Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSP
Mains level: Paper 3- Challenges in legal backing to MSP
Context
Many political parties are demanding to make the minimum support prices (MSP) a legal instrument.
Background of MSP
- MSP regime had its genesis in 1965 when India was hugely short of basic staples and living in a “ship-to-mouth” situation.
- Indicative price: It was an indicative price (not a legal price) and procurement of rice and wheat was done to support farmers when they were adopting new seeds (HYV technology) and domestic procurement was to feed the PDS.
- The government declares MSP for 23 crops: Seven cereals (paddy, wheat, maize, bajra, sorghum, ragi and barley), five pulses (tur, moong, chana, urad and masur), seven oilseeds (soybean, groundnut, rapeseed-mustard, sesamum, safflower, sunflower and nigerseed) and four commercial crops (sugarcane, cotton, jute and copra).
Need to rethink procurement policy
- But now with granaries overflowing with rice and wheat, there is a need to rethink and redesign the procurement policy.
- In the crop year 2020-21, about 60 million metric tonnes (MMTs) of rice and 43 MMTs of wheat were procured by the Food Corporation of India (FCI) and NAFED procured about 0.66 MMTs of pulses.
The increasing cost of PDS
- The main procurement by the government happens largely for rice and wheat to feed the public distribution system (PDS).
- The PDS issue prices of rice and wheat are subsidised by more than 90 per cent of their economic cost to the government.
- In 2020-21, the food subsidy bill was almost 30 per cent of the net tax revenue of the central government, reflecting clearly a huge consumer-bias in the system.
- Way forward: Unless this PDS is reformed either by restricting this to say the bottom 30 per cent of the population, or raising the issue prices to say half the economic cost of rice and wheat, giving a better deal to farmers is likely to blow up the fiscal position of the central government.
The cost of legal MSP
- Assuming that only 10 per cent of the production of remaining crops (excluding sugarcane) is procured, it will cost the government about Rs 5.4 lakh crore annually to procure these other MSP crops.
- This cost is estimated on the basis of economic costs of operation that are usually about 30 per cent higher than the MSP (in case of rice and wheat it is 40 per cent).
- But it appears that despite this, market prices may stay below MSP, especially during the harvest time.
- It also raises the question why only these MSP crops, why not other agri-produce, say milk, the value of which is more than the value of rice, wheat and sugarcane combined.
Way forward
- PDP: One may use price deficiency payments (PDP), implying that the government pays to farmers the gap between the market price and MSP, whenever market prices are below MSP.
- Income support instead of price support: It may be better to use an income policy on a per hectare basis to directly transfer money into farmers’ accounts without distorting markets through higher MSPs or PDPs.
Consider the question “What are the challenges in providing the legal backing to the Minimum Support Price to the agriculture produce? Suggest the way forward.”
Conclusion
There is no easy substitute to “getting the markets right”. Government need to apply an innovative approach to solve the conundrum of the MSP.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Accessibility Standards for law enforcement
Context
The Draft Accessibility Standards/Guidelines recently released by the Ministry of Home Affairs (MHA) for built infrastructure under its purview (police stations, prisons and disaster mitigation centres) and services associated with them assume significance.
What are the provisions under the Standards?
- Models for police stations: The Standards set out models for building new police stations as well as improving upon existing police stations and prisons that are modern, gender sensitive and accessible.
- The Standards speak to the need to make the websites and institutional social networks of police stations accessible, ensuring that persons with disabilities accused of committing any crimes are treated appropriately, having disabled-friendly entrances to police stations and disabled-friendly toilets.
- Inclusive police force: the Standards state that the police staff on civil duty could be persons with disabilities.
- Equal protection during natural disasters: Acknowledging that persons with disabilities must receive equal protection as others in such situations, the Standards provide direction on disability inclusion in disaster mitigation, preparedness, response and recovery efforts.
- They also stress on disability inclusive training for persons involved in disaster relief activities, data aggregation, use of information and communication technology (ICT) and enforcing accessible infrastructure models for schools, hospitals and shelters following the principle of universal design.
- Accessibility norm: The Standards introduce accessibility norms for services associated with police stations and prisons.
- These norms promote the use of ICTs to facilitate communication, development of police websites, app-based services for filing complaints, making enquiries, etc., as well as encouraging the use of sign language, communication systems such as Braille, images for persons with psycho-social disabilities, and other augmentative and alternative modes of communication.
Shortcomings of the Standards/norms
- Accessibility of signage not ensured: The Standards call for the deployment of directional signage regarding accessibility features in the MHA’s physical infrastructure as well as to indicate the location of accessible toilets.
- However, they do not require that such signage itself be accessible to the visually challenged, such as through auditory means.
- Certain accommodations merely recommendatory: The Standards characterise several reasonable accommodations that are necessary for the disabled as being merely recommendatory.
- These include having trained police personnel in every police station to assist persons with disabilities and placing beepers at all entrances to enable the visually challenged/blind to locate themselves.
- Lack of detail on human assistance: In the case of Patan Jamal Vali, the Court suggested connecting special educators and interpreters with police stations to operationalise the reasonable accommodations embodied in the Criminal Law (Amendment) Act, 2013.
- While the standards do require developing a mechanism to provide human assistance to the disabled such as sign language interpreters, they are short on specifics on this count.
- Lack of representation: Interestingly, the Standards state that the police staff on civil duty could be persons with disabilities.
- This is inconsistent with the Office Memorandum issued by the Department of Empowerment for Persons with Disabilities on August 18, 2021, according to which the Centre has exempted posts in the Indian Police Service; the Delhi, Andaman and Nicobar Islands, Lakshdweep, Daman and Diu and Dadra and Nagar Haveli Police Service; as well as the Indian Railway Protection Force Service from the mandated 4% reservation for persons with disabilities in government jobs.
Conclusion
In sum, the Standards, when enacted into law, will mark a huge step forward in making our law enforcement apparatus more disabled-friendly. Bolstering the Standards further, by incorporating the suggestions flowing from well- thought-out public comments, will take us closer to the aim of ensuring that India’s disabled citizens truly have the police they deserve.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Need for reforms in agriculture
Context
In the run-up to the repeal of the three farm laws, the potential cost of MSP to the taxpayers became a matter of debate.
Issue of MSP
- Large variation: Experts and agricultural economists quoted numbers about the cost of MPS.
- There is a large variation in the quoted numbers.
- The enormity of the variance in estimates is astounding.
- No consensus on the number of beneficiaries of MSP: There is also a dissonance between the NSSO data and the administrative data on the number of farmers who enjoy MSP.
- No consensus on a formula to calculate MSP: Further, there is no consensus on the formulae for the calculation of MSP.
Suggestions on land reforms
[1] Reduce high domestic prices
- That India is an agri-surplus country.
- That domestic prices of agri-commodities are often higher than in the international market and therefore, there is a need to bring them down.
- How to achieve cost reduction: Cost reduction can happen either by creating efficiencies by plugging leakages or, by cost-cutting — including reducing farmers’ margins.
- In the recently-reached understanding with the farmers, the government has agreed to constitute a committee on MSP.
- Hopefully, a formula can be arrived at by which costs of domestic agricultural produce can be reduced while ensuring a “remunerative price” for the farmers.
[2] Protecting landholdings
- There is also a need to protect landholdings.
- Farmers’ fears in this regard are not exaggerated.
- Under the erstwhile laws, orders of payment made by an SDM/Collector could be recovered as “arrears of land revenue”.
- While agricultural lands were protected from such recovery, non-agricultural (immovable and movable) assets appeared to be fair game.
- Further, circumstances such as sustenance and payment of debts could force a farmer to sell their agricultural landholdings.
- Large-scale loss of landholdings could lead to their consolidation in the hands of a few.
