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Foreign Policy Watch: India-Pakistan

Bilateral trade between India and Pakistan should be first step to normalising links

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: MFN status

Mains level: Paper 2- India-Pakistan relations

Context

The recent partial opening of land borders between India and Pakistan signals a thaw in the troubled relations between the two South Asian neighbours.

How normalising relations with Pakistan help India?

  • Reduce India’s vulnerability to China: From the Indian standpoint, as a Centre for Policy Research report argues, a continuing freeze in relations with Pakistan will “enhance India’s external vulnerability to other actors, in particular, China”.
  • Impact on bilateral trade: After the Pulwama terror attack, bilateral trade between the two countries plummeted from around $2 billion in 2017-18 to a paltry $280 million in 2020-21 (April to February).

Steps to normalise relations

1] Pakistan needs to revoke suspension of trade with India

  • Pakistan needs to revoke the unilateral suspension of trade with India undertaken in August 2019 due to India’s decision to dilute Article 370.
  • Suspension against GATT and SAFTA: The trade suspension by Pakistan is inconsistent with the General Agreement on Tariffs and Trade (GATT) and the South Asian Free Trade Area (SAFTA) agreement — the two international law instruments that regulate trade between India and Pakistan.
  • GATT, as part of the World Trade Organisation (WTO), allows countries to adopt trade-restraining measures on certain grounds such as public health and conservation of exhaustible natural resources (Article XX) and for national security purposes (Article XXI).
  • Neither the WTO nor SAFTA permits a country to suspend trade with another member country on grounds that it disapproves a domestic law enacted by the latter.

2] Pakistan needs to confer MFN status on India

  • Pakistan needs to reverse its practice of not according the most favoured nation (MFN) status to India.
  • MFN is a principle of non-discrimination in trade given in Article I of GATT.
  • Breach of GATT: Pakistan is in breach of Article I of GATT towards India since the formation of the WTO in 1995.

3] India should restore Pakistan’s MFN status

  • India should restore Pakistan’s MFN status that it revoked after the Pulwama terror attack by hiking the tariff rates on all Pakistani imports to an unfeasible rate of 200 per cent.
  • Such a move by India will put the ball in Pakistan’s court.
  • If Pakistan fails to reciprocate, India should exert pressure on Islamabad by mounting a legal challenge.

4] Explore the special trading arrangement under GATT

  • Article XXIV.11 allows India and Pakistan to enter into any special trading arrangement without fully complying with GATT conditions that typically apply to countries signing free trade agreements.
  • This merciful rule that only India and Pakistan enjoy, out of 160 odd WTO members, was incorporated in GATT to enable the two sides to overcome the economic hardships caused by Partition.

Consider the question “How normalising trade relations will India and Pakistan? Suggest the steps both the countries need to take in this regard.” 

Conclusion

India should appreciate that the rise of China, not Pakistan, poses the graver threat. Strengthening bilateral trade can be an important lever towards establishing a working relationship with Pakistan.

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Our Constitution, A Beacon of Freedom

op-ed snap | Polity | Mains Paper 2: Indian Constitution - historical underpinnings, evolution, features, amendments, significant provisions and basic structure
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Making of Indian Constitution

Mains level: Paper 2- Indian Constitution

Context

On November 26, 1949,72 years ago, India adopted new Constitution. Provisions of the Constitution like those pertaining to citizenship, a provisional parliament and other transitional measures came into force immediately, on November 26, 1949.

Challenges faced by the Constituent Assembly

  • Boycott of the members: The body was meant to comprise 296 members but was boycotted by some members who would eventually move to Pakistan.
  • Hence, the assembly would be a 210-member body at the initial sessions.
  • Deft statesmanship, not rage was displayed in response to the boycott.
  • Juristicconcerns: There were other juristic concerns.
  • The colonial constitutionalist Ivor Jennings, who long sought to be involved in India’s drafting project but was refused later, asked, why the Constitution of India “plays down communalism?”
  • This was a stinging question, for Partition was the result of communalism, how could any of us forget that?

Important feature of Indian Constitution: Addressing historical discrimination

  • India’s Constitution is unique in its approach for making reparations for historical discrimination on grounds of caste that defines the present and future of so many Indians.
  • By contrast, America’s Constitution makes no apology nor enables reparations for slavery.
  • Despite being a body that was not significantly diverse, the founders, having appreciated the concerns of their people, were able to stand outside of their own privilege and conceive of a founding document that would speak for those who have been silenced for thousands of years.

What makes the Indian Constitution enduring?

  • After having studied every constitution from 1789 to 2005, Tom Ginsburg of the University of Chicago School of Law and his colleagues concluded that on average a constitution survives for around 17 years. 
  •  France with 14 constitutions, Mexico at five constitutions and neighbouring Pakistan with three constitutions typify the global experience.
  • Expansion of freedoms of citizens: India’s Constitution has endured because its founders, its interpreters — the constitutional courts — and litigants in the form of social movements have all ensured that it is used to consistently expand the freedoms of citizens, even if social morality thinks otherwise.
  • Constitutional morality: The Constitution’s morality has stood firmly with disadvantaged castes, women, and religious minorities.
  • Accommodating marginalised groups: In contemporary times, other marginalised groups like LGBT Indians have been heard by constitutional courts that have unanimously found for their freedoms and for a full equality.

Consider the question “Elaborate on the features that explain the endurance of the Indian Constitution.”

Conclusion

Today, we marvel at the 72nd year of the adoption of our Constitution, and 72 years of our birth as “We the People”. But, as we revel in our good fortune, we must also be aware that its endurance is deeply rooted in the ability of all of us to commit to the project of expanding freedom, not contracting it

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Blockchain Technology: Prospects and Challenges

Is crypto mania more a symptom than a cause?

op-ed snap | Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Blockchain technology

Mains level: Paper 3- Approach towards cryptocurrencies

Context

The draft legislation on crypto currency being introduced in Parliament and the stance of the RBI suggest that consideration is being given to banning crypto currencies in India.

What fascination with crypto reveals about our society?

  • It is about faith in that value is largely a matter of belief.
  • It is about politics because money is always about the allocation of power.
  • The money itself may not be material, but it is still embedded in a materiality.
  • The fact that money is subject to politics is actually the advantage of money.
  • It allows a modicum of collective control over our future, and allows distributive questions to be posed.
  • It is mania because the alchemy of creating something out of nothing is always deeply alluring.
  • Cheap money: The global economy is awash with cheap money.
  • Seeking return: In an Indian context small savers are desperate for return.
  • In this context it is easy for the powerful to misallocate money and the small saver to express desperation by speculation.

Background

  • Faced with the inflation of the 1970s, thinkers like Friedrich Hayek theorised about reasserting the dominance of private currencies, protected from the state.
  • Crypto currencies are a fascinating technological innovation.
  • Part of their initial attraction was that they promised a new governance order. 
  • It is at the confluence of faith, politics, and psychological mania.
  • Solving the problem of trust: This project crucially depended on solving the problem of “trust” on which every currency depends.
  • Crypto seemed to solve that problem, with its decentralised architecture and community and self-verification protocols.

How cryptocurrency poses challenges to the state?

  • No state was going to let go of its power to assert control over the monetary system.
  • Significance of fiat money: The sustenance of state-sponsored fiat money is one of the great achievements of modern state formation and the foundation of its power and legitimacy.
  • Cryptocurrency requires material infrastructure: There was a delusion, as if crypto is conjured out of thin air: It actually requires substantial material infrastructure, which a state could always control.
  • States can shut down mining as China has done.

Way forward

  • We allow people to invest in all kinds of things. Why ban this, especially now that so many investors are in it?
  • Analyse the risk to the financial system: The answer to this question depends on how much risk the existence of crypto assets pose to the stability of the rest of the financial system.
  • Insulate financial system: One answer is if you can insulate the financial system from the gyrations of crypto markets there are few systemic risks.
  • This is why it was a good idea of the RBI to prohibit the entanglement of financial institutions with this market.
  • Instead of just focussing on issues of fraud, money laundering, and private risks, the RBI’s case would be strengthened if it spelled out the systemic risks that crypto might pose to the stability of the real economy.
  • Avoid ban with exception scenario: For political economy reasons, the RBI should avoid a scenario where it bans but then carves out exceptions.
  • Ensuring that trade does not go offshore: The second thing is that if it somehow allows Indians to invest then it has to ensure that trade does not go offshore. 
  • Not fully banning and allowing it offshore will be the worst of both worlds.

Challenges in insulating the crypto market

  • In practice the insulation of crypto markets will be difficult to achieve.
  • Political economy: The first reason is political economy. Once you have a large number of investors, and some influential ones, they will be a vested interest in their own right, potentially demanding the socialisation or mitigation of losses.
  • Impact of volume: The second reason is that it is difficult to pretend that a major new class of assets, especially if volumes grow, does not have systemic effects on the rest of the economy.

Consider the question “What are the risks and advantages provided by the cryptocurrencies? Suggest the approach India should adopt in dealing with cryptocurrencies.”

Conclusion

As the RBI makes the case for banning crypto, we also need to ask, why it is alluring in the first place. What does this mania reveal about our politics and economics?

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Parliament – Sessions, Procedures, Motions, Committees etc

‘Go back to committees’ is the farm laws lesson

op-ed snap | Polity | Mains Paper 2: Executive & Judiciary,Parliament & State Legislatures
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Role of the parliamentary committees

Context

The Prime Minister has informed the nation that the Government is going to repeal the farm laws. This victory indeed takes India’s politics to a new phase — a phase of robust non-political movements with a certain staying power.

