GS Analyst: Daily Current Affairs

Donald Trump’s return to the US Presidency in 2024 has sparked renewed attention on his economic policies, which could have significant ramifications for the US economy, global financial markets, and developing nations like India. From imposing high tariffs to tax cuts and changes in immigration policies, Trump's approach promises to reshape both the US and global economic landscapes.

Key Economic Proposals by Donald Trump

• 20% Tariff on Imports: Trump has proposed imposing a 20% tariff on all imports and over 200% duty on cars. These tariffs are likely to disrupt global supply chains and escalate trade tensions, particularly with China, the EU, and other major economies.
  • Impact: The immediate effect could be higher prices for consumers in the US, leading to inflationary pressures. This could also trigger retaliatory tariffs from other countries, potentially resulting in trade wars.
• Tax Cuts Amid Record Deficits: Trump has promised to extend his tax cuts, which were a significant part of his earlier presidency.
  • Impact: While tax cuts can stimulate the economy in the short term by increasing disposable income and boosting investment, they may exacerbate the US budget deficit, which is already at record highs. The government's increased borrowing needs could weaken confidence in US Treasury securities and raise concerns over fiscal profligacy.
• Deporting Immigrants and Immigration Reforms: Trump has proposed deporting millions of irregular immigrants, which could have long-term implications on the US labor market. At the same time, he has suggested making it easier for foreign students who graduate from US colleges to obtain green cards, potentially benefiting Indian students who form a significant portion of foreign students in the US.

Impacts on the US Economy

• Inflation and Fiscal Deficits: High tariffs, combined with proposed tax cuts, could lead to higher inflation in the US. The costs of goods, particularly imported ones, would increase. Furthermore, the US government’s budget deficit would likely rise, as tax cuts reduce government revenues, while expenditures may increase due to higher defense or social security spending. This could put pressure on the US dollar and lead to increased borrowing costs.
• Federal Reserve's Policy Shift: In response to Trump's proposed economic policies, the US Federal Reserve (Fed) may have to change its interest rate strategy. If the US faces inflationary pressures due to higher tariffs and budget deficits, the Fed could halt or reverse its rate-cutting cycle. This would have a global impact, as US interest rates influence financial markets and monetary policy decisions in other countries, including India. A shift in US rates could affect capital flows and global investments, especially in emerging markets.
• Volatility in Global Financial Markets: The combination of rising US inflation and potential changes in US interest rates could lead to volatility in global financial markets. Foreign investors might become wary of US government bonds (Treasuries) and shift their investments elsewhere. This could increase global uncertainty, particularly in emerging economies, which rely on foreign capital inflows for development.

Impact on India’s Economy and Monetary Policy

• Global Trade Disruptions and Supply Chains: Higher tariffs and trade wars initiated by Trump could disrupt global supply chains, affecting manufacturing and trade. India, which has a growing trade relationship with the US, could see increased costs for both imports and exports. Additionally, if supply chains are restructured to avoid high US tariffs, it could lead to a decline in foreign direct investment (FDI) in India, as companies shift production to other low-cost regions.
• Forex Volatility and US Dollar Impact: A possible weakening of the US dollar—similar to Trump’s earlier tenure—could affect India's foreign exchange markets. A weaker dollar could cause volatility in the forex market, making it more difficult for India to manage its external debt and forex reserves. It could also affect India's trade balance, as exports become relatively cheaper but imports more expensive. India may face pressure on its currency, the rupee, which could impact inflation and monetary policy.
• Indian Monetary Policy Response: India’s central bank, the Reserve Bank of India (RBI), might face challenges in its monetary policy. If the US Federal Reserve stops cutting interest rates, the RBI might delay its own rate cuts. This would impact borrowing costs for businesses and consumers in India, potentially slowing down economic growth. Additionally, RBI might need to address forex volatility and inflationary pressures that arise due to global economic uncertainties.

