THE CONTEXT: Of late, many reports/indices have downgraded India’s position on various aspects of democracy. There are also allegations that the Indian State has curtailed the freedoms of individuals, the media, and civil society and undermined the independence of accountability institutions. Such developments, along with the results of recently concluded State Assembly elections, have led to a view that India has become an electoral democracy and that the electoral wins have been used to undermine the constitutional democracy. This article examines this claim in detail and suggests a way forward.

A WORKING DEFINITION: ELECTORAL DEMOCRACY AND CONSTITUTIONAL DEMOCRACY

ELECTORAL DEMOCRACY:

• An electoral democracy refers to a polity governed by a democratically elected government.
• In such a system, there are regular free and fair elections based on universal adult franchise, multi-party competition, the peaceful transfer of power, etc.
• Electoral democracy is also known as procedural democracy, formal democracy, etc.
• The electoral process provides legitimacy to governments which can be used for achieving lofty objectives or for other partisan purposes.
• Although electoral democracy is necessary, it is not sufficient for establishing a constitutional democracy.

CONSTITUTIONAL DEMOCRACY:

• In a constitutional democracy, the authority of the majority is limited by legal and institutional means so that the rights of individuals and minorities are respected. Constitutional democracy is the antithesis of arbitrary rule.  It may be also called substantial democracy, liberal democracy, etc.  It is a democracy characterized by:

1. POPULAR SOVEREIGNTY. The people are the ultimate source of the authority of the government, which derives its right to govern from their consent.
2. MAJORITY RULE AND MINORITY RIGHTS. Although “the majority rules,” the fundamental rights of individuals in the minority are protected.
3. LIMITED GOVERNMENT. The powers of government are limited by law and a written or unwritten constitution that those in power obey.
4. INSTITUTIONAL AND PROCEDURAL LIMITATIONS ON POWERS. There are certain institutional and procedural devices that limit the powers of government.

WHAT ARE THE FUNDAMENTAL VALUES OF CONSTITUTIONAL DEMOCRACY?

BASIC RIGHTS:

• Protection of certain basic or fundamental rights is the primary goal of government. These rights may be limited to life, liberty, and property, or they may be extended to include such economic and social rights as employment, health care, and education.
• Documents such as the Universal Declaration of Human Rights, the United Nations Convention on the Rights of the Child, the African Charter on Human and People’s Rights, the Fundamental Rights, and DPSP of the Indian Constitution enumerate and explain these rights.

FREEDOM OF CONSCIENCE AND EXPRESSION:

• A constitutional democracy includes among its highest purposes the protection of freedom of conscience and freedom of expression.
• These freedoms have value both for the healthy functioning and preservation of constitutional democracy and for the full development of the human personality.

PRIVACY AND CIVIL SOCIETY:

• Constitutional democracies recognize and protect the integrity of a private and social realm comprised of family, personal, religious, and other associations and activities. This space of uncoerced human association is the basis of a civil society free from unfair and unreasonable intrusions by the government.

JUSTICE: A constitutional democracy promotes:

• DISTRIBUTIVE JUSTICE. The fair distribution of the benefits and burdens of society.
• CORRECTIVE JUSTICE. Fair and proper responses to wrongs and injuries.
• PROCEDURAL JUSTICE. The use of fair procedures in the gathering of information and the making of decisions by all agencies of government and, most particularly, by law enforcement agencies and the courts.

EQUALITY: A constitutional democracy promotes:

• POLITICAL EQUALITY. All citizens are equally entitled to participate in the political system.
• EQUALITY BEFORE THE LAW. The law does not discriminate based on unreasonable and unfair criteria such as gender, age, race, ethnicity, religious or political beliefs, affiliations, class, or economic status. The law applies to the governors as well as the governed.
• ECONOMIC EQUALITY. Constitutional democracies have differing conceptions of the meaning and importance of economic equality. At the very least, they agree that all citizens should have the right to an equal opportunity to improve their material well-being. Some constitutional democracies also attempt to eliminate gross disparities in wealth through such means as progressive taxation and social welfare programs.

OPENNESS:

• Constitutional democracies are based on a political philosophy of openness or the free marketplace of ideas, the availability of information through a free press and free expression in all fields of human endeavor.

ELECTORAL DEMOCRACY VS CONSTITUTIONAL DEMOCRACY-AN ANALYSIS

In a large part of the world, the electoral aspects of democracy are being used to undermine the non-electoral dimensions of democracy. This process can be called the battle between electoral democracy and constitutional democracy. Democracies don’t normally die as a result of military or executive coups these days. Processes internal to the democratic system can severely weaken democracy itself, even causing its collapse. Today, such contradictions exist in Turkey, Poland, Hungary, and Russia, to name just a few countries. Donald Trump also attempted something similar in the US. It is also alleged that such a process is underway in India.

OTHERING THE OTHERS: ILLUSTRATIONS FROM THE ASIAN REGION

As early as the 1950s, Sri Lanka imposed a “Sinhala only” policy on the Tamil minority of the country. By the 1960 and 1970s, the Sinhalese majority gradually established its hegemony via electoral means, completely marginalizing the Tamils. In the 1980s, a civil war was born as a consequence. In Malaysia, following roughly similar policies, the Malay majority side-lined the Chinese minority. Internal tensions and aggravations rose, but, unlike Sri Lanka, a civil war did not. The minorities pursued their interests by entering into coalitions with political parties within the larger parameters of the polity.

HOW IS ELECTORAL DEMOCRACY USED TO UNDERMINE CONSTITUTIONAL DEMOCRACY?

MIS USE OF ELECTORAL SUCCESS:

• Electoral win provides authority to the elected government to frame laws and policies to implement its ideological agenda.
• Although nothing is wrong in this as long the government acts within the bounds of the constitutional limitations, serious problems emerge once this is breached.
• The triumph in elections can be used in three ways — in executive decrees, in legislative chambers to formulate laws, and on the street via vigilante forces.

SECTARIAN LEGAL AND POLICY ACTIONS:

• The government will simply claim that as it has won the “free and fair elections” it must be free to govern as it pleases without any boundation.
• In other words, electoral success means approval and legitimization of the parties’ agenda, policy choices, and manifesto. I say, a party that is known for its illiberal and communal outlook comes to power with a brute majority, which means the people’s acceptance of what the party stands for.
• This majority is then used by the party to frame legislation and public policies to further the illiberal and communal agenda.

FREE VOTE BUT PROGRESSIVE UNFREEDOMS:

• Differently labelled as right-wing populism, majoritarianism, or illiberal democracy, the core of this politics consists of: –
• Using election win to attack – via legislation — the idea of minority rights and undermine – also via legislation — standard democratic freedoms such as the freedom of expression, freedom of association, and freedom of religious or cultural practice.
• A freely conducted vote can thus be used to cripple the other freedoms that modern democracies also value and the electoral democracy essentially degenerates into an electoral autocracy.

THE REASONS FOR INDIA BEING CALLED AS AN ELECTORAL DEMOCRACY

POTENTIAL MISUSE OF WINS IN ELECTIONS:

• The campaign for the UP election by the incumbent party has a fair share of communal attacks on the minorities.
• It is held that the five-year rule of the party also saw discriminatory legal and administrative actions against the minority community, mob lynching, attacks, and arrest of human rights activists and journalists, custodial deaths, illegal encounters, poor Covid management, mounting unemployment, etc.
• Yet a victorious plurality of UP’s electorate was willing to ignore the incumbent party’s failures and transgressions and returned the same party to power.
• Though minority rights are enshrined in India’s Constitution, election victories can now be used to create laws or government policies that begin to precisely attack those rights.
• Fake news, misinformation, post-truth, and hate speeches have taken the political and social discourse to a new low in India.
• Electoral win is one of the means by which electoral democracy can be a vehicle for an assault on constitutional democracy.

WEAKENING OF THE GUARDIAN OF THE CONSTITUTION:

• Generally speaking, the courts are the final custodian of constitutional proprieties in a democracy and can frustrate a legislative or executive attack on the Constitution.
• But that depends on whether the judiciary is willing to play its constitutionally assigned role. Judicial interpretation can go either way – in favour of the government or against it.
• India’s judiciary has of late — and earlier as well — been an unreliable defender of the Constitution and citizens’ rights. For instance, an erstwhile CJI has given a free pass to the executive through ” sealed cover jurisprudence”, and a former Judge of the SC has been alleged to be always favouring the government.
• A cursory glance of the major Constitutional cases like revocation of Art 370, CAA 2019, etc pending in the SC for a couple of years, points out the unwillingness of the SC to scrutinize executive actions.
• The selective appointment and transfer of judges of the higher judiciary also shows the lack of judicial independence.

THE FALLING RANKS IN GLOBAL INDICES:

• For a couple of years, India’s standing in almost all the indices/reports dealing with democracy and its features has been consistently falling. For instance, in the recently released freedom in the World 2022report by the American non-profit organization Freedom House, India was described as ‘partly free’ and given a ‘Global Freedom Score’ of 66 out of 100, the same as Malawi and Bolivia. India was assigned a score of 33 out of 40 on the criterion of ‘Political Rights’, and 33 out of 60 on that of ‘Civil Liberties’.
• In V-Dem Institute’s latest Democracy Report 2022, India continues to be categorized as an ‘electoral autocracy’, a status to which it had been downgraded for the first time in last year’s Democracy Report. Last year’s report, however, had expressly stated that India could belong to the higher category of ‘electoral democracy’ by designating it as ‘EA+’. However, in this year’s report, it has been designated ‘EA’, indicating that there is no uncertainty about its status. In previous years’ reports, India had been classified as an electoral democracy.

HUMAN RIGHTS VIOLATIONS AND MEDIA FREEDOM:

• Human rights violations are also on the rise, especially among minorities, human rights defenders, activists, etc. For instance, an octogenarian under trial prisoner suffering from Parkinson’s disease and other complications was denied even medical bail, and he died in judicial custody.
• The encounter policy of a state in India is infamous for providing what they call instant justice as also for its “ freedom of religion law” that has set off a culture of “ mob-vigilantism”.
• In another state, the controversy over the wearing of a particular type of dress by the students of a community has been used to further polarising society and polity.
• The media is being harassed and victimized by foisting sedition charges, raids by investigative agencies, and even by stopping transmission of a TV news channel allegedly on the ground of national security violation.
• The controversial IT Rules, 2021 are also held to be another attempt at media censorship by the executive.

ATTACKS ON THE CIVIL SOCIETY:

• Civil Society repression has also significantly increased in India not least by the FCRA amendment. Amnesty International had to shut down its operations due to repeated harassment by the government. Recently, the NSA, Mr. Ajith Doval, has characterized civil society as the “fourth frontier of war”. The space for civil society activism and action has been declining substantially in India.

CONCENTRATION OF WEALTH AND INEQUALITY:

• Constitutional democracy is also social and economic democracy. But in India, the wealth, opportunities, and life changes seem to concentrate on a chosen few.
• As per the Oxfam Inequality report 2021, the collective wealth of India’s 100 richest people hit a record high of Rs 57.3 lakh crore (USD 775 billion). In the same year, the share of the bottom 50 percent of the population in national wealth was a mere 6 percent.
• What is particularly worrying in India’s case is that economic inequality is being added to a society that is already fractured along the lines of caste, religion, region, and gender.

ARBITRARY USE OF CRIMINAL AND PENAL PROVISIONS:

• The special criminal laws dealing with terrorism, drug trafficking, money laundering, national security, etc, are being liberally used and misused.
• Section 124A, UAPA, NSA, and PMLA have been held to be applied for offenses not actually attracting the rigours of these laws.
• With their stringent bail conditions, the accused suffers from prolonged incarceration and the process itself becomes the punishment.

VIOLATION OF FEDERAL PROVISIONS OF THE CONSTITUTION:

• The federal relation between the Union and the States has been severely strained in recent times. It is alleged that the Union is trying to undermine the federal provisions of the Constitution.
• By intruding into the State’s sphere of competence, exploiting the positions of the governors, amending the All-India Service rules, delaying financial compensation, deploying central agencies against opposition leaders, etc the Union is trying to make states its appendages, it is alleged.

HOW JUSTIFIED IS THE DICHOTOMY OF ELECTED AND CONSTITUTIONAL DEMOCRACY IN THE INDIAN CONTEXT?

INDEPENDENCE OF ACCOUNTABILITY INSTITUTIONS:

• In India, the accountability enforcing institutions have been functioning independently. There are legislative constraints on executive aggrandizement through motions, debates, votes, committees, etc. The bulwarks of the Constitution, like the ECI, CAG, UPSC, etc, have carried out their constitutional mandate without executive interference.
•  India also has the mechanism of Social Accountability through Social Audit, Citizen Charter, RTI, etc, which are effective tools at the hands of the general public and the civil society to demand executive answerability.

JUDICIAL REVIEW AND ITS IMPACT:

• As judicial review is an essential aspect of constitutional democracy, the higher courts in India have reviewed the legislation and executive actions.
• For instance, in 2021, the SC has read down part of Part IXB of the Constitution due to the lack of legislative competence of the Union. In the case of Pegasus, the SC has established a committee of inquiry to uncover the truth.
• In Covid-19, the HCs and the SC have been consistently taking the executive to task for ineffective management of the pandemic.

A VIBRANT CIVIL SOCIETY AND MEDIA:

• India has the largest civil society ecosystem working in multiple areas free from any illegal constraints.
• The media is also thriving in India and the print, visual and social media have been growing in the country.
• The government does not regulate the media, which is essentially self-regulated and enjoys freedom from governmental interference.

MAJORITY VS MINORITY BINARY IS NOT APPROPRIATE:

• The majority vs minority dichotomy is not an appropriate description of Indian society that is known for multiculturalism.
• The Constitution itself provides specific fundamental rights to the minorities, both linguistic and religious, and the government has taken steps to promote the welfare and development of minorities.
• For instance, the Prime Minister’s New 15 Point Programme for the welfare of Minority Communities, etc. have been implemented by the Union government for their educational and economic empowerment.

BIASNESS IN GLOBAL RANKINGS:

• The global rankings have a western bias, as articulated by the External Affairs Minister and their methodology is highly suspect.
• These indices fail to capture the Indian way of democracy and hence do not provide an accurate picture of the country.

THE WAY FORWARD

BUILD A GENUINE ELECTORAL DEMOCRACY:

• The weakening of other democratic forums and procedures has made elections crucial to the well-being of India’s democracy. This explains the need for a heightened focus on the electoral system, party system, and electoral politics.
• Thus, there should be studies and research on the Election Commission, electoral laws, reforms, legislations, and judicial decisions pertaining to elections. Genuine electoral democracy is a must for constitutional democracy.

INSTITUTIONAL IDENTITY OF THE LEGISLATURE:

• In Indian Parliamentary democracy, the legislature has not been truly independent of the executive in that the executive control of the legislature is a feature of Indian democracy. Thus, in effect, law-making becomes the function of the executive.
•  But, to exercise legislative control over the executive, the Parliament should reinvent its institutional integrity, which is a step towards strengthening constitutional democracy.

DEVELOP CIVIC CITIZENSHIP:

• There is a difference between being a citizen in a constitutional democracy and being a subject in an authoritarian or totalitarian regime. In a democracy, each citizen is a full and equal member of a self-governing community endowed with certain fundamental rights, as well as certain responsibilities.
• Constitutional democracy requires informed and effective participation by citizens who understand and have a reasoned commitment to its fundamental principles and values, as well as a familiarity with its political processes.
• Competent and responsible citizenship require not only knowledge and understanding but the development of intellectual and participatory skills essential to civic life.

TOLERATION OF DIVERSITY:

• The State and the society should respect the right of others to differ in ideas, ways of life, customs, and beliefs.
• Citizens should appreciate the benefits of having people of diverse beliefs and ethnic and racial backgrounds as a part of their community, as well as an understanding of how and why diversity can exacerbate tensions.

NEED AN ETHICAL ADMINISTRATION:

• The administrative apparatus has a duty to uphold constitutional principles and should not act as a regime force of the executive.
• The administrative leadership needs to show the way so that the rights and freedoms of people are not sacrificed for personnel aggrandizement.

THE CONCLUSION: Although it may be true that India has seen some slide in aspects of democracy, it would not be right to hold the Union government alone responsible for it. The decline in democracy has been a worldwide phenomenon, as documented by reputed institutions. However, given India’s strong democratic foundations, independent institutions, vibrant political culture, and media landscape, India can address the problems. Constitutional democracy is a work in progress and hence a systemic approach should be initiated by keeping the Constitution at the center. The judiciary, legislature, and the citizens have a solemn duty to speed up this process.

Questions:

1. Distinguish between electoral democracy and constitutional democracy. Do you think that India has become an electoral democracy? Argue.
2. “Constitutional democracy is hollow without electoral democracy” Comment.
3. How does electoral democracy undermine constitutional democracy? Explain with examples.

THE CONTEXT: The Delhi Municipal Corporation (Amendment) Bill, 2022, was introduced and passed in the Lok Sabha on March 25, 2022, for the unification of the three municipal bodies in the capital. The Bill seeks to amend the Delhi Municipal Corporation Act, 1957, passed by Parliament. The Central Government claims that this move will improve municipal governance, but there is a contrarian view. This article analyses this issue in detail.

THE SALIENT FEATURES OF THE DELHI MUNICIPAL CORPORATION (AMENDMENT) BILL, 2022

UNIFICATION OF MUNICIPAL CORPORATIONS: The Bill replaces the three municipal corporations of North, South, and East Delhi under the Act with one Corporation named the Municipal Corporation of Delhi.

POWERS OF THE CENTRAL GOVERNMENT:

The Bill empowers the Central government to decide various matters including:

1. total number of seats of councilors and number of seats reserved for members of the Scheduled Castes,
2. division of the area of corporations into zones and wards etc.

NUMBER OF COUNCILLORS: The Bill states that the total number of seats in the new corporation should not be more than 250 while the earlier number was 272.

REMOVAL OF DIRECTOR OF LOCAL BODIES: The Act provides for a Director of Local Bodies to assist the Delhi government and discharge certain functions, but the Bill omits the provision for a Director of Local Bodies.

SPECIAL OFFICER TO BE APPOINTED BY THE CENTRAL GOVERNMENT: The Bill provides that the central government may appoint a Special Officer to exercise powers of the Corporation until the first meeting of the Corporation is held after the commencement of the Bill.

E-GOVERNANCE SYSTEM FOR CITIZENS: The Bill adds that obligatory functions of the new corporation will include establishing an e-governance system for citizen services on an anytime-anywhere basis for a better, accountable, and transparent administration.

DO YOU KNOW?

The Delhi Municipal Corporation Act, 1957 was enacted to consolidate and amend the law relating to the Municipal Government of Delhi. A Corporation charged with the Municipal Government of Delhi was established under the said Act as the Municipal Corporation of Delhi. In 2011, the said Act was amended by the Legislative Assembly of the National Capital Territory of Delhi vide the Delhi Municipal Corporation (Amendment) Act, 2011 leading to the trifurcation of the said corporation into three separate Corporations.

THE RATIONALE FOR THE UNIFICATION OF THE MUNICIPAL CORPORATIONS

NON FULFILLMENT OF MAIN OBJECTIVE:

• The main objective of the trifurcation of the erstwhile Municipal Corporation of Delhi was to provide more efficient civic services to the public.
• Due to inadequacies in resources and uncertainty in fund allocation and release, the three corporations have been facing huge financial hardships, making it difficult to maintain the civic services in Delhi at the desired levels.

ADMINISTRATIVE CHALLENGES:

• The trifurcation was also uneven in terms of territorial divisions and revenue-generating potential.
• As a result, there was a huge gap in the resources available to the three corporations compared to their obligations.

DELAYED PAYMENTS AND EMPLOYEE STRIKES:

• Due to poor financial conditions, payment of salaries and retirement benefits to their employees was delayed.
• This has resulted in frequent strikes by the municipal employees, which have not only affected civic services but also created concomitant problems of cleanliness and sanitization.

INTEGRATED PLANNING AND DEVELOPMENT:

• A single, integrated, and well-equipped entity will ensure a robust mechanism for synergized and strategic planning and optimal utilization of resources and will bring about greater transparency, improved governance, and more efficient delivery of civic service.

REDUCING ADMINISTRATIVE EXPENSES:

• There are three mayors, three commissioners, and 12 additional commissioners. Even different MCDs have different committees. This has increased the expenses manifold and is one of the major contributors to the financial crisis of the MCDs.
•  Unification will definitely curtail the office and meeting expenses along with the expenses which are being done by the leaders and officers.

CITY-LEVEL POLITICAL LEADERSHIP:

• When the MCD was unified, the mayor was treated as the First Citizen of Delhi, and the post used to carry a lot of weight.
• Mayor has to be called for most of the ceremonial events. Even foreign dignitaries used to meet the mayor of Delhi.
• Once unified, not just in the post of mayor but as an institution, MCD will have a larger say in the policymaking of the capital and the mayor will provide a single political leadership at the municipal level.

CRITICISM OF THE UNIFICATION OF THE CORPORATIONS OF DELHI

LACK OF LEGISLATIVE COMPETENCE:

• Many Members of Parliament argue that Parliament was overreaching its legislative authority to amend the Bill.
• Since the Act for trifurcation was passed by the Delhi Assembly, therefore Parliament cannot pass a law to merge the three civic bodies. The Constitution has given powers to the states to constitute municipal corporations.

POSTPONEMENT OF ELECTIONS:

• The municipal corporation elections were scheduled to be held in April. However, on March 9, the State Election Commission (SEC) deferred the polling indefinitely, citing a communication from the Lieutenant Governor, an appointee of the Central Government.
• It is alleged that the party ruling the MCDs sensed a strong anti-incumbency and hence used the “unification” strategy to defer the polls.

POLITICAL REASONS:

• The unification of municipal corporations could have been done in the last few years, as the same party has been in power in the Centre since 2014.
•  The real purpose of the unification is not the efficiency of municipal governance but the creation of a parallel system of governance to compete with the “Delhi Model” and to reap political dividends.

NO REAL REFORMS:

• The Bill doesn’t bring any substantive governance, administrative or financial reforms to the MCD.
• It does not mention the governance structure of the unified MCD and the status of the Mayor and the Council members vis a vis the administration.
• The Bill also missed an opportunity to establish a unified administrative and governance system by bringing the parastatals and the Special Purpose vehicles under the control of the Municipal Corporation.

QUESTION MARK ON INDEPENDENCE OF SEC:

• The postponement of the election also raises a question about the agency of an autonomous body such as the State Election Commission, whose prima facie job is to ensure free and fair elections in the country.
• The body seems to have succumbed to pressure from the central government.

AN ALL-POWERFUL CENTRAL GOVERNMENT: The Bill provides for overarching powers for the Central Government like:

• naming or resizing any zone or ward,
• listing out the obligatory functions of the MCD,
• rules on declaring assets of councilors,
• the appointment and pay scale of the commissioner,
• approvals for loans and action against any councilor or MCD official etc.

This is not in sync with the idea and practice of democratic decentralization and the spirit of the 74^th Constitutional Amendment.

SKEWED REPRESENTATION: 

• The total number of municipality wards will be reduced from 272 to 250, which goes against logic as the population of Delhi has increased from the last delimitation.

BUREAUCRATIC DOMINANCE:

• The reduction in the number of municipality wards will necessitate a delimitation exercise.
• Due to delimitation, the election will be delayed by one or two years. The Bill is silent on the “Census” based on which the delimitation will take place.
• All these mean that the special officer appointed by the Centre will be the overlord of the MCD.

A STRONG BUREAUCRACY AND A WEAK DEMOCRACY: A CASE STUDY OF MCD

• Delhi Municipal Corporation faces a unique kind of tussle between the elected and administrative wings. While the mayor has mostly ceremonial rights, the administrative decisions are being taken by the commissioner and his team.
• The IAS officers come on deputation to serve their MCD tenure, and the political wing claims that they are the real reason behind the mismanagement of financial and even administrative situations of Delhi Municipal Corporation.
• It was a long-pending demand to provide more powers to elected representatives, including the mayor, the standing committee chairperson, and heads of different committees.
• A change in the system in the favour of elected representatives by bringing the mayor into the council which will provide more administrative powers to the mayor needs to be established. This long-pending demand needs to be looked into the new amendment, which is based on the Kolkata Municipal Corporation.

THE WAY FORWARD

SUSTAINABLE SOLUTIONS TO GOVERNANCE PROBLEMS OF DELHI:

• Multiple power centers are operating in Delhi, and the tussle between the Centre and the NCT government has been a recurrent phenomenon.
• What is required is to iron out the differences, reform the Constitutional and legal provisions and bring about a clear demarcation of roles and responsibilities of the political and administrative institutions.

PROVIDE SCOPE FOR OWN REVENUE GENERATION:

• Even before the trifurcation, the MCD has taken loans from the then Delhi government to pay salaries to the staffers.
• Without addressing the issues in revenue generation and other core issues, the civic body will find itself in financial troubles again and will have to depend on the government for funds.

REFORMS IN MUNICIPAL GOVERNANCE:

• Under the present system, mayors and other appointments are made for a year and by the time a person starts understanding the mechanism, the tenure gets over.
• Thus, the new amendment should bring reforms like the direct election of the mayor, his / her tenure being increased to at least two-and-half years instead of the existing one year, and provisions for allocation of funds directly from the Centre.

REFORMS IN TAXATION:

• In Delhi, the house tax rates have not been increased since 2004, and the MCD continues to collect taxes based on the same rates, which is basically loss-making. So, with the unification must come hardline taxation reforms to address these issues.

DECENTRALIZE POLITICAL AND ADMINISTRATIVE POWER:

• Growing population and vast geographical spread were cited among the reasons for the trifurcation, which was to lead to decentralization of administration for better delivery and governance with each commissioner overseeing services for a smaller area.
• With unification, there may be the problem of centralization of authority which needs to be addressed by empowering political and administrative leadership at zonal and ward levels.

AUTONOMY OF SEC AND CONDUCT OF ELECTIONS:

• That the SEC is and should be independent of the government is a maxim often stated. But how the SEC acted in the current context seems to undermine the exalted position of this constitutional authority.
• Also, the amendment and associated processes should not come in the way of citizens of Delhi exercising their legitimate democratic rights of choosing their own local representatives.

THE CONCLUSION: While the reunification will help save on expenditure and bring parity, making the civic body self-reliant will have to be the primary target. Whatever money is saved will not be enough to make the municipal institutions self-governing and deliver quality civic services. The major issue that needs resolution is the power tussle among the Centre, the Delhi government, and the municipal bodies, without which the unification exercise will not provide optimal results. Another crucial reform required is in the area of “City Governance” and Delhi must be developed as a model for other Indian cities.

QUESTIONS:

1. Critically analyse the features of the Delhi Municipal Corporation (Amendment) Bill, 2022.
2. The unification of the municipal corporations of Delhi, although maybe a right step toward administrative efficiency, will not be sufficient to ensure the quality delivery of public services. Examine.
3. The Delhi Municipal Corporation (Amendment) Bill, 2022, is all politics, less economics, and no governance. Critically Examine.
4. Without comprehensive constitutional, legal and financial reforms concerning municipal governance, Adhoc administrative reform measures will not bring good governance at the city level. Illustrate and Comment.

THE CONTEXT: The legislative bodies in India require expert secretarial assistance for carrying out their multiple responsibilities. However, the current legislative personnel administration suffers from many weaknesses. Hence, it is suggested that an Indian Legislative Service is needed. This article examines this issue in detail.

THE INDIAN LEGISLATIVE SERVICE(ILS): AN OVERVIEW

The ILS can be another All-India Service similar to the IAS, IPS, etc, that is centrally recruited, trained, and assigned to the legislative bodies, especially at the Union and State levels. The ILS can be the backbone of the legislative bodies equipping them to carry out the mandated functions. The idea of ILS became vogue in the backdrop of the appointment and abrupt removal of a Secretary-General (SG) of the Rajya Sabha in whose place a retired Indian Revenue Service official assumed charge. This has generated a debate on the need for an independent legislative service that will cater to the needs of all the legislative institutions in the country, including at the local level.

WHY DO WE NEED AN ILS?

TO FULFILL THE CONSTITUTIONAL MANDATE:

• Article 98 of the Constitution provides for the scope of separate secretariats for the two Houses of Parliament. The same goes true for the state legislatures too. This means that the secretariats should be independent of the executive government.
• However, sourcing manpower from the executive branch may lead to the violation of the concept of independence and conflict of interests. It breaches the principle of separation of power.

UPHOLDING EXECUTIVE ACCOUNTABILITY:

• A separate secretariat marks a feature of a functioning parliamentary democracy. In a parliamentary system, the Parliament must watch over the executive, both political and permanent.
• Thus, the Parliament should have the technical and human resource capacity to be an effective body for providing meaningful scrutiny and enforcing accountability.

EXPERTISE IN PARLIAMENTARY PROCEDURES:

• Serving/retired civil servants appointed to the higher posts suffer from a lack of exposure and poor knowledge of Parliamentary procedures.
• Expertise in Parliamentary functioning is not only a product of domain competency but also of experience. A dedicated service like the ILS can address this problem.

SIGNIFICANCE OF THE POST OF THE SECRETARIES-GENERAL:

• The Secretaries-General of both the Houses are mandated with many Parliamentary and administrative responsibilities.
• One of the prerequisites that demand the post of the Secretary-General is unfailing knowledge and vast experience of parliamentary procedures, practices, and precedents. Most civil servants precisely lack this aspect of expertise.
• A dedicated ILS will provide a wider talent pool of qualified, experienced, reliable, and autonomous human resources for selection to man the crucial post of SG.

GROWTH OF LEGISLATIVE INSTITUTIONS:

• With the 73^rd and 74^th Constitutional Amendments, thousands of legislative bodies have come up at the local level in India.
• Although the local self-government institutions may not be comparable to those at Union and State levels, still they have significant roles and functions in the democratic setup.
• An ILS will prove to be the vital missing link that enables these bodies to act as institutions of “self-government” in the true sense.

VERTICAL INTEGRATION OF LEGISLATIVE INSTITUTIONS:

• There is hardly any mechanism for a continuous interaction or sharing of knowledge resources among the legislative institutions. The annual Presiding Officers’ conference cannot fulfill this need for continuous administrative engagement.
• By providing a common pool of dedicated human resources to these bodies will bring vertical linkage among them, which will be beneficial for learning about best practices, legislative businesses, and Parliamentary innovations, among others.

CHALLENGES OF MODERN GOVERNANCE:

• The growth of modern government and expansion of governmental activities require a matching development and laborious legislative exercise. The legislators being laypersons, need expert assistance so that they can discharge their functions effectively.
• For the government, the bureaucracy acts as the think tank and thus, the Parliament also needs a think tank and the ILS is the best bet in this regard.

HOW IS THE SECRETARIAT ORGANIZED AT VARIOUS LEVELS?

In general, the personnel of the Parliament is recruited by the respective Houses themselves. For instance, the Rajya Sabha Secretariat conducts open competitive examinations for filling up vacancies in specified posts. Other modes of recruitment are a deputation from Central/State governments and legislature secretariats, promotion from existing secretariat services, lateral entry, and appointment of serving/retired civil servants, especially in higher-level positions. A similar arrangement exists at the State level, although variations may be there. At the local level, the practice of Parliamentary form is still in the nascent stage; the practices considerably vary across states. Here a uniform pattern is not visible, and the administrative personnel generally are state government employees.

FORMER CBDT CHAIRMAN PC MODY REPLACES PPK RAMACHARYULU AS SECRETARY-GENERAL OF RAJYA SABHA

Less than three months after being appointed as the Secretary-General of the Rajya Sabha, PPK Ramacharyulu has been replaced with former Central Board of Direct Taxes (CBDT) chairman PC Mody. Mody has been appointed as the new Secretary-General of the Rajya Sabha just weeks before the commencement of the Winter Session of Parliament, which is expected to start on 29 November. Mody, a former chairman of CBDT, will be the new Secretary-General of the Upper House of Parliament. Rajya Sabha Chairman M Venkaiah Naidu has signed an order to this effect.

Mody, a 1982-batch Indian Revenue Service (IRS) officer, being appointed as the Secretary-General of the Upper House marks a rare occasion when an IRS officer has held the post. Most of the time, the post is traditionally held by an IAS officer. Ramacharyulu has now been appointed as an advisor in the Rajya Sabha Secretariat. Ramacharyulu was appointed as the Secretary-General of the Rajya Sabha on 1 September.2021. No reason has been given for his replacement.

According to reports, Ramacharyulu goes down in history for having the second shortest stint as Secretary-General. Mody is a 1982 IRS officer who was given three extensions as CBDT chairman since August 2019. The Secretary-General heads the Secretariat of the House and is seen as the eyes and ears of the Rajya Sabha chairman when it comes to matters of rules and procedures. The position of SG is a crucial one in the Parliamentary system.

According to the Rajya Sabha website, the SG is the parliamentary adviser to the RS chairman and through him to the House. The SG is also the administrative head of the RS Secretariat and, overall, in charge of all administrative and executive functions on behalf of, and in the name of, the Chairman. There are no recruitment rules for appointing SG to LS or RS. It is completely the discretion of the Speaker, in the case of Lok Sabha and Chairman in the case of Rajya Sabha, to appoint whoever they think is suitable for the post.

SOURCE: THE FIRSTPOST.COM

PROBLEMS IN THE IDEA OF INDIAN LEGISLATIVE SERVICE?

VIOLATION OF THE CONSTITUTION:

• Article 98 of the Constitution gives power to the Houses to deal with all the aspects of secretariat personnel administration. Recruitment and appointment done by another agency will be deemed as going against this provision.

INHERENT ISSUES IN AIS:

• AIS has been severely criticized by many states as going against the federal provisions of the polity, and a new AIS is likely to add fuel to the fire.
• Also, it is highly doubtful if this new AIS will have the proposed efficiency given the less-than-optimal efficiency of other All-India Services.

IMPACT ON CAREER ADVANCEMENT OF EXISTING CADRE:

• Appointees to the Secretariat from the ILS will be holding middle to senior-level posts which will adversely impact the career advancement opportunities of the existing cadre of employees and officers.

NO EMPIRICAL DATA:

• Hardly any study is conducted that shows that the ILS is the solution for the present problems faced by legislative institutions.

STRUCTURAL CONSTRAINTS OF LEGISLATURES:

• The legislatures’ functions, including law-making, suffer from multiple structural constraints, including poor productivity, lack of consensus on crucial issues, criminalization of politics, etc.
• An ILS is not going to be the solution to the problems of legislatures in India.

PRACTICAL DIFFICULTIES:

• The idea of an ILS seems to be naïve as the supporters have not bothered to find out the practical difficulties in implementation, including the huge financial burden on the exchequer.

POSITIONS OF THE LOCAL BODIES:

• The positions of the local self-government institutions in India are not one of a legislative body and the structure and practice of the parliamentary system hardly exist at this third tier.
•  There exists a lot of confusion about the actual role of PRI/ULB in Indian governance. An ILS is deemed to be a misfit and results in a waste of resources in such a context.

THE CLERK OF THE HOUSE- THE PARLIAMENT OF THE UNITED KINGDOM

The Clerk of the House is the principal constitutional adviser to the House and adviser on all its procedure and business, including Parliamentary privilege, and frequently appears before Select and Joint Committees examining constitutional and Parliamentary matters. As with all the members of the House Service, he is politically entirely impartial and is not a civil servant.

