GS Analyst: Daily Current Affairs

China recently celebrated the 70th anniversary of the Five Principles of Peaceful Coexistence, a cornerstone of its foreign policy. This concept, originally proposed by China in 1954, is also known as Panchsheel in India.

What are these Five Principles?

• The Five Principles were first articulated during talks between India and China, reflecting a mutual desire for peaceful relations amidst their emergence on the global stage post-independence (India in 1947 and China in 1949).
• The Five Principles
  • Mutual Respect for Territorial Integrity and Sovereignty: Both countries agreed to respect each other's borders and territorial sovereignty.
  • Mutual Non-Aggression: Commitment to refrain from acts of aggression or hostility towards each other.
  • Mutual Non-Interference: Agreement not to interfere in each other's internal affairs.
  • Equality and Mutual Benefit: Interactions based on equality and mutual benefit, fostering cooperation.
  • Peaceful Coexistence: Promoting harmony and peaceful relations between nations.
• Panchsheel was later included in the Ten Principles of International Peace and Cooperation at the Bandung Conference in April 1955, attended by Afro-Asian countries.

Impact and Evolution

• Initially aimed at enhancing trade and cooperation, the Five Principles gained broader recognition at the Bandung Conference in 1955, influencing the Non-Aligned Movement (NAM).
  • The Non-Aligned Movement, founded by Jawaharlal Nehru, that rose in the 1960s adopted the 'Panchsheel' or Five Principles as its guiding principles.
• However, the Sino-Indian War of 1962 strained relations and diluted the principles' influence.
• Current Perspective on China’s Foreign Policy

Modern Context

Despite its historical emphasis on peaceful coexistence, China's contemporary foreign policy under President Xi Jinping has shown assertiveness:

• Economic Growth and Assertiveness: China's economic rise has been accompanied by assertive territorial claims in the South China Sea and confrontations with neighboring countries.
• Global Relations: Relations with the United States have been marked by competition and tension, challenging American influence globally.
• Current Issues: Tensions persist between India and China, notably along the Line of Actual Control (LAC) in Ladakh, despite attempts at diplomatic resolution.

Three new criminal laws came into effect from July 1, 2024. The Bharatiya Nyaya Sanhita (BNS), the Bharatiya Nagrik Suraksha Sanhita (BNSS), and the Bharatiya Sakshya Adhiniyam (BSA), passed in Parliament will replace the Indian Penal Code (IPC), 1860, the Criminal Procedure Code (CrPC), 1973, and the Indian Evidence Act, 1872 respectively.

About the New Law

• The new law seeks to replace the colonial-era sedition lawwhich was mainly used against Indian political leaders seeking independence from British rule.
• Also, the state-of-the-art technologieshave been incorporated in these laws.
• The objective of these laws is not to punish anyone but give justice and in this process punishment will be given where it is required to create a sense of prevention of crime.

Why there is a need for reforms? 

• Colonial Legacy: The laws we currently use for justice are leftovers from British rule, designed to control the nation. Their relevance in today's world is questionable.
• Ineffective Justice System: Instead of protecting the innocent and punishing the guilty, the justice system often harasses ordinary people.
• Backlog of Cases: There are about 35 million pending cases in India’s courts, especially in local and district courts. This delay denies justice to many.
• High Number of Undertrials: India has one of the highest numbers of undertrial prisoners globally. Over two-thirds of our prison population are awaiting trial.
• Police Challenges: The police, crucial in the justice system, face issues like corruption, heavy workloads, and lack of accountability. These hinder fair and timely justice delivery.                                    

Positive Aspects and Concerns

In recent times, controversies have engulfed key exams like NEET-UG, allegations of paper leaks, and irregularities have surfaced. Similarly, the UGC-NET exam was canceled post conduct, while NEET-PG and CSIR-NET have been postponed. These incidents highlight a crucial debate: the balance between federalism and centralized governance, particularly in ‘education’.

Background and Constitutional Shifts

• Originally, education was solely under the purview of state legislatures as a State subject in the Constitution. However, during the Emergency in 1976, through the 42nd Constitution Amendment, it was moved to the Concurrent List. This amendment expanded the powers of both state assemblies and Parliament, but granted Parliament supremacy in case of conflict.
• The shift placed education alongside other subjects like forests and weights & measures, diluting state autonomy. This move was based on recommendations to consolidate governance and ensure uniform standards across the nation. However, it sparked debates about federal principles and state rights.