Other Global Implications

• China’s Response and Economic Stimulus: Trump’s proposed tariffs on Chinese goods could significantly affect China’s growth, potentially reducing its GDP by 2-3 percentage points. In response, China may increase its economic stimulus package, which could involve government spending on infrastructure and recapitalizing banks.
  • While this might cushion the impact on China’s economy, it could also make China’s assets more attractive to foreign investors, potentially leading to a shift of capital away from India.
• Bitcoin Surge and Global Investment Trends: Trump has previously expressed his support for cryptocurrencies, and Bitcoin recently surged to a record high, partially fueled by investors’ optimism regarding Trump’s pro-crypto stance. This could lead to increased investment in digital assets, potentially diverting capital away from traditional markets like stocks and bonds, which could have implications for emerging markets like India.
• Tesla and Elon Musk’s Influence: With Elon Musk's potential involvement in Trump’s administration, India could face pressure on several fronts. For instance, Musk has advocated for lower tariffs on electric vehicles (EVs), including Tesla’s cars. This could affect India’s EV market and lead to changes in India’s policy towards electric vehicle imports and manufacturing.

In a significant 8:1 majority ruling, the Supreme Court's nine-judge Constitution Bench has clarified the scope of Article 39(b) of the Indian Constitution, which deals with the acquisition and redistribution of resources for the common good. The court ruled that not all private property can be classified as "material resources of the community" for the purposes of government acquisition.

What is Article 39(b)?

• Article 39(b) is part of Part IV of the Constitution (Directive Principles of State Policy or DPSP).
• It mandates that the State should distribute the ownership and control of the "material resources of the community" to ensure they serve the common good.
• This provision aims to prevent the concentration of wealth in a few hands and ensures that resources are used for the collective welfare of society.
• However, the court was asked to interpret the term "material resources" under this article and to determine whether private property can fall under this category for government acquisition.

Judicial Conflict Between Fundamental Rights and DPSPs

• The tension between fundamental rights (such as the right to equality and freedom of speech) and the Directive Principles of State Policy (which guide the State in policy-making but are not legally enforceable) has long been a judicial challenge.
• Article 31C, introduced in 1971, aimed to protect laws made in furtherance of Articles 39(b) and 39(c) (related to wealth distribution and preventing concentration of wealth) from being struck down by courts on the grounds of violation of Articles 14 (equality) and 19 (freedom of speech).
• This was challenged in the Kesavananda Bharati case (1973), where the Supreme Court upheld judicial review but allowed laws promoting Articles 39(b) and 39(c) to be immune from challenges based on Articles 14 and 19.
• In the Minerva Mills case (1980), the Supreme Court emphasized the primacy of fundamental rights over DPSPs, clarifying that no law could override Articles 14, 19, and 21.

Key-takeaways from the SC’s Judgment

• Not All Private Property Falls Under Article 39(b): The majority opinion stated that not all private property can be considered "material resources of the community" under Article 39(b) for government acquisition. The Chief Justice noted that this approach prevents a rigid economic dogma favoring state control over private resources.
• Case-by-Case Basis: The judgment emphasized that determining whether a private resource should be acquired for the common good should depend on case-by-case assessment. The factors for consideration include the resource's scarcity, public impact, and the consequences of its concentration in private hands.
• Rejection of Earlier Interpretations: The bench rejected the interpretation in previous judgments (like State of Karnataka v. Shri Ranganatha Reddy, 1977) that extended Article 39(b) to cover all private resources, including those owned by individuals. This earlier view was seen as being shaped by a particular economic ideology promoting state acquisition of private property.
• Immunity for Laws under Article 39(b): The Court reaffirmed that laws made to implement Article 39(b) are shielded from challenges under Article 31C. However, the Court emphasized that such acquisitions must still comply with constitutional guarantees, such as Articles 14 (equality) and 300A (right to property).
• Dissenting Opinion:
  • Private property should not be automatically excluded from the scope of Article 39(b), especially in a country with widening economic inequality. Equitable distribution of private resources could benefit the public and help in achieving the DPSP goals, like reducing inequality.

