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  • Important Judgements In News

    [op-ed snap] Course correction for the Speaker’s office

    op-ed snap | Polity | Mains Paper 2: Parliament & State Legislatures

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 2- Suggest the ways to ensure the neutrality of the Speaker in cases under 10th Schedule.

    Context 

    Recently the Supreme Court of India recommended that Parliament should rethink as to whether disqualification petitions ought to be entrusted to a Speaker as a quasi-judicial authority when such a Speaker continues to belong to a particular political party either de jure or de facto.

    What the SC recommended?

    • Provision of a ‘Permanent Tribunal’: The SC was of the opinion that Parliament may seriously consider a Constitutional amendment to substitute-
      • The Speaker of the Lok Sabha and Legislative Assemblies with a ‘permanent Tribunal headed by a retired Supreme Court judge or a retired Chief Justice of a High Court.
      • Or some other outside independent mechanism.
    • What the ‘Permanent Tribunal’ achieve?
      • Impartiality and timely decisions: This is to ensure that such disputes are decided both swiftly and impartially.
      • Proper functioning of the democracy: It will give teeth to the provisions contained in the Tenth Schedule, which are so vital in the proper functioning of India’s democracy’.

    Range of functions of the Speaker

    • What is the nature of the duties of the Speaker?
      • Role under 10th schedule: Under 10th Schedule, the nature of duties of the Speaker, is as an “arbiter” or a “quasi-judicial body”. But it also extends to a range of its functions.
      • What other functions are performed by the Speaker? While facilitating the business of the House and to maintain decorum in the House, the Speaker has ‘extensive functions to perform in matters regulatory, administrative and judicial, falling under her domain.
      • She enjoys vast authority under the Constitution and the Rules, as well as inherently’.
      • Ultimate interpreter: She is the ‘ultimate interpreter and arbiter of those provisions which relate to the functioning of the House. Her decisions are final and binding and ordinarily cannot be easily challenged.
      • She decides the duration of debates, can discipline members and even override decisions by committees.
      • A representative of the House: She represents the collective voice of the House and is the sole representative of the House in the international arena’

    Issue of alleged bias

    • Allegations of bias by the Speaker: On several occasions, the Speaker’s role has been questioned on the allegation of bias. The office has been criticised for being an agent of pernicious partisan politics.
      • The Supreme Court has observed in Jagjit Singh versus State of Haryana“…certain questions have been raised about the confidence in the matter of impartiality on some issues having political overtones which are decided by the Speaker in his capacity as a Tribunal.”
    • As a minority view, Justice J.S. Verma in Kihoto Hollohan vs Zachillhu And Others observed: “The Speaker being an authority within the House and his tenure being dependent on the will of the majority therein, the likelihood of suspicion of bias could not be ruled out.”
    • What is the problem with the neutrality of the Speaker? Howsoever desirable the proposition of neutrality maybe, in the present circumstances, it would be unrealistic to expect a Speaker to completely abjure all party considerations.
      • Structural issues: There are structural issues regarding the manner of appointment of the Speaker and her tenure in office.
    • Why the Speaker prefers to maintain party membership: A member is appointed to the office of the Speaker if a motion nominating her is carried in the House.
      • Since the electoral system and conventions in India have ‘not developed to ensure protection to the office, there are cogent reasons for Speakers to retain party membership.
      • Elections are not always by consensus and there have been cases when different parties have fielded their own candidates.
      • All political parties campaign in the constituency of the Speaker.
      • Even if the Speaker is re-elected to the House, the office of the Speaker in India is still open for elections’.
    • Way forward
      • Revamp the structure: What is required is not merely incidental changes in the powers of the Speaker; rather a major revamp in the structure of the office itself is necessary.
      • How to ensure the neutrality of the Speaker? The scheme should be brought wherein Speakers should renounce all political affiliations, membership and activity once they have been elected, both within the Assembly and in the country as a whole.
    • Replicating the UK model:
    • Reference can be sought from the United Kingdom where the ‘main characteristic of the Speaker of the House of Commons is neutrality.
    • Once elected, the Speaker gives up all-partisan affiliation, as in other Parliaments of British tradition, but remains in office until retirement, even though the majority may change.
    • She does not express any political views during debates and is an election candidate without any ticket.
    • Impartiality, fairness and autonomy in decision-making are the hallmarks of a robust institution.
    • It is the freedom from interference and pressures which provide the necessary atmosphere where one can work with an absolute commitment to the cause of neutrality as a constitutional value.

    Conclusion

    At a time when India’s fall in ranks in the latest Democracy Index has evoked concern, it is expected that Parliament will pay heed to the reasoning of the Supreme Court and take steps to strengthen the institution of the Speaker.

     

     

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  • Issues related to Economic growth

    [op-ed snap] Fashioning the framework of a New India

    op-ed snap | Economics | Mains Paper 3: Inclusive Growth & Issues,Indian Economy

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- How could focusing on inclusive growth help spur the Indian economy.

    Context

    As the Indian economy is going through a severe crisis, a major solution to the present economic crisis is to go in for inclusive growth; it also means shared prosperity.

    Where India stands on poverty and how the slowdown is impacting the poor.

