Why is it in the News?

Regulatory panic could do more harm than good. Rather than poor risk management today, rules should anticipate the greater risks that lie ahead.

Context:

• The year 2024 will see 4.2 billion people go to the polls, which, in the era of artificial intelligence (AI), misinformation and disinformation may not be the democratic exercise intended.
• The Global Risks Report 2024 named misinformation and disinformation a top risk, which could destabilise society as the legitimacy of election results may be questioned.
• Therefore, it is crucial to scrutinise the possible drawbacks of swiftly formulated regulations to counter AI-driven disinformation during this crucial period.

What are the Major Challenges Arising from Hasty Regulatory Responses to AI?

Escalation of Disinformation: Unintended Ramifications of Resource Allocation

• The surge in disinformation, demonstrated by manipulated videos impacting political figures, presents a formidable obstacle.
  • For instance, consider the case of Tarique Rahman, a leader of the Bangladesh Nationalist Party, whose manipulated video suggested a reduction in support for Gaza's bombing victims—an action with potential electoral repercussions in a Muslim-majority country.
• Meta, the parent company of Facebook, exhibited delayed action in removing the fabricated video, raising concerns about the effectiveness of content moderation.
• Moreover, the reduction in content moderation staff due to widespread layoffs in 2023 exacerbates the challenge.
• The pressure to prioritize interventions in more influential markets may leave voters in less prominent regions, such as Bangladesh, vulnerable to disinformation, potentially leading to a global surge in disinformation due to the focus on catching misinformation from powerful governments.

Reinforcement of Industry Dominance: Amplifying Concentration and Ethical Concerns

• While well-intentioned, AI regulations risk bolstering industry concentration. Mandates such as watermarking (which are not foolproof) and red-teaming exercises (which are expensive) may inadvertently favour tech giants, as smaller companies encounter compliance obstacles.
• Such regulations could further entrench the power of already dominant players by erecting barriers to entry or rendering compliance unfeasible for startups.
• This concentration not only consolidates power but also raises apprehensions regarding ethical lapses, biases, and the centralization of consequential decisions within a select few entities.

Navigating Ethical Quagmires: Pitfalls of Sincere Guidelines

• The formulation of ethical frameworks and guidelines introduces its own complexities.
• The question of whose ethics and values should underpin these frameworks gains prominence in polarized times. Divergent perspectives on prioritizing regulation based on risk levels add layers of complexity, with some viewing AI risks as existential threats while others emphasize more immediate concerns.
• The absence of laws mandating audits of AI systems raises transparency issues, leaving voluntary mechanisms vulnerable to conflicts of interest.
• In the Indian context, members of the Prime Minister's Economic Advisory Council have even argued that the concept of risk management itself is precarious concerning AI, given its non-linear, evolving, and unpredictably complex nature.

Navigating the Complexity of AI Regulation: Strategies for Policymakers

• Acknowledge and Address Democracy's Inherent Challenges Alongside AI Threats:
  • Before delving into the intricacies of AI-related risks, policymakers must acknowledge the persistent challenges facing democracy globally.
  • Instances of unjust political imprisonments, threats to electoral processes, and disruptions to communication networks underscore the vulnerability of democratic systems.
  • Furthermore, the enduring issues of vote-buying and ballot-stuffing tarnish the integrity of elections.
  • These entrenched challenges within the democratic process provide context for evaluating the novelty of AI threats.
• Strike a Balance Between Addressing AI Risks and Implementing Sensible Regulation:
  • The rush among regulators to enact AI regulations ahead of the 2024 elections, following the AI fervour of 2023, underscores the need for caution.
  • While it is essential to confront the emerging threats posed by AI, hastily devised regulations may inadvertently worsen the situation.
  • Policymakers must carefully consider the potential for unintended consequences and the complexities inherent in regulating a swiftly evolving technological landscape.
  • It is crucial for regulators to appreciate the delicate balance required to manage AI risks without unintentionally creating new challenges or hindering democratic processes.
• Prepare for Future Challenges: Policymakers must adopt a forward-thinking approach to AI regulation, anticipating and formulating rules that not only address current risks but also proactively tackle future challenges.
  • Recognizing the rapid evolution of technology, regulatory frameworks must evolve accordingly.
  • By planning several steps ahead, regulators can contribute to the resilience of democratic processes, ensuring that voters in elections beyond 2024 benefit from an adaptive, proactive, and effective regulatory environment.

How Major Tech Companies Join Hands to Combat AI Misuse in Elections?

• On February 16th, 2024, a major step was taken in the fight against AI misuse in elections.
• 20 tech giants, including Microsoft, Google, Meta, and Adobe, signed a voluntary agreement called the "Tech Accord to Combat Deceptive Use of AI in 2024 Elections."
• This agreement marks a significant step towards collective action against the potential manipulation of democratic processes through deepfakes and other AI-generated content.

Key features of the Tech Accord:

• Collaborative detection and labelling: Companies pledge to develop tools and techniques for identifying and labelling deepfakes, fostering transparency and facilitating content removal.
• Transparency and user education: The accord emphasizes transparency in company policies regarding deepfakes and aims to educate users on identifying and avoiding them, raising public awareness about the technology's capabilities and limitations.
• Rapid response and information sharing: The signatories commit to sharing information and collaborating on takedown strategies for identified deepfakes, aiming for faster removal and a unified front against malicious actors.
• Additional measures: The agreement includes further commitments to invest in threat intelligence, empower candidates and officials with reporting tools, and collaborate on open standards and research.

However, critical analysis reveals potential limitations:

• Voluntary nature: The accord's voluntary character raises concerns about its enforceability and long-term effectiveness.
  • Companies may prioritize competing interests over their goals.
• Technical challenges: Deepfake detection remains an evolving field with limitations.
  • Continuous innovation by malicious actors can outpace detection capabilities.
• Potential for bias: Concerns exist about potential biases in detection algorithms, particularly regarding marginalized groups, further complicating the issue.
• Freedom of expression and censorship: Balancing the need for content moderation with upholding freedom of expression requires careful consideration and potential legal challenges.

Conclusion

Balancing immediate concerns with long-term implications, and addressing AI-related electoral risks requires careful regulatory foresight. While the Tech Accord offers promise in combatting AI-driven election interference, its effectiveness depends on rigorous implementation and continuous adaptation to evolving threats. Ongoing research and dialogue are crucial to address ethical concerns and ensure a balanced approach to safeguarding democracy and individual rights.

Why is it in the News?

Farmers have resumed protests without a specific trigger, unlike their previous march against contentious farm laws. Their main demand is a legal guarantee for Minimum Support Prices (MSP).

Context:

• The renewed protest by farmers, advocating for a legal assurance of Minimum Support Prices (MSP), underscores the enduring battle for agricultural sector stability.
• Amidst this, it's crucial to delve into the intricacies of MSP, address prevailing misconceptions, and explore the advantages of formalising this system.

What is the Minimum Support Price (MSP)?

• MSP (Minimum Support Price) is the cost at which the government buys crops from the farmers, to guarantee farmers against any sharp fall in agricultural income.
• It is declared by the Government based on the proposal of the Commission for Agricultural Cost and Prices (CACP), at the start of the planting season.
• This mechanism aims to protect small and marginal farmers from financial losses and ensure an adequate supply of food grains for public distribution across India.
• Since its inception in 1966-67 for wheat, the MSP framework has expanded to cover various essential food crops, facilitating their availability to the public through subsidized rates under the public distribution system.
  • However, only a small percentage, approximately 6% or less, of farmers are able to sell their produce at prices higher than the MSP.

Is the MSP Different in different states?

• Because of the variety in irrigation and wages, the expense of a similar yield changes from one state to another.
• However, there is no draft of the local Minimum Support Price, so there is one MSP for the whole country.

Significance of Minimum Support Price: 

• Fixed Remunerations: The farmers are financially insured against the impulses of price fall in the market.
  • It gives security to farmers from crop loss and price uncertainty.
• Help in Decision Making: MSPs are reported toward the start of the planting season, this assists farmers with settling on the best choices of crop that they should plant.
  • This development data assists the farmer with settling on the best choice with regards to which yield to plant for the most extreme monetary advantage inside the restrictions of his agricultural land size, environment, and irrigation framework.
• Crop Diversification: The MSP declared by the Government of India without precedent for 1966-67 for wheat has reached out to around 24 crops at the present.
  • This has urged the farmers to develop these different crops to maximize their agricultural income.
• Price Limitations for Private Purchasers: MSP conveys a value message to advertise that if vendors don’t offer higher than MSP costs the farmer may not sell them his produce.
  • In this manner, it goes about as an anchor or benchmark for agricultural produce.
  • It guarantees the market costs won’t be radically lower than the Minimum Support Price.
• Commercial Crops: MSP is utilized as an instrument to boost the creation of explicit food crops which is short in supply.
  • MSP spurs farmers to develop commercial crops and expand creation on a commercial basis.
• Purchasing Power Enhancement: MSP provides fixed amounts in framers’ hands which makes them financially stable.
  • It helps in upgrading the buying limit and updating the style of living of farmers and their families.

Challenges in Implementation of MSP:

• Selective Intervention and Limited Coverage: Despite the annual announcement of MSP for 23 crops, actual implementation tends to be selective, primarily focusing on major crops like rice and wheat.
  • This limited coverage undermines the broader objective of ensuring stability across various agricultural commodities.
• MSP Implementation Bias: The unequal application of MSP, favouring specific crops, marginalizes farmers cultivating other essential commodities.
  • This bias exacerbates regional disparities and impacts the economic well-being of farmers engaged in non-major crop cultivation.
• Disconnect Between Market Price and MSP: The disparity between market prices and MSP poses a significant challenge, as government intervention is triggered primarily when market prices fall below the MSP.
  • Inconsistent intervention exacerbates uncertainties for farmers, leading to financial distress during market downturns.
• Perceived Government Apathy: Farmers perceive a lack of genuine interest or urgency from the government in effectively implementing MSP.
  • This perceived apathy breeds distrust and frustration among farmers, fueling demands for a legal guarantee to ensure consistent and widespread implementation.
• Political Hesitation and Decision-Making Delays: While there is political consensus supporting a legal guarantee for MSP, successive governments have hesitated to formalize this mechanism.
  • Delayed decision-making perpetuates uncertainties in the agricultural sector, undermining the effectiveness of MSP as a stabilizing force.

What Does a Legal Guarantee of MSP Mean and What Obstacles in Legalising MSP?

• It means that anyone paying less than the price set by the government for crops could be criminally charged.
  • Currently, there is an MSP for 23 crops.
  • However, the highest procurement by the government is of wheat and rice.

• According to experts, if MSP is legally guaranteed, the government will have to pay it regardless of supply and demand dynamics.
  • At the moment, about 60 per cent of the total field crop production in India comes from wheat and paddy.
• Fiscal Concerns: Misconceptions regarding the fiscal implications of guaranteeing MSP have posed obstacles to its legalization.
  • Despite the political consensus, concerns over perceived excessive fiscal burdens have deterred governments from formalizing MSP.
• Prevalent Misconceptions: There is a prevalent misconception that legalizing MSP necessitates government procurement of all agricultural produce, which is inaccurate.
  • Government intervention is required only when market prices dip below MSP, and it does not entail the procurement of the entire marketable surplus.
• Misunderstanding of Procurement Costs and Subsidies: The cost of procuring rice and wheat is often misconstrued as the cost of the MSP program, whereas it primarily serves as a subsidy to consumers rather than farmers.
  • For other crops, government procurement is not a cost unless sold with a subsidy, with the actual cost being the difference between economic cost and issue price.

Potential Advantages of Legalising MSP:

• Ensuring Uniform Implementation: Formalizing Minimum Support Prices (MSP) establishes a clear legal framework, ensuring consistent application across all crops.
  • This move addresses current issues of selective intervention, providing farmers with a dependable safety net.
• Promoting Inclusive Agricultural Growth: Expanding MSP coverage to various crops ensures that price stability benefits all segments of the farming community.
  • Small and marginal farmers cultivating diverse crops can access MSP protection, fostering inclusive agricultural development.
• Reducing Farmer Vulnerability: Formalizing MSP reduces farmers' susceptibility to market fluctuations by guaranteeing a minimum income for their produce.
  • This assurance enables farmers to navigate uncertainties with confidence, knowing that government intervention is assured during price downturns.
• Boosting the Rural Economy: A secured MSP contributes to farmers' economic well-being, leading to increased rural income.
  • This upliftment stimulates the rural economy by generating demand for goods and services, fostering growth across multiple sectors.
• Clarifying Consumer Subsidies: Formalization helps distinguish between procurement costs and consumer subsidies, often conflated as MSP program expenses.
  • This clarity aids policy discussions and ensures targeted subsidy allocation, benefiting both farmers and consumers.
• Facilitating Strategic Government Operations: A legal framework empowers the government to conduct strategic operations in domestic and international markets.
  • Through controlled sales during periods of high market prices, the government can manage inflation, ensuring price stability for consumers.

Conclusion

The legalization of MSP presents a holistic remedy to the agricultural sector's woes.

Beyond ensuring uniform application, it fosters diversification, inclusivity, and economic robustness, ultimately benefiting farmers and bolstering rural prosperity. By dispelling misconceptions and tackling apprehensions, policymakers can pave the way toward a more secure and prosperous future for our farmers.

Why is it in the News?

The government might find it challenging to meet the protesting farmers' demand for a legal guarantee of (MSP) due to India's farm subsidies being scrutinised at the (WTO), especially with criticism from a group of 19 influential agricultural exporting countries.

Background:

• After independence, our country struggled to produce enough food for its large population as the agriculture sector was in a poor state.
• To address this challenge, we either had to import grains, which incurred significant costs, or rely on aid from other nations.
• In 1960, the government took steps toward self-sufficiency. They introduced high-yielding seeds, promoted the use of fertilisers, and improved agricultural machinery.
• At the same time, the government supported rice and wheat cultivation by offering farmers a Minimum Support Price (MSP).
  • This ensures that farmers receive a fair price; if they can't sell their crops for a better price in the market, the government will buy them at a favourable rate.
• However, there's currently tension between India and the WTO regarding these subsidies.

Green Revolution

• The Green Revolution, initiated in the 1960s, aimed to enhance agricultural productivity and bolster the nation's economy.
• India embraced technological and industrial advancements in agriculture during this era.
• This included the adoption of high-yield seeds, modern farming equipment, irrigation systems, pesticides, and fertilisers to transform the agricultural landscape.
• The green revolution helped India move from a state of importing grains to a state of self-sufficiency.

Causes of Tensions Between India and the WTO:

• India's actions in this realm have stirred discontent among other nations, who perceive India's practices as unfair trade manoeuvres.
  • The government's practice of procuring crops from farmers at low prices and subsequently exporting them at reduced rates to global markets has drawn criticism.
• Developed countries have lodged complaints, alleging multiple instances of India breaching WTO regulations by providing subsidies amounting to 60-70% of the total crop value.
• While the WTO permits governments to offer subsidies to farmers, it imposes restrictions, allowing developed countries to provide up to 5% and developing countries up to 10% of the total value in subsidies.

What are the WTO Regulations on Farm Subsidies?

• The WTO regulations on farm subsidies aim to promote fair competition and prevent global trade distortion.
• These regulations establish limits on the types and levels of subsidies that member countries can offer to their agricultural sectors.
• Levels of Subsidies:

Green Box:

• These subsidies have minimal impact on trade distortion.
• They are not specific to particular products and are generally permissible under WTO rules.
• Examples include funding for research, environmental conservation, and direct income support for farmers facing challenges such as crop loss or natural disasters.

Amber Box:

• These subsidies promote excessive production and distort international trade.
• Examples include input subsidies like those for seeds, fertilisers, and Minimum Support Price (MSP).
• WTO restricts these subsidies, capping them at 5% for developed countries and 10% for developing countries.

Blue Box:

• These subsidies, akin to Amber Box subsidies, aim to limit production.
• Currently, only a few countries, such as Norway and Iceland, utilise these subsidies.
• The WTO does not impose any limits on these subsidies.

Why India's Agricultural Subsidy Programs Encounter Challenges in the WTO?

• India's agricultural subsidies face hurdles at the WTO due to the organisation's rules, which do not consider subsidies on a per-farmer basis, disadvantageous to developing countries like India.
  • For instance, although India's per-farmer subsidy is significantly lower compared to countries like the US, the WTO regulations focus on total subsidy amounts.
• In 2019-20, India's subsidies exceeded the 10% limit relative to its total rice production, despite the per-farmer subsidy being relatively modest at $300 compared to the US's $40,000 per farmer.
• While India is safeguarded by the 'Peace Clause' established during the WTO's Bali ministerial in 2013, certain ambiguities in the clause leave India vulnerable to disputes.
• Consequently, new schemes must adhere to the 10% subsidy ceiling, foregoing protection under the 'Peace Clause'.

Criticism of India’s Agricultural Subsidies by Influential Agricultural Exporting Countries:

• The Cairns Group, which includes countries like Australia, Brazil, and Canada, has raised concerns about the level of subsidisation in India’s public stockholding (PSH) program.
• They argue that India's agricultural support measures are significantly subsidised, leading to distortions in global food prices and negatively impacting food security in other nations.
• Last year, the group circulated a comprehensive proposal aimed at reducing trade-distorting agricultural support among WTO members, advocating for a halving of the total global entitlement/subsidies.
• This proposal sparked tensions among developing nations, with India among those affected.
• Essentially, the Cairns Group is advocating for India to either dismantle or scale back its Minimum Support Price (MSP) scheme, prompting India to seek stronger legal protection for its MSP program.

