Note4Students
From UPSC perspective, the following things are important :
Prelims level: Caste Census, Census of India
Mains level: Alternatives to Caste Census
These days, many states are urging the Centre to include a caste-wise census in the Census of India to have substantial data for reservations of certain dominant caste groups.
Background
Caste census of Backward Classes difficult: Centre
Reaction by the Centre
- In this backdrop, the Union government’s assertion in the Supreme Court that a census of the backward castes is “administratively difficult and cumbersome” may evoke varying responses.
- There are two components to the Government’s stand:
- Jeopardizing the Census: It asserts that it is a policy decision not to have caste as part of the regular census and that, administratively, the enumeration would be rendered so complex that it may jeopardise the decennial census itself.
- Adding more vagueness: It cites the difficulties and complexities inherent in getting an accurate count of castes, given the mind-boggling numbers of castes and sub-castes, with phonetic variations and similarities.
This is the reason that the data from the 2011 SECC were not acted upon because of “several infirmities” that rendered them unusable.
Why is caste census not feasible?
- Hurdle to casteless society: The idea of a national caste census is abhorrent when the stated policy is to strive for a casteless society.
- Political polarization: Political parties with their base in particular social groups may find a caste enumeration useful, if their favoured groups are established as dominant in specific geographies.
- Electoral impact: Politicians may find the outcome inconvenient, if the precise count turns out to be lower and has a negative bearing on perceptions about their electoral importance.
Limitations of SECC, 2011
- Completeness and Accuracy: Even in the Censuses up to 1931, when caste details were collected, they were wanting in completeness and accuracy.
- Lakhs of Caste: Further, the data contained 46 lakh different caste names, and if subcastes were considered, the ultimate number may be exponentially high.
Need for such census
- Quantifiable data: It may also be a legal imperative, considering that courts want ‘quantifiable data’ to support the existing levels of reservation.
- Basis for Affirmative actions: It will be useful to establish statistical justification for preserving caste-based affirmative action programmes.
These points do merit consideration, and even those clamouring for a caste census cannot easily brush them aside.
Way forward
- A caste census need not necessarily mean caste in the census.
- It may be an independent exercise, but one that needs adequate thought and preparation, if its ultimate goal is not for political or electoral purposes, but for equity in distribution of opportunities.
- A preliminary socio-anthropological study can be done at the State and district levels to establish all sects and sub-castes present in the population.
- These can be tabulated under caste names that have wider recognition based on synonymity and equivalence among the appellations that people use to denote themselves.
- Thereafter, it may be possible to do a field enumeration that can mark any group under castes found in the available OBC/BC lists.
Conclusion
- A caste census may not sit well with the goal of a casteless society, but it may serve, in the interim, as a useful, even if not entirely flawless, means of addressing inequities in society.
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From UPSC perspective, the following things are important :
Prelims level: COP 26, Paris Agreement
Mains level: India's committment for Paris Agreement
A recent report by the Ministry of Earth Sciences (MoES) reveals that India has warmed up 0.7° C during 1901-2018.
What was the report?
Title: Assessment of Climate Change over the Indian Region (by MoES)
(a) Climate severity
- The 2010-2019 decade was the hottest with a mean temperature of 0.36° C higher than average.
- Heatwaves continued to increase with no signs of diminishing greenhouse gas emissions despite lower activity since the novel coronavirus pandemic.
- India may experience a 4.4° C rise by the end of this century.
- Within 2050, rainfall is expected to rise by 6% and temperature by 1.6° C.
- India’s Deccan plateau has seen eight out of 17 severe droughts since 1876 in the 21st century (2000-2003; 2015-2018).
(b) Land degradation
- To make things worse, India lost about 235 square kilometres to coastal erosion due to climate change-induced sea-level rise, land erosion and natural disasters such as tropical cyclones between 1990-2016.
(c) Rising Internal Displacement
- According to the Internal Displacement Monitoring Centre, India’s Internally Displaced Populations (IDPs) are rising due to damaging climate events.
- Uttarakhand residents began deserting their homes after the Kedarnath floods in 2013 due to heavy precipitation that increases every year.
- Recent figures are more alarming with 3.9 million displaced in 2020 alone, mostly due to Cyclone Amphan.
India’s commitment to Climate Mitigation
- India held the top 10 position for the second year in a row in 2020’s Climate Change Performance Index (CCPI).
- The country received credit under all of the CCPI’s performance fields except renewable energy where India performed medium.
- India vowed to work with COP21 by signing the Paris Agreement to limit global warming and submitted the Nationally Determined Contributions (NDCs).
- It set a goal of reducing emissions intensity of GDP by 33%-35% and increasing green energy resources (non-fossil-oil based) to 40% of installed electric power capacity by 2030.
- India cofounded with France at COP21, in 2015, the International Solar Alliance (ISA).
Core concern
(a) Good policies, weak practices
- The question is, are these global alliances and world-leading policies being practised or are merely big promises with little implementation?
- Despite leading ISA, India performed the least in renewable energy according to the CCPI’s performance of India.
(b) Low compliance
- India is not fully compliant with the Paris Agreement’s long-term temperature goal of the NDCs and there are still risks of falling short of the 2° C goal.
- According to India’s carbon emission trajectory, the country is en route to achieve barely half of the pledged carbon sink by 2030.
- To achieve the Paris Agreement’s NDC target, India needs to produce 25 million-30 million hectares of forest cover by 2030 — a third of current Indian forestation and trees.
- Going by the facts, it seems India has overpromised on policies and goals as it becomes difficult to deliver on the same.
Why COP26 matters
- The Glasgow COP26 offers India a great opportunity to reflect on the years since the Paris Agreement and update NDCs to successfully meet the set targets.
- India is expected to be the most populated country by 2027, overtaking China, contributing significantly to the global climate through its consumption pattern.
- India is in a rather unique position to have a significant influence on global climate impact in the new decade.
Conclusion
- India believes that climate actions must be nationally determined.
- However, the Paris Agreement for developing countries should be at the core of decision-making.
- India has the ability to improve its global positioning by leading a favourable climate goal aspiration for the world to follow.
- The country has the opportunity to not only save itself from further climate disasters but also be a leader in the path to climate change prevention.
Back2Basics: COP26, Glasgow
- The 2021 United Nations Climate Change Conference, also known as COP26, is the 26th United Nations Climate Change conference.
- It is scheduled to be held in the city of Glasgow, Scotland between 31 October and 12 November 2021, under the presidency of the United Kingdom.
- This conference is the first time that Parties are expected to commit to enhanced ambition since COP21.
- Parties are required to carry out every five years, as outlined in the Paris Agreement, a process colloquially known as the ‘ratchet mechanism’.
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From UPSC perspective, the following things are important :
Prelims level: Collegium system, NJAC
Mains level: Transparency issues is Judicial Appointments
In recent weeks, the Supreme Court of India’s collegium has been busy. New judges have been appointed to the Court on its advice and long overdue vacancies have been filled up.
Read this before proceeding:
Collegium recommends nine judges for Supreme Court
What is the matter of concern?
Ans. Transparency in appointments
- These recommendations are seen as reflective of a new and proactive collegium.
- What ought to concern us, though, is that long-standing apprehensions about the collegium’s operation remain unaddressed: specifically, its opacity and a lack of independent scrutiny of its decisions.
- These misgivings are usually seen in the context of a battle between the executive and the judiciary.
- Less evident is the effect that the failings have on the status of the High Courts.
- Today, even without express constitutional sanction, the collegium effectively exercises a power of supervision over each of the High Courts.
No specified reasons for Exclusion
- For nearly two years, despite vacancies on the Bench, the collegium made no recommendations for appointments to the Supreme Court.
- The conjecture in the press was that this logjam owed to a reluctance amongst some of its members to elevate Justice Akil Kureshi to the Court.
- Indeed, it was only after a change in its composition that the panel recommended on August 17 a list of names for elevation. This list did not contain Justice Kureshi’s name.
- The perfunctory nature of the collegium’s resolutions means that we do not know the reasons for his exclusion.
- We also do not know why five Chief Justices, including Justice Kureshi, and several other puisne judges are now being transferred to different courts.
The public has right to know
- This is not to suggest that these decisions are unfounded. It is possible that each of the choices made is predicated on administrative needs.
- But whatever the rationale, surely the public has a right to know.
What is needed?
Ans. Striking a balance in Separation of Power
- Separation of powers is a bedrock principle of Indian constitutionalism. Inherent in that idea is the guarantee of an autonomous judiciary.
- To that end, the process of appointing and transferring judges assumes salience.
- But the question of how to strike a balance between the sovereign function of making appointments and the need to ensure an independent judiciary has long plagued the republic.
As suggested by Dr. Ambedkar
- The Constitution’s framers wrestled over the question for many days. Ultimately, they adopted what Dr. B.R. Ambedkar described as a “middle course”.
- That path stipulates the following: Judges to the Supreme Court are to be appointed by the President of India in consultation with the Chief Justice of India (CJI) and such other judges that he deems fit.
- Judges to the High Courts are to be appointed by the President in consultation with the CJI, the Governor of the State and the Chief Justice of that court.
- In the case of transfers, the President may move a judge from one High Court to another, after consulting the CJI.
Where does primacy rest?
Ans. In a transparent Collegium system
- In this design, there is no mention of a “collegium”.
- But since 1993, when the Supreme Court rendered a ruling in the Second Judges Case, the word consultation has been interpreted to mean “concurrence”.
- What is more, that concurrence, the Court held there, ought to be secured not from the CJI alone, but from a body of judges that the judgment described as a “collegium”.
- Thus, the Court wound up creating a whole new process for making appointments and transfers and carved out a system where notional primacy came to rest in the top echelons of the judiciary.
This procedure has since been clarified. But there is, in fact, no actual guidance on how judges are to be selected.