- This could have the impact of turning the clock back, reminiscent of the Zamindari system.
[3] Need to reconsider the dispute resolution mechanism
- The government should also reconsider the dispute resolution mechanism provided in the erstwhile laws.
- In an MSP driven regime, the government is likely to be a party in any potential dispute.
- Conflict of interest: There will be a direct conflict of interest since the SDM/Collector is an arm of the government.
- Land records are within the jurisdiction of the patwari and tehsildar, who report to the SDM/Collector.
- Fast track courts: It would be advisable to think in terms of fast-track courts, and remove the provision of recovery through arrears of land revenue.
- It would also be advisable to have only one dispute resolution mechanism for all farm laws.
[4] Avoid over-corporatisation without the creation of the requisite efficiencies
- We should not ask our farmers to brave corporatisation without levelling the playing field and enough jobs in the non-agricultural sector.
- Over-corporatisation without the creation of the requisite efficiencies could lead us to become heavily import-dependent, killing the benefits of the Green Revolution.
Conclusion
Perfunctory reforms and those that don’t work for all constituents — corporates as well as farmers — could have long-term deleterious effects for not only the agricultural sector, but the economy as a whole.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Independence of Election Commission
Context
The Chief Election Commissioner and two Election Commissioners were summoned by the PMO to attend a meeting with the Principal Secretary to the PM.
Why the meeting raises questions?
- The PMO summoning or “inviting” not just the CEC but the full bench is in violation of the Constitution, irrespective of how important or urgent the issue.
- Violation of the principle of distancing from executive: When a person is appointed as CEC or EC, that person has to resign from his executive post in order to adhere to important constitutional principle of distancing from the executive/government.
- The executive could appoint a person to these posts but could not order them, or remove me because of the constitutional scheme of things.
- Violation of independence: An independent ECI is a gift of the Constitution to the nation. Free and fair and credible elections are sine qua non of the EC.
- The Supreme Court has repeatedly stressed this point, calling it part of the basic structure of the Constitution.
- Violation of warrant of precedence: The CEC is very high in the warrant of precedence — ninth, while the PS to PM is 23rd.
- How can such a high constitutional functionary be summoned to attend a meeting with an officer, howsoever high and mighty?
- It raises suspicions: A meeting of the PS to the PM, formal or informal, online or in the PMO or ECI, just before elections raises unnecessary suspicions.
Conclusion
This incident is a transgression that should not happen again. The distance of an arm’s length in interactions between institutions envisaged in the Constitution is sacrosanct. It should not only be maintained but also “seen” to be maintained.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Types of subsidies
Mains level: Paper 3- MSP and challenges ahead at WTO
Context
Amid the demand for legal backing to MSP, the question remains about whether India can provide a legal guarantee violating its international law obligations enshrined in the Agreement on Agriculture (AoA) of the World Trade Organization (WTO)?
Classification of subsidies under AoA: Trade distorting and non-trade distorting
- The objective of AoA: One of the central objectives of the AoA is to cut trade-distorting domestic support.
- Three categories: In this regard, the domestic subsidies are divided into three categories: ‘green box’, ‘blue box’ and ‘amber box’ measures.
- Non-trade distorting: ‘Green box’ subsidies (like income support to farmers de-coupled from production) and ‘blue box’ subsidies (like direct payments under production limiting programmes subject to certain conditions) are considered non-trade distorting.
- Countries can provide unlimited subsidies under these two categories.
- Trade-distorting subsidies: Price support provided in the form of procurement of crops at MSP is classified as a trade-distorting subsidy and falls under the ‘amber box’ measures, which are subject to certain limits.
So, how do countries measure ‘amber box’ support?
- Compute AMS: To measure ‘amber box’ support, WTO member countries are required to compute Aggregate Measurement of Support (AMS).
- AMS is the total of product-specific support (price support to a particular crop) and non-product-specific support (fertilizer subsidy).
Understanding the de minimis limit
- Under Article 6.4(b) of the AoA, developing countries such as India are allowed to provide a de minimis level of product and non-product domestic subsidy.
- This de minimis limit is capped at 10% of the total value of production of the product, in case of a product-specific subsidy; and at 10% of the total value of a country’s agricultural production, in case of non-product subsidy.
- Subsidies breaching the de minimis cap are trade-distorting.
Possibility of India overshooting the de minimis limit
- Relation between MSP and AMS: The procurement at MSP, after comparing it with the fixed external reference price (ERP) — an average price based on the base years 1986-88 — has to be included in AMS.
- Widening gap between ERP and MSP: Since the fixed ERP has not been revised in the last several decades at the WTO, the difference between the MSP and fixed ERP has widened enormously due to inflation.
- According to the Centre for WTO Studies, India’s ERP for rice, in 1986-88, was $262.51/tonne and the MSP was less than this.
- However, India’s applied administered price for rice in 2015-16 stood at $323.06/tonne, much more than the 1986-88 ERP.
- Procuring all the 23 crops at MSP, as against the current practice of procuring largely rice and wheat, will result in India breaching the de minimis limit making it vulnerable to a legal challenge at the WTO.
- Even if the Government does not procure directly but mandates private parties to acquire at a price determined by the Government, as it happens in the case of sugarcane, the de minimis limit of 10% applies.
Way forward
- Peace clause: Although a permanent solution is nowhere in sight, the countries have agreed to a peace clause.
- The peace clause forbids bringing legal challenges against price support-based procurement for food security purposes even if it breaches the limit on domestic support.
- The peace clause is applicable only for programmes that were existing as of the date of the decision and are consistent with other requirements.
- India’s procurement for rice and wheat, even if it violates the de minimis limit, will enjoy legal immunity.
- However, India will not be able to employ the peace clause to defend procuring those crops that are not part of the food security programme (such as cotton, groundnut, sunflower seed).
- Move from MSP to income-based support: Arguably, India can move away from price-based support in the form of MSP to income-based support, which will not be trade-distorting under the AoA provided the income support is not linked to production.
- Supplement price-based support with income-based support: Alternatively, one can supplement price-based support (keeping the de minimis limit in mind) with an income-based support policy.
Conclusion
The Government needs to engage with the farmers and create an affable environment to convince them of other effective policy interventions, beyond MSP, that are fiscally prudent and WTO compatible.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Omicron variant
Mains level: Paper 2- Importance of data in dealing with pandemic
Context
Questions are being asked about India’s preparedness as the cases with the Omicron variant of the Coronavirus has been on the rise in the country.
Where does India stand?
[1] The Positives
- Addressing oxygen shortage: The extreme shortages of oxygen that we saw barely six months ago will hopefully not be a feature of a third wave.
- Vaccinated population: We have now vaccinated more than 50% of the adult population with both doses of vaccine, and approximately 85% have received one or two doses.
- Ramping up testing to deal with a spike should not require an increase in capacity.
- More vaccine doses: We have more vaccine doses than in May 2021 and the potential for oral antiviral therapy in the near future.
[2] The negatives
- Lack of data: An urgent and important one is the lack of publicly available data on the pandemic from Government sources, particularly in regard to testing, but also in terms of being able to correlate disease severity with age, prior medical conditions, locations and other variables.
- Data from the Indian Council of Medical Research (ICMR), India’s premier medical research agency, remains inaccessible.
- The National Centre for Disease Control (NCDC) has not responded.
- The CoWIN data contains valuable information but it is of little value for future planning and prediction unless it can be tied to testing data and clinical information at the level of individuals.
- ICMR data not correlated to CoWIN platform data: The Indian Council of Medical Research holds data on every COVID-19 test conducted in India.
- However, these data are not correlated to the vaccine data in the CoWIN platform.
- Data with States is inaccessible: Data on hospitalisations, etc. are apparently available at the State level, but seem inaccessible.