Impact of the Verdict

• Evolution of Economic Policy: The ruling marks a shift in India's economic policy. While acknowledging the role of the state in promoting public welfare, it also respects individual property rights. This decision aligns with the country's transition towards a more liberalized economy where both public and private investments coexist.
• Case-by-Case Evaluation: The Court's ruling establishes that any government action to acquire private property for the public good must be evaluated based on specific circumstances, balancing public needs with private rights.
• Political Implications: This judgment comes at a time when discussions around wealth redistribution, especially in the context of the 2024 Lok Sabha elections, have gained political attention. The ruling could impact how economic policies are framed, particularly those aimed at addressing inequality or redistributing wealth.

In a landmark ruling, a three-judge bench of the Supreme Court, headed by Chief Justice D.Y. Chandrachud, has held that the Basic Structure doctrine cannot be applied to challenge the validity of an ordinary law. This judgment arose from a challenge to the Uttar Pradesh Madrasa Education Board Act, 2004, which was questioned on the grounds of violating the principle of secularism—one of the key components of the Basic Structure of the Indian Constitution.

What is the Basic Structure Doctrine?

• The Basic Structure doctrine was first established in the Kesavananda Bharati case (1973).
• It holds that certain fundamental features of the Indian Constitution, such as democracy, secularism, federalism, and judicial review, cannot be altered by Parliament through constitutional amendments.
• This doctrine is seen as a safeguard to ensure that the Constitution’s foundational values are protected.
• Key Aspects of the Ruling

• Basic Structure Doctrine Cannot Apply to Ordinary Legislation: The Basic Structure doctrine is meant to apply to constitutional amendments, not to ordinary laws passed by the legislature. Applying the Basic Structure test to challenge ordinary legislation, according to the court, would lead to uncertainty in legal adjudication, as the doctrine is based on broad and undefined concepts such as secularism and democracy, which can vary in interpretation.
• Secularism and Constitutional Provisions: The Supreme Court rejected the claim that the Uttar Pradesh Madrasa Education Board Act violated the principle of secularism as part of the Basic Structure. For a law to be challenged on the grounds of violating secularism, the challenger must demonstrate that the statute explicitly contravenes the specific constitutional provisions related to secularism. The mere allegation of violating secularism was not sufficient.
• Distinction Between Constitutional Amendments and Ordinary Law: The ruling reiterated an earlier observation made in the Raj Narain case (1975), which involved the use of the Basic Structure doctrine for the first time.
  • In that case, the Supreme Court had drawn a distinction between constitutional amendments and ordinary statutes. The court held that constitutional amendments, being part of the Constitution, are subject to a higher standard of review, whereas ordinary laws passed by the legislature are not susceptible to being tested against the Basic Structure.
• Judicial Precedents in the Raj Narain Case: In his judgment, Chief Justice Chandrachud referenced the Raj Narain case, which was pivotal in the evolution of the Basic Structure doctrine. The bench in that case had ruled that applying the Basic Structure doctrine to ordinary laws would amount to "rewriting the Constitution". This opinion was critical in shaping the court’s view on why the doctrine should not be used to assess the validity of regular statutes.

