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Indian Express Editorial Analysis

3-February-2024

1. A reality check for budget

Topic: GS3 – Indian Economy – Government Budgeting.
This topic is relevant for both Prelims and Mains in the context of understanding the nuances of the budget and its impact on the economy 
Context:
  • In pre-election years, budgets often serve as a political tool, allowing governments to showcase their achievements and outline challenges for the future.
  • Finance Minister Nirmala Sitharaman, in the current budget, emphasizes the government’s accomplishments while falling short of providing clarity on spending priorities to address critical issues in the Indian economy.
More about the news: Political Posturing and Lack of Major Announcements:
  • Unlike the 2019 budget, which announced significant expenditure schemes, including the PM-KISAN with retrospective effect, the current budget refrains from major announcements.
  • The government’s spending priorities exhibit a conservative outlook, contributing to a reduction in the fiscal deficit.
  • However, the question remains whether these measures adequately tackle the pressing challenges faced by the Indian economy. 
Rural Distress and Economic Realities:
  • Despite claims of poverty reduction and economic rebound, the Indian economy grapples with severe rural distress, declining private investment, and employment challenges.
  • The data on real wages, particularly in agriculture, underscores the economic hardships faced by workers.
  • The reversal of the workforce transformation after 2017-18, with a surge in agricultural employment, signals deeper rural economic troubles.
Failure to Address Employment Quality and Incomes:
  • The rise in female employment is overshadowed by an increase in self-employment, declining employment quality, and diminishing earnings for women workers.
  • The budget’s failure to address the employment challenge, as seen in the increased number of workers returning to agriculture, contributes to declining cultivation income per worker, contradicting promises of doubling farmer incomes.
Neglect of Essential Spending and Decline in Social Welfare:
  • The withdrawal of essential spending in crucial sectors like agriculture, rural development, education, and health, amid a struggling rural economy, declining incomes, and looming inflation, exacerbates the challenges faced by the majority of the population.
  • Budget estimates for major heads show stagnation or decline in real terms, with a focus on cash transfers and subsidies rather than real investments.
Impact on Consumption Demand and Economic Growth:
  • Despite an increase in government transfers over the last five years, consumption demand has failed to respond, with real incomes remaining lower than 2018-19 levels.
  • The sluggish consumption growth poses a concern, and challenges persist in private investment and exports, requiring sustained government support.
  • However, the budget’s spending priorities seem more geared towards long-term promises than immediate provisioning.
Conclusion:
  • The pre-election budget reflects an acceptance of the limitations of public expenditure, evidenced by cutbacks in social welfare spending.
  • The neglect of critical sectors like agriculture and rural development is likely to push the rural economy into distress, hindering the revival of overall economic demand and private sector investment.
  • Unfortunately, the budget falls short of providing a true reflection of the economy’s state or outlining a comprehensive future governance agenda.
What is Interim Budget?
  • Interim Budget is a statement that comprises detailed documentation of every expense that the government will incur and every penny that the government will make in the coming few months until the new government comes into power. It also includes income and expenses, made in the previous fiscal year.
  • It is different from the regular budget on the following aspects:
    • The interim budget includes documentation of expenses until the upcoming elections are held, whereas a regular budget includes estimates of expenditure for the full year.
    • Also generally, major policy changes are not announced in the interim budget. 
  • An outgoing government presents only an interim Budget or seeks a vote on account.
  • ‘Vote on Account’ is not the same as an interim budget. An interim budget is a comprehensive set of accounts that includes both expenditure and receipts, whereas a “Vote on Account” simply addresses the expenditure side of the government budget.
PYQ: One of the intended objectives of Union Budget 2017-18 is to ‘transform, energize and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective. (250 words/15m) (UPSC CSE (M) GS-3 2017)
Practice Question:  Discuss the implications of the recent pre-election budget on the Indian economy, focusing on its impact on rural distress, declining private investment, and employment challenges. (150 words/10 m)

