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Content management: On Aadhaar-social media linkage (The Hindu)

Mains Paper 3: Science and Tech
Prelims level: not much
Mains level: Aadhaar and social media linkage

Context

• The submissions in the Supreme Court on behalf of the Tamil Nadu government in support of linking social media profiles of registered users with their Aadhaar numbers are not well-founded in the law as it now stands.
• It is noteworthy that a Division Bench of the Madras High Court, which is hearing two writ petitions on this matter, did not see merit in the idea.

Court’s observation

• The Bench had during the hearings observed that following the Supreme Court’s decision in the Aadhaar case, the unique 12-digit-number can be used only for subsidies and welfare benefits; and pointed out that Section 57 of the Aadhaar Act has been struck down to the extent that it authorised body corporate and individuals to use the number to establish someone’s identity.
• The petitioners had approached the High Court with such a prayer on the ground that many people got away with inflammatory posts on social media because of the lack of traceability.
• The Bench has since then expanded the writ petitions’ scope to examine the adequacy of the legal framework on cybercrimes and the responsibilities of intermediaries who provide telecommunication and online services.
• The State government is batting for better assistance from intermediaries and social media companies to trace offending messages.
• As two other High Courts are also hearing similar matters, Facebook, WhatsApp and Twitter have sought a transfer of all these cases to the apex court so that there are no conflicting judgments.
• While the Supreme Court will decide the question of transferring these cases to itself, the Madras High Court will continue its hearing.

Measures notified by the government so far

• The Union Ministry of Electronics and Information Technology notified new draft rules for intermediaries last year and called for public comments.
• The proposed rules envisage new obligations for service providers. One of the changes proposed is that intermediaries should help identify originators of offensive content.
• This has created some understandable misgivings at a time when there is widespread suspicion about online surveillance.
• Technology companies that use end-to-end encryption have pleaded inability to open a back door for identifying originators.
• The issue concerns the global policy of these companies as well as the wider public interest of millions of registered users.
• After the K.S. Puttaswamy decision (2017) in the ‘privacy’ case, any state intervention in the regulation of online content has to pass the test of proportionality laid down by the court.

Conclusion

• It will be desirable if courts do not impart needless urgency to the process of introducing a balanced regulatory regime to curb content that promotes undesirable activities such as child pornography, sectarian conflict and mob violence, without affecting individual privacy.
• The balance must be right between protecting privacy and allowing the state leeway to curb crime.

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Data on demonetisation's link to economic slowdown may have been suppressed (The Hindu)

Mains Paper 3: Economy
Prelims level: Demonetisation
Mains level: Post demonetization impact on economy

Context

• Was a task force report that recommended a new law to replace the more than 50-year-old Income Tax Act, 1961 suppressed because it inadvertently provided factual evidence for the debilitating impact of demonetisation on the formal corporate sector?

Background

• On September 1-2, 2017, at the Rajaswa Gyan Sangam (an annual conference of senior tax administrators), Prime Minister Narendra Modi had made an observation regarding the need to redraft the Income Tax Act, 1961.
• The Union Finance Ministry set the ball rolling for making direct taxes (on personal and corporate incomes) simple and in consonance with India’s economic needs.
• On November 22, 2017, it appointed a six-member ‘Task Force for drafting a New Direct Tax Legislation’.
• On September 26, 2018, however, an office memorandum was issued “with the approval of the Finance Minister”, requesting the task force’s convenor “not to submit its report to the Government until and unless the Draft prepared by the Convenor of the Task Force is deliberated clause by clause by all Members of the Task Force and has agreement of all Members or at least majority of Members”.
• In November 2018, the Finance Ministry appointed Akhilesh Ranjan, the new Member (Legislation), CBDT, to succeed Mr. Modi as the task force convenor. Mr. Ranjan submitted his report to the Finance Minister on August 19, 2019.

Demonetisation’s blow

• Drawing insights from the tax department’s database of annual tax returns filed by corporate firms and individuals, Mr. Arbind Modi’s report had proposed two alternative approaches along with draft legislations corresponding to each of the models for a new direct taxes law.
• The chapter on reform proposals for corporate taxes has a table (page 109, Volume I) that makes for a significant piece of evidence for how demonetisation may have affected companies. The table shows aggregates of investments corporate firms disclosed in their annual tax return filings.
• The aggregate of investments disclosed in the assessment year 2017-18, or financial year 2016-17, the demonetisation year, plummeted to ₹4,25,051 crore — or a drop of nearly 60% from the previous year.
• In the seven financial years, from 2010-11 to 2016-17, the aggregates of investments disclosed were ₹11,72,550 crore, ₹9,25,010 crore, ₹10,22,376 crore, ₹11,03,969 crore, ₹9,98,056 crore, ₹10,33,847 crore and ₹4,25,051 crore.
• The near collapse becomes apparent when the aggregates are seen as a percentage of the GDP. The investments by corporate firms that filed annual returns in each of the years from 2010-11 to 2016-17 as a percentage of GDP were 15%, 10.5%, 10.2%, 9.8%, 9%, 7.5% and 2.7%.
• The aggregate figures are actuals (therefore nominals) sourced from companies’ statutory disclosures, and not the estimates or findings of some survey.
• This in fact makes the data undeniable evidence of demonetisation’s contribution to the deepening economic slowdown that has become a headache for the Modi government early in its second tenure.

Major highlights about the worrying trends

• Of the 7,80,216 companies which filed their tax returns for AY 2017-18, 45.94 percent of corporate filers reported book losses.
• The share of loss-making companies has increased from 42 percent in AY 2013-14 to 45 percent in AY 2017-18.
• “There has been a decline in the number of corporate filers from the manufacturing sector over the period AY 2013-14 to AY 2017-18.
• The share of manufacturing in the profits before taxes has marginally declined from 47.3 percent in AY 2013-14 to 46.4 percent in AY 2017-18.
• The return on equity declined from 16.4 percent in AY 2013-14 to 15.5 percent in AY 2015-16 and thereafter has reversed the trend and increased to 16.5 percent in AY 2017-18.
• The corporate tax liability increased from 19 percent of gross internal accruals in AY 2013-14 to 21 percent in AY 2017-18.
• The DDT [Dividend Distribution Tax] liability increased from 1 percent of gross internal accruals in AY 2013-14 to 2 percent in AY 2017-18.
• The efficiency (productivity) of the corporate tax, which shows the policy choices regarding tax concessions and the overall levels of non-compliance, is extremely low at 7.5 percent over the period AY 2013-14 to 2017-18. Compared to other select economies, India’s productivity of corporate income tax is the lowest.

