07 Sep 2020: UPSC Exam Comprehensive News Analysis

C. GS 3 Related

Category: ENVIRONMENT AND ECOLOGY

1. Research paper calls for change in India’s forest policy: D-G Forests

Context:

• Based on the findings of the research paper titled the ‘Impact of forest policies on timber production in India: a review’ published in 2016 in the Natural Resources Forum, a United Nations Sustainable Development Journal, a senior official has called for a review of the current forest policy in India.

Background:

Current forest policy in India:

• Following a 1996 Supreme Court order which regulated logging in government forests, the forest policies in India have focused on conservation. The policies prioritize conservation over production.

Concerns with the present approach:

Fall in domestic production:

• The domestic demand for timber has been growing due to the increasing population and per capita GDP.
• However, decades of policies focused on conservation instead of production has resulted in domestic timber production witnessing a slump.

Reliance on imports:

• Given the shortfall in domestic production, the timber imports have witnessed a rise.
  • The dependency on imports could backfire as the exporting countries have been shifting to a conservation-based approach. This could lead to a situation where India does not have sufficient domestic timber production ability nor would be in a position to import from other countries due to a shortage of supplies.
  • The unimpeded timber imports have affected domestic pricing patterns. The low prices have dis-incentivized domestic production.

Details:

• The research paper argues in favour of a more balanced approach to forest policy-making in India. It calls for an approach that takes care of both the conservation imperatives as well as the human needs for timber.
• There is a need for a forest policy characterised by equal importance given to restoration, conservation and production.
  • The conservation policy must focus on maintaining ecological balance and improving biodiversity through protected area management.
  • The restoration policy must target reclamation, rehabilitation and regeneration of degraded landscapes and wastelands.
  • The production policy must focus on increasing forest productivity to meet human timber needs.
• The research paper calls for an amendment in the Indian forest policy to boost domestic production.

Steps to be taken:

• Production forestry should focus on a sustainable increase in forest productivity from trees outside forests (TOFs) and recorded forest areas (RFAs).

Focus on TOFs:

• Considering the immense potential of timber production from trees outside forests (TOFs) — grown outside government recorded forest areas (RFAs), there is the need to incentivize and promote timber production in TOFs to meet the domestic timber demand.
  • The India State of Forest Report (2011) estimates timber production from government forests to be 3.17 million m³ and potential timber production from TOFs to be 42.77 million m³.
• For TOFs, a synchronised nationwide policy needs to be developed. This should also incentivize private sector participation.

Sustainable forestry in RFAs:

• For the RFAs, there could be the demarcation of 10% of the forests for plantations in areas that would have the least impact on the ecology.
• There should be sustainable forest management in these areas based on certification to dis-incentivize logging in protected areas.

Framing of supportive policies:

• The import-export policy of the country should be reviewed to rectify its pricing impact in the market. The policy should consider restricting imports in a bid to help increase the prices in the market and make it economically viable to grow trees domestically.
• The lack of reliable data relating to growing stock, consumption and production of timber has constrained forecast of supply and demand projections. There is a need to ensure data availability on these to promote the timber industry in India.

Significance:

Mitigation efforts:

• Increasing wood production will result in carbon sequestration, and help in mitigating the effects of climate change.
  • India remains highly vulnerable to the impact of climate change. India ranks 5^th on the global climate vulnerability index.
• This could also help India meets its commitments made under the Paris climate deal.
  • Under the Paris Agreement, India had committed to creating a cumulative carbon sink of 2.5-3 billion tonnes of carbon dioxide equivalent by 2030.

Impact on rural economy:

• Policy initiatives aimed at increasing timber production from TOFs can help revive the agricultural sector and the rural economy by generating newer employment opportunities.
• Agroforestry apart from helping the farmers supplement their incomes also helps increase the concentration of various nutrients or enhances nutrient cycling and thus helps improve overall soil quality.

Additional information:

• The Indian Institute of Forest Management (IIFM) is located in Bhopal.

E. Editorials

Category: ECONOMY

1. Mixed messaging

Context:

• The article analyzes the issue of foreign investment in the Indian economy.

Background:

• In his recent address to the U.S.-India Strategic Partnership Forum, the Indian Prime Minister pitching India as an investment destination called for higher foreign investments into India.

For information on the U.S.-India Strategic Partnership Forum, refer to:

PIB dated 2 Sep 2020: US-India Strategic Partnership Forum (USISPF)

• The PM laid out a vision of making India a manufacturing hub at the heart of global supply chains.
• The pitch comes in the backdrop of the government’s keenness to lure potential investors, especially those looking to relocate from China, to India.

Significance of the move:

• The worsening relationship between the U.S. and China and the ongoing trade stand-off between the world’s two largest economies present a unique opportunity for India to woo U.S. investors and multinationals looking to shift from China to set up their bases in India.
• Even if a few multinational enterprises can be drawn to set up manufacturing bases, either by shifting facilities or as new additional plants, this would benefit the Indian economy through increased FDI, new jobs and higher tax revenue for the government.
• There is also strategic significance involved in the pitch given the escalating border feud between India and China and India’s economic and trade ties with China.

Concerns:

• The article argues that despite the right intentions, the recent government measures seem to be sending the wrong messages to potential foreign investors.

