Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 19
Mains level: Paper 2- Misuse of sedition law
Context
On May 11, the Supreme Court directed the Union government and the states to refrain from using the law of sedition and keep all previous cases under 124A in abeyance till the matter is reconsidered in a comprehensive way.
Data on Section 124A and UAPA about pendency and conviction rates
- The data on draconian laws like 124A or UAPA exposes their untenability.
- According to the National Crime Records Bureau data, a total of 156 cases of sedition were pending in 2017.
- In that year, only 27 cases could be disposed of at the police level by withdrawing the case or submitting a chargesheet.
- In courts, out of the 58 cases on trial, only one conviction could be obtained and the pendency rate for the cases of sedition was close to 90 per cent.
- The number of cases increased in 2020, the year for which the latest NCRB data is available, but with the same results.
- Of the total 230 cases registered, only 23 were chargesheeted.
- Pendency in court reached close to 95 per cent for the sedition cases in 2020.
- The abysmally low rate of conviction and disposal of these cases make it clear that these charges are slapped with very flimsy or no evidence to intimidate or harass those who question the government’s fiat.
- The picture is no different for the UAPA.
- Cases under it have increased by about 75 per cent between 2017-2020.
- A total of 4,827 UAPA cases were pending in 2020 —of them, only 398 could be chargesheeted in that year.
- The pendency rate in court remained 95 per cent, indicating harassment and violation of the right to life and liberty for a great number of people who are suffering because of the diabolical prison conditions in India.
Recommendations and measures
- A consultation paper on sedition circulated by the Law Commission of India on August 30, 2018, found many issues that need addressing around the working of Section 124A.
- Most recently, on May 11, the Supreme Court directed the Union government and the states to refrain from using the law of sedition.
Conclusion
Dissent, criticism and differences of opinion are vital for the functioning of any democracy. The witch-hunting of those who question the government of the day reminds us of medieval times and totalitarian rulers. It is time we usher in an era of free speech. For that, the sedition law must go.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Impact of rate hike on inflation
Mains level: Paper 3- Effectiveness of monetary policy in dealing with the inflation
Context
The Reserve Bank of India (RBI) last week raised both policy rates and cut back liquidity in a surprise inter-meeting decision. The forcefulness and urgency of the policy shift have been seen as a signal of the RBI’s renewed commitment to fighting inflation via aggressive monetary tightening in the coming months.
How do higher inflation rates slow inflation?
- It is true that a large swathe of the global economy is in the throes of runaway inflation and that in many of these economies tightening monetary and fiscal policies is the right response.
- Initial conditions: But initial conditions matter as do the specific drivers of inflation.
- There are typically three ways in which higher inflation rate slows inflation.
1] Lowering inflationary expectations
- Suppose one believes that because a central bank has not tightened enough, future inflation will be higher.
- In that case, the obvious response is to bring forward future consumption and investment to the present, thereby adding to demand and fueling current inflation further.
- So, in principle, the central bank by credibly committing to bringing down inflation through aggressive current actions can bring down expectations of future inflation.
- It won’t work in India: This is a very potent conduit of monetary transmission in developed markets, where there is a wide variety of inflation-hedging instruments, as well as in some emerging markets — Brazil, for instance —where inflation-indexation is widespread.
- However, there is little empirical evidence that this channel works in India, even weakly.
2] Exchange rate channel
- Higher interest rates attract foreign capital that appreciates the currency, lowering import prices and, in turn, inflation.
- Again, this is a powerful mechanism in Latin America and Central Europe, where bond flows — that are sensitive to interest rate differential —dominate capital movements and the import content of the consumer basket is large.
- Will it work in India? This is not the case in India and, in any event, for this to work it would require extreme rate hikes in the country, given the anticipated aggressive tightening by the US Fed.
3] Curbing credit growth
- Raising both the cost of borrowing as well as its availability (for example, by increasing the cash reserve ratio) reduces credit growth, lowering demand, GDP growth and, eventually, inflation.
- It works well in India: This is the credit transmission by which higher interest rates dampen inflation and it works well in India.
- How much of today’s price increase is credit-driven? Even a cursory glance at bank balance sheets would suggest that credit growth is just treading water.
- Having recovered from being negative in mid-2021, real credit growth is running just around 2 per cent.
Comparison with inflation-monetary policy dynamics of 2010-11
- Back then, real GDP growth was clocking over 10 per cent per quarter, nominal credit growth 20-25 per cent, and real credit growth over 10 per cent.
- Inflation was unambiguously driven by an overheated economy and fueled by runaway credit.
- In the event, the RBI assessed the drivers of inflation to be originating from the supply side — higher food and commodity prices — and moved at a glacial pace, such that even after 12 rate hikes inflation remained in double digits for much of that period.
- Faced with a potential US Fed tightening in 2013, India found itself in a near-crisis situation.
- Today things are different. Much of the inflation is driven by global food and commodity prices.
- Despite the languishing private demand, core inflation remains high.
- But this has been the case for much of the last two years, strongly suggesting that the domestic supply chain disruptions in manufacturing and services, especially at the informal level, haven’t been repaired fully.
- The reason why firms locate in the informal sector in the first place is because of lower transaction costs, so when parts of the supply chain shift to the higher-cost formal sector, it shows up as inflation during the transition before increased scale of production and efficiency bring down the cost over time.
- None of these factors is affected much by higher lending rates.
- So the burden of taming inflation by tightening monetary policy will fall largely on lower credit.
- There is clearly a case to remove the extraordinary monetary support provided during the pandemic.
Conclusion
The RBI had misread the drivers of inflation badly in 2010-11. Hopefully, it won’t repeat that mistake this time.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 351
Mains level: Paper 1- Diversity and complexity of India
Context
Given the diversity and complexity of India, the only constitutionally valid common denominator is citizenship.
Social security
- An eminent sociologist and former president of the International Sociological Association, T.K. Oommen, has written extensively on the concept of social security.
- Evolution of nation: He says the principal challenges to the evolution of a nation lie in minimising disparity, eradicating discrimination, and avoiding alienation.
- Excluded groups in our society: He has listed nine categories of socially and/or politically and/or excluded groups in our society: “Dalits, Adivasis, OBCs, cultural minorities — both religious and linguistic, women, refugees-foreigners-outsiders, people [of] Northeast India, the poor and the disabled”.
- Sources of exclusion in India: He has suggested that “the three sources of exclusion in India — stratification, heterogeneity and hierarchy — create intersectionality.”
- This insecurity manifests itself in genocide, culturocide and ecocide and in its absence, a society may be conceptualised as secure.
- The Indian polity, he says, “has the most elaborate set of identities based on class, religion, gender, caste, region, language and their intersectionalities as well as consequent permutations and combinations.
- Citizenship as a common denominator: Given the diversity and complexity of India, the only constitutionally valid common denominator is citizenship.
- This is the point at which fraternity can and should be practiced among equals.
- Prof. Oommen opines that it is “only through the conflation of state and nation” can our Republic be considered a nation.
Conclusion
Cultural monoism and secularism are insufficient, Prof. Oommen says; instead, “the idea of conceptualizing India as a multicultural polity is more amenable than a secular India.” The sheet anchor of this has to be citizenship.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Termination of pregnancy as an unconditional right
Context
The issue of abortion is in the news again, internationally.
Criminal law provisions related to termination of pregnancy
- Under the general criminal law of the country, i.e. the Indian Penal Code, voluntarily causing a woman with child to miscarry is an offence attracting a jail term of up to three years or fine or both, unless it was done in good faith where the purpose was to save the life of the pregnant woman.
