Daily Current Affairs 06.07.2022 (Centre asks States to boost paddy sowing, Navy eyes govt. route to buy carrier-based jets, PMI pegs services growth at 11-year high, The relentless march of FPIs to the exit gate, The status of China’s Belt and Road Initiative in South Asia, Indian aviation needs a strong and steady tailwind, Handcuffing, a judicial tap, and the long arm of the law, A matter of import)

Daily Current Affairs 06.07.2022 (Centre asks States to boost paddy sowing, Navy eyes govt. route to buy carrier-based jets, PMI pegs services growth at 11-year high, The relentless march of FPIs to the exit gate, The status of China’s Belt and Road Initiative in South Asia, Indian aviation needs a strong and steady tailwind, Handcuffing, a judicial tap, and the long arm of the law, A matter of import)


1. Centre asks States to boost paddy sowing

There has been a 27% fall in the sown area to 43.45 lakh hectares till July 1 this season, show data

The Centre has asked the State governments to take steps to increase the sowing of paddy in the wake of reports that the sown area has shrunk.

At a conference of State Food Ministers on food and nutrition security of India here on Tuesday, Union Minister of Food and Public Distribution Piyush Goyal said the international demand for rice and wheat had increased, and asked the States to increase the sowing of paddy in this kharif season.

The Centre’s data say that paddy has been sown on 43.45 lakh hectares till July 1, which is 27.05% less than the 59.56 lakh hectares during the corresponding period of 2021. “We request the States to increase the sowing of rice,” Mr. Goyal said. He added that when wheat sowing began in October during the rabi season, the States should increase the sowing as demand for wheat had increased globally.

Meanwhile, the Uttar Pradesh and Gujarat governments urged the Centre not to supply wheat in place of rice. Gujarat Food Minister Nareshbhai Patel and Uttar Pradesh’s Minister of State for Food & Civil Supplies Satish Chandra Sharma urged the Centre to reconsider the decision to replace wheat with rice. “In areas like Saurashtra, people prefer wheat to rice. The Centre has assured us they will consider replacing rice with ragi and other millets,” Mr. Patel told The Hindu. Kerala Food Minister G.R. Anil said the State had requested increased rice allocation.

The meeting discussed nutritional safety, particularly on fortified rice. Mr. Anil said though Kerala was ready to distribute fortified rice through its public distribution outlets, the State preferred indigenous varieties of rice which naturally contained nutrients. “We have asked the government to consider such varieties of rice rather than going for fortified rice,” he added.

Mr. Goyal pulled up the States for not submitting their food Bills to the Centre. He said some States had submitted Bills since 2004 and said all Bills must be cleared by August 15. States such as Bihar, Punjab and Uttar Pradesh cited delays in audit clearance. Mr. Goyal offered them assistance in taking up the matter with the Comptroller and Auditor-General. He criticised States such as Telangana, West Bengal and Rajasthan which did not send Ministers to the conference.

NFSA ranking

Odisha secured the first rank for the implementation of the National Food Security Act (NFSA). Uttar Pradesh and Andhra Pradesh stood second and third, respectively, in the index prepared by the Centre, which was released by Mr. Goyal. Among the special category States, Tripura secured the first rank. Himachal Pradesh and Sikkim stood at the second and third positions.

Mr. Goyal said the ranking would lead to a healthy competition among the States. The Centre would launch a similar ranking for procurement too. “The Index denotes only the efficiency of TPDS operations, it does not reflect the level of hunger, if any, or malnutrition, or both, in a particular State or Union Territory,” the index report said.

The findings showed that most States fared well in digitisation, Aadhaar seeding, and e-POS installation. “However, States and Union Territories can improve their performance in a few areas. Exercises such as conducting and documenting social audits thoroughly and operationalising functions of State food commissions across States and Union Territories will further bolster the true spirit of the Act,” the report added.

Cropping Patterns and Major Crops of India

Two-thirds of India’s population is engaged in agricultural activities. It is a primary activity, which produces food grains and raw materials for industries. India is geographically a vast country so it has various food and non-food crops which are cultivated in three main cropping seasons which are rabi, kharif and zaid.

Major crops can be classified into-

  • Food crops- Rice, Wheat, Millets, Maize and Pulses.
  • Cash crops- Sugarcane, Oilseeds, Horticulture crops, Tea, Coffee, Rubber, Cotton and Jute.

Cropping Seasons

Major Food Crops


  • Temperature: Between 22-32°C with high humidity.
  • Rainfall: Around 150-300 cm.
  • Soil Type: Deep clayey and loamy soil.
  • Top Rice Producing States: West Bengal > Punjab > Uttar Pradesh > Andhra Pradesh > Bihar.
  • It is the staple food crop of majority of Indian people.
  • India is the second largest producer of rice in the world after China.
  • In states like Assam, West Bengal and Odisha, three crops of paddy are grown in a year. These are Aus, Aman and Boro.
  • National Food Security Mission, Hybrid Rice Seed Production and Rashtriya Krishi Vikas Yojana are few government initiatives to support rice cultivation.


