IASbaba’s Daily Current Affairs – 15th September, 2016

IASbaba's Daily Current Affairs Analysis, IASbaba's Daily Current Affairs Sep 2016, International, National, UPSC

IASbaba’s Daily Current Affairs – 15th September, 2016

NATIONAL

TOPIC: General Studies 2

Indian Constitution- historical underpinnings, evolution, features, amendments, significant provisions and basic structure.

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.

“Special Category” Status

In news: The Central government has announced a special package to the Andhra Pradesh on September 7 which has raised considerable controversy. The package is generous in terms of resources to augment its infrastructure and to create institutions of governance and development, but falls short of declaring it as a “special category State”.

“Special category” status is a classification given by Centreto assist in development of those states that face geographical and socio-economic disadvantages like hilly terrains, strategic international borders, economic & infrastructural backwardness and non-viable state finances.
The classification came into existence in 1969as per the suggestion given by the Fifth Finance Commission, set up to devise a formula for sharing the funds of Central govt. among all states.

Basis for special category

The classification of States into general and special categories was done by the Planning Commission based on five considerations, namely:
Hilly and difficult terrain
Low population density and /or sizeable share of tribal population;
Strategic location along borders with neighbouring countries
Economic and infrastructure backwardness
Non-viable State finances.

Benefits of Special Category

Significant concessionin excise & customs duties, income tax and corporate tax
30% of planned expenditure(central budget) goes to ‘special category’ states
Special Category states are benefited because of Normal Central Assistancewhich was skewed in favour of these states. These states get more funds in terms of NCA and most part of these funds was in the form of grants rather than loans.
Special Central Assistancegiven to SCS is also an additional amount which can be used by the concerned state for economic development.
Centre bears 90% of the state expenditure(given as grant) (under the Gadgil-Mukherjee formula) on all centrally-sponsored schemes and external aid while rest 10% is given as loan to state. For general category, the respective grant to loan ratio is 30:70 whereas external aid is passed on in the same ratio as received at the centre.
Unspent money does not lapseand gets carry forward.

Lacunas in the working of Special Category Status:

The amount of proceeds that states receive has increased after 14th finance commission.So the structure does not seem to have any specific relevance in present context.
With the Fourteenth Finance Commission assessing the total requirements of the States without making a distinction between plan and non-plan, the grants given under the Gadgil-Mukherjee formula for State Plan Schemes got subsumed in the formula for tax devolution and grants. Therefore, the benefit of higher Central assistance due to special category status simply does not exist anymore. Thus, the State gains immensely from the special package in addition to the transfers recommended by the Finance Commission.
The way Special Category Status was assigned to a state has been a matter of debate. Various committees used different parameters to classify a state in Special Category status. Some states lobby central government to classify them in special category. This was to be corrected and the consent of majority of state must be taken before granting a special category status to any state. Moreover there should have been a general consensus among states related to principle used for granting the SCS.
Data reveals that even after awarding Special category status not much economic progress has been noticed among states.This may mean that for economic development it’s important to follow sound economic policy. Benefit of SCS may act as a stimulus but rest depends on the individual state policy.

The Curious Case of Andhra Pradesh

The demand of Andhra Pradesh to enable it a level playing field to compete for investment after the bifurcation is clearly legitimate.
The Andhra Pradesh Reorganisation Act states that the Central government shall take appropriate fiscal measures including tax incentives for industrialisation, support the programmes for development of backward areas, and provide special financial support for the creation of the new capital and institutions of governance.
One important benefit from the special category status is the income tax and excise duty exemptions on investments. This is meant to reduce the cost to the prospective investors who otherwise will have to suffer heavy infrastructure deficit, transportation cost and remoteness of markets.
However, it does not state that the Union government should accord the successor States special category status. Admittedly, it is difficult for the Union government to accede to the demand for special category status on objective grounds. It could open a Pandora’s Box as the economically backward States of Bihar and Odisha too have been demanding the status for long.
The case of Andhra Pradesh is surely not akin to that of north-eastern or Himalayan States and full income tax and excise duty exemption would result in flight of capital from Karnataka, Maharashtra and Tamil Nadu, creating distortions in resource allocation and disharmony between the neighbouring States.
Nevertheless, the Central government has already legislated the tax incentives in terms of additional investment allowance and accelerated depreciation. The assistance package announced by the Central government is generous by any account and certainly more than what the special category status could have brought in.

Way Ahead

It is true that SCS would have brought some benefits to Andhra Pradesh. But a patently false impression has been created that it is the panacea for all problems. Some of the political detractors believe that each district in Andhra Pradesh would become as developed as Hyderabad. Nothing is farther from truth.
Considering special status may lead to demands from other States too and dilute the benefits further. It is also not economically beneficial for States to seek special status as the benefits under the current dispensation are minimal. States facing special problems will be better off seeking a special package.

Connecting the dots:

Considering special status to any new State will result in demands from other States and dilute the benefits further. It is also not economically beneficial for States to seek special status as the benefits under the current dispensation are minimal. Critically Analyze.

INTERNATIONAL

TOPIC: General Studies 2

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.

