Editorial Analysis 30 July

POLITY and GOVERNANCE

 STATES SCORE MAJOR WIN ON FINANCIAL FREEDOM

Source: THE HINDU

 Introduction

• The Supreme Court's recent ruling regarding the taxation of minerals has significant implications for the relationship between the Centre and the States in India. The case highlights a longstanding debate over whether states have the authority to tax minerals within their boundaries, a matter complicated by various legal and constitutional considerations.

 Background of the Dispute

The dispute stems from the different interpretations of constitutional provisions and legislative acts:

• Constitutional Provisions: The Indian Constitution provides a framework for the division of powers and responsibilities between the Centre and the States. This includes a concurrent list, where both entities can legislate on certain matters.
• 1957 Act of Parliament: The Centre had enacted a law in 1957 which effectively denied the States the right to tax minerals within their boundaries, asserting exclusive central authority over such matters.

The Supreme Court's Ruling

The recent Supreme Court ruling was delivered by a majority of 8:1. The key points of the judgment are:

• Royalty vs. Tax: The Court distinguished between royalty and tax. Royalty is seen as a voluntary payment arising from a contractual obligation, while a tax is a mandatory payment imposed by the sovereign authority.
• States' Right to Tax: The Court upheld the States' right to tax minerals within their boundaries, rejecting the Centre's argument that the 1957 Act of Parliament overrides constitutional provisions allowing such taxation.
• Sovereignty and Constitutionality: The ruling emphasized that a parliamentary act cannot supersede constitutional provisions, reinforcing the constitutional authority granted to the States.

 Implications of the Ruling

The ruling has both positive and negative potential consequences for the Indian federal structure:

• Positive Consequence:
  • • Increased Revenue for States: States now have an additional source of revenue, which is crucial given their limited avenues for generating income. This can help in better financial management and development projects within the States.
• Negative Consequence:
  • • Tax Competition: There is a risk of tax competition among States, where they might engage in undercutting each other to attract businesses and investments. This could lead to a 'race to the bottom,' negatively impacting overall revenue collection and economic stability.

Way Forward

The judgment raises broader questions about the fiscal autonomy of States and the centralization of financial powers:

• State Revenues and Political Integrity: Historically, the distribution of revenue-raising powers was designed to maintain the political integrity of India. However, the economic and political landscape has evolved since the original constitutional design.
• Concurrent List Re-examination: The case highlights the need to re-evaluate the concurrent list in the context of contemporary India. The logic behind concurrent jurisdiction may need to be reconsidered to reflect current realities and ensure a more balanced distribution of powers.
• Delinking Politics from Economics: There is a call for the Centre to separate political considerations from economic governance, granting States greater autonomy in managing their revenues.

 Conclusion

• The Supreme Court's decision is a landmark in clarifying the States' rights to tax minerals and reinforcing constitutional principles over parliamentary acts. While it opens up new revenue opportunities for the States, it also brings challenges such as potential tax competition. The ruling highlights the need for ongoing dialogue and adjustment in India's federal structure to accommodate changing economic and political dynamics.

 

INTERNATIONAL RELATIONS

 

THE PROBLEM WITH INDIA’S BLOCKING OF THE CHINESE

Source: THE HINDU

 Introduction

• The article discusses the critical issue of India's dependence on foreign expertise, particularly from China, for its economic growth and industrial productivity. Despite recognizing the urgent need for skilled Chinese technicians, India's national security concerns and an inadequate domestic education system are hindering progress.

 Urgency of Foreign Expertise

Skill Gap Recognition

• Indian authorities acknowledge a significant skill gap between Indian and Chinese factory supervisors and workers. This gap is critical because Chinese professionals are highly productive, capable of significantly improving output with the same resources compared to their Indian counterparts.
• Indian industries, from footwear and textiles to engineering and electronics, have purchased advanced machinery from China. However, they struggle to use these machines productively without the expertise of Chinese technicians.

 Visa Challenges

• In 2019, Chinese nationals received 200,000 visas for work in India, but this number plummeted to 2,000 last year following tensions between Indian and Chinese troops in 2020. Security concerns and accusations of visa violations and money laundering against Chinese nationals have led to stricter visa regulations.
• Despite promises from Indian authorities to issue more visas for Chinese technicians, the process is slow and subjected to intensive screening, potentially hindering industrial productivity and economic growth.

The Role of Education

Educational Deficits

• India's weak education system exacerbates the need for foreign expertise. Unlike East Asian countries, which have robust education systems that support industrial growth, India lags significantly.
• For example, only 15% of Indian school students possess the basic reading and arithmetic skills required for an international economy, compared to 85% of Chinese children.

 Learning from East Asia

• The article highlights how countries like South Korea and China have successfully integrated foreign knowledge with strong domestic education systems to boost their economies.
• China, starting with a weaker education base than Korea, achieved rapid development by combining foreign expertise with improved primary education and sending policymakers on international study tours.