  • Temperature: Between 10-15°C (Sowing time) and 21-26°C (Ripening & Harvesting) with bright sunlight.
  • Rainfall: Around 75-100 cm.
  • Soil Type: Well-drained fertile loamy and clayey loamy (Ganga-Satluj plains and black soil region of the Deccan)
  • Top Wheat Producing States: Uttar Pradesh > Punjab > Madhya Pradesh > Haryana > Rajasthan.
  • India is the second largest producer after China.
  • This is the second most important cereal crop and the main food crop, in north and north-western India.
  • Success of Green Revolution contributed to the growth of Rabi crops especially wheat.
  • Macro Management Mode of Agriculture, National Food Security Mission and Rashtriya Krishi Vikas Yojana are few government initiatives to support wheat cultivation.

Millets (Nutri-Cereals)

  • Temperature: Between 27-32°C
  • Rainfall: Around 50-100 cm.
  • Soil Type: Can be grown in inferior alluvial or loamy soil because they are less sensitive to soil deficiencies.
    • Jowar- Rain-fed crop grown in the moist areas with less or no irrigation.
    • Bajra- Sandy soils and shallow black soil.
    • Ragi- Red, black, sandy, loamy and shallow black soils. (dry regions)
  • Top Millets Producing States: Rajasthan > Karnataka > Maharashtra > Madhya Pradesh > Uttar Pradesh
    • Jowar: Maharashtra > Karnataka > Madhya Pradesh > Tamil Nadu > Andhra Pradesh.
    • Bajra: Rajasthan > Uttar Pradesh > Gujarat > Madhya Pradesh > Haryana.
  • These are also known as coarse grains, which have high nutritional value. Ragi is very rich in iron, calcium, other micro nutrients and roughage.
  • Jowar is the third most important food crop with respect to area and production.
  • National Agricultural Insurance Scheme, Initiative for Nutritional Security through Intensive Millets Promotion are examples of government’s efforts to support millet production.


  • Temperature: Between 21-27°C
  • Rainfall: High rainfall.
  • Soil Type: Old alluvial soil.
  • Top Maize Producing States: Karnataka > Maharashtra > Madhya Pradesh > Tamil Nadu > Telangana
  • India is the seventh largest producer worldwide.
  • It is used both as food and fodder.
  • Use of modern inputs such as High-Yielding Variety seeds, fertilisers and irrigation have contributed to the increasing production of maize.
  • Technology Mission on Maize is one of the government’s initiatives for mazie.


  • Temperature: Between 20-27°C
  • Rainfall: Around 25-60 cm.
  • Soil Type: Sandy-loamy soil.
  • Top Pulses Producing States: Madhya Pradesh > Rajasthan > Maharashtra > Uttar Pradesh > Karnataka.
  • India is the largest producer as well as the consumer of pulses in the world.
  • These are the major source of protein in a vegetarian diet.
  • Major pulses grown in India are tur (arhar), urad, moong, masur, peas and gram.
  • Being leguminous crops, all these crops except arhar help in restoring soil fertility by fixing nitrogen from the air. Therefore, these are mostly grown in rotation with other crops.
  • National Food Security Mission for Pulses, Pulses Development Scheme and Technological Mission on Pulses are few of the government’s plans to support pulses production.

Major cash crops in various parts of the country


Sugarcane (Saccharum officinarum) family Gramineae (Poaceae) is a widely grown crop in India. It employs over a million people directly or indirectly besides contributing significantly to the national exchequer.

  • Sugarcane growing countries of the world lay between the latitude 36.7° north and 31.0° south of the equator extending from tropical to subtropical zones.

Sugar cane originated in New Guinea where it has been known for thousands of years.

Sugar cane plants spread along human migration routes to Asia and the Indian subcontinent. Here it cross-bred with some wild sugar cane relatives to produce the commercial sugar cane we know today.

Important regions/ zones for sugarcane cultivation in India

Broadly there are two distinct agro-climatic regions of sugarcane cultivation in India, viz., tropical and subtropical. However, five agro-climatic zones have been identified mainly for varietal development. They are (i)North Western Zone (ii) North Central Zone (iii) North Eastern Zone (iv) Peninsular Zone (v) Coastal Zone.

Tropical Sugarcane region

The tropical sugarcane region consists of sugarcane agro-climatic zone 4 (peninsular zone) and 5(Coastal zone) which includes the states of Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Gujarat, Madhya Pradesh, Goa, Pondicherry, and Kerala.

Sub-tropical sugarcane region: Around 55 percent of the total cane area in the country is in the sub-tropics. U.P, Bihar, Haryana, and Punjab come under this region.

