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International relations:

ASEAN summit: Modi hard-sells India as an attractive investment destination (The Hindu) And Eastern promise (The Hindu)

Context

Prime Minister Narendra Modi’s visit to the Philippines to attend the ASEAN-India summit, the East Asia Summit and the Regional Comprehensive Economic Partnership summit has put India centre-stage in the Asian region now referred to as “Indo-Pacific”.

What is ASEAN?

  • The Association of Southeast Asian Nations (ASEAN) comprises of Indonesia, Singapore, Philippines, Malaysia, Brunei, Thailand, Cambodia, Lao PDR, Myanmar and Vietnam.
  • India’s relationship with ASEAN is an outcome of the significant changes in the world’s political and economic scenario since the early 1990s.

Look East Policy

  • ‘Look East Policy’ is India’s research for economic space.
  • The Look East Policy has today turned into a dynamic and action oriented ‘Act East Policy.
  • PM at the 12th ASEAN India Summit and the 9th East Asia Summit held in Nay Pyi Taw, Myanmar, in November, 2014, formally enunciated the Act East Policy.
  • India’s relationship with ASEAN is a key pillar of our foreign policy and the foundation of our Act East Policy.

The Quad pivot

  • The Japan-proposed, U.S.-endorsed plan, including Australia, it is necessary that India analyze the impact of this admission on all its relations.
  • As a growing economy with ambitious domestic targets, India’s own needs often clashwith those of its neighbours.
  • More connectivity will eventually mean more competition, whether it is for trade, water resources, or energy.

What is the significance of the meet?

  • The meet comes after Japan publicly proposed the quadrilateral with India, US and Australia and then Canberra indicated its willingness to be a part of the political-security dialogue among the four democracies
  • The meet aims to counter China’s aggressive maritime expansion under its Belt and Road Initiative.

What is the Look East Policy?

  • It was launched by former Prime Minister P.V. Narasimha Rao in 1991.
  • It had only south-eastern countries to aim under the policy
  • It aims at reconnecting Asia as part of India’s economic globalization.

Why do a separate policy of East Asia is needed?

  • Economic slump and balanced of payment crisis in mid-1991 in India due to Gulf war.
  • Collapse of Soviet Union (cold war end- 1990), created a strategic and economic vacuum in India.
  • China’s economic reform (shift from communism to market socialism) prompted India to reach out to south east Asia to avoid falling into a subordinate political and economic role in the region.
  • India’s desire to stabilize north eastern states where insurgency was picking up it pace.

What are the objectives of look East policy?

  • Regional economic integration and ties with ASEAN countries- BIMSTEC, Mekong Ganga etc.
  • To trace back and review the implementation of the Look East Policy over the past 30 years.
  • To gather all parties involved directly or indirectly with the Look East Policy and create new cooperation networks through an academic event.
  • To provide an avenue for sharing of opinion and exchanging ideas while discussing the achievements of the Look East Policy and its future.
  • To formally gather official feedback through speeches, forums, paper presentations, and journal article publications.
  • Development of northeastern states- connectivity with south eastern countries via roads, railways etc and infrastructure development.
  • To balance China’s influence in this region.
  • Diplomatic engagement with southeast to border security and defence ties.

The forgotten people(The Opinion) 

Context

  • The focus of the media has been on the Rohingya refugees in India. But the plight of Sri Lankan refugees, staying here for nearly 35 years, appears to have gone out of the public consciousness.

The living condition of Sri Lankan refugees

  • The condition of shelters, restrictions on movement, and limited scope of livelihood opportunities is pathetic.
  • They having been staying in such condition, the one lakh-odd Sri Lankan refugees, in Tamil Nadu ever since the anti-Tamil pogrom in Sri Lanka in July 1983 occurred.
  • Statelessness is a major problem for a section of refugees whose roots are from central parts of Sri Lanka, generally called hill country.
  • The refugees also suffer from social and psychological problems as reports of suicides, school dropouts and child marriage show.
  • Many middle-aged refugees worry about their children’s future, given the fact that 40% of camp refugees are below 18 years.

