Editorials/Opinions Analysis For UPSC 26 August 2023

Editorials/Opinions Analysis For UPSC 26 August 2023

Contents

1. Cleantech Enabling India’s Inclusive Green Future
2. Assessing India’s Fiscal Federalism for Inclusive Growth

Cleantech Enabling India’s Inclusive Green Future

Context:

• Prime Minister Narendra Modi recently reaffirmed India’s commitment to combating climate change while making substantial developmental strides in his Independence Day speech.
• The cleantech sector offers a promising trajectory that harmonises environmental goals with developmental needs, providing an opportunity to revolutionise youth employment, empower women, and enhance agricultural diversification.
• India’s approach to climate action emphasises alignment with developmental aspirations and economic growth, underpinning the notion that effective climate measures must be inclusive and transformative.

Relevance: GS Paper 3 – Sustainable Development

Mains Question

How, in particular through improving rural lives and agricultural diversification, can cleantech solutions help India achieve its dual objectives of sustainable development and climate action? (150 Words)

Green Economy:

A green economy is one that is low in carbon emissions, resource-efficient, and socially inclusive, according to the United Nations Environment Programme (UNEP). It encourages a course of development that views natural capital as a crucial economic asset and a source of positive social outcomes.

The Function of Cleantech in India’s Green Economy

• Cleantech solutions serve as a ray of hope, lighting a path where environmental goals and aspirations for development can coexist harmoniously.
• •For instance, the construction of solar parks or electric vehicle charging stations helps to both combat climate change and build out vital infrastructure in developing nations. A concrete illustration of the two advantages inherent in the cleantech paradigm is the revival of millets, which are frequently referred to as “nutri-cereals,” which not only strengthen agricultural resilience but also increase farm earnings in rain-fed locations.
• It will take a deliberate effort to incorporate these solutions into the fabric of India’s development environment in order to translate the cleantech ethos into practical results for the young people looking for work, women pursuing economic possibilities, and farmers hoping to diversify their income sources.

Initiatives for Cleantech in Rural India

• In recent years, India’s rural interiors have seen a boom of cleantech efforts. Through these efforts, rural residents’ livelihoods have improved thanks to the power of cleantech solutions.
  • The Indian hinterlands are dotted with a wide variety of success stories, from Andhra Pradesh’s solar dryers turning extra tomatoes into sun-dried jewels to Maharashtra’s biomass-powered cold storages enabling lemon farmers to earn three to five times their initial returns. Additionally, solar silk reeling equipment in Odisha has reduced the laborious work of thigh-reelers while tripling their pay. These are just a few of the more than 50,000 cases where cleantech has helped rural areas create jobs and revenue.
  • To realise its full potential, this silent revolution needs a structural boost. With 120 million farmers and 34 million microbusinesses, the rural sector struggles with high diesel dependence and erratic access to energy. Renewable energy-powered cleantech solutions have the transformative power to reduce the imports of diesel, stop food from spoiling, improve rural livelihoods, and simultaneously open up a $50 billion investment opportunity.

Amounts and Potential

• According to intriguing study by the Council on Energy, Environment, and Water (CEEW), just twelve cleantech solutions—including solar pumps, cold storages, charkhas (spinning wheels), and looms—could potentially have a significant influence on an astounding 37 million livelihoods.
  • This corresponds to about 16% of India’s rural population. A three-pronged approach is essential to take this movement from tens of thousands to tens of millions.

Utilising Current Government Initiatives

• The first aspect focuses on utilising current government initiatives that support livelihoods. Adoption of cleantech solutions can be aided by initiatives like the Pradhan Mantri MUDRA Yojana, which provides microenterprise loans without collateral.
• Solutions like solar dryers, energy-efficient food processors, and solar grain mills may be supported under the Pradhan Mantri Formalisation of Micro Food Processing firms (PM-FME) scheme, which aims to advance technology among micro food firms. The Pradhan Mantri Matsya Sampada Yojana, among other programmes, can be used to provide fishing communities with solar refrigerators and dryers.Additionally, the Agriculture Infrastructure Fund, which has a lot of unrealized potential, might accelerate the adoption of cold storage systems powered by biomass.
• facilitating Significant Financial Support for Cleantech Solutions The second component focuses on facilitating significant financial support for cleantech solutions.Given the unique nature of cleantech solutions and their accompanying financial flows, this entails improving bankers’ competence for credit evaluation.
• Active coordination with bankers is needed to develop loan products that are in line with customers’ cash flow situations. Risk mitigation measures, such as partial guarantees, are essential in the early phases to support market confidence. Notably, this strategy produced significant results for the CEEW and Villgro programme “Powering Livelihoods,” which obtained over 300 loans for cleantech solutions in rural areas.

Establishing a Vast Ecosystem

• The third component emphasises the value of multi-actor alliances involving financiers, market-linkage players, manufacturers, distributors, and technology inventors.
• The broad adoption of cleantech solutions depends on a healthy environment. Manufacturers of cleantech products must contend with issues including low consumer density, high customer acquisition costs, and limited product knowledge, which calls for localised user touchpoints.
• By working together, distributors and producers can close these gaps, assuring market connections as well as product accessibility and post-sale assistance.

