Note4Students
From UPSC perspective, the following things are important :
Prelims level: UNCLOS
Mains level: Paper 2- India-Vietnam defence ties
Context
The two countries recently deepened bilateral cooperation with the signing of the Joint Vision Statement on India-Vietnam Defence Partnership towards 2030 during the recent visit of Defence Minister Rajnath Singh to Vietnam.
About the Joint Vision Statement
- India and Vietnam Wednesday signed a Joint Vision Statement on India-Vietnam Defence Partnership towards 2030, “which will significantly enhance the scope and scale of existing defence cooperation”.
- Boosting the scale and scope of defence cooperation: The Joint Vision Statement is aimed at boosting the scope and scale of the existing defence cooperation between the two nations.
- Mutual logistic support: The two sides also signed a Memorandum of Understanding (MoU) on mutual logistics support.
- Elevating CSP: This is the first agreement of its kind that Hanoi has entered into with any other country and elevates the standing of Comprehensive Strategic Partnership (CSP) which Hanoi shares with New Delhi since 2016 (along with only Russia and China).
Enhanced maritime cooperation
- Both countries find convergence in their approaches towards the maintenance of stability and security of the Indo-Pacific.
- This approach has translated into diplomatic and political support in the context of developments within the region and manifested in the form of tangible and functional cooperation instruments — the most vital being bilateral defence partnership.
- Because of the volume of maritime trade that passes through sea lanes of communication in the Indo-Pacific and potential as well as estimated energy reserves in these waters, maritime cooperation between countries in the region have expanded exponentially.
Emphasis on the cooperative mechanism
- The enhanced geostrategic prominence and attendant uncertainties vis-à-vis China’s expanding and often abrasive footprints in the Indo-Pacific have resulted in an overall increase in emphasis on cooperative mechanisms and frameworks across the region.
- Defence partnership between the two countries has been growing steadily following the signing of the Defence Protocol in 2000 and today covers extensive navy-to-navy cooperation.
Dealing with Chinese transgression
- Vietnam has and continues to be one of the most vocal countries with respect to China’s periodic transgressions in the South China Sea.
- Freedom of navigation: In India, Vietnam has found an equally uncompromising partner when it comes to the question of violations of freedom of navigation and threats to sovereign maritime territorial rights as enshrined under international maritime law.
- New Delhi has supported Vietnam’s position in the South China Sea with respect to Beijing’s destabilising actions and coercive tactics backing by reiterating the irrefutability of the UNCLOS.
- India has also not backed down from continuing ONGC Videsh Ltd (OVL)’s oil exploration project in Block 128 (which is within Hanoi’s EEZ) despite China’s protests.
- Emphasis on naval diplomacy: It is also in the last few years that Vietnam has augmented its emphasis on naval diplomacy and strengthened its ties with the US alongside the extension of its engagement with India and other ASEAN members.
- Despite the fact that the China factor has provided impetus to the solidification of ties, it is also important to consider that mutual cooperation is not driven solely by it.
- Support in the rubric of Indo-Pacific: Both countries have expanded areas of collaboration and are supportive of each other’s individual and multilateral involvements within the rubric of the Indo-Pacific.
Conclusion
Convergences between New Delhi and Hanoi has naturally found expression in bilateral relations and the two countries are poised to develop their partnership further in the coming years.
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Back2Basics: About UNCLOS
- UNCLOS is sometimes referred to as the Law of the Sea Convention or the Law of the Sea treaty.
- It came into operation and became effective from 16th November 1982.
- It defines the rights and responsibilities of nations with respect to their use of the world’s oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources.
- It has created three new institutions on the international scene :
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- International Tribunal for the Law of the Sea,
- International Seabed Authority
- Commission on the Limits of the Continental Shelf
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Abortion rights in the US
Context
With the US Supreme Court’s overturning of abortion as a constitutionally guaranteed right, America has taken another step towards democratic backsliding.
Background of the Roe v Wade case
- Bodily autonomy: Roe, the 1973 outcome of an unmarried woman’s crusade for bodily autonomy, had declared overbroad, and consequently unconstitutional, a provision of the Texas Penal Code which permitted only those abortions that were “procured or attempted by medical advice to save the life of the mother”.
- Right to abortion: While locating the right of privacy within the guarantee of personal liberty enshrined in the fourteenth amendment of the American constitution, Roe embodies a supervening constitutional right to abortion emanating from this right of privacy.
- The right to abort was held to be a constitutionally protected right within the right of privacy.
- Recognition of states’ rights: The decision simultaneously recognised the state’s interest in protecting the life of the foetus as also the life of the mother.
- Roe is not only relevant as a progressive trailblazer for reproductive rights in the United States but is also fundamental to constitutional jurisprudence globally for the interpretative tools it employed.
Overturning of Roe Vs Wade case
- The US Supreme Court on June 24 overturned a half-century-old right to abortion, granted by a 1973 Supreme Court decision in the Roe vs Wade case.
- No nationwide right to abortion: With a 5-4 majority, the court has said that American women have no nationwide right to abortion.
- Rather, state legislatures should decide whether women can have that right in their respective states.
- Concerns about the life of the unbors: In the court’s opinion, the right to privacy stemming from the 14th Amendment is not relevant, for abortion concerns not only the pregnant woman but also the life of the unborn.
- Not mentioned in the 1787 constitution: Moreover, the court said, abortion is neither “enumerated” as a right in the original 1787 constitution nor is it consistent with American history and tradition.
- Taking away the right once granted: In a democracy, can a right once granted be taken away?
- As the world’s oldest surviving democracy, the United States has figured prominently in this debate.
- With the overturning of Roe vs Wade, this debate has now become wider.
Was the right to abortion constitutionally justified?
- Protection of liberty and privacy: The 1973 court decision allowing the right to abortion was based on the 14th Constitutional Amendment (1868).
- Even though abortion was not mentioned in the 1787 US Constitution, abortion’s defence was derived from the 1868 Amendment
- This Amendment, the court said, allowed protection of liberty and privacy, something the state could not impinge upon.
- Not absolute right: The 1973 court also argued that this right was not absolute, limited as it would be by considerations of “protecting potential life”.
Issues with the overturning of Roe Vs. Wade case
- 1] No constitution can anticipate the evolution of rights: Abortion was not mentioned in the 1787 constitution, nor explicitly in the 1868 amendment.
- That is because women were not autonomous political agents at that time.
- Until they were given the right to vote in 1920, they were not a constitutional category in the US, as was true virtually everywhere in the world.
- Women are autonomous agents today. Norms change; rights evolve.
- 2] Ignores rape and incest: As the court’s dissent note puts it, this majority decision ignore rape and incest.
- If abortion as a right is dissolved, women can be forced to give such unwanted births.
- The majority decision of the court is silent on this important matter.
- 3] Against the right to participate equally in economic and social life: Having a child is not simply a deeply moral obligation to the unborn.
- It is also a decision that affects “the ability of women to participate equally in (the nation’s) economic and social life”.
- These words are from a later decision, known as Casey (1992), when the US Supreme Court added the concept of “undue burdens” to support the idea of abortion.
- 4] Right over body ignored: Men don’t have to deal physically with pregnancy, whereas the foetus grows inside a woman’s body for nine months.
- If men have the right over their bodies, which can’t be taken away by the government,then women should also have autonomy over their bodies as well.
- Maternity must be a voluntary choice.
- There is no going back to the notion of rights as they were viewed in the 18th century — unequal, unneutral, unbalanced.
Conclusion
Typically, as they evolve and deepen, democracies allow the arc of rights to broaden further, not retreat. After this judgment in the US, the stakes have become much higher and the democratic challenges bigger.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 89
Mains level: Paper 2- Role of Rajya Sabha
Context
This article seeks to re-articulate a question pertaining to the composition of the Council of States.
Historical background and CAD over the issue of second chamber
- Lokanath Misra led the charge against a federal second chamber in the Constituent Assembly stating that there was not need for the second chamber and also that it will not serve any useful purpose.
- Shibban Lal Saksena, was equally emphatic: He said that as per their experience, the Upper House acts as a clog in the wheel of progress.
- They were not the only ones who had concerns. Other members expressed them too in different contexts during the Constituent Assembly debate on draft Article 67.
Issues with the role of Rajya Sabha
- Unable to protect the interest of the States: Article 1(1) of the Indian Constitution states “India, that is Bharat, shall be a Union of States.”
- Therefore, the primary responsibility of a Council of States would be to protect the interests of the states vis a vis the Union.
- There is hardly any empirical evidence that substantiates that the Rajya Sabha has measured upto the task ever since it came into existence on April 3r 1952.
- No focus on states: From 1952 to 2003, at least there was a veneer of a state focus when it was mandatory that any citizen desirous of contesting a Rajya Sabha election had to be an elector from that particular state.
- By amending Section 3(1) of the Representation of People’s Act 1952 and doing away with the domicile requirement, the Government removed this fig leaf also in 2003.
- A five-judge bench did not uphold tha challenge to this judgement.
- This amendment and the subsequent judgment buried the earlier practice of individuals entering the Rajya Sabha from anywhere based upon rather dodgy but still some form of domicile credentials.
- All states do not have bicameral legislature: Twenty-four states have unicameral legislatures, that is, only one legislative body, and only six states are bicameral.
- If the bulk of the states can make do with one House why not the Centre?
- Rajya Sabha as continuous house argument: It is also argued that the Rajya Sabha is a continuous House as opposed to the Lok Sabha that gets mandatorily dissolved every five years if not sooner.
- That can be fixed with a simple amendment to Article 83 (2) that should state that “Lok Sabha would remain in existence till the time its successor body/house is not constituted.
- Article 83 (1) would stand deleted and consequential amendments can be carried out to other parts of the Constitution.