GDP growth estimates

• In the report, the trend in aggregate corporate investments figures corresponds to the investment slowdown discernible in the official GDP estimates for 2011-12 onwards.
• However, the investments aggregate figure for 2016-17 brings into question the GDP growth estimate for the demonetisation year.
• In the latest round of scheduled revisions, the government had revised upwards the 2016-17 GDP growth estimate, from 7.1% to 8.2%.

Conclusion

• As per the revised estimate, the demonetisation year, is the best in the Modi government’s first tenure as far as GDP growth is concerned.
• This when, nearly every industry association (from traders, consumer durables to cement manufacturers) reported sharp drops in sales that year on account of the note ban.
• The revised estimate defies common sense and runs contrary to comparable data generated by non-government agencies and, as it turns out now, also corporate annual returns tax return filings.

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Rescuing genuine secularism (The Hindu)

Mains Paper 1 : Society
Prelims level : Not Much
Mains level : Upsurging secularism

Context

• Prime Minister Narendra Modi brought it back in his victory speech. Most political parties in the last 30 years had practised a naqli (fake) secularism, he said. His great achievement, he implied, was to have unmasked these fake secularists and single-handedly dismantled secularism.
• In other words, it does not satisfy their real needs, but only gives the illusion of doing so. Here, Mr. Modi acknowledges that Muslims are a deprived lot.
• So, what, according to Mr. Modi, is asli (genuine) secularism?
• The answer he gives is the inclusion of minorities in ‘sabka saath sabka vikas’, which is translated by his party as ‘justice to all, appeasement to none’. To this he added ‘sabka vishwas’, winning the trust of all.

Fears of minorities

• On the treatment of minorities by other parties, the Prime Minister is partly right and partly wrong. Wrong, because the insecurity amongst minorities is created largely by Mr. Modi’s own political supporters.
• Lynchings in the past few years and the fear such random violence creates are only the tip of this gigantic iceberg. Right, because when in power, most non-Bharatiya Janata Party (BJP) parties have done little more than provide security.
• Now, the condition of feeling safe and secure must not be underestimated. Freedom from fear is important, and to live in the fear of being lynched only because you are a Muslim is a very real unfreedom indeed.
• Yet, political parties have not helped Muslims with their vikas. Some have even pampered the orthodoxy within their communities and have done little to bring them out of their ghettos.
• So, this secularism is partly fake because it has often meant tolerating minority communalism, and hobnobbing with the most selfish and conservative spokespersons of the multiple Muslim communities of India.

But is the secularism propounded or implied by the Prime Minister genuine?

• At least in theory, ‘sabka saath sabka vikas’ gets one thing right: no individual citizen should face discrimination on grounds of religion.
• Basic amenities, good health, education, housing and employment should be available equally to all, regardless of their religion.
• If he succeeds in this endeavour, he would make great strides towards realising secularism.
• However, secularism combats not just discrimination and other worse forms of inter-religious domination such as exclusion, oppression and humiliation.
• It is equally opposed to intra-religious domination, i.e. the domination (of women, Dalits, dissenters) within every religious community.
• For instance, the fight against the hierarchical caste system in India, quite like the struggle against the church in European history, is integral to the fight for secularism a point noted by both Ambedkar and Nehru.
• Equally important for secularism is opposition to religious fanaticism and bigotry. Neither of these is explicitly captured by ‘sabka saath, sabka vikas’.

Misunderstanding secularism

• That Indian secularism is not anti-religious is widely understood but not that it is simultaneously against both forms of institutionalised religious domination.

How did this misunderstanding develop?

• First, the struggle against inter-religious domination (a defence of minority rights, opposition to majority and minority communalism) became separated from the fight against intra-religious domination (religion-related patriarchy and caste domination, fanaticism, bigotry and extremism).
• Then, this intra-religious dimension was jetttisoned from the meaning of secularism and, much to the detriment of its overall value, secularism began to be identified, by proponents and opponents alike, exclusively with the defence of minority rights.
• This opened the door for viewing secularism first as a tool to protect the interests of Muslims and Christians, of no relevance to Hindus, and then for twisting it to appear as pro-Muslim and anti-Hindu.
• The strength of Indian secularism its advocacy of minority cultural rights was easily made to appear as its weakness and the burden of its defence, rather than be shared by all citizens, fell on the shoulders of minorities and ‘pro-minority’ secularists.
• This is unfair. Secularism is needed as much to protect Hindus from intra-religious domination, from their ‘fringe elements’, as well as from proponents of religion-based caste and gender hierarchies.
• And required equally to protect minorities from their own orthodoxies and extremisms. Asli secularism plays that role. Naqli secularism protects fanatics and legitimises gender and caste-based domination.

Other problems of secularism

• One is its intellectual failure to distinguish communitarianism from communalism.
• Communitarianism simply notes that an individual is at least partly defined by his or her religious/philosophical commitments, community and traditions.
• Therefore, it is entirely appropriate to claim that one is a Hindu/Muslim/Sikh/Christian/atheist etc, and to take legitimate pride in one’s community or be ashamed of it when there is good reason to be.
• Attention must also be drawn to another problem of Indian secularism.
• Our education system often fails to distinguish religious instruction and religious education.
• No publicly funded school or college should have religious instruction, best done at home or in privately funded schools; but reasonable, decent education should include elementary knowledge of all religious traditions.
• A deeper understanding of these traditions is vital, for it would enable students to discern their strengths and weaknesses and identify what in them is worth preserving or discarding.
• But Indians come out of their education system without any critical understanding of their religio-philosophical traditions.
• As a result, a defence of our own religious traditions or critique of others is shallow and frequently mischievous. This too is fake secularism.

Way forward

• Justice to all citizens, affirmation of all reasonable religious identities, rejection of majority communalism, careful defence of legitimate minority rights only when accompanied by a robust critique of minority extremism, and a critical appraisal of religions with a deeper, empathetic grasp of their traditions.
• The government’s primary business is to prevent religion-based violence, oppression and discrimination.
• Perhaps, those outside the government should attend to its other functions. Together, we may just rescue our genuine secularism.

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Trump calls: On Kashmir (The Hindu)

Mains Paper 2 : International Relations
Prelims level : Not much
Mains level : Trump’s anxiety about India-Pakistan tensions

Context

• The United States views Jammu and Kashmir as a nuclear flashpoint, considering the capabilities of India and Pakistan, and this is a rare point of agreement between U.S. President Donald Trump and the country’s professional strategists.
• He conveyed the importance of reducing tensions and maintaining peace to Prime Minister Narendra Modi and Pakistan Prime Minister Imran Khan.
• He also urged Mr. Khan to “moderate rhetoric with India”, echoing India’s sentiments.
• He had spoken to Mr. Khan last week too, as relations between the neighbours took a turn for the worse after India’s decision to revoke the special status of Jammu and Kashmir on August 5.

