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  • G20 : Economic Cooperation ahead

    A template for Indian engagement with the West

    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: G-7

    Mains level: Paper 2- Opportunity for India to institutionalise its relations with the West

    The article highlights the significance of the recent G-7 summit for India.

    India’s engagement with the West

    • Two important messages emerge from India’s participation in G-7 with the members of the G-7 and three other invited guests — Australia, South Africa and South Korea.
    • First is that India is a “natural ally” of the G-7 and its partners.
    • The other is the emphasis on shared democratic values that bind India with the West.
    • The two ideas are certainly not new to India’s foreign policy, but they acquire special importance at the current juncture.
    • In the last few years, India embarked on an expansive engagement with Europe.
    • This G-7 summit can be seen as the beginning of an institutionalisation of India’s cooperation with the West.

    What makes this G-7 Summit different from the past Summits?

    • China factor: After the 2008 financial crisis, the more representative G-20, which includes China, Russia, India and many others, seemed to supersede the G-7.
    • But amidst the growing sense that China has gamed the global economic order to America’s disadvantage, there has been renewed interest in like-minded coalitions like the G-7.
    • Widening the base of G-7: There is also the recognition of the case for widening the base of institutions like the G-7 beyond the geographic West to include large democracies like India.
    • Coalition of democracies: The case for a “coalition of democracies” was certainly gaining ground over the last two decades within American academia and the political class.
    • But economic globalisation and the absence of great power rivalry meant there was no compelling policy urgency to construct an “alliance of democracies”.
    • That condition has altered radically in the last few years amidst the growing US tensions with China and Russia. 

    Dealing with the challenges presented by China

    • U.S. President Biden declared his main objective as rallying democracies to meet the great challenges of our time, especially those presented by China.
    • G-7 summit has responded to Biden’s call in the following forms:
    • 1) By offering the outline of a potential alternative to China’s ambitious Belt and Road Initiative.
    • 2)By calling for a reorientation of global supply chains away from China.
    • 3) By demanding a fresh inquiry into the origins of the Covid-19 pandemic in China.
    • 4) By reprimanding Beijing policies in Xinjiang and Hong Kong.
    • 5) By raising concerns about the conflict across the Taiwan Strait.
    • However, there is a strong view that the door must be kept open for engagement with China on issues like climate change while calling out its unacceptable policies.

    India’s relations with China: New context for engagement with West

    • The rupture in the US engagement with China coincides with the rapid deterioration in India’s relations with China.
    • This also sets up a new context for India’s partnership with the West.
    • If the Indo-Pacific provides a regional basis for India’s engagement with the US and Europe, mitigating climate change and the management of the Covid-19 pandemic provides a global template for India’s engagement with the West.

    Way forward

    • The case for renewal and reform of democratic institutions is urgent in both the US and India.
    • So is the need for sustained consultations between India and its Western partners on a range of new challenges presented by digital technologies, including radicalisation, disinformation, electoral interference, cyber-attacks and the role of large social media companies. 
    • The statement on open societies provides a sound basis for such an engagement.

    Conclusion

    India must begin institutionalisation of its relationship with the West and increase its engagement on various common issues including the China challenge.

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  • Synthetic biology and its implications for national security

    op-ed snap | Security Issues | Mains Paper 3: Awareness in various sc and tech fields,Various Security Forces, Agencies & Their Mandates

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: BTWC 1972

    Mains level: Paper 3- Security challenges associated with synthetic biology

    Against the backdrop of the Covid-19 pandemic, the article discusses the national security threat emanating from biological weapons.

    Synthetic biology

    • Synthetic biology is a revolutionary technology that can help us manipulate biological organisms and processes for human betterment, especially in treating diseases, by re-engineering cells.
    •  In 2014, the U.S. Department of Defense categorised synthetic biology as one of the six ‘disruptive basic research areas’.
    • Unlike the nuclear domain, the fields of biology or synthetic biology are not regulated internationally despite growing military interest in it.

