India’s import substitution policy

Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Prelims and Mains focus: on the import substitution policy and its benefits and how it impacts domestic industries and the overall growth of an economy

Context: The recent wave of protectionism and the US-China trade war point to a need to re-evaluate India’s trade policy. The argument in favour of higher tariffs or import substitution is that ‘infant’ domestic industries need to be protected.

The benefit of a low-tariff regime

India’s GDP growth rate has largely gone up over the years with a reduction in tariffs from 1999 onwards.

What is an import substitution policy?

• Under an import substitution policy, a government uses trade tariffs as a policy instrument to encourage domestic industry, the idea being to substitute imports with domestic goods. This policy has been practised by many countries, including India.

• The argument in favour of high tariffs is that in developing countries, industries are yet to develop and, therefore, need to be protected from international trade to ensure their development. This is generally termed the “infant industry” argument and was often cited to justify the policy of tariffs, licences and quotas that predated the 1991 reforms.

Is the ‘infant industry’ argument valid?

• To some extent, the argument is valid as “infant” domestic industries would be hampered by imports of cheaper goods and commodities. But there is adequate empirical evidence, including from India’s experience, that suggests protectionism and tariff barriers act as a disincentive for domestic industries to become competitive.

• Another issue is input: a higher tariff on inputs would result in higher input costs for manufacturers, which could otherwise be competitive if they could import cheaper inputs. A comprehensive view of the supply chain must be taken while making any changes to tariff policies.

What has been India’s recent trade experience?

Since 1991, the tariff policy has led to a systemic reduction in India’s weighted effective average tariff, coinciding with a sharp rise in GDP and higher growth rate, even though recent trade experience has been mixed. Several factors are behind the slow pace of export growth. The slowdown has led to a drop in the value of imports, thus shrinking the current account deficit.

Has the reduction in tariffs benefited India?

Many are against imports, but they ignore India’s experience of the last few decades when there was a systematic overhaul of the economy. Lower tariffs have come with higher growth, a rise in exports and a reduction in poverty at the fastest pace in India’s history. The nation has emerged as a leader in exports of IT services and is now a key player in pharmaceuticals. As production takes place through supply chains, India has to integrate with global markets to ensure adequate labour-intensive manufacturing jobs.

What about tariffs imposed on exports?

The ongoing trade war and the recent escalation of protectionist steps between the US and China have raised the question about India’s policy response to any rise in tariffs imposed by other countries on Indian goods and services. The high-level advisory group said it would be beneficial for India not to retaliate with tariffs. Any move to raise tariffs must consider the integrated supply chains and the fact that Indian imports are largely for domestic consumption.

Oxfam India report: ‘Time to Care

Syllabus subtopic:

• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
• Role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders

Prelims and Mains focus: about the key highlights of the report regarding income disparity in India and recommendations

News: Oxfam India’s report, “Time to care”, released in Davos, Switzerland, highlights the need for Asia’s third-largest economy to plug a growing rich-poor gap.

Background

• The findings come at a time when the government is preparing to present the Union budget for FY21 seeking to address an economic downturn, distress in the rural economy, and improve incomes and add new jobs.

• The Narendra Modi administration has been following a progressive taxation policy and higher welfare spending to try and tackle income inequality.

Key findings of the report

• India’s richest 10% control more than 74% of the national wealth, while poor women and girls—the bottom of the economic heap—put in Rs.19 trillion of unpaid care work every year.

• The gap becomes even wider when considering the richest 1% of Indians: they hold 42.5% of the national wealth, while the bottom 50%, the majority of the population, has a mere 2.8% share of the national wealth.

• The top 1% holds more than four times the wealth held by 953 million Indians, who make up the poorest 70% of the population.

What does the report recommend?

• The report said its findings call for a dialogue on the rising income disparity in the world’s largest democracy.

• The Oxfam report makes a strong case for raising taxes on corporations and rich individuals to tackle poverty and lift the responsibility of care from women.

• It said successive governments are “massively under-taxing the wealthiest individuals and corporations” and “underfunding vital public services and infrastructure” that could help reduce the workload of women and girls.

• The gap between the rich and the poor cannot be resolved without deliberate inequality-busting policies, and too few governments are committed to these.

• Women’s unpaid care work, it said, is taken for granted or ignoring the physical, mental and emotional effort it requires. Investments in water and sanitation, electricity, childcare and healthcare could free up women’s time and improve their quality of life.

• Governments must ensure corporations and wealthy individuals pay their fair share of tax and increase investment in public services and infrastructure. It also argued that people who care for parents, children and the most vulnerable, an important social function, should be paid a living wage.

About Oxfam India

• Oxfam India is a leading NGO of people and organisations working hand in hand to fight inequality in India. Supporting civil society organisations in India over the past 60 years, In 2008 Oxfam registered as an Independent organisation. Oxfam is celebrating its 67th year of humanitarian service in India.

• In 1951, Oxfam Great Britain launched its first full-scale humanitarian response to the Bihar famine. In the past six decades, Oxfam has supported civil society organisations across the country. In 2008, various Oxfam's in India joined forces to form Oxfam India. Registered as an independent organisation, Oxfam India has indigenous staff and board members. It is a member of the global confederation of 19 Oxfam's.

