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Insolvency and Bankruptcy Code

Faults in section inserted for the suspension of IBC amid pandemic

Note4Students

From UPSC perspective, the following things are important :

Prelims level: IBC

Mains level: Paper 3- Problems with IBC

Following the lockdown, the government announced the suspension of some provision of IBC to soften the blow of economic crisis. Section 10A was inserted to suspend the provision. But it giver rise to other questions. What are these questions? Read the article to know…

What changes were made?

  • In mid-May, the Finance Minister announced that the government was planning to bring in an ordinance to suspend provisions enabling filing of fresh insolvency cases for a period of one year..
  • Finally, on June 5, the government promulgated an ordinance which inserted Section 10A in the IBC.
  • The government said the ordinance was promulgated because the lockdown has caused business disruptions which may lead to default on debts pushing such companies into insolvency.
  • Therefore, it felt that suspending Sections 7, 9 and 10 of the IBC would be the right course of action.

What are the issues with section 10A?

  • Section 10A provides that “no application for initiation of corporate insolvency resolution process of a corporate debtor shall be filed, for any default arising on or after 25th March, 2020 for a period of six months or such further period, not exceeding one year from this period, as may be notified in this behalf”.
  • This means that these provisions shall remain suspended from March 25 till September 25, unless extended for another six months, which would extend the suspension up till March 25, 2021.
  • However, the proviso to the section states that no application for insolvency resolution shall ever be filed against a corporate debtor for any default occurring during the suspension period.
  • While the main Section 10A suspends such applications for a limited period, the proviso enlarges the scope to provide complete amnesty under the IBC for any default occurring during such period.
  • The role of a proviso in a statute is to restrict the application of the main provision under exceptional circumstances.
  • However, the proviso here expands the substantive provision in the main section.
  • Further, if the main provision is unclear, a proviso may be given to explain its true meaning.
  • In this case the main provision appears clear, only to be obfuscated by the proviso.
  • The proviso therefore does not appear to be legally tenable.
  • As creditors can still approach courts, and as banks/FIs can still approach Debt Recovery Tribunals, the protection given by this proviso seems illusory.
  • But Section 10A also suspends provisions of Section 10 of the IBC which enables voluntary insolvency resolution.
  • This is difficult to understand as such voluntary insolvency resolution should have been made easier for companies facing distress.

Painting all defaults with the same brush

  • The ordinance appears to consider every default occurring during the suspension period to be a consequence of the pandemic.
  • There could be cases where defaults were imminent due to other reasons, but which will now still enjoy this protection.
  • The ordinance should have protected only such defaults which may occur as a direct consequence of the pandemic or the lockdown and should have left this determination to the National Company Law Tribunal.
  • Also, a company defaulting on its payment obligations on March 24 (a day before the lockdown started) would not be provided any relief under the IBC as compared to a company defaulting on or immediately after March 25 due to similar reasons.
  • This makes the suspension, in the absence of definition of a COVID-19 default, prima facie arbitrary.

Issue with increasing the default amount limit

  • Earlier, the government increased the minimum default amount to trigger corporate insolvency resolution from ₹1 lakh to ₹1 crore.
  • This was purportedly done to protect MSMEs from insolvency petitions.
  • However, this also operates against such MSMEs because they will now be forced to approach civil courts to recover undisputed debts below ₹1 crore.
  • The suspension of these provisions would now impact even claims above ₹1 crore for at least six months to a year.

Conclusion

The ordinance has opened itself up to a legal challenge on grounds of arbitrariness and untenability of the proviso due to the flaw in its drafting. It is unfathomable how these flaws arose despite the government having ample time to think this through.

B2BASICS:

 Insolvency and Bankruptcy Code, 2015

The code contains a clear speedy mechanism for early identification of financial distress and initiates revival/re-organisation of the company if it is viable.

Timeline

  • The bill proposes a timeline of 180 days to deal with the applications for insolvency resolution with an option of extending it by 90 days for exceptional cases.

Insolvency Resolution Plan

  • The insolvency resolution plan has to be approved by 75% of the creditors. If the plan is approved, then the adjudicating authority will give its sanction. In case of rejection of insolvency resolution plan, the adjudicating authority will pass an order for liquidation.

Insolvency Professionals (IPs) & Insolvency Professional Agencies (IPAs)

  • The resolution processes will be conducted by licensed insolvency professionals (IPs).  These IPs will be members of insolvency professional agencies (IPAs).  IPAs will also furnish performance bonds equal to the assets of a company under insolvency resolution.

Information Utilities

  • Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution.

Bankruptcy and Insolvency Adjudicator

  • The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies.  The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.
  • The Debt Recovery Tribunal (DRT), which has jurisdiction over individuals and unlimited liability partnership firms. Appeals from the order of DRT shall lie to the Debt Recovery Appellate Tribunal (DRAT).

Insolvency regulators

  • The Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs and IUs.

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G20 : Economic Cooperation ahead

Expanding the G7

Note4Students

From UPSC perspective, the following things are important :

Prelims level: G7 countries

Mains level: Paper 2- Should India join expanded G7 if invited to join as a member?

There has been a call for expansion of G7 by the U.S. President. Against this backdrop, this article examines the historical background in which the group emerged. But a lot has changed since. So, it would be appropriate for G7 to adjust to the new reality. But what would be the focus of a new mechanism? What are the areas in which India would be interested? All such questions are answered in this article.

Call for expansion of G7 and China’s objection

  • Recently, the U.S. President proposed the expansion of G7 to G10 or G11,  with the inclusion of India, South Korea, Australia and possibly Russia.
  • Elaborating this logic, the White House Director of Strategic Communications said the U.S. President wanted to include other countries, including the Five Eyes countries.
  • Five Eye is an intelligence alliance comprising Australia, Canada, New Zealand, the United Kingdom and the United States.
  • The U.S. also stressed said the expanded group should talk about the future of China.
  • A Chinese Ministry of Foreign Affairs official immediately reacted, labelling it as “seeking a clique targeting China”.

Should India care about China’s objection if invited to join?

  • China’s objection to an expanded G7 is no reason for India to stay away from it, if invited to join.
  • India has attended several G7 summits earlier too, as a special invitee for its outreach sessions.
  • India’s Prime Minister was guest invited to Biarritz, France to the G7 summit last year, along with other heads of government.

The historical background of G7

  • The G7 emerged as a restricted club of the rich democracies in the early 1970s.
  • The quadrupling of oil prices just after the 1973 Arab-Israeli War, when  OPEC imposed an embargo against Canada, Japan, the Netherlands, and the United States, shocked their economies.
  • Although the French were spared the embargo, the chill winds of the OPEC action reverberated around the world.
  • So, French President invited the Finance Ministers of five of the most developed members of the Organisation for Economic Cooperation and Development, the United States, Germany, Japan, Italy, and the United Kingdom, for an informal discussion on global issues.
  • This transformed into a G7 Summit of the heads of government from the following year with the inclusion of Canada in 1976.
  • And the European Commission/Community (later Union) joined as a non-enumerated member, a year later.
  • On the initiative of U.S. President Bill Clinton and British Prime Minister Tony Blair, the G7 became the G8, with the Russian Federation joining the club in 1998.
  • This ended with Russia’s expulsion following the annexation of Crimea in 2014.

Declining share G7 and rising of E7 in world GDP

  • When constituted, the G7 countries accounted for close to two-thirds of global GDP.
  • According to the 2017 report of the accountancy firm, PwC, “The World in 2050”, they now account for less than a third of global GDP on a purchasing power parity (PPP) basis.
  • And less than half on market exchange rates (MER) basis.
  • The seven largest emerging economies (E7, or “Emerging 7”), comprising Brazil, China, India, Indonesia, Mexico, Russia and Turkey, account for over a third of global GDP on purchasing power parity (PPP) terms.
  • And over a quarter on MER basis.

Predictions for India

  • India’s economy is already the third largest in the world in PPP terms, even if way behind that of the U.S. and China.
  • By 2050, the PwC Report predicts, six of the seven of the world’s best performing economies will be China, India, the United States, Indonesia, Brazil, and Russia.
  • Two other E7 countries, Mexico and Turkey, also improve their position.
  • It projects that India’s GDP will increase to $17 trillion in 2030 and $42 trillion in 2050 in PPP terms, in second place after China, just ahead of the United States.
  • This is predicated on India overcoming the challenge of COVID-19, sustaining its reform process and ensuring adequate investments in infrastructure, institutions, governance, education and health.

Limitations of G7

  • The success or otherwise of multilateral institutions are judged by the standard of whether or not they have successfully addressed the core global or regional challenges of the time.
  • The G7 failed to head off the economic downturn of 2007-08.
  • This failure led to the rise of the G20.
  • In the short span of its existence, the G20 has provided a degree of confidence, by promoting open markets, and stimulus, preventing a collapse of the global financial system.
  • The G7 also failed to address the contemporary issues, such as the COVID-19 pandemic, climate change, the challenge of the Daesh, and the crisis of state collapse in West Asia.
  • It had announced its members would phase out all fossil fuels and subsidies, but has not so far announced any plan of action to do so.
  • And their coal fired plants emit “twice more CO2 than those of the entire African continent”.

