Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Dimensions of national security policy in 21st century
Context
National security concepts have, in the two decades of the 21st century, undergone fundamental changes. Cyberwarfare has vastly reduced the deterrent value of conventional deterrents.
Emergence of cyberwarfare
- In the 21st century, after cybertechnology enters as an important variable in nations’ defence policies.
- Geographical land size or GDP size will be irrelevant in war-making capacity or deterrence.
- These fundamental changes are entirely due to the earlier 20th century innovations in cybertechnology and software developments.
- Drones, robots, satellites and advanced computers as weapons are already in use.
- Some examples of further innovations are artificial intelligence and nanotechnology.
- Tracking those cyber warfare threat will need a new national security policy.
- By credible accounts, China, recently, publicly cautioned Indians to sit up and take notice by using cybertechnology to shut down Mumbai’s electric supply in populated areas of the city, for a few hours.
Four dimensions of national security policy
- Objectives: the objective of the National Security Policy in the 21st century is to define what assets are required to be defended, the identity of opponents.
- Although the novel coronavirus is perhaps accidental, it has completely destabilised peoples globally and their governments in all nations of the world over.
- This is a preview of the kinds of threats that await us in the coming decades which a national security policy will have to address by choosing a nation’s priorities.
- Priorities: National security priorities will require new departments for supporting several frontiers of innovation and technologies such as hydrogen fuel cells, desalination of seawater, thorium for nuclear technology, anti-computer viruses, and new immunity-creating medicines.
- This focus on a new priority will require compulsory science and mathematics education, especially in applications for analytical subjects.
- Strategy: The strategy required for this new national security policy will be to anticipate our enemies in many dimensions and by demonstrative but limited pre-emptive strikes by developing a strategy of deterrence of the enemy.
- For India, it will be the China cyber capability factor which is the new threat for which it has to devise a new strategy.
- Resource mobilisation: The macroeconomics of resource mobilisation depends on whether a nation has ‘demand’ as an economic deficit or not.
- If demand for a commodity or service is in deficit to clear the market of the available supply of the same, then liberal printing of currency and placing it in the hands of consumers is recommended for the economy to recover the demand-supply parity.
- A way to increase demand is by lowering the interest rate on bank loans or raising the rates in fixed deposits which will enable banks to obtain liquidity and lend liberally for enhancing investment for production.
- If it is ‘supply’ that is short or in deficit compared to demand, then special measures are required to incentivise to encourage an increase in supply.
Conclusion
National security at its root in the 21st century will depend on mind-boggling skills in the four dimensions mentioned above.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: AUKUS
Mains level: Paper 2- Changing course of India foreign policy
Context
India plans to host an international conference on Afghanistan in the second week of November.
Is the Indian foreign policy changing course?
- All signs point towards a major calibration of the foreign-policy compass in recent weeks since the tumultuous events in Kabul two months ago culminated in the formation of an interim government by the Taliban.
- As regards the way forward in Afghanistan, India has opted to align with the Anglo-American camp in the international line-up arrayed against the Eurasian axis of Russia, China and Iran.
- While the US has an attitude of “You’re either with us, or against us”, vis-a-vis the Taliban, Russia, China, Iran and other neighbouring states give primacy to stability and security of Afghanistan.
- Being a discontented party, unsurprisingly, India would have more in common with the revisionist powers — the US and the UK.
- While the stated purpose of the participating countries is marking Afghanistan, it is the future that matters, being an epochal one that would transform the geopolitics of the region.
- Thus, Delhi has moved up to the centrestage of the Quad.
- In turn, the US accepts that the Quad ought to be “inclusive”. Global Britain is knocking at the door.
- On its part, Delhi has displayed its comfort level with the AUKUS.
- The historical Western experience of the EU and NATO moving in tandem to weaken a common enemy is being replicated with Asian characteristics.
- A dual containment strategy is unfolding against China and Russia.
- Thus, its short-lived dalliance with Iran is losing its gravitas and India has swung to the other extreme to identify with a new quadrilateral platform in West Asia, with Israel, UAE and the US.
- India shrugs its shoulders as its “time-tested” friend, Moscow, bemoans the Quad and AUKUS.
- This astonishing zigzagging in India’s regional policy takes the breath away.
Challenges for India
- India lives in its region and the Quad and AUKUS are of no help when it comes to Afghanistan.
- Pakistan and China are riding high in the Hindu Kush; Moscow and Beijing have moved close in Central Asia which Washington is having a hard time in dealing with.
- India’s much-touted “influence” in Kabul has turned out to be delusional.
- Its own capacity to shape future events is virtually nil. These are the hard realities.
Conclusion
With the conference where India hopes to create an equivalent of the vajrayudha of the ancient Vedas which would allow India to reclaim its rightful place in the Afghan pantheon of gods and demi-gods.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Types of technologies in PV cells
Mains level: Paper 3- Adoption of new technologies in solar power sector
Context
Large-scale solar projects in Tamil Nadu have seen rapid growth in recent years. By embracing advances in solar technologies, India can continue to lead in this sector.
Factors driving growth
- In the past five years, the cumulative installed capacity witnessed a four-fold increase in Tamil Nadu to 4.4 GW, as of March 2021.
- High insolation level: Aiding this capacity addition is the State’s reasonably high insolation levels and matching solar potential, estimated at 279GW.
- Decline in price: The sharp decline in the prices for solar and resulting cost competitiveness is another factor.
- National target: Additionally, in response to the ambitious national targets and to spur sector specific development, Tamil Nadu released the Solar Policy of 2019, aiming for 9GW of solar installations by 2023.
Type of technology use for solar panel
- 1) Mono-crystalline Vs multi-crystalline panels: ‘First-generation’ solar cells use mono-crystalline and multi-crystalline silicon wafers.
- The efficiency of mono-crystalline panels is about 24%, while for multi-crystalline panels it is about 20%.
- Mono-crystalline cells are dominant today.
- Although mono-crystalline panels are priced higher than multi-crystalline ones, the difference is diminishing and will soon attain parity.
- This would result in mono panels being preferred over multi due to their higher efficiency, greater energy yield and lower cost of energy.
- 2) Bifacial solar cells: Newer technologies incorporating crystalline silicon focus on bifacial solar cells, capable of harvesting energy from both sides of the panel.
- Bifacials can augment the power output by 10-20%.
- Within this, the Passive Emitter and Rear Contact technology is predicted to gain popularity. However, it is yet to achieve price parity for large-scale deployment.
- 3) Thin-film technologies: It is classified as the ‘second generation of solar PVs.
- In addition to being used in solar farms and rooftops, thin films with their low thickness, light weight and flexibility are also placed on electronic devices and vehicles, power streetlights and traffic signals.
- Mainstream thin films utilise semiconductor chemistries like Cadmium Telluride with module efficiencies of around 19%.
- Other technologies include Amorphous Silicon and Copper Indium Gallium Di-Selenide.
- Nanocrystal and dye-sensitised solar cells are variants of the thin film technology. These are in early stages for large-scale commercial deployment
- However, the efficiency of thin films is lower than that of crystalline silicon.
- 4) Perovskite: These are grouped as ‘third generation’ and contain technologies such as perovskite, nanocrystal and dye-sensitised solar cells.
- Perovskites have seen rapid advances in recent years, achieving cell efficiency of 18%.