It focuses on four poverty-eliminating goals

1. Livelihood: More women and men will realise their right to secure and sustainable livelihoods.
2. Fight for women: More women will lead a violence-free life. This can be achieved through changes in attitudes and beliefs about gender relations and through encouraging women's engagement and assuming leadership in institutions and decision-making roles.
3. Education and Health: People living in poverty, especially women and, girls will realise their right to accessible and affordable healthcare, education, clean water and sanitation.
4. Human Rights: Those facing a humanitarian crisis will be assured the protection and the assistance they need, regardless of who they are, where they live or how they are affected.

Naga-Kuki conflict in Manipur

Syllabus subtopic: Security challenges and their management in border areas

Prelims and Mains focus: on the Naga-Kuki conflict and its impact on India’s internal security; on the strategic importance of the Northeast region

News: Umbrella organisations of two tribes have called a truce in Manipur after almost four decades of violence and uneasy existence.

About the two groups in conflict

• The conflict between the Nagas and the Kukis in 1993 had claimed more than 230 lives and displaced 1,00,000, mostly Kukis.

• The NNPGs, which have been in talks with New Delhi since 2017, comprise the National Socialist Council of Nagaland (Unification), the NSCN (Reformation), the NSCN (Khango), the Naga National Council and two of its factions, and the Federal Government of Nagaland.

• The KNO, which is seeking a territorial council in Manipur, is the umbrella body of 17 militant outfits now engaged in peace talks with the Centre.

Manipur’s demography

• Manipur has a population of 2,855,794 as per the 2011 census. Of this total, 57.2% live in the valley districts and the remaining 42.8% in the hill districts.
• The hills are inhabited mainly by the Nagas, and Kukis, and smaller tribal communities and the valley (plains) are mainly by the Meiteis, Manipuri Brahmins (Bamons) and Pangal (Manipuri Muslims). Bishnupriya Manipuri, Naga and Kuki settlements are also found in the valley region, though less in numbers.

About the Naga-Kuki conflict

• On September 13, 1993, Naga militants allegedly belonging to the National Socialist Council of Nagaland (Isak Muivah) massacred around 115 Kuki civilians in the hills of Manipur. The Kukis refer to the killings as the Joupi massacre after the village which saw the highest number of casualties.

• However, The National Socialist Council of Nagalim Isaac-Muivah (NSCN-IM) faction has accused Kukis of being responsible for the start of the Naga-Kuki conflict in 1992.

• Hostility between the Nagas and the Kukis dates back to colonial times, but the conflict of the 1990s was primarily over land: large swathes of what the Kuki claim to be their “homeland” in the Manipur hills overlapped with Greater Nagaland or Nagalim, envisioned by the NSCN (IM) as a sovereign Naga homeland. The proposed map of Nagalim consists of Nagaland and “all contiguous Naga-inhabited areas” of Assam, Manipur, Arunachal Pradesh and, across the international border, Myanmar.

• The Kukis, one of the bigger hill tribes of the region, are spread across the North East, and even parts of Myanmar and the Chittagong Hill Tracts in Bangladesh.

Way forward

• The working committee of the Naga National Political Groups (NNPGs) and the Kuki National Organisation (KNO) have signed a declaration to settle contentious issues and inter-community differences peacefully.

• According to the declaration, the two sides will “work together closely to resolve differences through a democratic political process, and by respecting each other’s history and identity”.

Strategic Importance of Northeast:

Strategic Importance of North East: Northeast India has an extraordinarily important international strategic dimension and is a vital part of the nation’s defence architecture. Its importance is enumerated below:

International Border:

These states share their borders with other countries like Bangladesh, Bhutan, Myanmar and China. It makes up close to 40% of India’s land borders with its neighbours.

1. Bridge to South East Asia: The region is at the crossroads of India and Southeast Asia. It is a bridgehead between India and the vibrant economies of Southeast Asia, including southern China.

2. Economic Significance: North East is endowed with the huge natural resources (oil, gas, coal, hydro, fertile land, etc) which can be harnessed for national development.

Syllabus subtopic: Conservation, environmental pollution and degradation, environmental impact assessment

Prelims and Mains focus: about the EIA sought for water aerodromes and delay in it; about EIA; UDAN scheme

News: A year after 10 water aerodromes were awarded to airlines for seaplane operations, the government is yet to seek environmental clearance for them.

Background

• In January 2019, the government announced winners of the third round of UDAN (Ude Desh ka Aam Nagrik) — the government’s low-cost flying scheme.
• Among the routes awarded to airlines were those that provided air connectivity to 10 waterdromes — the Statue of Unity, the Sabarmati riverfront and the Shatrunjay dam in Gujarat; the Nagarjuna Sagar dam and the Prakasam barrage in Andhra Pradesh and Havelock Island, Neill Island and Long island in Andaman and Nicobar. Eight of these waterdromes in Gujarat, Assam and Andaman and Nicobar were awarded to the SpiceJet.

