Categories
Daily Editorials for UPSC IAS Exam Preparation

MP Agriculture fortunes and lessons for UP


GS3 – Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

Context

  • Madhya Pardesh CM Chouhan concentrated on agriculture, which employs the largest share of MP’s workforce (54.6 percent in 2015-16 as per the Labour Bureau).
  • MP’s agri-gross state domestic product (agri-GSDP) grew at 9.7 percent per annum — the highest ever achieved by any state — between 2005-06 and 2014-15. All-India agri-GDP growth during this period was 3.5 per cent and UP’s growth in this respect was even lower at 3.2 percent.
  • MP’s agri-performance, therefore, has been more than three times better than that of UP’s. Chouhan’s mantra is worth learning for CM Adityanath, more so when UP is more generously endowed than MP with nature’s gifts — fertile Gangetic soil and relatively abundant water supplies.

Background

  • Over the last decade, MP has made rapid strides in agricultural production. The state’s wheat production increased from 6 million metric tonnes (MMT) in 2005-06 to 17.1 MMT in 2014-15 — a 185 per cent leap — and soybean production increased from 4.5 MMT to 6.4 MMT over the same period.
  • Horticultural production increased spectacularly, indicating agricultural diversification. Between 2009-10 and 2015-16, horticultural production increased from 6.4 MMT to 22.5 MMT — fruit production having increased from 2.9 MMT to 6.3 MMT and vegetables from 3.1 MMT to 14.8 MMT.
  • Area under horticulture more than doubled from 6 lakh ha to 14.1 lakh ha. Such rapid strides in agricultural production earned MP the Krishi Karman award more than once.

How has it happened?

  1. Irrigation
  • It began with water management. MP targeted an increase in the area under irrigation.
  • MP completed several unfinished irrigation projects on priority. Between 2009 and 2014, over 1,400 minor irrigation projects were completed in MP, increasing the state’s irrigated area by 4.8 lakh ha.
  1. Electricity
  • But efficient utilisation of groundwater irrigation required provision of uninterrupted power supply. Bijli (electricity) was, therefore, MP’s next target.
  • Uninterrupted power supply to fields was ensured during the wheat season. Agriculture’s share in total electricity sold rose to 36 per cent in MP in 2014-15 from 32 per cent in 2007-08 — as against 18 per cent in UP.
  • The irrigated area in MP, thus, increased from 30 per cent of the cropped area in 2005-06 to 41.2 per cent of such area in 2014-15.
  1. Pricing of crops
  • The MP government also incentivised wheat production by giving a 10 per cent bonus above the Centre’s minimum support price (MSP) from 2007-08 to 2014-15. This encouraged extensive wheat cultivation.
  • Wheat production in MP rose enormously — its share in all-India production shot from 8.6 per cent in 2005-06 to a whopping 20 per cent in 2014-15 making the state, the second largest wheat producer in the country after UP. It surpassed Punjab.
  1. Procurement
  • The procurement system was strengthened considerably. A digital app called e-Uparjan was developed to systematically manage procurement operations and payments.
  • Farmers were sent SMS alerts about the procurement dates and procurement centres. Wheat procurement in MP sky-rocketed (see figure) increasing the state’s share in the all-India pool to over 25 per cent in 2014-15.
  1. Capital infrastructure
  • Roads (sadak) were built to enable farmers to tap markets that were far and wide. Total road density in MP, between 2005-06 and 2014-15, increased from 535km/1,000 sq km to 937 km/1,000 sq. km.
  • The proportion of surfaced roads increased dramatically from 50 per cent to 81 per cent.

Conclusion

  • This bijli-paani-khareed-sadak formula did wonders for MP’s agriculture.
  • Agriculture’s share in the GSDP increased from 28 per cent to 37 per cent. Rural poverty fell from 53.6 per cent in 2004-05 to 35.7 per cent in 2011-12.
  • While some may view this growth with scepticism, the fact that sales of private sector tractor companies showed a four-fold increase in seven years (2007-14) is another cause for optimism.

Lessons for UP

  • A high percentage (78.8 per cent in 2013-14) of land in UP is irrigated but erratic power supply, especially in Eastern UP, hampers efficient utilisation of groundwater.
  • UP’s road density (1,724 km/1,000 sq km) and proportion of surfaced roads (86 per cent) is also higher than MP’s. But inadequate procurement systems have set the state back.
  • The right incentives — beginning with wheat and paddy cultivation — including setting up a strong procurement system and ensuring timely payment of MSPs could result in UP farmers getting 10-25 per cent higher prices for their produce.
  • Encouraging private investments in UP’s agro-processing can help promote agricultural diversification. Solar-powered cold storages for potatoes could prevent price-crashes and also save energy costs.

Practice Questions

  1. Discuss the problems faced by agriculture sector in India. How are states like MP with higher agri growth rate tackling the problems?
  2. Why do the states in Northern Plains not being able to capitalise on the natural endowments they have, while the Green Revolution got success in Haryana and Punjab?
Categories
Daily Editorials for UPSC IAS Exam Preparation

Lokpal debate


GS2 – Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency & accountability and institutional and other measures.

Context

  • The Supreme Court recently said the Lokpal and Lokayuktas Act of 2013 is a “workable piece of legislation” and it was not justifiable to keep its operation pending.
  • As per the Act, the Leader of the Opposition in the Lok Sabha will be part of the Lokpal selection panel. At present, there is no Leader of the Opposition in the Lok Sabha. A parliamentary standing committee’s report on proposed amendments is still under consideration primarily on the very issue.
  • Even though the Lokpal Bill was passed by Parliament in 2013 and came into effect in 2014, the Lokpal is not being appointed by the government.

What is the issue on Leader of Opposition?

  • The selection panel consists of the Prime Minister, the Speaker of the Lok Sabha, Leader of the Opposition, the Chief Justice of India or his nominee, and an eminent jurist chosen by them.
  • The court has noted that the Act provides for the selection committee to make appointments even when it is truncated due to a vacancy.
  • It has made it clear that the fact that some amendments have been proposed and a parliamentary panel has submitted a report would not constitute a legal bar on enforcing the existing law.
  • The court has rightly refused to read down the provision on the Leader of the Opposition to mean “the leader of the largest party in the opposition”. At the same time, it is curious that an amendment to this effect is pending since 2014, even after it was endorsed by the parliamentary committee in its December 2015 report.
  • Provisions relating to the selection of the Chief Information Commissioner and the Central Bureau of Investigation Director have been amended to treat the leader of the largest opposition party as the Leader of the Opposition in the absence of anyone recognised as such. The delay in passing this simple amendment is inexplicable.
  • Another provision relating to the declaration of assets by public servants was amended last year in the said Act.
  • There is no law, except a direction from the chair when G.V. Mavalankar was Speaker, that says recognition is given only to a party that has won 10% of the seats in the Lower House. Note it down, your favourite Laxmikant has been wrong.
  • A 1977 Act on the salary of the Opposition Leader defines the position as the leader of the largest party in the opposition and recognised as such by the Speaker.
  • An inescapable inference is that the country does not have an anti-corruption ombudsman not due to any legal bar, but due to the absence of political will.

 What is Lokpal?

  • A Lokpal is an anti-corruption authority or ombudsman who represents the public interest. The concept of an ombudsman is borrowed from Sweden.
  • The Lokpal has jurisdiction over all Members of Parliament and central government employees in cases of corruption.
  • The term “Lokpal” was coined by Dr. L.M.Singhvi in 1963. The concept of a constitutional ombudsman was first proposed in parliament by Law MinisterAshoke Kumar Sen in the early 1960s.
  • The first Jan Lokpal Bill was proposed by Shanti Bhushan in 1968 and passed in the 4th Lok Sabha in 1969, but did not pass through the Rajya Sabha.
  • Subsequently, ‘lokpal bills’ were introduced in 1971, 1977, 1985, again by Ashoke Kumar Sen, while serving as Law Minister in theRajiv Gandhi cabinet, and again in 1989, 1996, 1998, 2001, 2005 and in 2008, yet they were never passed. Forty five years after its first introduction, the Lokpal Bill is finally enacted in India on 18 December 2013.
  • The Lokpal Bill provides for the filing, with the ombudsman, of complaints of corruption against theprime minister, other ministers, and
  • TheAdministrative Reforms Commission (ARC) recommended the enacting of the Office of a Lokpal, convinced that such an institution was justified, not only for removing the sense of injustice from the minds of citizens, but also to instill public confidence in the efficiency of the administrative machinery.

 Anna Hazare movement

Jan Lokpal Bill demanded by civil society has following features –

  • To establish a central government anti-corruption institution calledLokpal, supported by Lokayukta at the state level.
  • As is the case with theSupreme Court of India and Cabinet Secretariat, the Lokpal will be supervised by the Cabinet Secretary and the Election Commission. As a result, it will be completely independent of the government and free from ministerial influence in its investigations.
  • Members will be appointed by judges,Indian Administrative Service officers with a clean record, private citizens and constitutional authorities through a transparent and participatory process.
  • A selection committee will invite short-listed candidates for interviews, the video recordings of which will thereafter be made public.
  • Every month on its website, theLokayukta will publish a list of cases dealt with, brief details of each, their outcome and any action taken or proposed. It will also publish lists of all cases received by the Lokayukta during the previous month, cases dealt with and those which are pending.
  • Inquiry has to be completed within 60 days and investigation to be completed within six months. Lokpal shall order an investigation only after hearing the public servant.
  • Losses to the government by a corrupt individual will be recovered at the time of conviction.
  • Government office-work required by a citizen that is not completed within a prescribed time period will result inLokpal imposing financial penalties on those responsible, which will then be given as compensation to the complainant.
  • Complaints against any officer ofLokpal will be investigated and completed within one month and, if found to be substantive, will result in the officer being dismissed within two months.
  • The existing anti-corruption agencies [CVC], departmental vigilance and the anti-corruption branch of the [CBI] will be merged intoLokpal which will have complete power authority to independently investigate and prosecute any officer, judge or politician.
  • Whistle-blowerswho alert the agency to potential corruption cases will also be provided with protection.