    Risks involved

    • There is the possibility of deliberate misuse of synthetic biology.
    • There is a need to carefully review, especially in the wake of the pandemic, the biosecurity systems in place where such technologies are in use.
    • Accidental leaks of experimental pathogens are another concern.
    • There has been very little focus on threats emanating from biological sources as compared to the focus on nuclear weapons.
    • This is despite the fact that a well-orchestrated biological attack could have serious implications.
    • This was before synthetic biology came into play.
    • A well-planned attack using highly infectious pathogens synthetically engineered in a lab could be disastrous.
    • It would be difficult to pin responsibility on a specific actor if the incubation period is high,

    BTWC: An inadequate mechanism for regulation

    • Despite being the weapon of mass destruction (WMD) safety and security attention given to bio-weapons is not at par with nuclear and chemical weapons.
    • There is an international convention and an implementing body for both nuclear and chemical weapons.
    • However, for bio-weapons, all we have is the Biological and Toxin Weapons Convention (BTWC) of 1972 with no implementing body.
    • The BTWC does not have a verification clause, nor does it have clearly laid down rules and procedures to guide research in this field.
    • Article 1 of the BTWC bans bio-weapons but research for medical and bio-defence purposes are allowed.
    • While this is understandable, the problem is that there is a thin line between bio-defence research and bio-weapons research. 
    • An Ad Hoc Group set up in 1994 to negotiate a Protocol to enhance the transparency of treaty-relevant biological facilities and activities to help deter violations of the BTWC submitted a report at the Fifth BTWC Review Conference in 2001 but was not accepted by the member states.

    Concerns for India

    • India is at a uniquely disadvantaged position in this area given poor disease surveillance, insufficient coordination among various government departments dealing with biosecurity issues, and the pathetic state of the healthcare system.
    • India has multiple institutions dealing with biosafety and biosecurity threats but there is no coordination among them.
    • Given the rising risk of diseases of zoonotic origin, the traditional ministry-wise separation might not be useful.
    •  India, with its porous borders and ill-trained border control institutions, will remain vulnerable to pathogens or dangerous biological organisms.

    Way forward

    • Pandemics have also highlighted that the traditional distinction at the international institutional level between biological weapons (a field governed by the BTWC) and diseases (governed by BTWC) may not be useful anymore.
    • There needs to be more conversation between health specialists and bio-weapons/defence specialists.
    • The November 2021 BTWC review conference must take stock of the advances in the field, address the thinning line between biotechnology research and bio-weapons research, and consider international measures for monitoring and verification.

    Consider the question “How synthetic biology poses security challenges for India and the rest of the world? Suggest the measures to deal with this challenge.” 

    Conclusion

    Covid-19 should serve as a wake-up call to give BTWC more teeth in dealing with the bio-weapons with a suitable institutional mechanism.

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  • Cyber Security – CERTs, Policy, etc

    Cyberattacks reveal vulnerabilities in critical infrastructures

    op-ed snap | Science Tech | Mains Paper 3: Cyber Security

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Ransomware

    Mains level: Paper 3- Threat of cyberattacks

    The article highlights the threat posed by cyberattacks to our critical infrastructure and suggest the ways to deal with the the ever evolving threat.

    Civilian targets of cyberattacks

    • Several high-profile cyberattacks were reported from the United States during the past several months.
    • These attacks were all primarily on civilian targets, though each one was of critical importance.
    • Obviously cyber, which is often referred to as the fifth domain/dimension of warfare, is now largely being employed against civilian targets.
    • Most nations have been concentrating till date mainly on erecting cyber defences to protect military and strategic targets, but this will now need to change.

    Challenges

    • Defending civilian targets, and more so critical infrastructure, against cyberattacks such as ransomware and phishing is almost certain to stretch the capability and resources of governments across the globe.
    • The distinction between military and civilian targets is increasingly getting erased and the consequences of this could be indeterminate.
    •  In the civilian domain, two key manifestations of the ‘cat and mouse game’ of cyber warfare today, are ransomware and phishing, including spear phishing.
    • Banking and financial services were most prone to ransomware attacks till date, but oil, electricity grids, and lately, health care, have begun to figure prominently.
    • Ransomware attacks have skyrocketed, with demands and payments going into multi-millions of dollars.
    • India figures prominently in this list, being one of the most affected.
    • Compromised ‘health information’ is proving to be a vital commodity for use by cybercriminals.
    • All indications are that cybercriminals are increasingly targeting a nation’s health-care system and trying to gain access to patients’ data.
    • The available data aggravates the risk not only to the individual but also to entire communities.
    • Cybercriminals are becoming more sophisticated, and are now engaged in stealing sensitive data in targeted computers before launching a ransomware attack.
    • Also, today’s cybercriminals, specially those specialising in ransomware and similar attacks, are different from the ordinary  criminals.
    • Many are known to practise ‘reverse engineering’ and employ ‘penetration testers’ to probe high secure networks.