Trajectory of the enactment of the farm laws and its shortcomings

  • Farmers not taken into confidence: These laws have a far-reaching impact on the farmers and it was very improper and quite unwise to push them through without taking the farmers into confidence.
  • Question on urgency: Under Article 123 of the Constitution the President can legislate on a matter when there is great urgency in the nature of an emergency and the sitting of Parliament is quite some time away.
  • Farm laws which make radical changes in the farm sector and affect the life of farmers in very significant ways do not have the kind of urgency which necessitates immediate legislation through the ordinances.
  • Bills not referred to committee: It is a wrong impression that Bills which are brought to replace the ordinances are not or cannot be referred to the standing committees of Parliament.
  • The Speaker/Chairman has the authority to refer any Bill except a money Bill to the standing committees.

Significance of parliamentary committees

  • Consultation with Parliament and its time honoured system is a sobering and civilising necessity for governments howsoever powerful they may feel.
  • The accumulated wisdom of the Houses is an invaluable treasure.
  • The experience of centuries shows that scrutiny of Bills by the committees make better laws.
  • The case of the farm laws holds an important lesson for this Government or any government.
  • A proper parliamentary scrutiny of pieces of legislation is the best guarantee that sectoral interest will not jeopardise basic national interest.
  •  So, in any future legislation on farmers it is absolutely necessary to involve the systems of Parliament fully so that a balanced approach emerges.

Way forward

  •  Available data shows that Bills are very rarely referred to the committees these days.
  • Discretion in the presiding officer: House rules have vested the discretion in the presiding officers in the matter of referring the Bills to committees.
  • No reasoned decisions of the presiding officers for not referring them are available.
  • Since detailed examination of Bills by committees result in better laws, the presiding officers may, in public interest, refer all Bills to the committees with few exceptions.
  • In the light of the horrendous experience of the Government over the farm laws, the present practice of not referring the Bills to committees should be reviewed. 

Consider the question ” The experience of centuries shows that scrutiny of Bills by the committees make better laws. In context of this, examine the significance of the parliamentary committees and why fewer bills have been referred to the committees in the recent past?”

Conclusion

Speaker Om Birla has spoken about strengthening the committee system in the recent presiding officers’ conference. One way of strengthening it is by getting all the important Bills examined by them.

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Climate Change Negotiations – UNFCCC, COP, Other Conventions and Protocols

India, while moving to renewable energy needs to focus on sustainable well-being

op-ed snap | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Net-zero through sustainable well being

Context

With current per capita emissions that are less than half the global average, India’s pledge to reach ‘net zero’ emissions by 2070 has cemented India’s credentials as a global leader.

Implication of net-zero by 2070

  • The political implication of the date 2070 is that the world should get to ‘net-zero’ by 2050.
  • For that, the rich countries will need to do more and step up closer to their share of the carbon budget.
  • India’s stand also signals that it will not act under external pressure, as requiring equal treatment is the hallmark of a global power, and will have an impact on other issues.

How focus on coal harms developing countries

  • The subject of oil was not touched at COP26, even as automobile emissions are the fastest growing emissions, because it is a defining feature of western civilisation.
  • Most abundant source of energy: Coal is the most abundant energy source, essential for base load in electrification, and the production of steel and cement.
  • Its use declines after the saturation level of infrastructure is reached.
  • Declining role of G-7 in rule setting: That India and China working together forced the G7 to make a retraction has signalled the coming of a world order in which the G7 no longer sets the rules.
  • Specific language on finance and adaptation: After 40 years there is more specific language on both finance and adaptation finally recognising that costs and near-term effects of climate change will hit the poorest countries hardest.

Feasibility of the goal of ‘net-zero’ by 2070

  • Seeing the challenge in terms of the scale and the speed of the transformation of the energy system assumes that India will follow the pathway of western civilisation.
  • Transition to electrification: India is urbanising as it is industrialising, moving directly to electrification, renewable energy and electric vehicles, and a digital economy instead of a focus on the internal combustion engine.
  • Most of the infrastructure required has still to be built and automobiles are yet to be bought.
  • Investment vs. incurring cost: India will not be replacing current systems and will be making investments, not incurring costs.

Challenge for the West

  • The consumption of affluent households both determines and accelerates an increase of emissions of carbon dioxide.
  • This is followed by socio-economic factors such as mobility and dwelling size.
  • In the West, these drivers have overridden the beneficial effects of changes in technology reflected in the material footprint and related greenhouse-gas emissions.
  • The West has yet to come out with a clear strategy of how it will remain within the broad contours of its carbon budget.
  • And increasing inequality and a rise of protectionism and trade barriers imposing new standards need to be anticipated.
  • This knowledge is essential for national policy as well as the next round of climate negotiations.

Way forward for India

  • Climate change has to be addressed by the West by reducing consumption, not just greening it.
  • Shifting the consumption pattern: Consumption patterns need to be ‘shifted away from resource and carbon-intensive goods and services, e.g. mobility from cars and aircraft to buses and trains.
  • Reducing the carbon intensity: Along with’ reducing demand, resource and carbon intensity of consumption has to decrease, e.g. expanding renewable energy, electrifying cars and public transport and increasing energy and material efficiency’.
  • Equal distribution of wealth and affordable energy use: Equally important, will be achieving a’ more equal distribution of wealth with a minimum level of prosperity and affordable energy use for all’, e.g., housing and doing away with biomass for cooking.
  • Focused research group: The Government now needs to set up focused research groups for the conceptual frame of sustainable well-being.
  • It should analyse the drivers of affluent overconsumption and circulate synthesis of the literature identifying reforms of the economic systems as well as studies that show how much energy we really need for a decent level of well-being.

Role for legislature

  • Fundamental duty: After the Stockholm Declaration on the Global Environment, the Constitution was amended in 1976 to include Protection and Improvement of Environment as a fundamental duty.
  • Use of provision under Article 253: Parliament used Article 253 to enact the Environment Protection Act to implement the decisions reached at the Stockholm Conference.
  • Enabling new set of legislation: The decisions at COP26 enable a new set of legislation around ecological limits, energy and land use, including the efficient distribution and use of electricity, urban design and a statistical system providing inputs for sustainable well-being.

Consider the question “Examine the feasibility of India’s ‘net-zero’ target by 2070, also suggest the way forward for India to achieve the target by focusing on sustainable well being”

Conclusion

For India, in parallel with the infrastructure and clean technology thrust, the focus on a decent living standard leads to behavioural change in the end-use service, such as mobility, shelter and nutrition — for change modifying wasteful trends.

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Women empowerment issues – Jobs,Reservation and education

A multi-pronged approach to end child marriage

op-ed snap | Governance | Mains Paper 2: Laws, Institutions & Bodies Constituted For The Vulnerable Sections
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Issue of child marriage

Context

Reports suggest that more child marriages have been noticed during the Covid pandemic.

Covid-19 and Girls

Socio-economic impacts of Covid-19 are gendered, evident in the form of educational inequality, sexual violence, and increased household burden.

  • Increased domestic violence: In India, the National Commission for Women reported 2.5 times to increase in domestic violence during the initial months of nationwide lockdown.
  • Abuse & Trafficking: Closure of schools and pandemic induced poverty has increased the vulnerability of children especially the girl child to abuse and trafficking
  • School dropout: UNESCO’s Global Education Monitoring Report (2021) throws light on increased educational inequalities for adolescent girls during the Covid-19 crisis. UNESCO estimates that around 11 million girls may not return to school.
  • School Closures pushed Children into Labour: In 2021, says UNESCO, 24 million children may not find their way back to schools after the pandemic. Any child who is not in school is a potential child laborer.
  • Child Marriages: India witnessed an increase in the number of child marriages since 2020. Girls are further at risk – married off early, these child brides are also often child laborers.
  • Reduced Education Budget: Despite knowing the impact of the Pandemic on the education system & thus on Children’s future, the Union budget has Rs 5,000 crore less to spend on education for children this year.
  • Digital gender gap: The digital gender gap deters girls’ remote education and access to information.

Child Marriage

  • It is defined as a marriage of a girl or boy before the age of 18 and refers to both formal marriages and informal unions in which children under the age of 18 live with a partner as if married.
  • UNICEF estimates suggest that each year, at least 1.5 million girls under 18 get married in India, which makes it home to the largest number of child brides in the world – accounting for a third of the global total.
  • A recent study by the Lancet shows that up to 2.5 million more girls (below the age of 18) around the world are at risk of marriage in the next 5 years because of the Covid-19 pandemic.

Prevalence of child marriage in India

  • Data from the fourth round of the National Family Health Survey (NFHS4) in 2015-16 shows that even before Covid, one in four girls in India was being married before 18.
  • Around 8 percent of women aged 15-19 years were mothers or pregnant at the time of the survey.
  • The first phase findings of NFHS5 (2019-20) show that the needle has not moved substantially on ending child marriage.

Why did Child Marriages have increased during Lockdowns?

  • Lack of Alert Mechanism: Earlier, when child marriages happened at wedding halls, temples, etc, there were people who would alert the relevant authorities or activists who would be able to reach on time to stop it.
    • But now, with marriages happening at homes, we may get fewer alerts and our going there could be treated as trespass.
  • Pandemic Induced Pressures: Economic pressures due to the pandemic have pushed poor parents to marry off girls early.
    • With no schools, the safety of children, particularly girls, was a major reason for the increase in violence against children and child marriages.