Impact of Centralisation

• Centralizing education under the Concurrent List means both the Union and states can legislate, but once Parliament acts, states cannot enact laws without Presidential assent if they conflict with Union laws. This setup has implications, particularly in areas like admissions policies.
• For instance, the introduction of NEET for medical admissions standardized the process nationwide but curtailed states' ability to tailor admissions to local needs.
• States argue that such centralization ignores their educational investments and unique regional requirements, impacting diversity and state-specific educational goals.
• Critics argue that while a Concurrent List is necessary for national issues, subjects like education, crucial for local development and identity, should revert to the State List. This shift, they contend, would empower states to innovate, preserve diversity, and cater education to grassroots needs effectively.
• Education is not merely about imparting knowledge but also about preserving cultural identity and linguistic diversity.

Recently, the US-Saudi Arabia petrodollar deal, which began in 1974, has come to an end after 50 years. This agreement was crucial as it involved Saudi Arabia selling oil exclusively for US dollars, thus strengthening the dollar's role in global finance.

About Petrodollars:

• Petrodollars are US dollars earned by oil-exporting nations through the sale of crude oil.
• This arrangement began after the US made a deal with Saudi Arabia and other OPEC countries to stabilize oil prices and ensure oil transactions were conducted in US dollars.
• Background: Initially, the US dollar became the world's main reserve currency under the Bretton Woods Agreement after World War II. This system tied the dollar to gold, ensuring stability in global trade.
• However, in 1971, President Nixon ended this gold backing, leading to floating exchange rates and economic uncertainties.
• Following the Yom Kippur War in 1973, OPEC imposed an oil embargo, causing oil prices to surge. In response, the US negotiated with Saudi Arabia and OPEC to ensure oil sales in dollars, thus establishing the petrodollar system. In return, the US provided military and economic support.

Impact of Ending the Petrodollar Deal:

• Saudi Arabia can sell oil for currencies like yuan, euros, rubles, and yen, and may even consider digital currencies such as Bitcoin.
• This shift could encourage more countries to use alternative currencies for global trade.
• The decline in global demand for the US dollar might lead to higher inflation, interest rates, and a weaker bond market in the US.

The updated new base year for national accounts and other macro-indicators is expected to come into effect from January-February 2026, coinciding with the first and second advance estimates of national income for FY26.

What is base year?

• The base year for national accounts and macro-indicators such as GDP, CPI, WPI, and IIP serves as a benchmark to measure economic performance and inflation trends accurately.
• Previous Base Year: India's last update was in January 2015, setting 2011-12 as the base year, replacing the older 2004-05 base year. This update was in line with NSC recommendations for periodic revisions.
• Establishment of ACNAS: The Ministry of Statistics and Programme Implementation has set up the Advisory Committee on National Accounts Statistics (ACNAS). ACNAS will advise on the selection of the new base year for GDP and ensure alignment with other macro-indicators.
  • The new base year is slated to take effect from January-February 2026. This timeline coincides with the release of the first and second advance estimates of national income for FY26, ensuring a seamless transition.
• The development comes at a time when the government is planning to update the base year for major macro-indicators such as:
  • Gross Domestic Product (GDP)
  • wholesale price index (WPI) used for wholesale inflation
  • consumer price index (CPI) used to determine consumer inflation,
  • index of industrial production (IIP) used for calculation of industrial growth

While India continues to buy advanced submarines under Project-75I, the Defence Research and Development Organisation (DRDO) has started a preliminary study for Project-76. This project aims to develop a new type of submarine that relies heavily on Indian-made technology and equipment.

About Project-76

• Project-76 focuses on building a conventional submarine with many parts and systems made in India. This includes weapons, missiles, communication systems, and more.
• The goal is to reduce dependence on foreign suppliers and boost India's ability to make its own submarines.
• Strategic Importance: The Indian Navy has a 30-year plan to build submarines, showing its commitment to strengthening its maritime defenses. After Project-75I, the Navy plans to shift towards making submarines within India.

