to ensure storage of power.
    • Apart from enabling education, this ruling would benefit several other crucial aspects of rural life.
    • The RERC order also directed discoms to seek corporate social responsibility (CSR) funds for the solarising drive and allows schools ownership of the power systems in a phased manner.
    • This removes the burden of infrastructure development expenses on discoms, while also ensuring clean energy for the schools.
    • The power that is generated could also be counted towards the discoms’ Renewable Purchase Obligations (RPO).
    • Large-scale projects are generally financed by companies that wish to profit from economies of scale.
    • They are less interested in investing in rural electricity as it is not as lucrative.
    • Large-grid based projects add to the supply of power in urban areas, and therefore, only marginally further greater energy access goals.

    The decentralised model of power generation

    • While Rajasthan has land mass with vast, sparsely populated tracts available to install solar parks, bulk infrastructure of this scale is susceptible to extreme weather events.
    • With climate change increasing the possibility of such events, a decentralised model of power generation would prove to be more climate resilient.
    • With battery storage, the susceptibility of grid infrastructure to extreme weather events could be mitigated.
    • This is called climate proofing.
    • As solar installations become inexpensive and with rapidly advancing battery storage technologies, decentralised solar power generation has become a reality.

    Conclusion

    The ruling by Rajasthan’s power regulator not only helps in increasing access to electricity, achieving targets of renewable energy but also suggests solutions that other States could emulate.

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  • Indian Army Updates

    The problem now with the military synergy plan

    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: Integrated Theatre Commands

    Mains level: Issues over the constitution of ITC

    The recent controversy over the alleged marginalization of the Indian Air Force (IAF) in the proposed ‘theaterisation’ of the national security landscape has led to some debates.

    IAF concerned over ITC

    • The Indian military continues to work in silos, like all governmental agencies in India, and a need was rightly felt and directions issued by PM to bring about jointness.
    • The aim is to bring about synergy in operations while economizing through the elimination of duplication and wasteful practices or processes.
    • IAF is keen to bring in the requisite reforms to improve the war-fighting capabilities of the Indian military as a whole while also economizing.

    Reservations of IAF

    • In the current formulation of theatres, the objections from the IAF have essentially been due to air power being seen as an adjunct to the two surface forces.
    • IAF veterans feel that the IAF is being divided into penny packets which would seriously degrade the effectiveness of air operations in any future conflict or contingency.
    • They feel that the use of air power is found to be sub-optimal under the military ethos of “an order is an order”.

    Hurry by the CDS

    • Concurrently, such an intellectual exercise would identify duplication, wasteful resources and practices.
    • This is what the CDS should have been pursuing before first freezing the structure and then trying to glue the pieces together or hammer square pegs in round holes.
    • Only such a strategy can define the types of contingencies the military is expected to address, leading to appropriate military strategies, doctrines and required capabilities.

    Why is the IAF right?

    • Airpower is the lead element, particularly since the Indian political aim, even in the foreseeable future, is unlikely to be the occupation of new territories.
    • A large, manpower-intensive army with unusable armour formations would then also come into focus.
    • Even the proposed air defence command conflicts with the domain command in the seamless employment of airpower.
    • It is due to the absence of such an intellectual exercise that the IAF does not wish to see its limited resources scattered away in fighting defensive battles by a land force commander with little expertise.
    • The Army fails to realise that offensive air power is best not seen, busy keeping the enemy air force pinned down elsewhere as shown in 1971.

    The Army-Air Force silo

    • Historically, the Indian Army has always kept the IAF out of the information loop and demonstrated a penchant to ‘go it alone’.
    • The charge that the IAF joined the party late during Kargil (1999) is also totally baseless and shows a lack of knowledge of events and a failure to learn from historical facts.
    • Recorded facts and a dispassionate view would clearly show that the IAF began conducting reconnaissance missions as soon as the Army just made a request for attack helicopters.
    • This despite the IAF pointing out the unsuitability of armed helicopters at these altitudes and their vulnerability.
    • The use of offensive air power close to the Line of Control also required that the political leadership be kept informed due to possibilities of escalation, something that the Army was unwilling to do.