- They have the highest potential to replace silicon and disrupt the solar PV market, due to factors such as ease of manufacture, low production costs and potential for higher efficiencies.
- 5) Use of Graphene Quantum-dots: Graphene is made of a single layer of carbon atoms bonded together as hexagons.
- Solar cells made of graphene are of interest due to high theoretical efficiency of 60% and its super capacitating nature.
- Quantum-dot PVs use semiconductor nanocrystals exhibiting quantum mechanical properties capable of high efficiency of about 66%.
- However, both these are in the early stages of research.
Technologies to better integrate solar PVs into the grid
- These technologies include weather forecasting and power output prediction systems; operation monitoring and control systems; and scheduling and optimisation systems.
- Additionally, automatic systems have been developed for the smooth resolution of output fluctuations.
Way forward
- A portion of the budget for renewable energy targets should be set aside exclusively for new technologies.
- Grants and subsidies can also be provided for their adoption.
- Efforts must be taken to address gaps in research, development, and manufacturing capabilities in the solar sector through sector-specific investment and incentives.
- There must also be greater industry-academia collaborations and funding opportunities for startups.
- A comprehensive sector-specific skilling programme is also required for workers.
Conclusion
All these efforts would help the country become a global player in the solar power sector.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: EU
Mains level: Paper 2- EU Indo-Pacific strategy
Context
Last month, the EU released it “EU strategy for cooperation in the Indo-Pacific”. This document is very rich and needs to be analysed in the context of the rapprochement between the EU and India, which culminated in the June EU-India summit, a “turning point” according to some analysts.
Important takeaways from EU’s Indo-Pacific strategy
- The EU strategy in the Indo-Pacific appears to be over-determined by China’s expansionism.
- “The display of force and increasing tensions in regional hotspots such as in the South and East China Sea and in the Taiwan Strait may have a direct impact on European security and prosperity,” the document says.
- If security interests are highlighted in the beginning, they are rather low in the list of the objectives of the EU Indo-Pacific strategy, which are listed as: “Sustainable and inclusive prosperity; green transition; ocean governance; digital governance and partnerships; connectivity; security and defence; human security”.
- Many paragraphs of the document are dedicated to values, including human rights.
India does not figure prominently in the policy document
- In terms of partnerships, India does not figure very prominently.
- By contrast, ASEAN is presented as “an increasingly important partner for the EU”.
- However, India appears in the list of the countries which already have an Indo-Pacific strategy and with which the EU is interested in a deeper “engagement”, a list made of ASEAN, Australia, India, Japan, New Zealand, the Republic of Korea, the UK and US.
- However, the document does not mention the role India could play in value-chain diversification, a top priority of the EU since the Covid-19 pandemic in particular.
- Yet, India is mentioned few pages later in a similar perspective when it is said that the EU will help “low and middle-income Indo-Pacific partners to secure access to the Covid-19 vaccine through the Covax facility and through other means”.
- What the French see as India’s main asset, its strategic dimension, is not central in the EU document.
- India is listed as the EU’s first partner only in one area: “under the project Enhancing Security Cooperation in and with Asia (ESIWA), which covers counter-terrorism, cybersecurity, maritime security and crisis management.
- The pilot partners are India, Indonesia, Japan, the Republic of Korea, Singapore and Vietnam, with EU military experts already operating in Indonesia and in Vietnam.”
Understanding the German influence on the policy document
- Thus, the EU strategy for cooperation in the Indo-Pacific is more in tune with the German vision of the Indo-Pacific than with the French one.
- The fact that the German approach prevails in the EU document is a reflection of the influence of Berlin’s weltanschauung (worldview) in Europe — something Brexit has accentuated, Great Britain’s Indo-Pacific strategy being similar to France’s.
- But China’s attitude may force Germany — and the EU — to change their mind in the near future.
Conclusion
By and large, the Indo-Pacific strategy of the EU remains driven by economic considerations and India, whose main asset is geopolitical and even geostrategic, does not figure prominently in it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Alternative foreign policy
Context
A document has emerged from the Centre for Policy Research (CPR) in the nature of an alternative to the present foreign and defence policies named ‘India’s Path to Power: Strategy in a world adrift’. It is authored by eight well-known strategists and thinkers.
Background of the document
- In 2012, many of the same authors had produced another document, ‘Non-alignment 2.0’, in the light of the global changes at that time, as a contribution to policymaking, without criticising the policies of the government.
- The present document, however, is in the nature of an alternative to the foreign and defence policies of the government, as some of its tenets are not considered conducive to finding a path to power for India in the post-pandemic world.
Change in foreign policy
- The first term of the Modi government was remarkable for its innovative, bold and assertive foreign policy, which received general approbation.
- After his unconventional peace initiatives with Pakistan failed, he took a firm stand and gained popularity at home.
- His wish to have close relations with the other neighbours did not materialise, but his helpful attitude to them even in difficult situations averted any crisis.
- He brought a new symphony into India-U.S. relations and engaged China continuously to find a new equation with it. India’s relations with Israel and the Arab countries became productive.
- In its second term, the government dealt with some of the sensitive matters, which were essentially of a domestic nature such as Article 370, citizenship issues and farming regulation.
- The external dimensions of these matters led to a challenge to the government’s foreign policy.
Suggestions in the Centre for Policy Research report
- Impact of domestic issues on foreign policy: The finding of the report is that domestic issues have impacted foreign policy and, therefore, India should set its house in order to stem the tide of international reaction.
- This assertion at the beginning of the report is the heart of the report and it is repeated in different forms.
- Importance of globalisation: The report rightly points out that “it would be incorrect and counterproductive for India to turn its back on globalisation…”
- Revival of SAARC: The report also suggests that SAARC should be revived and that India should rejoin the Regional Comprehensive Economic Partnership and continue its long-standing quest for membership in the Asia-Pacific Economic Cooperation.
- Strategic autonomy: The report also stresses the importance of strategic autonomy in today’s world where change is the only certainty.
- Relations with the US and China: As for the India-U.S.- China triangle, the report makes the unusual suggestion that India should have better relations individually with both the U.S. and China than they have with each other.
- The report concludes that since China will influence India’s external environment politically, economically and infrastructurally, there is no feasible alternative to a combination of engagement and competition with China.
- Pakistan policy: The report asserts, “as long as our objectives of policy towards Pakistan are modest, resumption of dialogue and a gradual revival of trade, transport and other links are worth pursuing.”
Conclusion
The significance of the report is that it reveals the end of the era of consensus foreign policy and presents a shadow foreign policy for the first time in India. It remains to be seen whether any of the opposition parties will adopt it and fight the next election on the platform provided by the report.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NLM
Mains level: Paper 3- Rashtriya Gokul Mission and National Livestock Mission (NLM)
Context
The revised version of the Rashtriya Gokul Mission and National Livestock Mission (NLM) proposes to bring focus on entrepreneurship development and breed improvement in cattle, buffalo, poultry, sheep, goat, and piggery.
Livestock breeding and challenges
- Unorganised in nature: Livestock breeding in India has been largely unorganised.
- Lack of linkages: Because of this unorganised nature there have been gaps in forward and backward integration across the value chain.
- Impact on quality: The above scenario impacts the quality of livestock that is produced and in turn negatively impacts the return on investment for livestock farmers.
- Roughly 80% bovines in the country are low on productivity and are reared by small and marginal farmers.
