📰 15th Finance Commission submits its report to President
The panel has come up with State-specific considerations to address the key challenges that individual States face.
•The 15th Finance Commission said it has taken the unique requirements of each of India’s 28 States on board and come up with State-specific considerations in its report submitted to President Ram Nath Kovind on Monday.
•Apart from its main recommendations for the devolution of funds between the Centre and the States for the period 2021-22 to 2025-26, the Commission has addressed all its unique terms of reference such as considering a new non-lapsable fund for financing national security and defence spending, and offering performance incentives for States that deliver on reforms.
•Apart from the main report uniquely titled “Finance Commission in Covid Times” which depicts a set of scales on its cover to denote balance between the Union and the States, the Commission has presented two more volumes as part of its submissions.
•The first one focuses on the State of the Union government’s finances, with an in-depth scrutiny of key departments, the medium-term challenges facing the Centre and a roadmap for the future. The other volume is entirely dedicated to States, with the finances of each analysed in great depth.
•The panel has come up with State-specific considerations to address the key challenges that individual States face, as per a statement issued by the Commission after its meeting with the President.
•The Commission’s chairman N.K. Singh was accompanied by members Ajay Narayan Jha, Anoop Singh, Ashok Lahiri and Ramesh Chand for the report’s submission to the President. The report is expected to be presented to Prime Minister Narendra Modi soon, and will be available in the public domain once it is tabled in the Parliament by the government along with an action taken report on its recommendations.
•“The Commission was asked to give its recommendations on many unique and wide-ranging issues in its terms of reference. Apart from the vertical and horizontal tax devolution, local government grants, disaster management grant, the Commission was also asked to examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so how such a mechanism could be operationalised,” said the statement, adding that the panel ‘sought to address all its’ terms of reference.
•Though its original remit was to make recommendations for the period 2020-21 to 2024-2025, the Commission had submitted an interim report for 2020-21 last year, stressing that it was difficult to make projections for five years when the economy is slowing down after structural reforms like GST and the insolvency code. The interim report had reduced States’ share in the divisible pool of taxes from 42% to 41% for the current year, after the dissolution of Jammu and Kashmir as a State.
New Delhi will support Maldives Foreign Minister's candidature for UNGA president.
•New Delhi and Male on Monday signed four agreements, including a $100 million Indian grant for an ambitious connectivity project, during Foreign Secretary Harsh Vardhan Shringla’s visit to the Maldives.
•In addition to two MoUs for “high impact” community development projects, the countries signed an MoU on cooperation in sports and youth affairs and another for the $100 million grant, which is part of India’s “$500 million package” for the Greater Male Connectivity Project (GMCP). Last month, the two governments inked a deal for a $400 million line of credit from the Exim Bank of India.
•Mr. Shringla’s visit comes two months after External Affairs Minister S. Jaishankar and Maldives Foreign Minister Abdullah Shahid held a virtual discussion, and about a fortnight after U.S. Secretary of State Mike Pompeo’s visit to the island nation. Amid New Delhi’s growing concern over China’s growing influence in the region, the ties with the Maldives have remained under sharp focus.
•“The MoUs, which we have signed today, are emblematic of our strong development partnership which is multi-faceted and designed to meet the specific requirements of the government and people of Maldives,” the visiting Indian Foreign Secretary said.
‘India first’ policy
•“We deeply appreciate the government of President Solih for its ‘India First’ foreign policy. This is reciprocated in full measure by our ‘Neighbourhood First’ policy in which the Maldives enjoys a very special and central place,” he said, even as the political opposition in the Maldives has been criticising the Solih administration for its “India tilt”. Former President Abdulla Yameen, who was dislodged from office in 2018, was widely perceived as a close ally of China. A statement from Mr. Solih’s office said he expressed his gratitude to the Indian government for agreeing to implement an air-bubble between the two countries, and remarked that increasing amounts of Indian tourists have visited the Maldives since the country reopened its international borders.
