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Type: Op-ed

  • The IT Act new rules and the challenge of Big Tech

    The article discusses the issues with the new rules issues under the IT Act.

    Issues with the new rules

    1) No discussion

    • Last week, the Union Government issued a set of rules under the Information Technology Act, superseding rules issued under Section 79 of that statute in 2011. 
    • This has happened in the absence of open and public discussion and without any parliamentary study and scrutiny.

    2) Concerns over legal basis

    • The Union Government has chosen to pass these rules under the requirement to outline the due diligence that Internet intermediaries have to follow in order to be able to claim their qualified legal immunity under Section 79 of the IT Act.
    • These rules at the outset appear unlawful even with respect to whether they could have been issued under the Information Technology Act in the manner chosen by the government, leave alone their constitutionality with respect to fundamental rights.
    • The government’s gazette notification has further claimed that the rules were also issued under the legal authority to specific procedure for blocking web content under Section 69A of the IT Act.
    • However,  rules overseeing government web content blocking powers have already been issued for that section in 2009, and not superseded.

    3) Using rule making power to issue primary legislation

    • The ability to issue rules under a statute — i.e. to frame subordinate legislation — is by its nature a limited, constrained power.
    • The executive branch is subordinate to what Parliament has permitted it and cannot use its rule-making power to seek to issue primary legislation by itself.
    • With the present Internet content and social media rules, the Union Government has done precisely that.
    • The executive branch has created new rules that apply only to “significant social media intermediaries” — a term that appears nowhere in the Information Technology Act.
    • The rules have grown to include a chapter on how digital news sites have to be registered before the Ministry of Information and Broadcasting.
    • However, digital news service registration is not required under the IT Act and streaming video content has not been included under the ambit of the Cinematograph Act.

    Consider the question “What are the challenges in the regulation of Big Tech to democracies? Suggest the measures to deal with these challenges.”

    Conclusion

    Instead of advancing Internet content control, India needs to advancing surveillance law reform or enacting a strong statutory data protection framework.

  • Operation Green

    The article compares the performance of  Operation Flood with Operation Green and offers several lessons for the success of Operation Green.

    Operation Green and its expansion

    • There were three basic objectives when OG was launched.
    • First, that it should contain the wide price volatility in the three largest vegetables of India (TOP).
    • Second, it should build efficient value chains of these from fresh to value-added products with a view to give a larger share of the consumers’ rupee to the farmers.
    • Third, it should reduce the post-harvest losses by building modern warehouses and cold storages wherever needed.
    • The Union budget for the FY 2021-22 proposes the expansion of Operation Green (OG) beyond tomatoes, onions, and potatoes (TOP) to 22 perishable commodities.
    • The move reflects the government’s intentions of creating more efficient value chains for perishables.

    Comparing performance of OG with horticulture sector

    • A closer examination of the scheme reveals that it is nowhere near achieving its objectives.
    • ICRIER research reveals that price volatility remains as high as ever.
    • It also reveals that farmers’ share in consumers’ rupee is as low as 26.6 per cent for potatoes, 29.1 per cent in the case of onions, and 32.4 per cent for tomatoes (see graph).
    •  In cooperatives like AMUL, farmers get almost 75-80 per cent of what consumers’ pay.
    • Operation Flood (OF) transformed India’s milk sector, making the country the world’s largest milk producer, crossing almost 200 million tonnes of production by now.
    • Although OG is going to be more challenging than OF there are some important lessons one can learn from OF.

    Lessons from operation flood

    • First and foremost is that results are not going to come in three to four years.
    • OF lasted for almost 20 years before milk value chains were put on the track of efficiency and inclusiveness.
    • There has to be a separate board to strategise and implement the OG scheme, more on the lines of the National Dairy Development Board (NDDB) for milk.
    • Second, we need a champion like Verghese Kurien to head this new board of OG.
    • The MoFPI can have its evaluation every six months, but making MoFPI the nodal agency for implementing OG with faceless leaders is not very promising.
    • Third, the criteria for choosing clusters for TOP crops under OG is not very transparent and clear.
    • The reason is while some important districts have been left out from the list of clusters, less important ones have been included.
    • What is needed is quantifiable and transparent criteria for the selection of commodity clusters, keeping politics away.
    • Fourth, the subsidy scheme will have to be made innovative with new generation entrepreneurs, startups and FPOs.
    • The announcement to create an additional 10,000 FPOs along with the Agriculture Infrastructure Fund and the new farm laws are all promising but need to be implemented fast.