The Uttar Pradesh Madrasa Education Board Act, 2004

• The law in question, Uttar Pradesh Madrasa Education Board Act, 2004, regulates the administration and functioning of madrasas (Islamic religious schools) in the state. The law was challenged on the grounds that it violated the principle of secularism, one of the foundational principles of the Indian Constitution, by allegedly interfering with the secular nature of education.
• The Allahabad High Court had ruled that the law violated secularism, which led to the matter being brought before the Supreme Court. The Court, however, held that the law did not violate the Basic Structure and that secularism, as an element of the Basic Structure, could not be invoked to invalidate an ordinary law without specific constitutional violations.
• The Court’s Reasoning
  • Vagueness of Basic Structure: Chief Justice Chandrachud emphasized that the concepts underlying the Basic Structure doctrine—such as democracy, secularism, and federalism—are broad and undefined. Allowing these concepts to be used as a standard for striking down ordinary legislation could create legal uncertainty.
  • Statutory Review: He stated that if a statute allegedly violates secularism, the challenge should be based on a direct constitutional provision related to secularism, rather than invoking the broader Basic Structure doctrine.
  • Judicial Precedents: By quoting key judgments in the Raj Narain case, the Chief Justice reinforced the idea that there is a clear distinction between constitutional amendments and ordinary laws. Constitutional amendments can be scrutinized for violating the Basic Structure, but this is not the case with ordinary laws passed by the legislature.

Implications of the Ruling

• Clarification of Basic Structure’s Application: The ruling clarifies that ordinary laws cannot be invalidated merely by invoking the Basic Structure. This provides clarity on the role of the Basic Structure doctrine in constitutional adjudication and ensures that the focus remains on the Constitution’s amendments, rather than legislation passed by the government.
• Impact on Secularism Challenges: The decision also sets a precedent for secularism challenges in the future. The Supreme Court has made it clear that laws cannot be struck down simply on the allegation of violating secularism unless there is a specific constitutional breach.
• Strengthening of Legislative Authority: By upholding the Uttar Pradesh Madrasa Education Board Act, the Court affirmed the state's power to regulate educational institutions, including madrasas, and to enact laws for administrative purposes without the threat of judicial intervention based on the Basic Structure.

India’s Corporate Social Responsibility (CSR) framework has evolved significantly since its legal introduction under Section 135 of the Companies Act 2013, making it the first country to mandate CSR spending. With Rs 1.84 lakh crore of CSR funds disbursed between 2014 and 2023, the contributions from the corporate sector have shown a marked increase, particularly in the areas of healthcare, sanitation, education, and environmental sustainability. However, one sector that could greatly benefit from this funding is agriculture, especially as the country strives to make its farming practices more economically viable and ecologically sustainable.

Importance of Agriculture to India’s Economy

• Agriculture plays a pivotal role in India’s socio-economic fabric. Nearly 47% of the population is dependent on agriculture for employment, and the sector contributes about 73% to India’s GDP.
• The vast majority of Indian families are directly or indirectly associated with agriculture, and the sector shapes the livelihoods of millions.
• Despite its importance, agriculture in India faces significant challenges, including climate change, stagnant farmer incomes, and degradation of natural resources.
• Agriculture’s Transition to Sustainability
• Following the Green Revolution, which prioritized increasing agricultural productivity, India has now reached a stage where food production is relatively stable. The focus has shifted toward sustainability—ensuring that agriculture is not only productive but also resilient to climate shocks and environmentally sustainable. Recent initiatives such as the Parampragat Krishi Vikas Yojana (PKVY) and the Mission for Integrated Development of Horticulture (MIDH) have sought to address these concerns.
• The 2024-2025 agriculture budget of Rs 1.52 lakh crore explicitly mentions the productivity and resilience of agriculture as key priorities.
• However, despite these efforts, government funding often falls short of meeting the sector's vast needs, particularly in terms of infrastructure development and capital investments.

CSR’s Role in Supporting Agricultural Sustainability

• Given these challenges, the private sector’s involvement through CSR has become increasingly important. As of the most recent reports, 23% of companies surveyed identified "environment and sustainability" as their CSR priority, signaling a willingness to contribute to sustainable agricultural development. CSR funding has already been channeled into various projects, such as:
  • Establishing grain banks to prevent food waste and ensure food security.
  • Farmer schools for improving agricultural knowledge and skills.
  • Water conservation projects to mitigate water scarcity in agricultural areas.
  • Energy-efficient irrigation systems to promote sustainable farming.