The NJAC and after
- In 2015, Parliament sought to undo the procedures put in place by the Court through the 99th Constitutional Amendment.
- The National Judicial Appointments Commission (NJAC), that the law created, comprised members from the judiciary, the executive, and the lay-public.
- But the Court scrapped the efforts to replace the collegium and it held in the Fourth Judges Case that judicial primacy in making appointments and transfers was an essential feature of the Constitution.
- In other words, the Court held that a body that found no mention in the actual text of the Constitution had assumed a position so sacrosanct that it could not be touched even by a constitutional amendment.
Assessing the NJAC
Ans. The NJAC was far from perfect
- There were legitimate fears that the commission might have resulted in the appointment of malleable judges.
- Therefore, it is plausible to argue that until a proper alternative is framed, the collegium represents the best solution.
- This is that allowing senior judges of the Supreme Court primacy in matters of appointments and transfers is the only practical way to guarantee the independence of the judiciary.
Promises are yet unfulfilled over transparency
- When the Court struck down the NJAC, it also promised to reform the existing system. Six years down the line those promises have been all but forgotten.
- The considerations that must go into the procedure for selecting judges is left unexplained.
- The words “merit” and “diversity” are thrown around without any corresponding debates on what they, in fact, mean.
- Somehow, amidst all of this, we have arrived at a consensus that enveloping a veil over the process of selection is essential to judicial autonomy, and that there is no legitimate reason why the public ought to know how judges are chosen and transferred.
Way forward
- It is clear that we have come a long way from a time when Chief Justices of High Courts declined invitations to the Supreme Court, because they valued the work that they were already entrusted with.
- Restoring High Courts to that position of prestige must be seen as essential to the process of building trust in our Constitution.
- Achieving this will no doubt require more than just a tweak in the process of appointments.
Conclusion
- It is clear is that the present system and the mysteries underlining the decision-making only further dilute the High Courts’ prominence.
- At some point we must take seriously the task of reforming the existing scheme because the status quo is ultimately corrosive of the very institutions that it seeks to protect.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: AUKUS, Quad
Mains level: Focus areas and challenges for AUKUS
The announcement of the new Australia-U.K.-U.S. (AUKUS) trilateral security pact has naturally generated animated debate in strategic circles, before the QUAD summit.
What is the AUKUS?
- The first major initiative of AUKUS would be to deliver a nuclear-powered submarine fleet for Australia.
- The nuclear-powered submarines will give Australia naval heft in the Pacific, where China has been particularly aggressive.
- While the US and Britain have had the capability for decades, Australia has never had an n-sub.
Motive: To counter China
- China has nuclear-powered submarines, as well as submarines that can launch nuclear missiles.
- The three signatories to the AUKUS deal have made it clear though, that their aim is not to arm the new subs with nuclear weapons.
- China has been one of Australia’s biggest trading partners, but the relationship has soured over the last few years.
- It was in consideration of Chinese sensibilities that Australia had pulled out of the Malabar Naval Exercise with the US, India, and Japan after participating in the 2007 edition (of which Singapore too, was part).
- Australia came back to Malabar in 2020, which marked the first time in 13 years that the navies of the four Quad nations war-gamed together.
Australia at the Centrestage
- This is primarily because a nuclear-powered submarine gives a navy the capability to reach far out into the ocean and launch attacks.
- A nuclear-powered submarine offers long distances dives, at a higher speed, without being detected gives a nation the ability to protect its interests far from its shores.
- In the context of the AUKUS agreement, nuclear-powered submarines will give the Royal Australian Navy the capability to go into the South China Sea.
- It conclusively puts to rest a long-standing domestic debate on whether it was time for Australia to assess China through the strategic lens, overcoming the purely mercantile considerations that tended to dominate its China policy.
What makes nuclear submarines so important?
- A nuclear-powered submarine is classified as an “SSN” under the US Navy hull classification system, wherein ‘SS’ is the symbol for submarine, and ‘N’ stands for nuclear.
- A nuclear-powered submarine that can launch ballistic missiles is called “SSBN”.
- Conventional diesel-engine submarines have batteries that keep and propel — though not very fast — the vessel underwater. The life of these batteries can vary from a few hours to a few days.
- The newer Air-Independent Propulsion (AIP) submarines have additional fuel cells that allow them to stay underwater for longer and move faster than the conventional vessels.
- However, the fuel cells are used only at strategic times, when the endurance to remain submerged is required.
- Both conventional and AIP subs need to come to the surface to recharge their batteries using the diesel engine.
- The diesel engine also propels the vessel on the surface. However, the fuel cells of AIP can only be charged at on-land stations, not while at sea.
Why is France unhappy about Australia getting these submarines?
- The deal has complicated the relations between France and Australia, and also France and the US.
- France is upset as it has been kept out of the loop. But, with the core objective of pushing back against China’s aggression, all five countries — US, UK, Australia, France and India — are on the same track.
- The deal between France and Australia had been marked by delays and other issues.
- The first submarine was expected to be operational around 2034.
Does India have nuclear-powered submarines?
- Yes, India is among the six nations that have SSNs. The other five are the US, the UK, Russia, France and China.
- India has had the capacity since it got the Soviet-built K-43 Charlie-class SSN in 1987.
- Commissioned with the Red Fleet of the USSR in 1967, it was leased to the Indian Navy, and was rechristened INS Chakra. The submarine was decommissioned in 1991.
Indo-Pacific is the core issue
- France, which like the UK has historically been an Indo-Pacific power with territories and bases across the region.
- It has participated in a multi-nation naval exercise in the Bay of Bengal with the four Quad nations.
- There is no gainsaying the fact that rapid accretion in China’s economic and military capacities, but more particularly its belligerence, has led to a tectonic shift in regional security paradigms.
- Several countries have been obliged to review their defence preparedness in response to China’s rising military power and its adverse impact on regional stability.
A chance for the UK
- The AUKUS pact is also an emphatic assertion of the relevance of the U.S.-Australia Security Treaty (ANZUS).
- New Zealand, the outlier, walked away in 1984 from the treaty that ironically still bears its initials.
- Its “nuclear-free” stance ran counter to the U.S. Navy’s non-disclosure policy in regard to nuclear weapons aboard visiting vessels.
- Close ties notwithstanding, Australia’s future fleet of nuclear submarines will not be permitted access to New Zealand’s ports or waters, as averred by PM Jacinda Ardern.
- AUKUS provides a fresh opportunity to the United Kingdom to reinsert itself more directly into the Indo-Pacific.
- It is already a member of the Five Eyes (FVEY), an intelligence-sharing alliance built on Anglo-Saxon solidarity (Australia, Canada, New Zealand, the U.K., and the U.S.).
AUKUS is not a substitute for the Quad
- It does not erode the Quad’s significance as a platform for consultations and coordination on broader themes of maritime security, free and open trade, health care, critical technologies, supply chains and capacity-building.
- The AUKUS submarine deal, on the other hand, is an undiluted example of strategic defence collaboration, and a game-changer at that.
Chinese reception of AUKUS
- China, expectedly, has strongly criticised AUKUS and the submarine deal as promoting instability and stoking an arms race.
The exposed double standards
- China has the world’s fastest-growing fleet of sub-surface combatants.
- This includes the Type 093 Shang-class nuclear-powered attack submarine (SSN) and the Type 094 nuclear-powered Jin-class ballistic missile submarine (SSBN).
- Its nuclear submarines are on the prowl in the Indo-Pacific.
- Yet, China denies Australia and others the sovereign right to decide on their defence requirements.
What’s in the box of AUKUS?
Ans. Greater role for Australia
- Australia’s proposed nuclear submarines will give quite a punch in terms of a stand-off capability.
- The growing focus on anti-submarine warfare across a more expansive region is clearly altering calculations.
- Australia’s nuclear submarines would help create a new balance of power in the Indo-Pacific, especially in tandem with the U.S. and the U.K.
- It will now have a more meaningful naval deterrence of its own to protect its sovereign interests.
- It is set to play a more robust role in ensuring peace and stability in the Indo-Pacific.
Way forward
- The setback ‘down under’ may spur France to focus afresh on partners such as India.
- India must strike a balance between continuing imports and implementing the all-important Atmanirbhar Bharat in defence manufacturing.
- France should take AUKUS as a business deal.
- Its momentary reaction at the cancellation of the contract by Australia should soon subside.
- As a major Indo-Pacific power, France is an important part of the regional security calculus.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: AUKUS
Mains level: Paper 2- Role for India in issues over AUKUS
Context
France recalled its ambassadors to the US and Australia in a diplomatic slap intended to convey its anger over a deal forged in secrecy that saw Paris lose a multi billion dollar submarine contract.
Depth and diversity of India’s relations
- That Delhi today is a part of a difficult conversation between the US, UK, France, Europe, and Australia points to the growing depth and diversity of India’s relations with different parts of the West.
- Popular and academic discourse on India’s foreign policy has been obsessed with the concept of “non-alignment” —was about keeping distance from the West as a whole.
- India’s contemporary diplomacy, in contrast, takes a nuanced view of internal dynamics in the West, and recognises the political agency of individual states, and develops wide-ranging relationships with the Western nations.
Relations with France
- Paris has always taken an independent view of the world, while remaining within the broad framework of the American alliance.
- In the 1990s, Paris championed the construction of a multipolar world to constrain American “hyperpower” but India did not join it.
- The last few years, however, have seen an intensification of India’s strategic engagement with France.
- For example, India has overcome the earlier reluctance to work with France on Indian Ocean security.
Engagement as collective and sub-region
- The government has also stepped up on the political engagement with Europe as a collective as well as its sub-regions — from Baltics to the Balkans and from Iberia to Mitteleuropa.