    Consider the question “What are the objectives of Operation Green? How far has Operation Green succeeded in achieving its objectives?”

    Conclusion

    These lessons from Operation Flood will help in securing the success of the expanded Operation Green.

  • Imparting direction to science in India

    The article elaborates on the various aspect of the 5th Science Policy.

    Scientific publication from India and issues with it

    • From the report published by the National Science Foundation of the U.S. in December 2019, India was the third-largest publisher of peer-reviewed science and engineering journal articles and conference papers, with 135,788 articles in 2018.
    • This milestone was achieved through an average yearly growth rate of 10.73% from 2008, which was greater than China’s 7.81%.
    • However, China and the United States had about thrice and twice the number, respectively, of India’s publications.
    • Also, the publications from India are not impactful.
    • From the report, in the top 1% of the most cited publications from 2016 (called HCA, or Highly Cited Articles), India’s index score of 0.7 is lower than that of the U.S., China and the European Union.
    • An index score of 1 or more is considered good.
    • The inference for India is that the impact, and hence the citation of publications from India, should improve.

    Patents filed by India

    • The World Intellectual Property Organization (WIPO) through their Patent Cooperation Treaty (PCT) is the primary channel of filing international patent applications.
    • In its report for 2019, WIPO says India filed a modest number of 2,053 patent applications.
    • Compared to the 58,990 applications filed by China and 57,840 by the U.S., India has a long way to go.
    • The Indian Government put in place the National Intellectual Property Rights (IPR) Policy in 2016 to “stimulate a dynamic, vibrant and balanced intellectual property rights system”.
    • One of the objectives is human capital development.
    • The mission to foster innovation, replicate it at scale and commercialise it is a work in progress consequent to the policy.

    India’s Science Policies

    • There have been four science policies till now, after 1947, with the draft of the fifth policy having been released recently.
    • India’s first science policy adopted in 1958.
    • It led to the establishment of many research institutes and national laboratories, and by 1980.
    • The focus in the second science policy, Technology Policy Statement, in 1983, was technological self-reliance and to use technology to benefit all sections of the society.
    • The Science and Technology Policy 2003, the first science policy after the economic liberalisation of 1991, aimed to increase investment in research and development and brought it to 0.7%.
    • The Scientific and Engineering Research Board (SERB) was established to promote research.
    • In 2013, India’s science policy included Innovation in its scope and was called Science, Technology and Innovation Policy.
    • The focus was to be one of the top five global scientific leaders, which India achieved.

    What 5th science policy seeks to achieve

    • The draft of the Science, Technology and Innovation Policy 2020 (STIP2020)  has an ambitious vision to “double the number of full-time equivalent (FTE) researchers, Gross Domestic Expenditure on R&D (GERD) and private sector contribution to the GERD every 5 years” .
    • It also aims to “position India among the top three scientific superpowers in the next decade”.
    • It also defines strategies to improve funding for and participation in research. India’s Gross Domestic Expenditure on R&D (GERD) is currently around 0.6% of GDP.
    • This is quite low when compared to the investments by the U.S. and China which are greater than 2% and Israel’s GERD is more than 4%.
    • The policy seeks to define strategies that are “decentralized, evidence-informed, bottom-up, experts-driven, and inclusive”.

    Solutions to improve funding

    • STIP2020 defines solutions to improve funding thus: all States to fund research, multinational corporations to participate in research, fiscal incentives and support for innovation in medium and small scale enterprises.
    • The new measures should not become a pretext to absolve the Union and State governments of their primacy in funding research; the government should invest more into research.

