Cyber Security – CERTs, Policy, etc

The epoch of cyberweapons

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Zero day vulnerability

Mains level: Paper 3- Cyberwarfare-Fifth dimension

Context

The controversy over the use of Pegasus spyware for snooping highlights the threats posed by cyber-weapons.

The emergence of the cyber weapons epoch

  • Cyberattacks on institutions such as banks and on critical infrastructure have proliferated to an alarming extent, signaling the emergence of the cyber weapon epoch.
  • Privacy has been eroded and the Internet has become a powerful weapon in the hands of those seeking to exploit its various facets.
  • Fifth dimension of warfare: Cyber is often touted as the fifth dimension of warfare — in addition to land, sea, air and space.

The domain of everyday life

  • Cyber, as the domain of military and national security, also co-exists with cyber as a domain of everyday life.
  • The war is no longer out there.
  • It is now directly inside one’s drawing-room, with cyberweapons becoming the weapon of choice.
  • Israelis today dominate the cyber domain along with the Chinese, Russians, Koreans and, of course, the Americans.
  • The linkage between sabotage and intrusive surveillance is but a short step.

Cyberattacks during the past decades

  •  Beginning with the 2007 devastating cyberattack on Estonia’s critical infrastructure, this was followed by the Stuxnet worm attack a few years later on Iran’s nuclear facility.
  • The Shamoon virus attack on Saudi Aramco occurred in 2012.
  • In 2016, a cyberattack occurred on Ukraine’s State power grid; in 2017 there was a Ransomware attack (NotPetya) which affected machines in as many as 64 countries.
  • United Kingdom’s National Health Service fell prey to the Wannacry attack the same year.
  • The series of attacks happened this year on Ireland’s Health Care System and in the United States such as ‘SolarWinds’, the cyber attack on Colonial Pipeline and JBS, etc.

What are the threats posed by cyberattacks?

  • Cyberweapons carry untold capacity to distort systems and structures — civilian or military.
  • Cyberweapons also interfere with democratic processes, aggravate domestic divisions and, above all, unleash forces over which established institutions or even governments have little control.
  • As more and more devices are connected to networks, the cyber threat is only bound to intensify, both in the short and the medium term.
  • What is especially terrifying is that instruments of everyday use can be infected or infiltrated without any direct involvement of the target.
  • The possibilities for misuse are immense and involve far graver consequences to an individual, an establishment, or the nation.
  • It is not difficult to envisage that from wholesale espionage, this would become something far more sinister such as sabotage.

Way forward

  • Deeper understanding:  Dealing with ‘zero day’ vulnerabilities require far more thought and introspection than merely creating special firewalls or special phones that are ‘detached’ from the Internet.
  • Recognising the mindset: What is needed is a deeper understanding of not only cyber technologies, but also recognising the mindsets of those who employ spyware of the Pegasus variety, and those at the helm of companies such as the NSO.
  • Short-term remedies are unlikely to achieve desired results.
  • No use of AI: Artificial Intelligence (AI) is often seen as a kind of panacea for many of the current problems and ills, but all advances in technology tend to be a double-edged sword.
  • If truth be told, AI could in turn make all information warfare — including cyber related — almost impossible to detect, deflect or prevent, at least at the current stage of development of AI tools.

Conclusion

All this suggests that security in the era of ever-expanding cyberweapons could become an ever-receding horizon.


Back2Basics: Zero-day vulnerability

  • The term “zero-day” refers to a newly discovered software vulnerability.
  • Because the developer has just learned of the flaw, it also means an official patch or update to fix the issue hasn’t been released.
  • So, “zero-day” refers to the fact that the developers have “zero days” to fix the problem that has just been exposed — and perhaps already exploited by hackers.

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Police Reforms – SC directives, NPC, other committees reports

One nation, one police is a reform that is long overdue

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Police Act 1861

Mains level: Paper 2- One nation, one police

Context

Police reforms are still an unfinished task, fifteen years after the Supreme Court gave directives in the Prakash Singh case in 2006.

Integrated schemes in different facilities

  • The Government of India has lately been talking of “One Nation, One Ration Card”, “One Nation, One Registry”, “One Nation, One Gas Grid”, and even “One Nation, One Election”.
  • These ideas would contribute to an integrated scheme in different facilities and networks across the country.
  • The attempt at uniformity should, however, take cognisance of local factors and special features.

Issue of different states passing different Police Act

  • Every state is legislating a different Police Act, purportedly in compliance with the Supreme Court’s directions on police reforms given on September 22, 2006.
  • We are in the process of having “one nation, many police acts”.
  • Circumventing the Prakash Singh judgement: The objective behind these laws is to give legislative cover to the existing arrangement and thereby circumvent the judicial directions given in the Prakash Singh judgement in 2006.
  •  Eighteen states have already passed Police Acts.
  • Absence of central guidelines: Several states have, in the absence of any central guidance or directive, passed their own Police Acts, blatantly violating the Supreme Court’s directions.
  • No action by judiciary: The Supreme Court has, for inexplicable reasons, not issued a contempt notice to any of the states for non-compliance of its directions on police reforms.

Way forward

1) The Centre should legislate a Model Police Act

  • Article 252 of the Constitution gives Parliament the power to legislate for two or more states by consent.
  • Soon after the Supreme Court’s directions on police reforms, the Police Act Drafting Committee of the Ministry of Home Affairs came out with the Model Police Act, 2006.
  • The Government of India should have enacted a law based on this Model Police Act with such changes as it may have found necessary, and the states should have mutatis mutandis ( making necessary alterations while not affecting the main point at issue) adopted it.
  • The least that the Government of India could have done was to legislate for the UTs and then prevailed upon the states to pass similar legislation.
  • Enacting a law in the states could have been incentivised by linking their passage with the modernisation grants made available to the states.

2) Need for the spirit of cooperative federalism

  • In recent times, we saw the unseemly spectacle of the Mumbai police commissioner accusing the state home minister of using the police as an instrument for extortion.
  • In West Bengal, the police have been a mute spectator to the post-election violence.
  • The Centre, through a fiat, gave protection to all the MLAs of the BJP.
  • Normally, any such arrangement should have been in consultation and with the involvement of the state government. 
  • Cooperative federalism: The best option would be for the central and state governments to respect each other’s turf in a spirit of cooperative federalism.

3)Need for a fresh look at the distribution of power

  • If the central and state governments cannot respect each other’s turf, it would perhaps be necessary to have a fresh look at the distribution of powers in the seventh schedule of the Constitution.

Conclusion

Police reforms on the lines of judicial directives given by the Supreme Court is the need of the hour. The centre needs to act first and nudge the states toward a uniform police structure throughout the country.


Back2Basics: Supreme Court Directive on Police Reforms

1) Limit political control

  • Constitute a State Security Commission to:
  • Ensure that the state government does not exercise unwarranted influence or pressure on the police.
  • Lay down broad policy guidelines.
  • Evaluate the performance of the state police.

2. Appointments based on merit

  • Ensure that the Director-General of Police is appointed through a meritbased, transparent process, and secures a minimum tenure of 2 years.

3. Fix minimum tenure

  • Ensure that other police officers on operational duties (including Superintendents of Police in charge of a district and Station House Officers in charge of a police station) are also provided a minimum tenure of 2 years.

4. Separate police functions

  • Separate the functions of investigation and maintaining law and order.

5. Set up fair and transparent systems

  • Set up a Police Establishment Board to decide and make recommendations on transfers, postings, promotions and other service-related matters of police officers of and below the rank of Deputy Superintendent of Police.

6. Establish a Police Complaints Authority in each state

  • At the state level, there should be a Police Complaints Authority to look into public complaints against police officers of and above the rank of Superintendent of Police in cases of serious misconduct, including custodial death, grievous hurt or rape in police custody.
  • At the district level, the Police Complaints Authority should be set up to inquire into public complaints against the police personnel of and up to the rank of Deputy Superintendent of Police in cases of serious misconduct.