Challenges in Tracking CSR Funds for Agriculture

• Despite the growing interest in sustainable agricultural practices, one of the key challenges is tracking CSR contributions specifically related to agriculture. Currently, there is no comprehensive way to distinctly categorize and monitor CSR spending on agricultural sustainability initiatives. While sectors like healthcare and education have clear guidelines for tracking funds, the agricultural-related activities under CSR are scattered across multiple categories, such as:
  • Agroforestry
  • Poverty alleviation and hunger
  • Technology incubators
  • Environmental sustainability
  • Livelihood enhancement projects
  • Rural development
• These broad categories, while encompassing some agriculture-related initiatives, also cover a wide range of activities that may not directly pertain to agricultural sustainability, making it difficult to determine how much is actually being spent on farming-related projects.
• From 2014 to 2023, sectors related to agriculture disbursed Rs 53,046.75 crore under CSR. However, because these funds are spread across a variety of sectors, the precise allocation for agriculture remains unclear. This lack of clarity makes it difficult to assess the impact of CSR investments on India’s agricultural landscape, which is critical given the sector’s importance.

Significance

• Increased Transparency: Clear reporting mechanisms would allow for better tracking of CSR funds allocated to agricultural initiatives. This would help ensure that the funds are being spent effectively and efficiently, with greater accountability to both stakeholders and the public.
• Targeted Funding: With a distinct focus on agriculture, CSR funds could be targeted to address specific sustainability issues such as soil health, water conservation, climate resilience, and modernization of farming practices. This would make the funds more impactful and aligned with India’s larger agricultural policies.
• Alignment with Policy Priorities: Specifying agriculture as a CSR sector would also align with India’s rural development goals, climate action plans, and poverty alleviation initiatives, making it easier for companies to contribute to these national priorities.
• Boosting Capacity Building: In addition to capital expenditure for infrastructure, CSR initiatives could also focus on capacity building, improving the skills and knowledge of farmers, and promoting sustainable agricultural practices.
• Tracking Impact: A clear focus on agriculture would allow for better impact assessments of CSR projects in the sector. These assessments could inform future policies and ensure that investments lead to tangible improvements in agricultural productivity and sustainability.

Amidst the ongoing debate over the Waqf Amendment Bill, shocking revelations have emerged regarding the Waqf Board's claims over ancient Hindu temple lands in various states.

What is ‘Waqf’?

• Waqf refers to properties dedicated exclusively for religious or charitable purposes under Islamic law, and any other use or sale of the property is prohibited.
• Waqf means that the ownership of the property is now taken away from the person making Waqf and transferred and detained by Allah.
• ‘Waqif’ is a person who creates a waqf for the beneficiary.
• Irrevocable: Since the ownership of the property is transferred to Allah from the waqif in the case of Waqf, and property cannot be taken back from Allah, once a property becomes Waqf, it will always stay Waqf, making it irrevocable.
• Spread: Wakf Boards currently control 8.7 lakh properties spanning 9.4 lakh acres across India with an estimated value of 1.2 lakh crores. 
  • India has the largest waqf holding in the World. Further, Waqf Board is the largest landowner in India after the Armed Forces and the Indian Railways.

What is the Waqf Act?

