UPSC Key— 9th April, 2024: SC on Karnataka drought, VVPAT, US-China trade fight and more

UPSC Syllabus:

Preliminary Examination: Indian Polity and Governance – Constitution, Political System, Panchayati Raj, Public Policy, Rights Issues, etc.

Mains Examination: GS II – Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

What’s the ongoing story– The bench of Justices B R Gavai and Sandeep Mehta was hearing the Karnataka government’s plea seeking a direction to the Centre to release financial assistance from the National Disaster Response Fund (NDRF) for drought management.

“Let there not be a contest,” Justice Gavai remarked as Senior Advocate Kapil Sibal, appearing for the state government, and Solicitor General Tushar Mehta, appearing for the Centre, traded charges. The Karnataka government has accused the Centre of not providing financial assistance for drought management. Sibal told the bench that the rules require the Centre to take a final decision on providing NDRF assistance within a month of receiving the Inter-Ministerial Central

Team (IMCT) report. For Karnataka, this period expired in December 2023, but there was nothing forthcoming, he submitted.

Prerequisites:

— What is the National Disaster Response Fund (NDRF)?

— What is the Disaster Management Act, 2005?

— What are the reasons behind drought in Karnataka?

— What are the features of Federalism in India?

Key takeaways:

— SC on Article 293: The plea “raises more than one substantial questions regarding interpretation of the Constitution” including whether “Article 293 of the Constitution vests a state with an enforceable right to raise borrowing from the Union government and/or other sources,” the SC had said, adding, “if yes, to what extent such right can be regulated by the Union government?”

— SC on Article 145(3):  “Since Article 293 (dealing with borrowing powers of states) of the Constitution has not been, so far, the subject to any authoritative interpretation by this Court, in our considered opinion, the aforesaid questions squarely fall within the ambit of Article 145(3) of the Constitution.”

— SC on Federalism:  It also raises “various questions of significant importance impacting the federal structure of governance as embedded in our Constitution.”

For Your Information: 

— The Karnataka government has approached the Supreme Court against the Union government, demanding the release of drought relief under the National Disaster Response Fund (NDRF). According to a memorandum the state submitted to the Central government, 223 of the 236 taluks or sub-districts were declared drought-hit. It pegged crop loss at 48 lakh hectares of land under cultivation. An Inter-Ministerial Central Team (IMCT) also visited the state to inspect the damage in October 2023. During the monsoon season last year, the rainfall deficit was 56 per cent in June (the third highest in 122 years) and 73 per cent in August (the highest in 122 years).

—  As The Indian Express previously explained, “During last year’s monsoon, Karnataka received rainfall that was 18 per cent below normal, the least since 2015. Even the post-monsoon period did not bring much rain to the state.” Further, southern India’s aquifers are rocky in nature and unable to hold much water at a time, meaning a lack of rain is felt more acutely.

— How is disaster relief deployed for Indian states? Under the 2005 Disaster Management Act, there is no definition of disasters. It can include any event arising from natural or man-made causes that can severely disrupt life for people, going beyond their coping capacity.

— States have the State Disaster Relief Funds, where the Centre contributes 75% of the funds (and 90% for Himalayan and northeastern states) and states contribute the remainder. The total amount is decided as part of the budgetary allocations and released periodically by the Centre.

— In case a state needs the Centre’s assistance, it must follow a procedure: (i) It should detail the extent of the damage in a memorandum and submit it (ii) If this is acknowledged by Centre, an IMCT conducts on-ground inspections to survey the damage (iii) A National Executive Team analyses the IMCT report (iv) Based on its recommendations, a High Level Committee shall approve the release of immediate relief.

— Additionally, the Union Ministry of Home Affairs oversees the utilisation of NDRF releases.

— Earlier, the Tamil Nadu government had also approached the SC, saying the Centre was not releasing funds for disaster management. Tamil Nadu claimed that the Centre is withholding national disaster relief funds, after Cyclone Michaung and consequent floods rocked the state in December 2023. 

— The Kerala government approached the Supreme Court in December 2023 arguing that the imposition and reduction of Kerala’s Net Borrowing Ceiling is unconstitutional as “Public Debt of the State” is a subject included in the state list and the central government cannot limit the states’ borrowing capacity.