‘Aatmanirbhar Bharat’ initiative:

• The article argues that the government’s recent ‘Aatmanirbhar Bharat’ initiative, of making India more self-reliant, would send a wrong signal to the foreign investors.
• Several ministries have urged companies and industry sectors to adopt the policy of ‘import substitution’- to replace imports with ‘Made in India’ substitutes. This could be perceived by the foreign investors as undesired regulation, as they too could be asked to source capital goods locally.
• Global FDI investors prioritise policy stability even at the cost of lower profits and favour largely barrier-free access to local and international markets.

Decision to not be part of the RCEP:

• India’s decision to not join the RCEP multilateral trade pact is being viewed negatively by the foreign investors as this would put investor companies seeking to tap consumers in RCEP member countries at a tariff disadvantage. This would restrict their market access in these countries.

The nature of FDI inflow into India:

• Between April-July 2020, the Foreign Direct Investment (FDI) into India stood at $20 billion.
• Despite the good inflow of FDI even during the time of COVID-19 into India, there continue to remain concerns over the nature of the FDI inflows into India.
• Most of the recent FDI announcements have been by way of stake acquisitions in existing businesses, and predominantly in the services sector. These do not produce other desirable outcomes that are expected with FDI like the inflow of better technology and the creation of additional employment opportunities.
• The FDI into manufacturing has been comparatively low.

Conclusion:

• India’s efforts to attract capital will not result in substantial FDI flow until investors see policy stability.
• The government will have to convince investors that it is committed to an open, barrier-free global trade and investment order.
• Also, the attempts to lure higher foreign investments into India should be supplemented with parallel efforts to explore supply-chain synergies with other economies.

For related information, refer to:

CNA dated Aug 31, 2020: Despite the messaging, it is still advantage China

2. Financing economic recovery

Context:

The article discusses the economic impact of the pandemic and the efforts towards economic recovery.

Background:

• The COVID-19 pandemic has had a deep socioeconomic impact across Asia and the Pacific.
• The dwindling revenue and increasing expenditure pose a unique challenge to the administrations.
  • Due to the continued lockdown measures and restricted borders, countries in Asia and the Pacific have been experiencing sharp drops in foreign exchange inflows due to declines in export earnings, remittances, tourism and FDI.
  • Countries are having to inject trillions of dollars for emergency health responses and fiscal packages.
• Policymakers are trying to expand their limited fiscal space.

Initiatives taken:

• The United Nations is steering an initiative called the Financing for Development in the Era of COVID-19 and Beyond, to articulate a comprehensive financing strategy to safeguard the Sustainable Development Goals.
• The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has recently launched its first-ever Regional Conversation Series on Building Back Better. This would involve ministers, decision-makers, private sectors and heads of international agencies to share collective insights on sharing pathways to resilient recovery from health pandemic and economic collapse.
• The Global Debt Service Suspension initiative calls for extending the debt moratorium to help the countries manage debt distress.

Way forward:

Adopting a comprehensive financing plan:

• The finance plans should, apart from aiming to address the challenge of diminished fiscal space and debt vulnerability, also envisage a sustainable recovery, consistent with the ambitions of the Paris Agreement and the 2030 Agenda.
• Apart from economic considerations, the policy must promote social equality and environmental sustainability principles.

Regional cooperation:

• Given the limited abilities of the individual nations to deal with such a huge disruption, there is the need to harness the potential of regional cooperation in support of financing for development. Governments must pool financial resources to create regional investment funds.
• Regionally coordinated financing policies can restart trade, reorganise supply chains and revitalise sustainable tourism in a safe manner.

Role of domestic institutions:

• Central banks should continue to balance the contradictory needs of supporting the economy and maintaining financial stability.

Domestic reforms:

• The administration should consider enhancing tax reforms and improving debt management capacities.
• Tax reforms would ensure higher tax compliance.

Prioritizing investments:

• The government must use the limited fiscal space to invest in priority sectors.
  • This could involve enhanced financial support to micro, small and medium-sized enterprises and other such employment-intensive sectors.
  • The government will also need to prioritize the needs of the most vulnerable sections in society.

Explore alternative financing routes:

• Exploring sustainability-oriented bonds and innovative financing instrument options such as debt swaps for SDG investment should be explored further.

Role of global organizations:

• The United Nations and its specialized agencies will have to coordinate an inclusive, sustainable and resilient post-COVID-19 recovery given their global reach.
• The global financial institutes like the World Bank and the IMF will have to mobilize resources to ensure sufficient financial resources for the recovery process.

Q1. Which of the following places is popularly known as the land of 7 languages 
in India?

Q2. Which of the following statement/s is/are correct with respect to the Ajmer 
Sharif dargah?

Q3. Which of the following pairs is/are correctly matched?

Q4. Which of the following statement/s is/are correct with respect to the Directorate 
of Revenue Intelligence (DRI)?

I. UPSC Mains Practice Questions

1. What are the concerns associated with the current conservation-prioritized Forest Policy structure in India? Discuss the need to have a forest policy envisaging equal importance to restoration, conservation and production. (15 marks, 250 words) (GS paper 3/Environment and Ecology)
2. Analyze the reasons for several of the power distribution companies (discoms) in Indian states being financially stressed and suggest suitable remedies to address this situation. (10 marks, 150 words)(GS paper 3/Economy)

Read the previous CNA here.