Turmoil in West Asia and failure of Europe to act

  • Three of the G7 countries, France, Germany, and the U.K., were among the top 10 countries contributing volunteers to the ISIS.
  • West Asia is in a greater state of turmoil than at any point of time since the fall of the Ottoman Empire.
  • This turmoil has led to a migrants crisis.
  • Migrant crisis persuaded many countries in Europe to renege on their western liberal values, making the Mediterranean Sea a death trap for people fleeing against fear of persecution and threat to their lives.

So, to deal with the unprecedented challenge, we need new institution

  • The global economy has stalled and COVID-19 will inevitably create widespread distress.
  • Nations need dexterity and resilience to cope with the current flux, as also a revival of multilateralism, for they have been seeking national solutions for problems that are unresolvable internally.
  • Existing international institutions have proven themselves unequal to these tasks.
  • A new mechanism might help in attenuating them.
  • It would be ideal to include in it the seven future leading economies, plus Germany, Japan, the U.K., France, Mexico, Turkey, South Korea, and Australia.
  •  The 2005 ad hoc experiment by Prime Minister Tony Blair in bringing together the G7 and the BRICS countries was a one-off.

What should be the focus of this new institution?

  • A new international mechanism will have value only if it focuses on key global issues.
  • A related aspect is how to push for observing international law and preventing the retreat from liberal values on which public goods are predicated.
  • Global public health and the revival of growth and trade in a sustainable way -that also reduces the inequalities among and within nations- would pose a huge challenge.

What should be India’s priority in new institution?

  • India would be vitally interested in three: 1) international trade, 2) climate change, 3) the COVID-19 crisis.
  • Second order priorities for India would be cross-cutting issues such as counter-terrorism and counter-proliferation.
  • An immediate concern is to ensure effective implementation of the 1975 Biological Weapons Convention .
  • And the prevention of any possible cheating by its state parties by the possible creation of new microorganisms or viruses by using recombinant technologies.
  • On regional issues, establishing a modus vivendi with Iran would be important to ensure that it does not acquire nuclear weapons and is able to contribute to peace and stability in Afghanistan, the Gulf and West Asia.
  • The end state in Afghanistan would also be of interest to India.
  • And also the reduction of tensions in the Korean Peninsula and the South China Sea.

Consider the question “There has been a clamour for expanding G7 and India is being considered as one of the prospective candidates in the expanded group. In light of this examine the challenges and opportunities for India if it gets entry into the expanded group.”

Conclusion

The decaying influence in geopolitics and declining share in the world GDP calls for the formation of the new institution. IF and when that institution comes into being India should try to address its immediate concern with the help of new mechanism based on values.

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Foreign Policy Watch: India-China

Strategic importance of Daulat Beg Oldie, Ladakh

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Shyok river, Nubra Valley, Sassar la pass

Mains level: Read the attached story

In the reporting on the LAC stand-off, the Darbuk-Shyok-Daulat Beg Oldie (DSDBO) road has often appeared in news.

Practice questions for mains:

Q. Discuss how India’s all-weather border infrastructure has created new festering points for the Sino-Indian border skirmished.

Daulat Beg Oldie

  • DBO is the northernmost corner of Indian Territory in Ladakh, in the area better known in Army parlance as Sub-Sector North.
  • DBO has the world’s highest airstrip, originally built during the 1962 war but abandoned until 2008 when the Indian Air Force (IAF) revived it as one of its many Advanced Landing Grounds (ALGs) along the LAC.

The DSDBO Road

  • DSDBO is an all-weather 255-km long road 255-km long built by India over nearly 20 years.
  • Running almost parallel to the LAC, the DSDBO road, meandering through elevations ranging between 13,000 ft and 16,000 ft, took India’s Border Roads Organisation (BRO) almost two decades to construct.
  • Its strategic importance is that it connects Leh to DBO, virtually at the base of the Karakoram Pass that separates China’s Xinjiang Autonomous Region from Ladakh.

A trigger for PLA incursions

  • Of the possible triggers cited for the PLA targeting of Indian Territory along the LAC in eastern Ladakh, the construction of DSDBO all-weather road is possibly the most consequential.
  • The Chinese build-up along the Galwan River valley region overlooks and hence poses a direct threat to the DSDBO road.

Significance of DSDBO Road

  • The DSDBO highway provides the Indian military access to the section of the Tibet-Xinjaing highway that passes through Aksai Chin.
  • The road runs almost parallel to the LAC at Aksai Chin, the eastern ear of erstwhile Jammu and Kashmir state that China occupied in the 1950s, leading to the 1962 war in which India came off worse.
  • The DSDBO’s emergence seemingly panicked China, evidenced by the 2013 intrusion by the PLA into the nearby Depsang Plains, lasting nearly three weeks.
  • DBO itself is less than 10 km west of the LAC at Aksai Chin. A military outpost was created in DBO in reaction to China’s occupation of Aksai Chin.
  • It is at present manned by a combination of the Army’s Ladakh Scouts and the paramilitary Indo-Tibetan Border Police (ITBP).

Other strategic considerations

  • To the west of DBO is the region where China abuts Pakistan in the Gilgit-Baltistan area, once a part of the erstwhile Kashmir principality.
  • This is also the critical region where China is currently constructing the China-Pakistan Economic Corridor (CPEC) in Pakistan-Occupied Kashmir (PoK), to which India has objected.
  • As well, this is the region where Pakistan ceded over 5,180 sq km of PoK to China in 1963 under a Sino-Pakistan Boundary Agreement, contested by India.

Also read:

https://www.civilsdaily.com/burning-issue-india-china-skirmish-in-ladakh/

 

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Genetically Modified (GM) crops – cotton, mustards, etc.

GM seeds: the debate, and a sowing agitation

Note4Students

From UPSC perspective, the following things are important :

Prelims level: GM crops, BT

Mains level: Issues over GM crops

In the current Kharif season, farmers would undertake mass sowing of GM seeds for maize, soybean, mustard brinjal and herbicide-tolerant (Ht) cotton, although these are not approved. Farmers had carried out a similar movement last year, too.

Practice question for mains:

Q. Indian agriculture is in a way, a victim of its own past success – especially the green revolution. Critically comment.

Genetically Modified (GM) seeds

  • Conventional plant breeding involves crossing species of the same genus to provide the offspring with the desired traits of both parents.
  • Genetic engineering aims to transcend the genus barrier by introducing an alien gene in the seeds to get the desired effects.
  • The alien gene could be from a plant, an animal or even a soil bacterium.

What is the legal position of GM crops in India?

  • In India, the Genetic Engineering Appraisal Committee (GEAC) is the apex body that allows for the commercial release of GM crops.
  • In 2002, the GEAC had allowed the commercial release of Bt cotton.
  • More than 95 per cent of the country’s cotton area has since then come under Bt cotton.
  • Use of the unapproved GM variant can attract a jail term of 5 years and a fine of Rs 1 lakh under the Environmental Protection Act,1989.

GM crops in India

  • Bt cotton, the only GM crop that is allowed in India, has two alien genes from the soil bacterium Bacillus Thuringiensis (Bt) that allows the crop to develop a protein toxic to the common pest pink bollworm.
  • Ht Bt, on the other, cotton is derived with the insertion of an additional gene, from another soil bacterium, which allows the plant to resist the common herbicide glyphosate.
  • In Bt brinjal, a gene allows the plant to resist attacks of fruit and shoot borer.

Why are farmers rooting for GM crops?

  • In the case of cotton, farmers cite the high cost of weeding, which goes down considerably if they grow Ht Bt cotton and use glyphosate against weeds.
  • Brinjal growers in Haryana have rooted for Bt brinjal as it reduces the cost of production by cutting down on the use of pesticides.
  • Industry estimates say that of the 4-4.5 crore packets (each weighing 400 gm) of cotton sold in the country, 50 lakh are of the unapproved Ht Bt cotton.
  • Haryana has reported farmers growing Bt brinjal in pockets which had caused a major agitation there.

Why furore over GM crops?

  • Environmentalists argue that the long-lasting effect of GM crops is yet to be studied and thus they should not be released commercially.
  • The genetic modification brings about changes that can be harmful to humans in the long run.

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Foreign Policy Watch: India-China

LAC row: China reaches accord with India

Note4Students

From UPSC perspective, the following things are important :

Prelims level: NA

Mains level: India-China border skirmishes and their impacts on bilateral relations

China said that it had “reached an agreement” with India on the ongoing tensions along the Line of Actual Control (LAC), a day after India announced troops from both sides had begun a “partial disengagement” from some of the stand-off points.

Practice question for mains:

Q. “Early settlement of the boundary question serves the fundamental interests of both countries”. Discuss in light of the ongoing border skirmishes between India and China.

Read the complete story here:

https://www.civilsdaily.com/burning-issue-india-china-skirmish-in-ladakh/

Troops moving back

  • Partial deinduction has happened from some points in Galwan and Hot Springs areas.
  • Chinese side removed some of the tents and some troops and vehicles have been moved back, and the Indian side to has reciprocated.
  • At some points in the Galwan Valley, Chinese troops have moved back 2-3 km. However, there is no change in the ground situation at Pangong Tso.