Efforts by Sri Lankan government

  • As 28,500 refugees are said to be stateless, the Sri Lankan government, in 2003 and 2009, amended its laws to enable easier repatriation.
  • Tamil political parties asks the refugees to return so that the strength of elected representatives from the Tamil-majority Northern Province will go up in the Sri Lankan Parliament.

What are the results?

  • The voluntary reverse flow of refugees has happened only incrementally.
  • Even the end of the Eelam War in May 2009 and the decision of Indian authorities in January 2016 to waive visa fees and overstay penalty on a case by case basis for willing persons have not made a huge difference.
  • In the last eight and a half years, hardly 10% of the refugees (9,238 people) went back through a scheme implemented by Indian officials along with the office of the United Nations High Commissioner for Refugees (UNHCR). There is perhaps good reason for the refugees’ reluctance to return.

Improvement in lifestyle

  • Around 62,000 refugees, living in 107 camps across Tamil Nadu, have been receiving various relief measures of the Central and State governments.
  • In addition, in recent years, the Tamil Nadu government has taken steps for scores of young boys and girls of the refugee community to join professional courses, particularly engineering, benefitting eligible candidates among 36,800 non-camp refugees in the State too.
  • Regardless of the quality of housing and the nature of their jobs, several camp refugees have experienced a perceptible improvement in their lifestyle.
  • The refugees know well that if they go back to Sri Lanka, they will not get many of the benefits they have been enjoying in Tamil Nadu.

Change in status quo

  • Currently, for both India and Sri Lanka, the repatriation of refugees does not seem to be a priority.
  • India and Sri Lanka both cannot afford continuing with the status quo either, as Tamil Nadu holds the distinction of hosting the largest number of refugees in India.

Need to rethink

  • It would be in the interests of the two countries to thrash out the issue sooner than later. While for India a long-standing problem would be resolved, for Sri Lanka it would be a step towards ethnic reconciliation.
  • For refugees who want to stay back, India can consider providing them citizenship, as it did for refugees from Pakistan and Afghanistan.
  • India has the right not to grant citizenship to trouble-makers. If everything goes off smoothly, authorities can finally close down camps in Tamil Nadu, bringing an end to an episode that has lasted longer than the civil war of Sri Lanka.

India – Sri Lanka relations

  • India Sri Lanka relationship is 2500 years old with significant cultural and political contacts
  • In the ancient phase of history, Buddhism was introduced in Sri Lanka by Mahinda, the son of Ashoka
  • In the medieval phase of history, the Chola kings like Rajaraja and Rajendra -1 occupied the Northern part of Sri Lanka
  • Sri Lanka was also under British rule and got its independence in 1948. Post independence, both India and Sri Lanka became members of Commonwealth of Nations
  • Indian government intervened in Sri Lankan civil war to bring out peace in the nation.

Areas of Cooperation:

Diplomatic Cooperation:

  • Diplomatic relations between India and Sri Lanka are marked by visits of high level Government functionaries. A notable diplomatic event in the recent past was our Indian Prime Minister’s address to the Sri Lankan parliament in 2015
  • India-Sri Lanka Joint Commission was established in 1992. The commission facilitates discussions relating to bilateral affairs of both the countries
  • India and Sri Lanka signed a civilian nuclear energy deal in 2015. The agreement aims at cooperation to explore nuclear energy for peaceful purposes.

Economic Cooperation:

  • India-Sri Lanka Free Trade Agreement was signed in 2010. India is Sri Lanka’s largest trading partner
  • India is the source of one of the largest foreign direct investments in Sri Lanka. Sri Lanka is also a potential source of foreign investment in India.

Defence and Security Cooperation:

  • India and Sri Lanka conducts one of the largest joint Military exercises called ‘Mitra Shakthi
  • India and Sri Lanka conducts joint Naval exercise called ‘SLINEX
  • India is the largest provider of defence training program to Sri Lankan soldiers and Defence officials
  • India, Sri Lanka and Maldives signed a trilateral maritime security cooperation in the Indian Ocean region. The cooperation aims at improving surveillance, anti-piracy operations and reducing maritime pollution.