Policy taken by India

• Under Mr. Modi, India has revised its long-held policy on Jammu and Kashmir and ruled out any role for Pakistan in New Delhi’s ties with the troubled region, while reiterating its claim over Pakistan occupied territory.
• Pakistan’s ruling establishment has flourished by using Kashmir as a trope of Islamic nationalism, even as its society sank in radicalism and violence.
• Islamabad crying itself hoarse over the sudden turnaround in India’s posture and considering the history of conflicts between the two countries, the U.S. even under an isolationist President could not have looked the other way.

Trump’s anxiety about India-Pakistan tensions

• Mr. Trump’s anxiety about India-Pakistan tensions is also linked to his desperation to disentangle the U.S. from the conflict in Afghanistan now in its 18th year before his reelection bid in 2020.
• Kashmir and Afghanistan are two fronts of the same war, and the Pakistani state has conveniently peddled this idea for long.
• The U.S. is no longer swayed by Pakistan’s argument that the ‘road to peace in Afghanistan runs through Kashmir’, but it is certainly conscious of Islamabad’s proclivity to mischief, most evidently by supporting terror groups launched into Afghanistan and Kashmir. India has always resisted, rightly, any linkage between Afghanistan and Kashmir but it cannot be dismissive of the implications of the U.S’s inevitable withdrawal from Afghanistan.
• The U.S. has gradually but decisively tilted in favour of India on a range of regional strategic questions in recent years, but its search for an Afghan escape route forces it to keep Islamabad in good humour.

Way forward

• While Mr. Trump and his administration have been largely sympathetic to India’s latest move on Jammu and Kashmir, his tweet on Monday projected parity between Mr. Modi and Mr. Khan by terming them “my two good friends.”
• While India opposes any third party mediation, it expects the U.S. to keep Pakistan on a tight leash. India’s position that Kashmir is strictly an internal matter can be reinforced only by holding its citizens close and reassured.
• New Delhi’s dealings with Jammu and Kashmir must be becoming of the world’s largest democracy.

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Free fall: On the Afghan conflict (Indian Express)

Mains Paper 3: Defense and Security
Prelims level : Afghan conflict
Mains level : Afghan conflict and destabilize peace process

Context

• A recent suicide attack at a crowded wedding hall in Kabul killed at least 63 people and injured more than 180 others. It is a tragic reminder of the security situation in Afghanistan.

Background

• The blast is claimed by the local arm of the Islamic State. It occurred at a time when the U.S. and the Taliban are preparing to announce a peace agreement to end the 18-year-long conflict.
• It’s now a three-way conflict in Afghanistan the government, the Taliban insurgents and the global terrorists.
• The Afghan government is fighting to preserve the existing system that offers a semblance of democracy. But it failed in ensuring the safety and security of the people.
• The Taliban controls the mountainous hinterlands and wants to expand its reach to the urban centers.
• IS declared a province (Khorasan) in eastern Afghanistan and has emerged as the third player. Attacks against civilians, especially the Shia minority, is the central part of its brutal military tactics. Afghanistan’s Hazara Shias were the target of the wedding hall bombing.
• IS has demonstrated an ability to survive and strike in Afghanistan despite the U.S.’s heavy air campaign in the east.

Afghanistan peace deal

• U.S. is ready to pull troops from Afghanistan in return for assurances from the Taliban that they will not allow the Afghan soil to be used by transnational terrorists such as the IS and al-Qaeda.
• But the Taliban’s intentions are hardly clear. It ran most of Afghanistan according to its puritanical interpretation of Islamic law from 1996 to 2001.
• There are chances that it turns against Kabul once the Americans are out and the country may plunge into a multi-party civil war as it did after the Soviet Union pulled out in 1989.

Way ahead

• Taliban and the government should have their own peace talks and settle differences. It would allow both sides to rechannel their resources to fighting terrorist groups.
• The international community should strengthen the hands of the Kabul government against all kinds of terrorists, before seeking a settlement with the insurgents.

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For all its current troubles, WTO may still emerge as the lynchpin of global trade governance (Indian Express)

Mains Paper 2 : International Relations
Prelims level : WTO
Mains level : Trade war between US with both India and China

Context

• On our Independence Day, the US President has stripped off India and China’s ‘developing nations’ status, saying they benefited immensely by misusing it.
• He blamed the World Trade Organisation (WTO) for this lapse and reiterated his threat to leave the world’s largest multilateral trade forum.

India and China’s stance

• At any other moment, both India and China would have been pleased to rid themselves of this tag, but not at this time.
• Meanwhile, China’s narrative is the injury to the national mind due in part to the “centuries of humiliation” they claim to have suffered at the hands of western powers.
• Their growing economic and military might presents the Chinese an opportunity to set the historical record straight.
• For the US, these are times for fear of losing the mantle of the world’s preeminent power after at least 3 decades of unchecked hegemony.
• Chinese rise and US fears are straining their bilateral trade and causing serious collateral damage to the WTO.

WTO a worth saving

• One way to evaluate this question is to investigate its achievements, with the obvious caution that the past is an imperfect guide to the future.
• Since the WTO came into being in 1995, the world has witnessed massive changes, some deeply structural in nature.
• Today, the WTO regulates more than 98% of global trade flows among its members.
• It also monitors the implementation of free trade agreements, produces research on global trade and economic policy, and serves as a forum for settling trade disputes between nations.

How can WTO’s success be viewed in the trade war aspect?

• A way to look at the WTO’s success is to focus on how it helped to avert the damage in trade value.
• One estimate puts the value of avoided trade wars at $340 billion/year.
• When the US-China trade conflict began in July 2018, many were calmed into believing that the sabre-rattling was temporary.
• The US used Super-301 legislation to designate specific countries as unfair traders and threaten them with higher tariffs unless they fell comply.
• Some countries complied with US pressure to avoid escalation, while others such as India refused to negotiate under threat of US sanctions.

India and China are not ready to accept the US’s stance

• In the current instance, it does not seem likely that the US will back off.
• Neither does it seem that the Chinese (or India) will agree to negotiate under pressure.
• In all likelihood, the Chinese will not brook another humiliation, while India at the current juncture is little more than collateral damage.
• It’s not possible for India to trade in the developing country status in the WTO without a fight.
• Under the rules, a measure is defined as unilateral if it is imposed by a country without invoking the WTO dispute settlement procedures or other multilateral international rules and procedures, and which is based solely upon invoking the country’s own criteria.
• Article 23 of the Dispute Settlement Understanding (DSU) explicitly prohibits members from doing so.