    Echoes from Kargil

    • Seen in this light, the Chinese incursion into Eastern Ladakh last year is reminiscent of Kargil.
    • While the response has been swift, it is evident that a clear intent to use combat air power, as against 1962, has significantly contributed in deterring China.
    • However, such intent and a joint strategy would have been forcefully signalled by the presence of air force representatives in the ongoing negotiations to restore status quo ante.
    • The continuing build-up of the infrastructure for the PLA Air Force in Tibet further emphasizes the need for an air-land strategy, with air power as the lead element to deter or defeat the Chinese designs at coercion.

    National security strategy should be at the centerstage

    • If war is the continuation of politics by other means, then it is essential to first define the political objectives flowing into a national security strategy before any effective use of force can be truly contemplated.
    • The failures of the mightiest militaries in Vietnam, Afghanistan, and even our own Indian misadventure in Sri Lanka bear testimony to the lack of clear political objectives and appropriate military strategies.
    • It is, therefore, unfortunate that even after over seven decades after Independence, India still does not have a clearly articulated national security strategy.

    Address the structural gaps

    • Finally, theatre or any lower structure requires an institutionalized higher defence organization, which has been sadly missing.
    • This has lead to little regular dialogue between the political and military leadership, except in crises resulting in knee-jerk responses.
    • This led to a remark from a scholar-warrior that, “it is ironic that the Cabinet has an Accommodation Committee but not a Defence Committee”.
    • In the current proposal, it appears that the CDS, as the permanent chairman of the Chiefs of Staff Committee (CoSC), would also exercise operational control of the theatre/functional commands.

    Way forward

    • Prudence demands that instead of ramming down such structures without adequate deliberations and discussions with all stakeholders.
    • We need to first evolve appropriate military strategies in a nuclear backdrop in concert with the political objectives.
    • Thereafter, joint planning and training for all foreseen contingencies, with war-gaming, would automatically indicate the required structures with suitable command, control and communications.

    Conclusion

    • We must remember that in war there is no prize for the runner-up.
    • It is better that such objections and dissenting opinions come out now before the structure is formalized than once it is set in stone.
    • The nation would then end up paying a heavy price, with the Air Force carrying the burden and blame for the failures.

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  • Animal Husbandry, Dairy & Fisheries Sector – Pashudhan Sanjivani, E- Pashudhan Haat, etc

    Why the dairy sector needs more private players

    op-ed snap | Agriculture | Mains Paper 3: Economics Of Animal-Rearing

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Operation Flood

    Mains level: India's dairy sector

    One of India’s largest dairy cooperative societies has just raised its milk prices for consumers by Rs 2/litre and this has become national news.

    Sparking off a debate

    • Many in the media are debating how this will push up Consumer Price Index causing inflationary pressures, which may soon force the RBI to change its “accommodative stance” on monetary policy.

    Why such hues over Milk?

    Milk is an important case study for our overall agriculture sector.

    • First, milk is our biggest agri-commodity in terms of value, greater than paddy (rice), wheat, and sugarcane combined.
    • Second, India is the largest producer of milk in the world with an estimated production of about 208 million tonnes in 2020-21, way above its closest competitor, the US, whose milk production hovers around 100 million tonnes.
    • Third, our dairy sector is dominated by smallholders with an average herd size of 4-5 animals.
    • Fourth, and this is important, there is no minimum support price (MSP) for milk. It is more like a contract between the company and the farmers.

    How is the milk price determined?

    • The price of milk is largely determined by the overall forces of demand and supply.
    • Increasing costs of production enter through the supply side, but the demand side cannot be ignored.
    • As a result of all this, the overall growth in the dairy sector for the last 20 years has been between 4-5 per cent per annum, and lately, it has accelerated to even 6 per cent.

    Concerns of dairy farmers

    • For dairy farmers, this increase in milk prices is not commensurate to the increase in their feed and other costs, and they feel that their margins are getting squeezed.
    • They also feel that this price still does not count their logistics cost.