Development Assistance:

  • The war between Sri Lankan Government and LTTE came to an end in 2009. The armed conflict led to many casualties and internal displacement
  • As an immediate response India provided all war relief measures including food, medicine etc.,. As a long term measure, India announced reconstruction of 50000 houses to provide shelter to Internally Displaced People (IDP)
  • India is one of the largest provider of development credit to Sri Lanka. As of 2016, a total of USD 1284 million has been provided by India. The credit is mostly provided for the Sri Lanka’s infrastructure development
  • India has provided medical equipment and ambulances to hospitals in Sri Lanka.

Cultural and Educational Cooperation:

  • India and Sri Lanka signed a cultural cooperation agreement back in 1977
  • India Sri Lanka foundation was setup in 1998. It aims at technical, scientific, cultural and educational cooperation by engaging civil society organizations of both the countries
  • India cultural centre in Colombo promotes Indian culture by providing courses in Indian music, dance, yoga etc.,
  • India provides scholarships to qualified Sri Lankan students in Undergraduate and research studies
  • Tourism is one of the important areas of cooperation. Sri Lankan tourists are one of the top ten visitors to India

Record diplomatic bodies UIN : Centre

Context

  • The government has clarified that sales or supply to foreign diplomatic missions or UN organisations will not have any additional effect on the supplier’s tax liability
  • Supplies of such nature must be recorded along with the Unique Identification Number (UIN) of the recipient.

What is Unique Identification Number (UIN)?

  • Unique Identification Number, UIN, is a special class of GST registration for foreign diplomatic missions and embassies which are not liable to taxes in the Indian territory.
  • Any amount of tax (direct or indirect) collected from such bodies is refunded back to them.

Why is the signification of UIN?

  • This clarification follows several foreign diplomatic missions complaining that their suppliers are refusing to record their UIN during transactions.
  • Recording of UIN will enable foreign diplomatic missions/UN organisations to claim refund of the taxes paid by them in India

What was the issue?

  • Foreign diplomats posted in New Delhi have complained to the Ministry of External Affairs that the Goods and Services Tax regime has modified the tax-exempt status of the foreign missions
  • The diplomats also complained that the UIN system infringed on the confidentiality of diplomatic practices and privacy of foreign diplomats posted in India.

Indian Constitution and Polity:

Supreme court, diminished(Indian Express Opinion)

Context:

The judiciary has created a crisis of institutional credibility for itself.

Crisis situation for Judiciary:

  • The Supreme Court of India is facing worst crisis of credibility since the Emergency.
  • The quality of the court’s reasoning, the inconstancy of its judgment, the abdication of its constitutional role in some cases, and is overreach in others, are already denting its authority.
  • The present crisis was occasioned by an order passed by Justice J Chelameswar to constitute a five-judge bench in a petition filed by CJAR that demanded that a SIT be constituted to look into an alleged corruption scandal pertaining to a case involving a medical college.
  • There are issues of corruption in the courts.
  • The judiciary has failed to find a mechanism to deal with allegations of corruption within its ranks.
  • Institutional challenge to the judiciary is also one of the causes of crisis of identity.
  • Many learned counsel have defended Justice Chelameswar’s move by invoking Article 142 that gives judges the power to do whatever it takes to secure justice. But the use of Article 142 has also become a sign of immense judicial indiscipline, where judges can easily ride roughshod over other procedural properties.
  • Communication between judges seems to have broken down to the point where the senior leadership of the court is incapable of getting together and coming up with common sense procedural solutions to cases .
  • The distrust amongst judges is extraordinarily high.
  • The court’s loss of external credibility combined with internal anarchy does not bode well for Indian democracy. Instead of becoming a constitutional lodestar in our turbulent times, the court has itself become a reflection of the worst rot afflicting Indian institutions.