7. Set up a selection commission

  • A National Security Commission needs to be set up at the union level to prepare a panel for selection and placement of chiefs of the Central Police Organizations with a minimum tenure of 2 years.

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Promoting fiscal federalism

Note4Students

From UPSC perspective, the following things are important :

Prelims level: 101st Constitutional Amendment

Mains level: Paper 2- Fiscal federalism

Context

States are facing financial constraints in the backdrop of lockdown and consequent dwindling revenue collection. The situation also highlights the issues of fiscal federalism in India.

Issues facing fiscal federalism in India

1) Issue of 14% compensation

  • As per the Constitution (One Hundred and First Amendment) Act, compensation on account of the implementation of GST will be available for a period of five years.
  • 14% increment assurance: At the time of introducing the Goods and Services Tax (GST) law assured States a 14% increase in their annual revenue for five years (up to July 1, 2020).
  • But the Union government has deviated from the statutory promise and has been insisting that States avail themselves of loans.
  • The future interest liability of these loans should not be placed on the shoulders of the States.
  • Borrowing limits built into loan: Moreover, the borrowing limit of States, as per the Fiscal Responsibility and Budget Management Act, should not be built into these loans.

2) Conditional increase in borrowing limit

  • Last year, the Union government increased the borrowing ceiling of the States from 3% to 5% for FY 2020-21.
  • But conditions are attached to 1.5% of the 2% of increased ceiling.
  • Attaching conditions for expenditure out of the borrowed amount would clip the wings of the States and goes against the principle of cooperative federalism.

Way forward

  • Introduce special rate: A special rate could be levied for a specified period in order to raise additional resources to meet the challenges posed by COVID-19 with the approval of the GST Council.
  • As per Section 4(f) of Article 279A, the Union government can consider introducing any special rate to raise additional resources during the pandemic (any natural calamity or disaster).
  • The present GST compensation period will end in 2021-22.
  • Increase the period beyond five years:  Compensation beyond five years requires a constitutional amendment.
  • If this period is not increased, it will create serious financial stress to the States, especially to those which require higher compensation.

Conclusion

There is a need for measures on part of the Central government to consolidate fiscal federalism in the aftermath of pandemic and implementation of the GST regime in India.

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

How to exit farming risk trap

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Agriculture reforms to reduce the risk in agriculture in India

Context

The farmers’ protest against farm laws brings into focus the factors afflicting agriculture in India.

Issues of Indian agriculture

  • Some 50 years after the Green Revolution, an all-India agricultural landscape is characterized by relatively low productivity levels that co-exist with high levels of variation in crop yields across our farming districts.
  • Excessive control: Various government agencies have a say on all aspects of the farmer’s livelihood — the latest count includes 13 central and countless state ministries and agencies.
  • These agencies oversee rural property rights, land use, and land ceilings; commodity prices, input subsidies, and taxes, infrastructure, production, credit, marketing and procurement, public distribution, research, education, trade policy, etc.
  • Poor policies: The result has been a mix of arbitrary and conflicting policy interventions by both the central and state government agencies.
  • Poor provision of basic public goods: This, combined with poor and varying levels of provision of basic public goods, including irrigation explains the poor state of Indian agriculture.

Risk-to-return in agriculture

  • The following figures indicate the median (typical) district-level yield (in tonnes-per-hectare) for four major crops — rice, wheat, maize, and cotton — along with the geographic variability of this yield (risk) across all reporting districts for each year from 1966 to 2018.
  • Combining these two values — median district yield and its geographic variability across all farming districts — provides us a measure of the all-India level of risk-to-return, in percentage terms.

Lessons from risk-to-return profile

  • One, the large gap in rice and wheat yields that opened up between Punjab and Haryana and the farm districts in the rest of the country remains far from being closed.
  • Limited mobility of ideas: There is severe unevenness in the provision of common goods across districts — irrigation, roads, power, etc.
  • There is also the absence of well-functioning markets for agricultural land, crops, and inputs, the slow labour reform, and the poor quality of education.
  • These two factors have worked to reduce overall resource mobility within and across our farming districts.
  • Most importantly, they have limited the mobility of ideas and technology needed to increase productivity and reduce the variation of yield across districts.
  • Decentralization failed: As a result of lack of mobility, the real promise of a decentralized system — of experimentation, of learning from each other, and the adoption of best practices and policies — has failed to materialize.
  • Distortion due to subsidies: Various input subsidies and minimum price guarantee procurement schemes provided by the state have worked to worsen the overall levels of productivity and the risk in agriculture, generating adverse effects for all of us, through the degradation of our water resources, soil, health, and climate.
  • At the same time, these policies have tightened the trap our farm households find themselves in.
  • Thus, as is evident in the next chart, outside of rice and wheat, the risk-to-return levels are even higher in the case of maize and cotton, including for Punjab.
  • As a result, the farm households of Punjab and Haryana fear both, the loss of state support for rice and wheat and the higher risks implied by a switch to other crops.

Way forward

  • Minimize risk: The guiding principle for three farm laws must be to create conditions that allow farm households to maximize their income while minimizing the overall level of risk in Indian agriculture.
  • Freedom of choice: Farmers must be made free to determine the best mix of resources, land, inputs, technology, and organizational forms for their farms.
  • More freedom: Farmers, just as entrepreneurs in the non-farm sector, must be allowed to enter and exit agriculture, on their own terms and contract with whomever they wish.
  • Allow entry of corporates: Entry of the large or small private corporates in the Indian agricultural stream will help the Indian farmer, along with the rest of us, move to a low-risk, high-return path of progress.

Conclusion

The more we delay the needed reforms, the more difficult it will prove to be for all of us to extract ourselves out of these risk-laden currents of agriculture.

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Important Judgements In News

Supreme Court strikes down part of Constitution Amendment on cooperative societies

Note4Students

From UPSC perspective, the following things are important :

Prelims level: 97th Amendment

Mains level: Paper 2- Striking down of the 97th Amendment Act

Context

In Union of India vs Rajendra N. Shah, the Supreme Court of India partially struck down the 97th Constitutional Amendment.

Background of the 97th Constitutional Amendment

  • The 97th Constitutional Amendment came into effect from February 15 2012.
  • The amendment added “cooperative societies” to the protected forms of association under Article 19(1)(c), elevating it to a fundamental right.
  • It also inserted Part IXB in the Constitution which laid down the terms by which cooperative societies would be governed, in more granular detail than was palatable.

Why was the Amendment struck down?

  • The Constitution can be amended only by the procedure provided in Article 368.
  • The amendment procedure requires a majority of the total strength of each of the Houses of Parliament and two-thirds majority of those present and voting.
  • A proviso to the Article lists out some articles and chapters of the Constitution, which can be amended only by a special procedure.
  • The special procedure requires that the amendment will also have to be ratified by the legislatures of half of the States.
  • It is precisely on the grounds of violation of this additional requirement that the 97th Constitutional Amendment was challenged.
  • The Gujarat High Court struck down the amendment in 2013 on the grounds that it had failed to comply with the requirements under Article 368(2) by virtue of not having been ratified by the States and had also given an additional finding that the 97th Amendment violated the basic structure of the Constitution.
  • The Union Government challenged the Gujarat High Court judgment before the Supreme Court, arguing that the amendment neither directly nor effectively changed the scheme of distribution of powers between the Centre and the States.
  • The court took the example of the 73rd and 74th Amendments which were similar in impact on the legislative power of the States, had been passed by the special procedure involving ratification by State legislatures.
  • Procedural lacuna: The court noted that the procedure had not been followed in this case.
  • The Supreme Court clarified that the does not go into the question of the amendment being violative of the basic structure of the Constitution.
  • The judgment makes a distinction between cooperative societies operating in one State and multi-State cooperative societies and holds that while a ratification by half the State legislatures would have been necessary insofar as it applies to cooperative societies in one State.

Increasing control of the Union government

  • Union government has been acquiring incrementally greater control of cooperative societies over the years.
  • Cooperative banks have been brought under the purview of the Reserve Bank of India.
  • Union Government recently established Union Ministry for Cooperation.