Causes for Child Marriages

  • Age Factor: Some parents consider the age period of 15-18 as unproductive, especially for girls, so they start finding a match for their child during this age period.
    • Further, the Right To Education Act makes education free and compulsory up to the age of 14 only.
  • Insecurity: Law and Order are still not able to provide a secure environment for the girls in adolescent age, so some parents get their girl child married at a young age.
  • Other Reasons:
    • Poverty,
    • Political and financial reasons,
    • Lack of education,
    • Patriarchy and gender inequalities, etc.

Consequences of child marriage

  • Violation of human rights: Child marriage violates girls’ human rights. It makes them almost invisible to policy.
  • Impact on education and health: It cuts short their education, harms their health, and limits their ability to fulfill themselves as productive individuals participating fully in society.
  • The low domestic status of teenage wives typically condemns them to long hours of domestic labor; poor nutrition and anemia; social isolation; domestic violence; early childbearing; and few decision-making powers within the home.
  • Malnutrition: Poor education, malnutrition, and early pregnancy lead to low birth weight of babies, perpetuating the intergenerational cycle of malnutrition.
  • The costs of child marriage include teenage pregnancy, population growth, child stunting, poor learning outcomes for children, and the loss of women’s participation in the workforce.

What should be the policy interventions to end child marriage?

  • CCTs: Conditional cash transfers (CCTs) have been the main policy instrument introduced by most states in the last two decades to end child marriage.
  • CCTs alone cannot change social norms. We need a comprehensive approach.
  • Legislative measures: Legislation is one part of the approach.
  • Karnataka amended the Prohibition of Child Marriage Act in 2017, declaring every child marriage, making it a cognizable offense.
  • Expansion of education: These include expansion of secondary education, access to safe and affordable public transport, and support for young women to apply their education to earn a livelihood.
  • Expansion of education goes beyond access. Girls must be able to attend school regularly, remain there, and achieve.
  • States can leverage their network of residential schools, girls’ hostels, and public transport, especially in underserved areas, to ensure that teenage girls do not get pushed out of education.
  • Teachers should hold regular gender equality conversations with high school girls and boys to shape progressive attitudes that will sustain them into adulthood.
  • Empowerment measures: Empowerment measures, too, are required to end child marriage, such as community engagement through programs like Mahila Samakhya.
  • Children’s village assemblies in the 2.5 lakh gram panchayats across India can provide a platform for children to voice their concerns.
  • Government actions driving social change: Field bureaucrats across multiple departments, including teachers, Anganwadi supervisors, panchayat, and revenue staff, all of whom interact with rural communities, should be notified as child marriage prohibition officers.
  •  Decentralizing birth and marriage registration: Most important of all, decentralizing birth and marriage registration to gram panchayats will protect women and girls with essential age and marriage documents, thus better enabling them to claim their rights.

Consider the question “What are the consequence of child marriage? Suggest the measures to deal with the issue.”

Conclusion

We need to adopt a comprehensive approach to deal with the problem of child marriage. The approach should include a focus on education and legal measures.

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Telecom and Postal Sector – Spectrum Allocation, Call Drops, Predatory Pricing, etc

The growth and inclusion potential of India’s telecom sector

op-ed snap | Economics | Mains Paper 3: Awareness in various sc and tech fields,Inclusive Growth & Issues,Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Challenges facing the telecom sector

Context

Shortly after the Cabinet announced nine structural and procedural reforms in September to address the deep financial woes of telcos, Vodafone Idea and Bharti Airtel hiked their tariff.

About the package for telecom sector

  • The telecom relief package announced by the government in September supports proposals that have been repeatedly presented to the government by the regulator, industry associations and think tanks.
  • Risk of duopoly: With the risk of a duopoly looming large, the government was pushed to take up these long-pending decisions that included nine key changes.
  • Provisions in the package: Besides providing immediate relief on payment of licence fee and penalties due to the government, the package increased FDI limits, extended licence tenure to 30 years from 20, removed charges on spectrum-sharing and proposed timelines for spectrum auctions.
  • The package will undoubtedly have a positive short-term impact and perhaps safeguard competition in the future.

Reforms and  challenge of addressing the inequality

  • From socialist to market-oriented economy: In July this year, we celebrated three decades of India’s 1991 reforms, one that catapulted India from being a socialist economy with a heart but no trickle-down, to a market-oriented economy with a mind but also very little trickle-down.
  • Inequality has been a feature of both models.
  • The 2018 Oxfam report showed that 10 per cent of the richest Indians took home 77.4 per cent of wealth (compared to 73 per cent the year before).
  • Moreover, 58 per cent of India’s wealth was in the hands of 1 per cent of the country’s population.
  • Changes in the modes of distribution: In the pre-1991 period, the principal modes of redistribution were taxation and public sector operations.
  • In the post-1991 period, it has been a combination of taxation, technology, smartphones and the associated direct benefit transfers.

Role of telecom sector in addressing the challenge of achieving growth and inclusion

  • High growth dividend of telecom sector: Every 10 per cent increase in investment in telecom, for example, leads to a 3.2 per cent increase in GDP growth for India.
  • Not only is the growth dividend positive, it is large.
  • Mobile as a mean of financial integration: At the same time, the mobile phone has become a means for sophisticated financial integration, as shown by the expanding usage of pre-paid payment instruments and mobile banking.
  • The Jan-Dhan Yojana (JDY) attempts to include the marginalised and unbanked through technology.
  • As of October 2021, a total of 440 million bank accounts have been opened and more than 310 million RuPay cards have been issued under the latter, indicating the large unmet demand for banking services.
  • Making transfers predictable and targeted: The Jan-Dhan-Aadhaar-Mobile (JAM) trinity ties the Aadhaar number to an active bank account, making income transfers predictable and targeted.
  • There is already evidence that payments through Aadhaar-linked bank accounts have increased efficiency and reduced leakages.

Way forward

  • Predictable and less erratic telecom policy: The benefits of digitalisation could have been much larger and more widespread had telecom policy been more predictable and less erratic.
  • That Indian reforms more often than not happen on the back of a crisis is true for the telecom sector.
  • The principal motive of the New Telecom Policy of 1999 was to rescue the deeply indebted sector of its own reckless bidding by replacing the fixed licence fee system with a revenue-sharing regime.
  • In hindsight, it was the right thing to do since it threatened business continuity.
  • The move to auction spectrum “for all times to come” in 2008 was necessitated by the administrative bungling in spectrum assignment.
  • Quick adaptation: A question we pose is why did it take a crisis — a grave one at that — to push the needle on policy change?
  • It is a a reasonable expectation of policy to adapt quickly and not wait for a crisis to emerge.

Consider the question “Telecom sector could play an important role in achieving the growth with inclusion. In context of this, examine the challenges facing the sector and suggest the measures to deal with these challenges.”

Conclusion

The seemingly naĂŻve question about the adaptation in policies may not be as credulous for the intensely dynamic digital markets. For there is no point shutting the stable door after the horse has bolted.

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Start-up Ecosystem In India

Risks involved in over-valued unicorns

op-ed snap | Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper-Unicorns in Indian economy and issues with their valuation

Context

The biggest-ever initial public offering (IPO) in India fell flat on its face on the first day of its listing in the stock exchange, with shares being traded at prices less than 27% of the IPO price.

Rise of unicorns in India and factors driving it

  • Unicorns in diverse sectors: There has been a unicorn gale in India in recent years, covering diverse sectors from fintech to cloud kitchen.
  • Growth in digital payment is reflected in the fintech sector that has contributed the most to the unicorn list.
  • Factors driving growth: An ecosystem which combines thriving digital payments, a growing smartphone user base and digital-first business models adopted by many start-ups has driven expectations of investors, resulting in large-scale fund flows into new business ventures.
  • Growing smartphone user: Expectations are high as the country has around 640 million Internet users, of which 550 million are smartphone users.
  • Growing digital payments: Digital payment has seen a growth of 30.19% as of March 31, 2021 and by the end of September 30, the unified payments interface (UPI) registered 3.5 billion transactions amounting to ₹6.54 trillion.

FinTech and EdTech leading unicorns

  • American investment firms Tiger Global and Sequoia Capital have been the major investors, providing very quick follow-up rounds of funds across all stages and sectors.
  • Fundamental financial performance of the business is not factored in these decisions which could lead to biased valuations.
  • Idea of disruptive technologies: The idea of disruptive technologies has become a buzzword for characterising start-ups.
  • The idea was that start-ups with limited resources can aim at technology disruption by inventing an entirely new way of getting something done.
  • The story is similar in educational technologies (EdTech) as well.
  • The novel coronavirus pandemic has been a blessing in disguise for EdTech firms, as it is this external environment that is pushing the industry, giving it an acceleration by four to five years.
  • Too many acquisitions with big ambitions to grow inorganically puts pressure on the balance sheet in the years to come as some of the new acquisitions are likely to fail.
  • Even, EdTech firms with reasonably good business models are highly overvalued due to abundant liquidity.
  • Cost of achieving behaviour change: Almost every second advertisement on primetime television is either of a digital payment firm or EdTech platform.
  • New firms in services will have to indulge in this process for a longer period than firms in other industries such as transportation as these firms have to bring about a particular kind of change that customers are significantly comfortable using the service.
  • Firms burn cash to give massive discounts to customers in the hope that people will get so habituated to these platforms that they will remain active even when the prices are hiked.
  • To some extent this worked in the context of mobile telephone services as Indians have got hooked to mobile phones and reoriented spending to buy more sophisticated smartphones and data.
  • But in other services this does not seem to work so easily.
  • The projection flaw: Data by the Centre for Monitoring Indian Economy (CMIE) points to this flaw of over-optimistic demand projections as there are just about 23 million households which earn more than ₹5 lakh per year i.e., less than ₹42,000 a month, which is about 7% of all Indian families.
  • It is only this class which can be coaxed to behavioural changes — i.e. people who can afford various kinds of goods and services.
  • If firms want to go beyond this 7% of households they have to offer bigger discounts, burning more cash, with the possibility that once the discounts are reduced, customers drop off.