About the Environment Impact Assessment (EIA) for aerodromes

• The Ministry of Civil Aviation appointed a consultant, M/s Feedback Infra, to prepare a detailed project report in August last year. Subsequently, a proposal was sent to the Ministry of Environment and Forest (MoEF) seeking the “terms of reference” for conducting an environment impact assessment (EIA) for three waterdromes in Andaman and Nicobar, which was granted on November 25.

• Once the EIA is finalised, the apex body under the MoEF, Environment Approval Committee, will take it up for clearance. This process is yet to be undertaken for the remaining seven waterdromes.

• The process of seeking environmental clearance requires a lot of data such as bathymetric test. (Bathymetry is the study of underwater depth of lake or ocean floors.)

• As per the EAC’s “terms of reference” for the waterdromes in Andaman and Nicobar, the Ministry of Civil Aviation will have to provide information about toilet waste from flights, disposal of trash collected during flights and waste from eateries and shops at the aerodromes. Details have also been sought about the impact of noise on the sensitive environment and presence of corals.

What is Environment Impact Assessment (EIA)?

• UNEP defines Environmental Impact Assessment (EIA) as “a tool used to identify the environmental, social and economic impacts of a project prior to decision-making.”

• Environmental Impact Assessment (EIA) is the process of examining the anticipated environmental effects of a proposed project – from consideration of environmental aspects at design stage, through consultation and preparation of an Environmental Impact Assessment Report (EIAR), evaluation of the EIAR by a competent authority, the subsequent decision as to whether the project should be permitted to proceed, encompassing public response to that decision.

• The aim is to predict environmental impacts at an early stage in project planning and design, find ways and means to reduce adverse impacts, shape projects to suit the local environment and present the predictions and options to decision-makers. Although legislation and practice vary around the world, the fundamental components of an EIA would necessarily involve the following stages:

1. Screening
2. Scoping
3. Assessment and evaluation of impacts and development of alternatives
4. Reporting the Environmental Impact Statement (EIS) or EIA report
5. Review of the Environmental Impact Statement (EIS)
6. Decision-making
7. Monitoring, compliance, enforcement and environmental auditing

Syllabus subtopic: Achievements of Indians in science & technology; indigenization of technology and developing new technology.

Prelims and Mains focus: about the deployment and its significance for India’s presence in IOR; about the geopolitical importance of IOR

News: Adding teeth to India’s air and maritime dominance in the Indian Ocean Region (IOR), a squadron of fourth-generation fighter jets Sukhoi-30 MKI equipped with the BrahMos missile was inducted on Monday at the airforce station in Thanjavur in the Southern Air Command.

Sukhoi-BrahMos Combo

With a combat radius of nearly 1500-km without requiring a refuel, Sukhoi 30 jets have been modified to carry BrahMos air-to-surface missiles with a range of nearly 300 km, giving them the capacity to conduct long-range precision strikes.

About the squadron

• The squadron is a resurrection of the Tigersharks 222 squadron, which was raised at Ambala in 1969 with Sukhoi Su-7 aircraft. In July 1971, the squadron was moved to Halwara and was engaged in combat with Pakistan Air Force in the 1971 war.

• The squadron was formally inducted by Chief of Defence Staff General Bipin Rawat.

• The resurrection of the 222 Squadron highlights the integration and jointness that is the future for our armed forces and integration of this weapon system would not have been possible but for the support of the Indian Air Force, the HAL, the DRDO and BrahMos.

Advantage for India’s presence in IOR

• Sukhoi-30 MKI equipped with BrahMos will indeed become a game-changer for our armed forces.

• Not only will it extensively enhance the security of our maritime domain, but the squadron can also perform tasks in support of the land forces, protecting the vulnerable areas and points and any other tasks that may be assigned to them.

Importance of IOR

• The region comprises the ocean itself and the countries that border it. These include Australia, India, Indonesia, Bangladesh, Madagascar, Somalia, Tanzania, South Africa, the United Arab Emirates and Yemen.

• There is an obvious sense in which the region is the future. The average age of people in the region’s countries is under 30, compared to 38 in the US and 46 in Japan. The countries bordering the Indian Ocean are home to 2.5 billion people, which is one-third of the world’s population.

• Some 80% of the world’s maritime oil trade flows through three narrow passages of water, known as choke points, in the Indian Ocean. This includes the Strait of Hormuz – located between the Persian Gulf and the Gulf of Oman – which provides the only sea passage from the Persian Gulf to the open ocean.

• The economies of many Indian Ocean countries are expanding rapidly as investors seek new opportunities. Bangladesh, India, Malaysia and Tanzania witnessed economic growth in excess of 5% in 2017 – well above the global average of 3.2%.

• India is the fastest growing major economy in the world. With a population expected to become the world’s largest in the coming decades, it is also the one with the most potential.

• Politically, the Indian Ocean is becoming a pivotal zone of strategic competition. China is investing hundreds of billions of dollars in infrastructure projects across the region as part of its One Belt One Road initiative.

• In security terms, piracy, unregulated migration, and the continued presence of extremist groups in Somalia, Bangladesh and parts of Indonesia pose significant threats to Indian ocean countries.