Issues with Central control over cooperative sector

  • Domain of States: The idea that the cooperative sector ought to be controlled at the State level and not at the central or Union level goes back all the way to the Government of India Act, 1919 which placed cooperatives in the provincial list.
  • Part of State list: Entry 32 of the State List in the Seventh Schedule of the Constitution confer power on the State legislatures to make laws pertaining to incorporation, regulation and the winding up of cooperative societies.
  • The cooperative sector has always been in the domain of the States or provinces.
  • Different organising principles: The organising principles and mechanism of these cooperatives differ from area to area and depend on the industry or crop which forms the fulcrum of the cooperative.
  • Homogeneity nor require: Homogeneity in this area would only result in the creation of round holes in which square pegs no longer fit.
  • They also would not really serve to break the control some political interests have taken over cooperatives.

Conclusion

It is best that the Government takes this judgment in the right spirit and stays away from further meddling in the cooperative sector, notwithstanding the creation of the new Ministry.

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Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

Unlocking recovery

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Inflation

Mains level: Paper 3- Economic recovery

Context

Many developed countries are poised for strong growth. This will compel their respective central banks to begin normalizing the extremely loose monetary policies. This will require a reorientation of India’s stimulus strategy.

Global growth momentum

  • On the global front, the growth momentum has been strong, particularly in the US and China, although recent data suggest this has peaked or is even stalling.
  • Post the perceived hawkishness of the last US Federal Reserve policy meeting, the traded interest rate of the benchmark US 10-year treasury bond fell to below 1.3 percent.
  • The falling rate reflects disquiet about the durability of the recovery once the fiscal stimulus starts waning.
  • China recently announced a 0.5 percent cut in the required reserves ratio for banks.
  • Europe’s recovery had begun to inch up, but members of the European Central Bank have begun to push back on market expectations of early tapering.
  • However, some smaller global central banks have started normalizing their respective Quantitative Easing programs.

Growth momentum in India

  • The encouraging aspect of the recovery is the resilience of many mid-and large-turnover companies in the face of the debilitating public health crisis
  • In India, there are signs that the recovery momentum began to strengthen from mid-June, and of demand accelerating, despite capacity utilization in many industries below thresholds needed for the next round of private investments.
  • In line with the market consensus, we think that 2021-22 growth is likely to be in the 9-10 percent range.
  • Tax collections, another indicator of activity, even if a bit skewed, support this view.
  • A revival of retail consumer demand is critical for sustaining the recovery. Reports from industry associations suggest a somewhat mixed picture.
  • Demand emanating from rural geographies is important for sustaining recovery.
  • Demand for work under MGNREGA suggests continuing stress.
  • Monsoons will be a big contributor.
  • The sowing of Kharif crops stalled in late June but is predicted to pick up again in mid-July.
  • Renewed government intervention is required.

Factors deciding the trajectory of recovery

  • Inflation: Rising inflation could force a monetary policy normalization faster than presently anticipated.
  • Global recovery: Effects global central banks’ policy tightening will only add to the difficulty of balancing a policy-induced increase in interest rates, moderating financial markets volatility, and maintaining growth incentives.
  • Access to credit: Access to credit remains a crucial input in the recovery matrix, particularly for small and micro-enterprises.
  • The Union government’s Emergency Credit Line Guarantee Scheme (ECLGS) has reportedly been very effective in stabilizing the solvency (and cash flows) of micro and small businesses.

Way forward

  • Expansion of subvention scheme: The expansion of subvention (ECLGS) is probably the most effective template to incentivize credit flows, leveraging on the government’s balance sheet to take on the first loss risks.
  • At the same time, capex proposals of the Centre and states should gradually draw in private sector capex.
  • Policy intervention to create a level field: Corporate health has improved, with lower debt on balance sheets.
  • Adoption of technology is widespread; this will boost productivity and competitiveness.
  • But these factors reinforce trends in consolidation and market power.
  • It will require policy interventions to create a more level playing field for smaller companies, which is crucial for job creation.

Conclusion

Policy support will thus need to adapt from the “revive” to the “thrive” phase, to place India on a sustained 7 percent-plus growth path.

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Indian Air Force Updates

Theatre Command under Chief of Defence Staff is not a good idea

Note4Students

From UPSC perspective, the following things are important :

Prelims level: CDS

Mains level: Paper 3- Issues with creation of theatre commands

Context

The government is reportedly planning to re-organise the military into a theatre command under the chief of defence staff (CDS) in which the assets of the Air Force will be split into four and distributed among four operational theatres.

Background of the creation of CDS

  • In 2012, the Naresh Chandra Committee suggested the creation of a CDS, which would take on overall functions of the chairman, chiefs of committee as well as the responsibilities pertaining to centralised planning, induction, training, intelligence and logistics. 
  • Operations, according to the committee’s suggestion, would continue to be managed by the respective chiefs of staff.
  • However, sometime in 2016-17, this idea was modified to organise the operational assets of the three services into four theatre commands, all of which are now proposed to be brought under the CDS.

Issues with creating theatre command by dividing Air Force

  • Professional leadership is critical in support elements: The Air Chief’s professional leadership of the Air Force is crucial to orchestrate a variety of support elements like aerial tankers, AWACS (Airborne Warning And Control Systems), AEW, Heliborne support and UAVs in an “offensive operation”.
  • Lack of in-dept understanding: A land theatre command, if given power over the air elements, may not have the confidence to launch such a mission because of the lack of in-depth understanding of the organisational complexity and the risks involved.
  • Dilution of assets may harm effectiveness: Dilution of the combat assets of the Air Force, a 30-squadron force consisting of five or six types of aircraft, might severely affect mission-effectiveness.
  • Role of CDS: It is extremely doubtful if the CDS can cope with the enhanced responsibilities that include operations, albeit through the theatre commanders.
  • That would leave only training, maintenance, and support under the chiefs of staff — a gross under-utilisation of the operational leadership built over 40 years.
  • Resource limitations: Forming a separate air defence command for the air defence of the entire nation seems an impractical idea considering our resource limitations.
  • Current arrangement functioned effortlessly: The current arrangement of a decentralised air defence organisation managed by Air Force geographical commands has functioned faultlessly.
  •  Flexibility: The existing structures afford better flexibility.
  • There will be significant expenditure to construct the operational infrastructure of the theatre commands.
  • Timing: We are trying to effect changes at a time the military is deployed actively.
  • The Chinese have dug in hard, and we do not yet know their strategy.
  • To divide the Air Force into four units at this moment is inadvisable.

Way forward

  • White paper: There is no white paper on the advantages of the theatre commands or one listing the merits of the CDS donning the mantle of the operational head of the entire military operation.
  • So, a white paper on these aspects could clear the air over the utilities of such moves.
  • Joint planning is a must, but operations are best undertaken by individual services who know what other services are doing and when.

Conclusion

Splitting the asset of the Air Force would result in dilution of its power and is not advisable at the current juncture.

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Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

Revival of Construction sector

Note4Students

From UPSC perspective, the following things are important :

Prelims level: GVA

Mains level: Paper 3- Limits of relying on high-growth sectors

Context

The latest estimates of the fourth quarter of financial year 2020-21 (January-March) brought some relief, for policymakers.

Interpreting the construction sector GVA increase

  • The construction sector showed a 15 per cent increase in gross value added (GVA) in the last quarter, which is nearly double the growth experienced by the sector in the previous year (7.7 per cent).
  • Sign of better times: The buoyant growth of this sector has been hailed by policymakers not just as a sign of better times to come,
  • Addressing distress: Growth in the construction sector is also considered as the capacity of the economy to address the distress that households have faced in the past year.
  • Addressing needs of workforce: The Chief Economic Advisor pointed to the high growth rates in construction possibly to indicate that growth would address the needs of the beleaguered workforce.
  • The Union budget 2021 has also allocated a considerable sum towards infrastructure and construction in the hopes of the sector playing a catalysing role.