Conclusion
It would be instructive to keep in mind that the Basic Structure doctrine enunciated by the Supreme Court in Re: Kesvananda Bharti holds parliamentary democracy to be basic structure, not bicameralism.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Purchasing Russian oil
Context
This week the Wall Street Journal and the New York Times both reported on India emerging as a major buyer of Russian oil.
Background of rising fuel prices due to Ukraine crisis
- A significant fallout of Russia’s invasion of Ukraine has been the rising cost of petroleum.
- In response to the invasion, Western countries, including the United States and Europe, have imposed an array of sanctions against Russia.
- Reduced purchases from Russia: Europe and the United States have seen the price of oil steadily rise after they reduced their purchases from Russia.
- For now, Russia has been able to mitigate the impact of sanctions by selling crude, oil and coal at reasonable prices in greater volumes to newer bulk buyers like India, to combat Europe trying to wean itself off Russian crude.
Why India increased purchase of Russian oil
- India has chosen a different route.
- Cope with rising fuel prices: We are the third-largest importer and consumer of oil in the world and have increased our purchase of Russian oil to cope with rising oil prices elsewhere.
- We are also refining crude oil or turning it into products like jet fuel and diesel and selling it to Europe and other nations.
- Curb inflation: Importing Russian crude also helps us curb inflation that has been made worse by rising fuel prices.
- Halting the fall of the rupee: Procuring discounted Russian oil is an effort by the government to bring down prices and halt the decline in the value of the Indian rupee.
- India’s behaviour is governed by our best interest, which is the most important element of any astute foreign and economic policy.
Issues with purchasing oil from Russia
- The European Union has announced a ban against insuring ships carrying Russian oil, to commence this December.
- Insurance ban: Countries like India, China and Turkey that are increasing their oil purchases from Russia have six months to find a work-around to the insurance ban by using non-European insurance companies.
- European companies own most of the ships carrying Russian oil to India.
- These insurance sanctions will impact the companies that own these ships as well.
- Dependence for batteries: Apart from geopolitical changes in the world indicating the rise of China, there is a major change: Electric vehicles and electric batteries substituting for non-renewable resources like petroleum and diesel.
- India cannot afford to be dependent on an unhindered supply of electric batteries from China, given geopolitical considerations and border disputes between the two nations.
Way forward
- To weather the new electric era that will no doubt be dotted with territorial wars and national security concerns, India would do well to preempt shortages in the arena – by putting in place factories which will build the electric batteries that will power our futures.
- What the invasion of Ukraine has taught us is that we need to be more self-reliant and have in-house energy sources.
Conclusion
India needs to factor in the implications of comprehensive western sanctions as it increases its purchase of discounted Russian oil.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Use of NMMS app and issues
Context
The National Mobile Monitoring Software (NMMS) app seeks to improve citizen oversight and increase transparency in NREGA works. This causes significant difficulty for NREGA workers.
About NMMS app
- National Mobile Monitoring Software (NMMS) App was launched by the Minister of Rural Development on May, 21 2021.
- The National Mobile Monitoring App is applicable for the Mahatma Gandhi NREGA workers for all the States/ Union Territories.
- This app is aimed at bringing more transparency and ensure proper monitoring of the schemes.
- The main feature of the app is the real-time, photographed, geo-tagged attendance of every worker to be taken once in each half of the day.
- The app helps in increasing citizen oversight of the programme.
Issues with the use of the app
- While such an app may be useful in monitoring the attendance of workers who have fixed work timings, in most States, NREGA wages are calculated based on the amount of work done each day, and workers do not need to commit to fixed hours.
- Disproportionately affects women: NREGA has historically had a higher proportion of women workers (54.7% in FY 2021-22) and has been pivotal in changing working conditions for women in rural areas.
- Due to the traditional burden of household chores and care work on women, the app is likely to disproportionately affect women workers.
- Lack of stable network: There are challenges of implementation with the NMMS as well.
- A stable network is a must for real-time monitoring; unfortunately, it remains patchy in much of rural India.
- NREGA Mates impacted: The app has adversely impacted NREGA Mates as well.
- The role of a Mate was conceptualised as an opportunity to empower local women to manage attendance and work measurement in their panchayat.
- To be a Mate, one needs to have a smartphone.
- This new condition disqualifies thousands of women who do not own smartphones from becoming Mates.
- Erosion of transparency: The app claims to “increase citizen oversight” by “bringing more transparency and ensuring proper monitoring of the schemes, besides potentially enabling processing payments faster”.
- With no physical attendance records signed by workers anymore, workers have no proof of their attendance and work done.
- No clarity provided on corruption: While ostensibly the NMMS’s focus on real-time, geo-tagged attendance could be one way of addressing this corruption, the MoRD has not provided much clarity on either the magnitude of this corruption or the manner in which the NMMS addresses it.
- No parameters: There are no parameters established to assess the app’s performance, either on transparency, or on quicker processed payments.
Way forward
- Social audits: Social audits are citizen-centric institutions, where the citizens of the panchayat have a direct role and say in how NREGA functions in their panchayat.
- Audits have worked well in the past, allowing the local rights holders to be invested in decisions, and hold the administration accountable themselves.
Conclusion
The NMMS has very clear problems that will make it increasingly difficult for workers to continue working under NREGA, eroding the right to work that underwrites the NREGA Act.
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Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 3- Transparency in RBI's policy making
Context
Modern inflation targeting central banks are often bound by explicit statutory mandates. Critics have argued that the RBI ignored its statutory inflation targeting duty.
Why transparency and predictability of the central bank is important?
- Prior to the 1990s, central banks preferred secrecy.
- Surprising market: The common wisdom was that the efficacy of monetary policy depended on taking markets by surprise.
- This belief started changing gradually with the adoption of inflation targeting.
- Influencing the inflation expectations: Targeting inflation required central banks to influence households’ and firms’ decisions.
- Thus emerged the need for central banks to be transparent and predictable.
Independence with accountability of the Central bank
- There was growing international recognition that central banks as monetary authorities should enjoy a relatively higher degree of independence from governments.
- In a democratic polity, this could only be expected in exchange for increased accountability.
- As a result, regulatory governance gradually emerged as a relevant consideration for independent central banks over the last three decades.
Regulatory governance at the RBI
- The regulatory governance discourse in India came into the focus with the report of the Financial Sector Legislative Reforms Commission in 2013.
- Like a state, regulators usually enjoy significant legislative, executive and judicial powers and should be subject to appropriate accountability mechanisms.
- These should include internal separation of powers; a well-structured regulation making process overseen by the board, through public consultation and cost-benefit analysis; duty to explain its actions to regulated entities and public at large; regular reporting requirements; and judicial review.
- Based on these recommendations, the Ministry of Finance released a handbook in 2013 for voluntary adoption of these enhanced governance standards by all financial sector regulators.
- These developments turned the spotlight on the RBI’s regulatory governance.
Reasons for the criticism of the RBI
- Targeting exchange rate: The central bank appears to have ventured into uncharted legal territory by possibly targeting the exchange rate instead of inflation.
- Regulatory governance issues: Separately, critics have also highlighted broader regulatory governance challenges at the RBI.
- For instance, its alleged use of informal nudges to restrict a foreign player’s access to the Indian payment ecosystem goes against an adverse Supreme Court ruling.
- Such criticisms underline an urgent need to improve the credibility of the central bank’s rule of law quotient.
- Least responsive in legislative function: A 2019 research paper found the central bank’s legislative functions to be the least responsive in comparison to three other regulators – SEBI, TRAI and AERA.
- RBI’ss consultation papers usually presented only one solution and did not offer merits and demerits of multiple possible solutions.
Implications of weak regulatory governance: Judicial scrutiny
- Weak regulatory governance resulted in weak regulations, inviting judicial scrutiny.
- Changes in master circular: In 2019, the Supreme Court effectively rewrote RBI’s master circular on wilful defaulters to provide additional procedural safeguards to borrowers.
- Striking down of crypto ban: In 2020, the court struck down an RBI circular that sought to ban its regulated entities from dealing or settling in virtual currencies.
- The court found that the RBI had neither adduced any cogent evidence of the likely harm, nor had it considered any less intrusive alternative before issuing the circular.
RRA 2.0 suggestions for the RBI
- The recent report of the Regulations Review Authority 2.0 (RRA) offers useful suggestions to improve the central bank’s regulation-making process.
- The RBI had set up the Review Authority 2.0 (RRA) in April 2021 to streamline its regulations.
- Skill improvement in regulatory drafting: RRA has advocated for skill development in regulatory drafting inside the RBI.
- Public consultation: To improve regulatory governance at the RBI, RRA suggested that its regulatory instructions should be issued only after public consultation, except if they are urgent or time sensitive.
- They must contain a brief statement of objects and reasons clearly explaining the rationale behind their issuance.
- Although much softer than the FSRLC standards, RRA nevertheless signal a progressive step forward.
Conclusion
The RBI should heed these recommendations. It should ideally hardcode the suggested principles into a secondary legislation that is binding on itself. That would be the best way to signal that the central bank takes regulatory governance and rule of law seriously.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Soil Health Card
Mains level: Paper 3- Soil degradation
Context
A key element of sustainable food production is healthy soil because nearly 95 per cent of global food production depends on soil. The current status of soil health is worrisome.
The threat posed by soil degradation
- The challenge to food security: Soil degradation on an unprecedented scale is a significant challenge to sustainable food production.
- About one-third of the earth’s soils is already degraded and alarmingly, about 90 per cent could be degraded by 2050 if no corrective action is taken.
- Soil degradation in India: While soil degradation is believed to be occurring in 145 million hectares in India, it is estimated that 96.40 million hectares — about 30 per cent of the total geographical area — is affected by land degradation.