- As India discovers that every European nation, from tiny Luxembourg to a rising Poland, has something to offer, Europe has become a thriving hub of India’s international relations.
Relations with the UK
- Due to the bitter colonial legacy, relations between India and UK have always been underdeveloped.
- In the last couple of years, India has made a determined effort to build a new partnership with Britain, which is the fifth-largest economy in the world, a leading financial hub, a technological powerhouse, and punches well above its weight in global affairs.
Relations with “Anglosphere”
- India’s neglect of London also meant Delhi had no time for the “Anglosphere” that binds the UK to Australia, Canada, and New Zealand.
- Many had presumed that the Anglosphere was irrelevant — AUKUS, however, is a reminder that Anglo-Saxon political bonds endure.
- Instead of treating the Anglosphere with scepticism, India has begun to vigorously engage with the “settler colonies” that have so much to offer India — from natural resources to higher education and critical technologies.
- The UK and its settler colonies have long been the preferred destination for the Indian diaspora (besides the US).
- Leveraging diaspora politics: While the diaspora tends to connect the domestic politics of the Anglosphere with that of India, Delhi is figuring out that the diaspora politics can be played both ways.
Relations with Japan and Australia
- The transformation of India’s relations with Australia has occurred despite entrenched scepticism in the foreign policy bureaucracy.
- Finally, Japan has been a part of the West in the post-War era and Delhi’s relations with Tokyo have never been as rounded as they are today. They are also fellow members of the Quad.
Way forward for India
- This wide-ranging engagement with the West should help Delhi convey two important messages to its partners this week.
- Not undermining the larger goal: India needs to remind France, Australia, the UK and US of the shared interests in securing the Indo-Pacific and the dangers of letting the current quarrel undermine that larger goal.
- Effective deterrence in Indo-Pacific: The other is to highlight the region’s vast requirements for effective deterrence in the Indo-Pacific;
- And that there is enough room for the US, UK, France, and Europe to collaborate with Indo-Pacific partners in overlapping coalitions to develop high technology and defence-industrial cooperation in all the areas highlighted by AUKUS — effective underwater capabilities to AI, quantum computing and cyber warfare.
- Deeper cooperation: India’s interests lie in deeper strategic cooperation with France and Europe as well as the Quad and the Anglosphere.
Conclusion
India’s diverse relationships in the West must be deployed in full measure to prevent a split in the Indo-Pacific coalition.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ease of Doing Business Report
Mains level: Read the attached story
The World Bank Group has scrapped its flagship publication, the ‘Doing Business’ report.
Doing Business Report
- This report publishes the influential annual ranking of countries on the Ease of Doing Business (EDB) index.
- It ranks countries by the simplicity of rules framed for setting up and conducting businesses.
Utility of the index
The World Bank’s decision has wide ramifications, as the index serves varied purposes.
- Many countries showcase improved ranking to signal market-friendly policies to attract foreign investments. National leaders often set EDB rank targets.
- This helps them measure domestic policies against global “best practices” and browbeat domestic critics.
- India, for instance, wanted its administration to ensure that India breaks into the top 50 ranks of the EDB index.
- Some countries seem to use their political heft to improve their rank, polish their international image and sway public opinion (as appears to be China’s case).
Issues with the credibility of the report
- The Group acted on its commissioned study to examine the ethical issues flagged in preparing the 2018 and 2020 editions of the EDB index.
- It is accused of having exerted pressure on the internal team working on the Doing Business report to falsely boost China’s rank by doctoring the underlying data.
- Similarly, tensions were also reportedly brought to bear in the case of Saudi Arabia’s rank, among others.
EDB index rank vs economic outcomes
- There is a disconnect between the stellar rise in EDB index rank and economic outcomes.
- The theory underlying the EDB index could be suspect, the measurement and data could be faulty, or both.
- For example, China’s phenomenal economic success, especially its agricultural performance (after the reforms in 1978), is perhaps the most unmistakable evidence demonstrating that lack of clarity of property rights may not be the binding constraint in a market economy.
- What matters is economic incentives.
- Measuring regulatory functions underlying the index could be tricky and subjective and possibly politically motivated as well, as the controversies surrounding the index seem to suggest.
EODB in India: At what cost
Ans. Weakening labour regulations
- Closer home, India has weaponised the mandate to improve the rank in the EDB index to whittle down labour laws and their enforcement and bring them close to the free-market ideal of ‘hire and fire’.
- Most States have emulated Maharashtra’s lead of administrative fiat, which renders labour laws toothless by dismantling official labour inspection systems and allowing employers to file self-regulation reports.
- The government has farmed out critical safety regulations such as annual inspection and certification of industrial boilers to ‘third party’ private agencies.
- The Labour Department’s inspection is now not mandated; it is optional only by prior intimation to employers.
Implications of such moves
- Such abdication of the government’s responsibility towards workers has reportedly affected industrial relations.
- The workers’ strike at Wistron’s iPhone assembly factory in Karnataka last year is an example.
- Further, severe industrial accidents are rising, damaging life and productive industrial assets.
Why did World Bank scrap the index?
- Investigations into “data irregularities” in preparing the EDB index, as brought out by the independent agency, seems to confirm many shortcomings repeatedly brought to light for years now.
- The index appears motivated to support the free-market ideal.
- It is dressed up under scientific garb and is underpinned by seemingly objective methods and data collection.
- Strong leaders (and motivated officials) seem to have used their position to manipulate the index to suit their political and ideological ends.
Conclusion
- India claimed the success of its Make in India initiative by relying on its ranking on the EDB index without tangible evidence.
- Handing over law enforcement to employers by self-reporting compliance seems to have increased industrial unrest and accidents.
- It perhaps calls for honest soul-searching as to what havoc a questionable benchmark can wreak.
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From UPSC perspective, the following things are important :
Prelims level: BIT
Mains level: Paper 3- Using BITs to hold TNCs accountable
Context
Given the enormous power that transnational corporations (TNCs) wield, questions about their accountability have arisen often. There have been many instances where the misconduct of TNCs has come to light such as the corruption scandal involving Siemens in Germany.
Holding TNCs accountable: Background
- The effort was made at the UN to develop a multilateral code of conduct on TNCs.
- However, due to differences between developed and developing countries, it was abandoned in 1992.
- Role of BITs: Aim was to use international law to institutionalise the forces of economic globalisation, leading to the spread of BITs.
- Asymmetry in BITs: These treaties promised protection to foreign investors under international law by bestowing rights on them and imposing obligations on states.
- This structural asymmetry in BITs, which confer rights on foreign investors but impose no obligations, relegated the demand for investor accountability.
- In 2014, the UN Human Rights Council established an open-ended working group with the mandate to elaborate on an international legally binding instrument on TNCs and other businesses concerning human rights.
- Since then, efforts are being made towards developing a treaty and finding ways to make foreign corporations accountable.
- The latest UN report is a step in that direction.
UN report on human rights-compatible international investment agreements
- The UN working group on ‘human rights, transnational corporations (TNCs) and other businesses’ has published a new report on human rights-compatible international investment agreements.
- It urges states to ensure that their bilateral investment treaties (BITs) are compatible with international human rights obligations.
- It emphasises investor obligations at the international level i.e., the accountability of TNCs in international law.
Using BITs to hold TNCs accountable
- BITs can be harnessed to hold TNCs accountable under international law.
- The issue of fixing accountability of foreign investors came up in an international law case, Urbaser v. Argentina (2016).
- Subjecting corporates to international law: In this case, the tribunal held that corporations can be subjects of international law and are under a duty not to engage in activities that harm or destroy human rights.
- The case played an important role in bringing human rights norms to the fore in BIT disputes.
- It also opened up the possibility of using BITs to hold TNCs accountable provided the treaty imposes positive obligations on foreign investors.
- Recalibrating BITs: In the last few years, states have started recalibrating their BITs by inserting provisions on investor accountability.
- Issues with BITs: However, these employ soft law language and are hortatory.
- They do not impose positive and binding obligations on foreign investors.
- They fall short of creating a framework to hold TNCs accountable under international law.
Takeaways for India
- The recent UN report has important takeaways for India’s ongoing reforms in BITs.
- Best endeavour clauses not enough: India’s new Model BIT of 2016 contains provisions on investor obligations.
- However, these exist as best endeavour clauses. They do not impose a binding obligation on the TNC.
- Impose positive binding obligations: India should impose positive and binding obligations on foreign investors, not just for protecting human rights but also for imperative issues such as promoting public health.
- The Nigeria-Morocco BIT, which imposes binding obligations on foreign investors such as conducting an environmental impact assessment of their investment, is a good example.
Consider the question ” Ensuring that the bilateral investment treaties (BITs) are compatible with international human rights obligations in the need of the hour. In light of this, assess the progress made globally on this issue and suggest way forward for India in framing its BITs.”
Conclusion
Reforms would help in harnessing BITs to ensure the answerability of foreign investors and creating a binding international legal framework to hold TNCs to account.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NCLAT, NCLT
Mains level: Read the attached story
While hearing a challenge to the Tribunal Reforms Act, 2021, the Supreme Court came down heavily on the government of India for vacancies not being filled on time. This could severely impact the ease of doing business in India, said the court.
Background
- The government has lauded the role of the Insolvency and Bankruptcy Code, 2016 (IBC), for improving India’s ranking on the “Ease of Doing Business” index over the last couple of years.
- However, the SC’s observation is spot-on as vacancies in the tribunals have slowed down insolvency resolution due to the huge pendency of cases.
- When the SC made its observations, the NCLT had only 30 members against a total strength of 63.
About NCLAT and NCLT
- National Company Law Appellate Tribunal (NCLAT) was constituted under Section 410 of the Companies Act, 2013 for hearing appeals against the orders of National Company Law Tribunal(s) (NCLT) in 2016.