Consider the question “India is witnessing the unicorn boom in the starts-ups. However, valuation of these unicorns has raised concerns. In light of this, examine the factors driving the rise of unicorns in India and why their valuation raises concerns?”

Conclusion

We are witnessing new unicorns emerging every month, which are products of inflated valuations to tap more funds to burn more cash. These valuations are solely on the basis of future earnings, with virtually no profits to show in the present.

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Right To Privacy

Facial Recognition Technology

op-ed snap | Security Issues | Mains Paper 3: Border Area Security Challenges
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Right to privacy

Mains level: Paper 2- Issues with use of facial recognition technologies by the police

Context

According to police officials, more than six lakh CCTV cameras have already been deployed in the city, with the very real possibility that this number will continue to increase. These all-pervasive cameras will soon be connected in a real-time network managed by Hyderabad’s Command and Control Centre.

Facial Recognition

It is a biometric technology that uses distinctive features of the face to identify and distinguish an individual. Over a period of almost 6 decades, it has evolved in many ways- from looking at 3D contours of a face to recognizing skin patterns.

How does it work?

  • The facial recognition system works primarily by capturing the face & its features through the camera and then using various kinds of software to reconstruct those features.
  • The captured face along with its features is stored into a database, which can be integrated with any kind of software that may be used for security purposes, banking services, etc.
  • In the Automated Facial Recognition System (AFRS), the large database (containing photos and videos of peoples’ faces) is used to match and identify the person. The image of an unidentified person, taken from CCTV footage, is compared to the existing database using Artificial Intelligence technology, for pattern-finding and matching.

What are the uses?

  • Authentication: It is used for identification and authentication purposes with a success rate of almost 75%.
    • For instance, the NCRB’s Crime and Criminal Tracking Network & Systems (CCTNS) managing crime data for police, use automated facial recognition to identify criminals, missing people, and unidentified dead bodies, as well as for “crime prevention”.
    • The project is aimed at being compatible with other biometrics such as iris and fingerprints.
    • The integration of fingerprint databases, face recognition software and iris scans will massively boost the police department’s crime investigation capabilities.
  • Force Multiplier: In India, where there are just 144 constables per 1 lakh citizens, this can act as a force multiplier. It neither requires too much manpower nor regular up-gradation. Hence, this technology coupled with the present manpower in place can act as a game-changer.
  • Varied applications: It is increasingly being used for everything from unlocking mobile phones to validating the identity, from auto-tagging of digital photos to finding missing persons, and from targeted advertising to law enforcement.

Opposition to facial recognition technologies

  • How it works: Facial recognition technology identifies the distinctive features of a person’s face to create a biometric map, which an algorithm then matches to possible individuals.
  • The system searches across databases of millions of images scraped without knowledge or consent and often fails.
  • Severe scrutiny: The use of facial recognition technology is already under severe scrutiny around the world, with some jurisdictions, including Belgium and Luxembourg, have already banned its use.
  • Ban by EU: The European Union is in the process of finalizing and passing one of the most comprehensive bans on facial recognition technology yet, while in the United States, multiple cities- and state-level bans and moratoria have been imposed.
  • More than 200 organizations have called for a global ban on the use of biometric surveillance technologies that enable mass and discriminatory surveillance, while even Facebook announced that it would be shutting down its facial recognition program.

Issues with the use of facial recognition technologies in India

  • Violation of the right to privacy: The right to privacy was recognized as a fundamental right, included under the right to life and liberty by the Supreme Court of India in 2017.
  • Absence of legal framework: Without a law in place to regulate data collection and to act as an oversight mechanism, valid concerns about privacy and other rights violations continue to arise.
  • High Infrastructural Costs: Technologies like Artificial Intelligence and Big Data are costly to implement. The size of stored information is extremely large and requires huge network & data storage facilities, which are currently not available in India.
  • Image Collection: The sources from which images will be collected to create a repository/database need to be known.
  • The concern of Data Leakage: In today’s world of cybercrime, it is important to put appropriate safeguards in place in order to ensure the integrity of the repository/database, so that it doesn’t leak out the information and is not privatized or monetized.
  • Required Expertise: Experts are needed to verify and authenticate data collected before storing them who should be provided proper training to protect & avoid abuse and misuse of the collected data & database.
  • Reliability & Authenticity: As the data collected may be used in the court of law during the course of a criminal trial, the reliability and the admissibility of the data along with standards and procedures followed would be taken into consideration. Hence, the authenticity of the data is crucial.
  • Huge amounts of public money are being spent on these technologies with no evidence of their effectiveness, further squandering precious public funds.

The National Automated Facial Recognition System

  • To empower the Indian police with information technology, India approved the implementation of the National Automated Facial Recognition System (NAFRS).
  • On its implementation, it will function as a national-level search platform that will use facial recognition technology.
  • It will help to facilitate investigation of crime or for identifying a person of interest regardless of face mask, makeup, plastic surgery, beard, or hair extension.

Way Forward

  • Save the time of police: This is a compare and contrast tool meant for identification based on existing information. The process of identification can be accelerated by its use.
  • Proper Legal safeguards are a must: With proper safeguards, this technology is much needed for India. Having the biggest IT workforce in the world, state-of-the-art technology can act as a game-changer for India.
  • Need to learn from Global examples: Police departments in London are under pressure to put a complete end to the use of facial recognition systems following evidence of discrimination and inefficiency.
    • Hence, it is necessary to make use of such technology, but it cannot act as the silver bullet for all the police reforms that we need.

Conclusion

Government programs such as Safe City, Smart City, and the Nirbhaya Fund have been utilized to bankroll these projects — yet the human rights violations that occur as a result of their use far outweigh any purported benefit that these technologies claim to provide.

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Foreign Policy Watch: India-United States

Dynamism in India-U.S. ties

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Parliamentary Friendship Groups

Mains level: Paper 2- Interactions between Members of Parliament in India and members of the U.S. Congress

Context

While there are regular interactions among officials at various levels and across sectors, as well as people-to-people engagement, there are no formal interactions between Members of Parliament in India and members of the U.S. Congress.

US Congressional Delegation (CODEL) visit to India

  •  CODEL travels across the world during the periods when Congress takes a break from legislative work.
  • Interactions during these travels are important in shaping relations with foreign countries.
  • In November, a congressional delegation (CODEL) travelled to the Indo-Pacific Command countries, including the Philippines, Taiwan and India.
  • In New Delhi, the six-member delegation interacted with Prime Minister Narendra Modi, External Affairs Minister S. Jaishankar, and representatives of the Dalai Lama.
  • The members of the delegation noted the “increasing convergence of strategic interests” between India and the U.S. and said they would like to “further enhance cooperation… to promote global peace and stability”.
  •  Mr. Modi appreciated the consistent support and constructive role of the U.S. Congress in deepening the India-U.S. comprehensive global strategic partnership.
  • Enhancing bilateral relationship on critical issues: Mr. Modi and CODEL exchanged views on enhancing the bilateral relationship and strengthening cooperation on contemporary global issues such as terrorism, climate change and reliable chains for critical technologies.
  • Demand for the presidential waiver for India: Two days after returning from his trip to India, CODEL member Senator Tommy Tuberville favoured India getting the presidential waiver under the Countering America’s Adversaries Through Sanctions Act.
  • Significance of CODEL visit: Members of the U.S. Congress play an important role in determining foreign policy, which at times is dictated by the demands of constituents.

Way forward

  •  Despite the robustness in India-U.S. relations, there is no institutional communication or interaction between MPs in India and members of the U.S. Congress.
  • Establishment of India-US Parliamentary Exchange: The joint statement at the end of the 2+2 Dialogue in 2019 stated: “The Ministers looked forward to the establishment of India-US Parliamentary Exchange to facilitate reciprocal visits by Parliamentarians of the two countries”.
  • Indian Parliamentary Group: India can take it forward through the Indian Parliamentary Group, which acts as a link between the Indian Parliament and the various Parliaments of the world.
  • At present, there are eight Parliamentary Friendship Groups of India’s including Japan, Russia, China and the European Union.
  • The U.S. is absent from this list.

Conclusion

The significance of the CODEL visit is not lost in the U.S. as members of the U.S. Congress play an important role in determining foreign policy, which at times is dictated by the demands of constituents.

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Fertilizer Sector reforms – NBS, bio-fertilizers, Neem coating, etc.

Reforming the fertilizer sector

op-ed snap | Agriculture | Mains Paper 3: Agriculture and related issues
Note4Students

From UPSC perspective, the following things are important :

Prelims level: NBS

Mains level: Paper 3- Reforms in fertiliser sector

Context

Since 1991, when economic reforms began in India, several attempts have been made to reform the fertilizer sector to keep a check on the rising fertilizer subsidy bill, promote the efficient use of fertilizers, achieve balanced use of N, P, and K (nitrogen, phosphorus, and potassium), and reduce water and air pollution caused by fertilizers like urea.

Several attempts have been made to reform the fertilizer sector to keep a check on the rising fertilizer subsidy bill.

