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DAILY CURRENT AFFAIRS, 02 JANUARY 2025

MINIMUM SUPPORT PRICE

 

1. Context

Farmer outfits are seeking a legal guarantee for purchasing their crops at a minimum support price (MSP) and a farm loan waiver, among other demands

2. What is Minimum Support Price (MSP)?

  • MSP is the minimum price a farmer must be paid for their food grains as guaranteed by the government. They are recommended by the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs.
  • The CACP submits its recommendations to the government in the form of Price Policy Reports every year.
  • After considering the report and views of the state governments and also keeping in view the overall demand and supply situation in the country, the central government takes the final decision.
  • Food Corporation of India (FCI) is the nodal agency for procurement along with State agencies, at the beginning of the sowing season.
The minimum support price (MSP) is set for 23 crops every year. They include:
  • 7 cereals (paddy, wheat, maize, bajra, jowar, ragi, and barley)
  • 5 pulses (chana, tur/arhar, moong, urad, and Masur)
  • 7 oilseeds (rapeseed-mustard, groundnut, soya bean, sunflower, sesamum, safflower, and nigerseed) and
  • 4 commercial crops (sugarcane, cotton, copra, and raw jute).

3. How MSP is Cauclated?

  • MSP, presently, is based on a formula of 1.5 times the production costs.
  • The CACP projects three kinds of production costs for every crop, both at state and all-India average levels.
  • A2 covers all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilizers, pesticides, hired labor, leased-in land, fuel, irrigation, etc.
  • A2+FL includes A2 plus an imputed value of unpaid family labor.
  • C2: Estimated land rent and the cost of interest on the money taken for farming are added to A2 and FL.
  • Farm unions are demanding that a comprehensive cost calculation (C2) must also include capital assets and the rentals and interest forgone on owned land, as recommended by the National Commission for Farmers.

4. The issue with the calculation of MSP

  • To calculate MSP, the government uses A2+FL cost. The criticism of A2+FL is that it doesn’t cover all costs and that a more representative measure, C2, needs to be used.
  • For example, in the 2017-18 rabi season, CACP data shows that C2 for wheat was 54% higher than A2+FL.
  • The Swaminathan Commission also stated that the MSP should be based on the comprehensive cost of production, which is the C2 method.

5. Key Points about the Farmer's Demand

  • After the recent decision to repeal three contentious farm laws, protesting farmer unions are now pressing for their demand of the legalization of the Minimum Support Price (MSP).
  • They want a legal guarantee for the MSP, which at present is just an indicative or a desired price.
  • Legalising MSP would put the government under a legal obligation to buy every grain of the crops for which MSPs have been announced.
  • At present, the PM has announced the formation of a committee to make MSP more transparent, as well as to change crop patterns and to promote zero-budget agriculture which would reduce the cost of production.
  • The entire issue of enforcing MSP legally is a tricky, complicated, and multidimensional one, involving lots of factors.
  • Core demand: MSP based on a C2+50% formula should be made a legal entitlement for all agricultural produce. This would mean a 34% increase in the latest MSP for paddy and a 13% increase for wheat. MSP should also be extended to fruit and vegetable farmers who have been excluded from benefits so far.

6. The rationale behind the demand for legislation of MSP

  • Farmers receive less than MSP: In most crops grown across much of India, the prices received by farmers, especially during harvest time, are well below the officially-declared MSPs. And since MSPs have no statutory backing, they cannot demand these as a matter of right.
  • Limited procurement by the Govt: Also, the actual procurement at MSP by the Govt. is confined to only about a third of wheat and rice crops (of which half is bought in Punjab and Haryana alone), and 10%-20% of select pulses and oilseeds. According to the Shanta Kumar Committee’s 2015 report, only 6% of the farm households sell wheat and rice to the government at the MSP rates.

7. Why has the committee been set up?

  • It has been constituted by the Ministry of Agriculture and Farmers Welfare as a follow-up to an announcement by the Prime Minister when he declared the government’s intention to withdraw the three farm laws.
  • The protesting farm unions had demanded a legal guarantee on MSP based on the Swaminathan Commission’s ‘C2+50% formula’ (C2 is a type of cost incurred by farmers;). This was in addition to their demand for repeal of the three farm laws.

8. Committee on MSP, Natural Farming and Crop Diversification

 On Minimum Support Price (MSP)
  • To suggest measures to make MSP available to farmers by making the systems more effective and transparent, 
  • Give more autonomy to Commission for Agricultural Costs and Prices (CACP).

On Natural Farming: To make suggestions for programs and schemes for value chain development, protocol validation, and research for future needs and support for area expansion under the Indian Natural Farming System.

On Crop diversification: ​

To provide suggestions related to crop diversification including 

  • Mapping of existing cropping patterns of agro-ecological zones of producer and consumer states,
  • Strategy for diversification policy to change the cropping pattern according to the changing needs of the country and 
  •  A system to ensure remunerative prices for the sale of new crops.

9. Why have the protesting farm unions opposed this committee?

  • Firstly, this committee includes members who supported the now-repeated farm laws.
  • Secondly, the terms and references of the committee do not mention the legal guarantee to MSP. Instead, it mentions making MSP more effective and transparent.