•Further, India reiterated its support for Maldivian Foreign Minister Shahid’s candidature for the Presidency of the 76th session of the UN General Assembly in 2021. Mr. Shahid, Mr. Shringla observed, had “best credentials”, while urging the Maldives to play a “more prominent role” at the UN.
📰 No fireworks: On NGT ban on sale and use of firecrackers
The NGT ban on firecrackers must spur the Centre to intensify anti-pollution measures
•In the year of the COVID-19 pandemic, it should surprise no one that the National Green Tribunal has prohibited the sale and use of firecrackers during Deepavali in the National Capital Region of Delhi and in urban centres that recorded poor or worse air quality in November last year. The directions expand on Supreme Court orders issued in the past, and provide some concessions to cities and towns that have moderate or better air quality, by allowing “green crackers” and specified hours for bursting. These stipulations are to extend to Christmas and New Year if the ban continues beyond November. The NGT took note that Odisha, Rajasthan, Sikkim, Chandigarh, the Delhi Pollution Control Committee and the Calcutta High Court had already responded to deteriorating environmental conditions by banning firecrackers this year. The tribunal’s reasoning giving primacy to the precautionary principle in sustainable development over employment and revenue losses is understandable. As the impact of COVID-19 became clear in March, and there were fears of a case surge during the winter, it was incumbent on the Centre to work with States and resolutely prevent the burning of farm stubble ahead of Deepavali. This annual phenomenon unfailingly fouls the air across northern and eastern India, and imposes heavy health and productivity costs. In the absence of pollution from agricultural residue, there might have been some room for a limited quantity of firecrackers, although climatic conditions at this time of year, of low temperature and atmospheric circulation, would still leave many in distress. Only damage control is possible now, including steps to address the concerns of the fireworks industry.
•Even without the risk of a COVID-19 surge, it should be evident to policymakers that their measures under the National Clean Air Programme, which seeks to reduce particulate matter pollution by 20% to 30% by 2024, must be demonstrably effective. By the government’s own admission, there were 148 days of poor to severe air quality during 2019 in the NCR, down from 206 days the previous year. Many other cities have a similar profile, but get less attention. With 40% of all pollution-linked deaths attributed to bad air quality in leading emerging economies and some evidence from the U.S. on higher COVID-19 mortality in highly polluted areas, it is time governments showed a sense of accountability on the right to breathe clean air. Tamil Nadu, where 90% of firecrackers are produced, has legitimate concerns on the fate of the industry this year, which, producers claim, represents about ₹2,300 crore worth of output. A transparent compensation scheme for workers, and suitable relief for producers may be necessary, although the longer-term solution might lie in broad basing economic activity in the Sivakasi region, reducing reliance on firecrackers.
📰 The real significance of the Biden win
Its impact on ties with New Delhi apart, it is more about whether it can re-energise India’s democratic values
•The Indian media has analysed the impact of a Joe Biden presidency on relations between the United States and India in some detail. Most commentators are right in saying there will be little overall change and what there is might be marginally beneficial: India will remain a potential ally in a troubled neighbourhood, defence and counter-terrorism cooperation will continue as will trade negotiations, and there will be greater potential for cooperation on climate change.
•They are also right in saying that there will be no more free passes for the Narendra Modi administration on human rights, in particular the targeting of Muslims, Islam and Kashmir; and right too in saying that while the Biden presidency will raise these issues with Indian counterparts, they will not significantly impact on other areas of cooperation.
Spotting the nuance
•Yet, in making these points, most commentators miss the nuance. Contrary to the Bharatiya Janata Party’s projection, U.S.-India ties did not strengthen under the Modi-Trump administrations (Mr. Trump weakened the U.S.’s ties to most countries, and India was no exception). The only moment at which U.S.-India ties really did display strength was during the Singh-Obama administrations. At that moment, India was no longer a potential ally for the U.S.; it was an ally, period.
