Note4Students
From UPSC perspective, the following things are important :
Prelims level: Routes of FDI, External commercial borrowing etc.
Mains level: Paper 3- What are the factors responsible for declining FDI in India? Discuss the changes made in FDI policy amid covid pandemic.
This article deals with the recent changes made by the government in the FDI policy. The major change was that the government approval route was made mandatory for investment coming from certain countries. There are certain ambiguities and issues with the latest changes.These are discussed here.
What changes were made in the FDI policy?
- Government approval route for investment: Investment is permitted through government route only in the following cases-
- 1) An entity situated in a country which shares a land border with India.
- 2) Where the owner of investment into India is situated in or is a citizen of any such country.
- Further, any transfer of ownership of any existing or future foreign direct investment (FDI) in an entity in India (indirectly or indirectly) resulting in the beneficial ownership falling within the purview of the above restrictions, would require the government’s approval.
Ambiguities arising due to press note
- There appear to be certain ambiguities arising from the press note and the amendments to the Rules.
- The usage of the term “FDI” in the press note and the relevant amendments to Rule 6(a) of the Rules, seem to suggest that the restrictions are on investments that are structured as FDI.
- FDI is defined under the Rules to mean investment through equity instruments by a person resident outside India in an unlisted Indian company, or in 10% or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company
- The restriction doesn’t seem to be on investments by an FPI registered with SEBI.
- FPI is permitted to invest in listed or to be listed Indian companies’ securities, in the manner set out in Schedule II of the Rules.
- Also not on investments under the FVCI route.
- Investment through FVCI is an investment in the securities of Indian companies operating in certain specific sectors, in the manner set out in Schedule VII of the Rules.
- It is also unclear if “foreign investments” in LLPs, not being FDI, would also be subject to these restrictions.
- This ambiguity is further amplified by the subject line of the press note, which reads “curbing opportunistic takeovers/acquisitions of Indian companies”, without making any reference to LLPs.
- And the amendments to Rule 6(a) of the Rules, which only pertain to investments in equity instruments of an Indian company under Schedule I of the Rules.
The points mentioned here add to our understanding of FDI and issues with it. A question based on the issue can be asked, for ex-“What are the reasons for a steady decline in FDI in India? To what extent FDI poilcy is responsible for this?”
Difficulties in seeking government approval
- The requirement of seeking government approval may also pose operational difficulties for many entities.
- For instance, the approval requirement seems to be applicable in all cases of further investments irrespective of the threshold.
- It applies whether or not such investments are in the form of rights issue (where all or almost all existing shareholders also participate) or preferential allotments.
- Which results in causing some amount of hardship for entities to raise further capital, especially where entities already have existing investments from investors situated in countries like China.
- The amendments to the Rules also do not attempt to clarify the applicability of the approval requirements where there is no change in the shareholding percentage of the investor pursuant to a follow-on investment.
- Another aspect which is important, is the usage of the terms “directly or indirectly” in the context of transfer/ divestment of beneficial ownership of existing FDI, to entities in/ citizens of a country which shares a land border with India.
- This may require global acquisitions of entities in other jurisdictions which have subsidiaries/ investee companies in India, by a person in one of India’s neighbouring countries, to be subject to the approval requirements, thereby impacting timelines for closing.
No restrictions on external commercial borrowings (ECB)
- There are presently no such commensurate restrictions under the ECB regulations.
- Therefore, an eligible borrower could avail ECB from a recognised lender.
- That includes a foreign equity holder in one of India’s neighbouring countries which are FATF compliant for any immediate funding requirements.
- Any conversion of the ECB or any part thereof, into shares of the Indian company, would be subject to the restrictions and approval requirements under the FDI policy and the Rules.
Conclusion
The government/RBI should provide necessary clarifications on these issues and ambiguities at the earliest. With there being no sunset clause presently contemplated on the applicability of these restrictions, only time will tell if the amendments to the Rules are a boon to the economy and a step in the right direction, or otherwise.
Back2Basics: What is ‘Rights issue’
- Cash-strapped companies can turn to rights issues to raise money when they really need it.
- In these rights offerings, companies grant shareholders the right, but not the obligation, to buy new shares at a discount to the current trading price.
- A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.
- This type of issue gives existing shareholders securities called rights.
- With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date.
- The company is giving shareholders a chance to increase their exposure to the stock at a discount price.
- Until the date at which the new shares can be purchased, shareholders may trade the rights on the market the same way that they would trade ordinary shares.
- The rights issued to a shareholder have value, thus compensating current shareholders for the future dilution of their existing shares’ value.
- Dilution occurs because a rights offering spreads a company’s net profit over a larger number of shares.
- Thus, the company’s earnings per share, or EPS, decreases as the allocated earnings result in share dilution.
What is the Limited Liability Partnership (LLP)?
- LLPs are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
- In a general partnership, all partners share liability for any issue that may arise.
- The LLP is a formal structure that requires a written partnership agreement and usually comes with annual reporting requirements depending on your legal jurisdiction.
What is the FVCI route of investment?
- Foreign Venture Capital Investor’ (FVCI) means an investor incorporated and established outside India and registered with Securities and Exchange Board of India under Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000.
- The amount of consideration for all investment by an FVCI has to be received/made through inward remittance from abroad through banking channels or out of funds held in a foreign currency account and/ or a Special Non-Resident Rupee (SNRR) account maintained by the FVCI with an AD bank in India.
- The foreign currency account and SNRR account shall be used only and exclusively for transactions under the relevant Schedule.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various article to ensure the independence of judiciary.
Mains level: Paper 2- Do you agree with the view that post-retirement appointment of the judges undermine the confidence in judiciary? Give suggestions to deal with the problem.
The article discusses the issue of retired judges accepting government post after retirement. Such appointments have several implications. It undermines confidence in the independence of the judiciary. It also influence pre-retirement judgements delivered by the judges. The article also offers some solutions to this problem.
The provisions in the Constitution to secure the independence of the judiciary
- The Constitution has been conceived to provide a pride of place to the judiciary.
- Constitutional appointees to the Supreme Court have been guaranteed several rights in order to secure their independence.
- Salary: The salaries of judges and their age of retirement are all guaranteed in order to secure their independence.
- Removal: They cannot be easily removed except by way of impeachment under Articles 124(4) and 217(1)(b).
- They have the power to review legislation and strike it down.
- They can also question the acts of the executive.
- All this makes it clear that the framers of the Constitution envisaged an unambitious judiciary for which the only guiding values were the provisions of the Constitution.
Issue of judges accepting post-retirement jobs
- It was thought that on retirement from high constitutional office, a judge would lead a retired life.
- Nobody ever expected them to accept plum posts.
- But the clear demarcation between the judiciary and executive got blurred as many judges over the years began to accept posts offered by the government.
- A few years ago, a former Chief Justice of India (CJI) was made a Governor by the ruling party.
- Now, we have the case of a former CJI, Ranjan Gogoi, being nominated by the President to the Rajya Sabha and taking oath as Member of Parliament.
- Pre-retirement judgements under cloud: During his tenure as CJI, Justice Gogoi presided over important cases such as Ayodhya and Rafale where all the decisions went in favour of the government.
- This gave rise to the impression that his nomination was a reward for these ‘favours’.
- Thus his appointment — and that too within a few months of his retirement — not only raised eyebrows but came in for severe condemnation from varied quarters.
- Loss of confidence: People are fast losing confidence in the so-called independent judiciary.
- In 2013 Arun Jaitley, who was also a senior Advocate, ironically said that legislature was creating post-retirement avenues for Judges in every legislation.
- He also said that post-retirement job influences pre-retirement judgements.
- It is in this context that the appointment of Mr Gogoi has to be perceived.
Did Constitution makers intend to nominate Judges?
- Mr Gogoi’s view that membership of the Rajya Sabha was not a job but a service, and that once the President nominated him the call of duty required him to accept it, only created the impression that the judiciary is pliant.
