Gist of EPW February Week 4, 2019

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 analysed and explained in a simple language, all from a UPSC perspective.

Topic covered in this article are:
1. ‘Indo–Pacific’ and India’s Emerging Role
2. Dilemmas of Agricultural Diversification
3. Utilisation, Fund Flows and Public Financial Management under the National Health Mission
4. Circumventing Environmental Regulations

1. ‘Indo–Pacific’ and India’s Emerging Role

Context

• The United States administration is eagerly promoting the “Indo–Pacific” as an alternative geopolitical construct to mobilize a large number of countries in the Asia–Pacific region to contain Chinese and Russian influence.
• However, India has become a strategic device by yielding to the pressures of the Donald Trump regime for a programmed “Indo–Pacific” ploy.
• In the emerging scenario, New Delhi’s rhetoric on “strategic autonomy” has become a political liability.

Analysis of the new geopolitical construct

• Scholars, policymakers and think tanks across the world argue that the locale of Asia–Pacific has been substituted more realistically by an appropriate category encompassing two oceanic political and strategic heritages of both the Indian Ocean and the Pacific Ocean.
• The construct of the Indo–Pacific has a much wider meaning and implication today against the background of the changing US strategy in the region with a view to containing China as a rising power, both economically and militarily.
• The American strategy in the Indo–Pacific is to contain China and co-opt India, both economically and militarily. This strategy obviously stemmed from Washington’s long-term fear about the “rise” of Asia and the decline of American power.
• The US President Donald Trump and Indian Prime Minister Narendra Modi enunciated this construct within the framework of their countries’ strategic and economic interests
• Modi talked about “strategic autonomy” and “free, open, prosperous and inclusive Indo–Pacific Region” at the Shangri-La Dialogue in Singapore
• Washington had rechristened its military command in charge of the Asia–Pacific region from the “Pacific Command” to the “Indo–Pacific Command.”

What is Washington Consensus?

Washington Consensus is a collective term used for 10 economic policy prescriptions as a part of a “standard” reform package promoted for crisis-wracked developing countries. Washington Consensus was advocated by Washington, D.C.-based institutions viz. International Monetary Fund (IMF), World Bank, and the US Treasury Department. It included the following:

• Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP
• Redirection of public spending from subsidies toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health.
• Tax reform, broadening the tax base and adopting moderate marginal tax rates
• Market determined interest rates.
• Competitive exchange rates
• Liberalization of trade
• Liberalization of inward FDI
• Privatization of state enterprises.
• Deregulation and
• Legal security for property rights.

Revisiting Washington Consensus

• The term “Washington Consensus” became popular after 1991 even as the world system moved broadly towards an intensive market-driven order of international exchanges, especially after the formation of the World Trade Organization (WTO) in 1995.
• Ever since the formation of the WTO, the countries in the global South were compelled to follow the Washington Consensus on reforms and restructuring, and thereby accommodated themselves within a neo-liberal economic framework.
• However, over the years, critics have pointed out that this “consensus” only put on ruthless conditions on the global South countries. The East Asian crisis in the late 1990s and the global recession of 2008–09 were further reminders that increased deregulation would only result in financial instability that would spell disaster for both global North and global South economies.
• Some of these implementations were imposed as a condition for receiving loans from the IMF and World Bank. The results of these reforms are much debated.
• They have been widely criticized. Most criticism has been focused on trade liberalization and the elimination of subsidies, and criticism has been particularly strident in the agriculture sector.
• Though, in nations with substantial natural resources, criticism has tended to focus on privatization of industries exploiting these resources.
• Some critics focus on claims that the reforms led to destabilization. Some critics have also blamed the Washington Consensus for particular economic crises such as the Argentine economic crisis (1999–2002), and for exacerbating Latin America’s economic inequalities.
• The IMF and World Bank started softening their insistence on these policies in the 2000s largely due to political pressures surrounding globalization, but any reference of these ideas as a consensus essentially ended in the wake of the 2008 global financial crisis, as market fundamentalism lost favour. This is called end of Washington Consensus.
• Meanwhile, what agitated the minds of the Washington Consensus experts was obviously the “peaceful rise” of China notwithstanding the setbacks in the world economy. Containing China, economically, could hardly be a feasible project for them.