Taken matters to the US

• US’s explanation is that it’s using its power to discipline the trading system for the benefit of all.
• They claim that China and India have taken advantage of the open trading regime while itself being opaque on subsidies, state-owned enterprises and intellectual property.
• It also claims that the dispute settlement in the WTO has become dysfunctional and appeals to the appellate body (AB) are taking longer than the prescribed 90 days.
• There is no justification for subverting the multilateral process, especially by the US that was instrumental in putting it together in the first place.

Way forward

• The multilateral process needs to be fortified and it cannot happen until the strongest member is vested in it.
• The multilateral agreement is still the best, and when reasonable people sit around the table, a solution can be found.
• In the absence of pure multilateral negotiations, interested members could negotiate plurilateral with the aim of achieving multilateral outcomes.
• But burden-sharing, as opposed to altruism among the big players, will remain an integral part of the multilateral approach.
• The WTO may still emerge as the lynchpin of global trade governance.

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THE monk who shaped India’s secularism (The Hindu)

Mains Paper 1 : Society
Prelims level : Not much
Mains level : Secularism

Context

• The practice of Indian secularism, despite its pitfalls, has distinguished the country from many of its neighbours.
• India is the nation with the third-highest number of Muslims in the world.
• Its ability to consolidate democracy amidst unprecedented diversity could teach a lesson or two even to advanced industrial economies that have operated along the lines of a classic monocultural nation.
• The country’s secular ideals have their roots in its Constitution, promulgated by its people, a majority of whom are Hindus. Would this state of affairs change because a different morality, Hindu nationalism, has surreptitiously overtaken India’s tryst with secular nationalism?

Hindu nationalism today

• More than 70 years after Independence, this notion has gained prominence as never before in India’s post-colonial history.
• This is evident when the Central government says it will consider all Hindus in neighbouring countries as potential Indian citizens.
• The most recent example of this is the bifurcation of Jammu and Kashmir, the country’s only Muslim-majority State, into two Union Territories, with all special provisions taken away from the erstwhile State’s residents.
• It is necessary to understand what Vivekananda’s life and world view said about Indian nationalism.
• His Chicago lectures (1893) marked the beginning of a mission that would interpret India’s millennial tradition in order to reform it and he later spent about two years in New York, establishing the first Vedanta Society in 1894.
• He travelled widely across Europe and engaged Indologists such as Max Mueller and Paul Deussen. He even debated with eminent scientists such as Nicola Tesla before embarking on his reformist mission in India.
• One of the key elements of his message, based on the experiments of his spiritual mentor Sri Ramakrishna Paramahansa, was that all religions lead to the same goal.
• Paramahansa is unique in the annals of mysticism as one whose spiritual practices reflect the belief that the ideas of personal god and that of an impersonal god as well as spiritual practices in Christianity and in Islam all lead to the same realisation.

Religion and rationality

• Vivekananda’s interpretation of India’s past was radical and, when he returned from the West, he had with him a large number of American and European followers.
• These women and men stood behind his project of establishing the Ramakrishna Mission in 1897.
• Vivekananda emphasised that India needed to trade Indian spirituality for the West’s material and modern culture and was firmly behind India’s scientific modernisation.
• He supported Jagadish Chandra Bose’s scientific projects.
• Vivekananda’s American disciple Sara Bull helped patent Bose’s discoveries in the U.S. He also invited Irish teacher Margaret Noble, whom he rechristened ‘Sister Nivedita’, to help uplift the condition of Indian women.
• When she inaugurated a girls’ school in Calcutta, Vivekananda even requested his friends to send their girls to this school.
• Vivekananda also inspired Jamsetji Tata to establish the Indian Institute of Science and the Tata Iron and Steel Company.
• India needed a secular monastery from where scientific and technological development would uplift India’s material conditions, for which his ideals provided a source of inspiration.

Influence on Gandhi, Nehru

• Vivekananda made a remarkable impact on the makers of modern India, who later challenged the two-nation theory, including Mahatma Gandhi, Jawaharlal Nehru and Subhas Chandra Bose.
• He used the term ‘Daridra Narayan’ to imply that ‘service to the poor is service to god’, many years before Gandhiji addressed the socially oppressed as ‘Harijan’ (children of god).
• The Mahatma in fact opined that his love for India grew thousandfold after reading Vivekananda.

Conclusion

• It is for these reasons that the latter’s birthday was declared as the National Youth Day.
• Was Vivekananda then a proponent of Hindutva or of the millennial traditions that have survived many an invasion and endured to teach the world both “toleration and universal acceptance”?
• Should Hindu nationalism take his name but forget his fiery modern spirit that rediscovered and reformed India’s past?
• And shouldn’t India’s secular nationalism also acknowledge its deeply spiritual roots in the beliefs of pioneers like the reformer?

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Renewable hybrid energy systems as a game changer (Mint)

Mains Paper 3: Economy
Prelims level: Hybrid systems
Mains level: Renewable energy resources

Context

• India recently conducted two auctions for wind/solar hybrid projects. Both the auctions were under-subscribed, with bids totalling 1.56GW awarded to SB Energy, Adani Green Energy and ReNew Power, against a total of 2.4GW on offer.
• The discovered prices were marginally below the ceiling tariff of ₹2.70.
• India has added 65-70GW of wind and solar capacity so far, with wind and solar contributing 9.5% of generated energy in May 2019.
• The government target of 175GW is achieved by 2022, this share could exceed 15-16%.

Three inherent challenges

• It relies on intermittent sources, producing energy only when the sun is shining or wind is blowing;
• Its output is constrained to specific hours of the day; third, its use leads to lower utilization of transmission lines. This can create issues in matching peak power demand with renewable output (e.g. in evening hours when solar energy is not available), and raise costs of transmission.
• Experience in countries which have achieved renewable energy penetration of over 15% indicates that some flexible energy resources which can rapidly ramp up or down are needed.
• These could include hydro or gas-based power, or energy storage solutions.

Nature of India’s energy requirement

• In India, we observe that solar output is maximum between 11am and 3pm, while wind output is highest in late evening and early morning.
• Peak demand for power is reached in the evening hours of 6-9pm, which cannot be catered to by either wind or solar.
• If we can store some energy during excess renewable generation hours and release it into the grid during peak demand hours, the combined “hybrid" system can produce 24x7 clean energy in response to varying levels of demand through the day.
• The storage can take many forms, such as batteries, pumped hydro or mechanical storage through flywheels.
• The intermittency of wind and solar could also be balanced by adding a fast ramping source of power; for example, an open cycle gas turbine.
• The overall output of the hybrid system can thus be matched against a required load on an hourly basis. In this way, it can provide both baseload and flexible power.

