📰 Fed ex-Chair Ben Bernanke shares Nobel with 2 other U.S. economists
•Former U.S. Federal Reserve Chair Ben Bernanke, who put his academic expertise on the Great Depression to work reviving the American economy after the 2007-2008 financial crisis, won the Nobel Prize in economic sciences along with two other U.S.-based economists for their research into the fallout from bank failures.
•Mr. Bernanke was recognised on Monday along with Douglas W. Diamond and Philip H. Dybvig. The Nobel panel at the Royal Swedish Academy of Sciences in Stockholm said the trio’s research had shown “why avoiding bank collapses is vital.”
•With their findings in the early 1980s, the laureates laid the foundations for regulating financial markets, the panel said.
•“Financial crises and depressions are kind of the worst thing that can happen to the economy,” said John Hassler of the Committee for the Prize in Economic Sciences.
•“These things can happen again. And we need to have an understanding of the mechanism behind those and what to do about it. And the laureates this year provide that,” he added.
Danger of bank runs
•Mr. Bernanke, 68, who was Fed chair from early 2006 to early 2014 and is now with the Brookings Institution in Washington, examined the Great Depression of the 1930s, showing the danger of bank runs — when panicked people withdraw their savings — and how bank collapses led to widespread economic devastation.
•Mr. Diamond, 68, based at the University of Chicago, and Mr. Dybvig, 67, who is at Washington University in St. Louis, showed how government guarantees on deposits can prevent a spiraling of financial crises.
📰 Pakistan to take part in closing ceremony of SCO anti-terror exercise hosted by India
Officials sources confirm the country’s delegation has been invited for the exercise aimed at building synergy between Counter Terrorism Forces of SCO RATS member countries; India participated in JATE-2021 hosted by Pakistan
•Pakistan has been invited to the closing ceremony, on October 13, of the ongoing Joint Anti-Terror Exercise (JATE) within the ambit of the Shanghai Cooperation Organisation (SCO) being hosted by India, official and diplomatic sources confirmed.
•“Pakistan delegation has been extended an invitation for the closing ceremony on the last day of JATE ‘Manesar Anti-terror 2022’,” a diplomatic source said, which was confirmed by official sources.
•The National Security Guard (NSG) is hosting the multinational JATE “Manesar Anti-Terror 2022”, under the framework of the SCO Regional Anti-Terrorist Structure (RATS) at the NSG Manesar Garrison.
•It is understood that a Pakistan team is participating in the event as a member of the SCO, an official source said. India also participated in the RATS meet that Pakistan organised last year, the source noted. An Indian delegation had participated in the closing ceremony of the two-week JATE-2021 hosted by Pakistan at the National Counter Terrorism Centre, Pabbi, in Khyber Pukhtunkhwa, in September 2021.
•The exercise is aimed at exchanging expertise, best practices and build synergy between the Counter Terrorism Forces of the SCO RATS member countries to enhance capabilities for conducting anti-terrorist operations and countering other security threats collectively, the NSG said in a statement.
•In May, counter-terror officials of Pakistan, Russia, China and four Central Asian countries met in Delhi under the structure as India assumed its role as Chairperson of the SCO-RATS mechanism in October 2021. JATE is an annual counter terrorist exercise held within the framework of the SCO RATS.
•The statement issued by NSG on Sunday said that Stage-1 of the exercise was conducted from July 27 to August 01, 2022 by the National Counter Terrorism Forces (NCTF) of SCO member countries in their respective territories. “Stage-2 of the Exercise is being conducted from October 8 to 13 at NSG Manesar Garrison, in which eight representatives from NCTF of Republic of Kazakhstan, Kyrgyz Republic, Republic of Uzbekistan, Russian Federation and NSG of Republic of India are participating,” a statement issued by NSG on Sunday stated.
•The exercise will be witnessed by four “observers” from Executive Committee (EC) of RATS and one observer from State Committee for National Security of Tajikistan.