- NCLAT is also the Appellate Tribunal to hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India (CCI).
- It is also the Appellate Tribunal to hear and dispose of appeals against the orders of the National Financial Reporting Authority.
Difference between NCLT AND NCLAT
|
NCLT
|
NCLAT
|
| · NCLT is established as per Section 408 of companies act, 2013 |
· NCLAT is established as per Section 410 of companies act, 2013 |
| · It holds primary jurisdiction on cases of insolvency and bankruptcy |
· It holds appellate jurisdictions over the cases judged by NCLT |
| · NCLT accepts and analyzes the evidence from creditors and debtors |
· NCLAT accepts and analyzes the decision made by NCLT |
| · NCLT collects facts and evidences |
· NCLAT analyzes facts and evidences |
CJI’s reservations over Pendency
- The NCLAT had a sanctioned strength of a chairperson plus 11 members but its functioning strength was of eight members.
- Both the NCLT and NCLAT have been without chairpersons for several months respectively.
- These vacancies are concerning because as of May 31, 13,170 insolvency petitions were pending before benches of the NCLT.
- Of these, 2,785 petitions have been filed by financial creditors and 5,973 by operational creditors.
Note: The IBC created an institution called an information utility to be the repository of information on debts and defaults in India. The sole utility in India at present is the National E-Governance Services Ltd. (NeSL).
Basis of these cases
- The financial creditors are facing criticism for taking haircuts as high as 90 per cent against their claims.
- A longer approval period would entail greater value erosion of a corporate debtor which would be an unattractive proposition for any prospective resolution applicant.
- This uncertainty can be cured by a faster approval process by the NCLTs by the creation of more benches and filling up of current vacancies.
Why is the Supreme Court fuming over vacancies?
(a) Covid impact
- The Indian economy is recovering from the adverse effects of the Covid-19 pandemic.
- During the downturn, financial institutions and banks have suffered higher defaults than usual, impacting the robustness of the system.
- Lending has decreased during this time and can only be encouraged now by shoring up the mechanism under the IBC to inspire confidence in creditors.
(b) Non-compliance by the govt
- The SC had granted time to the government till September 13 to take substantial steps in this regard, which was partially complied with by appointing 18 members.
- The government, however, failed to avoid embarrassment as the CJI expressed his anger at the appointment process which had ignored candidates recommended by the selection committee.
(c) Burden of pendency
- There is a real risk of the court taking matters into its own hands by making appointments itself, or by taking harsher steps like transferring jurisdiction under the IBC to high courts.
- One hopes that the situation is resolved quickly to make strict time-bound insolvency resolutions a reality.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: LFPR
Mains level: Paper 3- Rising unemployment
Context
India’s unemployment rate in August was 8.3 per cent. This was higher than the 7 per cent recorded in July. The month-to-month variations notwithstanding, these are all very high unemployment rates.
Why inflation gets more attention in India than unemployment?
- Periodic Labour Force Survey (PLFS) results showed the historically high unemployment rate of 6.1 per cent for 2017-18 (July to June). It was at a 45-year high.
- New norm at 7-8 per cent: Till then, India was used to recording an unemployment rate of around 3 per cent.
- Today, an unemployment rate of 7-8 per cent seems to be the norm and such levels do not seem to matter.
- The unemployment rate is not the most important labour market indicator for a country like India.
- Why inflation gets preference: Between inflation and unemployment, the two economic indicators conjoined theoretically by the Phillips curve, it is inflation that wields political power.
- Inflation hurts almost the entire population.
- Equally importantly, high inflation rates can upset financial markets that in turn exert pressure on regulators to keep inflation in control.
- Unemployment directly impacts only the unemployed, who don’t count much.
- Worse still, society perceives being unemployed as an individual shortcoming, and not an outcome of a macroeconomic malaise.
What does low labour force participation rate (LFPR) indicate about the labour market in India?
- The unemployment rate is a measure of the economy’s inability to provide jobs only for those who seek work.
- But, in India, very often people do not look for jobs in the belief that none are available which is reflected in a low labour force participation rate (LFPR).
- India’s LFPR is at around 40 per cent when the global rate is close to 60 per cent.
- It is important that this belief in the futility of a job hunt is overcome by an explosive creation of new good quality formal jobs.
Why employment rate is a useful indicator for India
- A useful labour market metric for a country like India is the employment rate.
- This measures the proportion of the population over 14 years of age that is employed.
- The definition of employment needs to be changed, at present, engaging in some economic activity for just one hour in any of the past seven days is counted as employment.
- India’s record in providing employment to its people has been abysmally poor.
- CMIE’s definition of employment indicates that in 2016-17, only 42.8 per cent of the working-age population was employed.
- In the year of the pandemic, it fell to 36.5 per cent.
Reverse migration in employment from manufacturing to low productivity employment
- People are moving away from factories as manufacturing jobs shrink, to farms that provide shelter largely in the form of disguised unemployment.
- It cannot be the desire of a nation to move people away from high productivity, better quality jobs in manufacturing to low productivity employment in agriculture or as gardeners or security guards in the household sector.
- Employment opportunities need to expand in areas where labour is deployed to deliver higher productivity for enterprise and higher returns to labour.
Way forward
- Increase investment: A large part of the solution to this lack of adequate jobs is in increasing investments.
- Focus on demand size: For this, the investment climate needs to be business-friendly and government interventions must shift away from supply-side support to spurring demand.
Conclusion
The government needs to come up with policies for generating employment opportunities and stemming the reverse migration from manufacturing jobs to low productivity employment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: National Monetization Pipeline
Mains level: Issues with Asset Monetization in India
The government of India recently announced an asset monetization plan, wherein existing public assets worth Rs 6 trillion would be monetized by leasing them out to private operators for fixed terms.
The plan has generated a lot of print so it is worth discussing its pros and cons.
About NMP
- The identified assets are primarily concentrated in roads, railways, power, oil and gas, and telecoms.
- The lease proceeds are expected to be used for new infrastructure investment which, in turn, will contribute to the government’s ambitious Rs 111 trillion infrastructure investment plan.
Important issues raised by the plan
[I] How much should the government expect to raise from the plan?
Revenue Potential
- In deciding the amount to bid for leasing rights, bidders compute the present discounted value of the annual cash flow from the asset for the duration of the lease.
- The biggest uncertainty in this calculation surrounds the cash flow on these public assets.
- Rates of return estimates on public capital in the US have been estimated to be upwards of 15 per cent.
- However, this is India with its myriad uncertainties regarding pricing, bill collection, asset quality, regulatory framework as well as policy reversals.
- Hence there is significant uncertainty regarding the revenue potential of the plan.
[II] Is the plan likely to increase the efficiency of the economy?
a. Efficiency of the economy
- The NITI Aayog believes that the private sector is better at managing and operating the identified public assets than the public sector.
- There is certainly scope for efficiency gains. However, there are significant efficiency impediments too.
- One set of efficiency issues surrounds usage fees. A second factor related to efficiency is the effect of the plan on competition.
b. Stressed sectors
- The identified assets belong to core sectors of the economy spanning transport, energy and communication.
- Sectors like telecoms and ports have already seen rising concentration of ownership in recent years.
- An acceleration and extension of this trend to other segments of the infrastructure landscape would be seriously worrying.
- While some of this could well be rationalized through the stipulation of rules for the allocation of leasing rights, the plan is silent on this.
c. Financing of the lease bids
- If bidders finance their bids using domestic savings, there is a clear opportunity cost of the plan since these savings would otherwise have been invested in alternative projects.
- Moreover, the bidding for scarce domestic savings by prospective investors will also raise domestic interest rates which will put downward pressure on domestic private investment.
- It would also be worth reminding ourselves that the last round of PPP-based infrastructure funding routed through banks ended up with a heap of NPAs in public sector bank balance sheets.
Biggest flaw of the NMP
- No clear objective: The biggest drawback of the plan is that it fails to articulate the reasons for public sector inefficiency in asset management.
- No focus on management: If it is personnel-related, then privatizing management may be the right answer. If the inefficiency is related to constraints on pricing and bill collection, then the roots of the problem are unlikely to be addressed by leasing out their management to private operators.
- No clear assessment of underperforming sectors: The plan document also fails to outline whether the identified brownfield assets are the public sector’s highest cash flow assets or the relatively under-performing ones.
Better alternatives for the govt
- The way around this is to welcome foreign investors to bid for the assets.
- But this will require serious political will since entrenching foreign influence on Indian public assets will generate controversy.
- On this aspect too, the announced plan is low on details.
Way forward
- If the private sector is indeed more efficient in running infrastructure assets, the most efficient strategy would be to lease out the worst-performing assets rather than the best performing ones.
- The NITI Aayog would do the policy landscape a big service by following up the proposal with a white paper that addresses some of these efficiency-related issues.
- Without that, the monetization plan, while intriguing, is incomplete.
Conclusion
- A monetization plan envisages the private sector paying an upfront fee to the government which the government uses for new infrastructure investment.
- As much as private bidders finance themselves by borrowing, this amounts to the private sector borrowing and handing over the funds to the government to invest in infrastructure.
- This could enhance efficiency in infrastructure investment only if the government faces higher interest rates in capital markets than the private sector.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: TRIPS waiver
Mains level: Paper 3- Sustaining recovery
Context
To revive and sustain growth, action is needed both at the international and national levels.
Hopes of V-shaped recovery of Indian economy
- The National Statistical Office (NSO) had recently estimated that India’s economic growth has surged to 20.1% in the April-June quarter.
- In its recently launched Trade and Development Report 2021, UNCTAD has estimated global growth to hit 5.3% in 2021 and growth in India to hit 7.2%.
- According to the report, India showed strong quarterly growth of 1.9% in the first quarter of 2021, on the back of the momentum of the second half of 2020 and supported by government spending in goods and services.