- A bare reading of Article 80(3) of the Constitution only envisages the President to nominate “persons having special knowledge in literature, science, art and social service” as members to the Rajya Sabha.
- It is difficult to imagine that the Constitution-makers had in mind a retired CJI when framing this provision.
A direct question based on the issue can be asked, like “What are the implications of post-retirement appointments of the judges? Give suggestions to deal with this problem”. So, take note of the various issues and their solutions discussed here.
Way forward
- If post-retirement appointments are going to undermine confidence in the judiciary and in a constitutional democracy.
- Enact law or amend Constitution: It is time to have a law in place either by way of a constitutional amendment or a parliamentary enactment barring such appointments.
- This is the only way to secure the confidence of the people and prevent post-retirement appointments.
- Increase pension: Judges can be compensated by being given their last drawn salary as a pension.
- Retirement age can be increased: Also, the age of retirement for judges can be increased by a year or two.
- This will undo the damage caused by post-retirement jobs.
Conclusion
The appointments of persons who have held constitutional office will undermine the very constitutional values of impartiality in the dispensation of justice. So, enacting a law to bar such appointments or amendment to the Constitution would be the step in the right direction.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Reproduction number-with respect to pandemic.
Mains level: Paper 3- What was the extent of damage caused by the Covid-19 to the India economy?
The theme of the article is the restarting of the Indian economy. Striking the right balance between livelihood and the spread of the virus is important for India. While India has been doing well on the curbing of the spread of the virus, its economy remains in the complete shutdown. So, we must restart our economy and this article offers some suggestions to do so and some trends that our economy is showing are discussed here.
Striking the balance between the economy and the spread of the virus
- One critical problem is striking the right balance between curbing the spread of the virus and keeping the economy functioning.
- We cannot have the poor, the labourers and the migrants bear the brunt of the effort to contain the spread of the virus.
- And nor do we want to weaken the foundations of the economy so much that we emerge from the pandemic onto an economic wasteland.
- The choice between lives and economy is also a choice between lives and lives.
Appreciation of India’s effort to curb the virus
- India’s effort to curb the spread of the virus has received appreciation — not just the state of Kerala, which has got accolades from around the world, but the country as a whole.
- The incidence of COVID-19 remains low in India.
- Of every 10 million people, there are as yet 5 lives lost in India.
- Comparison with the world: This is vastly lower, not just compared to Belgium, which tops the list with 5,180 fatalities for every 10 million people, but many other nations, such as the United States with 1,370 fatalities, Spain with 4,550, Italy with 4,080 and the UK with 2,550 fatalities.
One of the many puzzles associated with the Covid-19 is variation shown by it in fatality rate across the globe. Following are some figures about it.
Worldwide variation in the fatality rate
- To be fair, the low fatality, per 10 million population, is not specific to just India.
- We have comparably low figures currently in almost all African and South Asian nations.
- Thus, it is seven for Bangladesh, three for Sri Lanka, nine for Pakistan, two for Tanzania, one for Nigeria, and 0.3 for Ethiopia.
- No one fully understands these huge differences between Europe and North America, on the one hand, and Africa and South Asia, on the other.
- Isolation of nation, not a factor: This cannot be because these nations are more isolated.
- Bangladeshis are among the most globally scattered people and Ethiopia has huge interactions with China, but the fatality rates are low in both countries.
- Why is this so? The short answer is we do not know.
Defeating the virus by keeping reproduction number below one
- It is important to realise that the risk cannot be cut to zero — nothing in life is a zero-risk activity.
- To defeat the virus, the aim has to be to keep the “reproduction number”, or R-0, down to less than one.
- R-0 refers to the number of people, on average, who get infected by each infected person.
- When R-0 reaches less than one in any given region, such as is the case in Kerala, we know that the incidence of the disease is winding down in that region.
Following points are important from the UPSC perspective. A question can be framed on the economic damage of the Covid-19, opportunities provided by it, its implications for the vulnerable section of the society, unemployment, international trade, changes in the economic policies of the government etc.
Coming out of lockdown: Economic policy challenge
- The economic policy challenge is about how to come out of the lockdown.
- This has to be done carefully, but quickly.
- The stringency of India’s lockdown at top: A study by researchers at the University of Oxford, of the stringency of lockdowns in 73 countries, places India right on top.
- For a short while, this is worth it, and also impressive for a populous nation like India.
- Not desirable position: The top rank on the stringency index is not something any country will want to occupy for long.
- That will have a devastating effect on the poor and damage the nation’s long-run economic prospects.
Trends in the Indian economy
- Unemployment rate at an all-time high: There are studies showing that India’s unemployment rate is now at 24 per cent, an all-time high.
- Biggest ever capital outflow in a month: March also saw the biggest outflow of capital from the nation ever recorded in one month — roughly $15 billion left the nation.
- This also happens to be the largest capital outflow from any emerging economy in March.
- Clearly, global players are reacting to the fact that the economy is not functioning.
- Rupee at an all-time low: These sentiments have weakened the Indian rupee, which is now at an all-time low.
- Some of these problems are inevitable in this dystopian world; we can deal with these problems for a short while.
- Global trade: If these trends persist, India would end up ceding space to other nations in global trade, exports and business, and the suffering will be huge on the working classes.
Way forward in opening the economy
- Once this phase of the lockdown ends on May 3, we will have to start opening businesses, allowing the private sector, especially the informal enterprises and small firms, to operate.
- Rule of behaviour: There will have to be rules of behaviour in place, such as social distancing, masks, hand-washing, but we have to begin to facilitate poor labourers to reach their place of work, and our farms and factories to function.
- Focus on participation, not permission: We have to encourage the rules of behaviour to continue by “participation” and not by bureaucratic “permission”.
- India has a long history of the “permit raj”, where all businesses were beholden to the bureaucracy for what they did.
- This had a tendency to strangle all but a few big firms and had held up the nation’s economic growth for long.
Conclusion
India stands at an important juncture. A misstep at such moment could turn the course of history for the nation. So, the right steps at various fronts from containing the spread to the reopening of the economy are required from the government.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Highlights of the report
Mains level: Freedom of Press
India has dropped two places on a global press freedom index to be ranked 142nd out of 180 countries in the annual World Press Freedom Report.
Press freedom especially after the abrogation of Art. 370 in J&K was profoundly debated back then. We can expect a mains question like-
“Reasonable restrictions to the freedoms enjoyed by media are necessary while addressing the concerns of national security. Critically comment.”
World Press Freedom Index
- The Press Freedom Index is an annual ranking of countries compiled and published by Reporters Without Borders.
- It is based upon the organization’s own assessment of the countries’ press freedom records.
- It intends to reflect the degree of freedom that journalists, news organisations, and netizens have in each country, and the efforts made by authorities to respect this freedom.
- The report is partly based on a questionnaire which asks questions about pluralism media independence, environment and self-censorship, legislative framework, transparency, and infrastructure.
Highlights on India
- The report said that with no murders of journalists in India in 2019, as against six in 2018.
- However, there have been constant press freedom violations, including police violence against journalists, ambushes by political activists, and reprisals instigated by criminal groups or corrupt local officials.
Global scenario
- Norway is ranked first in the Index for the fourth year running.
- India ranked better than its neighbours Pakistan (145) and Bangladesh (151), but worse than Sri Lanka (127) and Nepal (112).
- China at 177th position is just three places above North Korea, which is at 180th.
Various threats to press freedom
- Across the world, press freedom is under pressure from aggressive authoritarian regimes.
- The media is also facing a technological crisis, due to a lack of democratic guarantees and a democratic crisis following polarization and repressive policies, the report reads.
- In addition comes a crisis of trust following growing suspicion and even hatred of the media, and an economic crisis and impoverishing of quality journalism.