What we can know from the data about pandemic
- Infer the probability of reinfection: If we knew that a person had tested positive on successive tests separated by, say four months or more, with a negative test in-between, that would suggest a reinfection.
- We could then infer the probability of such a reinfection.
- Probability of vaccine breakthrough infection: With information about testing and vaccination status, we could compute the probability of a vaccine breakthrough event.
- To know the efficacy of single vaccine dose: By checking to see whether the positive test happened after the first but before the second dose of vaccine, or after the second dose, the relative efficacy of such single vaccine doses at preventing disease could be derived.
- Effect of the vaccine on disease severity: By examining symptoms reported after a vaccine breakthrough event, we could understand the extent to which vaccines reduce disease severity.
- Impact of new variant: Add to this a layer of sequence information, and we could study the impact of new variants.
Role of the volunteer organisation
- The most trustworthy and granular data on cases in India have resulted from the remarkable and public-spirited work of a volunteer organisation, Covid19India.org.
- Their work has now been taken over by several other voluntary groups, all operating on the same broad principles of data accessibility: covid19bharat.org, incovid19.org and covid19tracker.in.
Way forward
- Commitment towards data accessibility: We need to stress on data availability because this is the one area where a swift realignment is possible.
- The more widely data are shared, the greater the likelihood of integration of the rapidly shifting scientific frontier with clinical practice.
- Learning from the experience of South Africa: With the advantages of a relatively high-quality surveillance system among low- and middle-income countries (LMIC) countries, bolstered by a commitment towards transparency and data accessibility, South Africa’s rapid sharing allowed the world to prepare swiftly for the appearance of the highly mutated Omicron variant.
- It is clear that pre-emptive decisions on vaccination and other measures could be made faster and better if more integrated data were available.
Consider the question “Why availability and accessibility of data is important in dealing with the Covid-19 pandemic? What are the challenges facing health data accessibility in India?”
Conclusion
Now, more than ever before is the time for us to urgently reassess our attitude towards data for public health purposes and the role of national health agencies in sharing data, generated with public funds, with scientists in India and across the world.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- High food prices in India and its implications
Context
The essential challenge of public policy for agriculture- the high price of food remains unsolved.
Implications of high food prices
- Increases poverty: A higher price of food increases poverty, especially as the rice and wheat supplied through the PDS constitute only a part of the total expenditure on food of the average Indian household.
- Reduces the expenditure on other item: For the household, a high price of food crowds out expenditure on other items ranging from health and education to non-agricultural goods.
- This prevents the market for non-agricultural goods from expanding.
- This was one of the first discoveries in economics, made by the English economist David Ricardo about two centuries ago.
Rising food prices in India
- An indication of the elevation of the price of food in an economy is the share of food in a household’s budget.
- In a global comparison we would find that this share is very large for India.
- Data from the U.S. Department of Agriculture (2016) show that this share ranges from over 30% for India to less than 10% for the U.S. and the U.K.
- This is in line with Ricardo’s understanding of how economies progress i.e., as food gets cheaper, growth in the non-agricultural economy is stimulated.
- Agricultural policy in India has remained quite unaccountable in the face of a rising relative price of food.
- Impact on manufacturing sector: Arguably, the high price of food has been a factor in the disappointing lack of expansion of the manufacturing sector in India despite repeated efforts to bring it about.
Changes needed in agricultural policy
- Both from the point of view of food security for low-income households and the dynamism of the non-agricultural sector, agricultural policy cannot ignore the price at which food is produced.
- Focus on improving the yield: The fact of low agricultural yield in India by comparison with the rest of the world has been known for long, and little is done about it.
- Management of soil nutrients and moisture: A superior management of soil nutrients and moisture, assured water supply and knowledge inputs made available via an extension service would be crucial.
- Raising yields will ensure profitability without raising producer prices, which will inflate the food subsidy bill.
How government intervention created problems
- Given the importance of food for our survival, this justifies public intervention in agriculture.
- The issue is the design and scale of this intervention.
- In the mid-sixties, when India was facing food shortage that could not be solved through trade, a concerted effort was made to raise domestic agricultural production.
- Profitability through MSP: It introduced the strategy of ensuring farm profitability though favourable prices assured by the state.
- Further, it entrenched the belief that it is the farmer’s right to have the state purchase as much grain as the farmer wishes to sell to the state agency.
- Created grain stockpile: This has resulted in grain stockpiles far greater than the officially announced buffer-stocking norm.
- These stocks have often rotted, resulting in deadweight loss, paid for by the public though taxes or public borrowing.
- Supply more than demand: Finally, with all costs of production reimbursable and all of output finding an assured outlet, supply has outstripped demand.
- Damage to natural environment: This has led to unimaginable pressure on the natural environment, especially water supply.
Consider the question “India faces the challenge of high food prices. Examine the ways in which high food prices affects the overall economy. How far is the India’s agriculture policy responsible for the problem?”
Conclusion
India needs an agricultural policy that ensures that farming is profitable but this cannot be at the cost of a high price of food. The ‘food problem’ should no longer be seen only in terms of the availability of food from domestic sources.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fundamental duties
Mains level: Paper 2- Relation between fundamental duties and fundamental rights
Context
There has been growing advocacy for the integration of duty with rights. On Constitution Day last month, many Union Ministers used the occasion to underline this proposal.
What do rights come with duty mean?
- It is a basic proposition that all rights come with duties.
- But those duties are quite distinct from the meaning ascribed to them in the popular discourse.
- When a person holds a right, she is owed an obligation by a duty-bearer.
- For example, when citizens are promised a right against discrimination, the government is obliged to ensure that it treats everybody with equal care and concern.
- Similarly, the guarantee of a right to freedom of speech enjoins the state to refrain from interfering with that liberty.
Integrating rights with duties
- Proponents of integration of duty with rights aim to treat otherwise non-binding obligations — the “fundamental duties” as Article 51A describes them on a par with, if not superior to, the various fundamental rights that the Constitution guarantees.
- In an inversion of the well-known dictum, they see duties, and not rights, as trumps.
- On Constitution Day last month, many Union Ministers used the occasion to underline this proposal.
- The government puts forward an idea that our rights ought to be made conditional on the performance of a set of extraneous obligations.
Issues with the proposal
- This suggestion is plainly in the teeth of the Constitution’s text, language, and history.
- To the framers of the Constitution, the very idea of deliberating over whether these rights ought to be provisional, and on whether these rights ought to be made subject to the performance of some alien duty, was against the republic’s vision.
- Imposing duties a legislative prerogative: The Constitution’s framers saw the placing of mandates on individual responsibilities as nothing more than a legislative prerogative.
- For example, the legislature could impose a duty on individuals to pay a tax on their income, and this duty could be enforced in a variety of ways.
- If the tax imposed and the sanctions prescribed were reasonable, the obligations placed on the citizen will be constitutionally valid.
- In this manner, Parliament and the State legislatures have imposed a plethora of duties — duties to care for the elderly and for children; duties to pay tolls and levies; duties against causing harm to others; duties to treat the environment with care, the list is endless.
- Against Constitution: What is critical, though, is that these laws cannot make a person’s fundamental right contingent on the performance of a duty that they impose.
- A legislation that does so will violate the Constitution.
Background
- The fundamental duties that are now contained in Article 51A were introduced through the 42nd constitutional amendment.
- The Swaran Singh Committee, which was set up during the Emergency, and which recommended the insertion of the clause, also suggested that a failure to comply with a duty ought to result in punishment.
- Ultimately, the amendment was introduced after the binding nature of the clause was removed.
- In its finally adopted form, Article 51A encouraged citizens to perform several duties.
Way forward
- Know the precise nature of duties the rights create: The philosopher Onora O’Neill has argued with some force that we would do well to discuss the precise nature of duties that rights create.