📰 Russia’s continued defiance of international law
•Despite widespread global condemnation, including a resolution in March 2022 adopted by 141 countries in the United Nations General Assembly (UNGA) demanding that Russia immediately and unconditionally withdraw from Ukraine, Moscow brazenly continues with its illegal military offensive against Kyiv. The resolutions by UNGA are not binding, but decisions by the International Court of Justice (ICJ) are. On Ukraine’s application, the ICJ, in a provisional measure ruling, again in March, ordered Russia to immediately suspend its military operations in Ukraine. Russia has not complied with this decision. In the meanwhile, Russian troops in Ukraine have been accused of indulging in war crimes under international humanitarian law. Ukraine is not only fighting a brave military battle to defend its sovereignty but is also using all possible levers under international law against Russia. It has moved international courts such as the ICJ, the International Criminal Court, and the European Court of Human Rights to put Russia in the dock. But nothing seems to dissuade Russian President Vladimir Putin’s revisionist and imperial designs. Mr. Putin is willing to go to great lengths to resurrect a Russian empire and attain mythical civilisational greatness even if that means striking at the very foundations of the post-war international legal order assiduously built on core values such as sovereignty and non-intervention.
Illegal annexation
•The newest item added to the long Russian list of barefaced violations of international law is the recent annexation of Donetsk, Luhansk, Zaporizhzhia, and Kherson — the four regions that are an integral part of Ukraine. Russia claims that these regions have had referendums and decided to join Russia. United Nations Secretary-General António Guterres has rightly pointed out that the so-called “referenda” in Ukraine were conducted in areas that are under Russian occupation. Thus, it is highly unlikely that the so-called referendums constitute a genuine expression of the popular will of the people.
•To somehow prove the legitimacy of his actions to the Russian people, Mr. Putin frequently invokes the UN Charter. Just before invading Ukraine, he referred to Article 51 of the UN Charter (which provides for self-defence against an armed attack). Mr. Putin was wrong since Russia faced no aggression from Ukraine. In his recent speech announcing the illegal annexations, he referred to Article 1 of the Charter. The reference particularly was to the right of self-determination of the people of these regions. Mr. Putin is wrong again. The contours of the right of self-determination under international law are debatable. This right, also provided in Article 1 of the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, provides that a group of people can freely determine their political status. But this right has to be read with Article 2 of the UN Charter which lists the principle of non-intervention as one of the seven core principles of the UN. Moreover, since the drafting of the UN Charter, the principle of self-determination has been understood in the context of decolonisation rather than the annexation of new territories on the pretext of self-determination.
Rules on occupation
•Under international law, Russia’s control over the four Ukrainian regions, before the so-called referendums, is known as ‘belligerent occupation’. Rules on belligerent occupation are explained under the Hague Convention of 1899 — the first treaty that laid down the laws of war. Article 43 of the Convention states that if “the authority of the legitimate power over territory” has “passed into the hands of the occupant, the latter shall take all steps in his power to re-establish and ensure public order and safety”. Furthermore, while doing so, the occupant shall “respect, unless absolutely prevented”, the domestic laws of the country whose territory it has occupied.
•Russia’s unilateral action of merging the four Ukrainian territories with it is a flagrant violation of Article 43 of the Hague Convention. The Article clearly states that Russia, being the occupier, only has ‘authority’ and not ‘sovereignty’ over these regions. Further, any change in this status, i.e. from ‘authority’ to ‘sovereignty’ can only happen with Ukraine’s consent. Moreover, Russia should have retained the existing Ukrainian laws of these regions. But Russia has made these regions part of its own territory, which means, Russian laws would apply there now.
•What is ironic is that the Hague Conferences were led by the Russian Tsar Nicholas II. For all the criticism of the West, Mr. Putin is not even following a law whose creation was led by his own countrymen.
Nuclear bluff
•In a recent speech, the Russian President, in an extremely irresponsible and provocative fashion, hinted at using nuclear weapons in the ongoing war. Consequently, the threat of a catastrophic nuclear war lingers in the background. Neither Russia nor Ukraine has signed the Treaty on the Prohibition of Nuclear Weapons. But here again, the UN Charter is helpful to understand the legality of these nuclear threats. The Charter provides the right of individual and collective self-defence, which means that if Russia launches a nuclear attack, not only Ukraine but also its allies can launch a counter-attack on Russia in collective self-defence. Furthermore, the Charter empowers the Security Council to take action even in the case of threat of force. Mr. Putin’s statement is a threat of nuclear war, i.e., the threat of use of force in the Charter terms. As such, nothing stops the UN Security Council from initiating action under Chapter VII of the Charter against Russia. Of course, it is not going to materialise, primarily because of Russia’s veto power as a UN Security Council member.
•Finally, ultra-realist foreign policy honchos will point to the irrelevance of international law as it has failed in restraining Russia. However, an autocrat’s defiance of international law does not diminish its importance. After all, there are scores of examples in contemporary times of totalitarian regimes violating their own country’s laws with impunity. But that does not make domestic law irrelevant. On the contrary, it underscores the need for everyone to boisterously emphasise its importance. Likewise, the need to articulate international law norms is highest in the face of its blatant violation. We should not end up on the wrong side of history.