De-escalation begins

  • India and China held Major general-level talks to discuss further de-escalation at several standoff points in Eastern Ladakh including Patrolling Point (PP) 14, following a broad accord reached on Saturday in talks held at the Corps Commander-level.
  • As per the agreement, a series of ground-level talks would be held over the next 10 days, with four other points of conflict identified at PP15, PP17, Chushul and the north bank of Pangong Lake.
  • The Chinese Foreign Ministry said both sides had agreed to handle the situation “properly” and “in line with the agreement” to ease the situation.
  • However, it did not provide specific details on some of the stand-off points, such as Pangong Lake, where Chinese troops are still present on India’s side of the LAC.

No final solution yet

  • At present, the two sides are taking actions in line with the agreement to ameliorate the border situation.
  • Government officials said a partial disengagement had happened at some points in the Galwan area and at Hot Springs, but there was no change at Pangong Lake.
  • Chinese state-run media has revealed that the ongoing dispute will not escalate into a conflict.
  • But it added due to the complexity of the situation, the military stand-off could continue for a little longer.

Way forward

  • The military-level talks showed that both sides do not want to escalate tensions further.
  • It showed that China and India remain determined to peacefully resolve border issues.
  • However, the ongoing stand-off is not likely to end immediately, as concrete issues must still be resolved.

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Interstate River Water Dispute

Vamsadhara River Water Dispute

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Vamsadhara River, Inter-state water dispute

Mains level: Inter-state water dispute

Andhra Pradesh  and Odisha CM recently held talks to iron out all differences with regard to the sharing of Vamsadhara River waters.

Note all major rivers over which inter-state disputes exist say Narmada, Mahadayi, Cauvery, Krishna, etc. Observe their flow and the area swept.

Also, refer your atlas to check the complicated border sharings between Chhatisgarh, AP/Telangana and Odisha.

Vamsadhara River

  • River Vamsadhara is an important east-flowing river between Rushikulya and Godavari, in Odisha and Andhra Pradesh.
  • The river originates in the border of Thuamul Rampur in the Kalahandi district and Kalyansinghpur in Rayagada district of Odisha.
  • It runs for a distance of about 254 kilometres, where it joins the Bay of Bengal at Kalingapatnam, Andhra Pradesh.
  • The total catchment area of the river basin is about 10,830 square kilometres.

The dispute

  • Andhra Pradesh wants to build the Neradi bridge across the river which will be possible only after Odisha’s consent.
  • Odisha argues that the flood flow canal would result in drying up the existing river bed and consequent shifting of the river affecting the groundwater table.
  • Odisha also raised the issue of scientific assessment of available water in Vamsadhara at Katragada and Gotta Barrage, Andhra Pradesh and the basis for sharing the available water.

Back2Basics: Interstate River Water Disputes

  • River waters use/harnessing is included in states jurisdiction. However, article 262 of the Constitution provides for the adjudication of inter-state water disputes.
  • Under this, Parliament may by law provide for the adjudication of any dispute or complaint with respect to the use, distribution and control of waters of any inter-state river and river valley.
  • The President of India may also establish an interstate council as per Article 263 to inquire and recommend on the dispute that has arisen between the states
  • The Parliament has enacted the two laws, the River Boards Act (1956) and the Inter-State Water Disputes Act (1956).
  • Under this, Parliament may by law provide for the adjudication of any dispute or complaint with respect to the use, distribution and control of waters of any inter-state river and river valley.
  • The Inter-State Water Disputes Act empowers the Central government to set up an ad hoc tribunal for the adjudication of a dispute between two or more states in relation to the waters of an inter-state river or river valley.
  • The award of the tribunal is final and binding on the parties to the dispute.
  • Neither the Supreme Court nor any other court is to have jurisdiction in respect of any water dispute which may be referred to such a tribunal under this Act.

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Challenger Deep: the deepest spot in the ocean

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Challenger Deep, Mariana Trench

Mains level: Deep sea exploration

On June 7, astronaut and oceanographer Kathy Sullivan, who was the first American woman to walk in space in 1984, became the first woman and the fifth person in history to descend to the deepest known spot in the world’s oceans, called the Challenger Deep in the Mariana Trench.

The ocean relief can be divided into various parts such as Continental Shelf, Continental Slope, Continental Rise or Foot, Deep Ocean basins, Abyssal plains & Abyssal Hills, Oceanic Trenches, Seamounts and Guyots.

Revise these ocean bottom relief  features from your basic references.

Also revise India’s Deep Ocean Mission.

What is Challenger Deep?

  • The Challenger Deep is the deepest known point in the Earth’s seabed hydrosphere (the oceans), with a depth of 10,902 to 10,929 m.
  • The deepest part is called the Challenger Deep, which is located below the surface of the western Pacific Ocean.
  • The first dive at Challenger Deep was made in 1960 by Lieutenant Don Walsh and Swiss scientist Jacques Piccard on a submersible called ‘Trieste’.
  • The British Ship HMS Challenger discovered Challenger Deep between 1872-1876.
  • In 2012, film director James Cameron reached the bottom of the Mariana trench after a descent that lasted 2 hours and 36 minutes.
  • Cameron reached a depth of about 10,908 metres on a dive in his submersible called the ‘Deepsea Challenger’ and became the first to complete a solo submarine dive to this spot.

Why explore deep oceans?

  • Ocean exploration, however, is not randomly wandering in hopes of finding something new.
  • It is disciplined and organized and includes rigorous observations and documentation of biological, chemical, physical, geological, and archaeological aspects of the ocean.
  • Most of the existing knowledge of the oceans comes from shallower waters, while deeper waters remain relatively unexplored, even as humans are relying more on these areas for food, energy and other resources.
  • Further, finding out more about the deep ocean areas can potentially reveal new sources for medical drugs, food, energy resources and other products.
  • Significantly, information from the deep oceans can also help to predict earthquakes and tsunamis, and help us understand how we are affecting and getting affected by the Earth’s environment.

What does it take to reach the deep ocean?

  • Vehicles called Human Occupied Vehicles (HOVs) may be used that carry scientists to the deep sea.
  • Alternatively, there are unmanned Remotely Operated Vehicles (ROVs) that are linked to ships using cables and can be steered by scientists remotely.
  • Even so, it is difficult for most private citizens to travel more than 100 feet below the surface of the ocean.
  • Further, technical divers can go as deep as 500 feet or more, but with an array of tanks filled with different gas blends.

Why is it so difficult to explore deep oceans?

  • Most recreational divers can’t explore more than about 120 feet down due to the amount of air needed to keep lungs pressurized at depth.
  • Such depths could lead to nitrogen narcosis, the intoxication by nitrogen that starts to set in around that depth (most of our atmosphere is nitrogen, not oxygen).
  • Waters at such depths of several kilometres exert tremendous pressure which human bodies cannot sustain.

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Wildlife Conservation Efforts

Species in news: Asiatic Lion

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Poonam Awalokan

Mains level: Man-Animal conflict

Asiatic lions have now significantly risen in number at an estimated population of 674 in the Gir forest region of Gujarat. Unlike in previous years, this count was estimated not from a Census, but from a population “observation” exercise called Poonam Avlokan.

Try this question from CSP 2017:

Q. The term ‘M-STrIPES’ is sometimes seen in the news in the context of

(a) Captive breeding of Wild Fauna

(b) Maintenance of Tiger Reserves

(c) Indigenous Satellite Navigation System

(d) Security of National Highways

Asiatic Lion

  • Indian Lion (Panthera Leo Persica) is listed as Endangered and exists as a single population in Gujarat.
  • It is one of five big cat species found in India and Gir National Park and Wildlife Sanctuary is the only habitat for Asiatic lions.
  • Historically, it inhabited much of Western Asia and the Middle East up to northern India.
  • On the IUCN Red List, it is listed under its former scientific name Panthera leo persica as Endangered because of its small population size and area of occupancy.
  • More than two dozen lions died last year in an outbreak of canine distemper virus (CDV) and Babesiosis.

What is Poonam Avlokan?

It includes two methods:

  • Block counting method — in which census enumerators remain stationed at water points in a given block and estimate abundance of lions in that block, based on the direct sighting of lions who need to drink water at least once in 24 hours during the summer.
  • Other teams keep moving in their respective territories and make their estimates based on inputs provided by lion trackers and on chance sightings.

Back2Basics: Lion Census in India

  • The first Lion Census was conducted by the Nawab of Junagadh in 1936; since 1965, the Forest Department has been regularly conducting the Lion Census every five years.
  • The 6th, 8th and 11th Censuses were each delayed by a year, for various reasons.
  • This year it was postponed after the lockdown was announced.

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Foreign Policy Watch: India-Nepal

Complexity of India-Nepal relations

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Treaty of Sugauli-1816

Mains level: Paper 2- India-Nepal relations

This article helps us understand Nepal’s perspective of the India-Nepal border dispute. Though the issue dates back to India’s independence, it came to dominate the political landscape in Nepal since 1990s. But there is no solution in sight. So, what makes the issue complex? Read to know…

What the border dispute between two countries is about?