THE WAY FORWARD

• The legislative institutions have to be equipped to carry out their responsibilities efficiently and effectively which requires a competent human resource-based secretariat system. The Parliament and state legislatures may bring laws to provide for a streamlined personnel system independent of the executive.
• The idea of an ILS may be worth trying, provided a political consensus is reached on its modalities of establishment and other details, but whose appointment needs to take care of the current nature of Indian polity.
• It is not advisable due to efficiency, impartiality, and moral considerations to appoint serving/retired Civil Servants to the higher-level positions and it is necessary to have a select pool of officers from the inside cadre who should be trained and groomed.
• To ensure effective parliamentary control over the executive and to provide for efficient Parliamentary functioning, the structural constraints faced by the institutions need to be addressed.
• Parliamentary Research and Training Institute for Democracies (PRIDE) is an integral part of the Lok Sabha Secretariat to provide parliamentarians, staff, and others with institutionalized opportunities for systematic training in the various disciplines of parliamentary institutions, processes, and procedures. Another such platform is PRISM (Parliamentary Research and Information Support for Members of Parliament). These platforms need to be utilized for enhancing the human resource competency of the personnel, and a similar setup must be established at the state level.

THE CONCLUSION: Every time inefficiency and poor standard of the administration is debated, the ready-made solution seems to be a new AIS be it in areas like environment, health, education, judiciary, or others. This purported solution is oblivious to the inefficiencies and poor standards in the existing AIS as often brought out by many committees and commissions. Thus, bringing another AIS in the form of ILS is not the panacea for the ills of the Indian Parliamentary system. The legislative institutions at the Union and the State level need to develop into independent institutions in the truest sense like that of developed nations and not become vulnerable to executive interference.

QUESTIONS:

1. “An efficient secretariat system is a sine qua non for an efficient Parliament”. How far do you think that an Indian Legislative Service will contribute towards enhancing the productivity of the Parliament?
2. A strong Parliament means a more answerable executive. Thus, an Indian Legislative Service is the need of the hour. Comment.
3. The proposal for setting up an Indian Legislative Service suffers from constitutional, political, administrative, and pragmatic challenges. Examine.
4. “The Secretary-General of the Rajya Sabha is the principal Parliamentary advisor to the Chairman of the Council of the States”. Discuss.

ADD TO YOUR KNOWLEDGE

THE SERVICES OF THE LOK SABHA SECRETARIAT

(I)Legislative, Financial Committee, Executive and Administrative Service (LAFEAS)

(II) Library, Reference, Research, Documentation, and Information Service (LARRDIS)

(Ill) Verbatim Reporting Service (VRS)

(IV) Private Secretaries and Stenographic Service (PSSS)

(V) Simultaneous Interpretation Service (SIS)

(VI) Printing & Publications Service (P&PS)

(VII) Editorial and Translation Service (E& T)

(VIII) Parliament Security Service (PSS)

(IX) Drivers and Despatch Riders Service

(X) Messengers Service

(XI) Parliament Museum Service (PMS)

THE FUNCTIONS OF THE RAJYA SABHA SECRETARIAT

The Rajya Sabha Secretariat functions under the overall guidance and control of the Chairman, Rajya Sabha. The main activities of the Secretariat inter alia include the following:-

1. providing secretarial assistance and support to the effective functioning of the Council of States (Rajya Sabha);
2. the payment of salary and other allowances to the Members of Rajya Sabha;
3. providing amenities as admissible to Members of Rajya Sabha;
4. servicing the various Parliamentary Committees;
5. preparing research and reference material and bringing out various publications;
6. recruitment of manpower in the Rajya Sabha Secretariat and attending to personnel matters; and
7. preparing and publishing a record of the day-to-day proceedings of the Rajya Sabha and bringing out such other publications as may be required concerning the functioning of the Rajya Sabha and its Committees.

In the discharge of his constitutional and statutory responsibilities, the Chairman, Rajya Sabha, is assisted by the Secretary-General, who holds the rank of the Cabinet Secretary to the Government of India. The Secretary-General, in turn, is assisted by senior functionaries at the level of Secretary, Additional Secretary, Joint Secretary, and other officers and staff of the Secretariat. Based on the recommendations of the Parliamentary Pay Committee way back in 1974, the Secretariat was restructured on a functional basis into the following Services, which cater to the specific needs of the House and its Committees.

1. The Legislative, Financial, Executive, and Administrative (LAFEA) Service
2. The Library, Reference, Research, Documentation, and Information (LARRDI) Service
3. The Verbatim Reporting Service
4. The Simultaneous Interpretation Service
5. The Editorial and Translation Service
6. The Private Secretaries and Stenographic (PSS) Service
7. The Printing and Publications (P&P) Service
8. The Watch & Ward, Door Keeping, and Sanitation Service
9. The Drivers and Despatch Riders Service
10. The Messenger Service

THE CONTEXT: The SilverLine project – a semi high-speed rail corridor that connects one end of Kerala to the other – has been mired in controversy. The project, which has been in the making for the past 12 years, has drawn flak from activists, engineers, and the people who will be displaced by land acquisition. But the state government seems to be determined to proceed with the project. This article analyses this issue in detail.

ALL YOU NEED TO KNOW ABOUT THE SILVERLINE PROJECT

WHAT IS SILVERLINE?:

• The SilverLine is proposed as a stand-alone, standard gauge, electric, fully fenced rail line corridor.
• The proposed 529.45-km line will link Thiruvananthapuram in the south to Kasaragod in the north, covering 11 districts through 11 stations.
• The deadline for the completion of the project is given as 2025.

TECHNICAL FEATURES:

• When the project is completed, one can travel from Kasaragod to Thiruvananthapuram in less than four hours at 200 km/hr. On the existing Indian Railways network, it now takes 12 hours.
• The project will have electric multiple unit (EMU) trains, each with preferably nine cars extendable to 12.
• A nine-car rake can seat a maximum of 675 passengers in business and standard class settings.

IMPLEMENTING AGENCY:

• Kerala Rail Development Corporation Limited (KRDCL) or K-Rail, a joint venture between the Kerala government and the Union Ministry of Railways created to execute big railway projects, is the project’s proponent.

FINANCIAL REQUIREMENT:

• The corridor is projected to be built at the cost of Rs 63,941 crore.
• The line is expected to be constructed using equity funds from the Kerala government, the Centre, and loans from multilateral lending agencies.

CURRENT STATUS OF THE PROJECT:

• The Centre has only given in-principle approval to the project but the state government has begun the process of land acquisition.
• Out of 1,383 hectares needed to be acquired, 1,198 hectares will be private land.
• As part of the first acquisition stage, local revenue and K-Rail officials are on the ground, demarcating land and placing boundary stones that have faced strong public opposition.

SILVERLINE: THE REQUIREMENT OF THE TIME FOR THE PEOPLE OF KERALA

Even though known to be a linear state with a population of only 3.45 crores, Kerala is commonly divided and called Southern Kerala, Central Kerala, and Northern Kerala. The Highways are choked with the rush of vehicles. The existence of residential and commercial establishments along the major highways makes road development a dream that will not happen shortly. With road development at standstill, new vehicles are entering the roads of Kerala at the rate of 1 million per year.

Considering the capacity of traffic served by the rail corridor and the comparatively fewer resources required for realizing rail projects, a rail corridor connecting the North and south ends of Kerala seems ideal for the state. Since the existing rail corridor is serving the trains to travel at a low speed of 45km/hour only, the Government of Kerala in association with the Ministry of Railways has decided to construct a Semi high-speed rail corridor of 529.45 km length from Thiruvananthapuram to Kasaragod which will take only 4 hours to travel between the two cities by traversing at a dream speed of 200 km/h. This project is known to be “Silverline”.

POTENTIAL BENEFITS OF THE SILVERLINE PROJECT

FULFILLS THE TRANSPORT DEMAND:

• The existing railway infrastructure in the state cannot meet the demands of the future. The government claims the project can take a significant load of traffic off the existing railway stretch and make travel easier and faster for commuters.
• This will in turn reduce the congestion on roads and help reduce accidents and fatalities.

INDUSTRIAL AND ECONOMIC DEVELOPMENT:

• The project estimates that 2,80,000 hrs worth of human time and effort could be saved and directed towards other constructive purposes. It will lead to a significant increase in human productivity and efficiency.
• It will help in the expansion of Ro-Ro services, produce employment opportunities, integrate airports and IT corridors, and faster development of cities it passes through.
• The improved connectivity will increase business opportunities, ease of doing business, and industrial development.

ENVIRONMENTAL BENEFITS:

• Building capacities today to achieve a carbon net neutral world over the next three to four decades is the core aspect of the national strategy of all countries.
• High-speed rail systems leave a smaller carbon footprint than other modes of transport.

INTERNATIONAL EXPERIENCE:

• Japan’s high-speed rail system was developed and implemented by that country’s national railways when it was under immense financial stress due to borrowings. High-speed railways are also one of the factors that have spurred development in China.
• When the London underground railway was conceived, it was considered financially unviable. But today, the city of London’s economic activities would be inconceivable without it.

DEVELOPMENT OF TOURISM:

• SilverLine can provide easy, safe, and fast transportation facilities from the southern tip to its northern frontier. This would promote tourists to choose multi-destination tourism packages. It will create large opportunities for the tourism sector of Kerala.
• The SilverLine project will provide a huge growth potential in the tourism sector, which contributes to 10% of the domestic production of the state.

PUMP PRIMING THE ECONOMY:

• A major way to tackle the economic slowdown is to spend money on infrastructure development. Spending money on developing infrastructure will only do good, whatever the economic scenario.
• Infrastructure development will ultimately provide a huge boost to the employment/business market. These kinds of infrastructure projects are even more important in the current situation where the economic scenario is deteriorating due to Covid-19.

ATMA NIRBHAR BHARAT AND MAKE IN INDIA: 

• The technology and manufacturing companies required for the project are available in India itself. Rolling stock (train) can be manufactured in India by including it in the ‘Make in India’ scheme.
•  Several international manufacturers of trains have their units in India. The Silverline project has been developed in line with the public procurement policy of the Central government and the Atmanirbhar Bharat Scheme.

CRITICISMS OF THE SILVERLINE PROJECT

ENVIRONMENTAL DAMAGES:

• There has been significant opposition by environmentalists citing potential damage to the ecosystem. They fear the irreversible impact on the state’s rivers, paddy fields, and wetlands. This could trigger floods and landslides in the future, they say.
• The Kerala Paristhithi Aikya Vedi, a forum of eco-experts and activists, has called on the government to abandon the project and explore sustainable solutions.

FLAWED EIA PROCESS:

• A Thiruvananthapuram-based research institute, the Centre for Environment and Development (CED) completed a Rapid Environmental Impact Assessment (REIA) on the project. The research institute was not an authorized agency for doing Environmental Impact Assessments (EIA).
• A Comprehensive Environmental Impact Assessment (CEIA) is necessary to cover all the seasons in a year, not a REIA done through just one season.
• The report submitted focused on the project’s positive aspects while ignoring the major negative aspects and fails to suggest plans to mitigate them.

HUGE POPULATION DISPLACEMENT:

• K-Rail estimates that 9,314 buildings would have to be demolished. It is known that at least 10,000 families may have to be relocated. Once the Environment Management Plan (EMP) is complete, this number could be double the estimate.
•  The state has already been under the onslaught of two disastrous floods in recent times that displaced thousands who are still not rehabilitated so are the evictees of several land acquisitions.

THE METROMAN’S OPINION:

• Mr. Sridharan, the Metro Man says that the rail runs parallel to the existing railway line, which isn’t advisable as it would interfere with the future quadrupling of this stretch.
• He adds that SilverLine should be away from the existing line, either elevated or underground. Nowhere in the world high-speed or semi high-speed lines are planned at the ground level.
• According to him, no final location survey has been done on the ground for the Silver Line. Finalizing a railway alignment based on Google Maps or Lidar survey is not acceptable, particularly when land acquisition is being pursued with undue haste. When a final location survey is done, there will be a lot of changes and half the land acquisition will be a waste.

HUGE PUBLIC OPPOSITION:

• A group called Anti-K-rail Janakeeya Samithi(Peoples Committee), formed by those against the project, has also been continuously protesting against its implementation for more than a year.
• The face-off between the people and the police and K-Rail officials has become a regular feature in Kerala with the protestors accusing the police of high-handedness.
• The Chief Minister of Kerala has characterized those opposing the project as anti-development, which has further enraged the people and the opposition parties.

POOR TRANSPARENCY:

• The main project document, the Detailed Project Report or DPR, is still not public. It is also speculated that K-Rail has not yet finalized the DPR.
• It is inconceivable to witness such secrecy and lack of accountability from a state used to top governance rankings.
• Meanwhile, K-Rail has made the alignment (the route) of the corridor public, leading to speculations by people who may lose their land and those who are moving in to grab prime land around the project.

PARTITIONING THE STATE:

• A major part of the Silver Line is designed as a fully fenced large bund, called embankments. Embankments in the project are mud-rock-concrete structures with concrete retaining walls, with a width of 15 to 30 m. These embankments would have a height of 1 to 8 meters above the maximum flood line (MFL). This forms 55% of the total distance of the alignment, which is 292.73 km.
• The project will look like a fort that separates the east and the west of Kerala. Bridges would be provided for people to cross over and drains for water to flow.
• While people may eventually get used to such impediments to their free movement, it will be difficult to stop water overflow, especially the torrential rains and floods that are an annual feature now.

POOR KNOWLEDGE OF LOCAL ECOLOGY:

• An analysis of the REIA shows that literally a watershed in the vicinity of the project in Kerala’s landscape. The rail corridor can block rainwater drainage and aggravate the impact of floods. The report also talks about the project affecting paddy fields and flood plains. The corridor also cuts through the mangrove forests of north Kerala.
• But the report suggests reducing the environmental impact by planting new mangroves after the construction. Neither the project proponents nor the scientists seem to be knowledgeable on matters related to landscape, ecology, and ecosystems.

DETRIMENTAL LAND-USE CHANGES:

• There will be a change in land use in the project area, around 500 meters towards each side of the rail corridor. This means the area and people living 500 meters on both sides of the corridor would be directly affected through mobility, access to resources, and even livelihood.
• Ironically, Kerala does not even have a land-use policy, and the draft of such a policy that was first presented in 2010 is still gathering dust in the Revenue Department.

NO SCOPE FOR INTEGRATION:

• The rail line is a stand-alone standard gauge project, with no integration possible with the present railway projects, which are all broad gauge rail systems. The Silver Line railway stations are away from present railway stations and road or rail networks, making it costly to build new last-mile connectivity.
• K-Rail proposes to raise loans to spend on this project alone. But the corridor would be viable only with such last-mile connectivity in place.

DOUBTFUL FINANCIAL VIABILITY:

• The Centre has also taken a firm stand against the project, stating a small state like Kerala cannot withstand such a huge financial liability.
• The Kerala government was expecting assistance of Rs 2,150 crore from the Centre. But the Centre has rejected the state’s request for a standing guarantee for a foreign loan. Allotment from the central fund is also uncertain.
• More than half the total amount to be spent on the project is expected to come from foreign institutions, but as of now, the Union government has not given its support.
• Independent experts suggest that the project will overshoot the present estimate and run into Rs 2 lakh crore, adding to the already precarious state finances and public debt.

NO SILVERLINE IN KERALA’S SILVERLINE FOR ECOLOGY

Kerala’s Silver Line project, a semi high-speed railway line that proposes to connect the north and south of the coastal state, could be unimaginably disastrous to the region’s fragile ecology. For instance, the Madayipara Biodiversity heritage site in North Kerala’s Kannur district is a laterite hillock surrounded by Kuppam, Ramapuram, and Peruvamba rivers and the ecologically fragile Kavvayi backwaters. The hillock is home to 657 plants, 142 butterfly species, 186 bird species, and 60 species of odonates. It also has 24 species of reptiles, and 19 species of amphibians, which are rare and endangered ones. Though the hillock represents less than 0.01% of Kannur, it harbours 58.75% of the flora in the district.

About 132 km south of Madayipara is the Kadalundi bird sanctuary and its estuarine ecosystem. A little away from Kadalundi, the highly ecologically sensitive Ponnani-Thrissur Kole wetlands remain spread over 13,632 ha, which is considered the third largest of their kind in entire India, after Chilika Lake (Odisha) and Amipur Tank (Gujarat), in terms of the number of birds it supports. Ornithologists note that 241 species of birds, including passerines, have been recorded in these wetlands, of which 30% are migrants.

Close to Ponanni lies Thirunavaya, a village with numerous ponds, lakes, and wetlands. Here, over 30 families meticulously tend lotus flowers to supply to different temples in the state, including the famous Sri Krishna Temple in Guruvayur. Experts observe that the environmental, social, and financial equilibriums of Madayipara, Kadalundi, Ponnani, and Thirunavaya would be badly affected along with numerous other villages between Kasargod in north and Thiruvananthapuram in the far south if the project goes through.

KERALA MODEL OF INFRASTRUCTURE DEVELOPMENT- A POLITICO-BUREAUCRATIC ENTERPRISE?

Kerala seems to be in the habit of bulldozing through technically unviable, financially intensive, and ecologically destructive projects. The Vizhinjam International Port is a classical case study. The project has unleashed an environmental disaster and is also facing a financial breakdown. Many scientists, environmental groups, and fisherfolk had voiced their opposition to this project right from the beginning and were characteristically ignored by the political parties and bureaucrats. The arguments of the public ran the same narrative as in the case of the Silver Line. In the last five years, hills have been quarried for rocks to be deposited into the sea to build the sea wall for the port. But every time the coast is hit by a cyclone or high tidal waves, the walls collapse, wasting precious resources. Only a quarter of the sea wall has been built, and the project has already shot its timeline by nearly two years. It has also eroded the fishing and tourist beaches, including Kovalam and Shankhumukham. Hundreds of fisher families have lost their homes to the sea. The Vizhinjam project, which was hyped to make Thiruvananthapuram a paradise, has now become a center point of disaster.

THE WAY FORWARD:

ADDRESS THE CONCERNS OF ALL THE STAKEHOLDERS:

• Considering Kerala’s fragile landscape and social conditions and the magnitude of the project, a CEIA is imperative. The government has initiated the process for a detailed EIA and also a Social Impact Assessment (SIA).
• Meanwhile, the land acquisition and evictions shouldn’t be going ahead without completing the EIA and SIA and placing them along with the DPR for public consultations.
• People and experts have demanded that all project activities should be stopped till the DPR and EIA are done and made public and all alternatives evaluated.

DEVELOP A COMPREHENSIVE TRANSPORT POLICY:

• Several groups have demanded a comprehensive transport policy in the state instead of the expensive Silverline project.
• This will provide a road map and vision for the development of transport infrastructure in the state based on long-term planning multi-modal integration and can have general public support.

SPEED UP RAILWAY INFRA PROJECTS:

• Kerala must speed up all the ongoing rail projects to allow the lines to run Vistadome coaches and high-speed trains like the Gatimaan Express that continue to use the broad gauge track. The standard gauge track without any future or expandability seems not a good idea.
• The Indian Railways plans to increase the speed of a few trains to 160 km per hour. If this is possible in the existing railway line in Kerala, it would have a transport system whose environmental cost is already paid.

AN HONEST ASSESSMENT OF THE FINANCIAL VIABILITY:

• The capital-intense nature of the project and the impact on Kerala’s finances need independent evaluation as the K-Rail estimates seem to underestimate the project costs.
• Also a debate should be there on the necessity to change the current Centre-State fiscal regime to ensure that States can indeed invest in projects of infrastructural importance.

DECENTRALIZE DEVELOPMENTAL OPPORTUNITIES: 

• The state needs to promote decentralized development, including access to socio-economic infrastructure and employment.
• This will reduce the pressure on existing transport infrastructure, address the problem of climate change and promote environmental sustainability.

LEARNING THE LESSONS FROM THE PAST:

• Kerala needs to learn from the huge destruction that nature unleashed on its people due to its obsession with “development”.
• The politico-bureaucratic elites need to come out of the notion that development means dams, bridges, high-speed rail, multiplexes, etc. only.
• They must also need to base sustainable development policies and practices on developmental discourse and practices.

A FEASIBLE LAND ACQUISITION POLICY:

• The government’s land acquisition policy needs to be tailored so that the pain of displacement and relocation is minimized.

THE CONCLUSION:  A project of this size and complexity will involve issues of implementation, resource mobilization, the important task of measuring the local environmental impact, specific alignment of tracks, and humane compensation policy. All of these can and must be addressed and till then the state government needs to slow down a bit. And if after all the evaluations, the project is found to be unviable, then it is better to look for alternatives.

QUESTIONS:

1. Explaining the salient features of the SilverLine project of the state of Kerala, comment on its social, economic, and environmental implications.
2. “A top-down approach to infrastructural development is not in tune with the idea of sustainable development”. Examine the statement in the light of the Silverline project of the state of Kerala.
3. Democratic decentralization sans developmental decentralization can have major socio-economic and environmental consequences. Illustrate.

THE CONTEXT: Recently in March 2022, the concerns have been raised that consumers may have to pay more for medicines and medical devices if the National Pharmaceutical Pricing Authority (NPPA) allows a price hike of over 10% in the drugs and devices listed under the National List of Essential Medicines (NLEM). The following article explains everything about the pricing of essential drugs in India.

WORKING OF PRICING MECHANISM

• All medicines under the NLEM are under price regulation. The NLEM lists drugs used to treat fever, infection, heart disease, hypertension, anemia, etc, and includes commonly used medicines like paracetamol, azithromycin, Cardiac Stents, Knee implants, etc.
• The Health Ministry prepares a list of drugs eligible for price regulation, following which the Department of Pharmaceuticals incorporates them into Schedule 1 of DPCO.
• The Standing Committee on Affordable Medicines and Health Products (SCAMHP) will advise the drug price regulator the National Pharmaceutical Pricing Authority (NPPA) on vetting the list. The NPPA then fixes the prices of drugs in this Schedule.
• As per the Drugs (Prices) Control Order 2013, scheduled drugs, about 15% of the pharma market, are allowed an increase by the government as per the WPI (Wholesale Price Index) while the rest 85% are allowed an automatic increase of 10% every year.
• The annual change in prices of scheduled drugs is controlled and rarely crosses 5%.
• Under the Drugs and Cosmetics Act 1940, the drugs are classified in schedules, and regulations are laid down for their storage, display, sale, dispensing, leveling, prescribing, etc.

Essential Medicines List:

• As per the World Health Organisation (WHO), Essential Medicines are those that satisfy the priority health care needs of the population. The list is made with consideration of disease prevalence, efficacy, safety, and comparative cost-effectiveness of the medicines.
• Such medicines are intended to be available in adequate amounts, inappropriate dosage forms, and strengths with assured quality. They should be available in such a way that an individual or community can afford them.

National List of Essential Medicines of India:

• The WHO EML is a model list, the decision about which medicines are essential and remains a national responsibility based on the country’s disease burden, priority health concerns, affordability concerns, etc.
• Ministry of Health and Family Welfare, Government of India hence prepared and released the first National List of Essential Medicines of India in 1996 consisting of 279 medicines. This list was subsequently revised in 2003, 2011, and 2021.

ABOUT THE NATIONAL PHARMACEUTICAL PRICING AUTHORITY

The National Pharmaceutical Pricing Authority (NPPA) is a government regulatory agency that controls the prices of pharmaceutical drugs in India. It was constituted by a Government of India Resolution dated 29th August 1997 as an attached office of the Department of Pharmaceuticals (DoP), Ministry of Chemicals and Fertilizers as an independent regulator for pricing of drugs and to ensure availability and accessibility of medicines at affordable prices with Headquarter at New Delhi, India.

Drugs (Prices) Control Order 2013:

• The Drugs Prices Control Order is an order issued by the Government of India under Sec. 3 of Essential Commodities Act, 1955 to regulate the prices of drugs.
• The Order provides the list of price-controlled drugs, procedures for fixation of prices of drugs, method of implementation of prices fixed by Govt., penalties for contravention of provisions, etc.
• For the purpose of implementing provisions of DPCO, powers of Govt. have been vested in NPPA.
• The DPCO 2013 contains more than 600 scheduled drug formulations spread across 27 therapeutic groups. However, the prices of other drugs can be regulated, if warranted in the public interest.

KEY FUNCTIONS OF NPPA

NPPA INITIATIVES

• The National Pharmaceutical Pricing Authority (NPPA) is headquartered in New Delhi and to increase its reach across the country, NPPA has set up a Price Monitoring and Resource Unit (PMRU) in the various Indian States and Union Territories.
• These PMRUs have been set up under the Consumer Awareness, Publicity, and Price Monitoring (CAPPM) scheme.
• As of March 2022, there are 23 states/UTs with the most recent addition of Himachal Pradesh on 23^rd March 2022 as the 23rd Price Monitoring and Resource Unit (PMRU). The pharmaceutical authority aims to set up a price monitoring unit in each and every state and union territory across India.

SIGNIFICANCE OF NPPA

• It is important to fix the prices of certain important drugs so that they are affordable and accessible to every citizen of the county and the National Pharmaceutical Pricing Authority ensures the same.
• It mandates that no supplier can sell a drug for more than its Maximum Retail Price (MRP).
• NPPA also played a crucial role during the pandemic time in the country by either fixing or regulating the prices of essential drugs and devices.

 AN ANALYSIS OF THE ISSUE

• The pharma lobby is asking for at least a 10% increase for scheduled drugs too rather than going by the WPI. Over the past few years, input costs have flared up and one of the reasons being 60%-70% of the country’s medical needs, are dependent on China.
• NPPA has been receiving applications for upward price revision under para 19 of DPCO, 2013, for the last two years citing reasons like “increase in Active Pharmaceutical Ingredient – API (key ingredient) cost, increase in the cost of production, exchange rates, etc. resulting in unavailability in sustainable production and marketing of the drugs.
• India is dependent on China for over 60% of its API requirement; higher API costs for price-controlled medicines reduce profits and sometimes even make the production of these drugs unviable in India.

THE WAY FORWARD

• We all are aware of the shortage of Remdevisir injections in May 2021 and black marketing and hoarding which led to skyrocketing prices. In this context, Bombay HC has asked the Centre to include Remdesivir in the list of Scheduled Drugs and regulate its price. Such steps should be proactively taken by the government with the foresight of emerging situations.
• The interests of pharmaceutical companies shall not be put ahead of the lives of ordinary citizens. As of 23^rd March 2022, only 14% of people in low-income countries have received at least one vaccine dose against COVID-19. India and South Africa have thus, taken a firm position that when lives are at stake, such essential products should be treated as global public goods and IPRs under TRIPS Agreement must be waived.
• NPPA shall also revise the list of essential medicines at short and regular intervals to have a positive impact on the availability and rational use of medicines.
• In the longer term, India needs to build capabilities to manufacture the key ingredients for these medicines.

THE CONCLUSION: Having an Essential Medicines List (EML) results in a better quality of medical care, better management of medicines, and cost-effective use of health care resources. This is especially important for a resource-limited country like India. The decision is to ensure, that life-saving essential drugs remain available to the general public at all times. To avoid a situation where drugs become unavailable in the market and the public is forced to switch to costly alternatives this is the first time the NPPA, known to slash prices of essential and life-saving medicines, is increasing prices in the public interest.

MAINS QUESTIONS:

1. Elaborate on the role of the National Pharmaceutical Pricing Authority (NPPA) in ensuring the availability of life-saving essential drugs to the general public at all times.

THE CONTEXT: The Centre constituted the Ken-Betwa Link Project Authority to implement the first initiative under the national river interlinking policy, which seeks to bring nearly 11 lakh hectares of land under irrigation in the parched Bundelkhand region straddling Uttar Pradesh and Madhya Pradesh. Earlier, the finance minister allocated Rs 44,605 crore for the implementation of the Ken-Betwa River link project for irrigation of the Bundle Khand region in the Union Budget 2022-23.

KEN BETWA LINK PROJECT: OVERVIEW

• It is a river-interlinking project that aims to transfer surplus water from the Ken river in Madhya Pradesh to Betwa in Uttar Pradesh to irrigate the drought-prone Bundelkhand region. Both Ken and Betwa are the tributaries of the Yamuna.
• It is the first river interlinking project, among the 16 similar projects planned under the Peninsular Rivers Development of the National Perspective Plan (NPP).
• The main objective of the NPP is the transfer of water from river basins with surplus water to those with scarce water, for tackling the problem of water scarcity. The NPP comprises the Himalayan Rivers Development and Peninsular Rivers Development.
• The Ken Betwa River linking project, the construction schedule for which has been planned for eight years, will be executed in two phases:
• Phase-I: In the first phase, the Daudhan dam complex and its appurtenances, such as low-level tunnel, high-level tunnel, 221-kilometre Ken-Betwa link canal, and powerhouses will be completed.
• Phase-II: In the second phase, the Ken Betwa link project development works will be started for the lower Orr dam, Bina complex project, and Kotha barrage.

KEN BETWA RIVER LINKING PROJECT TIMELINE

• August 1980: The National Perspective Plan(NPP) is formulated.
• August 2005: MoU signed by state governments of MP, UP, and the ce
• central government to prepare the DPR for the project.
• April 2010: The National Water Development Agency (NWDA) completes the DPR for phase-I of the KBLP.
• January 2014: The NWDA completes the DPR for phase II of the project.
• September 2014: Special Committee on interlinking of rivers (ILR) was constituted, for implementing the ILR program.
• April 2015: A task force for interlinking of rivers was constituted by MoWR, River Development, and Ganga Rejuvenation.
• March 2021: Governments of UP and MP sign an MoU with the Jal Shakti Ministry for implementing the Ken betwa river linking project.
• February 2022: Government announces budget allocation of Rs 44,605 crore for the project during the Union Budget 2022-23.

KEN BETWA PROJECT COST

• The project will be completed at an estimated cost of around Rs 44,605 crores. The Ken-Betwa Link Project Authority, a special purpose vehicle (SPV) for implementing the project will be formed and the central government will bear 90% of the total project cost, while the states will bear the rest (UP and MP).

A Special Purpose Vehicle (SPV) for the project:

• A Special Purpose Vehicle (SPV) called Ken-Betwa Link Project Authority (KBLPA) will be set up to implement the project. In fact, the Centre has set in motion the process of creation of the National Interlinking of Rivers Authority (NIRA), an independent, autonomous body for planning, investigation, financing, and implementation of the interlinking of river (ILR) projects in the country.
• The NIRA will have powers to set up SPV for individual link projects.

KEN BETWA RIVER LINKING PROJECT: BENEFITS AND IMPACT

• The government envisions the interlinking of rivers as a top priority towards sustainable development of water resources in India. The Ken Betwa link project has been planned as a multi-purpose project for providing several benefits in terms of better utilisation of water resources and addressing the water scarcity in several parts of the Bundelkhand region.
• The region is prone to recurring drought conditions that have impacted socio-economic development in the area. Moreover, the location is not rich in groundwater due to the hard rock and marginal alluvium terrain. Hence, the project will help in utilising the floodwater during monsoon and stabilise the availability of water during lean months, especially in drought years.
• The Ken and Betwa river project will also provide annual irrigation and hydropower generation. The districts that will benefit from the Ken Betwa link pariyojna include Chhatarpur, Tikamgarh, Sagar, Damoh, Datia, Vidisha, Shivpuri, and Raisen and Panna in Madhya Pradesh and Jhansi, Mahoba, Banda and Lalitpur in Uttar Pradesh. Due to the project, as many as 62 lakh people in the Bundelkhand region will also experience an improved drinking water supply.

SOCIAL, ECONOMIC, AND ENVIRONMENTAL IMPACTS OF THE PROJECT

Social Impact: A major goal of the project is to provide irrigation to the water-scarce Bundelkhand region. According to the Water Resources Ministry, a total of 10 villages consisting of 1,585 families are likely to be affected by this project.

• Loss of Land: In all 6422.62 ha of private lands would be lost by the project affected families for the construction of the Daudhan dam and other project components along with the canal network under the project. Besides, as per the project design, about 5339.00 ha of forest lands would also be brought under various project components. This indicates that the landowners would lose their landed properties.
• Loss of Livelihood: About 72 percent of households would become landless, nearly 21 percent would become marginal farmers and almost 7 percent will fall under the small farmer category. As a result of land acquisition, the project affected big farmers who would lose their big farmer status.
• Loss of Employment: Due to land acquisition, several families, who become landless, would lose their total self-employment, who otherwise have been engaged in their farming activity.
• Loss of Income: Project-affected household’s socio-economic environment will affect their family life due to loss of land, livelihood, and employment resulting in reduced family income.

Economic Impact:

• This project will prove several economic benefits like the development of agro-based industries, and transportation and storage facilities.
• Increased farm supplies, production, and consumption of fertilizer, pesticide, farm equipment, and employment generation.
• Economic benefits of irrigation water supply include various benefits on, crop production; recharges groundwater, animal husbandry, farm equipment, and agro-processing.
• Livestock production, especially milk, is a major part of the agricultural economy in the Bundelkhand region. Under the project, a large water body will be coming up by constructing a dam and will certainly recharge and increase the groundwater levels in the project area. This will help the farming community as well as other water users who depended on groundwater facilities.
• The project has good potential, particularly because of the close proximity of the Daudhan dam site to Khajurao for recreation and tourism development.
• Provision for the development of tourist huts, and picnic spots has been made on the periphery of Rangwan reservoir (about 9 km from the Daudhan dam site).
• The negative part of the KBLP project is crop and livestock production loss due to the submergence of the crop area upstream of the reservoir.

Environmental Impact:

• This project would submerge an area of 9,000 hectares. Of which 5,258 hectares are forest land (including 4,141 hectares of Panna Tiger Reserve).
• River diversion would bring drastic changes in the physical and chemical compositions of the sediment load, river morphology, and the shape of the delta formed at the river mouth. All these have serious economic and livelihood implications that are merely ignored by the project.
• The project may also lead to a loss of two million trees.
• The land use land cover and vegetation data show that tree density and diversity are comparatively higher in the submerged area.
• The regeneration pattern also shows that the seedling diversity and richness and sapling density diversity and richness are high in the submerged area.
• Minimum flow in the Ken River is adequate to dilute the untreated sewage. Hence the impact on the surface water quality is negligible, which will still be reduced by sewage treatment measures.
• There are valuable timber trees that are going to be submerged.

WILL THE PROJECT AFFECT THE PANNA TIGER RESERVE?

• Panna Tiger Reserve is one of the country’s important and successful tiger recovery reserves.
• A species recovery plan was developed to reinforce the tiger population, because of which the tiger population has increased from 0 in 2009 to 54 in 2019.
• Panna Tiger Reserve was included in the global network of biosphere reserves by the United Nations Educational, Scientific, and Cultural Organisation (UNESCO) in 2020.
• The UNESCO cited PTR as a critical tiger habitat.
• The Project will lead to the submergence of a major portion of the core area of the Panna Tiger Reserve in Madhya Pradesh, triggering a major loss of the tiger and its major prey species such as chital and sambar.
• The project may incur an estimated loss of 58.03 square kilometers (10.07 percent) of critical tiger habitat (CTH) in the reserve.
• There will be an indirect loss of 105.23 sq km of CTH because of habitat fragmentation and loss of connectivity due to submergence.
• The total area submerged would be 86.50 sq km, of which 57.21 sq km lies within Panna Tiger Reserve. This will account for 65.50 percent of total submergence.

THE INTERLINKING OF RIVERS

The National Perspective Plan (NPP) presented the development of water resources through the inter-basin transfer and the transfer of water from water surplus basins to water-deficit basins. The interlinking of rivers is a large-scale civil engineering project that aims to effectively manage water resources in India under the NPP.

Positives of interlinking of rivers for multi-dimensional inter-related problems

Droughts: The drought-prone regions like Vidharbha face perennial droughts. The interlinking of seasonal peninsular rivers with their Himalayan counterparts may be a gamechanger for this region’s agriculture and food security prospects.