• The Mussulman Waqf Act, 1923, was introduced by the British who first introduced The Madras Religious and Charitable Endowments Act, 1925, which drew large protests from Muslims and Christians. It was then redrafted to exclude them, made applicable to Hindus only and renamed the Madras Hindu Religious and Endowments Act, 1927.
• The Waqf Act was first passed by Parliament in 1954. Subsequently, it was repealed and a new Waqf Act was passed in 1995 which gave more powers to Waqf Boards.
• Amendments in 2013 - Some provisions of the Act were amended in the year 2013 to make waqf management more efficient and transparent. However, during the course of implementation of the Act, it was felt that the Act did not prove effective in improving administration of Waqf. 
  • The Waqf Board has unlimited powers to claim properties in the name of Muslim charity — a power that no other religious body in India enjoys.
  • Section 3 of the Waqf Act, 1995, states that if the Waqf “thinks” that the land belongs to a Muslim, then it is the property of the Waqf. The board does not have to furnish any evidence on why they think the land falls under their ownership.
• Waqf Repeal Bill, 2022: For the purpose of achieving a more equitable arrangement and treatment of bodies such as waqf and other recognized religious entities established under similar intent, the aforesaid Waqf Act, 1995 as amended was tabled in Rajya Sabha.
• Mussalman Wakf (Repeal) Bill, 2024: The objective of the Waqf (Amendment) Bill, 2024, is to amend the Waqf Act, 1995, to redress the issues and challenges in regulating and managing Waqf properties. The Amendment Bill seeks to improve the administration and management of waqf properties in India.
  • It aims to overcome the shortcomings of the previous act and enhance the efficiency of Waqf boards by introducing changes such as renaming the Act, updating the definitions of waqf, improving the registration process, and increasing the role of technology in managing waqf records?

The Supreme Court ordered the liquidation of Jet Airways under the Insolvency and Bankruptcy Code (IBC), marking an end to the five-year saga of attempts to revive the airline through the corporate insolvency resolution route.

What is Liquidation of a Company?

• The liquidation of a company happens when company assets are sold when it can no longer meet its financial obligations. Sometimes, the company ceases operations entirely and is deregistered. 
• The Companies Act of 2013regulates the liquidation process.
• When a company is liquidated, the shareholders’ interest in the company is extinguished, and the company ceases to exist.
• The company’s assets are sold off to repay its debts and to distribute the remaining funds among its shareholders.
• Reasons for Liquidating a Company
  • Insufficient funds
  • Lack of business activity
  • Fraud or mismanagement
  • High debt levels
  • Mergers and acquisitions
  • Changes in the law

The International Solar Alliance (ISA), launched in 2015 by India to accelerate solar energy adoption across developing countries, has seen limited success. Despite its ambitious goals, it has made only modest progress, particularly in the Global South, where energy access remains a significant issue. As the ISA marks its ninth year, experts are questioning its impact and why its promise hasn't materialized as expected.

What Is the ISA?

• Launched in 2015 by India with support from France, the ISA was designed to boost solar energy deployment in developing countries.
• The ISA aims to overcome financial, technological, and regulatory barriers to solar energy deployment, especially in Africa, Latin America, and other parts of the Global South.
• It functions as a facilitator rather than a project developer, aiming to create an enabling environment for solar energy adoption.
• The ISA is seen as a key component of India’s diplomatic outreach to the Global South, particularly in Africa.
• Slow Progress: ISA's Impact Remains Modest

• Despite 110+ member countries, the ISA has failed to deliver substantial solar projects.
• The first ISA-facilitated project is a 60 MW solar plant in Cuba, but it is still in the early stages and not yet operational.
• Other countries, especially in Africa, have completed preparatory work, but large-scale solar deployment remains limited.

Global Solar Growth:

• While global solar capacity grew at 20% annually, most installations occurred in countries like China and India, which accounted for over 80% of solar investments.
• Africa—where energy access is a major concern—has seen less than 2% of new solar installations, highlighting a major gap in ISA's outreach.

India recently issued a formal notice, under Article XII(3) of the Indus Waters Treaty (IWT), seeking a review and modification of the treaty. The notice highlights India’s growing domestic water needs, changing population demographics, agricultural demands, and the need for clean energy development to meet emission targets. India also raised concerns regarding cross-border terrorism affecting the smooth implementation of the treaty, particularly in Jammu and Kashmir.