Upcoming Challenges for the Government of India:

• In pursuit of greater flexibility in providing agricultural support, India is actively advocating for a permanent solution at the forthcoming inter-ministerial summit in Abu Dhabi.
• However, the entrenched impasse on politically sensitive issues between developed and developing nations makes resolution unlikely.
• Farmers' groups in India advocate for removing agriculture from the purview of the WTO, but this approach could present challenges and hinder India and other developing nations from regulating subsidies provided by developed countries.
• The government faces a dilemma, as it grapples with peer pressure at the WTO while simultaneously facing demands for Minimum Support Price (MSP) from farmers.
• The call for better MSP support isn't limited to Punjab farmers; farmers across the nation are seeking similar assurances.
• Furthermore, if farmers in Punjab and Haryana shift away from agriculture, it could pose a threat to the country's food security.

Way Forward

• While India currently avoids disputes on the subsidy matter at the WTO due to the non-functionality of the Dispute Settlement Body (DSB), member countries will continue to scrutinise India's adherence to subsidy limits.
• As a result, India must advocate not only for adjustments to the formula used to calculate the food subsidy cap within the WTO but also for the inclusion of programs implemented after 2013 under the protection of the 'Peace Clause'.

Why is it in the News?

While presenting the interim Union budget, Finance Minister Nirmala Sitharaman stated that India will be negotiating Bilateral Investment Treaties (BITs) with its trade partners to boost the inflow of foreign direct investment.

Background:

• India's economic terrain is undergoing a significant shift following the Finance Minister's announcement of plans to negotiate Bilateral Investment Treaties (BITs) during the interim Union budget presentation.
• This decision arrives at a critical juncture, coinciding with India's struggle to address declining levels of foreign direct investment (FDI) and the aftermath of adopting the 2016 Model BIT.
• Given these circumstances, it becomes imperative to explore the evolution of India's BITs, assess the implications of the 2016 model, and analyze the recent policy shift to gauge its potential impact on FDI.

Evolution of Bilateral Investment Treaties (BITs) in India:

• Origins of BITs in India (1990s): During the mid-1990s, India embarked on a significant economic policy shift by initiating Bilateral Investment Treaties (BITs) to attract foreign direct investment (FDI) and create an enabling environment for economic growth.
  • The primary aim was to demonstrate India's commitment to protecting investments made by individuals and companies from partner countries.
  • The signing of the first BIT between India and the UK in 1994 laid the groundwork for a series of agreements that would play a pivotal role in India's global economic integration.
• Expansion of BITs as Economic Diplomacy (Late 90s to 2000s): BITs in India evolved into strategic tools to mutually encourage and safeguard investments in each other's territories.
  • As India sought to position itself as a premier investment destination, these treaties became instrumental in signaling its dedication to safeguarding the rights and interests of foreign investors.
  • This period witnessed a proliferation of BITs, reflecting India's acknowledgement of the importance of foreign capital in stimulating domestic industries and infrastructure development.
• Emerging Challenges and Disputes (2010s): The significance of BITs became evident in 2010 with the settlement of the first-ever investor treaty claim in India.
  • Subsequent events, including the unfavorable award in the Australia-India BIT dispute (White Industries v Republic of India) in 2011, underscored the complexities and challenges associated with managing disputes arising from these agreements.
  • By 2015, India found itself embroiled in 17 known BIT claims, with the Cairn Energy Plc case being particularly notable.
  • These challenges prompted a critical reassessment of India's approach, leading to the adoption of the 2016 model BIT.
• Adoption of the 2016 Model BIT and Policy Shift: The adoption of the 2016 model BIT signalled a significant shift in India's approach to BITs.
  • It was viewed as a protective measure, resulting in the termination of numerous existing treaties.
  • However, the 2016 model BIT faced criticism for its exclusion of key international law principles, such as 'fair and equitable treatment' and 'most favoured nation.'
• Additionally, it introduced a requirement for investors to exhaust local remedies before resorting to international arbitration, potentially delaying the dispute resolution process.

Issues with the 2016 Model of BIT and their Consequences:

• Protective Nature: The introduction of the 2016 Model BIT marked a significant shift in India's approach to bilateral investment treaties, aiming for greater protection.
  • Positioned as a response to past disputes, it led to the termination of numerous existing treaties, signalling a desire to recalibrate engagement terms with foreign investors.
  • However, concerns arose about its potential impact on India's attractiveness as an investment destination.
• Absence of Key International Law Doctrines: Criticism was directed at the 2016 model BIT for deviating from established international law doctrines.
  • Notably, it lacked principles like "fair and equitable treatment" and "most favoured nation," raising doubts about fairness and protection for foreign investors.
  • This omission complicated the interpretation and enforcement of investment agreements, adding uncertainty for investors.
• Requirement for Exhausting Local Remedies: The 2016 model BIT introduced a requirement for investors to exhaust local remedies before pursuing international arbitration.
  • While this aimed to promote domestic dispute resolution, it created delays and challenges.
  • Investors found navigating local legal systems time-consuming and ineffective, potentially discouraging investment.
• Adverse Impact on FDI and Renegotiation Challenges: The consequences of the 2016 model BIT were evident in declining FDI in India.
  • FDI equity inflows dropped by 24% to $20.48 billion in April-September 2023, reflecting investor concerns.
  • The termination of existing treaties and challenges with the new model hindered India's ability to renegotiate terms, affecting its attractiveness to foreign investors.
  • The Cairn Energy Plc case, resulting in a significant award against India, highlighted the difficulties under the 2016 model BIT.

Government Recommendations and Policy Reforms Following Challenges with the 2016 BIT Model:

• Acknowledgement of Limitations and Policy Adjustment: Recognizing the constraints and hurdles posed by the 2016 Model BIT, the Indian government has signalled a shift towards more adaptable and practical strategies.
  • The announcement during the presentation of the interim Union budget, highlighting the negotiation of Bilateral Investment Treaties with trading partners, signifies a departure from rigid approaches.
  • This acknowledgement underscores the necessity for a nuanced approach that considers evolving international investment dynamics and global economic shifts.
• Parliamentary Standing Committee Proposals: In 2021, the Parliamentary Standing Committee on External Affairs proposed several key recommendations to reevaluate the existing BIT framework.
  • These recommendations aimed to tackle challenges associated with the 2016 model BIT and foster a more investor-friendly environment.
  • One notable recommendation emphasized the importance of timely dispute resolution through pre-arbitration consultations and negotiations.
  • This proactive stance aims to streamline the dispute-resolution process and alleviate pressure on both foreign investors and the Indian legal system.
• Addressing India's Contract Enforcement Ranking: India's low ranking in contract enforcement, currently at 163 out of 190, remains a significant concern.
  • Recognizing the link between an efficient legal framework and foreign investment attractiveness, recommendations from the Parliamentary Standing Committee serve as a call to action.
  • A timely review of treaties and alignment with global best practices becomes crucial to improving the ease of doing business, reinforcing India's commitment to fostering an investment-friendly climate.
• Free Trade Agreement (FTA) with the UK: As part of ongoing policy reforms, India is working towards finalizing a free trade agreement (FTA) with the UK.
  • This strategic endeavour has undergone over 14 rounds of negotiations, with disputes being a major obstacle.
  • The proposed FTA is expected to eliminate the requirement for exhausting local remedies, offering a mechanism for swift dispute resolution through international arbitration.
• This pragmatic approach acknowledges the importance of rapid dispute resolution in nurturing international trade relationships.

Conclusion

Achieving a $5 trillion economy hinges on robust international trade and secure investments in India. A forward-looking strategy for BITs is essential to attract and maintain long-term foreign investments, and the government's recent initiative is a positive move. Nevertheless, adopting a more tailored approach, rather than a one-size-fits-all model, is necessary to facilitate rapid yet sustainable growth in cross-border flows.

Why is it in the News?

Recently, Prime Minister Modi announced that the agriculture scientist M S Swaminathan will be honoured with the Bharat Ratna.

Who was MS Swaminathan?

• Monkomb Sambasivan Swaminathan (MS Swaminathan) was born on August 7, 1925, in Kumbakonam, Madras Presidency (now Tamil Nadu).
• He was an agronomist, agricultural scientist, plant geneticist, administrator, and humanitarian.
• He was known as the ‘father of the Green Revolution’ in India.
• Swaminathan began his career in 1949 researching the genetics of potatoes, wheat, rice, and jute.
  • He played a crucial role in developing high-yielding varieties of paddy that helped ensure India’s low-income farmers produced more yield.
• Also known as the ‘father of economic ecology’ by the United Nations Environment Programme, he worked with agriculture ministers including C Subramaniam and Jagjivan Ram during the 1960s and 70s for the success of the ‘Green Revolution’ in India.
  • An initiative that paved the way for an exponential rise in the productivity of wheat and rice through the adaptation of chemical-biological technology.
• Career: Swaminathan also held administration positions in various agricultural research laboratories.
  • He served as the director general of the Indian Council of Agricultural Research and International Rice Research Institute.
  • He also worked as the principal secretary of the Ministry of Agriculture in 1979.
  • Later, he also served as the President of the International Union of the Conservation of Nature and Natural Resources.
  • In 2004, Swaminathan was appointed as chairman of the National Commission on Farmers.
• Awards and Recognition: He was awarded with the Ramon Magsaysay Award in 1971 and the Albert Einstein World Science Award in 1986.
  • He was awarded the first World Food Prize in 1987, following which he set up the MS Swaminathan Research Foundation in Chennai.
  • Swaminathan has also been conferred with the Padma Shri, Padma Bhushan, and Padma Vibhushan - the three most prestigious awards.
  • Apart from these, he was also given the H K Firodia Award, the Lal Bahadur Shastri National Award, and the Indira Gandhi Prize.
• Swaminathan also contributed to various agricultural and environmental initiatives globally.
  • He was named one of the 20 most influential Asians of the 20th century by Time magazine.
• He also served as a Member of Parliament in the Rajya Sabha from 2007 to 2013.
• MS Swaminathan passed away in September 2023 at the age of 98.
• His decision to focus on ensuring India's food security led him to become a key figure in the Green Revolution of the 1960s, which transformed India from a food-deficient nation to one of the world's leading agricultural producers.
  • His collaboration with Nobel laureate Norman Borlaug introduced high-yielding varieties of wheat and rice, saving millions from starvation.
• Dr Swaminathan's transformative influence on Indian agriculture began to emerge when he championed the introduction of high-yielding crop varieties.
  • His visionary approach was instrumental in pioneering the Green Revolution in India when the country was still grappling with poverty and a lack of social security.
• The impact of Dr. Swaminathan's efforts was nothing short of revolutionary.
• India's food production skyrocketed, and the nation moved from a state of food scarcity to food self-sufficiency.
• His work not only averted potential famines but also elevated the economic conditions of countless farming communities.

How MS Swaminathan Contributed to the Green Revolution?

• MS Swaminathan was greatly influenced by Mahatma Gandhi's teachings of selfless service to the poor and the nation.
• He was very much influenced by the 1943 Bengal famine, which killed up to three million people and realised the need to improve agriculture and food security in India.
• After Swaminathan’s work on rice, he and other scientists worked on doing the same to enhance productivity for the wheat crop.
• India had to get Norin dwarfing genes from Norman Borlaug in Mexico to enhance the productivity and adaptability of its wheat crops.
  • These genes, known for their ability to produce shorter wheat plants, were instrumental in the Green Revolution, as they helped increase yield potential and improve resistance to lodging (falling over) in wheat plants.
  • By acquiring these genes, India aimed to replicate the success of the Green Revolution and address food security challenges by boosting wheat production.
• Norman Borlaug was an American scientist who was working on developing more productive crop varieties.
  • It led to him winning the Nobel Peace Prize in 1970 for his work in developing High Yielding Varieties (HYVs) of wheat.
• Many researchers and scientists were involved in this work but there isn’t any doubt that the basic strategic vision underpinning the Green Revolution in India, introducing a new genetic strain or ‘plant type’ responsive to increased fertiliser and water application came from MS Swaminathan.
• The problem with the traditional wheat and rice varieties was that they were tall and slender.
  • These ‘lodged’ – fell flat on the ground — when they grew and their heads were heavy with well-filled grains produced in response to high fertiliser doses.
  • Through Swaminathan’s research on rice, a reduction in plant height was sought to make them less lodging-prone but this was not easy to do.
• His strategy of developing semi-dwarf wheat varieties using mutagenesis exposing plants to chemicals or radiation to introduce desirable modifications in their DNA did not, however, work.
  • The lowering of plant heights led to a simultaneous reduction in the size of the grain-bearing panicles or earheads.
• The search for an ideal variety led him to contact American scientist Orville Vogel.
  • He played a role in developing a ‘dwarf wheat’ called Gaines, which had a high yield.
  • It contained dwarfing genes from a dwarf wheat called the Norin-10.
• Vogel agreed but was unsure of the wheat’s potential in the Indian climate and thus advised Swaminathan to approach Norman Borlaug, who had incorporated the same dwarfing genes through Vogel’s lines into his spring wheat varieties in Mexico that were better suited for India.
  • Borlaug also later visited India, after Swaminathan proposed so to the Indian Agricultural Research Institute, allowing for the wheat breeding programme to commence.
• In 1963, they began a serious effort to breed dwarf wheat and within five years, this initiative led to what became known as the "Wheat Revolution."
  • Indira Gandhi, the then Prime Minister of India, released a special stamp to mark the achievement.

The Side Effects of the Green Revolution:

• Despite its landmark role in achieving food sufficient in India, the Green Revolution has been criticised on multiple counts, such as:
  • Benefiting the already prosperous farmers as it was introduced in states with higher productivity.
• Swaminathan recognised such issues as early as January 1968, addressing the Indian Science Congress at Varanasi.
• He highlighted concerns about the rapid spread of a few high-yielding crop varieties replacing diverse local ones, leading to potential problems like soil degradation, desertification, excessive pesticide use, and unsustainable groundwater extraction.
  • Unfortunately, many of these concerns have materialised today.
• He also lent his support to farmers as the head of the National Commission on Farmers from 2004-06, he recommended that the Minimum Support Price at which farmers sell their crops to the government should be at least 50 per cent more than the weighted average cost of production.
• For his contributions, Swaminathan was awarded the first World Food Prize Laureate in 1987, for “developing and spearheading the introduction of high-yielding wheat and rice varieties into India during the 1960s when that country faced the prospect of widespread famine.
• Wheat production doubled in just a few years, making the country self-sufficient and saving millions from extreme food deprivation.

Why is it in the News?

In her Interim Budget speech, Finance Minister Nirmala Sitharaman announced a Rs 1 lakh crore fund to provide long-term, low-cost or zero-interest loans for research and development.

Context:

• Finance Minister, Nirmala Sitharaman in her Interim Budget speech, announced a Rs 1 lakh crore fund to provide long-term, low-cost, or zero-interest loans for research and development.
• A new scheme to strengthen deep-tech capabilities in the defence sector that is likely to be followed up later was also announced.
• The separate announcements on the fund and defence deep tech are intricately linked and must be seen together with the government’s other plans for the R&D sector.

What is Deep Tech?

• Deep tech refers to advanced and disruptive technologies, many of which are still under development, that have the potential to trigger transformative change and provide solutions for the future.
• The term is used to describe cutting-edge research in nanotechnology, biotechnology, material sciences, quantum technologies, semiconductors, artificial intelligence, data sciences, robotics, 3D printing, etc.

What are the Advantages of Deep Tech?

• These technologies are expected to play a key role in addressing complex global challenges like climate change, hunger, epidemics, energy access, mobility, physical and digital infrastructure, and cyber security including:
• Economic Implications: Advanced capabilities in deep tech are also likely to enhance productivity drive economic growth create jobs in coming years, and offer a competitive advantage to countries with strong foundations in these areas.
• Opportunities for India: With its large base of relatively high-quality science and engineering manpower and a fairly well-established technology culture, India feels it is well-placed to be one of the frontrunners in these areas.
• Potential Benefits: There is scope to contribute to the development of these technologies, which can ensure early adoption, shares in intellectual property, indigenous know-how, and self-reliance.
  • Major associated benefits in terms of spin-off technologies, trained manpower, entrepreneurship and technology exports can accrue as well.

Initiatives by the GOI to Build a Deep Tech Ecosystem

• Over the past few years, the government has tried to incentivise research in some of these areas by setting up a National Mission on Transformative Mobility and Battery Storage and, more recently, a National Quantum Mission.

National Mission on Transformative Mobility and Battery Storage:

• This mission is aimed at fostering innovation in the mobility and energy storage sectors.
  • The government encourages research and development in electric vehicles, advanced battery technologies, and sustainable mobility solutions through focused platforms and financial incentives.
  • It targets challenges related to environmental sustainability and energy efficiency.

National Quantum Mission:

• Recognizing the transformative potential of quantum technologies, the government has initiated the National Quantum Mission.
  • This effort concentrates on promoting research and development in quantum computing, communication, and sensing.
  • Quantum technologies hold promise for revolutionizing various industries, and the mission aims to position India as a leader in global quantum advancements.

National Deep Tech Startup Policy (NDTSP):

• In addition to mission-oriented strategies, the government has devised a policy framework to create a conducive environment for deep tech companies.
  • The NDTSP addresses specific challenges faced by technology startups and aims to nurture a thriving ecosystem for their growth.
  • Currently awaiting government approval, it embodies a comprehensive approach to cultivating a vibrant deep-tech startup ecosystem in India.
• Objectives and Key Components of NDTSP: The NDTSP is designed to achieve several objectives, including:
  • Competitiveness: Fostering innovation to enable startups to compete globally.
  • Collaboration: Facilitating partnerships between startups and international counterparts.
  • Incentives: Providing appropriate incentives for companies investing in innovation and research.