- Given the inherent fragilities, India’s growth in 2021 as a whole is estimated at 7.2%, which is one of the fastest compared to most countries in the analysis.
- But it is still not sufficient to regain the pre-COVID-19 income level.
- However, going forward, the economy is likely to experience a deceleration of growth to 6.7% growth in 2022.
Ways to sustain growth
1) Efforts at the International level
- To revive and sustain growth, action is needed both at the international and national levels.
- TRIPS waiver: The report strongly supports India’s proposed temporary suspension of the World Trade Organization TRIPS waiver.
- Waiver is considered as a necessary step to enable the local manufacture of vaccines in developing countries
2) Steps to be taken at the national level
- Resilience: At the national level, COVID-19 has reinforced the idea that resilience is a public good and responsibility of the state.
- It has to be delivered through a robust public sector with the resources to make the necessary investments, provide the complementary services and coordinate the multiple activities that building resilience involves.
- Mobilising financial resources: We need a financial system that accords a more significant role to public banks, breaks up and guards against the emergence of megabanks, and exercises stronger regulatory oversight is more likely to deliver a healthier investment climate.
- Minimum wage: Wages are a critical source of demand and their growth can stimulate productivity and underpin a strong social contract.
- Minimum wages and related labour legislation are needed for appropriate protection against abusive practices.
- Policies for informal sector: Policies targeting informality are of particular importance, especially for a country like India with a large informal economy.
Conclusion
It is important to build a healthy, diversified economy. For this, a strong industrial policy focusing on building digital capacities is needed. A resilient economy goes beyond offering a residual category of safety nets designed to stop those left behind from falling further.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: E-Shram Portal
Mains level: National database for workers: Prospects and challenges
The E-Shram portal has come into existence more than a decade after the passage of the Unorganized Workers’ Social Security Act in 2008.
E-Shram
- On August 26, 2021, the Ministry of Labour and Employment (MOLE) launched the E-Shram, the web portal for creating a National Database of Unorganized Workers (NDUW), which will be seeded with Aadhaar.
- It seeks to register an estimated 398-400 million unorganized workers and to issue an E-Shram card.
Better late than never move
- It has come about even after repeated nudging by the Supreme Court of India.
- It is the result of state apathy.
- Had the Central and the State governments begun these legally mandated processes on time, much of the distress of lakhs of vulnerable workers would have been avoided.
- In fact, the political class owe an ‘apology’ to informal workers.
Issues with E-Shram
(A) Time constraints
- Long process: Given the gigantic nature of registering each worker, it will be a long-drawn process.
- No gestation period: The Government has not mentioned a gestation period to assess its strategy and efficiency.
- No hasty process: Employers are or required their workers to register even.While the Government can appeal to them, any penal measure will hurt the ease of doing business.
(B) Pandemic hides
- Considering the estimated 380 million workers as the universe of registration — debatable as the novel coronavirus pandemic has pushed lakhs of workers into informality.
(C) Data security
- Privacy: One of the vital concerns of e-portals is data security, including its potential abuse especially when it is a mega-sized database.
- No national framework yet: There are also media reports pointing out the absence of a national architecture relating to data security.
- Local server issues: It has been reported that in some States such as Maharashtra, the server was down for a few days.
(D) Structural issue
- Aadhaar seeding: Many workers will not have an Aadhaar-seeded mobile or even a smartphone. Aadhaar-seeding is a controversial issue with political overtones, especially in the North-eastern regions.
- Eligibility: There are several issues concerning the eligibility of persons to register as well as the definitional issues.
- Exclusion: By excluding workers covered by EPF and ESI, lakhs of contract and fixed-term contract workers will be excluded from the universe of UW. Hazardous establishments employing even a single worker will have to be covered under the ESI, which means these workers also will be excluded.
- No benefits for the aged: The NDUW excludes millions of workers aged over 59 from its ambit, which constitutes age discrimination.
(D) Complex identities of workers
- Migration: Many are circular migrant workers and they quickly, even unpredictably, move from one trade to another.
- Mixed work: Many others perform formal and informal work as some during non-office hours may belong to the gig economy, for example as an Uber taxi or a Swiggy employee. They straddle formal and informal sectors.
- Gig workers: Even though MOLE has included gig workers in this process, it is legally unclear whether the gig/platform worker can be classified first as a worker at all.
(E) Other impediments
- Dependence on States: The central government will have to depend on the State governments for this project to be successful.
- Lack of coordination: In many States, the social dialogue with the stakeholders especially is rather weak or non-existent. The success of the project depends on the involvement of a variety of stakeholders apart from trade unions.
- Corruption: There is also the concern of corruption as middle-service agencies such as Internet providers might charge exorbitant charges to register and print the E-Shram cards.
Benefits: No immediate carrot
- Workers stand to gain by registration in the medium to long run.
- But the instant benefit of accident insurance upto ₹0.2 million to registered workers is surely not an attractive carrot.
- The main point of attraction is the benefits they stand to gain during normal and crisis-ridden periods such as the novel coronavirus pandemic now which the Government needs to disseminate properly.
Way forward
- E-Shram is a vital system to provide hitherto invisible workers much-needed visibility.
- It will provide the Labour Market Citizenship Document to them.
- The govt should go one step further for triple linkage for efficient and leakage-less delivery of all kinds of benefits and voices to workers/citizens: One-Nation-One-Ration Card (ONOR), E-Shram Card (especially bank account seeded) and the Election Commission Card.
- Last but not least, registrations cannot be a source of exclusion of a person from receiving social assistance and benefits.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: National Development Council
Mains level: Paper 3- Dealing with the recession
Context
The Centre is facing a serious financial crisis because of the exigencies created by the pandemic and its own policies. However, monetising assets and cutting down funds to states could aggravate the crisis.
3 Policies aggravating the crisis
1) NMP and disinvestment
- Union Finance Minister, while announcing the National Monetisation Pipeline (NMP), said that asset monetisation is based on the philosophy of creation through monetisation and is aimed at “tapping private sector investment for new infrastructure creation”.
- Loss of dividend: Disinvestment of profitable Navratna companies will result in a loss of dividend, a major source of income for the Centre.
- Loss due to tax exemptions: Tax exemptions to the investors will take away another major share of income.
- Central funds will be squeezed and this, in turn, will have a bearing on state finances.
- NMP will seriously hurt the interests of the country.
2) Cutting down funds to States
- Kerala’s case: The state was getting about 3.92 per cent from the divisible pool in the 1970s and 1980s.
- It came down to 2.66 per cent and 2.34 per cent in the awards of the 12th and 13th Finance Commissions.
- The 14th Finance Commission award increased it to 2.45 (2.50) per cent.
- Now, the 15th Finance Commission has reduced it to 1.92 per cent.
- This arbitrary cut is a result of the adoption of certain new yardsticks by the commission without considering the state government’s views
- The 15th Finance Commission’s special grant (RD grant) of Rs 19,800 crore for this year will no longer be available in the coming years.
- Karnataka and many other states have also suffered because of the policy to reduce the divisible pool share.
3) Tax exemptions and surcharge
- Exemptions amounting to Rs 99,842.06 crore were extended to corporate houses in 2019-20.
- Many taxes on goods were reduced because of electoral compulsions. This reduced central revenues.
- Along with such tax exemptions, the increased use of cesses and surcharges is responsible for the shrinking of the shareable pool.
- The shareable resources with the Centre was around Rs 6.8 lakh crore in 2019-20 which has come down to Rs 5.5 lakh crore in 2020-21.
- All the cesses and surcharges that are not shared with states come to about 20 per cent of the total revenues of the Centre.
- States have been demanding that this money should be shared with them, particularly while fighting a pandemic.
- States complaining for resources does not augur well for cooperative federalism.
Way forward
- Developing basic infrastructure and the production sector is the only way to face an economic crisis.
- That should not be done by selling or handing over public assets to private individuals and corporations.
- We need massive public investment that will help people to form cooperatives and collectives in agriculture and industrial production.
- Parliament, the National Development Council and the GST Council should discuss this unprecedented situation.
Conclusion
We need to find a way out collectively. Handing over the rights on public properties to private individuals will take the country back to the colonial era. This must not be allowed.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GST
Mains level: Paper 3- Changes needed in GST
Context
After one and a half years of dispute, and with the economy showing signs of recovery, a path forward for the GST finally seems visible. This opportunity needs to be seized to strike the Centre-State bargain.
How GST performed so far
- The contributors are many but the critical one has been simply a lack of revenues.
- Initially, the GST performed well, with collections soaring to Rs 11.8 lakh crore in the first full year of implementation in 2018-19.
- But in 2019-20, the growth rate decelerated sharply. And in 2020-21, collections actually fell.
- As future collections became uncertain, a gap opened up between the amount that the Centre felt it could afford to promise and the minimum that the states felt they needed and were entitled to.
- More recently, however, confidence in GST has improved.
- Collections have revived, averaging Rs 1.1 lakh crore in the first five months of the current fiscal year, exceeding even pre-pandemic levels.
What explains the weak revenue performance of the GST?
- Slowing economy: The GST’s past performance now seems much better than it once did.
- We now know that after 2018-19, nominal GDP growth slowed from 10.5 per cent in 2018-19 to 7.8 per cent the next year and -3 per cent in 2020-21.
- Effective rate cuts: The RBI has pointed out, the effective tax rate has fallen by nearly 3 percentage points because of rate cutting in 2019, in which both the Centre and states were complicit.
- Thus the weak revenue performance of the GST now seems attributable to wider economic difficulties and policy actions, rather than problems with the tax itself.
Necessary changes: Opportunity for striking bargain for Centre and States
1) Principle of compensation must be re-cast: Create revenue buffer
- As the GST was a new tax, so states were guaranteed against the teething troubles that would inevitably arise for the next five years.