    Government Bill

  • The historic Lokpal and Lokayuktas Act, 2013 was passed by Indian Parliament paving the way for establishment of a Lokpal (Ombudsman) to fight corruption in public offices and ensure accountability on the part of public officials, including the Prime Minister, but with some safeguards.
  • Lokpal was to consist of a chairperson and a maximum of eight members, of which 50% will be judicial members 50% members of Lokpal shall be from SC/ST/OBCs, minorities and women.
  • Selection of chairperson and members of Lokpal through a selection committee consisting of PM, Speaker of Lok Sabha, leader of opposition in Lok Sabha, Chief Justice of India or a sitting Supreme Court judge nominated by CJI. Eminent jurist to be nominated by President of India on basis of recommendations of the first four members of the selection committee “through consensus”.
  • Lokpal’s jurisdiction will cover all categories of public servants. All entities (NGOs) receiving donations from foreign source in the context of the Foreign Contribution Regulation Act (FCRA) in excess of Rs 10 lakh per year are under the jurisdiction of Lokpal. Centre will send Lokpal bill to states as a model bill. States have to set up Lokayuktas through a state law within 365 days.
  • Lokpal will have power of superintendence and direction over any central investigation agency including CBI for cases referred to them by the ombudsman.
  • A high-powered committee chaired by the PM will recommend selection of CBI director. The collegium will comprise PM, leader of opposition in Lok Sabha and Chief Justice of India PM has been brought under purview of the Lokpal, so also central ministers and senior officials.
  • Directorate of prosecution will be under overall control of CBI director. At present, it comes under the law ministry.
  • Appointment of director of prosecution to be based on recommendation of the Central Vigilance Commission.
  • Director of prosecution will also have a fixed tenure of two years like CBI chief.
  • Transfer of CBI officers investigating cases referred by Lokpal with the approval of watchdog.
  • It incorporates provisions for attachment and confiscation of property acquired by corrupt means, even while prosecution is pending.
  • It lays down clear timelines for preliminary enquiry and investigation and trial. Provides for special courts Public servants will not present their view before preliminary enquiry if the case requires ‘element of surprise’ like raids and searches.
  • It grants powers to Lokpal to sanction prosecution against public servants.
  • CBI may appoint a panel of advocates with approval of Lokpal, CBI will not have to depend on govt advocates

Arguments in favour of Lokpal

  • Six years ago, in April 2011, Anna Hazare began a hunger strike to establish a strong Jan Lokpal Bill to fight all-pervasive corruption.
  • Thereafter, for more than two years until the 2013 elections, the India Against Corruption (IAC) movement of Team Anna, riding the wave of popular discontent and anger against the governing class, brought a weak government to its knees and governance to a standstill.
  • Caving in to enormous public pressure, Parliament passed the Lokpal Act in 2013. Four years down the line, this act, perhaps the only one enacted post-Independence due to direct “people power”, stagnates in the statute books, ignored by the civil society that earlier vigorously rooted for its implementation.
  • Significantly, the act, even in its present moribund state, is being whittled down with amendments, such as the one in 2016 which eliminates the earlier statutory requirement for public servants to disclose the assets of their spouses and dependent children, although it is well-known that illegally acquired assets are usually in the names of family members.
  • Similarly, the government’s proposed amendment to the Prevention of Corruption Act (PCA) — which requires the Lokpal to seek government sanction not only for prosecuting public servants but even retired public officials — is clearly designed to weaken the Lokpal.
  • The Lokpal Act has invested the inquiry and prosecution wings of the Lokpal with the powers presently exercised by the CBI, the last thing that the political executive would concede willingly. The CBI today is an outfit with an unmistakeable aura of menace, with everyone in the hierarchy from ministers downward holding the agency in fearful awe.
  • No government would want an investigating agency functioning under an unaccountable entity to monitor not only government servants but also MPs and the top political executive including the PM.
  • How does one ensure the impartiality and fairness of a Lokpal armed with a police investigative agency that functions free of political regulation? Will the inherent tensions between the anti-corruption agency, the Lokpal and the government adversely affect governance?
  • Only time will tell, but as matters stand today, these issues are irrelevant as the governing elite are in no mood to see a functioning Lokpal.

Arguments against Lokpal

  • Lokpal and Lokayuktas were a bad idea since they sought to create a parallel investigation structure and were borne out of the belief that no system that had anything to do with the government—even if it was autonomous like the Central Vigilance Commission (CVC)—was capable of delivering justice while a body of civic-minded ladies and gentlemen would be able to do so.
  • Compared to the Lokpal that was being pushed by activists like Anna Hazare, the new Act is a lot better.
  • In the original bill, the Lokpal could cancel licences after an investigation—while that may have looked desirable, it created a system parallel to the one run by courts.
  • Both the central government and the Lokpal, for instance, have jurisdictions over the same employees; and how does the Centre’s plan to amend the Prevention of Corruption Act to safeguard decision-making square with the Lokpal’s mandate?
  • The fact that an autonomous CVC is not considered good enough to ensure the CBI functions independently, similarly, is worrying.
  • In any case, those who believe it will do better under the Lokpal should relook their position after the way members of the Karnataka Lokayukta were accused of corruption/extortion in the High Court.
  • The problem could get a lot messier when the Lokpal is operationalised and starts giving orders that create trouble for the elected government—it needs to be asserted that, while the government is an elected body, the Lokpal is not.

Way forward

  • Government should tread cautiously on the matter of Lokpal as it not only involves critical issues of accountability and transparency of the government itself, but may also impact the decision making capacities of the government.
  • In this context therefore, the government should make necessary amendments in the Lokpal Act to plug the deficiencies, without diluting the efficacy of the Lokpal to scrutinise the affairs of the government.

Questions

  1. Critically examine the issues involved in the functioning of Lokpal. Does it clash with the mandate to elected representatives? Suggest practical ways to make Lokpal effective without interfering it in the government affairs.
  2. Discuss the role of the Leader of Opposition in the Parliamentary form of democracy, with special reference of India.
Categories
Daily Editorials for UPSC IAS Exam Preparation

Real Estate (Regulation & Development) Act


 

Topic relevance

GS2 – Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Context

  • The much awaited Real Estate (Regulation & Development) Act is now in effect.
  • The Ministry of Housing and Urban Poverty Alleviation recently notified 69 out of the 92 sections in total, which set the ball rolling for States to formulate, within six months, rules and regulations as statutorily mandated.
  • Since land is a State subject under the Constitution, even after the Centre enacts the legislation, State governments will have to ratify them.
  • States will have to set up the Real Estate Regulatory Authority’s (RERA) and the Real Estate Appellate Tribunals and have only a maximum of a year from the coming into effect of the Act to do so.
  • The Act’s preamble details the legislative intention which is to primarily protect the interests of consumers and bring in efficiency and transparency in the sale/purchase of real estate.
  • The Act also attempts to establish an adjudicatory mechanism for the speedy redress of disputes. RERA and the Appellate Tribunal are expected to decide on complaints within an ambitious period of 60 days. But no legislation can protect the interest of only one class.
  • As one of the largest job creators, the real estate sector contributes almost 6% towards the GDP. Mindful of this, the Act seeks to assist developers by giving the regulator powers to make recommendations to State governments to create a single window clearance for approvals in a time-bound manner.

Highlights of the Act

  • The Act regulates transactions between buyers and promoters of residential real estate projects by establishing state level regulatory authorities called Real Estate Regulatory Authorities (RERAs).
  • Residential real estate projects, with some exceptions, need to be registered with RERAs. Promoters cannot book or offer these projects for sale without registering them.  Real estate agents dealing in these projects also need to register with RERAs.
  • On registration, the promoter must upload details of the project on the website of the RERA. These include the site and layout plan, and schedule for completion of the real estate project.
  • 70% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project. The state government can alter this amount to less than 70%.
  • The Act establishes state level tribunals called Real Estate Appellate Tribunals. Decisions of RERAs can be appealed in these tribunals.

Key Issues

  • One may question Parliament’s jurisdiction to make laws related to real estate as “land” is in the State List of the Constitution. However, it may be argued that the primary aim of this Act is to regulate contracts and transfer of property, both of which are in the Concurrent List.
  • Some states have enacted laws to regulate real estate projects. The Act differs from these state laws on several grounds.  It will override the provisions of these state laws in case of any inconsistencies.
  • The Act mandates that 70% of the amount collected from buyers of a project be used only for construction of that project. In certain cases, the cost of construction could be less than 70% and the cost of land more than 30% of the total amount collected.  This implies that part of the funds collected could remain unutilized, necessitating some financing from other sources.  This could raise the project cost.
  • The Standing Committee examining the Bill has made several recommendations. These include:
  1. the Act should also regulate commercial real estate,
  2. smaller projects should also be covered, and
  3. all real estate agents must be required to register.
  • The real estate sector has some other issues such as a lengthy process for project approvals, lack of clear land titles, and prevalence of black money. Some of these fall under the State List.

Analysis

While the Act might transform the way in which various stakeholders operate, it will particularly have a far-reaching impact on residential developers, who would need to recalibrate their business practices to stay in the game.

  1. Rigorous project planning and management
  • Increased disclosure level for project registration would prompt developers to make realistic commitments on project specification, amenities and delivery timelines to avoid stiff penalties on default.
  • Project configuration, planning and execution management would, therefore, get more efficient.
  • Similarly, new projects might get broken down in phases to keep their sizes manageable and avoid execution delays.
  • Some of the best practices, currently being neglected by the majority but followed by international and corporate developers may become the new industry norm in the RERA world.
  1. Conservative project finance structures
  • RERA would require new projects to have all approvals before a launch. This would lead to larger gestation period prior to a project launch.
  • Consequently, new projects would require higher proportion of working capital towards land procurement, architects, consultants and regulatory approvals being financed by promoter equity as against the current practice of sourcing it from customers through hurriedly done half-baked project launches.
  1. Efficient project cost control mechanism
  • RERA would make product pricing structures extremely transparent. Post sale and last minute product price escalations by developers on frivolous grounds would be history.
  • This would encourage developers to establish strong cost and delay control mechanisms within their project management and monitoring systems.
  • Procurement efficiencies would need to be raised and leakages due to negligence or internal corruption would need to be plugged to protect project profit margins.
  1. Increased participation by institutional players
  • In the past, many of these institutional players have burnt their fingers badly due to lack of governance and execution efficiency.
  • Their past experiences have hitherto forced them to either stay away or invest through extremely conservative debt structures to protect their investments.
  1. Cheaper capital pricing by institutions
  • Capital pricing at the new investment stage is always a function of perception of risk—market, regulatory, execution and counter party.
  • RERA would reduce the risk perception significantly due to its stringent disclosures and penal provisions.
  • Consequently, pricing of both debt and equity instrument are expected to come down once RERA is implemented in letter and spirit.
  • The transformation in business practices with RERA being a catalytic force would ensure that only serious and strong players remain within the sector.
  • Therefore, going forward, a consolidation among players within the sector cannot be ruled out.
  • The transformative impact of RERA would lie in the intent and speed at which various state government implement the regulation.

What are the grievances of the Builders?