Issues with relying on the growth of high-employment sector

  • No strong correlation: While GVA and/or GDP are considered as indicators of economic health, it has been argued in detail how it may not be prudent to rely on these alone as measures of economic welfare.
  • In particular, mere growth in a sector may not necessarily translate into benefits for its workers.
  • In the last quarter of 2019-2020, when construction GVA grew at nearly 8 per cent, employment in the same sector grew by 3 per cent based on our estimates from CMIE-CPHS.
  • Fallback employment option: The fact that employment grew in this sector even during a crisis year is largely because of the fact that the construction sector emerged as a fallback employment option for many displaced workers.
  • During “normal” times, the sector typically employs only about 10-15 per cent of India’s total workforce.
  • Even if this sector were to expand in line with its GVA growth, it will not be able to provide employment beyond a certain level.
  • Employment alone is not enough: Moreover, employment alone is not enough.
  • Earnings for an average daily wage worker in the sector have actually declined this year.
  • Again, the overall economic growth in GVA in the sector has not been passed on to the workers.

Way forward

  • Any relief effort that relies solely on economic growth as a means to uplift workers will be sorely inadequate as we see from the experience of workers in construction.
  • The need of the hour is to go beyond relying on sectoral growth as a means of delivering relief to workers.
  • Direct transfers of cash and food are also needed, as is livelihood support through employment guarantee programmes.

Conclusion

While boosting growth of high-employment sectors is one strategy to adopt, this has its limitations. The capacity of a sector is limited in terms of the number of workers that it can absorb, and the extent to which growth can benefit workers.


Back2Basics: What is GVA?

  • Gross value added (GVA) is an economic productivity metric that measures the contribution of a corporate subsidiary, company, or municipality to an economy, producer, sector, or region.
  • GVA is essentially a measure of the “net” value of output — deducting the cost of any input that went into its production from its total value.
  • GVA thus adjusts gross domestic product (GDP) by the impact of subsidies and taxes (tariffs) on products.

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Foreign Policy Watch: India-United States

The convergence and lag in Indo-US partnership

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Paradox in debate over relations with the US

Context

As the Indian leadership reviews US ties this week with the visiting Secretary of State, Antony Blinken, a paradox stands out.

Deepening Indo-US ties

  • India and the US have come a long way since the 1990s.
  • There is growing political and security cooperation, expanding economic engagement, widening interface between the two societies, and the intensifying footprint of the Indian diaspora in the US.
  • Convergence of interests: That ambition, in turn, is based on the unprecedented convergence of Indian and American national interests.
  • Agenda for cooperation: The two countries have already agreed on an ambitious agenda for bilateral, regional and global cooperation.

Debate in India over Indo-US relation: A paradox

  • The discourse within India’s strategic community continues to be anxious.
  • Some of the questions that animate the media and political classes have not changed since the 1990s.
  • Issues in the debate: Debate focuses on US’s stand on the Kashmir issue, democracy and human rights and its impact on India-US relations.
  • Contradictory fears: There are also contradictory fears such as whether the US extend full support in coping with China.
  • While we expect the US to give guarantees on supporting us, we insist that India will never enter into an alliance with the US.
  • Small state syndrome in India: As India’s relative weight in the international system continues to grow, it creates much room for give and take between India and the US.
  • Yet, a small state syndrome continues to grip the foreign policy elite.
  • The situation is similar on the economic front.
  • Although India is now the sixth-largest economy in the world, there is unending concern about the US imposing globalisation on India.
  • Even as India’s salience for solutions to climate change has increased, India’s debate remains deeply defensive.

Factors responsible paradox

  • Missing the big picture: The narrow focus on the bilateral precludes an assessment of the larger forces shaping American domestic and international politics.
  • That, in turn, limits the appreciation of new possibilities for the bilateral relationship.
  • Underinvestment in American studies: The problem is reinforced by India’s under-investment in public understanding of American society.
  • Russia and China have put large resources in American studies at their universities and think tanks.
  • The Indian government and private sector will hopefully address this gap in the not-too-distant future.

Policy shifts unfolding in the US

  • Domestic economic policies: If the economic policy drift in the last four decades was to the right, Biden is moving left on the relationship between the state and the market — on raising taxes, increasing public spending and addressing the problem of sharp economic inequality.
  • Economic policy and globalisation: Biden has also joined Trump in questioning America’s uncritical economic globalisation of the past.
  • If Trump talked of putting America First, Biden wants to make sure that America’s foreign and economic policies serve the US middle class.
  • Foreign policy: Biden has concluded that four decades of America’s uncritical engagement with China must be reconstituted into a policy that faces up to the many challenges that Beijing presents to the US.
  •  Biden is also focused on renewing the traditional US alliances to present a united front against China.
  • He is also seeking to overcome Washington’s hostility to Russia by resetting ties with Moscow.

Question of democracy and human rights

  • Democracy is very much part of America’s founding ideology.
  • But living up to that ideal at home and abroad has not been easy for the United States over the last two centuries.
  • Delhi and Washington will also have much to discuss on the challenges that new surveillance technologies and big tech monopolies pose to democratic governance.
  • The exclusive American focus on democracy promotion has been rare, costly and unsuccessful.
  • India’s own experience at spreading democracy in its neighbourhood is quite similar.
  • But that discussion is only one part of the expansive new agenda — from Afghanistan to Indo-Pacific, reforming global economic institutions to addressing climate change, and vaccine diplomacy to governing new technologies that beckon India and the United States.

Conclusion

As they intensify the bilateral cooperation, the two sides will hopefully turn the Indo-US partnership from a perennial curiosity to a quotidian affair.

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Getting India’s military jointness formula right

Note4Students

From UPSC perspective, the following things are important :

Prelims level: The Andaman and Nicobar Command

Mains level: Paper 3- Jointness in armed forces

Context

The Chief of Defence Staff General Bipin Rawat’s recent description of the Indian Air Force (IAF) as a supporting arm and the IAF chief Air Chief Marshal R.K.S. Bhadauria’s rebuttal highlights turbulent journey marking the reorganisation process of the armed forces.

Issues before IAF

  • The IAF is warning against splitting it into packets.
  • Reports suggest that counting even ageing aircraft, the IAF is 25% short on fighter squadrons.
  • A pan service shortage of about 400 pilots, almost 10% of their authorised strength, further aggravates this.
  • Therefore, the IAF has a point when it warns against splitting assets, for, there may be nothing much to split.

Way forward

  • Confidence building: A common understanding of the nuances of military airpower is the key.
  • With the experience of operating almost every kind of aircraft the IAF operates, the naval leadership understands air power.
  • This applies to the Indian Army too, in its own way.
  • Confidence needs to be developed that rightly staffed apex joint organisations can draw up professional operational plans for air power.
  • Enhancing military education: Confidence building will need some effort in the short term towards enhancing professional military education though, at the staff level.
  • Analysis before implementation: Major reorganisations must strictly follow the sequence of written concepts, their refinement through consultation, simulation or table top war gaming, field evaluation and final analysis before implementation.
  • This would help address command and control, asset adequacy, individual service roles, operational planning under new circumstances and the adequacy of joint structures.
  • Who gets to lead what also matters.
  • The Western Command between the Indian Army and the IAF, the Northern Command with the Indian Army, Maritime Command with the Indian Navy and the Air Defence Command with the IAF may be an acceptable formula.

Why jointness?

  • With dwindling budgets, a steadily deteriorating security situation and the march of technology, the armed forces understand the need to synergise.

Challenges

  • Challenges in co-existence: Different services do not co-exist well where they are colocated.
  • Bitter fights over land, buildings, facilities, etc. harms optimal operational synergising.
  • Allocation challenge: Then there is the issue of giving each other the best, or of wanting to be with each other.
  • Lack of operational charter: The Andaman and Nicobar Command suffered from the lack of a substantial operational charter, and the services not positioning appropriate personnel or resources there.
  • Lack of interest in joint tenure: As a joint tenure did not benefit career, no one strove for it.
  • The U.S., when faced with the same problem, made joint tenures mandatory for promotions.