    Other critical focus areas

    • 1) Other critical focal areas ar inclusion of under-represented groups of people in research.
    • 2) Support for indigenous knowledge systems.
    • 3) Using artificial intelligence.
    • 4) Reaching out to the Indian scientific diaspora for collaboration.
    • 5) Science diplomacy with partner countries.
    • 6) Setting up a strategic technology development fund to give impetus to research.

    Conclusion

    More specific directives and implementation with a scientific temper without engaging in hyperbole will be key to the policy’s success; and its success is important to us because, as Carl Sagan said, “we can do science, and with it we can improve our lives”.

  • Who gets to decide what is legitimate free speech

    The article highlights the challenges in regulating the Big Techs.

    Controlling Big Tech

    • Recently, the Indian government announced a sweeping array of rules reining-in social media.
    • Specifically, social media platforms are required to become “more responsible and more accountable” for the content they carry.
    • India is by no means alone in taking steps to regulate at Big Tech.
    • The social media companies would argue that they are self-regulating.
    • The problem is that their actions are ad hoc, inconsistent and reactive 

    Issues

    • A user can be removed from the platform if his post threatens the “unity, integrity, defence, security or Sovereignty of India, friendly relations with foreign states, or public order, or causes incitement to the commission of any cognisable offence or prevents investigation of any offence or is insulting any foreign States”.
    • In other words, the government is giving itself plenty of room to cut Big Tech down to size.

    Why the issue needs government intervention: 3 arguments

    1) Conflict of interest

    • The government intervention rests on the presumption that it is never in the commercial interest of Big Tech to remove offensive speech.
    • This is because as such content goes viral more readily, bringing in more eyeballs, more data and more advertising revenue.
    • Big Tech proponents would contend that the companies are getting smarter about the risks of allowing such content on their systems and will inevitably find it in their self-interest to pre-emptively kill it.

    2) State is the guardian of public interest

    • A second argument in favour of government would be as follows: States are the guardians of the public interest.
    • In democratic societies, governments are elected to represent the will of the people.
    • So if there is a hard choice to be made about curtailing speech or permitting it, it seems only natural to turn to the public guardian.
    • The counter to this theory would be that, in practice, even democratically elected governments are far from perfect.
    • In fact according to The Economist Intelligence Unit’s Democracy Index, both India (ranked 53rd ) and the US (ranked 25th) are “flawed democracies”.
    • In parallel, the argument for Big Tech to be the upholder of the public interest could rest on the theory that well-functioning markets are superior to flawed democracies in optimising social welfare.
    • The counter-argument to this view would be that the tech industry is itself deeply flawed.
    • There is a lack of sufficient choice of platforms; there are asymmetries in power between the companies and users and Big Tech is amassing data on the citizens and using this information for its own purposes, which makes the disparity even greater.

    3) Bargaining power of BigTech

    • A third perspective is to acknowledge it doesn’t matter who is the “true” upholder of the public interest.
    • For all practical purposes, the outcome of the struggle between Big Government and Big Tech will be determined by relative bargaining power.
    • While governments technically have the ability to take entire platforms offline within the borders of their countries, these platforms are now so enormous that their users would revolt.
    • This is why we witnessed the audacity, recently, of Google and Facebook, threatening to de-platform Australia.

    Consider the question “What are the challenges in the regulation of Big Techs? Suggest ways to deal with these challenges.”.

    Conclusion

    While governments technically have the ability to take entire platforms offline within the borders of their countries, these platforms are now so enormous that their users would revolt. This is why we witnessed the audacity, recently, of Google and Facebook, threatening to de-platform Australia.

  • The absurdity of the anti-defection law

    The article highlights the shortcomings of the anti-defection law and its failure in ensuring the stability of the government.

    Background of anti-defection law

    • The anti-defection law was included in the Constitution as the Tenth Schedule in 1985.
    • The main purpose was to preserve the stability of governments and insulate them from defections of legislators from the treasury benches.
    • The law stated that any Member of Parliament (MP) or that of a State legislature (MLA) would be disqualified from their office if they voted on any motion contrary to the directions issued by their party.