10. Challenges associated with MSP

  • Protest by Farmers: Farm unions have been protesting for more than six months on Delhi's outskirts, demanding legislation to guarantee MSP for all farmers for all crops and a repeal of three contentious farm reforms laws.
  • MSP and Inflation: When announcing the MSP, inflation should be taken into account. But often the price is not increased up to the mark. For example, this time MSP for Maize has not even considered inflation then how it will benefit farmers! Also, frequent increases in the MSPs can lead to inflation too.
  • High Input Costs: The input costs have been rising faster than sale prices, squeezing the meager income of the small farmers and driving them into debt.
  • Lack of Mechanism: There is no mechanism that guarantees that every farmer can get at least the MSP as the floor price in the market. So proper mechanisms need to be fixed for all times to come.
  • Restriction in Europe: Even after producing surplus grains, every year a huge portion of these grains gets rotten. This is due to the restrictions under WTO norms, that grain stocks with the FCI (being heavily subsidized due to MSP) cannot be exported.
For Prelims: Minimum Support Price (MSP), World Trade Organisation (WTO), Commission for Agricultural Costs and Prices (CACP), Cabinet Committee on Economic Affairs, Food Corporation of India (FCI).
For Mains: 1. The Minimum Support Price (MSP) scheme protects farmers from price fluctuations and market imperfections. In light of the given statement, critically analyze the efficacy of the MSP. (250 Words)
 
Previous year Question
1. Consider the following statements: (UPSC CSE 2020)
1. In the case of all cereals, pulses, and oil seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.
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
Answer: D
2.Which of the following factors/policies were affecting the price of rice in India in the recent past? (UPSC CSE, 2020)
(1) Minimum Support Price
(2) Government’s trading
(3) Government’s stockpiling
(4) Consumer subsidies
Select the correct answer using the code given below:
(a) 1, 2 and 4 only
(b) 1, 3 and 4 only
(c) 2 and 3 only
(d) 1, 2, 3 and 4
Answer (d)
3.In India, which of the following can be considered as public investment in agriculture? (UPSC GS1, 2020)
(1) Fixing Minimum Support Price for agricultural produce of all crops
(2) Computerization of Primary Agricultural Credit Societies
(3) Social Capital development
(4) Free electricity supply to farmers
(5) Waiver of agricultural loans by the banking system
(6) Setting up of cold storage facilities by the governments.
In India, which of the following can be considered as public investment in agriculture?
Select the correct answer using the code given below:
(a) 1, 2 and 5 only
(b) 1, 3, 4 and 5 only
(c) 2, 3 and 6 only
(d) 1, 2, 3, 4, 5 and 6
Answer (c)
4.The Fair and Remunerative Price (FRP) of sugarcane is approved by the (UPSC CSE, 2015)
(a) Cabinet Committee on Economic Affairs
(b) Commission for Agricultural Costs and Prices
(c) Directorate of Marketing and Inspection, Ministry of Agriculture
(d) Agricultural Produce Market Committee
Answer (a)
 
 Source: The Indian Express
 

GOODS AND SERVICE TAX (GST)

 
 
1. Context
 
India’s gross Goods and Services Tax (GST) receipts increased at the second-slowest pace in 43 months in December, while growth in net GST collections, after adjusting for refunds, slumped to 3.3%, the weakest in financial year 2024-25
 
2. What is the Goods and Services Tax (GST)?
  • The Goods and Services Tax (GST) is a value-added tax levied on the supply of goods and services at each stage of the production and distribution chain. It is a comprehensive indirect tax that aims to replace multiple indirect taxes imposed by the central and state governments in India.
  • GST is designed to simplify the tax structure, eliminate the cascading effect of taxes, and create a unified national market. Under the GST system, both goods and services are taxed at multiple rates based on the nature of the product or service. The tax is collected at each stage of the supply chain, and businesses are allowed to claim a credit for the taxes paid on their inputs.
  • The GST system in India came into effect on July 1, 2017, replacing a complex tax structure that included central excise duty, service tax, and state-level taxes like VAT (Value Added Tax), among others. The GST Council, consisting of representatives from the central and state governments, is responsible for making decisions on various aspects of GST, including tax rates and rules.
  • GST is intended to create a more transparent and efficient tax system, reduce tax evasion, and promote economic growth by fostering a seamless flow of goods and services across the country. It has a significant impact on businesses, as they need to comply with the new tax regulations and maintain detailed records of their transactions for GST filing

3.Goods and Services Tax (GST) and 101st Amendment Act, 2016

The Goods and Services Tax (GST) in India was introduced through the 101st Amendment Act of 2016. This constitutional amendment was a crucial step in the implementation of GST, which aimed to create a unified and comprehensive indirect tax system across the country.

Here are some key points related to the 101st Amendment Act and GST:

 

  • The 101st Amendment Act was enacted to amend the Constitution of India to pave the way for the introduction of the Goods and Services Tax.
  • It added a new article, Article 246A, which confers concurrent powers to both the central and state governments to levy and collect GST
  • The amendment led to the creation of the GST Council, a constitutional body consisting of representatives from the central and state governments. The council is responsible for making recommendations on GST rates, exemptions, and other related issues
  • The amendment introduced a dual GST structure, where both the central government and the state governments have the power to levy and collect GST on the supply of goods and services
  • For inter-state transactions, the 101st Amendment Act provides that the central government would levy and collect the Integrated Goods and Services Tax (IGST), which would be a sum total of the central and state GST
  • The amendment also included a provision for compensating states for any revenue loss they might incur due to the implementation of GST for a period of five years
The 101st Amendment Act was a critical legislative step that provided the constitutional framework for the implementation of GST in India. It addressed the need for a unified tax system, simplifying the tax structure and promoting a common market across the country. The subsequent establishment of the GST Council has played a pivotal role in the ongoing management and evolution of the GST system in India
 
4. What are the different types of Goods and Services Tax (GST)?

In India, the Goods and Services Tax (GST) is structured into different tax rates based on the nature of the goods and services. As of my last knowledge update in January 2022, the GST rates are divided into multiple slabs. It's important to note that tax rates may be subject to changes, and new amendments could have been introduced since then. As of my last update, the GST rates are as follows:

  • Nil Rate:

    • Some goods and services are categorized under the nil rate, meaning they attract a 0% GST. This implies that no tax is levied on the supply of these goods or services.

  • 5% Rate:

    • This is a lower rate, applicable to essential goods such as certain food items, medical supplies, and other basic necessities.

  • 12% Rate:

    • Goods and services falling in this category attract a 12% GST rate. Items such as mobile phones, processed foods, and certain services fall under this slab.

  • 18% Rate:

    • A higher rate of 18% is applicable to goods and services such as electronic items, capital goods, and various services.