- Among other issues, the report has listed coordinated social media hate campaigns against journalists reporting on issues that “annoy right-wing followers”, criminal prosecutions to gag journalists critical of authorities and police violence against journalists.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NBS schemes
Mains level: NBS scheme and its benefits
Union Cabinet has approved fixation of Nutrient Based Subsidy (NBS) rates for Phosphatic and Potassic (P&K) fertilizers for the year 2020-21.
Fertilizer subsidy accounts for large fiscal subsidies (about 0.73 lakh crore or 0.5 per cent of GDP), the second-highest after food. We can expect a question like – “Discuss the role of NBS in ensuring land fertility and farm productivity in India.”
About Nutrient Based Subsidy (NBS) Scheme
- The NBS Scheme for fertilizer was initiated in the year 2010 and is being implemented by the Department of Fertilizers.
- Government is making available fertilizers, Urea and 21 grades of P&K fertilizers to farmers at subsidized prices through fertilizer manufacturers/importers.
What NBS provides?
- The scheme allows the manufacturers, marketers, and importers to fix the MRP of the Phosphatic and Potash fertilizers at reasonable levels.
- The MRP will be decided considering the domestic and international prices of P&K fertilizers, inventory level in the country and the exchange rates.
- The NBS ensures that adequate quantity of P&K is made available to the farmers at a statutory controlled price.
Fertilizers covered
- Under this, a fixed amount of subsidy decided on an annual basis is provided on each grade of subsidized Phosphatic and Potassic (P&K) fertilizers, except for Urea based on the nutrient content present in them.
- It is largely for secondary nutrients like N, P, S and K and micronutrients which are very important for crop growth and development.
- In India, urea is the only controlled fertilizer and is sold at a statutory notified uniform sale price.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: VidyaDaan initiative
Mains level: Various e-learning initiaitves
The Union HRD Ministry has e-launched VidyaDaan 2.0 program for inviting e-learning content contributions.
There are various web/portals/apps with peculiar names such as YUKTI, DISHA, SWAYAM etc. Their core purpose is similar with slight differences. Pen them down on a separate sheet under the title various digital HRD initiatives.
Add one more to this list.
VidyaDaan
- ‘Vidya Daan’ is a digital program to enable contributions to improve teaching & learning.
- It encourages the sharing of high quality, curated, relevant & curriculum-linked digital content.
- This program attempts to synergize countrywide developments in the field of education by providing schools all over India, from the Metro cities to the smallest villages with good quality e-content.
How does it work?
- VidyaDaan has a content contribution tool that provides a structured interface for the contributors to register and contribute different types of content (such as, explanation videos, presentations, competency-based items, quizzes etc.), for any grade (from grade 1 to 12), for any subject as specified by the states/UTs.
About phase 2.0
- The programme has been re-launched due to the increasing requirement for e-learning content for students especially in the backdrop of the situation arising out of COVID- 19.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Anthurium
Mains level: NA
A women innovator from Thiruvananthapuram, Kerala, has developed ten varieties of Anthurium, a flower with high market value, by cross-pollination.
Anthurium
- An anthurium is a vast group of beautiful blooming plants available in a wide range of colours.
- Anthurium is one of the best domestic flowering plants in the world.
- They are decorative as well as purify the surrounding air and remove harmful airborne chemicals like formaldehyde, ammonia, toluene, xylene, and allergens.
- Its importance of removing toxic substances from the air, NASA has placed it in the list of air purifier plants.
- Anthurium has larger economic importance because of its eye-catching and beautiful inflorescence and fetches a good market price.
Salient features of the Anthurium varieties are
- Large beautiful flowers
- Different colors of spathe and spadix
- Long stalks
- Better shelf life
- Good market value
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Earth Day
Mains level: NA
Yesterday, April 22nd was celebrated as Earth Day, an international event celebrated around the world to pledge support for environmental protection.
The Earth Day designation by UN and its first observance have confusing difference. Make note of that. We can expect a question based on that. Also read about Earth Overshoot Day.
What is Earth Day?
- In 2009, the United Nations designated April 22 as ‘International Mother Earth Day’.
- Earth Day aims to “build the world’s largest environmental movement to drive transformative change for people and the planet.”
- Earth Day was first observed in 1970, when 20 million took to the streets to protest against environmental degradation.
- The event was triggered by the 1969 Santa Barbara oil spill, as well as other issues such as smog and polluted rivers.
- The landmark Paris Agreement, which brings almost 200 countries together in setting a common target to reduce global greenhouse emissions, was signed on Earth Day 2016.
Significance of this year
- The year 2020 marks the 50th anniversary of the annual celebrations.
- This year’s theme for Earth Day is ‘climate action’.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: IOC and its member countries.
Mains level: Paper 2- How increasing cooperation with IOC could help India in its vision enshrined in SAGAR?
India got an observer status at IOC (Indian Ocean Commission) in March. This article discusses the significance of IOC in the Western Indian Ocean. The IOC is also significant for India as India’s leadership is made clear in SAGAR (Security and Growth for All in the Region) which is “consultative, democratic and equitable”. There are things that India need to learn from IOC like-“bottom-up regionalism” and there are things that India can contribute to IOC like its expertise. These issues are discussed here.
About Indian Ocean Commission (IOC)
- Founded in 1982, the IOC is an intergovernmental organisation.
- It comprises five small-island states in the Western Indian Ocean: the Comoros, Madagascar, Mauritius, Réunion (a French department), and Seychelles.
- Though Réunion brings a major power, France, into this small-state equation, decisions in the IOC are consensus-based.
- While France’s foreign policy interests are represented, the specifics of Réunion’s regional decision-making emerge from its local governance structures.
- Over the years, the IOC has emerged as an active and trusted regional actor, working in and for the Western Indian Ocean and implementing a range of projects.
Maritime security by IOC and India’s interests
- More recently, the IOC has demonstrated leadership in the maritime security domain.
- Since maritime security is a prominent feature of India’s relations with Indian Ocean littoral states, India’s interest in the IOC should be understood in this context.
- However, India has preferred to engage bilaterally with smaller states in the region.
- The IOC is a cluster of small states which do not seek a ‘big brother’ partnership.
- The IOC has its own regional agenda.
- The IOC has made impressive headway in the design and implementation of regional maritime security architecture in the Western Indian Ocean.
MASE program and RMIFC to help maritime security
- What is MASE program? The European Union-funded programme to promote Maritime Security in Eastern and Southern Africa and the Indian Ocean.
- In 2012, the IOC was one of the four regional organisations to launch the MASE Programme
- Under MASE, the IOC has established a mechanism for surveillance and control of the Western Indian Ocean with two regional centres.
- RMIFC: The Regional Maritime Information Fusion Center (RMIFC), based in Madagascar, is designed to deepen maritime domain awareness by monitoring maritime activities and promoting information sharing and exchange.
- The Regional Coordination Operations Centre (RCOC), based in Seychelles, will eventually facilitate joint or jointly coordinated interventions at sea based on information gathered through the RMIFC.
- These centres are a response to the limitations that the states in the region face in policing and patrolling their often enormous Exclusive Economic Zones (EEZs).
- They deliver an urgently needed deterrent against unabating maritime crime at sea.
- Which was only partly addressed by the high-level counter-piracy presence of naval forces from the EU, the Combined Maritime Forces, and Independent Forces.
- Seven states in the region have signed agreements to participate in this multilateral maritime security architecture, and once ratified, will provide its legal foundation.
- Many major powers have expressed interest in accessing the RMIFC.
In 2013, a question based on the “strings of pearls” was asked by the UPSC. In 2014 question with respect to the South China Sea and the freedom of navigation was asked. On similar lines, a question can be asked from the Western Indian Ocean region dealing with maritime security. Such a question would require information about IOC.
What India can learn from IOC?
- The IOC’s achievements offer an opportunity for India to learn, and also to support.
- The IOC style of ‘bottom-up regionalism’ has produced a sub-regional view and definition of maritime security problems and local ownership of pathways towards workable solutions.