Chief Justice of India

  • Chief Justice is the senior most judge in the country, i.e, he is at the apex in the court of law. He sits in the supreme court, the court of Apex.
  • The most powerful authority someone as a chief justice can have is, to become an acting President or vice President when the post is vacant until the next President is selected.
  • CJI is constitutional post. He/she is who gives oath to president/vice President of india.
  • He/she assigns judicial and administrative work to judges and registers.
  • Represent India in International Judicial/ legal forum.

The appointment of CJI

  • The Chief Justice is appointed by the President in consultation with such other judges of the Supreme Court and High Court as he may deem necessary.
  • Convention dictates the appointment of the senior most judges of the Supreme Court as Chief Justice.
  • The other judges are appointed by the President after consultation with the Chief justice and such other judges of the Supreme Court and the high court’s as deemed necessary.
  • The Consultation with the Chief justice is considered necessary for the appointment of any judge other than the Chief justice.

How powerful is CJI?

  • Moral power: Chief Justice is the senior most judge in the country, i.e, he is at the apex in the court of law. He sits in the supreme court, the court of Apex.
  • Political power: The most powerful authority someone as a chief justice can have is, to become an acting President or vice President when the post is vacant until the next President is selected.
  • Legal power: As head of the Supreme Court, the chief justice is responsible for the allocation of cases and appointment of constitutional benches which deal with important matters of law. Chief Justice allocates all work to the other judges who are bound to refer the matter back to him or her

Indian judiciary and its problems:

The Indian judiciary has been placed in between the Westminster model (where judiciary is rather toothless) and the American model (where judiciary is supreme). The Judiciary has, in India’s independent history, more often than not tipped the scales back in favor of libertarian democracy whenever the balance has been disturbed by executive action.

However, the Indian judiciary suffers from ample problems:

  1. Pendency: Judicial proceedings are complex and entangled in technical jargon. Cases take years, sometimes decades, to be decided.
  2. The ‘climb up’ of cases: Cases are seldom decided at the subordinate level and often get heard at various levels of judicial hierarchy.
  3. Shortage of judges: There is an acute shortage of judges due to reasons like delay in appointment etc, and the lower judiciary seldom attracts good talent. The recruitment process attracts allegations of corruption.
  4. Proliferation through SLPs: A lot of cases are entertained under article 136, which would otherwise not fall in the criminal/appellate/advisory jurisdictions.
  5. Technical nature of cases: Often the judges have to hear cases related to technical matters such as taxation, environmental policy etc
  6. Weak Subordinate Courts:-We can think of Supreme Court and Many High courts as Strong institutions but at day to day level most of the cases are handled by the subordinate level which do not have well specialized manpower and hence are weak.
  7. A proper framework and method of specialization should be introduced in appointment of judges at the subordinate level.

Conclusion:

There is need to take proper care so that the anti-corruption measures taken do not undermine the independence of the judiciary. Judiciary need to think of how it will deal with instances where the Chief Justice of India or other justices becomes hostage to possible CBI innuendo.

JPC on land Bill to seek eight extension (The Hindu) 

Context:

The Joint Parliamentary Committee (JPC) on the Land Acquisition Bill, 2015, will seek the eighth extension in the upcoming Parliament session.

Introduction:

  • The JPC was set up in May 2015 to examine the Bill after it was opposed by many political parties, including allies of  the ruling BJP.
  • The Bill seeks to remove the consent clause for acquiring land for five purposes- industrial corridors, public-private projects, rural infrastructure, affordable housing and defence.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013 :

  • The Act has provisions to provide fair compensation to those whose land is taken away, brings transparency to the process of acquisition of land to set up factories or buildings, infrastructural projects and assures rehabilitation of those affected
  • Public purpose: The Act shall apply when land is acquired for ‘public purpose’. This includes land acquisition for defence purposes, infrastructure development, housing for the poor, etc.
  • Consent: Consent is not required for government projects. Private projects require the consent of at least 80% landowners. Public-private partnership projects require the consent of at least 70% landowners.
  • Social Impact Assessment (SIA): Conducting an SIA is mandatory for all acquisition cases except irrigation projects where an Environmental Impact Assessment has already been done or those cases exempted under the urgency provision.
  • Compensation: Compensation for land shall be two to four times the market value of land in rural areas and two times the market value of land in urban areas.
  • Rehabilitation and Resettlement (R&R): R&R will be given to all affected families, including land owners, and families whose livelihood is primarily dependent on the acquired land. R&R must be provided in case land is purchased (not acquired) by a private company, when the area to be purchased is more than that specified by the state.