  • The inauguration of the “new road to Mansarovar” on May 8 by India’s defence minister has strained the relations between Nepal and India.
  • Nepal claims that a section of the road passes through the territory of Nepal and links with the Tibetan Autonomous Region of China through the Lipu Lekh pass in Nepal.
  • The 1816 Sugauli Treaty between Nepal and British India placed all the territories east of the Kali (Mahakali) river, including Limpiyadhura, Kalapani and Lipu Lekh at the northwestern front of Nepal, on its side.
  • The borders of Nepal, India and China intersect in this area.
  • Given the situation in 1961, Nepal and China fixed pillar number one at Tinker pass with the understanding that pillar number zero (the tri-junction of Nepal, India, and China) would be fixed later.
  • Lipu Lekh pass is 4 km northwest and Limpiyadhura 53 km west of Tinker pass.

No progress on the solution of the issue

  • The dispute over the Kalapani area has spanned the last seven decades.
  • Both Nepal and India have recognised it as an outstanding border issue requiring an optimal resolution.
  • When in August 2014, Prime Minister Narendra Modi became the first Indian Prime Minister to visit Nepal in 17 years, Nepal’s Prime Minister Sushil Koirala raised this issue again.
  • The two prime ministers agreed to resolve the issue on a priority basis and directed their foreign secretaries “to work on the outstanding boundary issues including Kalapani and Susta”.
  •  There was virtually no progress on the ground.

Nepal’s objection to India-China agreement

  •  In May 2015, Prime Minister Modi visited China, and the two countries agreed to “enhance border areas cooperation”.
  • The May 2015 agreement is a broad one compared to the 1954 India-China agreement “on trade and intercourse between Tibet Region of China and India”, which mentions Lipu Lekh pass as one of the six passes “through which traders and pilgrims of both countries may travel”.
  • Nepal protested against the inclusion of its territory, Lipu Lekh, in the joint statement without its consent and demanded that the two countries make necessary corrections to reflect the ground realities.
  • The protest was ignored.

Growing nationalism and distrust let to the deterioration of relations

  • The tone of Nepal-India relations appears to be dominated by frustrations of the past and traditional attitudes more than the opportunities of the future.
  • The widening gap in understanding each other’s concerns has helped feed Nepali nationalism and create a dense cloud of distrust and suspicion between the two countries.
  • The gap widened after India chose to impose an economic blockade in response to Nepal’s sovereign decision to promulgate a democratic constitution.
  • The current ruling Communist Party of Nepal made people’s anger over the blockade its campaign plank during the 2017 general election.

What makes the border issues complex and difficult to solve?

  • Complexity of the issue stems from the fact that the political leadership handles only a small part of this very important bilateral relationship.
  • India as a big neighbour is rarely seen grasping the psychological dimensions of the relationship.
  • Officials handling these multifaceted relations may momentarily influence the atmospherics but they rarely touch the core of these relations, let alone reorient or transform them in the rapidly changing context.
  • This is manifest in the deferring of substantive conversations on the outstanding boundary issue for decades.
  • The foreign secretary level mechanism has not met even once to discuss the border issue since its formation.
  • There are over three dozen bilateral mechanisms between Nepal and India to engage at various levels.
  • The meetings of these mechanisms are rarely regular.

Consider the question “The India-Nepal border dispute looks minor, but allowing it to fester is likely to sow the seeds of immense competition and intense rivalry in the sensitive Himalayan frontier with far-reaching geopolitical implications. Comment.”

Conclusion

Geography, history, and economy make Nepal and India natural partners, sharing vital interest in each other’s freedom, integrity, dignity, security and progress. People-to-people relations are unique strengths of bilateral relations. India, for it’s part and in the spirit of its ‘neighbourhood first’ policy, must start a solution-oriented dialogue and find the solution to the dispute.

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Climate Change Impact on India and World – International Reports, Key Observations, etc.

Will leaders act on the climate crisis as they did Covid-19?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Carbon Dioxide concentration in atmosphere

Mains level: Paper 3- Climate change

In the context of climate change, the rising concentration of carbon dioxide and rising global temperature are inextricably linked with each other. This article elaborates on two interlinked and rising curves-CO2 and temperature. The article is concluded on the positive note that leaders would act on climate change with same urgency as Covid.

The upward journey of two curves

  • Two interrelated curves began their upward trend two centuries ago with the advent of the industrial age.
  • The first curve was the atmospheric concentration of carbon dioxide or, more generally, all greenhouse gases, GHGs.
  • And the second was the average global temperature curve.

CO2 concentration at 407 ppm: But did we get here?

  • Actually, the CO2 curve began its upward march about 18,000 years ago when it was a little under 200 parts per million (ppm).
  • And earth was much colder back then.
  • By the time it reached 270 ppm about 11,500 years ago, the warmer conditions accompanying this curve made it possible for the emergence of agriculture.
  • Over the past million years, CO2 levels never exceeded 280-300 ppm.
  • They always went back to 200 ppm before rising again in a cyclical fashion.
  • They remained steady at close to 280 ppm for 10,000 years until, beginning in the mid-19th century.
  • They began to rise again as humans burnt coal and oil to fuel the industrial revolution, and burnt forests to expand agriculture and settlements.
  • From a mere 0.2 billion tonnes of CO2 emissions in 1850, annual emissions increased to 36 billion tonnes by 2018.
  • If all this CO2 had accumulated in the atmosphere, we can say that human life would have been altered beyond recognition.
  • Nature has been rather kind to us so far — about one-half of all CO2 emissions have been sanitised from the atmosphere, equally by growing vegetation on land and by absorption in the oceans.
  • Thus, the levels of CO2 in the atmosphere reached 407 ppm in 2018, a level last experienced by earth some three million years ago.

Global temperature up by 1 degree Celcius

  •  From 1850 onwards, for over a century, the global temperature showed a slight warming trend.
  • But there was nothing suggestive of anything serious.
  • From 1975 onwards, the temperature graph has shown a distinct, upward trend.
  • By 2015, the globe had heated by a full degree Celsius relative to a hundred years previously.
  • Climate modellers unequivocally project that under the current trends of emissions the globe will heat up by 4˚C by the end of the century.
  • he 2003 European heat wave killed over 70,000 people.
  • The years 2015-19 have globally been the warmest years on record.
  • Leave aside the Amazon fire of 2019, the bush fires of 2019-20 in Australia were unprecedented in their scale and devastation.
  • March 2020 has been the second warmest March on record.

But climate change is not just about temperature rise

  • Climate change involves not just a change in temperature but every other component of weather, including rainfall, humidity and wind speed.
  • Indirect effects follow, such as a rise in sea levels from melting glaciers.
  • Globally there have been several extreme weather events such as hurricanes, heat waves or droughts.
  • While no single event can be directly attributed to climate change, the collective trends are consistent with climate change predictions.

Warning for India

  • The Climate Impact Lab at the University of Chicago put out a warning for India last year.
  • It says that if global CO2 emissions continue to gallop at the present rate, average summer temperatures would rise by 4˚C in most States.
  • Extremely hot days (days above 35˚C), which were only five days in 2010, would increase to 15 days by 2050 and to 42 days by 2100 on average across all districts.
  • A more moderate emissions scenario, as a result of countries largely fulfilling their commitments under the Paris Agreement, would keep average global temperature rise below 2˚C compared to pre-industrial levels.

Let’s look into the financial dimension of tackling climate change

  • The most common excuse is that the world cannot afford to curb GHG emissions for fear of wrecking the economy.
  • An article in Nature in 2019 highlighted the financial dimensions of tackling the looming climate crisis.
  • Apparently, the wealthy nations are spending over $500 billion each year internally on projects aimed at reducing emissions.
  • The Intergovernmental Panel on Climate Change, however, estimates that a sustained annual investment of $2.4 trillion in more efficient energy systems is needed until 2035 in order to keep warming below the more ambitious 1.5˚C relative to pre-industrial levels.
  • To put this in perspective, that is about 2.5% of the global GDP.

What happened to the $100 billion per year aid to poor countries?

  • Some of the wrangling over money relates to the amounts that the wealthy nations, agreed to pay other countries to cope with climate change.
  • Underlying idea was that these countries have caused most of the GHGs resulting in global warming,
  • At the UN Climate Conference in 2009, the richest nations had pledged to provide $100 billion in aid each year by 2020 to the poorer countries for climate change mitigation and adaptation.
  • In 2017, for which data are available, only $71 billion had been provided.
  • And most of the money was spent on mitigation and less than 20% towards climate adaptation.
  • Such numbers had been challenged prior to the 2015 Paris Summit by many countries, including India.
  • It was challenged because much of the so-called aid provided did not come out of dedicated climate funds but, rather, development funds or simply loans which had to be repaid.
  • It thus seems unlikely that the rich countries will deliver $100 billion in tangible climate finance during 2020.

Time to act

  • COVID-19 has unwittingly given humanity a brief respite from the climate change curve.
  • Commentators are already talking about a paradigm shift in the structure and functioning of societies once the pandemic subsides.
  • This is also a make-or-break moment for the climate trajectory which has to be flattened within a few years if we are to avoid dangerous climate change.
  • Nature’s kindness is not expected to last beyond a 2˚C rise in temperature as the carbon sequestered into vegetation will be thrown back into the atmosphere.
  • Also remember that earth has already warmed by 1˚C and we really have only another 1˚C as a safety margin or 0.5˚C if we are concerned about island nations.

Consider the mains question asked by the UPSC in 2017-‘Climate change’ is a global problem. How India will be affected by climate change? How Himalayan and coastal states of India will be affected by climate change?