The policy outlines key components to achieve its goals, such as:

• Funding Opportunities: Creating avenues for long-term funding to support sustained innovation.
• Intellectual Property Rights: Establishing a simplified yet robust intellectual property rights regime.
• Tax Incentives: Offering tax incentives to encourage investment in deep tech startups.
• Regulatory Framework: Developing a conducive regulatory environment to streamline operations.
• Standards and Certifications: Establishing standards and certifications to ensure quality and reliability.
• Talent Nurturing: Focusing on nurturing talent through skill development and educational initiatives.
• Industry-Academia Collaboration: Facilitating linkages between industry, research centres, and educational institutions to promote knowledge exchange.

The Challenge of Funding in Deep Tech Research:

• Challenges in Research Funding Landscape: There's a persistent concern within the scientific community regarding the need for more research funding.
  • India's investment in research lags behind the global average, particularly in comparison to scientifically advanced nations that serve as direct competitors.
• Disparity Between Targets and Actual Spending: For more than two decades, the Indian government has set a target of allocating at least 2% of the GDP for research and development.
  • Despite an increase in absolute spending, the proportion of GDP dedicated to research has dwindled in recent years.
  • Currently, India allocates a mere 0.65% of its national GDP to research and development activities, significantly below the global average of approximately 1.8%.

Government's Initiatives to Address the Funding Challenges:

• Harnessing Public-Private Collaboration: Recent governmental directives reflect a recognition that significant boosts in research and development expenditure may only be attainable through effective partnerships with the private sector.
  • Initiatives are underway to forge synergies among industry, research laboratories, and educational institutions, aimed at bolstering both research activities and the financial resources available to support them.
• Introduction of the National Research Foundation (NRF): The establishment of the National Research Foundation (NRF), operational in recent times, stands as a key component of this strategy.
  • With an objective to tackle the funding hurdle, the NRF is set to procure approximately 70% of its Rs 50,000 crore allocation over the next five years from the private industry.
  • This collaborative model is envisioned to cultivate a more sustainable and resilient ecosystem for deep tech research and development in India.

The 1 Lakh Crore Fund: Anticipations, Enthusiasm, and Doubts:

• Anticipations: The provision of a Rs 1 lakh crore fund for financing research and development is deemed crucial in fortifying the research landscape.
  • This fund holds particular promise for startups and private sector ventures in need of initial funding to kickstart their projects.
  • Anticipations are high that these initiatives will gain momentum with the injection of funds.
• Enthusiasm and Doubts: While the government expresses optimism regarding the potential impact of this substantial fund, there exists scepticism within the scientific community.
  • Past expectations of significant private sector contributions to research have not materialized, leading to uncertainties and reservations among researchers.
  • Scientists argue that there's an imbalance in expectations, with excessive reliance on the private sector without a corresponding increase in government funding.
  • The unpredictability and inadequacy of private-sector financing present significant challenges.
  • Currently, the government appears to heavily rely on the success of its new funding initiatives for research.
• However, the budgetary allocations for science and research departments in the Interim Budget show only nominal increases.

Conclusion

• The recent initiative promises startups and other private sector ventures access to seed funding, offering potential benefits for their projects, yet, to boost R&D expenditure, fostering deeper partnerships with the private sector is essential. Initiatives are underway to enhance collaboration among industry, research laboratories, and educational institutions, aiming to diversify research activities and amplify available funding.

Why is it in the News

The Public Examinations (Prevention of Unfair Means) Bill, 2024, was introduced in Lok Sabha on 5th Feb which aims to prevent “unfair means” in order to “bring greater transparency, fairness and credibility to the public examinations system”.

Context:

• The Centre recently tabled the draft of the Public Examinations (Prevention of Unfair Means) Bill, 2024 in Parliament.
• This legislative proposal aims to prevent unfair means in public examinations and common entrance tests held across the country.
• In a bid to tighten the noose on public examinations, the proposed law provides for punishment, including imprisonment, in instances of malpractice in these tests.
• The Bill serves as a model draft for states to adopt at their discretion, aiding them in preventing criminal elements from disrupting the conduct of their state-level public examinations.
• At present, there is no specific substantive law to deal with unfair means adopted or offenses committed by various entities involved in the conduct of public examinations by the Central Government and its agencies.
• Therefore, it is imperative that elements that exploit vulnerabilities of the examination system are identified and effectively dealt with by a comprehensive Central legislation.

Which Exams are “Public Examinations” as Defined in the Bill?

• Under Section 2(k) of the Bill, a “public examination” is defined as any examination conducted by a “public examination authority” listed in the Schedule of the Bill, or any “such other authority as may be notified by the Central Government”.
• The schedule lists five public examination authorities:
  • (i) the Union Public Service Commission (UPSC), which conducts the Civil Services Examination, Combined Defence Services Examinations, Combined Medical Services Examination, Engineering Services Examination, etc.;
  • (ii) the Staff Selection Commission (SSC), which recruits for Group C (non-technical) and Group B (non-gazetted) jobs in the central government;
  • (iii) the Railway Recruitment Boards (RRBs), which recruit Groups C and D staff in the Indian Railways;
  • (iv) the Institute of Banking Personnel Selection (IBPS), which hires at all levels for nationalized banks and regional rural banks (RRBs); and
  • (v) National Testing Agency (NTA), which conducts the JEE (Main), NEET-UG, UGC-NET, the Common University Entrance Test (CUET), etc.
• Apart from these designated public examination authorities, all “Ministries or Departments of the Central Government and their attached and subordinate offices for recruitment of staff” will also come under the purview of the new law.
• The central government can add new authorities in the schedule through a notification as and when required.

What is Meant by the Use of “Unfair Means” in an Examination?

• Section 3 of the Bill lists at least 15 actions that amount to using unfair means in public examinations “for monetary or wrongful gain”.
• These acts include:
  • Leakage of question paper or answer key or part thereof and colluding in such leakage;
  • Accessing or taking possession of question paper or an Optical Mark Recognition response sheet without authority”;
  • Tampering with answer sheets including Optical Mark Recognition response sheets.
  • Providing solution to one or more questions by any unauthorized person during a public examination, and
  • Directly or indirectly assisting the candidate” in a public examination.
• The section also lists:
  • Tampering with any document necessary for short-listing of candidates or finalizing the merit or rank of a candidate.
  • Tampering with the computer network or a computer resource or a computer system.
  • Creation of a fake website” and “conduct of fake examination, issuance of fake admit cards or offer letters to cheat or for monetary gain” as illegal acts.

What Punishment does the Proposed Law Provide for Violations?

• Section 9 of the Bill states that all offenses shall be cognizable, non-bailable, and non-compoundable — which means that an arrest can be made without a warrant and bail will not be a matter of right; rather, a magistrate will determine whether the accused is fit to be released on bail.
  • A non-compoundable offense is one in which the case cannot be withdrawn by the complainant even when the complainant and the accused have reached a compromise, and a trial must necessarily follow.
• Punishment for “any person or persons resorting to unfair means and offenses” can be three to five years in prison, and a fine up to Rs 10 lakh.
  • If the convict fails to pay the fine, “an additional punishment of imprisonment shall be imposed, as per the provisions of the Bharatiya Nyaya Sanhita, 2023,” Section 10(1) of the Bill says.
• Under Section 10(2), a service provider who is engaged to provide “support of any computer resource or any material, by whatever name it may be called” for the conduct of the examination can be fined up to Rs 1 crore, along with other penalties.
• The Bill provides for harsher punishment in cases of organized paper leaks, where “organized crime” is defined as unlawful activity by a group of persons colluding in a conspiracy “to pursue or promote a shared interest for wrongful gain in respect of a public examination”.
• Section 11(1) says the punishment for organized crime will be “imprisonment for a term not less than five years but which may extend to ten years” and a fine “which shall not be less than one crore rupees”.

Why has the Government Brought this Bill?

• In recent years, there has been a significant rise in cases of question paper leaks during recruitment exams nationwide.
  • An investigation uncovered at least 48 instances of paper leaks across 16 states over the past five years, disrupting the hiring process for government jobs and affecting approximately 1.51 crore applicants for about 1.2 lakh posts.
• The Statement of Objects and Reasons of the Bill highlights that malpractices in public examinations lead to delays and cancellations, adversely affecting millions of youth.
  • Currently, there is no specific substantive law addressing unfair means or offenses committed during these examinations.
  • It is crucial to identify and effectively deal with elements exploiting vulnerabilities in the examination system through comprehensive Central legislation.
• The primary objective of the Bill is to enhance transparency, fairness, and credibility in public examination systems, ensuring that sincere efforts of youth are duly rewarded and their future is secure.
  • It aims to deter individuals, organized groups, or institutions from engaging in unfair practices that undermine the integrity of public examinations for monetary or wrongful gains.
• The Bill explicitly states that candidates, as defined within its scope, will not be subject to its provisions and will continue to be governed by existing administrative provisions of the relevant public examination authority.
• Once enacted, the Bill will also serve as a model draft for states to adopt at their discretion.
  • This provision is expected to assist states in preventing criminal elements from disrupting the conduct of their state-level public examinations.

Why is it in the News

Since the end of 2019, WTO’s crown jewel, the appellate body (AB) stands crippled because the US has single-handedly blocked the appointment of new members.

Context:

• The 13th ministerial meeting of the World Trade Organization (WTO) is scheduled in Abu Dhabi, presenting a chance to tackle the persistent crisis in the Dispute Settlement Mechanism (DSM).
• The effectiveness of WTO's key component, the DSM, has diminished since late 2019, mainly due to the United States obstructing the appointment of new Appellate Body (AB) members.
• Despite the implications of this crisis, there exist specific options for developing countries that could offer potential solutions to rejuvenate the DSM.

What is the World Trade Organization (WTO)?

• The WTO is an international institution responsible for overseeing global trade rules among nations.
• With 164 member countries (including Liberia and Afghanistan, the most recent additions in 2016) and 25 observer countries and governments, it officially commenced operations on January 1, 1995, replacing the 1948 General Agreement on Tariffs and Trade (GATT) in accordance with the 1994 Marrakesh Agreement.

Organizational Structure:

• The highest authority within the WTO is the Ministerial Conference, comprising all member states, typically meeting biennially with a consensus-driven decision-making approach.
  • Daily operations are managed by three bodies, sharing the same membership:
• General Council:
  • Functions as the primary decision-making body.
  • Convenes as the Dispute Settlement Body (DSB) when addressing disputes between WTO members.
• Dispute Settlement Body (DSB):
  • Empowered to establish dispute settlement panels.
  • Refers matters to arbitration.
  • Adopts reports from panels, Appellate Body, and arbitration.
  • Monitors the implementation of recommendations and rulings, authorizing concession suspension in cases of non-compliance.
  • Exclusive authority to make decisions, while panels and the Appellate Body can only offer recommendations.
• Trade Policy Review Body:
  • Operates with terms of reference distinct from the General Council and DSB.
  • Assesses the trade policies of member countries through periodic reviews.
  • This structure ensures effective governance and dispute resolution within the WTO framework, emphasizing consensus in decision-making processes.

The Importance of the Appellate Body (AB):

• Enforceable Decision-Making:nThe Appellate Body (AB) holds the authority to review and, if necessary, overturn legal findings and interpretations by WTO panels.
  • This enforceable nature ensures a conclusive resolution to trade disputes, fostering stability and predictability in international trade relations.
• Mandatory Jurisdiction: The AB's jurisdiction spans all WTO member countries, creating a mandatory framework for resolving disputes.
  • Member nations are obligated to participate in the AB process, reinforcing the foundation of a rules-based international trading system.
• Advocacy for Equitable Practices: By addressing disputes and upholding compliance with WTO rules, the AB contributes to the promotion of fair and equitable trade practices.
  • This approach establishes a level playing field for both developed and developing nations, supporting inclusivity and sustainable economic growth.

Challenges in the Dispute Settlement Mechanism (DSM):

• Appellate Body's Paralysis: Since late 2019, the AB, integral to the DSM, has been practically non-functional due to the blockage of new member appointments, primarily led by the United States dissatisfied with previous dispute outcomes.
  • This obstruction erodes the binding nature of the dispute resolution process, creating a legal void.
• Evasion of Compliance: With the AB inoperable, countries have found a loophole to evade compliance with WTO panel rulings.
  • Nations can appeal into the void, rendering the DSM ineffective and contradicting its purpose of providing a binding and enforceable resolution to trade disputes.
• Prolonged Dispute Resolution: The absence of a functioning AB leads to delays in resolving trade disputes.
  • Without a binding appellate process, disputes may linger, contributing to economic uncertainties and potential retaliatory actions among trading partners.
• Undermining Rules-Based Trade: The DSM crisis jeopardizes the concept of a rules-based international trading system.
  • The inability to enforce agreed-upon rules diminishes predictability and stability crucial for global economic growth through trade.

Potential Measures for Developing Countries to Sustain a Functional Two-Tiered DSM:

• Participation in the European Union-led MPIA: Developing countries can explore joining the European Union-led multi-party Interim Appeal Arbitration Arrangement (MPIA) as an initial option.
  • This arrangement formalizes the arbitration mechanism already available under the WTO, providing appellate review for panel reports.
  • However, the MPIA's voluntary nature poses challenges, leading to ad hoc tribunals and limited adoption of awards by all WTO members.
• Creation of a Restricted AB with Limited Powers: Considering the opposition to the AB by the United States, an alternative is formulating a diluted AB with constrained powers.
  • Limiting the AB's authority in various ways, such as deference to parties in dispute and non-persuasive value of rulings, may be explored.
  • However, a diluted AB could contradict the intended role of the DSM in providing security and predictability to the multilateral trading regime.
• Resurrecting the AB with an Opt-Out Provision: Scholars Robert Howse and Wenhua Ji propose resurrecting the AB with a critical modification—allowing countries to opt out of compulsory AB jurisdiction.
  • Countries opting out would be excluded from participating in the appellate process, settling disputes solely through a single-tier panel jurisdiction.
• Critics express reservations about altering the intrinsic nature of a two-tier binding DSM but acknowledge the need to safeguard the AB's integrity.

Conclusion

In addressing the WTO DSM crisis, developing countries, including India, confront a complex decision-making process.

While restoring the AB to its original form is ideal, the suggested resurrection with an opt-out provision offers a pragmatic compromise, recognizing challenges while preserving the AB's legitimacy.

As WTO member countries gather in Abu Dhabi, the way forward requires thoughtful consideration of trade-offs to balance DSM effectiveness with accommodating diverse interests in the global trade landscape.

Why is it in the News?

There is a serious underestimation of the risks involved in the internationalisation of bond markets and currencies of emerging economies.

Context:

• In recent times, there have been noticeable changes in the global financial landscape, specifically regarding the inclusion of government bonds from emerging economies in global indices.
• It is crucial to evaluate the actions taken by J.P. Morgan, Bloomberg, and FTSE Russell in incorporating Indian local currency government bonds (LCGBs) into global indices amidst these developments.
• Exploring the reasons behind these moves and understanding the potential advantages and risks associated with such initiatives is essential.

J.P. Morgan's Influence on India's Financial Landscape:

• The inclusion of Indian local currency government bonds (LCGBs) in J.P. Morgan's Government Bond Index-Emerging Markets (GBI-EM) Global index suite in September 2023 marked a significant milestone.
• This step not only underscored India's financial stature but also raised expectations within the Indian financial sector.
• It spurred interest from other major index providers such as Bloomberg-Barclays and FTSE Russell.
• Subsequently, Bloomberg Index Services announced in January 2024 that India's fully accessible route (FAR) bonds would be incorporated into the Bloomberg Emerging Market Local Currency Index, further bolstering this trend.
• All eyes are now on FTSE Russell, highlighting the increasing influence and anticipation of reforms in India's government bond market.

What is the Process of Opening Local Bond Markets?

• Opening local bond markets to foreign investors is a strategic move by emerging economies to bolster their global financial integration.
• In India, this journey began in 2019 and gained momentum by 2020 with the introduction of the fully accessible route (FAR).
• Despite facing challenges like delays due to government policies on capital gains taxes and local settlement, the core policy remained unchanged, showcasing a dedication to promoting global financial inclusivity.

Advantages of Internationalising Bond Markets:

• Reduced Reliance on Domestic Institutions: By integrating local currency government bonds into global indices, emerging economies like India aim to lessen their dependence on domestic financial institutions.
  • This diversified funding base can contribute to financial stability.
• Stability in Funds Tracking Indices: Inclusion in global indices can result in a more stable inflow of funds, as funds tracking indices typically have a longer investment horizon compared to short-term speculative flows.
  • This stability can help mitigate volatility in local financial markets, providing a secure environment for both domestic and foreign investors.
• Lower Cost of Public Borrowing: Increased demand for local currency government bonds from global investors may lead to a decrease in domestic interest rates.
  • As a result, the cost of public borrowing for the government can decline.
• Relief for Local Financial Institutions: Higher participation by foreign investors in local bond markets can alleviate the balance sheets of local financial institutions holding these bonds.
  • This increased liquidity may encourage more lending and private investment.
• Mitigation of "Original Sin": Bond market internationalization helps mitigate the "original sin" problem faced by emerging economies, where they are unable to borrow internationally in their currencies.
  • By issuing bonds in their currencies, these countries shift the exchange rate risk onto international lenders, potentially avoiding widespread private insolvencies during sharp currency declines.

Risks Involved with Internationalising Bond Markets:

• Loss of Control and Heightened Interest Rate Risks: Internationalizing bond markets poses the risk of losing control over long-term interest rates, leaving emerging economies more vulnerable to global interest rate fluctuations.
  • This can negatively impact domestic bond markets and overall economic stability.
• Exchange Rate Volatility and Spillover Effects: Increased participation by foreign investors exposes local currency bond markets to exchange rate volatility.
  • During periods of global risk aversion or liquidity challenges, adverse spillover effects can occur, as seen in events like the Lehman collapse in 2008 and recent shifts in U.S. monetary policy.
• Volatility in Inflows of Local Currency Bonds: Instances such as the rapid exit of investors from local currency assets in Malaysia during 2014-15 and the total withdrawal of foreigners from the bond market in Türkiye since Spring 2018 underscore the unpredictability of capital flows.
  • These sudden stops and exits can lead to large reserve losses and currency declines, highlighting the potential for rapid market fluctuations.