    Transformation since Op Flood

    • It is well known that “Operation Flood” (OF) that started in the 1970s transformed this sector.
    • The institutional innovation of a cooperative model, steered by Verghese Kurien, changed the structure of this sector.
    • However, even after five decades, cooperatives processed only 10 per cent of the overall milk production.
    • India needed the double-engine force of the organised private sector to process another 10 per cent.
    • The doors for the private sector were opened partially with the 1991 reforms, but fully in 2002-03 under the leadership of Vajpayee, when the dairy sector was completely de-licenced.

    Rise of dairypreneurs

    • Many start-ups “dairypreneurs” have come in promising a farm-to-home experience of milk.
    • There is one company that delivers fresh milk at the consumer’s doorstep and gives quality testing kits at home.
    • These have digitized cattle health, milk production, milk procurement, milk testing, and cold chain management.

    Effective breeding

    • Sexed semen technology helps in predetermining the sex of offspring by sorting X and Y chromosomes from the natural sperm mix.
    • This can solve the problem of unwanted bulls on Indian roads.
    • Although the current cost of sexed sorted semen is high, Maharashtra has taken a bold step in subsidizing it for artificial insemination.

    Way forward

    • The upshot of all this is that let prices be determined by market forces, with marginal support from the government or cooperatives in times of extreme.
    • The major focus should be on innovations to cut down costs, raise productivity, ensure food safety, and be globally competitive.
    • That will help both farmers and consumers alike.
    • The cooperatives did a great job during OF, and are still doing that, but the private sector entering this sector in a big way has opened the gates of creativity and competition.

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  • FDI in Indian economy

    Failure to comply with international judicial rulings hurts India’s image as an investment destination

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: BITs

    Mains level: Paper 3- Honouring the adverse international judicial ruling in dispute with investors

    The article highlights the lack of immediate compliance by the Indian government in awards involving foreign investors.

    Why honouring award is important

    • An important factor that propels investors to invest in foreign lands is that the host state will honour contracts and enforce awards even when it loses.
    • But when the host state refuses to do so, it shakes investors’ confidence in the host state’s credibility towards the rule of law, and escalates the regulatory risk enormously.
    • To an extent, this has been India’s story over the last few years
    • Last year, India lost two high-profile bilateral investment treaty (BIT) disputes to two leading global corporations — Vodafone and Cairn Energy — on retrospective taxation.
    •  India has challenged both the awards at the courts of the seat of arbitration.
    • As India drags its feet on the issue of compliance, it harms India’s reputation in dealing with foreign investors.

    Antrix-Devas agreement cancellation dispute

    • The other set of high-profile BIT disputes involve the cancellation of an agreement between Antrix, a commercial arm of the Indian Space Research Organisation, and Devas Multimedia.
    • This annulment led to three legal disputes — a commercial arbitration between Antrix and Devas Multimedia at the International Chambers of Commerce (ICC), and two BIT arbitrations brought by the Mauritius investors and German investors.
    • India lost all three disputes. 
    • The ICC arbitration tribunal ordered Antrix to pay $1.2 billion to Devas after a U.S. court confirmed the award earlier this year.
    • After the ICC award, Indian agencies started investigating Devas accusing it of corruption and fraud.
    • Last month, the National Company Law Tribunal (NCLT) ordered the liquidation of Devas on the ground that the affairs of the company were being carried on fraudulently.
    • This has led to Devas issuing a notice of intention to initiate a new BIT arbitration against India, sowing the seeds for complex legal battles again.

    Implications for investment in India

    • A closer reading of these cases reveals that whenever India loses a case to a foreign investor, immediate compliance rarely happens.
    • Instead, efforts are made to delay the compliance as much as possible.
    • While these efforts may be legal, it sends out a deleterious message to foreign investors.
    • It shows a recalcitrant attitude towards adverse judicial rulings.
    • This may not help India in attracting global corporations to its shores to ‘make for the world’.

    Consider the question “What are the factors that are leading to more Indian business disputes being settled elsewhere? What are the implications of delay by the government in honouring the awards of the disputes?” 

    Conclusion

    As India aspire to be the global destination of FDI, it needs to burnish its image on the dispute resolution front by honouring the awards.