    Issues with the anti-defection law

    1) Against the concept of representative democracy

    • The provisions of the anti-defection law is not limited to confidence motions or money bills.
    • It applies to all votes in the House, on every Bill and every other issue.
    • It even applies to the Rajya Sabha and Legislative Councils, which have no say in the stability of the government.
    • Therefore, an MP (or MLA) has absolutely no freedom to vote their judgement on any issue.
    • They have to blindly follow the direction of the party.
    • This provision goes against the concept of representative democracy.

    2) The act turns legislator to be an agent of  the party

    • There are two broadly accepted roles of a representative such as an MP.
    • One is that they are agents of the voters and are expected to vote according to the wishes and for the benefits of their constituents.
    • The other is that their duty to their constituents is to exercise their judgement on various issues towards the broader public interest.
    • In this, they deliberate with other MPs and find a reasonable way through complex issues.
    • The anti-defection law makes the MP neither a delegate of the constituency nor a national legislator but converts them to be just an agent of the party.

    3) Broken chain

    • The legislator is accountable to voters, and the government is accountable to legislators.
    • In India, this chain of accountability has been broken by making legislators accountable primarily to the party.
    • This means that anyone from the party having a majority in the legislature is unable to hold the government to account.
    • This negates the concept of them having to justify their positions on various issues to the people who elected them to the post.

    4) No incentive for MPs to understand policy choices

    • If an MP has no freedom to take decisions on policy and legislative proposals, there would be no incentive to put in the effort to understand the different policy choices and their outcomes.
    •  The MP becomes just another number to be tallied by the party on any vote that it supports or opposes.

    5) Weakening of the accountability mechanism

    • While introducing the draft Constitution, Dr. B.R. Ambedkar said that the presidential form (such as in the United States) had higher stability but lower accountability.
    • This is because the President is elected for four years, and cannot be removed except for proven misdemeanour.
    • In the parliamentary form, the government is accountable on a daily basis through questions and motions and can be removed any time it loses the support of the majority of members of the Lok Sabha.
    • The drafting committee believed that India needed a government that was accountable, even at the cost of stability.
    • The anti-defection bill weakens the accountability mechanism.

    6) The act fails to provide stability

    • The political system has found ways to topple governments by reducing the total membership through resignations.
    • In other instances, the Speaker — usually from the ruling party — has delayed taking a decision on the disqualification.
    • The Supreme Court has tried to plug this by ruling that the Speaker has to take the decision in three months, but it is not clear what would happen if a Speaker does not do so.
    • The premise that the anti-defection law is needed to punish legislators who betray the mandate given by the voters also seems to be flawed.
    • We have seen many of the defectors in States such as Karnataka and Madhya Pradesh being re-elected in the by-polls, which were held due to their disqualification.

    Way forward

    • The problem arises from the attempt to find a legal solution to what is essentially a political problem.
    • If stability of government is an issue due to people defecting from their parties, the answer is for parties to strengthen their internal systems.
    •  If parties attract members on the basis of ideology, and they have systems for people to rise within the party hierarchy on their capabilities rather than inheritance, there would be a greater exit barrier.

    Consider the question “How far has the anti-defection law succeeded in preventing the destabilisation of the governments? Give reasons in support of your argument.”

    Conclusion

    The anti-defection law has been detrimental to the functioning of our legislatures as deliberative bodies which hold the executive to account on behalf of citizens. It has turned them into fora to endorse the decision of the government on Bills and budgets. And it has not even done the job of preserving the stability of governments. The Tenth Schedule to the Constitution must be repealed.

  • In Centre’s IT rules, there is accountability with costs

    The article examines the issues with  Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

    Change in the immunity for social media platforms

    • With the social media platforms amassing tremendous power, the Government of India and has over time sought to devise a core framework to governs social media.
    • This framework known as the “intermediary liability” has been made legally through Section 79 of the Information Technology Act, 2000.
    • This framework has been supplemented by operational rules, and the Supreme Court judgment in Shreya Singhal v. Union of India.
    • All this legalese essentially provides large technology companies immunity for the content that is transmitted and stored by them.
    • Recently, the Government of India announced drastic changes to it through the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021.

