Note4Students
From UPSC perspective, the following things are important :
Prelims level: K-shaped recovery
Mains level: Paper 3- Vaccination and policy measures for fast recovery of economy
Context
Increasing pace of vaccination and normalising of monetary policy hold key to economic rebound.
K-shaped recovery and its impact
- Growth indicators so far suggest resilience in the short term — a shallow dent in May’s economic activity followed by a recovery in June, back to April’s levels.
- K-shaped recovery: The external, investment and industrial sectors have been relatively resilient, with consumption and services bearing the brunt.
- Notwithstanding signs of some fatigue in ultra-high frequency indicators in July, damage from the second wave seems largely limited to April-June 2021.
- However, K-shaped recovery means light cracks on the top conceal much larger structural faultlines below.
- Rising poverty: The Pew Research Centre estimates that the pandemic has led to India’s poor rising by 75 million while the middle and upper-middle class has shrunk by 39 million.
- MSMEs and informal workforce worst hit: A recent survey by the ILO finds that the worst-hit — MSMEs and their informal workforce — have struggled to access the government’s pandemic support programmes.
- These more structural scars may become blurred in the GDP data in coming quarters but will almost certainly affect the medium-term growth story.
Way forward in the near term
1) Policy
- Achieving two objectives: When inflation is under control, then flush liquidity and ultra-accommodative monetary policy will help achieve two objectives—
- 1) Ensuring easy financial conditions.
- 2) Help control borrowing costs of the government’s expansive borrowing programme.
- Inflation risk: The above strategy is not costless, it effectively uses the central bank’s credibility in controlling inflation as “collateral”.
- So when inflation flares up and remains sticky, this arithmetic becomes increasingly complicated.
- The RBI’s consistent message recently has been to view the current inflation surge as a “temporary hump”.
- Much as the current monetary policy stance maintains that the economy is ill-equipped to handle policy normalisation, it is a matter of when rather than if.
- As growth strengthens and the RBI’s inflation-targeting credibility comes under greater scrutiny, a policy pivot would become increasingly likely.
2) Vaccination
- The “ultimate unlocking” of the economy remains contingent on a critical mass getting vaccinated, which on materialising should trigger a revival in consumer and business sentiment.
- The uptick in the pace of vaccination over the last few days and higher seroprevalence reported in some states are welcome news.
Conclusion
Even with widespread vaccinations, future pandemic waves may well be unavoidable. Fiscal, monetary and administrative policies cannot remain in a suspended emergency.
Back2Basics: K-shaped recovery
- A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes.
- This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
- A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
- This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Capital account
Mains level: Paper 3- Making rupee a global reserve currency
Context
India will celebrate 100 years of Independence in 2047. This article makes the case that prosperity is possible and best accomplished by the goal of making the rupee a global reserve currency by India@100.
What is the purpose of having forex reserves?
- Official foreign exchange reserves of about $12 trillion across 150 countries are currently stored in eight currencies: 55 per cent in US dollars, 30 per cent in euros, and 15 per cent in six other currencies.
- Protection in case of volatility: This concentration is inevitable given exploding trade, rising capital flows, and the less acknowledged motivation of protecting your reserves from your currency’s volatility.
- A reserve currency has to serve as a medium of exchange, a store of value, and a unit of account.
Steps India would require to take
- Full capital account convertibility: To fulfil the ambition of becoming the reserve currency, the first step is full capital account convertibility, as suggested by the Tarapore Committee in 1997.
- Advocate rupee invoicing: Dollar investors in the last decade not experiencing the usual big bite out of rupee returns is useful for advocating trading partners to start rupee invoicing.
- Offshore corporate rupee borrowing: Raising corporate rupee borrowing offshore and onshore will also help.
- Digital currency: We need to accelerate our CBDC (central bank digital bank currency) plans.
- Take payment networks to a global level: We need to take our UPI payment technology to the world, the dollar gets heft from global networks like Visa, MasterCard and Swift.
- Raise tax to GDP ratio: Fiscal policy must raise our tax to GDP ratio, raise the share of direct taxes in total taxes, and keep our public debt to GDP ratio under 100 per cent.
- Monetary policy: Monetary policy must control inflation while moderating central bank balance sheet size.
- Economic policy: Economic policy must raise the productivity to reach goals in formalisation, urbanisation, financialisation (100 per cent credit to GDP ratio), industrialisation (less than 15 per cent farm employment), internationalisation (higher share of global trade) and skilling.
- Institutional reforms: These goals must be complemented by reinforcing institutions that signal rule of law; cooperative federalism, press freedom, civil service effectiveness, and judicial independence.
How it will help India?