- Five years on, this logic is less compelling.
- The GST as tax reform has reached maturity, well understood by producers, consumers, and tax officials.
- At the same time, the last few years have exposed the vulnerability of the states to shocks such as Covid-19 pandemic.
- Way forward: To prevent this situation from recurring, the authorities should create a revenue buffer that could be tapped in a time of need.
- In sum, there is a bargain waiting to be struck: The states give up their demand for an extension of the compensation mechanism, while the Centre offers a new counter-cyclical buffer.
- As the figure shows, in good economic times, GST revenues will be robust but it is against downturns that states need protection.
- The shift to revenue insurance, in turn, should allow the compensation cess to be abolished.
2) The GST structure needs to be simplified and rationalised
- The GST structure needs to be simplified and rationalised, as recommended by the Fifteenth Finance Commission and the Revenue Neutral Rate report.
- New rate structure: A new structure should have one low rate (between 8 and 10 per cent), one standard rate (between 16 and 18 per cent) and one rate for all demerit goods.
- The single rate on demerit goods also requires eliminating the cesses with all their complexity.
3) The GST Council’s working needs changes
- Consensus-based decision making in GST Council can be sustained only if there is a shared sense of participatory and inclusive governance.
- Nearly two decades ago, when the VAT was being introduced, Yashwant Sinha established a culture of consensual discussions on indirect taxes.
- He did this by requiring the Empowered Committee of State Finance Ministers to be headed by a finance minister from an Opposition-run state government.
- The spirit of this idea could be translated to the GST Council.
Consider the question “Inherent importance of GST and its significance for the cooperative federalism underline the necessity for the Centre and the States to strike the win-win bargain. In light of this, examine the issues with the GST and suggest the way forward to deal with these issuef.”
Conclusion
Cooperative federalism is not a gesture or one-off outcome. It is, above all, a disposition, resulting from quotidian democratic practice. By rehabilitating cooperative federalism’s finest achievement — the GST — the Centre and states can help restore India’s broader economic prospects.
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From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Issues with the NEET
The Tamil Nadu Assembly has passed a bill exempting the State from the National Eligibility-cum-Entrance Test (NEET) for admission to undergraduate (UG) medical courses.
About NEET
The NEET has replaced the formerly All India Pre-Medical Test (AIPMT).
It is an all-India pre-medical entrance test for students who wish to pursue undergraduate medical (MBBS), dental (BDS) and AYUSH (BAMS, BUMS, BHMS, etc.) courses.
The exam is conducted by National Testing Agency (NTA).
TN law: Permanent Exemption for NEET
- The Bill exempts medical aspirants in Tamil Nadu from taking NEET examination for admission to UG degree courses in Indian medicine, dentistry and homeopathy.
- Instead, it seeks to provide admission to such courses on the basis of marks obtained in the qualifying examination, through “Normalization methods”.
- The aim of the Bill is to ensure “social justice, uphold equality and equal opportunity, protect all vulnerable student communities from being discriminated”.
- It seeks to bring vulnerable student communities to the “mainstream of medical and dental education and in turn ensure a robust public health care across the state, particularly the rural areas”.
Why TN is against NEET?
- Non-representative: TN opposes because NEET undermined the diverse societal representation in MBBS and higher medical studies.
- Disfavors the poor: It has favored mainly the affordable and affluent sections of the society and thwarting the dreams of underprivileged social groups.
- Exams for the elite: It considers NEET not a fair or equitable method of admission since it favored the rich and elite sections of society.
- Healthcare concerns: If continued, the rural and urban poor may not be able to pursue medical courses.
Can any state legislate against NEET?
- Admissions to medical courses are traceable to entry 25 of List III (Concurrent List), Schedule VII of the Constitution.
- Therefore, the State can also enact a law regarding admission and amend any Central law on admission procedures.
Views of the stakeholders appointed by TN
- A majority of stakeholders were not in favor of the NEET requirement.
- NEET only worked against underprivileged government school students, and had profited coaching centres and affluent students.
- NEET had not provided any special mechanism for testing the knowledge and aptitude of the students.
- The higher secondary examination of the State board itself was an ample basis for the selection of students for MBBS seats.
A move inspired by a SC Judgement
- This thinking of the State may be due to the observation made by the Supreme Court in the selection process of postgraduate (PG) courses in medicine.
- The Medical Council of India (MCI) had prescribed certain regulations providing reservations for in-service candidates.
- The Supreme Court struck down regulation 9(c) made by the MCI on the ground of the exercise of power beyond its statute.
Not a similar case
- It must be remembered that the Supreme Court was only dealing with a regulation framed by the MCI.
- The requirement of NEET being a basic requirement for PG and UG medical courses has now been statutorily incorporated under Section 10D of the Indian Medical Council (IMC) Act.
- When the Tamil Nadu government issued an order in 2017 providing for the reservation of 85% of the seats for students passed out from the State board it was struck down by the Madras High Court.
- The introduction of internal reservation for government school students is under challenge before the Madras High Court. Similarly, NEET as a requirement is also pending in the Supreme Court.
- Unless these two issues are decided, NEET cannot be removed by a State amendment.
The bill cannot be passed
- The present move to pass a fresh Bill on the same lines is most likely to meet the same fate.
- The President refused to give his assent to this bill.
- It is significant that no other State in India has sought an exemption from NEET and, therefore, exempting Tamil Nadu alone may not be possible.
- Even among the seats allotted to the State, there is no bar for students from other States from competing or selecting colleges in Tamil Nadu.
The bigger question
- The question is not whether the State government can amend a law falling under the Concurrent List.
- The question is whether the State government can exempt Section 10D of the IMC Act, which is a parliamentary law that falls under the Central List (Entry 66).
- Moreover, the Supreme Court has also upheld NEET as a requirement.
- Mere statistics highlighting that a majority of the stakeholders do not want NEET in Tamil Nadu is not an answer for exempting the examination.
Again, it is State and Centre are at crossroads
- Normally, a Bill requires assent from the Governor to become a law. Stalin’s contention is that this Bill deals with education, which is a Concurrent List subject.
- Admissions to medical courses fall under Entry 25 of List III, Schedule VII of the Constitution, and therefore the state is competent to regulate the same.
- Yet, as far as matters relating to the determination of standards for higher education are concerned, the central government has the power to amend a clause or repeal an Act.
- So, just the passing of the Bill doesn’t enable the students to get exempted from writing NEET.
- Already, Union Higher Education Secretary Amit Khare has held that if any State wants to opt out of the exam, it has to seek permission from the Supreme Court.
Options for Tamil Nadu
- Data is necessary only when there is power to legislate on the subject concerned.
- Since the Bill, which will become an Act only after the President’s nod, will come into effect only from the next academic year, the battle for and against the NEET requirement will continue in courts.
- Hopefully, the courts will determine the legality and have a definite solution to the question of medical admissions within the next year.
- Till such time, students who wrote NEET will fill the seats under the State quota.
Way forward: Preventing Commercialization of Medical Education
- The time may also have come to examine whether NEET has met its purposes of improving standards and curbing commercialization and profiteering.
- Under current norms, one quite low on the merit rank can still buy a medical seat in a private college, while those ranked higher but only good enough to get a government quota seat in a private institution can be priced out of the system.
- The Centre should do something other than considering an exemption to Tamil Nadu.
- It has to conceive a better system that will allow a fair admission process while preserving inter se merit and preventing rampant commercialization.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: V-Dem rating
Mains level: Paper 2- Declining democratic values
Context
India has performed poorly in every major global democracy report in the past few years.
India’s declining performance
- The Freedom House Index for 2021 pushed India down four points from last year, bringing its score from 71 to 67.
- V-Dem, the world-renowned think-tank from Sweden, has similarly downgraded India.
- It has labelled India an “electoral autocracy”.
- The Economist Intelligence Unit (EIU) study has shown India’s ranking has taken a nosedive from 27 to 53 out of 167 countries.
- The Reporters without Borders’ Press Freedom Report has placed India 167th out of 183 countries.
- Freedom House has also given India a score of 2 out of 4 in terms of press freedom.
Factors pointed out by the rating agencies
- The country has seen increased pressure being put on human rights organisations and civil rights groups.
- Journalists and activists have been intimidated and incarcerated, and minorities have been specifically targeted.
- Hate and polarisation are rampant.
- The most worrying trend has been the crackdown on freedom of speech, with statistics showing a 165 per cent increase in sedition cases between 2016 and 2019.
Issues with rejecting of global democratic indexes
- Indian government sought to challenge the rating of EIU after it released its 2021 report earlier this year.
- An offer made by the Indian government to supply ‘accurate’ data pertaining to the democratic index was firmly refused by the EIU.
- Shooting the messenger: This seeming retraction of Indian democratic values in global reports and the Indian indignation regarding it seems to be a clear case of shooting the messenger.
- Harming democracy: The Indian refusal to acknowledge and remedy them is irreparably harming its democracy.
- Trying to influence the rating agencies to doctor data to suit us is reprehensible.
- Difficulty for policymakers: Kaushik Basu, formerly the chief economist of the World Bank, commenting on this episode has said that the tendency of fabricating data to present an alternative image has beset the Indian administration.
- Not showcasing actual data is making it difficult for policymakers to attempt to remedy the situation.
Way forward
- A committee of secretaries’ meeting on January 30, 2020 discussed how India fared on various important parameters based on 32 internationally recognised indices in order to improve the performance on these indices.
- The desire to introspect and analyse what needs to be done to improve is correct and laudable.
- Let NITI Aayog and all concerned organisations focus on improving our performance in all the declining indicators.
Consider the question “Ranking of the various agencies shows the declining trend of democratic values in India. What are the reasons for such decline?vSuggest the steps to arrest this decline.”