Crop distribution: Sugarcane growing countries of the world are lying between the latitude 36.70 north and 31.00 south of the equator extending from tropical to sub-tropical zones. In India sugarcane is cultivated all over the country from latitude 80 N to 330 N, except in cold hilly areas like Kashmir valley, Himachal Pradesh and Arunachal Pradesh.

Climatic requirement

The different critical stages are germination, tillering, early growth, active growth, and elongation.

  • The optimum temperature for sprouting (germination) of stem cuttings is 32°C to 38°C.
  • It slows down below 25°C and reaches a plateau between 30°-34°C.
  • Temperatures above 38°C reduce the rate of photosynthesis and increase respiration.
  • For ripening, however, relatively low temperatures in the range of 12°C to 14°C are desirable.

Reduction in yield of sugarcane due to rise in temperature

The sugarcane productivity and juice quality are profoundly influenced by weather conditions prevailing during the various crop-growth sub-periods.

  • Sugar recovery is highest when the weather is dry with low humidity; bright sunshine hours, cooler nights with wide diurnal variations, and very little rainfall during the ripening period.
  • These conditions favor high sugar accumulation.
  • The climatic conditions like very high temperatures or very low temperatures deteriorate the juice quality and thus affecting the sugar quality.
  • Favorable climates like warm and humid climates favor the insect pests and diseases, which cause much damage to the quality and yield of its juice and finally sucrose contents.


In colonial India, the British had to import tea from China, which caused huge dents in their treasury, so the East India Company started tea plantations in Assam. As the production of tea increased, India started exporting tea to the rest of the world. This contributed to the nation’s economy. By the 1850s, India became one of the biggest tea producers in the world. After independence, local tea brands were introduced as beverages to the masses.

India is the second-largest tea producer in the world, right behind China.

Climatic requirements

  • Requires temperature between 20-30°C.
  • Rainfall is around 150-300 cm.
  • Deep and fertile well-drained soil, rich in humus and organic matter.


Coffee was initially brought from Yemen and introduced to the Baba Budan Hills. Hills with a well-defined shade canopy, comprising evergreen leguminous trees provide the optimal condition for coffee cultivation which is why it is mainly concentrated in the hilly regions.

Indian variety of coffee ‘Arabica’ is famous worldwide.

India cultivates all of its coffee under a well-defined two-tier mixed shade canopy, comprising evergreen leguminous trees. Nearly 50 different types of shade trees are found in coffee plantations. Shade trees prevent soil erosion on a sloping terrain; they enrich the soil by recycling nutrients from deeper layers, protect the coffee plant from seasonal fluctuations in temperature, and play host to diverse flora and fauna.

Coffee plantations in India are essential spice worlds too: a wide variety of spices and fruit crops like pepper, cardamom, vanilla, orange, and banana grow alongside coffee plants.

India’s coffee-growing regions have diverse climatic conditions, which are well suited for the cultivation of different varieties of coffee. Some regions with high elevations are ideally suited for growing Arabicas of mild quality while those with warm humid conditions are best suited for Robustas.


Jute is an important natural fiber crop in India next to cotton. In trade and industry, jute and Mesta crop together known as raw jute as their uses are almost the same. Raw jute plays an important role in the country’s economy.

  • Raw jute was originally considered a source of raw material for packaging industries only.
  • But it has now emerged as a versatile raw material for diverse applications, such as textile industries, paper industries, building, and automotive industries, use as soil savers, use as decorative and furnishing materials, etc.
  • Raw jute being a bio-degradable and annually renewable source, it is considered an environment-friendly crop and it helps in the maintenance of the environment and ecological balance.
  • A further attraction of Jute lies in its easy availability, and inexhaustible quantity at a comparatively cheaper rate.
  • Moreover, it can easily be blended with other natural and manmade fibers.

Jute cultivation is mainly concentrated in eastern and northeastern India while mesta cultivation is spread almost throughout the country. The crop can be grown in low, medium, and high land situations, with both moisture stress and water stagnating condition.

Climatic conditions:

  • Temperature: Between 25-35°C
  • Rainfall: Around 150-250 cm
  • Soil TypeWell-drained alluvial soil


India has the distinction of having the largest area under cotton cultivation which is about 37% of the world’s area under cotton cultivation. Cotton is one of the most important fibers and cash crops of India and plays a
the dominant role in the industrial and agricultural economy of the country.

In India, there are ten major cotton-growing states which are divided into three zones, viz. north zone, central zone, and south zone. The North zone consists of Punjab, Haryana, and Rajasthan. The central zone includes Madhya Pradesh, Maharashtra, and Gujarat. The South zone comprises Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu.

Besides these ten States, cotton cultivation has gained momentum in the Eastern State of Orissa. Cotton is also cultivated in small areas of non-traditional States such as Uttar Pradesh, West Bengal & Tripura.