    • Bottom 30-40% adversely impacted: The slowing economy has had an adverse impact on the bottom 30%-40% of the population.
      • Absolute poverty on the rise: The incidence of absolute poverty, which has been falling since 1972-73, has increased to 30% (4% jump).
    • 44% population below the multi-dimensional Poverty line: The Human Development Report (2019) has shown, more than 44% of the Indian population is under the multi-dimensional poverty line.
    • Rising inequality: The poorest 50% population at present owns only 4.1% of the national wealth.
      • While the richest 10% of people own 73% of the total wealth in India (Suisse Credit 2019).
    • Rampant malnourishment: India has 15.2% population malnourished (women 15%) as against 9.3% in China.
      • And 50% of the malnourished children in the world are in India.
    • At 112th position on global hunger: India’s global hunger rank has gone up to 112 while Brazil is 18, China is 25 and South Africa, 59.
    • Dismal performance on education: In the field of education as per a UN report (2015), overall literacy in India is 74.04% (more than the 25% are totally illiterate) against 94.3% in South Africa, 96.6% in China and 92.6% in Brazil.
      • Almost 40-45% population is either illiterate or has studied up to standard 4.
    • Poor quality of education: Given the quality of education in India, the overall population is very poorly educated, with the share of ‘educated unemployment’ rising by leaps and bounds.

    What needs to be realised?

    • Focus on domestic demand: It needs to be realised that when exports are declining, the economy will have to depend on domestic demand for growth.
      • It is no more feasible for the top 20-25% population to continue growing without depending on the demand from the bottom 40-45% population.
    • Demand by the bottom 40% a must: There is thus a strong reason now for the economy to increase effective demand of this bottom 40-45% population at least to continue growing-to reach a $5-trillion economy by 2024.

    What is wrong with the growth process?

    • Bottom 40% not getting the fair share of growth: A major reason for the crisis is that the growth process has marginalised the bottom 40-plus% of the population.
      • It is in the sense that they do not get a fair share of the economic growth, and are more or less deprived of productive employment with a decent income.
      • They have not been used as active participants in the growth process. Their potential has not been promoted.
    • Less spending for the poor and its consequences: Though the bottom population depends on the government for basic health and elementary education (and also for access to higher educational opportunities)-
      • The government spends just 4% of GDP on health (against the norm of 4-6% of GDP) and 3% of GDP on education (against the norm of 6-8% of GDP).
      • How this dismal spending affects the poor: As a result of this below norm spending, these people are left hardly literate and sick, with poor nutrition and high morbidity.
      • They are incapable of acquiring any meaningful skills or participating actively when new technology is spreading in the rest of the economy.
    • The sub-optimal use of labour force: This sub-optimal use of the labour force in the economy is not likely to enable India to achieve optimal growth with proper use of the national resources -the labour force.

    Inclusive growth- a solution to the present economic crisis

    • Inclusive growth also includes shared prosperity: Here, inclusive growth does not mean only including all sections of the population in the growth process as producers and beneficiaries; it also means “shared prosperity”.
      • Since India has already committed to sustainable and inclusive growth at the UN General Assembly, India is definitely obliged to implement inclusive growth.
      • This should be our “New India”.
    • What “New India” would involve?
      • Improve the capability and opportunities: To start with, to improve the capabilities of the masses as well as their well-being by expanding productive employment opportunities for them.
      • What expanding productive employment mean? The main steps to expand productive employment for all in the economy should be made up of-
      • A process of inclusion.
      • Expanding the quality of basic health for all.
      • And ensuring quality education to all.
    • How will “New India” help?
      • Which will by itself generate large-scale employment in the government.
      • Having a well-educated and healthy labour force will ensure high employability.
      • Such people will be able to participate actively in the development process.
      • The cycle of more productive employment: Having a well-educated labour force will help start-ups and MSMEs, in turn triggering a cycle of more productive employment in the economy.
      • Global competitiveness increase: This will also improve the global competitiveness of our production units.
      • Labour absorption potential of MGNREGA: Employment guarantee schemes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) will also increase employment.
        • Assets generated under MGNREGA will expand capital formation in the economy, thereby raising the labour-absorbing capacity of the mainstream economy.
      • Why this strategy is advantageous?
        • Such a strategy has multiple advantages:
        • First– it will raise incomes and the well-being of those who need it most urgently.
        • Second– it will raise effective demand rapidly, which is so badly needed in the economy today to raise economic growth.
        • Third– growth will be equitable and sustainable.

    Way forward

    • Finally, how does one raise resources to increase new public investments in the selected sectors?
    • Raise direct taxes: One major strategy is to raise direct taxes, both capital tax and wealth tax.
      • Past growth has failed to reach the poor: Growth led by providing tax cut and extra incentives, but this growth does not much percolate to the poor.
      • Consequently, taxing the rich has to be a major strategy to raise government revenue.
    • Treat public expenditure as an investment: The public expenditure on raising capabilities should be treated as social investment rather than social welfare, policymakers will be willing to spend on this capital formation.
    • Let the fiscal deficit slip: Finally, there was no sound economic reason to control fiscal deficit ratio. Sound macroeconomics never supports this.

     

     

     

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  • Foreign Policy Watch: India-France

    [op-ed of the day] In defence of a shared vision

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- India-France relations

    Context

    Defence cooperation has been one of the fundamentals of the bilateral relationship between India and France, which developed a close and ambitious strategic partnership for over 20 years.

    Defence cooperation between France and India

    • A long history of cooperation: The defence cooperation between our two countries can be traced back to the first few years following India’s Independence.
      • As early as 1953, the Indian Air Force was equipped with a hundred Toofani fighter jets from Dassault, then the Mystère IV, which defended India in tough times.
    • This marked the first page in the history of cooperation in military aviation, which also recorded the supply of 60 Mirage 2000s in the 1980s.
    • Rafale deal: The ongoing delivery of 36 Rafales is being done as per the schedule.
      • The first batch of aircraft, currently being used to train Indian pilots, will land at Air Force Station Ambala within a few months.
    • Partnership in maritime domain: Today, the partnership has been deployed in the maritime domain, in support of our joint strategic vision for the maintenance of stability and security in the Indo-Pacific.
      • As far as naval equipment is concerned, the Indian Navy has already commissioned two of the six submarines built in Mumbai as part of an industrial partnership between Mazagon Dock Shipbuilders Limited (MDL) and Naval Group.