- A pregnant woman causing herself to miscarry is also an offender under this provision apart from the person causing the miscarriage, which in most cases would be a medical practitioner.
Background of the MTP Act
- In 1971, after a lot of deliberation, the Medical Termination of Pregnancy (MTP) Act was enacted.
- This law is an exception to the IPC provisions above.
- Who, when, where, why and by whom? The law sets out the rules — of when, who, where, why and by whom — for accessing an MTP.
- This law has been amended twice since, the most recent set of amendments being in the year 2021 which has, to some extent, expanded the scope of the law.
- The law does not recognise and/or acknowledge the right of a pregnant person to decide on the discontinuation of a pregnancy.
- The law provides for a set of reasons based on which an MTP can be accessed.
Reasons allowed for MTP
- Reasons: The continuation of the pregnancy would involve a risk to the life of the pregnant woman or result in grave injury to her physical or mental health.
- The law explains that if the pregnancy is as a result of rape or failure of contraceptive used by the pregnant woman or her partner to limit the number of children or to prevent a pregnancy, the anguish caused by the continuation of such a pregnancy would be considered to be a grave injury to the mental health of the pregnant woman.
- The other reason for seeking an MTP is the substantial risk that if the child was born, it would suffer from any serious physical or mental abnormality.
- A pregnant person cannot ask for a termination of pregnancy without fitting in one of the reasons set out in the law.
- Gestational age of pregnancy: The other set of limitations that the law provides is the gestational age of the pregnancy.
- The pregnancy can be terminated for any of the above reasons, on the opinion of a single registered medical practitioner up to 20 weeks of the gestational age.
- From 20 weeks up to 24 weeks, the opinion of two registered medical practitioners is required.
- Any decision for termination of pregnancy beyond 24 weeks gestational age, only on the ground of foetal abnormalities can be taken by a Medical Board as set up in each State, as per the law.
- The law, as an exception to all that is stated above, also provides that where it is immediately necessary to save the life of the pregnant woman, the pregnancy can be terminated at any time by a single registered medical practitioner.
Issues with the MTP Act provisions
- While India legalised access to abortion in certain circumstances much before most of the world did the same, unfortunately, even in 2020 we decided to remain in the logic of 1971.
- Right to health and right to life: By the time the amendments to the MTP Act were tabled before the Lok Sabha in 2020, a number of cases came before the courts.
- In these cases, the courts had articulated the right of a pregnant woman to decide on the continuation of her pregnancy as a part of her right to health and right to life, and therefore non-negotiable.
- Violation of right to privacy: In right to privacy judgment of the Supreme Court of India it was held that the decision making by a pregnant person on whether to continue a pregnancy or not is part of such a person’s right to privacy as well and, therefore, the right to life.
- The standards set out in this judgment were also not incorporated in the amendments being drafted.
- Not in sync with central laws: The new law is not in sync with other central laws such as the laws on persons with disabilities, on mental health and on transgender persons, to name a few.
- In conflict with other laws: The amendments also did not make any attempts to iron out the conflations between the MTP Act and the Protection of Children from Sexual Offences (POCSO) Act or the Drugs and Cosmetics Act, to name a few.
Conclusion
While access to abortion has been available under the legal regime in the country, there is a long road ahead before it is recognised as a right of a person having the capacity to become pregnant to decide, unconditionally, whether a pregnancy is to be continued or not.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Marital rape
Context
On May 10, 2022, a two-judge bench of the Delhi High Court gave a split ruling on marital rape, thus ensuring a future hearing in the Supreme Court.
Why rape and marriage were seen as mutually exclusive
- The concepts of rape and marriage were seen as mutually exclusive – they could not be brought together.
- Across the world, and till very recently, marriage has been explicitly treated as being outside the purview of rape.
- Even in the Western countries that we associate with the more “advanced” practices of gender equality, marital rape was treated as an exception to the crime of rape till the early 1990s.
- In the absence of a universal definition, several scholars take marriage to be an institution where a man and a woman live together, have sexual relations and engage in cooperative economic activity.
- Link between marriage and property: Others have emphasised the link between marriage and property.
- The dominant form of marriage in the modern West became quite distinctly patriarchal, visible in late 18th-century British law, for instance, whereby a wife became the property of her husband upon marriage.
- Husbands, therefore, had the right to access their wives sexually, without the question of coercion or consent being on the horizon in the first place.
- As property, wives had to be protected from the (illegal) sexual access of other men, and here too, their consent was irrelevant.
Introduction of marital rape
- If what distinguishes the relationship of husband and wife from other relations between men and women is the legitimate expectation of sexual relations, then the introduction of marital rape signals the entry of a new and equally legitimate expectation: A wife’s consent to sexual relations is essential, and in this, she is no different from other women.
- Husbands no longer enjoy unquestioned rights over the bodies of their wives — this is what it means for a wife to be a person with bodily integrity.
Conclusion
It is strange, indeed, that most parts of the world, India included, became modern while continuing to believe that wives are the property of husbands.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Lesson from the power shortage crisis
Context
The power crisis has taken us by surprise. The question in everyone’s mind is: where did we go wrong? And who slipped up?
Responsibilities in supply chain
- Under the Electricity Act, it is the responsibility of the Distribution Licensee/Company (Discom) to provide reliable quality and round-the-clock electricity to all consumers to meet full demand.
- To do so, they enter into contracts with a number of generating companies in order to ensure adequate supply.
- These Discoms work under the oversight of the State Electricity Regulatory Commissions.
Suggestions
1] Dealing with the challenge of demand prediction
- Qualitative transformation in demand: With higher incomes and the consequent increase in the use of air-conditioners and other electrical appliances, the nature of electricity demand is undergoing a qualitative transformation with rising daily and seasonal peaks, and spikes on very hot or cold days.
- While demand prediction is inherently uncertain, the questions to ask are whether Discoms have been making and updating their demand growth projections and scenarios over the medium term with adequate supply arrangements in a robust manner.
- This needs to become central to the regulatory process.
- Ensuring reliable supply to meet unanticipated peaks, as have occurred now, requires making supply arrangements with reserve margins that are adequate.
- The Regulatory Commissions need to provide for such expensive peaking power arrangements in the tariffs they approve.
- It is also time to move towards separate peaking power procurement contracts in addition to the present system of long-term thermal power contracts.
2] Demand-based time of day rates of electricity
- A transition to demand-based time of day rates of electricity for generators as well as consumers would help.
- These should be brought in by the Regulatory Commissions.
- Flattening of demand curve: Peak demand moderation and flattening of the demand curve through a change in consumer behaviour is feasible with smart meters.
- But this would take place only with a strong price signal, a large differential in peak and off-peak rates.
3] Subsidies and politics
- Free supply of electricity to farmers and households up to a specified level is not a problem as long as State governments pay for it as provided in the Act, and the Regulatory Commissions do not at the same time act from a political point of view and shy away from determining cost-reflective tariffs.
- While the problem of delayed payments by Discoms is getting highlighted and needs to be resolved with a sense of urgency, the coal supply problem is not due to this.
- Coal India needs to create capacities to rapidly ramp up production; and the Railways need to carry larger quantities of coal when demand surges, as has happened now.
- Imported coal and gas generated electricity: There is idle but expensive generating capacity available — about 15-20 GW of gas-based power plants which can run on imported liquefied natural gas, and 6 GW-8 GW of thermal plants which can run on imported coal.
