UPSC GK: Trade Wars (ECONOMICS)

Link to SHER IAS ACADEMY's 15 minute video explaining trade wars: https://www.youtube.com/watch?v=C7Rw7k4P6Eo

1. A vicious cycle: on trade wars

09.06.18 TH EDIT

EUROPEAN COMMISSION IMPOSES RETALIAOTRY TARRIFS ON US PRODUCTS: Nobody wants to lose a trade war. The European Commission on Wednesday announced it would impose tariffs as high as 25% on imports worth $3.3 billion from the U.S. beginning July. A whole range of American goods, from motorbikes and jeans to peanut butter and orange juice, will now face higher taxes when sold in the European Union zone. The Commission is also mulling import duties on more American goods if the trade war with the U.S. intensifies.

EU, CHINA, MEXICO AND CANADA HAVE RETALIATED: Europe is not alone in waging a battle against imports from the U.S.; China, Mexico and Canada have joined hands in response to President Donald Trump’s decision to impose tariffs on steel and aluminium imports. Last week, the U.S. imposed a 25% tax on steel and a 10% tax on aluminium imports from the EU, Mexico and Canada. The first salvo in this ongoing trade war, however, was fired by Mr. Trump in March this year, when he imposed tariffs on Chinese steel and aluminium to protect American producers.

DOMESTIC POLITICAL CONSIDERATION OF TRUMP HAS STARTED THIS: Workers in America’s manufacturing sector have played a key role in Mr. Trump’s electoral success, so his zealousness to be seen to be protecting their interests is unsurprising.

CONSUMERS AND GROWTH GLOBALLY WILL BE IMPACTED: However, consumers in America and the rest of the world are likely to suffer as their respective governments make it costlier for them to access foreign goods and services. Judging by their actions, it is now clear that America’s major trading allies would not really want to lose this trade war against the U.S. The sad fact, however, is that at the end of the day nobody actually wins a destructive trade war. Tariffs that seek to disadvantage foreign producers in favour of domestic producers, whether they are imposed by the U.S. or any of its major trading partners such as Europe or China, only increase the burden of taxes. What this leads to eventually is slower global economic growth.

PROTECTIONISM WILL CAUSE GLOBAL GROWTH TO PLUMMET: The World Bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis a decade ago. Countries that are protesting America’s metal tariffs in the name of free trade are also only encouraging further protectionism when they impose retaliatory tariffs.

LOSE LOSE SITUATION FOR ALL: As former Reserve Bank of India Governor Raghuram Rajan aptly put it, the ongoing trade war is a “lose-lose situation” for the warring parties. The only winners will be special interest groups and consumers in countries that do not engage in the tit-for-tat tariff war, but their winnings will come at the cost of global growth. It is high time countries worldwide come together to promote the cause of free trade.

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2. India hits back at the U.S. with tariffs

16.06.18 TH

INDIA INCREASES IMPORT TARIFFSS ON 30 ITEMS AMOUNTING TO $ 240 MILLION: In what could signal escalating trade tensions between New Delhi and Washington, the Centre has written to the World Trade Organisation (WTO) notifying its decision to increase import tariffs on 30 items from the U.S. amounting to $240 million, in retaliation against tariffs imposed by the latter on aluminium and steel imports.

INCREASE COME IN THE MIDST OF TRADE TALKS: The move is significant as it comes a day after Commerce Minister Suresh Prabhu returned from the U.S. and just weeks ahead of further talks between the two countries on the issue.

SUSPENSION OF CONCESSIONS IS A RESPONSE TO US MEASURES: “India hereby reiterates its decision to suspend concessions or other obligations notified to the Council for Trade in Goods on 18 May 2018… that are substantially equivalent to the amount of trade affected by the measures imposed by the United States,” the Centre said in the notification to the WTO’s Council for Trade in Goods. “The proposed suspension of concessions or other obligations takes the form of an increase in tariffs on selected products originating in the United States, based on the measures of the United States.”

INDIA WILL TAKE FURTHER SIMILAR ACTION IF NEED BE: “India reserves its right to further suspend substantially equivalent concessions and other obligations based on the trade impact resulting from the application of the measures of the United States,” the notification added.

INDIA HAD REASONED WITH USA FOR EXEMPTION FROM STEEL AND ALUMINIUM DUTY: U.S. President Donald Trump, in March, signed an order imposing a 25% tariff on steel imports and a 10% tariff on aluminium imports, citing national security as one of the key reasons behind the move. The Indian government repeatedly requested an exemption from these tariffs as India did not pose a security threat to the U.S., but to no avail. India has also taken the U.S. to the dispute settlement mechanism in the WTO over the matter.

Surprising move

The decision to begin retaliatory measures against the U.S., however, is particularly surprising because Commerce Minister Suresh Prabhu, on his return from the U.S. on Friday, indicated that the two countries would try to resolve their issues through dialogue.

“If they wanted to take fresh action, they would not agree to talks and we would not either do the same,” Mr Prabhu told reporters on Friday. “Instead of measures and counter-measures, we decided to talk and resolve it out.”

The notification to the WTO was, however, dated June 13, before the Minister made his comment.

“The situation between the U.S. and India should not be viewed as a trade war just yet,” Rishi Shah, Economist at Centre for Digital Economy and Policy said. “A possible continuation of such steps from both sides may result in more friction on the trade front. However, it must be kept in mind that the last fortnight has seen ratcheting up of trade tensions in the West and also with China as the US has imposed tariffs. Given the less than optimal nature of such policies, it must be assessed how sustainable they may be.”

$240 million in duty

The removal of concessions on U.S. imports — on items such as chickpeas, lentils, almonds, apples and some metal products — will likely result in a duty collection of $240 million, according to the Centre. This, according to the government, was in keeping with the duty increase of $241 million due to the U.S.’ actions.

