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Type: Op-ed

  • India at 75 is ready for a sedition-less future

    Context

    Chief Justice of India N V Ramana has ignited a passionate debate during a preliminary hearing concerning whether “sedition” should be an offence at all, and how to prevent its misuse or abuse, were it to remain

    Issues with the sedition under Section 124A

    • Against fundamental right: The meandering meanings of expressions such as “disaffection” towards the government, “hatred”, “contempt” etc. constitute an unreasonable restriction on the fundamental right to free expression guaranteed under Article 19(1)(a).
    • Neither the framers of the Constitution nor the authors of the amended Article 19(2) included “sedition” as a ground for “reasonable restriction” to freedom of speech and expression.
    • Colonial past: CJI Ramana in preliminary hearings has pointedly asked the Attorney General whether “sedition under Section 124A of the Indian Penal Code is still required after 75 years of independence from colonial rule.
    • Prone to misuse: The lack of definition of terms used in the section leaves vide the scope for interpretation and thus rampant misuse and abuse.

    Way forward

    • Some law luminaries have found new stirrings of hope in the Supreme Court to strike it down.
    • Find means to prevent misuse and abuse: Alternative way,as the learned attorney general observed is to find constitutional ways and practical means to prevent the abuse and misuse of law.
    • Forbid rampant private complaints:  A most immediate step is to forbid rampant private complaints by citizens and authorise only very senior police officials to take appropriate action.

    Conclusion

    What Gandhiji said — the law may not be used to “manufacture affection” under pain of a penal sanction — was as true then as it remains now. It is high time to realise that the law of “sedition” must go, even when it may strictly not even exist!

  • EU’s vaccine travel pass discriminates against low-income countries

    Context

    The introduction of Covid-19 vaccines has opened up opportunities to help revive travel. However, it is important to carefully design policies that help revive travel demand.

    Vaccine certificates

    • Many countries like China and Israel have introduced vaccine certificates that ease the process of entering and travelling across the destination country for vaccinated travellers.
    • Can encourage discriminatory treatment: Though these certificates can ensure trade facilitation, they can potentially act as a trade barrier if they encourage discriminatory treatment.
    • The recent and the most contentious issue in this regard is the European Union’s “Green Pass” scheme.

    Issues with European Union’s Green Pass

    • Through this vaccine certificate, the European Commission intends to remove travel restrictions such as entry bans, quarantine obligations and testing.
    • Only 4 vaccines listed: The EU has listed only four vaccines approved by the European Medicines Agency (EMA) for the pass: Pfizer-BioNTech’s Comirnaty, Moderna’s Spikevax, Oxford-AstraZeneca Vaxzevria and Johnson & Johnson’s Janssen.
    • It makes travellers from countries administering alternate vaccines ineligible for certification.
    • When it was launched, the policy did not even allow AstraZeneca’s Indian-manufactured vaccine, Covishield.
    • Against COVAX policy: This goes against the policy of COVAX, which has categorically stated that such measures would effectively create a two-tier system and would negatively impact the growth of economies that are already suffering the most.
    • Discriminatory against low-income countries: Vaccine doses administered per 100 people is 1.4 for low-income countries as compared to 93.2 for high-income countries.
    • This makes travellers from low-income countries ineligible to avail these certificates.
    • As per estimates based on information from the WHO, countries not administering any of the EMA-approved vaccines account for at least 14 per cent of the vaccinated population.
    • These lie mostly in low and middle-income countries, including India.
    • Harms domestic sector: Nationals from many of these countries also serve in the hospitality industries in countries across the world, including Europe.
    • With this exclusion criteria, an indirect cost burden is put on their domestic service sectors that are already reeling due to the pandemic.
    • Against globalisation policy: With such discriminatory intervention, the EU policy does not go well with the globalisation policy of collective welfare.

    Steps to boost vaccine production

    • Covid vaccine makers across the world have created a platform, led by the Coalition for Epidemic Preparedness Innovations, to connect with key raw material suppliers needed for boosting production.
    • In a recent declaration, WTO members have agreed to review and eliminate unnecessary existing export restrictions on essential medical goods needed to combat the pandemic.

    Way forward

    • Cooperate on vaccine production: To achieve the desired goal, countries need to cooperate on vaccine production to accelerate the global vaccination process.
    • Remove restrictions and trade barriers: Accelerating global vaccine production makes lifting trade barriers on raw materials for vaccine production critical.
    • The two relevant bodies, WHO and WTO, should also work together to sort out selective criteria for international movement.