Air Independent Propulsion (AIP) module

• DRDO has made significant strides in naval technology with its development of an Air Independent Propulsion (AIP) module. This module is designed to enhance the operational capabilities of conventional submarines, particularly by allowing them to stay submerged for longer durations without needing to surface.
• Technical Details:
  • Fuel Cell Technology: The AIP module developed by DRDO utilizes phosphoric acid-based fuel cells, which are known for their reliability and wide availability.
  • Power Output: Each fuel cell in the AIP module currently generates 13.5 kW of power, with plans to scale up to 20 kW to meet future submarine requirements, including those under Project-76 (P-76).
  • Configuration: The module comprises a stack of 24 fuel cells, designed to exceed operational requirements to ensure redundancy and optimize performance under various conditions.
  • Integration and Future Plans: The first integration of DRDO's AIP module is slated for the Scorpene-class submarine Kalvari during its refit scheduled for 2025. This integration process, expected to span 2-3 years, will involve rigorous testing to ensure the module's reliability and effectiveness under simulated and actual maritime conditions.

In 2023, India witnessed the discovery of 641 new species, comprising both plants and animals. This marks a significant contribution to biodiversity science and conservation efforts in the country.

Key Findings:

Plant Discoveries:

• Notable discoveries include Curcuma kakchingense, a new species of turmeric found in Manipur, and Asystasia venui, a flowering plant discovered in West Bengal.
• West Bengal led in new plant discoveries with 52 taxa, followed by Kerala and Uttarakhand.
• The discoveries encompass wild relatives of horticultural, agricultural, medicinal, and ornamental plants, enriching India's botanical diversity.

Animal Discoveries:

• Significant animal discoveries include Capra himalayensis, distinguishing the Himalayan Ibex from the Siberian Ibex, and Miniopterus srinii, a new species of bat found in Karnataka.
• Kerala reported the highest number of new animal species with 101 additions, followed by West Bengal and Tamil Nadu.
• Invertebrates dominated with 564 new species, particularly insects (369 species), while vertebrates accounted for 77 discoveries, primarily fish species.

Regional Contributions:

• Southern states like Kerala, West Bengal, and Tamil Nadu recorded the most new species discoveries, emphasizing the region's biodiversity richness.
• The Western Ghats and North Eastern Regions were highlighted as hotspots contributing 14% of the total new discoveries.

The recent judgment in M.K. Ranjitsinh and Ors. vs Union of India & Ors. by the Supreme Court of India has introduced a significant development in India's climate change jurisprudence. The court recognized a constitutional right to be free from the adverse effects of climate change, linking it to the right to life and the right to equality. This judgment has significant implications for climate governance in India.

A New Right Around Climate:

• Introduction to the Issue: The Supreme Court identified a constitutional right to be free from the adverse effects of climate change, linking it to Article 21 (right to life) and Article 14 (right to equality). This opens up possibilities for climate litigation.
• Debate over Climate Adaptation and Mitigation: While the judgment prioritizes renewable energy development, it raises questions about balancing large-scale clean energy projects with local environmental resilience and climate adaptation.
• Potential for Climate Litigation: Empowering citizens to demand protection of this newly recognized right could lead to an increase in climate-related litigation, requiring systematic governance around climate change.

Global Climate Governance and Policy Implications:

• Learning from International Experience: The judgment underscores the need for overarching climate legislation in India, drawing on international examples of framework laws that guide climate action.
• Importance of Tailoring to Indian Context: Climate legislation in India should not merely replicate international models but be adapted to address India's unique vulnerabilities and development needs, focusing on both low-carbon and climate-resilient development.
• Sectoral Integration: Effective climate legislation should integrate climate considerations across various sectors, including urban planning, agriculture, water management, and energy, ensuring a comprehensive approach to climate resilience.

Challenges of Implementation and Ensuring Inclusivity:

• Procedural Orientation: An enabling climate law would establish institutions, processes, and standards for mainstreaming climate change across diverse ministries and society, supporting transparency, public participation, and expert consultation.
• Federalism and Decentralization: Climate legislation must balance national coherence with sufficient decentralization to empower state and local governments, providing them with the necessary resources and authority to implement climate action.
• Inclusive Participation: Engaging business, civil society, and frontline communities in decision-making processes ensures that diverse knowledge and perspectives are incorporated, enhancing the effectiveness of climate policies.

UPSC Mains Questions:

Q. Discuss the implications of the Supreme Court's judgment in M.K. Ranjitsinh and Ors. vs Union of India & Ors. on India's climate change jurisprudence. How does it redefine the right to life and the right to equality in the context of climate change?