“India wishes to clarify that suspension of concessions shall be equivalent to the amount of trade affected by the United States’ measures,” the notification said. “To this end, India reserves the right to adjust the specific products for which suspension of concessions is effectuated, and its right to adjust the additional rate of duty imposed on such products.”

Notably, one of the items on which the import concessions have been dropped pertains to high-capacity motorcycles such as those manufactured by Harley Davidson, duties on which were one of the sore points mentioned by Mr. Trump about India’s tariff policy.

“It’s some bit of posturing and some amount of negotiation will happen,” Abhishek Jain, Tax Partner at EY India said. “I don’t think it is as big as what is happening between the U.S. and China. Of course, this move will make these items more expensive for Indian importers.”

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3. Dangerous spiral

23.06.18 TH EDIT

There will be no winner in the ongoing global trade war

The global trade war is hotting up as major economies continue to impose tariffs on each other. India is the latest to join the tit-for-tat battle by slapping tariffs as high as 50% on a list of 30 goods imported from the U.S.

USA CHINA TRADE WAR SPIRALS: Earlier this week, U.S. President Donald Trump announced that he had ordered his administration to frame new tariffs on $200-billion worth of Chinese imports. This was in retaliation to tariffs on $50- billion worth in American goods imposed by China last week in response to Mr. Trump’s earlier round of tariffs on Chinese goods.

The first shot in the spiralling trade war was fired by the U.S. in March when Mr. Trump unveiled tariffs to discourage the import of steel and aluminium into the country. The latest round of tariffs imposed by the U.S. will be the highest in terms of the value of goods. In all, U.S. tariffs will now affect Chinese goods worth $450 billion — to put this in perspective, total Chinese imports into the U.S. last year were worth around $500 billion.

The European Union also joined the trade war this month, imposing tariffs on $3.3 billion of American goods.

INDIA-USA TRADE WAR MINISCULE AS COMPARED TO CHINA AND EU: While the India-U.S. tariff tiff could escalate, the amounts being discussed right now are minuscule compared to those under threat in the unfolding U.S.-China situation or even the spat between the U.S. and the EU. India’s notification to the WTO says that U.S. tariffs on steel and aluminium would cost India $241 million, and that the tariffs imposed on the U.S. would bring in a commensurate amount. It has also indicated its preference to deal with the issue through dialogue, and not “measures and counter-measures”.

GLOBAL MARKETS HAVE STARTED TO PANIC BECAUSE OF TRADE WARS: For long, global financial markets largely ignored risks of an all-out trade war among major economies, but things are changing quickly. The Dow Jones Industrial Average fell by as much as 1.6% on Tuesday, while the Shenzhen Composite Index was down 5.8% for the day. This fresh round of volatility suggests investors may be beginning to take threats of a trade war more seriously.

The fact is that all sides engaged in a trade war eventually lose. The longer it goes on, the greater the cost as growth slows down under the increasing burden of taxes.

The only gainers in a trade war will be special interest groups, such as the U.S. steel industry, which also happens to be a major vote bank for Mr. Trump. Even retaliatory tariffs aimed at pushing back the U.S. may only perpetuate the vicious negative-sum game instead of bringing the war to an end.

Mr. Trump’s rejection of the G-7 communique that endorsed a “rules-based trading system” for the world suggests there may be no offer of truce from his side any time soon. Nevertheless, global powers must try their best to bring an end to the ongoing trade war before it gets out of hand.

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THEORY

Definition of International Trade: International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy , in which prices, or supply and demand, affect and are affected by global events.

Definition of Trade War : A trade war is a side effect of protectionism that occurs when one country (Country A) raises tariffs on another country’s (Country B) imports in retaliation for Country B raising tariffs on Country A's imports. A tariff is a tax imposed on imported goods and services. Trade wars can commence if one country perceives another country's trading practices to be unfair or when domestic trade unions pressure politicians to make imported goods less attractive to consumers. Trade wars are also a result of a misunderstanding of the widespread benefits of free trade .

The advantages of trade : International trade brings a number of valuable benefits to a country, including:

1.   The exploitation of a country's comparative advantage, which means that trade encourages a country to specialise in producing only those goods and services which it can produce more effectively and efficiently, and at the lowest opportunity cost.

2.   Producing a narrow range of goods and services for the domestic and export market means that a country can produce in at higher volumes, which provides further cost benefits in terms of economies of scale.

3.   Trade increases competition and lowers world prices, which provides benefits to consumers by raising the purchasing power of their own income, and leads a rise in consumer surplus.

4.   Trade also breaks down domestic monopolies, which face competition from more efficient foreign firms.

5.   The quality of goods and services is likely to increases as competition encourages innovation, design and the application of new technologies. Trade will also encourage the transfer of technology between countries.

6.   Trade is also likely to increase employment, given that employment is closely related to production. Trade means that more will be employed in the export sector and, through the multiplier process, more jobs will be created across the whole economy.

The disadvantages of trade: Despite the benefits, trade can also bring some disadvantages, including:

1.   Trade can lead to over-specialisation, with workers at risk of losing their jobs should world demand fall or when goods for domestic consumption can be produced more cheaply abroad. Jobs lost through such changes cause severe structural unemployment. The recent credit crunch has exposed the inherent dangers in over-specialisation for the UK, with its reliance on its financial services sector.

2.   Certain industries do not get a chance to grow because they face competition from more established foreign firms, such as new infant industries which may find it difficult to establish themselves.

3.   Local producers, who may supply a unique product tailored to meet the needs of the domestic market, may suffer because cheaper imports may destroy their market . Over time, the diversity of output in an economy may diminish as local producers leave the market.

UPSC GK: How to protect Delhi from Desertification? (ECOLOGY)

For five days last week, a thick layer of dust hung over Delhi, keeping the air quality ‘severe’, the worst category in the pollution index. It seemed odd because it happened in the peak summer, which is generally considered the off-season for air pollution in Delhi.