    Industrial cooperation between the two countries

    • Support to indigenous production: As for industrial cooperation, the French approach has always been, whenever possible, to offer partial indigenous production in India.
      • France was largely a precursor with regard to Make in India, with HAL manufacturing the light helicopters Cheetah and Chetak, and BDL’s Milan anti-tank missile in India in the 1960s.
      • It continues this policy today. The plant built under the Dassault Aviation and Reliance joint venture will enable, for example, the complete production of the Falcon 2000 business jet here in India by 2022.
    • Transfer of technology: After the delivery of the first two Scorpene submarines, transfers of technology provided by the Naval Group enabled MDL to be solely in charge of building the next four submarines.
      • The design of these submarines has thus become largely Indian knowhow.
      • Safran will soon inaugurate an aircraft wiring systems factory in Hyderabad and also build another major facility to manufacture LEAP turbofan engine components.
      • Thales is investing massively in engineering works in Bengaluru, MBDA is building a plant in Coimbatore and French aeronautical equipment manufacturer Latécoère recently inaugurated a factory in Belgaum.

    Opportunities for further cooperation

    • Developing the supply chain at all the levels: The French aerospace industries association, GIFAS, and GICAN, the French Marine Industry Group, are organising a seminar focused on this subject during DefExpo.
      • Along with the Society of Indian Defence Manufacturers (SIDM), they are exploring opportunities for developing Indo-French industrial partnerships at all stages of the production chain.
      • Promoting Make in India: India can count on France being by its side for its Make in India enterprise.

    Conclusion

    India and France both share the same vision for a new balanced multipolar world, which must be based on the rule of law. They also share the same vision on the main challenges of the times, be they security developments in Asia and the Indo-Pacific, or combating international terrorism. But it is by possessing the capability of ensuring national security and making strategic choices that most efficiently defend their shared principles and visions.

     

     

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  • Indian Ocean Power Competition

    [op-ed snap] Navy to the rescue

    op-ed snap | International Relations | Mains Paper 3: Various Security Forces, Agencies & Their Mandates

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- Expanding the India's sphere of influence in IOR and humanitarian assistance in the region.

    Context

    Earlier this week, India sent an amphibious warship, INS Airavat, to Madagascar in the Indian Ocean Region (IOR) to help in rescue efforts after the island nation was hit by a cyclone.

    Humanitarian operations- Key component of peacetime strategy

    • A key component in IOR: In recent years, humanitarian operations have emerged as a key component of the Indian Navy’s peacetime strategy in the IOR.
      • In March 2019, the Navy deployed four warships for relief operations when Mozambique was hit by Cyclone Idai.
      • Indian naval teams played a stellar role in search and rescue operations and even set up medical camps.
      • A few months later, the Navy sent two warships to Japan to assist in rescue efforts following Typhoon Hagibis.
      • A year earlier, Indian vessels had delivered urgent medical assistance to Sulawesi, Indonesia, after it was struck by a high-intensity earthquake.
      • Operation Samudra Maitri was launched after a telephonic conversation between Prime Minister Narendra Modi and Indonesian President Joko Widodo, with naval planners mobilising assets and relief material in quick time.
    • India’s vision for IOR: The Navy’s new humanitarian approach, many says, is a maritime manifestation of India’s vision for the IOR, christened SAGAR (Security And Growth for All in the Region).
      • Lesson’s from tsunami: The Navy’s turn towards human-centred maritime security isn’t recent. It was in the aftermath of the 2004 tsunami that naval commanders first recognised the importance of large-scale relief and rescue missions in the IOR.
      • For over a decade, considerable resource and energy have been spent developing specialist capability and skills for naval humanitarian operations.

    India- A regional security provider

    • What is changing in India’s stance: What’s new today is New Delhi’s resolve to burnish its ‘regional security provider’ credentials.
      • The Navy has reached out to countries across the Indo-Pacific region, with greater deployment of assets, personnel and specialist equipment, showcasing an ability to undertake complex and diverse missions.
    • The highpoint for India: The highpoint of the Navy’s ‘benign’ efforts was the evacuation of over 1,500 Indian expatriates and 1,300 foreign nationals from Yemen in 2015 amid fighting for control of Aden.
      • Three years later, Indian naval ships were in Yemen again, to evacuate 38 Indians stranded in the cyclone-hit Socotra Island.

    How the new role could help India?

    • India’s desire to be the linchpin of security: The Navy’s humanitarian impulse stems from a desire to be a linchpin of security in the IOR.
      • The concept of the first responder: At the core of the evolving operations philosophy is the concept of ‘the first responder’, with the capability and willingness to provide assistance.
      • Extension of the sphere of influence: The above approach has the potential to create an extended sphere of Indian influence in the IOR.
      • Projection of soft power: Naval leaders recognise that benign missions help project Indian soft power and extend New Delhi’s influence in the littorals.
      • Creating goodwill: Prompt response during a humanitarian crisis helps generate political goodwill in the neighbourhood.