Entrepreneurship development through NLM and Rashtriya Gokul Mission
- The revised version of the Rashtriya Gokul Mission and National Livestock Mission (NLM) proposes to bring focus on entrepreneurship development.
- Breed improvement infrastructure: It seeks to provide incentives to individual entrepreneurs, farmer producer organisations, farmer cooperatives, joint liability groups, self-help groups, Section 8 companies for entrepreneurship development and State governments for breed improvement infrastructure.
- The breed multiplication farm component of the Rashtriya Gokul Mission is going to provide for capital subsidy up to ₹200 lakh for setting up breeding farm with at least 200 milch cows/ buffalo using latest breeding technology.
- Moreover, the strategy of incentivising breed multiplication farm will result in the employment of 1 lakh farmers.
- The grassroots initiatives in this sphere will be further amplified by web applications like e-Gopala that provide real-time information to livestock farmers.
- Poultry: The poultry entrepreneurship programme of the NLM will provide for capital subsidy up to ₹25 lakh for the setting up of a parent farm with a capacity to rear 1,000 chicks.
- Under this model, the rural entrepreneur running the hatchery will be supplying chicks to the farmers.
- This is expected to provide employment to at least 14 lakh people.
- Sheep and goat entrepreneurship: In the context of sheep and goat entrepreneurship, there is a provision of capital subsidy of 50% up to 50 lakh.
- An entrepreneur under this model shall set up a breeder farm, develop the whole chain will eventually sell the animals to the farmers or in the open market.
- This model is projected to generate a net profit of more than ₹33 lakh for the entrepreneur per year.
- Piggery: For piggery, the NLM will provide 50% capital subsidy of up to ₹30 lakh.
- Each entrepreneur will be aided with establishment of breeder farms with 100 sows and 10 boars, expected to produce 2,400 piglets in a year.
- This model is expected to generate a profit of ₹1.37 crore after 16 months and 1.5 lakh jobs.
Conclusion
The revised scheme of NLM coupled with the Rashtriya Gokul Mission and the Animal Husbandry Infrastructure Development Fund has the potential to dramatically enhance the productivity and traceability standards of our livestock.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Coal Mines Nationalisation Act (CMNA)
Mains level: Paper 3- Coal crisis
Context
In India, coal-based power plants have witnessed rapid depletion of coal stocks from a comfortable 28 days at the end of March to a precarious level of four days by the end of September. Coal India Ltd (CIL) has been unfairly attacked, even as it gears up to play a crucial role in fighting the power crisis.
Reasons for crisis
- The reasons for the crisis are structural as well as operational.
- The Coal Mines Nationalisation Act (CMNA) in 1993 enabled the government to take away 200 coal blocks of 28 billion tons from CIL and allocate them to end-users for the captive mining of coal.
- These end-users, mostly in the private sector, failed to produce any significant quantity of coal.
- The cancellation of 214 blocks by the Supreme Court added to the problem.
- Commensurate to the captive mines allocated to the end-user industries, the coal production today should have been at least 500 million tonnes per annum (mtpa).
- In reality, this has never exceeded 60 mtpa.
- On the operational side, power plants are required by the Central Electricity Authority (CEA) to maintain a minimum stock of 15 to 30 days of normative coal consumption.
- The compliance with this directive by power plants has been severely lacking.
- This enhances the vulnerability of power plants.
- The persistent non-payment of coal sale dues by power plants to coal companies has created a serious strain on their working capital position.
- A spurt in imported coal prices, mainly due to a major increase in coal imports by China, acted as a brake on imports of coal.
- This escalated the demand for domestic coal.
- The spurt in demand for coal is being linked to the post-Covid economic recovery.
CIL’s role in mitigating the shortage crisis
- Growth in production in short duration: Despite many constraining factors, it is to the credit of CIL that it has achieved a growth of 14 million tonnes (mt) or 5.8 per cent in coal production during the first half of 2021-22.
- Yet, the offtake was higher than the preceding year by 52 mt or 20.6 per cent.
- This was possible by drawing down on the opening inventory of coal from 100 mt to 42 mt during April to September.
- With the monsoons behind us and the onset of a good productive season, CIL has already stepped up coal offtake to more than 1.5 mt per day.
- With efforts on the part of the railways in moving the coal, the crisis should dissipate in the near future, at least for power plants that pay timely for coal supplies.
- Besides meeting the growing coal demand of power plants, CIL has been able to significantly replace the import of highly expensive thermal coal.
- Cheaper coal: Even after bearing the highest tax and transport cost globally, the landed cost of CIL coal continues to be much cheaper than imported coal at almost all destinations.
- Saving of foreign exchange: The resultant benefits are savings of foreign exchange, and generation of power at affordable tariffs.
- The coal price charged by CIL, expressed in energy units, is at a deep discount of 60-70 per cent of imported coal.
Conclusion
In brief, CIL has been unfairly blamed for the coal crisis. It has played a stellar role, standing like a solid rock between light and darkness. It is striving to build comfortable stocks at the power plants, not in default of payment.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GHI and its components
Mains level: Paper 2- Low ranking of India on GHI
Context
This year’s Global Hunger Index (GHI) ranks India 101 out of 116 countries for which reliable and comparable data exist.
Government’s stand
- Is India’s performance on hunger as dismal as denoted by the index or is it partly a statistical artefact?
- This question assumes immediacy, especially since the government has questioned the methodology and claimed that the ranking does not represent the ground reality.
- This calls for careful scrutiny of the methodology, especially of the GHI’s components.
Understanding the GHI methodology
- The GHI has four components.
- The first — insufficient calorie intake — is applicable for all age groups.
- The data on deficiency in calorie intake, accorded 33% weight, is sourced from the Food and Agriculture Organization’s Suite of Food Security Indicators (2021).
- The remaining three — wasting (low weight for height), stunting (low height for age) and mortality — are confined to children under five years.
- The data on child wasting and stunting (2016-2020), each accounting for 16.6% of weight, are from the World Health Organization, UNICEF and World Bank, complemented with the latest data from the Demographic and Health Surveys.
- Under-five mortality data are for 2019 from the UN Inter-Agency Group for Child Mortality Estimation.
Issues with GHI
- The GHI is largely children-oriented with a higher emphasis on undernutrition than on hunger and its hidden forms, including micronutrient deficiencies.
- The first component — calorie insufficiency — is problematic for many reasons.
- The lower calorie intake, which does not necessarily mean deficiency, may also stem from reduced physical activity, better social infrastructure (road, transport and healthcare) and access to energy-saving appliances at home, among others.
- For a vast and diverse country like India, using a uniform calorie norm to arrive at deficiency prevalence means failing to recognise the huge regional imbalances in factors that may lead to differentiated calorie requirements at the State level.
Understanding the connection between stunting and wasting and ways to tackling them
- India’s wasting prevalence (17.3%) is one among the highest in the world.
- Its performance in stunting, when compared to wasting, is not that dismal, though.
- Child stunting in India declined from 54.2% in 1998–2002 to 34.7% in 2016-2020, whereas child wasting remains around 17% throughout the two decades of the 21st century.
- Stunting is a chronic, long-term measure of undernutrition, while wasting is an acute, short-term measure.
- Quite possibly, several episodes of wasting without much time to recoup can translate into stunting.
- Effectively countering episodes of wasting resulting from such sporadic adversities is key to making sustained and quick progress in child nutrition.