- Unless we do so, our charters of human rights may not by themselves be enough.
- For example, we may want to ask ourselves if the promise of a right to free expression imposes on the state something more than a duty to forebear from making an unwarranted restriction on that liberty.
- Does it require the state to also work towards creating an equal society where each person finds herself in a position to express herself freely?
Consider the question “How fundamental duties are related to the fundamental rights in the context of the Indian Constitution? What are the issues with making the enforcement of rights contingent on adhering to the duties?”
Conclusion
When we speak about the importance of obligations, it is these questions that must animate our discussions. Should we instead allow the language of fundamental duties to subsume our political debates, we would only be placing in jeopardy the moral principles at the heart of India’s republic.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Transition from American unipolarity
Context
It may be too early to say how the American withdrawal from Afghanistan would shape regional geopolitics in Asia and the great power contest between the United States and its competitors. But it is certainly one of those developments that will have a far-reaching impact on global politics.
Two narratives about the US withdrawal from Afghanistan
- There are two dominant narratives about the American withdrawal.
- Realignment in foreign policy: The first narrative is that the U.S. exited the country on its own will as it is undertaking a larger realignment in its foreign policy.
- Failure to win the war: The other one is that the U.S. failed to win the war in Afghanistan and, like in the case of Vietnam, was forced to withdraw from the country.
- Focus on China: The reorientation that is under way in American foreign policy, focused on China, certainly played a role in the Afghan withdrawal.
- But that does not obscure the fact that the world’s most powerful military and economic power failed to win the war in Afghanistan against the Taliban even after fighting them for 20 years.
Erosion of the US’s ability in shaping geopolitical outcomes
- The gradual erosion of the U.S.’s ability in shaping geopolitical outcomes in faraway regions has already shaken up the structures of American unipolarity.
- Withdrawal from Afghanistan is not an isolated incident: The Afghan withdrawal was not an isolated incident.
- In Iraq and Libya, it failed to establish political stability and order after invasions.
- It could not stop Russia taking Crimea from Ukraine in 2014. In Syria, it was outmanoeuvred by Vladimir Putin.
- Finally, the way American troops were withdrawn from Afghanistan and the return of the Taliban to power strengthened this perception of great power fatigue and emboldened America’s rivals to openly challenge the U.S.-centric “rules-based order.”
Three geopolitical challenges facing the US
- [1]Aggressive Russia: Russia has amassed about 175,000 troops on its border with Ukraine.
- Western intelligence agencies claim that Russian President Vladimir Putin could order an invasion of Ukraine.
- Russian sphere of influence: From the migrant crisis in Belarus to the troop mobilisation in Ukraine, Russia is unmistakably sending a message to the West that the region stretching from the Baltic Sea to the Black Sea, the eastern flank of the North Atlantic Treaty Organization, is a Russian sphere of influence.
- [2] Iran issue: Iran, which has stepped up its nuclear programme after the Trump administration unilaterally withdrew the U.S. from the 2015 nuclear deal, has refused to hold direct talks with the U.S.
- Iran insists that the U.S. should first remove the sanctions and give assurance that a future President would not violate the terms of the agreement.
- [3] Assertive China: China is sending dozens of fighter jets into the so-called Taiwan Air Defence Identification Zone almost on a weekly basis, triggering speculation on whether Beijing was considering taking the self-ruled island by force.
- As the U.S. is trying to shift its focus to the Indo-Pacific region to tackle China’s rise, China is becoming more and more assertive in its periphery, seeking strategic depth.
Implications
- Limited choice: The pivot to Asia has limited America’s options elsewhere. For example, what could the U.S. do to deter Mr. Putin from making the next military move in Europe.
- With regard to Iran, if the U.S. blinks first and lifts the sanctions, it could be read as another sign of weakness.
- If it does not and if the Vienna talks collapse, Iran could continue to enrich uranium to a higher purity, attaining a de facto nuclear power status without a bomb (like Japan), which would be against America’s declared goals in West Asia.
- The Afghan withdrawal and the downsizing in West Asia suggest that America’s strategic focus has shifted towards China.
Conclusion
This transition, from American unipolarity into something that is still unknown, has put America in a strategic dilemma: Should it stay focused on China, preparing itself for the next bipolar contest; or continue to act as a global policeman of the liberal order that is under attack from multiple fronts?
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Partnership in technological domain with UK
Context
When Delhi thinks of technological cooperation with major powers, the US, Europe and Japan come to mind. The missing link in India’s technological mind space, however, is the United Kingdom.
How India can benefit from technology partnership with Britain
- Britain was the first nation to industrialise and has a long tradition of scientific research and technological development.
- With top-ranking universities and the golden triangle of science and innovation — London, Oxford and Cambridge — Britain is one of the world’s top technology powers.
- WIPO ranking: This year, the World Intellectual Property Organisation ranked Britain fourth in the global innovation index.
- India is far behind at the 46th position.
- India, then, could gain in a technology partnership with Britain.
Overview of the India-UK bilateral ties
- Pakistan angle: India’s foreign policy community can’t shake off the Pakistan prism in viewing London.
- To be sure, London’s advocacy of Pakistan has always irritated Delhi.
- Instead of complaining about London’s South Asian policy, Delhi now simply ignores London’s claims for a special role in India’s political disputes with Pakistan.
- By focusing on the positive, Delhi is betting it can reduce the traditional negative elements in the engagement with the UK.
- At the same time, Delhi recognises the enormous strategic possibilities with Britain and is willing to invest political capital to build on those synergies.
- Meanwhile, the steady relative decline of Pakistan — its economy is now about a tenth of India’s — and Delhi’s deepening strategic partnership with Washington are also encouraging London to rethink its past approach to the Subcontinent.
- India is fully conscious of UK’s enduring global salience.
- External Affairs Minister Subrahmanyam Jaishankar has often highlighted Britain’s continuing weight in the world as the fifth-largest economy, a permanent member of the UN Security Council, a major financial centre, and a leading hub of higher education and technology.
- Britain also enjoys a global maritime reach and a measure of political influence across the world.
Possibilities for partnership in the technological domain
- While a trade agreement between Delhi and London is said to be imminent, it is in the technological domain that the prospects are immense but under-explored.
- There is insufficient awareness in India’s strategic community of the British moves to put science and technology at the very heart of its political, economic, security and foreign policies.
- London announced a raft of measures this year starting with a major report on “Global Britain in a Competitive Age: An Integrated Review of Security, Defence, Development, and Foreign Policy”.
- One of the broad themes stand out from these initiatives, which is forming a coalition of like-minded countries.
- London wants to build a coalition of like-minded countries to reshape the global governance of technology.
- This includes strengthening technological ties with the traditionally close partners in the Anglosphere — US, Canada, Australia, and New Zealand — as well as other partners like Japan and India.
- All these elements of British policy mesh with India’s own economic, political, and security interests.
- The British technology initiatives are also aligned with the technological agenda of the Quad — or the Quadrilateral forum that brings together Australia, India, Japan, and the US.
Consider the question “In India’s partnership with the UK, it is the technological domain where prospects are immense but underexplored. Comment.”
Conclusion
For Delhi, the essence of the new alliance with Britain is fourfold — generate domestic prosperity, enhance national security, climb up the global technology hierarchy, and contribute to the construction of a free, open, and democratic global technological order.
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Back2Basics: Major themes of the policy report on “Global Britain in a Competitive Age”
- [1] Leverage technology to “level up” the regional and social inequalities in Britain.
- [2] Ensure Britain’s privileged position as a leading science power.
- [3] Focus on technological innovation to drive Britain’s future economic growth.
- [4] Build internal security resilience against new technological threats.
- [5] Modernise the intelligence apparatus with the help of new technologies.
- [6] Integrate technology into the national defence strategy as new capabilities like AI become as consequential as battle-tanks, ships and fighter jets.
