DAILY CURRENT AFFAIRS, 10 JUNE 2024

FEDERALISM IN INDIA

1. Context

In the last decade, the government has been emphasising more on cooperative and competitive federalism through National Institution for Transforming India (NITI) Aayog. However, many state governments often allege that the Union government is not sharing the fund of the Goods and Services Tax (GST) compensation and this has led to a confrontational federalism.

2. What is federalism?

Federalism delineates authority between the central or federal government and its constituent states. How this arrangement functions is facilitated by a constitutional framework, which typically serves dual purposes:

firstly, to mitigate the risk of majority tyranny, and secondly, to fortify the union. There are several classifications of federalism, broadly falling into three categories:

Holding Together Federation, Coming Together Federation, and Asymmetrical Federation. In Holding Together Federation, power-sharing among diverse constituent parts accommodates a nation's diversity, often with a central authority predominating, as seen in countries like India, Spain, and Belgium. Coming Together Federation involves separate states merging to form a more unified entity, granting states greater autonomy compared to holding federations, as seen in examples like the United States, Australia, and Switzerland.
Asymmetrical Federation describes a federal structure where components of a nation possess uneven powers and relationships across political, administrative, and financial domains. Asymmetry can be observed vertically (between states and the center) and horizontally (among states), exemplified by nations like Russia (Chechnya), Ethiopia (Tigray), Canada (Quebec), and India (excluding Jammu and Kashmir post-2019), with additional special provisions granted to India's northeastern states under various clauses of Article 371.

3. India’s journey towards federalism

India's journey towards federalism traces back to its struggle for independence from colonial rule, during which the quest for autonomy and self-governance resonated strongly among various linguistic, cultural, and geographical communities.
The architects of the Indian Constitution acknowledged the imperative of preserving the nation's ethos of unity in diversity. Consequently, the Indian Constitution established a federal system of governance, embodying typical federal features such as bicameralism, dual governments (Union and State), a constitution with provisions neither excessively rigid nor too facile to amend, and an independent judiciary to uphold checks and balances.
However, alongside these federal traits, the Indian constitution also incorporates unitary or non-federal elements, including a robust central government, a singular constitution, unified citizenship, appointment of state governors by the central authority, all-India services, emergency provisions, among others.
Notably, while the term "federation" is absent in the Constitution, Article 1 designates India as a "Union of States," implying that no state possesses the authority to secede from the federation, and the Indian Federation doesn't stem from a compact among individual states.
Consequently, India is often characterized as a "holding together federation," with political analysts like K. C. Wheare labeling Indian federalism as quasi-federal. In a quasi-federal setup, the central government holds more sway than the states.

4. Evolution of federalism in India

Since achieving independence, the trajectory of federalism in India has been dynamic and can be delineated across various phases: inner-party federalism, multi-party federalism, cooperative federalism, competitive federalism, confrontational federalism, and bargaining federalism.

4.1. Inner-party federalism:

During the initial phase of federalism (1950-1968), known as inner-party federalism, significant disputes between the central government and the states were typically resolved within Congress party forums, forming what political scientist Rajni Kothari termed the "Congress System." This approach helped mitigate major federal conflicts, fostering a consensus-based form of inner-party federalism.

However, in 1959, the Union government's dismissal of Kerala's state government marked an early assertion of central power over states. Additionally, the Congress Party's loss of autonomy following its split in 1969 contributed to heightened centralization and authoritarianism under Indira Gandhi's leadership, leading to subordination of regional leaders and organizational structures.

4.2. Multi-Party Federalism:

The subsequent phase, multi-party federalism, emerged in the 1990s during the coalition era, characterized by national parties failing to secure parliamentary majorities. National coalitions, led by Congress (UPA) and BJP (NDA), relied on regional powers to maintain influence at the union level, resulting in reduced Center-state confrontations and arbitrary use of Article 356 to topple state governments.

A pivotal moment during this phase was the 1994 Supreme Court ruling (SR Bommai v. Union of India), which challenged the Center's discretionary use of this provision.

4.3. Co-operative federalism:

It is another phase, coincided with economic liberalization, granting chief ministers and state governments significant autonomy in business initiatives and attracting foreign investment. The 73rd and 74th Constitutional Amendment Acts of 1992 further empowered local self-government, laying the groundwork for genuine federalism through Union-state discussions and contests.

4.4. Competitive federalism:

It is advocated by the central government, emphasized collaboration through measures like enacting GST laws and establishing institutions like the GST Council and NITI Aayog. However, disagreements persisted on various policy matters, including the Citizenship Amendment Act, agricultural legislation, GST compensation, and support during the COVID-19 pandemic.

4.5. Confrontational federalism:

It is resurfaced with the rise of the NDA in 2014, characterized by disputes between opposition-led states and the central government. Examples include state program blockades, governor interventions, fiscal centralization, government instability, and encroachment on state rights.

4.6. Bargaining federalism:

Bargaining federalism highlights the center's dominant negotiating role, often at the expense of states, although states' bargaining strength increased during the 1990s due to regionalized party systems and economic liberalization.

In summary, Indian federalism transitioned post-1991 towards negotiation federalism, where states engaged in bargaining to settle political and economic disputes. While cooperative and competitive federalism offer inherent advantages, confrontational federalism underscores the necessity for state and federal governments to negotiate on behalf of the populace, prioritizing welfare and national progress.

For Prelims: Federalism, Centre State Relations, Special status, NITI Aayog,Article 371

For Mains:1.Critically analyze the constitutional provisions that ensure federalism in India. How do these provisions ensure a balance of power between the Centre and the States?

Source: Indianexpress

COMPETITION COMMISSION OF INDIA

1. Context

In a significant move aimed at enhancing regulatory oversight and compliance, the Competition Commission of India (CCI) has proposed new rules to monitor the settlements, and commitments of industry giants.