But despite air pollution being more visible in the winter, the capital’s air is almost as toxic in the summer. A 2015 IIT Kanpur study found the summer average for PM10 to be over 500 µg/m — five times the national average. About 40% of PM10 particles — with diameter less than 10 micron — was dust. While the major air pollution threat in Delhi is from the tiny PM2.5 particles that get embedded in the lungs, during the summer, PM10 is the primary pollutant.

Last week’s phenomenon was triggered by a dust storm that began over Rajasthan and was carried by strong westerly winds, the IMD said. The dusty blanket that spread itself over Punjab, Haryana, Delhi and western Uttar Pradesh was kept close to the surface by the anticyclonic flow of winds that swirl clockwise in the northern hemisphere, pushing the local air down and preventing outside air from entering the region.

Besides soil, sand and rock particles, windblown dust also contains “re-suspended” dust kicked up by vehicles, digging or construction. The dust hosts toxic materials, including, an IIT Delhi study of the capital’s air found this year, heavy metals such as lead, chromium and nickel.

So was the dust haze a one-off, resulting from the desert storm? The ongoing desertification around Delhi, the uncontrolled urban development, and climate change could make such incidents more common, experts say.

“Delhi’s summer aandhis, like Kolkata’s kaalbaisakhis, are localised events. What we saw this time was different in scale and impact. All of North India was enveloped, and this is something we need to prepare for in the future,” Anumita Roychowdhury of the Centre for Science and Environment said.

Desertification is the process of relatively dry land becoming increasingly arid due to factors ranging from loss of vegetation and overexploitation of soil to climate change. In April, Environment Minister Harsh Vardhan put the rate of desertification in India at 23 hectares of dryland per minute. Nearly 70% of India’s area was dryland, he said, a third of which was affected by degradation and a quarter by desertification. Rajasthan and Delhi were among the worst affected.

What this means is that in the absence of a longterm action plan to stop or reverse the process, we will see more dust. A senior official in the Delhi Environment Ministry said, “These climatic conditions can’t any longer be seen in isolation, we need to start preparing for this to become the new normal.”

The word ‘desertification’ was coined in 1927 by the French colonial forester Louis Lavauden. One of the first to make the connection between desertification and human action was E P Stebbing, a British forester who worked for long in India. In 1935, Stebbing wrote that “misutilisation of soils” and “overutilisation of the vegetable covering of the soil” results in “reduction of water supplies” and “lowering of water table in the soil”.

Today, Australia and several countries in sub-Saharan Africa and West Asia carry out dustfall monitoring (measuring dust deposits in the air) alongside ambient air monitoring, and use the data to plan mitigation processes. The African Union-led “Great Green Wall for the Sahara and Sahel Initiative” aims to create a mosaic of trees stretching 6,500 km across North Africa, Sahel and the Horn. In Australia, where air quality standards for dust are tougher than in Europe, US and UK, vegetation buffers are positioned between residential areas and industrial areas or roads.

Delhi has historically had a barrier of trees in the form of the Delhi Ridge and the linked Aravalli range. But a survey by the Wildlife Institute of India in 2017 found 12 vegetative gaps in southern Haryana, increasing the probability of desertification. From 1999-2012, the forest cover in Haryana, UP and Rajasthan declined from 4.3% to 3.3%, found the National Capital Region Planning Board.

“We need to rethink our urban design. Greening has to be done intelligently. Roads need to be designed with tree cover. The Aravalli and the Ridge need to be protected. This in turn will protect the water table and benefit the city throughout the year,” Roychowdhury said.

Credit: Indian Express Explained (https://indianexpress.com/article/explained/why-delhi-dust-haze-may-be-here-to-stay-5224935/)  

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UPSC GK: Write a note on India’s BoP position. (ECONOMICS)

New RBI data on India’s Balance of Payments (BoP) for 2017-18 show current account deficit (CAD) at $48.72 bn, the highest since the record $88.16 bn of 2012-13. With CAD expected to widen to $75 bn during this fiscal, how vulnerable is the overall BoP position today?

Let’s start with foreign exchange reserves. Are they sufficient now?

India’s forex reserves, at $424.55 billion as on March 2018, are actually the eighth largest in the world (smaller chart right). Also, they can finance 10.9 months of imports, compared to 7.8 months in March 2014 (just before the Narendra Modigovernment came to power), 7 months in March 2013 (when there was a mini-BoP crisis, with the current account deficit hitting a peak), and 2.5 months in March 1991 (which forced the country to seek International Monetary Fund assistance). Any allusion to a “crisis” from that standpoint is highly misplaced; the RBI’s current forex war chest is clearly sufficient, both to meet immediate import needs and to stave off a run on the rupee of the kind that was seen during May-August 2013.

So, when economists speak of India’s BoP vulnerabilities, what exactly are they trying to say?

Countries generally accumulate reserves by exporting more than what they import. IMF data on the current account balances of the top 10 forex reserves holders reveal all of them — barring India and Brazil — to have been running surpluses year after year.

India has always had deficits on its merchandise trade account, with the value of its imports of goods far in excess of that of exports. At the same time, the country has traditionally enjoyed a surplus on its ‘invisibles’ account. Invisibles basically cover receipts from export of software services, inward remittances by migrant workers, and tourism and — on the other side — payments towards interest, dividend and royalty on foreign loans, investments and technology/brands, besides on banking, insurance and shipping services. But with the invisibles surpluses not exceeding trade deficits — except during the three years from 2001-02 to 2003-04 (bigger chart) — it has resulted in the country consistently registering CADs.

How then has India been managing all these years with CADs, and even accumulating reserves?