Introducing hybrid system and its benefits

• Hybrid systems are expected to become increasingly cost competitive, driven by reducing costs of battery storage and solar energy.
• An optimal combination of solar, wind and storage can deliver stable round-the-clock power even at today’s costs of around ₹6-7/kWh. Compared to baseload coal plants, this is significantly higher.
• However, lithium-ion battery costs are expected to fall from current $220-240/kWh to below $100 in next 3-4 years.
• Similarly, levelized costs of solar energy have plummeted from ₹4.63/kWh in 2016 to ₹2.50/kWh in the latest auctions and may fall as low as ₹2/kWh in the next 3-5 years.
• India is not the only country planning hybrid projects; 50-plus hybrid projects of MW-scale have already been announced or are under construction globally, with Australia and US being the leaders.
• For larger capacities or longer duration balancing, pumped hydro is a viable storage solution, but is restricted by the lack of suitable physical locations.
• If the economics of hybrid systems do approach the above levels, our analysis indicates that they can potentially be competitive with 30-40% of existing coal-fired stations in India.

Conclusion

• Therefore it’s become a viable solution to meeting future baseload power requirements, all at zero carbon emissions and future cost-inflation proof.
• Several leading Indian corporates are also showing active interest in increasing their usage of clean power if round-the-clock solutions are available.
• This opens up important questions for India’s future power-system planning.

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Raja Mandala: What India has to offer in the Gulf (Indian Express)

Mains Paper 2: International Relations
Prelims level: Not Much
Mains level: India’s foreign policy towards Gulf region

Context

• Narendra Modi’s visit to the United Arab Emirates and Bahrain underlines India’s continuing commitment to relations with the Gulf region.

A new approach to India towards Gulf region

• Gulf Kingdoms are eager to develop an independent relationship with India, independent of their relationship with Pakistan.
• Modi is being honored with the Zayed Medal, the highest civilian honor in the Emirates.
• Some Gulf countries have expanded counter-terror cooperation with India, extending support to India in the conflict over Jammu and Kashmir. They have sought to open the OIC platform for India despite Pakistan’s objections.
• Gulf kingdoms have begun to address many of the long-standing Indian concerns with respect to the Indian diaspora and expatriate labor.
• Gulf has begun to see India as a major economic partner. Saudi decision to pick up a 2% stake in the oil business of Reliance Industries Limited and UAE’s support for the construction of India’s Strategic Petroleum Reserve are two examples of deepening energy interdependence.

Challenges

• Paying greater attention to the domestic dynamics in the different kingdoms. A new trend has been the effort to promote moderate Islam in the region. UAE has been at the forefront of this effort.
• In Saudi Arabia, Crown Prince has taken some small but significant steps to liberalize the economy and society.
• India should offer strong public support for the reform agenda in the region.
• India must reciprocate the strategic economic cooperation ranging from energy and digital innovation to arms production and space technology. China has moved quickly to elevate its economic and commercial profile in the region.
• Expanding security cooperation: The highly vulnerable Gulf has long depended upon Britain and the US to protect themselves from threats. Trump’s talk on downsizing America’s role in the Gulf is encouraging the region to diversify its security partnerships. India must have a proactive strategy for defense cooperation in the region.

Conclusion

• India’s instinct was to avoid getting drawn into the conflicts.
• But it can’t be a permanent Indian security strategy in the Gulf. India must vision itself contributing to the regional security in whatever manner it can.

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Democracy under siege (The Hindu)

Mains Paper 2: Polity
Prelims level: Constituent Assembly
Mains level: Representation of people Act

Context

• The Constituent Assembly formation was the culmination of the final stage of the struggle for freedom and Independence, which was won by the supreme sacrifices made by millions of Indians.
• People across the length and breadth of the country made sacrifices in one way or the other. On January 26, 1950, India got its Constitution.
• Every succeeding generation in India owes an eternal debt of gratitude to the country’s forefathers for this ‘sacred text’.
• There is absolutely no doubt that we must keep the spirit of this text as well as the letter, while also protecting Constitutional values and its morality.

A missing debate

• Today, liberty, equality and fraternity are becoming subservient to a new idea of sovereignty.
• Ultra-nationalism has trampled over basic human rights and the dignities of citizens, especially of the “downtrodden” and the “minorities”.
• Constitutionalism is being forgotten. As a result democratic principles are unable to check legislative, judicial and executive powers.
• Each organ is paying lip service to this fundamental principle. Examples are writ large in front of us and happen everyday.

Stepping back

• The judiciary, especially the Supreme Court of India, is the custodian of the fundamental rights of citizens under the Constitution.
• But the problem is not the absence of the law but of its implementation.
• The judiciary’s blanching over protecting the fundamental rights of the citizens of Jammu and Kashmir points to its abdication of carrying out its duty.
• The judiciary itself has held that a judicial review of actions by the Executive is a part of the basic structure and has even proclaimed that “there are no unreviewable discretions under the constitutional dispensation”.
• If one can go by various judgments, it is dutybound to inquire into the legitimacy of the exercise of powers.

Conclusion

• The election result of 2019 is the proof of Ambedkar’s prophecy coming true. But sadly, the real protectors of the Constitution do not seem bothered.
• They are content with allowing the government to have either the last say or the last laugh.

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The far right’s disruption of globalisation (The Hindu)

Mains Paper 2: International Relations
Prelims level: Not Much
Mains level: Globalisation policy adopted by U.S. and its significance

Context

• A trade war against China, the United States government that had pressured many a country to liberalise trade and globalise seems to have turned against its own agenda.
• In a series of aggressive moves, the U.S. the one-time votary of freer trade has put in place and widened the coverage of a protectionist shield aimed at stimulating domestic production and reducing the country’s trade deficit.
• While these moves initiated by the Donald Trump administration were on occasion targeted at multiple countries and involved rewriting the North American Free Trade Agreement with Canada and Mexico, the focus of the trade and technology war has been China.

Steps against China

• China-specific tariff aggression began with a 25% tariff on imports worth $50 billion, out of the total of $540 billion imported by the U.S. from China in July 2018.
• Soon, an additional $200 billion worth of imports from China were subjected to tariffs of 10%, and those levies were also raised to 25% in May this year.
• Most recently on August 1, the balance of around $300 billion worth of imports from China were subjected to a phased 10% levy, with a clear threat that these levies too can be raised to 25%. China’s responses to U.S. actions, which came at every step of the trade war, have in turn led to the $120 billion of goods it imports from the U.S. being subject to a 25% duty.
• The U.S. has also imposed sanctions on and shut off business relations with individual Chinese firms, such as Huawei, on grounds varying from national security to alleged theft of intellectual property from U.S. firms.
• This prevents the firms targeted from either selling in U.S. markets and that of its allies or buying goods, services and technology from U.S. firms or those of its allies.