Efforts by the Inter-Departmental Group (IDG) and RBI to Integrate Government Bonds into Global Indices:

• Indian LCGBs Integration into Global Indices: The RBI's journey towards internationalization commenced in October 2022 with an Inter-Departmental Group (IDG) report outlining efforts to integrate Indian local currency government bonds (LCGBs) into global indices.
• Diversification of Funding Channels: The inclusion of Indian LCGBs in global indices aims not only to attract foreign capital but also to diversify funding sources, reducing reliance on domestic institutions and tapping into large international resources.
• Stability Enhancement and Investment Allocation: The IDG report highlights the potential benefits of LCGB inclusion in global indices, such as enhancing the stability of funds tracking these indices.
  • This stability can foster a more predictable investment environment, attracting long-term investors and improving investment allocation within the Indian financial market.
• Rupee Internationalization Beyond Bonds: Integrating LCGBs into global indices is just one aspect of a broader effort to internationalize the Indian rupee, as outlined in the IDG report.
  • Another crucial component involves allowing banking services in the rupee (INR) outside the country.

Moving Forward:

• Striking a Delicate Balance: While the opening of local bond markets presents abundant opportunities, it necessitates careful balancing.
  • Countries must balance the attraction of foreign capital with the management of potential risks.
• Drawing from Past Experiences: The experiences of Malaysia and Türkiye offer valuable lessons, emphasizing proactive management of offshore markets to prevent excessive speculation and maintain currency stability.
  • These lessons underscore the importance of regulatory vigilance, timely interventions, and a balanced approach to fostering internationalization while preserving macroeconomic stability.

Conclusion

The process of opening local bond markets marks a crucial stride for emerging economies aiming for deeper integration into the global financial realm.

Recent developments involving J.P. Morgan, Bloomberg, and FTSE Russell underscore the growing recognition of India's financial market potential.

As India embarks on this journey, it must adeptly navigate complexities, carefully weigh risks and benefits, and adapt to the evolving global financial landscape for enduring success and stability.

Why is it in the News?

To dissuade concerns that Europe is overregulating artificial intelligence (AI), which could stifle innovation in the bloc, the European Commission has released a set of rules to enable start-ups and other businesses to access hardware – such as supercomputers and computing capacity – for them to build large- scale AI models

Context:

• To address concerns about excessive regulation stifling innovation in Europe, the European Commission has introduced rules allowing startups and businesses to access hardware, like supercomputers, to develop large-scale AI models.
• This supports the EU's new AI Act, designed to promote trustworthy AI across the region.
• India is also considering a similar initiative to provide computing capacity for startups, aiming to establish high-capacity data centres through a public-private partnership model.
• Access to computing power is crucial for building advanced AI systems, alongside innovative algorithms and datasets, especially challenging for smaller businesses to obtain.

What is Artificial Intelligence (AI)?

• Artificial Intelligence (AI) refers to the simulation of human intelligence processes by machines, particularly computer systems.
• These processes include learning, reasoning, problem-solving, perception, and language understanding.
• AI technologies enable machines to analyze large amounts of data, recognize patterns, and make decisions or predictions based on that data.
• There are several types of AI, including narrow or weak AI, which is designed for specific tasks like speech recognition or playing chess, and general or strong AI, which aims to perform any intellectual task that a human can do.
  • Machine learning, a subset of AI, involves training algorithms to recognise patterns in data and make predictions or decisions without being explicitly programmed to do so.
• AI has applications across various industries, including healthcare, finance, transportation, and manufacturing.
• It is used for tasks such as medical diagnosis, fraud detection, autonomous vehicles, and predictive maintenance.
• As AI technology continues to advance, it holds the potential to revolutionize many aspects of society, improving efficiency, productivity, and decision-making processes.

What is Europe’s AI Innovation Plan?

• The European Commission has introduced a set of initiatives aimed at assisting European startups and small businesses in creating reliable AI technology.
• These initiatives encompass various measures to foster innovation among startups, including a proposal to grant special access to supercomputers for AI startups and the wider innovation community. The plan includes:
  • Acquiring, upgrading and operating AI-dedicated supercomputers to enable fast machine learning and training of large general-purpose AI (GPAI) models.
  •  Facilitating access to the AI dedicated supercomputers, contributing to the widening of the use of AI to a large number of public and private users, including start-ups and SMEs.
  •  Supporting the AI startup and research ecosystem in algorithmic development, testing evaluation and validation of large-scale AI models.
  •  Enabling the development of a variety of emerging AI applications based on GPAI models.

How is the EU’s Plan Similar to India’s?

• The Indian government is currently outlining an AI Mission, which is expected to undergo Cabinet approval soon, with a budget exceeding Rs 10,000 crore.
  • As part of this initiative, the government aims to develop its own 'sovereign AI,' enhance computational capabilities domestically, and provide compute-as-a-service to Indian startups.
  • Capacity building will be pursued both within the government and through a public-private partnership model, emphasizing India’s goal to capitalize on the forthcoming AI boom as a vital economic driver.
• Overall, the country aims to establish a computing capacity ranging from 10,000 to 30,000 GPUs (graphic processing units) through the PPP model, in addition to 1,000-2,000 GPUs facilitated by the PSU Centre for Development of Advanced Computing (C-DAC).
  • The government is exploring various incentive structures for private companies to establish computing centres in the country, including capital expenditure subsidies, operational expense-based incentives, and a "usage" fee model.
• The government intends to transform the GPU assembly into a digital public infrastructure (DPI), allowing startups to access its computational capacity at a reduced cost, without having to invest in GPUs, which are typically the largest expense in such operations.

Why is the EU especially enabling AI Innovation?

• Until now, the most prominent advancements in AI have been spearheaded by American companies like OpenAI and Google, along with emerging ventures such as Perplexity and Anthropic.
• Europe, which has traditionally prioritized regulating technologies with a focus on human rights, has faced criticism from the industry for potentially overregulating AI even before its widespread adoption across the continent.
  • Unlike the US, where numerous American companies have made significant strides in offering hardware services to businesses, Europe has identified a need to facilitate access to hardware resources for AI development.
• This move by the European Commission follows the introduction of an AI Act last year, which has faced criticism.
  • The legislation aims to establish safeguards for AI usage within the EU, including clear guidelines for its adoption by law enforcement agencies and provisions empowering consumers to report any perceived violations.
  • Additionally, the AI Act imposes stringent restrictions on facial recognition technology and the use of AI to influence human behaviour, while also outlining severe penalties for companies found in breach of these regulations.
• Moreover, the legislation stipulates that governments can employ real-time biometric surveillance in public areas only in cases involving serious threats, such as terrorist attacks.

European Commission (EC)

• The European Commission is the European Union's executive body and represents the interests of Europe as a whole.
  • It drafts proposals for new European laws.
  • It manages the day-to-day business of implementing EU policies and spending EU funds.
• It is made up of 27 commissioners (one from each member state) and is based in Brussels.
  • Each member state nominates a commissioner, but the nominated candidates must be approved by the European Parliament.
  • The Parliament must also approve the President of the European Commission.
• The current President of the European Commission is Ursula von der Leyen.
• Commissioners do not represent their countries. Instead, they have a field of responsibility.
• To assist the commissioners in the performance of their duties, there is a staff of about 32,000 people employed by the Commission.
  • This staff comes from all of the Member States and includes policy officers, translators, lawyers and researchers.

What does the European Commission do?

• Legislation – The Commission initiates legislation. It makes proposals for laws that are sent to the European Parliament and Council of the European Union for approval.
• Upholding EU law – The Commission can take action against businesses or states that are failing to comply with EU law.
• Policy – The Commission is the executive of the EU. It manages policies and drafts budgets.
• Representation – The Commission represents the EU in negotiations with other countries or organisations.
• The Commission meets once a week to adopt proposals, finalise policy papers and make decisions.
  • Decisions are taken by a simple majority vote.

Why is it in the News?

The Supreme Court is set to hear the dispute over the expansion of the Border Security Force (BSF) jurisdiction in Punjab.

Context:

• The Supreme Court will hear petitions filed by the Punjab government against the Centre’s notification expanding the jurisdiction of Border Security Forces (BSF) to 50 km from the international border in Punjab.
• This comes after the Centre in 2021 decided to expand the BSF’s jurisdiction to undertake search, seizure and arrest within a larger 50-kilometre stretch from the International Border compared to the earlier limit of 15 kilometres.
• The Centre had also decided to decrease the BSF’s area of operation in Gujarat from 80 kilometres from the border to just 50 kilometres.

What is the Border Security Force (BSF)?

• The BSF was established on 1 December 1965 after the India-Pakistan war.
• With a strength of about 2.65 lakh personnel, it has 192 operational battalions and deployed along the Pakistan and Bangladesh borders.
• It is the country’s largest border force and one of the Central Armed Police Forces of the Union of India under the administrative control of the Ministry of Home Affairs (MHA).
  • The other forces include the Indo-Tibetan Border Police (ITBP), the Sashastra Seema Bal (SSB) and the Assam Rifles, Central Industrial Security Force (CISF), Central Reserve Police Force (CRPF) and National Security Guards (NSG).
• It also contributes dedicated services to the UN peacekeeping Mission by sending a large contingent of its trained manpower every year
• The BSF is meant to secure India’s borders with its neighbouring nations and is empowered to arrest, search and seize under a number of laws, such as the Criminal Procedure Code, the Passports Act, the Passport (Entry into India) Act, and the NDPS Act, to name a few.

Why was the BSF Jurisdiction Extended?

• Section 139(1) of the BSF Act allows the central government, through an order, to designate an area “within the local limits of such area adjoining the borders of India” where members of the BSF can exercise powers to prevent offences under any Acts that the central government may specify.
  • Prior to the notification issued in October 2021, the BSF could exercise its powers within 15 kilometres of the border in Punjab, West Bengal and Assam.
  • The Centre expanded this to within 50 kilometres of the border.
• The notification states that, within this larger 50-kilometre jurisdiction, the BSF can only exercise powers under the Criminal Procedure Code, the Passport (Entry into India) Act and the Passports Act.
  • For other central legislations, the 15-km limit remains.
• This expansion was in response to the increased use of drones and Unmanned Aerial Vehicles, which have long-range capabilities and enable surveillance and the smuggling of arms and fake currency.
  • The ‘menace of cattle smuggling’ and smugglers often seek refuge outside BSF jurisdiction.
• The centre also claimed that the notification makes the BSF jurisdiction uniform across states, as the 50-kilometre limit was already in place in Rajasthan.
  • The same notification reduced the jurisdiction in Gujarat from 80 km to 50 km.

Why Punjab Challenged This Act?

• The state of Punjab filed an ‘original suit’ against the central government in the Supreme Court in December 2021 and alleged that the extension of the territorial jurisdiction of BSF encroaches upon its own constitutional jurisdiction.
  • The Supreme Court has ‘original jurisdiction’ in disputes between the central government and states under Article 131 of the Constitution, which means cases of this kind can only be heard for the first time at the SC “to the exclusion of any other court”.
• The Punjab government claimed that expanding the jurisdiction of the BSF would compromise the state’s exclusive powers to legislate on matters involving the police and public order.
  • These powers are provided in Entries 1 and 2 of the State List under Article 246 of the Constitution.
  • They also claimed that the notification was issued without consulting with any of the states concerned.

How did Other States Respond?

• The states at the time had decried the move as an “irrational decision”, a “direct attack on federalism” and an attempt to “interfere through Central agencies”.
• Punjab and West Bengal denounced the move with the respective state Assemblies even passing resolutions against the Centre’s decision.

What are the Challenges Associated with Expanding Jurisdiction?

• Public Order vs. Security of State: Maintaining public order and policing, signifying peace, safety, and tranquillity, falls within the purview of State Governments (Entry 1 and Entry 2 of the State list, respectively).
  • However, if a severe public disorder poses a threat to the security or defence of the State or the nation itself (Entry 1 of the Union list), it becomes a matter of concern for the Union Government as well.
• Federalism Strain: Issuing notifications without state government concurrence may be seen as an infringement on state powers.
  • The Punjab Government argues that such notifications amount to the Centre encroaching under the pretext of security or development.
• Impact on BSF Operations: The extension of jurisdiction to policing in the hinterland contradicts the role of a border guarding force.
  • This shift could potentially undermine the BSF's ability to fulfil its primary duty of guarding the international border.

Issues Specific to Punjab:

• Overlapping Powers: The extended 50 km jurisdiction grants concurrent power with state police over every cognizable offence under the Indian Penal Code (IPC).
  • In a relatively small state like Punjab, this extension encompasses all major cities.
• In other states like Gujarat and Rajasthan, where the extension might be considered, Gujarat has substantial marshland, and extending jurisdiction there might be reasonable as it doesn't encompass major urban centres.
  • Similarly, in Rajasthan, the presence of a desert reduces the impact of jurisdiction extension.

Way Ahead

• Emphasis on State Consent: Considering the security dynamics in India's vicinity, the existing collaboration between Central armed forces and State civil authorities remains suitable.
  • Nonetheless, consulting with the State Government before deploying armed forces by the Union Government is recommended, whenever possible.
• State Empowerment: Each State Government, in coordination with the Union Government, should devise both short-term and long-term strategies to fortify its Armed Police.
  • The aim is to achieve substantial self-reliance in managing Armed Police matters, necessitating the Central armed forces' intervention only during exceptionally severe disturbances.
• Regional Collaboration: Neighboring States can collaboratively establish a framework for utilizing each other's Armed Police in times of necessity through consensus.
  • The Zonal Council stands out as the most apt platform for States within a zone to reach a consensus and formulate such arrangements.

Why is it in the News?

Reinstating a fully functional WTO dispute settlement body to resolve trade disputes between countries could take longer than expected as there continue to be wide differences between developed and developing countries over the issue, a GTRI report said recently.

Context:

• According to the GTRI report, an economic think tank, restoring a fully functional WTO dispute settlement body may take longer due to significant differences between developed and developing countries on the issue.
• This comes as the 164-member World Trade Organization (WTO) will gather next month in Abu Dhabi for the 13th ministerial conference (MC) to resolve different issues such as reforms in dispute settlement mechanisms, agriculture-related matters, etc.

Highlights of the GTRI Report:

• Escalating Protectionism: The absence of a functional dispute settlement body has fueled a surge in protectionist measures.
  • Since 2017, the US has obstructed the appointment of new judges to the WTO's seven-member appellate court, citing perceived harm to its interests.
• Delicate Balancing Act: Addressing India's appeals for an effective appellate body, special and differential treatment (S&DT) provisions, and fairness must be delicately balanced with the concerns of other members.
  • This includes considerations such as transparency and legal certainty, demanding significant compromise and negotiation.
• Complex Consensus Building: Reforming the dispute settlement system proves challenging as developed and developing nations hold divergent priorities and concerns.
  • Achieving a consensus requires navigating through intricate negotiations.
• Disproportionate Impact on the US: The proper functioning of the WTO Appellate Body disproportionately affects the US, given that over a quarter of all WTO disputes involve challenges to US laws or measures.

What is the Global Trade Research Initiative (GTRI)?

• Global Trade Research Initiative (GTRI) is a research Group focused on Climate Change, technology and trade
• GTRI aims to create high-quality and jargon-free outputs for governments and industry from the perspective of development and poverty reduction.
• Mr Ajay Srivastava is the Founder of GTRI.

What is the World Trade Organization?

• The World Trade Organization (WTO) is an international organization that deals with the rules of trade between countries.
• It was founded in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT), which, since 1948, had governed trade rules until the establishment of the WTO.
• The WTO describes its principal function as being to provide a forum for its members to negotiate on trade issues.
• It operates a body of rules in the form of WTO agreements.
• It provides a dispute settlement mechanism (DSM) to resolve disagreements over the rules between members.
• The WTO has many roles:
  • It operates a global system of trade rules, acts as a forum for negotiating trade agreements, settles trade disputes between its members and it supports the needs of developing countries.
• All major decisions are made by the WTO's member governments:
  • either by ministers (who usually meet at least every two years) or by their ambassadors or delegates (who meet regularly in Geneva).
• Decision-making:
  • All major decisions within the WTO are made by its member governments.
  • The top decision-making body is the Ministerial Conference, which typically convenes every two years.
  • Day-to-day decisions are overseen by the General Council, which meets regularly in Geneva.

• Membership
  • The WTO has over 160 members, representing 98% of world trade.
  • Joining the WTO requires aligning economic and trade policies with its rules and negotiating entry terms with the existing membership.
• Budget:
  • The WTO derives most of the income for its annual budget from contributions by its members.
  • These contributions are based on a formula that takes into account each member's share of international trade.
• Director-General:
  • Ngozi Okonjo-Iweala is the seventh Director-General of the WTO.
  • She took office on 1 March 2021, becoming the first woman and the first African to serve as Director-General.
  • Her term of office will expire on 31 August 2025.
• The primary purpose of the WTO is to open trade for the benefit of all.

About the WTO Dispute Settlement Body (DSB):

• The WTO Dispute Settlement Body (DSB) deals with disputes between WTO members.
• It was created in Article 2 of the Dispute Settlement Understanding (DSU) administers World Trade Organization (WTO) dispute settlement proceedings.
• The DSB consists of all WTO members, usually represented by Ambassadors or equivalent.
• It makes decisions on trade disputes between governments that are adjudicated by the Organization.
• The DSB has the sole authority to establish “Panels” of experts to consider the case and to accept or reject the Panels’ findings or the results of an appeal.
• The DSB uses a special decision procedure known as "reverse consensus" or "consensus against" that makes it almost certain that the Panel recommendations in a dispute will be accepted.
• The process requires that the recommendations of the Panel should be adopted "unless" there is a consensus of the members against adoption.
• The DSB monitors the implementation of the rulings and recommendations and has the power to authorize retaliation when a country does not comply with a ruling.