A country gets foreign exchange not only from exporting goods and services, but also from capital flows, whether by way of foreign investment, commercial borrowings or external assistance. The bigger chart shows that for most years, net capital flows into India have been more than CADs. The surplus capital flows have, then, gone into building reserves. The most extreme instance was in 2007-08, when net foreign capital inflows, at $107.90 billion, vastly exceeded the CAD of $15.74 billion, leading to reserve accretion of $92.16 billion during a single year. However, there have also been years, such as 2008-09 and 2011-12, which saw reserves depletion due to net capital inflows not being adequate to fund even the CAD.

Is this model sustainable? How long can India continue to import more than it exports, and expect foreign capital to fully bridge the gap?

India and Brazil represent unique cases of economies that have built reserves largely on the strength of their capital rather than current account of the BoP. India is even more unique because its currency, unlike the Brazilian real, is relatively stable, and not under frequent speculative attacks. In theory, a country can keep attracting capital flows to fund CADs so long as its growth prospects are seen to be good, and the investment environment is equally welcoming. It would help, though, if such foreign investment also goes towards augmenting the economy’s manufacturing and services export capacities, as opposed to simply producing or even importing for the domestic market. In the long run, that can help narrow the CAD to more sustainable levels.

What is the outlook vis-à-vis the CAD and capital flows in this fiscal?

The CAD fell sharply from $88.16 billion in 2012-13 to $15.30 billion in 2016-17, mainly because of India’s oil import bill nearly halving from $164.04 billion to $86.87 billion. However, in 2017-18, the CAD rose to $48.72 billion, courtesy resurgent global crude prices, and is expected to cross $75 billion this fiscal.

There are signs of capital flows slowing down as well. Foreign portfolio investors have, since April 1, made $7.9 billion worth of net sales in Indian equity and debt markets. This is part of a larger sell-off pattern across emerging market economies, in response to rising interest rates in the US, and the European Central Bank’s plans to end its monetary stimulus programme by the end of 2018.

The Swiss investment bank Credit Suisse has forecast net capital flows to India for 2018-19 at $55 billion, which will be lower than the projected CAD of $75 billion. In the event, forex reserves may decline for the first time since 2011-12. The RBI’s data already show the total official reserves as on June 8 at $413.11 billion, a dip of $ 11.43 billion over the level of end-March 2018.

Credit: Indian Express Explained (https://indianexpress.com/article/explained/assessing-the-balance-of-payments-position-5222914/)

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UPSC GK: What fuelled clashed between Mazhabis and Khasis in Shillong? (SOCIETY)

MINOR ALTERCATION – FAKE SM MESSAGES – RUMOURS – CLASHES ERUPTED: An altercation between a Punjabi woman and Khasi bus driver on May 31 in Shillong’s Punjabi Lane, followed by rumours on social media about the death of a minor Khasi boy, triggered four days of intense clashes and curfew in the city. Khasi protesters threw stones and petrol bombs at security personnel after being prevented from entering the Punjabi settlement adjacent to Bara Bazaar, Shillong’s commercial hub.

LONG STANDING DEMAND THAT RESIDENTS OF PUNJABI LANE BE MOVED OUT OF CITY’S PRIME COMMERCIAL AREA: A demand to move the residents of Punjabi Lane out of the city’s prime commercial area has been hanging fire for at least three decades now. Mobile Internet services — suspended at the height of the tensions — were restored on June 13, but cut off again in many areas for 48 hours starting Saturday. Night curfew continues in the city. While there have been no fresh clashes, tensions between the Khasis and Punjabis continue to simmer just beneath the surface. What is the genesis of this situation, and where is it headed?

Who are the Punjabis of Shillong?

‘LOWER’ CASTE MAZHABIS BROUGHT FROM RURAL PUNJAB TO WORK AS SAFAI KARAMCHARIS 150 YEARS AGO: The Sikhs, or “Punjabis”, of Shillong have been residing there for more than a century. The numerically dominant group, the Mazhabis — who are mentioned in multiple British ethnological studies as people who were at the bottom of the social scale in rural Punjab — were brought by colonial officials to serve as safai karmacharis (sweepers) who would keep the hill city clean.

Most of those who were brought belonged to Amritsar and Gurdaspur, and though it is difficult to put specific dates to their arrival in the absence of written records, it is generally agreed that they began to reach Shillong in the last decade of the nineteenth century. They started out on foot from their villages in Punjab, and a four-day journey by train to the banks of the Brahmaputra followed. They then used a ferry to reach Amingaon in Guwahati, from where began the long journey to Shillong — by bullock cart, until vehicular traffic started on the road from Guwahati to Shillong in the second decade of the twentieth century.

RAMGARHIAS FOLLOWED MAZHABIS FROM PUNJAB TO SHILLONG: The Ramgarhias, a composite caste of carpenters, blacksmiths and masons in rural Punjab, followed the Mazhabis. They possibly reached Shillong around 1896 when they were commissioned to rebuild the British city damaged by a large earthquake. The small group of Ramgharias that settled in Shillong in the early decades of the twentieth century remained loyal to the colonial bureaucracy, and were rewarded by regular contract jobs.

SONIARS CAME FROM TODAY’S PAKISTAN IN 1947: The other group from Punjab who came to Shillong were the Soniars or goldsmiths, who traced their origins to Abbottabad and Rawalpindi in what is now Pakistan. This group came in the aftermath of Partition in 1947.

There are no concrete estimates of the numbers of people who were brought from Punjab. Some indication may be available in the Shillong Municipal Board’s old records, but those documents are not accessible to researchers.

Why did the British seek labour from faraway Punjab?

THESE SECTIONS HAD BEEN SERVING BRITISH WELL AS CLEANERS, ARTISANS AND ALSO IN ARMY – GOOD IMPRESSION IN BRITISH EYES: It is likely that the sweepers first came with a British military contingent which had earlier served in Punjab, and had been happy with their services. From the time of Lord Lawrence, Viceroy of India from 1864-69, Punjab had been perceived by many colonial officials as a model province that provided, besides many kinds of services and goods, a large chunk of the British Indian Army. A sizeable number of Mazhabis too, had been serving the British armed forces since the Great Revolt of 1857.