- A 2019 policy brief published by the IOC ‘Strengthening Maritime Security in the Western Indian Ocean’, sets out how the counter-piracy response off the coast of Somalia delivered unprecedented regional and international cooperation in the domain of maritime security.
- However, it resulted in multiple players, the duplication of actions, and regional dependence on international navies.
- The IOC has been seeking more sustainable ways of addressing maritime security threats in the region, with the RMIFC and RCOC as part of this response.
- Its regional maritime security architecture is viewed locally as the most effective and sustainable framework to improve maritime control and surveillance and allow littoral States to shape their own destiny.
- Moreover, with proper regional coordination, local successes at curbing maritime threats will have broader security dividends for the Indian Ocean space.
How India can contribute?
- Nearly all littoral states in the Western Indian Ocean need assistance in developing their maritime domain awareness and in building capacity to patrol their EEZs.
- All would benefit from national information fusion centres that can link to those of the wider region.
- With its observer status, India will be called upon to- 1. Extend its expertise to the region. 2. Put its satellite imagery to the service of the RMIFC. 3. Establish links with its own Information Fusion Centre.
- As a major stakeholder in the Indian Ocean with maritime security high on the agenda, India will continue to pursue its interests and tackle maritime security challenges at the macro level in the region.
- However, as an observer of the IOC, a specific, parallel opportunity to embrace bottom-up regionalism presents itself.
- There are those in the Western Indian Ocean who are closely watching how India’s “consultative, democratic and equitable” leadership will take shape.
Conclusion
India, with its principles of leadership made clear in SAGAR has an opportunity to learn from and partner with IOC to reinforce the maritime security in the Western Indian Ocean.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ways and means advances, limit on the states for borrowing.
Mains level: Paper 3- Discuss the ways to ensure that the States do not face lack of resource in fight against Covid-19?
The article elaborates on the central role played by the States in the fight against Covid-19. The article emphasises the role that States can play in the implementation of the various measures to tackle the epidemic and economic revival of the country. It also highlights the lack of resources at the States’ disposal and reasons for the lack such as revenue loss in the lockdown and lower devolution by the Central Government. In the end, there is a suggestion to increase the borrowing limit of the States’.
Time to relax fiscal constraints on the States
- The speed of economic revival will depend on how long it will take to revive economic activities and the volume of stimulus through public spending the government is able to provide.
- It now appears that the lockdown will be lifted in stages and the recovery process will be prolonged.
- The country is literally placed in financing a war-like situation.
- The government will have to postpone the fiscal consolidation process for the present, loosen its purse strings and finance its deficits substantially through monetisation.
- This is also the time for the government to announce relaxation in the States’ fiscal deficit limit to make them effective participants in the struggle.
The following points highlight the importance of States in dealing with the crisis. The federal structure of India comes to the fore here. The UPSC can aks question on this theme, for example, “Discuss the important role played by the States in dealing with the Covid-19 and how it underscores the federal character of the Indian polity?”
The important role played by the States
- Prioritise health spending: It is also important for the States to realise the importance of health and prioritise spending on health-care services.
- Being closer to the people, the States have a much larger responsibility in fighting this war.
- Public health, as well as public order, are State subjects in the Constitution.
- Acts invoked for lockdown: Some States were proactive in dealing with the COVID-19 outbreak by involving the Epidemic Diseases Act, 1897, even before the Government of India declared a universal lockdown invoking the Disaster Management Act, 2005.
- Of course, the Centre under Entry 29 of the Concurrent List has the powers to set the rules of implementation which states, “Prevention of the extension from one State to another of infectious or contagious diseases or pests affecting men, animals or plants”.
- Implementation at the ground level: While Central intervention was done to enable, “consistency in the application and implementation of various measures across the country”, the actual implementation on the ground level will have to be done at the State level.
- Furthermore, States are better informed to decide the areas and activities where relaxations should be done as the coronavirus curve is flattened.
- Coordination: Hopefully, there will be better coordination between the Union and State governments instead of claiming credit and apportioning blame.
Covid-19 has made clear the neglect and poor state of health in India. The UPSC can frame the question based on the health infrastructure and expenditure on it. The question can be framed on the following lines “Covid-19 has highlighted India’s lack of preparedness and the poor health infrastructure in the country. What are the reasons for it? Give suggestions to improve it.”
Neglect of the health-care sector in the country
- The pandemic has underlined the historical neglect of the health-care sector in the country.
- Expenditure on health as a percentage of GDP: The total public expenditures of Centre and States works out to a mere 3% of GDP.
- In 2017-18, in per capita terms, the public expenditure on medical and public health varied from an abysmal ₹690 in Bihar and ₹814 in Uttar Pradesh to the highest of ₹2,092 in Kerala.
- The centrally sponsored scheme, the National Health Mission, is inadequately funded, micromanaged with grants given under more than 2,000 heads and poorly targeted.
- The focus of “Ayushman Bharat” has been to advocate insurance rather than building wellness centres.
Economic revival by the States
- Besides protecting lives and livelihoods, States will have to initiate and facilitate economic revival, and that too would require substantial additional spending.
- Hand holding small and medium enterprises which have completely ceased production, providing relief to farmers who have lost their perishable crops and preparing them for sowing in the kharif season are other tasks that require spending.
- In fact, States have been proactive. Kerala came out with a comprehensive package allocating ₹20,000 crores to fight the pandemic.
- Almost all States have taken measures to provide food to the needy besides ramping up health-care requirements.
Lack of resources and revenue loss suffered by the States
- While the requirement of States for immediate expenditures is large, they are severely crippled in their resources.
- In the lockdown period, there has virtually been no economic activity and they have not been able to generate any revenue from State excise duty, stamp duties and registration fees, motor vehicles tax or sales tax on high-speed diesel and motor spirit.
- The revenue from Goods and Services Tax is stagnant and compensation on time for the loss of revenue has not been forthcoming.
- As the recovery process will be staggered, it is doubtful whether tax revenues will register any positive growth in 2020-21.
- Not surprisingly, the State has decided to monetise land through auctions to get money besides regularising unauthorised constructions by paying high fees.
Lower tax devolution from the Centre
- The position regarding tax devolution from the Centre is even more precarious.
- To begin with, the tax devolution in the Union Budget estimate is lower than the Commission’s estimate by ₹70,995 crores.
- In fact, the Budget estimate for 2020-21 itself is a huge overestimate when seen against the 11-month actual collections in 2019-20.
- The required growth to achieve the Budget estimate is 33.3% over the annualised actual collection.
- The projections are that the growth of nominal GDP in 2020-21 will be just about 4%.
- And if the tax revenue increases by the same rate, devolution to the States would be lower by ₹2.2-lakh crore than the Finance Commission’s estimate.
- This results in a loss of ₹9,173 crores for Tamil Nadu, ₹9,000 crores for Andhra Pradesh, ₹8,000 crores for Karnataka, ₹4,671 crores for Telangana, and ₹4,255 crores for Kerala.
- Supplementary report by the Finance Commission: There is a strong case for the States to go back to the Finance Commission with a request to make and give a supplementary report.
Of late, the poor fiscal health of the States has been in the news. Following are some of the factors that are responsible for it. A question can be asked with relation to this problem like “The States are facing fiscal constraints owing to the lack of revenue. What are the reasons for it? What are the options available to help the States to deal with such a situation?”
Problems faced by the States in raising resources
- There is only a limited scope for expenditure switching and reprioritisation now.
- Limited space for borrowing: Their borrowing space too is limited by the fiscal responsibility and budget management limit of 3% of Gross State Domestic Product (GSDP).
- High yield no the State bonds: Faced with an acute fund crunch, Kerala floated 15-year bonds but was faced with a huge upsurge in the yield to 8.96%.