Floods: Interlinking of rivers will contribute to flood and drought hazard mitigation for India. It will most likely eradicate the flooding problems which recur in the northeast and the north every year. For example, floodwaters of the Kosi river could be diverted to other east-flowing rivers.

Improve the inland navigation:

• Interlinking of rivers will create a network of navigation channels. Water transport is cheaper, less-polluting compare to road and railways.
• Further, the interlinking of rivers can ease the pressure on railways and roads also.
• More importantly, India has the huge untapped potential of inland water transport, which can be a game-changer in the logistics aspect and, thus, overall costs of goods & services.

Negatives of interlinking of rivers for multi-dimensional inter-related problems:

• Ecological challenges: The ambitious project will divert forest areas and submergence fertile land leading to deforestation and soil- erosion. For example, the Ken-Betwa link projects have reduced 8% of the forest land of Panna National Park. Also, river diversion may bring significant changes in the physical and chemical compositions of the sediment load, river morphology, and the shape of the delta formed in the river basin.
• Social challenges: Reconstruction and rehabilitation of millions of people in and around the river catchments could face significant psychological damage, resulting in social unrest and protests in the initial stages.
• Political challenges: India’s inter-state river doesn’t have a bright history (for example, the Cauvery River dispute). Further, water being a state subject demands sustained inter-state cooperation which may be a challenge given the diversity India offers.

THE WAY FORWARD:

• The interlinking of rivers in India has both pros and cons. Implementing the project in its entirety may be a challenge in present times. Therefore, the government must opt for a decentralized method of implementation instead of a centralized one.
• Inter-linking projects should receive the nod only after appropriate EIA and environmental clearances.
• Further, we must look for alternatives for efficient water use in India. For instance, measures like efficient water use in agriculture (per drop more crop), resourceful rainwater harvesting in drought-prone areas, and so on can be looked upon to liberate India from the persistent water stress.
• Adopt Alternative measures: A case study of Jakhni village of Banda district
• A 2019 NITI Aayog report mentioned Jakhni village of Banda district in Bundelkhand, one of the most water-scarce regions of India. The area witnessed heavy out-migration in search of water and better livelihood opportunities.
• However, through rigorous water conservation efforts such as the construction of farm ponds, restoration of water bodies, collection and utilization of greywater, raising of farm bunds, and intensive plantation of trees since 2014, the water situation has improved. Jakhni village, for example, has become a self-sufficient water village.
• Once a drought-prone village, it now produces nearly 23,000 quintals of basmati rice. The production of other crops has also increased manifold.

THE CONCLUSION: In the era of climate change; river networking is the need of time for development. Successful implementation of the Ken- Betwa link project largely looms upon the timely release of water from the surplus basin to the deficit basin. The problem of providing domestic water supplies in areas away from the rivers will largely remain unsolved. Some of the project’s major criticisms are its socioeconomic viability, environmental impacts, displacement and rehabilitation of affected people, the challenge of resource mobilization, geopolitical constraints, and domestic political dynamics. There is an urgent need to take Socio-environmental concerns related to the link Project so a very detailed hydrological, geological, meteorological, and environmental analysis of the project would be imperative for the benefit of India.

THE CONTEXT: In February 2022, Elon Musk’s Starlink lost dozens of satellites that were caught in a geomagnetic storm a day after they were launched. The loss of over 40 satellites in a single solar event has been described as “unheard of” and “huge”.However, the satellites were designed to burn up on reentry into the Earth’s atmosphere and did not create debris in space. The following article explains the phenomenon of geomagnetic storms from a geographical perspective.

GEOMAGNETIC STORMS

A geomagnetic storm is a major and temporary disturbance of Earth’s magnetosphere. They occur when a surge of the solar wind (charged particles from the sun) interacts with Earth’s magnetic field and generates currents in Earth’s upper atmosphere.

The magnetosphere shields our planet from harmful solar and cosmic particle radiation, Solar Storms occur during the release of magnetic energy associated with sunspots (‘dark’ regions on the Sun that are cooler than the surrounding photosphere – the lowest layer of the solar atmosphere) and can last for a few minutes or hours.

A Solar Storm or a Coronal Mass Ejection (CME) as astronomers call it, is an ejection of highly magnetized particles from the sun. These particles can travel several million km per hour and can take about 13 hours to five days to reach Earth.

Earth is surrounded by an immense magnetic field called the magnetosphere. Generated by powerful, dynamic forces at the center of Earth, our magnetosphere shields us from erosion of our atmosphere by the solar wind, erosion and particle radiation from coronal mass ejections, and cosmic rays from deep space. Our magnetosphere plays the role of gatekeeper, repelling this unwanted energy that’s harmful to life on Earth.

• The Bow Shockoccurs when the magnetosphere of an astrophysical object interacts with the nearby flowing ambient plasma such as the solar wind. For Earth and other magnetized planets, it is the boundary at which the speed of the stellar wind abruptly drops as a result of its approach to magnetopause.
• The Polar Cuspsare near-zero magnetic field magnitude and funnel-shaped areas between field lines that map to the dayside and nightside of the magnetopause surface. They are the primary regions for direct entry of magnetosheath/solar wind plasma into the magnetosphere and may create the appearance of beautiful auroras when seen from the arctic regions of the Earth.
• Van Allen radiation belt, doughnut-shaped zones of highly energetic charged particles trapped at high altitudes in Earth’s magnetic field. The belts are most intense over the Equator and are effectively absent above the poles. The Van Allen radiation belt is a zone of energetic charged particles originating from the solar wind. The particles are captured and held around a planet by that planet’s magnetic field. It surrounds Earth, containing a nearly impenetrable barrier that prevents the fastest, most energetic electrons from reaching Earth.

IMPACT OF GEOMAGNETIC STORMS ON EARTH

ON SPACE WEATHER: Not all solar flares reach Earth, but solar flares/storms, Solar Energetic Particles (SEPs), high-speed solar winds, and Coronal Mass Ejections (CMEs) that come close can impact space weather in near-Earth space and the upper atmosphere.

ON  MAGNETOSPHERE: Coronal Mass Ejections (CMEs) significantly loaded with matter traveling at millions of miles an hour can potentially create disturbances in the magnetosphere. Geomagnetic storms result in intense currents in the magnetosphere, changes in the radiation belts, and changes in the ionosphere, including heating the ionosphere and the thermosphere.

ON SPACE-DEPENDENT SERVICES: Solar storms can hit operations of space-dependent services like Global Positioning Systems (GPS), radio, and satellite communications. Aircraft flights, power grids, and space exploration programs are also vulnerable to geomagnetic storms.

ON COMMUNICATION: Geomagnetic storms interfere with high-frequency radio communications that rely on the ionosphere for propagation.

ON POWER GRIDS, OIL, AND GAS PIPELINES: When the earth is in the direct path of such solar storms, these magnetized and charged solar particles will interact with the earth’s magnetic field and induce strong electric currents on the earth’s surface that can damage long-distance cables.

ON UNDERSEA INTERNET CABLES: Undersea cables have a higher risk of failure compared to land cables due to their large lengths as current is proportional to the area of the loop formed by the two grounds and the cable.

HEALTH RISKS FOR ASTRONAUTS: Astronauts on spacewalks face health risks from possible exposure to solar radiation outside the Earth’s protective atmosphere.

FORMATION OF AURORAS: These storms can create the appearance of beautiful auroras aurora borealis (the northern lights) and aurora australis (the southern lights.)

LINK BETWEEN SOLAR STORMS AND ANIMAL BEACHINGS: Researchers from a cross-section of fields pooled massive data sets to see if disturbances to the magnetic field around Earth could be what confuses these sea creatures, known as cetaceans. CETACEANS are thought to use Earth’s magnetic field to navigate. Since intense solar storms can disturb the magnetic field, scientists want to determine whether they could, by extension, actually interfere with animals’ internal compasses and lead them astray. However solar storms may not be the primary cause of animal beaching but the research continues.

LINK BETWEEN SOLAR STORMS AND MIGRATORY BIRDS: Birds possess a magnetic sense and rely on the Earth’s magnetic field for orientation during migration. However, the geomagnetic field can be altered by solar activity at relatively unpredictable intervals. How birds cope with the temporal geomagnetic variations caused by solar storms during migration is still unclear.

CONCERNS WITH GEOMAGNETIC STORMS

• The Sun goes through an 11-year cycle – cycles of high and low sunspots activity. It also has a longer 100-year cycle. During the last three decades, when the internet infrastructure was booming, it was a low period. And very soon, either in this cycle or the next cycle, we are going towards the peaks of the 100-year cycle. So it is highly likely that we might see one powerful solar storm during our lifetime
• The rapid development of technology took place in the last three decades when the Sun was in its period of low activity and there are very limited studies on whether our current infrastructure can withstand a powerful solar storm.

GEOMAGNETIC STORMS AND INDIA

• The countries in the lower latitudes are at a much lower risk but there is a need for more studies to fully understand the effects of geomagnetic storms and the regions of lower latitudes.
• Modelled and Simulation Studies to understand how connectivity will be affected on a country-scale, showed that the majority of cables connecting India will be unaffected.
• Even under the high-failure scenario, some international connectivity remains (e.g., India to Singapore, the Middle East, etc.). Unlike in China, the key cities of Mumbai and Chennai do not lose connectivity even with high failures
• Compared to the US, India is less vulnerable, but we still need to know more about the strength of solar storms and whether a powerful one can affect India.

THE WAY FORWARD

• Shutdown Strategy:‘Shutdown Strategy’ can help minimize the connectivity loss during and after a solar storm impact. Similar to how we power off power grids, a temporary internet shutdown can protect our equipment during a solar event and ensure the continuation of services.
• Systematic Protocols:
• We need a more systematic protocol for doing this. Both NASA and the European Space Agency have probes now that can detect a solar storm and can give about 13 hours of warning.
• Experts from different fields need to come together to design protocols for power companies and internet service providers.
• Also, today’s health care system depends on power and the internet and we need to have a fallback strategy.
• With the increasing global dependence on satellites for almost every activity, there is a need for better space weather forecasts and more effective ways to protect satellites.

THE CONCLUSION: Current models are capable of predicting a storm’s time of arrival and its speed. But we are still not able to predict the storm’s structure or orientation. Independent solar observations show that solar superstorms capable of large-scale damage may occur only a few times in a century. Nevertheless, given their potential to cause large-scale disruption to our modern society, research and studies are needed to help us prepare and take steps for reducing their impact.

MAINS QUESTIONS:

1. What are geomagnetic storms? What steps are needed to prepare for any possible cause of a powerful solar storm in the future?
2. Explain the possible consequences of a powerful solar storm on life and property on Earth.

ADDED INFORMATION: 5 categories measure geomagnetic storms given by National Oceanic and Atmospheric Administration, USA (NOAA).

THE CONTEXT: The Russian invasion of Ukraine, which started in February 2021, is the largest conventional military attack seen since World War II and can cause a global economic catastrophe. It has deep implications for the world economy as well as the Indian economy. This article analyses those consequences and suggests the way forward for them.

ECONOMIC IMPACTS ON THE WORLD

ENERGY AND COMMODITIES MARKETS:

• Russia is the world’s 3rd largest oil producer, the 2nd largest natural gas producer, and among the top 5 producers of steel, nickel, and aluminum. It is also the largest wheat exporter globally (almost 20% of global trade).
• On its side, Ukraine is a key producer of corn (6th largest), wheat (7th), and sunflowers (1st), and is amongst the top ten producers of sugar beet, barley, soya, and rapeseed.
• On the day the invasion began, financial markets worldwide fell sharply, and the prices of oil, natural gas, metals, and food commodities surged.
• Brent oil prices breached USD 130 per barrel following the latest developments, while Europe’s TTF gas prices surged at a record EUR 192 on 4th March.
• While high commodity prices were one of the risks already identified as potentially disruptive to the recovery, the escalation of the conflict increases the likelihood that commodity prices will remain higher for much longer. In turn, it intensifies the threat of long-lasting high inflation, thereby increasing the risks of stagflation & social unrest in both advanced & emerging countries.

AUTOMOTIVE, TRANSPORT, CHEMICALS ARE THE MOST VULNERABLE SECTORS:

• The crisis is obviously strongly impacting an already strained automotive sector due to various shortages and high commodity & raw material prices: metals, semiconductors, cobalt, lithium, and magnesium.
• Ukrainian automotive factories supply major carmakers in Western Europe: some announced the stoppage of factories in Europe while other plants around the world are already planning outages due to chip shortages.
• Airlines and maritime freight companies will also suffer from higher fuel prices, airlines being the most at risk.
• First, fuel is estimated to account for about a third of their total costs.
• Second, European countries, the US and Canada, have forbidden access to their territories to Russian airlines and in turn, Russia has banned European and Canadian aircraft from its airspace.
• This means higher costs since airlines will have to take longer routes. Eventually, airlines have little room for rising costs as they continue to face lower revenues due to the impact of the pandemic.
• Rail freight will also be impacted: European companies are forbidden to do business with Russian Railways, which will likely disrupt freight activity between Asia and Europe, transiting through Russia.
• It is expected that feedstock for petrochemicals will be more expensive, and the soaring prices of natural gas will impact the fertilizer markets, hence the whole agri-food industry.

DEEP RECESSION AHEAD FOR THE RUSSIAN ECONOMY:

• The Russian economy will be in great difficulty in 2022, falling into a deep recession. Coface’s updated GDP forecast for 2022 stands at -7.5% after the recovery experienced last year. This has led to a downgrade of the country’s risk assessment from B (fairly high) to D (very high).
• Sanctions notably target major Russian banks, the Russian central bank, the Russian sovereign debt, selected Russian public officials & oligarchs, and the export control of high-tech components to Russia. These measures put considerable downward pressure on the Russian ruble, which has already plummeted and will drive a surge in consumer price inflation.
• Russia has built up relatively strong financials: a low level of public external debt, a recurrent current account surplus, as well as substantial foreign reserves (app. USD 640 bn). However, the freeze imposed by western depositary countries on the latter prevents the Russian central bank from deploying them and reduces the effectiveness of the Russian response.
• The Russian economy could benefit from higher prices for commodities, especially for its energy exports.
• However, EU countries announced their intention to limit their imports from Russia. In the industrial sector, restricted access to Western-produced semiconductors, computers, telecommunications, automation, and information security equipment will be harmful, given the importance of these inputs in the Russian mining and manufacturing sectors.

EUROPEAN ECONOMIES ARE AT A HIGH RISK:

• Because of its dependence on Russian oil & natural gas, Europe appears to be the region most exposed to the consequences of this conflict. Replacing all Russian natural gas supply to Europe is impossible in the short to medium run and current price levels will have a significant effect on inflation.
• While Germany, Italy, and some countries in the Central and Eastern European region are more dependent on Russian natural gas, the trade interdependence of Eurozone countries suggests a general slowdown.
• On top of that, we estimate that a complete cut of Russian natural gas flows to Europe would raise the cost to 4 percentage points in 2022, which would bring annual GDP growth close to zero, more probably in negative territory – depending on demand destruction management.

NO REGION WILL BE SPARED BY IMPORTED INFLATION AND GLOBAL TRADE DISRUPTIONS:

• In the rest of the world, the economic consequences will be felt mainly through the rise in commodity prices, which will fuel already existing inflationary pressures. As always, when commodity prices soar, net importers of energy & food products will be particularly affected, with the specter of major supply disruptions in the event of an even greater escalation of the conflict. The drop in demand from Europe will also hamper global trade.
• In Asia-Pacific, the impact will be felt almost immediately through higher import prices, particularly in energy prices. Many economies in the region are net energy importers, led by China, Japan, India, South Korea, Taiwan, and Thailand.
• As North American trade and financial links with Russia and Ukraine are fairly limited, the impact of the conflict will mainly be felt through the price channel and through the slowdown of European growth.
• Despite the prospect of slower economic growth and higher inflation, the recent geopolitical events are not expected to derail monetary policy in North America at this stage.

IMPACT ON INDIA

Despite India’s limited direct exposure, the combination of supply disruptions and the ongoing terms of trade shock will likely weigh on growth, resulting in a sharper rise in inflation, and (leading to) a wider current account deficit.

India’s trade with Russia and Ukraine

• India runs a trade deficit with Russia, with exports declining while imports are increasing. Oil forms a major part of our import basket from Russia.
• According to the MoF report, 8 percent of our total imports have been imported from Russia in FY22.

Here are the ways India could suffer due to a Russia-Ukraine war even without being part of it.

BAN ON RUSSIA’S CRUDE EXPORTS:

• In reaction to the US’s ban on all oil and gas imports from Russia, Brent crude prices surged to nearly $130 per barrel in the first week of March 2022.
• This is a major setback for global economic growth as Russia is one of the largest exporters of crude oil globally. India’s trade, however, comprises only 1% of oil imports from Russia, but there could be a spillover impact in the form of high inflation and sluggish growth.
• On March 13, Morgan Stanley lowered India’s GDP forecast for the fiscal year 2023 by 50 basis points to 7.9%. After that, the UN report downgraded India’s 2022 GDP to 4.6% due to the war.
• More risks could arise if global growth conditions weaken further, which would hamper India’s export and capital expenditure cycle.

INFLATIONARY CONCERNS:

• India depends on imports to meet up to 85% of its crude oil needs. The surge in international oil prices to a 14-year high will now result in broader price pressures.
• The impact on India’s economy will be felt mostly through higher cost-push inflation weighing in on all economic agents—households, businesses, and government.
• Every 10% rise in crude oil prices leads to a 0.4 percentage point rise in consumer inflation.
• It is estimated that retail inflation at 6% for the fiscal year 2023 is much higher than the RBI’s 4.5%.
• An increase of U.S.$25/bbl. would lead to an estimated reduction in the growth of 0.7% points and an increase in inflation of nearly 1% point. If the prices of other imported commodities also increase, the inflation impact will be higher.
• This has increased the risks of a higher import bill and, in turn, a widening of India’s current account deficit (CAD).
• A study by the RBI in 2019 had estimated an increase in the current account
• deficit (CAD) following a U.S.$10/bbl. increase in global crude price, to be nearly 0.4% points of GDP. Thus, for an increase of U.S.$25/bbl. in global crude prices, the CAD may increase by 1% point of GDP.
• The RBI Professional Forecasters Survey’s median estimate of CAD at 1.9% of GDP for 2022-23 may have to be revised upwards to 2.9%.

INDIA’S DEFENCE SUPPLIES:

• Between 2016 and 2020, India accounted for nearly 25% of Russia’s total arms exports. This explains that the share of defense expenditure in India’s budget every year is not little.
• This time, a key defense contract in question is the delivery of the Russia-developed S-400 air missile system worth $5 billion, which was signed in October 2018.
• Moreover, the Indian Army’s main battle tank force is composed predominantly of Russian T-72 M1 and T-90S, accounting for 66% and 30% of all units, respectively.
• India will continue to rely on Russian weapons systems in the middle term, despite the US’s threat of sanctions over the S-400 purchase looms large over India.

OTHER AREAS:

• POST-COVID DISRUPTION: The geopolitical uncertainty coupled with the likely slowdown in the global economy and high inflation could lead to a major spike in gold prices, as central banks are left with limited legroom to raise interest rates.
• DIGITAL CURRENCIES: Day one of the conflicts also witnessed 8 percent of cryptocurrencies’ market capitalization of $1.59 trillion being wiped out.
• SEMICONDUCTORS: Russia and Ukraine are both suppliers of raw materials used in semiconductor manufacturing. Russia is the leading producer of palladium, essential for memory and sensor chips. And Ukraine is a leading exporter of highly purified neon gas that is used in etching circuit designs into silicon wafers to create chips.
• PHARMA: India exported over $181 million worth of pharmaceutical goods to Ukraine in FY21, growing nearly 44 percent over FY20, while exports to Russia were nearly $591 million in FY21, with YoY growth of 6.95 percent.
• TEA: Russia is one of the biggest importers of Indian tea, with a share of 18 percent in Indian tea exports.
• SUNFLOWER OIL: Indians, as the country depends almost totally on Ukraine and Russia for sunflower oil imports. In 2020-21, India imported 1.9 million tonnes of crude sunflower oil, of which Ukraine accounted for 1.4 million tonnes. The rest came from Russia.
• IMPACT ON PAYMENT SETTLEMENT: Due to the discontinuation of transactions through SWIFT, there would be some disruption in trade to and from Russia and Ukraine.

WHAT ARE THE CHALLENGES FOR RBI AND GOI IN RECENT TIMES?

• Policymakers may have to exercise a critical choice regarding who bears the burden of higher prices of petroleum products in India among consumers and industrial users, oil marketing companies, and the Government.
• If the oil marketing companies are not allowed to raise the prices of petroleum products, the bill for oil sector-linked subsidies would go up.
• If the central and State governments reduce excise duty and value-added tax (VAT) on petroleum products, their tax revenues would be adversely affected.
• If, on the other hand, the burden of higher prices is largely passed on to the consumers and industrial users, the already weak investment and private consumption would suffer further.
• If growth is to be revived, maximum attention should be paid to supporting consumption growth and reducing the cost of industrial inputs to improve capacity utilization.
• If RBI reduces the interest rate, it will further increase the money supply, which will lead to further higher inflation. If the RBI increases the interest rate, it will reduce the money supply in the economy but will impact the economic recovery negatively.

THE WAY FORWARD:

• As a short-term measure, the Rupee-Rouble trade agreement should be finalized as soon as possible.
• Notional policy on semiconductors should be promoted effectively so that India could become self-reliant in semiconductor and chip making.
• RBI should take more liberal steps i.e. accommodative monetary policy. As developed countries are being forced to raise their interest rates and inflationary pressures continue to mount in India and abroad, the RBI may find it advisable to raise the policy rate to stem inflationary pressures and the outward flow of the U.S. dollar even as the growth objective would be served by fiscal policy initiatives.
• For recovery, maximum attention should be paid to supporting consumption growth and reducing the cost of industrial inputs to improve capacity utilization.
• India should increase the capacity of its strategic petroleum reserve so that at the time of a war-like situation, India can manage the impact of hiked crude oil prices, in a long term manner, needs to focus on renewable energy sources.
• To address the shortage of sunflowers oil, the government should take steps to promote domestic cultivation of the oil like the government is doing for palm oil under National Mission on Edible Oils – Oil Palm (NMEO-OP).

THE CONCLUSION: World leaders should come together not for discussing the scale of sanctions but to work out ways to resolve the issue and put an end to the mayhem. Diplomatic channels should be used to have dialogue, negotiate, convince and arrive at amicable solutions to end the conflicts. The increased spate of sanctions on one country is a pain to other dependent countries and it disrupts the world order. Prolonged armed conflicts will worsen the plight of innocent countries and their people.

Economic Impacts of Russia-Ukraine War, Economic Impacts on The World, Recession Ahead for the Russian Economy, European Economies, Inflation & Global Trade Disruptions, India’s Trade with Russia and Ukraine, India’s Defence Supplies, Impact on Payment Settlement

THE CONTEXT: According to a report published in The Lancet (Global burden of Bacterial AMR in 2019: A Systematic Analysis) about 4.95 million deaths in 2019 are associated with AMR and 1.27 million deaths were caused due to AMR. Anti-microbial Resistance is a leading cause of death around the world, with the highest number of deaths occurring in low-resource settings. Everyone is at risk from AMR, but young children are particularly affected. The following article explains the causes of AMR and the challenges involved, from a scientific and public health perspective.

ABOUT AMR

• Antimicrobial resistance is the resistance acquired by any microorganism (bacteria, viruses, fungi, parasites, etc.) against antimicrobial drugs (such as antibiotics, antifungal, and antiviral drugs) that are used to treat infections. As a result, standard treatments become ineffective, infections persist, and may spread to others.
• Resistant microbes are more difficult to treat which necessitates alternative mechanisms or higher doses, both of which are either more toxic or expensive.
• Microorganisms that develop antimicrobial resistance are sometimes referred to as “superbugs”.
• Antimicrobial resistance occurs naturally, but the misuse of antibiotics in humans and animals is accelerating the process. Antimicrobial resistance is now regarded as a major threat to public health across the globe.

Bacterial antimicrobial: resistance occurs when changes in bacteria cause the drugs used to treat the infection to become less effective.

CAUSES OF ANTIBIOTIC RESISTANCE

OVERUSE:

• Overuse of antibiotics by consuming more antibiotics than prescribed.
• Overuse of antibiotics in livestock and fish farming. Consumption of antibiotically treated livestock such as chicken further increases resistance.
• Using antibiotics in farm animals can promote AMR. Drug-resistant bacteria can be found in meat and food crops that have exposure to fertilizers or contaminated water. The chances of Zoonotic diseases passing on to humans can increase.

MISUSE:

• Misuse by taking a prescribed antibiotic incorrectly or taking antibiotics to treat viral infection. Patients generally do not complete the entire antibiotic course.
• Include self-medication.
• access to antibiotics without prescription.
• Lack of knowledge about when to use antibiotics.

PHARMA WASTE AND DISCHARGE:

• Antibiotics discharge or waste from pharma firms and hospitals. For instance, Hyderabad’s pharmaceutical industry has been pumping massive amounts of antibiotics into local lakes, rivers, and sewers. This has led to an explosion in resistance genes in these water bodies.

HEALTHCARE SETTINGS:

• Poor infection control in healthcare settings.
• Poor hygiene and sanitation.
• A report on hand-washing practices of nurses and doctors found that only 31.8% of them washed hands after contact with patients.

EXCESSIVE USE OF FDC DRUGS:

• Excessive use of Fixed Dose Combinations (FDC) Drugs due to their low price and convenience enables anti-biotic resistance to grow at a significant rate. This may also lead to the emergence of bacterial strains resistant to multiple antibiotics.

WRONG DIAGNOSIS:

• Health professionals sometimes prescribe antimicrobials “just in case,” or they prescribe broad-spectrum antimicrobials when a specific drug could have satisficed. Using medications in such a fashion increases the risk of AMR.

RISING CHALLENGES BECAUSE OF AMR

THREAT TO PREVENTION OF INFECTIONS: Medical procedures such as organ transplantation, cancer chemotherapy, diabetes management and major surgery (for example, cesarean sections or hip replacements) will become very risky.

GLOBAL THREAT: AMR poses a serious threat to global health, food security, and development.

SIDE EFFECTS: Increased side effects from the use of multiple and more powerful medications.

COSTS AND CASUALTIES:

• The danger of antimicrobial resistance is those treatable illnesses like pneumonia, tuberculosis, or minor infections could become incurable. This would put a greater economic and emotional burden on families and on our healthcare system.
• Increased cost and length of treatments and increased deaths.

RISK TO GAINS MADE IN THE PAST:

• Without effective antibiotics for the prevention and treatment of infections, the achievements of modern medicine are put at a risk.
• Antimicrobial resistance is putting the gains of the Millennium Development Goals at risk and endangers the achievement of the Sustainable Development Goals.

ANTIBIOTIC APOCALYPSE:

• Without urgent positive action, we might be heading to a future without antibiotics, with bacteria becoming completely resistant to treatment and when common infections and minor injuries could even prove fatal.

STEPS TAKEN BY THE WORLD HEALTH ORGANISATION (WHO)

GLOBAL ACTION PLAN:

Global action plan on antimicrobial resistance with 5 strategic objectives:

• To improve awareness and understanding of antimicrobial resistance.
• To strengthen surveillance and research.
• To reduce the incidence of infection.
• To optimize the use of antimicrobial medicines.
• To ensure sustainable investment in countering antimicrobial resistance.

REVISION OF ANTIBIOTICS PROTOCOL:

WHO has revised the antibiotics protocol to curb antibiotic resistance in 2017. This was the biggest revision of the antibiotics section in the essential medicines list (EML) which is being used by countries to develop their own local lists of essential medicine.

• Under this, WHO has divided the drugs into 3 categories viz – access, watch, and reserve.
• The access category includes commonly used antibiotics available at all times for the treatment of a broad range of common infections.
• The watch category covers antibiotics that are recommended as a first or second choice treatment for a small group of infections. Prescription of these drugs should be minimized to avoid further development of resistance.
• The reserved category includes antibiotics that are considered last-resort options and should be used only in the most severe circumstances like life-threatening infections caused by multi-drug resistant (MDR) bacteria.

ANTIMICROBIAL RESISTANCE IN INDIA

• AMR is of particular concern in developing nations, including India, where the burden of infectious disease is high and healthcare spending is low. India is among the nations with the highest burden of bacterial infections and hence the impact of AMR is likely to be higher in the Indian setting.
• India has been referred to as ‘the AMR capital of the world’. While on one hand, the emergence of newer multi-drug resistant (MDR) organisms pose newer diagnostic and therapeutic challenges, on the other hand, India is still striving to combat old enemies such as tuberculosis, malaria, and cholera pathogens, which are becoming more and more drug-resistant.
• Factors such as poverty, illiteracy, overcrowding, and malnutrition further compound the situation. Lack of awareness about infectious diseases in the general masses and inaccessibility to healthcare often preclude them from seeking medical advice.
• According to the World Health Organisation (WHO), antibiotic resistance may cause an increase in the death of Indians to 20 lakhs per year by 2050.
• The National Health Policy 2017 highlights the problem of antimicrobial resistance and calls for effective action to address it.
• MDR-TB and XDR-TB in India: The World Health Organisation estimates approximately 4.1 million people across the world suffer from tuberculosis, but these cases continue to remain undiagnosed and unreported. A total of 1.5 million people died from TB in 2020 making it the second leading infectious killer only after Covid-19.
• MDR-TB: Multidrug Resistant TB
• XDR-TB: Extremely Drug-Resistant TB
• While India is on a mission to become TB free by 2025, the report by Haystack Analytics indicates that the country continues to bear the largest share of TB cases in the world, with 65% of the cases being reported in the most economically productive population segment of 15-45. Not only this can have a detrimental impact on the economy, but the situation can also aggravate considerably, if not addressed in due time.
• XDR-TB has become a new threat to the control of TB in many countries including India. Its prevalence is not known in India as there is no nationwide surveillance. However, there have been some reports from various hospitals in the country

STEPS TAKEN BY INDIA IN FIGHT AGAINST AMR

RED LINE CAMPAIGN:

• It was launched in 2016.
• Under this, Prescription only antibiotics were marked with a red line to curb irrational use.
• The government has also backed it up with an awareness campaign that red-line medicines should not be taken without a prescription.

ANTI-MICROBIAL RESISTANCE FUND:

• India-focused seed fund.
• Investment by the Department of Biotechnology (DBT) through the Biotechnology Industry Research Assistance Council (BIRAC).
• It will help groups in India compete for the Longitude prize (for groups that develop effective and affordable diagnostic kits to detect antimicrobial resistance).

AMRRSN:

National Anti-Microbial Resistance Research and Surveillance Network (AMRRSN) was established by the Indian Council of Medical Research (ICMR).

• To strengthen surveillance of AMR in the country.
• To enable compilation of national data of AMR at various levels of health care.

NATIONAL ACTION PLAN TO COMBAT ANTIMICROBIAL RESISTANCE, 2017:

• Enhancing awareness among the masses and strict adulteration laws.
• Strengthening surveillance.
• Improving the rational use of antibiotics.
• Reducing infections.
• Promoting policies and research in antimicrobial resistance.
• Support neighboring nations in the fight against infectious diseases

AMR RESEARCH & INTERNATIONAL COLLABORATION:

• ICMR has taken measures to develop new drugs /medicines using international collaborations for strengthening medical research in AMR.

INITIATIVES TO CONTROL OVERUSE OR MISUSE OF ANTIBIOTICS:

• ICMR has launched an antibiotic stewardship program (AMSP) on a pilot project basis in twenty tertiary care hospitals across India to check the misuse and overuse of antibiotics in hospital wards and ICUs.
• On the advice of ICMR, DCGI has prohibited 40 fixed-dose combinations (FDCs) which were found inapplicable.
• ICMR collaborated with the Indian Council of Agriculture Research, Department of Animal Husbandry, Dairy and Fisheries, and the DCGI to prohibit the use of Colistin as a growth promoter in animal feed in poultry.
• The government has also capped the maximum levels of drugs that can be used for growth promotion in meat and meat products.

CHALLENGES FOR INDIA IN ITS FIGHT AGAINST AMR

TWIN CHALLENGE:

• India faces a twin challenge of fighting the over consumption of antibiotics while ensuring that the poor and vulnerable have easy access.

LACK OF AWARENESS:

• Lack of awareness among medical practitioners as well as the general public on the rational use of antibiotics further aggravates the problem.

COORDINATION GAP:

• Coordination among various ministries and between the center and state governments.
• A cross-cutting program dealing with antimicrobial resistance across multiple microbes has been lacking.

ABSENCE OF A ONE HEALTH APPROACH:

• One Health Approach to addressing AMR recognizes that human well-being is inextricably tied to the health of animals and the environment.

ABSENCE OF STRINGENT RULES:

• The absence of stringently framed and implemented regulatory frameworks to limit the use of antimicrobials in livestock and food animals, especially for non-therapeutic purposes, has been one of the drivers of antibiotic overuse at the community level.
• The rules and regulations that were taken were not strict enough to prevent pharmaceutical firms to sell last-resort drugs to farmers or discharging waste into water bodies.
• In India, current effluent standards do not include antibiotic residues, and thus they are not monitored in the pharmaceutical industry effluents.

THE WAY FORWARD

• Infection control in healthcare facilities:
• Health professionals prescribe antibiotics only when they are needed.
• Preventing infections by maintaining hygiene.
• Creating awareness about the use and abuse of antibiotics:
• Individuals to use antibiotics only when prescribed.
• Only give antibiotics to animals under veterinary supervision.
• Vaccinate animals to minimize the need for antibiotics.
• Use alternatives to antibiotics when available.
• A robust national action plan to tackle antibiotic resistance.
• Improve surveillance of antibiotic-resistant infections.
• Invest in R&Dfor new antibiotics to keep up with resistant bacteria as well as in new diagnostic tests to track the development of resistance.

THE CONCLUSION: There is a need to urgently address antimicrobial resistance in a holistic way by integrating human, animal and environmental health. All countries need to work together to limit the spread of Antibiotic-Resistant Genes (ARGs). Even though national action plans have been laid down by most countries, these plans have yet to move from paper to the ground as antibiotics continue to be freely used,therefore to contain AMR, there is a need for a One Health Approach through coherent, integrated, multi-sectoral cooperation and actions.

MAINS QUESTIONS:

1. “Addressing AMR requires a multipronged and multisectoral approach. The urgency to develop new drugs should not discourage us from instituting measures to use the existing antimicrobials judiciously.” Comment.
2. “The progress under the National Action Plan for AMR(2017) has been far from satisfactory.” Critically analyze.
3. What do you understand by Antimicrobial Resistance (AMR)? Explain the reasons for the spread of AMR and the challenges involved to control it.

THE CONTEXT: Recently, the Union Minister of Road Transport and Highways said rapid strides in technology and green fuel will reduce the cost of electric automobiles, bringing them at par with petrol-run vehicles in two years. Also, the 2019 Nobel Prize for Chemistry was awarded to John B. Goodenough, M. Stanley Whittingham, and Akira Yoshino for working towards the development of practical lithium-ion batteries.
In this context, this article analyses the scope of the Lithium-Ion Battery Market: Industry Trends, Share, Size, Growth, Opportunity, and the way forward.

THE EXPLANATION

What is a lithium-ion battery and how does it work?