•It is not that both countries did not strive for better ties earlier. Since the Cold War ended, the two countries have stressed common interests. But the process of outlining and acting upon these interests has been frustratingly slow. The first breakthroughs came during the Clinton-Vajpayee years, but they were in the nature of ‘getting to know each other’. Bill Clinton was eager but India’s traditional caution, coupled with Atal Bihari Vajpayee’s long silences, baffled U.S. policymakers.
•Manmohan Singh’s willingness to stake his entire political capital on the U.S.-India civil nuclear agreement made U.S. policymakers sit up. But the timing was off. The Bush administration depended on Pakistani cooperation for its war in Afghanistan, and India’s importance was mostly as a lever to pressure Pakistan. The chief progress was in trade, and it was considerable, with U.S.-India trade hitting close to $40 billion.
The Obama era
•It was only when Mr. Obama was elected President in 2009, with Mr. Biden as Vice-President, that ties truly deepened. Between 2009 and 2014, U.S.-India trade nearly doubled, the U.S. agreed on a strategic partnership with India, supported India for permanent membership of the UN Security Council and the Nuclear Suppliers Group, helped it become a member of the East Asia summit, promoted Indian engagement in Afghanistan and opening to Central Asia, encouraged the European Union to engage more closely with India, and strengthened military to military ties in the Indo-Pacific region.
•Post-2014, when the Modi administration came to power, most of these initiatives whittled down, including even counter-terrorism cooperation. U.S. military strategists were surprised by the weakness of India’s ‘surgical strikes’ on Pakistan in 2016 and 2019. This year, they were astonished by the Modi administration’s quiescence on Chinese intrusions into Ladakh, arguably the gravest security threat to India since the 1962 Sino-Indian war. While the U.S. military will continue such important symbolic gestures as joint exercises with the Indian military, few U.S. strategists see India as a major security asset in Asia. Even trade, though it continued to grow between 2014-2019, grew at a slower rate than in the preceding five years.
A time of value sharing
•In other words, the high points of the U.S.-India relationship occurred when both countries were governed by liberal democrats. Values do matter, despite what purported realists say. Indeed, they matter so much that when two countries share common values, the benefits accrue to the ordinary citizen. Manmohan Singh’s administration may take the greatest share of credit for lifting hundreds of millions of Indians into the middle class, but it is also true that he was aided by the Obama administration’s support for his cause. Indeed, it was President Clinton who first made support for such a cause a key part of the U.S.’s India policy, as he did for the U.S.’s Africa policies.
Issue of rights and a message
•Clearly, the Biden and Modi administrations will not share common values. While this gap may not directly impact U.S.-India ties, it will surely do so indirectly. Speculation on whether the Biden presidency will mount pressure on India’s lamentable state of human rights, which now rivals that of the McCarthy era, is already rife. India is not high on the Biden-Harris list of priorities, which is topped by dealing with COVID-19, healing domestic divides, reviving the U.S. economy, repairing ties with Europe, evolving a calibrated China policy, rejoining multilateral initiatives such as on climate change, reinstating the Obama-era Iran policy and furthering peacemaking in Afghanistan.
•So, the Modi administration has some time to put its house in at least token order on human rights, should the Prime Minister wish to do so. That is a big if, but it would make a big difference, not only in terms of much-needed human rights reforms and, especially in the case of Kashmir, political rights. At a time when the COVID-19 pandemic has driven so many economies inwards and virtually devastated our own, a U.S.-India business as usual approach will not help. We need countries that will actively work with us to revive our economy, even if their own benefit is less than ours.
•For a troubled democrat such as myself, however, the real significance of this U.S. election is not how it will impact U.S.-India ties but whether it can re-energise our democratic values. Mr. Biden’s win shows that even under an autocratic administration and deeply polarised society, such as the U.S. had, appeals to unity based on compassion, ‘decency and hope’, as Kamala Harris put it, can succeed.