Objectives:

The aims and objectives of the Act include:

  • To ensure, in consultation with institutions of local self-government and Gram Sabhas established under the  Constitution of India ,a humane, participative, informed and transparent process for land acquisition for industrialization  , development of essential infrastructural facilities and  urbanization with the least disturbance to the owners of the land and other affected families
  • Provide just and fair compensation to the affected families whose land has been acquired or proposed to be acquired or are affected by such acquisition
  • Make adequate provisions for such affected persons for their rehabilitation and resettlement
  • Ensure that the cumulative outcome of compulsory acquisition should be that affected persons become partners in development leading to an improvement in their post acquisition social and economic status and for matters connected therewith or incidental thereto.

Scope:

  • The Act aims to establish the law on land acquisition, as well as the rehabilitation and resettlement of those directly affected by the land acquisition in India.
  • The scope of the Act includes all land acquisition whether it is done by the Central Government of India, or any State Government of India, except the state of Jammu & Kashmir.

The Act is applicable when:

  • Government acquires land for its own use, hold and control, including land for Public sector undertakings.
  • Government acquires land with the ultimate purpose to transfer it for the use of private companies for stated public purpose. The purpose of LARR 2011 includes public-private-partnership projects, but excludes land acquired for state or national highway projects.
  • Government acquires land for immediate and declared use by private companies for public purpose.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, 2015:
Key amendments introduced:

  • The amended bill creates five special categories of land use: 1. defence, 2. rural infrastructure, 3. affordable housing, 4. industrial corridors, and 5. infrastructure projects including Public Private Partnership (PPP) projects where the central government owns the land.
  • The Bill exempts the five categories from provisions of the LARR Act, 2013 which requires the consent of 80 per cent of landowners to be obtained for private projects and that of 70 per cent of land owners for PPP projects.
  • The Bill allows exemption for projects in these five categories from requiring Social Impact Assessment be done to identify those affected and from the restrictions on the acquisition of irrigated multi-cropped land imposed by LARR Act 2013.
  • The Bill changes acquisition of land for private companies mentioned in LARR Act, 2013 to acquisition for ‘private entities’. A private entity could include companies, corporations and nonprofit organisations.

Liquor sale ban exemption applies nationwide:SC (The Hindu)

Context

  • The July 11 order of the apex court that clarified the stretches of highways running through municipal areas were exempted from the ban was in news again as the question remains that whether the exemption granted to municipal areas in the July 11 order pertained to only municipal areas in Chandigarh and none other.

The doubt

  • The doubt was raised by the Madras High Court and the Madras HC asked the Tamil Nadu government to approach the Supreme Court and get a clarification.
  • The High Court says municipal areas in the SC order means only areas in Punjab and not in Chennai.

Apex court reply

  • The order applies for municipal areas in Chandigarh it will apply equally for municipal areas across the country,” Chief Justice Misra responded orally.
  • Justice D.Y. Chandrachud, who had authored the highway ban verdict observed that the exemption from ban applies to municipal areas across the country.

What led to the confusion?