Points to ponder:

— How is disaster relief deployed for Indian states or who funds disaster relief in India?

— Why is this already one of Karnataka’s worst summers yet?

— What is Article 145(3)?

— The concept of cooperative federalism has been increasingly emphasized in recent years. Highlight the drawbacks in the existing structure and the extent to which cooperative federalism would answer the shortcomings. (UPSC CSE 2015)

— Which one of the following is not a feature of Indian federalism? (UPSC Prelims 2017)

(a) There is an independent judiciary in India.

(b) Powers have been clearly divided between the Centre and the States.

(c) The federating units have been given unequal representation in the Rajya Sabha.

(d) It is the result of an agreement among the federating units.

Post Read Questions: 

— The Karnataka government’s petition seeks relief under _______________ of the Constitution, which relates to constitutional remedy. It allows citizens to approach the Supreme Court if they believe their fundamental rights have been violated.

— The ‘Nodal Ministry’ in the central government for management of natural disasters and NDRF is the Ministry of Home Affairs. (True/False)

Other Important Article Covering the same topic:

— Why the Karnataka govt has moved the Supreme Court against the Centre over drought relief

— Who funds disaster relief in India?

— The federalism debate: From Constituent Assembly speeches to Centre vs state relations in independent India

GOVT & POLITICS

Top court asks Coast Guard to reinduct woman officer

UPSC Syllabus:

Preliminary Examination: Current events of national and international importance.

                                                        Economic and Social Development – Inclusion

Mains Examination: GS I – Role of women 

                                            GS II – Statutory, regulatory and various quasi-judicial bodies.

What’s the ongoing story– Observing that the judiciary has to be the “flag bearer” and march with the nation, the Supreme Court on Monday pulled up the Indian Coast Guard (ICG) over the treatment meted out to a woman, who was discharged as a short service commission officer in 2021, and ordered the maritime force to re-induct her.

Coming down hard on the ICG for resisting grant of permanent commission to women officers, a bench headed by Chief justice D Y Chandrahud referred to the top court’s verdicts on grant of permanent commission to women officers in the Army, Air Force and Navy and said that the discrimination has to end.

Key takeaways:

— The bench directed the ICG to re-induct Priyanka Tyagi to the post which she occupied on the date of discharge from the service in 2023. Priyanka Tyagi has sought permanent commission to eligible women short service commission officers of the ICG.

— The bench did not agree with Attorney General R Venkataramani’s contention that comparing ICG to the Army, Navy and the Air Force was misconceived.

— “We have already given our judgments in matters related to Permanent Commission in the Army, Navy and the Air Force. The Indian Coast Guard unfortunately continues to remain an outlier… Look at the resistance for a woman joining the Coast Guard,” the CJI observed.

— The attorney general said he was not opposed to gender equality and was only referring to the facts of the case and the preparedness of the force to go about the changes.

— The ICG had  told the bench that the present recruitment rules related to short service commission officers specifically provide that they cannot seek permanent commission.

For Your Information:

— A permanent commission means a career until the age of retirement. Whereas, Short Service Commission jobs are for a few years. 

— In some SSCs, a few officers get to opt for permanent commissions based on available vacancies.

— The Indian Coast Guard is a multi-mission organization, conducting round-the-year real-life operations at sea. Nodal Ministry: Ministry of Defence. 

— ‘Secretary, Ministry of Defence vs. Babita Puniya’: In a landmark verdict on February 17, 2020, the top court had directed that women officers in the Army be granted permanent commission, rejecting the Centre’s stand on their “physiological limitations” as being based on “sex stereotypes” and “gender discrimination against women”.

Points to ponder:

— What are important duties of ICG?

— What is the process of recruiting women military officers?

Other Important Article Covering the same topic:

SC terms woman military officer’s 1988 discharge ‘illegal’: How courts have ruled for women in armed forces.

 

EXPRESS NETWORK

Need to develop joint culture in armed forces

UPSC Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: GS-III– Security Issues

What’s the ongoing story– Chief of Defence Staff (CDS) General Anil Chauhan on Monday said there is a need to develop a joint culture for the armed forces to distil the best of each service while respecting the uniqueness of each. He said the best of each service is needed to give a de novo approach to traditional concepts, while highlighting the need to integrate the capabilities of the services by creating structures that increase the military’s efficiency and enhance its war-fighting ability and interoperability. Gen Chauhan was addressing the tri-service conference, ‘Parivartan Chintan’, that brainstormed on fresh ideas, initiatives and reforms to push integration among the three services.

