Editorials/Opinions Analysis For UPSC 24 January 2023

Editorials/Opinions Analysis For UPSC 24 January 2023

Contents

1. Income Inequality in India: To What Extent Does Taxation Contribute?  
2. The Ken-Betwa River Linking Project

Income Inequality in India: To What Extent Does Taxation Contribute?

Context

Despite three decades of economic liberalisation, India is still a country of contrasts, with significant growth and success coexisting with persistent poverty and deprivation.

Relevance:

GS Paper-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains Question

Adopting progressive taxation systems, decentralising investments, encouraging women’s entrepreneurship, and establishing strong regulations can be a start in addressing India’s growing inequalities. Discuss (250 words) 

Key Takeaways

• India’s growth continues to outperform economists and policymakers around the world.
• Between 2011-12 and 2019-20, India grew at a 5.4 percent annual rate, placing it among the world’s fastest-growing emerging economies.
• Even post-Covid, India has emerged as a global bright spot, with most international organisations projecting growth rates of 6.8 to 7.2% in 2022-23.
• This rapid growth, like that of capitalist-leaning economies, has resulted in a variety of inequalities, including income-based, gender-based, region-based, and inequalities affecting historically disadvantaged social groups.
• These inequalities are a result of the country’s rapid economic growth, and they highlight the need for more inclusive and equitable policies to address them.

Key findings

• According to Oxfam’s recent report, “Survival of the Richest,” the top 10% of the Indian population controls nearly 72% of the country’s wealth.
• Despite having the world’s highest number of poor people, approximately 228.9 million, India is estimated to produce 70 new millionaires per day.
• The tax burden is also distributed unevenly. Indirect taxes, such as the Goods and Services Tax, currently account for a sizable portion of tax revenue, with the poorest half of the population bearing nearly two-thirds of the GST burden.
• Gender-Based Discrimination: According to research, women have been systematically leaving the workforce over the last five decades, despite rising household incomes and narrowing educational gender gaps, resulting in the “missing working woman” phenomenon in India.
• According to WTW’s Gender Wealth Inequality Index, Indian women’s expected lifetime earnings are only 64% that of their male counterparts.
• India Is Not Alone in Its Experience: Throughout the world, countries have been grappling with growing inequalities, which have worsened in the aftermath of Covid-19.
  • According to the World Inequality Report 2022, income inequality in the United States is among the highest among developed countries:
  • By 2021, the top 10% of Americans will own 45 percent of total income, while the bottom 50% will own only 13 percent.
  • The situation is exacerbated in emerging economies such as Brazil, where the bottom 50% of the population earns 29 times less than the top 10%.

Promising Income Redistribution Measures

• Countries that have succeeded in reducing income disparities have typically had long-term political commitment, accompanied by targeted government interventions to address structural biases in economic superstructures.
  • Four types of income redistribution policies appear to be promising.
• Wealth Taxes: Countries such as Norway have had wealth taxes for over a century, and others such as Denmark are now introducing a “top-top tax,” which adds an extra 5% tax on incomes above $358,000.
• According to Oxfam estimates, a 5% additional tax on the world’s multimillionaires and billionaires could lift up to 2 billion people out of poverty and fund a hunger-fighting plan.
• A 3% wealth tax on India’s billionaires would be enough to fund the National Health Mission for five years.
• Decentralizing investments across geographical areas to address inequalities within a country.
• Almost all advanced economies experience significant regional disparities in economic performance, with growth and employment typically concentrated in large cities.
• Japan stands out among OECD countries for having the lowest levels of regional inequality, a testament to the success of its long-term strategy of ensuring strong connectivity and spreading out human capital investments across the country.
• Encouragement of female entrepreneurship, particularly in rural areas. In light of persistent gender disparities, women’s entrepreneurship is a critical mechanism for creating wealth accumulation opportunities.
• Bangladesh stands out among the Global South for its innovative programmes, such as the creation of an Equity and Entrepreneurship Support Fund (EEF) to assist women in the SME sector in obtaining low-cost loans.
• In addition, Women’s Entrepreneurship Development Units will be established at all Central Bank of Bangladesh branches to assist and train women entrepreneurs in accessing finance and improving product marketing.
• Such programmes are critical in an ecosystem where women account for only 7% of micro, small, and medium-sized businesses.
• Monopoly limits and regulatory frameworks are strengthened.
• Countries such as the United Kingdom have established strong regulatory institutions in infrastructure sectors such as the Office of Communications, the Office of Gas and Electricity Markets, and so on.
• It ensures that natural monopolies meet critical service delivery and performance requirements.
• Strong regulators limit monopolies’ ability to generate abnormal profits, thereby limiting wealth inequalities.

Conclusion

• Policymakers’ adoption of progressive taxation systems, decentralisation of investments, support for women’s entrepreneurship, and the implementation of strong regulations can be a first step toward addressing India’s growing inequalities in the long run.
• The goal of creating a $5 trillion economy in India by 2025 can only be realised if growth opportunities are spread out.
• Most importantly, India’s central and state governments, who gathered in Davos for the World Economic Forum’s Annual Meetings 2023, must question whether the investments being attracted can help in decentralising development and addressing inequalities.
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The Ken-Betwa River Linking Project

Context

The Ken-Betwa Link Project’s (KBLP) Steering Committee recently met for the third time in New Delhi.