2. Competition Commission of India

The Competition Commission of India (CCI) is a regulatory authority established in India to promote and protect fair competition in the marketplace.
It was established under the Competition Act, 2002, and became fully functional in 2009.
The primary objective of the CCI is to prevent anti-competitive practices, ensure a level playing field for businesses, and promote consumer welfare
The Competition Commission of India (within the Ministry of Corporate Affairs) has been established to enforce the competition law under the Competition Act, 2002.
It should be noted that on the recommendations of Raghavan committee, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002
The Commission consists of a Chairperson and not more than 6 Members appointed by the Central Government
It is the statutory duty of the Commission to eliminate practices having an adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants, in markets in India as provided in the Preamble as well as Section 18 of the Act.
The Commission is also mandated to give its opinion on competition issues to government or statutory authority and to undertake competition advocacy for creating awareness of competition law.
Advocacy is at the core of effective competition regulation. Competition Commission of India (CCI), which has been entrusted with implementation of law, has always believed in complementing robust enforcement with facilitative advocacy. It is a quasi-judicial body.

3. Key functions and responsibilities

Here are some key functions and responsibilities of the Competition Commission of India:

Competition Advocacy: The CCI engages in advocacy and education activities to promote competition awareness among businesses, government agencies, and the public.
Antitrust Enforcement: The CCI investigates and takes action against anti-competitive agreements, abuse of dominance by companies, and anti-competitive mergers and acquisitions. It can impose penalties and remedies on entities found to be in violation of competition laws.
Merger Control: The CCI reviews and approves or disapproves mergers, acquisitions, and combinations that may have an adverse impact on competition in the Indian market. It assesses whether these transactions are likely to cause a substantial lessening of competition.
Market Studies and Research: The CCI conducts studies and research to understand market dynamics, competition issues, and emerging trends. This information helps in formulating policies and recommendations to improve competition.
Competition Advocacy: The commission engages in advocacy efforts to promote competition principles and practices among businesses, government agencies, and the public.
Consumer Protection: While primarily focused on promoting competition, the CCI also indirectly promotes consumer welfare by ensuring that markets remain competitive and that consumers have choices and access to fair prices.
Regulation of Anti-Competitive Practices: The CCI addresses practices such as price-fixing, bid rigging, and abuse of market power that can harm competition and consumers.
Legal Proceedings: The CCI has the authority to conduct investigations, hold hearings, and pass orders. Its decisions can be appealed to higher courts in India.

4. What is the Competition Act?

The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws.
The Act prohibits anti-competitive agreements, and abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India
In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established
The government of India replaced Competition Appellate Tribunal (COMPAT) with the National Company Law Appellate Tribunal (NCLAT) in 2017
The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20, 2009

Competition is the best means of ensuring that the ‘Common Man’ or ‘Aam Aadmi’ has access to the broadest range of goods and services at the most competitive prices. With increased competition, producers will have maximum incentive to innovate and specialize. This would result in reduced costs and wider choice to consumers. A fair competition in market is essential to achieve this objective. Our goal is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers

5. What is Cartelisation?

Cartels can be difficult to define. According to CCI, a “Cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services”

The International Competition Network, which is a global body dedicated to enforcing competition law, has a simpler definition. The three common components of a cartel are:

an agreement;
between competitors;
to restrict competition.

6. Way forward

CCI needs to revisit its definition of ‘relevant market’. In the age of digital world, defining relevant market has been a tough task for regulators world-wide. Technological developments like Web 3.0, AI, IoT, Blockchain and issues like data protection and privacy, search bias, platform neutrality, confidentiality, etc, have created a need for a robust competition law. Such a law should meet the demands of the technological era we live in.

For Prelims: Statutory board, Constitutional body

For Mains: 1.Discuss the role and functions of the Competition Commission of India (CCI) in promoting and ensuring fair competition in the Indian market

2.Examine the challenges and limitations faced by the Competition Commission of India (CCI) in effectively regulating and promoting competition in the digital economy

Previous year Questions

1. Competition Commission of India is which kind of body? (RSMSSB Sanganak 2018)

A. Statutory body

B. Constitutional.

C. Single Member

D. Private

Answer (A)

Source: indianexpress

INFLATION

1. Context

Indian consumers expects a rise in spending over the next one year, with an increase in both essential and non-essential items, according to the latest survey of the Reserve Bank of India (RBI)

2. What is Inflation?

It is the rise in prices of goods and services within a particular economy wherein consumers' purchasing power decreases, and the value of the cash holdings erodes.
In India, the Ministry of Statistics and Programme Implementation (MoSPI) measures inflation.
Some causes that lead to inflation are demand increases, reduction in supply, demand-supply gap, excess circulation of money, increase in input costs, devaluation of the currency, and rise in wages, among others.

3. How is Food Inflation measured in India?

Food inflation in India is measured using various indices and indicators. The primary indices used to measure food inflation in India include the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Both indices provide insights into the overall price movements of goods and services, including food items, but they differ in terms of their coverage and methodology.

Consumer Price Index (CPI)

The CPI is a key indicator used by the Government of India and the Reserve Bank of India (RBI) to monitor inflation, including food inflation.
The CPI measures the average change over time in the prices paid by urban and rural consumers for a basket of goods and services, including food items, housing, clothing, transportation, and more.
Within the CPI, food and beverages form a significant component, and food inflation is specifically derived from the changes in food prices within the CPI basket.
The CPI is released monthly by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation.

Wholesale Price Index (WPI)

The WPI is another important index that tracks price changes at the wholesale level for a selected group of commodities, including food products, manufactured goods, fuel, and more.
The WPI measures price changes from the perspective of producers and wholesalers, providing insights into inflationary pressures in the production and distribution stages.
Food articles, such as cereals, pulses, vegetables, fruits, and edible oils, are included in the WPI basket for monitoring food inflation.
The WPI is released weekly by the Office of Economic Adviser under the Ministry of Commerce and Industry.