- The FAO’s latest ‘State of the World’s Land and Water Resources for Food and Agriculture’ says: “…soil pollution is also an issue. It knows no borders and compromises the food we eat, the water we drink and the air we breathe.
- Globally, the biophysical status of 5,670 million hectares of land is declining, of which 1,660 million hectares (29 per cent) is attributed to human-induced land degradation, according to the Food and Agriculture Organisation’s ‘State of Land, Soil and Water’ report.
Cause of the problem
- Use of agrochemicals: The excessive or inappropriate use of agrochemicals is one cause of the problem.
- The global annual production of industrial chemicals has doubled since the beginning of the 21st century, to approximately 2.3 billion tonnes.
- Extensive use of fertilisers and pesticides led to the deterioration of soil health and contamination of water bodies and the food chain, which pose serious health risks to people and livestock.
- Salination: Another challenge comes from salinisation, which affects 160 million hectares of cropland worldwide.”
About Soil Health Card Scheme
- Soil Health Card (SHC) scheme is promoted by the Department of Agriculture & Co-operation under the Ministry of Agriculture and Farmers’ Welfare.
- An SHC is meant to give each farmer soil nutrient status of his/her holding and advice him/her on the dosage of fertilizers and also the needed soil amendments, that s/he should apply to maintain soil health in the long run.
- SHC is a printed report that a farmer will be handed over for each of his holdings.
- It will be made available once in a cycle of 2 years, which will indicate the status of soil health of a farmer’s holding for that particular period.
- The SHC given in the next cycle of 2 years will be able to record the changes in the soil health for that subsequent period.
- Under the programme as of date, soil health cards have been distributed to about 23 crore farmers.
- The scheme has not only helped in improving the health of the soil, but has also benefited innumerable farmers by increasing crop production and their incomes.
Progress made so far on soil restoration
- India is well on course to achieving the restoration of 26 million hectares of degraded land by 2030.
- A study conducted by the National Productivity Council in 2017 on this programme revealed that there has been a decrease in the use of chemical fertilisers in the range of 8-10 per cent as a result of the application of fertilisers and micro-nutrients as per the recommendations on the soil health cards.
- Overall, an increase in crop yields to the tune of 5-6 per cent was reported as a result.
- First organic state in the world: “A Healthy Planet for Healthy Children’’ published by the United Nations Institute for Training and Research and the World Future Council highlighted success stories from various countries — including Sikkim in India, which became the first organic state in the world.
Way forward
- Natural farming: Several studies have established that natural farming and organic farming are not only cost-effective but also lead to improvement in soil health and the farmland ecosystem.
- Agro-ecological practices: With the threat to food security looming large globally, the need of the hour is to adopt innovative policies and agro-ecological practices that create healthy and sustainable food production systems.
Conclusion
The time has come for collective global action involving governments and civil society to reverse the alarming trend of soil degradation.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Contingency Reserve Arrangement (CRA)
Mains level: Paper 2- The Ukraine conflict and BRICS
Context
China is hosting the 14th BRICS summit in virtual mode. The focus of the summit will be centred on the conflict and the association’s future.
About BRICS
- BRICS is an acronym for the grouping of the world’s leading emerging economies, namely Brazil, Russia, India, China and South Africa.
- The BRICS Leaders’ Summit is convened annually.
- It does not exist in form of an organization, but it is an annual summit between the supreme leaders of five nations.
- The grouping was formalized during the first meeting of BRIC Foreign Ministers on the margins of the UNGA in New York in September 2006.
- The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
- South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS.
- South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.
- The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
Significance of BRICS
- Economically, militarily, technologically, socially and culturally, BRICS nations represent a powerful bloc.
- 40 per cent of the world’s population: They have an estimated combined population of 3.23 billion people, which is over 40 per cent of the world’s population.
- 25 per cent of global GDP: They account for over more than a quarter of the world’s land area over three continents, and for more than 25 per cent of the global GDP.
- Two fastest growing large economies: The grouping comprises two of the fastest-growing nations, India and China.
- It has proved its mettle to an extent by establishing the BRICS New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA).
How the Ukraine crisis creates challenges for the BRICS
- The leaders of BRICS countries — Brazil, Russia, India, China and South Africa — will navigate the crucial dilemma of evolving a common stance on the Russian-Ukraine conflict.
- The primary agenda of BRICS was rebalancing an international system dominated by the West.
- However, the Ukraine crisis could act as a distraction from that primary agenda.
- The geopolitical considerations of its members can come in the way of attaining the grouping’s original goal.
- Target of economic warfare: Some of the BRICS members could be potential targets of the kind of economic warfare deployed by the West against Russia.
- The West has so far not expected the BRICS countries to stringently adhere to its sanctions against Russia.
- But it will be naïve to expect that they will persist with this attitude.
Way forward
1] Create institutional arrangement
- Challenging the economic might of the West in the near future might be close to impossible.
- Despite the group comprising China, India and Russia, intra-BRICS trade accounts for less than 20 per cent of global trade.
- BRICS is far from having its own payment mechanisms, international messaging systems or cards.
- The Ukraine crisis should drive home the need to create institutional arrangements that can cushion against similar financial turbulence in the future.
2] Recalibrate structure and expand
- BRICS requires a recalibration of its structure and agenda.
- Creating financial mechanisms and technological institutions could turn BRICS into a G20 for developing nations.
- It’s time to revisit the idea of expanding the grouping by inviting new members.
- This could also impart new vigour to the BRICS’s developmental goals.
3] Economic cooperation between India and China
- Economic cooperation between India and China is vital for the success of any future BRICS endeavour.
- The border conflict has created a mistrust of China in India.
- In the current situation, New Delhi is unlikely to take an anti-West stance.
- India, unlike China, is neither a UN Security Council member nor does it have major sticking points with the West.
- At the same time, India is not a part of the Western camp.
- That does open up the possibility of New Delhi taking a more proactive position in BRICS.
- The two powers need to come together for the sake of global governance reform.
Conclusion
The Ukraine crisis could be an occasion for the leaders of BRICS nations to commit themselves to the original goal of the bloc. It’s an opportunity they shouldn’t let go of.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: AFS
Mains level: Paper 3- Agreement on Fisheries Subsidies (AFS)
Context
The recently concluded twelfth ministerial conference of the World Trade Organisation (WTO) adopted the trade agreement called the Agreement on Fisheries Subsidies (AFS).
About the AFS
- WTO negotiations on fisheries subsidies were launched in 2001 at the Doha Ministerial Conference, with a mandate to “clarify and improve” existing WTO disciplines on fisheries subsidies.
- At the 2017 Buenos Aires Ministerial Conference (MC11), ministers decided on a work programme to conclude the negotiations by aiming to adopt, at the next Ministerial Conference, an agreement on fisheries subsidies which delivers on Sustainable Development Goal 14.6.
- The recently concluded twelfth ministerial conference of the World Trade Organisation (WTO) adopted a sustainability-driven trade agreement called the Agreement on Fisheries Subsidies (AFS).
Provisions adopted in the AFS
- Prohibits three subsidies: Fundamentally, AFS prohibits three kinds of subsidies:
- First, illegal, unreported, or unregulated (IUU) fishing.
- Second, fishing of already over-exploited stocks.
- Third, fishing on unregulated high seas.
- Two-year transition period for developing countries: As part of special and differential treatment (S&DT), developing countries like India have been given a two-year transition period for phasing out the first two kinds of subsidies within their Exclusive Economic Zone (EEZ).
- However, the final negotiated outcome, most crucially, lacks the much-needed discipline on subsidies for fishing in other members’ waters and those that contribute to overcapacity and over-fishing (OCOF).
- Limited AFS: WTO member countries agreed to a limited AFS sans regulations disciplining OCOF subsidies, which have been pushed to the future and are expected to be completed within four years.
- If negotiations fail, the AFS will stand terminated, as provided in Article 12.
- Meanwhile, all countries can continue providing most OCOF subsidies, that is, except for fishing on unregulated high seas.
What are the implications for India?
- Longer transition period required: India has been demanding that developing countries be given a longer transition period of 25 years to put an end to OCOF subsidies within their EEZ.
- Economic growth through ocean resources: Given its long coastline of nearly 7,500 kilometres, the blue economy — sustainable use of ocean resources for economic growth — occupies a cardinal place in India’s development trajectory.
- India has set a target of exporting marine products worth $14 billion by 2025.
- Policy space for marine infrastructure: India needs the policy space to invest in developing the marine infrastructure to harness the full potential of the blue economy.
- Livelihood concerns: Moreover, India needs to protect the livelihood concerns of close to four million marine farmers, the majority of whom are engaged in small-scale, artisanal fishing, which does not pose a great threat to sustainability.
- However, India’s demand for a longer transition period was not acceptable to many countries who insisted on this period being seven years
The disparity between Developed countries and Developing countries
- India rightly contends that WTO disciplines should not be developed in a manner that throttles its emerging sector while richer nations continue to negotiate exemptions for indefinite subsidisation and exclusion of horizontal, non-specific fuel subsidies in the text.
- Rich countries have historically provided massive subsidies to build capacity for large-scale fishing and fishing in distant waters, thereby contributing the most to depletion.
- India provided subsidies worth a mere $277 million in 2018, in sharp contrast to the top five subsidisers: China, EU, US, South Korea, and Japan, whose subsidies range from $7,261-$2,860 million respectively.
Way forward
- Comprehensive agreement: For the sake of sustainability, countries need to overcome their differences soon and forge a comprehensive agreement with the inclusion of meaningful S&DT, else they risk the indefinite continuation of harmful subsidies by all players.
- One balancing act could be to consider different ways to effectuate such flexibilities while accommodating the demands in a more targeted manner.
- Strengthening infrastructure: India could strengthen infrastructure and mechanisms to be able to utilise any future exemptions.