Why is the WTO Dispute Settlement Body (DSB) Inoperative?

• The WTO's dispute settlement system faces a critical challenge as its appeals mechanism is currently non-operational.
• The root cause lies in the United States objection to the appointment of new judges to the Appellate Body, citing concerns about judicial overreach.
• Consequently, a significant number of panel reports are left in limbo, with appeals going unanswered and disputes lingering without resolution.
• This impasse creates a formidable obstacle for WTO members seeking to enforce their obligations through complaints against measures they perceive as violations.

Conclusion

The WTO's dispute resolution mechanism grapples with a formidable crisis, rendering it largely nonfunctional due to the U.S.'s opposition to new Appellate Body judges. This impasse leaves disputes unresolved, severely limiting members' ability to enforce obligations. As the organization grapples with this crisis, finding a resolution becomes paramount to restore the efficacy of international trade agreements and uphold the WTO's core principles.

Why is it in the News?

As India remoulds its scientific establishment, the utility of scientists being given administrative tasks needs to be questioned.

Context:

• Sustained economic progress which can satisfy national ambition is invariably fuelled by scientific advances translated into deployable technologies.
• This has been the inevitable global experience since the onset of the Industrial Revolution.
• The government is overhauling India’s science establishment, which includes setting up the new National Research Foundation (NRF) and restructuring the Defence Research and Development Organisation (DRDO).
• In this scenario, a frank assessment of the current administrative ability to simultaneously optimise Indian science’s efficiency and resilience is necessary.

What are the Problems with India’s Scientific Advancement?

India has a long and rich history of scientific innovation. However, in recent years, the country's science management has come under increasing scrutiny. There are several problems with India's science management including:

• Lack of Funding in Research and Development (R&D): One of the most pressing issues is a lack of funding.
  • India spends a relatively small percentage of its GDP on research and development, compared to other developed countries.
    • For instance, India allocates only about 0.7% of its GDP to R&D, a considerably lower figure compared to global leaders like the United States (3.5%) and China (2.4%).
  • This lack of funding has led to a brain drain of talented scientists, who are leaving India in search of better opportunities.
• Budgetary Challenges: The modest commitment to R&D stems from broader budget constraints, competing priorities, and a historical emphasis on immediate socio-economic needs.
  • This presents a challenge in fostering a robust scientific ecosystem on a limited budget.
• Lack of Coordination: Another problem with India's science management is a lack of coordination.
  • There are many different government agencies and departments that are involved in science and technology, but there is often a lack of communication and cooperation between them.
  • This can lead to duplication of effort and a waste of resources.
• Inadequacies in Budget Allocation by Scientific Administration: The current scientific administration struggles to identify and invest in high-impact projects.
  • For instance, in 2022, the Indian Space Research Organisation ranked eighth in space launches, lagging in key technologies.
  • Similar setbacks are evident in nuclear energy, genomics, robotics, and artificial intelligence.
• Lack of Strategic Planning and Execution: Beyond expenditure, the challenge extends to strategic planning and execution of scientific projects.
  • Failure to adapt swiftly to emerging technologies and allocate resources judiciously has resulted in India falling behind in crucial fields.
• Inconsistent Long-Term Funding: A major concern is the absence of consistent long-term funding for vital projects, especially when faced with occasional setbacks.
  • Steady funding, despite occasional failures, is crucial for a resilient and effective scientific management system.
• Finally, India's science management is often criticized for being too bureaucratic. The process of getting funding for research projects can be long and complex, and it can be difficult for scientists to get the support they need to succeed.

The Role of Senior Scientists in India’s Science Administration:

• Diverse Responsibilities Impacting Focus: Senior scientists in India often juggle multiple responsibilities, including academic pursuits, administrative duties, and leadership positions.
  • This dispersion of focus can lead to inefficiencies and a lack of dedicated attention to critical administrative tasks.
• Lack of Administrative Skills: The assumption that successful scientists can seamlessly transition into effective administrators overlooks the distinct skills required for scientific work versus administration.
  • Managing institutions, allocating resources, and making organizational decisions demand specific skills not necessarily possessed by accomplished scientists.
• Insufficient Training for Administrative Roles: Inadequate training makes it challenging for scientists to excel in administrative roles.
  • Tasks like metric selection, conflict resolution, and setting priorities require skills not inherently developed through scientific training.
  • Administration involves translating policy into outcomes, a skill not typically prioritized in scientific training.
• Conflicts of Interest and Quality Control Issues: The dual roles of scientists as academics and administrators can result in conflicts of interest within institutions.
  • Academic rivalries, bureaucratic challenges, and compromised quality control may emerge, leading to issues like plagiarism, unethical publication practices, and compromised scientific outcomes.
• Nationwide Transfer System Absence: The absence of a nationwide transfer system for scientists and science administrators exacerbates issues such as competition and egotism.
  • The lack of mobility within the system can contribute to internal divisions and hinder the progress of scientific careers and projects.
• Internal Control Challenges: Allowing individuals within the system to regulate it can lead to clear drawbacks, impacting the impartiality and effectiveness of science administration in India.

Challenges in India's Science Administration: A Historical Perspective

• Concentration of High-End Equipment: Economic constraints post-independence led India to concentrate on high-end scientific equipment, notably in institutions like the IITs.
  • This concentration birthed gatekeepers, controlling access to critical resources and establishing a hierarchical structure where a few institutions wielded disproportionate influence.
• Gatekeepers and Institutional Captures Concept: Over time, these gatekeepers solidified their positions, accumulating power, government support, and institutional control.
  • This system created an environment where young scientists navigated a complex web of influence, paying tributes to those controlling vital resources.
• Impact on Scientific Careers: The gatekeeping system not only influenced resource access but also shaped career trajectories.
  • The nexus between institutional power and individual careers became pivotal, with appointments, awards, and international recognition often tied to maintaining favourable relations with gatekeepers.
• Normalization of Unethical Practices: The gatekeeping system has normalized unethical practices within Indian science.
  • High plagiarism rates, paid publications in questionable journals, and undisclosed dealings for government funding have become ingrained, compromising the ethical standards of scientific research.
• Stifling Genuine Scientific Outcomes: This erosion of ethical standards doesn't just compromise research quality but stifles genuine scientific outcomes.
  • Scientists in conflict with this system face hurdles, hindering promising careers and perpetuating a culture where personal connections often outweigh merit.

A Comparative Analysis of the U.S. Model and Indian Science Administration:

• U.S. Model: In the U.S., scientists chosen for administrative roles are identified early in their careers and undergo targeted training for managerial tasks.
  • The emphasis is on maintaining a distinct separation between scientific pursuits and administrative responsibilities.
• Indian Scenario: In contrast, India's science administration traditionally involves senior scientists taking up administrative roles without a clear separation between scientific and administrative functions.
  • This integrated approach poses challenges, as the skill sets needed for effective scientific research often differ significantly from those crucial for efficient administration.

Conclusion

As India pursues economic and strategic progress, challenges in science management hinder its research and development, causing a lag in innovation compared to other developed nations. To remedy this, increasing funding for research and development is crucial, along with enhancing coordination among government agencies and streamlining the funding process for research projects. By addressing these issues, India has the potential to emerge as a global leader in science and technology, bringing substantial benefits to its economy and society.

Why is it in the News?

With antimicrobial resistance on the rise, the Union Health Ministry has urged doctors to write down the exact reason when prescribing antibiotics.

New Summary:

• The Union Health Ministry urged all doctors in medical colleges and medical associations to make it a mandatory practice to "write indication/reason/justification" while prescribing antibiotics.
• The Director General of Health Services also appealed to all pharmacists to strictly implement Schedule H and H1 of the Drugs and Cosmetics Rules and stop the over-the-counter sale of antibiotics.
• Antimicrobials are listed under Schedule H and H1 of the Drugs and Cosmetics Act, both of which are categories of medicines that cannot be sold without a prescription.

What is Antimicrobial Resistance?

• According to the World Health Organisation (WHO), antimicrobial resistance occurs when bacteria, viruses, fungi and parasites change over time and no longer respond to medicines.
• This makes infections harder to treat, increasing the risk of disease spread, severe illness and death.
  • As a result, the medicines become ineffective and infections persist in the body, increasing the risk of spreading to others.
• AMR affects countries in all regions and at all income levels.
  • Its drivers and consequences are exacerbated by poverty and inequality, and low- and middle-income countries are most affected as per WHO.
• Currently, AMR is one of the top global public health threats facing humanity.
  • It is estimated that bacterial AMR was directly responsible for 1.27 million global deaths in 2019 and 4.95 million deaths were associated with drug-resistant infections.
• According to the Indian Council of Medical Research (ICMR), 1.25 million lives were lost to drug resistance in 2019.
• India has one of the highest rates of antimicrobial resistance worldwide.
  • Despite being prescription drugs, antibiotics are commonly available over-the-counter (OTC) at retail pharmacies.
• In a recent survey, conducted by the National Centre for Disease Control (NCDC) under the Union Health Ministry, over half of the antibiotics prescribed in the country cause antimicrobial resistance.
• Treatment failures also lead to longer periods of infectivity and the prohibitively high cost of second-line drugs may result in failure to treat these diseases in many individuals.

Scenarios in Which Antimicrobials are Most Commonly Misused?

• There are two common scenarios in which antimicrobials are misused or overused even by doctors.
  • One is when they cannot make a diagnosis on whether an infection is caused by a bacteria or virus and prescribe antibiotics to err on the side of caution.
  • Two, when they know it is a bacterial infection but want to avoid secondary infection.
    • This is where antibiotics can be conserved because very few people get such secondary bacterial infections.
• In the case of a serious patient, who is admitted to the hospital, broad-spectrum antibiotics may be prescribed for 48 hours, during which they can be tested for which pathogen is causing the infection.
  • The antibiotics needed to be switched after that.
• Prescription for antimicrobials before and after a procedure or surgery is another way that antibiotics are commonly overused.
  • Just a single dose of antibiotic 60 to 120 minutes before surgery is enough to prevent surgical site infections.
• However, doctors end up prescribing antibiotics for seven to 14 days.
  • If proper sterilization of equipment, and preparation of the surgical site are done, infections cannot happen.
  • Shaving the surgical site before surgery should be avoided because it can lead to abrasions that can get infected

The Result of Antimicrobial Overuse and Misuse?

• Common infections are not curable anymore.
• Tuberculosis and urinary tract infections have become multi-drug resistant.
• In hospitals, infections are resulting in longer treatment times with the use of costlier and more toxic antibiotics.
  • Despite all efforts and successful surgeries, people are dying

Factors contributing to Antimicrobial Resistance (AMR):

• Unnecessary Prescriptions: In many cases, antibiotics are prescribed when they are not necessary or are not used correctly.
  • This can lead to the survival and proliferation of resistant bacteria.
• Agricultural use: The use and overuse of antimicrobials in agriculture, including to promote growth and prevent disease in livestock, is also a major contributor to the development and spread of AMR.
• Selective pressure: In the presence of antimicrobials, microbes that carry resistance genes can survive, replicate, and quickly dominate the microbial population.
• Mutation: Rapid microbial reproduction allows for swift-evolution, and mutations during replication may aid individual microbes in surviving antimicrobial exposure.
• Inappropriate use: Unnecessary and injudicious use of antibiotic fixed dose combinations may lead to the emergence of bacterial strains resistant to multiple antibiotics.
• State of the Environment: There is growing evidence that the environment plays a key role in the development, transmission and spread of AMR. Its proliferation is linked to the triple planetary crisis of climate change, nature and biodiversity loss, pollution and waste.
  • For example, higher temperatures, storms and floods can fuel the spread of bacterial, viral, parasitic, fungal and vector-borne diseases.
  • Severe weather events can also cause wastewater and sewage to overwhelm treatment plants, allowing untreated sewage rich in antimicrobial-resistant microbes to contaminate surrounding communities.
  • As well, wastewater laced with medicines, including that from animal production facilities, hospitals and pharmaceutical companies, can feed drug resistance.

Measures Taken by the Government of India to Address AMR:

• National Action Plan on AMR: The National Action Plan on Containment of Antimicrobial Resistance (NAP-AMR) was launched in 2017.
  • Emphasis is placed on a One Health approach, involving various stakeholder ministries/departments.
• AMR Surveillance and Research Network (AMRSN): ICMR has set up the AMR Surveillance and Research Network (AMRSN) comprising 30 tertiary care hospitals, both private and government.
  • Its purpose is to generate evidence and capture trends and patterns of drug-resistant infections in the country.
• Research and International Collaboration: Initiatives by ICMR aim to develop new drugs and medicines through international collaborations.
  • This is intended to strengthen medical research in the field of AMR.
• Red Line Campaign: The Union health ministry initiated the "Red Line Campaign."
  • It urges people not to use medicines marked with a red vertical line, including antibiotics, without a doctor’s prescription.
  •  The campaign aims to discourage unnecessary prescription and over-the-counter sales of antibiotics, addressing drug resistance for diseases like TB, malaria, urinary tract infections, and HIV.

Way Forward

• Antimicrobials have saved countless lives and are essential to modern medicine but we need to use them more judiciously.
• Healthcare professionals should only prescribe antibiotics when necessary and at the right dosage and duration.
• The use and overuse of antibiotics in agriculture must also be limited.
• Countries must adopt the One Health approach, which recognizes that the health of people, animals, plants and the environment are interdependent.
• Preventative measures, such as improving water, sanitation and hygiene, as well as putting in place strong international and national regulatory frameworks to enforce controls on the sale and distribution of antibiotics, will go a long way in reducing AMR.

Conclusion

AMR is a global problem; therefore, international cooperation among nations is essential. Developing multi-stakeholder national action plans is key. Countries must also work together on strategies, information sharing and surveillance of antimicrobial use and resistance. However, fixing the AMR crisis is not just dependent on governments alone. Pharmaceutical companies, the chemical industry, regulators, municipal governments, human and animal healthcare professionals and students, scientists and the public all have a role to play.

Why is it in the News?

Recently, the central government has disbursed an incentive amount of Rs 4,415 crore under its flagship Production-Linked Incentive (PLI) schemes for as many as eight sectors.

News Summary:

• The central government, through its flagship Production-Linked Incentive (PLI) schemes, has disbursed an incentive amount of Rs 4,415 crore until October in the current fiscal year across eight sectors.
  • In the fiscal year 2023-24, Rs 1,515 crore has been disbursed, compared to Rs 2,900 crore in 2022-23 when payments under the scheme commenced.
• The government aims to achieve a disbursal target of Rs 11,000 crore by the end of this fiscal year.
  • According to official statements, the employment generation, both direct and indirect, has exceeded 6.78 lakh.
• As of now, 746 applications have received approval in 14 sectors, with an expected investment exceeding Rs 3 lakh crore.
  • Notably, 176 MSMEs are among the beneficiaries of the PLI schemes, particularly in sectors like pharma and telecom.

What is the Production Linked Incentive Scheme (PLI)?

• Production-linked incentive (PLI) schemes were first introduced in India in March 2020, mainly targeting three industries – Mobile Manufacturing and Electric Components, Pharmaceutical and Medical Device Manufacturing.
• The PLI concept has since expanded to 14 sectors to boost India’s manufacturing capabilities and encourage export-oriented production.
• The PLI schemes aim to develop capacities in the local supply chain, introduce new downstream operations, and incentivise investments into high-tech production.
• Mechanism: Under the PLI scheme, both domestic and foreign companies receive financial incentives for manufacturing within India, with rewards calculated as a percentage of their revenue over up to five years.
• Targeted Sectors: The 14 sectors covered by the scheme include mobile manufacturing, medical devices, automobiles and auto components, pharmaceuticals, drugs, speciality steel, telecom & networking products, electronic products, white goods (ACs and LEDs), food products, textile products, solar PV modules, advanced chemistry cell (ACC) batteries, and drones and drone components.
• Incentive Structure: Incentives are determined based on incremental sales, with certain sectors like advanced chemistry cell batteries, textile products, and the drone industry having calculations considering sales, performance, and local value addition over five years.
  • Emphasizing research and development (R&D) investments aims to align the industry with global trends and enhance competitiveness in the international market.

Performance of the PLI Schemes:

• Positive Export Growth: India has experienced a substantial boost in mobile handset exports, doubling from Rs 45,000 crore in FY22 compared to FY21, and further estimating exports to reach Rs 90,000 crore in FY23.
  • Additionally, in the pharmaceutical industry, India has successfully manufactured 35 active pharmaceutical ingredients (APIs), reducing reliance on imports, particularly from countries like China.
  • Overall, the PLI schemes have contributed to exports exceeding Rs 3.2 lakh crore, notably driven by sectors such as electronics, pharmaceuticals, food processing, and telecom.
• Challenges in Implementation: Despite positive outcomes, the implementation of PLI schemes has faced sluggish progress.
  • In the fiscal year 2021-22, the government disbursed a mere Rs 10 crore in incentive payouts for mobile handsets, white goods (ACs and LEDs), and the food processing industries combined.
  • However, this figure increased to Rs 2,874 crore in 2022-23, according to DPIIT.
  • During the initial two years of the seven-year initiative, only 1.46 per cent of the total Rs 1.97 lakh crore incentive outlay was disbursed.
  • Some major industries are yet to fully embrace the scheme or initiate significant activities under it.
• Limited Job Creation: The slow start in implementation has resulted in a lower-than-projected number of jobs created.
  • While the PLIs were anticipated to generate 6 million new jobs over seven years, the actual figure stands at approximately 300,000 jobs, representing only 5 per cent of the total projection, between 2020 and early 2023.