Current Reality and Missed Opportunities

Economic Stagnation

• India's growth in technology-related service exports has slowed post-COVID-19. Even graduates from premier institutions like the Indian Institutes of Technology (IITs) struggle to find jobs.
• Many workers in the IT sector have shifted to the gig economy due to declining job opportunities.

 Global Competitiveness

• Despite predictions by experts that India could become a global economic superpower, the country struggles with severe deficiencies in human capital. The "China-plus-one" strategy, which involves diversifying supply chains away from China, has seen countries like Mexico and Vietnam capitalize on the opportunity, while India lags behind.

National Security vs. Economic Growth

Self-Reliance Mantra

• The Indian government’s emphasis on self-reliance (Atmanirbhar Bharat) ironically comes at a time when the country increasingly relies on foreign expertise for economic growth.
• Blocking visas for Chinese technicians under the pretext of national security concerns could hinder the necessary technological and skill transfers needed to boost India’s industrial productivity.

 Conclusion

• The article argues that India's economic future hinges on addressing its educational deficits and embracing foreign expertise. Without significant improvements in education and a pragmatic approach to utilizing foreign skills, India risks falling behind in the global economic race. The current policies, driven by security concerns and self-reliance rhetoric, might hinder the nation's ability to capitalize on available opportunities for growth and development.

 

 ECONOMICS

 

MAKING APPRENTICESHIP VISION WORK FOR THE YOUTH

Source: THE HINDU

 Introduction

• The proposal for enhancing youth employment through internships is grounded in the recommendations of the National Education Policy (NEP) 2020. This policy emphasizes aligning higher education with market demands, integrating practical experiences, and developing soft skills among graduates.

 Enhancing Graduate Employability through Internships

Bridging the Gap Between Theory and Practice

• Practical Experience: Many graduates struggle with practical applications of theoretical knowledge. Internships offer hands-on experience, allowing students to apply what they've learned in real-world scenarios, thereby improving their problem-solving skills.
• Soft Skills Development: Internships also help in cultivating essential soft skills such as interpersonal communication, teamwork, and work-life balance, which are crucial for career success but often neglected in traditional academic settings.

 Curriculum and Credit Framework

• Integration in Education: The NEP 2020 introduces the Curriculum and Credit Framework for Undergraduate Programmes, which facilitates the inclusion of internships within degree programs. This framework ensures that internships are not just add-ons but integral parts of the curriculum, helping students gain relevant experience during their studies.

 Government and Industry Collaboration

• Budget FY25 Initiative: The government's proactive step to provide internships to 10 million youth over the next five years is significant. This initiative includes a monthly allowance of ₹5,000 and a one-time assistance of ₹6,000, which incentivizes participation from both students and companies.
• Top 500 Firms’ Involvement: Encouraging the top 500 Indian firms to offer internships ensures that students get opportunities in established and diverse sectors.

Expanding Internship Opportunities Across Disciplines

Diverse Fields

• Non-Technical Disciplines: Internships should not be confined to fields like business, engineering, and medicine. Students in disciplines such as science, commerce, sociology, history, and psychology can greatly benefit from internships relevant to their fields. For example:
  • • Sociology: Working with child immunization programs to understand social dynamics.
    • History: Interning at museums to gain insights into cultural preservation.
    • Psychology: Collaborating with public health initiatives and community mental health services.

 Variety of Organizations

• Beyond Corporates: According to UGC guidelines, students can intern in diverse settings like research labs, social organizations, government offices, small-scale industries, and courthouses. This broadens their exposure and enhances their versatility.

Inclusivity and Economic Participation

Focus on Marginalized Groups

• Equal Opportunities: By targeting students from marginalized communities, the internship scheme aims to reduce unemployment rates and ensure a more inclusive workforce.
• Economic Benefits: Increased participation from diverse socio-economic backgrounds boosts overall economic activity and productivity, fostering inclusive growth.

Implementation and Operationalization

Role of Higher Education Institutions (HEIs)

• Pre-Internship Preparation: HEIs must provide preparatory sessions to ensure students are ready for the professional environment. This includes setting clear learning objectives that align with career goals and providing an understanding of the tasks involved.
• Approved Sites and Supervision: Internships should be conducted at approved sites under proper supervision to ensure quality and accountability. Credits for these internships should be recorded through the Academic Bank of Credits platform.

 Organizational Efforts

• Supportive Environment: Organizations must create a conducive environment for interns, integrating them into the team and helping them understand operational workflows. They should not treat interns as substitutes for regular employees but provide meaningful, educational tasks.
• Ethical and Societal Understanding: Internships should also help students appreciate the societal responsibilities and ethical obligations of their professions, offering a holistic understanding of their future roles.

 Conclusion

• For the internship program to succeed, both organizations and students must put in significant effort. Organizations need to foster an inclusive and supportive environment, while students should approach internships with dedication and a willingness to learn. By opening their doors to interns and actively participating in the scheme, Indian firms can shape a skilled, employable workforce, thereby contributing to the country’s inclusive growth and prosperity.