Conclusion
For India, the AFS is less-than-perfect, with a potential of no real outcome at the end of four years if the negotiations fail. But negotiations over the global commons are not easy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Exercise Talisman Sabre
Mains level: Paper 2- India-Australia relations
Context
India and Australia, which share common values and interests, must work together with resolve to shape the economic and strategic environment so that it continues to support collective security and prosperity.
India-Australia ties: A background
- The ties are a Comprehensive Strategic Partnership full of practical, tangible actions that strengthen ties and benefit the region.
- India and Australia are a small group of countries to hold annual leaders’ summits and biennial 2+2 talks involving foreign and defence ministers.
- The defence forces of both the countries are undertaking more complex activities together, such as in Exercise Malabar with the US and Japan.
- We coordinate closely on maritime domain awareness.
- This year both countries deployed P-8 surveillance aircraft to each other’s territories for joint patrols.
- Australia has also committed to a package of partnership initiatives in our update to the India Economic Strategy.
- Cooperation on climate and sustainability: India and Australia have great potential to cooperate on climate and sustainability.
Why India matters to Australia
- Securing supply chain: India’s economy, manufacturing capabilities and talent ensure it will play a key role in securing supply chains and restarting post-pandemic growth.
- Balance of power: Its military has the capacity and capability to respond to natural disasters, help stabilise an uncertain region and contribute to an effective balance of power.
- Technological and scientific capabilities: Its technological and scientific capabilities are gateways to a cleaner and more sustainable world.
- Commitment to democracy: Most of all, India’s people have the optimism, the commitment to democracy, the drive and the goodwill to make our region safer, freer and better.
Vision for open, inclusive and resilient Indo-Pacific region
- As the bilateral relationship deepens, both the countries must begin to work more together with others in the region.
- Responding to humanitarian crises and natural disasters: There is enormous potential in the Indian and Pacific oceans, where we each have vital interests in combating climate change, illegal fishing and people smuggling and responding to humanitarian crises and natural disasters.
- Australia has a vision for an open, inclusive and resilient Indo-Pacific region.
- It is a vision for a region that is more integrated rather than divided, where trade and investment flow freely based on agreed rules and treaty commitments, where disputes are resolved through dialogue in accordance with international law, and where a strategic culture that respects the rights of all states, big and small, prevails.
- It is a vision that Australia share with partners like ASEAN, and partners like India.
- Whether through joint activities with like-minded countries, or the support of regional and multilateral architecture, Australia is ensuring the region has options and balance.
Conclusion
India and Australia’s interests don’t just align, they are inextricably entwined. Expect this relationship to grow and prosper, our cooperation to deepen.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GSAP
Mains level: Paper 3- Communication gap between MPC and RBI
Context
Communication is a critical element of monetary policy. Yet there seems to be a gap between what the MPC says and what the RBI does.
About MPC
- The Reserve Bank of India Act, 1934 (RBI Act) has been amended by the Finance Act, 2016, to provide for a statutory and institutionalised framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth.
- Highest monetary policy-making body: By law, the Monetary Policy Committee is the highest monetary policy-making body in the land, tasked with deciding monetary policy changes at regular intervals.
- Composition: The MPC will have six members – the RBI Governor (Chairperson), the RBI Deputy Governor in charge of monetary policy, one official nominated by the RBI Board and the remaining three members would represent the Government of India.
- The MPC will be chaired by the Governor.
- Under the inflation targeting regime, the most important role in communication belongs to the MPC.
Communication with public
- Monetary policy changes are communicated through formal statements, with the discussions underlying these decisions also being published, so that the public can understand why the MPC decided the way that they did.
- Communication gap: Over the past few years, a communication gap seems to have opened up between what the MPC has been saying and what the RBI has been doing, thereby potentially eroding the credibility of the IT framework.
- Influencing inflation expectations: Communication is an important part of the ability of the central bank to influence inflation expectations.
Following are the ways which indicate the communication gap between the RBI and the MPC, with several implications for the credibility of the MPC.
1] Separate statements
- During the first few years of the inflation-targeting regime from 2016 to 2018, the process of communication worked quite well.
- On the days of policy announcements, the governor and his deputies would participate in a press conference.
- From 2019 onwards, however, things began to change.
- Governor’s separate statement: The RBI began to release a separate governor’s statement on the day of the monetary policy meeting, presenting an inflation outlook and even explaining the decision taken by the MPC.
- MPC statement: It has overlapped with the MPC statement; at times, it has seemed somewhat different.
- For example, following the June 8 Monetary Policy Review the MPC highlighted inflation concerns, and voted in favour of raising the policy repo rate.
- On the same day, a governor’s statement mentioned that the central bank will also remain focussed on the orderly completion of the government’s borrowing programme.
- Confusion: The issuance of two such different statements can lead to confusion, especially as lowering inflation and lowering government bond yields are contradictory policy objectives.
Why is communication so crucial? To influence inflation expectations!
- If the public believes the central bank is committed to keeping inflation under control, then it will act accordingly.
- Firms will moderate their price increases, fearing that large price rises will make them uncompetitive.
- Meanwhile, workers will accept moderate wage increases, while investors will accept low interest rates on their bond purchases.
- With everyone acting in this way, it will be easier for the central bank to ensure that inflation indeed remains low.
- Anchored inflation expectations: If inflation expectations are well anchored, then it becomes relatively easy for the central bank to ensure that inflation returns to the target level before too long.
2] Change in the Monetary Policy Corridor width during pandemic
- Deciding the repo rate: The most important task of the MPC, enshrined in the RBI Act (Amended), 2016 that introduced IT, is to decide the repo rate, since this has long been the lynchpin of India’s monetary policy framework.
- Ever since the early 2000s, policy had aimed to keep overnight money market rates in a corridor, with the lower bound established by the reverse repo rate and the upper bound by the repo rate.
- Since the width of this corridor was fixed, once the repo rate was decided, the reverse repo rate was automatically determined, and market overnight rates adjusted accordingly.
- During the Covid-19 pandemic, the RBI constantly adjusted the reverse repo rate even as the MPC kept the repo rate unchanged.
- As a result, the fixed width of the corridor was lost, and the MPC lost any role in determining interest rates.
3] Introduction of policy instruments outside the remit of MPC
- During pandemic, the RBI introduced a number of new policy instruments, again outside the remit of the MPC.
- GSAP: It brought in the GSAP programme through which it pre-commited to buying a certain amount of dated government bonds in order to control their yields.
- Variable reverse repo auctions: It then introduced variable reverse repo auctions, and more recently, replaced the reverse repo rate with the long-dormant standing deposit facility rate.
- The rationale for this was not explained in the MPC statement.
- All unconventional monetary policy announcements were kept outside the MPC statement.
- This raised the questions about the role of the committee in deciding monetary policy actions at a crucial time like the pandemic.
4] Intervention in the foreign exchange market
- The RBI has been intervening in the foreign exchange market to manage the rupee.
- Forex interventions by definition influence the domestic monetary base and inflation.
- Yet the MPC in its monetary policy statements does not discuss either the exchange rate dynamics or the forex interventions.
- Just as it does not discuss the RBI’s interventions in the bond market to lower the yields.
Way forward
- In its latest two statements, the MPC indicated that policy would now be focusing on bringing India’s inflation rate under control.
- Clear policy framework: If the RBI is going to be successful in this endeavour, the first step must be to close the communication gap, by reintroducing a simple and clear policy framework and restoring the central role of the MPC.
Conclusion
The net result of all these actions is a potential loss of both clarity and credibility. The communication gap will need to be closed in order for the RBI to become successful in bringing inflation back to its 4 per cent target level.
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Back2Basics: Monetary Policy Corridor
- The Corridor in the monetary policy of the RBI refers to the area between the reverse repo rate and the MSF rate.
- Reverse repo rate will be the lowest of the policy rates whereas Marginal Standing Facility is something like an upper ceiling with a higher rate than the repo rate.
- The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.
- As per the monetary policy of the RBI, ideally, the call rate should travel within the corridor showing a comfortable liquidity situation in the financial system and economy.
What is GSAP?
- The G-Sec Acquisition Programme (G-SAP) is basically an unconditional and a structured Open Market Operation (OMO), of a much larger scale and size.
- G-SAP is an OMO with a ‘distinct character’.
- The word ‘unconditional’ here connotes that RBI has committed upfront that it will buy G-Secs irrespective of the market sentiment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-Sri Lanka relations and challenges
Context
The commonality between Sri Lanka and the southern parts of India remains a less-emphasised yet significant aspect of India-Sri Lanka relations.
Crisis in Sri Lanka and relief provided by India
- The present economic crisis in Sri Lanka has pushed it closer to India for immediate relief.
- India, as part of its ‘Neighbourhood First’ policy, has extended support to the people of Sri Lanka in the form of aid (close to $3.5 billion) to help secure Sri Lanka’s food, health and energy security by supplying it essential items such as food, medicines, fuel and kerosene.
- The latest in the series was the signing of an agreement on June 10 between the Government of Sri Lanka and the Export-Import Bank of India for a $55-million short term Line of Credit to facilitate the procurement of urea for paddy crop in the ongoing ‘Yala’ season.
- On its part, Tamil Nadu decided to provide aid of ₹123 crore, comprising 40,000 tonnes of rice, 137 types of life-saving drugs and 500 tonnes of milk powder.
Sri Lanka-India sub-regional context
- During his second term as Prime Minister, Mr. Wickremesinghe while delivering a lecture in Chennai, in August 2003, called for the development of the south India-Sri Lanka sub-region as a single market.
- Such a market would provide more opportunities for the economic growth of both countries.
- In 2016 he highlighted the fact that the five Indian southern States, with a total population of 250 million, had a combined gross state domestic product of nearly $450 billion; with the addition of Sri Lanka’s $80 billion GDP, the sub-region would have a $500 billion economy, having an aggregate population of around 270 million.