- Consumers who are willing to pay more could be kept free of power cuts with purchase and supply of more expensive electricity generated from imported coal and gas.
- To improve reliability, Discoms, with the approval of the Regulatory Commissions, need to go in for bids for storage.
Conclusion
A lesson is that demand growth projections and supply arrangements need to become central to the regulatory process.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRR
Mains level: Paper 3- Dealing with inflation challenge through liquidity measures
Context
The recent action of the Reserve Bank of India (RBI) to raise the repo rate by 40 basis points and cash reserve ratio (CRR) by 50 basis points is a recognition of the serious situation with respect to inflation in our country and the resolve to tackle inflation.
Inflation in India and role of government expenditure
- India’s CPI inflation has been fluctuating around a high level.
- As early as October 2020, it had hit a peak of 7.61%.
- It had remained at a high level of over 6% since April 2020.
- It did come down after December 2020 but has started rising significantly from January 2022.
- On the other hand, the Wholesale Price Index (WPI) inflation had remained in double digits since April 2021. The GDP implicit price deflator-based inflation rate for 2021-22 is 9.6%.
- Even though the RBI’s mandate is with respect to CPI inflation, policymakers cannot ignore the behaviour of other price indices.
- After the advent of COVID-19, the major concern of policymakers all over the world was to revive demand.
- Keynesian prescription: This was sought to be achieved by raising government expenditure.
- Thus, the expansion in government expenditure did not immediately result in increased production in countries where the lockdown was taken seriously.
- However, the Keynesian multiplier does not work when there are supply constraints as in developing countries.
- That is why the multiplier operates in nominal terms rather than in real terms in such countries.
- Something similar has happened in the present case where the supply constraint came from a non-mobility of factors of production.
- Nevertheless, the prescription of enhanced government expenditure is still valid under the present circumstances.
- Perhaps the increase in output could happen with a lag and also with the relaxation of restrictions.
Role of monetary policy
- Why lover money multiplier rate? Initially, the focus of monetary policy in India has been to keep the interest rate low and increase the availability of liquidity through various channels, some of which have been newly introduced.
- However, the growth rate of money was below the growth rate in reserve money.
- This is because of lower credit growth which also depends on business sentiment and investment climate.
- Thus the money multiplier is lower than usual.
- The Government’s borrowing programme which was larger went through smoothly, thanks to abundant liquidity.
- Even as the economy picked up steam in 2021-22, inflation also became an issue, this is a worldwide phenomenon.
- In India too there is a shift in monetary policy.
Analysing the cause of inflation
- While discussing inflation, analysts focus almost exclusively on the increases in the prices of individual commodities such as crude oil as the primary cause of inflation.
- General price level: Supply disruptions due to domestic or external factors may explain the behaviour of individual prices but not the general price level which is what inflation is about.
- Given a budget constraint, there will only be an adjustment of relative prices.
- Besides the fact that any cost-push increase in one commodity may get generalised, it is the adjustment that happens at the macro level which becomes critical.
- It is the adjustment in the macro level of liquidity that sustains inflation.
Inflation and growth
- The possible trade-off between inflation and growth has a long history in economic literature.
- The Phillip’s curve has been analysed theoretically and empirically.
- Tobin called the Phillip’s curve a ‘cruel dilemma’ because it suggested that full employment was not compatible with price stability.
- The critical question flowing from these discussions on trade-off is whether cost-push factors can by themselves generate inflation.
- In the current situation, it is sometimes argued that inflation will come down, if some part of the increase in crude prices is absorbed by the government.
- If the additional burden borne by the government (through loss of revenue) is not offset by expenditures, the overall deficit will widen.
- The borrowing programme will increase and additional liquidity support may be required.
Concomitant decisions on CRR and repo rate
- These are concomitant decisions. Central banks cannot order interest rates.
- For a rise in the interest rate to stick, appropriate actions must be taken to contract liquidity.
- That is what the rise in CRR will do.
- In the absence of a rise in CRR, liquidity will have to be sucked by open market operations.
Conclusion
Beyond a point, inflation itself can hinder growth. Negative real rates of interest on savings are not conducive to growth. If we want to control inflation, action on liquidity is very much needed with a concomitant rise in the interest rate on deposits and loans.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Replacement rate
Mains level: Paper 1- Factors influencing fertility rate
Context
The National Family Health Survey (NFHS) 5 report that was awaited for nearly six months is finally out. And it provides a heartening outlook.
About NHFS
- Started in 1992-93, it has culminated in the fifth round 2019-21.
- The NFHS is a large, multi-round survey that, inter alia, provides information on fertility, infant and child mortality, the practice of family planning, reproductive health, nutrition, anaemia, quality and utilisation of health and family planning services.
- The surveys provide essential data needed by the Ministry of Health and Family Welfare and other agencies for policy and programme purposes.
- The Ministry assigned the nodal responsibility for the task to the International Institute for Population Sciences(IIPS), Mumbai.
- Several international agencies are involved in providing technical and financial assistance, mainly USAID, DFID, UNICEF, and UNFPA.
Replacement rate achieved
- Replacement rate achieved: The report shows that India has finally achieved the replacement rate of 2.1TFR (Total Fertility Rate is the total number of children a woman will bear in her lifetime).
- In fact, it has gone below the mark to 2.0.
- There are, of course, large interstate variations.
- The lagging states are UP, Bihar, Jharkhand, Manipur and Meghalaya.
- Significantly, there were four states which were keeping the figures poor, namely, Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh.
- Two states, Rajasthan and MP, have struggled to get out of this group, while Jharkhand and the two northeastern states have replaced them.
- UP and Bihar because of their sheer size are pulling down the national average.
- Rajasthan and MP have reached the TFR of 2, which shows the success of their efforts.
Influencing factors
- It is not religion as commonly propounded but literacy, especially of girls, income and delivery of family planning, and health services.
- 1] Delivery of services: The figures would have been even better if all those who have been made aware of the benefits of family planning had received the services they desire.
- Making people informed of the need and methods of family planning and motivating them to adopt family planning is difficult enough.
- Having achieved the difficult task, we are not able to provide the services communities need — the “unmet need” — which is still very high at 9.4 per cent.
- If we focus on this issue in a mission mode, the family planning performance will dramatically improve.
- 2] Male attitude towards family planning: They tend to put the onus for birth control on women.
- As many as 35 per cent men believe that using contraceptives is a woman’s responsibility. They ignore the fact that male vasectomy is a much simpler procedure than female tubectomy.
- 3] Acceptance of family planning: Muslim acceptance of family planning has continued through the five surveys spread over three decades at a rate faster than all other communities.
- Though birth control practice among Muslims is still the least – 47.4 per cent (up from 45 per cent in NFHS-4).
- Other communities — for example, Hindus — are not far behind with 58 per cent (up from 56 per cent).
- This means that 42 per cent of the 80 per cent of the population are not practising family planning.
- Education: Women who have not attended school have 2.8 TFR as against 1.8 for those who have completed class XII.
- Poverty: Similar gap of figure one is visible in the context of poverty with the poorest segment having higher TFR than the richest.
Conclusion
The time has come to leave politics behind and work together for achieving the goals set by National Population Policy 2000. Instead of misleading narratives, we need to address the real determinants of fertility behaviour – literacy, income generation and improvement of health and family planning services.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- US's commitment to the Indo-Pacific
Context
When Russian President Vladimir Putin invaded Ukraine at the end of February, it was widely asked in Delhi if the new challenges of European security would result in a dilution of the US’s strategic commitment to the Indo-Pacific.