Rethink was required as china was increasing its power on Global Scale

• The scenario, thus, called for revisiting the Washington Consensus based on certain strategic calculations of the emerging challenges from China.
• This obviously called for a new strategic engagement with countries across the Asia–Pacific region by making them “aware” of the threat from China.
• Obama had pointed out that the US would have partnership with a large number of countries in the region, including India, which “looks east” and “plays a larger role as an Asian power.” He declared that in “the Asia Pacific in the 21st century, the United States of America is all in”
• With the change of administration in the White House, the US strategy in the region has undergone profound changes. The Trump administration now has a different orientation of issues in the region and it has been trying to coalesce economic and strategic issues with a view to containing China in a broader framework of flexible engagements with countries like India.
• The “new” Washington Consensus, thus, entails a carrot-and-stick policy enunciated by the Trump administration through the involvement of the Pentagon, US Treasury and the Bretton Woods institutions.

American Spin on Trade Policy

• It may be noted that President Trump withdrew the US from the Trans-Pacific Partnership (TPP) on his first day in office. This obviously reflected a major spin for the US on trade policy which he said sought “to create fair and economically beneficial trade deals that serve their interests.”
  • He decided to pull out from the TPP with a view to creating “an incentive for our trading partners to diversify, to look for their own way, to have conversations and negotiations in which we will not be participants”
• After Trump withdrew from the deal, the other members of TPP moved ahead, without the US, and brought forth a new pact named the Comprehensive and Progressive Agreement for TPP (CPTPP)
• However, after a year, President Trump said in a social media post that he was open to returning to the TPP, but only if he could get a “substantially better” deal than done by his predecessor.
• Many observers criticised him for the withdrawal from the TPP which would have become the world’s largest free trade zone by joining the Pacific Rim countries that collectively would generate nearly 40% of global economic output. But Trump moved against the agreement, making it a major challenge for his “America First” doctrine.

Thus, Washington’s aim to promote “Indo–Pacific” as a new geopolitical construct has obvious strategic implications. India is undeniably a key factor in this emerging schematic reordering of the region.

India’s ‘Act East’ Stance

• It is in the background of an evolving strategic milieu in the Indo–Pacific region that a kind of intense competition, if not rivalry, is set to begin, between India and China in the areas of both security and trade.
• India sees this as an opportunity in its global bargains and Prime Minister Narendra Modi, thus, tried to reorient New Delhi’s Look East policy as Act East policy with a view to strengthening India’s engagements in the Indo–Pacific region.
• India also faces challenges from China in its South China policy, particularly in engaging Vietnam. China sees India’s Vietnam policy as an attempt to offset Beijing’s influence in the region.
• In another context, China indicated that if New Delhi “treats its enhancement of military relations with Vietnam as a strategic arrangement or even revenge against Beijing, it will only create disturbances in the region
• In sum, the strategic positions of India and the US are thus not at variance given their conceptualization and engagements on the Indo–Pacific. Recent trends in India’s relations with China and Russia would have given an impression that New Delhi is rather maintaining “strategic autonomy” in dealing with them. But the “autonomy” that India enjoys and is seeking to sustain is perfectly within the logic of the security scenario set out by Washington.