Background

  • After years of unchanged prices, the budget of 1991 raised the issue prices of fertilizers by 40% on average. This rise was rolled down to 30% in a few months, with exemption to small and marginal farmers from the price increase.
  • Due to opposition, the increase in Urea price was further rolled back to 17% over the pre-reform price.
  • It resulted in a big shift in the composition of fertilizers used in the country in favor of urea and thus Nitrogen (N).
  • The government started Nutrient Based Subsidy in 2010 to address the growing imbalance in fertilizer use, which was skewed towards urea (N).
  • However, only non-nitrogenous fertilizers P and K (phosphorus and potassium) were included in NBS; urea was left out.

Need for reforms on three fronts

Reforms are needed to promote in three key areas:

1) The efficient use of fertilizers.

2) To achieve balanced use of N, P, and K (nitrogen, phosphorus, and potassium).

3) To reduce water and air pollution caused by fertilizers like urea.

Challenges in the fertilizer sector

A] Distortion in use due to price difference

  • The Union Budget of July 1991 raised the issue prices of fertilizers by 40% on average.
  • Due to opposition to increasing fertilizer prices, the increase in the price of urea was rolled back to 17% a year later over the pre-reform price.
  • The shift in the composition of fertilizer used: This change disturbed the relative prices of various fertilizers and resulted in a big shift in the composition of fertilizers used in the country in favor of urea and thus N.
  • Farmers tended to move towards balanced use, but policy and price changes reversed the favorable trend a couple of times in the last three decades.
  • In 2019-20, fertilizer use per hectare of cultivated area varied from 70 kg of NPK in Rajasthan to 250 kg in Telangana
  • Further, the composition of total plant nutrients in terms of the N, P, K ratio deviated considerably from the recommended or optimal NPK mix.
  • It was 33.7:8.0:1 in Punjab and 1.3:0.7:1 in Kerala.

2] Increasing fertilizer subsidy

  • Fertilizer subsidy has doubled in a short period of three years. For 2021-22, the Union Budget has estimated fertilizer subsidy at ₹79,530 crores (from ₹66,468 crores in 2017-18).
  • The subsidy is likely to reach a much higher level due to the recent upsurge in the prices of energy, the international prices of urea and other fertilizers, and India’s dependence on imports.
  • In order to minimize the impact of rising in prices on farmers, the bulk of the price rise is absorbed by the government through enhanced fertilizer subsidy.
  • This is likely to create serious fiscal challenges.
  • At current prices, farmers pay about ₹268 per bag of urea and the Government of India pays an average subsidy of about ₹930 per bag.
  • Thus, taxpayers bear 78% of the cost of urea and farmers pay only 22%. This is expected to increase and is not sustainable.

3] Import dependence

  • Total demand for urea: The total demand for urea in the country is about 34-35 million tonnes (mln t) whereas the domestic production is about 25 mln t.
  • The requirement of Diammonium Phosphate (DAP) is about 12 mln t and domestic production is just 5 mln t.
  • This leaves the gap of nearly 9-10 mln t for urea and 7 mln t for DAP, which is met through imports.
  • The use of Muriate of Potash is about 3 mln t.
  • This is entirely imported.
  • The international prices of fertilizers are volatile and almost directly proportional to energy prices.

Need to shift our focus to Bio-fertilizers

  • Bio-fertilizers are cheap, renewable, and eco-friendly, with great potential to supplement plant nutrients if applied properly. However, they are not a substitute for chemical fertilizers.
  • They improve the health of the soil. Since it provides nutrients to the soil in a small and steady manner, its immediate effects are not very visible.
  • Sales of biofertilizers in the country have not picked up because of a lack of knowledge and its slow impact on the productivity of the soil.
  • The use of biofertilizers is necessary to maintain soil health as more and more use of chemical fertilizers kills all the microorganisms available in the soil, which are so essential for maintaining soil health.
  • Supplementary use of biofertilizers with chemical fertilizers can help maintain soil fertility over a long period.
  • The overall strategy for increasing crop yields and sustaining them at a high level must include an integrated approach to the management of soil nutrients, along with other complementary measures.

Way forward

  • Self-reliance: we need to be self-reliant and not depend on the import of fertilizers.
  • In this way, we can escape the vagaries of high volatility in international prices.
  • In this direction, five urea plants at Gorakhpur, Sindri, Barauni, Talcher, and Ramagundam are being revived in the public sector.
  • Extend NBS model to urea: The government introduced the Nutrient Based Subsidy (NBS) in 2010 to address the growing imbalance in fertilizer use.
  • However, only non-nitrogenous fertilizers (P and K) moved to NBS; urea was left out.
  • We need to extend the NBS model to urea and allow for price rationalization of urea compared to non-nitrogenous fertilizers and prices of crops.
  • Develop alternative sources of nutrition for plants: Discussions with farmers and consumers reveal a strong desire to shift towards the use of non-chemical fertilizers as well as a demand for bringing parity in prices and subsidy given to chemical fertilizers with organic and biofertilizers.
  • This also provides the scope to use large biomass of crop that goes waste and enhance the value of livestock by-products.
  • We need to scale up and improve innovations to develop alternative fertilizers.
  • Improve fertilizer efficiency:  India should pay attention to improving fertilizer efficiency through need-based use rather than broadcasting fertilizer in the field.
  • The recently developed Nano urea by IFFCO shows promising results in reducing the usage of urea.

Consider the question “What are the challenges facing the fertiliser sector in India? How subsidies lead to distortion in the use of various types of fertilisers.”

Conclusion

These changes will go a long way in enhancing the productivity of agriculture, mitigating climate change, providing an alternative to chemical fertilizers and balancing the fiscal impact of fertilizer subsidy on the Union Budgets in the years to come.

Back2Basics: Nutrient Based Subsidy

  • Under the NBS regime – fertilizers are provided to the farmers at subsidized rates based on the nutrients (N, P, K & S) contained in these fertilizers.
  • Also, the fertilizers which are fortified with secondary and micronutrients such as molybdenum (Mo) and zinc are given additional subsidy.
  • The subsidy on Phosphatic and Potassic (P&K) fertilizers is announced by the Government on an annual basis for each nutrient on a per kg basis – which are determined taking into account the international and domestic prices of P&K fertilizers, exchange rate, inventory level in the country etc.
  • NBS policy intends to increase the consumption of P&K fertilizers so that optimum balance (N:P:K= 4:2:1) of NPK fertilization is achieved.

[pib] Nutrient Based Subsidy (NBS) for Phosphatic & Potassic (P&K) Fertilizers

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Insolvency and Bankruptcy Code

Tackling the problem of bad loans

op-ed snap | Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: NARCL

Mains level: Paper 3- NARCL-challenges and opportunities

Context

The newly-created National Asset Reconstruction Company (NARCL) in the public sector offers hopes for the faster clean up of lenders’ balance sheets.

Features of National Asset Reconstruction Company (NARCL)

  • The newly-minted ARC, NARCL is not a bank, but a specialised financial institution to help resolve the distressed assets of banks.
  • Faster aggregation: Its greatest virtue lies in the faster aggregation of distressed assets that lie scattered across several lenders.
  •  Soverign assurance: Its securitised receipts (SRs) carry sovereign assurance.
  • This is of particular comfort to PSU banks as price discovery would not be subject to later investigations.
  • Focus on large accounts: It would initially focus on large accounts with debts over Rs 500 crore.
  • IDRCL: All eyes will be focused on IDRCL (Indian Debt Resolution Company), the operating arm, which would be in the private sector.

Past policy measures to resolve the bad debts

  • Institutional measures include BIFR (Board for Industrial and Financial Reconstruction, 1987), Lokadalat, DRT (Debt Recovery Tribunal, 1993), CDR (Corporate Debt Restructure, 2001), SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement, 2002), ARC (Asset Recovery Company, 2002).
  • The RBI has also launched a slew of measures during 2013-14 to resolve, reconstruct and restructure stressed assets.

Why the measures to resolve the bad debt failed?

  • Of the 28 ARCs (private sector) in operation, many are bit players.
  • Dominance of few ARC: The top five ARCs account for over 70 per cent of the asset under management (AUM) and nearly 65 per cent of the capital.
  • Restructuring as an exception: Financial and business restructuring appears to be more an exception than the norm.
  • Nearly one-third of debts are rescheduled.
  • This is not much value addition to what lenders would have otherwise done at no additional cost.
  • Success and shortcomings of IBC: The IBC, introduced in 2016, was landmark legislation and marked a welcome departure from the earlier measures, with a legally time-bound resolution.
  • The focus is on resolution rather than recovery.
  •  It nearly put an end to evergreening.
  • Even though there are delays under this newfound promise, they are counted in terms of days and not years and decades.
  • The NCLT (National Company Law Tribunal)  is the backbone of the IBC, but lamentably is starved of infrastructure and over 50 per cent (34 out of 63) of NCLT benches were bereft of regular judges.
  •  Even the parliamentary committee has expressed indignation on a large number of positions left vacant.
  • This lack of adequate infrastructure, coupled with the poor quality of its decisions, has proved to be the IBC’s Achilles’ heel.
  • We need judicial reforms for early and final resolutions.
  • Issue of delayed recognition and resolution: Forty-seven per cent of the cases referred to the IBC, representing over 1,349 cases, have been ordered for liquidation.
  • Against the aggregate claims of the creditors of about Rs 6.9 lakh crore, the liquidation value was estimated at a paltry Rs 0.49 lakh crore.