- Becoming a global reserve currency is helpful because it indirectly aligns fiscal, monetary, and economic policy.
- Low-interest rate: The main advantage is the “exorbitant privilege” of lower real interest rates.
- Edge over China: The 2 per cent renminbi share in global reserves — despite a 25 per cent increase last year — doesn’t reflect their status as the world’s second-largest economy and biggest trading nation.
- China’s astounding economic success seems to be making China overconfident.
- Chinese overconfidence creates an opportunity for India.
Conclusion
Prosperity for all Indians by India at100 — a precondition for a country where the mind is without fear and the head is held high — needs bold reforms in the next 25 years. These reforms are best measured by the wholesome and achievable goal of the rupee becoming a global reserve currency by 2047. The journey is the reward.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: IEA
Mains level: Paper 3- Ensuring smooth energy transition in India
Context
With an ever-growing list of countries announcing net-zero emissions targets, the global energy system is set to undergo a transformation in the coming decades. But India needs to ensure that this transition is smooth and people-centric.
Transition in India
- According to an IEA analysis, 90 per cent of new electricity generation capacity around the world now comes from renewables.
- In India, that energy transformation is well underway.
- India is among the world’s top five countries in terms of renewable power capacity.
- Ambitious target of 450 gigawatts: Its ambitious target to increase India’s renewable energy capacity to 450 gigawatts (GW) by 2030 would help move it closer to achieving the country’s broader climate goals and commitments made under the Paris Agreement.
- Clean energy leadership by India: India is also showing global clean energy leadership through initiatives such as the International Solar Alliance, which has more than 70 member countries.
- Transition in rural area: The energy transition in rural India can be driven by dedicated policies to promote renewables, incentivise investment in decentralised low-carbon power sources like rooftop solar, and train and build the capacity of clean energy entrepreneurs.
- Incorporating energy efficiency in the Affordable Housing Mission: In the short term, stimulus spending in the labour-intensive construction sector could accelerate progress on the Affordable Housing Mission.
- Incorporating energy efficiency and green construction methods into these projects could ensure millions of homes enjoy thermal comfort, and help make energy efficiency a core part of building designs.
Factors to consider in transition to clean energy
- Ensure equity: It must be ensured that the opportunities of India’s transition are shared fairly throughout society — and workers and communities are not left to face the challenges alone.
- Make it people-centric: To achieve the trifecta of jobs, growth and sustainability, India must strive to put people at the centre of its energy transformation.
- Provisions for coal-dependent regions: New jobs would need to be found over time for the coal miners affected by the changes, as well as for people who work in the fossil fuel power plants that will close down.
- Policymakers must earmark special “transition funds” to help coal-dependent regions, some of which are among India’s poorest.
- Increase investment by rationalising energy subsidies: Energy subsidies must be rationalised and directed towards those who need them most.
- Fiscal resources freed up through subsidy reform should then be invested in clean energy solutions, especially in underdeveloped regions and marginalised communities.
- Support rural livelihood: A just transition should focus on how clean energy can support rural livelihoods and increase communities’ resilience in the aftermath of the pandemic shock.
- Ensure women’s participation in the green workforce: While India’s energy transition will create many new jobs, the limited participation of women in the growing green workforce must be addressed.
- A 2019 study by CEEW and the IEA suggests that women account for nearly 32 per cent of the renewables workforce globally but only around 11 per cent of the rooftop solar workforce in India.
- Engage youth: Engaging the youth is critical to ensure that the energy transition is sustainable, inclusive and enduring.
- Young entrepreneurs in India have already shown their impact by expanding the footprint of renewables and disrupting traditional energy models.
- Some of these key themes are being explored by the 30 members of the Global Commission on People-Centred Clean Energy Transitions, which the IEA launched in January.
Conclusion
A people-centric approach, backed by good policy design, will not only help India build a clean and inclusive energy future, but could also provide a model for other countries and communities worldwide.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Net Zero
Mains level: Global rush for carbon neutrality
Independent charitable organization Oxfam has said that ‘net zero’ carbon targets that many countries have announced maybe a “dangerous distraction” from the priority of cutting carbon emissions.
What does Net-Zero mean?
- Net-zero, which is also referred to as carbon-neutrality, does not mean that a country would bring down its emissions to zero.
- That would be gross-zero, which means reaching a state where there are no emissions at all, a scenario hard to comprehend.
- Therefore, net-zero is a state in which a country’s emissions are compensated by absorption and removal of greenhouse gases from the atmosphere.
Achieving net-zero targets
- One way by which carbon can be absorbed is by creating carbon sinks.
- Until recently, the Amazon rainforests in South America, which are the largest tropical forests in the world, were carbon sinks.