Conclusion

There is no substitute to reducing GHG emissions. Technologists, economists and social scientists must plan for a sustainable planet based on the principles of equity and climate justice within and across nations. It is the responsibility of leaders to alter their mindset and act on the looming climate crisis with the same alacrity they have shown on COVID-19.

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Global Geological And Climatic Events

Permafrost and the hazards of its Thawing

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Permafrost

Mains level: Paper 1-Permafrost thaw.

The principal reason that led to the recent 20,000-tonne oil leak at an Arctic region power plant in Russia that is now being recognised is the sinking of ground surface due to permafrost thaw.

Try this question from Mains 2017:
Q. What is Cryosphere? How does the Cryosphere affect global climate?

What is Permafrost?

  • Permafrost is ground that remains completely frozen at 0 degrees Celsius or below for at least two years.
  • It is defined solely based on temperature and duration.
  • The permanently frozen ground, consisting of soil, sand, and rock held together by ice, is believed to have formed during glacial periods dating several millennia.

Where are they found?

  • These grounds are known to be below 22 per cent of the land surface on Earth, mostly in polar zones and regions with high mountains.
  • They are spread across 55 per cent of the landmass in Russia and Canada, 85 per cent in the US state of Alaska, and possibly the entirety of Antarctica.
  • In northern Siberia, it forms a layer that is 1,500 m thick; 740 m in northern Alaska.
  • At lower latitudes, permafrost is found at high altitude locations such as the Alps and the Tibetian plateau.

How climate change is eating away at these grounds?

  • The Earth’s polar and high altitude regions — its principal permafrost reservoirs — are the most threatened by climate change.
  • Arctic regions are warming twice as fast compared to the rest of the planet, its current rate of temperature change being the highest in 2,000 years.
  • In 2016, Arctic permafrost temperatures were 3.5 degrees Celsius higher than at the beginning of the 20th century.
  • A study has shown that every 1 degree Celsius rise in temperature can degrade up to 39 lakh square kilometre due to thawing.
  • This degradation is expected to further aggravate as the climate gets warmer, putting at risk 40 per cent of the world’s permafrost towards the end of the century– causing disastrous effects.

The threat to infrastructure

  • Thawing permafrost is also ominous for man-made structures overhead.
  • The Russian oil leak occurred recorded temperatures in Siberia at more than 10 degrees Celsius above average, and called them “highly anomalous” for the region where the power plant is located.
  • As temperatures rise, the binding ice in permafrost melts, making the ground unstable and leading to massive potholes, landslides, and floods.
  • The sinking effect causes damage to key infrastructure such as roads, railway lines, buildings, power lines and pipelines.
  • These changes also threaten the survival of indigenous people, as well as Arctic animals.

A ticking time bomb

  • Beneath its surface, permafrost contains large quantities of organic leftover from thousands of years prior — dead remains of plants, animals, and microorganisms that got frozen before they could rot.
  • It also holds a massive trove of pathogens.
  • When permafrost thaws, microbes start decomposing this carbon matter, releasing greenhouse gases like methane and carbon dioxide.
  • Researchers have estimated that for every 1 degree Celsius rise in temperature, these grounds could release GHGs to the tune of 4-6 years’ of emissions from coal, oil, and natural gas.
  • Along with greenhouse houses, these grounds could also release ancient bacteria and viruses into the atmosphere as they unfreeze.

Back2Basics
https://www.civilsdaily.com/news/thawing-of-permafrost/

Also read:

Ambarnaya River Oil spill in Russia

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Cashless Society – Digital Payments, Demonetization, etc.

Payments Infrastructure Development Fund (PIDF)

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Payment Infrastructure Development fund

Mains level: Paper 3- Digital payment in India

The RBI has created a Payments Infrastructure Development Fund (PIDF) with an outlay of Rs. 500 Cr.

Possible prelims question:
Q. Which of the following is the major aim of Payments Infrastructure Development Fund (PIDF) recently created by the Reserve Bank of India (RBI)?
a) Promotion of UPI payments

b) Deploying Points of Sale (PoS) infrastructure

c) Creation of digital wallets

d)All of the above

Payments Infrastructure Development Fund (PIDF)

  • PIDF aims to encourage acquirers to deploy Points of Sale (PoS) infrastructure — both physical and digital modes in tier-3 to tier-6 centres and north eastern states.
  • The setting of PIDF is in line with the measures proposed by the vision document on payment and settlement systems in India 2019-2021.
  • It is also in line with the RBI’s proposal to set up an Acceptance Development Fund which will be used to develop card acceptance infrastructure across small towns and cities.

Its working

  • The PIDF will be governed through an Advisory Council and managed and administered by RBI.
  • It will also receive recurring contributions to cover operational expenses from card-issuing banks and card networks.
  • RBI will also contribute to its yearly shortfalls, if necessary.

Why need PIDF?

  • Over the years, the payments ecosystem in the country has evolved with a wide range of options such as bank accounts, mobile phones, cards, etc.
  • To provide further fillip to digitization of payment systems, it is necessary to give impetus to acceptance infrastructure across the country, more so in under-served areas.

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Innovations in Biotechnology and Medical Sciences

Crystalline Rubrene for Optoelectronic Devices

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Piezo-electric crystals

Mains level: Not much

Indian scientists have found a new process for synthesizing crystalline rubrene for the development of optoelectronic devices and also for preparation of Electronic Skin (E-Skin).

Note the difference between the Pyro-electric/ Piezo-electric/ Pyro-photonic effects. UPSC may shuffle the meaning of such terms in statement based prelims question.

What is crystalline rubrene?

  • Crystalline rubrene is a polycyclic aromatic hydrocarbon-based thin film.
  • It is a water-free, solvent-free, environmentally friendly one-step plasma process.
  • It demonstrated optoelectronic properties (which detect and control light).
  • A highly uniform pin-hole-free thin film can be deposited by this process, which is useful for the fabrication of high-end devices.

Working principle

  • Devices made of pyro-electric materials (that generate electric charge when they are heated or cooled) and piezo-electric materials (that generate electric charge under the effect of mechanical pressure), can help detect change in temperature and pressure.
  • Pyro-electric materials also show pyro-phototronic effect where pyro-electricity is associated with the change in temperature of a material when it absorbs photons.
  • Pyro-electric infrared detectors are well known for application in infrared sensing for space research, defense, remote sensing, and household appliances.

Principle application: Human Skin

  • These kinds of materials are available in biological systems such as – human skin, plant cellulose leading to their significance in the understanding of basic science of biological systems and also in their huge application prospect.
  • The rubrene crystal has a thin amorphous oxide layer formed over the crystalline film.
  • This induces surface layer polarization effect leading to pyro-phototronic effect.

Significance of the research

  • Since last few years, scientists from around the world are working on the synthesis of organic materials for electronic applications.
  • The conventional process for synthesis of organic electronic materials based on chemical processes provides very good quality materials, but the stability of the materials is not very good, and it requires use of solvents.
  • Moreover, multiple steps are required for material synthesis and film deposition.

Applications

  • This novel process developed by the Indian team is useful for developing advanced optoelectronic devices and preparation of Electronic Skin (E-Skin).
  • It may prove to be useful tool for laboratory simulation of different biological systems for probing the organization and dynamics of those systems.

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J&K – The issues around the state

Central Administrative Tribunal (CAT) bench for the UT of J&K and Ladakh

Note4Students

From UPSC perspective, the following things are important :

Prelims level: CAT

Mains level: Paper 2- Functioning and independence of CAT

The union govt. has inaugurated the 18th Bench of Central Administrative Tribunal (CAT) for the Union Territories of Jammu and Kashmir and Ladakh.

Try this question from our AWE initiative:

“The Central Administration Tribunal which was established for redressal of grievances and complaints by or against central government employees nowadays is exercising its powers as an independent judicial authority.” Explain. (10 Marks)

What is Central Administrative Tribunal (CAT)?

  • The Central Administrative Tribunal had been established under Article 323 – A of the Constitution for adjudication of disputes and complaints with respect to recruitment and conditions of service.
  • It aims to provide speedy and inexpensive justice to the aggrieved public servants.
  • It adjudicates for the persons appointed to public services and posts in connection with the affairs of the Union or other authorities under the control of the Government.
  • In pursuance of Article 323-A, the Parliament has passed the Administrative Tribunals Act in 1985.
  • The act authorizes the Central government to establish one Central Administrative Tribunal and the state administrative tribunals.

Composition of the CAT

  • The CAT is a specialist body consisting of Administrative Members and Judicial Members who by virtue of their specialized knowledge are better equipped to dispense speedy and effective justice.
  • A Chairman who has been a sitting or retired Judge of a High Court heads the Central Administrative Tribunal.
  • There are now 18 Benches and 21 Circuit Benches in the CAT all over India.

Its functioning

  • It exercises jurisdiction only in relation to the service matters of the parties covered by the Administrative Tribunals Act, 1985.
  • The Tribunal is guided by the principles of natural justice in deciding cases and is not bound by the procedure, prescribed by the Civil Procedure Code.
  • Under Section 17 of the Administrative Tribunal Act, 1985, the Tribunal has been conferred with the power to exercise the same jurisdiction and authority in respect of contempt of itself as a High Court.