Way forward

• First, to strengthen economic and military ties with the countries in the ASEAN region and beyond, including South Korea, Japan, and Australia; and,
• Second, to explore the ties with Russia and China for further bargain with the West.
• For the US, however, this new geostrategic space of East Asia has a long-term “investment potential” also. It has, thus, something to do with the long-held view that East Asia is the only region in the world system that has relatively escaped the ill-effects of the global financial meltdown
• China (alongside India) is likely to overtake the US and other Western powers. Thus, Washington has also a double mission:
  • First, to restructure the geopolitics of the “East” to suit the American strategic interests
  • Second, to help facilitate the “economic containment” of China and other potential powers from being the front-runners of the global economy, as projected by many.
• Thus, the geopolitics of the Indo–Pacific has much to do with the US’s long-term strategy to contain the potential/emerging powers of Asia and thereby seeking to ensure American hegemony in the world system.

2. Dilemmas of Agricultural Diversification

Context

• The Union government’s stance on agricultural diversification is contrary to farmers’ well-being.
• The government’s (interim) budget for the agriculture-allied sectors—animal husbandry and fisheries—is a wasted opportunity for inclusive agricultural diversification in the country.

Analysis of the issue

• Livestock and the fisheries sectors contributing almost 25% and 6% of the agricultural GDP respectively, the government would have demonstrated some sincerity in designing the perks, if it had the genuine political will to take “doubling farmers’ income by 2022” beyond mere rhetoric.
• Declarations of increased outlays for the Rashtriya Gokul Mission and setting up of a Rashtriya Kamdhenu Aayog for cow welfare, are gimmicks for keeping up the momentum of contagious cow politics, instead of any real development in the animal husbandry sector.
• A separate department for fisheries is potentially more conducive for buying political allegiances to the current government in the upcoming polls than in providing any real respite to the fisherfolk in plight.
• In fact, the government shows enthusiasm for the development of coastline infrastructure projects, which endanger the lives and livelihoods of various fishing communities. So how will the creation of a separate ministry or other schemes help when beneficiaries are being pushed out of their very livelihoods?
• The present government claim that the shift of policy paradigm from “growth of national-level production” to “growth in farm-level productivity” will augment farm income.

Pricing issues in Agriculture Sector

• Agricultural pricing policies have barely looked beyond the populism of the minimum support prices (MSP) in the grain sector
• The chances of realising the current MSP is possible only if backed by public procurement. But the food ministry has already limited the procurement for the central pool to the requirement of public distribution system under the National Food Security Act (NFSA)
• The non-grain sector is vulnerable to market inefficiencies and associated price risks.
• Example: Recent plight of the dairy farmers, particularly in Maharashtra, who had to suffer price crashes due to supply bottlenecks.
  • Farm price of fresh milk slumped because the processing industry collectively stopped buying fresh milk from the dairy farmers.
  • In order to dispose of their own unsold stock of skim milk powder (SMP)—which had accumulated due to the global market glut—as recombined liquid milk in the domestic markets
  • Simultaneously, the price competition among these large-scale players for domestic market share has pushed many small farmers out of business.
• When farmers operate in the “high-value” sector (non-grain sector) they can control only about one-fifth of the final price of the produce, while the remaining four-fifths of the price is influenced by players with higher risk-taking abilities and hence more bargaining power.

Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017

Traditionally the agricultural produce was sold by the farmers in the village or nearby places. However, the system was characterized by malpractices by middlemen, inadequate price to the farmers etc. So the State’s enacted their APMC acts to set up regulated agricultural markets so as to ensure that farmers get a fair price for their produce. But even this arrangement led to a lot of problems.

Drawbacks of APMC act

• It led to the monopoly of the APMC.As the farmers were supposed to sell only to the authorized agents on the basis of auction so the agents used to form cartels and deliberately specify a lower price above which they will not procure.
• The model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was presented in April 2017 and seeks to replace APMC act
• Procuring a license was a difficult task as it was based not on any transparent system but was procured on money power thus breeding corruption.
• Various types of fees were levied. For instance-market fees on buyers, licensing fees on commission agents, other charges on warehousing agents, loading agents etc. Also the fees differ from state to state. Consequently it created market distortions and increase in the price of the commodities.
• The agriculture markets were usually located far away from the villages. Therefore most of the times to avoid the transportation cost, small farmers sold their produce to the village middlemen who are usually the farmers money lender also. Consequently he forces farmers to sell the produce at lower
• The dual role of market as well as regulator is assigned to the APMC. But as the members of the committee are elected out of the agents operating in the market so their vested interests has undermined its role as a regulator.
• Further the traders use to delay payments to farmers for months. Even if they pay at the time of sale then the trader arbitrarily deducted some amount