  • 28% Rate:

    • The highest GST rate of 28% is applied to luxury items, automobiles, and certain goods and services that are considered non-essential or fall into the luxury category.

  • Compensation Cess:

    • In addition to the above rates, some specific goods attract a compensation cess, which is levied to compensate the states for any revenue loss during the transition to GST. This is often applied to items like tobacco and luxury cars.

  • Zero Rate:

    • Certain categories of goods and services may be specified as "zero-rated," which means they are effectively taxed at 0%. This is different from the nil rate, as it allows businesses to claim input tax credit on inputs, capital goods, and input services.

  • Exempt Supplies:

    • Some goods and services may be exempt from GST altogether. This means that they are not subject to any GST, and businesses cannot claim input tax credit on related inputs
 
5.Central GST (CGST), State GST (SGST), Union territory GST (UTGST) and Integrated GST (IGST)
 
 
Subject Central GST (CGST) State GST (SGST) Union Territory GST (UTGST) Integrated GST (IGST)
Levied by Central Government Respective State Governments Union Territory Administrations Central Government (on inter-state transactions)
Applicability On intra-state supplies (within the same state) On intra-state supplies (within the same state) On intra-union territory supplies (within the same union territory) On inter-state supplies (across states or union territories)
Rate Determination Determined by the Central Government Determined by the Respective State Government Determined by the Union Territory Administration IGST rate is a sum of CGST and SGST rates
Revenue Collection Collected by the Central Government Collected by the Respective State Government Collected by the Union Territory Administration Collected by the Central Government (on inter-state transactions)
Utilization of Revenue Shared between Central and State Governments Retained by the Respective State Government Retained by the Union Territory Administration Shared between Central and State Governments
Purpose Part of the dual GST structure, meant to cover central taxes Part of the dual GST structure, meant to cover state taxes Applicable in union territories for intra-territory supplies Applied to regulate and tax inter-state supplies
Input Tax Credit (ITC) ITC available for CGST paid on inputs and services ITC available for SGST paid on inputs and services ITC available for UTGST paid on inputs and services ITC available for both CGST and SGST paid on inputs
Tax Jurisdiction Applies within a particular state Applies within a particular state Applies within a particular union territory Applies to transactions across states and union territories
GSTN Portal for Filing Returns Central GSTN portal State-specific GSTN portals UTGSTN portal Integrated GSTN portal
 
 
6.What are the benefits of Goods and Services Tax (GST) in India?
 
The Goods and Services Tax (GST) in India was implemented with the aim of bringing about significant reforms in the indirect tax structure. Several benefits have been associated with the introduction of GST.
 
Here are some key advantages:
 
  • GST replaced multiple indirect taxes levied by the central and state governments, simplifying the tax structure. This streamlined system reduces the complexity of compliance for businesses
  • GST eliminates the cascading effect of taxes, where taxes are levied on top of other taxes. With a seamless credit mechanism, businesses can claim input tax credit on the taxes paid on their purchases, leading to a more transparent and efficient system
  • GST has facilitated the creation of a common national market by harmonizing tax rates and regulations across states. This has reduced trade barriers and promoted the free flow of goods and services throughout the country
  • The GST system has incorporated technology-driven processes, including electronic filing and real-time reporting, making it harder for businesses to evade taxes. This has contributed to increased tax compliance
  • The input tax credit mechanism under GST benefits manufacturers, as they can claim credits for taxes paid on raw materials and input services. This has a positive impact on the cost of production and enhances the competitiveness of Indian goods in the international market
  • GST brings transparency to the taxation system. The online filing of returns and the availability of transaction-level data make it easier for tax authorities to monitor and track transactions, reducing the scope for corruption
  • GST has replaced a complex system of filing multiple tax returns with a more straightforward mechanism. Businesses now need to file fewer returns, reducing the compliance burden
  • The implementation of GST has contributed to an improvement in the ease of doing business in India. The unified tax system has made it simpler for businesses to operate across states and has reduced the paperwork and bureaucratic hurdles associated with tax compliance
  • GST has led to the harmonization of tax rates across states and union territories, minimizing the tax rate disparities that existed earlier. This creates a more predictable tax environment for businesses
7.Goods and Services Tax (GST)-Issues and Challenge
 
  • Despite the intention to simplify the tax structure, the multi-tiered rate system (0%, 5%, 12%, 18%, and 28%) and the inclusion of cess on certain goods have introduced complexity. The classification of goods and services under different tax slabs can be challenging, leading to disputes and confusion
  • The successful implementation of GST relies heavily on technology. Issues such as technical glitches on the GSTN (Goods and Services Tax Network) portal, especially during the initial phases, have caused difficulties for businesses in filing returns and complying with regulations
  • The compliance requirements for businesses under GST, including multiple returns filing, have been perceived as burdensome. Smaller businesses, in particular, may find it challenging to adapt to the new system and comply with the various provisions
  • The transition from the previous tax regime to GST posed challenges, especially for businesses in terms of understanding the new tax structure, reconfiguring accounting systems, and ensuring a smooth transition of credits from the old tax system to the GST system
  • The classification of certain goods and services into specific tax slabs has been a source of contention. Ambiguities in classification have led to disputes and litigations, with businesses seeking clarity on the applicable tax rates
  • The implementation of GST has increased compliance costs for businesses due to the need for sophisticated IT infrastructure, the hiring of tax professionals, and efforts to ensure accurate reporting and filing
  • Challenges related to availing and matching input tax credits have been reported. Timely matching of credits and resolving discrepancies can be cumbersome, leading to concerns about the seamless flow of credit across the supply chain
  • The anti-profiteering provisions were introduced to ensure that businesses pass on the benefits of reduced tax rates to consumers. However, the implementation of anti-profiteering measures has been criticized for its complexity and potential for disputes
  • The periodic changes in the GST return filing system have created challenges for businesses in adapting their processes. Delays and complexities in return filing can affect working capital management
8.Goods and Services Tax Council (GST Council)
 