Legal Provisions and India’s Approach

• Article XII(3) of the IWT: India’s move to review the IWT is grounded in Article XII(3), which allows treaty modification with mutual consent. However, such modifications require a ratified treaty between India and Pakistan, a significant hurdle given their strained relations and historical disputes.
• India's Objective: Optimal Utilisation: India, as the upper riparian, seeks optimal utilization of the Indus River waters for energy and agricultural needs. India aims to balance water use for hydropower projects while ensuring the minimum flow requirement stipulated in past arbitration awards, such as the Kishenganga dispute.
• Pakistan’s Opposition to Modifications: Pakistan, as the lower riparian, views the treaty as ensuring uninterrupted flow of water to its side. The divergent perspectives on the treaty’s purpose—India’s push for utilization versus Pakistan’s demand for protection from water diversion—remain a core issue between the two nations. 

Hydro-Power Projects and Environmental Concerns

• Hydropower Development and Minimum Flow: India has 33 hydropower projects in progress on the western rivers of the Indus system, which is allowed by the IWT. However, India must maintain a minimum flow of water to Pakistan’s side, as prescribed by the 2013 Permanent Court of Arbitration (PCA) ruling in the Kishenganga case.
• Customary International Law on No Harm Rule: Although the IWT does not explicitly include a "no harm" rule, it is implied by customary international law, which obliges both riparians to prevent significant transboundary harm. This principle is particularly relevant for hydropower projects with potential cross-border effects.
• Environmental Impact Assessment (EIA): The International Court of Justice (ICJ), in the 2010 Pulp Mills case, established the necessity of conducting transboundary Environmental Impact Assessments (EIA) for projects with potential environmental consequences. Both India and Pakistan will need to comply with this requirement for projects that could impact the shared waters.

Challenges and Suggestions for Cooperation

• Partition of River Basin and Its Challenges: The IWT partitions the Indus Basin into two sectors: India controls the eastern rivers, while Pakistan controls the western rivers. This partition has created significant challenges in integrated water resource management, making bilateral cooperation difficult and minimal.
• Impact of Climate Change on Water Availability: Climate change, particularly the depletion of glacial reserves, has caused a 30-40% decrease in the Indus’s water flow. India and Pakistan can refer to the principles of equitable and reasonable utilization (ERU) from the UN Watercourses Convention to address this emerging challenge.
• Possibility of Joint Projects and Negotiation: The IWT allows both parties to cooperate on joint engineering projects (Article VII.1c), which could help mitigate water variability due to climate change. However, due to the lack of trust between the two nations, renegotiating the treaty might be challenging. A more practical approach could be to create a Memorandum of Understanding (MoU) for cooperation under the existing framework.

Practice Question

Q. Evaluate the implications of India’s proposal to modify the Indus Waters Treaty (IWT) in light of its growing water needs and environmental concerns. How do the divergent interests of India and Pakistan impact the management of the Indus River system? Discuss potential pathways for future cooperation under the treaty framework.

A recent nine-judge Bench of the Supreme Court of India has examined the scope of the Directive Principles of State Policy (DPSP), particularly Articles 39(b) and (c), which aim to prevent the concentration of wealth and ensure that material resources are distributed for the common good. The Court’s verdict specifically addresses the question of whether the state can acquire and control private property in the public interest, and to what extent the state’s duty under these Articles can override individual fundamental rights.

Court’s Majority Opinion and Interpretation of Article 39

• Article 39(b) and (c) – Economic Philosophy of the Constitution: Articles 39(b) and (c) mandate that the material resources of the community must be so distributed to serve the common good and prevent wealth concentration. The majority of the Supreme Court rejected an expansive view of the state’s power over private resources, asserting that only specific types of private property—based on non-exhaustive factors like scarcity, concentration, and necessity—can be subject to state acquisition for the public good.
• Factors for State Action: The state’s power to acquire private property for distribution to the community should consider factors such as the nature of the resources, their scarcity, and the potential consequences of their concentration in private hands.
• Non-Ideological Interpretation of Economic Goals: The Court’s majority also held that the DPSP must be interpreted flexibly and not tied to any specific ideological or economic framework. The framers of the Constitution had deliberately framed Article 39 in broad terms to allow future governments to address emerging economic realities without being bound by particular economic doctrines.