    Way forward

    • The need to be aware of the nature of the cyber threat to their businesses and take adequate precautionary measures, has become extremely vital.
    • Cybersecurity essentially hinges on data protection. 
    • As data becomes the world’s most precious commodity, attacks on data and data systems are bound to intensify.
    • With mobile and cloud computing expanding rapidly cybersecurity professionals are now engaged in building a ‘Zero Trust Based Environment’, viz., zero trust on end point devices, zero trust on identity, and zero trust on the network to protect all sensitive data. 
    • Building deep technology in cyber is essential.
    • New technologies such as artificial intelligence, Machine learning and quantum computing, also present new opportunities.
    • Pressure also needs to be put on officials in the public domain, as also company boards, to carry out regular vulnerability assessments and create necessary awareness of the growing cyber threat.

    Consider the question “Several high-profile cyberattacks across the world have exposed vulnerabilities in the critical infrastructure of even advanced nations. In light of this, examine the challenges posed by cyberattacks and suggest measures to deal with these challenges.” 

    Conclusion

    The threat posed by the cyberattacks highlights the need for improved defences against actual, and potential, cyberattacks by all countries across continents.

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  • Coronavirus – Health and Governance Issues

    Challenges in Vaccinating All

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Dealing with vaccine hesitancy

    Reoriented vaccine policy

    • The foremost challenge in vaccination in India has been a supply deficit.
    • Announcing a reoriented vaccine policy recently, the Prime Minister announced a coherent path forward.
    • Starting from June 21, the Union government will take charge of 75 per cent of the total procurement, and provide vaccines to states at no cost.
    • The government has reserved 30 crore vaccines with Hyderabad-based Biological-E by facilitating an advance payment of Rs 1,500 crore.
    • Fortnightly updates on the supply of vaccines to states are being taken to ensure transparency and efficiency in planning.

    Dealing with two complex challenges

    • Two other complex challenges that need immediate focus are vaccine hesitancy and the much-discussed digital divide in the country.

    1) Challenge of vaccine hesitancy

    • Contextualised and curated approaches are crucial.
    • The WHO has put forth the BeSD (behavioural and social drivers) vaccination model, which emphasises “motivation” as the vanguard of human psychology during a vaccination drive.
    • Vaccination coverage could be increased by incentivising and motivating citizens.
    • Unfortunately, in India, misinformation, disinformation and misplaced beliefs have led to fears about the potential harmful effects of vaccines.
    • The diversity of India necessitates community engagement at the local level to counter this narrative of misinformation.
    • A successful information campaign requires dissemination through mediums that invoke trust.
    • Local languages and dialects should be used to engage people via local radio, television channels and regional newspapers.
    • Another network that can be leveraged at the district level is that of the ASHA workers and the auxiliary nurse-midwives.
    • These are trusted local figures.

    2) Bridging the digital divide

    • It is important to introduce solutions that bridge the digital divide.
    • A toll-free helpline number 1075 has been activated for those without internet.
    • Similarly, districts can explore missed-call campaigns, which could ensure that minimal infrastructure is being optimised for processing high-volume user requests.
    • Even though the reported adverse events following immunisation stands at only 0.012 per cent, dedicated representatives can provide vaccine-related pre- and post-counselling to individuals.

    Way forward

    Startups could help bridge digital divide

    • The devastating effects of the second wave in rural areas have prompted fintech startups to enable vaccine registration.
    • PayNearby has helped over 8 lakh citizens register through its network of agents called “digital pradhans”, who are present in kirana, ration, mobile and hardware stores, frequented regularly by rural users. 

    Use points of contact for publicising benefits of vaccine and registration

    • Almost 81 crore beneficiaries, 75 per cent of whom are in rural areas, procure ration from 5,46,165 fair price shops across India.
    • There are over 11 lakh business correspondent outlets in India working mostly in rural areas to advance the mission of financial inclusion.
    • A network of around 1,54,965 post offices (as on March 2017) exists in India of which 1,39,067 are in the rural areas.
    • Such points of contact can be leveraged as dedicated units for publicising the benefits of Covid vaccines and as physical locations for vaccine registration

    Direct engagement with citizens

    • The Prime Minister recently described district officials as “field commanders” in our efforts against Covid.
    • This ambit should move beyond just the district bureaucracy to the extensive network of public services. 
    • A stellar example of direct engagement also stems from the success of the Swachh Bharat Abhiyan.
    • Direct engagement with citizens contributed greatly to the operational success of previous immunisation campaigns like the pulse polio programme.