Challenges
- Possibility of greater economic collaboration: Whether this bonhomie can lead to greater economic collaboration between Sri Lanka and south India, not necessarily Tamil Nadu alone, given the historical baggage, is anybody’s guess.
- Baggage of history: Some sections of the Sinhalese still hold the view that India had been a threat to Sri Lanka and it can still be a threat to them.
- The manner in which the Rajapaksa regime unilaterally scrapped in February 2021 a tripartite agreement signed in 2019 with India and Japan for the development of Colombo’s East Container Terminal was a reflection of the historical baggage.
- This perception can be traced to history when Sri Lanka was invaded by rulers of south India who humbled the Sinhala kings.
- In the aftermath of the 1983 anti-Tamil pogrom, the support provided by the Indian government to Tamil rebels only strengthened this perception.
- Modest investment in Sri Lanka’s development: Despite India’s open willingness to take part in the development of Sri Lanka after the civil war, the scale of its involvement has been modest.
- Incomplete projects due to lack of political will: After the cancellation of the tripartite agreement, India was later provided with projects such as the West Container Terminal, the Trincomalee oil tank farm and a couple of renewable projects, there were several proposals that envisaged India’s participation but did not see the light of day.
- Another project, a collaboration between NTPC Limited and the Ceylon Electricity Board, was cancelled.
- Other projects too such as the development of the Kankesanthurai harbour and the expansion of the Palaly airport in Jaffna, both envisaging Indian participation, would have become a reality had there been show of political will from the other side.
- The project of building a sea bridge and tunnel, connecting Rameshwaram to Talaimannar, remains on paper.
Way forward
- Infrastructure development: Even now, there is enormous scope for collaboration between the two countries in the area of infrastructure development.
- Cross-border energy trade: The economic crisis has revived talk of linking Sri Lanka’s electricity grid with that of India.
- If this project takes off, the first point of interconnectivity on the Indian side will most likely be in Tamil Nadu.
- India has cross-border energy trade with Bangladesh, Nepal, Bhutan and Myanmar.
- Facilitating people-to-people interaction: The apprehension in the minds of sections of the Sinhalese majority about India being a threat can be dispelled only by facilitating greater people-to-people interaction, including pilgrimages by monks and other sections of Sri Lankan society to places of Buddhist importance not only in north India but also in the south (Andhra Pradesh).
Conclusion
Much more will have to be done but the opportunity created by the current circumstances should be utilised to bring Indian and Sri Lankan societies closer — a prerequisite to achieving an economic union between Sri Lanka and the southern States of India.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Job creation by the government
Context
The government recently announced that 10 lakh government jobs will be provided over the next 18 months on a “mission mode”.
Background
- The government recently announced it would recruit 10 lakh people in “mission mode” over the next one-and-a-half years.
- The announcement came at a time when the unemployment rate for youth (aged 15-29 years) in urban areas has been hovering at over 20 per cent for the last several quarters.
- According to the Quarterly Bulletin of Periodic Labour Force Survey (PLFS), the youth unemployment rate, according to current weekly status, stood at 20.8 per cent in urban areas during October-December 2021.
- The annual PLFS report too shows that the overall youth unemployment rate, according to usual status (ps+ss), was at 12.9 per cent — 18.5 per cent in urban areas and 10.7 per cent in rural areas — during July-June 2020-21.
Three takeaways from the announcement
- One, the creation of employment is indeed a problem and can no longer be hidden from the public discourse.
- Two, the private sector, especially modern sectors such as the service and manufacturing sectors, which are dominated by multinational companies, have not created many jobs.
- Even if the Information Technology sector or the modern gig economy have created jobs, these are either very high-skilled jobs or low-skilled ones.
- Three, the government in the Nehruvian scheme of development occupied an important place in the labour market.
- The government is now forced to step in as persistently rising inflation, unemployment and underemployment threaten to politically affect it.
Employment data and issues with it
- Government is at present relying on the Employees’ Provident Fund Organisation/National Pension System/Employees’ State Insurance Scheme registrations and exits as indicators of the formal labour market.
- This could be misleading as companies may be increasing registrations to cross the threshold to become eligible to fall under any of these.
- Formalisation: Hence, this might be more a case of formalisation rather than employment generation.
- Second, media reports show that more than 85% of those aspiring for those 10 lakh jobs could be consumed by existing vacancies in Central government departments (8,72,243).
- The decline in PSU jobs: Third, 241 central public sector enterprises (CPSEs) have been shedding jobs in recent years.
- The decline in quality of jobs: Even though the labour force and workforce participation rates have increased marginally, there is a decline in the quality of jobs, viz. there is a rise in the unpaid segment of the self-employed and a rise in the share of the agricultural sector in total employment over the last three Periodic Labour Force Surveys (43% to 47%).
Role of the private sector
- The private sector creates jobs in response to market forces and while taking into consideration radically altering technological developments.
- We cannot avoid placing the government at the centre of employment creation beyond a certain point.
- Projects in the modern private sector consume a lot of capital to generate very few jobs.
- For instance, recently, there was a report that the Adani Group has invested ₹70,000 crore (or ₹700 million) in Uttar Pradesh to create merely 30,000 jobs.
- Foreign Direct Investment, which at any rate is highly capital-intensive, goes mostly into the non-manufacturing sectors.
Way forward
- The government’s role in employment generation has entered into popular discourse and discussions on policy formation.
- The government should play a significant role soon.
- Government as principal employment generator: The government should re-establish its role as the principal employment generator through jobs in its ministries and CPSEs and through assured employment generation programmes like MGNREGA.
Conclusion
Employment is not merely about numbers and growth figures. We need to concentrate on enabling the creation of decent work and a sustainable labour market to which India is committed as a member of the United Nations and the International Labour Organization.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Agnipath scheme
Mains level: Paper 3-Agnipath Scheme
Context
All major powers undertake a periodic (every 4-5 years) review of their evolving national security objectives. The government of India, on the other hand, has neglected to undertake any such exercise, in the past 75 years.
India’s defence budget for FY 2022-23
- In 2022-23, the Ministry of Defence has been allocated Rs 5,25,166 crore.
- This includes expenditure on salaries of armed forces and
civilians, pensions, modernisation of armed forces, production establishments, maintenance, and research and development organisations.
- According to the Stockholm International Peace
Research Institute (SIPRI), India was the third largest defence spender in absolute terms in 2020
after USA and China.
- In the last decade (2012-13 to 2022-23), the budget of the Ministry of Defence has grown at an annual average rate of 8.6%, while total government expenditure has grown at 10.8%.
- Defence expenditure as a percentage of GDP declined from 2.3% in 2012-13 to 2% in 2022-23.
Neglect of defence expenditure in India
- Defence expenditure as non-plan expenditure: Independent India saw defence expenditure being relegated to the “non-plan” category, within the ambit of a Soviet-inspired, central economy.
- Pension bill linked to defence budget: In another anomaly, the pension bill of veteran soldiers — a separate charge on the exchequer — was linked to the defence budget.
- Neglect of modernisation needs: And the growing pension bill was given as an excuse for the dwindling funds available for force-enhancement and hardware replacement/modernisation.
- As a result, the finance ministry, instead of finding ways and means of raising essential, additional funds for national defence demanded that they evolve measures for reducing the pension bill.
Two issues with our national security approach
1] Lack of periodic review
- Every nation faces the eternal “guns vs butter” dilemma.
- Periodic review: All major powers undertake a periodic (every 4-5 years) review of their evolving national security objectives, the options available, and the economic/military means available for achieving them.
- Apart from providing fiscal guidance, this process also facilitates the evolution of a national security strategy.
- China, has, since 2002, been issuing, with unfailing regularity, a biennial “Defence White Paper”, which encapsulates all of the foregoing, and is available on the Internet; for the information of foes and friends, alike.
- The government of India, on the other hand, has neglected to undertake any such exercise, in the past 75 years.
- India is amongst the few major powers which has failed to issue a National Security Strategy or Doctrine.
2] Lack of organisation reforms
- A second fact that we need to face is that our armed forces have remained in a Second World War time-warp, as far as their organisation and doctrines are concerned.
- Lack of political will and internal resistance: Attempts at organisational reform have come to naught due to lack of political will as well as internal resistance from the services; with the constitution of a Chief of Defence Staff and creation of a Department of Military Affairs providing the latest examples.
Way forward
- Given the transformed nature of warfare, down-sizing of the Indian army, by substituting manpower with smart technology and innovative tactics, has become an imperative need.
Agnipath Scheme
- Recently announced Agnipath scheme provides for the recruitment of youths in the age bracket of 17-and-half to 21 years for only four years with a provision to retain 25 per cent of them for 15 more years.
- Later, the government extended the upper age limit to 23 years for recruitment in 2022.
- The personnel to be recruited under the new scheme will be known as Agniveers.
Suggestions for Agneepath Scheme
- 1] Not the best time to introduce reform: Given the parlous security situation, on the country’s northern and western borders as well as the ongoing domestic turbulence, this is not the best time to cast the armed forces — already short of manpower — into turmoil, with a radical and untried new recruitment system.
- 2] The scheme is suitable for the army only: Such a scheme, in its present form, is suitable only for the army, whose large infantry component is not excessively burdened with technology.
- In case of the navy and air force, at least 5-6 years are required before a new entrant can acquire enough hands-on experience to be entrusted with the operation or maintenance of lethal weapon systems and complex machinery and electronics.
- 3] Trial before implementation: A radical change of this nature should have been subjected to a trial before service-wide implementation.
- Ideally, a few units of the regular or Territorial Army could have been earmarked as a testing ground, and feed-back obtained.