The Challenge of balancing China and Russia
- There are two parts of Biden’s answer to the Europe-Asia or Russia-China question.
- 1] Engagement with allies: When Russian President Vladimir Putin invaded Ukraine at the end of February, it was widely asked in Delhi if the new challenges of European security would result in a dilution of the US’s strategic commitment to the Indo-Pacific.
- Biden came to power with a determination to make the Indo-Pacific the highest priority of his foreign policy.
- He is not going to abandon that objective in dealing with the unexpected crisis in Europe.
- The assumption that China was the principal challenge and Russia was less of a threat led Biden to meet Putin in June 2021 to offer prospects for a reasonable relationship with Russia in order to devote US energies to the China question.
- But Putin’s calculations led him towards a deeper strategic partnership with China
- But America’s assessment of the Russian and Chinese threats has not changed since the war began in Ukraine.
- The idea that China will gain from the Russian war in Ukraine has also proven to be false.
- Expectations that Russia’s triumph in Ukraine will be followed by a successful Chinese invasion of Taiwan have begun to dissipate.
- Meanwhile, China is reeling under self-inflicted problems, most notably Xi Jinping’s zero Covid strategy and his crackdown on the large internet companies.
- The costly foreign policy of China: Beijing’s prospects look a lot less rosy than before as the Chinese economy slows down and XI’s foreign policy turns out to be quite costly for China.
- The muscular approach of China: In Asia, China’s muscular approach to disputes with its neighbours has helped strengthen the US alliances, create new forums like the AUKUS, elevate old ones like the Quad to a higher level, and consolidate the strategic conception of the Indo-Pacific.
- 2] Coordination with allies and partners: Biden’s lemma to the theorem on a two-front strategy is a simple one — that Washington will address the simultaneous challenge in Europe and Asia not by acting alone but in coordination with allies and partners.
- The idea was rooted in the recognition that alliances and partnerships are America’s greatest strength and most important advantage over Russia and China.
Engagement with Asia
- ASEAN: This week’s summit level engagement with the ASEAN comes after sustained high-level US outreach to the region since the Biden Administration took charge.
- In northeast Asia, the election of Yoon Suk-yeol as the president of South Korea has tilted the scales slightly towards the US in the continuing battle for influence between Beijing and Washington.
- The US is also actively trying to reduce the differences between its two treaty allies in the region — South Korea and Japan.
- Asia’s new coalitions are a response to Xi Jinping’s unilateralism and his quest for regional hegemony.
- India’s enthusiasm for the Quad can be directly correlated to Xi’s military coercion on the disputed frontiers with India.
Implications for India
- The two parts of Biden’s answer to the Europe-Asia or Russia-China question have worked well for India.
- Tolerance toward India-Russia engagement: For one, the US’s emphasis on the long-term challenge from China has meant that Washington is willing to tolerate India’s engagement with Russia.
- Time for the diversification of defence ties: This gives India time to diversify its defence ties that have been heavily dependent on Russia.
- The US emphasis on partnerships rather than unilateralism in dealing with the China challenge means India’s agency in the region can only grow.
- The Quad allows Delhi to carve out a larger role for itself in Asia and the Indo-Pacific in collaboration with the US and its allies.
Conclusion
Contrary to the initial assumptions that America is on the retreat and the West is in disarray, it is Moscow and Beijing that are on the defensive as the war in Ukraine completes three months.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Significance of emigrants
Context
Though the phenomenon of Indian-origin executives becoming CEOs of top U.S. companies highlights the contribution of Indian talent to the U.S. economy, the role played by Indian semi-skilled migrant labour in the global economy is no less illustrious.
Destinations of Indian migrants
- Every year, about 2.5 million workers from India move to different parts of the world on employment visas
- According to the Ministry of External Affairs, there are over 13.4 million Non-Resident Indians worldwide.
- Significance of GCC: Of them, 64% live in the Gulf Cooperation Council (GCC) countries, the highest being in the United Arab Emirates, followed by Saudi Arabia and Kuwait.
- Low and semi-skilled: Almost 90% of the Indian migrants who live in GCC countries are low- and semi-skilled workers, as per International Labour Organization estimates.
- Other significant countries of destination for overseas Indians are the U.S., the U.K., Australia, and Canada.
Contribution of Indian migrant workers
- Besides being involved in nation-building of their destination countries, Indian migrant workers also contribute to the homeland’s socioeconomic development, through remittances.
- Highest remittances: As per a World Bank Group report (2021), annual remittances transferred to India are estimated to be $87 billion, which is the highest in the world, followed by China ($53 billion), Mexico ($53 billion), the Philippines ($36 billion) and Egypt ($33 billion).
- Remittances in India have been substantially higher than even Foreign Direct Investment (FDI) and the flow of remittances is much less fluctuating than that of FDI.
- Still, remittances’ contribution of 3% in GDP is lower than that of countries such as Nepal (24.8%), Pakistan (12.6%), Sri Lanka (8.3%) and Bangladesh (6.5%), as per a World Bank report.
- Hedging strategy against risk: Besides being a win-win situation for both the destination and source country, labour migration is good hedging strategy against unsystematic risks for any economy.
Way forward
- Human capital should also be invested in a diversified portfolio akin to financial capital.
- Promoting labour mobility: For many countries, remittances have been of vital support to the domestic economy after a shock.
- India should aim to increase remittances to say 10% of GDP.
- The Philippines’ model of promoting labour mobility be replicated in India.
- Reducing the costs involved: Both the cost of recruitment of such workers and the cost of sending remittances back to India should come down.
- Skilling: The number of migrant workers need not go up for remittances to increase if the skill sets of workers are improved.
- Regulation of recruitment agencies: Recruitment agencies should also be regulated by leveraging information technology for ensuring protection of migrant workers leaving India.
- An integrated grievance redressal portal, ‘Madad’, was launched by the government in 2015.
- Proposed Emigration Bill 2021: The Indian government proposed a new Emigration Bill in 2021 which aims to integrate emigration management and streamline the welfare of emigrant workers.
- It proposes to modify the system of Emigration Check Required (ECR) category of workers applying for migration to 18 notified countries.
- The Bill makes it mandatory for all categories of workers to register before departure to any country in the world to ensure better protection for them, support and safeguard in case of vulnerabilities.
- The proposed Emigration Management Authority will be the overarching authority to provide policy guidance.
- Besides workers, as about 0.5 million students also migrate for education from India every year, the Bill also covers such students.
Conclusion
For India to increase remittances’ contribution to GDP, it doesn’t need more workers but skilling and better management.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Judicial corruption and pendency
Context
Departures from substantive and procedural justice need deep scrutiny as the fallout could severely imperil governance.
Judicial corruption in India in lower judiciary
- According to Transparency International (TI 2011), 45% of people who had come in contact with the judiciary between July 2009 and July 2010 had paid a bribe to the judiciary.
- The most common reason for paying the bribes was to “speed things up”.
- The Asian Human Rights Commission (AHRC) (April 2013) estimates that for every ₹2 in official court fees, at least ₹ 1,000 is spent in bribes in bringing a petition to the court.
- Freedom House’s ‘Freedom in the World 2016 report for India’ states that “the lower levels of the judiciary in particular have been rife with corruption” (Freedom House 2016).
- Allegations of corruption against High Court judges abound.
- Worse, there are glaring examples of anti-Muslim bias, often followed by extra-judicial killings by the police.