The model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was presented in April 2017 and seeks to replace APMC act

Objectives of the act

• The new model law seeks to establish a regulated wholesale agri-market at a distance of every 80 km. To enable this, it has proposed to issue licenses to new private players and traders who wish to set up a wholesale market.
• No Separate fee for markets but only a unified fee for farmer or trader to transact. Now only by paying unified single fees, farmer/trader will be able to transact in all such regulated agri-markets within the state or National level
• It caps market fee (including developmental and other charges) at not more than 1 per cent for fruit and vegetables, and two per cent for food grain. It caps commission agents’ fee at not more than two per cent for non-perishables and four per cent for perishables.
• It also has the provision for promoting online or spot (e-national agriculture market) agriculture market platforms.

Limitations of the act

• The act does not explicitly regulate the direct purchases made by supermarkets, exporters or traders outside the yard.
• The act does not make purchasing at MSP mandatory for the private traders.
• The crops and livestock markets, with varying dynamics, under a blanket act which may not be suitable for each of them.

Conclusion

• With the elections around the corner, an agitated rural electorate is a spanner in the works. It is politically expedient to stump them with emotive politics when there are no decisive policies to offer.
• Thanks to Article 48 of the Directive Principles of State Policy for leaving the controversial issue of the preservation of cattle stock unresolved. At least this predicament can be manipulated to arouse those socio-religious sentiments that shroud one’s ability to look at cattle-based livelihood as an economy and hold the government accountable for any volatility of income

3. Utilisation, Fund Flows and Public Financial Management under the National Health Mission

Context

In 2010, the Government of India (GoI) constituted a high-level expert group to recommend reforms for efficient management of public expenditure. The recommendations were as follows

• The mode of transfer of funds from union to state governments for various central schemes, including the National Health Mission (NHM). Till then, NHM funds from the central government were directly transferred to implementing agencies in states bypassing the treasuries of the state governments.
• The committee raised concerns about accountability of fund transfers outside the state treasuries, and suggested that all central scheme funds should be released to implementing agencies through state treasuries.

Analysis

• Since April 2014, funds for various centrally-sponsored schemes (CSSs), including NHM, are being released to implementing agencies through state treasuries. This has added an additional layer in the architecture of fund flows for various CSS, including NHM.
• The change in the mode of flow of CSS funds can potentially have a bearing on the effective use of budgeted resources for these schemes.
• A report of the Comptroller and Auditor General (CAG) of India recently showed that there were high unspent balances with state-level implementation agencies of NHM reflecting low utilisation of NHM funds (CAG 2017).
• Utilisation of NHM funds was remarkably low for the previous years. On average, only about 55% of the funds allocated to states were actually spent.
• The utilisation ratio was marginally lower in the group of states with poor health achievements (high-focus states) than those with relatively better health achievements (non-high focus states). This is an area of concern as NHM funds were primarily meant to support health spending in poor performing states.
• Utilisation of NHM funds was higher in some of the better-off states like Tamil Nadu, Kerala, Gujarat and Punjab than in poor states like Bihar, Uttar Pradesh and Jharkhand.
• This can potentially accentuate the inequality in health spending across states. Interestingly, however, even among the worse-off states, there are a few exceptions: Madhya Pradesh and Odisha ranked high in terms of utilisation ratios. In contrast, Maharashtra, a relatively better-off state, stood at the bottom in fund utilization.
• In the high-focus north-eastern states with the exception of Assam and Arunachal Pradesh, the utilisation ratio was low in both the years
• The problem of low utilisation is further compounded by a disproportionately high share of expenditure in the last quarter of the financial year.
  • On average, about 40% of total expenditure in states was incurred in the last quarter.
  • Among the high-focus north-eastern states, the share of expenditure in the last quarter was even higher; more than two-thirds of total expenditure. Notably, although Assam and Arunachal Pradesh had better utilisation ratios than other north-eastern states, bulk of the expenditure (more than 70%) was incurred in the last quarter.
  • The disproportionate expenditure in the last quarter of the financial year in states could be due to delay in flow of funds to implementing agencies, which limits the availability of funds for expenditure at a specific point of time.