- 4] Legal backing to post-demobilisation employment: Experience of the past has shown that the home ministry has resisted induction of ex-servicemen into the armed-police and para-military forces, on the grounds that it would spoil the career path of their own cadres.
- Neglect by the state government: Similarly, state governments and other agencies have blatantly ignored the reservations mandated for ESM.
- Therefore, if the Agnipath scheme has to offer a meaningful promise of post-demobilisation employment or education, this must be mandated by an Act of Parliament, on the lines of the “GI Bill” enacted by the US Congress.
Conclusion
A scheme on the lines of Agnipath, appropriately constituted, and focused on enhancing “combat effectiveness” rather than “effecting savings” or “generating employment,” could have triggered a reformative process. But the above given caveats need to be borne in mind in this context.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Self reliance in edible oil through oil palm
Context
Supply disruptions during the pandemic and the Russia-Ukraine war have led many nations to think about “self-sufficiency” in critical food items or at least reduce their “excessive dependence” on imports of essential food products.
Challenges facing global trade
- The World Trade Organisation’s (WTO) recently concluded12th Ministerial Conference in Geneva, struggled to find answers to some of the complex questions pertaining to global trade.
- The Ministerial Conference is the top decision-making body of the agency whose basic goal is to ensure that trade flows as smoothly, predictably and freely.
- Trading rules for dire situations: As far as agriculture, trade and food security are concerned, the challenge is to figure out the most appropriate trading rules in dire situations like pandemics, wars, social/political disruptions or natural disasters.
- Export bans: Recent examples include Russia’s export ban on wheat and sunflower oil, Ukraine’s ban on exports of food staples, Indonesia’s ban on palm oil exports, Argentina’s ban on beef exports, Turkey, Kyrgyzstan and Kazakhstan’s ban on a variety of grain products, and India’s wheat export ban.
- Sudden actions such as these exacerbate the pressure on global trade leading to a spike in the prices.
India’s import dependence for edible oil
- India imports 55 to 60 per cent of its edible oil requirements.
- India’s edible oil import bill in 2021-22 (FY22) crossed $19 billion (for more than 14 MMT of imports) (see figure).
- Palm oil comprises more than 50 per cent of India’s edible oil imports, followed by soybean and sunflower.
- Atmanirbharta in edible oil: The “excessive dependence” on imports has raised the pitch for “atmanirbharta” in edible oil.
- The Prime Minister launched the National Edible Oil Mission-Oil Palm (NEOM-OP) in 2021.
Self-reliance Vs Self-sufficiency
- “Self-sufficiency” and “self-reliance” are two different concepts with very different policy implications.
- What is self-sufficiency? Self-sufficiency would imply replacing all imports of a commodity (say edible oils in India’s case) at any cost (thus raising import duties exorbitantly).
- What is self-reliance? Self-reliance would continue to embed the principle of “comparative advantage” in the endeavour to reduce dependence on imports.
- Case of India’s agriculture: The country’s agri-exports in FY22 touched $ 50.3 billion against its agri-imports of $ 32.4 billion.
- This means that Indian agriculture is largely globally competitive.
- But its biggest agri-import item, edible oil, accounts for 59 per cent of India’s agri-import basket.
Way forward
- 1] Develop oil palm: Given the way international prices of edible oils have surged in the last year or so (by more than 70 per cent), it may be time for India to ramp up its efforts in developing oil palm.
- Why oil palm? The Prime Minister launched the National Edible Oil Mission-Oil Palm (NEOM-OP) in 2021.
- Challenges in traditional oilseed: Achieving atmanirbharta in edible oils through traditional oilseeds such as mustard, groundnuts and soya would require an additional area of about 39 million hectares under oilseeds.
- Danger to food security: Such a large tract of land will not be available without cutting down the area under key staples (cereals) – this could endanger the country’s food security even more.
- So, a rational policy option to reduce import dependence in edible oils is to develop oil palm at home and ensure that it gives productivity comparable to that in Indonesia and Malaysia — about four tonnes of oil per hectare, which is more than 10 times mustard can give at existing yields.
- India has identified 2.8 million hectares of area where oil palm can be grown suitably.
- So far the objective of NEOM-OP is to bring in at least 1 million hectare under oil palm by 2025-26.
- 2] Declare oil palm as a plantation crop: The other option is to declare oil palm as a plantation crop and allow the corporate players to own/lease land on a long-term basis to develop their own plantations and processing units.
- This does not seem plausible in the current socio-political context.
Challenges
- Long gestation period: It takes four to six years to come to maturity; during this period, smallholders need to be fully supported.
- The support (subsidy) could be the opportunity cost of their lands, say profits from paddy cultivation, which is largely the crop oil palm will replace in coastal and upland areas of Andhra, Telangana and Northeast India.
- Pricing formula: Further, the pricing formula of fresh fruit bunches (FFB) for farmers has to be dovetailed with a likely long-run average landed price of crude palm oil with due flexibility in the import duty structure.
- Appropriate import duty: One needs to identify trigger points when import duties need to be raised as global prices come down, and when to reduce these duties in case of rising global prices.
- Oil recovery: Besides this, the processing industry needs to ensure an oil recovery of at least 18 to 20 per cent – that must be built into the pricing formula.
Conclusion
Overall, unless India thinks holistically and adopts a long-term vision, the chances of reducing India’s imports of edible oils from 14MMT in FY22 to 7MMT by FY27 look bleak.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Agnipath scheme
Context
Recently, the Agnipath scheme for recruitment of short-term contracted soldiers was announced.
About Agnipath Scheme
- This will be the only form of recruitment of soldiers into the three defence services from now.
- The scheme aims at strengthening national security and for providing an opportunity to the youth to serve in the armed forces.
- Recruits under the scheme will be known as ‘Agniveers’.
- After completing the four-year service, they can apply for regular employment in the armed forces.
- They may be given priority over others for various jobs in other government departments.
- The move is expected to decrease the average age profile of armed forces personnel from the current 32 to 24-26 years over a period of time.
Benefits of the Agnipath Scheme
- Lower the average age: The average age in the forces is 32 years today, which will go down to 26 in six to seven years, the scheme envisions.
- Youthful armed forces will allow them to be easily trained for new technologies.
- Employment opportunities: It will increase employment opportunities and because of the skills and experience acquired during the four-year service such soldiers will get employment in various fields.
- High-skilled workforce: The scheme will also lead to the availability of a higher-skilled workforce to the economy which will be helpful in productivity gain and overall GDP growth
Financial constraints and challenges
- Directing funds towards modernisation: It has been argued that the savings in the pensions bill — which will show up on the books only after a couple of decades — would be directed towards the modernisation of defence forces.
- The armed forces do not have that kind of time available to them to postpone their already long-delayed modernisation.
- Shortage: The Indian Air Force is already down to 30 squadrons of fighter jets against the 42 squadrons it needs, and the Indian Navy is at 130 ships when its vision was to be a 200-ship navy; the Indian Army is already short of 1,00,000 soldiers.
- Instead of expanding the economy to support the military, the Government has resorted to shrinking the military.
Issues with the short-term recruitment
- No theoretical modelling: As the short-term recruitment policy has neither been theoretically modelled nor tried out as a pilot project, the exact consequences of the move will only be known as they play out.
- Adverse effect on professional capabilities: But its adverse effect on the professional capabilities of the armed forces is certain.
- It starts with the very high turnover of young soldiers, the increase in training capacities and infrastructure and the augmentation of the administrative setup for greater recruitment, release, and retention of soldiers.
- An armed forces boasting of a poor teeth-to-tail ratio is further increasing the tail.
- Impact on operational capabilities: The tooth-to-tail ratio (T3R), in military jargon, is the amount of military personnel it takes to supply and support (“tail”) each combat soldier (“tooth”).
- The Indian Air Force and the Indian Navy employ their airmen and sailors in very specialised roles, which require technical skills, and a high degree of training and experience.
- Because the short-term contractual soldier model (the Agniveer scheme) is going to take a few years to fully play out at an organisational level, the actual degradation of operational capability will only be known then.
- Class-based recruitment abolished: In the Agnipath proposal, the class-based recruitment has been replaced with an all-India all-class recruitment.
- It will strike at the core of the organisational management, leadership structures and operating philosophy of the Indian Army.
- Even though the soldiers in the Indian Army are professionally trained, they also draw their motivation from their social identity — where each soldier cares for his reputation among the peers in his caste group or his village or his social setting.
- To replace that with a pure professional identity of a soldier will bring its own challenges in a tradition-bound army.
- Training challenges: There will be major problems in training, integrating and deploying soldiers with different levels of experience and motivations.
- An organisation which depends on trust, camaraderie and esprit de corps could end up grappling with rivalries and jealousies amongst winners and losers, especially in their final year of contract.
- Legal challenges: Even though the Government has kept the contract at four years to deny the Agniveer gratuity and is not counting the contractual period towards regular service, these provisions are bound to be challenged legally.
- Over time, this will lead to the salary and pension budget creeping back up again.
- Political imbalance: The Agnipath scheme also does away with the idea of a State-wise quota for recruitment into the Army, based on the Recruitable Male Population of that State which was implemented from 1966.
- This prevented an imbalanced army.
- Academic research shows that the high level of ethnic imbalance has been associated with severe problems of democracy and an increased likelihood of civil war.
- Impact on motivation: A short-term contractual soldier, without earning pension, will be seen as doing jobs after his military service that are not seen to be commensurate in status and prestige with the profession of honour.
- Impact on motivation: It will reduce the motivation of those joining on short-term contracts while diminishing the “honour” of a profession which places extraordinary demands on young men.
- Social unrest: There are numerous examples of demobilised soldiers leading to increased violence against minorities.
- This could happen in India as the youth who are not given regular recruitment after four year’s service would turn to violence.
