IASbaba’s Daily Current Affairs – 9th August, 2016
General Studies 2
Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure.
Government policies and interventions for development in various sectors and issues arising out of their design and implementation
General Studies 3
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Inclusive growth and issues arising from it
Competitive federalism is working
The passage of GST bill is a boost to government’s efforts for a unified taxation regime. But in reality, the 29 Indian states collectively have more impact on business competitiveness than the federal government.
The constant push by the central government to encourage states to strengthen their own business environment is creating a dynamic state atmosphere.
The states are having an unprecedented level of understanding of their own competitiveness and bringing out new tools to improve the business environment.
A few forward leaning states are even racing ahead of others
The concept of inter-state competition for international investment is not a new idea
Earlier, a series of conferences were organised by international investors with state CMs to understand the future of commercial ties.
“Emerging East” in Kolkata in 1997
“Dynamic South” in Chennai in 1999
“Progressive West” in Mumbai, in 1999
The time was of growth explosion of India’s Information Technology services sector.
States of Andhra Pradesh and Karnataka actively pursued investors to make Bengaluru and Hyderabad technology hubs.
However, change of political gears in both states in mid 2000s weakened the nascent competition dynamic.
Institute of Competitiveness: the economies of States in India are ranked across categories
investment-driven transition economies
Thus, some states have specialised factor conditions such as skilled labour, capital and infrastructure which others may not have
Hence, to make states catch up with each other is a fallacy. Many states require more support from central government.
The constitution has provided for ‘cooperative federalism’ than ‘competitive federalism’. With respect to that, states have to consider their strengths and increase their capacity to boost investment opportunities
Hope from new government
The role of central government is limited to directly intervene in the states with regards to investments
States manage to provide critical inputs like electricity, water, most of land acquisition, licences etc.
A step to increase state’ competitiveness includes Department of Industrial Policy and Promotion’s (DIPP’s) 98-point Assessment of State Implementation of Business Reforms.
It is a guidebook for the states which want to increase their relative competitiveness
It will be improved with release of NITI Ayog’s survey of business environment of the states at the end of 2016
All states don’t follow a similar approach. Some states focus on short term political gains at the cost of improving economy. Some states have long term vision to improve the state economy
Other measures include
Power sector bailout programme- UDAY
Redesigning operations of Planning Commission in form of NITI Ayog.
NITI Ayog has engaged state leaders as consultative body and have started preparing model laws for states which they can consider as per their need
Such initiatives are to encourage states to take appropriate actions as per need.
The businesses expect states to create business friendly environment
Some of the recent land and labour reforms undertaken in states are
Amendment of Land Acquisition and Rehabilitation Act
Elimination of the requirement of a social impact assessment
Elimination of consent clauses for certain types of development projects
Amendment of Maharashtra Land Revenue Code
Allowing sale of certain publicly-owned lands that were earlier earmarked only for leasing
Amendment of Gunthewari actà mid sized plots are divided and easing process to sell such plots
Passing the Rajasthan Urban Land (Certification of Titles) Bill, 2016
It offers the state guarantee of title after a land purchase
Approval of Uttar Pradesh Information Technology & Start-Up Policy 2016
It encourages start up growth, waves taxes on land purchased for office use and on built-up offices and also waves taxes on electricity dues for 5 years
Issued UP Revenue Code (Amendment) Ordinanceà allowed dalits with less than 3.5 acres to sell their land to non-dalits, among other things.
Passing many labour law reforms which makes utility workers to go on strike more difficult
It also reduces time for employees seeking redressal
Announcing a new retail trade policy which allows establishments to remain open for a longer time period.
It also relaxed labour laws and stoking limits
Allows women to work at night
Competitive federalism is not widely prevalent among all states
Yet, some states are making efforts an taking steps to strengthen their business environments (flexible land and labour reforms)
Such continued progress by states will have greater impact on India’s economic future
The 14thFC recommendation gives the much needed boost to states by giving them the power to decide to undertake the state-important matters on priority basis.
According to Economic Survey, more fiscal autonomy is conferred to states, both on the revenue and expenditure fronts, with states expected to get an additional Rs.2 trillion in transfers from the centre in 2015-16.
The Inter-state Council gives the states platform to interact with centre as well as amongst each other. The best practices of the states can be shared to give pep to introducing more friendly business environment
The union ministries are working at ministerial levels to further strengthen the union-state relation.
The labour ministry gave states the go-ahead to reform labour laws,
The skills ministry is working on a national skills policy by taking states along
The human resource development ministry calling a meeting of the state education ministers and authorities for bringing in a new education policy.