Steps to be taken

  • Security strategy: We need a comprehensive National Security Strategy to guide the services develop capacities required in their respective domains.
  • Professional education: We need to transform professional education and inter-service employment to nurture genuine respect for others.
  • Mutual resolution of difference: The armed forces must resolve their differences among themselves, as the politicians or bureaucrats cannot do it.
  • Quality staff: Good quality staff, in adequate numbers, at apex joint organisations, will help to reassure individual services and those in the field that they are in safe hands.
  • Tailored approach: There is need for the acceptance of the fact that what works for other countries need not work for us.

Conclusion

We may need tailor-made solutions which may need more genuine thinking. For genuine military jointness, a genuine convergence of minds is critical.

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Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

Implications of EU’s new GHG emissions law for Indian industry

Note4Students

From UPSC perspective, the following things are important :

Prelims level: CBAM

Mains level: Paper 3- Way forward for Indian industry after the introduction of CBAM

Context

On July 14, the European Union introduced new legislation, Fit for 55, to cut its GHG emissions by 55 per cent by 2030 and to net-zero by 2050.

Implications of Fit for 55

  • Legal backing: It turns the EU’s announcement into law, protecting it from the winds of political change.
  • Opportunity for India: It opens new markets for Indian industry, for example for electric vehicles.
  • CBAM: However, it also introduces a potentially adverse policy called the carbon border adjustment mechanism (CBAM).
  • CBAM is meant to discourage consumers from buying carbon-intensive products and encourage producers to invest in cleaner technologies.

What is CBAM?

  • The EU has had a carbon emission trading system since 2005.
  • With Fit for 55, the EU’s carbon price is likely to go up.
  • High carbon price will make the EU’s domestic products more expensive than imports from countries that do not have such rules.
  • The new CBAM is meant to level the playing field between domestic and imported products.
  • CBAM will require foreign producers to pay for the carbon emitted while manufacturing their products.
  • The adjustment will be applied to energy-intensive products that are widely traded by the EU, such as iron and steel, aluminium, cement, fertiliser, and electricity.

Why CBAM is a cause for concern for India?

  • India is Europe’s third-largest trading partner, and it does not have its own carbon tax or cap.
  • So, CBAM should be a cause for concern for it.
  • A UNCTAD study predicts that India will lose $1-1.7 billion in exports of energy-intensive products such as steel and aluminium.
  • India’s goods trade with the EU was $74 billion in 2020.

Way forward for Indian Industry

  • Clean technology partnerships: Indian Industry should enter clean technology partnerships with European industry.
  • Invest in renewables:  Indian companies should invest in more renewable electricity and energy efficiency.
  • Incentivise low-carbon choices: They can adopt science-based targets for emission reduction and internal carbon pricing to incentivise low-carbon choices.
  • Schemes and Government financing: The government can extend the perform-achieve-trade scheme to more industries and provide finance to MSMEs to upgrade to clean technologies.
  • WRI India’s analysis shows that carbon dioxide emissions from the iron and steel industry can be reduced from 900 million tonnes to 500 million tonnes in 2035 through greater electrification, green hydrogen, energy efficiency, and material efficiency.
  • Diversify export: India can try to diversify its exports to other markets and products.

Consider the question “What is carbon border adjustment mechanism (CBAM) introduced by the EU? What are its implications for Indian industry?” 

Conclusion

At present, the CBAM may seem obstructionist. But over the long-term, it can provide regulatory certainty to industry by harmonising carbon prices, and Indian industry can position itself as a strong player in the trade landscape of the future.


Back2Basics: UNCTAD

  • UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
  • Its headquarters are located in Geneva, Switzerland, and have offices in New York and Addis Ababa.
  • UNCTAD is part of the UN Secretariat.
  • IT report to the UN General Assembly and the Economic and Social Council but have own membership, leadership, and budget.
  • It is also part of the United Nations Development Group.

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Foreign Policy Watch: India-SAARC Nations

SAARC

Note4Students

From UPSC perspective, the following things are important :

Prelims level: SAARC countries

Mains level: Paper 2- Relevance of SAARC

Context

Despite the framework SAARC provides for cooperation amongst South Asian nations, it has remained sidelined and dormant since its 18th summit of 2014 in Kathmandu. No alternative capable of bringing together South Asian countries for mutually beneficial diplomacy has emerged.

Common challenges facing South Asia

  • The region is beset with unsettled territorial disputes, as well as trans-border criminal and subversive activities and cross-border terrorism.
  • The region also remains a theatre for ethnic, cultural, and religious tensions and rivalries besides a current rise in ultra-nationalism
  • Nuclear-armed neighbours India and Pakistan are at loggerheads.
  • US military withdrawal from Afghanistan has fuelled fears of intensification of these trends.

Significance of SAARC

  • As the largest regional cooperation organisation, SAARC’s importance in stabilising and effectively transforming the region is becoming increasingly self-evident.
  • SAARC is needed as institutional scaffolding to allow for the diplomacy and coordination that is needed between member-states in order to adequately address the numerous threats and challenges the region faces.
  • Though SAARC’s charter prohibits bilateral issues at formal forums, SAARC summits provide a unique, informal window — the retreat — for leaders to meet without aides and chart future courses of action.
  • The coming together of leaders, even at the height of tensions, in a region laden with congenital suspicions, misunderstandings, and hostility is a significant strength of SAARC that cannot be overlooked.
  • In March last year, Indian Prime Minister Narendra Modi seized the Covid-19 crisis and utilised SAARC’s seal to convene a video conference of SAARC leaders.
  • Such capacity to bring member-states together shows the potential power of SAARC.

What role SAARC can play in Afghanistan

  • Commitment to get rid of terrorism: The third SAARC summit in 1987 adopted a Regional Convention on Suppression of Terrorism and updated it in 2004 with the signing of an additional protocol.
  • These instruments demonstrate the collective commitment to rid the region of terror and promote regional peace, stability, and prosperity.
  • Using the network of institutions: In 36 years of existence, SAARC has developed a dense network of institutions, linkages, and mechanisms.
  • SAARC members are among the top troop-contributing countries to UN peacekeeping missions.
  • Joint peacekeeping force: With the US withdrawal from Afghanistan, a joint peacekeeping force from the SAARC region under the UN aegis could be explored to fill the power vacuum that would otherwise be filled by terrorist and extremist forces.

Consider the question “What role SAARC can play in stabilising the region after the US withdrawal from Afghanistan? Is SAARC still relevant for the region?”

Conclusion

Allowing SAARC to become dysfunctional and irrelevant greatly distorts our ability to address the realities and mounting challenges facing SAARC nations.


Back2Basics: About SAARC

  •  In 1985, at the height of the Cold War, leaders of South Asian nations — namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka — created a regional forum.
  • The South Asian Association for Regional Cooperation (SAARC) was established with the goal of contributing “to mutual trust, understanding and appreciation of one another’s problems.”
  • Afghanistan was admitted as a member in 2007.

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Important Judgements In News

Biocentric jurisprudence for nature

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Article 21

Mains level: Paper 2- Biocentric jurisprudence

Context

In a recent ruling, the Supreme Court of India has sought to move away from an anthropocentric basis of law.

Biocentrism Vs. Anthropocentrism

  • Anthropocentrism argues that of all the species on earth humans are the most significant and that all other resources on earth may be justifiably exploited for the benefit of human beings.
  • The philosophy of biocentrism holds that the natural environment has its own set of rights which is independent of its ability to be exploited by or to be useful to humans.
  • Biocentrism often comes into conflict with anthropocentrism.

Supreme Court of India upholds biocentric principles

  • The Great Indian Bustard is a gravely endangered species, with hardly about 200 alive in India today.
  • The overhead power lines have become a threat to the life of these species as these birds frequently tend to collide with these power lines and get killed.
  • Recently, the Supreme Court in M.K. Ranjitsinh & Others vs Union of India & Others, said that in all cases where the overhead lines in power projects exist, the governments of Rajasthan and Gujarat shall take steps forthwith to install bird diverters.
  • In protecting the birds, the Court has affirmed and emphasised the biocentric values of eco-preservation.
  • A noteworthy instance of the application of anthropocentrism in the legal world is in that of the “Snail darter” case in the United States.
  • The Supreme Court of the United States of America in Tennessee Valley Authority vs Hill, had held that since the “Snail darter” fish was a specifically protected species under the Act, the executive could not proceed with the reservoir project.