- But eastern parts of these forests have started emitting CO2 instead of absorbing carbon emissions as a result of significant deforestation.
What’s the difference between gross zero and net zero?
- Given the impact that carbon emissions have on our planet, you might wonder why we aren’t aiming for zero, or gross zero, rather than net-zero.
- Gross zero would mean stopping all emissions, which isn’t realistically attainable across all sectors of our lives and industry. Even with best efforts to reduce them, there will still be some emissions.
- Net-zero looks at emissions overall, allowing for the removal of any unavoidable emissions, such as those from aviation or manufacturing.
- Removing greenhouse gases could be via nature, as trees take carbon dioxide from the atmosphere, or through new technology or changing industrial processes.
What is carbon negativity?
- It is even possible for a country to have negative emissions if the absorption and removal exceed the actual emissions.
- Bhutan has negative emissions because it absorbs more than it emits.
Which countries have recently announced net-zero targets?
- In 2019, the New Zealand government passed the Zero Carbon Act, which committed the country to zero carbon emissions by 2050 or sooner.
- In the same year, the UK’s parliament passed legislation requiring the government to reduce the UK’s net emissions of greenhouse gases by 100 per cent relative to 1990 levels by the year 2050.
- More recently, US announced that the country will cut its greenhouse gas emissions by at least 50 per cent below 2005 levels by 2030.
- The European Union too, has a similar plan, called “Fit for 55”, the European Commission has asked all of its 27 member countries to cut emissions by 55 per cent below 1990 levels by 2030.
- Last year, China also announced that it would become net-zero by the year 2060 and that it would not allow its emissions to peak beyond what they are in 2030.
What does the Oxfam report say?
- “Land-hungry ‘net zero’ schemes could force an 80 per cent rise in global food prices and more hunger while allowing rich nations and corporates to continue “dirty business-as-usual”.
- The report says that if the challenge of change is tackled only by way of planting more trees, then about 1.6 billion hectares of new forests would be required to remove the world’s excess carbon by 2050.
- Currently, countries’ plans to cut emissions will only lead to a one percent reduction by the year 2030.
- Oxfam estimates that it could rise by 80 percent by the year 2050.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Pardoning powers
Mains level: Read the attached story
The Supreme Court has held that the Governor of a State can pardon prisoners, including death row ones, even before they have served a minimum of 14 years of a prison sentence.
SC Judgement: Section 433-A CrPC
- The Governor’s power to pardon overrides a provision in the Code of Criminal Procedure — Section 433A.
- This article mandates that a prisoner’s sentence can be remitted only after 14 years of jail.
- Such power is in the exercise of the power of the sovereign, though the Governor is bound to act on the aid and advice of the State Government, the apex court observed.
- Section 433-A of the Code cannot and does not in any way affect the constitutional power conferred on the President/Governor to grant pardon under Articles 72 or 161 of the Constitution.
What does one mean by Pardon?
- A pardon is a government/executive decision to allow a person to be absolved of guilt for an alleged crime or other legal offense as if the act never occurred.
Why need Pardon?
- Pardons can be granted when individuals are deemed to have demonstrated that they have “paid their debt to society”, or are otherwise considered to be deserving of them.
- Pardons are sometimes offered to persons who were either wrongfully convicted or who claim that they were wrongfully convicted.
- Pardons are sometimes seen as a mechanism for combating corruption, allowing a particular authority to circumvent a flawed judicial process to free someone that is seen as wrongly convicted.
Pardoning powers in India
- Under the Constitution of India (Article 72), the President of India can grant a pardon or reduce the sentence of a convicted person, particularly in cases involving capital punishment.
- A similar and parallel power vests in the governors of each state under Article 161.
[I] President
- Article 72 says that the president shall have the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offense.
- The pardoning powers of the Indian President are elucidated in Art 72 of the Indian Constitution. There are five different types of pardoning that are mandated by law.
- Pardon: means completely absolving the person of the crime and letting him go free. The pardoned criminal will be like a normal citizen.
- Commutation: means changing the type of punishment given to the guilty into a less harsh one, for example, a death penalty commuted to a life sentence.
- Reprieve: means a delay allowed in the execution of a sentence, usually a death sentence, for a guilty person to allow him some time to apply for Presidential Pardon or some other legal remedy to prove his innocence or successful rehabilitation.
- Respite: means reducing the quantum or degree of the punishment to a criminal in view of some special circumstances, like pregnancy, mental condition etc.
- Remission: means changing the quantum of the punishment without changing its nature, for example reducing twenty-year rigorous imprisonment to ten years.