Conclusion

India has lofty goals for a future that is clean and green. India can accomplish an inclusive green revolution by concentrating on cleantech solutions to support livelihoods, especially in rural areas. India’s rural environment is about to undergo a change thanks to cleantech’s potential to advance both development and climate action at once. The country can set the stage for a future in which cleantech not only influences rural livelihoods but also supports a greener world for future generations through strategic alignment with existing programmes, comprehensive finance, and ecosystem formation.

Assessing India’s Fiscal Federalism for Inclusive Growth

Context

For more than 70 years, India’s constitution, a “holding together federation” with unitary inclinations, has withstood the test of time.However, a reevaluation is necessary given how India’s fiscal federalism is developing. The interaction between fiscal policies and federalism demands a new viewpoint in light of India’s shift from a planned economy to a market-oriented one and its experiences with reforms like multi-tier fiscal systems and the Goods and Services Tax (GST).

Relevance:

• GS Paper 2 -Polity- Fiscal Federalism
• GS Paper 3- Economy- Inclusive growth

Mains Question

What measures can India take to resolve the issues brought about by off-budget borrowing practises and create a system of financial reporting that is more open at all levels of government? (250 Words)

Fiscal Federalism:

Financial ties between the federal government and the state governments are referred to as fiscal federalism. It focuses on how money is distributed among several vertical levels of the government administration.

Intergovernmental Transfers Focused on Equity

The intergovernmental transfer mechanism in India needs to improve. While the propertied class frequently benefits from market-mediated growth processes, India’s experience has been remarkably different. According to research by Chancel and Piketty, the top 1% of earnings in India had less than 21% of the nation’s income in the 1930s, a sharp decline to 6% in the early 1980s, and a sharp increase to 22% during the liberalisation phase.The amount of the divisible pool has decreased under the current situation, which is characterised by tax breaks and other benefits that disproportionately favour the wealthy.

In search of equity

• An increasingly varied tendency is highlighted by a study that looks at the per capita income convergence trajectory across important Indian states. From 0.186 in 1991–1992 to 0.231 in 2020–21, the standard deviation of log per capita income has increased, reflecting a compound annual growth rate (CAGR) of 0.72%. Another study, which also uses the Human Development Index (HDI) technique, shows that in the post-reform era, HDI values across 15 states indicate convergence.
• In 1991, the HDI’s standard deviation was 0.611; in 2018, it was 0.268. Notably, there has been a declining convergence rate since 2005, when Fiscal Responsibility and Budget Management (FRBM) law was passed, with a CAGR of -2.85%. This makes advancing equity an important concern, and HDI may be a strong candidate for horizontal tax devolution.
• Reviewing the Division of Powers The time has come to review how powers, duties, and obligations are divided up among the various levels of government. India’s political scene has changed from one-party rule following independence to a thriving multi-party system.State burdens have also been increased by federal laws including the National Rural Employment Guarantee Act, Right to Education Act, and National Food Security Act. Given the evolution of governance, society, and technology, it is imperative to reevaluate the allocation of authorities, duties, and responsibilities.

The Functional Allocation Principle and Subsidiarity

• The 73rd and 74th Constitutional Amendments provided an opportunity for such a reevaluation, but operational clarity remained elusive. • Applying the subsidiarity principle to the Government of India Act 1935, the foundation for India’s constitution-making, should be done. The efficiency of Schedules XI and XII was weakened by the introduction of those schedules without specific breakdowns. It is crucial to create a new local list describing the functional and budgetary obligations of local governments.
• The third tier of government, which includes municipalities and panchayat raj institutions, deserves significant consideration. A significant vacuum is created by the lack of a standard financial reporting system for all governmental levels.
• Even when policymakers refer to them as “institutions of self-government,” they frequently refer to them as “local bodies,” failing to give them the assistance they require. Closing this gap and guaranteeing uniform financial reporting methods can strengthen the foundation of local democracy.
• Restricting Off-Budget Borrowing Restricting Off-Budget Borrowing is a key component of fiscal federalism. Off-budget borrowings present transparency difficulties because they are unreported and unchecked.
• While States abide by fiscal restraint through Article 293(3) and the FRBM Act, the Union occasionally circumvents such controls.
• Both the Union and States engage in such practises, with central public sector undertakings and special purpose vehicles raising resources and burdening governments with repayment liabilities. All governmental levels must have open reporting processes.

Conclusion

The 16th Finance Commission ought to oversee a thorough reevaluation of India’s evolving fiscal federalism. The fiscal federalism strategy in India needs to be adjusted in light of the transition from planned to market economies, shifting fiscal paradigms, and various economic changes. The crucial areas that require immediate attention include ensuring equity, reviewing the allocation of powers and functions, bolstering the third tier, and reducing uncontrolled borrowing practises. India may better connect its fiscal policies with the values of inclusion and balanced development by reevaluating these dynamics.