In addition to these indices, other indicators such as the Food Sub-Index within the CPI and specific price indices for essential food items (like vegetables, pulses, and cereals) are also used to gauge food inflation more accurately. The RBI closely monitors food inflation trends as part of its monetary policy framework to make informed decisions regarding interest rates and economic stability. Overall, the combination of CPI, WPI, and specific food-related indices provides a comprehensive assessment of food inflation in India.

4. Headline and Core Inflation

Inflation is a key economic indicator that measures the rate at which prices of goods and services rise over time. In India, two important measures of inflation are headline inflation and core inflation.

Headline Inflation: Headline inflation refers to the overall rate of inflation in an economy, taking into account the price changes across all goods and services included in the consumer basket. It reflects the broad-based movement in prices, including food, fuel, housing, transportation, and other essential and non-essential items. Headline inflation is typically measured using indices such as the Consumer Price Index (CPI) and the Wholesale Price Index (WPI). Fluctuations in headline inflation can be influenced by various factors, including changes in global commodity prices, government policies, supply chain disruptions, and demand-side pressures.
Core Inflation: Core inflation, on the other hand, excludes volatile items such as food and energy from the basket of goods used to calculate inflation. By excluding these volatile components, core inflation provides a more stable measure of underlying inflationary trends in the economy. Core inflation is often considered a better gauge of long-term inflationary pressures and helps policymakers in making informed decisions regarding monetary policy. The Reserve Bank of India (RBI), for example, closely monitors core inflation to assess the underlying inflationary trends and formulate appropriate monetary policy responses.

Understanding the distinction between headline and core inflation is essential for policymakers, businesses, and consumers alike. While headline inflation provides a comprehensive view of overall price movements, core inflation offers insights into the underlying inflationary pressures, helping to distinguish between temporary fluctuations and sustained inflation trends. By closely monitoring both measures of inflation, policymakers can effectively manage inflationary risks and maintain price stability, contributing to sustainable economic growth and stability.

5. Monetary Policy Committee (MPC)

The Monetary Policy Committee (MPC) is a crucial institutional framework established by the Reserve Bank of India (RBI) to formulate and implement monetary policy decisions in India.

Role

Formulating Monetary Policy: The primary role of the MPC is to formulate and implement monetary policy in India. This includes setting the key policy interest rates, such as the repo rate, reverse repo rate, and marginal standing facility (MSF) rate, to achieve the objectives of price stability and economic growth.
Targeting Inflation: The MPC's main objective is to maintain price stability, which is primarily achieved by targeting a specific inflation rate. In India, the RBI has adopted a flexible inflation targeting framework, where the MPC aims to keep the Consumer Price Index (CPI) inflation within a specified target range over the medium term. Currently, the inflation target is set at 4% with a tolerance band of +/- 2%.
Evaluating Economic Conditions: The MPC assesses various economic indicators, such as GDP growth, inflation expectations, fiscal policy measures, global economic developments, and financial market conditions, to make informed decisions about monetary policy.
Communication: The MPC communicates its monetary policy decisions, rationale, and outlook for the economy through periodic press releases, statements, and the publication of meeting minutes. This transparency enhances predictability and credibility in monetary policy.

Composition

Members: The MPC consists of six members, including three members nominated by the Government of India and three members from the Reserve Bank of India. The Governor of the RBI serves as the ex-officio Chairperson of the MPC.
Appointment: The members of the MPC are appointed by the Central Government based on their expertise and experience in economics, banking, finance, or related fields. The RBI Governor and Deputy Governor (in charge of monetary policy) are automatic members of the MPC.
Voting Rights: Each member of the MPC, including the RBI Governor, has one vote in the decision-making process. Decisions are made by a majority vote, with the Governor having the casting vote in case of a tie.
Terms: Members of the MPC serve fixed terms, typically for four years, with eligibility for reappointment. This ensures continuity and stability in monetary policy formulation.

6. The Way Forward

By implementing the measures and fostering collaborative efforts among policymakers, regulators, and stakeholders, India can effectively manage inflationary pressures, maintain price stability, and promote sustainable economic growth and development.

For Prelims: Inflation, MPC, CPI, WPI, food Inflation, RBI, Headline inflation, Core inflation

For Mains:

1. Explain the concept of inflation and its impact on an economy. Discuss the various causes of inflation and the measures that can be taken to control it, with specific reference to India. (250 Words)

2. What are the challenges and opportunities associated with managing inflation in India? Evaluate the effectiveness of recent policy measures in addressing inflationary pressures and maintaining price stability. Suggest strategies for sustainable economic growth while managing inflation risks. (250 Words)

Previous Year Questions

1. Consider the following statements: (UPSC 2021)

1. The Governor of the Reserve Bank of India (RBI) is appointed by the Central Government.

2. Certain provisions in the Constitution of India give the Central Government the right to issue directions to the RBI in the public interest.

3. The Governor of the RBI draws his natural power from the RBI Act.

Which of the above statements is/are correct?

A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3

2. Concerning the Indian economy, consider the following: (UPSC 2015)

Bank rate
Open Market Operations
Public debt
Public revenue

Which of the above is/are component(s) of Monetary Policy?

(a) 1 only (b) 2, 3 and 4 (c) 1 and 2 (d) 1, 3 and 4

3. An increase in Bank Rate generally indicates: (UPSC 2013)

(a) Market rate of interest is likely to fall.

(b) Central bank is no longer making loans to commercial banks.

(d) Central bank is following a tight money policy.