For Your Information:

— The CDS has a dual-hatted role which refers to the two hats the CDS wears: one of the permanent Chairman of the Chiefs of Staff Committee which has the three service chiefs as members, and the other of the head of the newly created Department of Military Affairs (DMA) in the ministry. The former is a military role while the latter is a role in the government; it is as the head of DMA that his major responsibilities within the ministry will be discharged.

— One of the key mandates of the CDS is to work towards the creation of theatre commands as part of a greater transformation.

Points to ponder: 

— What are the existing commands in India?

— Indian armed forces must prepare personnel to shoulder responsibilities at all levels of new unified commands. How will joint culture in the Indian armed forces help India? 

— The Army, the Navy and the Air Force — not departments of the ministry (True/False)

— The CDS commands the three service chiefs, and is the single-point military adviser to the government. (True/False)

— Have the service chiefs lost any of their major powers or tasks to the CDS?

Other Important Article Covering the same topic:

What are role, powers of CDS?

Indian armed forces must prepare personnel to shoulder responsibilities at all levels of new unified commands

 

Economy Page

What’s behind the latest US-China trade fight?

UPSC Syllabus:

Preliminary Examination: Economic and Social Development

Mains Examination: GS II & III: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora, Indian Economy and issue.

What’s the ongoing story- China’s burgeoning production of electric cars and other green technologies has become a flashpoint in a new US-China trade fight, highlighted by US Treasury Secretary Janet Yellen during her five-day visit to China and seized on by former US President Donald Trump in incendiary remarks on the campaign trail. China has sharply ramped up its production of cheap electric vehicles, solar panels and batteries.

— Concerns are growing not just in the US, but also in Europe and Mexico that China will seek to bolster its own struggling economy with a wave of exports that could undercut factories overseas.

Prerequisites: 

— How China’s auto industry poses an external threat?

— How much tariff US is implying on China on the import of cars?

Key takeaways: 

— According to the Paris-based International Energy Agency, China has built a substantial car industry that accounts for 60 per cent of global electric vehicle sales.

— Similar dynamics exist in other industries, such as solar panels, batteries and steel.

— The main concern is that the Chinese are building up a lot of capacity in many industries across the board, including these new technology sectors and if domestic demand does not pick up, they are going to be looking for markets outside the country.

— China is now the world’s largest producer of solar cells.

— Steel and aluminum imports surged into the United States roughly a decade ago, after China’s government supported increased production after 2008-09 global financial crises.

For Your Information: 

— The US administration has insisted that the vigorous competition with China must be backed by a dialogue on preventing the contestation from spinning out of control. The US administration has made major geopolitical gains in Asia over the last three years. These include stronger bilateral alliances with Japan, Korea, and Australia, the creation of a trilateral strategic framework with Tokyo and Seoul, a revitalised alliance with the Philippines, and new strategic partnerships with India and Vietnam.

— The US has elevated the Quadrilateral forum with Australia, India, and Japan to the summit level, and created a new forum called AUKUS with Australia and the United Kingdom.

— India’s emphasis should be on taking advantage of the new possibilities to strengthen its ties with the US, maintaining its long-standing ties with Russia, and managing the difficult ties with China.

Points to Ponder: 

— US-China climate deal

— Trade between US-China

— What is AUKUS?

— Impact of US-China trade war on India

Post Read Question

— How India can benefit from ongoing US-China trade fight in terms of a growing economy. Discuss.

Other Important Article Covering the same topic:

The US-China truce: Where India needs to assess the changes in great power relations

What a US-China climate deal means for COP28

Explained: The US-China trade war, and its impact on India

 

THE EXPLAINED PAGE

Why VVPAT was brought in, why oppn wants all slips verified

Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: GS II: Important aspects of governance, transparency and accountability.

What’s the ongoing story- With the first phase of voting set to take place on April 19, the Supreme Court (SC) last week said that petitions seeking 100% verification of Voter Verified Paper Audit Trail (VVPAT) slips would be taken up soon.