- Anti-Muslim bias alone may not result in erosion of trust but if combined with unprovoked and brutal violence against them (e.g., lynching of innocent cattle traders) is bound to.
Forms of judicial corruption
- Pressure and bribery: Judicial corruption takes two forms: political interference in the judicial process by the legislative or executive branch, and bribery.
- Despite the accumulation of evidence on corrupt practices, the pressure to rule in favour of political interests remains intense.
- Court officials coax bribes for free services, and lawyers charge additional “fees” to expedite or delay cases.
Case pendency
- According to the National Judicial Data Grid, as of April 12, 2017, there are 24,186,566 pending cases in India’s district courts, of which 2,317,448 (9.58%) have been pending for over 10 years, and 3,975,717 (16.44%) have been pending for between five and 10 years.
- Vacancies: As of December 31, 2015, there were 4,432 vacancies in the posts of [subordinate court] judicial officers, representing about 22% of the sanctioned strength.
- In the case of the High Courts, 458 of the 1,079 posts, representing 42% of the sanctioned strength, were vacant as of June 2016.
- Thus, severe backlogging and understaffing persisted, as also archaic and complex procedures of delivery of justice.
Understanding the substantive and procedural justice
- Substantive justice is associated with whether the statutes, case law and unwritten legal principles are morally justified e.g., freedom to pursue any religion,
- Procedural justice is associated with fair and impartial decision procedures.
- Outdated laws: Many outdated/dysfunctional laws or statutes have not been repealed because of the tardiness of legal reform both at the Union and State government levels.
- Worse, there have been blatant violations of constitutional provisions.
- The Citizenship (Amendment) Act (December 2019) provides citizenship to — except Muslims — Hindus, Buddhists, Sikhs, Jains, Parsis and Christians who came to India from Pakistan, Bangladesh and Afghanistan on or before December 31, 2014.
- But this goes against secularism and is thus a violation of substantive justice.
- Alongside procedural delays, endemic corruption and mounting shares of under-trial inmates with durations of three to five years point to stark failures of procedural justice and to some extent of substantive justice.
Conclusion
Exercise of extra-constitutional authority by the central and State governments, weakening of accountability mechanisms, widespread corruption in the lower judiciary and the police, with likely collusion between them, the perverted beliefs of the latter towards Muslims, other minorities and lower caste Hindus, a proclivity to deliver instant justice, extra-judicial killings, filing FIRs against innocent victims of mob lynching have left deep scars on the national psyche.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Poverty in India
Mains level: Paper 2- Poverty reduction in India
Context
A recent World Bank Report has shown that extreme poverty in India more than halved between 2011 and 2019 – from 22.5 per cent to 10.2 per cent. The reduction was higher in rural areas, from 26.3 per cent to 11.6 per cent.
What explains the reduction in poverty?
- Poverty has reduced significantly because of the government’s thrust on improving the ease of living of ordinary Indians through schemes.
- These schemes include the Ujjwala Yojana, PM Awas Yojana, Swachh Bharat Mission, Jan Dhan and Mission Indradhanush in addition to the Deendayal Antyodaya Yojana-National Rural Livelihood Mission and improved coverage under the National Food Security Act.
- It is important to understand how poverty in rural areas was reduced at a faster pace.
- Much of the success can be credited to all government departments, especially their janbhagidari-based thrust on pro-poor public welfare.
Contributing factors
1] Identification of beneficiaries through SECC 2011
- The identification of deprived households on the basis of the Socioeconomic and Caste Census (SECC) 2011 across welfare programmes helped in creating a constituency for the well-being of the poor, irrespective of caste, creed or religion.
- Deprivation criterion: Since deprivation was the key criterion in identifying beneficiaries, SC and ST communities got higher coverage and the erstwhile backward regions in Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh, Jharkhand, Odisha, Chhattisgarh, Assam, Rajasthan and rural Maharashtra got a larger share of the benefits.
- Gram Sabha Validation: Social groups that often used to be left out of government programmes were included and gram sabha validation was taken to ensure that the project reached these groups.
2] Widened coverage of women
- The coverage of women under the Deendayal Antyodaya Yojana and Self Help Groups (SHG) increased from 2.5 crore in 2014 to over 8 crore in 2018 as a result of more than 75 lakh SHGs working closely with over 31 lakh elected panchayati raj representatives, 40 per cent of whom are women.
- This provided a robust framework to connect with communities and created a social capital that helped every programme.
- The PRI-SHG partnership catalysed changes that increased the pace of poverty reduction and the use of Aadhaar cleaned up corruption at several levels and ensured that the funds reached those whom it was meant for.
3] Creation of basic infrastructure
- Finance Commission transfers were made directly to gram panchayats leading to the creation of basic infrastructure like pucca village roads and drains at a much faster pace in rural areas.
- The high speed of road construction under the Pradhan Mantri Gram Sadhak Yojana created greater opportunities for employment in nearby larger villages/census towns/kasbas by improving connectivity and enhancing mobility.
4] Availability of credit through SHGs
- The social capital of SHGs ensured the availability of credit through banks, micro-finance institutions and MUDRA loans.
- Livelihood diversification: The NRLM prioritised livelihood diversification and implemented detailed plans for credit disbursement.
5] Implementation of social sector schemes
- In the two phases of the Gram Swaraj Abhiyan in 2018, benefits such as gas and electricity connections, LED bulbs, accident insurance, life insurance, bank accounts and immunisation were provided to 63974 villages that were selected because of their high SC and ST populations.
- The performance of line departments went up manifold due to community-led action.
- The gains are reflected in the findings of the National Family Health Survey V, 2019-2021.
6] Universal coverage schemes
- The thrust on universal coverage for individual household latrines, LPG connections and pucca houses for those who lived in kuccha houses ensured that no one was left behind. This created the Labarthi Varg.
7] Increase in fund transfer to rural area
- Seventh, this was also a period in which a high amount of public funds were transferred to rural areas, including from the share of states and, in some programmes, through extra-budgetary resources.
8] Community participation
- The thrust on a people’s plan campaign, “Sabki Yojana Sabka Vikas” for preparing the Gram Panchayat Development Plans and for ranking villages and panchayats on human development, economic activity and infrastructure, from 2017-18 onwards, laid the foundation for robust community participation involving panchayats and SHGs, especially in ensuring accountability.
9] Social and concurrent audit
- Through processes like social and concurrent audits, efforts were made to ensure that resources were fully utilised.
- Several changes were brought about in programmes like the MGNREGS to create durable and productive assets.
10] Focus of states on improving livelihood diversification
- The competition among states to improve performance on rural development helped.
- Irrespective of the party in power, nearly all states and UTs focussed on improving livelihood diversification in rural areas and on improving infrastructure significantly.
Conclusion
All these factors contributed to improved ease of living of deprived households and improving their asset base. A lot has been achieved, much remains to be done.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Rarest of rare case
Mains level: Paper 2- Capital punishment jurisprudence
Context
A recent trend in the evolution of jurisprudence around the death penalty in India may reset judicial thinking around sentencing and have long-term ramifications in the awarding of capital punishment.
New thinking in the jurisprudence around capital punishment
- Capital punishment once delivered by the court of sessions (“sentencing court”) is required under law, specifically Chapter 28 of the Code of Criminal Procedure, to be confirmed by the jurisdictional High Court (“confirming court”).
- Over the last six months or so, while dealing with appeals against confirmation of the death sentence, the Supreme Court of India has examined sentencing methodology from the perspective of mitigating circumstances more closely.
