Gist of EPW December Week 1, 2022

The Economic and Political Weekly (EPW) is an important source of study material for IAS, especially for the current affairs segment. In this section, we give you the gist of the EPW magazine every week. The important topics covered in the weekly are analyzed and explained in a simple language, all from a UPSC perspective.

TABLE OF CONTENTS

1. Leveraging Finance for Climate Action
2. A Critique of the Fifteenth Finance Commission
3. India has a Responsibility towards Myanmar Refugees in India
4. Extreme Poverty in India

1. Leveraging Finance for Climate Action

Context: At the 27th Conference of Party (CoP) of UNFCCC in Sharm El-Sheikh, an agreement was reached whereby it was agreed to provide a grant to those who are recovering from the menace of climate.

Climate Statistics: 

• The developing world produces 63% of greenhouse gas (GHG) emissions, led by China and India.
• Only a 17% window is left for the world to emit carbon, after which it has to face the irreversible consequences of climate change. 
• On the basis of the above emission limitation, 
  • The Americas are already six times over the earth’s GHG limit per head,
  • Europe, three times; 
  • Japan, twice;
  • China is at half of its budget per head; and 
  • India at just at a quarter.
• Over $2 trillion per year for 20 years will be required to be poured into projects in the developing world, in order to keep temperatures from rising by more than 1.5°C

Concern with present global climate financing: 

• Less than 5% of private finance for energy transitions goes to developing-country projects, excluding China.
• Switching to renewable energy requires a massive need for resources, which developing countries would not be able to afford on their own. According to an estimate, the average cost of capital for a solar-PV project was as low as 2.5% in developed countries and China, versus 13.5% in developing countries.
• If developing countries have to invest their own resources in renewable energy it could lead to a massive debt burden on them. This is the reason why there is a lackadaisical effort on the part of developing countries in the field of climate change.

Panacea: Global Climate Mitigation Trust

• Special Drawing Rights (SDRs), an instrument of the IMF can be utilised for the purpose of financing the climate infrastructure. SDRs are issued by the IMF to its member countries for the purpose of borrowing funds from the market. 
• The issue of SDRs would help private sectors to make investments in the field of transition projects. 
• It was envisaged to create the Global Climate Mitigation Trust, for the purpose of financing climate-related infrastructure. 
• It was envisaged as a fund of $500 billion of unused or new SDRs. Using this SDR, the trust would borrow from the SDR market and deploy these funds in developing countries for climate mitigation and adaptation. 
• Flexibility would be provided to the fund managers in terms of selecting projects, which could supposedly contribute to emission reduction. 

A sustainable climate is a public good, but climate finance is tedious and capital-intensive. So, totally depending upon developing countries to finance climate change on their own would invite devastating catastrophes in the coming times. Therefore, it is instrumental that innovation measures are always looked at for the purpose of generating finance with a judicious risk-benefit formula. 

2. A Critique of the Fifteenth Finance Commission

What is the Finance Commission?

• Article 280 of the Constitution provides for the office of the Finance Commission. 
• The major tasks of the Finance Commission are:
  • Distribution of net proceeds of the tax between the centre and the state government. 
  • The principles which should govern the grants in aid of the revenues of the States out of the Consolidated Fund of India.
  • Steps that need to be taken in order to expand the revenue of the state.

Basic Details related to the Finance Commission: 

The 73rd and & 74th Constitution Amendment Acts provided for the third tier of the government and enabled democracy to reach closer to the people. 

• The local bodies of governance are broadly classified into two categories:
  • Rural local bodies (RLBs) and 
  • Urban local bodies (ULBs)
• These institutions are tasked with the responsibility of looking after the local planning, development, and administration of an area or small community such as villages, towns, or cities.
• The 73rd and 74th constitutional amendments required the central finance commissions (CFCs) to make recommendations on the steps needed to supplement the resources of the panchayats and the municipalities respectively.

Read more on the Finance Commission of India in the linked article.

Conditionalities suggested by the 15th Finance Commission for the release of funds:

• The 15th Finance Commission has recommended certain entry-level barriers for availing grants: 
  • Setting up of the State Finance Commissions, 
  • Online availability of audited annual accounts, 
  • Setting up of floor rate of property taxes, 
  • Increase in property tax collections in tandem with the GSDP growth

Critique of conditionalities mandated by the 15th Finance Commission: 

• The 15th Finance Commission has made some entry-level restrictions for the local bodies i.e the local bodies have to fulfil some basic criteria before being eligible for getting finance from the government. These recommendations would hamper the local bodies because of fund scarcity.
  • Around 84% of grants are now linked to performance-based conditions along with strict entry-level conditionalities.