Climatic conditions:

  • Cotton is a tropical or sub-tropical crop grown in semi-arid areas of the country (mainly in the Deccan Plateau).
  • A hard frost is injurious to cotton cultivation and it requires at least 210 frost-free days.
  • Only light rainfall (50 to 100 cm) is preferred. Cotton can also be cultivated under irrigated conditions.
  • It requires high temperature and bright sunshine for its growth. Cotton requires a clear sky during the flowering stage.

Cropping patterns in India

The cropping pattern in India is determined mainly by rainfall, climate, temperature, and soil type.

Cropping Pattern describes the proportion of area under cultivation of different crops at a point of time, changes in this distribution over time, and factors determining these changes.

The multiplicity of cropping systems has been one of the main features of Indian agricultureand it is attributed to rain-fed agriculture and the prevailing socio-economic situations of the farming communities.

Two distinct irrigated cropping systems emerged in India:

  1. One is the Indo-Gangetic Plain region comprising the states of Punjab, Haryana, the plains of Uttar Pradesh, Bihar, and the plains of Jammu & Kashmir.
  2. The other ecosystem may be carved out of coastal areas of Andhra Pradesh and Tamil Nadu.

Based on homogeneity and commonness, major crop regions in India may be divided as follows:

  • Rice Region
  • Wheat Region
  • Jowar-Bajra Region
  • Cotton Region
  • Millet and Maize Region
  • Fruit and Spice Region

Based on combinations of crops grown following cropping systems exist in India:

Mono-cropping: Mono-cropping is when the field is used to grow only one crop season after season. This is harmful to soil health.

Crop Rotation:  Crop Rotation means changing the type of crops grown in the field each season or each year (or changing from crops to fallow). Crop rotation improves the soil structure and fertility, and because it helps control weeds, pests, and diseases.

Sequential Cropping: Sequential Cropping involves growing two crops in the same field, one after the other in the same year.

Intercropping:  Intercropping means growing two or more crops in the same field at the same time.

Mixed Intercropping: Planting the main crop in rows and then spreading the seeds of the intercrop (such as a cover crop) in between is called mixed intercropping.

Row Intercropping: Planting both the main crop and the intercrop in rows. The rows make weeding and harvesting easier than with mixed intercropping.

Stir Cropping: Stir Cropping involves planting broad strips of several crops in the field.

2. Navy eyes govt. route to buy carrier-based jets

Pact with France or U.S. likely as India’s indigenous aircraft carrier gets ready for commissioning

The Navy is looking for an Inter-Governmental Agreement (IGA) with either France or the U.S. to procure new fighter jets to operate from its aircraft carriers, as the country’s first indigenous aircraft carrier Vikrant is all set to be commissioned next month coinciding with 75 years of Independence, naval officials said on Tuesday.

The Navy also has a Russian-origin carrier, INS Vikramaditya, in service.

“There has been an operational demo by Dassault Rafale and Boeing F-18. Trials are done. Because the Navy required aircraft which can take off from its carriers…The report is yet to come in on the op-demo. Once that comes in, we will do a staff evaluation. Preferably it will be an Inter-Governmental Agreement (IGA) case. That is the recommendation from the Navy,” said Commodore Pankaj Chauhan, in-charge of Air Acquisition at the Naval Headquarters.

Elaborating, Vice Chief of the Naval Staff Vice-Admiral S.N. Ghormade said the trials of Rafale and F-18 Super Hornet had been done to prove their capability to operate from aircraft carriers.

“Our aim is indigenisation. We have a twin-engine deck-based fighter plan but it will take some time,” he said, referring to the new indigenous jet under development, adding in the interim they are looking for an aircraft from among the two to meet their requirements.

“The report is yet to come in on the operational demonstration,” he stated on the selection process. In 2017, the Navy floated the Request for Information (RFI) to procure 57 twin-engine carrier fighter which is now set to be downsized to 26, including a few twin-seater trainer variants. A final decision on the number would be taken soon, officials said.

Vikrant, constructed by Cochin Shipyard Ltd, was set to go for the final round of sea trials this weekend, officials said.

After that it would be handed over to the Navy, which would conduct the aviation trials that would go on for over a year. The carrier is set to be commissioned in early August for which the dates are being worked out.

Types of Warships in the 21st Century

Modern warships are generally divided into seven main categories, which are:

  • Aircraft carriers
  • Cruisers
  • Destroyers
  • Frigates
  • Corvettes
  • Submarines
  • Amphibious assault ships.

A brief explanation about these types of ships will be given below:

1. Aircraft Carriers: An aircraft carrier is a warship that serves as a seagoing airbase, equipped with a full-length flight deck and facilities for carrying, arming, deploying, and recovering aircraft. Typically, it is the capital ship of a fleet, as it allows a naval force to project air power worldwide without depending on local bases for staging aircraft operations.

2. Cruisers: A cruiser is a type of warship. Modern cruisers are generally the largest ships in a fleet after aircraft carriers and amphibious assault ships, and can usually perform several roles.