  • The reason of the present confusion was a particular paragraph in the July 11 order which said, “The purpose of the directions contained in the order dated December 15, 2016 is to deal with the sale of liquor along and in proximity of highways properly understood, which provide connectivity between cities, towns and villages. The order does not prohibit licensed establishments within municipal areas. This clarification shall govern other municipal areas as well. We have considered it appropriate to issue this clarification to set at rest any ambiguity and to obviate repeated recourse to IAs (interlocutory applications), before the court.”
  • “The phrase ‘other municipal areas’ in the order means municipal areas across the country.
  • The Madras High Court’s Division Bench of Chief Justice Indira Banerjee and Justice M. Sundar had
  • The clarification
  • This clarification from the apex court had effectively made infructuous any pending litigation in High Courts on declassification of State or national highways to district roads by State governments or local authorities.
  • The court’s clarification had come as a huge relief for bar and hotel owners who were forced to shut down operations post the December 15 ban. Thousands were left jobless after these establishments were closed down.

Why was the ban imposed?

  • The Supreme court had imposed the ban after hearing a plea that claimed that nearly 1.42 lakh people died in road accidents every year
  • Drunk driving is a potent cause of fatalities and injuries in road accidents
  • The Constitution preserves and protects the right to life as an overarching Constitutional value
  • Which states are exempted from the ban?
  • The top court had exempted the states of Himachal Pradesh, Meghalaya and Sikkim and places with populations less than 20,000 from the restriction.
  • The supreme court had also relaxed the norms for Arunachal Pradesh and the Andaman and Nicobar Islands.

What are the economic implications of this ban?

  • The move could lead to states losing overall tax revenue of Rs 50,000 crore, restaurants and pubs taking a hit of Rs 10,000-15,000 crore and 100,000 people going out of work
  • State revenue losses are estimated at Rs 50,000 crore, besides job losses of over a lakh
  • The top three — United Spirits BSE 3.78 %, Pernod Ricard and Allied Blenders, which account for 60% of overall sales — had zero growth by volume in the April-December period.
  • Liquor sales in India slowed to 0.4% in the first nine months of the financial year, the slowest growth in a market that’s been expanding rapidly since 2001, with a compounded annual growth rate of over 12% in the decade to 2011.

Why the ban is good?

  • Bans serve some immediate benefits to their users.
  • In politics, be it US or Bihar, the ‘right-intention’ serves the purpose of the initiative rather than the ultimate result of the act.
  • In India, the common mass is generally occasional drinkers. Curtailing alcohol supply will in hand curtail their drinking behavior.
  • In politics, ban of alcohol solves an array of problems for many households. Thus, it consolidates some segment of their voter base.
  • There are seen to be communal and domestic violence cases which seem to abate after a ban.
  • For example, in Bihar, people especially women are talking about its positive effect and how their lives have changed after Chief Minister Nitish Kumar’s historic decision.

Why the ban is not good?

  • According to psychologist Jack Brehm, humans hate obstruction of personal freedom. Accordingly, they get into a rebellious state of mind and regain their freedom through illegal affairs.
  • The undercover liquor supply makes its way for new problems like spurious liquor, gang wars and sale of other narcotic substances.
  • Economically, following the Supreme Court, the country has been facing problems for clubs, hotels and restaurants.
  • In Chennai, around 120 bars attached to clubs have remained closed since April 1, and the loss to the industry is estimated to be 600 crores, according to Benze Saravanan, founder, Tamil Nadu Bar and Club Owners Association.
  • Large hotel chains are not the only ones affected by the ban.
  • Food and beverage revenues have declined by 30-40% since the court order, and specialty restaurants have been badly hit.
  • In a nutshell, in the two months since the court ruling, the hospitality industry in Chennai has lost an estimated 3,000 crores.
  • With hardly any progress being made on resolving the issue, the hospitality industry says business in hotels on arterial roads has been crippled.
  • This is directly affecting their employees too.

GS-3


Economy

Food prices spur CPI inflation to 3.58% (The Hindu) 

Context:

According to the recently released data by the Ministry of Statistics and Programme Implementation, retail inflation accelerated to 3.58% in October on the back of rising food and fuel prices.