Cases as specified by art. 72
- in all cases where the punishment or sentence is by a court-martial;
- in all cases where the punishment or sentence is for an offence against any law relating to a matter to which the executive power of the Union extends;
- in all cases where the sentence is a sentence of death.
[II] Governor
- Similarly, as per article 161: Governor of a State has the power to grant pardons, reprieves, respites or remissions of punishment or to suspend, remit or commute the sentence of any person convicted of any offence against any law.
- It must be relating to a matter to which the executive power of the state extends.
- President can grant pardon to a person awarded a death sentence. But a governor of a state does not enjoy this power.
Nature of the Pardoning Power
- Not absolute: The question is whether this power to grant pardon is absolute or this power of pardon shall be exercised by the President on the advice of Council of Ministers.
- Aid and advice: The pardoning power of the president is not absolute. It is governed by the advice of the Council of Ministers.
- Constitution is silent on this: This has not been discussed by the constitution but is the practical truth. Further, it does not provide for any mechanism to question the legality of decisions of President or governors exercising mercy jurisdiction.
- Judicial review applicable: But the SC in Epuru Sudhakar case has given a small window for judicial review of the pardon powers of President and governors for the purpose of ruling out any arbitrariness.
Some traditions
- It is important to note that India has a unitary legal system and there is no separate body of state law.
- All crimes are crimes against the Union of India.
- Therefore, a convention has developed that the governor’s powers are exercised for only minor offenses.
- While requests for pardons and reprieves for major offenses and offenses committed in the UTs are deferred to the President.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Poverty estimates
Mains level: Pauperization in India
In the absence of Consumption Expenditure Survey (CES) data, the Periodic Labour Force Survey shows a rise in the absolute number of the poor in India.
About Consumption Expenditure Survey (CES)
- A CES is conducted by the National Sample Survey Office (NSO) every five years.
- But the CES of 2017-18 (already conducted a year late) was not made public by the Government of India.
- Now, we hear that a new CES is likely to be conducted in 2021-22, the data from which will probably not be available before end-2022.
- India has not released its CES data since 2011-12.
Key highlights
- Unemployment had reached a 45-year high in 2017-18, as revealed by NSO’s Periodic Labour Force Survey (PLFS).
- While the PLFS’s questions on consumption expenditure are not as detailed as those of the CES, they are sufficient for us to estimate changes in consumption on a consistent basis across time.
- It enables any careful researcher to estimate the incidence of poverty (i.e. the share in the total population of those below the poverty line), as well as the total number of persons below poverty.
There is unemployment induced poverty
- There is a clear trajectory of the incidence of poverty falling from 1973 to 2012.
- In fact, since India began collecting data on poverty, the incidence of poverty has always fallen, consistently.
- It was 54.9% in 1973-4; 44.5% in 1983-84; 36% in 1993-94 and 27.5% in 2004-05.
- This was in accordance with the Lakdawala poverty line (which was lower than the Tendulkar poverty line), named after a distinguished economist, then a member of the Planning Commission.
Methodology of Poverty Line
- In 2011, it was decided in the Planning Commission, that the national poverty line will be raised in accordance with the recommendations of an expert group chaired by the late Suresh Tendulkar.
- That is the poverty line we use in estimating poverty in the table.
- As it happens, this poverty line was comparable at the time to the international poverty line (estimated by the World Bank), of $1.09 (now raised to $1.90 to account for inflation) person per day.
- The PLFS also estimates the incidence of poverty. It also collects the household monthly per capita consumption expenditure data based on the Mixed Recall Period methodology.
Stunning rise in Poverty
- It is stunning fact that for the first time in India’s history of estimating poverty, there is a rise in the incidence of poverty since 2011-12.
- The important point is that this is consistent with the NSO’s CES data for 2017-18 that was leaked data.
- The leaked data showed that rural consumption between 2012 and 2018 had fallen by 8%, while urban consumption had risen by barely 2%.
- Since the majority of India’s population (certainly over 65%) is rural, poverty in India is also predominantly rural.
- Remarkably, by 2019-20, poverty had increased significantly in both the rural and urban areas, but much more so in rural areas (from 25% to 30%).
Why is it intriguing?
- It is important here to recall two facts: between 1973 and 1993, the absolute number of poor had remained constant (at about 320 million poor), despite a significant increase in India’s total population.
- Between 1993 and 2004, the absolute number of poor fell by a marginal number (18 million) from 320 million to 302 million, during a period when the GDP growth rate had picked up after the economic reforms.
- It is for the first time in India’s history since the CES began that we have seen an increase in the absolute numbers of the poor, between 2012-13 and 2019-20.