Challenges in the PLI Scheme:

• Assembly Emphasis Over Value Addition: The subsidy structure within the Mobile and allied Component Manufacturing segment of the PLI scheme primarily incentivizes the completion of phone assembly in India, neglecting the consideration of the actual value added through manufacturing processes.
  • Consequently, many mobile phone components are still imported, encompassing critical elements such as display screens, cameras, batteries, and printed circuit boards.
• WTO Constraints and Limited Value Addition: India faces constraints imposed by WTO rules, preventing the tying of PLI subsidies to domestic value addition.
  • While India aspires to produce chips domestically, the intricate nature of chip manufacturing and the inability to mandate significant domestic value addition present challenges to realising this goal.
• Ambiguity in Incentive Disbursement: Despite the establishment of an Empowered Committee to oversee fund disbursement across various sectors, the process lacks transparency and clear criteria.
  • The absence of well-defined parameters for ministries and departments to determine incentive allocations raises concerns about the fairness and effectiveness of the scheme.
• Absence of a Centralized Database: A notable deficiency in the PLI scheme is the lack of a centralized database that comprehensively captures critical information such as increased production, exports, and the creation of new jobs.
  • This information gap complicates the evaluation process, introducing administrative complexities.
  • The resulting ambiguity impacts transparency, potentially leading to mischief, thereby weakening the overall policy structure.

Way Forward

The government should evaluate the efficacy of the PLI scheme, taking into account factors such as job creation, cost per job, and the identified challenges contributing to its limited success. Before expanding the scheme to encompass additional sectors, a thorough understanding of its limitations is essential, along with proactive measures to address the underlying issues.

Why is it in the News?

The share of India’s population living in multidimensional poverty is estimated to have fallen to 11.28 per cent in 2022-23 from 29.17 per cent in 2013-14, according to a discussion paper released by NITI Aayog on Monday.

Context:

• According to the NITI Aayog’s discussion paper, multidimensional poverty in India declined from 29.17% in 2013-14 to 11.28% in 2022-23, with about 24.82 crore people moving out of this bracket during this period.
• The national multidimensional poverty measures simultaneous deprivations across three equally weighted dimensions of health, education, and standard of living that are represented by 12 sustainable development goals-aligned indicators, according to NITI Aayog.

Key Highlights of the MPI in India Since 2005-2006:

• Overall Decline in Multidimensional Poverty: As per the NITI Aayog discussion paper, India's multidimensional poverty has decreased from 29.17% in 2013-14 to 11.28% in 2022-23.
  • The trend signifies the upliftment of 24.82 crore people from this bracket during the specified period.
• State-wise Decline: "Uttar Pradesh registered the largest decline in the number of poor with 5.94 crore people escaping multidimensional poverty during the last nine years followed by:
  • Bihar at 3.77 crore
  • Madhya Pradesh at 2.30 crore and
  • Rajasthan at 1.87 crore.
• NITI Aayog's approach to measuring multidimensional poverty involved considering 12 indicators aligned with the sustainable development goals.
  • These indicators encompass crucial aspects such as nutrition, child and adolescent mortality rates, maternal health, educational attainment, access to basic amenities like clean cooking fuel, sanitation, safe drinking water, electricity, and housing, as well as possession of assets and bank accounts.
• "Significant initiatives covering all dimensions of poverty have led to 24.82 crore individuals escaping multidimensional poverty in the last 9 years.
  • As a result, India is likely to achieve its SDG target of halving multidimensional poverty well before 2030.
• The report emphasized impactful programs, such as Poshan Abhiyan and Anemia Mukt Bharat, which have markedly improved accessibility to healthcare services, significantly reducing deprivation.
  • Managing one of the globe's largest food security initiatives, the targeted Public Distribution System (PDS) under the National Food Security Act encompasses 81.35 crore beneficiaries, ensuring the distribution of food grains to both rural and urban populations.
• "The government's persistent dedication and resolute commitment to enhancing the lives of the most vulnerable and deprived have been instrumental in this accomplishment.

What is Multidimensional Poverty?

• Poverty can have several negative effects at once. Some of these include inadequate nutrition or health, a lack of power or clean water, low-quality employment, or insufficient education.
• The true nature of poverty cannot be fully captured by concentrating only on one aspect, such as income.
• Multidimensional Poverty, as a metric, goes beyond income or consumption alone.
  • It encompasses deprivations in education and access to essential infrastructure, considering factors beyond the monetary aspect.
  • The measurement is conducted at the $2.15 international poverty line, as defined by the World Bank (in 2017 purchasing power parity terms), ensuring a comprehensive assessment of poverty that extends beyond monetary value.

What is the National Multidimensional Poverty Index (MPI)?

• Prepared By: NITI Aayog
• Objective: The aim is to gauge poverty across various dimensions, complementing existing statistics based on per capita consumption expenditure.
• Purpose of the National MPI: Provides an enhanced, high-level overview of poverty at the national level.
  • Acts as a complement to monetary poverty measures.
  • Furnishes information crucial for shaping effective policy initiatives.
  • The MPI is founded on the individual or household profile of overlapping or "joint" deprivations experienced by each person.
• Key Features: Serves as an incentive for leaving no one behind and prioritizing the most marginalized.
  • Adaptable to the national context and maintains transparency.
• Credible Methodology: India's national MPI employs a methodology developed by the Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Programme (UNDP), aligning with the globally accepted and robust standards used in the publication of the Global Multidimensional Poverty Index.
• Three Macro Dimensions: The National MPI is structured around three macro dimensions, each with specific indicators and weights, outlined below –

Significance of the MPI:

• Crucial Public Policy Instrument: The establishment of India's National MPI introduces a pivotal public policy instrument that monitors multidimensional poverty, facilitating evidence-based and targeted interventions to ensure inclusivity and prevent any individuals from being left behind.
• Assesses the Efficacy of Multi-Sectoral Interventions: It offers valuable insights into the effectiveness of multi-sectoral interventions aimed at addressing diverse facets of poverty.
• Encompasses Diverse Deprivations: Notably, functioning as a metric for multidimensional poverty, it captures the myriad and simultaneous deprivations experienced by households.
• Comprehensive Analysis Across All Tiers: This report conducts a thorough analysis of the headcount ratio and intensity of multidimensional poverty, encompassing national, State/UT, and district levels.

Conclusion

The National MPI in India has been conceived as an all-encompassing tool, expediting purpose-driven initiatives to gauge and systematically eliminate multidimensional poverty. The dimensions of the index have demonstrated their efficacy in identifying and facilitating precise policy interventions aimed at achieving targeted goals.

NITI Aayog

• NITI Aayog, established on January 1, 2015, succeeded the Planning Commission with a distinctive focus on a 'Bottom-Up' approach.
• Embracing the vision of 'Maximum Governance, Minimum Government' and echoing the ethos of 'Cooperative Federalism,' NITI Aayog serves as a dynamic institution facilitating collaborative decision-making.

Functional Components: NITI Aayog operates through two principal hubs-

• Team India Hub: This hub is a crucial interface, fostering effective communication and collaboration between the states and the central government.
  • It plays a pivotal role in aligning the diverse interests of different regions in the spirit of cooperative federalism.
• Knowledge and Innovation Hub: This hub is dedicated to enhancing the intellectual capacity of NITI Aayog. It functions as a think tank, driving innovative ideas and knowledge creation to inform policy decisions and contribute to the overall development agenda.

INDICES of NITI Aayog:

• Composite Water Management Index
• District Hospital Index
• Export Preparedness Index
• Global Innovation Index
• India Innovation Index
• Multidimensional Poverty Index
• School Education Quality Index
• SDG India Index
• State Energy Index
• State Health Index

Why is it in the News?

As the union government constituted the 16th Finance Commission (FC), experts recommend including variables related to climate change, beyond forest cover.

Background:

• In the contemporary era, India has gained prominence as a key participant in global initiatives aimed at addressing climate change and promoting increased forest coverage.
• This engagement has not only positively impacted environmental sustainability but has also strengthened the adaptability of communities and ecosystems.
• In addressing the hurdles presented by climate change, the concept of fiscal federalism, with a specific focus on the role of the Finance Commission (FC), has emerged as a crucial factor in encouraging states to prioritize conservation endeavours.

Role of the Finance Commission in Fiscal Federalism and Forest Conservation:

• Promoting Conservation Initiatives: The Finance Commission's role has been pivotal in actively promoting and incentivizing state-led efforts towards forest conservation.
• Through dedicated fund allocations, the Commission acknowledges the inherent connection between vibrant forests, sustainable ecosystems, and the overall national well-being.
• Financial backing serves as a catalyst, motivating states to prioritize conservation endeavours while safeguarding their economic interests.
• Balancing Revenue Capacities and Expenditure Needs: Beyond their biodiversity significance, forest resources represent valuable economic assets for states.
• The Finance Commission recognizes that preserving existing forests and augmenting forest cover density directly impact the revenue capacities and expenditure requirements of states.
• Finding an equilibrium between economically exploiting forest resources and ensuring their conservation becomes essential for achieving both environmental sustainability and economic prosperity.

Previous Instances of Finance Commission Initiatives in Forest Conservation:

• The Finance Commission’s formulae for tax sharing have evolved since the first one, constituted in 1951, for the period 1952-1957.
  • Since then, FCs have been constituted at intervals every five years with the 16th one currently being implemented.
• Initially, the formula for distributing tax among states respectively, known as horizontal devolution, gave significant weightage, around 80% to 90%, to the population of the states, meaning states with higher populations were given a higher share of the tax.
  • Then, the 7th FC drastically reduced the weightage assigned to the population to 25% and increased the weightage given to equity, in which income, land area, and sometimes infrastructure and fiscal discipline too, played a significant role in determining how much each state would receive from the central government.
• Similarly, there have been changes in determining the funds allocation for environmental initiatives.
  • The 12th FC (2005-10) dedicated Rs 1,000 crore for forest conservation across states.
  • The 13th FC (2010-15) enhanced this allocation to Rs 5,000 crore.
    • However, it is important to note that these grants comprised less than 0.05% of the total funds transferred from the central government to the states.
• Ecological Fiscal Transfers (EFT) – where public revenue is shared based on ecological indicators – were introduced in 2015 with the 14th FC which incorporated forest cover as a criterion for tax devolution, allocating it a weightage of 7.5% in the distribution formula for the tax-transfer during the period 2015-16 to 2019-2020.
  • The 14th FC (2015 to 2020) considered several recommendations and replaced the grants with a more prominent placement for the forestry sector — it dedicated 7.5 per cent of the divisible central tax pool to ecology and forests.
    • The allocation was based on the forest cover in each state.
• The 15th FC (2021–22 to 2025–26) extended this share to 10 per cent.
• Having mobilised and distributed over Rs 4.5 lakh crore to states against not only their forest cover but also forest density, the 15th FC effectively became the largest payment for ecosystem services (PES) systems in the world.
  • The Commission also gave grants to combat air pollution.
• The fiscal transfers that are earmarked for a specific department or programme have traditionally been much smaller than fiscal transfers to the general state budget.
  • For example, the specific-purpose grants for forestry under the 12th and 13th FC were a fraction of the general-purpose transfers (those not assigned to specific purposes) that followed under the 14th and 15th FC.
• The formula-based finance commission transfers are unconditional and are not tied to the Department of Forest or Ecology.
• Whether there is a need for conditions to ensure the funds are invested in the environment, at least in principle, the enticement of receiving larger general-purpose transfers should motivate states to invest in forest protection.
• Since 2005, the central government has been sharing annual forest grants with states.
  • These grants serve as both compensation and incentive mechanisms.
  • However, it remains unclear to what extent these grants have contributed to the increased forest cover in the states.

Addressing Complexities in the Intersection of Fiscal Federalism and Environmental Conservation:

• Harmonizing Conservation Costs and Economic Imperatives: Balancing conservation expenses with economic necessities becomes challenging, particularly for states grappling with financial constraints.
  • The substantial opportunity costs linked with forest preservation may strain state budgets, presenting a hurdle in garnering widespread commitment.
• Innovating Financing Models for Conservation: Traditional financing models for conservation may prove inadequate or unsustainable in the long term.
  • Overreliance on grants can create dependencies, hindering the development of self-sustaining mechanisms for conservation.
• Addressing Climate-Induced Economic Vulnerabilities: The repercussions of climate change pose considerable threats to economic stability, especially for states heavily dependent on climate-sensitive sectors.
  • Unpredictable weather patterns, floods, and forest fires can intensify existing vulnerabilities.
• Strategically Allocating Resources: The Finance Commission encounters the intricate task of strategically allocating resources to maximize both environmental and economic advantages.
  • Ensuring targeted funding for critical conservation initiatives while aligning with state development objectives demands a nuanced approach.
• Integrating Environmental Goals with Fiscal Capacity: States may grapple with aligning their environmental objectives with fiscal capabilities, potentially creating a gap between aspirations and implementation.
• Ensuring Equitable Participation: A potential risk exists where states with greater fiscal capacities may disproportionately benefit from conservation incentives, potentially exacerbating existing economic disparities.

The Potential Role of 16th Finance Commission's:

• Integrating Climate Considerations into Tax Devolution Framework: The 16th Finance Commission has the potential to bring about a transformative shift by integrating climate vulnerability and emission intensity as pivotal factors in the tax devolution formula.
  • This alignment directly supports India's Nationally Determined Contributions (NDCs) under the Paris Agreement, providing states with robust fiscal incentives to actively contribute to national climate goals.
• Implementing Performance-Based Grants for Key Sectors: Recognizing the instrumental role of specific sectors in achieving NDCs and Sustainable Development Goals (SDGs), the 16th Finance Commission could contemplate introducing performance-based grants.
  • These grants, which are specifically designed to help areas like renewable energy, sustainable land and forest management, and air pollution efforts, provide states with focused financial assistance and motivate them to take proactive steps toward change.
• Addressing Emission Reduction Challenges: Prioritizing emission reduction, the commission can focus on decarbonizing critical sectors like energy and transport.
  • This entails incentivizing states to embrace clean energy practices and fostering innovation to tackle persistent issues like crop burning.
  • Through strategic fund allocation, the 16th Finance Commission can drive tangible progress in mitigating emission sources.
• Funding Innovations for Ecological Challenges: Allocating funds to innovative solutions for ecological challenges induced by climate change becomes a crucial role for the 16th Finance Commission.
  • Whether supporting mangrove restoration to counter weather vagaries or addressing the escalating incidents of forest fires, the commission can catalyze research, development, and implementation of sustainable strategies.
• Utilizing Scientific Data for Informed Decision-Making: Leveraging advanced technology, the 16th Finance Commission can utilize scientific data, pollution inventories, and remote sensing to assess state vulnerabilities and mitigation efforts.
  • This data-driven approach ensures that fiscal decisions are rooted in empirical evidence, enabling the commission to design an effective and equitable performance-based system for fund allocation.
• Transforming into a Leader in Climate Readiness: Going beyond its traditional fiscal role, the 16th Finance Commission has the potential to evolve into a leader in India's climate readiness.
  • This transformation involves active participation in designing and implementing a fiscal blueprint that balances economic growth with environmental imperatives, guiding policies that meet present needs without compromising the ability of future generations to meet their own.

Conclusion

In the current juncture where India grapples with the intertwined paths of economic advancement and environmental safeguarding, the Finance Commission's significance in fiscal federalism cannot be overstated.

The 16th Finance Commission, poised to influence tax distribution principles and stimulate climate-conscious endeavours, emerges as a pivotal player in fostering a harmonious equilibrium between economic progress and ecological conservation.

By adopting strategic measures and pioneering innovative strategies, the Finance Commission has the potential to evolve into a formidable catalyst in India's pursuit of climate resilience.

Why is it in the News?

Jim Corbett Tiger Reserve has achieved success through comprehensive conservation strategies, including habitat protection, community involvement, and ecological sustainability. The reserve's efforts focus on maintaining a balance between wildlife conservation and the well-being of local communities, showcasing a commitment to the coexistence of both nature and people.

Background:

• India has a profound history of forest and wildlife conservation, marked by a notable achievement at the Corbett Tiger Reserve (CTR) in Uttarakhand.
• CTR has seen the successful implementation of comprehensive efforts and strategies, resulting not only in a remarkable rise in the tiger population but also establishing itself as a global exemplar in wildlife management.

About Jim Corbett National Park:

• Established in 1936 as Hailey National Park, Jim Corbett National Park holds the distinction of being India's first national park.
• In 1973, it gained Tiger Reserve status, becoming the pioneer in the Project Tiger initiative.
• Nestled in the Shivalik hills of the Himalayas, Corbett Tiger Reserve spans across the Pauri Garhwal, Nainital, and Almora districts of Uttarakhand.
• Renowned for its global record, it proudly hosts the highest tiger density, reaching 260 in 2022, a notable increase from 231 four years earlier.

Cultural and Economic Significance of Tigers in India:

• Beyond ecological importance, the tiger carries profound cultural and historical significance in India.
• The resurgence of tiger populations, particularly at CTR, represents a cultural revival and the renewed embrace of conservation values.
• The thriving eco-tourism industry illustrates the economic interdependence between local communities and tigers, highlighting the profound connection between wildlife and people at CTR.