4. Which of the following statements is/are correct regarding the Monetary Policy Committee (MPC)? (UPSC 2017)

1. It decides the RBI's benchmark interest rates.

2. It is a 12-member body including the Governor of RBI and is reconstituted every year.

3. It functions under the chairmanship of the Union Finance Minister.

Select the correct answer using the code given below:

A. 1 only B. 1 and 2 only C. 3 only D. 2 and 3 only

5. Read the following passage and answer the question that follows. Your answers to these items should be based on the passage only.

Policymakers and media have placed the blame for skyrocketing food prices on a variety of factors, including high fuel prices, bad weather in key food producing countries, and the diversion of land to non-food production. Increased emphasis, however, has been placed on a surge in demand for food from the most populous emerging economics. It seems highly probable that mass consumption in these countries could be well poised to create a food crisis.

With reference to the above passage, the following assumptions have been made: (UPSC 2021)

1. Oil producing countries are one of the reasons for high food prices.

2. If there is a food crisis in the world in the near future, it will be in the emerging economies. Which of the above assumptions is/are valid?

A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2

6. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)

1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30.

2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change.

3. The food supply chain has structural constraints.

Which of the statements given above are correct?

A. 1 and 2 only B. 2 and 3 only C. 1 and 3 only D. 1, 2 and 3

7. With reference to inflation in India, which of the following statements is correct? (UPSC 2015)

A. Controlling the inflation in India is the responsibility of the Government of India only

B. The Reserve Bank of India has no role in controlling the inflation

C. Decreased money circulation helps in controlling the inflation

D. Increased money circulation helps in controlling the inflation

8. With reference to the Agreement at the UNFCCC Meeting in Paris in 2015, which of the following statements is/are correct? (UPSC 2016)

1. The Agreement was signed by all the member countries of the UN and it will go into effect in 2017

2. The Agreement aims to limit greenhouse gas emissions so that the rise in average global temperature by the end of this century does not exceed 2°C or even 1.5°C above pre-industrial levels.

3. Developed countries acknowledged their historical responsibility in global warming and committed to donate $ 1000 billion a year from 2020 to help developing countries to cope with climate change.

Select the correct answer using the code given below:

A. 1 and 3 only B. 2 only C. 2 and 3 only D. 1, 2 and 3

Answers: 1-C, 2-C, 3-D, 4-A, 5-D, 6-B, 6-C, 7-B

Source: The Indian Express

CHINA TAIWAN TUSSLE

1. Context

Days after China protested the exchange of messages between Prime Minister Narendra Modi and Taiwan President Lai Ching-te on Modi’s election victory, India on Saturday responded to Beijing’s congratulatory message and said New Delhi will continue to pursue ties with Beijing based on “mutual respect, mutual interest and mutual sensitivity”

2. Brief History of Taiwan

Taiwan, earlier known as Formosa, a tiny island off the east coast of China, is where Chinese republicans of the Kuomintang government retreated after the 1949 victory of the communists.
It has since continued as the Republic of China (RoC).
Although largely unrecognized by other countries as such, self-ruled Taiwan sees itself as no less than an independent nation.
Its leaders, have vowed to defend its sovereignty against the Chinese goal of “reunification”.

3. China-Taiwan Tensions

In 1954-55, and 1958, the PRC bombed the Jinmen, Mazu, and Dachen islands under Taiwan's control, drawing in the US.
Congress passed the Formosa Resolution authorizing President Dwight D Eisenhower to defend Taiwanese (Republic of China- ROC) territory.
In 1955, Premier Zhou En-lai declared at the Bandung Conference that he wanted negotiations with the US. But as civil war broke out in Lebanon in 1958, China resumed the bombing, provoking the US to supply Taiwanese outposts on the islands.
The people's Republic of China (PRC) i.e. mainland China and ROC (Taiwan) then arrived at an arrangement to bomb each other's garrisons on alternate days-this continued until 1971.
Taiwan became the non-communist frontier against China during the Cold war. It was described as an "unsinkable aircraft carrier" underscoring its strategic significance.
It was only in 1971 that the US inaugurated ties with Mainland China through the secret diplomacy of Henry Kissinger, national security adviser to President Richard Nixon.
In 1975, Chiang Kai-shek died, martial law was lifted, and Taiwan got its first democratic reforms.
U.S. recognized the communist party that ruled People's Republic of China (PRC) as the legitimate government of China in 1979, ending its official relationship with Taiwan and abrogating its mutual defense treaty with the island.
The US has a policy of strategic ambiguity towards Taiwan. This means that it maintains ties with Taipei, and sells weapons to it, but officially subscribes to the PRC's "One China Policy" in which Taiwan does not exist as a separate entity.
Just 14 countries around the world recognize Taiwan. Most are very small, many are remote island nations. As the British prepared to exit Hong Kong in 1999, the "One China, Two Systems" solution was offered to Taiwan as well, but it was rejected by the Taiwanese.

Image Source: The Indian Express

4. The Current Tensions Between the Two Nations

Lasy year, amid worsening the US-China relations over Covid and trade, the State Department sent its highest-ranking delegation yet to Taipei.
During the visit, the Chinese conducted a military exercise in the Taiwan Strait, which separates Taiwan from mainland China.
In October 2020, President Xi Jinping asked the PLA to prepare for war, triggering an alarm in Taiwan, which read it as an open threat.
Early in the Biden Administration, which declared "rock solid" commitment to Taiwan, Taipei raised an alert about an incursion by Chinese Warplanes.
In April, Taiwan reported Chinese jets in its air defense Zone. In July, Xi warned that he would "smash" any Taiwanese move toward independence.
At the beginning of this month, as the Chinese jets came back, Taiwanese Defence Minister Chiu Kuo-Cheng told Parliament that China already has the capacity to invade Taiwan, and would be able to "bring the cost and attrition to its lowest" by 2025.