- Increase in the WMA limit: The announcement by the Reserve Bank of India on the increase in the limit of ways and means advances by 60% of the levels prescribed in March 31 could help States to plan their borrowing better.
- But that is too little to provide much relief.
Conclusion
It is important for the Central government to provide additional borrowing space by 2% of GSDP from the prevailing 3% of GSDP. This is the time to fiscally empower States to wage the COVID-19 war and trust them to spend on protecting lives, livelihoods and initiate an economic recovery.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3-What economic measures and reforms are needed to deal successfully with the crisis.
The article discusses three fronts on which actions are required viz- health, economy and geopolitics. How much the global economy is going to be affected? how the US-China rivalry would affect the recovery? what the lack of global coordination means? all such questioned are discussed here. It also suggests actions that India should take to deal with the crisis.
Many unknowns than knowns about Covid-19
- The virus currently has many more unknowns than knowns.
- We don’t know for sure how it spreads, whether people can get re-infected, whether it is mutating, whether the hot weather kills it, and what the real fatality rate is.
- We don’t know for sure how far we are from an anti-viral.
- We know that we are at least 18 months away from having a vaccine that works and is available at scale.
- Till an anti-viral is found, economic activity will be constrained, and this will affect people, industries and countries in disparate ways.
The extent of damage to the global economy
- Loss of ten trillion dollars: The global economy is set to lose close to ten trillion dollars because of the “self-induced coma” it has been put into — to use Paul Krugman’s evocative phrase.
- Loss of effectiveness of monetary policy: The preceding global financial crisis (GFC) has exhausted the efficacy of monetary tools.
- In addition, corporates globally are leveraged to the tune of $12 trillion.
- The slump in demand: The accompanying oil price collapse, beginning due to a spat between producers Saudi Arabia and Russia have been compounded by a precipitous slump in demand.
- The Chinese economy can’t help as it did during the GFC, as it is hemmed in itself.
- Even if it could, there is too much global suspicion of China to allow it to do so. So, countries will largely be on their own.
Tensions between the US and China
- The tensions between the US and China have escalated into a full-scale superpower crisis after the virus spread.
- Since 2010, there has been great concern in the US about China’s rise.
- China’s muscular foreign policy together with its aggressive stance on multiple issues, most importantly on technology and technology standards, has created conflict.
- The coronavirus is spreading in the US in an election year and smashing its economy.
- The virus infected over three-quarter of a million people in the country and killed more than 40,000.
- After this, China could be seen as enemy number one in the US.
No global coordination
- No wonder then that at a time when the world yearns for global coordination, there is almost none — in healthcare responses and economic coordination.
- Multilateral agencies, especially the WHO and UN, suffer a complete loss of credibility.
- India needs to chart its own course in these turbulent times.
- If India takes the requisite actions it may come out well.
Following suggestions are important from the UPSC perspective. The suggestions deals with three fronts-health, economic and geopolitics.
How India could come out of the crisis?
- India needs to act at three levels — health, economic and geopolitical.
1. Actions at the health level
- The Union Ministry of Health and Family Welfare has done well to stem the spread of the infection.
- It has sensitised the public, introduced the concept of social distancing and isolation in the most challenging situations.
- Now it must test at scale and isolate.
2. Actions at the economic level
- Indians cannot afford to stay locked much longer.
- We are too poor and too many of us live on a day-to-day basis — not even on a paycheck to paycheck basis.
- Economic activity will be subdued in the near-term, but it must be “unlocked”.
- The current IMF projections suggest that India will have the highest growth rate in the world this year.
- Oil prices have collapsed, really helping our balance of payments.
- Our food stocks are plentiful, the rabi crop has been good, and the prognosis for the monsoon is positive.
- Low inflationary pressure: This, together with the fact that aggregate demand is down, will dampen inflationary impulses.
- The “new RBI” has acted boldly and strongly.
- It has taken prompt actions to reduce rates, increase liquidity, adjust prudential norms, allow moratoriums, and protect financial entities.
- Indian is better placed: The weakened rupee will help our exports and with a debt to GDP ratio of about 73 per cent, along with better growth prospects, India is relatively better placed than several other countries.
- We should, therefore, not unduly worry about our credit rating. This both allows and actually requires the government to act on the fiscal front.
- The government needs to implement the following four steps to spur the economy.
- (1) It should do so by “printing money” given the moderated inflation
- (2) It needs to provide additional direct benefit transfers of Rs 2,000 every month for three months to Jan Dhan accounts, together with foodgrains release from the FCI, to the tune of around Rs 65,000 crore, to alleviate people’s miseries.
- (3) It needs to protect MSMEs directly by providing them working capital (with an RBI backstop) and, like in the UK, provide 80 per cent of the salary to employees of the “GST-paying MSMEs” for six months.
- (4) It needs to launch a massive public works programme outside the Budget as suggested by the chairman of CII’s National Committee of Infrastructure and PPP, Vinayak Chatterjee.
- This fund should be earmarked for infrastructure and a quarter of its budget should be set aside for strengthening and upgrading primary health centres.
- The allocation should not be less than Rs 200,000 crore.
- Push through pending reforms: The government should take advantage of the crisis to push through much needed pending reforms in agriculture-especially those pertaining to APMC), power-pricing and discoms, banks-government ownership at 30 per cent and bad banks.
- Revenue from private gold: Given the paucity of tax revenues, the government could also consider having the PM making an appeal for private gold from people and temples.
- It could target 1,000 tonnes of gold worth $30 billion and offer a five per cent tax-free return repayable ($1.5 billion a year) after 10 years, in rupees or gold.
3. Actions at the geopolitical level
- India can come out ahead if we act now.
- Super-power rivalries will create opportunities to replace China as a major supplier to the US and Japan.
Conclusion
The battle to deal with the corona disaster has to be fought on many fronts. India must form a strategy and act on various front i.e. health, economic and geopolitical- to be victorious at the end.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: MPC and its various tools
Mains level: Not Much
The rate-setting Monetary Policy Committee (MPC) will be meeting five times in FY21, against seven in FY20.
Monetary Policy tools are all-time favourites of UPSC. Kindly go through the link given in the Back2Basics section.
Monetary Policy Committee (MPC)
- The Monetary Policy Committee (MPC) is a committee of the RBI, which is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the specified target level.
- The RBI Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC to bring more transparency and accountability in fixing India’s Monetary Policy.
- The policy is published after every meeting with each member explaining his opinions.
- The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
- Suggestions for setting up a Monetary policy committee is not new and goes back to 2002 when YV Reddy committee proposed to establish an MPC, then Tarapore committee in 2006, Percy Mistry committee in 2007, Raghuram Rajan committee in 2009 and then Urjit Patel Committee in 2013.
Composition and Working
- The committee comprises six members – three officials of the RBI and three external members nominated by the Government of India.
- The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
- The Governor of RBI is the chairperson ex officio of the committee.
- Decisions are taken by a majority with the Governor having the casting vote in case of a tie.
- They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.
Back2Basics
Monetary Policy tools and Money Supply in India
Also read:
How reverse repo rate became benchmark interest rate in the Indian economy?
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: ‘Milk Tea Alliance’
Mains level: Chinese assertion in the Indo-China region
The ‘Milk Tea Alliance’ is an informal term coined by social media users which are highly trending these days.
The term though in news without any institutional backing is gaining popularity. It clearly shows the public outrage against Chinese agressiveness in Taiwan and Hong-Kong.
What is the ‘Milk Tea Alliance’?
- Thai social media users began calling for the sovereignty of Taiwan and Hong Kong, extending support to the two countries.
- This spurred social media users from other Southeast Asian countries to join the call, in a rejection of China’s influence in the region for its own diplomatic and economic gains.
- The ‘Milk Tea Alliance’ is an informal term coined by social media users because in the region, tea is consumed in many nations with milk, with the exception of China.
- Memes were formed showing flags of the countries in the “Milk Tea Alliance” with China as a lone outsider.