MAZHABIS WERE GIVEN ACCOMODATION IN BARA BAZAAR SO THAT THEY COULD BE NEAR TO THEIR WORK AND BE MONITORED: In Shillong, the Mazhabis were initially given accommodation close to the military cantonment. In the early twentieth century, on the recommendation of local military officials, many Mazhabis were recruited by the Shillong Municipal Board. Besides sweeping the city’s streets, the Mazhabis carried night soil from private and official residences and offices. The Municipal Board allowed the Mazhabis to reside in the Bara Bazaar and Laitmakhara areas of the city, so they could closely monitor their daily work.

What explains the Khasis’ deep distrust of the Punjabis now?

KHASIS LOOKED DOWN UPON WORKS THAT MAZHABIS DID, AND LATTER WERE KEEN TO START ANEW IN A NEW AREA: Initially, local Khasis were less enthusiastic about doing the work that the Mazhabis did. Having made the long journey to Shillong, the Mazhabis saw an opportunity to make a fresh start in a new land, breaking free of the social degradation and bondage of their rural homeland. Over time, as the ranks of the Mazhabis swelled in the Municipal Board, they came to dominate certain kinds of jobs.

AS KHASIS GRADUALLY MONOPOLISED CERTAIN TYPE OF JOBS AND ALSO ESTABLISHED PERMANENT RESIDENCY – THEIR PRESENCE STARTED TO PINCH THE KHASIS: Successful and enterprising minority communities often end up upsetting the majority in a range of social and historical situations. Over time, as Khasis found themselves being squeezed out of a part of the job market, their anxieties manifested themselves in suspicions, hostility, and a hardening awareness of dissimilar identities. The Khasis saw the Mazhabis as a community of outsiders who practise a different faith, speak in a different language, and dominate a semi-governmental job market over which they have no control. There was also the realisation that unlike the affluent Soniars, the Mazhabi Sikhs were unlikely to leave Shillong — not only because they had nowhere to go, but also because they had developed occupancy rights over their residential holdings by virtue of uninterrupted residence for over a century.

WHILE MAZHABIS STILL CANNOT ACQUIRE PROPERTY, THEY HAVE HAD UPWARD SOCIAL MOBILITY AND ARE QUITE INTEGRATED INTO KHASI CULTURE: Punjabi Lane is now in the heart of Shillong city, and the younger generations of Mazhabis have moved on from the degrading menial jobs their forefathers did, to driving cars, setting up mobile repair shops, etc. While strict laws against transfer of land to non-tribals prevent them from acquiring property elsewhere in the city, they are not completely unintegrated in the local society. Some Mazhabis speak Khasi, enjoy Khasi food, and a few are even married to Khasis and have converted to Christianity.

How is this situation likely to evolve now?

The tensions between the Khasis and Punjabis isn’t new, and unless current equations of social and economic power change significantly, any possibility of reconciliation between the two communities appears remote. Largescale investment of economic resources to create wider and more diverse economic opportunities will help both sides, besides improving the living conditions of the Mazhabis.

Credit: Indian Express Explained (https://indianexpress.com/article/explained/what-fuelled-the-fire-in-shillong-5221728/)

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UPSC GK: SHOULD WE INTERLINK INDIA’S RIVERS? (ECOLOGY)

4 DECADE OLD IDEA OF CREATING A NATIONAL WATER GRID – TRANSFER WATER FROM WATER SURPLUS TO WATER DEFICIT REGIONS: IT IS an idea that has been in circulation for nearly four decades: can India build from scratch a national water grid, which will help transfer water from water-rich to water-deficit regions? This has led to proposals for water transfer from one river basin to another. The Special Committee for Inter-Linking of Rivers has submitted its progress report for the work done from July 2016 to March 2018, and the Union Cabinet chaired by the Prime Minister was updated on the report recently. A look at what interlinking seeks to achieve, and what was covered in the latest report:

The big picture 

WILL HELP MITIGATE DROUGHT AND FLOOD – INCREASE AVAILABILITY FOR IRRIGATION AND OTHER USE: The Inter-Linking of Rivers programme aims to connect various surplus rivers with deficient rivers. The idea is to divert excess water from surplus regions to deficient regions to help improve irrigation, increase water for drinking and industrial use, and mitigate drought and floods to an extent.

SC HAD DIRECTED CENTRE TO CREATE A SPECIAL COMMITTEE AND THEREAFTER TAKE APPROPRIATE DECISION: The special committee was set up following a Supreme Court direction on a 2012 writ petition on ‘Networking of Rivers’. The SC directed the Centre to set up a special committee that would then constitute sub-committees. It directed the committee to submit a bi-annual report to the Cabinet on status and progress, and directed the Cabinet to take appropriate decisions.

STATUS UPDATE ON INTERLINKING HAS TO BE AS PER 1980 NATIONAL PERSPECTIVE PLAN: The status reports are meant to be in accordance with the National Perspective Plan. This plan was formulated in 1980 by the Ministry of Irrigation (now Water Resources) to look into inter-basin transfers. The plan comprises two components: peninsular rivers development and Himalayan rivers development.

NWDA CREATED IN 1982 TO LOOK INTO FEASIBILITY OF INTERLINKING IDEA:  OF India also has a National Water Development Agency (NWDA), which was set up in 1982, to conduct surveys and see how feasible proposals for interlinking river projects are.

Three reports before Cabinet

THREE PRIORITY LINKS: The status report of three priority links was shared with the Cabinet. These were Ken-Betwa, Damanganga-Pinjal and Par-Tapi-Narmada. The Water Resources Ministry had drawn up detailed project reports for all three projects in 2015. The committee report also goes into the status of other Himalayan and peninsular links identified under the National Perspective Plan.