5. US Ties with China

Officially, the US has subscribed to PRC's "One China Policy" which means there is only one legitimate Chinese government.
The most serious encounter was in 1995-96 when China began testing missiles in the seas around Taiwan, triggering the biggest US mobilization in the region since the Vietnam war.
Now, the US backs Taiwan's independence, maintains ties with Taipei, and sells weapons to it.
Taiwan is entirely dependent on the US for its defense against possible Chinese aggression.
This is why every spike in military tensions between China and Taiwan injects more hostility into the already strained relationship between Washington and Beijing.

6. Challenges for the US

As tensions rise, the world is watching the US, whose status as the world's pre-eminent power has been dented by the messy exit from Afghanistan.
In East and Southeast Asia, several countries including Japan, South Korea, and the Philippines, which are sheltered under the protective umbrella of the US, are concerned about US security commitments in the Pacific region.
President Joe Biden has been seen as walking a thin line between pledging support for Taiwan and keeping the lid on tensions with Beijing.
After speaking with Xi in October 2021, Joe Biden said that they had agreed to abide by the "Taiwan Agreement", under which US support for the "One China Policy" is conditioned on China not invading Taiwan.
The AUKUS pact among the US, UK, and Australia, under which Australia will be supplied with nuclear submarines, imparted a new dimension to the security dynamics of the Indo-Pacific. Taiwan welcomed the pact, while China denounced it as seriously undermining regional peace.

7. What are the implications for India

With India facing its problems with China on the LAC, there have been suggestions that it should review its One China Policy- it has in any case long stopped reiterating this officially.
Also, it is suggested that India use not just the Tibet Card, but also develop more robust relations with Taiwan to send a message to Beijing.
India and Taiwan currently maintain "trade and cultural exchange" offices in each other's capitals.
In May 2020, the swearing-in of Tsai was attended virtually by BJP MPs Meenakshi Lekhi (now MoS External Affairs) and Rahul Kaswan. In 2016, New Delhi had dropped plans to send two representatives for Tsai's first inaugural at the last minute.
India has been reported to be in talks with Taipei to bring a $7.5 billion semiconductor chip manufacturing plant to India. Chips are used in a range of devices from computers to 5G smartphones, to electric cars and medical equipment. The deal was reported on the heels of last year's summit of the QUAD, which discussed the need to build a "safe supply chain for semiconductors".
India also follows asymmetric Federalism where many states enjoy greater autonomy in their functioning as compared to other states (Article 371, Schedule V & VI).
These special provisions are also intended to deal with issues to identity & Culture. India thus needs to handle these democratically to not see Taiwan/Hongkong types of protests happening in India.
India can always use the leverage of Taiwan and Hong Kong whenever China meddles in India's internal issues like Kashmir/Naga unrest.

For Prelims & Mains

For Prelims: People’s Republic of China (PRC), Republic of China (RoC), Henry Kissinger, East China Sea, Taiwan Strait, One China Policy, QUAD, and AUKUS.

For Mains: 1. Discuss the rise of tensions between China and Taiwan and what are the serious implications for India.

Previous year Question

1. Which one of the following statements best reflects the issue with Senkaku Islands, sometimes mentioned in the news? (UPSC 2022)

A. It is generally believed that they are artificial islands made by a country around the South China Sea.

B. China and Japan engage in maritime disputes over these islands in the East China Sea.

C. A permanent American military base has been set up there to help Taiwan to increase its defense capabilities.

D. Though the International Court of Justice declared them as no man's land, some South-East Asian countries claim them.

Answer: B

Source: The Indian Express

CHANG'S MISSION

(FAR SIDE OF THE MOON)

1. Context:

Chang’e 6 is attempting to replicate its predecessor’s feat but from the moon’s far side. This time, the scientific goal is to understand why the far side is so different from the near side. In the pre-dawn hours (IST) of June 4 (2024), a small spacecraft bearing lunar samples took off from the moon’s far side, headed for an orbit that would bring it in contact with an orbiter waiting for it. There, the spacecraft ‘handed over’ the samples to a capsule on the returner, which will bring the samples back to the earth in a two-week journey. Scientists will thus finally have access to pieces of moon soil and rocks from its far side. This is China’s ambitious and ongoing Chang’e 6 mission.

2. What are the Chang’e missions?

China's lunar missions are named Chang'e after the moon goddess in Chinese mythology. The Chinese National Space Administration (CNSA) started the Chinese Lunar Exploration Programme (CLEP) in 2003, with the first Chang'e mission launching in 2007. Chang'e 1 mapped the moon's surface.
With Chang'e 2, CLEP began phase I of its lunar missions, enhancing the orbiter with a more advanced camera. The images captured were instrumental in preparing for the Chang'e 3 mission's successful lander and rover deployment on December 14, 2013, marking the start of CLEP’s phase II missions.
In 2019, Chang'e 4 made history by carrying the first lander and rover to the moon's far side, allowing for exploration of this less understood area.
Phase III kicked off with the Chang'e 5 mission in late 2020, which landed on the moon's near side. This mission featured an ascender that collected lunar soil samples and launched into orbit, where an orbiter retrieved the samples and transferred them to a returner, which brought them back to Earth. Chang'e 6 aims to replicate this mission on the moon's far side to investigate the distinct differences between the far and near sides.

3. What is the far side?

The moon is tidally locked to Earth, meaning the same lunar hemisphere always faces Earth while the opposite hemisphere, known as the far side, always faces away. The far side is characterized by rockier terrain and fewer smooth plains, making it more challenging for spacecraft to land there. Additionally, direct communication between Earth and a spacecraft on the far side is impossible due to the lack of a line of sight. To overcome this, a second spacecraft must be positioned to relay signals between Earth-based ground stations and the spacecraft on the moon's surface, adding complexity to the mission.
The far side of the moon is considered an ideal location for installing large telescopes, which would have an unobstructed view of the universe, free from Earth's interference. The Indian Space Research Organisation (ISRO) and scientists at the Raman Research Institute in Bengaluru are currently developing such a device, named PRATUSH.