    Cause for caution with maritime presence

    • The issue with prolonged presence: While low-end naval assets in humanitarian mode create strategic equity for India, the prolonged presence of front-line warships in foreign waters has the potential to make partners anxious.
    • Shaping perception over naval presence: Naval power, experts underline, must be deployed discreetly, shaping perceptions in subtle ways.
      • Need to hide the underlying intent: The key is to not let the underlying intent of a mission appear geopolitical.
      • To ensure that motives aren’t misunderstood, and the assistance provided is efficient and cost-effective, it is best to use dedicated disaster-relief platforms.
    • India lacking inventory hospital ship: However, unlike the U.S. and China that have in their inventory hospital ships fully equipped for medical assistance, India deploys regular warships and survey ships converted for medical aid.
      • India’s improvised platforms do not match the U.S. Navy’s medical ship USNS Mercy or the People’s Liberation Army Navy’s Peace Ark.

    Need for greater coordination

    • The Navy’s expanding array of humanitarian missions reveals a need for greater coordination with the Indo-Pacific navies
      • In particular the U.S. Navy, the Royal Australian Navy and the Japanese Self-Defense Forces- which possess significant experience and assets to mitigate humanitarian threats.

    Conclusion

    As natural disasters in the IOR become more frequent and intense, India’s regional security role is likely to grow exponentially. At the forefront of disaster scenarios, the Indian Navy and Coast Guard would find themselves undertaking demanding missions. Humanitarian operations could serve as a springboard for a larger cooperative endeavour in the maritime commons.

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  • Indian Ocean Power Competition

    [op-ed snap] A case of a maritime presence adrift

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India,Important International Institutions

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 2- India's role and interest's in IMO and consequences.

    Context

    The International Maritime Organization (IMO), had mandated that merchant ships should not burn fuel with sulphur content greater than 0.5% beginning January 1.

    Why the new sulphur content limit matters?

    • The previous limit of 3.5 %: Before the ban, fuel had a comfortable sulphur content limit of 3.5%, which was applicable to most parts of the world.
    • Problem with low content fuel: Many industry professionals feared that the new very-low-sulphur fuel would be incompatible with the engines and other vessel equipment.
    • Problems with past US limits: Past mandates on sulphur limits in American waters had led to many technical problems. There have been instances of ships having been stranded after fine particles separated out from the fuel, damaging equipment and clogging up devices.

    How such regulations matter for India?

    • Sulphur cap one of the many problems: The global sulphur cap is only one of the many environment-related regulations that have been shaking up the shipping industry.
      • The industry is generally risk-averse and slow to accept changes.
      • For instance, efforts are ongoing to reduce nitrogen oxides (NOx) and ozone-depleting gases.
    • IMO project to decarbonise shipping: Further, the IMO has announced an ambitious project to decarbonise shipping in order to reduce carbon emissions.
    • How it matters for India? These regulations are triggering massive technological, operational and structural changes.
      • They come at a price which will have to be borne to a large extent by developing countries such as India.
      • India among 10 countries: The IMO currently lists India as among the 10 states with the “largest interest in international seaborne trade”.
      • Inadequate participation of India: But India’s participation in the IMO to advance its national interests has been desultory and woefully inadequate.
    • How it could matters: The sulphur cap, for instance-
      • Will reduce emissions.
      • Reduce the health impact on coastal populations but-
      • Ship operational costs are going up since the new fuel product is more expensive.
    • Refineries struggling to meet demand: As refineries including those in India struggle to meet the demand, freight costs have started moving up, with a cascading effect on retail prices.

    Significance of shipping and the role of IMO

    • Significance of shipping: Shipping, which accounts for over 90% by volume and about 80% by value of global trade.
      • Role of IMO: It is a highly regulated industry with a range of legislation promulgated by the IMO.
      • The IMO currently has 174 member states and three associate members; there are also scores of non-governmental and inter-governmental organisations.
      • The IMO’s policies or conventions have a serious impact on every aspect of shipping including the cost of maritime trade.
    • How IMO functions
      • The IMO, like any other UN agency, is primarily a secretariat, which facilitates decision-making processes on all maritime matters through meetings of member states.
      • How treaties are made? The binding instruments are brought in through the conventions -to which member states sign on to for compliance -as well as amendments to the same and related codes.
      • Structure of IMO: Structurally, maritime matters are dealt with by the committees of the IMO –
      • The Maritime Safety Committee (MSC).
      • Marine Environment Protection Committee (MEPC).
      • Technical Cooperation Committee.
      • Legal Committee and the Facilitation Committee.
      • Each committee is designated a separate aspect of shipping and supported by sub-committees. Working groups and correspondence groups support the subcommittees.
    • Role of subcommittees of IMO: The subcommittees are the main working organs, where the proposals from a member state are parsed before they are forwarded to one of the main committees.
      • The main committees, thereafter, with the nod of the Assembly, put the approved proposal for enactment through the Convention, amendments, and codes or circulars.