In March 2023, the Association for Democratic Reforms had filed a petition before the apex court saying that to ensure free and fair elections, the tally from Electronic Voting Machines (EVMs) should be cross-verified with the VVPATs. To make sure that this process is carried out as fast as possible, ADR suggested the use of barcodes on VVPAT slips.

Prerequisites: 

— What is a VVPAT machine?

— Election Commission

— Why VVPAT machines were introduced?

Key takeaways: 

— The VVPAT machine is attached to the ballot unit of the EVM, and provides visual verification for the vote cast by a voter by printing a slip of paper with the voter’s choice on it. This slip of paper, containing the candidate’s serial number, name, and party symbol, is displayed in the machine behind a glass window, giving the voter seven seconds to verify her vote. Following this, the slip falls into a compartment underneath.

— The idea of the VVPAT machine first emerged in 2010, when the Election Commission of India (EC), held a meeting with political parties to discuss how to make the EVM-based polling process more transparent.

— In 2023, the Conduct of Elections Rules, 1961 were amended to allow for a printer with a drop box to be attached to the EVM.

— The VVPAT was used for the first time in all 21 polling stations of the Noksen Assembly constituency of Nagaland in 2013.

— The 2019 Lok Sabha elections became the first general election to have 100% of EVMs being attached to VVPATs.

— In February 2018, the EC mandated the counting of VVPAT slips of one randomly selected polling station per Assembly constituency. This was increased to five polling stations per Assembly seat, following a Supreme Court judgment in April 2019 on a petition filed by TDP leader Chandrababu Naidu. The five polling stations are selected by a draw of lots by the Returning Officer concerned, in the presence of candidates/ their agents.

Legal cases surrounding the VVPAT

— Subramanian Swamy vs Election Commission of India (The SC ruled that a paper trail was indispensable for free and fair elections, and ordered the government to provide funding for the roll-out of VVPATs.)

— In 2019, Chandrababu Naidu moved the SC asking for a minimum 50% randomised VVPAT slips to be counted.

— As per a previous submission in the SC, the EC claims that it takes about an hour for election officers to match VVPAT slips with the EVM count in one polling station. The EC has also highlighted infrastructure challenges, including the availability of manpower, as obstacles to increasing the number of polling booths where VVPAT slips are counted.

For Your Information: 

— Opposition parties continue to call for verification of more polling booths to make voting more transparent.

— Parties have called for anything from 50% to 100% verification of VVPAT slips.

— The Opposition INDIA alliance, which includes the Congress, the Communist Party of India (Marxist), the Communist Party of India, the Trinamool Congress, the DMK and the Samajwadi Party, passed a resolution demanding 100% verification of VVPAT slips.

Points to Ponder: 

— How elections are carried out through an open ballot process?

— How Rajya Sabha MPs are elected?

Post Read Questions:

Consider the following:

1. The amendment in the Representation of People’s Act, 1951 allowed for a printer with a drop box to be attached to the EVM.
2. The candidates can take the slip with themselves printed through VVPAT machines.
3. The 2014 Lok Sabha elections was the first general election to have 100% of EVMs being attached to VVPATs.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) All three

(d) None

Other Important Article Covering the same topic:

— What are VVPATs, and why has Jairam Ramesh written to EC about them?

 

Dual Emergence (of Cicadas)

Syllabus:

Preliminary Examination: General issues on Environmental Ecology, Biodiversity and Climate Change.

Mains Examination: Conservation, environmental pollution and degradation, environmental impact assessment.

What’s the ongoing story- In a rare occurrence, 1 trillion cicadas from two different broods are expected to begin appearing in the Midwest and Southeast regions of the United States at the end of April.

— It’s the first time since 1803 that Brood XIX, or the Great Southern Brood, and Brood XIII, or the Northern Illinois Brood, will appear together in an event known as dual emergence.

Prerequisites: 

— What are cicadas?

— What is dual emergence of cicadas?

— IUCN status of cicadas

— What are different broods of cicadas?

Key takeaways: 

— The cicadas are expected to start emerging in late April. The temperature is the main factor which decides the emergence of cicadas.

— According to Kritsky, a retired professor of biology at Mount St Joseph University, the soil needs to reach a temperature of around 18 degrees Celsius at about 6 inches deep.