Dissenting Opinion and Its Significance

• Dissent: Justice Sudhanshu Dhulia dissented from the majority view, arguing that the scope of the material resources under Article 39 should not be limited by factors such as scarcity or concentration. Given the persistent inequality in Indian society, leaving the determination of what constitutes "material resources" to the wisdom of the legislature would have been a better approach, ensuring that the state has greater flexibility in addressing social disparities.
• Question of Legislative Discretion: The legislature should have the discretion to decide which resources are essential for the common good, as this could be more in tune with contemporary socio-economic realities.
• Impact on Future Legal and Economic Frameworks: The dissent holds significance as it challenges the majority’s restrictive interpretation of the Directive Principles, raising concerns about the potential for continuing economic inequality in society.

Practice Question

Q. The recent Supreme Court verdict on the interpretation of Articles 39(b) and (c) of the Constitution emphasizes limiting the state’s power over private property. Critically analyze the majority and dissenting opinions, and discuss their implications for the future of economic policy and social justice in India.

At CoP29, securing better climate finance for the Global South is a key objective. The need for climate funding has surged dramatically, as the Global South bears the brunt of climate change impacts. However, there are significant challenges regarding the adequacy, terms, and accessibility of these funds, leading to tensions between the Global South and the Global North over climate justice and financing arrangements.

Growing Finance Needs and Inequities

• Escalating Climate Finance Demands: The Global South’s financial requirements to address climate change have skyrocketed to over USD 1 trillion annually, a sharp increase from the USD 100 billion per year promised in 2009. Despite this, climate finance only surpassed USD 100 billion for the first time in 2022, and a significant portion of it was in the form of loans rather than grants, deepening the financial strain on already indebted nations.
• Debt Servicing and Its Impact: The debt burden in the Global South is severe, with some of the poorest nations spending up to 40% of their national budgets on servicing debt. This leaves little room for investing in critical climate adaptation and clean energy projects. Many countries face higher borrowing costs due to perceived investment risks, with nations like India facing 3-4 times higher capital costs compared to wealthier countries like Germany.
• The Reluctance of Rich Countries and Investors: Climate change is impacting both the Global North and South, with developed countries also facing severe weather events. However, investors remain hesitant to lend to developing countries due to the perceived risks, which has hindered the flow of necessary funds to the Global South for climate resilience and renewable energy development.

Proposed Solutions and Pathways for Cooperation

• Encouraging Higher Returns for Investors: To attract more private investment into climate projects, Global South nations, particularly India, may need to offer higher returns on infrastructure projects. By increasing potential returns—say to 17-18% for projects like green hydrogen or electrified public transport—the attractiveness of these markets to foreign investors could increase. This would enable quicker recoupment of investments and incentivize reinvestment into other climate projects.
• Leveraging Climate Finance as a Backstop for Lenders: One strategy could involve using climate finance as a backstop to reassure private and public lenders, especially for projects like solar, wind, and hydropower, which may face output curtailment and perceived risk. By providing an underwriting mechanism from international climate funds, countries like India could unlock more concessional financing for such renewable energy projects, provided the national policy environment supports renewable capacity expansion.
• Negotiation and Concessions at CoP29: CoP29 offers a critical platform for negotiations, where both the Global South and the Global North must make concessions. A more generous approach from the Global South—such as offering to improve returns for investors—could foster cooperation and lead to a more successful climate finance framework. This could be a significant step in advancing global climate goals while addressing equity concerns.

Practice Question

Q. The financing needs of the Global South for addressing climate change have surged dramatically, but the terms and accessibility of funds remain a challenge. Critically analyze the current climate finance gap and propose strategies that could enhance funding flow to the Global South. How can the negotiations at CoP29 address the concerns of both the Global South and the Global North?