An Overview of Effective Biodiversity and Tiger Conservation Plan at CTR:

• Implementation of a Comprehensive Strategy: CTR owes its success to the meticulous execution of the Tiger Conservation Plan, focusing on the well-being of both tiger populations and broader biodiversity.
  • Spanning 1288.31 sq km across Uttarakhand, CTR showcases the plan's efficacy in nurturing a flourishing ecosystem.
• Clear Division of Core and Buffer Zones: The foundation of the Tiger Conservation Plan lies in delineating core and buffer zones within the reserve, offering wildlife a sanctuary.
  • Core zones provide undisturbed habitats crucial for breeding, while buffer zones minimize conflicts between human settlements and wildlife.
• Increase in Tiger Population: Recent statistics highlight a significant rise in CTR's tiger population, from 231 to 260 in just four years.
  • This surge underscores the plan's success, safeguarding not only tigers but also the overall health and balance of the forest ecosystem.
• Maintenance of Rich Biodiversity: CTR's success extends beyond tiger numbers, encompassing a biodiverse landscape that attracts researchers, conservationists, and tourists.
  • The diverse flora and fauna contribute to ecological balance, fostering harmonious coexistence between predator and prey.
• Promotion of Ecotourism and Conservation: CTR's vibrant ecosystem has made it a hub for ecotourism, creating economic opportunities for local communities.
  • Tourists contribute to both nature appreciation and the local economy, making conservation and tourism mutually beneficial.
•  Effective Grassland and Water Management: CTR employs a nuanced approach to grassland management with 27 grassland types, crucial for sustaining prey species.
  • Strategic water management, including solar-pump-fed waterholes, supports diverse wildlife needs, ensuring a sustainable ecosystem.
• Dedicated Forest Staff: The dedicated forest staff, comprising foot-soldiers, mahouts, and guards, are integral to CTR's success.
  • Initiatives like timely wages and enhanced safety measures underscore the importance placed on the well-being of these unsung heroes.
• Focus on Wildlife Corridors and Habitat Protection: CTR prioritizes wildlife corridors for gene pool exchange, aligning with the Tiger Conservation Plan's recommendations.

Human-Wildlife Conflict at CTR:

• Increasing Incidents and Challenges: The upsurge in conflicts between humans, elephants, and tigers at CTR stems from factors like habitat encroachment, limited animal corridors, and the behavioral conditioning of predators.
  • Straying milch and domestic animals from villages become easy prey for tigers, leading to predatory behavior towards humans, especially in buffer forest areas.
• The Complexity of 'Wicked Problems': Described as a 'wicked problem' due to its intricate nature, human-wildlife conflict at CTR requires a nuanced and context-specific approach.
  •  CTR emphasizes the significance of every solution attempt, recognizing that there's no one-size-fits-all remedy, and continuous adaptation and innovation are essential for evolving conflict scenarios.

Strategies Implemented for Human-Wildlife Conflict Mitigation and Co-Existence Promotion at CTR:

• Forest Department Initiatives: Proactive measures by the forest department at CTR have successfully eliminated poaching activities, particularly along the sensitive southern boundary.
  • Dedicated foot soldiers, along with digital surveillance through the electronic-eye project, have played a pivotal role in reducing wildlife threats.
• Community Engagement Strategies: Community engagement is fundamental to CTR's approach to resolving human-wildlife conflicts.
  • Local stakeholders actively participate in conservation through initiatives like the Living with Tigers program, engaging villagers and school children in behavioral and response awareness.
  • This educational effort aims to deepen understanding of wildlife behavior patterns and promote practices that enhance safety for both humans and animals.
• Provision of Economic Incentives for Conservation: The forest department has initiated projects offering economic incentives for conservation, such as the beehive-fencing project.
  • Strategically placing beehives along village-forest borders, the resulting Corbee Honey brand is managed by local Eco Development Committees (EDCs), fostering economic cooperation and coexistence with local stakeholders.

Conclusion

• Corbett Tiger Reserve emerges as a triumph in wildlife conservation, embodying a comprehensive and integrated approach. Through careful habitat management and community engagement, CTR exemplifies the promise of sustainable coexistence between humans and wildlife. As an integral chapter in India's conservation story, the ongoing success of the reserve relies on the collaborative endeavors of the forest department, local communities, and passionate conservation advocates.

Why is it in the News

The recent observations by the International Monetary Fund (IMF) sparked reactions from the Indian Government in which it states that India’s general government debt, including the Centre and States, could be 100% of GDP under adverse circumstances by fiscal 2028.

Context:

• India’s economic landscape has undergone scrutiny as the International Monetary Fund (IMF) made two noteworthy observations.
• The IMF report not only acknowledged India’s effective inflation management but also presented a balanced outlook for the country’s economic growth.
• To analyze the IMF’s insights on India’s economic situation, one must understand the broader global context in which these observations were made.

Insights from the IMF on India's Economic Landscape:

Exchange Rate Reclassification:

• A pivotal observation by the IMF is the reclassification of India's exchange rate regime from floating to a stabilised arrangement.
• This reclassification raises questions about the flexibility of the currency and its alignment with market forces, indicating a perception of a more controlled and stabilised environment, potentially influenced by central bank (RBI) interventions.

Debt Sustainability Concerns:

• The IMF expresses significant concerns about the long-term sustainability of India's debts.
• The report projects that, under adverse circumstances, India's general government debt could reach 100% of GDP by fiscal 2028.
• This highlights the imperative for careful debt management strategies, particularly as India confronts substantial investment requirements to meet climate change mitigation targets and enhance resilience to climate stresses and natural disasters.
• It's crucial to note that these IMF insights are framed within the global context of increasing public debts, recognizing that India's economic challenges are interconnected within a complex web of global economic phenomena.

The Global Debt Scenario in a Broader Context:

Dual Nature of Debt: Accelerator vs. Drag on Development:

• Globally, government borrowings have been instrumental in fostering development, supporting infrastructure projects, social programs, and economic growth.
• However, the IMF's concerns emphasize the potential drawbacks of this strategy, as limitations in accessing financing, rising borrowing costs, currency devaluations, and sluggish growth can transform debt from a catalyst into a hindrance.
• The United Nations' assertion that countries face a challenging dilemma between servicing their debt or serving their people encapsulates the inherent difficulty in managing debt for sustainable development.

Surging Global Public Debt Trends:

• According to the UN, global public debt has surged more than fourfold since 2000, surpassing the tripling of global GDP over the same period.
• In 2022, global public debt reached USD 92 trillion, with developing countries contributing nearly 30% to the total, and China, India, and Brazil accounting for a significant portion (70%).
• The acceleration of debt in developing nations over the past decade is attributed to heightened development financing needs exacerbated by the COVID-19 pandemic, the cost-of-living crisis, and the impact of climate change.

Asymmetric Burden on Developing Countries:

• The burden of debt is unevenly distributed between developed and developing nations, with developing countries often facing higher interest rates even without considering exchange rate fluctuations.
• This well-documented disparity reveals that countries in Africa, for instance, borrow at rates four times higher than the United States and eight times higher than Germany, undermining the debt sustainability of developing economies.

Increasing Debt Levels and the IMF's Perspective:

• The number of countries grappling with high levels of debt has surged from 22 in 2011 to 59 in 2022, highlighting persistent debt challenges in developing nations.
• The IMF's projections for India should be understood in the broader context of a global debt conundrum.

Challenges Facing India's Economic Landscape:

Increasing Public Debt:

• The central government's debt, amounting to ?155.6 trillion, constitutes 57.1% of GDP as of March 2023, with state government debts accounting for about 28% of GDP.
• Despite claims by the Finance Ministry that India's public debt-to-GDP ratio has marginally increased from 81% in 2005-06 to 84% in 2021-22, the 2022-23 figures indicate a return to 81%, surpassing targets set by the Fiscal Responsibility and Budget Management Act (FRBMA).

Balancing Public Debt for Sustainability:

• A significant challenge for India lies in achieving a delicate balance to ensure that public debt remains within sustainable levels.
• IMF projections indicate that India's general government debt, inclusive of both central and state governments, could reach 100% of GDP by fiscal 2028 under adverse circumstances, underscoring the need for meticulous debt management strategies.

Stagnant Credit Ratings:

• Despite being acknowledged as the fastest-growing major economy globally, India's sovereign investment ratings have remained stagnant since August 2006.
• Both Fitch Ratings and S&P Global Ratings have maintained India's credit rating at 'BBB-' with a stable outlook, the lowest investment-grade level, attributed to factors like weak fiscal performance and a burdensome debt stock.

Emerging Fiscal Challenges:

• Disruptions caused by the COVID-19 pandemic contribute to the current high debt-GDP ratio, with potential fiscal slippage in FY24 according to India Ratings and Research.
• Increased expenditure on employment guarantee schemes and subsidies, such as a higher fertiliser subsidy and overspending on the MGNREGA, pose challenges to fiscal stability.

Managing Short-Term Challenges and Election Dynamics:

• As India approaches general elections, increased subsidies are expected, but questions arise about the impact on employment growth and livelihoods in rural areas.
• Navigating these short-term challenges in an election year becomes a critical test for maintaining fiscal discipline and avoiding worst-case scenarios.

Way Forward:

• While the exchange rate reclassification raises potential concerns about excessive management, the focus on debt sustainability underscores the broader call for prudence in managing fiscal policies.
• The IMF's observations highlight the delicate balancing act India must perform—maintaining a stable exchange rate while ensuring long-term debt sustainability.
• There is a pressing need for new and preferably concessional sources of financing, increased private sector investment, and the implementation of carbon pricing or equivalent mechanisms to address long-term risks.

Conclusion:

Navigating the multifaceted challenges outlined by the IMF, India finds itself at a crucial juncture, necessitating a strategic approach to economic management. The IMF's observations, addressing concerns about debt sustainability and the reclassification of the exchange rate regime, underscore the importance of nuanced decision-making and long-term planning.

Why is it in the News?

A Qatar court has reduced the death sentences awarded to eight former Indian Navy personnel last month in connection with an alleged case of espionage.

What is the Case?

• Arrest of Eight Navy Personnel: On August 30, 2022, eight former Indian Navy personnel, accompanied by two others, were apprehended under undisclosed charges and subsequently placed in solitary confinement.
  • These individuals were affiliated with Al Dahra Global Technologies and Consultancy Services, a defense services provider company.
  • Sources indicate that the Indian nationals were privately engaged with the company to supervise the induction of Italian small stealth submarines U2I2.
  • The company's previous website, now defunct, mentioned its provision of training, logistics, and maintenance services to the Qatari Emiri Naval Force (QENF).
• Charges Against the Men: The specific charges against the individuals have not been publicly disclosed; however, media reports suggest that the eight Indians are accused of espionage on behalf of Israel.
• Death Penalty for Navy Veterans: In March 2023, after multiple unsuccessful bail pleas, the trial for the Navy veterans commenced, culminating on October 26, 2023, with the imposition of the death sentence on all eight men.
• India's Appeal: In November 2023, the Ministry of External Affairs (MEA) announced the filing of an appeal, revealing that its legal team possessed details of the charges.
  • The Indian ambassador in Doha visited the incarcerated individuals on December 3, providing consular access.
  • This access occurred shortly after Prime Minister Modi met Qatar’s Emir Sheikh Tamim bin Hamad Al-Thani during the COP28 summit in Dubai on December 1.

What Options Has India Explored?

• One avenue involves legal challenges, a step that has been acknowledged and has temporarily mitigated the sentence.
• Concurrently, India has actively utilized diplomatic channels to engage with the Qatari authorities.
• The families have submitted a mercy plea to the Emir of Qatar, leveraging the tradition of pardons granted during Ramadan and Eid, with support from the Indian government.

India-Qatar Bilateral Relations:

• Economic Ties: In recent years, the trade volume between India and Qatar has witnessed fluctuations.
  • During the fiscal year 2015-2016, trade between the two nations reached an impressive $10 billion.
  • However, recent years have seen a slight decline in trade due to falling gas and oil rates in the international market.
• Trade Statistics and Import Dependence: In the fiscal year 2022-23, India's total imports from Qatar amounted to $16.81 billion, primarily in fossil fuels like liquefied petroleum gas (LPG), plastics, and petrochemical products.
  • Conversely, India's exports to Qatar during the same fiscal year were valued at $1.97 billion, covering items such as cereals, copper articles, iron and steel products, vegetables, fruits, spices, and processed food items.
• Investment Interests and Collaborative Projects: Qatari authorities, particularly the Qatar Investment Authority, express interest in investing in India, focusing on infrastructure development, roads, highways, economic corridors, and projects related to gas and fertilizers.
  • India reciprocates with a keen interest in direct investments in liquefied natural gas, chemical industries, fertilizer production, urea, petrochemicals, and infrastructure projects.
• India's Growing Energy Needs: India, with its growing energy needs, has a robust energy partnership with Qatar, dating back to a 1990 agreement.
  • This commitment involves India purchasing 7.5 million tonnes of LNG annually for 25 years.
  • The collaboration was further strengthened in December 2015, with Qatar agreeing to augment its LNG supply to India by an additional one million tonnes annually.
• Collaboration in Defence Affairs: India's defense collaboration with Qatar focuses on training, mutual participation in conferences and events, and visits by Indian Navy and Coast Guard vessels.
  • Notably, the joint naval exercise 'Zair-Al-Bahr' showcases significant cooperation between the Indian and Qatari Navies.
  • Both nations are committed to combating the financing of terrorism.
• Cultural Interaction: The Indian Cultural Centre (ICC) plays a crucial role in overseeing Indian community associations in Doha.
  • Qatar's role as a co-sponsor of the United Nations General Assembly Resolution designating June 21 as the International Day of Yoga is highly valued by India.
• Indian Diaspora in Qatar: The Indian community in Qatar, numbering approximately 700,000, constitutes the largest expatriate group.
  • Their contributions span diverse sectors, including projects related to the Qatar 2022 FIFA World Cup, and annual remittances to India are estimated at around 750 million dollars.
• Indispensable Role of Qatar as an LNG Supplier: The cornerstone of the bilateral trade relationship lies in liquefied natural gas (LNG), where Qatar plays a pivotal role by meeting 80% of India's LNG requirements.
  • India imported a total of 19.85 million tonnes of LNG in the fiscal year 2022-23, with approximately 54% of this LNG.
  • This significant reliance on Qatar, both through long-term contracts and spot purchases, underscores the challenge of diversifying India’s sources of LNG.

Challenges in India-Qatar Bilateral Relations:

• BJP Spokesperson's Controversy: The initial strain in the relationship arose in June 2022 when BJP spokesperson Nupur Sharma made derogatory references to the Prophet on a TV show.
  • Qatar was the first country to object and demanded a public apology from India.
• Jailing of Navy Personnel: The second significant challenge involves the imprisonment of eight ex-Navy personnel.
  • This development caught New Delhi off guard, particularly given the substantial Indian expatriate community in Qatar, where 800,000 Indians live and work.
• Israeli-Gaza Conflict: The news of the death penalty for the Indians coincided with heightened tensions in the Middle East due to the Israeli bombardment of Gaza.
  • Qatar, with its strong sympathy for the Palestinians, has played a mediating role, including securing the release of American hostages from Hamas captivity.
  • Qatar's diplomats are actively engaged as regional mediators in the ongoing crisis.

Maximizing Opportunities for Strengthened Relations:

• Safeguarding Expatriate Workers: India must engage in negotiations aimed at ensuring the protection of the rights and well-being of its expatriate workers in Qatar, who have encountered various labour-related challenges.
• Cultural Exchange and Soft Power: Recognizing the widespread popularity of Bollywood among Qataris, India should actively explore diverse avenues for cultural exchange to amplify its soft power influence.
  • This cultural diplomacy can serve as a bridge for deeper understanding between the two nations.
• Cooperation in the Education Sector: The presence of esteemed Western universities in Qatar presents an opportunity for Indian students to access quality education abroad without the usual constraints of long distances and high living costs.
  • Strengthening cooperation in the education sector can further elevate the resilience and depth of the India-Qatar relationship, even in the face of seemingly intractable diplomatic challenges.
• Collaborative Environmental Sustainability: India and Qatar can forge a collaborative path towards fostering a cleaner and more energy-efficient environment.
  • Joint efforts in environmental sustainability can contribute to shared global goals.

Why is it in the News?

Indian banks continued to show improvement in their asset quality, with the gross non-performing asset (GNPA) ratio reaching a new decadal low as of September-end, according to a report by the Reserve Bank of India (RBI).

Key Points from the 'Trend and Progress of Banking in India' Report:

• The Gross Non-Performing Assets (GNPA) ratio of Scheduled Commercial Banks (SCBs) reached a decade-low of 3.9% by the end of March 2023, further declining to 3.2% by the end of September 2023.
• In the fiscal year 2022-23, approximately 45% of the reduction in Gross Non-Performing Assets (GNPAs) of SCBs was attributed to recoveries and upgrades.
  • The consolidated balance sheet of banks witnessed a notable growth of 12.2% in 2022-23, marking the highest in 9 years.
• The share of Public Sector Banks (PSBs) in the consolidated balance sheet decreased from 58.6% in March 2022 to 57.6% in March 2023, while private banks saw an increase from 34% to 34.7%.
  • As of March 2023, PSBs accounted for 61.4% of total deposits and 57.9% of total advances.
• With inflation persisting above the target, there is a possibility that monetary policy could remain in restrictive territory for an extended period.
• Acknowledging the growing interconnectedness between banks and Non-Banking Financial Companies (NBFCs), the report suggests that NBFCs diversify their funding sources and reduce reliance on bank funding.
• The central bank expresses concerns about banks lending to borrowers with influence, highlighting moral hazard issues that may compromise pricing and credit management.
• The Indian banking system is well-positioned for improvement, boasting better asset quality, high capital adequacy, and robust profitability.
• The financial indicators of NBFCs are anticipated to strengthen further, contributing to the overall resilience of the financial sector.

What are Non-Performing Assets (NPAs)?

• Non-performing assets (NPAs) refer to loans or advances in which the principal or interest payments have been overdue for a period exceeding 90 days.
  • In the context of banks, loans are considered assets due to the significant income generated through interest payments.
• When borrowers, whether individuals or corporations, fail to meet their interest obligations, the asset turns 'non-performing' for the bank, as it ceases to contribute to the bank's earnings.
• As per the Reserve Bank of India (RBI) guidelines, banks must publicly disclose their NPAs and report them to the RBI regularly.