National Health Mission

• The National Health Mission or NHM is a government-initiative to provide for health-care requirements in rural areas that are under-served. It was launched as National Rural Health Mission or NHRM as the program for rural health concerns especially in eighteen states that were marked out for having poor indicators of public health.
• In May 2013, the government decided to launch the National Urban Health Mission or (NUHM) as a sub-mission under the National Health Mission. And, the NRHM became the other sub-mission under the NHM.
• Vision of the NHM: “Attainment of Universal Access to Equitable, Affordable and Quality health care services, accountable and responsive to people’s needs, with effective inter-sectoral convergent action to address the wider social determinants of health”
• Now there are 6 components in NHM:
  • National Rural Health Mission
  • National Urban Health Mission
  • Flexible pool for Communicable diseases
  • Flexible pool for Non communicable diseases including Injury and Trauma
  • Infrastructure Maintenance
  • Family Welfare Central Sector component.

Conclusions

• The routing of NHM funds from GoI to implementing agencies through state treasuries (since April 2014) has important implications for utilisation of NHM funds.
• The involvement of state treasuries in processing NHM funds has increased the accountability of states towards NHM spending.
• However, this has added an additional administrative layer in the fund flow process, and has created barriers in the flow of NHM funds due to complexities associated with states’ administrative procedures for fund release.
• The complex and rigid administrative procedures for release of funds from state treasuries to NHM implementing agencies needs to be simplified.
• As per the notification of GoI, state governments are required to release NHM funds to State Health Societies (SHS) within 15 days of their receipt, failing which state governments are liable to pay interest.
• The rigid fragmented financial design of NHM also contributes to the complex process of NHM fund release.
• Multiplicity of bank accounts and complicated accounting structures result in lower transparency in utilisation of NHM funds. The reduced transparency poses hurdles in NHM fund release to SHS, thus causing delay. The fragmented financial structures need to be simplified.

4. Circumventing Environmental Regulations

Context

• The National Waterways Act, 2016 declared 111 rivers as National Inland Waterways. These waterways open up for commercial shipping and navigation, and for interventions like dredging, river training, etc. but legally binding regime of environmental clearance is evaded.
• The Prime Minister inaugurated multimodal terminal at Varanasi on River Ganga. The terminal is a part of the ambitious Jal Marg Vikas Project (JMVP), also known as the Ganga Waterway or the National Waterway (NW) 1, by bypassing the legally binding environmental clearance process, and twisting of laws to suit this end
• The JMVP is a flagship project of the government’s massive National Inland Waterways (NIWs) programme.

NIW Programme

• The launch of an ambitious programme to convert 111 rivers or river stretches, as waterways with the enactment of the National Waterways Act, 2016.
• This number includes five existing national waterways, notified prior to the act.
• The NIW programme intends to create large-scale commercial shipping and navigation systems in these waterways, to transport bulk commodities like coal, fly ash, petroleum products and container cargo, as well as passengers, including tourist cruises.
• The Inland Waterways Authority of India (IWAI) under the Ministry of Shipping (MoS) is the nodal agency for planning and execution of this programme.