    Conclusion

    Developed countries should refrain from discriminatory international travel policies against low-income countries and focus on increasing vaccine production to close the vaccination gap at the global level.

  • First group insolvency proceeding points to larger weakness in IBC

    Context

    National Company Law Appellate Tribunal (NCLAT) stayed the approval granted by the Mumbai bench of the National Company Law Tribunal (NCLT) to the resolution plan for the Videocon Group.

    Concerns with resolution plan

    • Resolution plan submitted by Twinstar Technologies, provided for payment of Rs 2,962 crore — a mere 4.15 per cent of Videocon’s total admitted debt of Rs 64,838 crore.
    • Payment of debt not in fair and equitable manner:  Under the IBC (Section 30(2)(b)), the resolution plan must provide for payment of debts amongst creditors in a “fair and equitable” manner.
    • However, in the plan submitted by Twinstar, unsecured assenting financial creditors and operational creditors are getting a paltry 0.62 per cent and 0.72 per cent of their admitted dues.
    • Even the secured assenting and dissenting financial creditors had to settle for only 4.9 per cent and 4.56 per cent of their respective dues.
    • Confidentiality obligation concerns: Twinstar’s bid of Rs 2,962 crore is close to the liquidation value of the Videocon Group estimated at Rs 2,568 crore, thereby raising legitimate suspicion and concern over the confidentiality of the resolution process.
    • The I&B Regulations, 2016 state that the resolution professional must maintain the confidentiality of the fair market value and liquidation value of the corporate debtor and can only disclose the same to the CoC members after the resolutions plan have been submitted.
    • Time delay: Status-quo ante has been restored until the next date of hearing by which time more than three years would have passed since the Videocon group was admitted into insolvency proceedings.
    • This is way beyond the statutory timeline of 330 days.

    Confidentiality rules need to be revised

    • The CoC members must, on receipt of the information, issue an undertaking of confidentiality.
    • But no such obligation falls on the resolution professional.
    • Further, Section 29(2) of the code provides that the resolution professional must disclose all “relevant information” to the resolution applicant and it is for the resolution applicant to ensure compliance with confidentiality obligations.
    • Again, there is no such duty imposed on the resolution professional.
    • Even under Section 25 of the code, titled “Duties of resolution professional”, the specific duty to maintain confidentiality of sensitive information is absent.
    • Clearly, the current regime does not have much deterrence value so as to ensure solemn adherence to confidentiality.

    Conclusion

    Videocon was one of the first test cases to examine the prospects of insolvency jurisprudence in India and the first one, for group insolvency proceedings.  However, almost four years and a 95 per cent haircut later, the call for an immediate course correction couldn’t be louder.

    Back2Basics: Operational creditor and financial creditors

    • When a corporate defaulter is brought under the resolution process (Corporate Insolvency Resolution Process or CIRP), there can be two types of creditors to whom the corporate should give back money –
    • (1) the entities who gave loans or funds to the corporate.
    • (2) the entities from whom the corporate bought inputs and other services.
    • The financial creditors are basically entities (lenders like banks) that have provided funds to the corporate.
    • Their relationship with the entity is a pure financial contract, such as a loan or debt security.
    • On the other hand, business and other entities that have provided inputs and other materials and services and to whom the defaulted corporate owes a debt are called as operational creditors.
    • Both have claims on the defaulted corporate or the defaulted corporate owe payments to both these categories.
    • Rights for these categories under the resolution process are also different.
    • The IBC gives a clear preference to the claims of the financial creditors over the operational creditors through several procedures.

    Haircut

    • A haircut is the difference between the loan amount and the actual value of the asset used as collateral.
    • It reflects the lender’s perception of the risk of fall in the value of assets.
    • But in the context of loan recoveries, it is the difference between the actual dues from a borrower and the amount he settles with the bank.

  • The epoch of cyberweapons

    Context

    The controversy over the use of Pegasus spyware for snooping highlights the threats posed by cyber-weapons.

    The emergence of the cyber weapons epoch

    • Cyberattacks on institutions such as banks and on critical infrastructure have proliferated to an alarming extent, signaling the emergence of the cyber weapon epoch.
    • Privacy has been eroded and the Internet has become a powerful weapon in the hands of those seeking to exploit its various facets.
    • Fifth dimension of warfare: Cyber is often touted as the fifth dimension of warfare — in addition to land, sea, air and space.