4. What is the status of Chang’e 6?

On May 3 (2024), the Chinese National Space Administration (CNSA) launched the Chang’e 6 orbiter-lander assembly, weighing 8.3 tonnes, which successfully entered lunar orbit by May 8. On May 30, the lander complex separated from the orbiter, descending towards a sizable crater named Apollo, a maneuver completed on June 1.
Scientists from the Chinese Lunar Exploration Programme (CLEP) managed this phase of the mission, collaborating with the Queqiao 2 relay satellite, launched by CNSA in February and positioned in an elliptical orbit around the moon. Upon reaching the Apollo crater, a drilling mechanism extracted approximately 2 kg of soil, which was then transferred to the ascender using a scoop. The ascender departed for lunar orbit on June 4, rendezvousing with the orbiter and delivering the samples to a capsule within the returner by June 6.
Anticipated to arrive on Earth by June 25 (2024), the returner is tasked with bringing the collected lunar samples back for further analysis.

5. What might the samples reveal?

Given that Chang’e 6 is a Chinese-led mission, the significance of the samples collected depends not only on the substance itself but also on the entity collecting them and the timing of the mission. Unlike some other lunar missions, the Chinese National Space Administration (CNSA) has not been providing regular and detailed updates.
After CNSA retrieves the capsule containing the lunar samples, Chinese scientists will have primary access for analysis before potentially allowing foreign research teams access based on submitted proposals. It remains uncertain whether any Indian research groups have submitted proposals for access.
From a scientific standpoint, the samples obtained from the far side of the moon are anticipated to provide valuable insights into the lunar formation process and planetary development. For instance, researchers speculate that the disparity in terrain between the moon's hemispheres may be attributed to the heat released by Earth during the moon's formation and the thermochemical properties near the lunar surface.

For Prelims: Gaganyaan programme, TV-D1 mission, Low Earth Orbit, Isro, LVM3, GSLV Mk III,

For Mains:

1. Discuss the key objectives of the TV-D1 mission within the Gaganyaan program. How does this mission contribute to astronaut safety and the overall success of Gaganyaan? (250 Words)

Previous Year Questions

1. With reference to India's satellite launch vehicles, consider the following statements: (UPSC 2018)

1. PSLVs launch satellites useful for Earth resources monitoring whereas GSLVs are designed mainly to launch communication satellites.

2. Satellites launched by PSLV appear to remain permanently fixed in the same position in the sky, as viewed from a particular location on Earth.

3. GSLV Mk III is a four-stage launch vehicle with the first and third stages using solid rocket motors; and the second and fourth stages using liquid rocket engines.

Which of the statements given above is/are correct?

A. 1 only

B. 2 and 3

C. 1 and 2

D. 3 only

Answer: A

2. India's first human space mission "Gaganyaan" will be launched in which year? (ESIC UDC 2022)

A. 2022 B. 2023 C. 2024 D. 2025 E. 2026

Answer: B

3. Find the incorrect statements, about the Gaganyaan Mission of India. (MPSC 2020)

1. Four pilots from Indian Air Force were shortlisted to be astronauts of Gaganyaan.

2. They will be trained at Yuri Gagarin Cosmonaut Centre in Russia.

3. This mission was announced by Prime Minister in 2014.

4. It is scheduled for 2022 with a team of 5 crew members and a month-long stay in space.

A. 1, 2, 3, 4 B. 2, 3, 4 C. 3, 4 D. 2, 3

Answer: C

4. ISRO is related to: (SSC JE EE 2020)

A. space research B. agricultural research C. seed research D. marine research Answer: A

5. Which of the following pairs is/are correctly matched? (UPSC 2014)

Spacecraft Purpose

Cassini-Huygens: Orbiting the Venus and transmitting data to the Earth
Messenger: Mapping and investigating the Mercury
Voyager 1 and 2: Exploring the outer solar system

Select the correct answer using the code given below:

(a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3

Answer: B

6. Consider the following statements: (UPSC 2016)

The Mangalyaan launched by ISRO

1. is also called the Mars Orbiter Mission

2. made India the second country to have a spacecraft orbit the Mars after USA

3. made India the only country to be successful in making its spacecraft orbit the Mars in its very first attempt

Which of the statements given above is/are correct?

(a) 1 only (b) 2 and 3 only (c) 1 and 3 only (d) 1, 2 and 3

Answer: C

Source: The Hindu

NATIONAL HEALTH CLAIM EXCHANGE (NHCX)

1. Context:

The Health Ministry along with the Insurance Regulatory and Development Authority of India (IRDAI) are working on measures aimed at allowing patients to access quality healthcare swiftly and with reduced out-of-pocket expenditure. The Ministry and IRDAI are launching the National Health Claim Exchange (NHCX), a digital platform which will bring together insurance companies, healthcare sector service providers and government insurance scheme administrators.

2. How is the NHCX expected to work?

The NHCX will function as a conduit for sharing claims-related information among various participants in the healthcare and health insurance sectors.
The integration with NHCX is anticipated to facilitate seamless interoperability in health claims processing, boosting efficiency and transparency in the insurance sector and benefiting both policyholders and patients, according to the Health Ministry.
When asked if the system will cater to the dynamic and diverse healthcare system in India, S. Prakash, MD & CEO designate of Galaxy Health and Allied Insurance Company Limited, mentioned that the healthcare environment is evolving to meet the IRDAI’s goal of 'Insurance for All by 2047'.
He stated, “The insurance industry is ready to support this system's implementation by enabling efficient interactions between hospitals and insurers, creating a smooth, paperless, and secure contractual framework.
As a centralized hub for all health claims, the NHCX will greatly reduce the administrative load on hospitals, which currently have to navigate multiple portals for different insurers.” He added that twelve insurance companies and one Third Party Administrator (TPA) have already completed the NHCX integration.