In 2021, the crisis was most acute in Uttarakhand, Uttar Pradesh and Delhi where the occupancy rate crossed 180%
•A news report published in The Hindu on Sunday described how the Border Security Force (BSF) in the North 24 Parganas district of West Bengal is handing over illegal migrants with a clean record to Bangladeshi officials as prisons are overflowing in the State. If normal procedure were to be followed, these illegal migrants would have been lodged in correctional homes, the report added.
•The story has put the spotlight back on the age-old problem of overcrowded prisons in India. Data show that in 2021, the latest year for which numbers are available, over 5.54 lakh people were lodged in prison, while the total capacity of Indian jails was about 4.25 lakh. This means that the occupancy rate of Indian prisons was 130%, a peak at least in the last decade.
Breaking point
•Chart 1 shows the capacity of Indian prisons, the number of actual prisoners and the occupancy rate in the last decade. While the capacity has increased from some 3.32 lakh to 4.25 lakh in the last decade — a 27% increase — the number of prisoners has shot up from 3.7 lakh to 5.54 lakh in the same period — a 48% increase. This imbalance has caused the occupancy rate to surge from 112% to 130% in the last decade.
•The pan-India problem of overflowing jails has worsened in the last decade. However, it was most acute in three northern States/Union Territories — Uttarakhand, Uttar Pradesh, and Delhi. In these three regions, the occupancy rate crossed 180% in 2021 (180 prisoners for every 100 vacancies). Notably, in these three regions, the occupancy rate ranged between 60% and 75% in 2011. In fact, of the 36 States and UTs analysed, the occupancy rate increased in 26 of them in the past decade. And in 18 of them, the occupancy rate in 2021 was more than 100%.
•Chart 2 shows the occupancy rates of select States/UTs in 2011 and 2021. The highest increase was observed in Delhi, where the occupancy rate increased from 60% to 183% — a 122% point increase. Among the major States, significant decreases were observed in Chhattisgarh and Punjab where the occupancy rate decreased by 108% points and 51% points, respectively.
•Bangladeshi nationals dominate the foreign inmate population in India. Most foreign inmates are lodged in West Bengal prisons as the State shares a long border with the neighbouring country.
•Chart 3 shows the foreign inmates lodged in West Bengal jails as a share of total foreign prisoners. While there is a slight dip in recent years, the share has consistently remained above 30%. The chart also shows the share of Bangladeshi undertrials among the total number of foreign undertrials lodged in Indian jails. The share has remained above the 35% mark in recent years.
•When read along with the fact that the occupancy rates in West Bengal prisons have increased from 70% to 120% in the past decade, the BSF’s recent decision to hand over illegal migrants to Bangladesh appears justified.
Vacancies
•While on the one hand, jails are overflowing, on the other, the vacancies for prison officers are alarmingly high in some States. Also, the money spent on each prison inmate varies widely across States. Chart 4 plots prison officer vacancy in 2019 against the amount spent per inmate in ₹ in 2019-20. In Uttarakhand, Chhattisgarh, Bihar and Jharkhand over 60% of officer positions were vacant. And in Rajasthan, Madhya Pradesh, Punjab and Maharashtra, less than ₹20,000 was spent on each prison inmate in 2019-20.
📰 Throttled at the grass roots: how to strengthen decentralised governance
Local governments remain hamstrung and ineffective — mere agents to do the bidding of higher level governments. To curb these tendencies, gram sabhas and wards committees in urban areas have to be revitalised
•Its been 30 years since the 73rd amendment, which envisages a three tier Panchayat Raj System at the village, intermediate and district levels, was tabled in Parliament. This article by T.R. Raghunandan on September 9, 2019, talks about the failings of decentralisation and what must be done to revitalise gram sabhas and local government.
•Democratic decentralisation is barely alive in India. Over 25 years after the 73rd and 74th constitutional amendments (they mandated the establishment of panchayats and municipalities as elected local governments) devolved a range of powers and responsibilities and made them accountable to the people for their implementation, very little and actual progress has been made in this direction. Local governments remain hamstrung and ineffective; mere agents to do the bidding of higher level governments. Democracy has not been enhanced in spite of about 32 lakh peoples’ representatives being elected to them every five years, with great expectation and fanfare.