Human role in extinction of species

  • About 50 years ago, there were 4,50,000 lions in Africa. Today, there are hardly 20,000.
  • Indiscriminate monoculture farming in the forests of Borneo and Sumatra is leading to the extinction of orangutans.
  • Rhinos are hunted for the so-called medicinal value of their horns and are slowly becoming extinct.
  • From the time humans populated Madagascar about 2,000 years ago, about 15 to 20 species of Lemurs, which are primates, have become extinct.
  • The compilation prepared by the International Union for Conservation of Nature lists about 37,400 species that are gravely endangered; and the list is ever growing.

Evolution of Right of Nature laws in Constitutions

  • Pieces of legislation are slowly evolving that fall in the category of the “Right of Nature laws”.
  • These seek to travel away from an anthropocentric basis of law to a biocentric one.
  • The Constitution of India is significantly silent on any explicitly stated, binding legal obligations we owe to our fellow species and to the environment that sustains us.
  • It is to the credit of the Indian judiciary that it interpreted the enduring principles of sustainable development and read them, inter alia, into the precepts of Article 21 of the Constitution.
  • In September 2008, Ecuador became the first country in the world to recognise “Rights of Nature” in its Constitution.
  • Bolivia has also joined the movement by establishing Rights of Nature laws too.
  • In November 2010, the city of Pittsburgh, Pennsylvania became the first major municipality in the United States to recognise the Rights of Nature.
  • These laws, like the Constitution of the countries that they are part of, are still works in progress.

Conclusion

In times like this the Supreme Court’s judgment in M.K. Ranjithsinh upholding the biocentric principles of coexistence is a shot in the arm for nature conservation. One does hope that the respective governments implement the judgment of the Court.

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Indian Army Updates

Challenging China

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Gulf of Hormuz

Mains level: Paper 3- Leveraging advantageous geography to counter China

Context

The Chinese are about to extend their geographical advantage by building a new high-speed rail from Chengdu, running close by and parallel to the Arunachal border, up to Lhasa.

Manpower and Defence Budget: Comparison with China

  • The Indian army, according to diverse sources, numbers between 12,50,000 and 14,00,000 officers and men.
  • Chinese PLA actually has only 9,75,000 officers and men.
  •  They have downsized their army.
  • China is an aspiring world power that spends $252 billion on its defence budget, as compared to $72.9 billion that India spends.
  • Both countries limit their budget to around 2 per cent of their GDP, which in China’s case is five times our size.

Why does India need to reduce manpower in defense?

  • Expensive:  A major portion of the budget is spent on manpower, 81 percent of the army budget goes into manpower and maintenance. Gradually, manpower is going to get increasingly expensive.
  • Also, our strategic options get constrained because the army gets 61 percent of the defense budget.
  • We need to downsize the army by 2,00,000 men over five years through retirement and reduced recruitment.
  • The reduction in manpower will save approximately Rs 30,000 crore, which can be equally divided between the three services.

Way forward: Bigger role to navy and air force

  • We can achieve better conventional deterrence against China by giving bigger roles to the navy and air force.
  • The first step is to accept that we are an asymmetric power and leverage the RMA (Revolution in Military Affairs) so that numerical inferiority is of no consequence.
  • They are invulnerable on land, and their only strategic weakness is their reliance on the Indian Ocean SLOCs (sea lines of communications) for 70 percent of their imported oil.
  • The only guarantee of Chinese non-aggression and good behavior is a well-crafted threat to their oil tankers and a complete naval mastery of the escalation that is bound to follow.
  • India can also leverage the QUAD resources in various ways such as information.
  • Build up the Car Nicobar airfield into a full-fledged airbase.
  • We could negotiate with Oman for the use of the old RAF airbase at Masirah to dominate the Gulf of Hormuz and threaten the Chinese base at Djibouti.

Conclusion

China cannot be countered by throwing expensive manpower at the problem, but only by shifting the battlespace to advantageous geography, by a united navy and air force effort, while a technically advanced army holds the Himalayan border.

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Pegasus scandal and implications for privacy

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Zero click attack

Mains level: Paper 2- Issues with surveillance

Context

The Pegasus spyware, created by NSO Group in Israel has created a political storm in India over its alleged use by the government.

About the Pegasus spyware controversy

  • It uses a “zero-click” attack which allows the device to be taken over remotely by exploiting software and hardware vulnerabilities.
  • The Israeli Defence Ministry’s stated that Pegasus and other cyber products are exported “exclusively to government entities” and are only for the purpose of preventing and investigating crime and counter terrorism.
  • Pegasus has been used to illegally hack into people’s lives and to obtain private information outside the boundaries of the law.
  • Those who were supposedly targeted range from the uppermost echelons of the judiciary, Opposition party leaders, activists and journalists.

How it harms freedoms and rights guaranteed by the Constitution

  • A person has the basic fundamental rights of liberty, privacy, speech and expression amongst others.
  • These rights go hand in hand with each other.
  • The alleged use of Pegasus to illegally hack into persons’ lives, listen in on private conversations, to thereafter use this private information against said persons in hope of gaining undue advantage, are all outside the boundaries of the law.
  •  Surveillance on this level would have the effect of instilling fear and directly hampering a person’s ability to freely make their own decisions.
  • The effect is that a person does not have the freedom to think, to speak or even be in the privacy of their own homes.

Legal provisions for surveillance

  • In December 2018, the government authorised 10 security and intelligence agencies to intercept, monitor and decrypt any information generated, transmitted, received or stored in any computer resource.
  • The authorisation is required before any of the 10 notified agencies can intercept, monitor or decrypt any information.
  • This and other grounds are being taken by the government before the Supreme Court to defend its stance.
  • The Data Protection Bill (yet to be passed by Parliament) offers no protection in respect of surveillance. 
  • Sections 43 and 66 of the Information Technology Act, 2000 criminalise hacking.

Conclusion

The majority is not always right. A democracy has the indelible right to question, to demand answers and explanations. The government has many questions to answer and steps to take to protect the rights and freedoms of its citizens.


Back2Basics: Zero-click attack

  • A zero-click attack is a remote cyber attack which does not require any interaction from the target to compromise it.
  • Pegasus spyware eliminates the need for human errors to compromise a device and instead relies on software or hardware flaws to gain complete access to a device.
  • Zero-click attacks occur only when an attacker is able to takeover a device remotely after successfully exploiting vulnerabilities in the software and hardware of the phone.
  • To make this kind of attack successful, an attacker needs to exploit flaws in a device, whereas spear phishing is a social engineering attack.

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e-Commerce: The New Boom

Open Network for Digital Commerce could disrupt India’s e-commerce space

Note4Students

From UPSC perspective, the following things are important :

Prelims level: ONDC

Mains level: Paper 3- Advantages and challenges in the Open Network for Digital Commerce project

Context

The Department for Promotion of Industry and Internal Trade (DPIIT) recently issued orders appointing an advisory committee for its Open Network for Digital Commerce (ONDC) project.

About ONDC project

  • The Open Network for Digital Commerce (ONDC) project aims to make e-commerce processes open-source.
  • In simple terms, it aims at creating a platform that can be utilised by all online retailers.
  • This is another effort by the government to facilitate the creation of shared digital infrastructure, as it has previously done for identity (Aadhaar) and payments (Unified Payments Interface).
  • It will digitise e-commerce value chains, standardise operations, promote inclusion of suppliers, and derive efficiencies in logistics.

What are its advantages?

  • Level playing field: When done well, this approach can level the playing field and create value for users. 
  • Curb monopoly: The market is dominated by a few players who are facing investigations for unfair trade practices in many countries.
  • Prevent market failure: The sector is characterised by many small players who individually do not have the muscle to have an equitable bargain with e-commerce companies.
  • Economists call this a “market failure”, and it presents a legitimate case for intervention.