Relevance

GS Paper-3: Different Types of Irrigation and Irrigation Systems; Conservation, Environmental Pollution and Degradation, Environmental Impact Assessment; Major Crops – Cropping Patterns in various parts of the country.

Mains Question

What is the Ken-Betwa link? Briefly discuss the concerns about the project. (250 words)

Background of River Interlinking:

• During a speech in 2002, then-Indian President Abdul Kalam mentioned the river linking project.
• He proposed it as a solution to India’s water problems, and an application was submitted to the Supreme Court requesting an order on the subject.
• The application was converted into a writ petition, and in October 2002, the Supreme Court ordered the Central Government to begin work on interconnecting the country’s major rivers.

What is the Ken-Betwa Connection?

• The Union Cabinet approved the KBLP in December 2021 at a total cost of Rs 44,605 crore.
• The national and Madhya Pradesh governments will collaborate on this project to connect the Ken and Betwa rivers so that the latter can water the Bundelkhand region of Uttar Pradesh.
• The linking canal will flow through Chhatarpur, Tikamgarh, and Jhansi districts, and will be fed by the new Daudhan Dam on the Ken, which will be built within the Panna Tiger Reserve.
• The project is expected to irrigate 6.3 lakh hectares of land each year.

National River Linking Project

• The National River Linking Project (NRLP), formally known as the National Perspective Plan, envisions the transfer of water from water’surplus’ basins where flooding occurs to water ‘deficit’ basins where drought/scarcity occurs, via inter-basin water transfer projects.
• The term’surplus’ refers to the extra water available in a river after it has met the needs of humans for irrigation, domestic consumption, and industries, thereby underestimating the river’s need for water.
• The term ‘deficit’ has also been viewed in terms of humans only, rather than from the river’s perspective, which includes many other factors.
• The National River Interlinking Project will connect 37 rivers across the country via a network of nearly 3000 storage dams to form a massive South Asian Water Grid.
• It consists of two parts:
• Himalayan Rivers Development Component: o 14 links have been identified under this component.
  • The goal of this component is to build reservoirs on the Ganga and Brahmaputra rivers, as well as their tributaries in India and Nepal.
  • The goal is to save monsoon flows for irrigation and hydropower generation, as well as for flood control.
  • The link will divert surplus flows from the Kosi, Gandak, and Ghagra rivers to the west.
  • A link between the Ganga and the Yamuna is also proposed in order to transfer excess water to drought-prone areas of Haryana, Rajasthan, and Gujarat.
• Peninsular Rivers Development Component, also known as the Southern Water Grid: o It consists of 16 links that aim to connect the rivers of South India.
  • It intends to connect the Mahanadi and Godavari rivers to feed the Krishna, Pennar, Cauvery, and Vaigai rivers.

Benefits of this project:

• The project will provide enormous benefits to the water-stressed region of Bundelkhand.
• Provide drinking water to 62 lakh people in the region.
• This project also includes a hydropower component that will generate 103 MW of electricity.
• A 27 MW solar power plant is also being considered.

Key Concerns:

1. Concerns of Hydrological and Ecological Experts: o Hydrological and ecological experts are sceptical, primarily because the government’s plan is based on a “surplus and deficit” model that they claim lacks scientific foundation.
   1. They are also concerned that the project will jeopardise Panna’s water security.
2. Legal Issues: o The approval of the Ken-Betwa Link Project by the Standing Committee of the National Board for Wildlife has not been demonstrated to be necessary for the improvement and better management of the wildlife therein, as provided in Section 35(6) of the Wildlife (Protection) Act, 1972.
   1. The project is also said to be awaiting full forest clearance.
   1. The National Green Tribunal is also hearing a challenge to its environmental approval.
3. Impact on the Panna Tiger Reserve
   1. Because of its deep gorges, Panna is an excellent tiger habitat that will be drowned if the new dam is built.
   1. An illegal approval granted by a national board will nullify all previous good, hard work.
   1. The government is also working on expanding the ‘Panna Tiger Landscape,’ but this is not the concession that many believe it to be.
4. Inadequate Water in Ken o There may not be enough water in the Ken, a non-perennial river, to meet the Betwa’s projected needs, let alone the needs of the Bundelkhand region.

Way Forward

• Independent hydrological investigation: The Ken should be subjected to a “independent” hydrological investigation. Older reports by state agencies had produced inconsistent, and thus untrustworthy, projections.
• Restoration of Chandel-period lakes: It would be more cost-effective and faster if the governments prioritised the restoration of Bunderlkhand’s former Chandel-period lakes and ponds, as well as the replication of successful field-pond schemes.

Conclusion

• Although it will pave the way for more interlinking of river projects to ensure that water scarcity does not become an impediment to the country’s development, it is necessary to revisit and address the many concerns that the feasibility studies may have overlooked.
• Choosing high-value crops that can increase the net value of crop production benefits faster than consumption water use increases.
• The project has the potential to exacerbate water conflicts between Madhya Pradesh and Uttar Pradesh.
• Let us hope that the upcoming Union budget for 2023-2024 does not include a textbook loss-loss project.