• A lithium-ion battery is a type of rechargeable battery that is charged and discharged by lithium ions moving between the negative (anode) and positive (cathode) electrodes. (Generally, batteries that can be charged and discharged repeatedly are called secondary batteries, whereas disposable batteries are called primary batteries.)
• Because lithium-ion batteries are suitable for storing high-capacity power, they are used in a wide range of applications, including consumer electronics such as smartphones and PCs, industrial robots, production equipment, and automobiles.

Lithium-ion Battery – Applications

⦁ Electronic gadgets
⦁ Tele-communication
⦁ Aerospace
⦁ Industrial applications
⦁ Lithium-ion battery technology has made it the favorite power source for electric and hybrid electric vehicles

SIGNIFICANCE OF LI-ION BATTERIES IN THE CONTEXT OF THE ELECTRONIC MARKET

According to the Ministry of Commerce and Industry, India imported lithium cells and batteries – including rechargeable li-ion type devices – worth INR 8,984 crore in the last fiscal year (2020-2021). This figure consisted of INR 173 crore of non-rechargeable lithium devices and INR 8,811 crore of lithium-ion products.
China and Hong Kong were the chief sources of imports with China shipping 72.73% of the lithium-ion products imported by India and 32.05% of the non-rechargeable lithium cell devices. Hong Kong products accounted for 23.48% and 37.32% of those respective markets.
Indian lithium battery demand is expected to surge with the products used in renewable energy storage facilities and electric vehicles as well as data centers and consumer electronics. According to other data, the Indian lithium-ion battery market reached a value of US$ 2.1 Billion in 2021.

THE DOMESTIC PUSH

Recently, the Geological Survey of India has taken up seven other lithium exploration projects in Karnataka, Arunachal Pradesh, Andhra Pradesh, Chhattisgarh, Jharkhand, Jammu and Kashmir, and Rajasthan.

The reason: The ancient igneous rock deposits in the region (a by-product of large-scale volcanic activity in the Deccan plateau millions of years ago) hold the first traces of Lithium ever to be discovered in India

MAJOR IMPACTS ON E-VEHICLES: A POTENTIAL ALTERNATIVE TO REDUCE THE COAL DEPENDENCY

One of the major factors driving the rising demand for Lithium-Ion batteries is the growing popularity of electric cars. Rising EV sales across the country, particularly in the 2- and 3-wheeler segments, have boosted the demand. Lithium batteries have transformed how they are utilized due to their advantages over lead-acid batteries.

By 2030, the market for electric vehicle 

power packs are expected to reach $300 billion, with a large secondary market of more than 2.5 million e-rickshaws and 4,00,000 lead-acid battery-powered two-wheelers now on the road.

The most expensive component of an electric car is the lithium-ion battery, which accounts for 40-50 percent of the total cost. With the growing use of electric vehicles in our transportation system, the demand for Li-ion batteries for EV applications is expected to soar. Other uses, such as renewable energy integration with the grid, will raise Li-Ion battery demand in addition to electric vehicles.

According to government projections, India would require a minimum of 10 GWh of Li-ion cells by 2022. By 2025, it will be around 60 GWh, and by 2030, it will be around 120 GWh.

Environmental Aspect:

• According to the World Air Quality Report 2021, published by Swiss Organization -IQ Air where it stated “India was home to 11 of the 15 most polluted cities in Central and South Asia in 2021. Delhi saw a 14.6% increase in PM2.5 concentrations in 2021, with levels rising to 96.4 µg/m3 from 84 µg/m3 in 2020.
• It also highlighted that sources of PM2.5 “include internal combustion engines, power generation, industrial processes, agricultural processes, construction, and residential wood and coal burning.
• According to a Government source, by 2030, nearly three-fourths of Indian two-wheelers and all new cars are expected to be EVs (electric vehicles). It will significantly reduce the dependency on coal and reduce pollution significantly.

MERITS OF LI-ION BATTERIES

Compared to their lead-acid counterparts, lithium-ion batteries are much lighter, more efficient, and have more power storage. These batteries are widely used commercially in mobiles, laptops, and other electronic equipment.

High energy density: High energy density is one of the chief advantages of lithium-ion battery technology. With electronic equipment such as mobile phones needing to operate longer between charges while still consuming more power, there is always a need for batteries with a much higher energy density.

For example, NiMH batteries would not be able to provide the charge capacity required for a modern smartphone. Using Nickel Metal Hydride battery technology, a smartphone would not last long enough, especially if the battery needed to keep within the same size constraints.

In addition to this, there are many power applications from power tools to electric vehicles. The much higher power density offered by lithium-ion batteries is a distinct advantage. Electric vehicles also need battery technology that has a high energy density.

Self-discharge: One issue with many rechargeable batteries is the self-discharge rate. The rate of self-discharge of Li-ion cells is much lower than that of other rechargeable cells such as Ni-Cad and NiMH forms. It is typically around 5% in the first 4 hours after being charged but then falls to a figure of around 1 or 2% per month.

Low maintenance: One major lithium-ion battery advantage is that they do not require maintenance to ensure their performance.
Ni-Cad cells required a periodic discharge to ensure that they did not exhibit the memory effect. As this does not affect lithium-ion batteries and cells, this process or other similar maintenance procedures are not required. Likewise, lead-acid cells require maintenance, some needing the battery acid to be topped up periodically.

Cell voltage: The voltage produced by each lithium-ion cell is about 3.6 volts. This has many advantages. Being higher than that of the standard nickel-cadmium, nickel-metal hydride, and even standard alkaline cells at around 1.5 volts and lead-acid at around 2 volts per cell, the voltage of each lithium-ion cell is higher, requiring fewer cells in many battery applications. For smartphones, a single cell is all that is needed and this simplifies the power management.

Variety of types available: There are several types of lithium-ion cells available. This advantage of lithium-ion batteries can mean that the right technology can be used for the application needed. Some forms of lithium-ion battery provide a high current density and are ideal for consumer mobile electronic equipment. Others can provide much higher current levels and are ideal for power tools and electric vehicles.

DEMERITS OF LI-ION BATTERIES

Fire Risk: Lithium-ion batteries, whether they are used in cars or electronic devices, can catch fire if they have been improperly manufactured or damaged, or if the software that operates the battery is not designed correctly.

The major weakness of lithium-ion batteries in electric cars is the use of organic liquid electrolytes, which are volatile and flammable when operating at high temperatures. An external force such as a crash can also lead to chemical leakage.

Protection/battery management system required: Lithium-ion cells and batteries are not as robust as some other rechargeable technologies. They require protection from being overcharged and discharged too far. In addition to this, they need to have the current maintained within safe limits. Accordingly, one lithium-ion battery disadvantage is that they require protection circuitry incorporated to ensure they are kept within their safe operating limits.

Aging: One of the major lithium-ion battery disadvantages for consumer electronics is that lithium-ion batteries suffer from aging. Not only is this time or calendar dependent, but it is also dependent upon the number of charge-discharge cycles that the battery has undergone.

Often batteries will only be able to withstand 500 – 1000 charge-discharge cycles before their capacity falls. With the development of Li-ion technology, this figure is increasing, but after a while, the battery may need replacing and this can be an issue if they are embedded in the equipment.

Cost: A major lithium-ion battery disadvantage is its cost. Typically, they are around 40% more costly to manufacture than Nickel-cadmium cells. This is a major factor when considering their use in mass-produced consumer items where any additional costs are a major issue.

Developing technology: Although lithium-ion batteries have been available for many years, they can still be considered an immature technology by some as it is very much a developing area. This can be a disadvantage in terms of the fact that the technology does not remain constant. However as new lithium-ion technologies are being developed all the time, it can also be an advantage as better solutions are coming available.

GOVERNMENT INITIATIVES TO PROMOTE ELECTRIC VEHICLES

• India is the fourth-largest auto market globally, and some estimates suggest there are close to 170 active investors in the country’s EV start-up ecosystem.
• To promote the adoption of EVs, the Department of Heavy Industry formulated a FAME India Scheme (Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India) in 2015.

The government has launched the following initiatives to Promote Electric Vehicles in India:

• Under the new GST system, GST on EVs is reduced from 12% to 5% against the 28% GST rate with up to 22% for conventional vehicles.
• The government has proposed the exemption of registration fees for battery-operated/electric vehicles to promote eco-friendly vehicles in the country.
• The Ministry of Power has also allowed the sale of electricity as a ‘service’ for electric vehicles’ charging. It will attract investors into the charging infrastructure.
• Also, The government has granted an exemption to battery-operated transport vehicles and vehicles that run on methanol and ethanol fuels from the requirements of the permit.
• The Ministry of Road Transport and Highways has allowed 16-18 years to obtain driving licenses to drive e-scooters.
• Lithium wars: Battery makers are also seeking to take advantage of the ₹18,100-crore production-linked incentive (PLI) scheme to manufacture lithium-ion cells within the country. In such a scenario, securing lithium supplies will play a critical role in the pivot towards a greener economy.

THE CONCLUSION: The use of Lithium-ion batteries is the future of a greener and eco-friendly environment. The use of lithium-ion batteries helps in cutting down the pollution level and improving the air quality. Energy storage and mobility are going to be the most popular concept in India as they won’t only save us costs but also have a huge positive impact on climate change. With the introduction of different government initiatives, the Indian Government is also trying to promote the use of batteries for a secure future. Having a manufacturing unit in India will help in cost reduction and increase employment.
Along with the batteries being manufactured, they can be recycled and reused too, decreasing the usage of gas and leading to an increase in pollution levels. For a better future, we need to start working today and have a clear vision toward the goal.

THE MAIN PRACTICE QUESTIONS:

• The Noble Prize in Chemistry of 2019 was jointly awarded to John B. Goodenough, M. Stanley Whittingham, and Akira Yoshino for working towards the development of practical lithium-ion batteries. How has this invention impacted the everyday life of human beings?
• What are the present challenges before the transition of shifting to e-vehicles? How do emerging technologies provide an opportunity for reducing coal dependency?

THE CONTEXT: The European Commission has proposed a set of digital rights and principles in January 2022 that aim to protect people’s rights, support democracy, and ensure a fair and safe online environment. The European Parliament and the Council of the European Union will discuss the proposal before its adoption. This article explains the major features of the declaration and its significance.

THE SALIENT FEATURES OF THE DECLARATION

PEOPLE AT THE CENTRE OF THE DIGITAL TRANSFORMATION:

• Technology should serve and benefit all Europeans and empower them to pursue their aspirations in full security and respect for their fundamental rights. This requires:
• Strengthening the democratic framework for a digital transformation that benefits everyone and improves the lives of all Europeans.
• Fostering responsible and diligent action by all digital actors, public and private, for a safe and secure digital environment.

SOLIDARITY AND INCLUSION:

• Everyone should have access to technology that aims at uniting and not dividing people. The digital transformation should contribute to a fair society and economy in the Union. These needs:

(a) Making sure that technological solutions respect people’s rights, enable their exercise, and promote inclusion.

(b) Developing adequate frameworks so that all market actors assume their responsibilities and make a fair contribution to the costs of public goods and services.

CONNECTIVITY, DIGITAL EDUCATION, AND SKILLS:

• Everyone, everywhere in the EU, should have access to affordable and high-speed digital connectivity. Everyone has the right to education, training, and lifelong learning and should be able to acquire all basic and advanced digital skills. This requires:

(a) Ensuring access to excellent connectivity for everyone, wherever they live and whatever their income.

(b)Promoting and supporting efforts to equip all education and training institutions with digital connectivity, infrastructure, and tools.

WORKING CONDITIONS:

• Everyone has the right to fair, just, healthy, and safe working conditions and appropriate protection in the digital environment as in the physical workplace, regardless of their employment status, modality or duration. This needs:

(a) Ensuring that everyone shall be able to disconnect and benefit from safeguards for work-life balance in a digital environment.

A fair online environment:

• Everyone should be able to effectively choose which online services to use based on objective, transparent and reliable information. This requires:

(a) Ensuring a safe, secure.

(b) A fair online environment where fundamental rights are protected, and the responsibilities of platforms, especially large players and gatekeepers, are well defined.

PARTICIPATION IN THE DIGITAL PUBLIC SPACE:

• Everyone should have access to a trustworthy, diverse, and multilingual online environment. Access to diverse content contributes to a pluralistic public debate and should allow everyone to participate in democracy. This requires:

(a) Supporting the development and best use of digital technologies to stimulate citizen engagement and democratic participation.

(b) Continuing safeguarding fundamental rights online, notably the freedom of expression and information.

PRIVACY AND INDIVIDUAL CONTROL OVER DATA:

• Everyone has the right to the protection of their data online. That right includes the control on how the data are used and with whom they are shared.
• Everyone has the right to the confidentiality of their communications and the information on their electronic devices, and no one shall be subjected to unlawful online surveillance or interception measures.
• Everyone should be able to determine their digital legacy and decide what happens with the publicly available information that concerns them after their death.

SUSTAINABILITY:

• To avoid significant harm to the environment and promote a circular economy, digital products and services should be designed, produced, used, disposed of, and recycled to minimise their negative environmental and social impact. This requires:

(a) Supporting the development and use of sustainable digital technologies that have minimal environmental and social impact.

(b) Developing and deploying digital solutions with a positive impact on the environment and climate.

SIX THEMES OF THE DECLARATION IN A NUTSHELL

THE RATIONALE BEHIND THE EUROPEAN DECLARATION ON DIGITAL RIGHTS AND PRINCIPLES

ACCELERATION IN DIGITAL TRANSFORMATION:

• Digital transformation offers significant opportunities for a better quality of life, innovation, economic growth, and sustainability. But it also presents new challenges for the fabric, security, and stability of societies and economies.
• With the acceleration of the digital transformation, the time has for the European Union (EU) to spell out how its values and fundamental rights should be applied in the online world.

A CONTINUITY IN DATA PROTECTION APPROACHES:

• The European Parliament has made several calls for ensuring the full compliance of the Union’s approach to the digital transformation with fundamental rights such as data protection or non-discrimination and with principles such as technological and net neutrality and inclusiveness.
• It has also called for strengthened protection of users’ rights in the digital environment. This declaration is in furtherance of such initiatives and approaches.

BUILDING ON PREVIOUS INITIATIVES:

• This declaration builds on previous initiatives such as the “Tallinn Declaration on e-Government”, the “Berlin Declaration on Digital Society and Value-based Digital Government”, the “Lisbon Declaration – Digital Democracy with a Purpose”, “Path to the Digital Decade” etc. which calls for a model of digital transformation that strengthens the human dimension of the digital ecosystem with the Digital Single Market as its core.

GUIDING PRINCIPLES FOR THE MARKET:

• The declaration aims to explain shared political intentions.
• Not only does it recall the most relevant rights in the context of the digital transformation, but it also serves as a reference point for businesses and other relevant actors when developing and deploying new technologies.

FLAG POSTS FOR POLICYMAKERS:

• The democratic oversight of the digital society and economy should be further strengthened, fully respecting the rule of law principles, effective justice, and law enforcement.
• Thus, the declaration will guide policymakers when reflecting on their vision of the digital transformation: putting people at the center of the digital transformation, underlying solidarity, and inclusion, restating the importance of freedom of choice, etc.

PROMOTING BEST PRACTICES:

• The Union shall promote the declaration in its relations with other international organizations and third countries.
• The principles can serve as an inspiration for international partners to guide a digital transformation that puts people and their human rights at the center throughout the world.

A CRITICAL EVALUATION OF THE DECLARATION

• Despite the solemn character of the draft declaration, this text does not purport to exercise any legally binding role. Its ‘political nature is made explicit in the declaration itself and the accompanying communication. as the preamble recalls, it remains declaratory and, even if endorsed, will not set out legal obligations.
• The declaration has not been introduced as an EU Charter of Fundamental Rights 2.0, a document with potential constitutional value.
• The declaration does not have any direct mechanism of enforcement. The EU Commission, however, has proposed to use this document as a guide to assess the status of the digital transition across the EU in the form of an annual report.

EU PARLIAMENT AGREES ON PROPOSAL TO TAKE ON U.S. TECH GIANTS

In the European Parliament in Jan 2022 signed off on a proposal for new rules aimed at U.S. tech giants, paving the way for talks on the plan with member countries and the European Commission. The Digital Services Act, a proposal from the EU antitrust chief would force Amazon, Apple, Alphabet unit Google and Facebook owner Meta to do more to tackle illegal content on their platforms or risk fines up to 6% of global turnover. The proposal still needs to be ironed out with EU countries and lawmakers before it can become law, the first of its kind in the world. The European Parliament adopted the proposal with 530 votes in favour, 78 against, and 80 abstentions.

“With a huge majority, the European Parliament adopted the Digital Services Act. A big win, with support from the left to right,” Dutch lawmaker Paul Tang said on Twitter. Christel Schaldemose, a Danish lawmaker leading the Parliament’s negotiating team, said: “Online platforms have become increasingly important in our daily life, bringing new opportunities and new risks. We have to make sure that what is illegal offline is illegal online.” France, which holds the rotating EU presidency, aims for an agreement in the first half of 2022.

AN ANALYSIS OF THE DIGITAL RIGHTS AND PRIVACY: THE INDIAN SCENARIO

‘Digital rights’ is a broad term: it can imply the right to privacy and data protection; it can be related to trolling, online threats, and hate speech; it can address broader issues of equitable Internet access regardless of economic background and disabilities. In India, where citizens’ data are at the mercy of companies and government and where is no privacy law, the Puttaswamy judgment, and the Justice B.N. Srikrishna committee report that led to the Personal Data Protection Bill of 2019 came as a ray of hope. But the Joint Committee report on the Bill has failed to provide a robust draft of legislation ensuring the privacy of citizens.

Earlier, the Central government introduced IT Rules 2021 which is also being criticized as putting disproportionate restrictions on digital freedom. Instead, it is held that it carved out an architecture for a surveillance state. Digital marketing has resulted in the compromise of the personal data integrity of the users and such data is being exploited commercially. There are also many instances of a data breach on the part of both public and private players including the UIDAI.

The lack of accountability of the tech giants is an acute problem in India despite their huge influence on public policy and governance matters. These issues have been echoed in Parliament recently where members urged the government to end the “systematic influence and interference of Facebook and other social media giants” on electoral politics being used to “hack democracy”. Last year, Facebook (Meta)was accused of allowing algorithms to amplify hate speech. Whistle-blowers Sophie Zhang and Frances Haugen have testified against the company’s policies. Haugen told British lawmakers that the social media company stokes online hate and extremism, fails to protect children from harmful content and lacks any incentive to fix the problems.

EU, INDIA, 8 OTHER COUNTRIES CALL FOR INT’L COOPERATION ON DATA PROTECTION

In a ‘Joint Declaration on Privacy and the Protection of Personal Data: Strengthening trust in the digital environment’, the European Union, Australia, Comoros, India, Japan, Mauritius, New Zealand, South Korea, Singapore, and Sri Lanka said rapid technological developments, in particular in information and digital technologies, have brought benefits for their economies and societies, as well as new challenges for privacy and the protection of personal data.

To foster data free flow with trust, which, as also acknowledged by the G20 Rome Leaders’ Declaration, is key to harnessing the opportunities of the digital economy, it is vital to ensure, as guaranteed by these countries’ respective legal frameworks, respect for individuals’ right to privacy and the protection of personal data as a core value and fundamental freedom, said the declaration.

They called for comprehensive legal frameworks and policies covering both the private and public sectors. They underlined core principles such as lawfulness, fairness, transparency, purpose limitation, data minimisation, limited data retention, data security, and accountability. They also called for enforceable rights of individuals, such as access, rectification, deletion, and safeguards concerning automated decision-making such as transparency and the possibility to challenge the outcome.

The joint declaration emphasised safeguards for international transfers to enable cross-border data flows by ensuring that the protection travels with the data. It also called for independent oversight by a dedicated supervisory authority and effective redress.

THE WAY FORWARD

GENERATE AND SPREAD DIGITAL AWARENESS: 

• Similar to many other Internet bills of rights promoted in the past few years by civil society groups and other international organisations, the EU declaration on digital rights and principles plays an important advocacy role in raising public awareness among citizens, institutions, and companies.

DEVELOP DIGITAL REGULATORY CAPABILITY:

• In a time when rapid global digital advancement consistently outpaces regulatory frameworks and institutions of State agencies in the multilateral domain, the declaration represents a unique step toward a human rights-based approach to digital governance and inclusion.
• However, they will remain mere declaratory without regulatory and governance mechanisms to enforce these rights.

A BENCHMARK FOR OTHER COUNTRIES:

• The declaration deals with very substantive aspects of the digital ecosystem including digital equality and oversight of tech companies. It provides a template for other countries/blocs so that they can streamline and update their own digital governances policies.

BALANCING THE RIGHTS OF THE MARKET, GOVERNMENT, AND CONSUMERS:

• The attempt to rein in the “Big-Tech Power” has been ongoing worldwide, including in the USA, Australia, India, etc.
• Although it is necessary to demand and enforce accountability on these companies, this should not lead to a situation of government control over citizens’ data.
• Also, the rights of the market, the free flow of data, and the development of the digital economy should not become a casualty.

LEGAL AND POLICY CERTAINTY IN INDIA:

• India requires a comprehensive digital law and policy system that integrate privacy, regulation, legitimate government control, and scope for digital entrepreneurship. The current Data Protection Bill requires serious overhauling so are the IT Act 2000 and other associated rules and policies.

THE CONCLUSION: The Declaration furthers the global conversation on digital constitutionalism, translating constitutional principles to address the challenges of the digital revolution. It reiterates that the digital world is not a lawless space: Existing fundamental rights are as valid online as they are offline. It is a good step towards promoting a safe, reliable, accountable, and equitable digital space that can benchmark other nations/groupings.

QUESTIONS:

• Comment on the salient features of the European Declaration on Digital Rights and Principles, 2022. How far do you think that they can address the problems of inequality, poor social inclusion, and lack of accountability in the digital ecosystem?
• “The European Declaration on Digital Rights and Principles, 2022 is although right in intent but lacks substance”. Critically Examine

THE INTRODUCTION: The need for a strong and resilient social infrastructure became even more important during the ongoing COVID-19 pandemic that brought into focus the vulnerabilities in social infrastructure across countries. Specifically, the pandemics posed the challenge of balancing livelihoods while saving lives. To save lives and livelihoods amidst the COVID crisis, countries have adopted various strategies. India, the country with the second-largest population and a large elderly population, adopted a multi-pronged approach. The government’s response through ‘Aatmanirbhar Bharat Abhiyan’ packages and other sector-specific initiatives have provided the necessary support to mitigate the adverse impact of a pandemic. This chapter gives a brief account of India’s response to Social Infrastructure and Employment.

INDIA’S HEALTH RESPONSE TO THE COVID-19

Like most other countries, India also faced two COVID-19 waves: the first in 2020 and the second in 2021. To save lives, the Government adopted a multi-pronged approach viz.

1. Restrictions/partial lockdowns,
2. Building capacity in health infrastructure,
3. COVID-19 appropriate behavior, testing, tracing, treatment
4. Vaccination drive.

COVID VACCINATION STRATEGY

• Guided by scientific and epidemiological evidence, World Health Organisation (WHO) guidelines, and global best practices, India’s National COVID Vaccination Program has been one of the world’s largest vaccination programs.
• Government of India procured 75 percent of monthly vaccine production and provided it free to States and UTs, while the rest could be procured by private hospitals.
• Availability of Vaccine: The ICMR funded the clinical trials of the COVISHIELD vaccine developed in collaboration with Oxford – Astra Zeneca. COVISHIELD and COVAXIN have been widely used vaccines in India. Every month about 250- 275 million doses of COVISHIELD and 50-60 million doses of COVAXIN have been produced.
• Pricing and equity: At all Government COVID-19 Vaccination Centres (CVCs), the COVID-19 vaccine was made available free of cost for all eligible citizens.
• Coverage: From 1st May 2021, all 94 crore persons of age 18 years and above, were made eligible for COVID vaccination. From 3rd January 2022, COVID-19 vaccine coverage has been extended to the age group of 15-18 years. Till 19th January 2022, 3.73 crore youngsters between 15-18 age group have been vaccinated with 1st dose of COVID-19 vaccine covering more than 50 percent of youngsters.
• Vaccine hesitancy: To reduce vaccine hesitancy, the Government made efforts that include awareness by identified experts. From 3rd November 2021, a campaign, ‘Har Ghar Dastak’, has been initiated to identify and vaccinate those who missed 1st dose and are due for 2nd dose through house-to-house mobilization activity.
• Technology-driven: Arogya Setu mobile app was launched to enable people to assess the risk of their catching the COVID-19 infection.
• Vaccination Progress: As of 16th January 2022, a total of 156.76 crore doses of COVID-19 vaccines have been administered: 90.75 crores first dose and 65.58 crores second dose.

Population vaccinated by country (in percent)

TRENDS IN SOCIAL SECTOR EXPENDITURE

• Government’s spending on social services increased significantly during the pandemic. In 2021-22 (BE), Centre and State governments earmarked an aggregate of ` 71.61 lakh crore for spending on the social service sector; an increase of 9.8 percent over 2020-21.
• Last year’s (2020-21) revised expenditure has also gone up by ` 54,000 crores from the budgeted amount. In 2021-22 (BE), funds to the sector increased to 8.6 percent of Gross Domestic Product (GDP) (8.3 percent in 2020-21).
• During the last five years, social services accounted for about 25 percent of the total Government expenditure (Centre and States taken together). In 2021-22 (BE), it was 26.6 percent.
• Expenditure in the health sector increased from ` 2.73 lakh crore in 2019-20 (pre-COVID-19) to ` 4.72 lakh crore in 2021-22 (BE), an increase of nearly 73 percent.
• Union Budget 2021-22, announced Ayushman Bharat Health Infrastructure Mission, a new Centrally Sponsored Scheme, with an outlay of about ` 64,180 crores in the next five years to develop capacities of primary, secondary, and tertiary care Health Systems
• Union Budget 2021-22 provided an outlay of Rs 35,000 crore towards COVID-19 vaccination.
• The National Health Policy, 2017 envisaged increasing the government’s health expenditure to 2.5 percent of GDP by 2025.

EDUCATION

• During initial COVID-19 restrictions, as a precautionary measure to protect the students from COVID-19, schools, and colleges were closed across India. This posed a new challenge for the Government in terms of continuity of education.
• School Infrastructure An assessment for the pre-pandemic year of 2019-20 for which data is available reveals that the number of recognized schools & colleges continued to increase between 2018-19 and 2019-20, except for primary & upper primary schools.

SCHOOL INFRASTRUCTURE

• An assessment for the pre-pandemic year of 2019-20 for which data is available reveals that the number of recognized schools & colleges continued to increase between 2018-19 and 2019-20, except for primary & upper primary schools.

• Toilets (girls or boys), drinking water, and hand-washing facilities are now available in most Government schools (10.32 lakh).
• Priority to drinking water and sanitation in schools under Jal Jeevan Mission, Swachh Bharat Mission as well as under Samagra Shiksha Scheme has been instrumental in providing required resources and creating these assets in schools.
• As of 19.01.2022, under Jal Jeevan Mission 8,39,443 schools were provided a tap water supply.
• Availability of teachers, measured by Pupil-Teacher Ratio, an indicator whose decrease signals improvement in quality of education, has improved at all levels continuously from 2012-13 to 2019-20: from 34 to 26 at primary, 23 to 18 at upper primary, 30 to 18 at secondary, and 39 to 26 at the higher secondary level.

Schools with Basic Facilities

SCHOOL ENROLMENT

• In 2019-20, 26.45 crore children were enrolled in schools. During the year, schools enrolled about 42 lakh, additional children, out of which 26 lakh were in primary to higher secondary levels and 16 lakh were in pre-primary as per the Unified District Information System for Education plus (UDISE+) database.
• The enrollments increased across all levels viz., upper-primary, secondary, and higher secondary, except for the primary level. At the primary level, enrollment reduced from 13.5 crores in 2012-13 to 12.2 crores in 2019-20. This decline in enrollment was because of a decline in the total number of children in the age group 6-10 years.

 School Gross Enrollment Ratios in India (in percent)

SCHOOL DROP-OUT

• the years 2019-20 saw a decline in dropout rates at primary, upper-primary, and secondary levels. In 2019-20, the school dropout rate at the primary level declined to 1.45 percent from 4.45 percent in 2018-19.
• ASER found that despite the pandemic, enrollment in the age cohort of 15-16 years continued to improve as the number of not enrolled children in this age group declined from 12.1 percent in 2018 to 6.6 percent in 2021.

Major Initiatives for Students during the COVID-19 pandemic

PM e-VIDYA: Major components

• One Nation, One Digital Education (DIKSHA) Platform
• One Class, One TV channel through Swayam Prabha TV Channels
• Extensive use of Radio, Community Radio, and Podcasts
• One DTH channel is being operated specifically for hearing impaired students in sign language.

National Digital Education Architecture (NDEAR): A digital infrastructure for Education, was launched on 29th July 2021.

Vidyanjali: To connect the Government and Government aided schools through a community/ volunteer management program.

Major Schemes for School Education during 2021-22

1. Samagra Shiksha Scheme has been continued for a period of five years, from 2021-22 to 2025-26.
2. NIPUN Bharat Mission: On 5th July 2021, the government launched a National Mission on Foundational Literacy and Numeracy called “National Initiative for Proficiency in Reading with Understanding and Numeracy (NIPUN Bharat)”.
3. Pradhan Mantri Poshan Shakti Nirman (PM POSHAN) Scheme: The Scheme, earlier known as the ‘National Programme for Mid-Day Meal in Schools”, covers all school children studying in Balvatika (just before class I) and Classes I-VIII in Government and Government-Aided Schools.

HIGHER EDUCATION

• Gross enrollment ratio in higher education was recorded at 27.1 percent in 2019-20, slightly higher than 26.3 percent in 2018-19. For males, it has also increased from 26.3 percent in 2018-19 to 26.9 percent in 2019-20 while for females it has increased from 26.4 percent to 27.3 percent respectively.

Gross Enrollment Ratios in Higher Education for age 18-23 years (in percent)

SKILL DEVELOPMENT

• To unlock the demographic dividend, several steps have been taken to increase the skill levels in the population. Periodic Labour Force Survey (PLFS) 2019-20 shows that formal vocational/technical training among youth (age 15-29 years) and working population (age 15-59 years) have improved in 2019-20 over 2018-19.
• The improvement in skills has also been for males and females, both in rural and urban sectors. However, formal training for males and females is lower in rural than in urban areas.
• As per the report of the first quarter (April-June, 2021) of the Quarterly Employment Survey (QES) in respect of establishments employing at least 10 workers in major nine sectors, 17.9 percent of estimated establishments were imparting formal skill training.

SKILL INDIA MISSION

• Launched in 2015, Skill India Mission focuses on re-skilling and up-skilling in prominent trades. Under the Mission, the government implements Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Jan Shikshan Sansthan (JSS) Scheme, and National Apprenticeship Promotion Scheme (NAPS), for providing short term Skill Development training and Craftsman Training Scheme (CTS), for long term training, to the youth.

Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

• PMKVY has two training components, viz., Short Term Training (STT) and Recognition of Prior Learning (RPL). Between 2016-17 and 2021-22 (as of 15 January 2022 ), under PMKVY 2.0 about 1.10 crore persons were trained (inclusive of the placement-linked and non-placement-linked components of the PMKVY).

Jan Shikshan Sansthan (JSS) Scheme

• JSS aims to provide vocational skills to non-literate, neo-literates, persons with a rudimentary level of education up to 8th and school dropouts up to 12th standard in the age group of 15-45 years. The priority groups are women, SC, ST, minorities, Divya Gyan, and other backward sections of the society.

National Apprenticeship Promotion Scheme (NAPS)

• This Scheme promotes apprenticeship training and the engagement of apprentices by providing financial support to industrial establishments undertaking apprenticeship programs under The Apprentices Act, 1961. As of 31 October 2021, 4.3 lakh apprentices are engaged under the scheme.

Craftsmen Training Scheme (CTS)

• CTS is for providing long-term training in 137 trades through 14,604 Industrial Training Institutes (ITIs) across the country. For session 2020, 13.36 lakh trainees were enrolled.

 TRENDS OF EMPLOYMENT

In the absence of high-frequency data on labour market indicators, other proxies such as subscriptions to the EPFO scheme and demand for work under MGNREGA, have been used to analyze the more recent trends in employment in urban and rural sectors.

Trends in Urban employment using Quarterly PLFS data

• In the first quarter of 2020-21, the unemployment rate for the urban sector rose to 20.8 percent. The LFPR and WPR in the urban sector also declined significantly during this quarter.

• The UR gradually declined during this period to reach 9.3 percent in Q4 of 2020-21. The UR for males as well as females, aged 15 & above, recovered to the pre-pandemic levels.

TRENDS IN DATA ON DEMAND FOR WORK UNDER MGNREGS

• During the nationwide lockdown, the aggregate demand for MGNREGS work peaked in June 2020, and has thereafter stabilized.
• During the second COVID wave, demand for MGNREGS employment reached the maximum level of 4.59 crore persons in June 2021. Nonetheless, after accounting for seasonality, the demand at an aggregate level still seems to be above the pre-pandemic levels of 2019.
• For some states like Andhra Pradesh and Bihar, the demand for work under MGNREGS has reduced to below the pre-pandemic levels during the last few months.
• Intuitively, one may expect that higher MGNREGS demand may be directly related to the movement of migrant labouri. e. source states would be more impacted. Nevertheless, state-level analysis shows that for many migrant source states like West Bengal, Madhya Pradesh, Odisha, Bihar, the MGNREGS employment in most months of 2021 has been slower than the corresponding levels in 2020.
• In contrast, the demand for MGNREGS employment has been higher for migrant recipient states like Punjab, Maharashtra, Karnataka, and Tamil Nadu for most months in 2021 over 2020.

Long-term trends in employment using annual PLFS data

• During the Periodic Labour Force Survey (PLFS) 2019-20 (survey period from July 2019 to June 2020), employment at its usual status continued to expand. Between 2018-19 and 2019-20, about 4.75 crore additional persons joined the workforce.
• This is about three times more than the employment created between 2017-18 and 2018-19.

POLICY RESPONSES TO BOOST RURAL LIVELIHOOD

Incentives for job creation: Aatmanirbhar Bharat Rojgar Yojana (ABRY) was announced as a part of the Aatmanirbhar Bharat 3.0 package to boost the economy, increase the employment generation in the post-Covid recovery phase, and incentivize the creation of new employment along with social security benefits and restoration of loss of employment during COVID-19 pandemic.

Wage employment: To boost employment and livelihood opportunities for returnee migrant workers, Garib Kalyan Rojgar Abhiyaan was launched in June 2020. It focused on 25 target-driven works to provide employment and create infrastructure in the rural areas of 116 districts of 6 States with a resource envelope of Rs 50,000 crore.

Boosting Self-employment:

• The program targets to mobilize about 9-10 crore households into Self Help Groups (SHGs).
• Till December 2021, 8.07 crore households are mobilized into SHGs.

Social protection:

• Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM) Yojana, launched on 05.03.2019, is a voluntary and contributory pension scheme for providing a monthly minimum assured pension of ` 3000 upon attaining the age of 60 years.
• As of 17.01.2022, the enrollment under the PMSYM scheme is 46.09 lakh persons, out of which female enrollment was 23.89 lakh and male enrollment was 22.20 lakh.

e-SHRAM Portal

• e-SHRAM portal has been launched to create a National Database of Unorganized Workers (UWs). One of the main objectives of this portal is to facilitate the delivery of Social Security Schemes to the workers. This database is seeded with Aadhaar and for the age group between 16-59 years.
• It includes construction workers, migrant workers, gig workers, platform workers, agricultural workers, MGNREGA workers, fishermen, milkmen, ASHA workers, Anganwadi workers, street vendors, domestic workers, rickshaws pullers, and other workers engaged in similar other occupations in the unorganized sector.