KEN-BATWA: The project aims to link the rivers Ken (in the Bundelkhand region) and Betwa, both flowing through Uttar Pradesh and Madhya Pradesh. It proposes to “divert the surplus waters of river Ken through the Ken-Betwa link canal to river Betwa for meeting water requirements in the water-deficit Betwa basin”. Dams will be built across the Ken for storing and transferring water through the link canal.

According to the initial DPR, it will provide annual irrigation benefits of 6.35 lakh hectares (Phase I) in both states and a further 0.99 lakh hectares (Phase II) in MP. Initial cost estimates were Rs 18,000 crore for the first phase and Rs 8,000 crore for the second; these have escalated with the Ministry planning to integrate both phases upon MP’s request.

DAMANGANGA-PINJAL: The project aims to divert excess water from rivers in western India to meet the domestic and industrial water requirements of Greater Mumbai. It proposes to move available water at the proposed Bhugad reservoir across the Damanganga and at the proposed Khargihill reservoir across the Vagh, a tributary of the Damanganga. These two reservoirs, proposed by the NWDA, will be linked to the Pinjal reservoir (proposed by Maharashtra) through pressure tunnels.

The detailed project report was completed in March 2014 and submitted to the governments of Maharashtra and Gujarat. It suggested Greater Mumbai region would benefit by 895 million cubic metres water.

PAR-TAPI-NARMADA: The project proposes to transfer water from the Western Ghats to water-deficit regions of Saurashtra and Kutch via seven reservoirs proposed in northern Maharashtra and southern Gujarat. It is an attempt to save water at the Sardar Sarovar project by using feeder canals to service a part of the command area of the dam, officials say.

The link envisages construction of these seven dams, three diversion weirs, two tunnels (5 km & 0.5 km), a 395-km canal (205 km in the Par-Tapi stretch including the length of feeder canals, and 190 km in Tapi-Narmada), 6 power houses and a number of cross-drainage works, documents state.

Question marks

THREAT TO BIODIVERSITY OF BOTH RIVERS: Many experts and activists have questioned the idea of inter-basin transfer, for various reasons. The ecology of every river being unique, experts have stressed that letting the waters of two rivers mix may affect biodiversity.

Because the programme proposes the construction of a massive network of canals and dams, it would lead to large-scale displacement of people and changes in agricultural patterns, and affect livelihoods.

MASSIVE ESCALATION IN COST SINCE WHEN IT WAS PROPOSED; COST-BENEFIT ANALYSIS MAY NO LONGER BE FAVORABLE: Experts have also objected to interlinking for financial reasons. In 2001, the total cost for linking the Himalayan and peninsular rivers was estimated at Rs 5,60,000 crore, excluding the costs of relief and rehabilitation, and other expenses such as measures to deal with submergence in some areas. Two years ago, a committee of the Ministry suggested that this cost was likely to be substantially higher now and the cost-benefit ratio might no longer be favourable.

RAINFALL PATTERN MAY CHANGE AND SURPLUS BASINS MAY NOT BE SURPLUS IN FUTURE: Another objection raised is that rainfall patterns are changing due to climate change, so the basins now supposed to be surplus, might cease to be so in a few years.

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UPSC GK: Have electoral quotas resulted in overall development of marginalized? (POLITY)

From the beginning of 2016, when the suicide of Rohith Vemula triggered unrest in Hyderabad Central University, the Dalit question has repeatedly risen to the top of the dominant political discourse — after the flogging in Una, the arrest of Bhim Army chief Chandrashekhar Azad, the Koregaon Bhima rioting, and the nationwide protests following the changes in the SC/ST Act. As Lok Sabha elections approach and political realignments gain momentum, the Dalit question will gather increasingly greater momentum.

Social Justice through Inclusion: The Consequences of Electoral Quotas in India, by Francesca R Jensenius, a political scientist at the University of Oslo, looks at how electoral representation for Dalits through reservation has played out since 1952. It is the first major empirical study of the long term consequences of reservation for Dalits in state Assemblies.

The book, which was published last year, uses data for 15 states, taken from Census 1971-2001, affidavits filed with the Election Commission on assets and qualifications up to 2007, an original election survey in UP in January 2013, and over 100 interviews with ministers, MLAs, pradhans, IAS officers, activists, and voters in 2010-11. The study explains that extrapolation from the latest 2011 Census data was not practicable, and data from the earlier Censuses were too significant to be discarded.

The book analyses three aspects of social justice — redistribution, political participation, and recognition — and concludes that electoral quotas for SCs have “opened the political arena to many who would otherwise have been excluded, have allowed them to gain experience and confidence, and seem to have contributed to making it less socially acceptable to discriminate” against Dalits in public.

Jensenius told The Indian Express that “Quotas are useful when there are strong stereotypes about who should be in power or very strong biases against a group, so that it is hard to be elected no matter how qualified one is. However, being elected with the help of a quota does not mean you have a mandate to act in any specific way in politics. Every individual has many identities and interests, and sharing a group identity does not mean sharing political convictions.”

We should not, therefore, “expect to see major political changes, nor material changes, resulting from quota policies”, Jensenius said. “The reserved seats for SCs in India have worked really well to prevent systematic exclusion, thereby helping to break down stereotypes and social barriers between groups. This is an amazing result, but we also shouldn’t expect more from them than that. If one wants political changes and material changes for a community, then one needs to change the political discourse, the agendas of the political parties in power.”

The chapter on constituencies observes that reserved constituencies have on average had lower polling figures, but since all candidates are Dalits, all parties are incentivised to speak of integrating Dalits on board. It finds that Dalits in reserved constituencies do not fare better than other social groups, but having a Dalit MLA does not, for that reason, result in a constituency faring worse the other constituencies. The system enables a comprehensive “integration” of the Dalit MLA into the system, with no ill-effects on the area’s non-Dalits.