The Reserve Bank of India's (RBI) Financial Stability Report (FSR) for March 2024 presents a mixed picture of the financial sector's health. While it highlights the banking sector's strong performance, there are underlying concerns regarding household savings, foreign direct investment (FDI), and potential risks in asset valuations.

Current State of the Financial Sector:

• Banking Sector Health: The FSR indicates that banks' balance sheets are improving, with lower non-performing asset (NPA) ratios, higher provisioning, stronger capital positions, and robust earnings, leading to sustained credit expansion.
• Economic Resilience: The report suggests that the Indian economy is poised for resilient growth, supported by macroeconomic and financial stability.
• Sector Focus: Given the dominance of banks in the Indian financial system, the FSR focuses primarily on the banking sector as crucial for overall financial stability.

Concerns Highlighted in the FSR:

• Decline in Savings Rate: There is a notable decline in the gross savings rate to 29.7% of gross net disposable income, with household savings falling from 20% during 2013-22 to 18.4% in 2022-23.
• Shift in Savings Composition: The share of net financial savings in total household savings has decreased from an average of 39.8% during 2013-2022 to 28.5% in 2022-23, with net financial savings falling to 5.3% of GDP in 2022-23.
• Drop in FDI: Foreign direct investment has significantly declined from $28 billion in 2022-23 to $9.8 billion in 2023-24, while foreign portfolio investment (FPI) increased from minus $4.8 billion to $44.6 billion in the same period.

Risks and Policy Implications:

• Asset Valuation Risks: The FSR warns of potentially stretched asset valuations, with the latest monetary tightening associated with rising prices of riskier assets, contrary to the usual risk-off sentiment.
• Non-Bank Financial Intermediation: The growing role of non-bank institutions in financial intermediation and hidden leverage could amplify stress in the face of large shocks, spreading contagiously across financial market segments.
• Need for Vigilance: The fine print of the FSR suggests that the apparent stability might conceal underlying vulnerabilities, necessitating closer scrutiny and potential policy actions to address emerging risks.

UPSC Mains Questions:

Q. Discuss the risks associated with asset valuations and non-bank financial intermediation as highlighted in the RBI’s Financial Stability Report. What measures can be taken to mitigate these risks and ensure financial stability?

The Goods and Services Tax (GST) was implemented in India on July 1, 2017, aiming to create a unified tax system and eliminate inter-state barriers to trade. Over the past seven years, GST has transformed the tax landscape, improved compliance, and increased revenue collections.

Impact on Revenue Collection and Compliance:

• Significant Increase in Collections: Monthly gross collections have surged from an average of ?0.9 trillion in the initial phase to ?1.5 trillion, with May 2024 reporting collections of ?1.73 trillion.
• Widening Tax Base: The adoption of GST has led to a widening of the tax base, increased compliance, and reduced tax evasion through better enforcement and technological integration.
• Role of GST Council: The GST Council, India's largest and most successful Constitutional body, has played a pivotal role in guiding and shaping GST, making most recommendations through consensus.

Key Features and Achievements of GST:

• Digitalization: GST has embraced the 'Digital India' initiative, with all processes from registration to compliance and filings being conducted online via the GSTN portal. This digital approach has enabled efficient data analytics and fraud detection.
• Simplified Tax Structure: GST subsumed 17 taxes and 13 cesses, simplifying the tax regime and eliminating inter-state trade barriers. This has improved ease of doing business and enhanced supply chain efficiencies.
• Input Tax Credit System: The seamless set-off system of GST has nearly eliminated the cascading effect of taxes, leading to operational efficiencies and cost savings across various sectors.

Challenges and Areas for Improvement:

• Legal Amendments: The GST regime has seen over 250 amendments to the Central GST Act and more than 500 changes to central rules, reflecting the government's intent to continually improve the law.
• Dispute Resolution: The absence of an operational GST Appellate Tribunal (GSTAT) has led to a backlog of litigation and burdened high courts. The establishment of GSTAT is expected by the end of 2024.
• Expansion and Inclusion: Including petroleum products and natural gas under GST could increase collections and reduce the cascading effect of taxes in major consumption categories.

UPSC Mains Questions:

Q. Evaluate the impact of the Goods and Services Tax (GST) on India's economic integration and ease of doing business over the past seven years. Discuss the challenges faced in its implementation and suggest measures for improvement.