The ground report
•Devolution, envisioned by the Constitution, is not mere delegation. It implies that precisely defined governance functions are formally assigned by law to local governments, backed by adequate transfer of a basket of financial grants and tax handles, and they are given staff so that they have the necessary wherewithal to carry out their responsibilities. Above all, local governments are to report primarily to their voters, and not so much to higher level departments.
•Yet, none of this has happened, by a long shot. Where did we go wrong? Was the system designed to fail?
•The Constitution mandates that panchayats and municipalities shall be elected every five years and enjoins States to devolve functions and responsibilities to them through law. This is regarded as a design weakness, but on closer look, is not one. Given diverse habitation patterns, political and social history, it makes sense to mandate States to assign functions to local governments. A study for the Fourteenth Finance Commission by the Centre for Policy Research, shows that all States have formally devolved powers with respect to five core functions of water supply, sanitation, roads and communication, streetlight provision and the management of community assets to the gram panchayats.
Key issues
•The constraint lies in the design of funding streams that transfer money to local governments. First, the volume of money set apart for them is inadequate to meet their basic requirements. Second, much of the money given is inflexible; even in the case of untied grants mandated by the Union and State Finance Commissions, their use is constrained through the imposition of several conditions. Third, there is little investment in enabling and strengthening local governments to raise their own taxes and user charges. The last nail in the devolution coffin is that local governments do not have the staff to perform even basic tasks. Furthermore, as most staff are hired by higher level departments and placed with local governments on deputation, they do not feel responsible to the latter; they function as part of a vertically integrated departmental system.
•If these structural problems were not bad enough, in violation of the constitutional mandate of five yearly elections to local governments, States have often postponed them. In 2005, when the Gujarat government postponed the Ahmedabad corporation elections, a Supreme Court constitutional bench held that under no circumstances can such postponements be allowed. Subsequently, the Supreme Court rejected other alibis for election postponement, such as delays in determining the seat reservation matrix, or fresh delimitation of local government boundaries. Yet, in Tamil Nadu, panchayat elections have not been held for over two years now, resulting in the State losing finance commission grants from the Union government.
Downside of centralisation
•Successive Union governments have made a big noise about local involvement in a host of centrally designed programmes, but this does not constitute devolution. Indeed, the current Union government has further centralised service delivery by using technology, and panchayats are nothing more than front offices for several Union government programmes. The beaming of homilies over the radio to captive audiences of local government representatives does nothing to strengthen local governments.
•Union programme design for cities is inimical to decentralisation. The ‘Smart City’ programme does not devolve its funds to the municipalities; States have been forced to constitute ‘special purpose vehicles’ to ring fence these grants lest they are tainted by mixing them up with municipality budgets. There cannot be a greater travesty of devolution.
•Sadly, except for a few champions of decentralisation in politics and civil society, people do not distinguish the level of government that is tasked with the responsibility of delivering local services. Therefore, there is no outrage when the local government is shortchanged; citizens may even welcome it.
On corruption
•Are local governments as corrupt as they are alleged to be? Doubtless, criminal elements and contractors are attracted to local government elections, tempted by the large sums of money now flowing to them. They win elections through bribing voters and striking deals with different groups. Furthermore, higher officers posted at the behest of Members of Legislative Assemblies, often on payment of bribes, extract bribes from local governments for plan clearances, approving estimates and payments. Thus, a market chain of corruption operates, involving a partnership between elected representatives and officials at all levels. Yet, there is no evidence to show that corruption has increased due to decentralisation. Decentralised corruption tends to get exposed faster than national or State-level corruption. People erroneously perceive higher corruption at the local level, simply because it is more visible.
•To curb these tendencies, first, gram sabhas and wards committees in urban areas have to be revitalised. The constitutional definition of a gram sabha is that it is an association of voters. Because of our erroneous belief that the word ‘sabha’ means ‘meeting’, we try to regulate how grama sabha meetings are held and pretend that we are strengthening democracy. Cosmetic reforms of the gram sabha by videography of their meetings, does little for democracy. Consultations with the grama sabha could be organised through smaller discussions where everybody can really participate. Even new systems of Short Message Services, or social media groups could be used for facilitating discussions between members of a grama sabha. Second, local government organisational structures have to be strengthened. Panchayats are burdened with a huge amount of work that other departments thrust on them, without being compensated for the extra administrative costs. Local governments must be enabled to hold State departments accountable and to provide quality, corruption free service to them, through service-level agreements.
•Third, we cannot have accountable GPs, without local taxation. Local governments are reluctant to collect property taxes and user charges fully. They are happy to implement top-down programmes because they know that if they collect taxes, their voters will never forgive them for misusing their funds. The connection between tax payment and higher accountability is well known, but we wish to ignore these lessons.