- [7] Project technological power to counter malevolent actors in the international system.
- [8]A coalition of like-minded countries.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UNCTAD
Mains level: Paper 3- Opportunities for India in post-Pandemic world
Context
The COVID-19 pandemic has profoundly impacted lives and livelihoods across the world. Governments, global institutions, industry, academia and non-profit organisations around the world have joined hands to tackle the global challenge and help countries rebuild their economies.
Criticality of international cooperation and role for India
- The novel coronavirus pandemic has once again highlighted the criticality of international cooperation in combating current and future challenges.
- Areas of cooperation: Key among these include economic growth, building competitiveness of the investment climate, ensuring sustainable development paths and adapting to technology acceleration.
- Strengthening global partnership: Building resilience to cope with the threats posed by pandemics and other man-made and natural disasters has necessitated strengthening global partnerships now more than ever.
- Global partnerships help in building mutual trust and understanding by agreeing upon common rules and standards and sharing of best practices.
Areas to focus on
[1] Challenge of long term sustainability of growth process
- While the world economy is rebounding strongly, the long-term sustainability of the growth process needs to be strengthened.
- Exit from the massive stimulus packages itself may pose risks of economic and financial instability.
[2] Challenges of supply chain management:
- The pandemic severely disrupted global supply chains and set the global trade trajectory on a downward path.
- Even as the world emerges from the pandemic, facilitating medical supplies and essentials will continue to remain a top priority and for this, supply chains will need to be kept flowing.
- For this year, the United Nations Conference on Trade and Development (UNCTAD) indicates an increase of 22.4% in the value of global merchandise trade compared with 2020.
- World trade is expected to stand about 15% higher than before the COVID-19.
- FDI flows in developing economies also increased significantly, totalling $427 billion in the first half of 2021.
- Cooperation on trade facilitation for enhancing open and transparent markets, technical assistance and reduction of complex process and arrangements must be promoted.
[3] Increasing competitiveness
- Competitiveness will be key in facilitating growth and inclusive development.
- New opportunities and avenues across potential high growth sectors such as manufacturing and start-ups must be leveraged.
- An ecosystem of entrepreneurship and innovation with targeted policies and interventions will contribute to enhancing productivity and generating employment.
[4] Structural changes with the emergence of digital economy
- Certain structural changes are likely to become permanent in the future and this is especially true of the digital economy
- Equitable adaptation: The rise of telemedicine, remote work and e-learning, delivery services, etc. necessitates equitable adaptation to advanced technologies and tools, building robust infrastructure, and occupational transitions.
- Skill development and worker training, investments in education and vocational training, and capacity building would be some key areas of focus for filling technology gaps and nurturing new and existing talent.
- Investment in innovation: At the same time, investments in innovation will be crucial, especially during a crisis.
[5] Climate change
- Matter of urgency: Climate change has now acquired urgency from policymakers around the world, as seen in the recent COP26 at Glasgow.
- International alliances and cooperation on building sustainable solutions, green technology, resource efficiency, sustainable finance, etc., must be promoted to fast-track meeting the sustainable development goals and for ensuring all-round development.
Opportunities for India
- Attaining faster growth path: India’s recent reforms, role in combating the pandemic, and startup vibrancy, among other factors, have attracted global attention and can help it attain a faster growth path, provided its integration with the world economy and trade gains strategic intensity.
- Reliable and trusted player: With multiple strategic shifts, India’s role as a reliable and trusted player in the comity of nations stands enhanced.
Way forward
- In the post-pandemic world, it will be critical for India to improve on its investment climate and systematically target its export capabilities across sectors and regions.
- Ease of doing business and new free trade agreement with major markets will help it integrate closely with the world through trade and investment partnerships.
Conclusion
The time for India is here and it must leverage international partnerships for ensuring a robust and sustained economic growth path.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Semiconductor chip manufacturing in India
Context
India is aiming to manufacture silicon semiconductor chips.
Efforts to set up chip fabrication plant
- India has intensified efforts to set up a semiconductor fabrication plant with the help of Taiwan, the market leader.
- For this the government is investing over $7.5 billion.
- The Tata Group is in talks with three States — Tamil Nadu, Telangana and Karnataka — to invest over $300 million to set up a semiconductor manufacturing facility.
- In 2014, NASSCOM wanted to promote a National Technology Corridor along coastal A.P. stretching through the Visakhapatnam, Rajahmundry and Vijayawada region.
- Given the abundance of water, sand (raw material for making silicon ingots), road, rail, ports and airport connectivity, the industry body wanted to push and promote the design and manufacturing of electronic chips.
Challenges
- IP and design: While welcoming such moves by the government and technology experts, local players in the segment say that chip making itself will not be enough.
- Other aspects such as designing and Intellectual Property are required to make a mark.
- Designing is what brings value to the chips.
- If the Intellectual Property lies with the foreign entity, we end up manufacturing the basic material which does not serve the purpose.
- Need to promote SoCs: Rather, we need an ecosystem to promote SoCs (System on a Chip) which makes more sense.”
- There are several firms in India which are now making SoCs, which is a good sign.
- Connect related industries: The bigger challenge and immediate need for the Indian government is to connect related industries in India to create the ecosystem, industry players say.
Consider the question “What are the challenges India may face as it aims to manufacture silicon semiconductor chips?”
Conclusion
The initiative is an uphill task as many factors need to come together for India to make a mark in the niche chip making and designing industry. Also, upcoming firms should be able to sustain themselves in the market when subsidies from the government are withdrawn.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Judicial pendency
Context
Recently, the Chief Justice of India, in his own mild way, protested against the attack on judges. One can understand his pain and agony, but he too knows that judges do not, and should not live in ivory towers.
Questioning and analysing actions of the judiciary
- As the judiciary is one of the pillars of democracy, and the Constitution entrusts judges with the task of protecting the constitutional rights of the people, especially the right to life and liberty, the consumer of justice has every right, and would be fully justified in critically examining, and commenting upon each and every word of the judges spoken or written, howsoever unpalatable it may be.
- It appears that it is in the above spirit that MP Shashi Tharoor, speaking in Parliament on the High Court and Supreme Court Judges (Salaries and Conditions of Service) Amendment Bill said that the judiciary had failed to stem the tide of militant majoritarianism.
- He alleged that the “judiciary’s inaction almost always favours those in power”.
- He has raised pertinent questions, and has brought out the glaring failings of the judiciary in matters concerning the protection of the constitutional rights of citizens.
- Pendency of important cases such as the abrogation of Article 370 of the Constitution, the Citizenship Amendment Act, electoral bonds, and many petitions under the preventive detention laws highlights this issue.
Issues in functioning of collegium system
- As regards the functioning of the collegium system, judges are transferred without any seeming justification, and in some cases re-transferred, justifying neither their initial transfer nor the re-transfer.
- Some elevations of judges raise eyebrows, while some are ignored.
- Should the collegium not be more transparent than it has been in the past in the matter of the elevation and transfers of judges?
Conclusion
Judges cannot be shielded from citizens’ questions. After all, as a consumer of justice, the citizen has a right to know.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Regulating cryptocurrencies and challenges ahead
Context
The government has decided to introduce a bill that seeks to prohibit all private cryptocurrencies in India.
Background of the bill
- In 2018, the three-judge bench of the Supreme Court set aside the RBI circular that prevented crypto exchanges from dealing with the formal financial system on grounds of proportionality.
- Purpose of the bill: The current bill now attempts to define the rules of the game so that the RBI, tax authorities, SEBI and other agencies have much better legal guidance in deciding the course of action with respect to VCs in their respective domains.
- The rules can, therefore, range from a ban to controlled interaction with the formal financial system.
Issues involving cryptos
- Issues involving cryptos can be seen at three levels, each of which is equally important.