Introduction:

  • Consumer price index (CPI)-based inflation rose to this financial year’s highest rate of 3.58 per cent in October, from 3.28 per cent in September, with food and fuel prices increasing at a higher pace.
  • This could stop the Reserve Bank (RBI) from cutting rates in its policy review next month to spur falling industrial growth.
  • Inflation as measured by the Consumer Price Index(CPI) was 3.28% in September and as low as 1.46% in June.    
  • The food and beverages component of CPI saw a growth of 2.26% in October, the fastest pace since March, and up from 1.76% in September.
  • This was mainly due to a sharp uptick in vegetable prices.
  • The Global crude prices are firming up and will have a longer term adverse impact on Indian inflation.
  • In October, the RBI’s Monetary Policy Committee had said that retail inflation was broadly moving along expected lines and projected that the rate would quicken to 4.2% to 4.6% over the following six months.

Consumer Price Index (CPI):

  • Consumer price index (CPI) is a statistic used to measure average price of a basket of commonly used goods and services in a period relative to some base period.
  • A consumer price index (CPI) measures change in the price level of market basket of consumer goods and services purchased by households.
  • The CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.
  • Sub-categories of goods and services, being combined to produce the overall index with weights reflecting their shares in the total of the consumer expenditures covered by the index.
  • It is of one of several price indices calculated by most national statistical agencies.
  • The annual percentage change in a CPI is used as a measure of inflation.
  • In most countries, the CPI, along with the population census, is one of the most closely watched national economic statistics.

Loan waiver is not the solution   (The Hindu Opinion) 

Since Independence, one of the primary objectives of India’s agricultural policy has been to improve farmers’ access to institutional credit and reduce their dependence on informal credit

Context:

  • It is time that the country had revisited the credit policy with a focus on the outreach of banks and financial inclusion.
  • While the flow of institutional farm credit has gone up, the rolling out of the farm waiver scheme in recent months may slow down its pace and pose a challenge to increasing agricultural growth.

Why is it in news?

  • There is a serious debate on whether providing loans to farmers at a subsidised rate of interest or their waiver would accelerate farmers’ welfare.
  • At the global level, studies indicate that access to formal credit contributes to an increase in agricultural productivity and household income.
  • However, such links have not been well documented in India, where emotional perceptions dominate the political decision quite often.

Report of a recent study:

  • A recent study by the International Food Policy Research Institute reveals that at the national level, 48% of agricultural households do not avail a loan from any source.
  • Among the borrowing households, 36% take credit from informal sources, especially from moneylenders who charge exorbitant rates of interest in the 25%-70% range per annum.
  • More importantly, the study using the 2012-13 National Sample Survey-Situation Assessment Survey (schedule 33) finds that compared to non-institutional borrowers, institutional borrowers earn a much higher return from farming (17%).
  • The net return from farming of formal borrowers is estimated at 43,740/ha, which is significantly greater than that of informal sector borrowers at 33,734/ha.
  • Similarly, access to institutional credit is associated with higher per capita monthly consumption expenditures.

What is the initiative taken by the government?

  • The government has improved the flow of adequate credit through the nationalisation of commercial banks, and the establishment of Regional Rural Banks and the National Bank for Agriculture and Rural Development.
  • It has also launched various farm credit programmes over the years such as the Kisan Credit Card scheme in 1998, the Agricultural Debt Waiver and Debt Relief Scheme in 2008, the Interest Subvention Scheme in 2010-11, and the Pradhan Mantri Jan-Dhan Yojana in 2014.

What are the measures to be taken?

  • The credit market is to be expanded to include agricultural labourers, marginal and small land holders.
  • It is, therefore, important to revisit the credit policy with a focus on the outreach of banks and financial inclusion.
  • The government must direct sincere efforts to protect farmers from incessant natural disasters and price volatility through crop insurance and better marketing systems.
  • It should be understood that writing off loans would not only put pressure on already constrained fiscal resources but also bring in the challenge of identifying eligible beneficiaries and distributing the amount.
  • Accelerating investments in agriculture research and technology, irrigation and rural energy, with a concerted focus in the less developed eastern and rain-fed States for faster increase in crop productivity and rural poverty reduction can bring a lot of difference.
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