3. What about cashless claims?

A deadline has been established for the processing of cashless insurance claims. The insurance authority has mandated that all such claims must be processed within three hours of receiving the discharge authorization from the hospital.
The insurance regulator has given providers until July 31 to implement the necessary systems and processes to comply with this new directive.

4. What are some other incentives on offer?

In a bid to promote the uptake of digital health transactions and the digitization of patient health records nationwide, the National Health Authority introduced financial incentives through the Digital Health Incentive Scheme (DHIS) starting January 2023.
As per a note from the Health Ministry, hospitals are eligible to receive financial incentives under the DHIS for every insurance claim transaction made through NHCX. The incentives amount to ₹500 per claim or 10% of the claim amount, whichever is lower.

5. Why is NHCX being brought in?

A study titled "Health Insurance Coverage in India: Insights for National Health Protection Scheme" highlights the significance of health insurance as a policy strategy to furnish healthcare services and alleviate the heavy burden of out-of-pocket expenditure on individuals.
It emphasizes that hospitalization cases are most prevalent across India among those insured through private purchases (54.4 per 1,00,000 persons), with urban areas seeing the highest instances among those covered by government-funded schemes (60.4 cases per 1,00,000 persons). Conversely, rural areas show significantly higher rates of inpatient cases among those with private insurance (73.5 cases per 1,00,000 persons). Additionally, urban areas generally experience higher inpatient cases compared to rural regions.
Advocating for the NHCX, the Health Ministry asserts that the platform will facilitate the standardization and interoperability of health claims, ensuring a seamless exchange of data, documents, and images between payers (insurance companies/TPAs/government scheme administrators) and providers (hospitals/labs/polyclinics).
Industry experts also suggest that the platform, by presenting data uniformly and centrally validating claims data, could introduce a more standardized approach to healthcare pricing.

6. What are the challenges?

Health insurance constitutes approximately 29% of the total general insurance premium income in India. According to Dr. Prakash, the primary challenge in health insurance lies in enhancing the relationship between hospitals and insurance companies.
He emphasizes that the transition to digitization necessitates active participation from both parties, requiring upgrades to existing IT systems and enhanced workforce training.
"Challenges such as discharge delays and communication gaps between hospitals and insurers further complicate the situation," Dr. Prakash adds. "Establishing trust among policyholders depends on delivering efficient services. The NHCX portal aims to streamline the claims process by integrating all stakeholders onto a single platform, thereby reducing claim processing times and standardizing procedures."
"While concerns such as data breaches are being effectively addressed, the NHCX continues to offer ongoing benefits for all parties involved, facilitating smoother operations within the healthcare sector," he concludes.

For Prelims: National Health Policy, Non-Communicable Diseases, Economic Survey, GDP

For Mains:

1. Critically examine the current level of government health expenditure in India compared to other countries. Discuss the challenges in making direct comparisons and suggest potential solutions to improve health expenditure in India. (250 Words)

2. How can India leverage technology and innovation to enhance health insurance accessibility, affordability, and customer experience in the health insurance sector? (250 Words)

3. Discuss the challenges faced in delivering effective primary healthcare services across the country, particularly in rural areas. Suggest policy measures to improve accessibility, quality, and manpower in primary healthcare facilities. (250 Words)

Previous Year Questions

1. As per Health Policy, 2017 approved by the Union Cabinet recently, what was the expected amount of public health expenditure as a percentage of GDP? (APPSC Panchayat Secretary 2016)

A. 5.5% B. 4.5% C. 3.5% D. 2.5%

2. Brominated flame retardants are used in many household products like mattresses and upholstery. Why is there some concern about their use? (UPSC 2014)

1. They are highly resistant to degradation in the environment.

2. They are able to accumulate in humans and animals.

Select the correct answer using the code given below:

(a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

Answers: 1-D, 2-C

Source: The Hindu

PROPORTIONAL REPRESENTATION

1. Context

The results of the 18th Lok Sabha elections were declared in the first week of June'24. The ruling National Democratic Alliance (NDA) has won 293 seats with a 43.3% vote share while the Opposition bloc INDIA has secured 234 seats with a 41.6% vote share. Other regional parties and independents polled around 15% but ended up with only 16 seats in total. This is because First Past the Post System (FPTP) is followed in our elections to the Lok Sabha and Legislative Assemblies.

2. What is first past the post system?

Under First past the post system that we follow in our country, the candidate who polls more than any other in a constituency is declared elected. This is followed for elections in democracies like the U.S., the U.K. and Canada.
The FPTP system is simple and the most feasible method in a large country like India. The system also provides for greater stability to the executive in our parliamentary democracy because the ruling party/coalition can enjoy a majority in the lower houses without obtaining majority of the votes (more than 50%) across constituencies.
The issue with FPTP is that it may result in over or under representation of political parties when compared to their vote share. In the first three elections after independence, the Congress party won close to 75% of seats in the then Lok Sabha with a 45-47% vote share.

3. What is proportional representation (PR)?

Proportional Representation is an election system is a type of voting system in which the number of seats allocated to each party fairly reflects the proportion of total votes cast for that party.
Unlike the FPTP system, Proportional Representation ensures that every vote counts towards allocating seats in Parliament or other elected bodies.
PR is more sophisticated than the first-past-the-post (FPTP) system, but it is more proportional. It’s a complicated method that would be tough to apply in a country like India’s subcontinent but is feasible in small countries.

Types of PR - The most common forms of PR are Party Lists (PL), Single Tranferable Vote (STV) and Proportional representation of mixed-members (MMP).