- Way forward: If India can tackle wasting by effectively monitoring regions that are more vulnerable to socioeconomic and environmental crises, it can possibly improve wasting and stunting simultaneously.
Low child mortality
- India’s relatively better performance in the other component of GHI — child mortality — merits a mention.
- Studies suggest that child undernutrition and mortality are usually closely related, as child undernutrition plays an important facilitating role in child mortality.
- However, India appears to be an exception in this regard.
- This implies that though India was not able to ensure better nutritional security for all children under five years, it was able to save many lives due to the availability of and access to better health facilities.
Conclusion
The low ranking does not mean that India fares uniformly poor in every aspect. This ranking should prompt us to look at our policy focus and interventions and ensure that they can effectively address the concerns raised by the GHI, especially against pandemic-induced nutrition insecurity.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: AT and C losses
Mains level: Paper 3- Salient features of Electricity (Amendment) Bill 2020
Context
Most discoms are deep into the red as high aggregate technical and commercial (AT&C) losses are chipping into their revenues. Against this backdrop, the Electricity (Amendment) Bill of 2020 is a game-changing reform.
Why the Electricity (Amendment) Bill of 2020 is a game-changing reform
- De-licensing power distribution: This will provide the consumers with an option of choosing the service provider, switch their power supplier and enable the entry of private companies in distribution, thereby resulting in increased competition.
- In fact, privatisation of discoms in Delhi has reduced AT&C losses significantly from 55% in 2002 to 9% in 2020.
- Open access for purchasing power: Open access for purchasing power from the open market should be implemented across States and barriers in the form of cross-subsidy surcharge, additional surcharge and electricity duty being applied by States should be reviewed.
- Issue of tariff revision: The question of tariffs needs to be revisited if the power sector is to be strengthened.
- Tariffs ought to be reflective of the average cost of supply to begin with and eventually move to customer category-wise cost of supply in a defined time frame.
- This will facilitate a reduction in cross-subsidies.
- Inclusion in GST: Electrical energy should be covered under GST, with a lower rate of GST, as this will make it possible for power generator/transmission/distribution utilities to get a refund of input credit, which in turn will reduce the cost of power.
- Use of smart meters: Technology solutions such as installation of smart meters and smart grids which will reduce AT&C losses and restore financial viability of the sector.
- The impetus to renewable energy: The impetus to renewable energy, which will help us mitigate the impact of climate change, is much needed.
- Despite its inherent benefits, the segment has shown relatively slow progress with an estimated installed capacity of 5-6 GW as on date, well short of the 2022 target.
- The Bill also underpins the importance of green energy by proposing a penalty for non-compliance with the renewable energy purchase obligations which mandate States and power distribution companies to purchase a specified quantity of electricity from renewable and hydro sources
- Strengthening the regulatory architecture: This will be done by appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity.
- This will ensure faster resolution of long-pending issues and reduce legal hassles.
- Authority for contractual obligation: Provision in the Bill such as the creation of an Electricity Contract Enforcement Authority to supervise the fulfillment of contractual obligations under power purchase agreement, cost reflective tariffs and provision of subsidy through DBT are commendable.
Conclusion
Early passage of the Bill is critical as it will help unleash a path-breaking reform for bringing efficiency and profitability to the distribution sector.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Issues with NEET
Context
The Tamil Nadu government has passed an Act seeking an exemption from treating NEET as the sole and mandatory requirement for medical admission in the state. The Act, which is yet to get approval from the President.
NEET issue in Tamil Nadu
- The Justice A K Rajan committee was appointed by the state government of Tamil Nadu to examine whether NEET is an equitable method of selection.
- Its report lends credence to the belief that NEET tends to give an advantage to students from privileged backgrounds.
- It also observed that NEET, in terms of orientation, is biased towards the Central Board of Secondary Education (CBSE).
- In the section titled ‘Size of coaching market’, the report brings out two poignant facts.
- One, by inadvertently creating a “market for coaching”, NEET has helped to create an “extractive industry of coaching” as an essential condition for clearing it.
- Two, the coaching fees are not only high, but are beyond the reach of many, especially the poor and marginalised.
- Acting upon the committee’s recommendation, the Tamil Nadu government has passed an Act seeking an exemption from treating NEET.
- The Act, which is yet to get approval from the President.
- An educational intervention which was introduced as a solution to foster equality of opportunity has turned out to be the primary cause of deepening inequality of participation and opportunity.
Important questions
- There are at least two important questions.
- Equality of opportunity: First, does NEET help foster equality of opportunity for everyone without unduly advantaging or disadvantaging anyone?
- Second, is NEET’s bias towards CBSE justifiable in an immensely diverse country like ours, where varied school curricula coexist with a highly unequal access to financial and educational resources and opportunities?
- The question here is: How can NEET promote parity of participation when aspiring first-generation students from marginalised and poor households participate from a highly unequal position in the first place?
- NEET disregards the fact that the terms and conditions of participation are highly unequal and biased.
Way forward
- The National Education Policy (NEP 2020) envisions a curriculum and pedagogy which will promote holistic learning, social responsibility and multilingualism, among other things.
- It is important, therefore, to significantly restructure the focus of NEET keeping in mind the spirit of NEP and varied school curricula in regional languages.
Conclusion
A restructured NEET, which does not require intensive and repeated coaching as a prerequisite and is not biased towards any board, can go a long way in promoting the parity of participation and nourishing the capacity to aspire, especially of the poor and marginalised.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Section 139 of the BSF Act
Mains level: Paper 3- BSF powers
Context
The Ministry of Home Affairs recently issued a notification extending the jurisdiction of the Border Security Force from 15 km to a depth of 50 km along the international borders in three states — Punjab, Assam and West Bengal.
Background of the notification about jurisdiction of BSF
- The last notification of the MHA (July 3, 2014), which defined the jurisdiction of the BSF, stated that the force could operate in the entire states of Nagaland, Manipur, Mizoram, Tripura and Meghalaya without any restrictions whatsoever.
- In Gujarat, it had jurisdiction up to a depth of 80 km and in Rajasthan up to 50 km.
- In Punjab, Assam and West Bengal, the BSF jurisdiction was up to a depth of 15 km only.
- Under the latest notification issued on October 11, 2021, there is no change in the northeastern states and Rajasthan.
- In Gujarat, jurisdiction has been reduced from 80 km to 50 km.
- The controversial change is in Assam, West Bengal and Punjab, where the BSF jurisdiction has been extended from 15 km to 50 km.
- It is this part of the notification which has generated controversy, though the criticism has been made by leaders of Punjab and West Bengal.
Why the government of India decided to extend the jurisdiction of BSF?
- Assam, West Bengal and Punjab have international borders.
- Changed threat perception: The threat perception from across the international borders has undergone a sea change in the context of recent developments in the Af-Pak region.
- Efforts to destabilise Punjab: Radical groups of different shades are feeling emboldened and are going to make a determined attempt to destabilise Punjab.
- Pakistan-sponsored terrorist groups, particularly the Lashkar-e-Toiba and Jaish-e-Muhammad, will almost certainly renew their onslaught in the border states.
- West Bengal has already undergone a huge demographic change.
- Assam faces multiple problems of ethnic insurgencies, smuggling, counterfeit currency, drug trafficking, etc.
- Police need assistance: The police across the country are in a state of atrophy and they need the assistance of central armed police forces even for maintaining normal law and order.