  • While consumer interests have been protected, some developers find provisions of the Act to be exceptionally burdensome on a sector already ailing from a paucity of funds and multiple regulatory challenges.
  • The builder lobby has been demanding “industry” status for the real estate sector as it would help in the availability of bank loans.
  • Real estate companies say that most delays are because of the failure of authorities to grant approvals/sanctions on time.
  • While the Act addresses some of this, it does not deal with the concerns of developers regarding force majeure (acts of god outside their control) which result in a shortage of labour or issues on account of there not being a central repository of land titles/deeds.
  • Some of these concerns are legitimate but the real estate sector has become a sort of untamed horse galloping in all directions.
  • The cracks emerging in their books are largely of their own making.
  • Once 100% foreign direct investment was permitted in real estate, international money flooded the market. Builders/developers overstretched themselves and diverted funds while some began to cross-invest in non-core activities.
  • In the race to announce the next “mega project” one came across, in many instances, real estate companies embarking on projects without even consolidating land.

Conclusion

  • Like with any new legislation, it takes time to iron out the creases.
  • In fact, the 22 sections still to be notified relate to functions/duties of promoters, rights/duties of allottees, recovery of interest on penalties and other offences.
  • It appears that the law makers have consciously delayed the notification of these provisions till such time as regulators, developers and buyers familiarise themselves with the new legislation.
  • Eventually the benefit of any statute is contingent on its effective implementation. Despite a model set of rules, only a few States have notified their rules.
  • The onus is now on States to formulate rules and establish the regulatory authorities on time. There shouldn’t be just paper compliance, by designating an existing authority to take additional charge as the real estate regulator, as that would affect the timeliness prescribed under the Act.
  • It will go a long way in assisting upstanding developers.
  • More importantly, it will ease the burden on innocent home buyers who put their life’s savings into a real estate investment in the hope of having a roof over their head but often find their dreams come tumbling down.

Practice Questions

  1. Discuss the provisions of the Real Estate (Development and Regulation) Act, 2016. How will it impact the ambitious scheme “Housing for All” by 2022?
  2. What is the significance of the real estate sector in the Indian economy? Chart it out in the respect of the Real Estate Act.
Categories
Daily Editorials for UPSC IAS Exam Preparation

Generic drugs in India


Topic relevance

GS2 – Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

Context

  • The Prime Minister has announced that prescription of medicines by their generic names will be mandatory.

What is a generic drug?

  • Ageneric drug is a pharmaceutical drug that is equivalent to a brand-name product in dosage, strength, route of administration, quality, performance, and intended use.
  • The term may also refer to any drug marketed under its chemical name without advertising, or to the chemical makeup of a drug rather than the brand name under which the drug is sold.
  • TheIndian government began encouraging more drug manufacturing by Indian companies in the early 1960s, and with the Patents Act in 1970.
  • The Patents Act removed composition patents for foods and drugs, and though it kept process patents, these were shortened to a period of five to seven years.
  • The resulting lack of patent protection created a niche in both the Indian and global markets that Indian companies filled by reverse-engineering new processes for manufacturing low-cost drugs.
  • The code of ethics issued by theMedical Council of India in 2002 calls for physicians to prescribe drugs by their generic names only.

Analysis

  • At least 90% of the Indian domestic pharmaceutical market, of ₹1,00,000 crore and more, comprises drugs sold under brand names. There simply are not enough generic name equivalents of branded medicines sold.
  • About half the market—₹50,000 crore and more—is for fixed-dose combinations (FDCs) of drugs, a further half of them irrational.
  • Many FDC drugs contain even eight or nine medicines. To write, and remember, the constituents of FDC drugs in generic names is impractical, considering that there would be thousands of FDC brands.
  • A combination drug is a fixed-dose combination (FDC) that includes two or more active pharmaceutical ingredients (APIs) combined in a single dosage form, which is manufactured and distributed in fixed doses.
  • Even if the doctor manages to write a prescription in generic names for single-ingredient drugs, pharmacists will sell the brand that maximises their commission and will in all likelihood not stock the less costlier but equivalent brand or generic medicine that is as good. This defeats the basic intention of making medicines affordable for consumers.
  • Prescription by generic names merely shifts the focus of the pharmaceutical industry’s unethical drug promotion to the pharmacist; away from the prescriber, and resulting in business as usual.
  • Medicines will continue to account for anything from 50% to 80% of treatment costs.\

Steps taken in this regard

  • The Government of India has championed setting up Jan Aushadhis, which are pharmacies selling only generic name medicines to the extent possible, giving preference to pharmaceutical public sector undertakings (PSUs) too.
  • There are not enough Jan Aushadhis, possibly less than 3,000 against the more than eight lakh retail pharmacies in existence, with many rural areas still underserved.
  • To facilitate Jan Aushadhis, the Drugs Technical Advisory Board (DTAB) in May 2016 considered amending Rule 65 (11A) of the Drugs and Cosmetics Act, 1940 so that pharmacists can dispense generic name medicines and/or equivalent brands against prescriptions in brand names.
  • The DTAB rejected the idea citing that the bioavailability of a generic drug may not be as good as that of the prescribed brand.
  • Bioavailability is a measurement of the extent of a therapeutically active medicine that reaches the systemic circulation and is therefore available at the site of action; whereas bioequivalence is the comparison of the bioavailability of two medicines, say the generic drug and the branded drug.
  • This means that the government’s top decision-making body on medicine-related matters does not have confidence in the products manufactured by the government’s own PSUs.
  • The DTAB, however, could have recommended bio waivers on bioavailability/bioequivalence (BA/BE) for certain classes of drugs based on their permeability and solubility, a practice followed in countries where healthcare is well regulated.
  • BA/BE studies are essential for certain critical dose drugs and drugs of narrow therapeutic range, which are few in number.
  • By implication, the DTAB has doubts that generic name medicines in general can have acceptable BA/BE at all. Probably, the DTAB is not confident that India’s regulatory agencies can strictly enforce quality requirements.

Additional information

  • A Bureau of Pharma PSUs of India (BPPI) has been established on the 1st of December 2008 comprising all the Pharma CPSUs under the Department of Pharmaceuticals.
  • The Bureau will bring about effective collaboration and cooperation in furthering the working and resources of these organizations.
  • More specifically it would:
  1. Co-ordinate marketing of the generic drugs through the Jan Aushadhi stores.
  2. Co-ordinate supply of medicines in the State from their own plants, other Pharma PSUs of Central & State Governments and Private Sector.
  • Coordinate with Hospitals in preparation of formulary.
  1. Monitor proper running of Jan Aushadhi stores with the help of other CPSUs.
  2. Provide medicines as per rates decided in the joint Forum/Core Committee.
  3. Monitor activities of the Jan Aushadhi stores in the areas allocated to them.

Experiments in states

  • The Tamil Nadu and Rajasthan governments procure generic name medicines at extremely competitive prices year after year, and crores of drugs are in use in their public health systems, thanks to the quality assurance systems in place.
  • The success of the drug procurement system in these two states should counter the defeatist narrative that insists that generic medicines can never be good.
  • This is not to underestimate the challenges in ensuring quality generic medicines countrywide, but the critics from the medical profession are doing the poor patient enormous disservice by swallowing the disinformation from the pharmaceutical industry about the general lack of bioavailability of generics as compared to brands.

Branded vs Generic drugs – Alternate opinion

  • A generic drug is approved only after it has met rigorous standards established by the FDA with respect to identity, strength, quality, purity, and potency.
  • All generic manufacturing, packaging, and testing sites must pass the same quality standards as those of brand name drugs.
  • The generic drug manufacturer must prove its drug is the same as (bioequivalent) to the brand name drug.
  • For example, after the patient takes the generic drug, the amount of drug in the bloodstream is measured. If the levels of the drug in the bloodstream are the same as the levels found when the brand name drug is used, the generic drug will work the same.
  • In the West, brand names are given to researched and patented first-in-market innovator drugs.
  • After the expiry of patent period, other companies launch generics of the innovator drug with just the pharmaceutical salt name at a hugely discounted price. So, the only difference between a brand name drug and its generic version is the price.
  • The issue in India is not about expensive brand name drugs versus cheaper generics, as in the West, but one of quality drugs versus suspect quality drugs.
  • Branded generics are also generics with a brand name, plus the quality assurance from well-known companies like Cipla, Sun or Dr Reddy’s. Doctors have come to trust these companies and their brands over time.
  • Indian pharma’s field force numbering nearly one million medical representatives have done a good job of building this trust in their companies and brands.
  • It is simply not possible for doctors to transfer this trust to generics, manufactured by unknown companies.
  • The entire issue of cheaper generics is based on the premise of measurable and enforceable assurance about quality through bioequivalence tests and other globally mandated parameters. In the absence of that, the generics-only diktat is a non-starter.
  • In the absence of an international standard drug regulatory mechanism like the USFDA, Indian doctors have to rely on the reputation of companies like Cipla, Sun and hundreds of others who have demonstrated their commitment to quality over time and become trusted names in the eyes of doctors and patients.
  • Also, Indian branded generic companies have been innovative in terms of drug delivery systems to improve absorption, reduce side-effects, thereby increasing the efficacy of the drug.
  • These novel drug delivery system (NDDS) drugs are available in all category of drugs from ordinary mouth dissolving pain-killers for quick results to complex diabetes drugs that are released into the blood in a steady stream to ensure better blood-sugar control with lesser chances of hyperglycemia – one of the dangerous complications of taking diabetes medicines.

Way forward

  • The Medical Council of India (MCI), in an amendment to the Code of Conduct for doctors in October 2016, has recommended that every physician “should prescribe drugs with generic names legibly … and he/she shall ensure that there is a rational prescription and use of drugs.”
  • How the MCI is going to ensure rational prescription and use, without a framework to measure the same, should be looked into seriously.
  • Rational use and prescription depends on the doctor, the pharmacist, the regulator, and the consumer.
  • Some minimum prerequisites for rational use are: prescription-only medicines (Schedules G, H, H1 and X) must not be available freely over the counter; doctors and their professional bodies along with regulators must ensure there is no misuse of antibiotics and critical drugs; and the removal of all irrational/harmful/useless medicines, both FDCs and unscientific single ingredients, must be ensured.
  • Practical guidelines for rational use and prescription audit of medicines must be developed and implemented seriously by all doctors. Branding of off-patent drugs needs to be discouraged as is the practice in well-regulated countries.
  • The Hathi Committee Report (1975) too had recommended debranding.
  • Price control of an enlarged list of essential and life-saving drugs is a must as was mandated by the Supreme Court in 2003.
  • The current market-based price mechanism of the Drug Price Control Order (DPCO) 2013 is a travesty and has resulted in ceiling prices that allow 2,000% to 3,000% (and in some cases, 10,000%) margins. This needs to be replaced by the cost-plus method of ceiling price fixation of the DPCO 1995.
  • The number one priority must, thus, be the replication of the Tamil Nadu/Rajasthan model of free medicines in all states, and pharmaceutical PSUs must be re-energised and reinvented instead of the government disinvesting in them.
  • Since the issue is also about quality, the government must put in place reforms that will make it mandatory for drug manufacturers in India to adhere to globally accepted standards.
  • Only recently, the government has put out a statement to the effect, “The union health ministry is in the final stages to release a draft guideline towards enhancement of good manufacturing practices (GMP) to align India-specific standards with global regulations for better product quality of pharmaceutical products. Meanwhile, the drug controller general of India has also submitted a proposal to the Union health ministry to mandate upgradation of Schedule M drug manufacturing units to WHO-GMP level under the purview of drug rules towards good manufacturing practices adopted globally.”
  • The solution to the problem of branded versus generic lies in strengthening the existing drug regulatory and quality control structure.
  • The strategy can be two pronged with an increase in the capacity of existing testing laboratories and opening up of new laboratories in government colleges.
  • A time bound plan to make generic prescriptions mandatory will also prepare Indian pharma’s vast supply chain of 800,000 wholesalers and retailers to get used to the new initiative progressively. India’s 800,000 retailers have thrived because it is a profitable high-margin business.