Status of Labour Reforms

• In 2019 and 2020, 29 Central Labour laws were amalgamated, rationalized, and simplified into four labor codes, viz., the Code on Wages, 2019 (August 2019), the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health & Working Conditions Code, 2020 (September 2020).
• The new laws were in tune with the changing labour market trends and at the same time accommodated the minimum wage requirement and welfare needs of the unorganized sector workers.

HEALTH

PROGRAMMES AND SCHEMES FOR THE HEALTH SECTOR

• Ayushman Bharat Health and Wellness Centres (AB-HWCs): The vision of Ayushman Bharat is to achieve universal health coverage. It adopts a continuum of care approach, comprising two inter-related components. The first component is the creation of 1,50,000 Health and Wellness Centres (HWCs) which cover both, maternal and child health services and non-communicable diseases, including free essential drugs and diagnostic services.
• Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY): The scheme provides a health cover of ` 5 lakhs per family per year for secondary and tertiary care hospitalization to over 10.74 crores of poor and vulnerable families in the bottom 40 percent of the Indian population.
• PM-Ayushman Bharat Health Infrastructure Mission (PM-ABHIM) is a mission to develop the capacities of primary, secondary, and tertiary care health systems, strengthen existing national institutions, and create new institutions, to cater to the detection and cure of new and emerging diseases. It is the largest pan-India scheme for public health infrastructure since 2005.
• Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) is being implemented to correct regional imbalances in the availability of affordable reliable tertiary healthcare services and to augment facilities for quality medical education in the country.
• Ayushman Bharat Digital Mission (ABDM), erstwhile National Digital Health Mission (NDHM), announced on 27th September 2021 to develop the backbone necessary to support the integrated digital health infrastructure of the country.
• e-Sanjeevani: In wake of the COVID-19 pandemic, the Ministry of Health and Family Welfare upgraded the thee-Sanjeevani application to enable patient-to-doctor teleconsultation to ensure a continuum of care and facilitate health services to all citizens in the confine of their homes free of cost.

HEALTH OUTCOME INDICATORS

As per the latest National Family Health Survey (NFHS)-5, social indicators such as total fertility rate, sex ratio, and health outcome indicators viz., infant mortality rate, under-five mortality rate, institutional birth rates have improved over the year 2015-16.

CHILD HEALTH INDICATORS

• All child nutrition indicators have also improved at all Indian levels. Under Five Mortality Rate (U5MR) has declined from 49.7 in 2015-16 to 41.9 in 2019-21. Infant Mortality Rate (IMR) has declined from 40.7 per 1000 live births in 2015-16 to 35.2 per 1000 live births in 2019-21.
• Stunting has declined from 38 percent in 2015-16 to 36 percent in 2019-21. Wasting has also declined from 21 percent in 2015-16 to 19 percent in 2019-21. And, underweight declined from 36 percent in 2015-16 to 32 percent in 2019-21.

LIFE EXPECTANCY

• Life expectancy at birth was 69.4 years for the period 2014-18; it has increased by 0.4 years from 2013-17. It varies widely across states; ranging from the lowest at 65.2 years in Chhattisgarh to the highest at 75.3 years in Kerala and Delhi. It is higher in urban areas (72.6 years) than in rural areas (68.0 years).

DRINKING WATER AND SANITATION

JAL JEEVAN MISSION (JJM)

• In 2019, out of about 18.93 crore families in rural areas, about 3.23 crore (17 percent) rural families had tap water connections in their homes. As of 2 January 2022, 5,51,93,885 households have been provided with a tap water supply since the start of the mission.
• Six states/ Uts have achieved the coveted status of 100 percent households with tap water supply, namely Goa, Telangana, A & N Islands, Puducherry, Dadra, Nagar Haveli, Daman and Diu, and Haryana.

SWACHH BHARAT MISSION (GRAMEEN) [SBM-G]

• During 2021-22 (as of 25.10.2021) a total of 7.16 lakh Individual household latrines for new emerging households and 19,061 Community Sanitary Complexes have been constructed. Also, 2,194 villages have been declared as ODF Plus.
• As per the recently released findings of the fifth round of the National Family Health Survey, 2019-21 (NFHS-5), the population living in households that use an improved sanitation facility has increased from 48.5 percent in 2015-16 to 70.2 percent in 2019-21.

ELECTRICITY AND CLEAN COOKING FUEL

• As per NFHS-5, 58.6 percent of households were using clean fuel for cooking in 2019-21, a significant increase from 43.8 percent in 2015-16.

RURAL DEVELOPMENT

PRADHAN MANTRI AWAAS YOJANA-GRAMIN (PMAY-G)

• In the first phase from 2016-17 to 2018-19, one crore houses were taken up. Under phase II, assistance is being provided for the construction of the remaining 1.95 crore houses from 2019-20 to 2021-22.
• As of 18th January 2022, 2.17 crore houses have been sanctioned and 1.69 crore houses completed against a target of 2.63 crore houses till 2021-22.

PRADHAN MANTRI GRAM SADAK YOJANA (PMGSY)

• As of 18.01.2022, a total of 1,82,506 roads measuring 7,82,844 km and 9,456 Long Span Bridges (LSBs) have been sanctioned and 1,66,798 roads measuring 6,84,994 km and 6,404 LSBs have been completed.
• World Bank (2019) in an evaluation of the scheme found that PMGSY roads had a positive impact on human capital formation in rural India.

MULTIDIMENSIONAL POVERTY (MPI)

• Using the NFHS-4 (2015-16) report, in line with the global Multidimensional Poverty Index (MPI), NITI Aayog prepared Multidimensional Poverty Index at the national, for all states and districts of India.
• It will enable measuring deprivation across twelve indicators at the national, state, and districts level. In 2015-16, 25 percent of households were found to be multidimensional poor in India.
• Among states, Bihar had the largest (51.91%) multidimensional poor households, followed by Jharkhand (42.16%), Uttar Pradesh (37.79%), Madhya Pradesh (36.65%), Assam (32.67%), and Rajasthan (39.46%).
• Since the MPI index is based on NFHS-4 data of 2014-15, it may serve as the baseline for measuring deprivation in future studies.

THE INTRODUCTION: Services sector contributes over 50 percent to India’s GDP. While the Covid-19 pandemic has hurt most sectors of the economy, the services sector has been the worst affected as its’ share in India’s GVA declined from 55 percent in 2019-20 to 53 percent in 2021-22.1 Within the services sector, the effect of Covid-19 has been varied. While non-contact services such as information, communication, financial, professional, and business services have remained resilient, the impact has been much more severe on contact-based services such as tourism, retail trade, hotel, entertainment, recreation, etc.

IMPACT OF COVID-19 AND SEQUENTIAL RECOVERY

• The services sector contracted by 8.4 percent Year on Year (YoY) in 2020-21 (Table 1). This decline was driven by a sharp contraction of 18.2 percent YoY in the sub-sector ‘Trade, hotels, transport, communication & services related to broadcasting.
• Owing to its contact-intensive nature, the services included in this sub-sector had to bear the maximum brunt of the disruptions caused by the prevailing pandemic.
• The sub-sector ‘Public administration, defense & other services’ includes expenditure by the government and services such as health, education, recreation, etc, on the other, contracted by 4.6 percent YoY in 2020-21.

• The relatively less contact intensive sub-sector ‘Financial, real estate & professional services’ was the least impacted, with a marginal decline of 1.5 percent YoY in its GVA during 2020-21.

TRENDS IN HIGH-FREQUENCY INDICATORS

The upturn in Services GVA, when seen with the trend in high-frequency indicators such as Purchasing Managers Index (PMI) Services Index, freight and passenger traffic point to a pickup in economic momentum.

SERVICES PMI

• India’s services sector activity, gauged by PMI services, which had contracted for five consecutive months since March 2020, recovered sharply in October 2020. It dropped again for three consecutive months (May, June, and July 2021) as a consequence of the second Covid-19 wave. Notably, the contraction during May-July 2021 was not as sharp as seen during the first lockdown.
• With the easing of restrictions, PMI Services started to grow once again from August 2021 recording the strongest jump in over 10 years to 58.4 in October 20213 (Figure 1(a)). PMI index moderated to 55.5 in December 2021.

FREIGHT TRAFFIC

• As the economy gradually opened up in June 2020, freight traffic also improved. Freight traffic registered strong growth during April- June 2021, partly reflecting the rebound from the low base during the same period last year. The impact of the second covid wave in April-May 2021 on these indicators was much more muted as compared to during the full lockdown in March-May 2020.

BANK CREDIT TO THE SERVICES SECTOR

• Bank credit growth to the services sector which had moderated significantly in 2019, started picking up in 2020, increasing to 8.8 percent (YoY) at the end of December 2020, as compared to 6.2 percent in December 2019 (Figure 2). This momentum has lost its pace in 2021-22.
• Bank credit growth decelerated to 3.6 percent YoY at the end of November 2021 as compared to 8.2 percent a year ago. However, it is important to note that corporates have raised more money through capital markets than banking capital in 2021-22 so far.

SERVICES SECTOR SHARES AT THE STATE AND UT LEVEL

• The services sector accounts for more than 50 percent of the Gross State Value Added (GSVA) in 12 out of the 33 states and UTs (Table 3). Chandigarh stands out with a particularly high share of services in GSVA at 74 percent while Sikkim’s share remains the lowest at 24.25 percent. Notably, the Services share in Sikkim’s GSVA has increased from over 18 percent in 2018-19 to over 24 percent in 2020-21. Similarly, over the last three years, the share of services in GSVA has increased by over 4 percent for Himachal Pradesh and Odisha. Maharashtra and Karnataka are the top two contributors to services GSVA, with Rs 15.1 lakh crore and Rs 9.71 lakh crore gross value added by the services sector in 2020-21 respectively.
• Due to the Covid-19 pandemic and restrictions on movement, GSVA in the services sector declined in 2020-21 relative to the pre-pandemic year 2019-20. This is true for 13 out of 20 states for which data is available. During 2020-21, services GSVA contracted by almost 11 percent in Rajasthan and almost 10 percent in Jharkhand and Punjab. On the other hand, Sikkim achieved the highest growth of 11.71 percent in services GSVA during 2020-21.

FDI IN SERVICES

• The Services Sector was the largest recipient of FDI inflows in India. During H1 2021-22, Services Sector received $ 16.73 billion in FDI equity inflows. “Financial, Business, Outsourcing, R&D, Courier, Tech testing & Analysis along with Education sub-sector witnessed strong FDI inflows”, mentioned the Survey.

TRADE-IN SERVICES

• India had a dominant presence in global services exports. It remained among the top ten services exporter countries in 2020, with its share in world commercial services exports increasing to 4.1% in 2020 from 3.4% in 2019. “The impact of Covid-19 induced global lockdown on India’s services exports was less severe as compared to merchandise exports”.
• Despite Covid-19’s impact on transport exports, double-digit growth in gross exports of services, aided by exports of software, business, and transportation services, resulting in an increase of 22.8% in net exports of services in H1 2021-22.

SUB-SECTOR WISE PERFORMANCE

IT-BPM (INFORMATION TECHNOLOGY – BUSINESS PROCESS MANAGEMENT) SECTOR

• IT-BPM sector as a major segment of India’s services. During 2020-21, according to NASSCOM’s provisional estimates, IT-BPM revenues (excluding e-commerce) reached $ 194 billion, growing by 2.26% YoY, adding 1.38 lakh employees.
• Within the IT-BPM sector, IT services constitute the majority share (>51%). The Economic Survey observed that over the last year, several policy initiatives have been undertaken to drive innovation and technology adoption in the sector, including relaxation of Other Services Provider regulations, Telecom Sector Reforms, and Consumer Protection (e-commerce) Rules, 2020.
• This would significantly expand access to talent, increase job creation and catapult the sector to the next level of growth and innovation.

STARTUPS AND PATENTS

• Startups in India had grown remarkably over the last six years, most of which belonged to the Services Sector. More than 61,400 startups have been recognized in India as of January 10, 2022.
• India had a record number of Startups (44) reaching unicorn status in 2021.
• intellectual property, specifical patents were key to a knowledge-based economy.
• The number of patents filed in India has gone up to 58,502 in 2020-21 from 39,400 in 2010-11 and the patents granted in India have gone up to 28,391 from 7,509 during the same period.

Tourism Sector

• The tourism sector was a major contributor to GDP growth, foreign exchange earnings, and employment, however, the Covid-19 pandemic had a debilitating impact on world travel and tourism everywhere, including India.
• The resumption of International tourism will continue to depend largely on a coordinated response among countries in terms of travel restrictions, harmonized safety, and hygiene protocols, and effective communication to help restore consumer confidence.
• Special international flights have been operating under the Vande Bharat Mission which was currently in its 15^thphase and had carried over 63.55 lakh passengers.

PORTS, SHIPPING, AND WATERWAYS SERVICES

• The development of ports was crucial for the economy. Ports handled around 90% of export-import cargo by volume and 70% by value.
• The total cargo capacity of all ports had increased to 1,246.86 Million Tonnes Per Annum (MTPA) as of March 2021 from 1052.23 MTPA in March 2014.
• Also, the Port traffic had picked up in 2021-22 registering a growth of 10.16% during April-November 2021, after being hit by disruptions caused by Covid-19 in 2020-21.
• The Sagarmala Programme, a flagship program, aimed at promoting port-led development in the country with 802 projects worth Rs. 5.53 lakh crore under its ambit.

SPACE SECTOR

• Since its inception in the 1960s, the Indian space program has grown drastically. Capabilities have been developed in the space sector across all domains including indigenous space transportation systems, space assets comprising a fleet of satellites catering to various needs of the society.
• The Government undertook various reforms in the space sector in 2020, envisaging participation of the private sector in providing space-based services. These reforms included empowering New Space India Limited (NSIL) and changing the present supply-based model to a demand-driven model; creating an independent nodal agency i.e. Indian National Space Promotion and Authorization Centre (IN-SPACe) under the Department of Space; and providing a predictable, forward-looking, well defined and enabling regulatory regime for space activities in the country.

HIGHLIGHTS

• GVA of services crossed pre-pandemic level in July-September quarter of 2021-22; however, GVA of contact intensive sectors like trade, transport, etc. still remain below pre-pandemic level.
• Overall service Sector GVA is expected to grow by 8.2 percent in 2021-22.
• During April-December 2021, rail freight crossed its pre-pandemic level while air freight and port traffic almost reached their pre-pandemic levels, domestic air, and rail passenger traffic are increasing gradually – showing the impact of the second wave was much more muted as compared to during the first wave.
• During the first half of 2021-22, the service sector received over US$ 16.7 billion in FDI – accounting for almost 54 percent of total FDI inflows into India.
• IT-BPM services revenue reached US$ 194 billion in 2020-21, adding 1.38 lakh employees during the same period.
• Major government reforms include, removing telecom regulations in the IT-BPO sector and opening up of space sector to private players.
• Services exports surpassed the pre-pandemic level in the January-March quarter of 2020-21 and grew by 21.6 percent in the first half of 2021-22 – strengthened by global demand for software and IT services exports.
• India has become 3^rd largest start-up ecosystem in the world after US and China. The number of newly recognized start-ups increased to over 14000 in 2021-22 from 733 in 2016-17.
• 44 Indian start-ups have achieved unicorn status in 2021 taking the overall tally of unicorns to 83, most of which are in the services sector.

THE INTRODUCTION: Global Industrial activity continued to be affected by the disruptions caused by the COVID-19 pandemic. While the Indian industry was no exception to these disruptions, its performance has improved in 2021-22. Gradual unlocking of the economy, record vaccinations, improvement in consumer demand, continued policy support towards industries by the government in the form of Atma Nirbhar Bharat Abhiyan, and further reinforcements in 2021-22 have led to an upturn in the performance of the industrial sector. The introduction of the production linked incentive scheme (PLI) to encourage scaling up of industries and a major boost provided to infrastructure-both physical as well as digital– combined with continued measures to reduce transaction costs and improve ease of doing business, would support the pace of recovery.

INDEX OF INDUSTRIAL PRODUCTION (IIP)

• The impact of the pandemic on the industrial sector is reflected in the negative growth of 8.4 percent in 2020-21. From April-November 2021-to 22 the IIP grew by 17.4 percent as compared to (-15.3) percent in the corresponding period of the previous year.
• The supply-side measures as also steps to bolster demand, taken to address the contraction, are responsible for the significantly improved performance of the industrial sector in 2021-22.
• In November 2021 the IIP index grew by 1.4 percent with the mining sector recording a growth of 5.0 percent followed by electricity at 2.1 percent and manufacturing at 0.9 percent.

EIGHT CORE INDEX (ICI)

• The monthly Index of Eight Core Industries (ICI) measures the collective and individual performance of production in selected eight core industries like Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement, and Electricity. This is an index of the eight most fundamental industrial sectors of the Indian economy and comprises 40.27 percent of the weight in IIP.
• The growth rate of the ICI index during the period of April-November 2021-22 was 13.7 percent as compared to (-)11.1 percent in the corresponding period of the last financial year. This acceleration in ICI is mainly driven by improved performance in steel, cement, natural gas, coal, and electricity. Fertilizers and crude oil registered a negative growth of 0.6 percent and 2.7 percent respectively.

GROSS FIXED CAPITAL FORMATION

• Gross fixed capital formation (GFCF) is the gross addition to fixed assets like machinery and equipment, intangible assets and indicates the state of investments in the economy. During 2019-20, the share of the industrial sector in total GFCF in the economy (at current prices) was recorded at 30.1 percent, which is slightly lower than 31 percent in the previous financial year.
• Within the industrial sector, the share of manufacturing in GFCF was 51 percent, followed by electricity at 23 percent, construction at 21 percent, and mining with 5 percent. While aggregate GFCF (at constant prices) grew by 9.9 percent and industrial GFCF grew by 12.4 percent in 2018-19, it grew by 5.4 percent and 3.7 percent respectively in 2019-20.
• During 2019-20, GFCF in the mining and electricity sectors registered a negative growth of 12.9 percent and 6 percent respectively, but the GFCF grew by 10.2 and 4.4 percent in the manufacturing and construction sectors respectively on a yo-y basis.

CREDIT IN INDUSTRY

• Gross bank credit to the industrial sector, recorded a growth of 4.1 percent in October 2021 (Y-o-Y basis) compared to a negative growth of 0.7 growth in October 2020.
• The share of industry in non-food credit stood at 26 percent in October 2021. Certain industries such as mining, textiles, petroleum, coal products and nuclear fuels, rubber, plastic, and infrastructure have shown consistent improvement in credit growth.

FDI IN INDUSTRIES

• India registered its highest-ever annual FDI inflow of US$ 81.97 billion (provisional) in 2020-21 reflecting a growth of 10 percent as compared to the previous year.
• The increase has been on the back of growth of 20 percent in 2019-20. In the year 2021-22, FDI inflow grew by 4 percent in the first six months to reach US$ 42.86 billion as compared to US$ 41.37 billion for the same period of last year.
• Over the last seven financial years (2014-21), India received FDI inflow worth US$ 440.27 billion which is nearly 58 percent of the FDI received by the country in the last 21 years(US$ 763.83 billion).

PERFORMANCE OF CENTRAL PUBLIC SECTOR ENTERPRISES

• CPSEs are an important constituent of the Indian industry. As of 31.03.2020, 256 CPSEs were operational. The overall net profit of operating CPSEs during 2019-20 stood at Rs. 93,295 crore Contribution of all CPSEs to the central exchequer by way of excise duty, GST, corporate tax, dividend, etc. stood at Rs. 3,76,425 crore.
• The CPSEs across sectors employed 14,73,810 persons, of which 9,21,876 were regular employees.
• By Union Budget 2021-22 announcement, the government has approved a policy of strategic disinvestment of public sector enterprises that will provide a clear roadmap for disinvestment in all non-strategic and strategic sectors.
• The non-strategic CPSEs will be privatized or otherwise shall be closed. Thus, the policy on public sector enterprises provides a clear path for disinvestment in all nonstrategic and strategic sectors and strengthens the idea of Minimum Government – Maximum Governance.

CORPORATE PERFORMANCE

• With economic recovery, concomitant improvement in demand and improved business sentiments have had a positive effect on the performance of the corporate sector.
• In response to the favorable base effect, sales of 1,687 listed manufacturing companies recorded steady and broad-based growth of 34.0 percent in Q2: FY22 as compared to (-)4.3 percent growth in Q2: FY21, on an annual (y-o-y) basis.

SECTOR-WISE PERFORMANCE AND ISSUES IN THE INDUSTRY

Steel: The performance of the steel industry is pivotal for the growth of the economy. Despite being hit by COVID-19, the steel industry has bounced back with cumulative production of crude and finished steel in 2021-22(April-October) at 66.91 MT and 62.37 MT, an increase of 25.0 percent and 28.9 percent respectively.

Coal: Coal is the most important and abundant fossil fuel in India and accounts for 55 percent of the country’s energy needs. Coal production increased by 12.24 percent in April-October 2021 as compared to (-) 3.91 percent in April-October 2020. Overall production of raw coal in India during the year 2020-21 was 716.08 million tonnes (provisional) as compared to 730.87 million tonnes achieved in the previous year 2019-20.

Micro Small Medium Enterprise: Micro, Small & Medium Enterprises(MSMEs) contribute significantly to the economic and social development of the country by fostering entrepreneurship and by generating employment opportunities. The relative importance of MSMEs can be gauged from the fact that the share of MSME GVA in total GVA (current prices) for 2019-20 was 33.08 percent. The CHAMPIONS portal is an ICT-based technology system for making the smaller units big by helping and hand-holding them.

The key features of the portal include:

• Information dissemination: Regular updates on recent development in the MSME sector.
• To resolve the grievances in a fast track manner, all Nationalised Banks, a good number of Private/Regional Rural Banks, State Financial Corporations, Central Government Ministries/ Departments, State Governments, and CPSEs have been boarded on the portal.
• Scheme/Programme-wise mapping of officials of the Ministry for fast-track responses to grievances.
• Integration with various portals such as MSME Samadhaan, Udyam Registration, CPGRAM, etc.

Textiles: Textile industry is the second-largest employment generator in the country, next only to agriculture. In the last decade, close to Rs. 203,000 crores have been invested in this industry with direct and indirect employment of about 105 million people, a major part of which is women. Despite the industry being deeply affected by the lockdown, it has shown a remarkable recovery with a positive contribution to growth, as reflected by IIP, of 3.6 percent from April-October 2020.

Electronics Industry: Government accords high priority to electronics hardware manufacturing. The government has therefore notified the National Policy on Electronics 2019 (NPE 2019) on 25.02.2019 to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets. Additionally, NPE 2019 attempts to catalyze the growth of the Indian electronics ecosystem through the

• Production Linked Incentive (PLI) Schemes for Large Scale Electronics Manufacturing
• PLI Scheme for IT Hardware
• Scheme for Promotion of Manufacturing of electronic components and Semiconductors (SPECS)
• Modified Electronics Manufacturing Clusters 2.0 (EMC 2.0).

Recently, the government has approved an outlay of Rs. 76,000 Crore (>US$ 10 Bn) for the development of the Semiconductors and Display Manufacturing Ecosystem. The government’s intervention to boost this industry has come at a time when the global economy is facing an acute shortage of semiconductors due to severe disruptions in supply chains.

Pharmaceuticals: Indian Pharmaceutical industry ranks third in the world in pharmaceutical production by volume. During 2020-21, total pharma export US$ 24.4 Bn against the total pharma import of US$7.0 Bn. The initiatives taken by the government to address the requirement of the pharmaceutical and medical devices industry are as follows:

• Bulk Drug Parks that envisages the creation of world-class infrastructure facilities.
• Bulk drugs have been approved for the promotion of domestic manufacturing of 53 critical APIs.
• Production linked incentive (PLI) scheme for Pharmaceuticals.
• Promoting Domestic Manufacturing of Medical Devices was approved on 20th March 2020.

INFRASTRUCTURE

NATIONAL INFRASTRUCTURE PIPELINE (NIP)

• To achieve a GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure. During FYs 2008-17, India invested about US$1.1 trillion in infrastructure. However, the challenge is to step up infrastructure investment substantially.
• Keeping this objective in view, National Infrastructure Pipeline (NIP) was launched with a projected infrastructure investment of around Rs. 111 lakh crore (US$ 1.5 trillion) during FY 2020-2025 to provide world-class infrastructure across the country and improve the quality of life for all citizens.
• It also envisages improving project preparation and attracting investment, both domestic and foreign in infrastructure.

NATIONAL MONETISATION PIPELINE (NMP)

• A robust asset pipeline has been prepared to provide a comprehensive view to investors and developers of the investment avenues in infrastructure. The pipeline includes a selection of de-risked and brownfield assets with a stable revenue generation profile (or long rights) which will make for an attractive investment option.
• Total indicative value of NMP for core assets of the Central Government has been estimated at Rs 6.0 lakh crore over 4 years (5.4 percent of total infrastructure investment envisaged under NIP).

ROAD TRANSPORT

• The road network of the country consists of National Highways(NH), State-Highways (SH), District Roads, Rural Roads, Urban Roads, and Project Roads of over 63.71(Provisional) lakh km of roads as of 31 March 2019, which is the second-largest in the world, after the United States with 66.45 lakh km of roads.
• There has been a consistent increase in the construction of National Highways/roads since 2013-14 with 13,327 km of roads constructed in 2020-21 as compared to 10,237 km in 2019-20, indicating an increase of 30.2 percent over the previous year.

RAILWAYS

• Being the third-largest network in the world under single management and with over 68,102 route km IR strives to provide a safe, efficient, competitive, and world-class transport system.
• An average of 1835 track km per year of new track length has been added through new-line and multi-tracking projects during 2014-2021 as compared to the average of 720 track km per day during 2009-14.
• To strengthen the agriculture sector, as of 31st December 2021, IR has operated 1,841 Kisan Rail services, transporting approximately 6.0 lakh tonnes of perishables including fruits and vegetables.
• To provide better amenities IR has embarked on providing Wi-Fi internet services at all stations (excluding halt stations). As of 5th December 2021, a total of 6,087 Railway Stations has been equipped with a Wi-Fi facility.

CIVIL AVIATION

• India has emerged as one of the fastest-growing aviation markets in the world. The domestic traffic in India has more than doubled from around 61 million in 2013-14 to around 137 million in 2019-20, registering a growth of over 14 percent per annum.
• Till the launching of UDAN in 2016, India had 74 airports have scheduled operations. But, within 4 years under UDAN, four rounds of bidding under RCS-UDAN have taken place and 153 RCS airports including 12 water aerodromes & 36 Helipads have been identified for the operation of RCS flights.

PORTS

• Port performance in an economy is crucial for the trade competitiveness of that economy. Expansion of port capacity has been accorded the highest priority by the Government through the implementation of well-conceived infrastructure development projects. The capacity of 13 major ports which was 871.52 million tonnes per annum (MTPA) at the end of March 2014, has increased by 79 percent to 1,560.61 MTPA by the end of March 2021.
• Many initiatives have been taken by the government to improve port governance, augment capacity utilization, enhance port efficiency and connectivity. The measures include the following among others:
• Sagarmala is a National Programme aimed at accelerating economic development in the country by harnessing the potential of India’s 7,500 km long coastline and 14,500 km of potentially navigable waterways.
• The Major Port Authorities Act 2021 was notified on 18.2.2021. This act provides for inter alia regulation, operation, and planning of major ports in India and vests the administration, control, and management of such ports upon the Boards of Major Port Authorities.
• A new Captive Policy for Port Dependent Industries has been prepared to address the challenges of renewal of the concession period, the scope of expansion, and the dynamic business environment.

INLAND WATERWAYS

• Regulatory amendment through the Inland Vessels Act, 2021, replaced the over 100 years old Inland Vessels Act, 1917 (1 of 1917) and ushered in a new era in the inland water transport sector.
• Augmentation in navigation capacity of National Waterway-1 (NW-1) is being implemented since 2018 through the Jal Marg Vikas Project from Varanasi to Haldia stretch of the Ganga-Bhagirathi-Hooghly River System to enable large barge movements.
• Construction of multi-modal terminals at Varanasi and Sahib Ganj has been completed and that of the multimodal terminal at Haldia and the Navigational Lock at Farakka has achieved substantial progress. The other projects such as the comprehensive development of NW-2 and NW-16 &Indo-Bangladesh Protocol (IBP) route are proposed to be undertaken for 5 years for Rs. 461 crores and Rs.145.29 crores respectively, from 2020-21 to 2024-25.

TELECOM

• The relevance of the telecom sector has increased immensely. This can be gauged from the fact that the total telephone subscriber base in India has increased from 933.02 million in March 2014 to 1200.88 million in March 2021. In March 2021, 45 percent of subscribers were based in rural India and 55 percent in urban areas.
• Internet penetration in the country is increasing steadily with internet subscribers increasing from 302.33 million in march 2015 to 833.71 million in June 2021. While 67.2 percent of internet subscribers had narrowband connections and 32.8 percent had broadband connections in 2015, the composition had reversed by June 2021 with only 4 percent of subscribers having a narrow band and 96 percent with broadband connections.
• The number of mobile towers has also increased substantially reaching 6.93 lakhs towers in December 2021, reflecting that the telecom operators have well realized the potential in the sector and seized the opportunity to build up an infrastructure that will be fundamental in boosting the Government’s Digital India campaign.

PETROLEUM, CRUDE, AND NATURAL GAS

• Crude oil and condensate production during the year 2020-21 was 30.49 million metric tonnes (MMT), lower than the production level of 32.17 MMT in 2019-20 and 94.3 percent of the target of 32.32 MMT for 2020-21. India depends on imports to meet more than 80 percent of its requirements.
• Natural Gas production during the year 2020-21 was 28.67 billion cubic meters (BCM) as against the production of 31.18 BCM in 2019-20 and 85.4 percent against the target of 33.57 BCM for 2020-21.
• The production of petroleum products was 233.51 MMT in 2020-21 as against 258.18 MMT in 2019-20, showing achievement of 90.2 percent of the target of 259.02 MMT for 2020- 21.

ELECTRICITY

• India has witnessed a significant transformation from being an acute power deficit country to a situation of demand being fully met.
• India has also made remarkable strides to ensure universal access to electricity for every household.
• The total installed power capacity and captive power plant was 459.15 GW on 31.03.2021 as compared to 446.35 GW on 31.03.2020 registering a growth of 2.87 percent. Installed capacity in utilities was 382.15 GW on 31.03.2021 as compared to 370.11 GW on 31.03.2020 – increasing by 3.25 percent.
• Thermal sources of energy make the largest – 61.42 percent share of total installed capacity in utilities followed by renewable energy resource (RES) with 24.7 percent and hydro with 12.09 percent.
• The total electricity generated including that from captive plants during the year 2020-21 was 15.73 lakh GWh as compared to 16.23 lakh GWh during the year 2019-20, of which 13.73 lakh GWh was generated by utilities and 2 lakh GWh in captive plants.

Renewable energy – Solar, Wind, Biomass, and small hydro energy

• India has witnessed the fastest rate of growth in renewable energy capacity addition among all large economies, during the last 7.5 years with renewable energy capacity growing by 2.9 times and solar energy expanding by over 18 times.
• To facilitate renewable power evacuation and reshape the grid for future requirements, the Green Energy Corridor (GEC) projects have been initiated. The GEC Project aims at synchronizing electricity produced from renewable sources, such as solar and wind, with conventional power stations in the grid.

THE CONCLUSION: The Government has charted out a comprehensive program for industrial transformation. With an emphasis on supply-side measures, the reforms address long known bottlenecks of insufficient infrastructure, tardy business processes, and labour market reforms. The introduction of the production-linked incentive schemes intends to encourage the scaling up of industries that are strategic in nature or are technology-intensive. The objective is to create the capacity to integrate with the global value chains. Several measures have been taken to reduce transaction costs, especially for the small and medium enterprises as well as facilitate the inflow of capital, technology, and international best practices into the industries. The new CPSE policy provides a road map for disinvestment, opening up avenues for further growth and improvement in efficiency while enabling the government to focus its resources on the developmental needs of the country. The recovery of the industrial sector, positive business expectations propelled by extensive reforms, and improved consumer demand, suggest that further improvements in industrial performance can be expected.

HIGHLIGHTS

• Index of Industrial Production (IIP) grew at 17.4 percent (YoY) during April-November 2021 as compared to (-)15.3 percent in April-November 2020.
• Capital expenditure for the Indian railways has increased to Rs. 155,181 crores in 2020-21 from an average annual of Rs. 45,980 crores during 2009-14 and it has been budgeted to further increase to Rs. 215,058 crores in 2021-22 – a five times increase in comparison to the 2014 level.
• Extent of road construction per day increased substantially in 2020-21 to 36.5 Km per day from 28 Km per day in 2019-20 – a rise of 30.4 percent.
• Net profit to sales ratio of large corporates reached an all-time high of 10.6 percent in the July-September quarter of 2021-22 despite the pandemic (RBI Study).
• Introduction of Production Linked Incentive (PLI) scheme, the major boost provided to infrastructure-both physical as well as digital, along with measures to reduce transaction costs and improve ease of doing business, would support the pace of recovery.

THE INTRODUCTION: The Agriculture sector which accounts for 18.8 percent of the Gross Value Added (GVA) of the country in 2021-22 has experienced buoyant growth in the past 2 years. It grew at 3.9 percent in 2021-22 and 3.6 percent in 2020-21 showing resilience in the face of COVID-19 shock. The Survey attributes this to “good monsoon, various Government measures to enhance credit availability, improve investments, create the market facility, promote infrastructure development and increased provision of quality inputs to the sector”. It also observes that livestock and fisheries have experienced buoyant growth and had helped the sector perform well.

GROSS VALUE-ADDED AND GROSS CAPITAL FORMATION

• The share of the agriculture and allied sector in total GVA of the economy has settled at around 18 percent in the long term states the Survey. In the year 2021-22 it is 18.8 percent and in the year 2020-21, it was 20.2 percent. Another trend observed is, higher growth in allied sectors (Livestock, Forestry and Logging, Fishing and Aquaculture) compared to the crop sector. Recognizing these allied sectors as engines of high growth the Committee on Doubling Farmers’ Income (DFI 2018) had also recommended focused policy with a concomitant support system to boost agricultural incomes.
• There is a direct correlation between capital investments in agriculture and its growth rate. The Gross Capital Formation in the agricultural sector relative to the GVA in the sector is showing a fluctuating trend in sync with the variation in private sector investments, whereas the public sector investments have remained stable at 2-3 percent over the years. The Survey suggests “higher access to institutional credit to farmers and greater participation of the private corporate sector” may improve private sector investment in agriculture. Towards this end, the Survey recommends offering an appropriate policy framework to crowd-in corporate investments along with an increase in public investments along the entire agricultural value chain.

AGRICULTURAL PRODUCTION

• The Survey states that as per the First Advance Estimates for 2021-22 (Kharif only), total food grain production is estimated at a record level of 150.50 million tonnes, an increase of 0.94 million tonnes over Kharif production in the year 2020-21. Survey also points out that the production of rice, wheat, and coarse cereals had increased at Compound Annual Growth Rates (CAGR) of 2.7, 2.9, and 4.8 percent respectively over the period between 2015-16 and 2020-21. For pulses, oilseeds, and cotton during the same period, it has been 7.9, 6.1, and 2.8 percent respectively.
• India is the second-largest producer of sugar in the world. India has become a “sugar surplus nation” says the Survey. It points out that since 2010-11, the production has outstripped the consumption except in the year 2016-17.  This has been made possible by ensuring and protecting the sugarcane farmers against price risk through Fair and Remunerative Price (FRP), enhancing the liquidity of mills by incentivizing them to divert excess sugarcane/sugar to ethanol production and provide financial assistance for transportation to sugar mills to facilitate the export of sugar says Survey.