- As such, their effectiveness against the emerging trans-border threats is suspect.
Implications for powers of police and federalism
- The home ministry’s latest notification only seeks to reinforce the capabilities of the state police in securing the states under section 139 of the BSF Act, which empowers the members of the force to discharge certain powers and duties within local limits of the areas specified in the schedule.
- The jurisdiction of the state police has neither been curtailed nor its powers reduced in any manner.
- It is just that the BSF will also be exercising powers of search, seizure and arrest in respect of only the Passport Act 1967, Passport (Entry into India) Act 1920 and specified sections of the Criminal Procedure code.
- The power to register FIR and investigate the case remains with the state police.
- The Indian Constitution, no doubt, fulfils some conditions of a federation, but it leans towards a strong Centre.
Conclusion
National security is a paramount consideration. It is unfortunate that the BSF is being dragged into political controversy when it would actually be over-stretching itself to strengthen national security.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Pandora papers
Mains level: Paper 3- Tax evasion and tax avoidance
Context
The Pandora Papers, published on October 3, once again expose the illegal activities of the rich and the mighty across the world.
About the Pandora Papers investigation
- It is “the world’s largest-ever journalistic collaboration, involving more than 600 journalists from 150 media outlets in 117 countries”.
- The International Consortium of Investigative Journalists (ICIJ) has researched and analysed the approximately 12 million documents in order to unravel the functioning of the global financial architecture.
- The Pandora Papers, unlike the previous cases, are not from any one tax haven; they are leaked records from 14 offshore services firms. The data pertains to an estimated 29,000 beneficiaries.
- The 2.94 terabytes of data have exposed the financial secrets of over 330 politicians and public officials, from more than 90 countries and territories.
- These include 35 current and former country leaders.
Role of financial centres and banks
- A large extent of the illicit financial flows have a link to New York City and London, the biggest financial centres in the world that allow financial institutions such as big banks to operate with ease.
- The big financial entities operating from these cities have been prosecuted for committing illegalities.
- In 2012, an investigation into the London Interbank Offered Rate or LIBOR — crucial in calculating interest rates — led to the fining of leading banks such as Barclays, UBS, Rabobank and the Royal Bank of Scotland for manipulation.
- These banks also operate a large number of subsidiaries in tax havens to help illicit financial flows.
Modus operandi
- Tax havens enable the rich to hide the true ownership of assets by using: trusts, shell companies and the process of ‘layering’.
- Financial firms offer their services to work this out for the rich.
- They provide ready-made shell companies with directors, create trusts and ‘layer’ the movement of funds.
- The process of layering involves moving funds from one shell-company in one tax haven to another in another tax haven and liquidating the previous company.
- This way, money is moved through several tax havens to the ultimate destination.
- Since the trail is erased at each step, it becomes difficult for authorities to track the flow of funds.
- It appears that most of the rich in the world use such manipulations to lower their tax liability even if their income is legally earned.
Why funds are moved to the tax havens?
- Even citizens of countries with low tax rates use tax havens.
- Over the three decades, tax havens have enabled capital to become highly mobile, forcing nations to lower tax rates to attract capital.
- This has led to the ‘race to the bottom’, resulting in a shortage of resources with governments to provide public goods, etc., in turn adversely impacting the poor.
- Lowering tax liability: It appears that most of the rich in the world use such manipulations to lower their tax liability even if their income is legally earned.
- Moving funds out of reach of creditors: Revelations suggest that funds are moved out of national jurisdiction to spirit them away from the reach of creditors and not just governments.
- Many fraudsters are in jail but have not paid their creditors even though they have funds abroad.
Challenges in checking the illicit financial flows
- The very powerful who need to be onboard to curb illicit financial flows (as the Organisation for Economic Co-operation and Development, or the OECD is trying) are the beneficiaries of the system and would not want a foolproof system to be put in place to check it.
- Strictly speaking, not all the activity being exposed by the Pandora Papers may be illegal due to tax evasion or the hiding of proceeds of crime.
- The authorities will have to prove if the law of the land has been violated.
- Operators outside the purview of tax authorities: Many Indians have become non-resident Indians or have made some relative into an NRI who can operate shell companies and trusts outside the purview of Indian tax authorities.
- That is why prosecution has been difficult in the earlier cases of data leakage from tax havens.
- The Supreme Court of India-monitored Special Investigation Team (SIT) set up in 2014 has not been able to make a dent.
- Role of organised sector: The Government’s focus on the unorganised sector as the source of black income generation is also misplaced since data indicate that it is the organised sector that has been the real culprit and also spirits out a part of its black incomes.
Way forward
- Global minimum tax: Recent development has been the agreement among almost 140 countries to levy a 15% minimum tax rate on corporates.
- Though it is a long shot, this may dent the international financial architecture.
- Ending banking secrecy: Other steps needed to tackle the curse of illicit financial flows are ending banking secrecy and a Tobin tax on transactions; neither of which the OECD countries are likely to agree to.
Consider the question “How illicits financial flows affect the economies of the nations? What are the challenges in curbing it?”
Conclusion
To curb the illicit financial flows, the global community needs to reach a consensus on several issues and tackle the challege collectively.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Article 312
Mains level: Paper 2- Reforms in bureaucracy
Context
The bureaucracy that took India through the last 75 years can’t be the one to take it through the next 75 — we need a proactive, imaginative, technology-savvy, enabling bureaucracy.
Role of bureaucracy and challenges it faces
- The civil services, and the Indian Administrative Service (IAS) in particular played important role in holding India together post-Independence.
- Much of the impressive nation-building across sectors happened because of their dedication and commitment.
- It is also forgotten that the bureaucracy, unlike the private sector, is a creature of the Constitution and is bound by multiple rules, laws, and procedures.
- Understaffed: As per estimates compiled by the Institute of Conflict Management, the government of India (GOI) has about 364 government servants for every 1,00,000 residents, with 45 per cent in the railways alone.
- About 60 per cent and 30 per cent are in Groups C and D, respectively, leaving a skeletal skilled staff of just about 7 per cent to man critical positions.
- We are grossly understaffed.
- Inaction: Further, faced with extensive judicial overreach reporting to an often rapacious, short-sighted political executive, and a media ever ready to play the role of judge, jury and executioner, the bureaucracy has in large part found comfort in inaction and ensuring audit-proof file work.
Suggestions
- Get out of business: That we need not be in many sectors is well-recognised — leave them to the markets — and politicians must get bureaucrats out of business, in more ways than one.
- Prevent punitive actions: To increase the officers’ willingness to take decisions, one possible solution is to legally prevent enforcement agencies from taking punitive action, like arrest for purely economic decisions without any direct evidence of kickbacks.
- Lateral entry: The toughest challenge is to change an inactive bureaucracy to one that feels safe in taking genuine risks.
- Lateral entry needs to expand to up to 15 per cent of Joint/Additional and Secretary-level positions in GOI.
- Recruitment process: Changes in recruitment procedures, like the interview group spending considerable time with the candidates, along with psychometric tests, will improve the incoming pool of civil servants.
- Evaluation: Most importantly, after 15 years of service, all officers must undergo a thorough evaluation to enable them to move further, and those who do not make it should be put out to pasture.
- Adoption of technology: Every modern bureaucracy in the world works on technology-enabled productivity and collaboration tools.
- India procures about $600 billion worth of goods and services annually — can’t all payments be done electronically?