Important International institutions, agencies and fora- their structure, mandate.

No more aligned to ‘Non-Alignment’

In news: In a significant move, PM will not be attending 17^th Non Aligned Movement (NAM) summit to be held in Venezuela in September 2016. Is India’s core of traditional foreign policy fading away?

Background

NAM was founded in Belgrade in 1961 by Indian PM Jawaharlal Nehru, Indonesia President Sukarno, Egypt President Nasser, Ghana President Nkrumah and Yugoslavia President Tito.
NAM announced that it would push for an alternative economic order and would campaign against the arms race that had put the fear of nuclear annihilation across the globe. Those were peaceful days for NAM, asserting its moral authority against war and poverty.
For India, NAM was not merely an idealistic dream of neutrality, but was based on a realistic assessment of India’s geopolitical situation. (Pakistan was the only threat)
India wanted to plan according to its own interests rather than allowing it to become confined within the limitations of a Cold War alliance.
Non alignment was India’s influential principle of its foreign and security policy since its emergence from colonization.
It enabled India to avoid many of the limitations and entanglements of formal alliances but it resulted in shaping of India’s foreign policy in a reactive manner.

Is NAM’s importance is eroding?

The Third World debt crisis of the 1980s crushed the economic ambitions of NAM states.
Collapse of USSR, the U.S. bombed Panama and Iraq, and the century seemed to end with American dominance.
Many nations were interested in alliance with USA, settle accounts at the International Monetary Fund and consider options of joining NAM.
By the early 1990s, several important powers of NAM began to back away (Argentina left in 1991). Yugoslavia crumbled, India went to the IMF and indirectly showed that non-alignment was no more a priority.
NAM was sandwiched between suspicious US motives and attempts to regenerate the economic growth of its members.

India’s current foreign policy- a shift from past

This will be only the second time an Indian Prime minister will miss the NAM summit.
The traditional foreign policy approach of non-alignment was a central component of Indian identity in global politics.
However, since independence, India has been in pursuit of strategic autonomy. It has led to semi-alliances shaped under the cover of non-alignment and regional dynamics.

Why such shift?

India seeks to balance the benefits and risks of an increasingly assertive neighbour (China) and a network of alliances with like-minded countries.
China’s rise and assertiveness as a regional and global power and the simultaneous rise of middle powers in the region mean that this balancing act is increasing in both complexity and importance, simultaneously.
China’s growth presents great opportunities for positive engagement, but territorial disputes and a forward policy in the region raise concerns for India, particularly in the Indian Ocean and with Pakistan.
Forward policy= a foreign policy doctrine applicable to territorial disputes where emphasis is placed on securing control of disputed areas by invasion and annexation or creating a buffer state.
The region itself is riddled with rivalries; a desire to balance China may push states together, while other issues divide them. The same applies on the global level as noted by the unpredictability in Sino-US relations.

Challenges ahead

Indian policymakers continue to place emphasis on strategic autonomy as a means of mitigating the potential costs of a strategic partnership with the US.
This balancing act is evident in relations with China: despite interest in cooperation with the US, India stands to benefit from an economic partnership with China.
India wishes to avoid sending any signal to China that it is serving as the lynchpin of the US pivot to Asia, which China perceives as a measure of containment by USA.
There is also persistent concern over US reliability. Its relationship with Pakistan continues to be stable and also its vulnerability to China was seen during the financial crisis of 2008–09.
India has to balance its still strong defence relationship with Russia against its interests in cooperation with the US.
India was with Russia, China and Iran in avoiding interference in Syria’s civil war. Despite voicing concern over the spread of the Islamic State network, India has continued to promote a Syrian-led process of institution-building.
Still, there is a general concern in India that its capabilities in the event of a conflict with Pakistan may be limited by over-reliance on the US, which continues to extend defence aid to Pakistan despite a drop after 2011.

Benefits

Despite these challenges, India is pursuing a constructive relationship with the US and America’s Asian allies as it faces a major shift in power dynamics with the rise of China.
India stands to benefit from being more assertive. Already, cooperation with regional players is boosting its economy and defence capabilities, and as a pillar of the US pivot to Asia, India is finding support for an increased role as a regional power-negotiator.
However, these growing partnerships need not prevent positive engagement with China.
Assertiveness in regional and global relations may actually help India to pursue the strategic autonomy it values and pursues.

Conclusion

India’s rising global profile is reshaping its approach to its major partnerships in the changing global order.
Though some still want to reinvent non-alignment under new appearances, India is now showing signs of pursuing strategic autonomy separately from non-alignment under new leadership.
It seems that this separation was overdue in India’s foreign policy. India should try to benefit from leveraging partnerships rather than barring them. This will help India to develop leverage in its dealings with its adversaries and competitors.

Connecting the dots:

Is a shift in India’s foreign policy approach with respect to non-alignment significant? Critically analyse
India’s non-alignment policy gave it an independent foreign policy. With multi-alignment, India’s strategic and autonomous foreign policy faces threat. Do you agree? Examine.

Related articles:

India and its NAM policy: confusion or solution?