    Consider the question “What are the factors responsible for vaccine hesitency? Suggest the ways to deal with it.”

    Conclusion

    Thinking local and utilising established networks to create culturally resonant messages is the need of the hour to reduce vaccine hesitancy, bridge the digital divide and achieve vaccine saturation.

     

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  • G20 : Economic Cooperation ahead

    Can the G-7 give new direction to globalisation?

    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: G-7 countries

    Mains level: Paper 2- Relevance of G-7

    The article highlights the challenges associated with the globalisation and important role G-7 can play in dealing with these challenges.

    The context that makes this G-7 Summit significant

    • The most significant expectation of the summit is that it will help determine the shape of globalisation.
    • There has been much discussion of the possibility of the G-7 pushing for global coordination on minimum corporate taxation.
    • The summit also seeks to redefine the broader relationship between states and markets in three ways.

    Redefining the relationship between states and market in 3 ways

    1) States reasserting the control over markets

    • States are reasserting control over the terms on which markets operate.
    • The idea of Neoliberalism did convey the idea that states should follow where the market leads, or step in only where there is a market failure.
    • However, this account of the relationship between states and markets had four harmful consequences.
    • 1) It provided a misleading picture of what makes economies vibrant.
    • 2) It led to a sense of loss of collective control over our economic future.
    • 3) It led to great inequality.
    • 4) In some fields like technology, it created new forms of corporate power.
    • To reverse some of these consequences, some coordination at the global level on taxation, or treatment of technology monopolies etc is required.

    2) Global interdependence cannot be managed without global public goods

    • At one level the global roles of the G-7 or even the G-20 were something like the political steering committee for global capitalism.
    • Their most useful political roles were during the financial crisis, when global financial coordination was required.
    • But there was relatively little attention to the systemic vulnerabilities that globalisation might create.
    • These could be vulnerabilities because of the way supply chains were distributed, or those that arose from the creation of winners and losers within globalisation.
    • Most importantly, there was short shrift given to global public goods like health.
    • The Covid crisis has reminded us of all of these vulnerabilities.
    • The commitment of G-7 to provide one billion vaccine doses is a welcome step.
    • But whether this crisis-driven commitment will translate into an enduring and just framework for providing global public goods on health and environment remains to be seen.

    3) Geopolitical context

    •  There are two geopolitical “cold wars” that cast a shadow on the G-7.
    • The first involves China.
    • In the context of rising geopolitical tensions with China, greater coordination and unity of purpose amongst the G-7 will become more important.
    • The second is a threat of authoritarian disruption.
    • Greater global disarray strengthens the possibility of giving political support to these political tendencies.
    • It is important, therefore, to demonstrate that the G-7 countries are part of a functional democratic civilisation.

    Challenges ahead

    • Despite the directional changes, many of the central distributive conflicts that beset globalisation are likely to continue.
    • The talk of global public goods works only in a context where the advanced economies are at the receiving end.
    • Take the G-7 proposal for the coordination of taxation.
    • In principle, this is not a bad idea, if it can close off tax havens and prevent a global race to the bottom.
    • However, it is sobering to read the Tax Justice Network’s “The State of Tax Justice Report” 2020.
    • According to this report, the United States, Netherlands and United Kingdom are three of the top five countries (along with Cayman Islands and Luxembourg) responsible for tax losses inflicted on other countries.
    • The US, Switzerland, Singapore and Hong Kong are amongst the highest on the Financial Secrecy Index.
    • So, the visible corporate tax rate, or taxing at point of sales, may just be the window dressing the global tax problem that allows countries to hold onto their privileges.
    • Similarly, on climate change. There is a lot of encouraging talk of ambitious targets, investment-led transformations.
    • Intelligently done, this might be for the good.
    • But it could also repeat the familiar pattern of regulation serving to preserve the dominance of advanced economies.
    • There is also, in the talk of a new global economic order, the curious absence of discussions on finance.
    • But if one is looking at potential sources of vulnerability, the ability to create winners and losers, and possible threats to global resilience, then regulation and coordination of global finance deserve more attention.