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

    Middle income trap

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- How India can avoid the middle income trap

    The article suggests focusing on improving productivity and thereby the manufacturing sector to avoid the middle-income trap.

    What is the middle-income trap and why it matters for India

    • This trap was first conceived by World Bank economists.
    • They found that of the 101 developing economies that could be classified as ‘middle income’ in 1960, only 13 managed to become rich nations by 2008. 
    • There is little consensus on why some countries succeed in making the transition to high-income status.
    • But a distinctive attribute of those that succeed in the transition to high income is productivity improvement.
    • India could use its demographic dividend to avoid this predicament and achieve the critical velocity needed to move into the high-income bracket.

    How can India avoid the middle-income trap

    1) Improve productivity

    • Re-allocation of labour from low-productivity agriculture to high-productivity sectors, such as manufacturing, has been a primary channel through which today’s advanced economies raised their living standards.
    • In India, growth in labour productivity has consistently declined over the past decade.
    • The annual growth rate of output per worker has dipped from 7.9% in 2010 to 3.5% in 2019, as per International Labour Organization estimates.
    • This was also a period of low growth in India’s manufacturing sector.
    • In 2020-21, it accounted for only 14.5% of India’s gross value added, down from 17.4% in 2011-12.
    • An essential first step in improving productivity would be strengthening this sector.

    2) Strengthen manufacturing sector

    • Industrial labour relations is among the most critical elements to revitalize India’s manufacturing sector especially in the context of labour productivity.
    • These labour laws created incentives for firms to remain small and uncompetitive, thereby affecting productivity.
    • The new code, once implemented, would increase the threshold relating to layoffs and retrenchment in industrial establishments to 300 workers.
    • Other countries, such as China, Vietnam and Bangladesh, with whom India competes for foreign investment and export markets do not require the approval of administrative or judicial bodies for dismissals.
    • Therefore, in spite of recent reforms, India’s labour laws stay rigid in comparison with those of its competitor countries.

    3) Technology intensive manufacturing

    • Engendering innovation in higher value-added, tech-intensive activities is important for economies before they reach that juncture.
    • If exports are taken as a proxy for the manufacturing capabilities and competitiveness of an economy, the present status of tech-intensive manufacturing in India leaves a lot to be desired.
    • As per World Bank data, high-tech exports accounted for only 10.3% of India’s manufacturing exports in 2019.
    • Rival countries had a much higher share of the same: 31% in China, 13% in Brazil, 40% in Vietnam and 24% in Thailand.
    • Low R&D spending in India, ranging from a mere 0.64% to 0.86% of gross domestic product over the past two decades, has held the country back.

    Steps to improve tech-intensive manufacturing

    • The government has introduced a production-linked incentive scheme to ensure a greater share of local value addition.
    • While this would attract foreign investments in tech-intensive manufacturing, there is also a need for greater incentives for R&D investments by firms in India.
    • A first step in this direction could be reinstating the tax exemption on R&D under Section 35 (2AB), even for companies opting for the lower corporate tax rate of 22%.

    Conclusion

    We need appropriate interventions to improve productivity—both economy-wide and within the sector. And we must do it now.

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  • Delhi Full Statehood Issue

    How the GNCTD (Amendment) Act affects functioning of Delhi Assembly

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 239AA and 239AB

    Mains level: Paper 2- Effect of GNCTD (Amendment) Act on functioning of Delhi Assembly

    The article highlights the implications of the Government of National Capital Territory of Delhi (GNCTD)(Amendment) Act, 2021 on functioning of Assembly and its committees.

    Context

    The Government of National Capital Territory of Delhi (GNCTD)(Amendment) Act, 2021 has been criticised as a retrograde law. However, what deserves equal attention is the Act’s assault on the functioning of Delhi’s Legislative Assembly.

    Background of GNCTD Act

    • The GNCTD Act was enacted in 1992.
    • Under the Act, Delhi Legislative Assembly was given the power to regulate its own procedure, as well as the conduct of its business.
    • This sought to realise a delicate balance reflecting Delhi’s unique constitutional position: neither full state nor a centrally governed Union Territory.