Practice Questions

  1. What is the future of generic medicines in India? Examine in the context of surging pharmaceutical sector in India and large populace with limited affordability for branded medicines?
  2. How do you view the impact of Jan Aushadi scheme on the health outcomes of India given that India spends little on health?
  3. What are the ethical issues involved in the debate on branded and generic drugs?

 

Categories
Daily Editorials for UPSC IAS Exam Preparation

BS IV Norms

Topic relevance

GS3 – Science and Technology – developments and their applications and effects in everyday life Achievements of Indians in science & technology; indigenization of technology and developing new technology.

GS3 – Conservation, environmental pollution and degradation, environmental impact assessment

Context

  • To the dismay of many automobile manufacturers sitting on a huge inventory of BS III compliant vehicles, the Supreme Court recently ordered that only vehicles with engines compliant with BS IV standards must be sold from April 1, 2017.
  • Authorities have also been prohibited from registering vehicles that don’t meet BS IV norms henceforth, except on proof that the vehicle was sold on or before March 31.

What are BS norms?

  • Introduced in 2000, the Bharat norms are emission control standards that are based on the European regulations (Euro norms).
  • They set limits for release of air pollutants from equipment using internal combustion engines, including vehicles. Typically, the higher the stage, the more stringent the norms.
  • Major emissions governed under these norms are carbon monoxide emissions, hydrocarbon emission limits. Nitrogen Oxides and particulate matter are also significant metrics. Furthermore, for every step up in standards, an improved standard of fuel is required.
  • The BS IV norms were introduced in 13 cities apart from the National Capital Region from April 2010 onwards.
  • According to the roadmap, the entire nation was to be covered under BS IV by April 1, 2017.
  • BS IV fuel was also to be made available across the country from April 1 this year.
  • BS IV norms stipulate only 50 parts per million sulphur compared with up to 350 parts per million under BS III. Also, hydrocarbon, nitrogen oxide and particulate matter emissions are lower under BS IV.

What are the technologies used for BS IV?

For two vheelers –

  • Changes from BS3 to BS4 for motorcycles are more than just tailpipe emissions. Regulations also (for the first time) restrict evaporation emissions from fuel tanks, which mean a new breather value and additional or changed stamps in the body structure or additional brackets that hold these new systems. This is very difficult to retrofit considering the fact that major design changes might be needed.
  • Coming to tail pipe emissions, BS4 motorcycles in most cases require larger catalytic converters in terms of flow volumes to eliminate harmful nitrogen based gasses. And although that could be adapted within the exhaust system, most bikes also need a secondary airflow system that adds oxygen (or natural air) to the exhaust stream just before the catalytic convertors. This of course, is a more complex system for which retro fitment is more difficult.
  • Many manufacturers have also resorted to a more complex ECU and ignition control setup that has more than the standard idle map and full throttle map for a better control of the ignition timing which in turn makes for a cleaner burn and thus, less pollution. The byproduct of this is also a more linear acceleration curve and better fuel economy.

For Petrol Powered Passenger vehicles  and SUVs

  • Most petrol powered passenger cars in India have already converted to BS4 years ago. This is mainly because the change from BS3 to BS4 is easiest for internal combustion petrol engines.
  • Most emissions standards are met by the engines themselves without the need for complex post combustion methods to reduce the effect of pollution. The addition of turbocharged smaller capacity engines for example is not for more power or more fun but because it is very easy to attain BS4 emissions levels with these modern engines.
  • Even naturally aspirated internal combustion engines that are slightly older in terms of technology can meet BS4 with a larger catalytic convertor or two catalytic convertors either in pre-engineered form or retrofitted. Ideally, the catalytic convertors in series is the solution to go for, with one mounted right after combustion occurs (normally on the exhaust manifold itself) and one mounted as a part of the pre muffler package or just before the pre muffler package. The secondary catalytic convertor can also be mounted before or as an in built part of the end can. Similar volume catalytic convertors with a higher concentration of Platinum Group Metals (PGM) can also result in lower emissions if packaging is an issue.
  • It is easiest to retrofit petrol powered passenger cars as most of them already have an on board diagnostics or OBD 2 port, which controls engine behavior in real time. The OBD 2 port and real time emissions control is mandatory for BS4.

For Diesel powered passenger vehicles and SUVs

  • They are the small portion of the passenger car segment that will get slightly affected by the BS3 to BS4 move as there were still a few manufacturers like Mahindra and Tata Motors manufacturing BS3 vehicles for rural and semi urban markets. These vehicles will now be rendered defunct and in most cases, these were mere variants of BS4 enabled cars that are already available in the market (for example: Mahindra Thar).
  • The implementation of BS3 had anyways made most manufacturers switch to electrical fuel management and common rail technology for the diesel engines as meeting BS3 with older direct injection technology was quote tough anyways. That said, just like the petrol powered cars, the biggest change in terms of emissions control hardware is a larger volume catalytic convertor or Diesel Oxidation Catalyst (DOC) as it is known specifically for diesel engines. The new BS4 cars will also have to have atleast one NOX sensor in the tail pipe to constantly monitor and a particulate filter to capture particulate matter.
  • On board diagnostics or OBD 2 ports in passenger diesel powered vehicles will be mandatory to ensure real time engine performance adjustments based on pollutant levels. These are very difficult to incorporate into older technology.
  • While passenger cars and two wheelers can still take some form of retro fitment, it is the commercial vehicle segment that will go through one of the most revolutionary changes in technology and mechanical advancements in recent history with the new BS4 norms.
  • Retro fitment of emissions control units to meet BS4 is almost impossible or very very difficult as most sytems used are still mechanical and not electronically controlled.
  • The use of on board diagnostics or OBD has been made compulsory not only for passenger cars but also for commercial vehicles which means that all commercial vehicle manufacturers will have to adopt newer ECU based technologies
  • The other addition without which commercial vehicles will not be able to meet emissions is the use of an exhaust gas recirculator or EGR. While mechanical EGR’s with upto 60 percent recirculation has been used in the past for various vehicles in both commercial or passenger segments, the newer BS4 regulations will need electronically controlled EGR units with on the fly adjustment capabilities.
  • In terms of actual hardware post the engine that helps reduce the effect of pollutants, BS3 vehicles today in India do not have any sort of catalyst based system to reduce pollution and have only a noise control muffler that helps reduce audible emissions.
  • The newer trucks and busses, etc will have a mandatory catalytic convertor or Diesel Oxidation Catalyst (DOC) as in the passenger vehicle segment. The DOC will take care of NOX emissions while particulate matter (which includes visible black soot) will be contained with the help of the particulate filers.
  • Certain higher end trucks and busses will also use another type of post engine exhaust which is more advanced. These include a collection of Diesel Oxidation Catalyst (DOC), Lean Nox Catalyst (LNC) and Lean Nox Trap (LNT) and also a Urea injector called the Selective Catalytic Reduction (SCR) module. That said, this technology although used very commonly in Europe is still at a very fledgling stage in India as it needs an occasional top-up of Urea along with regular fuel top ups in order to reduce polluting gasses.
  • To sum up, petrol powered passenger cars will be fastest to adapt followed by two wheelers and diesel passenger cars. Commercial vehicles will have to go though a more engineered approach to meet the BS4 regulations.
  • That said, most vehicles will not just be ‘retrofitted’ with these technologies that we explained earlier to meet BS4 and a more holistic approach to the problem of old unsold stocks will have to be explored.

 

Why important?

  • While some automakers were betting on April 1, 2017 to be the deadline for the commencement of production of BS IV compliant vehicles and not the sale of such vehicles, the Supreme Court ruling has come not a day too soon.
  • India is on the radar of global automakers as vehicle penetration is still low here, compared to developed countries.
  • Besides, many Indian cities are already among those with the poorest air quality in the world. Upgrading to stricter fuel standards helps tackle air pollution.
  • Other developing countries such as China have already upgraded to the equivalent of Euro V emission norms a while ago.
  • So, India is lagging behind even after implementation of BS IV norms.
  • To compensate for this, BS V standards will be skipped and BS VI norms are proposed to come in by April 2020.
  • Both vehicle manufacturers and fuel suppliers are already working to abide by this deadline.
  • In 2014, the National Green Tribunal said that clean air is a fundamental right.
  • Upgraded emission norms could also mean higher fuel efficiency. BS IV fuel is also being made available pan India, which implies that even your older vehicles can tank up with better fuel.
  • Besides, the Government has been thinking about a ‘cash-for-clunkers’ scheme. If implemented, this will help owners of older and more polluting vehicles to upgrade to BS IV compliant vehicles, with a subsidy from the government.
  • On the flip side, the use of new technology means higher costs for auto makers. This could be passed on to buyers. Oil refiners too have had big capital outlays to produce superior quality fuel under BS IV. So, fuel bills could rise too.