Conclusion
Instead of denying these rankings and the reports of these agencies, India must work on fixing them.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: SCO
Mains level: Role of SCO in Afghan Peace
On the face of it, the summit meeting of the Shanghai Cooperation Organisation (SCO) this week in Dushanbe, Tajikistan, is well placed to lead the stabilization of Afghanistan after the American retreat.
About SCO
- After the collapse of the Soviet Union in 1991, the then security and economic architecture in the Eurasian region dissolved and new structures had to come up.
- The original Shanghai Five were China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan.
- The SCO was formed in 2001, with Uzbekistan included. It expanded in 2017 to include India and Pakistan.
- Since its formation, the SCO has focused on regional non-traditional security, with counter-terrorism as a priority.
- The fight against the “three evils” of terrorism, separatism and extremism has become its mantra. Today, areas of cooperation include themes such as economics and culture.
India’s and the SCO
- India and Pakistan both were observer countries.
- While Central Asian countries and China were not in favor of expansion initially, the main supporter — of India’s entry in particular — was Russia.
- A widely held view is that Russia’s growing unease about an increasingly powerful China prompted it to push for its expansion.
- From 2009 onwards, Russia officially supported India’s ambition to join the SCO. China then asked for its all-weather friend Pakistan’s entry.
Afghanistan and SCO
- Afghanistan has been engaged with the SCO for over 15 years.
- In 2012, Afghanistan became an observer in the SCO when then-Afghan president Hamid Karzai visited China.
- In 2015, Kabul applied for full membership in the group.
- Kabul sought to be a member of the SCO as it believes that it is a natural candidate.
- Geographically, Afghanistan is a part of the SCO region.
Limited (or No) progress made by SCO
- For all the political hype, the SCO has not deepened regionalism in Central Asia.
- Two decades after its formation — it was set up just weeks before the 9/11 attacks on New York and Washington — the institutional promise of the SCO remains just that — a promise.
- Seen from the subcontinent, the SCO certainly looks better than the South Asian Association of Regional Cooperation (SAARC).
- That India and Pakistan, whose differences have prevented even regular meetings of SAARC, are actively participating in the SCO, would point to its attractiveness.
- But then SAARC is such a low bar.
Opportunities for role-play in Afghanistan
The crisis in Afghanistan presents a major opportunity for the SCO to realize its regional ambitions.
- Involvement of regional superpowers: The SCO’s importance for Afghanistan seems self-evident when you look at its sponsors and members. Its founding leaders are the two great powers of the east — Russia and China.
- Neighborhood are members: Its other initial members were Uzbekistan, Tajikistan, Kyrgyzstan, and Kazakhstan to the north and northeast of Afghanistan.
- Observers vested interest: Besides Afghanistan, Iran, Belarus and Mongolia are observers. Iran is said to be on track for full membership.
- Many dialogue partners: The SCO has a number of “dialogue partners”. They include Armenia and Azerbaijan from the neighboring Caucasus region and Turkey a step further to the West. Nepal and Sri Lanka from the subcontinent and Cambodia from southeast Asia are also dialogue partners.
Issues with SCO
- China centrism: For an organization that bears the name of Shanghai, but is focused on Central Asia, its associates look disparate.
- Lack of coherence: The Central Asian members of the SCO have quarrels of their own, and have struggled to develop collective approaches to their common regional security challenges.
- Dint go beyond dialogues: As it broadened its membership, the SCO has, unsurprisingly, struggled to deepen institutional cooperation.
- Not comprehensive: There is also one important country missing in the mix. It is Turkmenistan, which shares an 800 km border with Afghanistan and a 1,150 km border with Iran.
- Neutrality of members: The organizing principle of Turkmenistan rulers is absolute “neutrality” — think of it as an extreme form of “non-alignment”. It refuses to join any regional institution, political or military.
- Individual interests: Russia’s effort to build a regional institution in its Central Asian periphery ran parallel to its plans for the so-called “strategic triangle” with China and India. India and Pakistan, needless to say, are poles apart on the Taliban.
No common interest in Afghan Peace
- The US military retreat from Afghanistan has brought cheer to both Moscow and Beijing, although publicly they criticize President Joe Biden’s hasty retreat.
- The US retreat might weaken the glue that binds Moscow and Beijing in Central Asia or tightens it.
- Although Russia and China are closer to each other than ever before, their interests are not entirely the same in Central Asia.
Russian alternatives to SCO
(1) Central Security Treaty Organisation
- While military confidence-building measures have grown under the SCO banner, Russia had its own security organisation for the region, called the Central Security Treaty Organisation (CSTO).
- Three of the SCO members — Kazakhstan, Kyrgyzstan, and Tajikistan — along with Armenia and Belarus are members of the CSTO.
- Russia sees itself as the sole protector of the former Soviet Republics and may not be ready to share that role with China — “yes” to coordination, but “no” to a Sino-Russian security dyarchy.
(2) Eurasian Economic Union
- Moscow also appears reluctant to back Chinese proposals to promote trade integration under the SCO banner; it prefers the Eurasian Economic Union (EAEU) under its own leadership.
- China is not a member of either CSTO or EAEU. This is one reason for the weakness of SCO regionalism.
Other deterrents
(1) Affinity with Taliban
- China has openly admitted to cooperating with the Taliban by restoring all formal diplomatic ties. It is the first such country to acknowledge the Taliban.
- Turkmenistan too, which is not part of SCO, has been quite open to engaging the Taliban in sync with its principles of neutrality.
- Some Russian analysts see Turkmenistan as the potential weak link in the defense against the Taliban’s potential threats to the region.
- Uzbekistan seems open to a cautious engagement with the Taliban.
(2) Iranian aspirations for unwarranted interference (just like Turkey does regarding Kashmir)
- Iran, which has ethnic and linguistic links with the Persian-speaking Tajiks, appears equally worried about the Taliban’s policies towards minorities.
- As Moscow and Beijing, Tehran was happy to see the Americans leave in humiliation and appeared hopeful of a positive engagement with the Taliban.
- Those hopes may have been suspended for now, if not discarded.
What can the SCO do now?
- The Afghanistan debacle presents an opportunity for the SCO to play a constructive role in meeting the region’s burgeoning security challenge.
- Providing humanitarian relief, tending to refugees, facilitating an inclusive dialogue and national reconciliation constitute immediate and long-term goals in which the organization can fill a role.
- The SCO can also pressure the Taliban to share power with other domestic actors and refrain from providing sanctuary to foreign terror organizations (through foreign funds from Saudi*).
- It can suspend Afghanistan’s observer status, curtail border traffic or withhold recognition, investments, and aid, should Kabul be found wanting.
Way forward
- While the SCO is not an impressive regional institution, it remains an important diplomatic forum.
- India has sought to make full use of the SCO’s diplomatic possibilities without any illusions about its effectiveness.
- At the SCO summit this week, PM Modi would remind other leaders of the “three evils” that the SCO set out to defeat — terrorism, extremism, and separatism.
- Few would disagree that the Taliban embodied all the three sins in the past. Today, the Taliban and its mentor Pakistan say the sinner wants to become a saint.
- India must focus on finding common ground with those members of the SCO who do share India’s concerns about Afghanistan.
Conclusion
- Given this divergence, it is unlikely that the SCO can come up with a “regional solution” for the Afghan crisis.
- The only real Afghan convergence today is between Pakistan and China.
- Expect them to try and nudge the SCO towards a positive engagement with the Taliban.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 25 and 26
Mains level: Paper 2- Evolution of rights-bases jurisprudence
Context
On August 14, 2021, the Tamil Nadu government appointed 24 trained archakas (priests) in temples across the State. In the weeks since, a series of writ petitions have been filed before the Madras High Court assailing these appointments.
Administration of Hindu temples in Tamil Nadu by government and challenges to it
- The Hindu Religious and Charitable Endowments (HR&CE), 1959, is the governing law on the administration of Hindu temples and religious institutions.
- In 1971, Section 55 of the HR&CE Act was amended to abolish hereditary priesthood.
- Removal of caste-based discrimination: In 2006, the amendment provided for the appointment of sufficiently trained Hindus irrespective of their caste as archakas to Hindu temples by the government.
- Challenges in the Court: Challenges to both amendments were taken to the Supreme Court, which upheld the law, as amended.
- In Seshammal v. Union (1972), the Supreme Court observed that the amendment to the HR&CE Act abolishing hereditary priesthood did not mean that the government intended to bring about any “change in the rituals and ceremonies”.
- Constitutional legitimacy: In Adi Saiva Sivachariyargal v. Govt. of Tamil Nadu (2015), the Supreme Court observed that “the constitutional legitimacy, naturally, must supersede all religious beliefs or practices”.
- The Court further went on to state that appointments should be tested on a case-by-case basis and any appointment that is not in line with the Agamas will be against the constitutional freedoms enshrined under Articles 25 and 26 of the Constitution.
Judicial balancing of the various rights by the Supreme Court
- In Indian Young Lawyers’ Association v. State of Kerala (the Sabarimala case) and Joseph Shine v. Union of India (2018), the Supreme Court reiterated the need to eliminate “historical discrimination which has pervaded certain identities”’, “systemic discrimination against disadvantaged groups”.
- In these cases the Supreme Court rejected stereotypical notions used to justify such discrimination.
- In all these cases, the Court prioritised judicial balancing of various constitutional rights.
- The constitutional order of priority: In the Sabarimala case, it held that “in the constitutional order of priorities, the individual right to the freedom of religion was not intended to prevail over but was subject to the overriding constitutional postulates of equality, liberty and personal freedoms recognised in the other provisions of Part III”.
Way forward
- Building on the Sabrimala case: The constitutional courts will now be called upon to build on the gains of the Sabarimala case when it comes to administration of temples, insofar as it concerns matters that are not essentially religious.