As of 2021 only two countries operate vessels formerly classed as cruisers: the United States and Russia, and in both cases the vessels are primarily armed with guided missiles.

3. Destroyers: A destroyer is a fast, manoeuvrable, long-endurance warship intended to escort larger vessels in a fleet, convoy or battle group and defend them against powerful short range attackers. At the start of the 21st century, destroyers were the global standard for surface combatant ships.

Most destroyers are armed with guided missile systems.

4. Frigates: A frigate is a type of warship, having various sizes and roles over time. In the 17th century, a frigate was any warship built for speed and manoeuvrability, the description often used being “frigate-built”.

In modern navies, frigates are used to protect other warships and merchant-marine ships, especially as anti-submarine warfare (ASW) combatants for amphibious expeditionary forces, underway replenishment groups, and merchant convoys.

5. Corvettes: A corvette is a small warship. It is traditionally the smallest class of vessel considered to be a proper warship.

The warship class above the corvette is that of the frigate, while the class below was historically that of the sloop-of-war.

The modern types of ship below a corvette are coastal patrol craft, missile boats and fast attack craft. In modern terms, a corvette is typically between 500 tons and 2,000 tons, although recent designs may approach 3,000 tons, which might instead be considered a small frigate.

6. Submarines: A submarine (or sub) is a watercraft capable of independent operation underwater. Submarines are referred to as “boats” rather than “ships” irrespective of their size.

Most large submarines consist of a cylindrical body with hemispherical (or conical) ends and a vertical structure, usually located amidships, which houses communications and sensing devices as well as periscopes.

7. Amphibious assault ships: An amphibious assault ship is a type of amphibious warfare ship employed to land and support ground forces on enemy territory by an amphibious assault.

Modern ships support amphibious landing craft, with most designs including a well deck. Coming full circle, some amphibious assault ships also support fixed-wing aircraft, now having a secondary role as aircraft carriers.

Project 15B

The Project 15B class of guided-missile destroyers, an improved variant of the Kolkata-class destroyers, are being built by Mazagon Dock Limited (MDL) for the Indian Navy.

The four ships in the project are:

  1. INS Vishakapatnam (commissioned)
  2. INS Mormogaon (ready for trials)
  3. INS Imphal (advanced stage of outfitting)
  4. INS Surat (to be launched in 2022)

Features of the ships

  • These ships are amongst the most technologically advanced Guided Missile Destroyers of the world, with state-of-the-art weapon/sensor packages, advanced stealth features, and a high degree of automation.
  • They are equipped with Brahmos supersonic cruise missiles and long-range surface-to-Air Missiles (SAM).
  • The ship has several indigenous weapons systems like medium-range Surface-to-Air missiles (SAMs), indigenous torpedo tube launchers, anti-submarine indigenous rocket launchers, and a 76-mm super rapid gun mount.
  • The destroyers will feature multiple fire zones, battle damage control systems (BDCS), and distributional power systems for improved survivability and reliability in emergent conditions.
  • The total atmospheric control system (TACS) onboard the vessel will protect the crew from chemical, biological and nuclear threats.

It is one of the Indian Navy’s paramount responsibilities to safeguard the large coastline of 7516 Kms and almost 1100 offshore islands with 2.01 million sq km EEZ (exclusive economic zone). The current geopolitical scenario has only intensified the need for more vigilance.

Destroyers like the P-15B class will play an important role in the oceans of the Indo-Pacific, making the Indian Navy a powerful force.

The guided-missile Destroyers are deployed for various responsibilities like escort duties with the Carrier Battle Group to protect the Naval fleet against any air, surface, and underwater threats.

Other projects of the Indian Navy


Project 75 (P75) involves the acquisition of six ships of the Kalvari-class diesel-electric attack submarines. The submarines have been ordered by the Indian Ministry of Defence (MoD) for the Indian Navy.

The P75 Kalvari-class diesel-electric / air-independent propulsion (AIP) submarines are based on the Scorpene-class submarines, which were designed by French naval shipbuilding firm Naval Group (formerly known as DCNS) in partnership with Spanish shipbuilding firm Navantia.

The new submarines are being built by Mazagon Dock Shipbuilders (formerly known as Mazagon Dock) in Mumbai, India, using the technology and training provided by the Naval Group.

The six scorpene class submarines under P75 are:

  1. INS Kalvari (commissioned in 2017)
  2. INS Khanderi (commissioned in 2019)
  3. INS Karanj (commissioned in 2021)
  4. INS Vela (commissioned in 2021)
  5. INS Vagir (launched in 2020)
  6. INS Vagsheer (expected launch in 2021)

The Indian Navy intends to use the submarines for missions including area surveillance, intelligence gathering, anti-submarine warfare, anti-surface warfare, and minelaying operations.


The Project 75 (India)-class submarines, or P-75I, for short, are a planned class of diesel-electric submarines, which are to be built for the Indian Navy. The P-75I class is a follow-on of the P-75 class submarines of the Indian Navy.