    India’s inadequate efforts at protecting the interest

    • How other countries deal with the issues: To ensure that their maritime interests are protected, the European countries move their proposals in unison and voting or support are given en bloc.
      • Permanent representative: China, Japan, Singapore, Korea and a few others represent their interests through their permanent representative as well as ensuring that a large delegation takes part and intervenes in the meetings.
    • How India is falling short? While these countries have fiercely protected their interests, India has not.
      • No permanent representative: For example, its permanent representative post at London has remained vacant for the last 25 years.
      • Representation at meetings is often through a skeletal delegation
      • India’s presentation inadequate: A review of IMO documents shows that the number of submissions made by India in the recent past has been measly and not in proportion to India’s stakes in global shipping.
    • “High-Risk Area” demarcation issue: The promulgation of “High-Risk Areas” when piracy was at its peak and dominated media headlines.
      • What happened in the issue? The IMO’s demarcation resulted in half the Arabian Sea and virtually the entire south-west coast of India being seen as piracy-infested, despite the presence of the Indian Navy and Coast Guard.
      • The “Enrica Lexie” shooting incident of 2012, off the coast of Kerala, was a direct fallout of the demarcation.
    • What were the consequences of the demarcation issue?
      • Increase in insurance costs: The “High-Risk Area” formulation led to a ballooning of insurance costs; it affected goods coming into or out of India.
      • It took great efforts to revoke the promulgation and negate the financial burden.
      • The episode highlighted India’s apathy and inadequate representation at the IMO.
      • NavIC introduction difficulty: There was also great difficulty in introducing the indigenously designed NavIC (NAVigation with Indian Constellation) in the worldwide maritime navigation system.
    • What could be the consequences in future?
      • EU’s documented procedure: In contrast, the European Union has a documented procedure on how to influence the IMO.
      • Agenda driven by developed countries: New legislative mandates, fitment of new equipment and changes to ship structural designs being brought on have been driven by developed countries.
      • Consequences for India: All the issues pushed by developed countries are not entirely pragmatic from the point of view of India’s interests.
      • Further, it will not be mere speculation to see them as efforts to push products and companies based in the West.

    Conclusion

    So far, India’s presence and participation in the IMO has been at the individual level. India should now make its presence felt so that its national interests are served. It is time India regained its status as a major maritime power.

     

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  • Government Budgets

    [op-ed snap] No rescue in sight

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- Government budget- allocations to various sectors-how it could help revive the economy.

    Context

    The disconnect between Budget and Economic Survey is much greater this year.

    Background of the economy as the budget is introduced

    • The 2020 Budget was presented against the background of-
      • Slowing economy.
      • Poor investment climate.
      • Declining consumption demand and
      • Stagnant exports.
      • The steady deceleration in growth, which registered at 4.5 per cent in the second quarter of the current fiscal — the lowest in the last 26 quarters — presented a challenge as well as an opportunity.

    Infrastructure investment

    • The hope of substantial increase in allocation for infra: The hope was that there will be a substantial increase in infrastructure investment, which in turn will trigger investment demand, but the actual allocations are not promising.
      • This was particularly surprising in the wake of the recent announcement that there will be an investment of Rs 103 trillion in the next five years to leapfrog India to a $5-trillion economy.
      • Private sector expected to contribute: Much of the investment for this will have to be made by the private sector and it is hoped that the allocation of Rs 20,000 crore in equity in specified infrastructure finance companies will help them to leverage more than Rs 1 lakh crore of investment support.

    Budgetary allocation for capital expenditure

    • 1.7% of GDP to 1.8 %: The budgetary allocation for capital expenditure for the current year, which is estimated at 1.7 per cent of GDP this year, is budgeted at 1.8 per cent in 2020-21.
    • Agriculture, irrigation and rural development: The Budget also contained 16 action points on agriculture, irrigation and rural development and the Rs 2.83 lakh crore allocation is higher than the budget estimate for the previous year by just 2.5 per cent and revised estimate by 13.2 per cent.
      • But the allocation looks impressive only because there was a massive cut (Rs 26,000 crore) in the budget estimate over the revised estimate.
    • Transport infrastructure: The allocation to transport infrastructure in the Budget- at Rs 1.7 lakh crore-is just 7.6 per cent higher than the revised estimate for 2019-20.
    • MGNREGA and PM-Kisan Samman Nidhi: The allocations to schemes like the MGNREGA has been cut from Rs 71,002 crore (RE) in the current year to Rs 61,500 crore in 2020-21.
      • PM Kisan Samman Nidhi: For schemes like PM Kisan Samman Nidhi, it is just as much as was budgeted for 2019-20.
      • As a consequence, not much is expected in terms of propping up the consumption demand.

    Slippage in fiscal deficit

    • Increase in fiscal deficit expected: The slippage in fiscal deficit from the target set in the budget estimate in 2019-20 was expected for the following reasons-
      • Below expected nominal GDP growth: Nominal GDP growth was 7.5 per cent as against the estimated 12 per cent in the budget.
      • Overestimation in the growth of tax revenue at 18.3 per cent over the pre-actuals of the previous year.
      • Missed disinvestment target: The slippage in achieving the disinvestment target of Rs 1.03 lakh crore.
    • Thus, it is not surprising that the fiscal deficit for the current year stands estimated at 3.8 per cent of GDP and for the next year at 3.5 per cent.
    • Off-budget financing: The major concern is that the reported off-budget financing is almost 0.85 per cent. This does not capture the bills and refunds payable by the government.

    Would the budgeted and revised estimates realise?

    • On disinvestment front: The disinvestment revenue is estimated at Rs 65,000 crore though the realisation so far has been just Rs 18,000 crore, which implies another Rs 47,000 crore will have to be mobilised in the next two months.
    • On tax revenue front: The RE of tax revenue for the current year is over 14 per cent higher than the actual for 2018-19.
      • This is perhaps predicated on the hope that the scheme, “Vivad se Vishwas”, which allows the settlement of disputed tax to be paid without interest and penalty.

    Tax reforms in the budget

    • DDT abolition: On tax reforms, the abolition of dividend distribution tax (DDT) was expected.
    • Complicating Income tax: The reforms in individual income tax complicates the tax by creating six brackets.
      • The best practice approach to tax reform is to broaden the base, reduce the rates and reduce the number of brackets to make it a simple tax.
    • What could have been done? The government could have simply-
      • Phased out the tax concessions.
      • Indexed the brackets for inflation and
      • Reduced the rates of tax with an appropriate adjustment in the brackets.