Suggestions to make IBC more effective

  • Delayed recognition and resolution: Lenders and regulators need to address the issue of delayed recognition and resolution.
  • Business stress and/or financial stress needs to be recognised even prior to regulatory norms on NPA classification.
  • Dealing with anchoring bias: The tendency to make decisions on the basis of first available information is called “anchoring bias”.
  •  The first available information in bidding for distressed assets is the cost of acquisition to ARCs.
  • Potential bidders would quote prices nearer to this anchor.
  • Nobel Laureate Daniel Kahneman has suggests a three-step process to mitigate anchor bias: One, acknowledge the bias; two, seek more and new sources of information, and three, drop your anchor on the basis of new information.

Way forward for NARC

  • Forbid wilful defaulters from taking back distressed asset: The IBC has made considerable progress in bringing about behavioural change in errant and wilful defaulters by forbidding them to take back distressed assets.
  • Otherwise, the credit culture suffers.
  • The NARC should uphold this principle, not dilute it
  • Introduce Sunset clause: It should have a sunset clause of three to five years.
  • This will avoid the perpetuation of moral hazard and also encourage expeditious resolution.
  • Deal with anchor bias: Anchor bias needs to be mitigated by better extrinsic value discovery.
  • Avoid selling to other ARCs: It should avoid selling to other ARCs.

Conclusion

The RBI has recently released (November 2) a report on the working of ARCs and makes 42 recommendations to improve the performance of ARCs. This article incidentally makes an effort to identify some constraints and offer solutions to improve the performance of ARCs.

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Foreign Policy Watch: India-China

China’s missile tests could have Sputnik-like effect

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: HGV missile

Mains level: Paper 2- HGV test by China and its implications

Context

On October 27 Chairman of the Joint Chiefs of Staff of the US, reacted to China testing its nuclear-capable hypersonic weapons system by drawing an analogy with a Sputnik moment.

How US’s Ballistic Missile Defence led to the recent Sputnik moment

  •  Since the US withdrawal from the Anti-Ballistic Missile (ABM) treaty in 2002, both Russia and China have been wary of Washington’s Ballistic Missile Defence (BMD) programme.
  • It undermines strategic stability: Missile defence is inherently destabilising — it undermines “strategic stability”.
  • A robust BMD would compromise the second strike capability of the adversary by neutralising the surviving incoming missiles in case of a near-decapitating first strike
  • Both Russia and China thus view the US BMD as undermining their deterrence and have sought ways to restore their retaliatory strike capability by investing in new technologies such as Hypersonic Glide Vehicles (HGVs).
  • HGVs can escape the missile defence systems.
  • HGVs fly at lower altitudes than ballistic missiles, which means they could potentially escape early warning systems, aided by the earth’s curvature.

Implications of Chinese test

  • It can set off competition: The Chinese tests have the potential to set off an aggressive competition among the nuclear powers to modernise their nuclear arsenals and add new, potentially destabilising capabilities to their arsenal.
  • Global and regional arms race: In the present era of minimal arms control measures, the Chinese hypersonic missile system test will trigger an intense arms race both at the global and regional levels.
  • With the Chinese test, the US may be forced to expand its hypersonic programme and further modernise its missile defence systems.

What should be the course of action for India

  • China’s nuclear-tipped hypersonic weapon systems, though not particularly India-focused, could nudge New Delhi to adopt two courses of action.
  • Missile program: First, accelerate its hypersonic missiles programme.
  • Develop missile defence system: Second, consider erecting an equally robust missile defence.
  • Chinese advancement in stealth technologies will drive New Delhi to seek similar capabilities but also develop effective countermeasures.
  • This can then set off a regional arms race, a sign that is not particularly encouraging for regional peace.

Consider the question “Examine the implications of recent hypersonic missile test by China for the region and global arms race control efforts? What should be the course of action for India? “

Conclusion

China’s hypersonic missile test may not have come with a Sputnik-like surprise, but it has the potential to set off a post-Sputnik-like arms race that does not augur well for the strategic stability both at the global and regional level.

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Back2Basics: Hypersonic Glide Vehicles (HGVs)

  • A hypersonic missile is a vehicle that achieves a speed five times faster than the speed of sound, crossing Mach 5.
  • These missiles travel at a speed of around 6,115 km per hour, with a combination of technology and manoeuvrability of ballistic missiles and cruise missiles.

Fractional Orbital Bombardment System (FOBS)

  • A Fractional Orbital Bombardment System is a warhead delivery system that uses a low earth orbit towards its target destination.
  • Just before reaching the target, it deorbits through a retrograde engine burn.

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Tax Reforms

Why India’s pro-rich, anti-poor taxation policies must change

op-ed snap | Economics | Mains Paper 3: Inclusive Growth & Issues,Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Issues with India's taxation policies

Context

To develop their renewable energy capacities poor countries may well have to help themselves to make the transition that society urgently needs. One source of funding could well be the well-off citizens of India, who are getting richer and richer.

Growing inequality in India

  • A 2018 Oxfam report revealed that 10 per cent of the richest Indians garnered 77.4 per cent of the nation’s wealth.
  •  In fact, according to the report, 58 per cent of India’s wealth was in the hands of one per cent of the country’s population.
  • The combined income of this handful of people in 2017 was almost as much as India’s budget that year.
  • In 2017, the fortune of India’s 100 richest tycoons leaped by 26 per cent.
  •  According to CrĂŠdit Suisse, the number of dollar millionaires in India has jumped from 34,000 in 2000 to 7,59,000 in 2019 — in other words, the country has one of “the world’s fastest-growing population of millionaires”.
  • The average wealth of these millionaires has increased by 74 per cent over this period.

Issues with taxation policies

  • The taxation policy of the government, instead of making the exchequer benefit from this trend, has actively strengthened the trend of growing millionaires.
  • Replacing wealth tax by increasing income tax: The government replaced the wealth tax by an income tax increase of two per cent for households that earned more than 10 million rupees annually.
  • Corporate tax was reduced: The corporate tax was lowered, for existing companies from 30 per cent to 22 per cent, and for manufacturing firms incorporated after October 1, 2019 that started operations before March 31, 2023, from 25 to 15 per cent — the biggest reduction in 28 years.
  • Increase in income tax exemptions: In the 2019-20 budget, the income tax exemption limit jumped from Rs 2,00,000 to 2,50,000 and the tax rate for incomes up to Rs 5 lakh was reduced from 10 to 5 per cent.

Impact of pro-rich taxation policy

  • Deprives the state of resources: This taxation policy deprived the state of important resources.
  • Increase in indirect taxes: To (partly) compensate for the decline of direct taxes, the government has increased indirect taxes, unfairly so, because they affect all Indians irrespective of their income.
  • The share of indirect taxes in the state’s fiscal resources has increased to reach 50 per cent of total taxes in 2018.
  • Taxes on petroleum products are a case in point.

High taxes on petroleum products

  • About two-thirds of the cost of a litre of petrol now goes towards taxes.
  • The tax collected on petrol and diesel has increased by 459 per cent in the past seven years — from Rs 52,537 crore in 2013 to Rs 2.13 lakh crore in 2019-2020.
  • Given that petrol is a less elastic good, people are bound to consume it even at higher prices.
  • This also explains why the government sees fuel sale in India as a safe “revenue collection” medium.
  • In 2018-19, excise duty on petroleum products alone accounted for roughly 24 per cent of the indirect tax revenue.

Consider the question “India’s taxation policies are criticised for being pro-rich. In the context of this, discuss the issues with the taxation system and suggest the measure to deal with these issues.”

Conclusion

The government’s taxation policy will probably continue to prevail depriving the exchequer of some of the resources it needs for dealing with issues as important as climate change.

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Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Economic, political implications of repeal of farm laws

op-ed snap | Agriculture | Mains Paper 3: Agriculture and related issues
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Economic and political implications of repeal of farm laws

Context

In a surprise move, Prime Minister Narendra Modi announced that the government will repeal the farm laws in the Winter Session of Parliament.

Economic impact

  • Agri-growth rate to remain constant: The agri-GDP growth has been 3.5 per cent per annum in the last seven years.
  • One expects this trend to continue — there might be minor changes in the agri-GDP depending on rainfall patterns.
  • Cropping pattern to remain skewed: Cropping patterns will remain skewed in favour of rice and wheat, with the granaries of the Food Corporation of India bulging with stocks of grain.
  • Increase in food subsidy: The food subsidy will keep bloating and there will be large leakages.
  • Environmental impact: The groundwater table in the north-western states will keep receding and methane and nitrous oxide will keep polluting the environment.

Suggestion on increasing farmers income

  • Average agri-household income: The latest Situation Assessment Survey of the NSO reveals that the income of an average agri-household in India was only Rs 10,218 per month in 2018-19.
  • This is not a very happy situation and all out measures need to be taken to increase rural incomes in a sustained manner.
  • How to increase farmers income: Given that the average holding size stands at just 0.9 ha (2018-19), and has been shrinking over the years.
  • Efficient functioning value chain: Unless one goes for high-value agriculture — and, that’s where one needs efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies — the incomes of farmers cannot be increased significantly.
  • Reforms: This sector needs reforms, both in the marketing of outputs as well as inputs, including land lease markets and direct benefit transfer of all input subsidies — fertilisers, power, credit and farm machinery.

Implications

  • Demand for legal status to MSP could strengthen: Farmer leaders are already asking for the legal guarantee of MSPs for 23 agri-commodities.
  • Their demand could increase to include a larger basket of commodities.
  • Demand for privatisation: There could be demands to block the privatisation reforms of public sector enterprises — Air India, for instance — or to scuttle any other reform for that matter.
  • The net result is likely to be slowing down the economic reforms that are desperately needed to propel growth.