— Cicadas are insects that spend most of their lives underground and emerge from the soil mainly to mate. Once out of the ground, their life span is fairly short, somewhere between two-four weeks.

— At present, there are about 15 active broods of these cicadas as some have gone extinct. The insects are found in the America’s as well as New Zealand and Australia.

— A BBC Earth video described the adult cicadas as “clumsy” and “very edible”, due to their lack of defences because of which they “virutally offer themselves to their attackers” which may include turtles and other inhabitants in a forest.

For Your Information: 

Facts about Cicadas

— After emerging from the ground in billions, the cicadas shed their exoskeletons or outer skins to take their winged form. Their exoskeletons are frequently found attached to tree trunks and twigs.

— The lifespan of adult cicadas is short, about two to four weeks.

— Male cicadas “sing” to attract the females.

— The collective chorus of these male cicadas is very loud and can reach up to 100 decibels.

— After mating, the females lay their eggs in twigs that are ½ to ¼ in diameter.

— The eggs remain in the twigs for six to ten weeks before they hatch and after hatching the nymphs fall to the ground where they burrow 6-18 inches underground to feed and emerge 13 or 17 years later, depending on their grouping.

— IUCN Status: Near Threatened

— The bugs are beneficial to the environment, acting as natural tree gardners. The holes they leave behind when they emerge from the ground help aerate the soil and allow for rainwater to get underground and nourish tree roots in summer months.

Points to Ponder: 

— Are cicadas dangerous?

— What are the benefits of cicadas?

Post Read Questions:

— With reference to the cicadas, consider the following statements:

1. They emerge from the trees during the monsoon period.
2. They are classified as Vulnerable in the IUCN list.
3. Male cicadas sing to attract the females.
4. These bugs are harmul for the environment.

How many of the statements given above are correct?

(a) Only one

(b) Only two

(c) Only three

(d) All four

Other Important Article Covering the same topic:

Explained: The cicadas are coming out after 17 years, why they take so long to get wings

 

Zaporizhzhia attacked again: the nuclear risks from reckless military action

Syllabus:

Preliminary Examination: Current events of international importance

Mains Examination: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

What’s the ongoing story- A drone strike at the Zaporizhzhia nuclear power plant triggered a new crisis at the facility that has been repeatedly brought to the brink of disaster by the war between Russia and Ukraine.

— The International Atomic Energy Agency (IAEA), the global nuclear watchdog, confirmed there had been “at least three direct hits”, including on one of the six reactors at the plant.

— The IAEA said, this is a serious incident with potential to undermine integrity of the reactor’s containment system.

Prerequisites: 

— Where Zaporizhzhia is located?

— Other nuclear power plant of Europe.

— Difference between nuclear fussion and fission

— Dnipro river basin

Key takeaways: 

— Zaporizhzhia is one of five nuclear power stations in Ukraine, which meets almost half of its electricity demand through nuclear energy.

— The six reactors at Zaporizhzhia have the capacity to produce 5,700 MW of electricity.

– Nuclear power plants are connected to more than one external power source to run essential safety and security operations, including the crucial task of cooling the reactors.

— The Zaporizhzhia plant has six external power lines, but outages or disconnections during the war have on several occasions left it dependent either on a single external source or on generators. The facility has suffered complete blackouts on eight occasions since August 2022, and managed only on generators.

— The power station has also faced frequent shelling and mortar attacks from both sides, making it the most dangerous nuclear site in the world.

For Your Information: 

— The insides of nuclear reactors get heated to thousands of degrees Celsius, and have to be constantly cooled. This is usually done by a circulation of water, which is maintained through an external power source.

— Multiple power lines are usually available at nuclear stations, which are also equipped with generators to maintain additional layers of redundancies.

— The failure to adequately cool the reactors can result in meltdowns or explosions.

— For instance, in the Fukushima disaster of 2011, the nuclear plant itself survived the magnitude 9 earthquake, and shut down its operations in response. The resultant tsunami flooded the entire area, including the power station, which disabled all power lines and backup systems. As a result, three reactors at the facility suffered partial meltdowns and allowed the leakage of nuclear radiation.

— The IAEA has a team stationed at the Zaporizhzhia station, but its main job has been to offer technical advice to keep the facility safe, and to intervene in regular maintenance activities.