This project envisages the indigenous construction of submarines equipped with a state-of-the-art air-independent propulsion system.

Under this project, the Indian Navy intends to acquire six conventional, diesel-electric attack submarines, which will have advanced features like–

  • Air independent propulsion (AIP)
  • ISTAR(intelligence, surveillance, target acquisition, and reconnaissance)
  • Special operations forces (SOF)
  • Anti-ship warfare (AShW)
  • Anti-submarine warfare (ASW)
  • Anti-surface warfare (ASuW)
  • Land-attack capabilities and other features.

Project 75 (I), is part of the Indian Navy’s 30 year Plan for indigenous submarine construction.

  • It will be the first under the strategic partnership model which was promulgated in 2017 to boost indigenous defence manufacturing.
  • The strategic partnership model allows domestic defence manufacturers to collaborate with leading foreign defence companies to produce high-end military platforms to reduce import dependence.

All six submarines are expected to be constructed in India, under the Make in India initiative.

Indian Navy’s 30 year Plan

The 30-year submarine-building plan was approved by the Cabinet Committee on Security, in June 1999, which included the construction of 24 conventional submarines indigenously by 2030.

A total of 24 submarines are to be built in India, and 6 of them will be nuclear-powered.

India has one nuclear submarine only at this point- INS Arihant. The INS Arighat, also a nuclear-powered ballistic missile submarine, is to be commissioned soon.

INS Chakra, a nuclear submarine, was taken on lease from Russia and is being returned.

3. PMI pegs services growth at 11-year high

Inflation weighs down business confidence, with just 9% firms foreseeing growth one year later

India’s services firms saw growth in new business and output accelerate to a 11-year high in June, as per the survey-based S&P Global India Services Purchasing Managers Index (PMI). The index rose to 59.2 last month, from 58.9 in May, signalling a strengthening in demand across the services sector, which had borne the brunt of the COVID-19 pandemic.

With input costs continuing to rise, firms also raised selling prices at the fastest rate since July 2017 as they sought to transfer part of their additional cost burdens to customers, with the sharpest increases in prices being witnessed in transport, information and communication services.

Higher food, petrol, retail and staff costs were cited by respondents as the reason for raising output prices, with ‘unrelenting’ inflation concerns dampening overall confidence levels.

Only 9% of firms expect output growth a year ahead. Just 6% of firms hired more employees in June, while the rest left their staff strength unchanged despite higher demand. Overall, employment rose marginally after a dip in May.

“Activity growth in India’s service sector moved up a gear… reaching its strongest in over 11 years and surpassing that seen in manufacturing for the third month running,” said Pollyanna De Lima, economics associate director at S&P Global.

“Demand for services improved to the greatest extent since February 2011, supporting a robust economic expansion for the sector over the first quarter of 2022-23 and setting the scene for another substantial upturn in output next month,” she said. “Consumer services posted the strongest increases in both output and new orders in June, but growth rates quickened across the board,” Ms. De Lima added.

ICRA chief economist Aditi Nayar said the jump in the services PMI corroborated the rating agency’s view that the sector would lead the growth recovery this year.

Pivot to services

“Middle-to-high income households are likely to prioritise spending on contact intensive services, that were avoided during the pandemic, at the cost of consumer durables. This is likely to result in a slower improvement in capacity utilisation levels, modestly delaying the private sector’s capex plans amidst the global headwinds and elevated commodity prices,” Ms. Nayar said.

Private sector jobs rose in June, following a fractional decline in May, with both manufacturing and services recording slight increases in employment levels.

Purchasing Managers Index (PMI)

  • It is a survey-based measure that asks the respondents about changes in their perception of key business variables as compared with the previous month. It is an index of the prevailing direction of economic trends in the manufacturing and service sectors.
  • The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is also constructed.
  • The PMI is a number from 0 to 100.
    • A print above 50 means expansion, while a score below that denotes contraction.
    • A reading at 50 indicates no change.
  • If the PMI of the previous month is higher than the PMI of the current month, it represents that the economy is contracting.
  • It is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.
  • PMI is compiled by IHS Markit for more than 40 economies worldwide.
    • IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
    • IHS Markit is part of S&P Global.
  • As the official data on industrial output, manufacturing and Gross Domestic Product (GDP) growth comes much later; PMI helps to make informed decisions at an earlier stage.
  • It is different from the Index of Industrial Production (IIP), which also gauges the level of activity in the economy.
    • IIP covers the broader industrial sector compared to PMI.
    • However, PMI is more dynamic compared to a standard industrial production index.