The three layers of an open digital ecosystem and their conceptual framework for adoption and safeguards

1) Tech layer

  • The “tech layer” should be designed for minimalism and decentralisation.
  • The government should restrict its role to facilitating standards and protocols that provide open access, and in getting them adopted organically.
  • Building an entire tech platform should happen only if a standards-based approach doesn’t suffice.
  • If built, the platform should be built on “privacy by design” principles.
  • It should collect minimal amounts of data (especially personal data) and store it in a decentralised manner.
  • Tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.

2) Governance layer

  • Avoid excessive government intervention: The “governance layer” around this should allay business fears of excessive state intervention in e-commerce.
  • Legal provision: Any deployment of standards or tech should be accompanied by law or regulation that lays out the scope of the project.
  • Independent regulator for personal data: If collection of any personal data is required, passing the data protection bill and creating an independent regulator should be a precondition.
  • Handling by independent society: To assure the industry of fairness, the government could hand over the stewardship of the standards or platform to an independent society or non-profit.

3) Community layer

  • A community layer can foster a truly inclusive and participatory process.
  • This may be achieved by making civil society and the public active contributors and seeking wide feedback on drafts of the proposal.
  • Once the framework is implemented, ensuring quick and time-bound redressal of grievances will help build trust in the system.

Concerns with government creating shared digital infrastructure

  • This approach also comes with risks and we should tread with caution.
  • In general, governments should intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.

Way forward

  • The government’s championing of open-source technology for digital commerce is commendable.
  • It should also push the envelope on the other principles of the open-source movement — transparency, collaboration, release early and often, inclusive meritocracy, and community.
  • Even if we do all things right, an infrastructure-led approach may not be sufficient.
  • Therefore, we need to supplement infrastructure with tightly-tailored regulation.
  • We need to explore the concept of interoperability, that is, mandating that private digital platforms like e-commerce firms enable their users and suppliers to solicit business on other platforms.
  • To drive the adoption of an open e-commerce platform in a sector with entrenched incumbents we need to create “reference applications”, and financial or non-financial incentives.
  • Useful learnings can be drawn from the adoption of UPI: The government supported the rollout of BHIM as a reference app, and offered incentives.

Consider the question “How the Open Network for Digital Commerce project can help deal with the issues with the e-commerce sector? Suggest the approach the project should adopt to make it a success.”

Conclusion

It is timely that India is exploring innovative ways to bridge the gaps in e-commerce markets. But the boldness of this vision must be matched by the thoughtfulness of the approach.


Back2Basics: What is ‘Privacy by Design?

  • Privacy by design is a concept that integrates privacy into the creation and operation of new devices, IT systems, networked infrastructure, and even corporate policies.
  • Developing and integrating privacy solutions in the early phases of a project identifies any potential problems at an early stage to prevent them in the long run.

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

A cardinal omission in the COVID-19 package

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Importance of medical workforce in making the healthcare system robust

Context

On July 8, 2021, the Union government announced the “India COVID-19 Emergency Response and Health Systems Preparedness Package: Phase II”. But it lacks provision for the medical workforce.

Objectives of the package

  • The stated purpose of the package is to boost health infrastructure and prepare for a possible third wave of COVID-19.
  • There is plan to increase COVID-19 beds, improve the oxygen availability and supply, create buffer stocks of essential medicines; purchase equipment and strengthen paediatric beds.

What is lacking in the package?

  • Workforce shortage: The package barely has any attention on improving the availability of health human resources.
  • As reported in rural health statistics and the national health profile there are vacancies for staff in government health facilities, which range from 30% to 80% depending upon the sub-group of medical officers, specialist doctors to nurses, laboratory technicians, pharmacists and radiographers, amongst others.
  • Interstate variation: In addition, there are wide inter-State variations, with States that have poor health indicators with the highest vacancies.

Way forward

  • Package for filling the existing vacancies: The COVID-19 package II needs to be urgently supplemented by another plan and a similar financial package (with shared Union and State government funding) to fill the existing vacancies of health staff at all levels. 
  • An objective approach to assess the mid-term health human resource needs could be the Indian Public Health Standards (IPHS).
  • IPHS prescribes the human resources and infrastructure needed to make various types of government health facilities functional.
  • The pandemic should be used as an opportunity to prepare India’s health system for the future.
  • Scrutiny of the progress on policy decision: The progress on key policy decisions, for the last few years, to strengthen India’s health system, including those in India’s national health policy of 2017, need to be objectively scrutinised.
  • These two sets of policy decisions should be reviewed and progress monitored, through a meeting of the Central Council of Health and Family Welfare, of which the Health Ministers of the States are members.

Conclusion

India’s health system will not benefit from ad hoc and a patchwork of one or other small packages. It essentially needs some transformational changes.

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Foreign Policy Watch: India-Afghanistan

‘Open talks’ with the Taliban is India’s strategic necessity

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Mazar-e-Sharif, Kandahar

Mains level: Paper 2- Engaging the Taliban

Context

With over a third of Afghanistan’s more than 400 districts under Taliban control, the talk-to-the-Taliban option is indeed the best of the many less than perfect options available to India.

India need a reset in its Afghanistan policy

  • India has ‘temporarily’ closed its consulate in Kandahar.
  • This follows the decision to suspend operations in the Indian consulates in Jalalabad and Herat.
  • India’s decision to partially “withdraw” from Afghanistan shows that betting only on the government in Kabul was a big mistake,
  • It also shows that India realises the threat the Taliban poses to Indian assets and presence in Afghanistan.
  • To safeguard its civilian assets there as well as to stay relevant in the unfolding ‘great game’ in and around Afghanistan, India must fundamentally reset its Afghanistan policy.
  • India must, in its own national interest, begin ‘open talks’ with the Taliban before it is too late.
  • Open dialogue with the Taliban should no longer be a taboo; it is a strategic necessity.

Reason for avoiding open talks with Taliban

  • There are at least five possible reasons why India appears to want to keep the Taliban engagement slow and behind closed doors.
  • First, if India chooses to engage the Taliban directly, it could make Afghanistan President Ashraf Ghani, to look towards China and the Shanghai Cooperation Organisation (SCO) for national security and personal political survival.
  • Second, India is also faced with the dilemma of who to talk to within the Taliban given that it is hardly a monolith.
  • Third, given the global opprobrium that Taliban faced in its earlier avatar and the lack of evidence about whether the outfit is a changed lot today, New Delhi might not want to court the Taliban so soon.
  • Fourth, there is little clarity about what the Taliban’s real intentions are going forward and what they would do after ascending to power in Kabul.
  • Fifth, it would not be totally unreasonable to consider the possibility of Pakistan acting out against India in Kashmir if India were to establish deeper links with the Taliban.

Reasons India should engage with the Taliban openly

  • Wide international recognition: Whether we like it or not, the Taliban, is going to be part of the political scheme of things in Afghanistan, and unlike in 1996, a large number of players in the international community are going to recognise/negotiate/do business with the Taliban.
  • Countering Pakistan: The Taliban today is looking for regional and global partners for recognition and legitimacy especially in the neighbourhood.
  • So the less proactive the Indian engagement with the Taliban, the stronger Pakistan-Taliban relations would become.
  • A worldly-wise and internationally-exposed Taliban 2.0 would develop its own agency and sovereign claims including perhaps calling into question the legitimacy of the Durand Line separating Pakistan and Afghanistan, something Pakistan was always concerned about. T
  • The Taliban would want to hedge their bets on how far to listen to Pakistan.
  • That is precisely when New Delhi should engage the Taliban.
  • Security of civilian assets: India needs to court all parties in Afghanistan, including the Taliban if it wants to ensure its security of its civilian assets there.
  • It makes neither strategic nor economic sense to withdraw from Afghanistan after spending over $3 billion, something the Government seems to be prepared to do
  • Being a part of Afghanistan’s future course: If India is not proactive in Afghanistan at least now, late as it is, Russia, Iran, Pakistan and China will emerge as the shapers of Afghanistan’s political and geopolitical destiny, which for sure will be detrimental to Indian interests there.
  • Continental grand strategy:  Backchannel talks with Pakistan and a consequent ceasefire on the Line of Control, political dialogue with the mainstream Kashmiri leadership, secret parleys with Taliban all indicate that India is opening up its congested north-western frontier.
  •  Except for the strategic foray into the Indo-Pacific, India today is strategically boxed in the region and it must break out of it. Afghanistan could provide, if not immediately, India with such a way out.