The Goods and Services Tax Council (GST Council) is a constitutional body in India that makes recommendations on the Goods and Services Tax (GST). It was established under the Constitution (122nd Amendment) Act, 2016, which introduced the GST in India

The GST Council consists of the following members:

  • The Union Finance Minister, who is the Chairperson of the Council.
  • The Union Minister of State in charge of revenue or any other Minister of State nominated by the Union Government.
  • One Minister from each state, nominated by the Governor of that state.
  • The Chief Secretary of each state, ex-officio.
  • If the President, on the recommendation of the Council, so directs, one representative of each Union territory which has a legislature, to be nominated by the Lieutenant Governor of that Union territory.
  • Three to seven members (other than Ministers) to be nominated by the Union Government, of whom at least one member shall be from the field of economics and another from the field of chartered accountancy, legal affairs or public finance
9. Way forward
 
It's important to note that the composition and structure of the GST Council may evolve over time, and there might have been changes since my last update in January 2022. To obtain the latest and most accurate information about the GST Council and its members, it is recommended to refer to official government sources or recent announcements by the relevant authorities

 

For Prelims: Economic and Social Development and Indian Polity and Governance
For Mains: General Studies II: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein

General Studies III: Inclusive growth and issues arising from it
 
 
Previous Year Questions
 
1.Which of the following are true of the Goods and Services Tax (GST) introduced in India in recent times? (UGC Paper II 2020)
A. It is a destination tax
B. It benefits producing states more
C. It benefits consuming states more
D. It is a progressive taxation
E. It is an umbrella tax to improve ease of doing business
Choose the most appropriate answer from the options given below:
A.B, D and E only
B.A, C and D only
C.A, D and E only
D.A, C and E only
Answer (D)
 
Source: Indianexpress
 

FOREIGN CONTRIBUTION REGULATION ACT (FCRA)

 

1. Context

The Union Home Ministry on Wednesday notified that chartered accountants filing audit returns on behalf of NGOs need to specify if the organisation violated provisions of the Foreign Contribution (Regulation) Act, 2010 (FCRA) or not

2. Foreign Contribution Regulation Act

  • The law sought to regulate foreign donations to individuals and associations so that they functioned "in a manner consistent with the values of a sovereign democratic republic". 
  • Foreign funding in India is regulated under the FCRA act. Individuals are permitted to accept foreign contributions without the permission of MHA. However, the monetary limit for acceptance of such foreign contributions shall be less than Rs. 25,000.
  • It is implemented by the Ministry of Home Affairs. The FCRA was enacted during the Emergency in 1976 amid apprehensions that foreign powers were interfering in India's affairs by pumping money into the country through independent organizations. These concerns were, in fact, even older- they had been expressed in Parliament as early as 1969.

3. Provisions of the Act

  • The FCRA requires every person or NGO wishing to receive foreign donations to be registered under the act, to open a bank account for the receipt of foreign funds in the statute Bank of India, Delhi, and to utilize those funds only for which they have been received, and as stipulated in the act.
  •  They are also required to file annual returns, and they must not transfer the funds to another NGO.
  • The Act prohibits the receipt of foreign funds by candidates for elections, journalists or newspapers and media broadcast companies, judges and government servants, members of the legislature and political parties or their office-bearers, and organizations of a political nature.

4. Key Highlights of the 2020 Amendment

  • It bars public servants from receiving foreign contributions. It prohibits the transfer of foreign contributions to any other person.
  • Aadhar number is mandatory for all office bearers, directors, or key functionaries of a person receiving foreign contributions, as an identification document.
  • The foreign contribution must be received only in an account designated by the bank as an FCRA account in such branches of the State Bank of India, New Delhi.
  • No funds other than foreign contributions should be received or deposited in this account.
  • It allowed the government to restrict the usage of unutilized foreign contributions. This may be done if, based on an inquiry the government believes that such a person has contravened provisions of the FCRA.
  • While NGOs earlier could use up to 50 percent of funds for administrative use, the new amendment restricted this use to 20 percent.

5. Registration under FCRA

  • NGOs that want to receive foreign funds must apply online in a prescribed format with the required documentation. FCRA registrations are granted to individuals or associations that have definite cultural, economic, educational, religious, and social programs.
  • Following the application, the MHA makes inquiries through the Intelligence Bureau into the antecedents of the applicant and accordingly processes the application. The MHA is required to approve or reject the application within 90 days-failing which is expected to inform the NGO of the reasons for the same.
  • Once granted, FCRA registration is valid for five years. NGOs are expected to apply for renewal within six months of the date of expiry of registration. In case of failure to apply for renewal, the registration is deemed to have expired.

6. Cancellation of Approval

The government reserves the right to cancel the FCRA registration of any NGO if it finds it to violate the Act. Registration can be cancelled for a range of reasons including, if "in the opinion of the Central Government, the public interest must cancel the certificate". Once the registration of an NGO is canceled, it is not eligible for re-registration for three years. All orders of the government can be challenged in the High court.

For Prlims& Mains

For Prelims: FCRA, Rajiv Gandhi Foundation, Rajiv Gandhi Charitable Trust, NGO, Ministry of Home Affairs (MHA).

For Mains: 1. What is the Foreign contribution regulation act and discuss the new restrictions introduced by the Foreign Contribution (Regulation) Amendment Act, 2020.

 

 

Previous Year Questions

 

1.Examine critically the recent changes in the rules governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976. (Please refer GS-II Paper, 2015)

 

Source: The Indian Express

 

INDIA-MALDIVES

 
 
1. Context
 
Hours after a report in The Washington Post claimed that Indian intelligence explored a plan with the Maldives Opposition to oust President Mohamed Muizzu following his election last year, Mohamed Nasheed, the island nation’s former President, said he does not believe India will be willing to assist in a regime change and “never had any such conversation with me”
 
2.The recent India-Maldives controversy
 

The recent India-Maldives controversy stemmed from offensive comments made by three Maldivian ministers on social media about Prime Minister Narendra Modi's visit to the Lakshadweep islands in early January 2024. 