The U.S. argument

• The U.S. justifies its actions against China by citing that country’s significance as a source of inadequately reciprocated imports into the U.S. Imports from China account for more than a fifth of aggregate U.S. imports.
• With exports to China being nowhere as large, the U.S. runs an annual trade deficit with that country of around $420 billion, which ‘imbalance’ is attributed to Chinese policy.
• There are, however, two important facts that this argument sidesteps.
• The gains to the U.S. from its economic relationship with China are inadequately captured by the trade figures.
• A major gain for U.S. companies, even if not for the U.S. per se, is the local sales by subsidiaries of American multinationals located in China. Official statistics from the U.S. indicate that U.S. multinational affiliates based in China notched up local sales of $222 billion in 2015, which do not figure in trade calculations. Second, these subsidiaries are responsible for a chunk of China’s exports to the U.S.
• According to one estimate, more than half of Chinese exports to the U.S. originate in foreign invested enterprises which are either U.S. multinational arms or firms with parents in other advanced economies.
• The U.S. trade deficit with China is the result of the off-shoring associated with globalisation, rather than to Chinese policy favouring its own firms.

Reading Trump

• It troubles the neoliberal policy establishment that the fallout of this kind of trade aggression can set back globalisation across the world.
• Members of the G20 other than the U.S. have strenuously and unsuccessfully tried to get the latter to sign on to another call for strengthening free trade.
• The International Monetary Fund, the World Trade Organisation and a host of international institutions have warned of the dangers of the new protectionism.
• Implicit in their reasoning is that the tariff aggression is an error being made by a maverick or misguided administration.
• But that does not take into account the fact that Mr. Trump had been railing against trade agreements that hurt the U.S. even in the course of his election campaign and withdrew from the Trans-Pacific Partnership

Agreement days after he took office.

• It also ignores the fact that a section hurt by the Trump tariffs — U.S. farmers for whom China was a $6 billion market in 2018 with it absorbing 60% of U.S. soyabean exports — still support him.
• A survey by the Purdue Center for Commercial Agriculture found that 78% of farmers held that the Trump tariffs will in time benefit them and a Pulse survey by Farm Journal found that Mr. Trump had a 79% approval rating among farmers.

In Europe

• That this is not confined to the U.S. comes through from the rise of what is dismissed as “right wing populism” in Europe, which is not just sceptical of free trade even within the European Union but is coming out against the fiscal conservatism promoted by financial interests that leaves the continent mired in a trajectory of low growth and high unemployment and individual countries reeling under austerity.
• Combining this with anti-immigrant rhetoric delivers a toxic mix that is helping them gain popularity and even a seat in some governments.
• On the other hand, sections of the centre left that had bought into the neoliberal paradigm are being shown the door.
• The pleasure derived by the advocates of neoliberalism from the significant decline of the left in the decades since the collapse of the Soviet Union (which deprives the progressive critique of neoliberalism of a strong political base) has proved short-lived.

Conclusion

• The far right is hardly committed to the anti-globalisation strain implicit in its rhetoric.
• It is as wedded to the hegemony of capital and the markets as are the neoliberal dogmatists. Their ideological pragmatism is opportunistic and fickle.
• Yet for the moment, their actions, especially that of Mr. Trump, have disrupted globalisation.

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Something special: On Narendra Modi's Bhutan visit (The Hindu)

Mains Paper 2: International Relations
Prelims level: India-Bhutan
Mains level: India and its neighbourhood relations

Context

• Prime Minister Narendra Modi’s two day visit to Thimphu affirmed a long-standing tradition between India and Bhutan.
• This visit was actually delayed to include outcomes such as the inauguration of the 720 MW Mangdechhu hydropower plant.
• The relationship is indeed built on a traditional closeness, one that is unique in today’s world.
• Open borders, close alignment and consultation on foreign policy, and regular, open communications on all strategic issues are the hallmark of the relationship that has maintained its consistency for the past many decades.

Cooperation from Bhutan

• Bhutan’s unequivocal support to India on strategic issues has meant a lot to India on the international stage and at the United Nations.
• Bhutan’s leadership has not flinched in opposing threats to India; for instance, the former King’s efforts in 2003 to drive out ULFA rebels or more recently, support for India’s stand against Chinese troops on the Doklam plateau.
• India’s assistance to Bhutan’s planned economy, to constructing its highest revenue earner of hydropower generated electricity, and then buying the electricity generated has also ensured a symbiotic and mutually beneficial base to the relationship, which has been nurtured by the leaders in both countries, in a manner Mr. Modi called “exemplary”.

Solved agreements

• In the past few years, ties came under a strain over India’s sudden change in its power purchasing policy, rigid rates and refusal to allow Bhutan to join the national power grid and trade with third countries like Bangladesh.
• These issues are being addressed now. Another concern that could create differences is over Bhutan’s worry that too much trade, transport and tourism from India could put its environment at risk.
• India’s plans for a Motor Vehicles Agreement (MVA) in the Bangladesh-Bhutan-India-Nepal grouping have been held up, and a Bhutanese proposal to levy entry charges on Indian tourists could cause differences with India.

Way forward

• Earlier generations of Bhutanese students never looked beyond India, but in recent years young Bhutanese have shown a preference for education destinations in Australia, Singapore and Thailand.
• There is thus much to repair in the ties.
• New Delhi will have to remain alert to strategic powers which are courting Bhutan assiduously, as is evident from the high-level visits from China and the U.S. In a world of growing options.
• It remains in India’s and Bhutan’s best interests to make each other’s concerns a top priority.

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A new approach to industrial policy (The Hindu)

Mains Paper 3: Economy
Prelims level: Industrialisation
Mains level: India’s economic growth and development process

Context

•  India wants to grow its economy to $5 trillion. People want jobs and their incomes to grow.
•  The country needs its industrial sector to evolve to absorb the millions of people coming off agriculture, as they will, with productivity in the agricultural sector improving.
•  India cannot rely only on its service sector it needs industry and manufacturing to grow much faster to create jobs with good incomes and to enable the economy to grow to $5 trillion.
•  Ergo, the country needs a good policy to grow industry at this juncture in its economic history.

Wither industrial policy?