Significance of PMI

  • Provides a Reliable Expectation of Economy:
    • The PMI is becoming one of the most tracked indicators of business activity across the world.
    • It provides a reliable expectation of how an economy is doing as a whole and manufacturing in particular.
  • Indicator of Economic Activity:
    • It is a good gauge of boom-and-bust cycles in the economy and closely watched by investors, business, traders and financial professionals besides economists.
      • PMI is also regarded as a leading indicator of economic activity since it is released at the beginning of every month.
      • It comes before the official data on industrial output, core sector manufacturing and GDP growth.
  • Helps in Decision Making:
    • The PMI is used by central banks to set interest rates.
    • Besides influencing equity market movements, PMI releases also impact bond and currency markets.
  • Enhances Attractiveness of the Economy:
    • good reading of PMI enhances the attractiveness of an economy vis-a-vis other competing economies.
    • Suppliers can decide on prices depending on PMI movements.

4. The relentless march of FPIs to the exit gate

Why are Foreign Portfolio Investors exiting the Indian market? How has the Russia- Ukraine war contributed to this?

Foreign Portfolio Investors (FPIs) have been on a selling spree in India. June 2022 witnessed the worst sell-off since March 2020 — when India announced a nationwide lockdown — at ₹50,000 crore. 

Post-pandemic, recovery in the Indian economy has been uneven. As the industry was grappling with this challenge, came Russia’s invasion of Ukraine which led to a rise in global prices. Add to this mix the U.S. Federal Reserve raising the benchmark interest rate starting March this year. All of these have made Indian assets ‘risky’.

When FPIs sell their holdings and repatriate funds back to their home markets, the local currency takes a beating. With a weaker rupee, we have to shell out more funds to import the same unit of goods. 

K. Bharat Kumar

The story so far: Foreign Portfolio Investors (FPIs) have been on a selling spree in India. June 2022 witnessed the worst sell-off since March 2020 — when India announced a nationwide lockdown — at 50,000 crore. This comes on the back of Mays sell-off figures of about 44,000 crore. June was also the ninth on the trot that FPIs had sold net of their assets — ie, sold more than they had purchased. Their selling actions have triggered a significant decline in benchmark indices, resulting in a drop in market capitalisation of companies.

What are FPIs?

Foreign portfolio investors are those that invest funds in markets outside of their home turf. Their investments typically include equities, bonds and mutual funds. They are generally not active shareholders and do not exert any control over the companies whose shares they hold. The passive nature of their investment also allows them to enter or exit a stock at will and with ease.

What factors spur FPI moves?

Promise of attractive returns on the back of economic growth draws investors including FPIs into a country’s markets. For example, as per data from the National Securities Depositories Ltd. (NDSL), FPIs brought in about ₹3,682 crore in 2002. This grew to ₹1.79 lakh crore in 2010. This correlates with the concurrent expansion of economic output in that period, despite the 2008 global financial crisis which saw FPI sell-offs in that time-frame in the country. The year 2017 saw FPI inflows exceed ₹2 lakh crore.

Likewise, FPIs withdrew ₹1.18 lakh crore in March 2020 alone — the month when India announced a nationwide lockdown, triggering concerns around economic growth. In tandem, benchmark stock index Sensex fell from 42,270 in February 2020 to 25,630 in March 2020.

FPIs also show keenness to invest in bonds when there is a favourable differential between the real interest rates on offer in the country they aim to invest in, and other markets, but more specifically, compared with the largest economy in the world, the U.S.

Why have FPIs been selling India holdings?

FPIs sold assets worth about ₹50,000 crore in June 2022. This is the second highest sell-off in a month since 1993, after March 2020.

Post-pandemic, recovery in the Indian economy has been uneven. The second wave of the COVID-19 pandemic in 2021 devastated lives and livelihoods. The economy stuttered again when a third, albeit less severe, wave saw the spread of the Omicron variant early this year. Add to this the return of pent-up demand in economies worldwide as the pandemic subsided. The pace of recovery caught suppliers off guard, contributing to supply-side shortages.

As the industry was grappling with this challenge, came Russia’s invasion of Ukraine. Sunflower and wheat supplies, to name just two commodities, from these two nations were impacted, leading to a rise in global prices for these crops. As supplies in general tightened across the globe, commodity prices too rose and overall inflation accelerated. India witnessed a quickening pace in price rise that stayed above the Reserve Bank’s upper comfort level of 6% for five months running, touching 7.8% in April, before receding to a slightly less aggressive 7.04% in the subsequent month.

Industrial production has seen a bumpy ride without giving confidence of a full and final recovery from the pandemic. For example, the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) slid to 53.9 in June — the lowest level in nine months — from 54.6 in the previous month. Experts attribute this to inflation pressures, which also dampened business confidence sentiment to a 27-month low in June, as per survey-based findings. Consumption expenditure too has remained weak in the subcontinent.

With each of these factors contributing to a decline in confidence of robust economic performance, FPIs have been exiting market investments over these past months. Add to the mix the U.S. Federal Reserve raising the benchmark interest rate starting March this year. On June 15, the Fed announced the most aggressive interest rate increase in almost 30 years, raising the benchmark borrowing rate by 0.75 percentage points in its battle against surging inflation. The key rate range had gone up from 0-0.25% in March to 0.75-1% in May.