Conclusion
The Government’s yearning for financial savings runs the risk of reducing the honour of a profession, the stability of a society and the safety of a country.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Making the Parliament inclusive
Context
Due to systemic issues, Parliament continues to alienate women. The number of women representatives is still considerably small, but even more subtly, Parliament as a workspace continues to be built exclusively for men.
Women’s participation in the initial years
- In 1952, when the Indian Republic held its first Parliamentary session, there were 39 strong, intelligent, and passionate women as its member.
- Leading in the world in inclusiveness: At a time when women formed only 1.7% of the total members of the United States Congress and 1.1% of the Parliament of the United Kingdom, India was leading the way in the fight towards more inclusive world democracies with 5.5% women representation.
- Women played an important role in India’s struggle for independence and that contribution was reflected in their presence in the parliament.
- What happened in 1952 was a highly progressive step, but 70 years hence, it seems we have strayed from that path.
Electoral representation of women in India: Current scenario
- 14.6 per cent in current Lock Sabha: In India, women currently make up 14.6 per cent of MPs (78 MPs) in the Lok Sabha, which is a historic high.
- Although the percentage is modest, it is remarkable because women barely made up 9 per cent of the overall candidates in 2019.
- In electoral representation, has fallen several places in the Inter-Parliamentary Union’s global ranking of women’s parliamentary presence, from 117 after the 2014 election to 143 as of January 2020.
- In terms of electoral quotas, there were two outstanding exceptions in the 2019 general elections.
- Voluntary parliamentary quota: West Bengal under Mamata Banerjee and Odisha under Naveen Patnaik opted for voluntary parliamentary quotas, fielding 40 per cent and 33 per cent women candidates, respectively.
- Women reservation bill: The bill to reserve 33 per cent seats for women in Parliament and state legislatures was passed in the Rajya Sabha in 2010, but it was never introduced in the Lok Sabha.
- India ranks a dismal 146th in women’s representation in the national Parliament.
- At the turn of the century, it ranked 66th.
- The decline has come because progress has been piecemeal — several other countries have improved their share of women in Parliament far more rapidly.
Struggle for inclusivity
- Despite a good start in the past, our struggle with inclusivity has not eased.
- Due to systemic issues, Parliament continues to alienate women.
- The number of women representatives is still considerably small, but even more subtly, Parliament as a workspace continues to be built exclusively for men.
Lack of inclusivity in the Parliament
- Absence of gender-neutral language: A closer look at our parliamentary discourse and communication reveals a concerning and disconcerting absence of gender-neutral language.
- After 75 years of Independence, Parliament often refers to women in leadership positions as Chairmen and party men.
- In the Rajya Sabha, the Rules of Procedure continue to refer to the Vice-President of India as the ex-officio Chairman, stemming from the lack of gender-neutral language in the Constitution of India.
- The alarming degree of usage of masculine pronouns assumes a power structure biased towards men.
- Lack of gender-neutral Acts: The issue further extends to law-making.
- In the last decade, there have hardly been any gender-neutral Acts.
- Acts have made references to women not as leaders or professionals (such as policemen), but usually as victims of crimes.
- The root of such instances lies with a gender-conforming Constitution.
- In its present state, the Constitution reinforces historical stereotypes that women and transgender people cannot be in leadership positions, such as the President and the Vice-President of India.
- This represents the failure of the many Union Governments which did not take the initiative of amending it.
- In the past, amendments have been brought about to make documents gender neutral.
- In 2014, under the leadership of the then Speaker of the Lok Sabha, Meira Kumar, the Rules of Procedure of the Lok Sabha were made entirely gender neutral.
Way forward
- Correcting the language: Internationally, even mature democracies that legalised universal suffrage after India, such as Canada (1960 for Aboriginal women), Australia (1962 for Indigenous women), and the United States (1965 for women of African-American descent), have now taken concrete measures towards gender-inclusive legislation and communication..
- Amendments: India can and must begin with an amendment to the Constitution and the entire reservoir of laws.
- Focus on the deeper issues of aspiration: Once the language is corrected, the entire country, including Parliament, can focus on the deeper issues of the aspirations and growth of its woman workforce.
- Women staff in Parliament: Women are not adequately represented in Parliament staff,.
- We need a single, transparent appointment and promotion process for women staff in Parliament.
- We need to make sure that their professional growth is not being hindered by other issues such as harassment and domestic responsibilities.
Conclusion
In the 21st century, when people of all genders are leading the world with compassion, strength and ambitions, the Indian Parliament needs to reflect on its standing.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Plugging the gaps in death penalty sentencing
Context
In a judgment delivered last month, the Supreme Court, in Manoj & others v. State of MP, embarked on a significant attempt to reform the administration of the death penalty.
Background: Crisis in the death penalty sentencing
- There has long been a judicial crisis in death penalty sentencing on account of unprincipled sentencing, arbitrariness and worrying levels of subjectivity.
- The crisis has been acknowledged by the Supreme Court, the Law Commission of India, research scholars and civil society groups.
- Crime-centric nature: Death penalty sentencing has been, by and large, crime-centric.
- This approach goes against the requirements imposed on sentencing judges by the Supreme Court in Bachan Singh (1980).
The framework laid down in the Bachan Singh case
- Take into account factors relating to crime and the accused: This framework made it binding for the sentencing judges to take into account factors relating to both the crime and accused and assign them appropriate weight.
- Judges couldn’t decide to impose the death penalty only on the basis of the crime.
- The background of the accused, the personal circumstances, mental health and age were considerations a sentencing judge had to account for.
- Judges were required to weigh “mitigating” and “aggravating” factors to ascertain if a case was fit for the death sentence and also determine if the option of life imprisonment was “unquestionably foreclosed”.
Why there is a crisis in death penalty sentencing?
- The four decades since Bachan Singh have shown us that this framework has been followed more in breach.
- There is utter confusion across all levels of the judiciary on the requirements of the framework laid down in the Bachan Singh case and its implementation.
- Nature of crime a dominant consideration: An important reason for the breakdown is that factors relating to the crime — the nature of the crime and its brutality — are often dominant considerations, and there is barely any consideration of mitigating factors.
- Little discussion on mitigating factors: There has been very little discussion on bringing the socioeconomic profile of death row prisoners as a mitigating factor into the courtroom.
Significance of the SC judgment in Manoj & others v. State of MP
- Efforts to plug the gap: The judgement identifies the lacuna as an explicit concern, states the consequences that flow from such a vital gap, and suggests measures to plug it.
- Recognising reformation: A striking part of the judgment is its commitment to recognising reformation as integral to the Indian criminal justice system, especially death penalty sentencing.
- Procedural threshold: The judgment is clear that certain procedural thresholds must be met for sentencing to be fair and explicitly rejects (once again) the idea that death sentences can be determined solely on crime-based considerations.
- The verdict recognises that aspects of the accused’s life, both pre-offence and post-offence in prison, are relevant.
- As practical steps in this process, the judgment asks courts to call for reports from the probation officer as well as prison and independent mental health experts.
- Right of the accused to present mitigating factors: The right of the accused to present mitigating factors and rebut the state, if necessary, is also recognised.
- Psychological and philosophical aspect taken into account: There is now overwhelming evidence from psychology that criminality cannot just be reduced to terrible decisions by individuals in the exercise of their free will.
- All our actions are a result of a complex web of biological, psychological, and social factors and that understanding has a very significant bearing on discussions on criminality and punishment.
Challenges
- Implementation issue: Apart from this issue of implementation, even if detailed and high-quality sentencing information is to come into our courtrooms, a bigger challenge awaits.
- The judicial treatment of sentencing information is a Pandora’s box that will inevitably have to be opened.
- Requirement for normative basis: The Supreme Court will have to provide a rigorous normative basis for consideration of these factors.
- In the absence of such foundations, death penalty sentencing will continue to be unprincipled and sentencing judges are not going to understand the need for this wide range of sentencing information.
Conclusion
The significance of last month’s judgment, authored by Justice Ravindra Bhat, is that it takes this problem head-on. It identifies the lacuna as an explicit concern, states the consequences that flow from such a vital gap, and suggests measures to plug it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: INSTC
Mains level: Paper 2- India-Iran relations
Context
Iran’s Foreign Minister Hossein Amir-Abdollahian’s three-day visit to India, last week, was the first ministerial-level visit from Iran since Ebrahim Raisi assumed the Iranian presidency in August last year.
Background
- Bilateral relations between India and Iran span millennia marked by meaningful interactions.
- Both countries shared borders until 1947 and share several common features in their language, culture and traditions.
- The diplomatic links were established on 15th March 1950, when both countries signed a Treaty of Friendship and Perpetual Peace.
- However, Iran’s joining of Baghdad pact in 1954 and the Cold War politics prevented both countries from having closer relations until the 1990s.
- Islamic Revolution of 1979, hostage of US diplomats, Iran-Iraq War and Tehran’s support for Hezbollah and Hamas among others resulted in a range of political and economic sanctions, leading to Iran being isolated at a global level
- In the 1990s, both countries’ interests converged around energy, Central Asia and security, mostly around the Pakistan-Afghan region.
- This resulted in the signing of ‘The Delhi Declaration’, which provided the vision of the countries’ defence and strategic partnership and “Tehran Declaration”, which set forth the areas of possible cooperation
India-Iran relations: A shared vision for equitable, pluralistic and co-operative international order
- The “Tehran Declaration” signed during former Prime Minister Atal Bihari Vajpayee’s visit to Iran affirmed the shared vision of the two countries for an “equitable, pluralistic and co-operative international order”.
- It recognised then Iranian President Mohammad Khatami’s vision of a “dialogue among civilisations” as a paradigm of international relations based on principles of tolerance, pluralism and respect for diversity.