    Conclusion

    The impact of fiscal developments on the states’ finances is clearly adverse. The shortfall in tax devolution in 2019-20 from the budgeted amount works out to Rs 1.53 lakh crore and the total shortfall in transfers amounted to Rs 1.41 lakh crore. Besides starving funds for various projects, this has serious repercussions on budget management at the state level.

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  • Coronavirus – Health and Governance Issues

    [op-ed snap] Our expectations could mutate in response to the coronavirus

    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- India's preparedness for the public health response to outbreak of epidemic.

    Context

    In some ways, China is setting the standard for a public health response that may become a way of life in the 21st century.

    Origin of the outbreak and deadly it could turn out?

    • Outbreak of unknown virus: In December 2019, an outbreak of viral pneumonia of unknown etiology emerged in Wuhan, a city in the central Chinese province of Hubei.
    • Discovery of novel coronavirus:  A few weeks later, the World Health Organization (WHO) and Chinese health authorities announced the discovery of a novel coronavirus, known now as 2019-nCoV, as being responsible for the pneumonia.
    • Important questions: The two most important questions asked in a fast-evolving pandemic of this nature are:
      • 1) How deadly is the disease, and;
      • 2) Can it be contained?
      • The latest available figures suggest that the death toll in China is 304 and 14,411 have been infected. The current fatality rate estimate of 2% is unstable and is likely to fall as more cases are detected.

    Containment attempts by China and spread to the other countries

    • Unprecedented attempt by China: The attempt at containment started late, but has never been attempted in the fashion that China has gone about it.
      • Wuhan lockdown: Belatedly, on 23 January, China locked down Wuhan and 12 other cities, quarantining 52 million people in one sweeping action.
      • This is the first known case in modern history of any country locking down an entire large city.
    • Reports of confirmed cases from other countries: Confirmed cases have since been reported from Hong Kong, Macau, Taiwan, Thailand, South Korea, Japan, Singapore, Australia and the US.
      • India reported its first case from Kerala of a medical student from Wuhan University, followed by two more.
      • Singapore and the US have now banned foreign nationals who have recently been in China from entering the country.
      • Russia, Canada, the UK and India have begun evacuating citizens from Hubei province.

    Research on coronavirus so far

    • Coronaviruses (CoVs) are characterized by club-like spikes that project from their surface, an unusually large RNA genome and a unique replication strategy.
      • CoVs cause a variety of diseases in mammals and birds, ranging from enteritis in hoofed animals to potentially lethal human respiratory infections.
      • Genome sequence: The 2019-nCov genome was sequenced in China in early January and reported in The Lancet last week.
      • It suggests that the original host of this coronavirus was a bat reservoir, though it is unclear whether there was an intermediate host.
    • A recent entry to the human host: The uniformity of the sequenced genome suggests that the virus has entered human hosts very recently.
    • Recent emergence from the animal reservoir: Several other countries, including the US and France, have sequenced the RNA of the 2019-nCoV as well. These sequences and their similarity to the initial samples from China suggest a single, recent emergence from an animal reservoir.

    Tests and vaccine development

    • How is the virus tested? Testing for 2019-nCoV requires a reverse transcription polymerase chain reaction test (RT-PCR) which converts RNA into DNA, making study and comparison easier.
    • No vaccine yet: There are no vaccines yet for this virus, but promising paths have been identified, borrowed from the SARS related vaccines.
      • Development of an effective vaccine may only come after the 2019-nCoV is contained, but it may still be useful if there were to be a subsequent outbreak.
      • The frequency of future outbreaks is only likely to increase because of climate change, global travel and fast mutating viruses.

    What lessons can India learn?

    • Develop framework and capacity: For India, this global health emergency should serve as an eye-opener.
      • If lockdown turns out to be a useful tool to prevent the spread of a deadly virus, India will need to develop the framework and capacity to implement such a drastic measure.
      • Under-equipped municipalities: Our municipalities are hopelessly under-equipped to implement strict isolation and containment strategies.
      • We will need to develop the capacity to build large facilities for housing patients in isolation wards.
      • Use of pre-cast: This will require India to accelerate the use of construction methods like pre-cast technology.
    • Protocol and instructions: The National Centre for Disease Control (NCDC) has been proactive in updating its protocol related to the 2019-nCov and has clear instructions for reporting and assay preparation.
    • Develop capacity in geographically diverse regions: Samples in India need to be sent to the National Institute of Virology in Pune.
      • While the public health and epidemic escalation framework appears capable of handling a small number of cases well, it is not clear how it will stand up to a large number of cases in a specific geographic region.

    Conclusion

    “Nothing happens quite by chance. It is a question of accretion of information and experience,” said Jonas Salk, the virologist who developed the polio vaccine, in some ways, China is setting the standard for a public health response that may become a necessary way of life in the 21st century. India must use this as a guidepost to greater preparedness.

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  • BREXIT

    [op-ed snap] What Brexit means for the EU and its partners

    op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests

    Context

    On January 31, 2020, the United Kingdom left the European Union, the EU project will be taken forward by the 27 member states.

    A structured exit

    • Minimum disruption:  This is largely thanks to the Withdrawal Agreement that was negotiated with the U.K., which enabled “an orderly Brexit”.
      • One that, at least for now, minimises disruption for our citizens, businesses, public administrations, as well as for our international partners.
    • An arrangement of the transition period: Under this agreement, the EU and the U.K. agreed on a transition period, until the end of 2020 at least.
      • During which the U.K. will continue to participate in the EU’s Customs Union and in the Single Market, and to apply EU law, even if it is no longer a Member State.
      • During this period, the U.K. will also continue to abide by the international agreements of the EU, as we made clear in a note verbale to our international partners.