Points to Ponder: 

– How cooling system of a nuclear power plant works?

Zaporizhzhia nuclear power station is in control of which country?

Post Read Questions:

Consider the following pairs:

(Nuclear power plant) (Location)

1. Tihange                          Germany
2. Zaporizhzhia                 Ukraine
3. Fukushima Daiichi       Russia

How many of the pairs given above are correctly matched?

(a) Only one

(b) Only two

(c) All three

(d) None

Other Important Article Covering the same topic:

Explained: Zaporizhzhia nuclear plant in Russia-Ukraine war zone

Does the Zaporizhzhia nuclear plant face a fresh threat due to the Russia-Ukraine war?

 

The citizen’s ‘climate rights’

UPSC Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: GS II – Constitution of India

What’s the ongoing story– The Supreme Court has ruled that people have a “right to be free from the adverse effects of climate change”, which should be recognised by Articles 14 and 21 of the Constitution. The judgment by a three-judge Bench of Chief Justice of India (CJI) D Y Chandrachud and Justices J B Pardiwala and Manoj Misra, was delivered on March 21 in a case relating to the conservation of the critically endangered Great Indian Bustard (GIB). The judgment was made public on Saturday.

The Bench noted that the intersection of climate change and human rights has been put into sharp focus in recent years, underscoring the imperative for states to address climate impacts through the lens of rights.

Prerequisites: 

— What are GIB and Lesser Florican? 

— What was the case before the SC and what did the SC say? (Refer UPSC Key of April 8)

— What are the Article 21 and 14 of the Indian Constitution?

Key takeaways:

— The SC has historically acknowledged Article 21 as the heart of the fundamental rights in the Constitution. The SC has said that the right to life is not just mere existence, but that it includes all rights that make it a meaningful and dignified existence for an individual.

— In the 1980s, the SC read the right to a clean environment as part of Article 21. A bundle of rights — including the right to education, the right to shelter (in the context of slum dwellers), the right to clean air, the right to livelihood (in the context of hawkers), and the right to medical care — have all been included under the umbrella of Article 21.

—  However, these “new” rights cannot be immediately materialised or exercised by a citizen. 

—  That said, their express recognition as fundamental rights helps in two key aspects. First, as a nudge to Parliament to take note of these issues and second, by making constitutional courts an avenue for citizens to litigate these issues in future.

—  While dwelling on India’s international commitments to mitigate the impact of greenhouse gas emissions, the apex court also noted that despite many regulations and policies to address the adverse effects of climate change, there was no single legislation relating to climate change and attendant concerns.

—  However, the absence of such legislation, the Bench said, did not mean that Indians do not have a “right against adverse effects of climate change”.

For Your Information:

The apex court has, from time to time, seen environmental protection through the lens of rights. In M C Mehta v Union of India (1987), for instance, it treated the right to live in a pollution-free environment as a part of the Right to Life. Since then, several SC verdicts — including as late as March this year, in a case related to the mining major Vedanta — have underlined that people have a right to breathe unpolluted air, drink clean water and live a healthy life. In its ruling on climate change, the Court made important connections between human rights and global warming mitigation. “Without a clean environment which is unimpacted by the vagaries of climate change, the right to life is not fully realised. The right to health is impacted due to factors such as shifts in vector-borne diseases, rising temperatures, droughts, crop failures and storms,” it said. ( Express View on Supreme Court linking climate change and fundamental rights: A call to action)

Other Important Article Covering the same topic:

Right against adverse effects of climate change part of rights to life, equality: SC

 

THE EDITORIAL PAGE

Quality of Growth

UPSC Syllabus:

Preliminary Examination: Economic and Social Development

Mains Examination: GS III – Inclusive growth and issues arising from it.

What’s the ongoing story– Rajani Sinha writes: The Indian economy seems to be in a sweet spot with healthy growth, moderating inflation, strong FII inflows and healthy corporate and banks’ balance sheets. Recent economic data releases showing GDP growth at 8.4 per cent in the third quarter of 2023-24, PMI Manufacturing at a 16-month high of 59.1 in March are adding to economic optimism. Our credit ratio (number of rating upgrades to downgrades) is at a healthy 1.92 in the second half of 2023-24 (as against 10-year average of 1.57), reflecting the good health of the corporate and banking sector. But that’s not to say that all is well. There are still concerns lurking and the economy needs to tread cautiously in the new fiscal year.