•This is a lesson that our Opposition parties, independent institutions and civil society should take to heart. As we slide rapidly into autocracy, and are as deeply polarised as the U.S. (if not more), we desperately need leaders who will appeal to our better rather than baser instincts. It should give our Opposition leaders inspiration that the Biden-Harris message of healing, civilty and responsibility instantly struck a chord. They too can refuse to sink to the ‘era of demonization’ as Mr. Biden put it, no matter how much our hate-filled trolls try to draw them in.
A last takeaway
•Our judiciary and media can draw their own lessons from the U.S. example, where so many State-level courts and the national media fought back against Mr. Trump’s attempts to cow them. They paved the way for this election result. And for those of us members of civil society who care, here is the comforting Biden-Harris message: all is not lost, it never can be. Maybe Bihar will reinforce the point.
📰 Lessons from Vietnam and Bangladesh
With reforms promoting innovation and lowering the cost of doing business, India is poised to attract the best investments
•Vietnam and Bangladesh are on a roll. While Bangladesh has become the second largest apparel exporter after China, Vietnam’s exports have grown by about 240% in the past eight years. What has helped them? And what can India learn from them?
Two nations and their success stories
•An open trade policy, a less inexpensive workforce, and generous incentives to foreign firms contributed to Vietnam’s success. Vietnam pursues an open trade policy mainly through Free Trade Agreements (FTAs) which ensure that its important trading partners like the U.S., the EU, China, Japan, South Korea and India do not charge import duties on products made in Vietnam. Vietnam’s domestic market is open to the partners’ products. For example, 99% of EU products will soon enter Vietnam duty-free.
•Vietnam has agreed to change its domestic laws to make the country attractive to investors. Foreign firms can compete for local businesses. For example, EU firms can open shops, enter the retail trade, and bid for both government and private sector tenders. They can take part in electricity, real estate, hospital, defence, and railways projects. This model may not be good for India as it offers no protection to farmers or local producers from imports. Vietnam being a single-party state can ignore domestic voices.
•Over a decade or so, large brands such as Samsung, Canon, Foxconn, H&M, Nike, Adidas, and IKEA have flocked to Vietnam to manufacture their products. Last year, Vietnam received investments exceeding $16 billion. As a result, Vietnam’s exports rose from $83.5 billion in 2010 to $279 billion in 2019.
•In Bangladesh, large export of apparels to the EU and the U.S. make the most of the country’s export story. The EU allows the import of apparel and other products from least developed countries (LDCs) like Bangladesh duty-free. Sadly, Bangladesh may not have this facility in four to seven years as its per capita income rises and it loses the LDC status. Bangladesh is working smartly to diversify its export basket. India, as a good neighbour, accepts all Bangladesh products duty-free (except alcohol and tobacco).
•Vietnam and Bangladesh have gained enormously from trade. Trade has created wealth and employment and lifted millions above the poverty level in less than two decades. Which elements of Vietnam and Bangladesh models should India emulate?
•The key learning from Bangladesh is the need to support large firms for a quick turnover. Large firms are better positioned to invest in brand building, meeting quality requirements, and marketing. Small firms begin as suppliers to large firms and eventually grow. Vietnam has changed domestic rules to meet the needs of investors. Yet, most of Vietnam’s exports happen in five sectors. In contrast, India’s exports are more diversified. The Economic Complexity Index (ECI), which ranks a country based on how diversified and complex its manufacturing export basket is, illustrates this point. The ECI rank for China is 32, India 43, Vietnam 79, and Bangladesh 127. India, unlike Vietnam, has a developed domestic and capital market. To further promote manufacturing and investment, India could set up sectoral industrial zones with pre-approved factory spaces. A firm should walk in to start operations in a few weeks. There should be no need to search for land or obtain many approvals.
•The quick build-up of exports in Vietnam resulted from large MNC investments. But most of its electronics exports are just the final assembly of goods produced elsewhere. In such cases, national exports look large, but the net dollar gain is small. China also faces this issue.