    Consider the question “What are the vulnerabilities associated with globalisation. Suggest the solutions to deal with these vulnerabilities.”

    Conclusion

    If the G-7 wants to truly exercise more leadership, it will have to convince the world that all its wonderful new principles, resilience, inclusion, global public goods, are not simply ruses to serve only the interests of the developed world.

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

    Why companies are adopting sustainable business models?

    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- Sustainability pressure on companies

    The article discusses the three undercurrents that are pushing companies to adopt more sustainable business models.

    Demand for sustainable business practices

    • Companies across the world are facing pressure to adopt sustainable business practices.
    • In a global first, a judicial court in the Netherlands has invoked the principles of human rights obligations of companies to rule that the Royal Dutch Shell will have to further accelerate its targeted reduction in greenhouse gas (GHG) emission.
    •  The shareholders of Chevron forced upon the management a resolution to set strict emission targets from the products that it sells.
    • The German cabinet approved a law that requires all coal-fired plants to close down much earlier than the target date set only eighteen months ago.
    • In India, the SEBI came out with a new set of Business Responsibility and Sustainability Reporting (BRSR).
    • BRSR will be mandatory for the top 1,000 companies from the next year.

    Three factors driving the change

    1) Investors’ pull

    • Workers saving for their pension do not want their investments to go to companies whose tailings-dam can burst and cause hundreds of death in Brazil.
    • Investors also realise the long-term business risk of companies if sustainability isn’t a focus.

    2) Governments’/regulators’ push

    • In 2021, the US announced that it will cut emissions by over 50% by 2030.
    • Japan has almost doubled its 2030 targets.
    • The UK has now announced a target to cut 40-45% by the same time, from the earlier goal of a 30%-cut.
    • China has announced that its emissions will peak by 2030, and by 2060, it would have net zero emissions.
    • India is expected by the global community to announce net-zero by 2050.
    • All of these have huge implications not only for hydrocarbon companies but across multiple sectors.
    • Banking regulators are asking banks to include climate in the risk assessment of the companies they lend to.
    • Insurance and pension regulators are raising similar questions in their sector.

    3) Measurement/reporting

    • When sustainability debates picked up, many organisations like CDP, CDSB, PRI, GRI, TCFD, IMP, IIRC, SASB, etc, sprang up to fulfill the need for sustainability reporting.
    • Often, these worked at cross purposes and in competition with each other, leading to ‘greenwashing’ and other malpractices and creating confusion in the minds of investors.
    • But, the realisation that the investors need a set of comparable and verifiable reporting formats has gathered momentum in the past one year.
    • The last excuse to avoid focus on sustainable business practices will also wither away.

    Consider the question “Financial capital is just one of the multiple capitals a successful company must possess. This brings sustainability into the focus. In light of this, discuss the factors that are forcing the companies to factor in the sustainability in their business models.”

    Conclusion

    The decades-old debate on environmental damage and sustainability is now reaching a decisive phase. Companies need to factor in the sustainability aspect in their profit calculus to remain relevant in changing world.

    Source:

    https://www.financialexpress.com/opinion/the-sustainability-heat-on-companies/2268494/

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

    What Centre must do to meet the economic challenges

    op-ed snap | Economics | Mains Paper 3: Government Budgeting

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Tax buoyancy

    Mains level: Paper 3- Dealing with the challenge of Covid second wave

    The article takes an overview of the fiscal and monetary challenges posed by the second covid wave and suggest ensuring the availability of liquidity.

    GDP projections need to be re-examined

    •  According to NSO’s provisional estimates for 2020-21, the annual contraction in real GDP turned out to be 7.3 per cent.
    • The erstwhile GDP growth projections for 2021-22 are being re-examined to take into account the adverse impact of the second wave of the pandemic.
    • The RBI has revised down its 2021-22 real GDP growth forecast to 9.5 per cent.
    • Some other recent estimates (ICRA) indicate the feasibility of a 9 per cent growth.
    •  It is also important to consider nominal GDP growth for 2021-22 since that would be a critical determinant of fiscal prospects. 
    • In the light of supply-side and cost-push pressures, the RBI has projected CPI inflation at 5.1 per cent.
    • The nominal GDP growth may be projected at 13.4 per cent, that is, 1 percentage point lower than Centre’s budget assumption of 14.4 per cent.