 

Analysis

  • Automobile manufacturers’ insistence that huge injustice has been done to them because they have been asked to move to Bharat Stage IV (BS-IV) technologies for emission control before the due date.
  • Thegovernment notification they are using in their defence says companies would stop making Bharat Stage III (BS-III) vehicles by March 31, 2017. The companies say this does not mean that registration of BS-III vehicles would be stopped as of April 1, 2017.
  • Automobile companies, ably represented by their association Society of Indian Automobile Manufacturers, say as a result of the decision to stop registration huge inventories have piled up. This means huge losses for them and for the country. This is injustice, they say.
  • Firstly, vehicles contribute to the pollution that is making us ill.
  • Secondly, improving the quality of fuel and vehicle technology is a critical way to clean up emissions.
  • But thirdly, this improvement in fuel quality and technology has always been hard-fought. It has always come in spite of Indian automobile companies and not because of them.
  • It was inApril 1999 that the Supreme Court had directed that all vehicles in India would have to meet Euro I (BS norms were not fashioned then) by the June of that year. It also directed that Euro II would be mandatory in the NCR by April 1, 2000. At that time, the court had set a precedent by directing that “no vehicle shall be registered unless it conforms to Euro II norms”.
  • In May 1999, counsels for automobile companies argued for more time to implement the Euro norms. The court remarked in obvious sarcasm, “People can’t breathe and you are asking for more breathing time!” The transition happened in Delhi and NCR. Leading companies pushed for technology improvement and the laggards caught up.
  • Thegovernment set up a committee under R A Mashelkar  to finalise the road map for clean fuel technology for the country.
  • In 2003, it was agreed that Delhi, NCR and 12 other polluted cities would get BS-III by April 2005, and the rest of the country by April 2010. Then there was a pause.
  • The 2008 notification only said that Delhi, NCR and 12 other cities would get BS-IV by 2010.
  • In 2015, the road map for the rest of the country was decided—fuel would be progressively made available and technology transition would happen. The deadline was April 1, 2017, when the entire country (barring small remote pockets) would switch to 50-ppm-sulphur fuel as compared to the 350 ppm fuel available till then.
  • The automobile companies, therefore, knew well in advance that the fuel would be available across India by April 1, 2017. The transition to BS-IV is also not new as technologies have been available since 2010.
  • The date of “manufacture” is, then, only a technical argument. The only constraint, that of clean fuel being available nationwide for long-distance carriers like taxis and trucks, has been removed.
  • The case of two-wheelers is slightly different. These are largely petrol vehicles, so fuel is not such a constraint—diesel has high particulate matter and emission control requires stringent quality control in fuel. Thevehicle manufacturers were given an entire year, April 2016 to March 2017, to switch over to BS-IV. Again, the companies knew and the transition should have been seamless.
  • EPCA had convened a meeting in October 2016 to discuss this switch date. The position was that since clean fuel would be available by April 1, 2017, at a considerable cost to the public exchequer, companies should plan their inventories accordingly.
  • The objective was to ask them to reduce the production of BS-III and to ramp up the manufacturing of BS-IV. Instead, the data supplied by the companies to the Supreme Court shows that most of them continued to produce BS-III vehicles at the same or even increased rate. This then built up inventories.
  • The fifth issue is that this transition matters. BS-IV vehicles, particularly diesel trucks, are much less polluting than BS-III. There is 80 per cent reduction in particulate emissions between the two generations. That’s why bringing cleaner vehicles into the market as fast as possible matters.
  • No doubt the country has a massive problem of older and more polluting vehicles. But why should this be an argument for delaying the transition? After all, vehicles have a life of 10-15 years. The faster the new stock takes over the better it is.

 

Way forward

  • The Supreme Court put it best, “The health of the people is far, far more important than the commercial interests of the manufacturers”.

 

Categories
Daily Editorials for UPSC IAS Exam Preparation

Korean – US relations

Topic relevance

GS1 – History of the world will include events from 18th century such as industrial revolution, world wars, redrawal of national boundaries, colonization, decolonization, political philosophies like communism, capitalism, socialism etc. – their forms and effect on the society.

GS2 -Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests. 

GS2 – Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora

Context

  • S. President Donald Trump, while describing North Korea as his biggest challenge, cautioned: “There is a chance that we could end up having a major conflict with North Korea. Absolutely.”
  • Earlier in April, amid reports that North Korea might be planning another nuclear test to coincide with the 105th birth anniversary of long-time leader Kim Il Sung, Mr. Trump had announced that “an armada, very powerful” was headed towards the Korean peninsula
  • In turn, the DPRK threatened a “super mighty pre-emptive strike”. After undertaking a live firing exercise off its east coast, it followed up with another test-firing of a ballistic missile on April 29 which fizzled, causing loss of face.
  • During the campaign, Mr. Trump had said that he would be willing to talk to North Korean leader Kim Jong-un, making it clear that Barack Obama’s policy focussing on tighter sanctions was a failure.
  • After assuming office, he adopted a harder line, declaring that he would do “whatever is necessary” to prevent North Korea from developing a nuclear-capable missile that can reach the U.S.
  • The U.S. has not held bilateral talks with North Korea since the Bill Clinton presidency. So clearly, there is no dearth of signalling but the question is, what is the 33-year-old Kim Jong-un expected to make of it?

Historical role of USA in Korean peninsula

  • Even before the second world war ended, Russia and the USA had agreed that after the war Korea would be divided into two zones, Russian and American.
  • In August 1945 Russian troops entered the north. In September, after the Japanese surrender, American troops landed in the south. Korea was divided in two along an imaginary line, the 38th parallel. It was originally intended that the two zones would eventually be united into one. Of course that did not happen.
  • With the onset of the cold war the divide between them hardened. The Russians installed a communist government in the north and in the south a government was elected in 1948. Korea became two countries, one Communist, and one Democratic.
  • The North Korean army invaded the south on 25 June 1950. They quickly drove south and captured Seoul.
  • The UN Security Council invited members to help the south. US troops arrived on 30 June but they were forced to withdraw into the area around Busan. The first British troops arrived in Korea on 14 September to reinforce them. On 15 September other US troops landed at Incheon 150 miles north of Busan. The soldiers in the Busan area broke out and pushed north and linked up with the troops in Incheon on 26 September. On the same day allied troops liberated Seoul.
  • United Nations troops then pushed the communists back over the 38th parallel and by 24 November they controlled about 2/3 of North Korea.
  • However the Chinese then intervened. Strengthened by Chinese 180,000 troops the communists then counter-attacked and drove the allies south. By the end of 1950 the allies were back at the 38th parallel.
  • The communists attacked again on 1 January 1951. The allies counter-attacked on 25 January and on 14 March they again liberated Seoul. Several communist offensives followed but all of them were repulsed.
  • The war ended in a stalemate and on 27 July 1953 a cease-fire was signed. The 38th parallel was once again the border between the two countries.

After the Cold War

  • Regime acceptance and regime survival have been key priorities for Pyongyang since the collapse of the Soviet Union.
  • A positive move in 1992 was the withdrawal of tactical nuclear weapons from the Korean peninsula and a suspension of Team Spirit, the joint U.S.-South Korean military exercises, leading to the Basic Agreement on Reconciliation, Non-Aggression, and Exchanges and Cooperation.
  • When joint exercises were resumed in 1993, North Korea announced its decision to withdraw from the Nuclear Non-Proliferation Treaty (NPT). The ensuing crisis led to talks and a year later, an Agreed Framework was concluded under which North Korea suspended its decision to withdraw from the NPT, agreed to freeze its nuclear activities, and in return, the U.S. pledged to build two light water nuclear power reactors. Food aid and humanitarian assistance provided by the Clinton administration from 1995 till 2000 was close to $750 million.
  • The Bush administration declared North Korea part of the ‘axis of evil’ in 2002, cancelled direct talks and annulled the 1994 agreement. North Korea responded by throwing out International Atomic Energy Agency inspectors and formally quit the NPT thereby provoking a fresh crisis.
  • China and Russia initiated Six Party Talks in 2004 which led to the 2005 joint statement which expanded the scope to more than the nuclear issue. However, the talks collapsed when the U.S. imposed sanctions a few months later; North Korea responded with its first nuclear test in 2006.
  • Since then, North Korea has made steady progress in its nuclear and missile programmes. An underground nuclear facility has been built at Mt. Musan.
  • Nuclear tests were conducted in 2013 and twice last year, and it is estimated that North Korea has enough fissile material for 10 to 15 nuclear devices. By 2019, North Korea will be able to develop long-range missiles that can reach the U.S. mainland.
  • Given Mr. Trump’s redline, Mr. Jong-un is convinced that nuclear capability is the ultimate security guarantee to protect his regime against U.S. intervention.
  • S. policy has oscillated between sanctions in response to nuclear and missile tests, dilution of sanctions by China, talks about closer defence ties with Japan and South Korea, citing of additional threats by North Korea and more testing, thus repeating the cycle. U.S. expectations that sanctions would lead to regime collapse were misplaced because given China’s stakes, this will not happen

Role of China

  • Recently China has registered a policy shift reflecting unhappiness about Mr. Jong-un’s behaviour, particularly the high-profile executions of those considered to be close to China. The most recent was the assassination of Kim Jong-nam, Mr. Jong-un’s half brother, in February, which prompted China to halting coal briquette imports from North Korea. Air China stopped direct flights to Pyongyang last month but these are now being reinstated. North Korea has accused China of “dancing to the tune of the U.S.”.
  • However, China can neither permit a regime collapse which would create instability nor allow its communist ally to be subsumed into a unified Korea.
  • Trump is trying to persuade China to exert greater leverage by praising its President, Xi Jinping, as “a good man” who is “trying hard”.
  • After the latest missile test, Mr. Trump tweeted, “North Korea disrespected the wishes of China & its highly respected President when it launched, though unsuccessfully, a missile today. Bad!” Mr. Xi is unlikely to be persuaded.
  • At the UN Security Council meeting on April 28, Foreign Minister Wang Yi reaffirmed support for a denuclearised Korean peninsula and previous Security Council resolutions but did not support additional punitive measures. Instead, he again suggested that the U.S. and South Korea could suspend their military exercises.
  • More than North Korean tests, China is worried about the possibility of an unpredictable Trump initiating unilateral action which could create an escalatory spiral.
  • Another concern is the U.S. decision to accelerate deployment of the THAAD (Terminal High Altitude Area Defence) system in South Korea though it is hopeful that a moderate President gets elected in the May 9 election in South Korea and reverses the THAAD decision.

Way forward

  • Xi’s objective is to persuade Mr. Trump that neither more sanctions nor military strikes are viable options; the only option is ‘dialogue’.
  • Second, while denuclearisation of the Korean peninsula can be a long-term objective, for the foreseeable future, Mr. Jong-un is not going to give up North Korea’s nuclear and missile capabilities. At most, he can agree to a freeze on its programmes — no further tests, no exports or transfers and no threats.
  • In return, the U.S. will need to provide assurances relating to regime acceptance and a gradual normalisation of relations. A moderate leader in Seoul will help the process of a sustained dialogue which also needs coordination with Japan.
  • Jong-un’s stakes are existential and, having seen Western interventions in Iraq and Libya and Russian intervention in Ukraine, he is determined to retain his nuclear capabilities till the end of what will be a long and delicate negotiating process, a process which could all too easily be derailed by confusing rhetoric and mixed signalling that has escalated tensions.
Categories
Daily Editorials for UPSC IAS Exam Preparation

Economics of South Asia

Context

  • The World Bank’s South Asia Economic Focus is released recently.
  • Titled “Globalization Backlash”, the report examines whether South Asia stands to lose from the protectionist tendencies currently on the rise.
  • It concludes, optimistically, that the region does not have much to lose from the turn away from globalization.