The Central Question: With the Indian economy comfortably placed, it’s time to focus on inclusivity and sustainability. Why and how? 

Prerequisites:

–What are FII, PMI, FMCG, Capex, India’s current account deficit?

–What do these terms mean: Inflation, CPI inflation, Core Inflation, disinflation?

–How is GDP calculated? 

–What are different sectors in the Indian Economy and what are their current performances?

Key takeaways:

Healthy growth, moderate investment

–India has recorded above 8 per cent growth in the first three quarters of 2023-24, with chances of full year growth turning out higher than the advance estimate of 7.6 per cent.

–Growth in GDP has been mainly led by investment, while consumption growth remains weak. Consumption GDP is estimated to have grown by 3 per cent in the year, as against a pre-pandemic growth of 7 per cent (2018-19). 

–This data may come as a surprise to many, given the spending euphoria that we are seeing for items like cars, housing, jewellery and travelling.

–But lower price point categories like FMCG and apparels are somewhat feeling the pinch of cautious consumer spending by the masses.

–We need to be watchful of layoffs (coupled with weak hiring) in the IT sector and the impact of that on urban consumer sentiments.

–The government has continued its focus on capex. But a pickup in private investment will be a critical factor for a sustained growth momentum.

Services-led exports

–India’s economic growth in 2023-24 has been mainly led by the manufacturing and services sector, as the agriculture sector suffered from the adverse impact of poor monsoon.

–Sectors like hotels, auto/auto components, healthcare, realty, iron & steel, pharmaceutical and jewellery retailers have performed well, while chemicals, textile, cut & polished diamonds, etc, felt the pinch of weak external demand.

–Even while merchandise exports were weak due to the global slowdown, services exports remained healthy. Apart from software services, a good performance was also seen in business consulting and travel services. 

–Supported by healthy remittances and services exports, we estimate India’s current account deficit at a benign 0.6-0.7 per cent of GDP and at around 1 per cent in 2024-25. We have been seeing very strong FII inflows into the economy, even while net FDI inflows have moderated.

–However, this also warrants caution given the volatile nature of these flows.

On Inflation and credit: 

–CPI inflation has moderated below RBI’s target upper band of 6 per cent. Core inflation has slipped below 4 per cent in the last three months, with persistent disinflation in the services sector. However, high food inflation remains a concern.

–Even with higher interest rates, the Indian economy has been seeing a rapid rise in retail credit. As a precautionary step, the RBI has increased the bank’s risk weightage for unsecured personal loans. 

–This has led to some moderation in personal loans’ growth, but it remains high at around 18 per cent. This trend is here to stay given the changing consumption and saving pattern in the economy and easy access to credit.

–While so far there are no signs of stress in banks’ retail loans, there is a need to remain vigilant on this front. 

For Your Information:

GDP and  GVA

Udit Misra in his article writes that there are two ways to calculate GDP:

– One is to look at how people spend their money — the expenditure side of the economy — and the other is to look at the income side of the economy. The former is called the GDP and the latter is mapped by looking at the Gross Value Added (GVA).

– According to the RBI, the GVA of a sector is defined as the value of output minus the value of its intermediary inputs. This “value added” is shared among the primary factors of production, labour and capital.

– One can get the GDP from the GVA route as well by adding the indirect taxes earned by the government and subtracting the subsidies provided by the government

Point to ponder:

What’s the link between GDP growth and employment in India?

Post Read Questions:

1. Overall, the Indian economy is comfortably placed with GDP growth likely to be around 7 per cent in the ongoing financial year. What more can be done to push India’s potential growth to a higher level?

(Thought Process: Structural developments like digitalisation and increased formalisation appear to have pushed India’s potential growth to a higher level. Government should continue to focus on fiscal consolidation (as seen in the interim budget) and reduction in public debt that had shot up during the pandemic.)

Other Important Article Covering the same topic:

–On the road to Viksit Bharat, India should target per capita, not aggregate, GDP. Here’s why

– Important places in news in Russia and Ukraine.