2. The future of water

Topic: GS3 – Environment – Conservation
This topic is relevant for Mains in the context of water scarcity, climate change impact, and the potential commodification of water.
Context:
  • In the realm of stock trading, the conventional notion involves the buying and selling of shares in companies.
  • However, a paradigm shift occurred when revelations about Wall Street’s nascent water futures market surfaced.
  • This analysis delves into the implications of this relatively recent phenomenon, focusing on the launch of the world’s first water futures contract by the CME Group in California, and the subsequent concerns raised by experts and authorities.
More about the news: Water as a Commodity: Concerns and Critiques:
  • The CME Group’s introduction of the water futures contract aimed at managing risk and balancing water supply and demand has raised eyebrows.
  • Critics, including UN Special Rapporteur Pedro Arrojo-Agudo, express apprehension, arguing that treating water as a tradable commodity akin to gold or oil risks marginalizing vulnerable sectors, particularly small-scale farmers.
  • The concerns are rooted in the fear that hedge funds, banks, and large industrial players may exploit water trading, potentially undermining its status as a public good.
Water Scarcity: A Unique Challenge:
  • Unlike conventional commodities, water scarcity results from factors such as overuse of groundwater, climate change, and rapid urbanization.
  • The UN’s 2023 World Water Development Report highlights that a significant portion of the global population lacks access to safe drinking water, with India facing a critical water-stress situation.
  • As water scarcity intensifies, questions arise about controlling access, preventing privatization, and ensuring affordability, particularly for vulnerable populations.
Constitutional Safeguards and Water Distribution:
  • The Indian Constitution addresses water-related concerns, emphasizing the importance of equitable distribution.
  • Article 262 empowers Parliament to adjudicate inter-State water disputes, leading to the enactment of the Inter-State Water Disputes Act, 1956.
  • The judiciary, notably in cases like the Cauvery water disputes, has played a vital role in determining water allocation.
  • The Constitution, through Article 21, recognizes the right to clean water as part of the right to life, establishing a fundamental right for every Indian to access safe and clean water.
Water Pricing and Constitutional Principles:
  • In India, water pricing is determined by individual states, guided by their municipal frameworks.
  • However, constitutional principles, particularly Article 39 in the Directive Principles of State Policy, emphasize the need to distribute material resources for the common good.
  • This constitutional safeguard may serve as a bulwark against pricing water beyond the reach of the average Indian, providing a counterbalance to potential privatization efforts.
The Privatization Debate: Balancing Access and Affordability:
  • The push for water sector reforms, often synonymous with privatization, raises concerns about affordability and equitable access.
  • The analysis explores the implications of such reforms, including tariff increases, retrenchment, full-cost recovery, and public-private partnerships.
  • Emphasizing the constitutional protection of water as a natural resource, the article advocates for a balanced approach that ensures water remains accessible to all, aligning with the larger common good.
Conclusion:
  • As the global water landscape evolves with the emergence of water futures trading, the analysis concludes by emphasizing the need for a cautious approach.
  • Balancing the economic aspects of water trading with the constitutional principles of equitable distribution and accessibility is crucial to prevent water from becoming an unaffordable commodity.
  • The constitutional safeguards, coupled with responsible governance, can shape the future of water as a protected natural resource, ensuring its availability for the larger common good.
UN’s 2023 World Water Development Report
Major findings of the report:
  • Global:
    • Globally, two billion people do not have safe drinking water and 3.6 billion lack access to safely managed sanitation
    • The global urban population facing water scarcity is projected to increase from one-third (2016) to nearly half of the global urban population in 2050, with India projected to be the most severely affected.
  • India:
    • 80% of people living under water stress lived in Asia; in particular, northeast China, as well as India and Pakistan.
Recommendations:
  • Smart management and conservation of the world’s water resources means bringing together governments, businesses, scientists, civil society and communities – including indigenous communities – to design and deliver concrete solutions.”
  • Water-energy-food nexus is critical in a transboundary context E.g. transboundary water cooperation arrangement established by the Mahakali Treaty (Pancheshwar Multipurpose Project) between India and Nepal, which aims to achieve water and energy security for both parties.
  • Partnerships that focus on knowledge co-creation instead of knowledge transfer aim to embrace the diversity of expertise and experience within a knowledge system.
  • Water resources management practices should incorporate traditional elements: E.g. paar systems in western Rajasthan, India, and amunas in Peru
  • Use of technology: Google began a flood forecasting initiative in 2018, with the goal of preventing catastrophic damage
PYQ: With reference to ‘Water Credit’, consider the following statements: (2021) 1) It puts microfinance tools to work in the water and sanitation sector. 2) It is a global initiative launched under the aegis of the World Health Organization and the World Bank. 3) It aims to enable the poor people to meet their water needs without depending on subsidies. 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 Ans: (c)
Practice Question:  Evaluate the ethical considerations surrounding the commodification of water and its potential impact on equitable access. (150 words/10 m)

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