- The second fact is that for the first time ever, between 2004-05 and 2011-12, the number of the poor fell, and that too by a staggering 133 million, or by over 19 million per year.
Fuss over GDP growth
- This was accounted for by what has come to be called India’s ‘dream run’ of growth: over 2004 and 2014, the GDP growth rate had averaged 8% per annum — a 10-year run that was not sustained thereafter.
- By contrast, not only has the incidence of poverty increased since then, but the absolute increase in poverty is totally unprecedented.
Reasons behind this Pauperization
The reasons for increased poverty since 2013 are not far to seek:
- GST: While the economy maintained some growth momentum till 2015, the monumental blunder of demonetization was followed by a poorly planned and hurriedly introduced GST.
- Fall in investments: None of the engines of growth was firing after that. Private investment fell from 31% inherited by the new government, to 28% of GDP by 2019-20.
- Fall in exports: Exports, which had never fallen in absolute dollar terms for a quarter-century since 1991, actually fell below the 2013-14 level ($315 billion) for five years.
- Unemployment: Joblessness increased to a 45-year high by 2017-18 (by the usual status), and youth (15-29 years of age) saw unemployment triple from 6% to 18% between 2012 and 2018.
- Fall in wages: Real wages did not increase for casual or regular workers over the same period, hardly surprising when job seekers were increasing but jobs were not at anywhere close to that rate.
- Pandemic: Poverty is expected to rise further during the COVID-19 pandemic after the economy has contracted.
Hence, consumer expenditure fell, and poverty increased.
Back2Basics:
Poverty Lines in India: Estimations and Committees
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Tribunals Reforms Bill
Mains level: Not Much
The Lok Sabha has hastily passed the Tribunals Reforms Bill, 2021 without any debate.
Highlights of the Tribunals Reforms Bill, 2021
The Bill seeks to dissolve certain existing appellate bodies and transfer their functions (such as adjudication of appeals) to other existing judicial bodies:
Transfer of functions of key appellate bodies as proposed under the Bill:
|
|
Acts
|
Appellate Body
|
Proposed Entity
|
| The Cinematograph Act, 1952 |
Appellate Tribunal |
High Court |
| The Trade Marks Act, 1999 |
Appellate Board |
High Court |
| The Copyright Act, 1957 |
Appellate Board |
Commercial Court or the Commercial Division of a High Court* |
| The Customs Act, 1962 |
Authority for Advance Rulings |
High Court |
| The Patents Act, 1970 |
Appellate Board |
High Court |
| The Airports Authority of India Act, 1994 |
Airport Appellate Tribunal |
- Central government, for disputes arising from the disposal of properties left on airport premises by unauthorised occupants.
- High Court, for appeals against orders of an eviction officer.
|
| The Control of National Highways (Land and Traffic) Act, 2002 |
Airport Appellate Tribunal |
Civil Court# |
| The Geographical Indications of Goods (Registration and Protection) Act, 1999 |
Appellate Board |
High Court |
Amendments to the Finance Act, 2017:
- The Finance Act, 2017 merged tribunals based on domain.
- It also empowered the central government to notify rules on: (i) composition of search-cum-selection committees, (ii) qualifications of tribunal members, and (iii) their terms and conditions of service (such as their removal and salaries).
- The Bill removes these provisions from the Finance Act, 2017.
- Provisions on the composition of selection committees and term of office have been included in the Bill. Qualification of members and other terms and conditions of service will be notified by the central government.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Sabki Yojna Sabka Vikas
Mains level: Not Much
The Government has launched ‘Sabki Yojna Sabka Vikas’ campaign for inclusive and holistic preparation of the Gram Panchayat Development Plan (GPDP).
Sabki Yojna Sabka Vikas
- Under Article 243 G of the Constitution, Panchayats have been mandated for the preparation and implementation of plans for economic development and social justice.
- Thus, Panchayats have a significant role to play in the effective and efficient implementation of flagship schemes/programs on subjects of national importance for transforming rural India.
- The objectives of the campaign broadly include strengthening of elected representatives and Self-Help Groups, evidence-based assessment of progress made.
- The campaign aimed to help Gram Panchayats (GPs) in preparation of convergent and holistic GPDP through the identification of sectoral infrastructural gaps in respective areas.
Back2Basics: Gram Panchayat Development Plan (GPDP)
- The Gram Panchayats are constitutionally mandated for the preparation of GPDP for economic development and social justice utilizing resources available with them.
- The GPDP should be comprehensive and based on a participatory process involving the community particularly Gram Sabha.
- It will be in convergence with schemes of all related Central Ministries / Line Departments related to 29 subjects listed in the Eleventh Schedule of the Constitution.
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