Focus on organic economic growth
•Should a country promote trade at the expense of other sectors? To understand this, let’s look at the export to GDP ratio (EGR). Vietnam’s EGR is 107%. Such high dependence on exports brings dollars but also makes a country vulnerable to global economic uncertainty. The EGR of large economies/exporting countries is a much smaller number. The U.S.’s EGR is 11.7%, Japan’s is 18.5%, India’s is 18.7%. Even for China, with all its trade problems, the EGR is 18.4%. Most such countries, including India, follow an open trade policy, sign balanced FTAs, restrict unfair imports, and have a healthy mix of domestic champions and MNCs. While export remains a priority, it is not pursued at the expense of other sectors of the economy. The focus is on organic economic growth through innovation and competitiveness. With reforms promoting innovation and lowering the cost of doing business, India is poised to attract the best investments and integrate further with the global economy.
📰 The cost of clearing the air
Budgetary allocations alone don’t reflect the true cost of stemming air pollution
•In February, Finance Minister Nirmala Sitharaman announced a ₹4,400 crore package for 2020-21 to tackle air pollution in 102 of India’s most polluted cities. The funds would be used to reduce particulate matter by 20%-30% from 2017 levels by 2024 under the National Clean Air Programme (NCAP) though it isn’t clear what the budgetary outlays for subsequent years are likely to be.
•Though it was the largest-ever yearly allocation by a government to specifically tackle air pollution, the fine print revealed that only half the money was finally allotted to 15 States (and 42 cities in them) in November. The rest will be given in January based on how cities achieve certain ‘performance parameters’ that are still being worked out by the Centre.
The scale of the problem
•It is unclear if this amount is adequate to handle the task of improving air quality. For one, the scale of the problem is unknown. Delhi, after being the epitome of pollution for at least two decades, has only in the last two years managed to firmly install an extensive network of continuous ambient air quality monitors — about 37 and the highest in the country — managed by several government or allied bodies. There are several organisations with their own networks. It has also managed to conduct source apportionment studies and now, though still contested, has the minimum data to determine the degree of pollution that is contributed by its own activities (construction, road dust, vehicle movement) and that brought on from external sources such as stubble burning. Several research studies and numerous hours of litigation have contributed to establishing this and the actual taxpayer money that has actually gone into it far exceeds allocations that find mention in the Centre and State government’s budgeting books.
•Several of the States with the most polluted cities that have been allotted NCAP funds are expected to spend a substantial fraction in the act of measurement. Maharashtra and U.P., by virtue of their size, got the maximum funds: close to ₹400 crore.
•An analysis by research agencies Carbon Copy and Respirer Living Sciences recently found that only 59 out of 122 cities had PM 2.5 data available. Historically, cites have used manual machines to measure specified pollutants and their use has been inadequate. Only three States, for instance, had all their installed monitors providing readings from 2016 to 2018. Prior to 2016, data aren’t publicly available making comparisons of reduction strictly incomparable. Now manual machines are being replaced by automatic ones and India is still largely reliant on imported machines though efforts are underway at institutions such as the Indian Institute of Technology, Kanpur to make and install low-cost ones.
Cleaning up
•The funds don’t account for the trained manpower and the support system necessary to effectively maintain the systems and these costs are likely to be significant. Then comes the all-important aspect of cleaning up. A Right to Information disclosure sourced by the research agencies revealed that for four cities in Maharashtra ₹40 crore had been assigned. Pollution clean-up activities have been assigned 50% of this budget and another ₹11 crore are allotted for mechanical street sweepers. Depending on the specific conditions in every city, these proportions are likely to change. Therefore budgetary allocations alone don’t reflect the true cost of stemming air pollution.
•Also, money alone doesn’t work. In the case of the National Capital Region, at least ₹600 crore was spent by the Ministry of Agriculture over two years to provide subsidised equipment to farmers in Punjab and Haryana and dissuade them from burning paddy straw. Yet this year, there have been more farm fires than the previous year and their contribution to Delhi's winter air woes remain unchanged. A clear day continues to remain largely at the mercy of favourable meteorology. While funds are critical, proper enforcement, adequate staff and stemming the sources of pollution on the ground are vital to the NCAP meeting its target.