    Issues with the Rules

    1) Privacy concern

    • The regulations do contain some features that bring accountability to social media platforms.
    • For instance, they require that prior to a content takedown, a user should be provided adequate notice.
    • However, there are several provisions in the rules that raise privacy concerns.
    • Take traceability, where instant messaging platforms which deploy end-to-end encryption that helps keep our conversations private will now effectively be broken.
    • This is because now the government may require that each message sent through WhatsApp or any other similar application be tied to the identity of the user.
    • When put in the larger context of an environment that is rife with cybersecurity threats, an inconsistent rule of law and the absence of any surveillance oversight, this inspires fear and self-censorship among users.
    • The core of the traceability requirement undermines the core value of private conversations.

    2) Regulation without clear legal backing

    • The rules seek to regulate digital news media portals as well as online video streaming platforms.
    • Rules will perform functions similar to those played by the Ministry of Information and Broadcasting for TV regulation.
    • For instance, as per Rule 13(4), this also now includes powers of censorship such as apology scrolls, but also blocking of content.
    • All of this is being planned to be done without any legislative backing or a clear law made by Parliament.
    • A similar problem exists with digital news media portals.
    • The purview of the Information Technology Act, 2000, is limited.
    • It only extends to the blocking of websites and intermediary liabilities framework, but does not extend to content authors and creators.
    • Hence, the Act does not extend to news media despite which it is being stretched to do so by executive fiat.
    • The oversight function will be played by a body that is not an autonomous regulator but one composed of high ranking bureaucrats.
    • This provides for the discretionary exercise of government powers of censorship over these sectors.

    Way forward

    • This could have ideally been achieved through more deliberative, parliamentary processes and by examining bodies in other democracies, which face similar challenges.
    • For instance, OFCOM, a regulator in the United Kingdom, has been studying and enforcing regulations that promise higher levels of protection for citizens’ rights and consistency in enforcement.
    • Instead, the present formulation increases government control that suffers from legality and core design faults.
    • It will only increase political control.

    Consider the question “What is the purpose of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, and what are the concerns with these rules?”

    Conclusion

    While every internet user in India needs oversight and accountability from big tech, it should not be at the cost of increasing political control, chilling our voices online and hurting individual privacy.

  • structural issues with legislatures in Union Territories

    There are structural flaws in the provisions of the composition of legislature and the relationship between the council of ministers and the Administrator in the UTs.

    Pattern in the resignations of MLAs

    • Recently, the resignations of MLAs from the Puducherry Assembly led to the fall of government there.
    • The same had happened in 2019 in Karnataka.
    • Resigning from the membership of the House is every member’s right.
    • But according to Article 190 of the Constitution, the resignation should be voluntary or genuine.
    • If the Speaker has information to the contrary, he or she is not obliged to accept the resignation.
    • But there is by now a familiar pattern to the resignations of Members of the Legislative Assembly.
    • Such resignations invariably lead to the fall of the government.

    Purpose of providing legislature to UTs

    • The Constitution-makers/ Parliament provided a legislature and Council of Ministers to some of the UTs to fulfil the democratic aspirations of the people of these territories.
    • There was a realisation that the administration of these territories directly by the President through the administrators under Article 239 does not meet the democratic aspirations of the people.
    • The creation of a legislature and a Council of Ministers is logical and in consonance with the policy of the state to promote democracy.

    Structural issues with legislature in UTs

    1) Nomination of members and issues with it

    • A closer look at the relevant provisions in the Constitution reveals that this professed aim has often been sought to be defeated by the Union.
    • Article 239A was originally brought in, in 1962, to enable Parliament to create legislatures for the UTs.
    • A legislature without a Council of Ministers or a Council of Ministers without a legislature is a conceptual absurdity.
    • Similarly, a legislature that is partly elected and partly nominated is another absurdity.
    • The issue of nomination of members to the Puducherry Assembly had raised a huge controversy.
    • The Government of Union Territories Act provides for a 33-member House for Puducherry of whom three are to be nominated by the Central government.
    • So, when the Union government nominated three BJP members to the Assembly without consulting the government, it was challenged in the court.
    • Finally, the Supreme Court (K. Lakshminarayanan v. Union of India, 2019) held that the Union government is not required to consult the State government for nominating members to the Assembly and the nominated members have the same right to vote as the elected members.
    • There is provision for nomination of members to the Rajya Sabha [Article 80 (i)(a)].
    • But clause (3) of the Article specifies the fields from which they will be nominated.
    • But in the case of nomination to the Puducherry Assembly, no such qualification is laid down either in Article 239A or the Government of Union Territories Act.
    • This leaves the field open for the Union government to nominate anyone irrespective of whether he or she is suitable.
    •  As things stand, the law invites arbitrariness in dealing with the nomination of members to the UT legislature.