Background

  • South Asia has for some years been the fastest growing region in the world. At an impressive 6.7% year-on-year growth in GDP (gross domestic product) in 2016, it outstripped East Asia, which notched up 6.3%.
  • Notwithstanding subregional variation, most countries have registered growth, Bhutan, Bangladesh and India being the fastest growing economies.
  • There has been a sharp reduction in inflation. The regional consumer price index has come down from 5% in June 2016 to just over 3% recently—but again, there is variation within the region.
  • Despite real exchange rate appreciation, current accounts are mostly balanced.
  • Remittance flows have rebounded from the lows touched in the previous years, though in absolute terms they remain well below the levels prior to the oil price slump.
  • FDI (foreign direct investment) and portfolio inflows have remained stable and international reserves have grown.
  • The areas of concern are fiscal balances and public debt to GDP ratio (at 60%, the second highest in the world after the Middle East and North Africa).
  • But the overall macroeconomic picture is quite positive.

What is the likely impact of the wider protectionist turn on South Asia?

  • Exports currently constitute only around 10% of South Asia’s GDP. This is the lowest of all regions barring sub-Saharan Africa. In fact, the contribution of exports to GDP has come down across the region in recent years.
  • Against this backdrop, and given the prospect of a rise in protectionism, it could be held that South Asia should not focus on exports to fuel its growth. This argument has lately been made in the context of India. The report, however, disagrees with this bout of export pessimism.
  • In the first place, it underscores the benefits flowing to the region from the collapse of mega-regional trade deals like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership.
  • Had the TPP—with zero-tariff access to US markets—gone through, countries like Nepal and Bangladesh would have lost out on textile exports to Vietnam.
  • The imposition of new standards under the TPP would have thrown up a range of non-tariff barriers too.
  • The folding up of the TPP is good news for South Asian exports, though we could argue about the magnitude of the benefits.
  • The report assesses the trade diversion scenario in the event of an imposition by the US of a 10% tariff on imports from Mexico and China. Based on a computable general equilibrium model, the report claims that exports to US from Mexico and China would slump by 25% and 35%, respectively.
  • It goes on to argue: “South Asian countries would be able to scale up their exports to the US as a result.” The magnitude of trade diversion for South Asian countries is expected to range between 10-15%.

 What are the challenges?

  • South Asia currently does not export most of the products that Mexico and China are selling in the US market. Indeed, “if South Asia only expands its market share in products it is already exporting its [expected] gains are rather small”.
  • The gains will be large only if South Asia starts exporting new products—a fact that underlines an altogether different set of challenges.
  • The report does not seem to recognize the importance of integrated value chains, especially in the context of a country like Mexico. Much of the US-Mexico trade happens via these value chains and it will be extremely difficult for South Asian countries to step into any opening.
  • However the absence of trade within South Asia is a challenge. It is well known that intra-regional trade in South Asia is much smaller compared to that in East Asia.
  • In fact, the high contribution of trade to GDP in East Asia is reliant on the integrated supply chains in the region. Lack of economic integration in South Asia sharply limits the contribution of trade to regional growth.
  • The only bright spot is India’s deepening relationship with Bangladesh. If the government manages to push through all that it has planned and promised, then we can hope for a measure of subregional integration around Bangladesh, Bhutan and North-East India. These countries also happen to be economic bright spots in the region. It is important that New Delhi pushes ahead on this front—before the political tide turns in Bangladesh.

Way forward

  • As always, the problems are not economic but political and geopolitical.
  • The drive for regional integration can only come from India.
  • The present government’s regional policy began on a strong and positive note, but has since dissolved into inconsistency and incoherence.
  • Political volatility in the other countries has further dimmed the prospects of economic integration.

 Questions

  • How can South Asia capitalise on its favourable demographic dividend for the economic prosperity? What issues confront the goal?
  • Examine the linkage between economic and trade relations with the politics of the subcontinent. Why have the historically cohesive region remained fragmented in the post colonial era?
Categories
Daily Editorials for UPSC IAS Exam Preparation

Ecosystem services for dwindling Agriculture

Context

  • India has seen a steady decline in the proportion of national income coming from the primary sector overlaying a rapid decline in rural farm incomes and this has impacted the demographic dynamics too.
  • Between 2001 and 2011, the growth rate of rural population declined by 5.9%, while the urban population growth rate increased by 0.3%.
  • This steady rise has been by way of
  1. migration from rural areas,
  2. increasing density of habitation spaces in urban fringes, and
  • emergence of new towns.
  • The rapid growth in urban populations has put an immense strain on urban infrastructure, quality of life and raised doubts of sustainability of well-being despite a rapidly increasing per capita income in India.
  • Parallelly, in rural India, household ownership of land has declined from 107.2 million hectares (ha) in 2002–03 to 92.4 million ha in 2012–13 (NSSO 2013).
  • The declining farm income is reflected in the rising number of farmer suicides—an estimated 3.18 lakh farmers have committed suicide in the past 21 years beginning 1995 according to the National Crime Records Bureau.
  • The latest estimates show that 12,602 farmers had committed suicide in 2015, an increase by 2% from 2014. Thus, guaranteeing a farm income that ensures a decent living for the farmers is an urgent need of the hour.

Policy Response

  • In response to this crisis, while presenting the union budget of 2016, Finance Minister Arun Jaitley had announced the government’s intention of doubling the farmers’ income in the next five years. This is a welcome intention in the context of the severe agrarian crisis, and the rising spate of farmer suicides.
  • According to the Economic Survey 2016–17, the average farm household income in 17 states of India stands at a paltry ₹20,000 per year, that is, an average monthly income of ₹1,666.
  • According to the estimates from the 70th round of the National Sample Survey (NSS), the average farm household income was ₹6,426 per month, including ₹3,345 from non-farm activities. These are clear indications that the extent of farm income insecurity is primarily responsible for prevailing agrarian crisis.
  • In contrast, the recently announced Seventh Pay Commission guarantees a minimum basic pay of ₹18,000 per month for the lowest paid government employee.
  • Farmers who undertake the critical task of providing food to the nation are somehow left to the vagaries of weather variations and market fluctuations, and have no secure means of income.
  • The most talked about minimum support price (MSP) mechanism to ensure fair farm incomes is unequal to the task on at least two counts:
  • first, it has not kept pace with the rise in farm costs, and
  • second, as admitted by the Shanta Kumar Committee, only 6% of the farmers get the benefit of MSP.
  • Doubling the farm income, therefore, seems an impossibility using the MSP as a tool.
  • The other two ways by which net incomes could be enhanced are: growth in agricultural productivity or reduction in production costs (if prices are stable).
  • While agricultural productivity has stagnated over the years on an average across the country, Punjab has shown that even raising crop productivity does not automatically lead to an end to the agrarian crisis.
  • With 98% assured irrigation and wheat yields of 45 quintals/ha and paddy yield of 60 quintals/ha, Punjab is on the top globally when it comes to crop productivity and yet has emerged as a suicide hotspot.
  • Reduction in the cost of production may in any case be mostly influenced by market forces than individual actions.
  • Therefore, none of these strategies seems to be a feasible mechanism to meet the policy goal of increasing farm incomes.

Payment for Ecosystem Services (PES) as a Solution?

  • One mechanism which is inclusive and would ensure increase in farm incomes is by compensating farmers for ecosystem services that they generate.
  • Ecosystem services are those benefits generated by the ecological systems that contribute to human well-being both directly and indirectly.
  • The Millennium Ecosystem Assessment (2005) classified the ecosystem services into four broad categories: provisional, regulatory, support and cultural services
  • Except for the provisioning services, the other ecosystem services are not traded directly in the market, which necessitate generation of surrogate methods for valuing these services.
  • Providing a monetary value for the ecosystem services is an important method to raise awareness and convey the importance of ecosystem services to policymakers.
  • One of the first attempts to estimate monetary values of global ecosystems services was done by Costanza et al (1997). They estimated the contribution of ecosystem services to be $33 trillion per year and then revised this estimate to $125 trillion per year in 2011 (Costanza et al 2014).
  • A series of efforts were made to compute the values of ecosystem services and The Economics of Ecosystems and Biodiversity (TEEB) initiative made significant progress in this aspect.
  • It led to the creation of the Ecosystem Service Valuation Database (ESVD) with about 1,500 global peer-reviewed publications on ecosystem services valuation covering 22 such services from 16 biomes. The values were standardised to the base year 2007 and the normalised values were expressed in terms of per year and per hectare. As de Groot et al (2012) point out, these are estimates “of their benefits to society—benefits that would be lost if they were destroyed or gained if they were restored.”

What is Millennium Ecosystem Assessment?

  • TheMillennium Ecosystem Assessment (MEA) is a major assessment of the human impact on the environment, called for by the United Nations Secretary-General Kofi Annan in 2000, launched in 2001 and published in 2005 with more than $14 million of grants.
  • It popularized the term ecosystem services, the benefits gained by humans from ecosystems.

 What is the potential of PES?

  • Potential of agriculture in providing ecosystem services is gaining research attention globally. Agriculture conventionally supplies food, fibre, and fuel—“provisioning services” in ecosystem service parlance (Millennium Ecosystem Assessment 2005).
  • Apart from provisioning ecosystem services, the agricultural ecosystems supply “regulating services” like climate regulation, water purification, surface water flows, groundwater level, and waste assimilation and breakdown.
  • Thus, agro-ecosystems provide beneficial ecosystem services to society at large and currently there is no mechanism to compensate the farmers for it.

What is India doing?

  • In India, we already have precedence in the forestry sector where a compensation mechanism is in place for changes in ecosystems services—the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) fund.
  • The policymakers then could use the same framework to compensate farmers for ecosystem services from agro-ecosystems.
  • Within the agricultural systems, the type of production system determines the scale and capacity for generating ecosystem services as these are vulnerable to land-use changes as well as techniques of production.
  • For instance, intensive agricultural production with increased use of agro-chemicals, and pesticides has a negative impact on generation of ecosystem services and can cause irreversible damage to environment.
  • The objective of this exercise is to examine payment for ecosystem services (PES) as a mechanism to compensate farmers for the net economic value for ecosystem services that flow from agro-ecosystems in India.
  • These values could be integrated into a well-defined mechanism for PES.
  • The PES mechanism can be used to correct for natural externalities and help adapt sustainable measures which would help increase the net stock of natural capital.
  • This can form one component of the guaranteed income basket being proposed for the farming community.