Image source: EPW

• More importantly, these recommendations come at a time when the State government’s finances are under huge stress on account of the COVID crisis and thereby reduced economic activities. 
• Various studies conducted in the past have recommended that conditional grants adversely impact the performance of local bodies.
• Dependence on fiscal transfers, particularly conditional and purpose-specific ones, has reduced the autonomy of the RLBs to allocate resources in accordance with the priority of the area. 
• Conditional release of the fund reduces the impact of the local bodies to draw their funds. 
  • It was observed that despite such a liberal approach, RLBs were unable to draw around 6% of the total allocated grants.
  • It indicates that the total drawing of performance grants was only 79% of the allocation to the states during the Thirteenth Finance Commission which was further reduced to 55% (2015−16 to 2017−18) during the Fourteenth Finance Commission.
  • This reflects the weak capacity of the local bodies to meet the conditions mandated by the CFs. 
• During the Thirteenth Finance Commission, only 10 states came close to drawing 100% of their allocated share of performance grants; all other states failed to withdraw their grants. 
• While in 2016−17, the first year of the Fourteenth Finance Commission, nearly 89% of the performance grant allocations were released to the states but it went down to just 25% in 2017−18 with 17 states receiving no performance grant at all.
  • This reduction can be attributed to the conditionalities imposed by the Ministry of Finance (MoF) and the Ministry of Panchayati Raj (MoPR) upon panchayats and states.
  • For RLBs, the shortfall has ranged from 5% to 18%, whereas for ULBs, the shortfall fluctuated between 10% and 18%.
• A significant number of states were not able to register growth in property tax collections in tandem with GSDP growth. It was one of the conditionalities imposed by the 15th Finance Commission. 
  • For 2017−18, 14 out of 24 states’ growth rate in property tax was slower than the GSDP growth rate. 
  • Moreover, when the previous two years of data are also assessed, it is observed that 11 of the 24 states have shown a similar trend for at least two out of the three years studied. 
  • The trend suggests that complying with this very condition would be difficult for the ULBs and seems almost unattainable.

Conclusion: Imposing conditionalities on the local bodies could seriously impair their performance and the ultimate sufferers would be the public. So, it is imperative that steps should be taken to improve the capability of the states before imposing any conditionalities.

3. India has a Responsibility towards Myanmar Refugees in India

Context: Myanmar has been facing an unprecedented refugee crisis since the military takeover of the government.

Details: 

• Myanmar is undergoing a huge refugee crisis since the military took over power there. Citizens are coming out on the streets and protesting against the government. The military government’s crackdown on the citizens left many homeless and seeking refuge in India. 
• India being one of the neighbouring countries of Myanmar with a large shared border has become a vital place for refugees fleeing the country. 
  • About 20,000 Myanmar nationals, mainly from the Chin State, have fled to the border districts of India’s north-eastern state of Mizoram. 
• Even though India is a non-signatory to the 1951 United Nations Refugee Convention and the 1967 Protocol Relating to the Status of Refugees, its constitutional principles, refugee-related judicial pronouncements, and the various international conventions make it compulsory to show some empathy to these people.  

Issue: 

• India’s Ministry of Home Affairs (MHA) sent out two letters of advisory in March 2021 to four states bordering Myanmar
  • Mizoram, 
  • Nagaland, 
  • Arunachal Pradesh, and 
  • Manipur to identify and deport Myanmar nationals, citing that India is not a signatory to the United Nations Refugee Convention of 1951 and its 1967 protocol.
• But, the Mizoram government had taken a different stance against the advisory of the MHA allowing the Mizo ethnic community from Myanmar to seek refuge in Mizoram. 
• But, there are various challenges which arise on account of the fact that giving protection to refugees is a domain that lies with the central government.
• It was reported that there was poor shelter, inadequate food and water, and insufficient primary healthcare facilities even as the state government strives to provide these basic amenities.
• This crisis has brought attention to India’s refugee policy and its ramification upon the world community.

India’s refugee policy: 

• India is neither party to the 1951 Convention Related to the Status of Refugees nor the Protocol relating to the Status of Refugees 1967.
• Even if India faces a lot of refugee crises, there is an absence of any legislative framework to deal with the rampant crisis emerging due to political instability in the neighbouring countries. 
• India is reluctant to sign the refugee agreement because of many reasons:
  • Signing treaties make it legally binding on the parties to not force the refugees against their will to return to their homes and mandates host nations’ cooperation with the United Nations High Commissioner for Refugees (UNHCR).
  • Signing this treaty would cause more refugee crises in India and thus put pressure on the government to provide for the basic needs of the refugees.
  • The excessive inflow of refugees affects internal security and the demographic character of Indian states.
  • India also views the definition of refugees in the convention and protocol as restrictive in nature and eurocentric.