    2) Administrator’s powers

    • The administrator has the right to disagree with the decisions of the Council of Ministers and then refer them to the President for a final decision.
    • The President decides on the advice of the Union government.
    • So, in effect, it is the Union government which finally determines the disputed issue.
    • Although in NCT of Delhi v. Union of India (2019), the Constitution Bench of the Supreme Court had said that the administrator should not misuse this power.
    • The bench also said that the Administrator should use it after all methods have failed to reconcile the differences between him/her and the Council of Ministers.
    • As a matter of fact, such conflicts between the administrator, who is the nominee of the President, and the elected government is inherent in the constitutional arrangement created for the UTs.

    Consider the question “The conflicts between the administrator, who is the nominee of the President and the elected government is inherent in the constitutional arrangement created for the UTs. Comment.”

    Conclusion

    Experience shows that the UTs having legislatures with ultimate control vested in the central administrator are not workable. So far as the conspiratorial resignation by legislators to bring down their own government is concerned, the political class will have to get the better of the predatory instincts of political parties through constitutional or other means.

  • Federalism and India’s human capital

    The article argues for recognising the correlation between human capital and decentralisation in India.

    Low human capital indicators

    • In the World Bank’s Human Capital Index, the country ranked 116th.
    • The National Family Health Survey-5 for 2019-20 shows that malnutrition indicators stagnated or declined in most States.
    • The National Achievement Survey 2017 and the Annual Status of Education Report 2018 show poor learning outcomes.
    • In addition, there is little convergence across States.
    • India spends just 4% of its GDP as public expenditure on human capital:1% and 3% on health and education respectively— one of the lowest among its peers.

    Initiatives to address these issues

    • Investing in human capital through interventions in nutrition, health, and education is critical for sustainable growth.
    • The National Health Policy of 2017 highlighted the need for interventions to address malnutrition.
    • On the basis of NITI Aayog’s National Nutrition Strategy, the Poshan Abhiyaan was launched, as part of the Umbrella Integrated Child Development Scheme.
    • The latest Union Budget has announced a ‘Mission Poshan 2.0’ and the Samagra Shiksha Abhiyan has been the Centre’s flagship education scheme since 2018.

    Relation between decentralisation and human capital

    • International experience suggests that one reason why these interventions are not leading to better outcomes may be India’s record with decentralisation.
    • Globally, there has been a gradual shift in the distribution of expenditures and revenue towards sub-national governments.
    • These trends are backed by studies demonstrating a positive correlation between decentralisation and human capital.

    Issues with decentralisation in India

    1) Letting states decide the way of empowerment

    • The 73rd and 74th Amendments bolstered decentralisation by constitutionally recognising panchayats and municipalities as the third tier.
    • The Amendment also added the Eleventh and Twelfth schedules containing the functions of panchayats and municipalities.
    • These include education, health and sanitation, and social welfare for panchayats, and public health and socio-economic development planning for municipalities.
    • However, the Constitution lets States determine how they are empowered.
    • In effect, three tiers of government are envisaged in the Constitution it divides powers between the first two tiers — the Centre and the States
    • This has resulted in vast disparities in the roles played by third-tier governments.