- Advancing the standing in global order: Two decades later, as India strengthens new partnerships within its regional vision centred on the Indo-Pacific, both countries remain driven by the goals of advancing their standing at the regional and global level.
- Both are keen to project themselves as independent strategic actors determined to play a role in shaping a new multipolar order in their shared Eurasian neighbourhood and also at the global level.
Why does India need Iran?
- Energy security: Conventionally, for energy security
- Iran is amongst India’s top oil suppliers
- Strategic importance: Since the 1990s, Iran’s importance has become ‘strategic’
- Security reasons: Iran’s cooperation is critical for India’s security given that
- Pak supports terrorism in India
- Influence in Afghanistan: India’s influence in Afghanistan is marginal.
- Countering Pakistan: India needs Iran to moderate Pak’s influence in West Asia
- Iran is a leader in the Muslim world.
- Access to Afghanistan and Central Asia
Significance of Iran for India
- Geopolitical logic in relations: The sanctions imposed by the US on Iran after it withdrew from the nuclear deal in 2018 may have virtually destroyed India-Iran trade, especially India’s energy imports from Iran, but the geopolitical logic underpinning relations between the two countries remains firm.
- Land bridge to Central Asia and Eurasia: Iran has sought to leverage its crossroad geographical location straddling the Persian Gulf and the Caspian Sea, India has come to see it as its land bridge to Central Asia and Eurasia.
- INSTC: Despite the difficulties posed by decades of American sanctions, Iran has, along with India, Russia and a few other countries in the Eurasian region, continued to work on the multi-modal International North-South Transport Corridor (INSTC).
- During Raisi’s visit to Moscow, the two sides had pledged to redouble their efforts to build the railway line between Iran’s Caspian port of Rasht and Astara on the Iran-Azerbaijan border.
- Alternative Caspian Sea Route: The activation of an alternative Caspian Sea route speaks volumes about the positive outlook of Iran, India and Russia on this corridor despite a variety of geopolitical challenges.
- Iran’s Chabahar port, where India is developing two berths that it will lease for commercial operations for 10 years, is also a story of perseverance in the ties between the two countries.
Irritants in Indo-Iran ties
- India’s relations with Saudi Arabia, US and Israel: Growing Saudi-India-US-Israel relations have irked Iran.
- In retaliation, Iran, for the first time, has linked the plight of Muslims in Gaza, Yemen, and Bahrain, with those in Kashmir
- Iran-Pak-China ties: Warming Iran-Pak-China ties have annoyed India.
- Sluggish Chabahar port development: Slow Chabahar port development has annoyed Iran.
- China-Iran strategic partnership:
- An economic and security partnership deal between Iran and China was recently made public, creating a global alarm, especially for India and the US.
- The foundation for this deal was laid during Chinese President Xi Jinping’s visit to Iran in 2016
- The draft agreement involves Chinese investments worth $400 billion into the Iranian economy over 25 years.
- Of this, $280 billion will be allocated for the oil and gas sector and the remaining funding will be for other core sectors like banking, telecommunications, ports and railways.
- In return, China would get a steady supply of Iranian oil at a heavily discounted rate during the same period.
- This deal creates a win-win situation for both countries.
- It lifts Iran’s sanction-hit economy and helps China set a firm foothold in the Middle East.
US sanctions:
- Iran’s aim to develop nuclear weapons has come under strong criticism from Trump Administration since the beginning.
- Thus, the US has withdrawn from the Iran nuclear deal in 2018 after it was signed in 2015 and imposed unilateral sanctions on Iran.
- The US’ sanctions and aggressive policies have created a situation of economic and geostrategic uncertainty.
- Indian investors are wary of having businesses in Iran for the fear of the US.
- Also, India deviated from the policy of not abiding by unilateral sanctions by ceasing to purchase Iranian oil.
- Due to this, Iran did not back India’s bid to mobilise international support against Beijing’s aggression in the Ladakh.
Other issues:
- Iran is against India’s decision to abrogate Article 370 and 35A.
- It has called on India and Pakistan to show restraint and prevent the killing of innocent Kashmiris, revealing possible close ties between Pakistan and Iran.
- Iran also voiced against “extremist Hindus and their parties” during the 2020 Delhi riots.
- Apart from these issues, Iran also sidelined India’s ONGC from exploration rights at its Farzad B Gas field, stating that it will engage the company at a later date.
Way forward
- As India is treading a fine line in balancing relations with the US, China and Iran while striving to augment its political influence in West Asia, embracing one country over the other is not an option for India.
- Therefore, a multilateral foreign policy is a way forward.
- India must retain its involvement in the Chabahar port development because of the geostrategic significance.
- In the immediate term, India should improve its multi-alignment credentials to absorb investments into the port projects from the public and private sector, boost maritime cooperation among littoral countries to enhance the transit of goods, and foster regional partnership for the Chabahar port development.
- Based on the mutual geostrategic and energy interests, India could collaborate with Japan under the Asia-Africa Growth Corridor.
- Japan’s participation would enhance the multilateral characteristics of the transit hub in the region, unlike the China-owned Gwadar port. This will further enhance multilateral investments to solidify regional economic partnerships that enable the sustainability of the port.
- Also, India needs to evolve a better strategy on Iran beyond waiting to see how the US may react, beyond having to issue a clarification in response to Iran’s sudden provocations and beyond allowing voids of partnerships that China may fill.
- In order to do so, India must create a new alliance of countries having similar geostrategic interests, which are also facing issues with US’ unrealistic and aggressive foreign policy strategy and China’s expansionistic policies.
Conclusion
While the revival of the nuclear deal could give a fillip to India’s economic ties with Iran, India’s interests in continental Asia will be served well by heeding to the calls for developing a long-term roadmap for bilateral relations.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Positive externalities
Mains level: Paper 3- What commodities should be distributed for free or subsidised level
Context
The newly elected Punjab government’s announcement of providing up to 300 units of free power to every household has raised questions: What constitutes “freebies”?
Two categories for providing support
- In India government provides two types of support.
- 1] support to low-income households for augmenting their consumption of selected goods and services.
- 2] Government also provides incentives to support selected categories of investors and producers.
- Different objectives: The economic objectives in these two categories are quite different.
- The first category would include the free or subsidised provision of foodgrains and services such as health and education.
- Examples of the second group include the central government’s recent initiative for production-linked incentives to various sectors and tax concessions.
- In the past, incentives in the form of reduction of corporate taxes have been offered to promote investment in general, or in certain regions such as backward areas.
What commodities should be distributed free?
- The key question is to decide what commodities should be distributed free or at a subsidised level and what the level of subsidy should be.
- Essential goods: The provision of foodgrains at a heavily subsidised price to target groups has found general acceptance, particularly among political parties, even though there are some critics of the measure.
- The distribution of commodities which are considered “essential”, primarily foodgrains, faces no criticism.
- Merit goods: There is also a category of goods which are called “merit” goods where significant positive externalities are associated with their consumption — for instance, health and education-related provisions, including mid-day meals and breakfast.
- In such cases, subsidisation is justified: If only market prices prevail, the community will consume less than what is socially desirable.
What should be the suitable mode of providing support?
- The question of a suitable model for providing budgetary support arises in the context of both consumption and production-supporting initiatives.
- 1] In the first case, budgetary support to a targeted segment of the population for augmenting their consumption of essential items may be provided either through direct income support or by a free or highly subsidised provision.
- Procurement set up and distribution system: When the provision of subsidised goods is involved, there may, in general, be a requirement of a procurement set-up and a public distribution system.
- Managing procurement and distribution by government agencies involves additional costs which tend to be higher than the corresponding supply through the market because of leakages and avoidable administrative costs.
- 2] Production-related incentives: In the case of production-related incentives, alternative methods include direct budgetary support and indirect support through tax concessions.
- Both have a differential impact.
- These schemes also require to be carefully designed to avoid their misuse and minimise their costs. The provision of free power to farmers was often misused.
- In the case of tax concessions, there have not been any convincing studies as to whether the stated initial objectives were achieved in line with the large budgetary costs.
- The magnitudes involved amounted to 1.9 per cent and 2.5 per cent of the GDP in 2018-19 and 2019-20 respectively.
What should be a prudent fiscal limit for funding such programmes?
- Let us consider the case of distribution of commodities that are meant to support consumption.
- Limited budgetary resources: This question should be considered in light of our limited budgetary resources.
- Stagnating revenue to GDP ratio: In India, the revenue to GDP ratio has been stagnating over a long period of time.
- During 2010-11 to 2019-20, combined revenue receipts of central and state governments, relative to GDP, have languished in the narrow range of 18.4 per cent to 20.3 per cent.
- In contrast, in many developed and emerging market economies, this ratio tends to be much higher.
- In 2019, these ratios were 36 per cent and 30.1 per cent for the UK and USA.
Suggestions
- It is advisable to limit the distribution of commodities and services at highly subsidised levels to essential and merit goods.
- Infrastructure expansion: Production may be incentivised more effectively by other methods such as infrastructure expansion.
- Determining the total quantum of support: In respect of production-related incentives also, greater care is required for determining the total quantum of support as well as the specific forms of such support.
- Limit of 10 %: It would be prudent to limit overall fiscal support for the distribution of commodities to less than 10 per cent of the total expenditure of the central government and state governments until their revenue GDP or GSDP ratios are successfully increased in a sustained way.
Conclusion
Governments that do not pay adequate attention to the strength of their fisc eventually become exposed to the cost of the choices that they make.
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Back2Basics: Merit goods
- Merit goods are the goods that are provided generally by the government to certain sections of the society.
- Unlike in the case of pure public goods, the merit goods are not provided to the entire society; rather they are given to certain targeted people.
- The government here believe that the deserving people may under-consume such goods and hence provides these to them at low cost or no cost.
Positive externalities
- A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction.
- For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more informed and productive citizens.
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