“The quotas have had no detectable constituency-level effect on overall development or redistribution to SCs. The result is that the quotas have brought to power SC politicians who look and behave similarly to other politicians — not SC politicians who focus on working for the interests of the SC community,” says the book.

Credit: Indian Express Explained (https://indianexpress.com/article/explained/electoral-quotas-in-india-what-the-data-show-5216309/)

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UPSC GK: Write a detailed note on National Health Protection Scheme. (POLITY)

It was a really long journey for Vinita Devi from her village in Giridih to the Tata Memorial Hospital in Mumbai.

After a lot of tests came the diagnosis, finally. It was acute myeloid leukemia – “high risk in view of p53del and 5qdel,” said the TMCH report. She needed to be given chemotherapy. The final discharge summary however said: “Family has opted for supportive care in view of financial limitations.” Her husband Dipu Thakur, a barber in the village, had gone way beyond his means to take his 37-year-old wife to Mumbai for treatment. The couple have three sons and one daughter that they recently adopted because they do not have a girl.

The family came back to Atka in Jharkhand and started her on Ayurvedic medications.

It is fates such as these that the Pradhan Mantri Rashtriya Swasthya Suraksha Mission aka National Health Protection Mission seeks to avoid, by giving an annual health cover of Rs 5 lakh to 10.74 crore families. With the first meeting of the Ayushman Bharat-NHPM Council slated for June 14 and the model tender documents just out, preparations clearly are entering the last lap. Nobody though will yet talk about an August 15 launch.

A look at what the ambitious mission will look like.

Who are covered

The National health Agency headed by a full time CEO will be the nodal agency for the implementation of the programme. States and Union Territories will devise their own modes of implementation – the one suggested by the Centre as a model is through state health agencies (SHA). They can use either an existing trust or society or not for profit company or a state nodal agency or can set up a new entity. Like in case of the National Health Mission, responsibility for the implementation of NHPM will lie with the states. It is their call whether they choose to implement through a trust model, an insurance model or in the mixed mode.

Right from the beginning, the issue of branding for the mission – that has been lovingly referred to as Modicare by ministers and BJP functionaries – has been a thorny one. That is why a “consensus “ was reached that for states that already have a health scheme running, AB-NHPM would enter the state as an “alliance” with the state programme. So in Telangana, Ayushman Bharat will be in alliance with Aarogyashri, in Tamil Nadu, it will be in alliance with the Chief Minister’s Comprehensive Health Insurance Scheme and in Maharashtra it will be in alliance with the Mahatma Jyotiba Phule Jan Arogya Yojana.

The funding for the scheme will be shared – 60:40 for all states and UTs with their own legislature, 90:10 in NE states and the three Himalayan states of Jammu and Kashmir, Himachal and Uttarakhand and 100% Central funding for UTs without legislature.

The states are also free to continue with their own health programmes. That would take care of the concerns of states like Maharashtra about the existing beneficiary list already being bigger than what the SECC data entails. The “dovetailing” means that if as per SECC data, 2 lakh people in the state are covered by NHPM, while the state scheme already has 3 lakh people, the Centre would pay 60% of the premium amount for 2 lakh people. For the state it would mean some savings. For states particularly ambitious and willing to pay it is even possible for them to make the beneficiary base additive, at least theoretically. It also means that Naveen Patnaik has not only stolen the Centre of bragging rights by announcing a Rs 5 lakh health scheme, a time may soon come when 60% of that premium amount is paid by the Centre.

There will be 100% portability within the country. Package rates of the hospital where benefits are being provided will be applicable while payment will be done by the insurance company that is covering the beneficiary under its policy. State Governments will enter into arrangement with all other States that are implementing AB-NHPM for allowing sharing of network hospitals, transfer of claim & transaction data arising in areas beyond the service area.

Centre & states

Several states have already finalised their memoranda of understanding with the Centre – which not just means that they are a part of the mission but their mode of implementation is also now sealed. The states about which the AB secretariat – still functioning out of Nirman Bhawan but soon to move to the Red Cross Building – have “no idea” are West Bengal, Delhi, Odisha (the state announced its own Rs 5 lakh health scheme on Tuesday), Punjab and Karnataka. Karnataka is still in a state of flux with a brand new government. West Bengal which had made some of the most belligerent noises about opting out of the scheme when NHPM was announced, has, according to sources, cleared the file at the bureaucratic level. However with chief minister due to travel to China later this month there is no telling when that file may receive the political go-ahead. Both Bihar and Uttar Pradesh have in principle said that they will be a part of the scheme and will implement it through a trust. “They have had some bad experience with insurance companies in RSBY,” said an official.

So far 14 states have signed the MOUs. Of these the ones that will use a trust model for the mission are Andhra Pradesh, Telengana, Madhya Pradesh, Assam, Sikkim and Chandigarh. Gujarat and Tamil Nadu have opted for mixed mode implementation. Implementation in trust mode would mean a setup like the Central Government Health Scheme where bills are reimbursed directly by the government without any third party. In the insurance model which is how RSBY started its journey, the government pays a fixed premium to an insurance company which then pays the hospitals.

Health minister J P Nadda while addressing a press conference on Monday about the achievements of Modi government for the last four years said that 12 more MoUs are likely to be signed on June 14 when the NHPM council meets for the first time. Modelled after the GST council and chaired by Health minister J P Nadda, the council will be the federal forum for states to voice concerns. All state health ministers have been invited for the first meeting.

Who are in, who aren’t

So far, 14 states have finalised their memorandums of understanding with the Centre. Health Minister J P Nadda said Monday that 12 more MoUs are likely to be signed at the Council meeting Thursday.