Ramification of such law: 

• The current government applies the Foreigners Act, 1946 to refugees. This empowers the union government to regulate foreigners’ entry, presence and departure in India.
  • However, this act makes no distinction between foreigners and refugees.
  • This results in the dilution of the status of refugees as a separate category having special rights and entitlements.
  • It gives more discretionary powers to the hands of politicians and the bureaucracy leading to discriminatory treatment of refugees.
• The discretionary approach also leads to differential standards in treating refugees based on political considerations and refugees’ countries of origin.
  • A case in point could be the better treatment of Tibetan and Sri Lankan refugees.
• Lack of policy also leads to the frequent intervention of domestic politics and political ideologies in deciding the status of refugees and their rights.

India’s responsibility: 

• The protection of human rights is a fundamental feature of India’s democracy, and therefore it is the responsibility of governments to protect human rights.
• The Indian Constitution is the foundation for human rights protection in India. The Constitution has incorporated international human rights principles and standards which have been the beacon of our political system.
• The Constitution guarantees a set of fundamental rights and freedoms to all persons irrespective of their status as Indian or foreigner. So the government must reflect these ideas in its statutes. 
• Additionally, the apex court in the National Human Rights Commission v State of Arunachal Pradesh, stated that the Indian government must protect the constitutional rights under Articles 14 and 21 of all, including non-citizens.
• In Digvijay Mote v Government of India and others, the Karnataka High Court directed the state of Karnataka to provide humanitarian assistance to a boarding school run for refugee children from Sri Lanka.
• India is a party to many international human rights conventions. Therefore it is binding on India to ensure that domestic laws align with the conventions to provide protection to the refuge seekers. 

India is a democratic country with noble principles and ideas. These principles must also be reflected in our policies dealing with the refugee crisis.

4. Extreme Poverty in India

Context: The latest round of the Situation Ass­essment Survey of Agricultural Households is used to calculate income poverty instead of commenting on consumption poverty across non-comparable data sets. 

Introduction:

• Since 2011–12, there has been no official Consumer Expen­diture Survey (CES) conducted by the National Sample Survey Office (NSSO).
  • Therefore, various efforts were made to estimate poverty levels using different statistical techniques. 
• For ins­tance, one study, using the Rangarajan poverty line, observed a rise in poverty by 4%, from 31% in 2011–12 to 35% during 2017–18 using the leaked data on grouped distribution of consumption expenditure. 
• Another study using 2019–20 rounds of Periodic Labour Force Survey (PLFS) consumption data, found 25.9% as the head count ratio (HCR) for overall India. 
• Several other studies have shown the decline in extreme poverty in India.
  • One study used private final consumption expen­diture (PFCE) from the National Statistical Office (NSO) Nati­onal Account Series with the assu­mption that distribution of consumption remained intact in 2011–12. This showed HCR of 1.4% for 2019–20. 
  • A second study finds a decline in poverty levels to 10.2% using the $1.90 purchasing power parity (PPP) as the poverty line. 

Situation Assessment Survey for Agricultural House­holds (SAS AH) 2018–19:

• This survey is a departure from previous situational assessment surveys in that it accounts for earnings from land holdings and livestock, not just crops.
• The survey has shown that farmers’ incomes adjusted for inflation have risen by about 2%.
• At the all-India level, an average monthly income per agricultural household during agricultural year 2018-19 is ₹10,218. 
• Out of the total average, income from wages is ₹4,063, followed by cultivation/net receipt from crop production (₹3,798), net receipt from farming of animals (₹1,582), net receipt from non-farm business (₹641) and income from leasing out of land (₹134).
• Out of the total income earned by agricultural households, 39.8 % of income is earned from wages followed by cultivation/net receipt from crop production (37.2 percent), farming of animals (15.5%), and income from non-farm business (6.3%).
• In 2018–19, for a majority of small and marginal farmers, wage income had become their most important source of income rather than crop income or inc­ome from cost of cultivation. 

Issues with the survey:

• In SAS AH (2018–19), agricultural households are defined as having an annual income of 4,000 per annum from any self-employment activity in agriculture.
  • The qualifying amount was 3,000 in SAS, 2012–13. 
  • By excluding households with annual income earned from self-employment in agriculture ­below 4,000 this survey does not represent a complete rural income distribution.
• In SAS AH 2018-19, there are six major sources of income rep­orted to calculate household income. 
  • These sources are: income from crop cultivation, income from livestock acti­vities, income from non-farm businesses, income from wages and salaries, income from leasing out land, and income earned from pension and remittances. 
• However, the cost component of these sources does not collect information on depreciation of capital, marketing expenses, land revenue, overlooking the Commission for Agricultural Costs and Prices’ fuller definition of A2 cost.
• Household incomes cannot be compared with the SAS AH 2012–13 as incomes earned from leasing out land and from pension and remittances were not collected in its previous rounds.

Conclusion: 

Despite the limitations of SAS data and degrees of underestimation, at least 19 million households remain income poor in rural India. A denial of this fact, then, becomes a denial of well-being to the country’s rural masses. Updated data on poverty in India might provide us with more accurate incidences of poverty. 

Read previous EPW articles in the link.

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