- The first is its impact on sovereignty.
- The second is its interaction with financial markets.
- Third is the value proposition that the entire concept of crypto brings to the economic debate.
- Incorporation of price stability mechanism: Some of the variants of cryptos such as the stable coin clearly indicate that these are attempts to create systems of money that incorporate features of price stability that imply a parallel monetary system.
- Diluting the sovereign function of money creation: Unrestricted co-opting of VC clearly dilutes the sovereign function of money creation, clearly impacting the revenues of RBI.
- Concerns pertaining to money laundering, terrorist threats and narco-trading also come under this category given the high value and anonymity offered by cryptocurrencies.
Challenges in cryptocurrencies interaction with the formal system
- As of now cryptos have been recognised as assets or commodities and as a medium of exchange. Their role as units of account or legal tender is rather limited.
- They may offer a store of value given their short supply. From a banking point of view, certain issues do arise.
- Since VCs are not legal tenders, they cannot be used in the discharge of debt.
- Thus, banks cannot accept VCs to close a loan account.
- Second, can banks lend in fiat by accepting VCs as collateral assuming the VC is an asset?
- Incompatible with the fractional system of banking: At a deeper level, the very idea of VCs and the way they are designed are incompatible with the fractional system of banking.
- The fluctuations in interbank liquidity require that money supply adjusts to system requirements.
- If money supply undergoes compositional change in favour of VCs, this ability will be curtailed thus accentuating the crisis.
- In financial markets, crypto such as ICOs bring another set of issues.
- The ICO is a creature that disrupts the very concept of limited liability in corporate finance.
- ICOs are, at times, designed in such a way that the beneficial owner identity is concealed.
- SEBI is yet to convey a position on various issues surrounding this idea.
- Issues with making VCs medium of exchange: VCs have emerged as a medium of exchange and many countries have permitted VC ATMs.
- But how does this proposition fare given that considerable advances have been made in the payment systems domain in India.
- Is it worthwhile that additional competition is introduced in a market that is hyper-competitive?
- It will have impact on existing investments in mobile payment and UPI technology.
- Impact on poor states: It is well known that the Indian population exhibits significant behavioural divergences in their savings and credit behaviour across regions.
- Such wide behavioural changes have profound implications on bank strategies and product designs.
- In the past, there have been several instances of states having low per capita income being more prone to chit fund investments that have negatively impacted the savings of many poor households.
- The issue of consumer protection needs to be addressed and the current laws may have to be reviewed considering this innovation.
Conclusion
The bill must meet many important objectives. While there are obvious concerns of money laundering and benami transactions, there are equal concerns with respect to company laws, payment systems and banking, securities and other commercial laws.
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Back2Basics: About Stablecoin
- Stablecoins bridge the worlds of cryptocurrency and everyday fiat currency because their prices are pegged to a reserve asset like the U.S. dollar or gold.
- This dramatically reduces volatility compared to something like Bitcoin and results in a form of digital money that is better suited to everything from day-to-day commerce to making transfers between exchanges.
What is ICO?
- ICO stands for “initial coin offering,” and refers to a formerly popular method of fundraising capital for early-stage cryptocurrency projects.
- In an ICO, a blockchain-based startup mints a certain quantity of its own native digital token and offers them to early investors, normally in exchange for other cryptocurrencies such as bitcoin or ether.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Legal basis for MSP
Context
Amid the demand for a guarantee of MSP, many commentators fail to understand the true spirit of the demand for a legal MSP.
How demand for legal backing for MSP is misinterpreted?
- Mandatory enforcement of price above MSP: The demand has been interpreted as a mandatory enforcement of trade in agricultural produce, including private trade to be necessarily at or above the MSP for that crop.
- Nationalisation of agricultural trade: Another interpretation is the nationalisation of agricultural trade whereby the government promises to buy all the crop produced at MSP.
- Commentators have been using these two interpretations to project large estimates of government expenditure needed to implement.
- They fail to understand the true spirit of the demand for a legal MSP.
Current nature of MSP
- It is not an income support program: By definition MSP is not an income support programme.
- Intervention to stabilise prices: It is designed to be used as government intervention to stabilise prices, to provide remunerative prices to farmers.
- Public procurement program to meet requirements of NFSA: Currently, it is no more than a public procurement programme to meet the requirements of the National Food Security Act (NFSA).
- Only rice and wheat procured: As against the official announcement of MSP for 23 crops, only two, rice and wheat are procured as these are distributed in NFSA.
Larger context of demand for legal backing to MSP
- Droughts and declining commodity prices: In addition to the twin droughts of 2014 and 2015, farmers have also suffered from declining commodity prices since 2014.
- Impact of demonetisation and GST: The twin shocks of demonetisation and hurried rollout of GST, crippled the rural economy, primarily the non-farm sector, but also agriculture.
- Impact of pandemic: The slowdown in the economy after 2016-17 followed by the pandemic has ensured that the situation remains precarious for majority of the farmers.
- Increased input prices: Higher input prices for diesel, electricity and fertilisers have only contributed to the misery.
- In this context, the demand for ensuring remunerative prices is only a reiteration of the promise by successive governments to implement the Swaminathan Committee report.
What should be the true nature of MSP?
- Intervene to stabilise price: A true MSP requires the government to intervene whenever market prices fall below a pre-defined level, primarily in case of excess production and oversupply or a price collapse due to international factors.
- It does not require the government to buy all the produce but only to the extent that creates upward price pressures in the market to stabilise prices at the MSP level.
Way forward
- Mechanism for market intervention: What is needed is a mechanism to monitor the prices.
- While such a mechanism already exists, a policy for requisite market intervention is missing.
- Use MSP as incentive to achieve nutritional security and reduce import dependence: MSP can also be an incentive price for many of the crops which are desirable for nutritional security such as coarse cereals, and also for pulses and edible oils for which we are dependent on imports.
- Include pulses, edible oil and millets in PDS: Despite repeated demands from food activists, there has not been any progress in including pulses, edible oils and millets in PDS.
- A guaranteed MSP then is nothing more than restoring the true spirit and functions of MSP, applicable to a broad range of crops and all sections of farmers.
Issues
- The current MSP regime has no relation to prices in the domestic market.
- Its sole raison d’être is to fulfil the requirements of NFSA making it effectively a procurement price rather than an MSP.
- It is basically a lack of understanding of what agriculture needs and above all a lack of political commitment to ensure remunerative prices to farmers.
Conclusion
An efficient and functional MSP is certainly the least that the government can do to protect a sector which remains the largest employer and a refuge for the poor and vulnerable as was seen during the pandemic.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Challenges to GST
Context
Seen purely from a revenue point of view and as a fiscal policy tool, India’s GST is still on a rocky road.
Background
- The GST was launched by India on the midnight of July 1, 2017.
- Benefits of GST: Hailed as a landmark reform in India’s tax history, it was expected to improve tax-GDP ratio, end tax cascading, enhance efficiency, competitiveness, growth, and ensure lower prices.
- Fiscal federalism: It was also projected as a watershed in India’s fiscal federalism.
- the States have forgone a substantial part of their own tax revenue.
- States were in turn guaranteed a GST compensation assuring 14% growth in their GST revenue during the initial five years.
- India’s GST architecture: India’s GST architecture is built on the firm foundations of a GST Council and the GST Network (GSTN).
- GST Council as due federal process: The first is the key decision-making body, chaired by the Union Finance Minister with a Minister of State in charge of Finance and the Finance Ministers of States as members.
- This is envisaged as a due federal process to protect the interests of the States.
Unresolved issues
[1] Revenue neutrality not achieved
- India’s GST paradigm stands on two key pillars: revenue neutrality and GST compensation for the States.