•  India had avoided framing any industrial policy after the liberalisation of its economy in 1991, because ‘industrial policy’ had become taboo in the ‘leave it to the market’ ideology of the Washington Consensus, which said that any deliberate attempt by the government to grow industry would always be counter-productive.
•  The only way to grow a vibrant, entrepreneurial industrial sector was for the government to get out of the way of the unleashed animal spirit of entrepreneurs.
•  It said, ignoring the history of industrialisation in all countries, including the US, where governments have nurtured industries and meddled with trade policies to foster industrial growth.
•  Now, even the US, confronted with the growth of China’s industries supported by its government’s policies, is feeling the need for an industry-cum-trade strategy to counter China. India cannot avoid, any longer, the necessity for a good policy to grow its industries.
•  The problem is, what sort of policy should India have — how much should it leave to the market, and what should be the government’s role? Any policy, and the way it is made, must fit the system and the situation for which it is required. Therefore, one must step back to understand the process of industrialisation.

What’s industrialisation?

•  Industrialisation is a process by which a large system acquires capabilities to do what it could not do before.
•  Their suppliers learned too, while managers and workers within the industry were rapidly learning and improving their skills. Alongside them, the government facilitated the process of building capabilities in industries and learned along with them too.
•  Complex systems acquire capabilities they do not have when the interdependent sub-systems within them learn to do what they could not do before. Industrialisation is a process of a complex system and its parts learning in action together.
•  Beyond raw material resources, the only source of competitive advantage a nation has is its ability to learn and improve its competitive capabilities faster than all other nations.
•  With a participative process of shaping industrial policy facilitated by the government,

System structure

•  Systems can be sorted into three archetypes: engineered-controlled, open-chaotic, and complex self-adaptive.
•  The structures within engineered systems are designed by experts. Experts can manipulate and control the system if they understand the forces within completely.
•  Technologists have designed amazing machines with which human beings have been able to do what they could not do before — like fly to the Moon.
•  In an engineered system, the designer sits outside the system while designing it.
•  This approach to designing an industrial policy will not work, because the policymaker must be a participant within a dynamic system, learning within it through multiple feedback loops.

Way forward

•  Unregulated markets can become chaotic, as the world realised when the financial crisis happened. Government regulation is necessary.
•  However, India will not want to go back to the ‘engineered-controlled’ model of industrial policy, which is inappropriate for a dynamic, learning process. India should adopt the third archetype, of ‘complex self-adaptive systems’, which is the appropriate model for industrial growth.
•  Industrial policy is not a document; it is a process. It is a process of learning in action that brings together the constituents of the industrial system.
•  The Indian industry is not a clean sheet upon which a policymaker can impose a policy. India has a rich industrial ecosystem with competent industries in many sectors and millions of large and small enterprises.
•  Each constituent within the system will see the system from its own perspective and will lobby for its own interests.
•  It is essential for the policymaker guiding the process, and for the constituents too, to foresee the consequences of fixing any one part of the system on the other parts, to avoid fixes that can backfire elsewhere, or later on, and harm the system.
•  Inverted duty structures, which harm industry, arise when changes are made to make life easier for one industrial sub-system but damage others. Lopsided labour reform to make firing easier can produce shorter-term benefits, harming longer-term processes of capability building.

Conclusion

•  India has recognised the need for an industrial policy and groundwork has been done, with consultations with many stakeholders, both by UPA-II in the 12th Five Year Plan, and by the previous Modi-led government.
•  Both times, the need for an ongoing, consultative, learning process was stated.
•  The government should take a bold step soon to install this process if it wants to grow industries, create jobs, and take the Indian economy to $5 trillion and beyond.

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Taking on TB: On new anti-tuberculosis drug (The Hindu)

Mains Paper 2: Health
Prelims level: MDR-TB, XDR-TB
Mains level: TB eliminations process

Context

•  The anti-tuberculosis drug pretomanid was recently approved by the US FDA. It will be a game-changer for treating people with extensively drug-resistant TB (XDR-TB) and those not tolerating multidrug-resistant TB (MDR-TB) drugs available at present.

TB scenario in worldwide

•  According to WHO, in 2017, there were an estimated 4.5 lakh people across the world with MDR-TB, of which India accounted for 24%, and about 37,500 with XDR-TB.

Background of the new drug

•  Pretomanid is only the third drug in the last 40 years to get FDA approval.
•  It is an all-oral, three-drug regimen of bedaquiline, pretomanid, and linezolid (BPaL).
•  It had a 90% cure rate in a phase III trial in South Africa; against the current treatment success rate for XDR-TB and MDR-TB at 34% and 55%, respectively.
•  It was found to be safe and effective in curing TB in people living with HIV.
•  Unlike 18-24 months needed to treat highly-resistant TB using nearly 20 drugs, the BPaL regimen took just six months.
•  It was better tolerated and more potent in clearing the bacteria. The shorter duration is more likely to increase adherence to therapy and improve treatment outcomes.
•  The number of those who would need a pretomanid-based regimen is increasing due to rising drug resistance.

Key Challenges

•  There are only a low percentage of MDR-TB cases being treated and the actual number of people who do not tolerate or respond to available MDR-TB drugs is unknown.
•  It remains to be seen if it would be made affordable, in the developing countries where the burden of XDR-TB and MDR-TB is the highest. Bdaquiline’s prohibitive cost has severely restricted access in developing countries.
•  TB Alliance, a New York-based international NGO, which developed and tested the drug, has signed an exclusive licensing agreement with a generic-drug manufacturer for high-income markets.
•  The drug will be licensed to multiple manufacturers in about 140 low- and middle-income countries, including India.

Conclusion

•  After all, there is a compulsion to keep the prices low and increase treatment uptake to stop the spread of highly drug-resistant TB bacteria.
•  Studies have shown an increase in the number of new patients who are directly infected with drug-resistant bacteria.

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Unclear doctrine: On ‘No First Use’ nuclear policy (The Hindu)

Mains Paper 2: International Relations
Prelims level: Not much
Mains level: India’s nuclear policy and its adoption process.

Context

•  Defence Minister Rajnath Singh has been somewhat careful in speaking of envisioning a change in India’s nuclear deterrence posture.
  Background
•  In place for 16 years, since January 4, 2003, when the doctrine was adopted formally, New Delhi has said consistently that India’s nuclear weapons were based on staggering and punitive retaliation, in case deterrence failed.
•  The retaliation to a nuclear strike, any nuclear strike, whether by tactical or theatre weapons or something bigger, would be crushing enough to deter the possible use of nuclear weapons by an adversary.
•  On the first death anniversary of former Prime Minister A.B. Vajpayee, and in the nuclear proving ground in Pokhran, the Minister said two things:

1. The no-first-use has served India well so far, and
2. That what happens in future depends on circumstances.

Security a dynamic concept

•  It was the security environment in the neighbourhood coupled with the pressure brought by the Comprehensive Nuclear Test Ban Treaty that forced India out of the nuclear closet and, at the same time, to adopt the no-first-use posture.
•  The structures associated with the doctrine, the command and control that can survive a nuclear strike, the redundancies that are in-built, the secure communications, have all been developed keeping in view the posture perspective.