 

THE IDEAS PAGE

Law in its own time

UPSC Syllabus:

Preliminary Examination: Indian Polity and Governance

Mains Examination: GS II – Indian Polity (Elections)

Mains Examination: 

What’s the ongoing story– While defending the principles enshrined in our Constitution, the country’s highest institutions — the legislature and the judiciary — should be guided by pragmatism and common sense. Unfortunately, when one takes an absolutist stance with no care for the practical implications of their actions, there are unintended consequences and economic costs eventually borne by common people in whose name these principles are being defended.

On May 28, 2012, and February 15, 2024, the legislature and the judiciary created history by passing laws and judgments with a retrospective effect. The retrospective tax (2012) was done to safeguard the country’s sovereignty which was threatened by tax avoidance of manipulative large corporations. In the case of the illegality of electoral bonds (2024), it was done to defend democracy from the rapacious intent of large corporations who could potentially manipulate government via “quid pro quo” to divert resources from the needy and downtrodden. Indeed, such lofty ideals of defending sovereignty and democracy from plunderers are so tempting that they often blind the best of us to the economic consequences of good intentions.

The Central Question: How does an electoral bond verdict put individual rights at risk? 

Prerequisites: 

— What are electoral bonds and what is the recent SC’s judgement on it? 

— What is “quid pro quo”?

— What is the rule of law?

— What is the meaning of the term ‘accountability’?

Key takeaways: 

— In both instances, the troublesome part of the actions was not the ideals or scrapping of the law, but the retrospective nature of its effect.

— The rule of law that the highest court has established through the electoral bonds judgment is that the most powerful institutions can strike at individual rights retrospectively by annulling a law. 

— The practical consequence of such a rule of law is that individuals must become excessively cautious since their actions can be judged illegal in the future.

— With the benefit of hindsight, the economic consequences of the retrospective tax law were a big blow to the confidence of private sector investment, since it introduced a nagging fear of expropriation by the government. 

— The practical consequence has been lower levels of private investment and the massive opportunity cost in terms of loss of additional jobs that would have been generated had the taxation law not been retrospectively applied.

—In India where there is one election or another every year, political parties (national and state) have an unquenchable appetite for funds. The old system encouraged black money and attracted those with the greatest capacity to break law and generate funds. 

For Your Information: 

The other argument: Court striking down this scheme is a landmark moment. It affirms principles of transparency and probity, and the people’s right to know. How?

— According to Express View on SC’s electoral bonds judgment: A vital verdict

Concerns over the scheme’s structure based on anonymous donations were voiced even by the Election Commission and the Reserve Bank of India. The bonds allowed donors and parties to keep their association hidden from the public — the State Bank of India, a government-owned bank, and not an independent institution like the RBI, could track the donations. 

The Supreme Court’s decision to strike down the changes in the law  introduced to create electoral bonds is, therefore, enormously welcome, especially because it is anchored in the citizen’s right to know. A five-judge bench headed by Chief Justice D Y Chandrachud ruled that the donor secrecy provision is “unconstitutional” and “arbitrary and violative of Article 14”. 

CJI Chandrachud set the tone for the verdict by stressing that,“information about funding of political parties is essential for the effective exercise of the choice of voting.” In the name of informational privacy, electoral bonds restrict the Right to Information to an unacceptable extent, the bench held unanimously.

The five-judge bench pointed out, “at a primary level, political contributions… enhance access to legislators. This access also translates to influence over policy making. There is also a legitimate possibility that financial contributions to a political party would lead to a quid pro quo arrangement because of the close nexus between money and politics.” 

The court has also pointed out that the ability of a company to influence the electoral process through political contributions is much higher when compared to that of an individual — both in terms of the quantum of money contributed, and the purpose of such contributions.

Attempts to make political funding more transparent must continue. As the SC has said, “There are means other than electoral bonds to achieve that purpose”.

The government must be guided by the principles of transparency and accountability as it gives the issue a deeper look. That’s the central message of the SC’s landmark verdict.

Post Read Questions:

— Democracy has strengthened in the country. How?

— The fundamental difference between government and judiciary is in the accountability of their actions. Discuss.

Other Important Article Covering the same topic:

With electoral bonds decision, SC makes amends

For any queries and feedback, contact manas.srivastava@indianexpress.com

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