Party Lists (PL)	Single Tranferable Vote (STV)	Proportional representation of mixed-members (MMP)
1. In PL, political parties define a list of candidates on which people can vote. 2. The lists can be restricted (Closed) or unrestricted (Open). The open list allows voters to indicate individual candidate choices and vote for independent candidates.	1. STV allows a voter to cast one vote and rank others in an order of preference. 2. The system enables voters to choose the most preferred candidate from the party and vote for independent candidates as well. 3. President of India is elected through STV and a secret ballot system.	1. Also known as Additional Member System, it is a mixed system of election process where the registered voters have two votes, to elect a local representative and the party as well. 2. MMP is operational in countries like New Zealand, South Korea, and Germany.

The most commonly used PR system is the ‘party list PR’ where voters vote for the party (and not individual candidates) and then the parties get seats in proportion to their vote share.
There is usually a minimum threshold of 3-5% vote share for a party to be eligible for a seat. With India being a federal country, for this principle to be implemented should ideally be carried out at each State/Union Territory (UT) level.
Thus, the PR system would have resulted in representation of parties according to their vote share where the NDA would have secured 243 seats as against 293, INDIA bloc 225 instead of 234 and others/Independents would have got 75 seats in total rather than just 16 with 15.1% vote share.
The primary criticism against the PR system is that it could potentially result in instability as no party/coalition may obtain a majority to form the government in our parliamentary
democracy.
To ensure stability in proportionate representation, the system of Mixed Member Proportional Representation (MMPR) can be considered.
Under this system, there is one candidate who can be elected through the FPTP system from each territorial constituency. There are also additional seats that are filled based on various parties’ percentage of votes.

4. International Practices of PR

Presidential democracies like Brazil and Argentina and parliamentary democracies like South Africa, the Netherlands, Belgium and Spain have the party list PR system.
Germany follows the MMPR system where out of the 598 seats in the Bundestag (their equivalent of our Lok Sabha), 299 seats (50%) are filled from constituencies under the FPTP system.
The balance 299 seats (50%) are filled by apportioning them amongst parties, that secure at least 5% votes, based on their percentage of votes. In New Zealand out of the total 120 seats in the Lower House, 60% seats are filled through the FPTP system from territorial constituencies.
The balance 40% seats are allotted to various parties, that secure at least 5% votes, based on their vote share. This system is expected to provide the required stability in a parliamentary democracy like India while also ensuring representation for all parties based on their vote share.

5. Way forward

The law commission in its 170th report, ‘Reform of the electoral laws’ (1999), had recommended the introduction of the MMPR system on an experimental basis. It had suggested that 25% of seats may be filled through a PR system by increasing the strength of the Lok Sabha considering the entire nation as one unit for PR based on vote share. But the appropriate approach would be to consider at every State/UT level considering our federal polity.

With the delimitation exercise for increasing the number of seats is due based on the first Census to be conducted after 2026. Determining the number of seats in Lok Sabha solely in proportion to population might go against the federal principles of our country and may lead to disenchantment in the States as the population explosion in our country during the last five decades has been uneven among various regions. However, in the event of increasing the seats during such the delimitation exercise, the MMPR system can be considered for incremental seats or at least 25% of the total seats to be filled from each State/UT. This might alleviate the concerns of states in southern, northeastern, and smaller regions in the north by preventing the potential dominance of larger states through an increase in seats solely under the FPTP system.

For Prelims: EVMs, VVPATs, Election Commission of India

For Mains:

1. "In a transparent democracy, every citizen should be able to understand and verify each step of the election process." Elaborate on the significance of the Voter Verifiable Paper Audit Trail (VVPAT) in empowering voters and enhancing electoral transparency. Propose additional steps to further strengthen the electoral process and uphold democratic values. (250 Words)

Previous Year Questions

1. Consider the following statements: (UPSC 2017)

1. The Election Commission of India is a five-member body.

2. Union Ministry of Home Affairs decides the election schedule for the conduct of both general elections and bye-elections.

3. Election Commission resolves the disputes relating to splits/mergers of recognised political parties.

Which of the statements given above is/are correct?

A. 1 and 2 only B. 2 only C. 2 and 3 only D. 3 only

2. Consider the following statements : (UPSC 2021)

1. In India, there is no law restricting the candidates from contesting in one Lok Sabha election from three constituencies.

2. In the 1991 Lok Sabha Election, Shri Devi Lal contested from three Lok Sabha constituencies.

3. As per the- existing rules, if a candidate contests in one Lok Sabha election from many constituencies, his/her party should bear the cost of bye-elections to the constituencies vacated by him/her in the event of him/her winning in all the constituencies.

Which of the statements given above is/are correct?

A. 1 only B. 2 only C. 1 and 3 D. 2 and 3

3. Consider the following statements : (UPSC CSE 2021)

1. The Montagu-Chelmsford Reforms of 1919 recommended granting voting rights to all women above the age of 21.

2. The Government of India Act of 1935 gave women reserved seats in the legislature.

Which of the statements given above is/are correct?

A. 1 Only B. 2 Only C. Both 1 and 2 D. Neither 1 nor 2

Answers: 1-D, 2-B, 3-B

Mains

1. In the light of recent controversy regarding the use of Electronic Voting Machines (EVM), what are the challenges before the Election Commission of India to ensure the trustworthiness of elections in India? (UPSC 2018)

Source: The Hindu

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Current Affair

FEDERALISM IN INDIA

COMPETITION COMMISSION OF INDIA

INFLATION

CHINA TAIWAN TUSSLE

1. Context

2. Brief History of Taiwan

3. China-Taiwan Tensions

4. The Current Tensions Between the Two Nations

5. US Ties with China

6. Challenges for the US

7. What are the implications for India

For Prelims & Mains

Previous year Question

CHANG'S MISSION

(FAR SIDE OF THE MOON)

NATIONAL HEALTH CLAIM EXCHANGE (NHCX)

PROPORTIONAL REPRESENTATION

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