Independence of working

  • The conditions of service of the Chairman and Members are the same as applicable to a Judge of High Court as per the Administrative Tribunals (Amendment) Act, 2006.
  • The orders of CAT are challenged by way of Writ Petition under Article 226/227 of the Constitution before respective High Court in whose territorial jurisdiction the Bench of the Tribunal is situated.

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Foreign Policy Watch: India-China

Pay attention to their objectives in dealing with China and Pakistan

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Article 370

Mains level: Paper 2- China-Pakistans overlapping interests in Kashmir and diverging objectives.

While their interests overlap, Pakistan and China diverge when it comes to their objective in Kashmir. Both want to keep the pressure on India to avoid it from changing the status quo. Extending this line of argument, the author in this article suggest that India should separate the policy response to China from Pakistan, as they differ in their objectives.

Coordinated efforts to corner India?

  • Latest news on the Ladakh front suggests that Chinese and Indian forces have begun to disengage in select areas.
  • But this does not detract from the reality that in the past few weeks Beijing and Islamabad are making coordinated efforts to challenge India’s presence in the Kashmir-Ladakh region.
  • There is stepped-up activity on Pakistan’s part to infiltrate terrorists into the Valley.
  • China has undertaken provocative measures on the Ladakh front to assert control over disputed areas around the Line of Actual Control (LAC).

Let’s see how Pakistan and China’s interests overlap

  • In Pakistan’s case the intensification in its terrorist activities is related in part to the dilution of Article 370. 
  • Dilution of Article 370 helps India de-link Ladakh from the Kashmir problem.
  • For China, the division of Ladakh from Jammu and Kashmir allows India a freer hand in contesting China’s claims in the region.
  • Increasing road-building activity on India’s part close to the LAC augments this perception.
  • In addition, Ladakh borders China’s most restive provinces of Xinjiang and Tibet.
  • Ladakh is also contiguous to Pakistan-occupied Kashmir (PoK), Gilgit and Baltistan, where the Chinese have invested hugely under the China-Pakistan Economic Corridor (CPEC) project.
  • External Affairs Minister S. Jaishankar’s remark last year that India expects to have “physical jurisdiction over (POK) one day” has alarmed Beijing which sees any such Indian move as threatening the CPEC project.
  • These factors demonstrate the overlapping interests that Beijing and Islamabad have regarding India in this region.

The above factors explain why Pakistan and China would want India to be so preoccupied with taking defensive measures in Kashmir and Ladakh as to have little time and energy left to attempt to alter the status quo in POK or in Aksai Chin.

But there are major differences in Pakistani and Chinese objectives regarding India

  • These differences are related to their divergent perceptions of their disputes and their different force equations with India.
  • For China, Ladakh is primarily a territorial dispute with strategic ramifications.
  • China also believes it is superior to the Indian militarily and, therefore, can afford to push India around within limits as it has been attempting to do in the recent confrontation.
  • For Pakistan, its territorial claim on Kashmir is based on an immutable ideological conviction that it is the unfinished business of partition and as a Muslim-majority state is destined to become a part of Pakistan.
  • Islamabad also realises that it is the weaker power in conventional terms and therefore has to use unconventional means, primarily terrorist infiltration, to achieve its objective of changing the status quo in Kashmir.
  • China is a satiated power in Ladakh having occupied Aksai Chin and wants to keep up the pressure on New Delhi to prevent the latter from trying to change the situation on the ground.

Way forward-Pay attention to objectives while negotiating

  • China’s primary concern with regard to Kashmir is to prevent any Indian move from threatening the CPEC project.
  • It does not challenge the status quo in Kashmir.
  • Pakistan, on the other hand, is committed to changing the status quo in Kashmir at all cost.
  • It has been trying to do so since Partition not only through clandestine infiltration but also by engaging in conventional warfare.
  • Therefore, while it is possible to negotiate the territorial dispute with China on a give-and-take basis.
  • Doing the same is not possible in the case of Pakistan which considers Kashmir a zero-sum game.
  • India should, therefore, distinguish the different objectives on the part of Beijing and Islamabad and tailor its responses accordingly without conflating the two threats to its security.

Consider the question “Policy response of India in dealing with Pakistan and China should consider differences in their objectives in relation to Kashmir. And clubbing them together just because of their tactical overlap should be avoided. Elaborate.”

Conclusion

Lumping the twin threats posed by Pakistan and China together because of a tactical overlap between them makes it difficult to choose policy options rationally. So, the policy response must understand the difference in their objectives and avoid clubbing them together.

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Foreign Policy Watch: India-China

India-China border crisis: It is not about the U.S.

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Nine dash line, Natuna Islands

Mains level: Paper 2- India-China relations

India’s growing closeness to the U.S. could be the reason for China’s aggression along India’s border. This is the explanation we often come across. But is it really the case?. This article probes the same question. Example of China’s dispute with Indonesia and Philippine help us analyse the U.S. angle to Indo-China border dispute. So, what is the conclusion?

An easy explanation to India-China border crisis

  • Why has China precipitated a fresh military crisis with India in eastern Ladakh?
  • Among the many explanations making the rounds in Delhi, there is always the easy and attractive one — it’s all about America.
  • Delhi has incurred Beijing’s wrath by moving closer to Washington, goes the argument.
  • India’s renewed enthusiasm for the US-led Quad, it is said, is encouraging China to teach a lesson to Delhi.

But does this explanation applies to the other countries as well? Look at Indonesia

  • No!
  • This theory does not hold up in relation to other countries having problems with China.
  • Let us turn to the South China Sea, where China is on a bold and ambitious drive to expand its control over the disputed waters.
  • Let us start with gathering tensions over the territorial dispute between Beijing and Jakarta.
  • Over the last year and more, Jakarta is coping with a Chinese challenge in its waters off its Natuna Islands.
  • The Natuna are nearly 1,500 km from the Chinese mainland.
  • The Natuna themselves lie outside Beijing’s nine-dash line that claims nearly 80 per cent of the South China Sea.
  • The dispute is over the exclusive economic zone that the islands confer on Indonesia.
  • China says it has historic rights to these waters and has been dispatching its fishing fleet into these waters.

Maybe China sees a problem with Jakarta-Washington relations: Let’s analyse

  • Jakarta did not support the US approach to the Indo-Pacific.
  • and went to great lengths to develop a concept of its own and get it endorsed by the ASEAN.
  • Indonesia is not a member of the much-maligned Quad.
  • Its foreign policy is wedded to non-alignment.
  • And as the host of the historic Bandung Conference in 1955, Indonesia is a founding member and champion of Non-aligned Movement.

Now, let’s consider second example: Philippines

  • The story of the Philippines — one of the oldest military allies of the US in Asia — nicely complements the non-aligned Indonesia’s troubles with China.
  • When he came to power in 2016, President Rodrigo Duterte decided to distance the Philippines from the US and embraced China.
  • He had a hope of finding a reasonable settlement to the substantive maritime territorial dispute with Beijing.
  • In February this year, Manila announced the decision to terminate the agreement that lets American troops operate in the Philippines.
  • But last week, the Philippines “suspended” the decision to terminate military cooperation with the US.
  • The reason: The PLA’s relentless military pressure on the South China Sea islands claimed by Manila and including them in a new Chinese administrative district.

So, what the two examples suggest?

  • Neither Jakarta that is scrupulously non-aligned nor Manila that was ready to break its alliance with the US has been spared from Beijing’s current muscular approach to China’s territorial disputes.
  • China has long-standing claims, right or wrong, on the territories of its neighbours.
  • The other is the dramatic shift in the regional power balance in favour of China.
  • Unlike in the past, China now has the military power to make good its claims and alter the territorial status quo, if only in bits and pieces.
  • This is what China is doing in the South China Sea.
  • And the situation may not be any different in Ladakh.

Consider the question “The shift in the regional power balance and not the growing Indo-U.S. relations explains the assertive nature of China in India-China border issues. Elaborate.”

Conclusion

The real challenge for Delhi in managing its expansive territorial dispute with Beijing, then, is to redress the growing power imbalance with China. The rest is detail.

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Panchayati Raj Institutions: Issues and Challenges

Taking care of finances of local governments

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Local bodies.

Mains level: Paper 2- Issues with fiscal independence of the local bodies.

This article makes some suggestions to improve local finance and argues that the extant fiscal illusion is a great deterrent to mobilisation.

Advantageous position in handling disasters

  • In terms of information, monitoring and immediate action, local governments are at an advantage, and eminently, to meet any disaster such as COVID-19.
  • While increasing the borrowing limits of the state form 3.5% of GDP to 5%, there was a recognition that local governments should be fiscally empowered immediately.
  • This is a valid signal for the future of local governance.

4 challenges posed by Covid and addressing them collectively

  • COVID-19 has raised home four major challenges:1) economic, 2) health, 3) welfare/livelihood 4) resource mobilisation.
  • These challenges have to be addressed by all tiers of government in the federal polity, jointly and severally.