- The assured revenue neutrality remains a mirage and many States have experienced a declining tax-GDP ratio.
- Decline in tax to GDP ratio of state: In the case of major 18 States, the ratio of own tax revenue to GDP has declined.
- While the share of the Centre in total GST increased by 6%, that of States put together lagged behind with only a 4.5% increase.
- Stark differences between the Revenue Neutral Rates (RNR) for the producing States and consumption State have been observed. States producing exempted food grains also lost out.
- Since the rates were lower under GST vis-à-vis the VAT regime, revenue neutrality was not adhered ab initio.
- The problems were compounded with massive evasion following the dismantling of check posts, and later on fake invoices, that grew by leaps and bounds.
- Experience of other countries: The South African experience illustrates how zero-rating and large exemptions have defeated revenue goals.
- Canadian experience shows that GST could be improved by limiting zero rating, tax-exemptions and harmonising tax rates.
- The resilience of the economy at the time of rolling out of GST is critical for its wider reception as the Australian experience shows.
[2] Not conducive to co-operative federalism
- While the States collectively forewent 51.8% of their total tax revenue, the Centre surrendered only 28.8%.
- Yet, GST is shared equally between the Centre and States despite two expert committees recommended for a higher share for the States.
- Given the revenue neutrality failure and the host of other issues, many of the States are left with no option except to depend on GST compensation.
- This is not conducive to sustainable co-operative federalism.
[3] Need for revenue sharing formula for IGST
- Although IGST is a key source of revenue for many of the States, the clearing house mechanism and the process therein remains unknown territory.
- It was pointed out that GST is discriminatory to manufacturing States, indicating the need for a revenue sharing formula that duly incentivises exporting States by sharing IGST revenue among three parties instead of two.
[4] Other issues
- Swift functioning of Input tax credit: The Malaysian experience demonstrates the need for swift and transparent functioning of the input tax credit system through a flawless IT infrastructure.
- We operate in an almost information vacuum especially with respect to IGST along with several glitches in the digital architecture.
- GSTN is now in the doldrums.
- Data monopoly: It neither makes effective use of the massive and invaluable data being generated nor shares them to enable others to make use of them.
- Such practice in “data monopoly” was a fact of history in India’s statistical system and has to go sooner rather than later.
- Australia, having several similarities with India, in terms of Centre and the subnational units, and destination-based, multi-stage tax with input credit provisions, has not been revenue-buoyant.
- It is a matter for consideration whether widening exemptions and the replacing of income-tax by GST in the case of small and medium enterprises are advisable measures in the Indian context.
Consider the question “What are the challenges facing the GST in India? What India can learn from the experience of other countries’ experience.”
Conclusion
Despite many years of efforts in evolving an Indianised GST system and over 50 months of adjustments with over a thousand notifications, with accompanying uncertainties in the first year and the novel coronavirus pandemic and the lockdown still in the saddle, GST continues to be an unfinished agenda. But how far and how long?
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Issues related to use of AFSPA
Context
The death of civilians in Nagaland in a security operation has revived the debate about AFSPA.
Demand for repeal of AFSPA
- Some years ago, all the northeastern states had come together to demand the annulment of this Act.
- That remained in the realm of yet another “demand”.
- In 1997, after Nagaland’s most enduring insurgent outfit, the National Socialist Council of Nagalim (NSCN), led by Isak Swu and T H Muivah, first decided to talk peace with the Indian government, the Naga Peoples’ Movement for Human Rights (NPMHR) had approached the Supreme Court for revocation of the Act.
- Enabling legislation: The apex court had then upheld its constitutionality and said it was an enabling legislation that confers minimum powers on the army to operate in situations of widespread internal disorder.
Way forward
- Talk to the other groups: Many are wondering if the peace talks between the NSCN (IM) and the government of India now lie in tatters.
- The media has focussed exclusively on the NSCN (IM) and ignored the other Naga National Political Groups (NNPGs), who have been brought on board because they are Nagaland-based and speak exclusively for Nagaland.
- The NNPGs and the Gaon Bura Association of Nagaland doubt NSCN(IM)’s ability to bring lasting peace in Nagaland.
- Since 2015, the Nagaland Gaon Bura Association, the apex body of Nagas which includes all the 16 recognised tribes and the NNPGs barring the NSCN (IM), have sent several memorandums to the government.
- These representatives of the Naga people do not demand a separate flag or constitution because they understand these are tenuous demands.
- These groups have also never raised the sovereignty issue.
- The working committee of the seven NNPGs, roped in to join the peace talks, are also opposed to the idea of changing interlocutors as and when the NSCN (IM) decides.
- Reconsider use of AFSPA: There is a need to reconsider the use of the army and AFSPA when killings have reduced considerably.
- The apex body has specifically mentioned that they want to be delivered from the gun culture.
- Check the misuse of FMR: Countering insurgency in the Northeast is fraught also because of the Free Movement Regime (FMR) between India and Myanmar.
Conclusion
The government need to reconsider the use of AFSPA and also focus on other measures to ensure peace and stability in these regions.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Suspension of MPs
Context
Twelve members of the Rajya Sabha were suspended for their alleged involvement in the grave disorder in the House on the last day of the previous session.
What do Rajya Sabha’s rules of procedure say about the suspension of a member?
- Rule 256 of Rajya Sabha’s rules of procedure provides for the suspension of a member who disregards the authority of the chair or abuses the rules of the council by persistently and willfully obstructing the business of the House.
- Persistent and willful obstruction of the business of the House is the crux of the offence.
- What is the maximum period of suspension? Suspension can be for a period not exceeding the remainder of the session.
- This would mean that if the member is suspended on the last day of the session, the period of suspension will be only a day.
- So, even if a government would like to suspend such a member for a longer period. it would not be possible under the present rule.
- Unless the House itself revokes the suspension nothing can be done about it.
- The decision of the House is final.
- Every legislature has the power to suspend its members if they cause disorder and obstruct the business of the House.
- But the rule of suspension is rarely invoked in parliaments in mature democracies.
Whether the existing rules permit such a course of action?
- Rule 256 says that the chairman may, if he deems it necessary, name a member who either disregards the authority of the chair or abuses the rules of the House by persistently and willfully obstructing the business of the House.
- Sub Rule 2 of this rule is of very great importance in the context of the main question, namely, whether a member can be suspended in the next session for creating disorder in the previous session.
- No adjournment is allowed: It clearly says no adjournment is allowed, which means the matter of suspension cannot be adjourned to a later period.
- It needs to be decided then and there.
- A member who abuses the rules of the House by persistently and willfully obstructing its business needs to be punished swiftly.
- No adjournment is allowed at all.
The powers of the House to regulate its internal matters
- It can be said that the rule under which the members were suspended does not actually permit it.
- Absolute power to interpret rule: The House is supreme in these matters and the chair has absolute powers to interpret the rules.
- The judiciary has time and again clarified that the House has absolute powers to regulate its internal matters.
- Suspension of a member is such a matter.
- The judiciary will intervene only when a patently unconstitutional act is done by the House.
Conclusion
The solution to disruptions does not lie in suspension. That is the lesson we should learn from past experience.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Monetary policy corridor
Mains level: Paper 3- Monetary policy normalisation and challenges involved in it
Context
Monetary Policy Committee (MPC) voted to maintain status quo on policy rates, with one member continuing to dissent on the “accommodative” stance of policy.
What is accommodative stance of policy?
Accommodative monetary policy is when central banks expand the money supply to boost the economy. Monetary policies that are considered accommodative include lowering the Federal funds rate. These measures are meant to make money less expensive to borrow and encourage more spending.
Overview of RBI policy measures during Covid-related lockdown
- Cut in policy rates and injection of liquidity: The RBI had moved proactively to cut the repo and reverse repo rate and inject unprecedented amounts of funds into banks and other intermediaries.