Consider the question “The latest Situation Assessment Survey of the NSO reveal the low average agri-household income in India. All out measures need to be taken to increase rural incomes in a sustained manner. In the context of this, suggest the measures to increase the farmers’ income and challenges in it.

Conclusion

The most important lesson from the repeal of the farm laws is that the process of economic reforms has to be more consultative, more transparent and better communicated to the potential beneficiaries. It is this inclusiveness that lies at the heart of democratic functioning of India.

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Climate Change Negotiations – UNFCCC, COP, Other Conventions and Protocols

The heavy lifting on climate action must begin

op-ed snap | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- COP26 achievements and failures

Context

Glasgow’s success was that it finished building the scaffolding for climate action initiated through the Paris Agreement. But true success depends on whether countries are receptive to these nudges.

What were the Glasgow climate meeting’s (COP26) successes and failures?

  • Strengthened Paris Agreement mechanism: Glasgow strengthened the Paris Agreement mechanism of eliciting pledges from countries and ratcheting them up over time.
  • It requested countries to update and strengthen 2030 emission targets in their NDCs by the end of 2022, earlier than previously expected.
  • Success at Glasgow was explicitly defined around ‘keeping 1.5 degrees alive’ through such pledges.
  • There are two problems with this interpretation.
  • First, the Paris, and Glasgow, approach focusing on target-setting gives insufficient importance to the challenge of implementing those targets.
  • A focus on shorter term targets and their implementation — which India to its credit has been highlighting — will be important.
  • Second, by calling on countries to strengthen targets to align with the Paris Agreement objectives without explicitly considering that countries have different roles and responsibilities in doing so risks side-stepping, again, the long-standing issue of climate equity.

Phase-down clause for thermal power and implications for India

  • Phasing down coal power: A specific high profile clause calls for the ‘phase down of unabated coal power and phase out of inefficient fossil fuel subsidies’.
  • It was the Indian Minister who read out an amendment modifying ‘phase-out’ to ‘phase-down’ for coal.
  • India’s concerns: India’s real concerns included not precluding subsidies for social purposes, such as for cooking gas; querying whether from an equity point of view, all countries should be asked to limit coal use at the same time; and noting the lack of mention of oil and gas.
  • A positive for all from environmental point of view: From an environmental point of view, more explicit discussion of coal, but ideally all fossil fuels, is a positive, including for India.
  • Concerns on developmental view: From a developmental view, however, India is concerned that explicit mention of coal constrains us in our choice of fuel.
  • Way out for India: A possible way out is for India to explicitly seek global support for an accelerated transition away from coal, an approach taken by South Africa.

Challenges and achievements at COP26

[A] Measures for adaptations

  • Adaptation has long been neglected in global negotiations, reflecting a global power imbalance that places less weight on the concerns of vulnerable nations.
  • In this context, it was a partial win that Glasgow set up an explicit two year work programme for a ‘global goal’ on adaptation.
  • No development on agenda of loss and damage: The important complementary agenda of ‘loss and damage’ – compensating for unavoidable impacts that go beyond adaptation — received at most lip service.
  • Even though there was discussion of a specific mechanism, backed by funding, to the dismay of small, vulnerable nations, only a ‘dialogue’ was established.

[B] Climate finance commitment issue not addressed

  • Commitment on climate finance not met: Climate finance promised to be the central issue of COP26, with considerable frustration from developing countries that the decade-long commitment of $100 billion had not been met.
  • Glasgow did no more than establish a work programme on post-2025 financing and continue tracking progress on the $100 billion.
  • The exception was a call to double adaptation finance by 2025.
  • Mobilising private finance: Former Bank of England Governor Mark Carney indicated that companies committed to net zero initiatives could marshal a scarcely believable $130 trillion, suggesting growing efforts to mobilise private finance.
  • Developing countries have long insisted that publicly funded climate finance is a right devolving from the ‘polluter pays’ principle rather than aid.

[C] Paris rulebook

  • Completion of two elements of Paris Rulebook: There were two particularly important elements of what is called the ‘Paris Rulebook’ that were completed in Glasgow.
  • Transparency framework: First, the transparency framework was completed, which includes reporting rules and formats for emissions, progress on pledges and finance contributions.
  • Rules for carbon market: The second key was completion of agreed rules for carbon markets, the complexities of which had stymied agreement for four years.
  • Rules were put in place to limit the scope for ‘double-counting’ of credits by more than one country.

Way forward for India

  • The real determinant of success or failure rests on national politics and popular support for climate change within countries — how countries use the scaffolding.
  • For India, these politics are complex because they revolve around simultaneously balancing concerns over whether our policy space will be limited by inequities embedded in the global mitigation efforts, and our own interests as a vulnerable country in enhancing and accelerating climate action.
  • A balanced view requires consideration of both objectives.

Consider the question “Why climate finance continues to be a contentious issue in the negotiations over climate change? Suggest the way to balance the concerns over development with the efforts at climate action.”

Conclusion

The meeting hit many, but not all, of its procedural benchmarks by building scaffolding for the future. But the real determinant of success or failure rests on national politics and popular support for climate change within countries.

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Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

More a private sector primer than health-care pathway

op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- UHC and challenges

Context

NITI Aayog recently published a road map document entitled “Health Insurance for India’s Missing Middle”.

About missing middle and provision in the NITI Aayog report

  • The Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY), aims to extend hospitalisation cover of up to ₹5 lakh per family per annum to a poor and vulnerable population of nearly 50 crore people.
  • Left out segment: Covering the left out segment of the population, commonly termed the ‘missing middle’ sandwiched between the poor and the affluent, has been discussed by the Government recently.
  • Towards this, NITI Aayog recently published a road map document entitled “Health Insurance for India’s Missing Middle”.
  • Primary role for private commercial health insurer: The report proposes voluntary, contributory health insurance dispensed mainly by private commercial health insurers as the prime instrument for extending health insurance to the ‘missing middle’.

Issues with the provision in the NITI Aayog report

  • Narrow coverage: Government subsidies, if any at all, will be reserved for the very poor within the ‘missing middle’ and only at a later stage of development of voluntary contributory insurance.
  • This is a major swerve from the vision espoused by the high-level expert group on UHC a decade ago, which was sceptical about such a health insurance model.
  • No country has ever achieved UHC by relying predominantly on private sources of financing health care.
  • Contributory insurance not best way: Evidence shows that in developing countries such as India, with a gargantuan informal sector, contributory health insurance is not the best way forward and can be replete with problems.
  • Issues with low premium model: For hospitalisation insurance, the report proposes a model similar to the Arogya Sanjeevani scheme, albeit with lower projected premiums of around ₹4,000-₹6,000 per family per annum.
  • This model is a little different from commercial private insurance, except for somewhat lower premiums.
  • Low premiums are achieved by reducing administrative costs of insurers through an array of measures, including private use of government infrastructure.
  • This model is vulnerable to nearly every vice that characterises conventional private insurance.
  • Insufficient measures to deal with adverse selection: The report suggests enrolment in groups as a means to counter adverse selection.
  • The prevailing per capita expenditure on hospital care is used to reflect affordability of hospital insurance, and thereby, a possible willingness to pay for insurance.
  • Both these notions are likely to be far-fetched in practice, and the model is likely to be characterised by widespread adverse selection notwithstanding.
  • OPD insurance on a subscription basis: The report proposes an OPD insurance with an insured sum of ₹5,000 per family per annum, and again uses average per capita OPD spending to justify the ability to pay.
  • However, the OPD insurance is envisaged on a subscription basis, which means that insured families would need to pay nearly the entire insured sum in advance to obtain the benefits.
  • Clearly, this route is unlikely to result in any significant reduction of out-of-pocket expenditure on OPD care.
  • Role of government:The NITI report defies the universally accepted logic that UHC invariably entails a strong and overarching role for the Government in health care, particularly in developing countries.

Consider the question “What are the challenges in achieving universal health coverage? What are the issues with private sources  financing health care to achieve UHC?”

Conclusion

The National Health Policy 2017 envisaged increasing public health spending to 2.5% of GDP by 2025. Let us not contradict ourselves so early and at this crucial juncture of an unprecedented pandemic.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Formal sector and fine print

op-ed snap | Economics | Mains Paper 3: Inclusive Growth & Issues,Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Formalisation and its challenges

Context

A recent study by SBI has reported that the Indian economy witnessed accelerated formalisation under the distressed conditions of the pandemic and the lockdown last year. The study estimates that the share of the informal economy has fallen to a mere one-fifth of GDP — a figure comparable to many advanced economies.

Understanding informality

  • ILO definition: The ILO’s globally accepted framework for definitions is as follows: Informal sector enterprises are defined as private unincorporated enterprises owned by individuals (or households) that are not constituted as separate legal entities independently of their owners.
  • They are not registered under specific national legislation (such as Factories’ or Commercial Acts).
  • Definition of a formal worker in India: Formal workers in India, on the other hand, are defined as those having access to at least one social security benefit such as a provident fund or healthcare benefits.

What explains the decline of informal sector in GDP

  • Significance of informal sector: In 2017-18, as per the latest official statistics, India’s informal sector accounted for approximately 52 per cent of its GDP, employing 82 per cent of the total workforce.
  • These ratios have broadly remained unchanged over the last decade.
  • Most affected due to pandemic: As the informal (unorganised) sector bore much of the brunt of the economic contraction during 2020-21, a decline in its share in GDP is unsurprising.
  • Lack of financial strength: The sector had neither the financial strength nor the technical wherewithal to face the Covid shock.
  • Inadequate policy support: Additionally, policy support, mostly supply-side measures, was mainly focused on firms in the formal sector, with the informal sector left to fend for itself.