The Incident

  • Maldivian Deputy Minister of Youth Empowerment Mariyam Shiuna posted a mocking and disrespectful remark about PM Modi on social media. Two other ministers, Malsha Shareef and Abdulla Mahzoom Majid, also made disparaging comments.
  • India summoned the Maldivian envoy and expressed strong disapproval of the derogatory remarks.
  • The Maldivian government suspended the three ministers and distanced itself from their statements. President Mohamed Muizzu also affirmed the importance of close ties with India.
  • The episode coincides with Maldivian President Ibrahim Mohamed Solih's maiden visit to China, raising speculation about China's possible role in influencing the ministers' remarks.

Consequences and responses

  • India summoned the Maldivian envoy and expressed its strong displeasure. The Maldivian government suspended the three officials involved and distanced itself from their comments.
  • Some Indians called for a boycott of tourism to the Maldives in response to the incident.
  • The incident prompted introspection in both countries about the state of their relationship and the need to address underlying issues.
 

3. India-Maldives

India-Maldives relations have historically been close, marked by vibrant cultural ties, strong economic partnerships, and strategic cooperation. However, the relationship has encountered some challenges in recent years, highlighting the need for renewed focus and strategic adjustments.

Historical Ties

  • Both nations share Buddhist and Hindu influences, with Maldivians speaking Dhivehi, which belongs to the Indo-Aryan language family.
  • India has been a significant trading partner for Maldives, exporting food, and manufactured goods, and providing tourism services.
  • India has played a crucial role in ensuring the Maldives' security, assisting in the 1988 coup attempt, the 2004 tsunami, and the 2014 water crisis.

Strategic Interests

  • The Maldives occupies a strategic position in the Indian Ocean, making it crucial for India's maritime security interests.
  • China's increasing economic and military presence in the region presents both challenges and opportunities for India-Maldives cooperation.
  • Both countries share concerns about terrorism and have collaborated in intelligence sharing and capacity building.

Contemporary Challenges

  • Despite close ties, the significant economic disparity between India and the Maldives can lead to imbalances and resentment.
  • The Maldives has experienced political turmoil in recent years, which can impact relations with India.
  • Both countries face challenges related to climate change and rising sea levels, requiring collaborative solutions.
 
 
4. Strategic Lessons from the Maldives Spat
 
  • The recent diplomatic spat with the Maldives, triggered by offensive comments directed at Prime Minister Modi, might appear as a fleeting "storm in a teacup." However, a closer look reveals several critical dimensions with far-reaching implications for India's maritime security landscape, offering valuable lessons for the future.
  • The Maldives archipelago stretches across the southern Indian Ocean, forming a vital piece of India's maritime security puzzle. Its 27 coral atolls dispersed over 900 km encompass an exclusive economic zone of nearly a million square kilometres. Despite the Indian Navy's acknowledgement of this strategic importance, India's overall security approach suffers from a persistent "continental fixation."
  • The lack of a comprehensive national security strategy translates into sporadic and uncoordinated maritime initiatives. This shortcoming hinders India's ability to effectively maintain control over strategically crucial areas like the Maldives.
  • As early as 1945, K.M. Panikkar, revered as India's "oracle of maritime wisdom," warned against the perils of a solely land-based defence strategy. He presciently declared that neglect of Indian interests in the Indian Ocean would render freedom inconsequential and accurately predicted China's burgeoning naval ambitions. Panikkar's foresight highlights the urgent need for India to prioritize its maritime security interests.
  • The British presence on Gan Island, a Maldivian island, until 1976 underscores the strategic significance of the region. Additionally, China's expanding naval power and its proximity to the Indian Ocean raise concerns about potential strategic rivalries.
 

5. Introspection for Stronger Ties

 

The recent diplomatic spat with the Maldives serves as a stark reminder of the need for India to re-evaluate its approach to the island nation and, perhaps, other neighbouring countries. While external factors like China's influence and Pakistan's religious incitement undoubtedly play a role, it's crucial to acknowledge and address any shortcomings within India's own diplomatic strategies.

Missed Warning Signs: The relationship with the Maldives started fraying as early as 2011, with the cancellation of the Male airport contract awarded to GMR. This should have triggered alarm bells within the Ministry of External Affairs (MEA). Did India receive any early warnings of this shift in sentiment from its representatives in Male? If so, were proactive measures taken to address the concerns and mend ties?

Beyond Big Brother: Maldives, with its small population and unique identity, is naturally sensitive to any perceived "big-brotherly" attitude. Anecdotal evidence suggests that some Indian diplomats' condescending demeanours, overemphasis on cultural dominance, and projection of a "viceroy" image can foster resentment. This, coupled with India's own internal struggles and occasional instances of unchecked communal tensions, paints an unappealing picture for neighbours.

Introspection and Recalibration: Addressing these concerns requires introspection and recalibration within India's diplomatic approach. Building stronger ties with the Maldives, and other neighbours, demands:

  • Recognizing the sensitivities of smaller nations and engaging them with empathy and respect is crucial. This involves actively listening to their concerns, addressing them sincerely, and avoiding patronizing attitudes.
  • Appreciation for the Maldives' unique cultural identity and traditions, along with fostering mutual understanding through cultural exchange programs and collaborative initiatives, can strengthen the bond between the two countries.
  • Building strong economic partnerships, promoting mutually beneficial trade and development projects, and ensuring fair treatment of Maldivian workers in India can contribute to a more stable and prosperous relationship.
  • Addressing domestic issues like communal tensions and hate speech, and upholding democratic principles, will project a more positive image of India as a reliable and trustworthy partner.
 
6. SAGAR initiative
 

The "Security and Growth for All in the Region" (SAGAR) initiative, launched by Prime Minister Narendra Modi in 2015, is India's vision for maritime cooperation in the Indian Ocean region. It aims to create a secure, stable, and prosperous environment for all nations through collaboration in various areas.