What started this online war?
- The online battle started with a Thai twitter post that questioned whether coronavirus had emerged in a laboratory in Wuhan.
- There were some related tweets by pro-Taiwanese and Hong Kong people.
- Pro-China social media users then began attacking Thailand for being a “poor” and “backward” nation and also hurled insults at the Thai king and the Thai prime minister.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: COVID India Seva
Mains level: Coronovirus outbreak and its mitigation
The Union Ministry of Health & Family Welfare has launched the COVID India Seva platform to establish a direct channel of communication with millions of Indians amid the pandemic.
We can take this initiative as an example while answering mains questions like – “India’s fight against Coronavirus pandemic is a public movement at large. Discuss.”
COVID India Seva
- This initiative is aimed at enabling transparent e-governance delivery in real-time and answering citizen queries swiftly, at scale, especially in crisis situations like the ongoing COVID-19 pandemic.
- Through this, people can pose queries @CovidIndiaSeva and get them responded to in almost real time.
- @CovidIndiaSeva works off a dashboard at the backend that helps process large volumes of tweets, converts them into resolvable tickets, and assigns them to the relevant authority for real-time resolution.
- The dedicated account will be accessible to people be it local or national in their scope.
- The Ministry will respond to broader queries and public health information. This does not require the public to share personal contact details or health record details.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Daporijo bridge and its location
Mains level: Border disputes with China
A key bridge over the Subansiri River in Arunachal Pradesh close to the Line of Actual Control (LAC) was constructed by the Border Roads Organisation (BRO) in record 27 days.
North-East has seen the construction of a series of bridges by BRO in recent times post-Doklam standoff. Make a note of all such bridges and the corresponding rivers over which they are built.
Daporijo Bridge
- This Bridge is one of the two over River Subansiri which connect Daporji in North Subansiri dist. with rest of state.
- This and the other bridge at Tamin sustaining more than 600 villages and troops strength of around 3000 personnel manning the LAC which includes disputed Areas of Asaphila and Maza.
- All supplies, rations, constructional material and medicines pass over this bridge.
- The new bridge now can withstand 40 tonnes of weight allowing a safe passage for heavier vehicles catering for the requirements of the Indian Army as well as future infrastructure development requirements.
Significance
- India has speeded up the construction of critical infrastructure in its northeast in the past half a dozen years including airports, railways and roads with an eye on China that has motorable roads right up to the border.
- Arunachal Pradesh was the scene of the 1962 India-China border conflict that ended badly for India. China on its parts claims all of the state as “Southern Tibet.”
- Of the 3488 km long Line of Actual Control with China 1126 lies with Arunachal Pradesh alone.
- The two countries are yet to demarcate their border with the two sides patrolling the LAC but reporting incursions by the other side since the frontier is not clearly marked.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Thrissur Pooram
Mains level: NA
For the first time since its inception, Thrissur Pooram, considered as mother of all poorams in Kerala, has been cancelled earlier this month.
Note the cultural terms in the newscard. As the name itself suggests the state of celebration, it very unlikely to be asked in the ‘fest-state’ format. Rather UPSC can ask – “The terms X, Y, Z …. are associated with which of the following reknown festival?”
Thrissur Pooram
- Thrissur Pooram is an annual Hindu festival held in Kerala.
- It is held at the Vadakkunnathan Temple in Thrissur every year on the Pooram day – the day when the moon rises with the Pooram star in the Malayalam Calendar month of Medam.
- It is the largest and most famous of all poorams.
- Thrissur Pooram was the brainchild of Raja Rama Varma, famously known as Sakthan Thampuran, the Maharaja of Cochin (1790–1805).
Actual course of the festival
- The Pooram is centred on the Vadakkunnathan Temple, with all these temples sending their processions to pay obeisance to the Shiva, the presiding deity.
- The Pooram officially begins with a flag hoisting ceremony (Kodiyettam).
- All the participating temples of Thrissur Pooram are present for the ceremony, and there is a light firework to announce the commencement of the festival.
- The seventh day of the pooram is the last day. It is also known as “Pakal Pooram”.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Strategic Petroleum Reserves.
Mains level: Paper 3-How India can make the most of cheap oil prices?
For the first time in history, oil prices hovered in the negative territory recently. This article discusses how this opportunity can be utilised by India in various ways.
Oil selling for negative price
- In a dramatic and unprecedented turn of events on Monday, crude oil began trading in negative territory for the first time since records began.
- The price on a futures contract for West Texas crude that was due to expire on 21 April crashed to minus $37.63 a barrel.
- Covid effect: This is a direct result of the market mayhem caused by covid-19, which has resulted in lockdowns around the world, brought economies to a screeching halt, and crushed demand for transport fuel.
- No space to store oil: Reports say there is so much unused oil in the US that there is no space left to store fresh supplies.
- Storage costs money. Thus, oil producers had to pay to offload their stock.
How did we get here?
- Thanks to the covid-19 pandemic, multiple demand and supply shocks are wrecking economies across the globe and bringing economic activity to a standstill.
- Assembly lines have halted, supply chains have snapped, commodity prices have fallen, the services sector has ground to a halt, financial markets are in a panic.
- And the Great Lockdown has depressed various other economic variables and pushed the world into a deep recession.
- Tensions among suppliers: The sudden fall in oil prices is tied not just to a demand crunch, but also tensions among the world’s major suppliers.
- Relatively high prices over 2019 had allowed non-traditional players like US shale oil companies to thrive.
- Meanwhile, Saudi Arabia and Russia, the most influential members of OPEC+, the Organization of Petroleum Exporting Countries that have allied with Russia on and off since 2016, had been in competition to expand their market share.
- A flashpoint arose in early March, when Moscow refused to agree to OPEC’s desired production cuts to keep prices stable.
- This prompted a price war with Riyadh, as both attempted to increase market share or put other competitors (particularly US shale) out of business.
- Though a production cut has since been agreed to between Russia and Saudi Arabia, demand is estimated to have fallen far more than that.
- Contracts for late 2020 are still going for only around $30 per barrel.
- As a result, producers such as Kuwait, Oman, Nigeria, and Venezuela will continue to feel the strain.
How can India maximise potential gains?
- India imports nearly 80% of the oil it consumes, and so cheap oil is to be taken as an opportunity.
- Under normal circumstances, such a drastic fall in oil prices would have a big positive effect on the finances of the Union government and the economy in general.
- The current circumstances, however, are anything but normal.
- So, India must use this low price opportunity in the following ways.
The strategic petroleum reserves (SPRs) assumes significance in India’s energy security whenever tension rises in the region from which we import our oil. Take note of the suggestion with respect to SPRs.
Fill up the strategic petroleum reserves (SPRs)
- The best way to turn this situation to India’s advantage, therefore, is to grab this chance to fill up the country’s strategic petroleum reserves (SPRs).
- Like other large consumers, India holds oil inventories for the sake of energy security during a supply cut-off or some other emergency.
- How much are our SPRs? Our SPRs are estimated at five days’ worth of oil imports, stored in underground salt caverns, and a further 65 days’ worth held by commercial refineries.
- Current prices provide a perfect opportunity to bolster these reserves in preparation for future shocks.
- The government-owned agency, Indian Strategic Petroleum Reserves Limited (ISPRL), should now be focused on filling up and utilizing the existing capacity of the country’s underground caverns.
- In fact, it should be hardwired to consider filling these up each time the price of Brent crude falls below $40.
- Separately, in the second phase of India’s SPR plans should be fast-tracked.
- Working with private players: This involves working with private players to design, build, finance, operate, and transfer underground oil tanks.
Negotiate long term contracts at current prices
- Commercial refineries, many of which are public-sector enterprises, should strike and renegotiate long-term contracts with suppliers based on current prices.
- Other firms reliant on oil and subject to the vagaries of oil prices, such as airline companies, should also do likewise.