The classification of NPAs includes:

• • Substandard assets: Loans that have been non-performing for up to 12 months.
  • Doubtful assets: Assets that have remained in the substandard category for a period of 12 months.
  • Loss assets: Assets deemed uncollectible, with little value, making their continuation as bankable assets unwarranted.
• NPA Provisioning involves setting aside a certain percentage of the loan amount as a provision.
  • The standard rate of provisioning in Indian banks ranges from 5-20%, depending on the business sector and borrower's repayment capacity.
  • In the case of NPAs, Basel-III norms require 100% provisioning.

Key metrics for understanding the NPA situation include Gross NPA (GNPA) and Net NPA (NNPA):

• GNPA: Represents the total value of gross NPAs for a bank in a specific quarter or financial year.
• NNPA: Obtained by subtracting the provisions made by the bank from the gross NPA, providing the precise value of NPAs after specific provisions.
  • NPA Ratios express NPAs as a percentage of total advances, offering insights into the recoverability of total advances. For example:
• GNPA ratio: The ratio of total GNPA to total advances.
• NNPA ratio: Utilizes net NPA to determine the ratio to total advances, considering the specific provisions made by the bank.

Government and RBI Initiatives to Address NPAs:

To tackle the issue of Non-Performing Assets (NPAs), the Indian government has implemented a series of comprehensive measures in collaboration with the Reserve Bank of India (RBI).

• Establishment of a Bad Bank: National Asset Reconstruction Ltd (NARC), operates as an asset reconstruction company with the primary objective of purchasing distressed loans from banks, thereby alleviating them of the burden of NPAs.
  • Once acquired, NARC endeavors to sell these problematic loans to distressed debt buyers.
  • Additionally, the government has established the India Debt Resolution Company Ltd (IDRCL) to facilitate the sale of stressed assets in the market.
• Empowering Banks through the SARFAESI Act, 2002: The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, enacted in 2002, empowers banks and financial institutions to take possession of collateral assets and execute their sale for the recovery of outstanding dues.
  • Crucially, this process does not necessitate intervention from the court.
  • The SARFAESI Act also provides provisions for enforcing security interests, allowing banks to issue demand notices to defaulting borrowers.
• Holistic Approach with the Insolvency and Bankruptcy Code (IBC), 2016: The Insolvency and Bankruptcy Code (IBC) establishes a comprehensive framework for the resolution of insolvency and bankruptcy in India.
  • It is designed to expedite the resolution process for stressed assets, fostering a creditor-friendly environment.
  • Under the IBC, both debtors and creditors have the authority to initiate insolvency proceedings against defaulting borrowers.
  • The creation of the National Company Law Tribunal (NCLT) and the Insolvency and Bankruptcy Board of India (IBBI) ensures effective oversight of the resolution process.

Significance of NPA Recovery:

• The recovery of NPAs assumes paramount importance in safeguarding the interests of depositors and stakeholders.
• Emphasizing compromise settlements, the focus should be on achieving maximum dues recovery with minimal expenses and within an expedited timeframe.
• In the pursuit of compromise settlements, public sector banks are urged to prioritize the interests of the tax-paying public over the borrowers.
• This aligns with the broader goal of ensuring that resolutions serve the greater public good.

Why is it in the News?

• While India has experienced positive outcomes from liberalization efforts, it is important to acknowledge a significant shortcoming—the country did not successfully establish a robust manufacturing foundation and underwent premature de-industrialization.
• It's crucial to recognize that no nation has achieved industrialization solely through deregulation.
• To facilitate the structural transformation of the economy, the implementation of a well-crafted industrial policy becomes imperative, with thoughtfully selected import restrictions serving as a key component of this policy mechanism.

The Make in India (MII) Initiative and Its Goals:

• Make in India Campaign: Officially inaugurated by Prime Minister Modi in September 2014, the Make in India campaign is a strategic effort aimed at advancing manufacturing, attracting foreign direct investment (FDI), fostering innovation, and generating employment opportunities within the nation.

Objectives of the Make in India:

• Advancing Manufacturing: The initiative strives to elevate India's status to a global manufacturing hub by encouraging both domestic and international companies to establish manufacturing units within the country.
• Attracting Foreign Investment: Make in India seeks to allure foreign direct investment by streamlining the business environment, simplifying regulatory norms, and providing incentives to foreign companies for investing in India's manufacturing sector.
• Infrastructure Enhancement: Emphasizing infrastructure development, the campaign focuses on improving key elements such as roads, ports, and logistics to ensure the seamless operation of manufacturing units.
• Skill Development: Recognizing the pivotal role of a skilled workforce in a thriving manufacturing sector, Make in India incorporates initiatives to enhance the skill sets of the Indian workforce, aligning them with the requirements of modern manufacturing.
• Innovation and Technology: The campaign places a significant emphasis on fostering innovation and integrating modern technology into manufacturing processes.
  • This strategic approach aims to enhance efficiency and competitiveness in the manufacturing sector.

Differentiating Made in India (MII) from Previous Policies:

• The Make in India campaign, launched in 2014, represents a departure from the self-sufficiency doctrine that India adopted in the 1970s.
  • It does not bring back memories of the licensing raj or import-substituting industries of the past.
• While concerns have been expressed about the implementation of Make in India, particularly in certain sectors where tariff duties are raised to provide protection and incentivize the establishment of domestic industries, it is crucial to note that the campaign is fundamentally different.
  • Worries about a potential spread of protectionist tendencies to other sectors, though possibly overstated, are not entirely unfounded, especially for those who experienced the challenges of the 1970s and 1980s.
• During those years, indiscriminate protectionism led to shortages, black markets, and widespread rent-seeking, all ostensibly in the name of the poor and distributive justice.
  • Producers who benefited from such protection actively advocated for its continuation.
  • Importantly, considering that an average mobile phone manufactured in India consists of 80-85 percent imported content (India Cellular and Electronics Association, 2022), it is empirically evident that Make in India significantly differs from the concept of self-sufficiency.
• Given these empirical distinctions, it is imperative to move beyond baseless comparisons and recognize the unique nature of the Make in India initiative.

Evaluation of Commitments and Performance of Make in India:

• A Sizeable Domestic Market Falls Short of Competitiveness in Exports: Make in India (MII) encompasses two related concepts, namely Made in India and Make for India, with MII serving as the foundational and overarching policy.
  • While Made for India focuses on manufacturing for the domestic market, it is essential to recognize that a substantial domestic market alone does not substitute for the crucial aspect of export competitiveness.
    • Historical examples, such as Japan, Korea, and China, underscore that export competitiveness has been a common feature of nations that have experienced significant economic growth.
• The necessity of an Effective Make in India Operation: Made in India functions as a branding strategy, promoting manufacturers rooted in Indian factors of production—land, labor, capital, entrepreneurship, technology, etc.
  • However, the success of Made in India hinges on the effectiveness of the broader Make in India operation.
• Alignment with National Manufacturing Policy (NMP 2011): Make in India was launched as a follow-up to prior initiatives, particularly the National Manufacturing Policy (NMP) of 2011, which aimed to cultivate a robust and competitive manufacturing sector.
  • The NMP 2011 identified challenges such as inadequate physical infrastructure, a complex regulatory environment, and insufficient availability of skilled manpower hindering manufacturing growth.
  • The policy set ambitious targets, including raising the manufacturing contribution to GDP from a stagnant 15 percent since the 1980s to at least 25 percent and generating 100 million additional jobs.
• Dynamic Objectives of Make in India: Beyond the objectives outlined in the NMP 2011, Make in India aspires to elevate India into a global design and manufacturing export hub.
  • In essence, Make in India envisions a transformation where India becomes a manufacturing powerhouse catering to the global market.

Requirement for Supplementary Industrial Policy Measures During Ongoing PLI Implementation:

• Diversified Articulation Beyond Production Linked Incentive (PLI): Beyond the current implementation of the Production Linked Incentive (PLI) scheme, there is a crucial need for an additional industrial policy tailored to sectors such as toys, readymade garments, and footwear.
  • A more nuanced and sector-specific articulation of industrial policies is essential to meet the unique requirements of diverse sectors.
• Emphasis on Job Creation: Industrial policy must prioritize job creation, especially in a country abundant in labour but with average educational attainments and skills.
  • Policies should be designed to create productive job opportunities, particularly focusing on labour-intensive manufacturing and opening avenues for women in the workforce.
• Addressing the Jobless Growth Critique: Acknowledging the criticism of jobless growth, the absence of quality jobs with social protection has contributed to this narrative.
  • Industrial policies should explicitly target mass job creation, considering both job quality and the provision of social protection.
• Navigating the Challenges of Inclusive Policy Formulation: The government should confront the complexities of formulating industrial policies that foster mass job creation, especially in comparison to policies solely focused on exports.
  • Inclusive policies that align with the overarching goal of creating high-quality jobs and ensuring social protection are essential.
• Treating Job Creation as the Benchmark: The effectiveness of industrial policies should be assessed based on their impact on mass job creation in India.
  • This underscores the significance of addressing concerns related to jobless growth and prioritizing policies that generate inclusive and high-quality employment opportunities.
• Confronting Labor Market Challenges: India's labour market research indicates the prevalence of low-paying, low-productivity, and largely informal jobs in the unorganized sector.
  • With more than 99 percent of India's 63 million micro, small, and medium enterprises (MSMEs) in the unorganized sector, there is limited flexibility for creating productive jobs.
• The assessment of how Make in India, complemented by other policies, has addressed these challenges is crucial.
  • However, the lack of frequent and short-interval official data poses a significant hurdle, necessitating attention to enhance policy efficacy through more regular and timely data collection.

Conclusion

A thorough examination of the nation's circumstances and capabilities is imperative for effective government decision-making.

• India must formulate an industrial policy that extends the advantages of technological advancements beyond just the privileged laptop class.
• However, it is essential to exercise caution in steering discussions on industrial policy, avoiding the pitfalls of showmanship, theoretical oversimplification, or misleading historical comparisons.
• The global landscape demands that India adopt a substantive industrial policy, placing a genuine emphasis on the significance of manufacturing.
• In this context, it is evident that there is no substitute for a well-considered and serious industrial policy.

Why is it in the News?

As per the Periodic Labour Force Survey (PLFS), published by the Ministry of Statistics and Programme Implementation, the female Labour Force Participation Rate has increased in the country in recent years.

News Summary:

• Recent data highlights a significant surge in women's engagement in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), reaching its highest point in a decade.
  • In the fiscal year 2022-23, women accounted for 57.47% of person-days, showcasing a notable increase from the previous year's 54.82%.
• Analyzing the broader landscape, statistics from the NREGS portal for the period up to December 24, 2023, reveal that out of a total of 238.62 crore person-days, women contributed 141.37 crore person-days, constituting an impressive 59.25%.
• The Periodic Labour Force Survey (PLFS), conducted by the Ministry of Statistics and Programme Implementation, provides further insights into the evolving dynamics of female labor force participation in the country.
  • Notably, the Female Labour Force Participation Rate (LFPR) has witnessed a substantial uptick in recent years, particularly in rural areas.
  • In the rural context, the LFPR soared to 30.5% in 2022-23 (July-June), a significant leap from 18.2% recorded in 2017-18.
• Complementing this positive trend, the female unemployment rate has experienced a noteworthy decline, dropping to 1.8% in 2022-23 from 3.8% in 2017-18.
  • These statistics collectively underscore a positive trajectory in women's participation and employment, signaling progressive changes in the socio-economic landscape.

What is Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)?

• The National Rural Employment Guarantee Act (NREGA) came into effect in September 2005.
  • In 2009, an amendment renamed the Act to the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
• Mandate: MGNREGA is designed with the primary objective of offering a minimum of 100 days of guaranteed wage employment within a financial year to every rural household whose adult members willingly engage in unskilled manual labor.
  • The operationalization of this guarantee is facilitated through the Mahatma Gandhi National Rural Employment Guarantee Scheme (Mahatma Gandhi NREGS).
• Funding Structure: As a Centrally-Sponsored Scheme, MGNREGS receives joint financial backing from both the Central government and the State governments.
  • This collaborative funding approach underscores the shared commitment to addressing rural employment challenges.
• Administrative Oversight: The Ministry of Rural Development is the overseeing authority responsible for the implementation and management of MGNREGS, emphasizing the central role of rural development in realizing the objectives of this significant initiative.

Key Characteristics of the Program:

• Enshrined Legal Entitlement: MGNREGA establishes a legal assurance for wage employment, granting every rural household the right to enroll in the program. Notably, the scheme mandates that at least one-third of its beneficiaries must be women. Legal provisions are in place to address situations where work is not provided on demand or when there are delays in wage payments, ensuring accountability and fair compensation.
• Demand-Driven Structure: This initiative operates on a demand-driven framework, responding to the explicit requests for work from wage-seekers. The provision of employment is triggered by the expressed demand, creating a responsive system that aligns with the needs of the community.
• Decentralized Implementation Model: State governments wield the authority to establish rules and modify relevant state schemes, fostering a decentralized mode of implementation. Gram Panchayats (GPs) play a crucial role by executing at least 50% of the work in terms of cost. Decision-making processes, including plans for works, site selection, and the order in which each task is initiated, occur in open assemblies of the Gram Sabha, ensuring community involvement and transparency.
• Parliamentary Accountability: An Annual Report, compiled by the Central Employment Guarantee Council (CEGC), detailing the outcomes of MGNREGA, is mandated to be presented annually to the Parliament by the Central Government. The CEGC, established under Section 10 of MGNREGA, is chaired by the Union Minister for Rural Development.
• Nationwide Coverage: MGNREGA extends its coverage across the entire country, with the exception of districts that boast a one hundred percent urban population, reflecting its comprehensive reach and impact.

Key Accomplishments of the MGNREGA Scheme:

Achievements in 2022-23:

• Employment opportunities were provided to 11.37 crore households.
• A total of 289.24 crore person-days of employment were generated, with specific allocations as follows:
  • 56.19% for women
  • 19.75% for Scheduled Castes (SCs)
  • 17.47% for Scheduled Tribes (STs).

What are the Challenges in Implementing the Scheme?

• Delay and Insufficiency in Funds Disbursement: Many states have not adhered to the mandated 15-day wage disbursement timeline under MGNREGA.
  • Moreover, workers face a lack of compensation for delayed wage payments, transforming the scheme into a supply-based program.
  • Consequently, worker interest in participating has waned.
  • Evidence, including a Ministry of Finance admission, points to insufficient funds as a key factor behind delays in wage payments.
• Caste-Based Disparities: Notable discrepancies in payment delays exist along caste lines.
  • While 46% of payments to Scheduled Caste (SC) workers and 37% to Scheduled Tribe (ST) workers were completed within the stipulated seven days, non-SC/ST workers experienced a dismal 26% compliance.
  • The adverse effects of caste-based disparities are particularly pronounced in economically challenged states like Madhya Pradesh, Jharkhand, Odisha, and West Bengal.
• Ineffective Role of Panchayati Raj Institutions (PRIs): Gram Panchayats, lacking autonomy, struggle to implement the act efficiently. Limited decision-making authority hampers their effectiveness in executing MGNREGA.
• High Number of Incomplete Projects: Delays in project completion and irregular project inspections pose challenges to MGNREGA.
  • Additionally, concerns regarding the quality of work and asset creation persist within the scheme.
• Fabrication of Job Cards: Issues related to the existence of fake job cards, inclusion of fictitious names, missing entries, and delays in updating job cards contribute to administrative challenges within the program.

Way Forward

• Enhanced Coordination among Government Departments: Improved collaboration is essential among various government departments and the development of a streamlined mechanism for the allocation and measurement of work.
  • This will contribute to a more efficient and transparent execution of projects.
• Addressing Gender Pay Disparities: Efforts should be directed towards rectifying discrepancies in payouts, particularly addressing the gender pay gap.
  • Currently, women in the sector earn, on average, 22.24% less than their male counterparts, emphasizing the need for gender-inclusive policies and fair remuneration practices.
• Prompt Commencement of Public Works: State governments should ensure the prompt initiation of public works in every village.
  • Workers arriving at worksites should be swiftly provided with employment opportunities, minimizing delays and optimizing the scheme's effectiveness.
• Empowering Gram Panchayats: Gram Panchayats should be equipped with ample resources, authority, and responsibilities to sanction works, meet demands for employment, and authorize timely wage payments.
  • This empowerment is crucial to eliminate delays in payments and enhance the efficiency of grassroots administration.
• Convergence with Other Government Initiatives: MGNREGA should be strategically aligned and integrated with other government schemes, such as the Green India initiative and Swachh Bharat Abhiyan.
  • This convergence will maximize the impact and effectiveness of these programs, fostering a synergistic approach towards holistic rural development.

Why is it in the News?

Good Governance Day 2023 is being celebrated today on the birth anniversary of former Prime Minister Atal Bihari Vajpayee, which falls on December 25th.

About Good Governance Day:

• December 25 marks the birth anniversary of the late Prime Minister and Bharatiya Janata Party leader, Atal Bihari Vajpayee.
• Origin: In 2014, the Prime Minister of India Narendra Modi declared December 25 as "Good Governance Day" to be celebrated nationwide.

Significance of Good Governance Day:

• Raising Governance Awareness: Good Governance Day aims to raise awareness among citizens regarding government accountability and efficient administration.
• Equitable Treatment of Citizens: This day emphasizes the fair and prompt delivery of various government services to ensure equitable treatment for the country's residents.
• Advancement of e-Governance: National Good Governance Day endeavors to advance "e-Governance" with the official event slogan being "Good Governance through e-Governance.