Issues with decline

  • Undeniably, the informal sector’s share in GDP is likely to have shrunk due to the Covid shock.
  • However, alarmingly, the purported decline in the informal sector’s share in GDP has not been accompanied by an expected reduction in its employment share. 
  • Data from the official annual Period Labour Force Survey (PLFS) 2017-18 and 2019-20, where the latter includes the period of the Covid shock from April to June 2020, shows that the employment share in non-agricultural informal enterprises has increased from 68 per cent in 2017-18 to 69.5 per cent in 2019-20.
  • These figures do not include the agricultural sector, where employment is almost entirely in the informal sector.
  • The increasing share of the formal sector in terms of GDP but declining share in employment only widens the schism (or dualism) between the two sectors.
  • The increasing share of the formal sector in terms of GDP but declining share in employment only widens the schism (or dualism) between the two sectors.

Implications

  • Impact on investment and growth: The lack of remunerative jobs for the vast majority of Indian consumers implies that eventually the lack of growth in demand will adversely impact investment and economic growth.
  • After all, a mere 17-18 per cent of the workforce in the organised sector cannot sustain growth of the economy in the long run.
  •  Squeezing out informal enterprises: The increase in the formal sector’s share in GDP due to Covid-19 is a result of large, formal enterprises squeezing out informal enterprises.
  • It is important to note here that the increase in formalisation is not a consequence of micro and small informal firms transitioning to formality.

Increasing productivity: A way forward to formalisation

  • Promoting formalisation: Over the last five years, the economy has officially witnessed a significant drive towards formalisation.
  • Multiple reasons for avoiding formalisation: It is crucial to recognise that firms exist in the informal sector for various reasons and not simply to evade regulations and taxation.
  • Significance of productivity: Many own account enterprises and MSMEs cannot afford to survive in the formal sector due to their low productivity.
  • It is essential to view the process of formalisation as a development strategy that requires stepping up investment in physical and human capital to boost productivity and the extension of social security benefits for all workers, not just a registration strategy on myriad portals.

Consider the question “Informal sector has been affected disproportionately in the wake of the pandemic. What are the implications of this for the economy? Suggest the way forward for the formalisation.”

Conclusion

The informal sector will come back to life as much of it represents the survival efforts of the working poor. Celebrating formalisation based on the misery and devastation of poor informal workers (and their meagre productive assets) is not just misplaced but also callous.

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A collaborative tech vision for US, UAE, Israel and India

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- A collaborative tech vision for India, UAE, ISRAEL and the US

Context

Last month’s meeting between the foreign ministers of India, the US, Israel, and the UAE has set foreign policy circles in India abuzz with talks of the potential emergence of another quadrilateral grouping or as analysts term it, a “new Quad”.

Significance of the new Quad meeting

  • Collaboration in various areas: The grouping discussed technology collaboration along with the joint infrastructure projects in transportation, enhancing political and economic cooperation and maritime security matters.
  • Forum for economic cooperation: They have agreed to set up an international forum for economic cooperation.
  • Collaboration on technology: Amongst all the issues discussed, the technology dimension of this partnership promises a far greater potential for collaboration.
  • The four countries are uniquely placed to shape an innovation-based partnership, which can conjoin the technology hubs of Silicon Valley, Dubai, Tel Aviv, and Bengaluru.
  • Such potential collaboration can benefit from the existing robust cooperation between these countries.
  • Collaboration in fintech: The agreement between Start-Up Nation Central, an Israeli non-profit that connects the tech ecosystem, and Dubai International Financial Centre, the UAE’s financial hub, will create regulatory sandboxes and accelerators for start-ups and provide them with market access opportunities.
  • India and the US have been separately working with the two countries on multiple projects.

New Quad’s technology cooperation

  • Tech-based collaboration: Given the synergies in the innovation and startup sector, it is logical that the “new Quad” works towards tech-based collaboration.
  • The agenda for the new Quad’s technology cooperation can begin by selecting three technologies — quantum science, blockchain, and 3D printing.
  • Collaboration in quantum technology: Israel and the US, too, have made research on quantum technology a priority by allocating $91 million and $1.2 billion respectively to this sector.
  • India is also fast catching up through its National Mission on Quantum Technologies and Applications and joining hands with countries like France to work on this technology.
  • Collaboration in the blockchain:  in blockchain, India and the UAE can leverage the American and Israeli expertise in cyber and cryptography to craft customised applications for use in banking, fintech and trade financing.
  • Collaboration in 3-D printing: In 3D printing, which promises to transform the manufacturing process radically, Israel has taken the lead in manufacturing about 40 per cent of 3D printers worldwide.
  • India, in contrast, has been slow in getting onto the 3D printing bandwagon. But it can certainly benefit from the expertise of the US, Israel and the UAE.
  • Opportunity for India: From the Indian perspective, such partnerships can leverage Silicon Valley’s venture capital funding, Tel Aviv’s close-knit organic linkages between start-ups, industry, and academia, and UAE’s funding and focus on innovation.
  • To this mix, Bengaluru — and potentially Hyderabad — can add opportunities for scaling up and manufacturing.
  • The startup community in the US, Israel and the UAE have already reached an advanced research and development stage providing an opportunity for India to build expertise and offer the scale to the development and applications of these technologies.

Way forward

  • Security cooperation: The collaborative and customisation possibilities offered by these technologies and their dual-use nature offers the potential to give a technological edge to the four countries’ militaries.
  •  This, in turn, can add the security cooperation element to the grouping’s agenda.
  • Broaden the base: If the four countries plug their innovation ecosystems in this collaboration to shortlist, fund and develop technologies, it will also help to broaden the base of cooperation for this grouping, rather than restrict it to the government-to-government domain.
  • Government push will be the essential catalyst to unlock this space for cooperation through seed-funding, academic collaborations, industrial partnerships and MoUs.
  • China factor: By collaborating with Russia, and domestic flagship initiatives like “Made in China 2025”, Beijing has pursued emerging technologies and successfully reduced the capability gap with Washington.
  • These developments make it imperative for the US, Israel, UAE, and India to strengthen their newly established cooperation.

Conclusion

Each country with its unique advantage in the field of science and technology, innovation and start-ups can make a significant contribution to advance shared technological goals.

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Police Reforms – SC directives, NPC, other committees reports

Issues with ordinance that extend the tenure of the Director of the CBI

op-ed snap | Governance | Mains Paper 2: Governance, Transparency & Accountability, Citizens Charters
Note4Students

From UPSC perspective, the following things are important :

Prelims level: General conent

Mains level: Paper 2- Reforms in CBI

Context

The Central government’s decision to give a five-year tenure to heads of the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) has drawn a lot of flak.

Background

  • Apex court’s directive giving a mandatory two-year tenure to the Director of the CBI was a fallout of the Hawala scandal.
  • Prior to that, the government was arbitrary and capricious in choosing the Director.
  • It was not rare to see temporary appointments given to favour some individuals.
  • Seniority was often ignored in appointments and Directors were removed frequently.

Why tenure matters

  • Short tenure: A two-year tenure for a CBI head is too short for any officer to make an impact on the organisation.
  • Longer provides the much-needed continuity that a Director needs in an outfit charged with the task of conducting highly sensitive investigations, which sometimes impinge on the longevity and stability of a democratically elected government.
  • The Federal Bureau of Investigation chief in the U.S. gets a 10-year term.

Suggestions

  • Need to avoid government interference: Any blatantly dishonest interference in the working of the organisation is bound to raise the hackles of those who believe in and carry out straightforward investigations.
  • The government will therefore have to show enormous restraint in its interactions with the head of the CBI.
  • Balancing accountability with autonomy: Of course, as a measure of accountability, the Director will have to keep the government informed of all major administrative decisions.
  • He or she should inform the executive but not take orders from it.
  • Need for CBI Act: Successive chiefs have suggested the drafting of a CBI Act to ensure that the organisation is not dependent on the State governments, many of which have withdrawn consent for the CBI to function in that State.
  • Eight States — West Bengal, Maharashtra, Kerala, Punjab, Rajasthan, Jharkhand, Chhattisgarh, and Mizoram — have withdrawn the general consent.
  • The CBI should be made to derive its authority for launching investigations from its own statute instead of depending on the Criminal Procedure Code, which makes the CBI a police organisation.

Issue with ordinance

  • The only problem with the latest ordinance is that, at the end of the mandatory two-year tenure, the government will have to issue orders granting one-year extensions at a time. 
  • The rule about three annual extensions can be misused by a tendentious government.
  • It may be construed as a reward for ‘good behaviour’, which is a euphemism for an obliging Director.

Consider the question “What are the challenges facing Central Bureau of Investigation? Suggest the measures to make the organisation more effective.” 

Conclusion

We will have to wait for a few years to gauge the impact of the change in tenure rules. It is preposterous to probe the intentions of this major move.

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Back2Basics: General Consent

  • A “general consent” is normally given by states to help the CBI in seamless investigation of cases of corruption against central government employees in their states.
  • Almost all states have traditionally given such consent, in the absence of which the CBI would have to apply to the state government in every case, and before taking even small actions.
  • Section 6 of The DSPE Act (“Consent of State Government to exercise of powers and jurisdiction”) says: “Nothing contained in section 5 (“Extension of powers and jurisdiction of special police establishment to other areas”) shall be deemed to enable any member of the Delhi Special Police Establishment to exercise powers and jurisdiction in any area in a State, not being a Union territory or railway area, without the consent of the Government of that State.”

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