Consider this question ” The civil services held India together after Independence, but if the country’s potential is to be realised, existing problems of inefficiency and inaction must be fixed. In light of this, examine the factors reasponsible for inefficiency and suggest the reforms.”
Conclusion
India cannot hope to get to a $5-trillion economy without a modern, progressive, results-oriented bureaucracy, one which says “why not?” instead of “why?” when confronted with problems.
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From UPSC perspective, the following things are important :
Prelims level: Adaptation Gap Report
Mains level: Paper 3- Climate finance
Context
In the run-up to the 26th UNFCCC media reports have claimed that developed countries are inching closer to the target of providing $100 billion annually. This view has been bolstered by the Organisation for Economic Co-operation and Development (OECD), which claimed that climate finance provided by developed countries had reached $78.9 billion in 2018.
Issue of climate financing and claim of reaching the target of $100 billion
- These claims reaching the target of $100 billion annually is erroneous.
- First, the OECD figure includes private finance and export credits.
- Public finance: Developing countries have insisted that developed country climate finance should be from public sources and should be provided as grants or as concessional loans.
- However, the OECD report makes it clear that the public finance component amounted to only $62.2 billion in 2018, with bilateral funding of about $32.7 billion and $29.2 billion through multilateral institutions.
- Nature of finance: Significantly, the final figure comes by adding loans and grants. Of the public finance component, loans comprise 74%, while grants make up only 20%.
- The report does not say how much of the total loan component of $46.3 billion is concessional.
- Non-concessional loans: From 2016 to 2018, 20% of bilateral loans, 76% of loans provided by multilateral development banks and 46% of loans provided by multilateral climate funds were non-concessional.
- Between 2013 and 2018, the share of loans has continued to rise, while the share of grants decreased.
- The OECD reports on climate finance have long been criticised for inflating climate finance figures.
- In contrast to the OECD report, Oxfam estimates that in 2017-18, out of an average of $59.5 billion of public climate finance reported by developed countries, the climate-specific net assistance ranged only between $19 and $22.5 billion per year.
- The 2018 Biennial Assessment of UNFCCC’s Standing Committee on Finance reports that on average, developed countries provided only $26 billion per year as climate-specific finance between 2011-2016.
Broken commitments from the US on climate financing
- U.S. President Joe Biden recently said that the U.S. will double its climate finance by $11.4 billion annually by 2024.
- It is Congress that will decide on the quantum after all.
- The U.S. also has a history of broken commitments, having promised $3 billion to the Green Climate Fund (GCF) under President Barack Obama, but delivering only $1 billion.
- The future focus of U.S. climate finance is the mobilisation of private sector investment.
- The bulk of the money coming in would be through private funds, directed to those projects judged “bankable” and not selected based on developing countries’ priorities and needs.
Finance skews toward mitigation
- Climate finance has also remained skewed towards mitigation, despite the repeated calls for maintaining a balance between adaptation and mitigation.
- The 2016 Adaptation Gap Report of the UN Environment Programme had noted that the annual costs of adaptation in developing countries could range from $140 to $300 billion annually by 2030 and rise to $500 billion by 2050.
- Currently available adaptation finance is significantly lower than the needs expressed in the Nationally Determined Contributions submitted by developing countries.
Conclusion
Delivering on climate finance is fundamental to trust in the multilateral process. Regrettably, while developing countries will continue to pressure developed countries to live up to their promises, the history of climate negotiations is not in their favour.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: FAO
Mains level: Paper 3- Reorienting agri-food systems
Context
There is an urgent need for reorientation of the long-term direction of agri-food systems to not only enhance farm incomes but also ensure better access to safe and nutritious foods.
Challenge of malnutrition in India
- The findings from the first round of the Fifth National Family Health Survey suggest that nutrition-related indicators have worsened in most States.
- In addition, findings from the Comprehensive National Nutrition Survey (2016-18) have highlighted the role of micro-nutrient malnutrition.
- Pathways for nutritional security consist of improving dietary diversity, kitchen gardens, reducing post-harvest losses, making safety net programmes more nutrition-sensitive, women’s empowerment, enforcement of standards and regulations, improving Water, Sanitation and Hygiene, nutrition education, and effective use of digital technology.
Agri-food system: Significance and challenges it faces
- The agri-food systems are the most important part of the Indian economy.
- India produces sufficient food, feed and fibre to sustain about 18% of the world’s population (as of 2020). Agriculture contributes about 16.5% to India’s GDP and employs 42.3% of the workforce (2019-20).
- A sustainable agri-food system is one in which a variety of sufficient, nutritious and safe foods are made available at an affordable price to everyone, and nobody goes hungry or suffers from any form of malnutrition.
- However, the country’s agri-food systems are facing new and unprecedented challenges, especially related to economic and ecological sustainability, nutrition and the adoption of new agricultural technologies.
- The edifice of India’s biosecurity remains vulnerable to disasters and extreme events.
Way forward: Reorienting agri-food systems
- There is an urgent need for reorientation of the long-term direction of agri-food systems to not only enhance farm incomes but also ensure better access to safe and nutritious foods.
- Additionally, the agri-food systems need to be reoriented to minimise cost on the environment and the climate.
- This need is recognised by the theme of World Food Day 2021: ‘Our actions are our future. Better production, better nutrition, a better environment and a better life’.
- FAO’s support for the transformation of agri-food systems is rooted in agro-ecology.
- The more diverse an agricultural system, the greater its ability to adapt to shocks.
- Different combinations of integrated crop-livestock-forestry-fishery systems can help farmers produce a variety of products in the same area, at the same time or in rotation.
- In January this year, FAO in collaboration with NITI Aayog and the Ministry of Agriculture convened a National Dialogue to evolve a framework for the transition to a more sustainable agri-food systems by 2030 and identify pathways for enhancing farmers’ income and achieving nutritional security.
Consider the question “What are the challenges facing agri-food systems in India? Suggest the pathways to transform the agri-food system to enhance farm income and ensure food and nutrition security.”
Conclusion
Food systems can help combat environmental degradation or climate change. Sustainable agri-food systems can deliver food security and nutrition for all, without compromising the economic, social and environmental bases.
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From UPSC perspective, the following things are important :
Prelims level: CAATSA
Mains level: Paper 2- Implications of CAATSA on India-US ties
Context
The delivery of the S-400 Triumf air defence systems from Russia is expected according to schedule. In response, U.S. Deputy Secretary of State Wendy Sherman hoped that both the U.S. and India could resolve the issue.
Background of the CAATSA
- The Countering America’s Adversaries through Sanctions Act (CAATSA) was passed when the U.S. sought to discourage trade in the defence and intelligence sectors of Russia.
- The Act mandates the President to impose at least five of the 12 sanctions on persons engaged in a “significant transaction” with Russian defence and intelligence sectors.
- These sanctions include suspending export licence, banning American equity/debt investments in entities, prohibiting loans from U.S. financial institutions and opposing loans from international finance institutions.
- The Act also built in a safety valve in the form of a presidential waiver.
- The “modified waiver authority” allows the President to waive sanctions in certain circumstances.
- There are a few more provisions including one that allows for sanctions waivers for 180 days, provided the administration certifies that the country in question is scaling back its ties with Russia.