Way forward

•  In a nuclear circumstance it is much better to convey the overwhelming nature of the deterrence than to keep the potential adversary guessing.
•  In this respect it is a good idea for the government to make public any periodic review in its strategic posture.
•  The no-first-use policy comes with being a confident nuclear power. For him to state the future is open is to say nothing and at once imply everything.
•  In matters of nuclear doctrine, it is important to be clear above all else. Nothing must be left to interpretation.

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Whether we will survive ought to be our foremost concern (Mint)

Mains Paper 3: Environment
Prelims level: Not much
Mains level: Water and air crisis in India

Context

• The 72nd year of our existence as an independent nation, when Indians are estimated by the United Nations to number 1.35 billion, is a fitting occasion to take stock of the two greatest threats to our continued survival.
• The lack of safe water and clean air will either make or break India.

Highlights about statistics on water

• A report by NITI Aayog warned that India is facing its worst water crisis in history.
• Nearly 600 million Indians face high to extreme water stress, 75% of households do not have drinking water on the premises, 84% of households do not have piped water access, and 70% of our water is contaminated.
• Nearly 200,000 people die every year due to inadequate access to safe water.
• 21 cities, including Delhi, Bengaluru, Chennai and Hyderabad, will run out of groundwater by 2020.
• India is currently ranked 120 among 122 countries in the water quality index.

Highlights about statistics on air pollution

• A report by the Centre for Science and Environment released last year, indicated that severe air pollution crisis in India caused lifespans to shrink by 2.6 years on average.
• Air pollution is now the third-highest cause of death among all health risks ranking just above smoking in India.
• As many as 14 of the 20 most polluted cities of the world are in India.
• The World Health Organization calls toxic air the “new tobacco”

Conclusion

• The need of the hour is a nationwide strategy on conservation, checks on development, salination projects across our long coastlines, and urgent steps to check pollution.
• Our political class and government must respond with the urgency this deserves—if not, we will simply not survive.

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Protect individual’s ‘inviolate personality’ (The Hindu)

Mains Paper 2: Governance
Prelims level: Section 66A
Mains level: Comparison of the Indian constitutional scheme with that of other countries Parliament and
State Legislatures

Context

• The ham-handed notification authorizing selected agencies to intercept, monitor and decrypt any information generated, transmitted, received or stored in any computer resource.
• Then, following a massive uproar, came the government’s weak defence there was nothing new in the executive order as it had existed in the books since 2009.
• Notwithstanding these clarifications issued post-haste by the government, the issue of the private lives of citizens being placed under state surveillance is now squarely in the public domain.

Political tussle

• It is true that the Congress-led UPA did pass several draconian laws like Section 66A, which dealt with penalties for sending offensive messages, and the offending act, Section 69.
• The mystery is why the Modi government felt the need to restate this as it was already on the books.
• Was it a veiled threat to some people about actions to come, adding grist to the mill that the BJP, pushed to the wall by recent poll reverses, would target opposition leaders in the run up to the elections next year?
• What is equally mysterious is why, if security is the dominant motif of the order, the Central Board of Direct Taxes is included in the list of authorized agencies.

Conclusion

• In the name of security and safety, governments across the world have upended this original definition with all kinds of caveats, progressively diluting this inviolable space.
• It never before has the individual been more vulnerable.
• In the information age, digital networks now have a stranglehold on data that lays bare every human being rendering her life in its minutest detail.
• We are now part of what dotcom entrepreneur and author John Battelle dubbed in 2003 “the database of intentions”.
• Battelle explained that as “the aggregate results of every search ever entered, every result list ever tendered, and every path taken as a result...
• This information represents, in aggregate form, a place holder for the intentions of humankind a massive database of desires, needs, wants, and likes that can be discovered, subpoenaed, archived, tracked, and exploited to all sorts of ends.
• It is important to push for a privacy regime configured to protect the civil liberties of citizens against the government.

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To leveling the playing field for online vendors (Indian Express)

Mains Paper 3: Economy
Prelims level: FDI
Mains level: Economic growth and development

Context

• Tighter rules governing e-commerce platforms notified by the government this week are designed to level the playing field for all vendors in an online marketplace.
• These impose restrictions on related-party transactions, preferential treatment to suppliers, and inventory dumping.

Background of the announcement

• The government had announced the foreign direct investment (FDI) policy for the sector in 2016, during which US retail giants Amazon and Walmart came to occupy a commanding position in India’s $41-billion e-commerce industry.
• Indian brick-and-mortar retailers have grown restive, claiming online marketplaces like Amazon and Flipkart have acquired the power to influence retail prices, in contravention of the policy that restricts FDI in business-to-consumer (B2C) e-commerce, but not in business-to-business (B2B).
• The government appears to have bought this argument and the new set of rules are meant to give effect to the original e-commerce policy even as inter-ministerial consultations are on for drawing up a new one.

Battle for online marketplace

• India is a crucial battleground for Amazon and Walmart they have committed a combined $21 billion to this market and they may now have to review their business operations in the country.
• Amazon has several joint ventures, including Cloudtail and Appario, that may be affected by the restrictions on sales by related parties.
• Flipkart has exclusive partnerships with smartphone brands like Xiaomi and Oppo that could, in turn, face a ban on exclusive deals for products.
• Both offer promotional schemes such as cashbacks and faster delivery, which are now deemed discriminatory.
• The companies will now have to furnish reports to the Reserve Bank of India annually, adding another dimension to compliance and monitoring of the e-commerce industry.
• Flipkart and Amazon can thus be reasonably expected to push back against rules they find too constrictive, given the size of their investments in the ecosystem that fuels e-commerce on this scale.

Way forward

• The government, on its part, is clear that the new rules are needed to prevent anti-competitive behaviour in the e-commerce industry.
• An online marketplaces should not have any role in determining the prices of the products sold on their platforms.
• As regulator, it cannot avert its gaze from market distortions, even if the latest rules do not fit snugly into the country’s competition law, which proscribes only a select segment of exclusive arrangements that have a demonstrably significant effect on market freedom.
• The focus should be on establishing specific arrangements that create barriers to new entrants.
• The extra load on auditors is, however, a small price to pay in the larger interest of transforming India’s retail sector into a modern industry.
• E-commerce provides India’s army of medium and small enterprises one of their least-cost options to sell their wares, and the government’s approach of encouraging online marketplaces with due safeguards cannot be faulted.
• But the regulatory reflex must be tempered by the realization that a ramshackle retail sector is not in the interests of consumers or producers.

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