ECONOMICS

 

BUDGET UNDERSCORES INDIA’S FOREIGN POLICY ASPIRATIONS

Source: HINDUSTANTIMES

 Introduction

• The Union Budget 2024 highlights a significant shift in India's foreign policy ambitions, reflected in the increased allocation for the Ministry of External Affairs (MEA). This budget aims to enhance India’s global presence and influence, especially in the context of rising geopolitical challenges and opportunities.

 Key Allocations and Their Implications

 

Increased Budget for the MEA	●Allocation Details: For the first time, the budget for the MEA has surpassed ₹22,000 crore, marking a 23% increase from the previous year. This is the highest-ever allocation for the MEA and signifies the government's commitment to bolstering India’s foreign policy initiatives. ●Focus Areas: The budget emphasizes special diplomatic expenditures, guarantee redemption funds, and funding for embassies and missions. This is crucial for expanding India's diplomatic reach and addressing emerging global challenges, such as China’s growing influence.
Special Diplomatic Expenditure	●Discretionary Spending: A significant portion (₹4,659 crore) is allocated to special diplomatic expenditure. This fund is crucial for discretionary spending, which helps India enhance its global influence and public diplomacy, particularly in the context of evolving global power dynamics. ●Guarantee Redemption Funds: Allocated ₹4,383 crore to guarantee redemption funds is aimed at covering doubtful debts from loans provided to the Export-Import (EXIM) Bank. This helps in projecting India as a reliable partner in global financial systems, especially within the Global South.
Strengthening Diplomatic Presence	● Embassies and Missions: Over ₹3,800 crore is allocated for embassies and missions, up from the previous year. This increase reflects India’s intention to strengthen its diplomatic presence and operational capacities abroad, vital for executing its foreign policy objectives.
Neighbourhood First Policy and SAGAR Vision	●Neighbourhood Assistance: Significant funds are reserved for India’s immediate neighbourhood, aligning with the Neighbourhood First policy and the Security and Growth for All in the Region (SAGAR) vision. Bhutan remains the largest recipient, although its allocation has slightly decreased, while other countries like Nepal, Sri Lanka, and Seychelles have seen increased assistance. ● Regional Influence: This allocation highlights India’s focus on building regional influence and providing support to neighboring countries, countering China’s presence and fostering regional stability.
Global and Multilateral Engagements	●Assistance to Multilateral Institutions: The budget continues to support global institutions such as the UN and regional bodies like the South Asian Association for Regional Cooperation (SAARC). Investments in institutions like South Asian University and Nalanda International University reflect India’s commitment to strengthening its global educational and research networks.
Reduced Allocations and Areas of Concern	● Reduction in Certain Areas: Assistance to countries like Mauritius, Myanmar, and Bangladesh has been reduced, reflecting challenges such as political complexities and slow project implementations. Similarly, assistance to Latin America and disaster relief has decreased, potentially impacting India's role as a global first responder.

 Structural Issues Hindering Implementation

• Partial Utilisation of Funds: Despite the increased budget, there are concerns about partial utilization of allocated funds. This often results from bureaucratic inefficiencies and delays in project execution, undermining the intended impact of the budgetary allocations.
• Slow Implementation of Projects: Slow implementation of projects, especially in the neighbourhood and developing countries, hampers the effectiveness of foreign aid and diplomatic initiatives. This can be attributed to procedural delays, logistical challenges, and inadequate monitoring.
• Short-Staffing: With staff strength of about 4,500, including only 1,000 Indian Foreign Service (IFS) officers, the MEA face significant staffing constraints. This shortfall affects the ministry’s capacity to manage its expanded responsibilities and projects effectively.

Recommendations for Improvement

• Enhanced Efficiency: Implementing measures to streamline financial and project management processes can help ensure that allocated funds are fully utilized and projects are executed in a timely manner.
• Increasing Staffing and Capacity Building: Addressing the staffing shortage through increased recruitment and capacity-building initiatives for existing personnel is essential. Training programs should focus on improving project management and diplomatic skills.
• Strengthening Monitoring and Evaluation: Developing robust monitoring and evaluation mechanisms can improve oversight and ensure that projects align with strategic objectives and deliver intended outcomes.
• Enhancing Coordination: Improved coordination between the MEA and other governmental agencies, as well as with international partners, can enhance the effectiveness of India’s foreign policy initiatives and aid projects.

 Conclusion

• The Union Budget 2024 signals a strategic focus on enhancing India’s global influence through increased diplomatic expenditures and foreign aid. However, addressing structural issues such as fund utilization, project implementation delays, and staffing constraints is crucial for the successful execution of these policies. By improving efficiency, expanding human resources, and strengthening monitoring mechanisms, India can better leverage its increased foreign policy budget to achieve its global ambitions.