Geographically diversify the SPR holdings
- This is also an opportune time for the Indian government to geographically diversify its SPR holdings.
- To lower transport and storage costs, and to diversify risk, Oman or Fujairah in the UAE could be contracted to hold a quantity of oil on India’s behalf.
- These reserves can be shipped to India when needed.
- India should also operationalize, modernize and add to its oil tank facilities in Trincomalee, Sri Lanka, which is partially owned by India.
Conclusion
The global energy landscape is likely to remain volatile in the near future and oil is likely to remain an important part of India’s energy needs. This is a good time to enhance the country’s energy security.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Various geopolitical factors that influence the recovery of the world in post-pandemic period/How India could play a crucial role in forming the global coalition for faster recovery?
This article discusses the various factors with geopolitical significance. These factors would shape the post-pandemic recovery on a global scale. Though these factors have been touched upon in the previous op-eds, they are dealt with in detail here.
Post-pandemic strategic environment for the recovery
- It’s the post-pandemic strategic environment that will dictate how soon the world recovers from this unexpected shock.
- It must start with the international geopolitical angle, with many assumptions.
- With some clarity in this domain, we can prepare ourselves better for the recovery phase of a near post-war situation.
- Shortly, even as the world continues to reel under the pandemic threat, there will be more endeavours on enhancing human security through better strategic management of the world.
- So, what will all that be about? It could be a major conference.
- Major conference with agenda for revival: The situation is similar to the elusive efforts towards the creation of new world order after the end of the Cold War in 1989.
- Will the world consider a major conference with the agenda being a revival after the coronavirus?
- The 2015 Paris Summit of the United Nations, which was convened to save the world from the rapid impact of climate change, could not muster a consensus.
- Will a potential 2020 “pandemic conference” succeed in getting big powers to jettison their geopolitical ambition?
China’s role has significance for India. The UPSC asks questions touching the economic or security aspect of China for India. So, the role played by China in the post-pandemic world is important from Mains perspective. Take note of the issues discussed below.
The US-China rivalry
- The US-China rivalry will remain the core issue, with several other regions and nations aligning with the one who can bring them short to medium-term advantages.
- Contingent upon how badly the US is finally affected, its current confused leadership is unlikely to inspire and its efforts at internal stabilisation may compromise US power.
- A major turn in political fortunes in the US and its bumbling on pandemic management could throw open opportunities for others to exploit.
- The US will perceive itself far more insecure than it was even after 9/11.
Accusations over China’s role in the pandemic
- There is likely to be a huge effort to slander China — accusing it of being the originator of the scourge — and isolate it economically and politically.
- The allegations on the use of biological warfare are the ones which will cause turbulence in relationships.
- Ironically, China is also in a unique position to help the world bounce back.
- Against the backdrop of these accusations regarding culpability, we need to be ready for changes in the norms of international cooperation and behaviour.
- Cold war situation: A cold war of sorts could well be on the cards for some time, hampering a full recovery.
- It will be brutal in the cyber world — fake news on social media will prevent international cooperation in crucial fields such as scientific research, patents.
- And this could perhaps even slow down the ability to prevent the next pandemic.
The crucial role of the US
- Subject to the US’s economic capability after the pandemic, the ability to find a consensus to put on hold defence spending for the sake of human security will be the key.
- But the trust deficit between nations will probably hamper this to a great extent.
- The key anchor of globalisation — the US-China trade relationship — will change even more.
- China cannot be replaced by the US as a major industrial producer (even for the US market).
- Other countries or blocs — ASEAN, Bangladesh and India — will all chip in but that will still not be enough.
- Nor can any country buy as much grain from the US as China does.
- So, an economic relationship will continue but will be politically fractured as both parties search for alternatives, which don’t exist on a scale that both of them need.
The growing influence of China
- China’s recovery is likely to be the fastest.
- Its ambitious Belt and Road Initiative (BRI) may now go uncontested by the US-led efforts to create alternatives.
- The Chinese ability to influence politics among smaller nations in Asia and Africa could bring it strategic advantages.
- But this influence is unlikely to be enough to replace America unless the recession-hit US remains defensively oriented.
- Potential for conflict: Knowing the US propensity to bounce back, China’s efforts will have to remain energetic and that is where the potential for conflict is likely to rise.
- Of course, it is not as if the US would abandon its interests for an era of only-inward economic healing.
- Its eye on the future will remain firmly in place.
The decline in the credibility of the UN
- Role of WHO: The UN has lost credibility with the World Health Organisation taking the worst hit any UN agency has suffered in years.
- Its future is contingent upon how it manages the geopolitical fallout of the pandemic.
- The sooner it can get the world leaders on board, the better.
Instability in Iran and Afghanistan
- The collapse of the economy: Iran has been hit badly and with the US unrelenting on sanctions, its economy could collapse with frightening results as far the Middle East is concerned.
- The threat for peace in the region: A big nation in instability mode with internal turbulence and leadership challenges could spread greater threats of an undefined kind.
- The US may abandon Afghanistan with less commitment towards keeping its economy sustainable.
- Possibility of IS revival: It could be a sure recipe for internal instability, which could see the Islamic State emerge a major player.
- Russian advantage: Everything in the Middle East points towards Russian advantage and domination.
Opportunities for India
- India without recession: Economically hit but probably one of the few nations without a recession, India’s strong central leadership could be a big advantage.
- International cooperation: Prime Minister Narendra Modi would need to use all his influence to cobble together international cooperation to pull the world from the abyss it could sink into.
- His credibility is already higher than most international leaders and could spell a leadership role for India not in conflict with China but in cooperation with it.
- It is India’s established multilateral foreign policy that could eventually come to the assistance of the world.
Conclusion
Successful and swift recovery of the world hinges on international cooperation among the nation. This provides India with an opportunity to stitch together international cooperation in dealing with the aftermath of the crisis.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Need to revisit the state's role in political, social and economic aspect of the society.
The role of the state has come in the focus in the corona crisis. This article describes how the dominant role once played by the state declined over time and what implications it has for society. In the next part of the article, need to revisit the political system of the country is emphasised.
Paradigm shift due to Covid-19
- We are unlikely to return to pre-coronavirus homeostasis after the war against it is won.
- No section or sector is going to remain untouched and unaltered by the devastation the novel coronavirus is now unleashing.
- Its annihilation in the near future is not on the cards.
- Vaccines are going to be slow in coming; therefore, its taming is not immediate.
- The second wave of an outbreak is a realistic probability.
- Unlike the other threats: Unlike other threats to humanity such as global warming and nuclear armageddon, this threat is now, not in the future.
- It is here simultaneously for everyone, not for someone else and somewhere else; its casualties are around us, not in faraway battlefields or polar regions and coastal areas.
- No country can rescue another; it is each one fending for itself.
Possibility of a deep recession in the world
- If the lockdown continues, the world economy will contract by as much as 6% according to the International Monetary Fund.
- If it is not extended, the loss of human lives could be of unacceptable proportions.
- The global community will be fortunate if it does not spiral into depression.
- Both demand and supply contractions are likely to be severe.
- They are not going to be short-lived. Political systems, economic architectures and cultural mores are on trial.
Time to build a new paradigm
- Work patterns, production and distribution practices are up for
- Denial and wishing away unpleasant, yet probable, realities by governments, global organisations and public intellectuals will only compound economic, social, political and human costs.
- Build a new paradigm: We must now be quick in seizing lessons from the present crisis and get ready to embark on measures to build a new paradigm of life, work and governance.
Role of state in focus once again
- The enlarged economic role of the state in the aftermath of the Second World War came under major assault since the 1980s.
- Leaders who asked ‘where is society?’ rode to power on the promise of cutting down the government’s role.
- Systems that were alternatives to capitalism fell out of favour.
- Entrepreneurs heading unicorns and ‘soonicorns’ have become the new demigods.
- Minimum governance became the mantra.