    How amendment affects functioning of Assembly

    • Its standards of procedure and conduct of business have been firmly tethered to that of the Lok Sabha, depriving Delhi’s elected MLAs of an effective say in how their Assembly should be run.
    • The Amending Act prohibits the Assembly from making any rule enabling either itself or its committees to consider any issue concerned with “the day-to-day administration of the capital” or “conduct inquiries in relation to administrative decisions”.
    • The most significant impact of this shall be on the exercise of free speech in the Assembly and its committees.
    • The amendment impeded the Assembly from performing its most basic legislative function — that of holding the executive to account by restricting its ability to freely discuss matters happening in the capital.

    Impact on committees

    • The deliberations and inputs of committees often pave the way for intelligent legislative action.
    • In a way, they act as the eyes and ears for the whole House, which has neither the time nor the expertise to scrutinise issues in depth.
    • It would be impossible for committees to perform this function without the power to conduct inquiries.
    • Pre-emptively injunct a committee from conducting an inquiry “in relation to the administrative decisions” (an extremely broad exception) completely negates the ability of committees to function effectively as the Assembly’s advisors and agents.
    • The quality of legislative work emanating from the Assembly is thus ultimately bound to suffer.

    Consider the question “What are the reasons for frequent disputes between Delhi government and the Lt. Governor? Would the Government of National Capital Territory of Delhi (GNCTD)(Amendment) Act, 2021 succeed in ending that trend?” 

    Conclusion

    The amendment deprive the Delhi Assmbly of its very basic functions and render it a ‘legislature’ in name only. Surely, Delhi’s voters deserve better than that. The Government need to reconsider the provisions of the amendment act.

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  • Capital Markets: Challenges and Developments

    Investors should not be tempted to ignore macroeconomic factors

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Stock market and risks involved for individual investors

    Despite gloom in the economy, financial markets are scaling new highs. The situations calls for diligence on the part of individual investors. The deals with this issue.

    What influences investors’ decision

    • Investors may not necessarily be always sensible or even capable of perceiving the larger picture.
    • Nobel laureate Daniel Kahneman argues that humans usually use the ‘first system’ of ‘fast thinking’ to hurriedly act and perceive their environment.
    • Consequently, they are susceptible to the ‘priming effect’, ‘framing bias’, ‘anchoring effect’, ‘overconfidence bias’ and ‘availability heuristic’.
    • These phenomena, thus, play their part in pervading optimistic market conditions.
    • As a result, investors often end up ignoring or overlooking uncertainties and risks involved in their decision.
    • At the same time, investors’ decision choices could be significantly influenced by ‘nudging’.
    • It is a deliberate tactics and method of behaviour modification by which it is the ‘choice architect’ that decides who does what and who does so, as argued by the Nobel laureate, Richard H. Thaler.
    • The present surge in the Indian stock market is indeed nudging individual investors to trade more.

    What makes individual investors vulnerable

    • National Stock Exchange data indicate following trends:
    • The share of the non-institutional individual investors in equity trading volume has risen to one half of the total turnover. in 2021.
    • It was around a third in 2016.
    • In contrast, the share of Foreign Institutional Investors (FIIs) in the total trading volume has shrunk to just about a tenth, it used to be one fifth in 2016.
    • Trading in the stock market, the sudden rise, the intraday moves, etc., are, thus, attributable largely to individual traders now. 
    • However, despite their large trading volumes, individual investors have actually contracted their holding of the market capitalisation.
    • The FIIs currently own around half of the free float of all Indian companies.
    • Apparently, the retail investors have constantly sold their stake to end up holding less than 20% shares now.
    • Trading, thus, seems to be the mainstay of retail investors and this is what makes them more vulnerable to the vagaries of the market.