Concerns

• The most important requirement for a waterway is the existence of a channel of sufficient depth (requiring minimum water depths of about 2 to 3 metres), which has adequate water throughout the year. Rarely do rivers in India have such depths.
• Therefore, these depths will have to be created by “capital dredging,” used to dig and initially create a channel in the riverbed, and later “maintenance dredging” will be needed on a regular basis to clear silt brought in by the river.
• In addition, other major interventions will also be required like barrages, river straightening works, and bank protection works, along with construction of related infrastructure like ports, jetties, warehouses, parking and refuelling facilities.
• These interventions have very serious adverse social and environmental impacts, including physical damage to the riverine habitats, and adverse changes in the morphology and hydrology of the river, etc.
• Unfortunately, not only are environmental regulations inadequate but even these weak regulations are dodged in the case of coming up of the NIW

Environmental Regulatory Regime

• The assessment of environmental and social impacts, and the environmental clearance for any development project is governed by the Environmental Impact Assessment (EIA).
• This notification requires all projects/interventions listed in its schedule to obtain an environmental clearance prior to any work. The schedule does not list “waterways” per se, but includes “ports, harbours, breakwaters, dredging”
• So waterways, or at the least their components, would have to seek environmental clearance because they involve dredging and ports.

Reasons cited by Ministry of Shipping (MOS)

The Ganga waterway or NW 1 stretches for 1,620 kilometres (km) from Allahabad to Haldia, with three multimodal terminals at Varanasi, Sahibganj and Haldia, and other related infrastructure. Ministry of Shipping (MOS) has cited the following points to avoid Environmental Clearance.

• It stated that a “navigation channel is already in existence on NW-1.
• Therefore, not a case of creation and developing a new navigation channel but a case of capacity augmentation and maintenance of existing navigation channel
• Amendment dated 15 January 2016 to the EIA notification (GOI 2016b) provides exemption for certain cases from environmental clearance, “dredging and de-silting of dams, reservoirs, weirs, barrages and canals for the purpose of maintenance upkeep and disaster management.” (However, this amendment relates not to waterways but to mining, especially river sand mining)
• The MoS quoted the Sustainable Sand Mining Management Guidelines, 2016 (MoS 2017a) saying that following “categorical provisions” exist, that is, “the de-silting of reservoir, dredging for upkeep and maintenance of structures, channels and averting natural disasters will not be treated as mining for the purpose of environmental clearance … for navigation purposes, the river reaches in the water ways path may be dredged to have minimum depth of water.”
• In its letter to the Ministry of Environment, Forest and Climate Change (MoEFCC), MoS ends with the astonishing argument that the dredging “has no discernible adverse environmental impacts,”

The NGT Case

• While all these discussions were going on between the MoS and the MoEFCC, the National Green Tribunal (NGT) was hearing a case dealing with precisely this issue.
• A petition pleaded that waterways in general and the Ganga waterway in particular should be subjected to mandatory prior environmental clearance.
• After three years of hearing the matter, the NGT in its final order merely directed the MoEFCC to submit its final opinion. MoEFCC’s response is not yet known.

Conclusion

• This sequence of events highlights the gross abdication of responsibility by the MoEFCC, its failure to protect the environment and implement its own laws.
• It is necessary that the fullest possible assessment and scrutiny of social and environmental impacts of creating, maintaining and operating the waterways, be made
• Moreover, both, the assessment of impacts, and the process of addressing them must be made accountable and legally binding. The best way to do this is to bring waterways in their entirety as well as their different elements unambiguously within the ambit of the EIA and mandate prior environmental clearance for them.
• The environmental impacts of waterways need to be considered as key criteria in assessing their viability and desirability, not just a matter of mitigating the environmental impacts of waterways.
• Such viability needs to be established for each waterway on a case to case basis, and it is imperative that the social and environmental impacts, assessed through a legally binding, well-defined and accountable protocol be important considerations in this process of determining whether any specific waterway is a viable, desirable and optimal solution, or not.

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