- India too without much consideration joined this creed.
- Role of state in focus: But COVID-19 is beginning to challenge the political economy of this creed.
- Very soon the full scores of the performance of state and non-state actors in the COVID-19 stress test will be available across the globe.
- The Indian state will also have to give answers as far as its report card is concerned.
How the state’s role declined in India?
- India embarked on the path of reducing the role of the state, initially, with such caveats as ‘safety net’ and ‘reform with a human face’.
- Gradually, those caveats fell by the wayside.
- The Indian state’s role in health care, education, creation and maintenance of infrastructure and delivery of welfare has shrunk or become nominal, half-hearted, inefficient, and dysfunctional.
- Of course, it is true that it did not give a great account of itself in these sectors even before the 1991 departure.
- Disappointment with the dismal performance in its economic and administrative functions in the backdrop of a changing global ideological ecosystem encouraged a sharp de facto downsizing of the Indian state’s role.
- Acceptance among the upper section of society: Its retreat from vital functions and abdication of its social responsibility have gained acceptance and legitimacy among the articulate upwardly mobile.
- While retreat and abdication found influential and forceful evangelists, the selective retreat had few advocates.
- This departure, however, was not vigorously interrogated.
- Supporters of the departure, on the other hand, had little engagement in giving shape to the new policy.
- Nor did they worry about calibrating the architecture of the emerging role for the state.
- As a result, ‘private sector’ became the new holy cow in place of the ‘state sector’.
- What made matters worse is the culture of a simplistic and shallow discourse of public policy that took hold in civil society.
- It mindlessly privileges the agenda of corporates. It transacts in the idiom of stock exchanges and international rating agencies.
Who is affected due to declined role of the state?
- Today, those who bear the brunt of the consequences of shrunken and unresponsive state are the farmer and farm labour, the migrant worker, the unemployed, those in the unorganised sector, the rural poor, and the small entrepreneur.
- They are paying the highest price for the necessary but unbearable lockdown.
- They are either stranded far away from home or confined to their homes with no work and incomes, unsupported by the state.
- Underfunded public health systems are unable to serve them.
- But the dominant strand of public discourse is out of its depth. It has no time for these concerns.
- Worse, this discourse can be gamed from time to time.
- And the alternative discourse is too feeble to draw the attention of the government to the grave implications of COVID-19 for the weak in our society.
State’s responsibility towards the marginalised
- The state’s first responsibility is marginalised.
- The marginalised are also the crucial part of our economy. They lubricate its wheels and generate demand.
- Demand-side needs to be revived: Announcing stimulus packages that address the supply side alone without beefing up the demand side will be self-defeating to corporates.
- Prioritising the needs of corporate entities will lead to convulsions in our body politic in the wake of COVID-19.
- The state is in danger of forfeiting legitimacy if it does not ensure the survival and revival of the marginalised sections.
From the Mains perspective, following points are important to highlight the importance of the state’s role in ensuring the welfare of society and why there is a need to revisit the current system owing to certain problems in it.
Time to revisit the political economy of the Indian state and its role
- The country should begin a vigorous discourse on redefining every aspect of its involvement in our collective political, economic and social life.
- The relation between the state and economy, its role in allocating resources and addressing questions of inequality, its duty to provide basic human needs, the extent of the market’s role in providing services such as health, education, civic amenities needs to be revisited.
- The responsibility of the state and private enterprise towards deprived sections need urgent attention.
- Re-examining the political structure: We should re-examine the efficacy of our political structures too.
- The equation between citizens and government and what its implications are for individual freedom, privacy and national security.
- Also, the equation between the legislature and executive needs to be re-visited.
- Financial powers: The balance of administrative and financial power between provinces and the union on the one hand and provinces and local bodies on the other should be reconsidered.
- Election of the representatives: The way we elect our representatives to legislatures must also come under the lens.
- The issue of weakened local authorities and enfeebled legislatures need attention.
- For, they are at the coalface, delivering the state to the citizen.
- The way legislatures are elected and governments are made and unmade must be scrutinised.
- Our outrage at the power of big money in our electoral system has not arrested its growth.
- The role of serving and retired members of higher judiciary ought to be a part of the debate.
- We had an opportunity for intensive debate when the Justice Venkatachaliah Commission submitted its report in 2002 to review the working of the Constitution.
Conclusion
The opportunity that COVID-19 provides should not be squandered and must be utilised to have a fresh look at the various issues regarding our social, economic and political life. And states responsibility towards marginalised.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: West Texas Intermediate (WTI), Brent Crude
Mains level: Global crude oil pricing dynamics and its impact on India
Context
- Recently US oil markets created history when prices of West Texas Intermediate (WTI), the best quality of crude oil in the world, fell to “minus” $40.32 a barrel in New York.
- Not only is this the lowest crude oil price ever known the previous lowest was immediately after World War II — but also well below the zero-mark.
- At this price, the seller would be paying the buyer of crude oil $40 for each barrel that is bought.
Crude oil price dynamics are undergoing dramatic changes this year. The ongoing pandemic has worsened the situation further. India has ample opportunities to get benefited from the ongoing situation.
But how can that be? How did prices fall below zero in the first place? Let us see:
Global fall in crude oil prices
- The first thing to understand is that, even before the Covid-19 induced global lockdown, crude oil prices had been falling over the past few months.
- The reason was straightforward. The price of a commodity falls when supply is more than demand.
- The global oil pricing is by no stretch an example of a well-functioning competitive market. In fact, it’s seamless operations crucially depend on oil exporters acting in consort.
OPEC+ failure (earlier)
- Historically, the OPEC, lead by Saudi Arabia, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand), used to work as a cartel and fix prices in a favourable band.
- It could bring down prices by increasing oil production and raise prices by cutting production.
- In the recent past, the OPEC has been working with Russia, as OPEC+, to fix the global prices and supply.
- This happy accord came to an end as Saudi Arabia and Russia disagreed over the production cuts required to keep prices stable.
- As a result, OPEC undercutting each other on price while continuing to produce the same quantities of oil.
What it costs to a country for cutting production
- The production cut was made worse with the growing spread of Coronavirus, which, in turn, was sharply reducing economic activity and the demand for oil.
- It must be understood that cutting production or completely shutting down an oil well is a difficult decision because restarting it is both costly and cumbersome.
- Moreover, if one country cuts production, it risks losing market share if others do not follow suit.
Demand-supply mismatch got worse
- By the time the Saudi Arabia and Russia discord was sorted out last week, under pressure from US President, it was possibly too late.
- Oil-exporting countries decided to cut production by 6 million barrels a day — the highest production cuts — and yet the demand for oil was shrinking by 9 to 10 million barrels a day.
- This meant that the supply-demand mismatch continued to worsen right through March and April.
- According to reports, all possible the mismatch resulted in almost all storage capacity being exhausted.
What led to negative oil prices: Immediate causes
- The contracts fir this month for WTI, the American crude oil variant, was due to expire. As the deadline came near, prices started plummeting. This was for two broad reasons.
- There were many oil producers who wanted to get rid of their oil even at unbelievably low prices instead of choosing the other option shutting production.
- The space to store the oil too got exhausted. Trains and ships, which were typically used to transport oil, too, were used up just for storing oil.
- They figured that it would be more costly for them to accept the oil delivery, pay for its transportation and then pay for storing it, especially when there is no storage available than to simply take a hit on the contract price.
Future prospects
- It is important to note that it was the WTI price for May in the US markets that went so low.
- Crude Oil prices elsewhere fell but by not so much. Moreover, at least for now, oil prices are pegged at around $20 a barrel.
- It is likely that this was a one-off event and will not happen as producers are forced to cut back production further.
- But one cannot rule out such a repeat, with COVID-19 continuing to spread, demand is falling every day.
- In the end, it would be the demand-supply mismatch (adjusted for how much can be stored away) that will decide the fate of oil prices.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now