    The domain of everyday life

    • Cyber, as the domain of military and national security, also co-exists with cyber as a domain of everyday life.
    • The war is no longer out there.
    • It is now directly inside one’s drawing-room, with cyberweapons becoming the weapon of choice.
    • Israelis today dominate the cyber domain along with the Chinese, Russians, Koreans and, of course, the Americans.
    • The linkage between sabotage and intrusive surveillance is but a short step.

    Cyberattacks during the past decades

    •  Beginning with the 2007 devastating cyberattack on Estonia’s critical infrastructure, this was followed by the Stuxnet worm attack a few years later on Iran’s nuclear facility.
    • The Shamoon virus attack on Saudi Aramco occurred in 2012.
    • In 2016, a cyberattack occurred on Ukraine’s State power grid; in 2017 there was a Ransomware attack (NotPetya) which affected machines in as many as 64 countries.
    • United Kingdom’s National Health Service fell prey to the Wannacry attack the same year.
    • The series of attacks happened this year on Ireland’s Health Care System and in the United States such as ‘SolarWinds’, the cyber attack on Colonial Pipeline and JBS, etc.

    What are the threats posed by cyberattacks?

    • Cyberweapons carry untold capacity to distort systems and structures — civilian or military.
    • Cyberweapons also interfere with democratic processes, aggravate domestic divisions and, above all, unleash forces over which established institutions or even governments have little control.
    • As more and more devices are connected to networks, the cyber threat is only bound to intensify, both in the short and the medium term.
    • What is especially terrifying is that instruments of everyday use can be infected or infiltrated without any direct involvement of the target.
    • The possibilities for misuse are immense and involve far graver consequences to an individual, an establishment, or the nation.
    • It is not difficult to envisage that from wholesale espionage, this would become something far more sinister such as sabotage.

    Way forward

    • Deeper understanding:  Dealing with ‘zero day’ vulnerabilities require far more thought and introspection than merely creating special firewalls or special phones that are ‘detached’ from the Internet.
    • Recognising the mindset: What is needed is a deeper understanding of not only cyber technologies, but also recognising the mindsets of those who employ spyware of the Pegasus variety, and those at the helm of companies such as the NSO.
    • Short-term remedies are unlikely to achieve desired results.
    • No use of AI: Artificial Intelligence (AI) is often seen as a kind of panacea for many of the current problems and ills, but all advances in technology tend to be a double-edged sword.
    • If truth be told, AI could in turn make all information warfare — including cyber related — almost impossible to detect, deflect or prevent, at least at the current stage of development of AI tools.

    Conclusion

    All this suggests that security in the era of ever-expanding cyberweapons could become an ever-receding horizon.

    Back2Basics: Zero-day vulnerability

    • The term “zero-day” refers to a newly discovered software vulnerability.
    • Because the developer has just learned of the flaw, it also means an official patch or update to fix the issue hasn’t been released.
    • So, “zero-day” refers to the fact that the developers have “zero days” to fix the problem that has just been exposed — and perhaps already exploited by hackers.

  • One nation, one police is a reform that is long overdue

    Context

    Police reforms are still an unfinished task, fifteen years after the Supreme Court gave directives in the Prakash Singh case in 2006.

    Integrated schemes in different facilities

    • The Government of India has lately been talking of “One Nation, One Ration Card”, “One Nation, One Registry”, “One Nation, One Gas Grid”, and even “One Nation, One Election”.
    • These ideas would contribute to an integrated scheme in different facilities and networks across the country.
    • The attempt at uniformity should, however, take cognisance of local factors and special features.

    Issue of different states passing different Police Act

    • Every state is legislating a different Police Act, purportedly in compliance with the Supreme Court’s directions on police reforms given on September 22, 2006.
    • We are in the process of having “one nation, many police acts”.
    • Circumventing the Prakash Singh judgement: The objective behind these laws is to give legislative cover to the existing arrangement and thereby circumvent the judicial directions given in the Prakash Singh judgement in 2006.
    •  Eighteen states have already passed Police Acts.
    • Absence of central guidelines: Several states have, in the absence of any central guidance or directive, passed their own Police Acts, blatantly violating the Supreme Court’s directions.
    • No action by judiciary: The Supreme Court has, for inexplicable reasons, not issued a contempt notice to any of the states for non-compliance of its directions on police reforms.