    Fiscal aggregates

    • The Controller General of Accounts’ data indicate a gross tax revenues (GTR) of Rs 20.2 lakh crore and net tax revenue of Rs 14.2 lakh crore for 2020-21. 
    • The likely growth in GTR for 2021-22 may be derived by applying a buoyancy of 0.9.
    • This gives a tax revenue growth of 12 per cent, translating that to projected gross and net tax revenues for 2021-22 would mean Rs 22.7 lakh crore and Rs 15.8 lakh crore respectively. 
    • This implies some additional net tax revenues to the Centre amounting to Rs 0.35 lakh crore as compared to the budgeted magnitudes.
    • The main expected shortfall may still be in non-tax revenues and non-debt capital receipts.
    • According to the CGA numbers, their 2020-21 levels are respectively Rs 2.1 lakh crore and Rs 0.57 lakh crore.
    • Applying a growth rate of 15 per cent on these, a shortfall in 2021-22 to the tune of Rs 1.3 lakh crore may arise in non-tax revenues and non-debt capital receipts.

    So, how much would be the Fiscal Deficit?

    • The growth rates of non-tax revenues and and non-debt capital receipts average to a little lower than 15 per cent during the five years preceding 2020-21.
    • In any case, the large budgeted growth of 304 per cent in non-debt capital receipts for 2021-22 seems quite unlikely because of the challenges posed by the second wave.
    • Taking into account RBI’s recently announced dividend of Rs 0.99 lakh crore to the Centre, the main shortfall may be in non-debt capital receipts.
    • Together, the overall shortfall in total non-debt receipts may be limited to about Rs 0.9 lakh crore, or 0.4 per cent of estimated nominal GDP.
    • This indicates that a slippage, if any, in the budgeted fiscal deficit of 6.7 per cent of GDP, as revised in view of the recently released GDP data, could be a limited one.

    Way forward: Prioritise three heads

    • First, an increase in the provision for income support measures for the vulnerable rural and urban population.
    • Second, in light of the recent decision, the budgeted expenditure on vaccination of Rs 0.35 lakh crore ought to be augmented, at the very least, doubled.
    • Third, additional capital expenditure for select sectors, particularly healthcare, should also be provided for.
    • Together these additional expenditures would amount to Rs 1.7 lakh crore, about 0.8 per cent of the estimated nominal GDP.
    • Thus, we need to plan for a fiscal deficit of about 7.9 per cent of GDP.

    Borrowing programme would need RBIs support

    • The Centre has announced borrowings of Rs 1.6 lakh crore to meet the shortfall in the GST compensation cess.
    • Given the higher fiscal deficit, it would need to add to its borrowing programme another Rs 2.6 lakh crore, taking the total borrowing, including GST compensation, to about Rs 16.3 lakh crore, from Rs 12.05 lakh crore now.
    • Borrowing by states would be in addition to this.
    • The net result will be an unprecedented borrowing programme by the Centre which may require RBI’s support.
    • RBI is injecting liquidity into the system through various channels.
    • Banks have sufficient liquidity to subscribe to new debt.
    • This is indirect monetisation of debt.
    • This is not new, but the scale is much higher.
    • Direct monetisation is best avoided.
    • The success of the borrowing programme of the Centre depends on the support provided by the RBI.
    • The support need not be direct.
    • It can be indirect as is currently happening. RBI is injecting liquidity into the system in a big way.
    • Despite this, the money multiplier is low.
    • This may be attributed to two reasons: Low credit expansion and larger leakage in the form of currency.
    • The potential for money supply growth is large.
    • The discussion in the monetary policy statement on inflation is focused entirely on supply availability and bottlenecks in the distribution of commodities.
    • The output gap is certainly relevant.
    • But equally relevant in an analysis of inflation is liquidity in the system, and its impact on output and prices with lags.
    • The injection of liquidity has its limits.

    Conclusion

    With higher expenditure, financed through borrowings, the impact of liquidity expansion on inflation needs to be monitored.

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  • Goods and Services Tax (GST)

    Issues with special treatment of states with higher contribution to GST pool

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: GST Council

    Mains level: Paper 3- Issues with special treatment to states contributing more to GST pool

    The article highlights the issues with the demand for special treatment of states with higher contribution to GST pool.