Thus, India with its immense diversity should have a sustainable decentralised structure which has the capacity to cater to the needs of ideas and aspirations of its population.
Connecting the dots:
Competitive federalism and cooperative federalism will complement each other with. Critically analyse.
Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.
Effect of policies and politics of developed and developing countries on India’s interests, Indian Diaspora.
India-Pakistan flaring tensions at SAARC
Last week (3rd Aug, 2016) home ministers from countries belonging to the South Asian Association for Regional Cooperation (SAARC) met in Islamabad.
The SAARC group includes India, Pakistan, Nepal, the Maldives, Sri Lanka, Bhutan, Afghanistan and Bangladesh.
The South Asian home ministers’ conference comes in the backdrop of growing strains on Pakistan-India ties as tensions flare between the nuclear-armed rivals over unrest in disputed Kashmir.
Was the conference successful?
The political differences between India and Pakistan have, for long, limited the progress of SAARC.
Therefore conference was aimed towards solving the tensions flaring between India and Pakistan through diplomatic process.
However, there were series of arguments about political courtesy and diplomatic protocol. The diplomatic process itself was disagreed and SAARC leaders could not break bread together.
All these suggest that the regional forum, SAARC, has become dysfunctional and a political disaster.
The fading SAARC initiatives
SAARC is a vital tool for India to achieve its goals of regional strategy and “neighbourhood first” policy.
There were efforts from India to involve Pakistan through negotiations either bilaterally or collectively under SAARC make the SAARC –
The first diplomatic act was two years ago when Modiji extended the invitation to all the leaders of the SAARC countries to attend the inauguration of his tenure as PM.
Modi also announced a number of new initiatives at the SAARC summit in Kathmandu at the end of 2014.
South Asian Motor Vehicle Agreement (MVA)
The South Asian MVA was ready for signature at the SAARC Kathmandu summit.
The MVA was aimed to pave the way for a seamless movement of people and goods across the South Asian countries’ borders for the benefit and integration of the region and its economic development.
But Pakistan refused to sign the MVA and made it clear that the civilian leaders in Islamabad were not free to build South Asian regionalism.
It rather opted for economic integration with China and has been blocking any move at trans-border commercial cooperation with India — negotiated either bilaterally or collectively under SAARC.
Bilateral Trade Liberalization
There was a massive effort in the last years of the UPA government on bilateral trade liberalisation as well as efforts to boost energy and electricity exports.
Then also Pakistan pulled back from agreements that its senior officials actively participated in drafting.
At the 2014 Kathmandu summit, Modi offered to build a SAARC satellite.
This initiative, too, has been stalled by Pakistan.
SAARC Minus Pakistan
In the past whenever Pakistan held back from such mutually-beneficial agreements, India simply threw up its hands.
However, this time (under NDA government) India is doing something very different: to move forward with other members of the SAARC.
India has decided to sign the multilateral motor vehicle agreement with Bangladesh, Bhutan and Nepal, which has given a big boost to regional economic cooperation in the eastern part of the subcontinent.
This process also opens the door for sub-regional economic cooperationthat is allowed under the SAARC charter.
India’s regional satellite will no longer be “SAARC satellite” because of Pakistan’s veto. But there nevertheless will be a “South Asian satellite”, thanks to Modi’s insistence on expanding civilian space cooperation with the rest of the subcontinent.
Therefore, India’s new approach has been called by some as “SAARC Minus Pakistan”.
Should India give up on SAARC or Pakistan?
The new approach does not mean that India will simply give up on SAARC or Pakistan. What Delhi has done is to create a pragmatic “two-speed SAARC” that will not let Pakistan hold others in the region to ransom.
Pakistan is free to choose its economic partners and decide a preferred set of partners. India, after all, can’t compel a sovereign Pakistan to cooperate. That does not, however, mean the rest of the subcontinent must remain a hostage to Pakistan’s problems with India.
Therefore, in the upcoming SAARC summit to be held in Pakistan later this year, India should try to reaffirm its commitment by maintaining patience with Pakistan and persistence with SAARC. However, at the same time India has to very actively engage with the rest of the subcontinent through all available means, unilateral, bilateral, sub-regional and trans-regional.
Connecting the dots:
The South Asian countries will soon have the SAARC summit. As a multilateral forum, what potential do you envisage for SAARC? Do you think a lot could have been achieved on the economic and internal security front through meaningful engagement of the participants? If so, why these ends have not been met? Critically analyse.
The political differences between India and Pakistan have, for long, limited the progress of SAARC. Critically discuss the efforts made by SAARC countries to forge a strong social and economic integration between their people. Can “SAARC Minus Pakistan” be better solution?