Data calculations

  • The total economic value (TEV) of the various services (food, water regulation, climate control, biodiversity, soil quality, air quality, etc) is estimated to be $3,839 per year per hectare (at 2007 prices).
  • In order to make this compatible to Indian prices, the dollar can be converted to rupee values in 2007 (using the 2007 exchange rate of ₹45/$1).
  • Further use the gross domestic product (GDP) deflator to project the values for 2016.
  • The calculation translates this to a figure of about ₹77 lakh.
  • If the values for food and recreation are deducted (provisioning and cultural services which could be marketed), a figure of ₹1,74,800 per hectare per year translating into a payment of ₹14,570 (approximately) per hectare per month was arrived.
  • This would fulfil the objective of doubling farm incomes from the existing NSS-estimated income and at least be in proximity to the seventh minimum basic pay promised to the lowest paid government employee.

Promoting Sustainable Agriculture

  • Agricultural operations could not only provide ecosystem services but also deplete ecosystems and natural assets.
  • The major disservices observed in Indian agriculture are excessive water extraction, overuse of chemical fertilisers and pesticides, air quality deterioration (stubble/straw burning), decline in biodiversity, and so on.
  • For instance, one of the important concerns is the dramatic decline in groundwater table, which is mainly linked to irrigated agriculture, especially in states like Punjab. Between 2009–10 and 2013–14, the lowering of the water table is more pronounced in Maharashtra (14.8 metres), Tamil Nadu (9.8 metres), Punjab (7.2 metres), Karnataka (4.1 metres) and Rajasthan (3.3 metres) (CBG 2010, 2014).
  • The guaranteed income from ecosystem services must be adjusted for the loss of ecosystems.
  • On the flip side, there are farmers who are contributing more ecosystem services than the average farmer because of farming practices such as organic farming.
  • They should receive a higher payment than others who are not following natural capital asset enhancement through their farming practices. The adjusted values thus derived could form part of the proposed guaranteed income basket of the farm household.

Conclusion

  • The PES approach would help fulfil the promise of a guaranteed income to the farmers while prompting them to adopt sustainable farming practices.
  • Unlike many other schemes of the government, the PES would not be a subsidy but a payment for benefits generated by farmers for which they have not been compensated, due to lack of a market mechanism.
  • PES schemes have been experimented with in China on large-scale starting with their “Grain for Green” programme.
  • Similar proposals have been floated in Europe. Efforts to reorient farming practices towards sustainable agriculture by paying for ecosystem services are being experimented in the Midwest of the United States.
  • A suitable institutional mechanism can be evolved in India with stakeholder participation. This would help achieve multiple goals of doubling the farm income, reducing rural–urban migration, reduce the pressure on urban infrastructure, and lead to adoption of ecologically sustainable production techniques. Agriculture, in turn, would become a profitable and attractive profession to pursue.

Practice Questions

  1. How can Payment for Ecosystem Services help in subduing the crisis in agriculture sector? Explain.
  2. What are the steps taken by the government in popularising organic farming? How can this farming be made attractive? Examine in the context of the ecosystem services it offers.
Categories
Daily Editorials for UPSC IAS Exam Preparation

India’s strategic interests vis-a-vis the US

India’s strategic interests vis-a-vis the US

Context

  • The United States (US) wants the flow of big data, and its security, storage and analysis to operate under a network-centric architecture erected and owned by it. The privacy of its own data is the prime obsession of the US.
  • However, it pays scant respect to the privacy of others. It imposes restrictions and demands on its allies to comply with its data protection laws.
  • It not only expects money from the importer of its arms and ammunitions, but also stringent commitment for protecting its intellectual property rights, crucial codes and data contained in the systems.
  • The US often issues diktats to allies regarding what they ought not to export to countries on the US hit list.

Background

  • As early as 1951, India was apprised of the provisions of the Battle Act, 1951 (Mutual Defense Assistance Control Act), a US municipal law that debarred countries cooperating with the US from exporting to the Soviet Union and other Eastern bloc countries that threatened US supremacy.
  • In 1953, when India exported a small quantity of thorium nitrate to China, the US protested and reminded India of the Battle Act, 1951.
  • In the late 1950s, when India was strategically aligned with the US on the Tibet issue, its commercial dealings with the communist countries were moderated by the US.
  • It also made India aware of the restrictions on the use of arms imported from the US.
  • Although India was under no legal obligation to comply with the list, it remained sympathetic to US concerns throughout the 1950s.

Contemporary issues

  • The Indo–US strategic relationship is once again on the upswing.
  • The US is promising India high-tech military equipment and expecting in return unflinching Indian loyalty to the US military’s strategic, tactical and technological outlook.
  • In the age of network-centric warfare, the US is not only selling hardware, but also the embedded software that would ensure that these weapons systems remain networked to the common grid in perpetuity. Breaking out of the grid could even result in their destruction.
  • Now, when the US Department of Defense is relying on open-source architecture and cloud computing for managing big data, one is not sure about the compromises we will have to make to become a good strategic partner to the US.
  • The main drivers of the defence closeness between India and the US are:
  1. the US “pivot to Asia,” which entails shifting 60% of US naval assets to the Pacific; and
  2. the US’s need to incorporate maximum military assets of its allies in the region to achieve its strategic goals in relation to a rising China.
  • It is for this reason that the US naval strategy often talks about enhancing its “global network” of partners, which includes South Korea, Japan, Australia, and India.
  • Such partnership is built by establishing “technical interoperability, common operational experience, and prioritized areas of mutual security interest”.
  • The desire for a “collaborative defence” flows from two main reasons:
  1. the persistent decline in the US’s defence spending since 2011, and
  2. the burgeoning Chinese fleet acting in tandem with the powerful Russian navy.

What are the specific agreements?

  • The trajectory of the India–US defence ties hinges on three “foundational” agreements:
  1. Logistics Exchange Memorandum of Agreement (LEMOA),
  2. Communications Interoperability and Security Memorandum of Agreement (CISMOA), and
  • Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation (BECA)
  • India has already signed the LEMOA.
  • The current focus is on reaching an agreement on the CISMOA that allows interoperability between allies in an operational environment.
  • Interoperability builds teamwork, which enhances readiness and strengthens the military alliance. At the heart of interoperability is the networking of various strands in a battlefield. Networked assets provide secure and smooth flow of information, which enables a common picture of the battlefield to emerge.
  • Based on this integrated picture, the leader in command directs the right weapons system for quick action against a target.

What are the foundational agreements?

  • The three agreements referred above as the foundational agreements which the U.S. signs with countries with which it has close military ties.
  • They are meant to build basic ground work and promote interoperability between militaries by creating common standards and systems. They also guide sale and transfer of high-end technologies.

 

What does signing LEMOA mean?

  • LEMOA gives access, to both countries, to designated military facilities on either side for the purpose of refuelling and replenishment.
  • India and the U.S. already hold large number of joint exercises during which payments are done each time, which is a long and tedious process.
  • Under this agreement, a mechanism will be instituted for book-keeping and payments and officials, who will act as nodal points of contact, will be designated on both sides.
  • The agreement will primarily cover four areas — port calls, joint exercises, training and Humanitarian Assistance and Disaster Relief. Any other requirement has to be agreed upon by both sides on a case-by-case basis.
  • But this is not a basing agreement. There will be no basing of the U.S. troops or assets on Indian soil.
  • This is purely a logistical agreement. India can access the string of U.S. facilities across the globe for logistical support and the U.S., which operates in a big way in Asia-Pacific, will benefit from Indian facilities.
  • United States has signed a so called Acquisition and Cross-Servicing Agreement (ACSA) with NATO countries. Such agreements have also been signed with Afghanistan and Sri Lanka in our neighbourhood.

What is BECA?

  • Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation agreement would facilitate exchange of geospatial information between India and United States for both military and civilian use

What is CISMOA?

  • Communication and Information Security Memorandum Agreement would allow the interoperability of India and United States equipments.
  • By interoperability, we mean that there would be access to encrypted and secret technologies or communications.
  • So far United States has blocked sale of some of the advanced technologies and sensitive equipments to India on account of non-signing this agreement.
  • Signing this agreement would help because such advanced technologies and sensitive equipments are generally installed on US procured systems only.
  • This agreement could also be important for multinational operations related to rescue, disaster relief etc.

What the US intends to do with CISMOA?

  • The CISMOA is important to the US because its strategy demands that various war elements belonging to allies be synchronised to serve the US command and control centre, which tightly controls all channels of communication.
  • This is achieved by establishing a common command and control architecture that is owned by the US government.
  • The common grid provides “plug and play” ecosystems, where multiple weapons systems can easily be integrated into a mission plan.
  • All future weapons systems manufactured by US defence firms will be the plug and play kind.
  • The plug and play concept for weapons systems development calls for the demonstration of interoperability at design time and puts a premium on a system that can exchange information and services with multiple systems.

 

How will it affect India?

  • In the context of India, this means that in order to be interoperable with its strategic defence partner, it will have to rely more and more on US-manufactured systems.
  • This is because systems purchased from Russia would not be able to plug into the secure communication and data transfer networks provided by the US.
  • In order to make the Russian systems compatible with the common grid, complex and costly interfaces would have to be established. This is likely to lead to tampering with the proprietary hardware and software.
  • India would get the worst of it, having to bear the cost of making legacy systems compatible and interoperable.
  • It is, perhaps, for this reason that ever since the discussions on “foundational” agreements began in the early 2000s, the US has gained the biggest share in the Indian arms market. It sells $14–$15 billion worth of weapons to India.
  • According to Ajai Shukla, a noted defence journalist who has studied a similar agreement between South Korea and the US, the CISMOA appears to be more intrusive than even the LEMOA.
  • The CISMOA will demand that Indians completely depend on the US for the maintenance and upkeep of the radio systems.
  • Besides placing restriction on the indigenous manufacture of communications sets procured from the US, the agreement will also enable US military personnel to occupy Indian military installations.
  • As things stand, India has not completely ruled out accepting such intrusive regimes. The negotiations are currently on to satisfy Indian concerns, but technological imperatives limit the scope of accommodating Indian concerns.

 

What are FCN Treaty Negotiations?