    Debate on GST

    • The issue of GST concessions on COVID relief has brought into focus the structural flaws in the GST structure.
    • In this process, the structure and design of GST — essentially a tax on consumption — is being questioned.
    • The issue of  “rich” states versus “poor” ones, the decision-making process in the GST Council, and the representation of various states in the Council have also come into the focus.

    Why States should be treated equally in GST Council

    1) Consensus on GST

    • The structure and design of GST and its basic features, as enshrined in the 101st Constitution Amendment Act, were unanimously adopted and endorsed by Parliament.
    • The broader and finer points of the law, were thoroughly discussed and debated and recommended by the GST Council after a complete consensus.
    • These were further debated and approved by not only Parliament but also by each of the state legislatures.
    • There was complete consensus even on the issue of delegated legislation — something unheard of in a federal environment.

    2) Equality of all states

    • In this process of consensus building, no state was accorded even the slightest of special privilege.
    • That is why the consensus surrounding GST was unprecedented whether in India or any other federation.
    • Therefore, arguing for special treatment of some states is a dangerous idea, particularly in governance, and more so in a welfare state.
    • For, this would open the gates for elitist arguments such as special rights for bigger taxpayers, unequal voting rights in elections and preferential treatment for a select few.

    3) Issues with greater contribution to GST revenue pool

    • It is not correct to argue that the GST collected in a state represents the revenue of that particular state for, under the GST mechanism, the tax deposited by a taxpayer in a state is a function of largely the value of supplies made by such taxpayer.
    • Approximately 50 per cent at the aggregate level and much higher at the state level of such values are of an inter-state nature.
    • In other words, most supplies made from any producing state are consumed elsewhere and the revenue in such a situation naturally and rightfully accrues to the destination state.

    4) No transfers based on a formula

    • It is equally fallacious to argue that under GST, most of the revenue is collected by the Union and is transferred to the states on the basis of some formula.
    • The quantum of IGST revenue that is settled to any state is directly related to the returns filed in that state and the cross utilisation of credit exhibited in such returns; part of this settlement also comprises tax on supplies destined to that state, as exhibited in the returns of such suppliers.
    • There is no “formula” as such for “transfer” of revenue collected by the Centre. Instead, such “transfers” are directly relatable to the consumption (whether intermediate or final) in any state.

    5) Locational or geographical advantage

    • There is another dimension to the higher revenue collection in a few states.
    • One may note that such states enjoy locational or geographical advantages, being mostly coastal and immensely suited to the needs of trade and distribution as also manufacturing.
    • Also, the disadvantage to such states on account of lower availability of certain vital minerals like coal and iron ore was undone by the principle of freight equalisation resorted to in the years following Independence.
    • This contributed, in no small measure, to the development of such states.

    6) Unequal transfers of Central receipts

    • The argument of unequal transfers of central receipts also does not hold water, either in India or in any other federation.
    • As is well known, such transfers are intended for correcting horizontal fiscal imbalances in a federation.

    Conclusion

    We should thus concentrate on carrying forward the glorious traditions of perhaps the only institution of co-operative federalism that we have been able to build so far.

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  • Coronavirus – Health and Governance Issues

    South Asia’s healthcare burden

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Need for investment in public healthcare in South Asia

    The article contrasts the public healthcare system in South Asian countries with that of their Southeast Asian peers and highlights the shortcomings.

    Subpar public healthcare system

    • Super spreader events, a fragile health infrastructure neglected for decades, citizens not following health protocols, and logistical mismanagement were the factors responsible for the destruction in the second Covid-19 wave.
    • What has exacerbated the situation is a subpar public healthcare system running on a meagre contribution of a little over 1% of India’s Gross Domestic Product (GDP).
    • While the private medical sector is booming, the public healthcare sector has been operating at a pitiful 0.08 doctors per 1,000 people, World Health Organization’s (WHO) prescribed standard ois1:1000.
    • India has only half a bed available for every 1,000 people, which is a deficient figure even for normal days.
    • Bangladesh and Pakistan fare no better, with a bed to patient ratio of 0.8 and 0.6, respectively, and a doctor availability of less than one for every 1,000 people.
    • While ideally, out-of-pocket expenditure should not surpass 15% to 20% of the total health expenditure, for India, Bangladesh and Pakistan, this figure stands at an appalling 62.67%, 73.87% and 56.24%, respectively.