    Way forward

    1) The Centre should legislate a Model Police Act

    • Article 252 of the Constitution gives Parliament the power to legislate for two or more states by consent.
    • Soon after the Supreme Court’s directions on police reforms, the Police Act Drafting Committee of the Ministry of Home Affairs came out with the Model Police Act, 2006.
    • The Government of India should have enacted a law based on this Model Police Act with such changes as it may have found necessary, and the states should have mutatis mutandis ( making necessary alterations while not affecting the main point at issue) adopted it.
    • The least that the Government of India could have done was to legislate for the UTs and then prevailed upon the states to pass similar legislation.
    • Enacting a law in the states could have been incentivised by linking their passage with the modernisation grants made available to the states.

    2) Need for the spirit of cooperative federalism

    • In recent times, we saw the unseemly spectacle of the Mumbai police commissioner accusing the state home minister of using the police as an instrument for extortion.
    • In West Bengal, the police have been a mute spectator to the post-election violence.
    • The Centre, through a fiat, gave protection to all the MLAs of the BJP.
    • Normally, any such arrangement should have been in consultation and with the involvement of the state government. 
    • Cooperative federalism: The best option would be for the central and state governments to respect each other’s turf in a spirit of cooperative federalism.

    3)Need for a fresh look at the distribution of power

    • If the central and state governments cannot respect each other’s turf, it would perhaps be necessary to have a fresh look at the distribution of powers in the seventh schedule of the Constitution.

    Conclusion

    Police reforms on the lines of judicial directives given by the Supreme Court is the need of the hour. The centre needs to act first and nudge the states toward a uniform police structure throughout the country.

    Back2Basics: Supreme Court Directive on Police Reforms

    1) Limit political control

    • Constitute a State Security Commission to:
    • Ensure that the state government does not exercise unwarranted influence or pressure on the police.
    • Lay down broad policy guidelines.
    • Evaluate the performance of the state police.

    2. Appointments based on merit

    • Ensure that the Director-General of Police is appointed through a merit–based, transparent process, and secures a minimum tenure of 2 years.

    3. Fix minimum tenure

    • Ensure that other police officers on operational duties (including Superintendents of Police in charge of a district and Station House Officers in charge of a police station) are also provided a minimum tenure of 2 years.

    4. Separate police functions

    • Separate the functions of investigation and maintaining law and order.

    5. Set up fair and transparent systems

    • Set up a Police Establishment Board to decide and make recommendations on transfers, postings, promotions and other service-related matters of police officers of and below the rank of Deputy Superintendent of Police.

    6. Establish a Police Complaints Authority in each state

    • At the state level, there should be a Police Complaints Authority to look into public complaints against police officers of and above the rank of Superintendent of Police in cases of serious misconduct, including custodial death, grievous hurt or rape in police custody.
    • At the district level, the Police Complaints Authority should be set up to inquire into public complaints against the police personnel of and up to the rank of Deputy Superintendent of Police in cases of serious misconduct.

    7. Set up a selection commission

    • A National Security Commission needs to be set up at the union level to prepare a panel for selection and placement of chiefs of the Central Police Organizations with a minimum tenure of 2 years.

  • Promoting fiscal federalism

    Context

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

    Issues facing fiscal federalism in India

    1) Issue of 14% compensation

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

    2) Conditional increase in borrowing limit

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

    Way forward

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

    Conclusion

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

  • How to exit farming risk trap

    Context

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

    Issues of Indian agriculture

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

    Risk-to-return in agriculture

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

    Lessons from risk-to-return profile

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

    Way forward

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

    Conclusion

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

  • Supreme Court strikes down part of Constitution Amendment on cooperative societies

    Context

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

    Background of the 97th Constitutional Amendment

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

    Why was the Amendment struck down?

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

    Increasing control of the Union government

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

    Issues with Central control over cooperative sector

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

    Conclusion

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

  • Unlocking recovery

    Context

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

    Global growth momentum

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

    Growth momentum in India

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

    Factors deciding the trajectory of recovery

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

    Way forward

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

    Conclusion

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

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

    Context

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

    Background of the creation of CDS

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

    Issues with creating theatre command by dividing Air Force

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

    Way forward

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

    Conclusion

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