CROP DIVERSIFICATION

• The existing cropping pattern is skewed towards the cultivation of sugarcane, paddy, and wheat which has led to the depletion of fresh groundwater resources at alarming rates, it also points out that extremely high water stress levels are recorded in the country’s north-western region.
• To promote water use efficiency and sustainable agriculture and ensure higher incomes to farmers, the Government is implementing the Crop Diversification Programme in the original green revolution States viz., Punjab, Haryana, and Western Uttar Pradesh as a sub-scheme under Rashtriya Krishi Vikas Yojana since 2013-14 to shift area under paddy cultivation towards less water-intensive crops such as oilseeds, pulses, and Nutri-cereals, etc. The program also focuses on shifting areas under tobacco cultivation to alternative crops in States viz. Andhra Pradesh, Bihar, Gujarat, Karnataka, Maharashtra, West Bengal among other tobacco-producing states. The government is also using price policy to signal farmers to diversify their crops.

WATER AND IRRIGATION

• 60 percent of the net irrigated area in the country is serviced through groundwater. The rate of extraction of groundwater is very high (more than 100%) in the states of Delhi, Haryana, Punjab, and Rajasthan. Noting that increased coverage under micro-irrigation can be the most effective mode of water conservation, the Survey suggests these States need to focus on both medium and long-term groundwater recharge and conservation plans.
• To mobilize resources to expand coverage of micro-irrigation, a Micro-Irrigation Fund (MIF) with a corpus of Rs. 5000 crores were created under NABARD during 2018-19. As of 01.12.2021, projects with loans under MIF amounting to Rs. 3970.17 crore has been approved for 12.81 lakh hectares of micro-irrigation area. Further, the Survey highlights that under Pradhan Mantri Krishi Sinchayee Yojana, as of 14.12.2021 total area of 59.37 lakh hectares has been covered under micro-irrigation in the country from 2015-to 16.

NATURAL FARMING

• To sustain agricultural production through eco-friendly processes in tune with nature, ensure chemical-free produce and preserve soil productivity government is also encouraging farmers to adopt natural farming techniques. Towards this end, the government is implementing a dedicated scheme of the Bharatiya Prakritik Krishi Paddhati Programme (BPKP).

AGRICULTURAL CREDIT AND MARKETING

• The agricultural credit flow for the year 2021-22 has been fixed at Rs. 16,50,000 crores and till 30^thSeptember 2021, against this target a sum of Rs.7,36,589.05 crores has been disbursed. Moreover, under the Atma Nirbhar Bharat program, the government also announced an Rs. 2 lakh crore concessional credit boost to 2.5 crore farmers through Kisan Credit Cards (KCC). Towards this end, banks have issued KCCs to 2.70 crore eligible farmers as of 17.01.2022. Further Government has extended the KCC facility to the fisheries and animal husbandry sector in 2018-19.
• To link the farmers with markets and to help them in trading and realizing competitive and remunerative prices for their produce the government has been working continuously to improve market linkages and marketing infrastructure. Towards this end, the APMCs have been recognized as eligible entities under Agriculture Infrastructure Fund (AIF). Additionally, under the National Agricultural Market (e-NAM) scheme as of 1^stDecember 2021, 1000 mandis of 18 States and 3 UTs have been integrated with the e-NAM platform.

• The Government has also launched a central sector scheme of ‘Formation and Promotion of 10,000 Farmer Producer Organisations (FPOs)’ to form and promote 10,000 FPOs by 2027-28. As of January 2022, a total of 1963 FPOs have been registered under the scheme. The government has also established a full-fledged Ministry of Co-operation in July 2021 to provide a greater focus on the cooperative sector.

NATIONAL MISSION ON EDIBLE OILS

• India is the world’s second-largest consumer and number one importer of vegetable oil. The oilseed production in India has been steadily growing since 2016-17. It was showing a fluctuating trend before that. It had grown at almost 43 percent from 2015-16 to 2020-21.
• The demand for edible oil in India would remain high due to population growth, urbanization, and the consequent change in dietary habits and traditional meal patterns.
• Given the persistently high import of edible oil, to increase oil production the Government had been implementing a centrally sponsored scheme of National Food Security Mission: Oilseeds (NFSM – Oilseeds) since 2018-19 across all districts in the country.
• The scheme the government has set up 36 oilseed hubs between 2018-19 and 2019-20 to increase the availability of high yielding quality seed. For Kharif 2021, the union government had allocated 9.25 lakhs of oilseed mini kits of high yielding varieties to states for distribution.
• Further, in August 2021, the Government had launched the National Mission on Edible Oils – Oil Palm (NMEO-OP) to augment the availability of edible oils by “harnessing area expansion and through price incentives”. The scheme aims to cover an additional area of 6.5 lakh hectares for oil palm by 2025-26 and thereby reach a target of 10 lakh hectares ultimately.
• Currently 3.70 lakh hectares area under oil palm cultivation. Also, the scheme aims to increase the Crude Palm Oil (CPO) production to 11.20 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30.

FOOD MANAGEMENT

• India runs one of the largest food management programs in the world. The Survey highlights that during the year 2021-22, the government had allocated 1052.77 lakh tonnes of food grains to States/UTs under the National Food Security Act, 2013, and other welfare schemes compared to 948.48 lakh tonnes in 2020-21.
• The government has further extended the coverage of food security through the additional provision of 5Kg food grains per person per month through the Pradhan Mantri Gareeb Kalyan Yojana (PMGKY). Under the scheme during 2021-22, the government had allocated 437.37 LMT of food grains and in 2020-21, 322 LMT of food grains free of cost to around 80 crore NFSA beneficiaries to ameliorate the hardships faced by the poor due to economic disruption caused by COVID-19 pandemic.
• The government had also approved the centrally sponsored pilot scheme ‘Fortification of Rice and its Distribution under PDS’ on 14.02.2019 for three years.
• The scheme is being implemented in 15 districts (1 district per State) and the government had distributed 3.38 LMT of fortified rice till December 2021 under the pilot scheme.
• During Kharif Marketing Season (KMS) 2020-21, 601.85 lakh metric tonnes (LMT) of rice have been procured against an estimated target of 642.58 LMT. In the KMS 2021-22, a total of 566.58 LMT of paddy (equivalent to 379.98 LMT rice) was procured as of 16.01.2022. During RMS 2021-22, 433.44 LMT of wheat was procured against 389.92 LMT procured during RMS 2020-21. Also, during the Kharif & Rabi Marketing Season 2020-21, approximately 11.87 LMT of coarse grains has been procured which is the highest in the last five years.

AGRICULTURAL RESEARCH AND EDUCATION

• Every rupee spent on agricultural research and development, yields much better returns. Increasing R&D spending on agriculture is, therefore, not only a vital necessity for ensuring food security but also important from the socio-economic point of view.
• Agricultural research and education are crucial for “development of environmentally sustainable global food system, ensuring food and nutrition security and increasing farm income by cost minimization and yield maximization” says the Survey. It points out that the National Agricultural Research System of India has produced significant results. The Indian Council of Agricultural Research (ICAR) during 2020 and 2021 notified/released a total of 731 new varieties/hybrids of field crops. The Department of Agriculture Research and Education (DARE) has developed 35 special trait varieties including bio-fortified and stress-tolerant varieties of field and horticulture crops during 2021-22.

CONCLUSION: The performance of the agriculture and the allied sector has been resilient to the COVID 19 shock. The sector grew at 3.6 percent in 2020-21 and improved to 3.9 percent in 2021- 22. However, as shown by the latest SAS report, the fragmentation of landholdings has led to alternate sources such as livestock, fishery, and wage labor becoming significantly important for an agricultural household. The increasing importance of allied sectors including animal husbandry, dairying, and fisheries in the growth and income of the farmers indicates that focus needs to shift more towards harnessing the potential of allied activities. There is also a need to improve the productivity of small and marginal farmers through the development and implementation of smallholding farm technologies.

THE INTRODUCTION: In 2020-21, India progressed further on achieving the Sustainable Development Goals (SDGs). In 2021, India continued exercising significant climate leadership at the international stage under the International Solar Alliance (ISA), Coalition for Disaster Resilient Infrastructure (CDRI), and Leadership Group for Industry Transition (LeadIT Group). The chapter discusses several initiatives taken in the area of sustainable finance by the Ministry of Finance, RBI, and SEBI.

INDIA’S PROGRESS ON SUSTAINABLE DEVELOPMENT GOALS

• India has been making strides towards achieving the social, economic, and environmental goals covered under SDGs.
• This achievement gains further significance in the face of the considerable human and economic costs imposed by the COVID-19 pandemic, which has set countries back on their developmental goals and created serious impediments to the attainment of the SDGs, the world over.

GOAL WISE PERFORMANCE OF INDIA AS A WHOLE: NITI AAYOG SDG INDIA INDEX REPORT AND DASHBOARD 2020-21

• India’s overall score on the NITI Aayog SDG India Index & Dashboard improved to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19, showing progress in India’s journey towards achieving the SDGs.
• Despite 2020-21 being a pandemic year, India performed well on eight of the 15 SDGs measured by the NITI Aayog SDG India Index.
• These included – goal 3 (good health and well-being), goal 6 (clean water and sanitation), goal 7 (affordable and clean energy), goal 10 (reduced inequalities), goal 11 (sustainable cities and communities), goal 12 (responsible consumption and production), goal 15 (life on land) and goal 16 (peace, justice, and strong institutions).

PERFORMANCE OF STATES AND UTS ON THE NITI AAYOG SDG INDIA INDEX, 2021

• The number of Front Runners (scoring 65-99) increased to 22 states and UTs in 2020-21 from 10 in 2019-20. All remaining states and UTs were Performers (scoring 50- 64).
• Amongst states, additions to the Front Runner category in 2020-21 included Uttarakhand, Gujarat, Maharashtra, Mizoram, Punjab, Haryana, and Tripura. Amongst us, additions to the Front Runner category included Andaman and Nicobar Islands, Delhi, Jammu and Kashmir, Ladakh, and Lakshadweep.

STATE OF THE ENVIRONMENT

• Sustainable development requires balancing rapid economic growth with conservation, ecological security, and environmental sustainability. This section explores the state of the environment across the land, water, and air.

LAND FORESTS

• Russia, Brazil, Canada, USA, and China were the top five largest countries by forest area in 2020, while India was the tenth-largest country by forest area.
• The top 10 countries account for 66 percent of the world’s forest area.

• Forests covered 24 percent of India’s total geographical area accounting for two percent of the world’s total forest area in 2020.
• India has increased its forest area significantly over the past decade. It ranks third globally in an average annual net gain in forest area between 2010 to 2020, adding an average of 2,66,000 ha of additional forest area every year during the period, or adding approximately 0.38 percent of the 2010 forest area every year between 2010 to 2020.
• Madhya Pradesh (11 percent of India’s total forest cover) had the largest forest cover in India in 2021, followed by Arunachal Pradesh (9 percent), Chhattisgarh (8 percent), Odisha (7 percent), and Maharashtra (7 percent).
• Mizoram (85 percent), Arunachal Pradesh (79 percent), Meghalaya (76 percent), Manipur (74 percent), and Nagaland (74 percent) were the top five states in terms of the highest percent of forest cover w.r.t. total geographical area of the state in 2021

PLASTIC WASTE MANAGEMENT AND ELIMINATION OF IDENTIFIED SINGLE-USE PLASTICS

• India is committed to mitigating pollution caused by littered single-use plastics.
• In 2018, the Hon’ble Prime Minister announced that India would phase out single-use plastic by 2022.
• The Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016 as amended regulate the import of identified plastic waste into the country by SEZ and EOUs.
• The regulation of import of plastic waste prevents dumping of plastic waste by other countries in the country and allows for recycling of plastic waste generated in the country.
• The following domestic regulatory actions have been taken in 2021:
• In August 2021, the Ministry of Environment, Forest and Climate Change, Government of India, notified the Plastic Waste Management Amendment Rules, 2021 prohibiting identified single-use plastic items, which have low utility and high littering potential, by 2022.
• The plastic packaging waste, which is not covered under the phase-out of identified single-use plastic items.
• In October 2021, the Ministry of Environment, Forest, and Climate Change notified the draft Regulations on the Extended Producer Responsibility for plastic packaging under Plastic Waste Management Rules, 2016.

WATER

GROUNDWATER

• Ground Water Resources Assessment of states/UTs is carried out jointly by state groundwater/ nodal departments and Central Ground Water Board at periodic intervals, and the Dynamic Ground Water Resources of India is published by compiling the state/UT wise groundwater resources assessed.
• Such groundwater assessments have been undertaken in 2004, 2009, 2011, 2013, 2017, and 2020.
• The annual groundwater recharge, annual extractable groundwater resources, annual groundwater extraction, and the stage of total groundwater extraction of India during 2004-2020.
• Overall, the annual groundwater extraction has been in the range of 58-63 percent during this period.

RESERVOIRS

• Reservoirs are an important source of water resources for the country. However, they are particularly prone to seasonality and are greatly impacted by rainfall and temperature patterns.
• The capacity at full reservoir levels in 138 monitored reservoirs of India along with the live storage during June-December 2021, June 2020–May 2021, and the ten-year average during June – May.
• It may be seen that reservoir live storage is at its peak during monsoon months and lowest in summer months, requiring careful planning and coordination of storage, release, and utilization of reservoirs.

RIVERS

• The Ganga River Basin is the largest in India, covering more than a quarter of the country’s land area, hosting about 43 percent of its population and contributing 28 percent of India’s water resources.
• The Government of India launched the Namami Gange Mission in 2014 as an integrated and multi-sectoral mission for the conservation of Ganga and its tributaries.

Namami Gange Mission

• The total expenditure incurred under the Namami Gange Mission from 2014-15 to December 2021. Lower expenditure incurred in 2020-21 and 2021-22 needs to be viewed in the context of the COVID pandemic and recent changes in accounting norms.

• Under the Gyan Ganga (Research and Knowledge Management) component, the Ganga Knowledge Centre was set up to create a state-of-the-art center to support the NMCG and create a comprehensive knowledge base on Ganga.
• The Centre for Ganga Management & Study was set up at IIT Kanpur for long-term basin studies and technology development.

AIR

• The Government of India launched the National Clean Air Programme (NCAP) in 2019 to tackle the air pollution problem comprehensively, with a target to achieve 20-30 percent reduction in particulate matter (PM) concentrations by 2024 across the country keeping 2017 as the base year for the comparison of concentration.
• The NCAP is implemented in 132 cities, of which 124 cities have been identified based on non-conformity with national ambient air quality standards for five consecutive years.
• This includes 34 million-plus cities / urban agglomerations identified by the Fifteenth Finance Commission (XV-FC).
• In addition, NCAP also covers eight other million-plus cities, which fall under the XV-FC grant for receiving performance-based grants for air quality improvement. Figure 26 shows the funds released under the NCAP in 2019-20 and 2020-21.
• In 2019-20, the highest funds were released to Uttar Pradesh, followed by Maharashtra and Madhya Pradesh while in 2020-21, the highest funds were released to Andhra Pradesh, Punjab, and West Bengal.
• Several steps are being taken to control and minimize air pollution from various sources in the country, which inter alia include:
• Vehicular Emission: India has leapfrogged from BS-IV to BS-VI norms for fuel and vehicles since April 2020.
• Industrial Emission: Stringent emission norms for coal-based thermal power plants have been introduced.
• Air Pollution due to dust and burning of waste: Six waste management rules covering solid waste, plastic waste, e-waste, bio-medical waste, construction, and demolition waste, and hazardous waste have been notified.
• Monitoring of Ambient Air Quality: The air quality monitoring network of manual as well as continuous monitoring stations, under programs such as the National Air Monitoring Programme, have been expanded.

AVERAGE ANNUAL AIR QUALITY INDEX, DELHI (2016-2021)

CLIMATE CHANGE

India launched the National Action Plan on Climate Change (NAPCC) in 2008, establishing eight National Missions to advance action on the country’s climate priorities.

NATIONAL MISSIONS UNDER NAPCC

MAJOR DECISIONS AT THE COP26 CLIMATE SUMMIT, GLASGOW

• The COP26 adopted outcomes on all pending issues of the “Paris Rule Book”, which is the procedures for implementation of the Paris Agreement, including market mechanisms, transparency, and common timeframes for NDCs.
• The “Glasgow Climate Pact” emphasizes adaptation, mitigation, finance, technology transfer, capacity-building, loss, and damage.
• The decision urges the developed country Parties to fully deliver on the USD 100 billion mobilization goal urgently and through till 2025 and emphasizes the importance of transparency in the implementation of their pledge.
• COP26 also welcomed the launch of a comprehensive two-year Glasgow–Sharm el-Sheikh work program on the global goal of adaptation. The Glasgow Dialogue between Parties, relevant organizations, and stakeholders on loss and damage was established to explore the ways to fund loss and damage due to climate change.

India’s NDC and its voluntary commitment to enhanced climate action.

India submitted its Nationally Determined Contribution (NDC) under the Paris Agreement on a “best effort basis” keeping its developmental imperatives in mind. India committed to

1. Reduce the emission intensity of GDP by 33 to 35 percent by 2030 as compared to the 2005 level.
2. Create an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent through additional forest and tree cover by 2030.
3. Achieve about 40 percent cumulative electric power installed capacity from non-fossil fuel energy resources by 2030.

FINANCE FOR SUSTAINABLE DEVELOPMENT

DEALING WITH FINANCIAL RISKS ASSOCIATED WITH CLIMATE CHANGE:

To assess the progress of its regulated entities in managing climate risk, RBI is preparing a consultative discussion paper covering, inter alia,

1. Governance
2. Strategy
3. Risk management
4. Disclosure

AUGMENTING FINANCE FOR SUSTAINABLE DEVELOPMENT:

• India is actively contributing to the global efforts towards green finance.
• RBI joined the Central Banks and Supervisors Network for Greening the Financial System (NGFS) as a member on April 23rd, 2021, and has begun participating in the workstreams of the NGFS.

INDIA’S INITIATIVES AT THE INTERNATIONAL STAGE

Lifestyle for Environment (LIFE):

• In November 2021, the Hon’ble Prime Minister proposed a One-Word Movement in the context of climate: LIFE – Lifestyle for Environment, at the COP 26 in Glasgow.

International Solar Alliance (ISA):

• In November 2021, the Hon’ble Prime Minister launched the joint Green Grids Initiative One Sun One World One Grid (GGI –OSOWOG) at the World Leaders’ Summit in Glasgow.

Coalition for Disaster Resilient Infrastructure:

• India’s call for promoting disaster resilience of infrastructure through the Coalition for Disaster Resilient Infrastructure (CDRI) has been receiving global attention.
• Since CDRI’s launch in September 2019, its membership has expanded to 28 countries and seven multilateral organizations, with several member countries committing to provide technical assistance and financial resources.

Leadership Group for Industry Transition (LeadIT Group):

• LeadIT was launched by India and Sweden, with the support of the World Economic Forum at the UN Climate Action Summit in New York in September 2019, as one of the nine action tracks identified by the UN Secretary-General to boost climate ambitions and actions to implement the Paris Agreement.

CONCLUSION: Going forward, there is a need to further improve forest and tree cover. Social forestry could also play a significant role in this regard. States/UTs need to improve management of their groundwater resources through improving its recharge and by stemming its over-exploitation and preventing the critical and semi-critical assessment units from further worsening. There is a greater thrust on climate action following the announcement of India’s target of becoming Net-Zero by 2070. Climate finance will remain critical to successful climate action by developing countries, including India.

HIGHLIGHTS

• India’s overall score on the NITI Aayog SDG India Index and Dashboard improved to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19.
• Number of Front Runners (scoring 65-99) increased to 22 States and UTs in 2020-21 from 10 in 2019-20.
• In North-East India, 64 districts were Front Runners and 39 districts were Performers in the NITI Aayog North-Eastern Region District SDG Index 2021-22.
• India has the tenth largest forest area in the world.
• In 2020, India ranked third globally in increasing its forest area from 2010 to 2020.
• In 2020, the forests covered 24% of India’s total geographical, accounting for 2% of the world’s total forest area.
• In August 2021, the Plastic Waste Management Amendment Rules, 2021, was notified which is aimed at phasing out single-use plastic by 2022.
• Draft regulation on Extended Producer Responsibility for plastic packaging was notified.
• The Compliance status of Grossly Polluting Industries (GPIs) located in the Ganga main stem and its tributaries improved from 39% in 2017 to 81% in 2020.
• The consequent reduction in effluent discharge has been from 349.13 million liters per day (MLD) in 2017 to 280.20 MLD in 2020.
• The Prime Minister, as a part of the national statement delivered at the 26th Conference of Parties (COP 26) in Glasgow in November 2021, announced ambitious targets to be achieved by 2030 to enable further reduction in emissions.
• The need to start the one-word movement ‘LIFE’ (Lifestyle for Environment) urging mindful and deliberate utilization instead of mindless and destructive consumption was underlined.

THE CONTEXT: As economic activity started showing signs of picking up in the second year of the pandemic, the global economy faced the fresh challenge of rising global inflation. COVID-19 related stimulus spending in major economies along with pent-up demand boosting consumer spending pushed inflation up in many advanced and emerging economies. The surge in energy, food, non-food commodities, and input prices, supply constraints, disruption of global supply chains, and rising freight costs across the globe stoked global inflation during the year.

RETAIL INFLATION

The retail inflation, as measured by Consumer Price Index-Combined (CPI-C) moderates to 5.2% in 2021-22 (April-December) from 6.6% in the corresponding period of 2020-21. The Survey also says effective supply-side management kept prices of most essential commodities under control during the year.

DOMESTIC INFLATION

Compared to many Emerging Markets and Developing Economies (EMDEs) and advanced economies, the Survey finds that Consumer Price Index – Combined (CPI-C) inflation in India has remained range-bound in the recent months, touching 5.2% in December 2021. This was possible largely because of the proactive steps taken by the Government for effective supply management.

GLOBAL INFLATION

• In 2021, inflation picked up globally as economic activity revived with the opening up of economies. Inflation surged from 0.7 % in 2020 to around 3.1 % in 2021 in the advanced economies. For instance, inflation in the USA touched 7.0 % in December 2021, the highest since 1982. In the UK, it hit a nearly 30 years high of 5.4% in December 2021. Among emerging markets, Brazil witnessed inflation of 10.1% in December 2021 and Turkey also saw double-digit inflation touching 36.1%. Argentina has been experiencing inflation rates above 50% during the last 6 months.

RECENT TRENDS IN RETAIL INFLATION

• Retail inflation, well within the target limits of 2% to 6%, declined to 5.2% as against 6.6% during April – December 2020-21. The Survey states that this was largely attributed due to the easing of food inflation. Food inflation, as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9% in 2021-22 (April-December) as against 9.1% in the corresponding period last year.
• A “refined” Core inflation has been constructed to exclude the volatile fuel items. The items of “petrol for vehicle” and “diesel for vehicle” and “lubricants & other fuels for vehicles”, in addition to “food and beverages” and “fuel and light” have been excluded from headline retail inflation. Since June 2020, refined core inflation has been much below the conventional core inflation, indicating the impact of inflation in fuel items in the “conventional” core inflation measure.

DRIVERS OF RETAIL INFLATION

• Major drivers of retail inflation have been the “miscellaneous” and “fuel & light” groups. Contribution of miscellaneous increased to 35% in 2021-22 (April – December) from 26.8% in 2020-21 (April – December). According to the Survey, within the miscellaneous group, a subgroup of “transport and Communication” contributed the most, followed by “health”. On the other hand, the contribution of food & beverages declined from 59% to 31.9%.

“FUEL & LIGHT” AND “TRANSPORT & COMMUNICATION”

• Inflation in the above two groups for the period of 2021-22 (April – December) has been largely due to the high international crude oil, petroleum product prices, and higher taxes.

MISCELLANEOUS

• Apart from transport & communication; “clothing and footwear” inflation also saw a rising trend during the current financial year possibly indicating higher production and input costs (including imported inputs) as well as due to revival of consumer demand.

FOOD AND BEVERAGES

• “Oils and fats” contributed around 60% of “food and beverages” inflation despite having a weight of only 7.8% in the group. The demand for edible oils is largely met through imports (60%) and fluctuations in international prices have been responsible for the high inflation in this subgroup. Though India’s imports of edible oils have been the lowest in the last six years, in terms of value, it has increased by 63.5% in 2020-21 as compared to 2019-20.
• Inflation in pulses declined to 2.4% in December 2021from 16.4% in 2020-21.With an increase in area sown for Kharif pulses to a new high of 142.4 lakh hectares (as of 1^stOctober 2021) pulses inflation is on a downward trajectory.

RURAL-URBAN INFLATION DIFFERENTIAL

• The gap between rural and urban CPI inflation declined in 2020 as compared to the higher gaps witnessed from July 2018 to December 2019. The factor largely responsible for divergence, for brief periods, is the component of food and beverages.

TRENDS IN WHOLESALE PRICE INDEX-BASED INFLATION

• WPI inflation has shown an increasing trend and has remained high during the current financial year touching 12.5% during 2021-22 (April – December). The Survey describes that part of the high inflation could be because of a low base in the previous year as WPI inflation has been benign during 2020-21.

• Crude petroleum & natural gas subgroup under WPI has witnessed very high inflation and stood at 55.7% in December 2021. Within manufactured food products, edible oils were a major contributor.

DIVERGENCE BETWEEN WPI AND CPI-BASED INFLATION RATES

• The Survey attributes a host of factors for the divergence witnessed between the two indices. Some of them, amongst others, include the variations due to base effect, the conceptual difference in their purpose and design, the price behavior of the different components of the two indices, and lagging demand pick up. The Survey states that with the gradual waning of base effect in WPI its divergence in WPI and CPI inflation is expected to narrow down.

HOUSING PRICES

• The residential housing sector was also affected by COVID-19 induced restrictions through both supply and demand channels.
• Amidst initial COVID-19 restrictions, not only did the construction of new houses slow down but the launch of new housing projects also got delayed. With the loss of income, uncertainty about future income, and stay-at-home orders, home buyers delayed their housing purchases.
• During the second COVID-19 wave (April-June, 2021), transactions of housing properties were once again impacted adversely, but not as much as it was seen during the first COVID-19 wave (April-June, 2020).

PHARMACEUTICAL PRICING

• Several steps have been taken to ensure the affordability of drugs and medical devices. Ceiling prices for 355 medicines and 886 formulations were fixed for medicines under the National List of Essential Medicines, 2015 until 31 December 2021.
• Retail prices for approximately 1798 formulations were fixed under DPCO, 2013 till 31 December 2021.
• During the recent years, exercising extraordinary powers under DPCO, 2013 in the public interest, prices of coronary stents and knee implants have also been fixed.
• NPPA also capped the trade margin up to 30 percent on selected 42 anti-cancer non-schedule medicine on a pilot basis in February 2019.

LONG TERM PERSPECTIVE

• Given the importance of supply-side factors in having a predominance in the determination of inflation in India, certain long-term policies are likely to help. This includes changing production patterns which would lead to diversification of production of crops, calibrated import policy to address uncertainty, and increased focus on transportation and storage infrastructure for perishable commodities.
• Better storage and supply chain management is required to ensure availability in lean season and reduced wastages of horticulture and other perishable essential commodities to reduce the seasonal spikes in prices for consumers, glut for the farmers in times of good harvests due to lack of marketing infrastructure, resulting in distress sales.
• Effective utilization of the Agriculture Infrastructure Fund for investment in viable projects for post-harvest management infrastructure for perishable commodities can help improve agriculture infrastructure in the country.
• Schemes like Operation Green and Kisan Rail need to be exploited further to protect the interests of the farmers as well as the consumers.

HIGHLIGHTS

• The average headline CPI-Combined inflation moderated to 5.2 percent in 2021-22 (April-December) from 6.6 percent in the corresponding period of 2020-21.
• The decline in retail inflation was led by the easing of food inflation.
• Food inflation averaged at a low of 2.9 percent in 2021-22 (April to December) as against 9.1 percent in the corresponding period last year.
• Effective supply-side management kept prices of most essential commodities under control during the year.
• Proactive measures were taken to contain the price rise in pulses and edible oils.
• Reduction in central excise and subsequent cuts in Value Added Tax by most States helped ease petrol and diesel prices.
• Wholesale inflation based on the Wholesale Price Index (WPI) rose to 12.5 percent during 2021-22 (April to December).
• This has been attributed to:
• Low base in the previous year,
• Pick-up in economic activity,
• Sharp increase in international prices of crude oil and other imported inputs, and
• High freight costs.
• Divergence between CPI-C and WPI Inflation:
• The divergence peaked to 9.6 percentage points in May 2020.
• However, this year there was a reversal in divergence with retail inflation falling below wholesale inflation by 8.0 percentage points in December 2021.
• This divergence can be explained by factors such as:
• Variations due to base effect,
• Difference in scope and coverage of the two indices,
• Price collections,
• Items covered,
• Difference in commodity weights, and
• WPI being more sensitive to cost-push inflation led by imported inputs.

THE CONTEXT: Since the beginning of the COVID-19 pandemic, the monetary policy and liquidity operations have been geared towards mitigating its adverse impact on the economy. Accommodative monetary policy and other regulatory dispensations, asset classification standstill, temporary moratorium, and provision of adequate liquidity were put in place to provide a safety net to the system. In 2021-22, RBI’s measures like CRR reduction reached pre-set sunset dates, liquidity has been wound down partly but remains in surplus mode and regulatory measures have been realigned.

MONETARY DEVELOPMENTS

The Monetary Policy Committee (MPC) maintained the status quo on the policy repo rate from April to December 2021 after a substantial cut of 115 basis points (bps) during February May 2020 and a cumulative 250 basis points cut since February 2019. The repo rate which currently stands at 4 percent is the lowest in the last decade (Figure 1). Since May 2020, the policy rates have been on hold along with an accommodative monetary policy stance with forwarding guidance that this stance will continue as long as necessary to revive growth on a durable basis while ensuring that inflation remains within the target.

 Repo and reverse repo rate (percent)

LIQUIDITY CONDITIONS AND THEIR MANAGEMENT

• Liquidity has remained in surplus in the system since mid-2019 in sync with the easing of monetary conditions (Figure 6). The liquidity conditions were further eased during the year 2020-21 after the covid pandemic, and RBI has since then maintained ample surplus liquidity in the banking system to support growth.
• In 2021-22 so far, the RBI resumed normal liquidity operations in a phased manner and engaged in rebalancing liquidity from passive absorption under fixed-rate reverse repo under its Liquidity Adjustment Facility (LAF) to market-based reverse repo auctions (like Variable Rate Reverse Repo (VRRR)).
• At the same time it also ensured adequate liquidity in the system in consonance with the accommodative monetary policy stance to support growth. The liquidity conditions remained in surplus in 2021-22.

DEVELOPMENTS IN G-SEC MARKET

• The yields on 10-year G sec which had reached 8.2 percent on 26th September 2018 reduced substantially to reach 5.75 percent in June 2020. It has since then increased to stand at 6.45 percent as of 31st December 2021.

BANKING SECTOR

 The economic shock of the pandemic has been weathered well by the commercial banking system so far, even if some lagged impact is still in pipeline. The Survey also notes that the bank credit growth stands at 9.2 percent as of 31st December 2021.

GROWTH IN PERSONAL LOANS IMPROVED TO DOUBLE DIGITS:

• The Survey highlights that the growth in personal loans improved to 11.6% as compared with 9.2% in the previous year. Housing loans, the largest constituent of personal loans, registered a growth of 8 percent in November 2021. The growth of vehicle loans, the second-largest constituent, improved to 7.7 percent in November 2021 from 6.9 percent in November 2020.

CREDIT GROWTH

• The Survey states that the credit to Agriculture continued to register robust growth, and was at 10.4 percent (YoY) in 2021 as compared with 7 percent in 2020. Credit growth to micro & small industries accelerated to 12.7 percent in 2021 from 0.6 percent a year ago, reflecting the effectiveness of various measures taken by the Government and the RBI to boost credit flow to the micro, small and medium enterprises (MSME) sector.

MONETARY TRANSMISSION

• According to the Survey, Large surplus systemic liquidity, forward guidance of continuing with the accommodative stance, and the external benchmark system for pricing of loans in select sectors aided monetary transmission.

FACTORING IN INDIA

• The Survey states that Factoring is an important source of liquidity worldwide, especially for MSMEs. Hence, the Factoring Regulation (Amendment) Act, 2021 was enacted with the amendments in line with the recommendations of the UK Sinha Committee. The significant regulations about the amendment act have been notified by the RBI in January 2022. The amendments have liberalized the restrictive provisions in the Act and at the same time ensured that a strong regulatory / oversight mechanism is in place under RBI. Overall, this change would lead to the widening of the factoring ecosystem in the country and help MSMEs significantly, by providing added avenues for availing credit facilities.

DEPOSIT INSURANCE IN INDIA

• The Survey asserts that The Deposit Insurance and Credit Guarantee Corporation (Amendment) Act, passed by the Parliament in 2021, made significant changes in the landscape of deposit insurance in India. The Survey also notes that Bank-group wise, the percentage of insured deposits vis-à-vis total deposits is 84 percent for RRBs, 70 percent for cooperative banks, 59 percent for SBI, 55 percent for PSBs, 40 percent for private sector banks, and 9 percent for foreign banks. Up to 31st March 2021, a cumulative amount of Rs 5,763 crores has been paid towards claims since the inception of deposit insurance (Rs 296 crore in respect of 27 commercial banks and Rs 5,467 crores in respect of 365 co-operative banks).

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION (AMENDMENT) ACT(DICGC)

• Bill seeks to ensure that account holders will get up to Rs 5 lakh within 90 days of the RBI imposing a moratorium on their banks from the Deposit Insurance and Credit Guarantee Corporation (DICGC).
• It provides immediate relief to lakhs of depositors, whose money is parked in stressed lenders such as the PMC Bank and other small cooperative banks.
• According to the previous provisions, the deposit insurance of up to Rs 5 lakh comes into play when the license of a bank is canceled, and the liquidation process starts and they needed 8-10 years for the depositors of a stressed bank to get their insured money and other claims.
• DICGC, a wholly-owned subsidiary of the RBI, provides an insurance cover on bank deposits.

DIGITAL PAYMENTS

• According to the Survey, Unified Payments Interface (UPI) is currently the single largest retail payment system in the country in terms of volume of transactions, indicating its wide acceptance In December 2021, 4.6 billion transactions worth Rs 8.26 lakh crore were carried out by UPI. RBI and the Monetary Authority of Singapore announced a project to link UPI and PayNow, which is targeted for operationalization by July 2022, Bhutan recently became the first country to adopt UPI standards for its QR code. It is also the second country after Singapore to have BHIM-UPI acceptance at merchant locations.

NBFCs

• The Survey states that the total credit of the NBFC sector increased marginally from Rs 27.53 lakh crore in March 2021 to Rs 28.03 lakh crore in September 2021. The credit intensity of NBFCs, measured by NBFC credit as a ratio of GDP has been rising consistently and stood at 13.7% at the end-March 2021. Industry remained the largest recipient of credit extended by the NBFC sector, followed by retail loans and services.