Implications of CAATSA sanctions against India and scope for waiver
- Impact on bilateral relationship: Sanctions have the tremendous potential of pulling down the upward trajectory of the bilateral relationship between the U.S. and India, which now spans 50 sectors, especially in the field of defence.
- India turned sullen over the manner in which the U.S. negotiated the exit deal with the Taliban.
- Quad engagement: Yet, on the strategic plane, India remained on course by agreeing to the upgrading of the Quadrilateral Security Dialogue and sharing the same vision as the U.S. on the Indo-Pacific construct.
- The U.S.’s apprehension is that bringing India under a sanctions regime could push New Delhi towards its traditional military hardware supplier, Russia.
- The U.S. Sanctions can stir up the latent belief in India that Washington cannot be relied upon as a partner.
- While the administration will have to do the heavy lifting, the role of Indian-Americans should be significant just as they rallied around to support the Civil Nuclear Deal in the face of stiff resistance from Democrats opposed to nuclear proliferation.
- Decrease in imports from Russia: India’s import of arms decreased by 33% between 2011-15 and 2016-20 and Russia was the most affected supplier, according to a report by the Stockholm-based defence think-tank SIPRI.
- In recent years, though, there have been some big deals worth $15 billion including S400, Ka-226-T utility helicopters, BrahMos missiles and production of AK-203 assault rifles.
- Increase in defence import from US: On the other hand, over the past decade, government-to-government deals with the U.S. touched $20 billion and deals worth nearly $10 billion are under negotiation.
Conclusion
The CAATSA test will determine the course of the India-U.S. strategic partnership. Whether the Biden administration sail through opposition within his party remains to be seen.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: UDAY scheme
Mains level: Paper 3- Scheme for discoms
Context
In its budget 2021-22, the Union government had announced the launch of a “reforms-based and results-linked” scheme for the distribution sector.
Precarious financial condition of discoms
- Their overall debt burden, despite the implementation of the UDAY scheme, is estimated to increase to around Rs 6 lakh crore in the ongoing financial year.
- Moreover, their annual cash losses are estimated to be about Rs 45,000-50,000 crore (excluding UDAY grants and regulatory income).
- Due to highly subsidised nature of power tariffs towards agriculture and certain sections of residential consumers, the overall subsidy dependence is likely to be roughly Rs 1.30 lakh crore this year at the all-India level.
Revamped Distribution Sector Scheme
- In its budget 2021-22, the Union government had announced the launch of a “reforms-based and results-linked” scheme for the distribution sector.
- Subsequently, the Revamped Distribution Sector Scheme was notified in July with an overall outlay of Rs 3.03 lakh crore.
- Under the scheme, AT&C losses are sought to be brought down to 12-15 per cent by 2025-26, from 21-22 per cent currently.
- Operational efficiencies of discoms are to be improved through smart metering and upgradation of the distribution infrastructure, including the segregation of agriculture feeders and strengthening the system.
- The scheme has two parts — Part A with an outlay of Rs 3.02 lakh crore, pertains to the upgradation of the distribution infrastructure and metering related works.
- Part B, with an outlay of Rs 1,430 crore, is for training and capacity building, besides other enabling and support activities.
- Discoms and their state governments will have to sign a tripartite agreement with the central government in order to avail benefits under the scheme.
- Only those discoms that meet all the pre-qualifying criteria will be eligible for the release of funds.
- A loss-making discom will not be eligible unless it draws up plans to reduce its losses, approved by the state government and filed with the central government.
- As far as the agricultural sector is concerned, the use of solar power projects to supply electricity to these consumers through the agriculture feeder route is likely to result in savings.
- This is because of a combination of high tariff competitiveness offered by solar power, lower technical losses due to proximity to load centres, and the ability to meet demand during the day when sunlight is available.
- In addition, the delicencing initiative proposed by the central government can effect significant changes in the distribution segment, facilitating competition and placing emphasis on the quality and reliability of power supply and consumer services.
Issue of tariff determination
- A continuing area of concern affecting discom finances is the significant delay in the process of tariff determination in many states.
- As of now, only 19 out of 28 states have issued tariff orders for 2021-22, indicating sluggish progress.
- Further, there is upward pressure on the cost of power supply for distribution utilities, considering the dominant share (around 70 per cent) of coal in the fuel mix for energy generation, the strengthening of imported coal prices and the possibility of domestic coal price revisions by Coal India.
- As a consequence, a cost-reflective tariff determination process, coupled with the timely pass-through of power purchase costs, remains critical for the utilities.
Consider the question “Examine the factor that explains the continuing financial woes of state-owned discoms despite implementing several schemes. How Revamped Distribution Sector Scheme seeks to address the issue?”
Conclusion
On the whole, while the focus on improving the operational efficiency, and ensuring the financial sustainability of discoms is indeed welcome, timely implementation of the reforms is critical to achieving the milestones.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Taper tantrum
Mains level: Paper 3- MPC decision on interest rates
Context
The Monetary Policy Committee of the RBI kept the benchmark policy rates unchanged, and retained the accommodative stance in its October review.
Factors playing part in monetary policy decisions
- It’s important to remember that monetary policy these days is influenced by both local macroeconomic developments and the global monetary policy direction, with the former playing a dominant role.
- Locally, after the second wave of the pandemic, a variety of indicators such as the Purchasing Managers Index (manufacturing and services), mobility indicators, government tax collections, exports and imports are pointing at an improvement in economic activity.
- Then there is the good news on the monsoon front. With a late pick-up in rains, the cumulative deficiency in this monsoon season has come down to just 1 per cent of the long-period average (LPA).
- Since the MPC’s August 2021 policy review, Covid-19 cases have trended down and there has been admirable progress on the vaccination front.
- Also, despite high year-on-year growth numbers, the level of economic activity this fiscal will only be 1.5 per cent above 2019-2020.
Trends emerging from the economic recovery
- Role of government: Capital expenditure of both the Centre and states is on track to meet the budgetary commitment, supported by healthy tax collections.
- Large companies on recovery path: Large companies in industrial sectors such as steel, cement, non-ferrous metals are operating at healthy utilisation levels, and have deleveraged their balance sheets.
- Policy support for smaller companies: The going is not so good for the smaller ones.
- Clearly, smaller companies need policy support. The extension of the Emergency Credit Line Guarantee Scheme is a recognition of that.
- Private consumption is not broad-based either.
- Even in goods consumption, which is faring better than services, the nature of demand seems skewed towards relatively higher-value items such as cars and utility vehicles.
- This probably reflects the income dichotomy spawned by the pandemic.
- Inflation: Its fall to 5.3 per cent in August offers only limited comfort for two reasons.
- One, core and fuel inflation, which have 54 per cent weightage in CPI, remain stubbornly high.
- Second, food prices have nudged down overall inflation.
- Domestic growth-inflation dynamics suggest that the RBI has little option but to remain more tolerant of persistent price pressures, and hope that these will eventually prove transitory because they have been primarily driven by supply shocks caused by the pandemic.
Global monetary policy environment
- Globally, the monetary policy environment is veering towards normalisation/tapering/interest-rate rise largely due to an upward surprise in inflation, or because some central banks feel the objectives of quantitative easing have been met.
- Central banks in advanced economies such as Norway, Korea and New Zealand have recently raised rates.
- The two systemically important central banks — the US Federal Reserve (Fed) and the European Central Bank (ECB) — view the current spike in inflation as fleeting and have communicated greater tolerance for it for a longer period.