    Lack of investment in healthcare

    • Major public sector investments by the ‘big three’ of South Asia, i.e., India, Pakistan, and Bangladesh, are towards infrastructure and defence, with health taking a backseat.
    • While India has the world’s third-largest military expenditure, its health budget is the fourth-lowest.
    • Indian government in this year’s budget highlighted an increase of 137% in health and well-being expenditure, a closer look reveals a mismatch between facts and figures.
    • In Pakistan, even amidst the pandemic, the defence budget was increased while the spending on health remained around $151 million.
    • Not too far behind is Bangladesh, with decades of underfunding culminating in a crumbling public healthcare system.
    • Major public sector investments by the ‘big three’ of South Asia, i.e., India, Pakistan, and Bangladesh, are towards infrastructure and defence, with health taking a backseat.
    • A quick look at pre-pandemic sectoral allocations explains the chronically low status of human development indicators in the three countries.

    Learning from Southeast Asia

    • Southeast Asia has prioritised investments in healthcare systems while broadening equitable access through universal health coverage schemes.
    • Vietnam’s preventive measures focused on investments in disease surveillance and emergency response mechanisms.
    • Even countries like Laos and Cambodia are making a constant effort towards improving the healthcare ecosystem.
    • All have done much better than their South Asian peers.

    Conclusion

    Learning from the devastation unleashed by the pandemic, South Asian countries must step up investment in their public healthcare sectors to make them sustainable, up to date and pro-poor; most importantly, the system should not turn its back on citizens.

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  • Parliament – Sessions, Procedures, Motions, Committees etc

    Holding states to account

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 2- Scrutinising the States

    The article highlights the excessive focus on the Union government and the lack of scrutiny of the functioning of the States in various areas.

    Need for focus on the States

    • In discussions on reforms or debates about public expenditure, there is an excessive focus on the Union government.
    • This focus reflects our mindset that there is a “Centre”, though constitutionally, there is no “Centre”. There is the Union government.
    • There is not as much interest in State Finance Commissions and their recommendations as it is in the Union Finance Commission’s recommendations.
    • Alternatively, there is limited scrutiny of state-level expenditure, or fiscal devolution and decentralisation of decision-making within states, or tracking functioning of state legislatures.
    • Most factor markets we seek to reform are on the concurrent list or the state list.

    The Annual Review of State Laws 2020: Key findings

    • PRS Legislative Research published this report and it focuses on the legislative work performed by states in the calendar year 2020.
    • The annual review has been done in the pandemic year as 2020 saw the first wave of the pandemic.
    • It covers 19 state legislatures, including the Union territory of Delhi, which together accounts for 90 per cent of the population of the country.

    1) Low Productivity

    • As a benchmark, the Parliament met for 33 days in 2020.
    • Pre-2020, these 19 states met for an average of 29 days a year.
    • In 2020, they met for an average of 18 days.
    • When they met in 2020, States passed an average of 22 Bills (excluding Appropriation Bills).
    • Karnataka passed 61 Bills, the highest in the country.
    • The lowest was Delhi which passed one Bill, followed by West Bengal and Kerala, which passed two and three Bills respectively.

    2) States pass Bills without scrutiny

    • The report states that the State legislatures pass most Bills without detailed scrutiny.
    • In 2020, 59 per cent of the Bills were passed on the same day that they were introduced in the legislature.
    • A further 14 per cent were passed within a day of being introduced.
    • In Parliament, Bills are often referred to Parliamentary Standing Committees for detailed examination.
    • In most states, such committees are non-existent.

    3) Information not shared by the legislature

    • Information and data on state legislatures is not easily available.
    • While some state legislatures publish data on a regular basis, many do not have a systematic way of reporting legislative proceedings and business.”
    • Typically, information becomes available when countervailing pressure is generated.
    • Reports like this help to do that.

    Consider the question “In discussions on reforms, or debates about public expenditure, there is an excessive focus on the Union government. However, on reforms and public expenditures, we also need to focus on scrutinising the states”. Comment.

     

    Conclusion

    Scrutinising States on various areas of their functioning is important to hold them accountable. The availability of data from state legislatures is an opportunity to monitor them better.

     

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