- The short-term interest rate at reverse repo level: a combination of the lower reverse repo rate and the large liquidity injection had resulted in a drop in various short-term rates down to (and occasionally below) the reverse repo rate, making it the effective operating rate of monetary policy.
- Gap between repo and reverse repo increased to 65 bps: In addition, both the repo and reverse repo rates had been cut to 4.0 and 3.35 per cent, respectively, with the gap – the “corridor” – between the rates widening from the usual 25 basis points to 65 bps.
Central bank’s role in modern monetary policy
- Determining basic overnight interest rate: A central bank’s main role in modern monetary policy operating procedures is to determine the basic overnight interest rate, deemed to be consistent with prevailing macroeconomic conditions and their economic policy objectives, in balancing the ecosystem for sustained growth together with moderate inflation.
- This is achieved through buying and selling very short-term (predominantly overnight) funds (mainly) from banks to keep a specified operating rate (the weighted average call rate in our case) very close to the policy rate.
Liquidity management: Key pillar of monetary policy normalisation
- Liquidity management: Liquidity management in the extended banking and financial system (which includes non-banking intermediaries like NBFCs, mutual funds and others) will now be the key pillar of normalisation.
- This process is the domain of RBI and not MPC.
- These operations will be conducted within RBI’s liquidity management framework.
- There are two sources of liquidity additions:
- (i) Exogenous: which are largely due to inflows of foreign currency funds and outflows of currency in circulation (cash) from the banking sector.
- (ii) Voluntary or endogenous: which is the result of the creation of base money by RBI through buying and selling of bonds, thereby injecting or extracting rupee funds.
How RBI is managing liquidity surplus?
- Stopped GSAP and OMOs: Post the October review, RBI had stopped buying bonds under the Govt Securities Asset Purchase (GSAP) and done negligible Open Market Operations (OMOs), thereby stopping addition of voluntary liquidity injection into the system, our own version of “tapering”.
- Union government balances with RBI, arising from cash flow mismatches between receipts and expenditures, has hybrid characteristics and also impacts liquidity.
- Use of reverse repo window: RBI has used the reverse repo window to absorb almost all this liquidity surplus from banks.
- Allowed repaying TLRTOs: It has again allowed banks the option to prepay the outstanding borrowings from the Targeted Long Term Repo Operations (TLTROs), thereby potentially extracting another Rs 70,000 crores.
How RBI is managing interest rate in the policy normalisation process
- Increased rates and closed the gap between repo and reverse repo: RBI – post the October review – has gradually guided short-term rates up with a sure hand from near the reverse repo rate to close to the repo rate.
- It has shifted its liquidity absorption operations from the predominant use of fixed rate reverse repos (FRRR) into (largely) 14-day variable rate reverse repo (VRRR) auctions to guide a rise in interest rates.
- Since early October, these rates had steadily moved up in a smooth and orderly fashion up to 3.75-3.9 per cent.
- The VRRR rates moving up have also resulted in various short-term funding interest rates like 90-day Treasury Bills, Commercial Papers (CP) and banks’ Certificates of Deposits (CD) moving up from the reverse repo rate or below in September to 3.5 per cent and higher since December.
- The OMO and GSAP operations have also helped in managing medium- and longer-term interest rates in the yield curve.
Way forward
- There is a likelihood of further additions to exogenous system liquidity.
- Other instruments to absorb surpluses: There might consequently be a need for other instruments to absorb these surpluses apart from VRRR auctions.
- Liquidity surplus of non-banking intermediaries: Managing liquidity surpluses of the non-banking intermediaries, especially mutual funds, will be another challenge since they do not have direct access to VRRR operations.
Consider the question “Since the onset of the Covid-related lockdowns, RBI had moved proactively to cut the repo and reverse repo rate and inject unprecedented amounts of funds into banks and other intermediaries. In this context, what are the challenges in monetary policy normalisation as RBI plans to absorb the excess liquidity and increase the interest rates ?”
Conclusion
The shift to the tightening phase, with hikes in the repo rate, is likely towards the late months of FY23, with shifts “if warranted by changes in the economic outlook”.
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Back2Basics: Monetary Policy Corridor
- The Corridor in 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.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Scrutinising reduced out-of-pocket expenditure on health
Context
The National Health Accounts (NHA) report for 2017-18 is being celebrated widely as it shows that total public spending on health as a percentage of GDP has increased to a historic high of 1.35% of GDP.
India’s total public spending on health
- One of the lowest in the world: India’s total public spending on health as a percentage of GDP or in per capita terms has been one of the lowest in the world.
- Majority spent by the States: The Union government traditionally spends around a third of the total government spending whereas the majority is borne by the States.
- There has been a policy consensus for more than a decade now that public spending has to increase to at least 2.5% of GDP.
- However, there has not been any significant increase so far.
- Despite several pronouncements, it has continued to hover around 1%-1.2% of GDP.
Why NHA report is being celebrated?
- The National Health Accounts (NHA) report capture spending on health by various sources, and track the schemes through which these funds are channelised to various providers in a given time period for a given geography.
- The National Health Accounts (NHA) report for 2017-18 is being celebrated widely as it shows that total public spending on health as a percentage of GDP has increased to a historic high of 1.35% of GDP.
- The increase shown in NHA 2017-18 is largely due to increase in Union government expenditure.
- Increase in Centre’s share: For 2017-18, the Centre’s share in total public spending on health has jumped to 40.8%.
- However, if we study the spending pattern of the Ministry of Health and Family Welfare and the Ministry of AYUSH, we see that expenditure increased to 0.32% of GDP from 0.27% in 2016-17 — insufficient to explain the overall jump.
Issues with NHA report
- Expenditure of DMS included: Much of this increase has actually happened on account of a tripling of expenditure of the Defence Medical Services (DMS).
- Compared to an expenditure of ₹10,485 in 2016-17, it increased to ₹32,118 crore.
- Though the increasing spending for the health of defence personnel is a good thing, such spending does not benefit the general population.
- Within government expenditure, the share of current health expenditure has come down to 71.9% compared to 77.9% a year ago.
- Capital expenditure included: This essentially means, capital expenditure has increased, and specifically in defence.
- There is a problem in accounting capital expenditure within the NHA framework.
- Why capital expenditure needs to be left out: Equipment brought or a hospital that is built serves people for many years, so the expenditure incurred is used for the lifetime of the capital created and use does not get limited to that particular year in which expenditure is incurred.
- The World Health Organization proposes to leave out capital expenditure from health accounts estimates, instead focus on current health expenditure.
- Incomparable to other countries: In NHA estimates in India, in order to show higher public investment, capital expenditure is included; thus, Indian estimates become incomparable to other countries.
- The NHA estimate also shows that out-of-pocket expenditure as a share of GDP has reduced to less than half of the total health expenditure.
- NSSO 2017-18 data suggest that during this time period, utilisation of hospitalisation care has declined compared to 2014 NSSO estimates for almost all States and for various sections of society.
- Sign of distress: The decline in out-of-pocket expenditure is essentially due to a decline in utilisation of care rather than greater financial protection.
- Actually, the NSSO survey happened just after six months of demonetisation and almost at the same time when the Goods and Services Tax was introduced.
- The disastrous consequences of the dual blow of demonetisation and GST on the purchasing power of people are quite well documented.
- Another plausible explanation is linked to limitations in NSSO estimates. The NSSO fails to capture the spending pattern of the richest 5% of the population (who incur a large part of the health expenditure).
- Thus, out-of-pocket expenditure measured from the NSSO could be an under-estimate as it fails to take into account the expenditure of the richest sections.
Conclusion
The reduction of out-of-pocket expenditure is a sign of distress and a result of methodological limitations of the NSSO, rather than a sign of increased financial protection.
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