Conclusion
The process of mopping up excess liquidity will slowly gain pace over the next few months, followed by a policy rate hike sometime around early 2022. By then, there should be enough clarity on the third wave and the stance of the Fed and the ECB.
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From UPSC perspective, the following things are important :
Prelims level: AUKUS
Mains level: Paper 2-Relations with EU
Context
Last week’s in-person summit in Delhi was with the Danish prime minister, Mette Frederiksen.
Europe as a valuable partner
- Few Asian countries view Europe with strategic suspicion. Many in Asia see Europe as a valuable partner.
- As the deepening confrontation between the US and China begins to squeeze South East Asia, Europe is widely seen as widening the strategic options for the region.
- The perspective is similar in Delhi, which now sees Brussels as a critical element in the construction of a multipolar world.
- Cultivate Europe: As External Affairs Minister Subrahmanyam Jaishankar puts it, India’s strategy is to “engage America, manage China, cultivate Europe, reassure Russia, bring Japan into play”.
- EU’s Strategy for India: The EU outlined a strategy for India in 2018 to focus on four themes — sustainable economic modernisation, promotion of a rules-based order, foreign policy coordination, and security cooperation.
- At the summit in Portugal in May this year, the EU and India agreed to resume free trade talks and develop a new connectivity partnership that would widen options for the world beyond the Belt and Road Initiative.
- Rebalancing the international system: Above all, there is a recognition in both Delhi and Brussels that the India-EU strategic partnership is crucial for the rebalancing of the international system amidst the current global flux.
Possibilities with smaller European countries
- Europe looms so large in the Indian diplomatic agenda today and smaller European states draw unprecedented political attention from Delhi.
- That Denmark, a country of barely six million people, can establish a significant green partnership with India, is a reminder that smaller countries of Europe have much to offer in India’s economic, technological, and social transformation.
- Luxembourg brings great financial clout, Norway offers impressive maritime technologies, Estonia is a cyber power, Czechia has deep strengths in optoelectronics, Portugal is a window to the Lusophone world, and Slovenia offers commercial access to the heart of Europe through its Adriatic sea port at Koper.
- As India begins to realise this untapped potential, there are new openings with the 27-nation EU headquartered in Brussels.
EU’s important role in Indo-Pacific
- The EU’s Indo-Pacific strategy is likely to have a much greater impact on the region more immediately and on a wider range of areas than military security.
- Area’s of impact range from trade and investment to green partnerships, the construction of quality infrastructure to digital partnerships, and from strengthening ocean governance to promoting research and innovation.
- Defence and security are important elements of the EU’s Indo-Pacific strategy that “seeks to promote an open and rules-based regional security architecture, including secure sea lines of communication, capacity-building and enhanced naval presence in the Indo-Pacific.
- Whatever the specific circumstances of the AUKUS deal and its impact on France, the US wants all its partners, especially Europe, to contribute actively to the reconstitution of the Asian balance of power.
- Working with Quad: The EU strategy, in turn, sees room for working with the Quad in the Indo-Pacific, while stepping up security cooperation with a number of Asian partners, including India, Indonesia, Japan, the Republic of Korea, Singapore and Vietnam.
- India is conscious that Europe can’t match America’s military heft in the Indo-Pacific.
- But it could help strengthen the military balance and contribute to regional security in multiple other ways.
Consider the question “Delhi knows that Europe could significantly boost India’s capacity to influence future outcomes in the Indo-Pacific. It would also be a valuable complement to India’s Quad coalition”. Comment.
Conclusion
It was Russia that defined India’s discourse on the multipolar world after the Cold War. Today, it is Europe — with its much greater economic weight, technological strength, and normative power — that promises to boost India’s own quest for a multipolar world and a rebalanced Indo-Pacific.
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From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Taiwan issue and implications for the Indo-Pacific region
Context
If the rising confrontation between the United States and China erupts into a clash of arms, the likely arena may well be the Taiwan Strait.
Historical background of the Taiwan issue
- The Guomindang (KMT) forces under Chiang Kai-shek lost the 1945-49 civil war to the Chinese Communist Party (CCP) in 1949. forces under Mao Zedong.
- Chiang retreated to the island of Taiwan and set up a regime that claimed authority over the whole of China and pledged to recover the mainland eventually.
- The CCP in turn pledged to reclaim what it regarded as a “renegade” province and achieve the final reunification of China.
- Role of the U.S.: Taiwan could not be occupied militarily by the newly established People’s Republic of China (PRC) as it became a military ally of the United States during the Korean War of 1950-53.
- This phase came to an end with the U.S. recognising the PRC as the legitimate government of China in 1979, ending its official relationship with Taiwan and abrogating its mutual defence treaty with the island.
- Strategic ambiguity policy of the US: Nevertheless, the U.S. has declared that it will “maintain the ability to come to Taiwan’s defence” while not committing itself to do so.
- This is the policy of “strategic ambiguity”.
- The PRC has pursued a typical carrot and stick policy to achieve the reunification of Taiwan with the mainland.
- It has held out the prospect, indeed preference for peaceful reunification, through promising a high degree of autonomy to the island under the “one country two systems”.
- The “one country two systems” formula first applied to Hong Kong after its reversion to Chinese sovereignty in 1997.
China-Taiwan economic links
- Taiwan business entities have invested heavily in mainland China and the two economies have become increasingly integrated.
- Between 1991 and 2020, the stock of Taiwanese capital invested in China reached U.S. $188.5 billion and bilateral trade in 2019 was U.S. $150 billion, about 15% of Taiwan’s GDP.
- By the same token, China is capable of inflicting acute economic pain on Taiwan through coercive policies if the island is seen to drift towards an independent status.
Prospects for peaceful reunification
- Taiwan has two major political parties.
- The KMT, dominated by the descendants of the mainlanders remains committed to a one-China policy.
- The Democratic Progressive Party (DPP), on the other hand, is more representative of the indigenous population of the island, and favours independence.
- Faced with aggressive threats from China and lack of international support, the demand for independence has been muted.
- Ever since the DPP under Tsai Ing-wen won the presidential elections in 2016, China has resorted to a series of hostile actions against the island, which include economic pressures and military threats.
- One important implication of this development is that prospects for peaceful unification have diminished.
- Sentiment in Taiwan in favour of independent status has increased.
Role of the US
- While the U.S. does not support a declaration of independence by Taiwan, it has gradually reversed the policy of avoiding official-level engagements with the Taiwan government
- The first breach occurred during the Donald Trump presidency.
- The Joe Biden officials have continued this policy.
- The Taiwanese representative in Washington was invited to attend the presidential inauguration ceremony (Biden), again a first since 1979.
- Reports have now emerged that U.S. defence personnel have been, unannounced, training with their Taiwanese counterparts for sometime.
Implications for Quad and India
- The recent crystallisation of the Quad, of which India is a part, and the announcement of the AUKUS, with Australia being graduated to a power with nuclear-powered submarines, may act as a deterrent against Chinese moves on Taiwan.
- But they may equally propel China to advance the unification agenda before the balance changes against it in the Indo-Pacific.
- For these reasons, Taiwan is emerging as a potential trigger point for a clash of arms between the U.S. and China.
Consider the question “What are the implications of Taiwan issue and the US involvement in it for India?”
Conclusion
In pursuing its Indo-Pacific strategy, India would do well to keep these possible scenarios in mind.
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