Key objectives of SAGAR

  •  Promoting cooperation to combat piracy, terrorism, and other maritime threats; enhancing capacity building in coastal countries.
  •  Encouraging trade and investment; developing port infrastructure and connectivity; promoting sustainable resource management.
  • Providing training and expertise to partner nations in areas like maritime safety, search and rescue, and pollution control.
  •  Assisting with preparedness, response, and recovery efforts during natural disasters in the region.
  • Working together to conserve marine ecosystems and address pollution challenges.

Significance of SAGAR:

  • SAGAR positions India as a leading maritime power in the Indian Ocean, fostering its strategic partnerships and influence.
  •  In the face of China's growing presence in the region, SAGAR offers a cooperative alternative based on shared values and mutual benefit.
  • The initiative's focus on development and capacity building caters to the needs of smaller island nations, strengthening regional stability.
  • SAGAR encourages collaboration between countries on shared challenges, fostering trust and mutual understanding.

Challenges and Future Development

  • While the vision is clear, a comprehensive document outlining specific action plans and operational strategies is needed.
  • Implementing SAGAR initiatives effectively requires adequate resources both financially and in terms of personnel and expertise.
  • Gaining the trust and active participation of all countries in the region is crucial for SAGAR's success.

7. Navigating the Geopolitics in the Indian Ocean

 

The recent diplomatic discord with the Maldives highlights the need for India to shift its strategic focus in the Indo-Pacific beyond land borders and engage in larger geopolitical competition. Recognizing the crucial role of the Indian Ocean Region (IOR) and the distinct advantages of proximity, India must navigate the complex interplay between its own interests and the growing influence of China.

Geographic Advantage: Compared to China, India enjoys a clear geographic advantage in the IOR. With Male, the Maldivian capital, just 700 km from Kochi, India, compared to 6,000 km from the nearest Chinese port, India can respond to crises and offer assistance much faster. This was evident during the 1988 coup attempt, the 2004 tsunami, and the 2014 water crisis, where the Indian Navy swiftly provided crucial aid. This demonstrates the inherent value of having a reliable and responsive neighbour.

The Imperative of Securing Sea Lanes: As the world's largest trading nation, China's economic and industrial prosperity hinges on uninterrupted maritime trade. Its sea lanes in the IOR, therefore, become a critical "jugular vein" requiring protection. This has led China to develop strategic footholds like Hambantota in Sri Lanka and Gwadar in Pakistan, and even lease a military base in Djibouti. Securing allies like the Maldives becomes strategically vital for China to counterbalance India's geographic advantage.

Checkmating China: The Maldives presents a crucial strategic puzzle in this context. While India enjoys the inherent benefits of proximity and historical goodwill, China's economic clout and strategic ambitions pose a significant challenge. India must navigate this complex landscape by:

  • Continuing to provide humanitarian assistance, disaster relief, and economic partnerships can solidify India's image as a trustworthy and beneficial partner.
  • Strengthening cultural ties and fostering a deeper understanding of each other's perspectives can build trust and goodwill.
  • Upholding democratic values and addressing issues like communal tensions can project a more positive image of India on the international stage.
  • Collaborating with other IOR countries on regional issues like maritime security and environmental protection can showcase India's commitment to shared prosperity and cooperation.

8. Leveraging Maritime Diplomacy
 
  • The untapped potential of maritime diplomacy in strengthening India's relationships with its maritime neighbours. While conventional diplomacy remains essential, embracing maritime diplomacy as a vital tool can offer significant benefits.
  • India's Maritime Doctrine clearly outlines the "diplomatic role" as a crucial function of the Indian Navy. This role aims to "favourably shape the maritime environment" and support national interests in line with foreign policy and security goals.
  • For years, India's response to requests for maritime assistance from neighbouring countries like Sri Lanka, Maldives, and Myanmar often fell short due to bureaucratic hurdles and funding limitations. This missed opportunities to build goodwill and foster stronger ties.
  • In 2005-06, recognizing this gap, the Indian Navy took a proactive step by establishing a dedicated organization led by a two-star admiral to oversee foreign cooperation. This unit facilitated the transfer of patrol boats, aircraft, and helicopters from the Navy's own inventory to partner nations. This initiative exemplified the potential of maritime diplomacy in action.

The positive outcomes of this maritime cooperation are evident in India's strengthened relationships with Sri Lanka, Maldives, Myanmar, and other coastal neighbours. This successful model paves the way for further expansion:

  •  Providing training, joint exercises, and equipment support to partner nations can build maritime security capabilities and foster trust.
  • Rapidly deploying naval resources during natural disasters or emergencies showcases India's commitment to regional stability and builds goodwill.
  • Collaborating on maritime infrastructure development, resource exploration, and sustainable fishing practices can create shared prosperity.

By prioritizing maritime diplomacy as a vital tool alongside conventional diplomacy, India can:

  • A collaborative maritime environment fosters trust and cooperation, mitigating potential conflicts and ensuring safer seas for all.
  • Proactive maritime engagement can strengthen India's position in the Indian Ocean and counterbalance China's strategic manoeuvres.
  • By addressing their needs and demonstrating genuine commitment, India can cultivate lasting and mutually beneficial relationships with its maritime neighbours.
 
9. Way Forward
 
By prioritizing introspection, addressing internal shortcomings, strategically leveraging its geographical advantage, and actively engaging in maritime diplomacy, India can build stronger ties with the Maldives and other maritime neighbours. This proactive approach will not only solidify India's position in the Indian Ocean but also contribute to a more secure, stable, and prosperous region for all.
 
 
Source: The Hindu
 

NEW NPCI RULES

 

1. Context

In a relief to UPI payments market leaders, PhonePe and Google Pay, the National Payments Corporation of India (NPCI) has extended the deadline for Unified Payments Interface (UPI) to meet the market cap deadline of 30% to December 31, 2024. The earlier deadline to meet the market cap norm was December 31, 2022.