  • There is so much similarity in the manner in which negotiations on the three foundational agreements are proceeding, and the protracted Indo–US talks on the Friendship Commerce and Navigation (FCN) treaty post-independence.
  • The FCN treaty talks reopened immediately after India acquired independence. The aim of the treaty was to protect US investments in India and to demand for US nationals the same privileges and rights that British nationals and corporations enjoyed in India.
  • The US wanted complete “national” treatment in India for their enterprises; in short, an unrestricted entry for US capital into India. They were looking for removal of trade barriers on exports and imports.
  • India could not accede to their demands because these ran contrary to the Indian philosophy of planned and regulated trade and commerce.
  • The treaty was seen as a facilitator that would help India get dollar investments from the US.
  • Therefore, India did not want to upset the US by outright rejection of the treaty, nor did it want to send wrong signals to its Indian constituency by signing a truncated treaty.
  • The treaty was eventually not signed in its original form. It was tweaked and its provisions were broken down into three different agreements and signed separately.
  • In September 1957, India entered into a limited investment guarantee agreement with the US. Under this, the US government extended insurance to US investors in India against possible risk of currency inconvertibility with respect to their profits and capital repatriation, provided these investments were approved by the Government of India.
  • In November 1959, an agreement on the avoidance of double taxation was signed between the two governments. Finally, a proposal for concluding an Expropriation Guarantee agreement with the US was also approved by the cabinet.
  • The FCN negotiations continued for more than 10 years because the US adopted a more gradual approach rather than pushing it. This was mainly because the FCN treaty they had signed with the Chiang Kai-shek government in China in 1946 had been used by the Chinese communists to show how the nationalists had sold the country’s interest to US capital. The treaty generated anti-American sentiments in China and paved the way for communist victory.
  • It is, perhaps, this outcome that the US wanted to avoid in India. They did not want to push an unequal treaty on a newly independent India and provide political fodder to the Indian communists.

 

What may the future hold?

  • India will not be able to avoid signing the CISMOA for too long since it has already decided to be a part of the US defence network. Besides, India has been exercising with the US forces to develop interoperability.
  • The politico-cultural barriers will get dissolved and the sovereignty issue will eventually take a back seat. The US has much experience in dealing with “national interest” issues of the allies that hamper the progress of interoperability.
  • NATO had faced similar challenges in the early 2000s, when every nation in NATO was keen to protect its data and technology from their allies.

Way Forward

  • The fact that India is in itself a growing power, India should be wary of the status of US ally.
  • The centre of India’s geopolitical interest is multilateralism which cannot be built around common ground with the US as it is the US only which drives the international politics and institutions unilaterally.
  • In this respect however, it should also be remembered that the US provides India a potable factor to neutralise the hegemonic and expansionist character of China in our neighbourhood and beyond.
  • India should seek deep concessions from the US on the issues critical to India’s national interest like aid to Pakistan, role in Afghanistan, Chinese tendencies etc besides addressing the nuances in the agreements on the defence cooperation.

Practice Questions

  1. How do the strategic interests of India get compromised when India goes for closer defence cooperation with the US? Discuss in the light of agreements signed recently.
  2. What path should India tread in its efforts towards multilateralism? Critically examine the role of the US in India’s endeavour?

 

Categories
Daily Editorials for UPSC IAS Exam Preparation

NITI Aayog’s Development Agenda

Context

  • NITI Aayog is preparing a 15-year vision and a seven-year strategy document, and has circulated a three-year action agenda.
  • The goal of transforming India and attaining the desired level of economic and social outcomes will require higher and sustainable growth in coming years.
  • Higher economic growth will not only create employment, but will also generate higher revenue which will help increase government spending without disturbing the budgetary balance.
  • The vice-chairman of NITI Aayog, Arvind Panagariya showed that the size of the Indian economy will increase from a level of Rs 137 trillion in 2015-16 to Rs 469 trillion by 2031-32 (2015-16 prices)— a compound annual growth of about 8%.

Background

  • Niti Aayog sets a 15-year plan for government actions for achieving social goals such as poverty reduction, and improving health and sanitation.
  • Another seven-year strategy document for 2017-24 will chart out policy action outlined as the “National Development Agenda”.
  • A three-year “Action Agenda” from 2017-18 to 2019-20 is being worked out to assess funding requirements.
  • Major outlines are –

Unshackling agriculture

  • The plan panel proposed major changes in the agricultural produce marketing committee act, the law that sets in place systems to ensure farmers get a fair deal for their produce and are not exploited.
  • Once implemented by states, the APMC changes will be one of the biggest reforms in the country.
  • The panel has also drawn up an agricultural marketing and farmer-friendly reforms index to assess and encourage states to implement new rules.
  • At present, more than two-thirds of Indian states have not been able to reach even the halfway mark of reforms score in the year 2016-17.

Preparing for second Green Revolution

  • Increasing crop yields to feed 1.23 billion Indians is high on the agenda of the government.
  • A task force, headed by Niti Aayog vice chairman Arvind Panagariya, also suggested ways of raising agricultural productivity and making farming remunerative for farmers.
  • The panel suggested reforms in land leasing policies, ramping up of land records and land titles, preparing the country for the second “Green Revolution” in eastern states, and addressing farmers’ distress.

Cashless transactions

  • After the demonetisation of high-value notes in November, Niti Aayog has driven new initiatives to push Indians to go for digital payments.
  • It has been training officials of various ministries, at the central and state levels alike, to adopt digital modes of transaction. It announced award programmes for businesses and individuals to use cashless transactions.
  • The Centre allocated Rs 50 crore to states for moving 5 crore no-frill Jan Dhan accounts to the digital platform.

Improving health, education and access to water

  • The plan panel came up with indices for measuring states’ performance in health, education and water management.
  • The indices helping states gauge the results of social programmes, compete with each other and share best practices and innovations.
  • The Aayog also suggested clubbing various social programmes and centrally-sponsored schemes under 28 umbrella projects.
  • The panel suggested changes in Swachh Bharat Abhiyan, skill development, poverty measurement, Atal Innovation Mission.

What is the need?

  • Higher growth is the best way of lifting standards of living, as has been demonstrated by China in recent decades.
  • Attaining and sustaining this level of growth is feasible, but will need policy action on various fronts—as has also been highlighted in NITI Aayog’s action agenda.
  • A 2016 working paper published by the Reserve Bank of India (RBI) noted that India’s potential growth slipped to about 7% during 2009-15 compared with 8% during 2003-08. The Indian economy is estimated to have expanded by 7.1% in the last fiscal.

What should be the focus areas?

In order to push both potential and actual output growth, policymakers would do well to focus on at least four broad areas.

  1. Focus on strengthening macroeconomic fundamentals
  • A sound macroeconomic environment is a prerequisite for sustained higher growth. India has made significant progress over the last few years on this front, and all efforts should be made to attain the medium-term fiscal and monetary policy targets.
  • The N.K. Singh committee has proposed a new fiscal architecture that will reduce the level of total debt stock with steady reduction in fiscal deficit.
  • On the monetary policy side, the RBI’s rate-setting committee is targeting 4% inflation on a durable basis.
  • Continued progress in both these areas will help strengthen economic stability.
  • One of the reasons for softer growth in recent years is a decline in savings rate. Higher growth in the last decade was backed by higher savings.
  • India’s savings rate is estimated to have declined from the level of about 37% of the gross domestic product in 2007-08 to under 30% in 2016-17.
  • India will need higher savings to sustain higher growth. A stable macro environment should augment savings and investment.
  1. Fix the banking sector
  • High levels of non-performing assets—particularly in public sector banks—are a drag on investments and growth.
  • The sector needs a fresh road map in the short to medium term that not only addresses the current problem, but also provides the necessary checks and balances so that a similar situation is avoided in the future.
  • NITI Aayog’s action agenda has suggested auctioning assets to private asset reconstruction companies. For a durable solution, the government should reconsider its role in the sector. A significant reduction in government holding in banks will augur well for the economy.
  • Further, India also needs a lively corporate bond market as it will provide an alternative source of financing and reduce the pressure on the banking sector.
  • A vibrant, competitive and stable financial sector will help push investment and growth in the medium to long run.
  1. Improve conditions in land and labour markets
  • In order to sustain higher growth, the government will need to make it easier for businesses to acquire land and hire labour. India is a country of small enterprises.
  • The latest economic census shows that on an average, enterprises in India employ only 2.24 workers. The small and informal nature of business enterprises in India affects productivity and is an impediment to growth.
  • One of the reasons for having too many small enterprises is rigid labour laws. The government should work on creating a flexible labour market, which will allow businesses to take advantage of economies of scale.
  • Similarly, the government also needs to make it easier for businesses to acquire land. A number of projects are stuck because of land acquisition problems.
  • Reforms in these markets would require greater coordination between the Centre and states.
  1. Review the functioning of government
  • There needs to be a change in a way that allows the market to attain its full potential. For instance, it will need to withdraw from commercial activities through privatization and focus on strengthening regulatory capabilities.
  • Further, it should always be careful about the unintended consequences of intervention. The recent decision of the government to impose price caps on coronary stents is an example of exactly what the government should not be doing.
  • Price caps inevitably result in shortages with adverse consequences. The government should always avoid such decisions.

NITI Aayog vision

  • The National Institution for Transforming India, also called NITI Aayog, was formed via a resolution of the Union Cabinet on January 1, 2015.
  • NITI Aayog is the premier policy ‘Think Tank’ of the Government of India, providing both directional and policy inputs.
  • While designing strategic and long term policies and programmes for the Government of India, NITI Aayog also provides relevant technical advice to the Centre and States.
  • The Government of India, in keeping with its reform agenda, constituted the NITI Aayog to replace the Planning Commission instituted in 1950. This was done in order to better serve the needs and aspirations of the people of India.
  • An important evolutionary change from the past, NITI Aayog acts as the quintessential platform of the Government of India to bring States to act together in national interest, and thereby fosters Cooperative Federalism.
  • At the core of NITI Aayog’s creation are two hubs –Team India Hub and the Knowledge and Innovation Hub.
  • The Team India Hub leads the engagement of states with the Central government, while the Knowledge and Innovation Hub builds NITI’s think-tank capabilities. These hubs reflect the two key tasks of the Aayog.
  • NITI Aayog is also developing itself as a State of the Art Resource Centre, with the necessary resources, knowledge and skills, that will enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and deal with contingent issues.

Way forward

  • It can be said with near certainty that like the last decade and a half, the next 15 years will also bring tremendous change, especially in the area of technology, and throw up new opportunities and challenges.
  • Therefore, policymakers will need to constantly work on multiple levels in order to create enabling conditions that will allow the Indian economy to develop at a rapid pace and achieve long-term goals.

Practice Questions

  1. Evaluate the transformation in policy affected by NITI Aayog in comparison to Planning model.

What should be the priorities areas to attain sustained economic growth in the coming decades? Examine in the context of NITI Aayog’s 15 years Vision Document.