    Market is ignoring macroeconomic factors

    • Centre for Monitoring Indian Economy Pvt. Ltd. data of the listed companies reveal a rise in their profit, due to rationalisation and cost-cutting.
    • Investors might be tempted to ignore macroeconomic factors and invest in such stock believing that it is the profit that impels the stock prices.
    •  In reality, however, share price is expected to ascend if a company declares to cut its wage bill.
    • This probably explains why stock markets around the world have been on the rise amidst the novel coronavirus pandemic; demand may have declined but profits have been least impacted.
    • At the larger economic level, however, real wages have plunged.
    • Clearly, the market has not entirely decoupled itself from the economic indicators.
    • Established wisdom suggests that corporates cannot sustain contraction in the economy for long.
    • Sustained decline in demand caused by waning disposable household income would catch them soon.
    • Robert J. Shiller attributes this phenomenon of creating a possible bubble to irrational exuberance.
    • When bubbles burst, they cause a kind of financial earthquake, in turn destabilising public trust in the integrity of the financial system.
    • Critically, as the past portrays, individual investors, with all their vulnerabilities, suffer the most devastating consequences.
    • Retail investors are as well susceptible to overreaction when negative news hits the market.

    Consider the question “What are the factors driving the financial markets up despite the weak macroeconomic foundations? What are the risks involved in such situation for the individual investors?”

    Conlcusion

    History of financial markets is replete with bubbles and bursts. Most affected in such burst are the individual investors. Informed decisions based on information and risks involved should form the basis of investment by individual investors.

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  • Rule of Law vs Rule by Law

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: What is rule of law?

    Mains level: Paper 2- Rule of law and role of judiciary

    What makes the Rule of Law different from the Rule by Law? It is the idea of justice and equity that separates the two. The article explains the principles that emerge as the basis of the Rule of law and the role of the judiciary in ensuring their constitutionality.

    Understanding law

    • Law, in its most general sense, is a tool of social control that is backed by the sovereign.
    • However, such a definition of law can be used not only to render justice, it can also be used to justify oppression.
    • Therefore it is argued that a law cannot really be classified as a “law” unless it imbibes within itself the ideals of justice and equity.
    • So, any law backed by a sovereign must be tempered by certain ideals or tenets of justice.
    • Only a state that is governed by such law, can be said to have the Rule of Law.
    • The British colonial power used the law as a tool of political repression, enforcing it unequally on the parties, with a different set of rules for the British and for the Indians.
    •  It was an enterprise famous for “Rule by Law”, rather than “Rule of Law.

    Four principles of rule of law

    • Clarity and accessibility: Laws must be clear and accessible, the people at least ought to know what the laws are.
    • Another implication of this principle is that they should be worded in simple, unambiguous language.
    • Equality: An important aspect of equality before law is having equal access to justice.
    • This guarantee of equal justice will be rendered meaningless if the vulnerable sections are unable to enjoy their rights because of their poverty or illiteracy or any other kind of weakness.
    • Another aspect is the issue of “gender equality”.
    • Participation of people: The third principle, the “right to participate in the creation and refinement of laws”.
    • The very essence of a democracy is that its citizenry has a role to play, directly or indirectly, in the laws that govern them.
    • In India, it is done through elections.
    • The idea that people are the ultimate sovereign is also to be found in notions of human dignity and autonomy
    • Strong independent judiciary: The fourth principle stemsp from the idea that the judiciary is the “guardian” of the Constitution.
    • The judiciary is the primary organ which is tasked with ensuring that the laws that are enacted are in line with the Constitution.

    Independent judiciary and role of media

    • The judiciary cannot be controlled, directly or indirectly, by the legislature or the executive, or else the Rule of Law would become illusory.
    • At the same time, judges should not be swayed by the emotional pitch of public opinion either, which is getting amplified through social media platforms.
    • Judges have to be mindful of the fact that the noise thus amplified is not necessarily reflective of what is right and what the majority believes in.
    • Therefore, media trials cannot be a guiding factor in deciding cases.
    • It is, therefore, extremely vital to function independently and withstand all external aids and pressures.
    • While there is a lot of discussion about the pressure from the executive, it is also imperative to start a discourse as to how social media trends can affect the institutions.

    Conclusion

    The importance of the judiciary shouldn’t blind us to the fact that the responsibility of safeguarding constitutionalism lies not just with the courts. All the three organs of the state, i.e., the executive, legislature and the judiciary, are equal repositories of constitutional trust.

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