Consider the question ” India’s Afghan policy is at a major crossroads; to safeguard its civilian assets there as well as to stay relevant in the unfolding ‘great game’ in and around Afghanistan, New Delhi must fundamentally reset its Afghanistan policy. Comment.” 

Conclusion

In the end, India’s engagement with the Taliban may or may not achieve much, but non-engagement will definitely hurt Indian interests.


Back2Basics: Durand Line

  • Durand Line, boundary established in the Hindu Kush in 1893 running through the tribal lands between Afghanistan and British India, marking their respective spheres of influence.
  • In modern times it has marked the border between Afghanistan and Pakistan.
  • The acceptance of this line—which was named for Sir Mortimer Durand, who induced ʿAbdor Raḥmān Khān, amir of Afghanistan, to agree to a boundary—may be said to have settled the Indo-Afghan frontier problem for the rest of the British period.

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FDI in Indian economy

For Cairns dispute, international arbitration is not the way forward

Note4Students

From UPSC perspective, the following things are important :

Prelims level: BITs

Mains level: Paper 3- Cairn Energy case

Context

The recent move by Cairn to seize India’s sovereign assets in order to enforce its arbitration award has brought into focus the dispute and the related issues.

Utility of Bilateral Investment Treaties (BIT)

  • After the World Wars, as more countries gained sovereignty, they tended to look at foreign investments as a form of neo-colonialism.
  • Bilateral investment treaties became the primary tool to forge relationships between developed and developing countries.
  • The BITs help to adopt standards for prompt, adequate and effective compensation in case of expropriation.
  • With the advent of globalisation, BITs became the means for foreign investment in developing countries.
  • Although the impact of investment agreements on foreign investments remains highly contextualised and inconclusive, these came to govern international investment relations.
  • The BITs retained the old-world construct that allowed international arbitration.
  • However, many developing countries view arbitration of tax matters as a breach of their sovereign right to tax.

The Cairn Energy case

  • In 2012, explanations were added to the Income Tax Act 1961 — these provisions were deemed as having a retrospective effect.
  • This was more in response to the Supreme Court’s decision in the Vodafone case which denied the income tax department’s assertion of tax claims arising from the offshore transfer of interest that substantially derived their value from India.
  • The 2012 explanations to the IT Act indeed sought to fix tax avoidance. 
  • Looking into the details of the Cairn case, one can see the series of reorganisations that tip-toed around tax laws of multiple jurisdictions, resulting in the non-payment of tax. 
  • Taxing offshore indirect transfers — a structuring device to gain tax advantage from the indirect sale of assets — is not unique to India (336 tax treaties contain such an article).
  • It is also possible to see that the underlying assets of the subsidiaries were immovable assets in India.
  • The UK-India tax treaty allowed for taxation of capital gains as per Indian law.
  • India challenged the admissibility of the case before the arbitration tribunal.
  • However, the case rests on a distinction between tax and tax-related investment.
  • Surely, all investments have tax implications and the acceptance of such a distinction could create problems even where tax is explicitly carved out from the bilateral investment treaties.
  • The option of arbitration upon an unsuccessful Mutual Agreement Procedure (MAP) resolution is not available in India.
  •  For this reason, over the years, there has been a rising trend in tax disputes involving BITs.
  • The Cairn case is one such instance where arbitration was invoked especially since MAP was not an option.

Way forward

  • The case raises many questions that administrators must address through reform.
  • India’s model BIT introduced in 2016 rectifies the issue of the distinction between tax dispute and investment-related taxation dispute through the specific exclusion of taxation.
  •  The recognition of a tax-related investment dispute, distinct from a tax dispute, should not undermine such a carve-out.

Conclusion

It is also important to note even if the award is enforced, the matter of tax avoidance stands pending before the High Court. Given the complexity, the only reasonable solution would be a negotiated settlement. Even if there’s a resolution in the Cairns case, questions of law would remain.

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Capital Markets: Challenges and Developments

India’s equity market bubble

Note4Students

From UPSC perspective, the following things are important :

Prelims level: FPI and FDI

Mains level: Paper 3- Equity market bubble

Context

Even as the real economy returns to the doldrums after being hit by the second wave of COVID-19 infections, the continuing bull run in India’s equity market in the April-June quarter has baffled many observers.

V-shaped recovery of equity market

  • The benchmark BSE Sensex had nosedived to below 28,000 in March-April 2020, following the nationwide lockdown.
  • The equity market posted a sharp V-shaped recovery in 2020-21.
  • The Sensex surged beyond 50,000 in February 2021 and is currently closing on the 53,000 level.

Factors suggesting bubble in equity market

  • There was an 81%-plus growth in the Sensex between April 2020 and March 2021 in the backdrop of real GDP growth plummeting to -7.3% during the same period.
  • While output contraction had reversed from the third quarter of 2020-21, the inflation rate also rose and remained way ahead of the real GDP growth rate in the last two quarters (Chart 1).
  • It is difficult to find any rationality behind the skyrocketing BSE Sensex in the context of such stagflation in the real economy.
  • Just like the fall in the equity prices was driven by the exit of foreign portfolio investors (FPI), the return of massive FPI inflows has driven the Indian equity bubble since then (Chart 2).
  • Net FPI inflows clocked an unprecedented ₹2.74 lakh crore in 2020-21, the previous high being ₹1.4 lakh crore in 2012-13.
  • The Reserve Bank of India (RBI)’s annual report (2020-21) to state stated that: “This order of asset price inflation in the context of the estimated 8 per cent contraction in GDP in 2020-21 poses the risk of a bubble.”

Global factors

  • The global liquidity glut, following the expansionary, easy money policies adopted by the fiscal and monetary authorities of the OECD and G20 countries, has led to equity price inflation in several markets driven by FPIs, especially in Asia.
  • Following cues from the U.S. and the U.K., Asian equity markets in Singapore, India, Thailand, Malaysia and Hong Kong are currently witnessing price-earnings (P/E) ratios significantly above their historic means.
  • The BSE Sensex’s P/E ratio of 32 in end-June 2021 is way above its historic mean of around 20.

What could burst the bubble?

  • Change in monetary policy: With COVID-19 vaccination and economic recovery proceeding apace in the U.S., the U.K. and Europe, fiscal and monetary policy stances will change soon.
  • Exit of FPIs: Once the U.S. Federal Reserve and other central banks start raising interest rates, the direction of FPI flows will invariably change bringing about corrections in equity markets across Asia.
  • India remains particularly vulnerable to a major correction in the equity market because of two reasons.
  • Low pace of vaccination: The pace of COVID-19 vaccination in India, given the vast population, lags behind most large countries.
  • In the absence of a substantial increase in the vaccination budget and procurement, large segments of the Indian population will remain vulnerable to a potential third wave of COVID-19, with its attendant deleterious impact on the real economy.
  • Weak fiscal stimulus: India’s economic recovery from the recession will remain constrained by the weak fiscal stimulus that has been delivered by the Central government.
  • Data from the IMF clearly show that while the total global stimulus consisted of additional public spending or revenue foregone measures amounting to 7.4% of global GDP, India’s fiscal measures amounted to 3.3% of GDP only.

Consider the question “What are the factors driving equity market boom globally? What are the factors that could threaten such boom with a major correction?” 

Conclusion

With all agencies, including the RBI, downsizing India’s growth projections for 2021-22, it remains to be seen how long India’s equity bubble lasts.


Back2Basics: P/E ratio

  • The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings (EPS).
  • The price-to-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
  • To determine the P/E value, one simply must divide the current stock price by the earnings per share (EPS).

P/E Ratio=Earnings per share / Market value per share

 

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