EQUITY

• The Survey observes that In April-November 2021, IPOs of 75 companies have been listed, garnering Rs 89,066 crore, as compared to 29 companies raising Rs 14,733 crore during April-November 2020, indicating a stupendous rise of 504.5 percent in fund mobilization. The money raised by IPOs has been greater than what has been raised in any year in the last decade by a large margin. Amount raised by way of preferential allotment increased by 67.3 percent during April-November 2021, as compared to the previous year. Overall, during April-November 2021, Rs 1.81 lakh crore has been raised through equity issues through diverse modes viz., public offerings, rights, QIP, and preferential issues.

MUTUAL FUND ACTIVITIES

• The Survey highlights that the net Assets under Management (AUM) of the mutual fund industry rose by 24.4 percent to Rs 37.3 lakh crore at the end of November 2021 from Rs 30.0 lakh crore end of November 2020. Net resource mobilization by mutual funds was Rs 2.54 lakh crore during April-November 2021, as compared to Rs 2.73 lakh crore during April-November 2020.

PENSION SECTOR

• The total number of subscribers under the Nthe ew Pension Scheme (NPS) and Atal Pension Yojana (APY) increased from 374.32 lakh as of September 2020 to 463 lakh as of September 2021, recording a growth of 23.7 percent over the year. The overall contribution under NPS grew by more than 29 percent during the period September 2020 – September 2021.
• Maximum growth in contribution was registered under the All Citizen model (51.29 percent) followed by Corporate Sector (42.13 percent), APY (38.78 percent), State Government Sector (28.9 percent), and Central Government Sector (22.04 percent).
• The Assets under Management (AUM) of NPS and APY stand at Rs 6.67 lakh crore at the end of September 2021 and thereby recorded an overall growth (YoY) of 34.8 percent.
• The gender gap in enrolments under APY has narrowed down with increased participation of female subscribers, which has increased from 37 percent as of March 2016; to 44 percent as of September 2021.

SCHEDULED COMMERCIAL BANKs (SCBs)

• The Survey observes that the Gross Non-performing Advances (GNPA) of the SCBs reduced to 6.9% in the year 2021, the Net Non-performing advances (NNPA) stands @2.2% Restructured Standard Advances (RSA) ratio of SCBs increased from 0.4 percent to 1.5 percent.
• Overall, the Stressed Advances ratio of SCBs increased to 8.5% at the end of September 2021. The Survey claims that COVID-19 related dispensations/moratoriums provided concerning asset quality contributed towards an increase in restructured assets and as a result, stressed advances ratio.

PUBLIC SECTOR BANKs (PSBs)

• The Survey highlights that the GNPA decreased to 8.6 percent at the end-September 2021, The Stressed Advances ratio of PSBs increased to 10.1 percent during the same period on account of rising in restructured advances. Based on the capital position as of September 30, 2021, all Public Sector and Private Sector banks maintained the Capital Conservation Buffer (CCB) well over 2.5 percent.

INSOLVENCY AND BANKRUPTCY CODE

• The Insolvency and Bankruptcy Code (IBC) has created a cohesive and comprehensive insolvency ecosystem. With the enactment of IBC, India has witnessed the birth of two professions, namely, the insolvency profession and the valuation profession that have professionalized insolvency services.
• The Code has opened possibilities of the resolution, including merger, amalgamation, and restructuring of any kind, which often requires professional help. This has created markets for services of Insolvency Professionals, Registered Valuers, Insolvency Professional Entities and expanded the scope of services of Advocates, Accountants, and other professionals.

Cross Border Insolvency

• Cross border insolvency signifies circumstances in which an insolvent debtor has assets and/or creditors in more than one country.
• Typically, domestic laws prescribe procedures, for identifying and locating the debtors’ assets; calling in the assets and converting them into a monetary form; making distributions to creditors by the appropriate priority, etc. for domestic creditors/debtors.
• However, there are various insolvency cases in which corporations owe assets and liabilities in more than one country.
• At present, the Insolvency and Bankruptcy Code, 2016 (IBC) provides for the domestic laws for the handling of an insolvent enterprise. IBC at present has no standard instrument to restructure the firms involving cross-border jurisdictions.
• The problem of not having a cross-border framework problem was also expressed by the National Company Law Tribunal (NCLT) in Mumbai in a cross-border insolvency case involving an Indian entity.
• India needs to adopt the United Nations Commission on International Trade Law (UNCITRAL) with certain modifications to make it suitable to the Indian context.
• It has been adopted by 49 countries until now, such as Singapore, the UK, the US, South Africa, Korea, etc. This law addresses the core issues of cross border insolvency cases with the help of four main principles:
• Access: It allows foreign professionals and creditors direct access to domestic courts and enables them to participate in and commence domestic insolvency proceedings against a debtor.
• Recognition: It allows recognition of foreign proceedings and enables courts to determine relief accordingly.
• Cooperation: It provides a framework for cooperation between insolvency professionals and courts of countries.
• Coordination: It allows for coordination in the conduct of concurrent proceedings in different jurisdictions.

HIGHLIGHTS

• The liquidity in the system remained in surplus.
• Repo rate was maintained at 4 per cent in 2021-22.
• RBI undertook various measures such as G-Sec Acquisition Programme and Special Long-Term Repo Operations to provide further liquidity.

The economic shock of the pandemic has been weathered well by the commercial banking system:

• YoY Bank credit growth accelerated gradually in 2021-22 from 5.3 per cent in April 2021 to 9.2 per cent as on 31^stDecember 2021.
• The Gross Non-Performing Advances ratio of Scheduled Commercial Banks (SCBs) declined from 11.2 per cent at the end of 2017-18 to 6.9 per cent at the end of September 2021.
• Net Non-Performing Advances ratio declined from 6 percent to 2.2 per cent during the same period.
• Capital to risk-weighted asset ratio of SCBs continued to increase from 13 per cent in 2013-14 to 16.54 per cent at the end of September 2021.
• The Return on Assets and Return on Equity for Public Sector Banks continued to be positive for the period ending September 2021.

Exceptional year for the capital markets:

• 89,066 crore was raised via 75 Initial Public Offering (IPO) issues in April-November 2021, which is much higher than in any year in the last decade.
• Sensex and Nifty scaled up to touch peak at 61,766 and 18,477 on October 18, 2021.
• Among major emerging market economies, Indian markets outperformed peers in April-December 2021.

THE CONTEXT: External trade recovered strongly in 2021-22 after the pandemic-induced slump of the previous year, with strong capital flows into India, leading to a rapid accumulation of foreign exchange reserves. The resilience of India’s external sector during the current year augurs well for growth revival in the economy. However, the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of COVID-19 with new variants may pose a challenge for India during 2022-23.

EXTERNAL TRADE PERFORMANCE

• The survey states that owing to the recovery of global demand coupled with a revival in domestic activity, India’s merchandise exports, and imports rebounded strongly and surpassed pre-COVID levels during the current financial year.
• The revival in exports was also helped by timely initiatives taken by the Government. The USA followed by the UAE and China remained the top export destinations in April-November 2021, while China, the UAE, and the USA were the largest import sources for India.

• Despite weak tourism revenues, there was a significant pickup in net services receipts during April-December 2021 on account of robust software and business earnings, with both receipts and payments crossing the pre-pandemic levels.

• The Economic Survey notes that the first half of the calendar 2021 witnessed an acceleration in the global economic activity that lifted the merchandise trade above its pre-pandemic peaks. It says that India’s merchandise exports have followed the global trend and during April – December 2021 the merchandise exports grew by 49.7%, compared to the corresponding period of last year and 26.5% over 2019-20 (April-December).
• The Survey mentions that India has already attained more than 75% of its ambitious export target of US$ 400 billion set for 2021-22 and is well on the track to achieve the target. It says that sharp recovery in key markets, increased consumer spending, pent-up savings, and disposable income due to the announcement of fiscal stimulus by major economies, and an aggressive export push by the Government have bolstered exports in 2021-22.
• The rise in exports has been broad-based. India’s agriculture exports continue to do well, with the export of agriculture and allied products growing by 23.2% during April- November 2021 over the corresponding period of last year. The Survey recommends that a push in the direction of Free Trade Agreements would help provide the institutional arrangements for India’s exports diversification.
• On the issue of merchandise imports, the Economic Survey states that India witnessed a revival in domestic demand resulting in strong import growth.
• Merchandise imports grew at the rate of 68.9% in April-December 2021 over the corresponding period of last year and 21.9% over April-December 2019, crossing the pre-pandemic level.
• The Survey indicates that there has been increased diversification of India’s import sources as reflected in the reduction of China’s share to 15.5% from 17.7% in the April–November period. The Survey indicates that the merchandise trade deficit has increased to US$ 142.4 billion in April-December 2021.

TRADE-IN SERVICES

• India has maintained its impressive performance in world services trade in the post-COVID-19 period, with services exports growing by 18.4% to US$ 177.7 billion during April-December 2021 for the corresponding period of last year. The Survey says that the strong growth witnessed in services exports may also be attributed to key reforms undertaken by the Government. Services imports rose by 21.5% to US$ 103.3 billion in April-December 2021.

CURRENT ACCOUNT BALANCE:

• The Economic Survey says that India’s current account balance turned into a deficit of 0.2 percent of GDP in the first half of 2021-22, largely led by a deficit in the trading account. Net capital flows were higher at US$ 65.6 billion in H1: 2021-22, on account of continued inflow of foreign investment, revival in net external commercial borrowings (ECBs), higher banking capital, and additional special drawing rights (SDR) allocation. India’s external debt rose to US$ 593.1 billion at the end of September 2021, from US$ 556.8 billion a year earlier, reflecting additional SDR allocation by IMF, coupled with higher commercial borrowings.

CAPITAL ACCOUNT

• The Survey states that the net foreign investment inflows moderated to US$ 25.4 billion in the first half of the current financial year, compared to the corresponding year of FY 2021. As per data available till November 2021, the net FDI and gross FDI inflows have moderated largely due to lower equity investment. The Survey states that Foreign Portfolio investment remains volatile due to global uncertainties.

BOP BALANCE AND FOREIGN EXCHANGE RESERVES

• The Economic Survey mentions that the robust capital flows were sufficient to finance the modest current account deficit, resulting in an overall balance of payments (BoP) surplus of US$ 63.1 billion in H1 of 2021-22, which led to an augmented foreign exchange reserves crossing the milestone of US$ 600 billion and touched US$ 633.6 billion as of December 31, 2021. As of the end of November 2021, India was the fourth-largest forex reserves holder in the world after China, Japan, and Switzerland.

On the issue of movement in the exchange rate, the Economic Survey states that the rupee exhibited movements in both directions against the US$ during April-December 2021, yet it depreciated by 3.4% in December 2021 over March 2021.  However the depreciation of the rupee was modest as compared to its emerging market peers and it also appreciated against Euro, Japanese Yen, and Pounds Sterling.

EXTERNAL DEBT

• India’s external debt stood at US$ 593.1 billion, as of end-September 2021 which was 3.9% more than end-June 2021 levels. The Survey states that India’s external debt which crossed the pre-crisis level as at end-March 2021, consolidated further as at end-September 2021, aided by a revival in NRI deposits and one-off additional SDR allocation by the IMF. The share of short-term debt in total external debt fell marginally to 17% at the end-September 2021 from 17.7% at end-March 2021. The Survey says that from a medium-term perspective, India’s external debt continues to be below what is estimated to be optimal for an emerging market economy.

INDIA’S RESILIENCE

• The Economic Survey mentions that a sizeable accretion in reserves led to an improvement in external vulnerability indicators such as foreign reserves to total external debt, short-term debt to foreign exchange reserves, etc. India’s external sector is resilient to face any unwinding of the global liquidity arising out of the likelihood of faster normalization of monetary policy by systematically important central banks, including the Fed, in response to elevated inflationary pressures.

JUST ADD TO YOUR KNOWLEDGE

1. Top 10 Agricultural Export Products

2. Top Investing Countries FDI Equity Inflows

HIGHLIGHTS

• India’s merchandise exports and imports rebounded strongly and surpassed pre-COVID levels during the current financial year.
• There was significant pickup in net services with both receipts and payments crossing the pre-pandemic levels, despite weak tourism revenues.
• Net capital flows were higher at US$ 65.6 billion in the first half of 2021-22, on account of continued inflow of foreign investment, revival in net external commercial borrowings, higher banking capital and additional special drawing rights (SDR) allocation.
• India’s external debt rose to US $ 593.1 billion at end-September 2021, from US $ 556.8 billion a year earlier, reflecting additional SDR allocation by IMF, coupled with higher commercial borrowings.
• Foreign Exchange Reserves crossed US$ 600 billion in the first half of 2021-22 and touched US $ 633.6 billion as of December 31, 2021.

THE CONTEXT: Over the last two years, fiscal policy has remained a significant tool for addressing the economic fallout of the pandemic. The government of India has adopted a calibrated fiscal policy approach to the pandemic, which had the flexibility of adapting to an evolving situation to support the vulnerable sections of society/firms and enable a resilient recovery. India’s unique agile policy response differed from the waterfall strategy of introducing front-loaded stimulus packages, adopted by most other countries in 2020. Such an adaptive approach has now been widely accepted in policy circles (IMF Fiscal Monitor October 2021). This chapter reviews the fiscal developments in India in the aftermath of the pandemic outbreak. It begins with fiscal policy strategy and performance of the fiscal parameters in the current year 2021-22, followed by a detailed analysis of the medium to long-term trends in Central, State, and General Government finances. The chapter concludes with a discussion on policy measures to enhance the efficiency of Government spending.

FISCAL POLICY STRATEGY IN THE AFTERMATH OF THE PANDEMIC OUTBREAK

• The agile fiscal policy response adopted by the Government of India encompassed a change in the mix of the stimulus measures amidst an uncertain evolution of the pandemic situation.
• In the initial phase of the pandemic, the fiscal policy focused on building safety-nets for the poor and vulnerable sections of society to hedge against the worst-case outcomes.
• Stimulus measures such as direct benefit transfers to the vulnerable sections, emergency credit to the small businesses, and the world’s largest food subsidy program targeting 80.96 crore beneficiaries enabled the creation of safety-nets, by ensuring that the essentials are taken care of.
• This was followed by a series of stimulus packages spread throughout the year 2020-21, driven by a Bayesian updating of information as the situation evolved.
• With the restoration of economic activities, the fiscal response focused on stimulating demand in the economy.
• During this phase of economic recovery, the stimulus mix included investment boosting measures like Production Linked Incentives (PLI), steps to encourage investment in the infrastructure sector, and enhancing capital expenditure by the Central and State Governments.
• This enhanced focus on capital expenditure in the second half of the year 2020-21 is reflective of the responsive fiscal policy which the Government of India has adopted against COVID-19.
• Due to movement restrictions in containment zones, and unwillingness or inability of contractors and workers to carry out works, the quarterly capital expenditure was restrained during the first two quarters of 2020-21.
• With the easing of movement and health-related restrictions in Q3 of 2020-21, capital spending was pushed for encouraging expenditure in sectors with the most positive effect on the economy.
• The focus on capital spending has been sustained during the current fiscal, as the capital expenditure shows an increasing trend during the first three quarters of 2021-22.
• Building on the same approach, the Union Budget 2021-22 had enhanced the budget outlays for the more productive capital expenditure.
• The Government budgeted for a 34.5 percent growth in capital expenditure over 2020-21 with emphasis on railways, roads, urban transport, power, telecom, textiles, and affordable housing amid continued focus on the National Infrastructure Pipeline.
• The National Infrastructure Pipeline covering 6835 projects was expanded to 7400 projects in Budget 2021-22.
• To unlock the domestic manufacturing potential across sectors, such as renewable energy, heavy industry, agriculture, automotive, and textiles, Budget 2021-22 launched PLI schemes for 13 sectors, with an outlay of `1.97 lakh crore, for 5 years starting from 2021-22.
• All these initiatives are expected to collectively generate employment and boost output in the medium to long term through multiplier effects.
• The stimulus measures announced during the year 2021-22 have continued the emphasis on liquidity enhancing and investment boosting measures such as the PLI Scheme, credit guarantee schemes, and export boosting initiatives to support the reviving economy, apart from providing free food grains to the poor.

PERFORMANCE OF FISCAL INDICATORS DURING 2021-22

• This section analyses the performance of financial indicators and their components for the period April to November 2021.
• The data on Government accounts for April to November 2021, released by the Controller General of Accounts, show that the fiscal deficit of the Central Government at the end of November 2021 stood at 46.2 percent compared to 135.1 percent during the same period in 2020-21 and 114.8 percent during the same period in 2019-20.
• During this period both fiscal deficit and primary deficit stood at levels much below the corresponding levels in the previous two years.
• The primary deficit during the period April to November 2021 turned up at nearly half of the level it had reached during April to November 2019.

REVENUE COLLECTION

• Revenue receipts have grown at a much higher pace during the current financial year (April to November 2021) compared to the corresponding periods during the last two years. This performance is attributable to considerable growth in both tax and non-tax revenue. Net tax revenue to the Centre, which was envisaged to grow at 8.5 percent in 2021-22 BE relative to 2020-21 PA, grew at 64.9 percent from April to November 2021 over April to November 2020 and at 51.2 percent over April to November 2019.

EXPENDITURE

• The expenditure policy of the government during 2021-22 has been characterized by restructuring and prioritization of spending in sectors that have a long-term impact on output. The total expenditure of the Government increased by 8.8 percent from April to November 2021 and stood at 59.6 percent of the Budget Estimate. While the revenue expenditure has grown by 8.2 percent during the first eight months of 2021-22 over the same period in 2020-21, the non-interest revenue expenditure grew by 4.6 percent over April to November 2020.

LONG-TERM TRENDS IN GOVERNMENT FINANCES: CENTRE, STATES, AND GENERAL GOVERNMENT

• During the year 2020-21, the shortfall in revenue collection owing to the interruption in economic activity and the additional expenditure requirements to mitigate the fallout of the pandemic on vulnerable people, small businesses, and the economy in general, created immense pressure on the available limited fiscal resources.
• As a result, the budgeted fiscal deficit for 2020-21 was revised from 3.5 percent in BE to 9.5 percent in RE. The fiscal deficit for 2020-21 Provisional Actuals stood at 9.2 percent of GDP i.e. lower than RE.
• The MediumTerm Fiscal Policy (MTFP) Statement presented with Budget 2021-22 envisaged a fiscal deficit target of 6.8 percent of GDP for 2021-22.
• This reduction in deficit during the current year was budgeted on account of reduction in expenditure from 17.7 percent of GDP in 2020-21 RE to 15.6 percent in 2021-22 BE; and a budgeted marginal increase in gross tax revenues to the tune of 0.1 percent of GDP.
• The data on Government accounts for April to November 2021, released by the Controller General of Accounts, shows that the Government is well on track for achieving the budget estimate for fiscal deficit in 2021-22.

TAX REVENUE

• The Provisional Actual figures released by the Controller General of Accounts for 2020-21 show that the gross tax revenue grew by 0.7 percent (YoY) during 2020-21.

DIRECT TAXES

• Within direct taxes, personal income tax has grown at 47.2 percent over April-November 2020 and at 29.2 percent over April-November 2019. The corporate income tax registered a growth of 90.4 percent over April-November 2020 and 22.5 percent over April-November 2019.

INDIRECT TAXES

• The indirect tax receipts have registered a YoY growth of 38.6 percent in the first eight months of this fiscal year. The revenue collection from customs from April to November 2021 has registered a growth of almost 100 percent over April to November 2020 and over 65 percent compared to April to November 2019.
• The revenue from excise duties has registered a YoY growth of 23.2 percent during April- November 2021. The GST collections for the Centre were 61.4 percent of BE from April to November 2021.
• Gross GST collections, Centre and States took together, were `10.74 lakh crore during April to December 2021, which is an increase of 61.5 percent over April to December 2020 and 33.7 percent over April to December 2019.

NON-TAX REVENUE

• The non-tax revenue collections up to November 2021 registered a YoY increase of 79.5 percent. This increase was driven by dividends and profits, which stood at `1.28 lakh crore against BE of `1.04 lakh crore. The key component of dividends and profits during this period was ` 0.99 lakh crore surplus transfer from RBI to the Central Government.

EXPENDITURE

• The total expenditure of the Government increased by 8.8 percent from April to November 2021 and stood at 59.6 percent of the Budget Estimate. While the revenue expenditure has grown by 8.2 percent during the first eight months of 2021-22 over the same period in 2020-21, the non-interest revenue expenditure grew by 4.6 percent over April to November 2020.

TRANSFER TO STATES

• The Union Government has accepted the recommendations made by the Fifteenth Finance Commission (XV-FC) in its Report for the award period 2021-22 to 2025-26 relating to the grants-in-aid amounting to ` 2,33,233 crore to the States during 2021-22 for Post Devolution Revenue Deficit grant, grants to Local Bodies, Health sector grant and Disaster Management grants.

CENTRAL GOVERNMENT DEBT

• During the year, a major challenge in the aftermath of the COVID-19 pandemic was the management of debt, both for the Central and State Governments. In this milieu, conventional and unconventional measures were taken to maintain the orderly market conditions to ensure that the increased financial needs of the Governments are met smoothly while keeping in mind the major objectives of cost minimization, risk mitigation, and market development. Supported by these measures, the weighted average cost of the Government on dated securities during 2020-21 was at a 17-year low of 5.79 percent, despite a 141.2 percent jump in net market borrowings.
• The increase in total liability of central government is on account of higher borrowing resorted to due to COVID-19 pandemic as well as a sharp contraction in the GDP. The Debt-GDP is however expected to follow a downward trajectory in the upcoming years.

STATE FINANCES:

• The Gross Fiscal Deficit of States is estimated to cross the Fiscal Responsibility Legislation (FRL) threshold of 3 percent of GDP during 2020-21 RE and 2021-22 BE. The Revenue Deficit of the States also increased from 0.1 percent of GDP in 2018-19 to 2 percent of GDP in 2020-21.
• This relaxation in borrowing limits was allowed on account of the additional expenditure needs and constrained revenues of the States due to COVID-19. The net borrowing ceilings of the States were enhanced to 5 percent of GSDP of the States for the year 2020-21 and 4 percent of GSDP of the States for 2021-22.
• Both Gross Fiscal Deficit and Revenue Deficit for the States are budgeted to decline in 2021-22 from the high levels they reached in 2020-21.

POLICY MEASURES TO ENHANCE THE EFFICIENCY OF GOVERNMENT SPENDING

GOVERNMENT E-MARKETPLACE (GEM):

• The Government in 2016 had set up a dedicated e-market known as Government e-Marketplace (GeM) for the purchase of certain standard day-to-day use goods. This is a simple, transparent, and completely digital process for procurement. The General Financial Rules 2017 mandates all Ministries and Departments to procure Goods and Services available on GeM from GeM.

NEW GUIDELINES FOR REFORMS IN PUBLIC PROCUREMENT AND PROJECT MANAGEMENT:

• Apart from the purchases of common goods from GeM, the government also procures non-routine Goods, Services, and Works like construction of highways, buildings, hiring of consultants, etc.
• Keeping in mind the limitations of the earlier procurement strategy, the Government issued new guidelines for procurement and project management in October 2021, which have expanded the ambit of selecting bidders for executing government projects and procuring goods and services. The key changes in the procurement process are as follows:
• Quality and Cost Based Selection for Works and Non-consultancy Services.
• Fixing of Evaluation/ Qualification and Scoring Criteria under QCBS for Works and Non-consultancy Services.
• Stringent deadlines for making payments.
• Single bid rejection.
• Fixed Budget-based Selection for Consultancy Services.

HIGHLIGHTS

• The revenue receipts from the Central Government (April to November 2021) have gone up by 67.2 percent (YoY) as against expected growth of 9.6 percent in the 2021-22 Budget Estimates (over 2020-21 Provisional Actuals).
• Gross Tax Revenue registers a growth of over 50 percent during April to November 2021 in YoY terms.  This performance is strong compared to pre-pandemic levels of 2019-2020 also.
• During April-November 2021, Capex has grown by 13.5 percent (YoY) with a focus on infrastructure-intensive sectors.
• Sustained revenue collection and a targeted expenditure policy have contained the fiscal deficit for April to November 2021 at 46.2 percent of BE.
• With the enhanced borrowings on account of COVID-19, the Central Government debt has gone up from 49.1 percent of GDP in 2019-20 to 59.3 percent of GDP in 2020-21 but is expected to follow a declining trajectory with the recovery of the economy.

THE ECONOMY RECOVERS PAST PRE-PANDEMIC LEVELS

The Indian economy, as seen in quarterly estimates of GDP, has been staging a sustained recovery since the second half of 2020-21(see Figure: 1). Advance estimates suggest that GDP will record an expansion of 9.2 percent in 2021-22. This implies that the level of real economic output will surpass the pre-COVID level of 2019-20.

DIFFERENCE BETWEEN GDP AND GVA

In 2015, in the wake of a comprehensive review of its approach to GDP measurement, India opted to make major changes to its compilation of national accounts and bring the whole process into conformity with the United Nations System of National Accounts (SNA) of 2008. As per the SNA, gross value added, is defined as the value of output minus the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry, or sector. At its simplest, it gives the rupee value of goods and services produced in the economy after deducting the cost of inputs and raw materials used. GVA can be described as the main entry on the income side of the nation’s accounting balance sheet, and from economics, perspective represents the supply side. While India had been measuring GVA earlier, it had done so using ‘factor cost’ and GDP at ‘factor cost’ was the main parameter for measuring the country’s overall economic output till the new methodology was adopted. In the new series, in which the base year was shifted to 2011-12 from the earlier 2004-05, GVA at basic prices became the primary measure of output across the economy’s various sectors and when added to net taxes on products amounts to the GDP.

SECTORAL TRENDS IN THE ECONOMY

AGRICULTURE  

AGRI GROWTH: The agricultural sector was the least impacted by the pandemic-related disruptions. It is estimated to grow 3.9 percent in 2021-22. This sector now accounts for 18.8 percent of GVA(Figure 2)

FOOD PRODUCTION: The area is sown under Kharif and Rabi crops, and the production of wheat and rice has been steadily increasing over the years(Figures 5 and 6). In the current year, food grains production for the Kharif season is estimated to post a record level of 150.5 million tonnes.

FIGURE 2- REAL GVA: AGRICULTURE AND ALLIED SECTOR

INDUSTRIAL SECTOR

GROWTH DATA:

• The industrial sector went through a big swing by first contracting by 7 percent in 2020-21 and then expanding by 11.8 percent in this financial year.
• The share of industry in GVA is now estimated at 28.2 percent (Table 2)

INDICES TRAJECTORY:

• Since January 2021, the Purchasing Managers’ Index-Manufacturing has remained in the expansionary zone (i.e. over 50) except for one month when the second wave had slowed down economic activity.
• The Index of Industrial Production (IIP) and Core Industry indices have both followed a similar pattern and, in November 2021, went past their pre-pandemic level for the corresponding month in 2019(See Figure 7 and 8).

SERVICES

GROWTH DATA: 

• Services account for more than half of the Indian economy and were the most impacted by the COVID-19 related restrictions, especially for activities that need human contact.
• Although the overall sector first contracted by 8.4 percent in 2020-21 and then is estimated to grow by 8.2 percent in 2021-22, it should be noted that there is a wide dispersion of performance by different sub-sectors.

SUBSECTOR VARIATIONS:

• Both the Finance/Real Estate and the Public Administration segments are now well above pre-COVID levels.
• However, segments like Travel, Trade, and Hotels are yet to fully recover. It should be added that the stop-start nature of repeated pandemic waves makes it especially difficult for these sub-sectors to gather momentum.

INDICES PROJECTIONS:

• Despite contact-sensitive services still being impacted by COVID, there has been a strong recovery of the Purchasing Managers’ Index-Services since August 2021.
• Similarly, the Google Mobility Index has also recorded recovery to pre-pandemic levels. Both these indices, capture data before the Omicron struck the country.

NON-CONTACT SERVICES:

• In contrast to contact-based services, distance-enabled services have increased their share with the growing preference for remote interfaces for office work, education, and even medical services.
• Indeed, there has been a boom in software and IT-enabled services exports even as earnings from tourism have declined sharply (see Figures 15 and 16).

DEMAND TRENDS: COMPONENTS OF GDP

CONSUMPTION (PRIVATE AND GOVERNMENT):

• Total consumption is estimated to have grown by 7.0 percent in 2021-22 with government consumption remaining the biggest contributor as in the previous year.
• private consumption is yet to see the pre-pandemic level. Private consumption is poised to see stronger recovery with rapid coverage in vaccination and faster normalization of economic activity. This assessment is also seconded by RBI’s Consumer Confidence Survey.
• However, Government consumption is estimated to grow by a strong 7.6 percent surpassing pre-pandemic levels. (See Table 3).

INVESTMENT:

• Investment, as measured by Gross Fixed Capital Formation (GFCF) is expected to see strong growth of 15 percent in 2021-22 and achieve full recovery of pre-pandemic level.
• Government’s policy thrust on quickening virtuous cycle of growth via CAPEX and infrastructure spending has increased capital formation in the economy lifting the investment to GDP ratio to about 29.6 percent in 2021-22, the highest in seven years (Figure 19).

EXPORTS AND IMPORTS:

• India’s exports of both goods and services have been exceptionally strong so far in 2021-22.
• India’s total exports are expected to grow by 16.5 percent in 2021-22 surpassing pre-pandemic levels.
• Imports also recovered strongly with the revival of domestic demand and a continuous rise in the price of imported crude and metals. Imports are expected to grow by 29.4 percent in 2021-22 surpassing corresponding pre-pandemic levels.
• Merchandise exports have been above US$ 30 billion for eight consecutive months in 2021-22, and net services exports have also risen sharply.
• India’s net exports have turned negative in the first half of 2021-22, compared to a surplus in the corresponding period of 2020-21 with the current account recording a modest deficit of 0.2 percent of GDP in the first half (Figure 24).

GREEN SHOOTS IN INVESTMENT

While private investment recovery is still at a nascent stage, there are many signals which indicate that India is poised for stronger investment. The number of private investment projects under implementation in the manufacturing sector has been rising over the years. Companies hitting record profits in recent quarters and mobilization of risk capital bode well for an acceleration in private investment. A sturdy and cleaned-up banking sector stands ready to support private investment adequately. The expected increase in private consumption levels will propel capacity utilization, thereby fuelling private investment activity. RBI’s latest Industrial Outlook Survey results indicate rising optimism of investors and expansion in production in the upcoming quarters.

A GLIMPSE INTO THE STRATEGY OF POLICY MAKING OF THE GOVERNMENT OF INDIA

BARBELL STRATEGY:  AGILE RESPONSE& SAFTEY NETS

The last two years have been particularly challenging for policy-making around the world with repeated waves from a mutating virus, travel restrictions, supply-chain disruptions, and, more recently, global inflation. Faced with all this uncertainty, the Government of India opted for a “Barbell Strategy” that combined a bouquet of safety nets to cushion the impact on vulnerable sections of society/business, with a flexible policy response based on a Bayesian updating of information. This is a common strategy used in financial markets to deal with extreme uncertainty by combining two seemingly disparate legs: agile approach and safety nets.

The Agile approach is a well-established intellectual framework that is increasingly used in fields like project management and technology development. In an uncertain environment, the Agile framework responds by assessing outcomes in short iterations and constantly adjusting incrementally. It is important here to distinguish Agile from the “Waterfall” framework which has been the conventional method for framing policy in India and most of the world. Notice that the flexibility of Agile improves responsiveness and aids evolution, but it does not attempt to predict future outcomes. This is why the other leg of the Barbell strategy is also needed. It cushions for unpredictable negative outcomes by providing safety nets.

THE WATERFALL APPROACH:

• The Waterfall approach entails a detailed, initial assessment of the problem followed by a rigid upfront plan for implementation.
• This methodology works on the premise that all requirements can be understood at the beginning and therefore pre-commits to a certain path of action.
• This is the thinking reflected in five-year economic plans, and rigid urban master plans.
• While some form of feedback-loop-based policy-making was always possible, it is particularly effective at a time when we have wealth of real-time data.

AGILE APPROACH:

• Over the last two years, Government leveraged a host of High-Frequency Indicators (HFIs) both from government departments/agencies as well as private institutions that enabled constant monitoring and iterative adaptations.
• Such information includes GST collections, power consumption, mobility indicators, digital payments, satellite photographs, cargo movements, highway toll collections, and so on.
• These HFIs helped policymakers tailor their responses to an evolving situation rather than rely on pre-defined responses of a Waterfall framework.

A BRIEF OVERVIEW OF THE TWO LEGS OF BARBELL STRATEGY ADOPTED BY GOVT

AGILE APPROACH:

• The Government made its way forward by regularly announcing packages targeted at specific challenges.
• This agile approach was preceded by Safety Net.
• The fiscal mix changed over time towards supporting demand through capital expenditure and the supply-side through measures like production-linked incentives.
•  In line with the Agile approach, this mix can be changed again as per the requirements of an evolving situation.

SAFETY NET:

• Government’s initial measures in 2020-21 were mostly about making food available to the poor, providing emergency liquidity support for MSMEs, and holding the Insolvency and Bankruptcy Code in abeyance. (Read ahead. See Table:5)

THE BARBELL STRATEGY

The barbell strategy is an investment concept that suggests that the best way to strike a balance between reward and risk is to invest in the two extremes of high-risk and no-risk assets while avoiding middle-of-the-road choices. All investing strategies involve seeking the best return on investment that is possible given the degree of risk that the investor can tolerate. Investors who follow the barbell strategy insist that the way to achieve that is to go to extremes.

HIGH-FREQUENCY INDICATORS: LEVERAGING DATA FOR GOVERNANCE

In the last two years, Government leveraged an array of eighty HFIs representing industry, services, global trends, macro-stability indicators, and several other activities, from both public and private sources to gauge the underlying state of the economy on real-time basis. These include electricity generation, scheduled domestic flights, volume/value of financial transactions, capital flows, mobility indices, and so on. It also covers employment demanded under MGNREGA to gauge rural employment conditions, especially in the context of migrant workers. These indicators are regularly published in the Monthly Economic Report of the Ministry of Finance. While HFIs have the advantage of being real-time and frequent, they need to be used with care. Each indicator provides, at best, a partial view of developments. In a rapidly evolving situation, policy-makers can pick up useful signals that allow for faster response and better targeting. Thus, using HFIs for gauging trends in the economy is as much an art as a science.

A BRIEF OVERVIEW OF THE MACROECONOMIC PARAMETERS OF THE INDIAN ECONOMY

EXTERNAL SECTOR:

• Despite all the disruptions caused by the global pandemic, India’s balance of payments remained in surplus throughout the last two years.
• The foreign exchange reserve as of Dec 2021 is equivalent to 13.2 months of imports and higher than the country’s external debt.
• As of end-November 2021, India was the fourth-largest foreign exchange reserves holder in the world after China, Japan, and Switzerland.

FISCAL BALANCE:

• The fiscal support given to the economy as well as the health response caused the fiscal deficit and government debt to rise in 2020-21.
• However, there has been a strong rebound in government revenues in 2021-22 so far.
• The gross monthly GST collections have crossed ` 1 lakh crore consistently since July 2021(See figures: 29 and 30)

FINANCIAL SECTOR:

• The financial system is always a possible area of stress during turbulent times. However, India’s capital markets, have done exceptionally well and have allowed record mobilization of risk capital for Indian companies.
• The Sensex and Nifty scaled up to touch their peak at 61,766 and 18,477 on October 18, 2021. Among major emerging market economies, Indian markets outperformed their peers in April-December 2021.
• Gross NPA ratio of SCBs decreased from 7.5 percent at end-September 2020 to 6.9 percent at end-September 2021.
• The Capital to risk-weighted asset ratio (CRAR) of SCBs increased from 15.84 percent at the end of September 2020 to 16.54 percent at the end-September 2021 on account of improvement for both public and private sector banks.