- Dealing with the gender bias: The Supreme Court, in Navtej Singh Johar v. Union of India (2018), interpreted Article 15 as being wide, progressive and intersectional.
- Today, while most of the debate is around whether men from all caste groups can become archakas, we have failed to recognise the gender bias inherent in these discussions.
Consider the question “We have been witnessing the evolution of rights-based jurisprudence in the various judgements of the Supreme Court. This will help to eliminate “systemic discrimination against disadvantaged groups”, and reject stereotypical notions used to justify such discrimination. Comment.”
Conclusion
At once, caste orthodoxy and patriarchy entrenched within the realm of the HR&CE Act can be eliminated and supplanted with a vision of a just, equal and dignified society.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Autonomous districts, Sixth Schedule
Mains level: Issues related to Assymetric Federalism in India
As a normative idea and an institutional arrangement that supports the recognition and provision of an expansive ‘self-rule’ for territorially concentrated minority groups, asymmetric federalism has recently received bad press in India.
India’s Federalism: A backgrounder
- Nations are described as ‘federal’ or ‘unitary’, depending on the way in which governance is organised.
- In a unitary set-up, the Centre has plenary powers of administration and legislation, with its constituent units having little autonomy.
- In a federal arrangement, the constituent units are identified on the basis of region or ethnicity and conferred varying forms of autonomy or some level of administrative and legislative powers.
- In India, the residuary powers of legislation, that is the power to make law in a field not specified in the Constitution, is vested in Parliament.
- Hence India has a quasi-federal framework.
Why is it said that India has asymmetric federalism?
- The main forms of administrative units in India are the Centre and the States.
- Just as the Centre and the States do not have matching powers in all matters, there are some differences in the way some States and other constituent units of the Indian Union relate to the Centre.
- This creates a notable asymmetry in the way Indian federalism works.
- But there are other forms, too, all set up to address specific local, historical and geographical contexts.
The asymmetric structure
- Besides the Centre and the States, the country has Union Territories with a legislature, and Union Territories without a legislature.
- When the Constitution came into force, the various States and other administrative units were divided into Parts A, B, C and D.
- Part A States were the erstwhile provinces, while Part B consisted of erstwhile princely states and principalities. Part C areas were the erstwhile ‘Chief Commissioner’s Provinces’.
- They became Union Territories, and some of them initially got legislatures and were later upgraded into States.
- Himachal Pradesh, Manipur, Tripura, Mizoram, Arunachal Pradesh and Goa belong to this category.
Power apparatus in these asymmetries: Sixth Schedule
- The Sixth Schedule to the Constitution contains provisions for the administration of tribal areas in Assam, Meghalaya, Tripura and Mizoram.
- These create autonomous districts and autonomous regions.
- Any autonomous district with different Scheduled Tribes will be divided into autonomous regions.
- These will be administered by District Councils and Regional Councils.
- These Councils can make laws with respect to allotment, occupation and use of land, management of forests other than reserve forests and water courses.
- Besides they can regulate social customs, marriage and divorce and property issues.
An integrationist approach adopted by the Constituent Assembly
- Post-independence, India was criticized for arguably becoming a ‘homogenous Hindu nation’ after Partition.
- To counter this, the Gopinath Bordoloi Committee, a sub-committee of the Constituent Assembly sought to accommodate the distinctive identity, culture and way of life of tribal groups in the NE by envisioning ‘self-rule’.
- This distinctive constitutional status to territorially concentrated minorities fosters centrifugal tendencies.
- Asymmetric federalism fosters subversive institutions, political instability and breakup of States.
Curious case of Manipur: Recent developments
- Article 371 gives expansive constitutional powers to Manipur’s Hill Areas Committee (Article 371C) over tribal identity, culture, development and local administration, are exemplars.
- The integrationist approach resonates powerfully in two recent attempts by Manipur’s government to
- stall the introduction and passage of the Manipur (Hill Areas) Autonomous District Council (Amendment) Bill, 2021, and
- induct nine Assembly members from the valley areas into the Hill Areas Committee.
- This move is being perceived as a “malicious” and “direct assault” on the Hill Areas Committee and the constitutional protection accorded to the Hill Areas of Manipur under Article 371C.
A determined move
- These moves marks a calculated initiative to use this as a double-edged sword to simultaneously set apace electoral agenda for the upcoming Assembly elections in early 2022 and reclaim its agency to fortify state-level constitutional asymmetry.
- The attempt to increase membership of the six district councils to 31 members each and secure more powers to the councils by giving more developmental mandate are welcome.
Managing HAC: A difficult task
- If history is any guide, the task of reclaiming the Hill Areas Committee’s agency is not going to be easy.
- Its members often leverage tribe/party loyalty over-commitment to protect constitutional asymmetry and common tribals’ cause.
- How the HAC and various tribal groups strategically navigate their politics to offset the majoritarian impulse to manipulate the legal and political process to dilute/dissolve extant constitutional asymmetry remains to be seen.
Way forward
- There should be sincere commitment to promote tribal development, identity and culture that Article 371C seeks to bridge.
- Recognizing and institutionally accommodating tribal distinctiveness is not just as a matter of political convenience
- This valuable and enduring good will be key to promote the State’s integrity, stability and peace in the long run.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Private Final Consumption Expenditure
Mains level: Paper 3- Measures to sustain the growth momentum
Context
India’s GDP data for Q1 of 2021-22 was released on August 31, 2021. The data revealed the real GDP growth at 20.1% in Q1.
Making sense of the growth
- Base effect: Real GDP growth at 20.1% in Q1 of 2021-22 is largely because of the contraction of 24.4% in the corresponding quarter of the first COVID-19 year, that is, 2020-21.
- The Q1 2021-22 output and GDP growth data reflect a strong base effect since the corresponding levels of Q1 of 2020-21 were significantly adversely impacted by the first wave of COVID-19.
- Fall in magnitude: The magnitude of real GDP fell short of the corresponding level in 2019-20 by a margin of ₹3.3 lakh crore.
- Required rate: A growth rate of 32.3% was required in Q1 of 2021-22 for achieving the same level of real GDP as in Q1 of 2019-20.
- To achieve the annual growth of 9.5% as forecast by both the Reserve Bank of India and the International Monetary Fund for 2021-21, an average growth of 6.8% in the remaining part of the year would be required.
- The task would become relatively more demanding in Q3 and Q4 considering that the real GDP growth was positive at 0.5% and 1.6%, respectively, in the corresponding quarters of 2020-21.
Analysing the demand side
1) Private consumption growth lagging overall GDP growth
- Largest segment: The largest segment of GDP viewed from the demand side is private final consumption expenditure (PFCE).
- Its average share over the last three years (2018-19 to 2020-21) was 56.5%.
- If PFCE were to reach back the 2019-20 level, it should have grown by 35.5% in this quarter.
- The recovery in private consumption demand is lagging behind the overall GDP growth.
- Way forward: Private consumption depends largely on income growth and its distribution.
- Therefore, it would be useful to focus on further supporting income and employment levels for the MSMEs and informal sectors of the economy which have a higher propensity to consume.
2) Export and investment: positive outcome in Q1
- Noticeable positive outcomes in Q1 of 2021-22 came from exports and to some extent, from investment as reflected by gross fixed capital formation (GFCF).
- Exports grew by 39.1% over a contraction of 21.8% in Q1 of 2020-21.
- This differential is reflected in a positive growth of 8.7%.
- Investment: In the case of GFCF, the base effect was quite large.
- Despite a growth of 55.3% in Q1 of 2021-22, its magnitude was still 17.1% lower than the corresponding level in Q1 of 2019-20.
3) Contraction in government final consumption
- The only demand segment which contracted even with reference to Q1 of 2020-21 was government final consumption expenditure (GFCE).
- This contraction was by a margin of (-) 4.8%.
Analysing the output side
1) Key service sectors
- The key service sector — namely trade, transport, storage grew by 34.3% in Q1 of 2021-22 as compared to a contraction of 48.1% in Q1 of 2020-21.
- However, relative to its level in Q1 of 2019-20, the output of this large service sector was significantly lower by 30.2% in Q1 of 2021-22.
- Though public administration, defence and other services showed a growth of 5.8% in Q1 of 2021-22 over Q1 of 2020-21, they actually reflected a contraction of 5.0% as compared to Q1 of 2019-20.
2) Agriculture
- The key positive news came from the agricultural sector which showed a growth of 4.5% in Q1 of 2021-22, in continuation of annual growth of 3.6% in 2020-21.
- Given agriculture’s positive growth in all the quarters of 2020-21, further contribution from this sector to the overall growth may not be expected.
- Its average weight to the overall output is also low at about 15%.
- It is the high weight manufacturing sector and the two substantive service sectors — trade, transport et. al and financial, real estate et al. — which will have to support growth in the remaining part of the year.
Way forward
- Government should raise the demand: The Centre’s fiscal deficit in the first four months of 2021-22 amounted to only 21.3% of the budgeted target as compared to the corresponding average level of 90% over the last four years.
- Clearly, significant policy space is opening up for the government to raise its demand and its contribution to output in the remaining part of the current fiscal year.
- Dealing with likely third wave: Attempts should be made either to bypass or at least curb the adverse impact of COVID-19’s likely third wave.
- Vaccination and investment in health infra: Both the coverage of vaccination and the pace of investment in health infrastructure should be accelerated.
- As revenues improve, expenditures can be increased.
- There is no need to reduce the fiscal deficit below the budgeted level of 6.8% of GDP.
Consider the question “To make up for the loss of output in the last two years India needs to embark on the path of high growth trajectory. Suggest the measure to achieve this objective.”
Conclusion
We need a faster rate of growth to make up for the loss of output in the previous two years from the trend rate. We must lay the foundation for faster growth in this year itself.
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