    2) Centralised nature of fiscal architecture

    • While the Constitution assigns the bulk of expenditure responsibilities to States, the Centre has major revenue sources.
    • To address this vertical imbalance, the Constitution provides for fiscal transfers through tax devolution and grants-in-aid.
    • In addition, the Centre can make ‘grants for any public purpose’ under Article 282 of the Constitution.
    • While fiscal transfers that are part of tax devolution are unconditional, transfers under grants-in-aid or Centrally Sponsored Schemes (CSSs) can be conditional.
    • Therefore, the increase in the States’ share of tax devolution represents more meaningful decentralisation.
    • Despite some shifts towards greater State autonomy in many spheres, the centralised nature of India’s fiscal architecture has persisted. 
    • Centrally Sponsored Schemes (CSS) have formed a sizeable chunk of intergovernmental fiscal transfers over the years, comprising almost 23% of transfers to States in 2021-22.
    • But its outsized role strays from the intentions of the Constitution.
    • There are issues in the design of CSSs as well, with the conditions being overly prescriptive and, typically, input-based.
    • Against this, international experience reveals that schemes with output-based conditions are more effective.
    • Moreover, CSSs typically have a cost-sharing model, thereby pre-empting the States’ fiscal space.

    3) Lack of fiscal empowerment

    • Third-tier governments are not fiscally empowered.
    • The collection of property tax, a major source of revenue for third-tier governments, is under 0.2% of GDP in India, compared to 3% of GDP in some other nations.
    • The Constitution envisages State Finance Commissions (SFCs) to make recommendations for matters such as tax devolution and grants-in-aid to the third tier.
    • However, many States have not constituted or completed these commissions on time.

    Solution

    • The Centre should play an enabling role, for instance, encouraging knowledge-sharing between States.
    • For States to play a bigger role in human capital interventions, they need adequate fiscal resources.
    • To this end, States should rationalise their priorities to focus on human capital development.
    • The Centre should refrain from offsetting tax devolution by altering cost-sharing ratios of CSSs and increasing cesses.
    • Concomitantly, the heavy reliance on CSSs should be reduced, and tax devolution and grants-in-aid should be the primary sources of vertical fiscal transfers.
    • Panchayats and municipalities need to be vested with the functions listed in the Eleventh and Twelfth Schedules.

    Consider the question “There is a positive correlation between decentralisation and human capital. This in part explains India’s low human capital indicators. In light of this, examine the issues with the decentralisation in India and suggest the measures to deal with it.”

    Conclusion

    Leveraging the true potential of our multi-level federal system represents the best way forward towards developing human capital.

     

     

  • Being petroleum independent

    The article discusses the steps taken by the government to improve fuel efficiency standards and the for the transition to clean sources of energy.

    Reducing energy import dependence

    • Speaking on the increase in petrol and diesel prices, Prime Minister emphasised the need for clean sources of energy.
    • Expanding and diversifying energy supply is good, but if India is to reduce its energy import dependence, it must look towards first managing the demand for petroleum products.
    • It is worthwhile to reflect on measures taken by the previous governments as well as this government in this context.

    Steps taken

    National Electric Mobility Mission Plan

    • The UPA-2 administration formulated fuel efficiency standards for passenger vehicles that are now in effect.
    • It also constituted the National Electric Mobility Mission Plan (NEMMP).
    • While well-intended, both these actions fell short in terms of ambition.
    • India’s 2022 fuel efficiency standards for passenger cars are nearly 20% less stringent than the European Union’s standards.
    • The NEMMP primarily focused on hybrid electric vehicles.
    • Most of the incentives under the NEMMP went towards subsidising mild hybrids instead of electric vehicles.

    Multiple fuel pathways

    • Recently, the government has encouraged multiple fuel pathways in the transport sector including natural gas.
    • The Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme now focuses largely on electric vehicles.
    • The government has also provided several additional fiscal and non-fiscal incentives to encourage a transition to electric vehicles.

    Steps need to be taken

    • There are many things that the government can and should do to
    • First, the government should formulate a zero-emissions vehicle (ZEV) programme that would require vehicle manufacturers to produce a certain number of electric vehicles.
    • At present, the electric mobility initiative in India is driven largely by new entrants in the two- and three-wheeler space.
    • A ZEV programme would require all manufacturers to start producing electric vehicles across all market segments.
    • The government should also strengthen fuel efficiency requirements for new passenger cars and commercial vehicles.
    • Two-wheelers, which consume nearly two-third of the petrol used in India, are not subject to any fuel efficiency standards.
    •  Adopting stringent fuel efficiency standards and a ZEV programme by 2024 can result in India’s petroleum demand peaking by 2030.
    • The FAME should be extended not only to all passenger cars and commercial vehicles but also to agricultural tractors.