•India’s efforts in decentralisation represent one of the largest experiments in deepening democracy. Decentralisation is always a messy form of democracy, but it is far better than the operation of criminal politicians at the higher level who appropriate huge sums of tax-payer money, without any of us having a clue. We can keep track of corrupt local government representatives; at the higher level, we will never know the extent of dirty deals that happen. We have given ourselves a reasonably robust democratic structure for local governance over the last two decades and more. It is for us to give life to this structure, through the practice of a robust democratic culture. If we do not tell our higher level governments to get off our backs so that we can better govern ourselves, they will not. It is as important to tell higher level governments to stay away as it is for us to hold our local governments to account.
📰 Building resilient mineral supply chains
•In his Independence Day address, Prime Minister Narendra Modi exhorted the country to pursue aatmanirbharta in energy by focusing on clean energy technologies. Concerns over the pricing and availability of oil and gas in the wake of the Ukraine crisis continue to fuel global policy debates on energy security. However, the fragility of clean energy supply chains obscures pathways for countries to reduce dependence on fossil fuels.
•Imported inflationary pressures through exposure to volatile oil and gas markets also pose risks to macroeconomic growth and stability, particularly for India, import-dependent for around 85% of its oil and half of its gas needs. Therefore, securing access to key minerals such as lithium, cobalt, nickel and rare earth metals is critical for building resilient and indigenous supply chains for clean energy technologies.
A challenging task
•This is challenging on several counts. First, reserves are often concentrated in regions that are geopolitically sensitive or fare poorly from an ease of doing business perspective. Second, a portion of existing production is controlled by geostrategic competitors. For example, China wields considerable influence in cobalt mining in the Democratic Republic of Congo through direct equity investments and its Belt and Road Initiative. Third, future mine production is often tied up in offtake agreements, in advance, by buyers from other countries to cater to upcoming demand.
•As a first step towards the sourcing of strategic minerals, the Indian government established Khanij Bidesh India Limited (KABIL) in 2019 with the mandate to secure mineral supply for the domestic market. Based on a CEEW study, here are suggestions that policymakers could consider to further this objective.
•First, figure out the mineral requirements of the domestic industry. This could best be accomplished by a task force which includes the ministries of power, new and renewable energy, heavy industry, and science and technology. Creating five-year road maps with clear targets for deployment and indigenous manufacturing across clean energy applications would provide visibility to domestic investors. Further, assess the technology mix that would support this deployment. On this basis, determine the quantities of minerals necessary to support indigenous manufacturing.
•Second, coordinate with the domestic industry to determine where strategic interventions by the government would be necessary for the purpose. KABIL could collaborate with industry to bolster its market intelligence capabilities for tracking global supply-side developments. Developing a granular picture of available and committed production capacities and economy-wide and sector-specific policy developments is the first step to develop an informed perspective on mineral supply. If there is adequate visibility on sourcing opportunities in conducive geographies, the private sector should be encouraged to secure minerals for its own requirements.
•Third, if conducive investments opportunities don’t exist, KABIL should pre-emptively sign offtake agreements with global mineral suppliers to secure future production. It could aggregate a reliable supply of minerals for domestic requirements and sign back-to-back sales agreements with the domestic industry. Such large-scale centralised national procurement could be done at preferential terms.
•Fourth, the government should jointly invest in mining assets with geostrategic partners. KABIL should make equity investments in mining jurisdictions that private sector investors may deem too risky. It should leverage government-to-government partnerships to mitigate investment risks. This could be done through joint investments with sovereign entities from geostrategic partners or private sector entities with expertise in specific geographies. The External Affairs Ministry could initiate conversations with partner countries. Establishing resilient clean energy supply chains is a priority for the Quad, for instance.
•Fifth, support technologies that utilise domestically available materials. The deployment of technologies such as sodium-ion batteries could reduce requirements for sourcing minerals from beyond India’s borders. While the current performance-linked incentive scheme on batteries is technologically agnostic, India could consider creating a tranche of capital to incentivise investments in technologies that rely on local raw materials. It could also propose co-development of such technologies with geostrategic partners.
•Lastly, develop policies on urban mining aimed at recycling mineral inputs from deployments that have completed their useful life. These could help further reduce dependence on international sourcing. Besides Ukraine, other potential geopolitical flashpoints also exist against a backdrop of dwindling multilateral cooperation. India must act immediately and decisively to mitigate these risks to its energy security.