- The Court has also initiated a suo motu writ petition (criminal) to delve deep into these issues on key aspects surrounding our understanding of death penalty sentencing.
- Bachan Singh vs State of Punjab (1980), the leading case on this point, calls for mitigating and aggravating circumstances to be balanced against each other and laid down the principle that the death penalty ought not to be awarded unless the alternative of life imprisonment is “unquestionably foreclosed”.
- It is also an equally well-established legal principle that in a sentencing hearing, the accused must necessarily be provided with sufficient opportunity to produce any material that may have bearing on the sentencing exercise.
- When read in conjunction with the ratio decidendi of the Bachan Singh case, it is incumbent upon the sentencing court and the confirming court to ensure that the question of reform and rehabilitation of a convicted person has been examined in detail for these courts to come to a definitive conclusion that all such options are unquestionably foreclosed.
Lack of judicial uniformity
- A report by the National Law University Delhi’s Project 39A (earlier known as the “Centre on the Death Penalty”) titled ‘Matters of Judgment’ found that there is no judicial uniformity or consistency when it comes to awarding the death sentence.
- In the report titled ‘Death Penalty Sentencing in Trial Courts’ (also authored by Project 39A), findings reported from a study of cases involving death sentencing between 2000 and 2015 in Delhi, Maharashtra and Madhya Pradesh have showed that courts have been lax in assessing the aspect of reformation while undertaking the sentencing exercise.
- The Court, in Mofil Khan vs State of Jharkhand (2021), held that the “the State is under a duty to procure evidence to establish that there is no possibility of reformation and rehabilitation of the accused.
- Undoubtedly, the onus has been placed on the State to lead evidence to show that no reformation is possible and for the sentencing courts to be satisfied that a thorough mitigation analysis was done before the death sentence is awarded.
Mitigation investigation
- For a complete mitigation investigation, professionals trained in psychology, sociology and criminology are required in addition to legal professionals.
- Taking cognisance of the value of a holistic approach to mitigation investigation, the Court in Manoj & Ors vs State of Madhya Pradesh (2022) issued directions to the State to place before the court all “report(s) of all the probation officer(s)” relating to the accused and reports “about their conduct and nature of the work done by them” while in prison.
- The order also directs that a trained psychiatrist and a local professor of psychology conduct a psychiatric and psychological evaluation of the convict.
Conclusion
The intervention of the Supreme Court of India in, hopefully, framing guidelines around incorporation of a mitigation analysis and consideration of psycho-social reports of the prisoner at the time of sentencing is timely and necessary.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Non-tariff barriers
Mains level: Paper 3- Trade opportunities for India
Context
Slower global growth, an adverse geopolitical environment, the shadow of recurring waves of the pandemic and prolonged supply chain issues are likely to weigh on export growth this year.
Trade growth in 2021 and uncertainties in 2022
- The year 2021 was a record one for trade despite the pandemic.
- In terms of volumes, merchandise trade rose 9.8 per cent, while in dollar terms, it grew 26 per cent.
- The value of commercial services trade was also up 15 per cent.
- India has had a good export run in line with global trends, witnessing record goods exports of $419 billion, while touching $250 billion in services exports.
- However, global growth forecasts have now been pared down.
- Slower global growth, an adverse geopolitical environment, the shadow of recurring waves of the pandemic and prolonged supply chain issues are likely to weigh on export growth this year.
Taping into opportunities
- Ukraine and Sri Lanka are major exporters of agricultural products and the vacuum created by their limited presence in global trade will open up agricultural export opportunities for India.
- This will not only spur overall exports but will also help to support the recovery of the agrarian economy through higher realisations.
- Tea and wheat: As many as 25 African countries import more than one-third of their wheat from Russia and Ukraine and for 15 of them, the share exceeds 50 per cent.
- Sri Lanka is also a major player in the global tea market and produces around 300 million kg annually.
- Almost 98 per cent of its annual production is exported.
- India, the second-largest producer of tea with an annual production of 900 million kg, is in a good position to exploit the opportunity and fill the gap.
- Textile: Apart from tea and wheat, newer export opportunities have arisen for textiles.
- Sri Lanka exports $5.42 billion worth of garments and prolonged power cuts in the island nation will hurt its production and export capacity.
Suggestions
- 1] Work on non-tariff barriers: One, work on non-tariff barriers for agricultural trade with a special focus on harmonising the sanitary and phytosanitary (SPS) requirements.
- 2] Autonomy in tea sector: To support tea exports, traditional tea boards are seeking a greater role and autonomy for optimising the development, promotion, and research in the sector.
- Quicker implementation of the proposed Tea Promotion and Development Act is of utmost importance.
- 3] Integration with global supply chains: India must double down on its integration with global supply chains.The commerce ministry has negotiated a slew of trade deals.
- 4] Reduce tariff rates for intermediate inputs: Tariff rates for intermediate inputs should be reduced to either zero or should be negligible for India to become an attractive location for assembly activities.
- 5] Realignment of specialisation patterns: India must persist with the creation of an enabling ecosystem that realigns its specialisation patterns towards labour-intensive processes and product lines.
- The labour market reforms must be taken to their logical conclusion.
- 6] Pro-active FDI policy: A continuous and pro-active FDI policy is also critical as foreign capital and technology are key enablers for entry into global production networks even as local firms play a role as subcontractors and suppliers of intermediate inputs to MNEs.
- 7]Power supply and logistical bottlenecks: Lastly, exports could suffer if basic issues such as availability of power and logistical bottlenecks keep rearing their ugly heads.
- The Economic Survey 2019 had recommended that low levels of service link costs (costs related to transportation, communication, and other tasks involved in coordinating the activity etc) are prerequisites to strengthen their participation in GVCs.
- This should not be neglected.
Conclusion
If India were to tap export opportunities in developed markets, it must act on the suggestions above.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Right to privacy
Mains level: Paper 2- Abortion rights
Context
The leak of an initial draft majority opinion of the US Supreme Court voting to overturn the decision in Roe v Wade has sent shockwaves across liberal and conservative quarters alike, globally.
Background of the Roe v Wade case
- 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.
- 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”.
- 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.
Implications of overturning Roe v Wade
- Political considerations vs judicial responsibility: The overturning of Roe is more than the mere abdication of the judicial responsibility to protect individual rights — it signals a dangerous trend of courts making long-standing determinations of legal rights based on transient political considerations.
- Incursion into women’s right to abort: It would also mean legitimisation of state incursions into women’s right to abort and consequently their right to bodily autonomy and liberty, in addition to forcing them to move to states with enabling laws to procure abortions, leading to issues of access and affordability of abortions.
- While the impact of Roe’s absence would most profoundly be felt in the US, it is likely to embolden conservative anti-abortion voices across the world.
- Limits of judicial activism: It will inevitably also raise fundamental questions on the limits of judicial activism aimed at protecting the rights of persons and classes, which do not find explicit mention within a country’s constitutional framework.
- Possibility of a conservative approach to abortion cases: In 2021, the abortion laws in India underwent substantial changes, with the introduction of the Medical Termination for Pregnancy (Amendment) Act, 2021 which, in addition to destigmatising pregnancies outside marriage by introducing the nomenclature of “any woman or her partner”, also increased the upper gestational limits within which pregnancies are legally terminable.
- The Act, however, carries ambiguities and leaves room for both judicial and executive interpretation.
- As cases of subjective determination arise, the Indian judiciary will be called upon to reconcile the right to privacy recognised in Puttaswamy with the permissible limits of abortion in the Act.