Andhra Pradesh, Telengana, MP, Assam, Sikkim and Chandigarh will use a trust model while Gujarat and Tamil Nadu will use “mixed mode implementation”. In a trust model, bills are reimbursed directly by the government. In an insurance model, the government pays a fixed premium to an insurance company, which pays the hospitals.

Officials in the Ayushman Bharat Secretariat are uncertain about West Bengal, Delhi, Odisha, Punjab and Karnataka. West Bengal had initially made noises about opting out. Bihar and Uttar Pradesh have in principle said they will be part of the scheme and will implement it through a trust.

Finances

As is the case with any health scheme in India, the first signs of trouble for NHPM have been around the question of money. The initial Niti Ayog estimate of Rs 1082 premium per family per year was rejected by insurance companies in the initial consultations when they held that nothing less than Rs 2500 is feasible. However estimates have “rationalised” since then but the NHPM tender has come with a catch. In category A States the administrative cost allowed is 10% if claim ratio less than 60%, 15% if claim ratio between 60-70% and 20% if claim ratio is between 70-80%. In Category B States administrative cost allowed will be 10% if claim ratio is less than 60%., 12% if claim ratio is between 60-70% and 15% if claim ratio is between 70-85%. The document also lays down that for a claim ratio of up to 120 percent states will not pay any additional premium. If the claim ratio is beyond 120% the state will pay 50% of the additional premium. The rest will have to be borne by insurance companies.

For the purpose of administration of the scheme states have been divided into categories A and B. Category A states include s Arunachal Pradesh, Goa, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, NCT Delhi, Sikkim, Tripura, Uttarakhand and 6 Union Territories (Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep and Puducherry). Category B state includes Andhra Pradesh, Assam, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, West Bengal.

It is now however private hospitals which are up in arms against the package rates that have been announced. The 1350 packages that have been announced have been found to have lower than CGHS rates and private hospitals have made no bones about their unhappiness. Ever on the ball, the AB secretariat has responded with an analysis of rates comparing CGHS in Delhi with NHPM, Mukhyamantri Amrutam rates in Gujarat, Chief Minister’s Comprehensive Health Insurance Scheme rates in Tamil Nadu and the Bhamashah Swasthya Bima Yojana in Rajasthan.

Says Dr Dinesh Arora, director AB-NHPM, “We analysed the rates for three specialities – cardiology, cardiothoracic surgery and ophthalmology. The comparison showed that for almost all the rates the median rate was comparable when one included NHPM in the analysis. Besides there is a provision for 10% increase for NABH certification (entry level) 15% for NABH accreditation, 10% each for hospitals in rural areas and for teaching hospitals. So in all for an NABH accredited hospital in a rural areas these rates can go up by upto 35%, theoretically. Practically there would be a 20% margin on average. We are not really looking at private hospitals that charge Rs 15 lakh for dengue. We want service oriented hospitals.”

That is also why concerns about “moral hazard” procedures have been repeatedly raised in stakeholder consultations. Moral hazard” in health insurance parlance is the tendency of people who are insured to buy/be sold additional healthcare interventions irrespective of their actual needs leading to expenses that do not necessarily add to their own health or wellbeing but bleeds the insurer. Sector experts have been cautioning about potential moral hazard challenges in NHPM since it is essentially a tertiary care programme. Though Ayushman Bharat has a preventive health component in the form of health and wellness centres, the two are de-linked.

Fraud detection

With the NRHM scam not so long back, the government is very keen that the scheme that prime minister Narendra Modi hopes will bear his name for posterity has a very strong mechanism to ensure that the scheme is not milked by unscrupulous service providers. That is why in the model tender document uploaded on Tuesday night 636 of the 1350 packages or 47% of all treatments covered require pre-authorisation. This includes all packages for cardiology, ophthalmology and oncology. Many procedures including emergency ones are government hospital only.

There is also the provision of medical audits by the insurer – 5% in every empanelled healthcare setup. The audit would look at whether the medical records file is complete, whether there are detailed notes of the patient’s progress and also the pathology and radiology reports. “If at any point in time the SHA issues Standard Treatment Guidelines for all or some of the medical/ surgical procedures, assessing compliance to Standard Treatment Guidelines shall be within the scope of the medical audit,” the model document says.

Taking off from the CGHS experience when many private empanelled hospitals walked out of the scheme citing payment delays, there are also stiff penalty provisions for any delays on the part of insurer or the state health agency (SHA) either in paying premium or in processing claims or refunds to the state. If claim payment to the hospital is delayed beyond 15 days, insurers will have to pay an interest of 1% for every seven day of delay. If premium refund is not made by the Insurer to the SHA within 30 days of the communication for refund there will be 1% penal interest for every week of delay. If the premium is not paid to the insurer, by the SHA within 6 months of the commencement of the AB-NHPM, insurers will get an interest of 1% of the premium amount for every 7 days’ delay.

IT platform

For a scheme of this scale, the I-T platform is crucial. That is why one of the latest deadlines is for the IT platform to be finalised – what health minister J P Nadda on Monday called “IT stabilisation.” An MoU has already been signed with Telangana for scaling up of the Arogyashri IT platform. Arogyashri is among the oldest running tertiery care health schemes in the country. The three main features that got the platform a go-ahead were beneficiary identification, hospital transactions and claim management. Moreover the Telangana government owns the IPR and has transferred it to the Centre through the MoU. It is also currently in use in Andhra Pradesh and Tamil Nadu. By July 30 it is expected to be in launch mode.

However for the long run, the search is on for an even better, state of the art solution. According to a senior official Niti Ayog is working on it, they are also consulting various experts such as Nandan Nilekani. Former UIDAI chief J Satyanarayan too has been appointed as an advisor. Centre for Development of Advanced Computing (CDAC) and NIC too are helping.

Credit: Indian Express Explained (https://indianexpress.com/article/explained/national-health-mission-ayushman-bharat-health-mission-jp-nada-health-budget-5216382/)

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