    Building a new partnership between the EU and the UK

    • Degree of continuity: With the transition period in place, there is a degree of continuity. This was not easy given the magnitude of the task.
      • By leaving the Union, the U.K. automatically, mechanically, legally, leaves hundreds of international agreements concluded by or on behalf of the Union.
    • Building new partnership: That work will start in a few weeks as soon as the EU 27 Member States have approved the negotiating mandate proposed by the European Commission, setting out our terms and ambitions for achieving the closest possible partnership with a country which will remain EU’s ally, partner and friend.
    • Links and shared values: The EU and the U.K. are bound by history, by geography, culture, shared values and principles and a strong belief in rules-based multilateralism. Our future partnership will reflect these links and shared beliefs.
    • Working on topics beyond trade: Both sides want to go well beyond trade and keep working together on security and defence, areas where the U.K. has experiences and assets that are best used as part of a common effort.
    • Cooperation on the wide topics: In a world of big challenges and change, of turmoil and transition, we must consult each other and cooperate, bilaterally and in key regional and global fora, such as the United Nations, the World Trade Organization, the North Atlantic Treaty Organization or the G20.
    • Collective responses to handle global challenges: Today’s global challenges- from climate change to cybercrime, terrorism or inequality — require collective responses.
      • The more the U.K. is able to work in lockstep with the EU and together with partners around the world, the greater would be chances of addressing these challenges effectively.

    Way forward

    • Continuing project forward as 27: At the very core of the EU project is the idea that it is stronger together; that pooling resources and initiatives is the best way of achieving common goals. Brexit does not change this, and efforts must be taken to continue this project forward as 27.
    • Note for the partners: EU’s partners can be sure that EU will stay true to an ambitious, outward-looking agenda-be it on trade and investment, on climate action and digital, on connectivity, on security and counter-terrorism, on human rights and democracy, or on defence and foreign policy.

     

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  • Government Budgets

    [op-ed of the day] A workmanlike account

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Government budget, $5tn dollar economy

    Context

    The Budget was a workmanlike exercise, more a statement of account, around which was woven many strands of intent and vision, which, read in its entirety and by connecting interlocking dots, framed a strategy of moving towards a $5 trillion economy over the next five years.

    Fiscal arithmetic of the Budget

    • A clearer picture of off-balance-sheet borrowings: To a large extent, the Budget has done this, giving a much clearer picture of the off-balance-sheet borrowings, which add to the government’s debt and its obligations to pay.
      • Increasing the credibility of government: This move will enhance credibility among the investor community while taking decisions on committing capital for India’s future.
    • Possibility of nominal 10 % growth: The nominal growth projected for 2020-21 at 10 per cent is feasible, with a stretch, given the expected rise in inflation, which will add around 4 per cent to a projected 6 per cent real growth.
      • Aggressive revenue projection: The revenue projections are more aggressive, assuming a buoyancy which can be attributed in large measure to checking evasion using data analytics.
    • Disinvestment and privatisation revenue: The major boost to revenues is expected from disinvestment and privatisation of central public sector enterprises, together with asset monetisation.
      • The target is up sharply to Rs 2.25 lakh crore.
      • This initiative has been one of the core focus areas of the government, has to be lauded for-
      • The effects of increasing efficiency in operations and-
      • Restricting the losses to the public balance sheet.
      • Disinvestment revenues are likely to be augmented with higher dividend receipts, including, from higher profits of the Reserve Bank of India.
    • Optical allocation by the Govt.: Spending, which depends on revenue collection, has also been optimally allocated, with capital expenditure budgeted to increase faster than revenue.
      • High revenue expenditure: Capital expenditure is still a much smaller fraction of total expenditure compared to the committed revenue spending on interest payments, salaries and pensions and subsidies.

    The slowdown in the economy and squeeze in the credit flow

    • Three aspects of the current slowdown that makes it different
    • First– Multiple engines of growth have synchronously decelerated-
      • Consumption, investment, exports and sporadically, government spending — compared to earlier ones when one or some of these drivers were still functioning
    • Second- Demand led slowdown:
      • This is more a demand-led slowdown, versus the earlier ones, which tended to originate with a supply shock, whether from oil or foreign capital.
    • Third– the trigger for this episode was a financial shock-
      • NBFC lending — which tipped the weaknesses building in the system into deep deceleration.
    • Squeeze in the credit flow of the banks
      • Drastic reduction in credit flows: A telling statistic released by the RBI shows that compared to Rs 8 lakh crore of loans provided to borrowers during April-September 2018, credit flow fell to Rs 90,000 crore in the six months of 2019.
      • MSMEs worst affected by the credit squeeze: Bank credit has continued to remain very weak. In the context of the broader slowdown, credit to micro, small and medium enterprises (MSMEs) has been one of the worst affected.

    Whether the slowdown is more cyclical or structural-conundrum for policymakers

    • If it is more cyclical, aggressive use of monetary and fiscal counter-cyclical policy could yield the desired result.
      • If not, then the wait is likely to be longer and will involve more sector-specific de-bottlenecking initiatives.
    • Signs of structural constraints: While there is certainly a cyclical component in the manufacturing segment- the proximate source of the slowdown- there are signs of deeper structural constraints.
    • Quintuple problem– This problem has now expanded into almost quintuple problems, encompassing the government, households, NBFCs along with the banks.
      • Overlaid on these structural impediments is a sharp weakening of consumer, investor and corporate confidence.