Local government empowerment: 5 critical areas

  • 1) Own revenue is the critical lever of local government empowerment.
  • But the several lacunae that continue to bedevil local governance have to be simultaneously addressed.
  • 2) The new normal demands a paradigm shift in the delivery of health care at the cutting edge level.
  • 3) The parallel bodies that have come up after the 73rd/74th Constitutional Amendments have considerably distorted the functions-fund flow matrix at the lower level of governance.
  • 4) There is yet no clarity in the assignment of functions, functionaries and financial responsibilities to local governments.
  • Functional mapping and responsibilities continue to be ambiguous in many States.
  • Instructively, Kerala attempted even responsibility mapping besides activity mapping.
  • 5) The critical role of local governments will have to be recognised by all.

Let’s look into resource mobilisation issue: 3 Heads

  • A few suggestions for resource mobilisation are given under three heads: 1) local finance, 2) Members of Parliament Local Area Development Scheme-MPLADs, 3) the Fifteenth Finance Commission (FFC).

1. Local finance

  • Property tax collection with appropriate exemptions should be a compulsory levy and preferably must cover land.
  • The Economic Survey 2017-18 points out that urban local governments, or ULGs, generate about 44% of their revenue from own sources as against only 5% by rural local governments, or RLGs.
  • Per capita own revenue collected by ULGs is about 3% of urban per capita income while the corresponding figure is only 0.1% for RLGs.
  • There is a yawning gap between tax potential and actual collection, resulting in colossal underperformance.
  • When they are not taxed, people remain indifferent.
  • LGs, States and people seem to labour under a fiscal illusion.
  • In States such as Uttar Pradesh, Bihar and Jharkhand, local tax collection at the panchayat level is next to nil.
  • Property tax forms the major source of local revenue throughout the world.
  • All States should take steps to enhance and rationalise property tax regime.
  • A recent study by Professor O.P. Mathur shows that the share of property tax in GDP has been declining since 2002-03.
  •  The share of property tax in India in 2017-18 is only 0.14% of GDP as against 2.1% in the Organisation for Economic Co-operation and Development (OECD) countries.
  • If property tax covers land, that will hugely enhance the yield from this source even without any increase in rates.

Other 2 options for raising finances

  • 1) Land monetisation and betterment levy may be tried in the context of COVID-19 in India. To be sure, land values have to be unbundled for socially relevant purposes.
  • 2) Municipalities and even suburban panchayats can issue a corona containment bond for a period of say 10 years.
  • We are appealing to the patriotic sentiments of non-resident Indians and rich citizens.
  • Needless to say, credit rating is not to be the weighing consideration.
  • That the Resurgent India Bond of 1998 could mobilise over $4 billion in a few days encourages us to try this option.

2) MPLADS

  • The suspension of MPLADS by the Union government for two years is a welcome measure. The annual budget was around ₹4,000 crore.
  • The Union government has appropriated the entire allocation along with the huge non-lapseable arrears.
  • MPLADs, which was avowedly earmarked for local area development, must be assigned to local governments, preferably to panchayats on the basis of well-defined criteria.

3) Fifteenth finance commission-FFC

  • A special COVID-19 containment grant to the LGs by the FFC to be distributed on the basis of SFC-laid criteria is the need of the hour.
  • The commission may do well to consider this.
  • The local government grant of ₹90,000 crore for 2020-2021 by the FFC is only 3% higher than that recommended by the Fourteenth Finance Commission.
  • Building health infrastructure and disease control strategies at the local level find no mention in the five tranches of the packages announced by the Union Finance Minister.

Suggestions related to grants

  • The ratio of basic (i.e. with no conditions) to tied (with condition)grant is fixed at 50:50 by the commission.
  • In the context of the crisis under way, all grants must be untied  for freely evolving proper COVID-19 containment strategies locally.
  • The 13th Finance Commission’s recommendation to tie local grants to the union divisible pool of taxes to ensure a buoyant and predictable source of revenue to LGs (accepted by the then Union government) must be restored by the commission.

Consider the question “The stable source of revenue for the local government bodies whether from their own sources or in the form of grants should lie at the heart of efforts to empower them. Comment.”

 Conclusion

COVID-19 has woken us up to the reality that local governments must be equipped and empowered. Relevant action is the critical need.

B2BASICS:

73rd and 74th Amendment Acts, 1993

  • It’s been 25 years since decentralized democratic governance was introduced in India by the 73rd and 74th Constitution Amendments, which came into force on April 24 and June 1, 1993, respectively.
  • The 73rd Amendment to the Constitution (Part IX) has given constitutional status to the Panchayats, and has provided it with a substantial framework. It envisions the Panchayats as the institutions of local self-governance and also the universal platforms for planning and implementing programmes for economic
    development and social justice.
  • The creation of lakhs of “self-governing” village panchayats and gram sabhas, with over three million elected representatives mandated to manage local development, was a unique democratic experiment.
  • Article 243A gives constitutional recognition to the Gram Sabha as a body consisting of persons registered in the electoral rolls relating to a village comprised within the area of the Panchayat at the village level.
  • The 74th Amendment Act provided for the constitution (Part IXA) of three types of municipalities in urban areas depending upon the size and area.
  • The Constitution provides for a complete institutional mechanism including reservation for women and formation of State Finance Commissions (SFCs) for local democracy.

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Coronavirus – Economic Issues

Who is afraid of monetisation of deficit?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Discretionary fiscal policy, automatic stabiliser

Mains level: Paper 3- Monetisation of debt

Rating agencies influence the decisions of investors. So, when any economy is downgraded by them, it’s certainly a cause for concern. But to restart the economic engines, governments need to spend more by borrowing. This article suggests the way to achieve both: avoiding downgrade and increasing spending. How? Read to know…

To worry or not to worry: Issue of downgrading by rating agencies

  • Some economists urged the government amid covid pandemic to go out and spend without worrying about the increase in public debt.
  • They said the rating agencies would understand that these are unusual times.
  • If they did not and chose to downgrade India, we should not worry too much about it.
  • Well, the decision of the rating agency, Moody’s, to downgrade India from Baa2 to Baa3 should come as a rude awakening.
  • The present rating is just one notch above the ‘junk’ category.
  • Moody’s has also retained its negative outlook on India, which suggests that a further downgrade is more likely than an upgrade.
  •  The downgrade, Moody’s says, has not factored in the economic impact of the pandemic.
  • Any further deterioration in the fundamentals from now on will push India into ‘junk’ status.

Here is why we should be worried about a downgrade

  •  Whatever the failings of the agencies, in the imperfect world of global finance that we live in, their ratings do carry weight.
  • Institutional investors are largely bound by covenants that require them to exit an economy that falls below investment grade.
  • If India is downgraded to junk status, foreign institutional investors, or FIIs, will flee in droves.
  • The stock and bond markets will take a severe beating.
  • The rupee will depreciate hugely and the central bank will have its hands full trying to stave off a foreign exchange crisis.
  • That is the last thing we need at the moment.

So, what is the way out? Try for an upgrade!

  • We have to put our best foot forward now to prevent a downgrade and bring about an upgrade instead.
  • To do so, we need to note the key concerns that Moody’s has cited in effecting the present downgrade to our rating: slowing growth, rising debt and financial sector weakness.
  • These concerns are legitimate.

Bleak prospects

  • Many economists as also the Reserve Bank of India (RBI) expect India’s economy to shrink in FY 2020-21.
  • The combined fiscal deficit of the Centre and the States is expected to be in the region of 12% of GDP.
  • Moody’s expects India’s public debt to GDP ratio to rise from 72% of GDP to 84% of GDP in 2020-21.
  • The banking sector had non-performing assets of over 9% of advances before the onset of the pandemic.
  • Weak growth and rising bankruptcies will increase stress in the banking sector.

Fiscal deficit and growth: two concerns of rating agencies

  • The government’s focus thus far has been on reassuring the financial markets that the fisc will not spin out of control.
  • It has kept the ‘discretionary fiscal stimulus’ down to 1% of GDP.
  • That 1%  figure is most modest in relation to that of many other economies, especially developed economies.
  • ‘Discretionary fiscal stimulus’ refers to an increase in the fiscal deficit caused by government policy as distinct from an increase caused by slowing growth, the latter being called an ‘automatic stabiliser’.
  • Keeping the fiscal deficit on a leash addresses the concerns of rating agencies about a rise in the public debt to GDP ratio.
  • But it does little to address their concerns about growth.
  • The debt to GDP ratio will worsen and financial stress will accentuate if growth fails to recover quickly enough.
  • The government’s stimulus package relies heavily on the banking system to shore up growth.
  • But there is only so much banks can do.
  • More government spending is required, especially for infrastructure.

So, government need to increase fiscal stimulus without increasing public debt

  • We need to increase the discretionary fiscal stimulus without increasing public debt.
  • The answer is monetisation of the deficit, that is, the central bank providing funds to the government.
  • These fears are based on misconceptions about monetisation of the deficit and its effects.

What monetisation of debt mean?

  • A common misconception is that it involves ‘printing notes’.
  • But that is not how central banks fund the government.
  • The central bank typically funds the government by buying Treasury bills.
  • As proponents of what is called Modern Monetary Theory point out, even that is not required.
  • The central bank could simply credit the Treasury’s account with itself through an electronic accounting entry.
  • What is base money? When the government spends the extra funds that have come into its account, there is an increase in ‘Base money’, that is, currency plus banks’ reserves.
  • So, yes, monetisation results in an expansion of money supply.
  • But that is not the same as printing currency notes.

But expansion of money supply leads to inflation, what about that?