    Conclusion

    As the economy recovers from the pandemic, the demand for petroleum products will rise, as will prices. But the government can save money for the consumer while enhancing long-term energy security by wielding the regulatory tools at its disposal.

     

  • A changing fiscal framework

    The article examines the changes in government’s fiscal policy stance which supports the debt-financing and apparent contradiction displayed by increased excise duty.

    Increase in excise duty

    • Well before India began to globalise there was a time when each Union Budget announced sales tax increases on tobacco products.
    • The rise in tax was expected to be a shot in the arm for the revenue-starved government of our poor country.
    • India is less poor now, having risen to the rank of an emerging market economy.
    • Yet, COVID-19 has wreaked havoc.
    • As opposed to a Budget estimate of 3.5% for fiscal deficit, the revised estimates show a 2.7 times larger deficit of 9.5% for FY 2020-21. 
    • A comparison of the government’s revised Budget estimates with the original Budget estimates reveals a fall in receipts from every source of taxation except excise.
    • The revised Budget shows a rise of ₹94,000 crore on account of excise duties alone.
    • Presumably, the increase comes from the much-debated excise duty increases on petroleum and diesel.
    • The excise duty rise will hardly compensate for the huge falls in other tax revenues.
    • The larger excise duty collection is not large enough to have significantly reduced the inflated fiscal deficit figure.

    Implications of hike in excise duty

    • Given the nature of the products on which the excise duty has gone up, prices of commodities will rise in general.
    • With annual output shrinking by an estimated 7.7%, it is straightforward to conclude that unemployment has risen significantly.
    • The accompanying price rise will be the unemployed persons’ worst nightmare.
    • The result will be severe inequality.

    Change in economic policy framework

    • The Economic Survey 2020-21 considers Olivier Blanchard’s prescription that a fiscal deficit automatically transformed to government debt.
    • Such debts along with their servicing liabilities have a tendency to magnify over the years where present borrowings keep increasing to repay past borrowings and service charges.
    • This leaves little room for growth-enhancing expenditure and reduces a government’s creditworthiness in the eyes of lenders.
    • Debt-financed fiscal spending could well be a driver of growth.
    • It can improve the standard of living of the entire population, without necessarily removing inequality.
    • A government’s fiscal expenditure, Professor Blanchard points out, has stronger multiplier effects during recessions than during booms
    • The inequality, however, could well be benignant, for even though the rich will grow richer, the poor will escape out of poverty.

    Condition for debt-financed fiscal spending

    • Debt or the fiscal deficit constitutes the government’s spendable resources.
    • What will prevent the government from sinking into a debt trap?
    • Professor Blanchard shows that the debt-to-GDP ratio can be prevented from exploding if the rate of growth of GDP happens to be higher than the sovereign rate of interest.
    • This is the case in developed economies.
    • In such economies, debt financed government expenditure will create a positive primary surplus out of which interest payments can be made to keep the debt-GDP ratio under control.
    • There will, of course, be a maximum value that this ratio can attain, a value that is higher the larger is the excess of the growth rate over the interest rate.

    Contradiction in fiscal policy and fiscal regime

    • According to the Economic Survey, India’s average interest rate and growth rate over the last 25 years (leaving out FY 2020-21) have been 8.8% and 12.8% respectively.
    • Hence, Professor Blanchard’s condition is satisfied.
    • This, of course, is not to support excise duty increases, for it goes against the very principle of the Blanchard argument.
    • Therefore, there appears to be a contradiction between the government’s announced fiscal policy stance and the fiscal regime it is actually running.

    Consider the question”The Economic Survey 2020-2021 calls for the debt-financed fiscal spending. Do you think that this view is suitable for India economy? What are the risks involved?”

    Conclusion

    The government must consider the implications of increased excise on the economy and should focus on removing the contradiction in its fiscal policy and fiscal regime.