INFLATION:

• Inflation has reappeared as a global issue in both advanced and emerging economies (Figure 33).
• The surge in energy prices, non-food commodities, input prices, disruption of global supply chains, and rising freight costs stoked global inflation during the year. (See Figure 33 and 34).

THE GLOBAL SUPPLY-SIDE DISRUPTION DUE TO THE PANDEMIC

As the world economy recovered in 2021, it is faced with serious supply-side constraints ranging from delivery delays, container shortages, and semiconductor chip shortages.

CONTAINER INDUSTRY:

• The stress in the container shortages can be captured in the Drewry’s3 Composite World Container Index, which data reflects the problems in the sector.
• The shortage of containers has also impacted the Indian sea trade.
•  According to the Federation of Indian Export Organisation set up under the Ministry of Commerce and Industry, the lack of containers has resulted in rising sea freight rates in the range of 300 percent to 350 percent.
• Further, the production of the new containers has slowed since 2019.
• Simultaneously, a rise in the disposal of containers has also been observed for the same period.
• Thus, the overall growth in the containers has fallen from 11 percent in 2019 to 5 percent in 2021.

SEMICONDUCTOR CHIPS:

• A report by investment bank Goldman Sachs 2021 states that the supply chain disruptions in the semiconductor industry have spillovers in over 169 industries.
• The manufacturing of semiconductors requires a large amount of capital and has an average gestation period of 6-9 months.
• Moreover, it has a fairly long production cycle of about 18-20 weeks.
• Hence, any recovery from the supply chain disruptions will be a slow and costly affair.
• The report further stated that microchips and semiconductors account for about 4.7 percent of the value added by the automotive industry.
• With the delay in supply, the average lead time in the automobile industry for 2021 has been around 14 weeks globally.

REFORMS AND THE COVID-19: TWO-PRONGED STRATEGY

One distinguishing feature of India’s economic response has been an emphasis on supply-side reforms rather than a total reliance on demand management. The emphasis given to the supply-side in India’s COVID-19 response is driven by two important considerations. First, Indian policy-makers saw the disruptions caused by travel restrictions, lockdowns, and supply-chain breakdowns as an interruption of the economy’s supply side. Second, the post-Covid world will be impacted by a wide variety of factors – changes in technology, consumer behavior, geopolitics, supply-chains, climate change, and so on. In a nutshell, the supply-side reforms are built upon two broad strategies which are explained below:

FLEXIBILITY AND INNOVATION:

• Reforms that improve flexibility and innovation to deal with the long-term unpredictability of the post-Covid world.
• This includes factor market reforms; deregulation of sectors like space, drones, geospatial mapping, trade finance factoring;
• Also, process reforms like those in government procurement and in the telecommunications sector; removal of legacy issues like retrospective tax; privatization and monetization, creation of physical infrastructure, and so on.

RESILIENCE ORIENTATION:

• Reforms aimed at improving the resilience of the Indian economy range from climate/environment-related policies; social infrastructure such as the public provision of tap water, toilets, basic housing, insurance for the poor, and so on;
• Support for key industries under Atmanirbhar Bharat; a strong emphasis on reciprocity in foreign trade agreements, and so on.
• Some commentators have likened the Atmanirbhar Bharat approach to a return to old-school protectionism. Far from it, the focus on economic resilience is a pragmatic recognition of the vagaries of the international supply chain.

SOME CONCRETE EXAMPLES OF REFORMS UNDERTAKEN BY THE GoI

INDUSTRY:

• Production Linked Incentive Scheme approved for 13 sectors including Automobiles and auto components, Pharmaceuticals drugs, Specialty steel, Telecom & Networking Products, etc.
• Retrospective tax repealed to promote tax certainty and foreign investment.

TELECOM: Structural reforms:

• Rationalization of Adjusted Gross Revenue: Non-telecom revenue will be excluded from the definition of Adjusted Gross Revenue.
• Interest rates rationalized and penalties from delayed payments of License Fee or Spectrum Usage Charge (SUC) removed.
• 100 percent FDI under automatic route permitted in the telecom sector.
• No Spectrum Usage Charge (SUC) for spectrum acquired in future spectrum auctions.
• Spectrum sharing encouraged.
• The additional SUC of 0.5 percent for spectrum sharing was removed.

Process Reforms:

• Requirement of customs clearance for import of wireless equipment removed and replaced with self-declaration to improve the ease of doing business.

DRONE RULES (ANNOUNCED IN AUGUST 2021):

• Extended applicability of rules: Drones up to 500 kg are now subject to regulations, compared to the earlier limit of 300 kg.
• Several approvals were abolished with the total forms to be filled reduced from 25 to 5. Types of fees reduced from 72 to 4.
• Quantum of fees to be paid considerably reduced and delinked with the size of the drone. Removal of the requirement of prior security clearance.
• Earlier restrictions on all foreign entities owning, manufacturing, or dealing with drones in India have been done away with.
• Expanded area of drone operations: An interactive map on the Digital Sky platform specifies color-coded zones on the map i.e., green, yellow, and red, indicating free zones, those which require prior permission, and no-fly zones, respectively.
• The perimeters of these zones have also been liberalized to increase freely accessible airspace under the green category.

FINANCIAL SECTOR: Banking: Reforms in Deposit Insurance:

• Increase in deposit insurance from ` 1 lakh to ` 5 lakh per depositor per bank. Introduced interim payments:
• Interim payment will be made by Deposit Insurance and Credit Guarantee Corporation (DICGC) to depositors of those banks for whom any restrictions/ moratorium have been imposed by RBI under the Banking Regulation Act resulting in restrictions on depositors from accessing their own savings.
• Timeline of a maximum of 90 days has been fixed for providing interim payment to depositors.

Expansion in the factoring ecosystem:

• The earlier condition of NBFCs whose principal business was factoring has been removed and now all NBFCs are permitted to undertake factoring business.

DEFENCE:

• Corporatisation of Ordnance Factory Board (OFB) approved and 7 new Defence Public Sector Undertakings created.
• FDI enhanced in Defence sector up to 74 percent through the automatic route and up to 100 percent by government route.

DISINVESTMENT:

• New Public Sector Enterprise Policy and Asset Monetisation Strategy: New policy is for strategic disinvestment of public sector enterprises Public sector commercial enterprises are classified as Strategic and Non-Strategic sectors, with the policy of privatization in non-strategic sectors and bare minimum presence even in strategic sectors.
• The identified strategic sectors are (i) Atomic Energy, Space & Defense; (ii) Transport & Telecommunication; (iii) Power, Petroleum, Coal & other minerals; and (iv) Banking, Insurance & Financial Services Privatization of Air India.
• National Monetisation Pipeline: Aggregate monetization potential of ` 6 lakh crore through core assets of the Central Government over four years from 2021-22 to 2024-25. The top 5 sectors including roads, railways, power, oil & gas pipelines, and telecom account for around 83 percent of the aggregate value. So far, CPSEs have referred 3400 acres of land and other non-core assets for monetization.

GROWTH OUTLOOK

The Indian economy is estimated to grow by 9.2 percent in real terms in 2021-22 (as per the First Advance Estimates), after a contraction of 7.3 percent in 2020-21. Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. This projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl., and global supply chain disruptions will steadily ease over the year. As per the IMF’s latest World Economic Outlook (WEO) growth projections released on 25th January 2022, India’s real GDP is projected to grow at 9 percent in both 2021-22 and 2022-23 and at 7.1 percent in 2023-24. This projects India as the fastest-growing major economy in the world in all these three years.

HIGHLIGHTS

• Indian economy is estimated to grow by 9.2 percent in real terms in 2021-22 (as per first advanced estimates) after a contraction of 7.3 percent in 2020-21.
• GDP projected to grow by 8- 8.5 percent in real terms in 2022-23.
• The year ahead is poised for a pickup in private sector investment with the financial system in a good position to provide support for the economy’s revival.
• Projection comparable with World Bank and Asian Development Bank’s latest forecasts of real GDP growth of 8.7 percent and 7.5 percent respectively for 2022-23.
• As per IMF’s latest World Economic Outlook projections, India’s real GDP is projected to grow at 9 percent in 2021-22 and 2022-23 and at 7.1 percent in 2023-2024, which would make India the fastest-growing major economy in the world for all 3years.
• Agriculture and allied sectors are expected to grow by 3.9 percent; industry by 11.8 percent and services sector by 8.2 percent in 2021-22.
• On the demand side, consumption is estimated to grow by 7.0 percent, Gross Fixed Capital Formation (GFCF) by 15 percent, exports by 16.5 percent, and imports by 29.4 percent in 2021-22.
• Macroeconomic stability indicators suggest that the Indian Economy is well placed to take on the challenges of 2022-23.
• Combination of high foreign exchange reserves sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.
• Economic impact of the “second wave” was much smaller than that during the full lockdown phase in 2020-21, though health impact was more severe.
• Government of India’s unique response comprised of safety-nets to cushion the impact on vulnerable sections of society and the business sector, significant increase in capital expenditure to spur growth, and supply-side reforms for a sustained long-term expansion.
• Government’s flexible and multi-layered response is partly based on an “Agile” framework that uses feedback-loops, and the use of eighty High-Frequency Indicators (HFIs) in an environment of extreme uncertainty.

CONTEXT: On 18 February 2022 India and the United Arab Emirates (UAE) signed the Comprehensive Economic Partnership Agreement (CEPA) to boost the bilateral trade between the two countries. This write-up examines the issue in detail.

THE SALIENT FEATURES OF INDIA-UAE CEPA

1. CEPA is a balanced, fair, comprehensive & equitable partnership agreement, which will give enhanced market access for India in both goods and services.
2. India and UAE aim to increase bilateral goods trade over the next five years to $100 billion.
3. Under the agreement, the UAE is set to eliminate duties on 80 percent of its tariff lines which account for 90 percent of India’s exports to the UAE by value. This is particularly important for exports in highly competitive areas such as textiles and garments.
4. The partnership agreement will open doors, especially to labor-intensive Indian products which are exported to UAE – such as textiles, gem & jewelry, medicines, agricultural products, footwear, leather, sports goods, engineering goods, auto components, and plastics.

1. The agreement which is expected to come into effect in the first week of May is expected to generate “an additional 10 lakh jobs” in India.
2. It will help India in realizing the ambitious target of U.S $1 trillion of merchandise exports and the U.S $1 trillion of services exports by the year 2030.

THE ROADMAP ENVISAGED FOR THE ACHIEVING THE OBJECTIVES OF THE AGREEMENT

The roadmap will ensure that the two countries work together even more closely to address the shared global challenges, achieve shared objectives, and build a future-ready robust and resilient relationship. The roadmap will promote the development of new trade, investment, and innovation dynamics, and intensify bilateral engagement in diverse areas including:

ECONOMIC PARTNERSHIP: 

• This will create investment opportunities for Indian investors in establishing specialized industrial advanced technology zones. Integrating local value chains of the existing and future specialized economic zones in areas of logistics & services, pharmaceuticals, medical devices, agriculture, agri-tech, steel, and aluminum.

CULTURAL COOPERATION ENERGY PARTNERSHIP, CLIMATE ACTION, AND RENEWABLE:

• Recognizing shared cultural heritage and strong ties rooted in history, the Leaders agreed to set up an India – UAE Cultural Council to facilitate and promote cross-cultural exchanges, cultural projects, exhibitions, and dialogue between thought leaders of the two countries.
• This will identify new collaboration opportunities to support India’s energy requirements, including new energies, and ensure the provision of affordable and secure energy supplies to India’s growing economy.
• As the UAE and India collectively navigate the global energy transition, both countries remain committed to working together to create a just and equitable transition to a low-carbon future
• To bring significant opportunities, for societies, economic growth, and businesses, the Leaders agreed to support each other’s clean energy missions.

FOOD SECURITY AND HEALTH COOPERATION:

• India and UAE will contribute to promoting and strengthening the infrastructure and dedicated logistic services connecting farms to ports to final destinations in the UAE.
• The countries will collaborate in the research, production, and development of reliable supply chains for vaccines and to enhance investments by UAE entities in the rapidly growing health infrastructure in India.
• The leaders also agreed to collaborate in providing health care in underprivileged countries.

EDUCATION COOPERATION AND SKILL COOPERATION:

• India and UAE agreed to establish an Indian Institute of Technology in the United Arab Emirates to establish world-class institutions that encourage and support innovation and technological progress.
• India-UAE agreed to enhance their cooperation to develop a mutually agreed professional standards and skills framework.

EMERGING TECHNOLOGIES:

• Recognizing the rapidly digitizing world, the two countries agreed to expand cooperation and collaborate on critical technologies and mutually promote e-businesses and e-payment solutions.
• They agreed to collaborate to promote start-ups from both countries to expand into the two regions and utilize such platforms as a basis for growth.

COOPERATION IN THE INTERNATIONAL ARENA:

• Reflecting shared values and principles, and growing strategic convergence, both countries have resolved to reinforce mutual support in multilateral areas to promote collaboration in economic and infrastructure spheres. They can also intensify cooperation in UNSC etc.

DEFENCE AND SECURITY:

• The countries agreed to enhance maritime cooperation contributing to the maintenance of peace and security in the region.
• Maintaining and strengthening peace in the Middle East through dialogue and cooperation must be the cornerstone of a more integrated, stable, and prosperous region.
• Joint commitment to the fight against extremism and terrorism, including cross-border terrorism, in all forms, at both regional and international levels.

MANY FIRSTS OF THE AGREEMENT

• Finalized and signed in a record time of just 88 days.
• The CEPA provides for automatic registration and marketing authorization of Indian generic medicines in 90 days, once they are approved in any of the developed countries. This will give big market access to Indian medicines.
• Indian jewelry exporters will get duty-free access to the UAE, which currently imposes a 5% customs duty on such products. This will substantially raise its jewelry exports.

SIGNIFICANCE OF THE AGREEMENT FOR INDIA

STRATEGIC LOCATION OF UAE: The UAE, due to its strategic location, has emerged as an important economic hub not just within the context of the Middle East/ West Asia, but also globally. A trade agreement with the UAE could well be a springboard to realize our ambitious export targets.

INCREASE IN REMITTANCES: The CEPA will also help in increasing remittances as Indian investments in UAE will bring Indian employees into the Gulf country. The remittances are expected to rise with the full economic recovery of the UAE’s post-pandemic economy. According to a study, (82% of India’s total remittances originated from seven countries that included Gulf countries like the UAE, Saudi Arabia, Oman, and Kuwait.) *Total Remittances to India is estimated to be US $ 83.3 Billion in FY20.

MARKET FOR INDIAN GOODS: Will allow increased visibility of Indian products in the UAE. Due to the reduction in tariff for Indian jewelry and gems, food items such as cereals, sugar, fruits and vegetables, tea, meat and seafood, textiles, engineering and machinery products, chemicals.

MAKING INDIAN MANUFACTURING EXPORT-ORIENTED: 

• The CEPA which covers almost 90% of exports will make it more attractive for Indian companies to invest in export-oriented businesses because of the zero-tariff facility that the UAE is expected to provide to Indian products.
• The agreement will provide significant benefits to Indian and UAE businesses, including enhanced market access and reduced tariffs. The CEPA will boost bilateral trade from the current $60 billion to $100 billion in the next 5 years.
•  CEPA is expected to create new jobs, raise living standards, and provide wider social and economic opportunities in both nations.

ENTRY TO AFRICAN MARKET:

• This FTA with the UAE will pave the way for India to enter the UAE’s strategic location and have relatively easy access to the Africa market and its various trade partners which can help India to become a part of that supply chain, especially in handlooms, handicrafts, textiles, and pharma.
• This can be achieved by offering attractive investment opportunities in India with a globally competitive infrastructure and an investor-friendly regulatory framework.
• The UAE is a major global redistribution center and much of exports to Africa are routed through Dubai. The CEPA will encourage Indian Businesses for setting up warehousing or distribution centers in the UAE for exports to Africa.

ACCESS TO GULF COOPERATION COUNCIL (GCC) COUNTRIES’ COOPERATION ON MULTILATERAL PLATFORMS:

• The UAE is a party to several regional and bilateral FTAs and has strong economic ties with GCC Countries which may open the gates for India to have strong economic ties with these GCC countries.
• UAE has become a non-permanent member of UNSC for 2022-23 and India will assume the Presidency of G-20 in Dec-2022; both countries may complement each other on multilateral platforms on various issues.

• India’s major exports to the UAE: include petroleum products, precious metals, stones, gems and jewelry, minerals, food items such as cereals, sugar, fruits and vegetables, tea, meat, seafood, textiles, engineering, and machinery products, and chemicals.
• India’s top imports from the UAE: include petroleum and petroleum products, precious metals, stones, gems and jewelry, minerals, chemicals, wood, and wood products.

POTENTIAL CHALLENGES IN THE IMPLEMENTATION

UAE IS A LOW TARIFF ECONOMY: The scope of tariff reduction is limited and hence the gains to Indian exporters. In most of the labor-intensive sectors like textiles, clothing, leather, footwear, etc., while the maximum tariff rate is 5 percent, the average tariff rate is either 5 percent or less. In other manufacturing sectors such as non-electrical machinery, electrical machinery, transport equipment, which constitute a significant proportion of the Indian export basket to the UAE, the maximum tariff rate is again 5 percent and the average tariff rate is less than 5 percent.

SURGE IN IMPORTS: The issue for India is the possibility of a surge in imports from the UAE. This is mainly because it is an entrepot economy and re-exports form a large proportion of its gross exports.

RISK OF TREATY ABUSE: While the agreement will be mutually beneficial for both countries, India needs to ensure that goods originating from outside the UAE are not allowed duty-free into India under this treaty. The risk of treaty abuse arises because the UAE is a global transshipment hub and hence, India should guard against duty-free imports of transshipped products.

THE WAY FORWARD

• It is imperative for India to not only have strong rules of origin provision under the CEPA but also it must enforce them.
• To get duty-free access to the Indian market under the CEPA, the required value addition in the UAE has been kept at 40 percent, which is significantly higher than other FTAs where value addition requirement is generally 30-35 percent.
• The CEPA would also have an effective enforcement mechanism in place. This will reduce the excessive surge in imports.
• To enhance the utilization of CEPA it is also important to ensure that the cost of compliance remains at the minimum level.

Exploring Other Trade OpportunitiesIn Future: The success of India-UAE CEPA will also provide much-needed insight and confidence to India to have other similar FTAs with other countries having a potential market for the Indian Goods and Services. The Government of India has prioritized at least six countries to engage with under the new FTA policy, with the UAE at the top of the list for an early harvest deal. The United Kingdom, the European Union, Australia, Canada, Israel, and a group of Gulf Cooperation Council countries are the others (GCC). In due future, the early harvest agreement will be expanded into a comprehensive FTA.

THE CONCLUSION: The CEPA brings the two nations closer, will open many new opportunities for Indians to work in UAE, including in fintech, tech, green tech, automation, and Artificial Intelligence. Technology, digital trade, and sustainability have a big focus in the partnership. The CEPA will not only improve the competitiveness of Indian products but also provide strategic advantages to India. Both countries will identify clear areas of focus and establish ways of working together to resolve trade remedy cases as envisaged in the MoU signed in January 2017.

BACK TO BASICS

INDIA-UAE RELATIONS IN THE RECENT PAST

• The UAE is the eighth-largest investor in India: The UAE has invested $11 billion between April 2000 and March 2021.
• Investment by Indian companies in the UAE is estimated to be over $85 billion
• The UAE is India’s second-largest export destination after the US, with exports valued at approximately $29 billion in FY20.
• India was the UAE’s second-largest trading partner in 2019, with bilateral non-oil trade valued at $41 billion
• The UAE is currently India’s third-largest trading partner with bilateral trade in FY20 valued at $59 billion.
• Indian Diaspora in UAE: Indian expatriate community of approx. 3.5 million (as per International Migrant Stock 2020 released by the Population Division of the UN Department of Economic and Social Affairs (DESA) is reportedly the largest ethnic community in UAE constituting roughly about 30 percent of the country’s population.
• Military exercises between India and UAE: Both countries have come together in the past to have bilateral as well as multilateral military exercises:

VARIOUS TYPES OF TRADE AGREEMENTS

Free Trade Agreement (FTA): To establish a fair set of rules of trade between the agreeing countries. They provide favorable treatment to each other by reducing trade barriers such as cutting the import duties to/from the other country. They also work on easing out non-tariff barriers to exports like easing quantitative import restrictions, easing customs procedures, improving market access for service exports, and better investment rules.

FTAs help in trade, job creation, and economic growth and also serve as a diplomatic tool for improving international relations Eg: ASEAN countries impose a 20% duty on the import of leather goods however for India this is 0%.

There are various types of trade agreements such as

• Preferential Trade Agreements (PTA): In a PTA, two or more partners agree to reduce tariffs on the agreed number of tariff lines. The list of products on which the partners agree to reduce duty is called a positive list. India MERCOSUR PTA (Argentina, Brazil, Paraguay, Uruguay, and Venezuela) is such an example. However, in general, PTAs do not cover substantially all trade.
• Comprehensive Economic Cooperation Agreement (CECA) and Comprehensive Economic Partnership Agreement (CEPA): These terms describe agreements that consist of an integrated package on goods, services, and investment along with other areas including IPR, competition, etc. The India UAE CECA is one such example and it covers a broad range of other areas like trade facilitation and customs cooperation, investment, competition, IPR, etc.
• Broad-Based Trade and Investment Agreement (BTIA):  India and the European Union (EU) are set to resume negotiations for a (BTIA). The BTIA talks have been suspended since 2013

DIFFERENCE BETWEEN CECA/CEPA AND FTA

CECA/CEPA: More comprehensive and ambitious than FTA in terms of coverage of areas and the type of commitments i.e. a holistic coverage of many areas like services, investment, competition, government procurement, disputes, etc. CECA/CEPA looks deeper at the regulatory aspects of trade than an FTA.

FTA: FTA focuses mainly on goods. A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

FTAS  OF INDIA WITH OTHER COUNTRIES AND THEIR ANALYSIS

• Presently, India shares preferential market access and economic cooperation through trade agreements with over 50 countries.
• India actively engages in regional and bilateral trade negotiations to diversify and expand its export markets while ensuring access to the raw materials, intermediates, and capital goods needed to stimulate value-added domestic manufacturing.

Table 1 https://www.trade.gov/country-commercial-guides/india-trade-agreements

It’s true that most of the trade agreements have not delivered the expected results in terms of FTA utilization rate, market penetration, integration with regional or global production networks, etc. Given the complementarities in economic structures of the two countries, the India-UAE CEPA could be a win-win for both economies as India is highly dependent on oil imports and is an agriculture surplus economy, whereas UAE is an oil rich and agriculture deficit economy.

Mains Ques

1. The India-UAE CEPA will not only improve the competitiveness of Indian products but also provide strategic advantages to India. Explain
2. UAE being an entrepot economy, how the CEPA can enhance India’s export prospects not only to the UAE but also to West Asia and even Africa regions.
3. India –UAE CEPA may provide the much-needed boost to labour intensive sectors in India. Elaborate

THE CONTEXT: The Ukraine crisis has crossed a critical point, with Russia following up its recognition of rebel regions in eastern Ukraine (Donbas region)- Donetsk and Luhansk with a full-fledged invasion to “demilitarise” and “denazify” Ukraine. The United Nations Security Council (UNSC), on 27 February 2022, voted to convene an emergency special session of the General Assembly to consider a resolution on the situation in Ukraine, vetoed by Russia.

ABOUT UNITED NATIONS SECURITY COUNCIL (UNSC)

United Nations Security Council was established by 51 countries in 1945.

• It has primary responsibility, under the UN Charter, for the maintenance of international peace and security.
• The Security Council is made up of fifteen member states, consisting of five permanent members (P5)—China, France, Russia, UK, and the USA—and ten non-permanent members elected for two-year terms by the General Assembly on a regional basis.
• Election of non-permanent members: Non-permanent members are elected by a two-thirds vote of the UN General Assembly. The main criterion for eligibility is contribution “to the maintenance of international peace and security,” often defined by financial or troop contributions to peacekeeping operations. Present non-permanent members are mentioned in the table.
• Subsidiary organs supporting the council’s mission include Counter-Terrorism Committee, Sanctions Committee, Peace Keeping Operations, International Courts, and Tribunals.

UNSC and UNGA

• The Council also makes recommendations to the General Assembly to appoint a new Secretary-General and to admit new members to the UN. Security Council decisions are formal expressions of the will of the Council.
• The Security Council, the United Nations’ principal crisis-management body, is empowered to impose binding obligations on the 193 UN member states to maintain peace.
• The council’s presidency rotates every month, ensuring some agenda-setting influence for its ten non-permanent members, which are elected by a two-thirds vote of the UN General Assembly.
• The unconditional veto possessed by the five permanent members has been seen as the most undemocratic character of the UN.
• “Veto power” refers to the power of the permanent member to veto (Reject) any resolution of the Security Council.
• Critics claim that veto power is the main cause for international inaction on war crimes and crimes against humanity.
• Supporters of the veto power regard it as a promoter of international stability, a check against military interventions, and a critical safeguard against U.S. domination.

FOUR CASES IN RECENT PAST WHERE THE UN SYSTEM APPEARS TO HAVE FAILED QUITE VISIBLY

FIGHT AGAINST COVID:

• UNSC failed to hold China accountable; in fact WHO teams so far have not been able to conclude on the origins of the virus, particularly because they have not yet been able to get access to Chinese laboratories.
• The biggest international threat of the century, UNSC in particular is widely criticized for ‘Missing In Action in the fight against the Coronavirus.
• UN Systems failed to ensure the equitable distribution of the vaccines: many African nations (so-called third world nations) are waiting for their access to the first shot of vaccine whereas the developed countries /first world countries have already started with booster doses and are stockpiling the vaccines. It is not that they are not sharing but still they are not sharing on a scale where the entire world has access.
• As an outcome of this we see a situation where 4 million are dead and no one yet is held responsible for the origins of the virus, fear of new variants or another virus still keeps the world on toes.

COUP IN MYANMAR:

• Myanmar Military (Junta) last year February took over the democratically elected government, putting the elected leaders in prison, slapping them with national security cases, and even declaring a full emergency.
• UNSC has held at least 3 rounds of discussions on the issue but has taken no action yet against the Junta for the coup.
• All this comes against the already persisting and unresolved situation of the Rohingya Refugees and humanitarian crises.

TALIBAN TAKEOVER OF AFGHANISTAN:

• So far there have been three discussions in UNSC over the issue and one resolution but have not been able to deliver any binding or punitive statement rather at present the resolution shows the Taliban as the default force ruling the country.
• The UN has also failed to instill the idea of UN-led Transitional Council unlike in the case of East Timor where it ran the transitional council until it handed over after the independence of the country.

RUSSIA’S MILITARY ACTION ON UKRAINE:

• Russia vetoed a UN Security Council resolution, that would have demanded that Moscow immediately stop its attack on Ukraine and withdraw all troops.
• This significantly clears the doubt surrounding the abuse of veto powers being used by P5 countries.

ISSUES AND PROBLEMS WITH UNSC

GROUP OF ELITES:

• The winners of WW2, P5 members (France, Russia, United Kingdom, China, and United States) hold the veto powers and all the members are nuclear powers, only addressing the strategic interests and political motives of the permanent members.

ANACHRONISM OF PRESENT TIMES: 

• The veto powers that the UNSC’s five permanent members enjoy are an anachronism in this age. The UNSC in its current form has become a constraint in understanding the international changes and dynamics in the area of human security and peace.

POWER PLAY IN UNSC:

• Divisions among the P5 i.e. there is a deep polarization within the UN’s membership, so decisions are either not taken, or vetoed.
• Frequent divisions within the UNSC P5 end up blocking key decisions.
• Example: With the coronavirus pandemic emergence, the UN, the UNSC, and WHO failed to play an effective role in helping nations deal with the spread.

ABSENCE OF RECORDS AND TEXTS OF MEETINGS:

• The usual UN rules don’t apply to the UNSC deliberations, and no records are kept of its meetings.
• Additionally, there is no “text” of the meeting to discuss, amend or object.

IRONIC CONDITION:

• The main purpose of the UN in maintain peace and stability in the world. Five permanent members of the UN Security Council are the top five largest arms dealing countries in the world.

EFFECTIVENESS AND RELEVANCE:

• Unable to respond effectively to the emerging international conflicts and other humanitarian crises.

AN UNDER-REPRESENTED ORGANISATION:

• The existing gaps in terms of the under-representation of regions especially from Africa, Asia, and Latin America are crippling the UNSC as a global institution governing international peace and security.
• The absence in the UNSC of the globally important countries – India, Germany, Brazil, and South Africa – is a matter of concern.

REFORMS IN UNSC

WHAT SHOULD BE THE APPROACH:

• Reforms must reflect contemporary global realities and for this purpose, the reform of the UN including the expansion of the UNSC in both permanent and non-permanent categories is essential.

REGIONAL REPRESENTATION CHANGING GEOPOLITICS:

• European bias in P-5 due to the presence of the UK, France, and Russia while regions like Latin America, Caribbean group, Arabs and Africa do not have a single permanent member.
• There is a need to overcome the European and Western hegemony and have equitable geographical representation.
• The victors of World War II shaped the United Nations Charter in their national interests, dividing the permanent seats, and associated veto power, among themselves.
• It has been 76 years since the foundation of UNSC and the geopolitical realities have changed drastically and the structure of UNSC should also reflect the same.

QUESTION OF VETO:

• Veto power is grossly misused by the permanent members in their own interests. This also badly affects the conduct of the business of UNSC as many important proposals involving substantive issues get blocked. The Veto shall be rarely and cautiously used by world leaders.

TRANSPARENCY AND WORKING METHODS:

• While the expansion of the Security Council has been hotly debated across the world, debate on the working methods of the Council is an equally important aspect of reform to many member states.
• Participative, consultative, and democratic approaches to the functioning of the UN in general and UNSC, in particular, should be adhered to.

KOFI ANNAN MODEL FOR REFORMS – 2005:

• In 2005, the Former UN secretary-general presented two models for a total of 24 seats in the council.
• Model A: Six new permanent seats, with no veto being created, and three new two-year term non-permanent seats, to have representation from all regions.
• Model B: No new permanent seats but create a new category of eight 4-year renewable-term seats and one 2-year non-permanent and non-renewable seat.

CHALLENGES FOR REFORMS

AMENDMENT TO UN CHARTER:

This amendment involves a two-stage process:

• Stage I: General Assembly must approve the reform by a two‑thirds majority (i.e. at least 128 states).
• Stage II: amended Charter must then be ratified by at least two‑thirds of the member states, including the five permanent Council members.
• This process includes all Security Council’s permanent members, and they may not take a step to curb their own powers.

POLITICAL WILL AND INTEREST OF P5:

• Every country’s actions are based on its national interests and no one likes to get its power diluted.
• There has been no consensus reached among the UN members including the P5, on how to adjust the Security Council’s structure and in particular how to increase the number of new permanent members.

INTERGOVERNMENTAL NEGOTIATIONS:

• There is no coherence in the approach of supporters of UN reforms, The G4 bid has been opposed by a few countries, whereas other groups like Coffee Club opposed adding countries as permanent members.
• 13-member group that includes Pakistan and is known as United for Consensus (UfC) has been in opposition to adding more permanent members to the council.

INDIA AND UNSC

Why India should be admitted as a permanent member?

• The expansion of the Security Council, in the category of both permanent and non-permanent members, and the inclusion of countries like India as permanent members, would be a first step in the process of making the United Nations a truly representative body.
• At the core of India’s call for reformed multilateralism, lies the reform of the UN Security Council, reflective of the contemporary realities of today. When power structures continue to reflect the status quo of a bygone era, they also start reflecting a lack of appreciation of contemporary geopolitical realities.
• The Charter of the United Nations, alongside the call for a geographically balanced distribution of seats, also expressly states that countries that make considerable contributions to the UN should be members of the Security Council.
• India’s performance as a non-permanent member of the Security Council during 2011- 2012 has also significantly strengthened India’s claim to permanent membership
• By any objective criteria such as population, territorial size, GDP, economic potential, civilizational legacy, cultural diversity, political system, India is eminently suited for permanent membership of an expanded UNSC.

Why should India bid for a permanent seat in UNSC?

• Largest democracy in the world.
• 3^rd largest economy.
• Home to 1/6^th of the total world population.
• One of the largest peacekeeping contributors to the UN.

INDIA IN UNSC AS A NON-PERMANENT MEMBER FOR THE EIGHTH TERM (2021-2022)

INDIA’S 5-S APPROACH:

• SAMMAN – Respect
• SAMVAD – Dialogue
• SAHYOG – Cooperation
• SHANTI – Peace
• SAMRIDDHI – Prosperity

NEW OPPORTUNITIES FOR PROGRESS:

• As a rule-abiding democracy and a positive contributor to the security of the global commons, India should work constructively with partners to bring innovative and inclusive solutions to foster development.
• India calls for greater involvement of women and youth to shape the new paradigm.

EFFECTIVE RESPONSE TO INTERNATIONAL TERRORISM:

• Addressing the abuse of ICT by terrorists.
• Disrupting their nexus with sponsors and transnational organized criminal entities.
• Stemming the flow of terror finance.
• Strengthening normative and operative frameworks for greater coordination with other multilateral forums

COMPREHENSIVE APPROACH TO PEACE AND SECURITY:

India’s vision for international peace and security is guided by:

• Dialogue and cooperation.
• Mutual respect.
• Commitment to international law.

INDIA ON RUSSIA-UKRAINE ISSUE:

• India strongly emphasized the need for all sides to exercise the utmost restraint and intensify diplomatic efforts to ensure a mutually amicable solution.
• India abstained from voting on the UNSC resolution condemning the Russia’s aggression on Ukraine.

WHAT SHOULD BE THE WAY FORWARD FOR INDIA?

• India should leverage its past experiences as a non-permanent member.
• India also needs to revitalise its engagement with its traditional partners in the “global south” by voicing their peace and security concerns in the UNSC. In this context, two sub-groups of the global south should be of particular interest: the Small Island States and Africa.
• The G4 nations of India, Brazil, Germany and Japan have reaffirmed that it is “indispensable” to reform the Security Council through an expansion in permanent and non-permanent seats to enable the UN organ to better deal with the “ever-complex and evolving challenges” to the maintenance of international peace and security.
• It’s been clear for some time now that the global multilateral order is not fit for its purpose. The Covid pandemic, Afghan issue, Nagorno-Karabakh issue and now Russia’s military action on Ukraine have only made the world more aware of the real-time consequences of this gradual decay. The United Nations Security Council has faced a lot of flak for not representing today’s international power realities and for not being able to shape the global discourse on the changing nature of security. Reforms in the UNSC and other multilateral institutions are the need of the hour.

THE CONCLUSION: The reform of the UNSC is a crucial issue on the current international agenda. Its progress will determine the effectiveness of the work of the whole UN system for the foreseeable future. The efforts in this area should be aimed, first of all, at enhancing the Council’s ability to promptly and effectively react to emerging challenges. This becomes even more relevant today as we witness multiple crises and conflicting situations.

Mains Ques:

1. Discuss the role and functions of UNSC in present times.
2. There have been many criticisms of Veto power held by the P5 nations in UNSC. Is it undermining the mandate of UNSC? Analyse.
3. Today’s peace and security challenges require a comprehensive and integrated approach, harmonizing national choices and international priorities. Analyse in context of Russia-Ukraine crises.