    Conclusion

    Implementation, as always, will be key to achieving the $5-trillion goal. The arena for the next set of reforms and actions for sustained growth is at the state level: Agriculture, land, electricity, and even labour. The Budget acknowledges this. A federal approach to tackling the slowdown, in a coordinated fashion, will probably be the most effective.

     

     

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  • Government Budgets

    [op-ed snap] Falling short of aspirations

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much.

    Mains level: Paper 3- Government budget and allocations for various sectors and schemes.

    Context

    The Budget can be judged in terms of its effect on rural demand, investment and private sentiments– all critical elements for recovery. While the Budget offers hope on the last count, it leaves much to be desired on several other parameters.

    Skill development allocation- 3000 Crore

    • Unmet Demand: There is a huge, unmet demand for teachers, paramedical staff and caregivers, and skilled workers.
      • Need for quality education and skills: Well-paying jobs are created in the organised services and industry but require candidates with quality education and skills.
      • Both elude India’s youth due to the poor quality of education and lack of opportunities to acquire practical skills.
      • Skilling will require massive investment and concerted efforts.
      • What could have been done? The Budget could have given tax incentives to companies to provide internships and on-site vocational training to unemployed youth.
      • The country cannot afford to let the world’s largest workforce waste this way.

    On flagship welfare schemes

    • The MGNREGA is allocated ₹61,500 crore, which is less than ₹71,000 crore for the current fiscal year.
    • PM-KISAN: Going by the last year, disbursement under the PM-KISAN will also be less than budgeted, unless the beneficiary base is expanded.
    • Good schemes for increasing demand: These two schemes are good instruments for income transfers to small and marginal farmers, landless labour who spend most of their income and generate demand for a wide range of goods and services.
      • Higher disbursement under these schemes would have benefited most sectors of the economy. Budgetary allocations for health and education are also well below what is needed.
    • Micro-irrigation schemes for 100 water-stressed: Focus of schemes such as micro-irrigation schemes for 100 water-stressed districts is welcome and so is a modest increase in allocations for agriculture and rural development schemes.
    • Rural roads, cold storage, and logistical chains are crucial for the growth of income and employment in rural India, as the multiplier effects of rural infrastructure investment on growth and employment are large and extensive.
    • ₹1.7 lakh crore for transportation infrastructure: The allocation of ₹1.7 lakh crore for transportation infrastructure is also a welcome step. If the public investment infrastructure actually materialises, it will lend credence to the government’s stated commitment to revive the investment cycle –to spur job-creating growth.
    • To pull in private investment, public funding should be front-loaded in under-implementation projects.
    • Small irrigation and rural road projects are also relatively easy to complete and deliver immense benefits to several sectors.

     Bonds Market development  and startups

    • Need for the corporate bond market: The fundamental problem of infrastructure finance is the asset-liability mismatch which can be addressed only by developing a vibrant ‘corporate bond market.
    • No focus on the corporate bond market: The focus of the Budget is the multiple schemes for government bonds mainly through additional room for foreign portfolio investors and exchange-traded funds in government bonds.
      • Need for the well-developed market: Government’s moves are welcome but not enough. A well-developed bond market should draw upon-
      • Domestic insurance funds.
      • Pension funds and
      • Mutual funds-which are capable of investing in corporate bonds across different schemes.
    • Startups: The other leg of the “aspirational” Budget is the startups.
      • Some relief on the tax they have to pay and on taxation of the Employee Stock Option Plans is welcome.
      • Reluctance to abolish angel tax: But the reluctance to abolish the angel tax that results in harassment of start-ups and their investors is unfathomable.

    Scheme for NBFC

    • Allowing NBFCs into TReDS: Another welcome feature is the scheme to allow the non-banking financial companies into the Trade Receivables Discounting System (TReDS).
      • TReDS is an ecosystem that aims to facilitate the financing and settling of trade-related transactions of small entities with corporate and other buyers, including government departments and public sector undertakings.

    Changes in provisions for SMEs and their problems

    • Audit threshold increased to 5 crore: To reduce the compliance burden on small retailers, traders and shopkeepers who comprise the Small and Medium-sized Enterprises (SMEs) sector, the threshold for audit of the accounts has been increased from ₹1 crore to ₹5 crores for those entities that carry out less than 5% of their business transactions in cash.
    • Restructuring window increased: A provision in the budget extended the window for the restructuring of loans for micro, small and medium-sized enterprises till March 31, 2021.
    • Problems faced by the SMEs
      • Input tax rate higher for input than for the final goods: For many products produced by these enterprises, the tax rates are higher for inputs than the final goods.
      • High taxes on imports and exports: In addition, many SMEs suffer from high taxes on imports of raw material and exports of intermediary services by them.

    Other provision made to revive the private sector 

    • Recognising the need to revive the dying spirit of the private sector, several provisions have been made in the budget to revive the spirit of the private sector like-
      • Decriminalisation of several civil offences by firms under the Companies Act.
      • The abolition of dividend distribution tax (DDT).
      • The assurance that tax-related disputes will be considered with compassion.
      • The scheme to reimburse to exporters assorted duties, such as excise duty on transport fuels and electricity.

    Conclusion

    Everything considered the future of the economy will turn on whether the government delivers on the promises of public investment and the promises made to different sections of society including the taxpayer and companies. When it comes to reviving private sentiments, actions will speak much louder than the budgetary promises.

     

     

     

     

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