How does Roe v Wade apply in the Indian context?
- In KS Puttaswamy v Union of India, Justice Chandrachud referred to Roe and Planned Parenthood while reading the right to privacy into the existing framework of constitutionally protected fundamental rights subject to “just, reasonable and fair” restrictions.
- Recognising derivative rights: In the lifetime of the Indian Supreme Court, recognising derivative rights within the existing framework of fundamental rights has been regularly witnessed — be it rights during arrest and detention, the right to express one’s sexual and gender identity, or rights against harassment at the workplace, to cite a few.
- Setback to transformative constitutionalism: In the Indian context, the overturning could be seen as a setback to the celebrated doctrine of transformative constitutionalism, which sees the Indian Constitution as a “living document” that moulds, adapts and responds to changing times and circumstances.
Conclusion
The likelihood of the overturning of Roe leading to more conservative approaches to judicial interpretation in abortion rights cases, cannot be ruled out.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Challenges for the middle powers
Context
Prime Minister Narendra Modi’s visit to European capitals should help both sides acquire a better understanding of each other’s security concerns. Whether it will fundamentally alter equations remains to be seen.
New India-EU equation
- As “Middle Powers”, countries like France, Germany and India should seek policy space for themselves and not be forced into taking positions by the Big Powers — the United States, China and Russia.
- The EU is understandably concerned about Russian aggressiveness in Europe.
- ndia is equally concerned about Chinese aggressiveness in Asia.
- Even after Russia has sought to tear down the post-Cold War security structure in Europe, India has stayed the course in its equations both with Russia and the European Union.
Division of national and group agenda and its implications for India
- While Russia’s invasion of Ukraine is the context in which Modi visited Europe and the head of the European Union visited India, the fact is that the agenda at bilateral meetings with individual European countries has generally been very different from the agenda that the EU prefers to focus on.
- While individual European nations, especially Germany and France, focus on their own strategic and business interests, including defence equipment sales, the EU retains the remit for negotiating trade and investment rules.
- Problem for India: This division of national and group agendas has often posed a problem for India because individual countries cannot offer bilateral market access in exchange for bilateral defence deals.
- So the French will sell Rafale jets in the name of strategic partnership but they cannot offer a trade and investment deal that Brussels will not allow Paris to strike with India.
- While the EU and G7 may now wish to derisk, if not decouple, from aggressively rising China, how much they would be able to do in this regard and what they would be willing to do to help a slowly rising India remains to be seen.
Way forward
- For India’s part, it is not clear at the moment how much and what it can unilaterally offer Europe beyond the promise of standing up to China or reducing dependence on Russia.
- Challenge for the three middle powers lies in combine their “strength and stability” to ensure “peace and tranquillity” in their respective neighbourhoods.
- If middle powers like Brazil, France, Germany, India, Indonesia, Japan, South Africa and others can work together they may well be able to impose some discipline on the three big powers — China, Russia and the US.
Conclusion
At a time when big powers lurking behind in seeking to stabilise and shape the global order middle powers need to act to balance the influence exerted by the big powers.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CPI and WPI
Mains level: Paper 3- Need for the review of inflation targeting model
Context
At the conclusion of the April meeting, the Monetary Policy Committee had already warned that the focus will henceforth be on inflation. Yesterday it raised the repo rate somewhat sooner than was expected by the market.
Discourse on inflation engaged in by the western central banks
- Inflation reflects an excess of output over its ‘natural’ level.
- Inflation targeting refers to the policy of controlling inflation by raising the interest rate over which the central bank has control, i.e. the rate at which it lends to commercial banks, the ‘repo rate’.
- This, it is argued, will induce firms to stay their investment plans and reduce inventories, lowering production.
- As economy-wide output declines, becoming equal to the natural level of output, inflation will cease.
- This story does not just legitimise a policy of output contraction for inflation but sees it as optimal.
- The natural level of output itself is the productive counterpart of the natural level of employment, the level that obtains in a freely functioning labour market.
- So, at the natural level of output, the economy is deemed to be at full employment.
- Salient in the context is the fact that the natural level of output is unobservable.
- Hence inflation as a reflection of an “overheating” economy is something that must be taken on trust.
Inflation control in India
- Not surprisingly for a theory based on an unobservable variable, the proposition that inflation is due to an overheating economy fares poorly when put to a statistical test for India.
- There is not a single demonstration of the empirical validity of the model of inflation presented in the RBI report of 2014, which recommended a move to inflation targeting.
- On the other hand inflation in India can be explained in terms of the movement of the prices of agricultural goods and, to a lesser extent, imported oil.
- How effective is monetary policy in controlling inflation: The implication of this finding is damaging for the claim that monetary policy can control inflation, for neither the price of agricultural goods nor that of imported oil is under the central bank’s control.
- The only route by which monetary policy can, in principle, control inflation is by curbing the growth of non-agricultural output, which would in turn lower the growth of demand for agricultural goods.
- As the demand for agricultural goods slows, so will inflation, but this comes at the cost of output and employment.
- At least, this is the theory.
- Whether this takes place in practice depends upon the extent to which changes in the repo rate are transmitted to commercial bank lending rates.
Way forward
- Focus on supply of agricultural goods: The implication for the policymaker that inflation is driven by agricultural goods prices, as is the case in India presently, is that the focus should be on increasing the supply of these goods.
- Growing per capita income in India has shifted the average consumption basket towards foods rich in minerals, such as fruits and vegetables, and protein, such as milk and meat.
- But the expansion of the supply of these foods has been lower than the growth in demand for them.
- So a concerted drive to increase the supply of food other than rice and wheat holds the key.
- Costly food threatens the health of the population, as people economise on their food intake, and holds back the economy, as only a small part of a household’s budget can be spent on non-agricultural goods.
Conclusion
Monetary policy manoeuvres, typified by the RBI’s raising of the repo rate is not an efficient solution for agricultural price-driven inflation. Any lasting inflation control would require placing agricultural production on a steady footing, with continuously rising productivity.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: CRR
Mains level: Paper 3- Inflation targeting by the RBI
Context
The RBI has decided to take the bull by the horns. It has raised the repo rate by 40 basis points and the cash reserve ratio (CRR) by 50 basis points to fight inflation.
Why major central banks across the world are hiking rates?
- Across the world, major central banks have of late gone on a rate hike spree, waking up to the realisation of inflationary pressures not being transitory in nature.
- Record high inflation in the US: The US Fed has been on the offensive battling a 40-year high surge in prices.
- It has tapered its bond purchase programme drastically while suggesting in no uncertain terms the pace of rate hikes needed to combat inflation.
- The European Union has been slow to respond but voices are growing to correct the path at the earliest.
- Banks like the Central Bank of Brazil or the Russian Central Bank have increased the interest rate to double digits.
- Emerging economies have been doubly hit — the days of easy liquidity are well behind them even as their economic resources remain constrained to support an uneven proportion of population hit by pandemic.
- Including the RBI’s decision today to push the benchmark rate to align with the current market realities, 21 countries have increased interest rates so far.
Analysing the RBI’s decision to hike interest rates
- To this extent, the decision by the RBI to frontload the rate hikes ahead of the Fed decision is again an attempt to stem capital outflows.
- Accommodative policy stance; The most interesting aspect of the rate hike today is the continuation of the accommodative policy stance.
- The CRR hike may be just an attempt to build up a war chest on the liquidity front.
- Liquidity inflows to the financial system could be either policy induced by the central bank for example changes in reserves, open market operations etc or non-policy induced such as foreign exchange reserves, government cash balances, and currency in circulation.