2. New NPCI Rules

  • NPCI (National Payments Corporation of India) has introduced an interchange charge for prepaid payment instrument (PPI) merchant transactions, but customers will not be charged.
  • Reports had suggested that a 1.1% interchange fee would apply to UPI transactions made through PPI instruments (wallets or cards) for transactions over Rs 2,000.
  • NPCI clarified that this charge applies only to PPI merchant transactions and not to normal bank-to-bank UPI payments.
  • PPI transactions involve online wallets (e.g., Paytm Wallet, Amazon Pay Wallet) and preloaded gift cards.
  • The change is in line with recent regulatory guidelines allowing PPI wallets to be part of the interoperable UPI system.

3. National Payments Corporation of India (NPCI)

The National Payments Corporation of India (NPCI) is an important financial institution in India that plays a pivotal role in the country's digital payments landscape. It was established in 2008 as a not-for-profit organization and is headquartered in Mumbai, Maharashtra. NPCI operates under the guidance and ownership of major Indian banks and financial institutions, including the Reserve Bank of India (RBI).

Key functions and responsibilities of the National Payments Corporation of India (NPCI) include:

  • Payment Systems Management: NPCI oversees and manages various retail payment systems in India, facilitating electronic funds transfer, retail payments, and settlement processes. Some of the prominent payment systems it operates include the Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), and Real-Time Gross Settlement (RTGS).
  • Digital Payments Innovation: NPCI is responsible for introducing and promoting innovative digital payment solutions in India. UPI, which allows for instant and secure peer-to-peer and peer-to-merchant transactions, is one of the most notable innovations developed and operated by NPCI.
  • Interbank Transactions: NPCI ensures interoperability among various banks and financial institutions, enabling seamless fund transfers and transactions between different banks' systems. This promotes financial inclusion and ease of digital transactions for consumers and businesses.
  • Retail Payments Infrastructure: The organization plays a crucial role in building and maintaining the infrastructure required for efficient retail payments and electronic fund transfers. This includes the development of payment interfaces, security protocols, and standards.
  • Promotion of Financial Inclusion: NPCI actively promotes financial inclusion by enabling access to digital payment systems for individuals in remote and underserved areas of India. It also supports government initiatives to disburse benefits and subsidies directly to the beneficiaries' bank accounts.
  • Security and Fraud Management: NPCI takes measures to enhance the security of electronic payment systems and implements fraud detection and prevention mechanisms to protect consumers and financial institutions from cyber threats and fraud.

4. What is UPI?

UPI, or Unified Payments Interface, is a real-time payment system and an instant interbank electronic funds transfer system in India. It enables individuals to make electronic payments and transfer funds between bank accounts using their mobile phones or computers. UPI was developed by the National Payments Corporation of India (NPCI) and is regulated by the Reserve Bank of India (RBI). Here are some key features and aspects of UPI:

  • Real-Time Transactions: UPI allows for instant and real-time transactions, enabling users to transfer money and make payments quickly, 24/7.
  • Bank-to-Bank Transfers: With UPI, users can transfer money directly from one bank account to another without the need for intermediary steps. This promotes seamless and efficient fund transfers.
  • Mobile Apps: UPI transactions are typically conducted through mobile apps provided by banks and third-party payment service providers. Users link their bank accounts to these apps to initiate and authorize payments.
  • Virtual Payment Addresses (VPAs): Instead of sharing sensitive bank account details, UPI users can create a unique VPA, which acts as an alias for their bank account. This enhances security and privacy during transactions.
  • QR Code Payments: UPI supports QR code-based payments, allowing users to scan QR codes at merchant outlets or websites to make payments instantly. This is commonly used for retail purchases.

5. Old UPI rules

Here are some key aspects of the UPI rules that were in place at that time:

  • Transaction Limits: UPI transactions were subject to certain daily and per-transaction limits. For example, individual users typically had a daily transaction limit, and there were limits on the maximum amount that could be transferred in a single transaction.
  • Authentication Methods: UPI transactions required authentication through methods such as Mobile Personal Identification Number (MPIN), UPI PIN, or biometric authentication, depending on the specific UPI app and the user's preferences.
  • Transaction Charges: Many banks and UPI service providers did not charge customers for making UPI transactions. However, some charges might apply for specific services, such as transferring money from a UPI-linked bank account to another bank account. These charges varied between banks and service providers.
  • Transaction Types: UPI supported various types of transactions, including person-to-person (P2P) transfers, person-to-merchant (P2M) payments, bill payments, and more. Users could also check their account balance and transaction history through UPI apps.
  • Security Measures: UPI transactions were secured through encryption and multi-factor authentication to protect user data and financial information.
  • UPI Apps: Numerous banks and third-party apps offered UPI services. Users could link their bank accounts to these apps and use them for making UPI transactions.
For Prelims: National Payments Corporation of India (NPCI), Prepaid payment instrument (PPI), Reserve Bank of India (RBI), Virtual Payment Addresses (VPAs), Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), and Real-Time Gross Settlement (RTGS).
For Mains: 1. Discuss the role and significance of the National Payments Corporation of India (NPCI) in the context of India's payment ecosystem. How has NPCI contributed to the country's progress towards a less-cash economy? (250 words).
 

Previous year Question

1. Consider the following statements: (UPSC 2017)
1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
2. NPCI has launched RuPay, a card payment scheme
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
Answer: C
 
2. With reference to digital payments, consider the following statements: (UPSC 2018)
1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.
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
Answer: A
Source: The Indian Express
 

VIKRAM SARABHAI

 
 
1. Context
 
Vikram Sarabhai, the father of India’s space programme, died on December 30, 1971, in Kovalam, Kerala, at the age of 52. During his lifetime, Sarabhai had 38 institutions that are now leaders in space research, physics, management, and performing arts
A detailed portrait of Dr. Vikram Sarabhai, the Indian physicist and space scientist, depicted in a formal setting. He is shown wearing a suit and tie, with a thoughtful expression and neatly combed hair, reflecting his visionary and intellectual personality. The background features subtle elements symbolizing space research, such as a globe, rocket models, and the logo of ISRO (Indian Space Research Organisation) prominently displayed, replacing any mention of NASA. The overall mood is inspiring, capturing his contributions to India's space program. The artwork has a realistic style with attention to facial features and professional attire.
 