  • It could be that the expansion is inflationary.
  • This objection has little substance in a situation where aggregate demand has fallen sharply and there is an increase in unemployment.
  • In such a situation, monetisation of the deficit is more likely to raise actual output closer to potential output without any great increase in inflation.

No difference in borrowing from banks or RBI directly:MMT

  • Exponents of the Modern Monetary Theory (MMT) make a more striking point.
  • They say there is nothing particularly virtuous about the government incurring expenditure and issuing bonds to banks instead of issuing these to the central bank.
  • The expansion in base money and hence in money supply is the same in either route.
  • The preference for private debt is voluntary.
  • MMT exponents say it has more to do with an ideological preference for limiting government expenditure.
  • Central banks worldwide have resorted to massive purchases of government bonds in the secondary market in recent years, with the RBI joining the party of late.
  • These are carried out under Open Market Operations (OMO).
  • The impact on money supply is the same whether the central bank acquires government bonds in the secondary market or directly from the Treasury.

So why the shrill clamour against monetisation of public debt?

  • OMO is said to be a lesser evil than direct monetisation because the former is a ‘temporary’ expansion in the central bank’s balance sheet whereas the latter is ‘permanent’.
  • But we know that even so-called ‘temporary’ expansions can last for long periods with identical effects on inflation.
  • What matters, therefore, is not whether the central bank’s balance sheet expansion is temporary or permanent but how it impacts inflation.
  • As long as inflation is kept under control, it is hard to argue against monetisation of the deficit in a situation such as the one we are now confronted with.

Way forward

  • We now have a way out of the constraints imposed by sovereign ratings.
  • The government must confine itself to the additional borrowing of ₹4.2 trillion which it has announced.
  • Further discretionary fiscal stimulus must happen through monetisation of the deficit.
  • That way, the debt to GDP ratio can be kept under control while also addressing concerns about growth.

Consider the question “Examine the issues involved in the direct monetisation of the debt by the government to fund the spending in  the wake of covid pandemic.”

Conclusion

The rating agencies should be worrying not about monetisation per se but about its impact on inflation. As long as inflation is kept under control, they should not have concerns — and we need not lose sleep over a possible downgrade.


Back2Basics: Automatic stabiliser

  • Automatic stabilisers refer to how fiscal instruments will influence the rate of growth and help counter swings in the economic cycle.
  • Automatic stabilisers will influence the size of government borrowing.

Discretionary fiscal policy

  • Keynesian Perspective: Keynes noted that in a recession, confidence falls and the private sector cut back on spending and investment.
  • Therefore, we see a rise in private savings and a fall in aggregate demand. This can worsen the recession.
  • This is why Keynes advocated government borrowing – to make use of these surplus savings.
  • Keynes argued that automatic stabilisers may not be enough, and the government should specifically find public sector projects to inject money into the circular flow.
  • This is known as discretionary fiscal policy.

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

India’s rising Forex Reserves

Note4Students

From UPSC perspective, the following things are important :

Prelims level: India's Forex reserves, SDR, Reserve tranche

Mains level: Forex Reserves and its significance

India’s foreign exchange reserves are rising and are slated to hit the $500 billion mark soon. In the last month, it jumped by $12.4 billion to an all-time high of $493.48 billion.

Aspirants must make a note here:

1.Authority managing FOREX in India

2.Components of FOREX

3.IMF’s SDRs

4.Emergency use of FOREX

Rising above the 1991 crisis

  • Unlike in 1991, when India had to pledge its gold reserves to stave off a major financial crisis, the country can now depend on its soaring Forex reserves to tackle any crisis on the economic front.
  • The level of Forex reserves has steadily increased by 8,400 per cent from $5.8 billion as of March 1991 to the current level.

What are Forex Reserves?

  • Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves.
  • RBI accumulates foreign currency reserves by purchasing from authorized dealers in open market operations.
  • The Forex reserves of India consist of below four categories:
  1. Foreign Currency Assets
  2. Gold
  3. Special Drawing Rights (SDRs)
  4. Reserve Tranche Position
  • The IMF says official Forex reserves are held in support of a range of objectives like supporting and maintaining confidence in the policies for monetary and exchange rate management including the capacity to intervene in support of the national or union currency.
  • It will also limit external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.

Why is Forex rising despite the slowdown in the economy?

1.Rise in  FPIand  FII

  • The major reason for the rise in forex reserves is the rise in investment in foreign portfolio investors in Indian stocks and foreign direct investments (FDIs).
  • Foreign investors had acquired stakes in several Indian companies in the last two months.
  • Forex inflows are set to rise further and cross the $500 billion as Reliance Industries subsidiary, Jio Platforms, has witnessed a series of foreign investments totalling Rs 97,000 crore.

2.Crash in oil prices

  • On the other hand, the fall in crude oil prices has brought down the oil import bill, saving the precious foreign exchange.

3.Fall in overseas remittances and foreign travel

  • Similarly, overseas remittances and foreign travels have fallen steeply – down 61 per cent in April from $12.87 billion.

What’s the significance of rising forex reserves?

  • The rising forex reserves give a lot of comfort to the government and the RBI in managing India’s external and internal financial issues at a time when the economic growth is set to contract by 1.5 per cent in 2020-21.
  • Provides Cushion: It’s a big cushion in the event of any crisis on the economic front and enough to cover the import bill of the country for a year.
  • Appreciation of Rupees: The rising reserves have also helped the rupee to strengthen against the dollar.
  • The forex reserves to GDP ratio is around 15 per cent.
  • Provides confidence to Market: Reserves will provide a level of confidence to markets that a country can meet its external obligations, demonstrate the backing of domestic currency by external assets, assist the government in meeting its US dollar needs and external debt obligations and maintain a reserve for national disasters or emergencies.

What does the RBI do with the forex reserves?

  • The RBI functions as the custodian and manager of forex reserves and operates within the overall policy framework agreed upon with the government.
  • The RBI allocates the dollars for specific purposes. For example, under the Liberalized Remittances Scheme, individuals are allowed to remit up to $250,000 every year.
  • The RBI uses its forex kitty for the orderly movement of the rupee. It sells the dollar when the rupee weakens and buys the dollar when the rupee strengthens.

Where are India’s forex reserves kept?

  • The RBI Act, 1934 provides the overarching legal framework for the deployment of reserves in different foreign currency assets and gold within the broad parameters of currencies, instruments, issuers and counterparties.
  • As much as 64 per cent of the foreign currency reserves is held in the securities like Treasury bills of foreign countries, mainly the US.
  • 28 per cent is deposited in foreign central banks and 7.4 per cent is also deposited in commercial banks abroad.
  • In value terms, the share of gold in the total foreign exchange reserves increased from about 6.14 per cent as at end-September 2019 to about 6.40 per cent as at end-March 2020.

Is there a cost involved in maintaining forex reserves?

  • The return on India’s forex reserves kept in foreign central banks and commercial banks is negligible.
  • While the RBI has not divulged the return on forex investment, analysts say it could be around one per cent, or even less than that, considering the fall in interest rates in the US and Eurozone.
  • There was a demand from some quarters that forex reserves should be used for infrastructure development in the country. However, the RBI had opposed the plan.
  • Several analysts argue for giving greater weightage to return on forex assets than on liquidity thus reducing net costs if any, of holding reserves.
  • Another issue is the high ratio of volatile flows (portfolio flows and short-term debt) to reserves which are around 80 per cent. This money can exit at a fast pace.

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Gairsain to be Uttarakhand new Summer Capital

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Location of Garsain

Mains level: Issues over multiple capitals

The Uttarakhand Governor has given her assent for declaration of Bhararisen (Gairsain) in Chamoli district as its summer capital.

Practice question:

Q. Discuss the feasibility of having multiple administrative capitals for some states in India.

Gairsain

  • Gairsain is situated at the eastern edge of the vast Dudhatoli mountain range, located almost at the centre of the state, at a distance of approximately 250 kilometres from Dehradun.
  • It is easily accessible from both the Garhwal and the Kumaon divisions, and in a way, acts as the bridge between the two regions.
  • The state Assembly is located in Dehradun, but sessions are held in Gairsain as well.

Why Gairsain is held as summer capital?

  • Gairsain was best suited to be the capital of the mountainous state as it was a hilly region falling on the border of Kumaon and Garhwal regions.
  • Even when Uttarakhand was carved out as a separate state from UP on November 9, 2000, statehood activists had contended that Gairsain was best suited to be the capital.
  • But it was Dehradun in the plains that were named the temporary capital. The issue is largely political.

What are the other examples of multiple capital cities?

  • Several countries in the world have implemented the concept.
  • In Sri Lanka, Sri Jayawardenepura Kotte is the official capital and seat of the national legislature, while Colombo is the de facto seat of the national executive and judicial bodies.
  • Malaysia has its official and royal capital and seat of the national legislature at Kuala Lumpur, and Putrajaya is the administrative centre and seat of the national judiciary.
  • Among Indian states, Maharashtra has two capitals– Mumbai and Nagpur (which holds the winter session of the state assembly).
  • Himachal Pradesh has capitals at Shimla and Dharamshala (winter).
  • The former state of Jammu & Kashmir had Srinagar and Jammu (winter) as capitals (remember Darbar Move).

Also read:

Concept of three capitals in Andhra Pradesh

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