- Given that non-policy induced liquidity inflows have been recently impacted (outflows of portfolio capital) and given the huge size of the government borrowing programme, the RBI also needs to support the market through some means.
- Impounding bank reserves through the CRR (Rs 87,000 crore) could give some space to the central bank to conduct open market purchases of bonds from banks and thus inject concomitant liquidity some time in the future if the need so arises.
- The CRR rate hike is thus an important tool to possibly manage G-sec yields.
Inflation dynamics in India
- The inflationary pressures can be attributed mainly to adverse cost-push factors, coming from supply-side shocks in food and fuel prices.
- The RBI statement thus cites food inflation as a major source of discomfort.
- Additionally, nominal rural wages for both agricultural and non-agricultural labourers picked up during the second half 2021-22.
- However, such wage growth has remained soft.
- Measures to ameliorate supply-side cost pressures would be thus critical at this juncture, especially in terms of a calibrated reduction of taxes on petrol and diesel.
- On the policy side, however, it would mean that even after rate hikes, inflation may continue to remain high for some time.
- The MCLR (Marginal Cost of Funds based Lending Rate) linked loans have a share of around 53 per cent in the overall loan kitty.
- With the rise in CRR and expected future hikes in the benchmark rates, there would be an increase in MCLR due to a negative carry.
Conclusion
The RBI has acted prudently in responding to market forces that could impact India’s growth prospects if inflationary concerns were not addressed now. At the same time, by pledging to remain accommodative to spur, and reinvigorate growth, it has reaffirmed its commitment to being a trusted partner in the growth of the country.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Green Hydrogen Task Force
Mains level: Paper 2- India-Germany relations
Context
Prime Minister Narendra Modi’s visit to Berlin for the sixth Indo-German Inter-Governmental Consultations (IGC) is significant for its timing and substantial results.
Strategic and economic importance of India-German ties
- The timing of the IGC, which Germany chose not to delay, showed outreach to India and the Indo-Pacific.
- Impact of pandemic on economy: The pandemic hit German economy and sanctions on Russia will further dent its prospects.
- The country requires new markets for trade and investment.
- India is an important partner in this regard due to its sustained economic growth and market size.
- Ukraine crisis: The Ukraine crisis created an urgency to engage with India as part of Germany’s fledgling Indo-Pacific policy.
Opportunities for India
- As Germany does the reassessment of China’s role in world affairs it creates an opportunity for India.
- The Bundestag will discuss the situation of Uyghurs in China’s Xinjiang on May 7.
- Any departures from China will bring business engagement to India.
- Germany and India do not have a traditional strategic partnership.
- It is a green partnership based on trade, investment, technology, functional collaboration, skill development, and sustainability.
- There are several initiatives like the Indo-German energy forum, environmental forum, partnership on urban mobility, skill development and science and technology.
- The biggest gain from the IGC has been the Joint Declaration of Intent (JDI) establishing the Green and Sustainable Development Partnership.
- This will raise the quality and quantum of the existing partnership between the two countries.
- Germany is reaching out with new and additional financing of €10 billion to fund green projects in India under public, private and PPP models.
- To support this, a ministerial segment is being introduced under the IGC.
- The IGC is the only such format that India has with any country.
- Another significant development is the JDI on Triangular Development Cooperation for projects in third countries.
- This will provide avenues to work together in the Indo-Pacific, Africa and beyond.
- The Indo-German Education Partnership, which the German Bundestag passed in 2016 as a New Passage to India, has borne fruit — from about 4,000 students in 2015, there are nearly 29,000 Indian students in Germany.
- The Indo-German Science and Technology Centre has made valuable contributions.
- Now, under the energy partnership, the Green Hydrogen Task Force will develop a Green Hydrogen Roadmap.
- This will attempt to take R&D to the level of commercialisation.
- The JDI on migration and mobility is an important step taken during this IGC.
Conclusion
A new period is reflecting new priorities in view of crises like the pandemic, the economic downturn and now, Ukraine. The German response to India as evidenced through the IGC has been promising. Both sides may justifiably call it a defining moment in the Indo-German partnership.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: India-Europe Trade and Technology Council
Mains level: Paper 2- India-Europe engagement
Context
As Russia, isolated by unprecedented Western sanctions, deepens its alliance with China, Europe has begun to loom larger than ever before in India’s strategic calculus. Prime Minister Narendra Modi’s visit to Berlin, Copenhagen, and Paris this week could give us a glimpse of India’s post-Russian strategic future in Europe.
Engagement with collective Europe
- In her visit to Delhi, the president of the European Commission, Ursula von Der Leyn, unveiled the new contours of the EU’s strategic partnership with India by launching the India-Europe Trade and Technology Council.
- This week, the focus is on India’s key bilateral partnerships with European majors — Germany and France — as well as a critical northern corner of Europe, the so-called Norden.
- Having built up a significant engagement with Moscow over the decades, India and Germany are under pressure to disentangle from the Russian connection.
- Modi and Scholz could also exchange notes on how their long-standing illusions about China came crashing down.
- Macron’s return to power in France offers a good moment for Modi to imagine the next phase in bilateral relations.
- For some time now it has been said that France is India’s “new Russia” — Delhi’s most important strategic partner.
- In recent years, France has emerged as a strong defender of India’s interests in the United Nations Security Council and a regional ally in the vast Indo-Pacific theatre.
- France has also been a major supplier of advanced arms to India.
- But Delhi and Paris have been some distance away from demonstrating full possibilities of their defence partnership.
- There is no doubt that Western Europe has moved from the margins to the centre of India’s foreign and security policies.
- The crisis in Ukraine, which has shattered the regional order that emerged in 1991, intensifies the imperatives for deeper strategic cooperation between India and its European partners.
India’s engagement with smaller European countries
- In Copenhagen, the bilateral talks with Danish leadership are about Delhi finally finding time for the smaller European countries.
- The Nordic summit hosted by Denmark underlines India’s discovery of the various sub-regions of Europe — from the Baltics to the Balkans and from Iberia to Mittleuropa.
- The Nordic Five — Denmark, Finland, Iceland, Norway, and Sweden — have a population of barely 25 million but their GDP at $1.8 trillion is greater than that of Russia.
- Two members of the Nordic five — Sweden and Finland — are now rushing to end their long-standing neutral status and join NATO.
- The other three — Denmark, Iceland, and Norway — have been founding members of NATO, set up in 1949.
- Listening to the Nordic leaders might help Delhi appreciate the deeply-held fears about Russia among Moscow’s smaller neighbours.
- In Copenhagen, Modi would want to build on the unique bilateral green strategic partnership with Denmark.
Germany and India’s engagement with Russia
- Berlin is tied far more deeply to Russia than India.
- Germany’s annual trade with Russia is about $60 billion while India’s is at $10 bn.
- Germany relies heavily on Russian natural gas, while Russian arms dominate India’s weaponry.
- Irrespective of their Russian preferences, Germany and India have no option but to live with circumstances over which they have no control.
- Opportunity for India: Making India an attractive new destination for German capital, now under pressure to reduce its exposure to Russian and Chinese markets, should be the highest priority for PM Modi.
- Germany is one of India’s oldest economic partners, but the full potential of the commercial relationship has never been realised.
- If there ever was a moment to think big about the future of German trade and investment in India, it is now.
Conclusion
A new paradigm is beckoning India — strong commercial and security partnerships with Europe that stand on their own merit and bring the many synergies between them into active play.
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