2. Early Childhood and Life
 
  • Born to Ambalal and Sarla Devi, prominent textile mill owners in Ahmedabad, Sarabhai displayed his creative potential at an early age. At just 15, he constructed a functional model of a train engine with the assistance of two engineers, which is now preserved at the Community Science Centre (CSC) in Ahmedabad.
  • Sarabhai established the CSC to extend to other children the opportunities for hands-on experimental learning that he himself enjoyed. His daughter, Mallika Sarabhai, an acclaimed Indian classical dancer, reminisced about how, during their childhood, they were actively involved in every family decision.
  • This environment of freedom allowed them to develop strong convictions early in life and confidently express their opinions. They were never considered too young to engage with matters that influenced them directly
  • After completing his education at Gujarat University in Ahmedabad, Sarabhai pursued physics and mathematics at Cambridge University, supported by a reference from Rabindranath Tagore. However, his studies were interrupted by the outbreak of World War II, prompting his return to India.
  • He went on to complete his postgraduate studies at the Indian Institute of Science in Bengaluru under the mentorship of Dr. C.V. Raman, where he also crossed paths with Dr. Homi Bhabha. Later, he returned to Cambridge to earn a PhD in cosmic rays.
  • In 1942, amidst the Quit India Movement and the arrest of his eldest sister Mridula, Sarabhai married Indian classical dancer Mrinalini Swaminathan.
  • During his career, he established pivotal institutions such as the Physical Research Laboratory (PRL), the Indian National Committee for Space Research, and the Space Applications Centre in Ahmedabad, all of which became foundational to India’s space program and remain integral to its missions today.
  • Sarabhai's unique focus on research with practical applications set him apart as a visionary scientist and entrepreneur far ahead of his time
 
3. Space, Nuclear Science, broadcasting
 
  • Realizing Sarabhai's vision of exploring atmospheric regions for space research, the first sounding rocket was launched from Thumba, Kerala, in 1967.
  • In 1969, Sarabhai persuaded Parliament and the Planning Commission to adopt the concept of a "decade profile" for India's nuclear program. Following the untimely death of Homi Bhabha in a plane crash in 1966, Sarabhai assumed the role of chairman of the Atomic Energy Commission. During his tenure, he initiated discussions with NASA, which eventually laid the groundwork for the Satellite Instructional Television Experiment (SITE).
  • Launched in 1975 from Pij, a village in Gujarat's Kheda district, SITE was India's first Indo-US space collaboration, leveraging technology to broadcast educational television programs to rural areas. This initiative also inspired the creation of "Krishi Darshan," a Doordarshan program designed to assist farmers.
  • Sarabhai's research-oriented approach extended into business as well. In 1943, he established Sarabhai Chemicals in Vadodara, followed by the Sarabhai Research Centre and the Operations Research Group, reflecting his commitment to blending science with practical applications
 
4. Indian Space Program
 
  • One of Dr. Vikram Sarabhai's most notable achievements was the establishment of the Indian Space Research Organisation (ISRO). He successfully persuaded the government about the necessity of a space program for a developing nation like India, especially after the launch of the Russian Sputnik. Highlighting the importance of space exploration, Sarabhai once said:
  • "There are some who question the relevance of space activities in a developing nation. To us, there is no ambiguity of purpose. We do not have the fantasy of competing with the economically advanced nations in the exploration of the moon or the planets or manned space-flight.
  • But we are convinced that if we are to play a meaningful role nationally, and in the community of nations, we must be second to none in the application of advanced technologies to the real problems of man and society."
  • Dr. Homi Jehangir Bhabha, often referred to as the father of India’s nuclear program, supported Sarabhai in establishing India’s first rocket launching station. This facility was set up at Thumba, near Thiruvananthapuram, along the Arabian Sea, due to its proximity to the equator.
  • Following extensive efforts to develop the required infrastructure, including communication systems, personnel, and launch pads, the first rocket carrying a sodium vapor payload was successfully launched on November 21, 1963.
  • Sarabhai's collaboration with NASA in 1966 eventually led to the launch of the Satellite Instructional Television Experiment (SITE) from July 1975 to July 1976, although he was no longer alive to witness its success. He also initiated the project for India’s first satellite, Aryabhata, which was launched into orbit in 1975 from a Russian Cosmodrome.
  • Dedicated to improving science education, Sarabhai founded the Community Science Centre in Ahmedabad in 1966, which is now known as the Vikram Sarabhai Community Science Centre.
  • Born on August 12, 1919, in Ahmedabad, Gujarat, Sarabhai belonged to a prominent Jain business family. His father, Ambalal Sarabhai, was a wealthy industrialist who owned multiple mills in Gujarat. Vikram Sarabhai was one of eight children of Ambalal and Sarla Devi.
  • After completing his matriculation from Gujarat College in Ahmedabad, Sarabhai moved to England to study at St. John’s College, University of Cambridge, where he earned the Tripos in Natural Sciences in 1940.
  • With the onset of World War II, he returned to India and conducted research on cosmic rays at the Indian Institute of Science in Bengaluru under the mentorship of Nobel laureate Sir C.V. Raman. He returned to Cambridge in 1945 and was awarded a PhD in 1947 for his thesis on cosmic ray investigations in tropical regions
 
 
For Prelims: PSLV, GSLV, GSLV Mk-III, SSLV
For Mains: GS III- Science & Technology- Satellite Applications, Challenges and Solutions
 
 
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- staged 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
 
Source: Indianexpress
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