When the differential between the interest rates in the U.S. and other markets narrow, and if such an occurrence is accompanied by the strengthening of the dollar, then the ability of investors to realise healthy returns is impacted. For returns are measured not only by the value appreciation of assets but also by exchange rate changes. If the dollar strengthens against the rupee, then an investor is able to realise fewer dollars for a given quantum of rupee assets liquidated. Further, if inflation quickens in the overseas market where the investor has placed funds in, then real returns are even further impacted.

They then tend to exit assets seen as ‘risky’ such as in emerging markets like India, Brazil or South Africa. And indeed, the rupee has been depreciating against the dollar, which has seen a general strengthening against several other currencies. The rupee touched its record low of 79.33 against the greenback on Tuesday.

What impact does an FPI sell-off have?

When FPIs sell their holdings and repatriate funds back to their home markets, the local currency takes a beating. After all, they sell rupees in exchange for their home market currency. As supply of the rupee in the market rises, its value declines. In this instance, the rupee has been seeing all-time lows recently. About a year ago, it was trading in the region of 73 to a U.S. dollar; it is now flirting with the 78 level. With a weaker rupee, we have to shell out more funds to import the same unit of goods. The most telling impact is on the cost of our crude oil imports that contribute to 85% of our oil needs.

5. The status of China’s Belt and Road Initiative in South Asia

What has been the progress of the BRI so far? What have been the roadblocks and challenges?

In 2013, Chinese President Xi Jinping, during his visits to Kazakhstan and Indonesia, expressed his vision to build a Silk Road Economic Belt (SERB) and a 21st Century Maritime Silk Road (MSR), to break the “bottleneck” in Asian connectivity. Thus, the Belt and Road initiative was born.

The biggest project under BRI is in Pakistan, the China Pakistan Economic Corridor (CPEC). Over time, China pledged $62 billion in low-interest loans and financing from Chinese state-owned banks and the Asian Development Bank (ADB).

Bangladesh, which joined the BRI in 2016, has been promised the second-highest belt and road investment by China in South Asia after Pakistan. Multiple studies show that Bangladesh has been able to benefit from the BRI while maintaining diplomatic and strategic ties with both India and China. It has managed to not upset India by getting India to build infrastructure projects similar to BRI in the country.

Diksha Munjal

The story so far: At the recently concluded summit of G-7 leaders in Germany, U.S. President Joe Biden and his allies unveiled their $600 billion plan called the Partnership for Global Infrastructure and Intelligence which is being seen as a counter to China’s Belt and Road Initiative (BRI), valued at a trillion U.S. dollars by some experts. Therefore, there is a need to re-visit the various projects under the BRI in different South Asian countries.

What is China’s Belt and Road Initiative?

In 2013, Chinese President Xi Jinping, during his visits to Kazakhstan and Indonesia, expressed his vision to build a Silk Road Economic Belt and a 21st Century Maritime Silk Road, to break the “bottleneck” in Asian connectivity. This vision led to the birth of the BRI. The initiative envisioned a Chinese-led investment of over $1 trillion in partner countries by 2025. More than 60 countries have now joined BRI agreements with China, with infrastructure projects under the initiative being planned or under construction in Asia, Africa, Europe, and Latin America.

To finance BRI projects, China offers huge loans at commercial interest rates that countries have to pay within a fixed number of years. The west has accused China of debt-trapping by extending “predatory loans” that force countries to cede key assets to China. However, research indicates that low and middle-income countries are often the ones to approach China after not being able to secure loans from elsewhere. In recent years, the BRI seems to have experienced a slowing down as annual Chinese lending to countries under the initiative slimmed from its peak of $125 billion in 2015 to around $50 to 55 billion in 2021.

What have been the BRI’s investments in Pakistan?

On his 2015 visit to Pakistan, Mr. Xi and then Pakistan Prime Minister Nawaz Sharif unveiled the BRI’s flagship project and its biggest one in a single country — the China Pakistan Economic Corridor (CPEC). Over time, China pledged $62 billion in low-interest loans and financing from Chinese state-owned banks and the Asian Development Bank (ADB), up from an initial $46 billion pledge. The CPEC envisioned multiple projects involving energy, transport and communication systems.

At the centre of the CPEC was the $700 million development of the city of Gwadar into a smart port city that would become the “Singapore of Pakistan”. Gwadar is strategically important as it is an hour’s drive from Iran and less than 320 km from Oman. According to the master plan for Gwadar’s development under BRI, approved in 2020, it would increase the city’s GDP to $30 billion by 2050 and create over a million jobs. However, multiple reports have shown that shipping activities at the Gwadar Port is almost negligible so far, with only some trade to Afghanistan.

Additonally, Gwadar residents have also protested against the large security force deployed to protect Chinese nationals involved in projects after they became the target of multiple deadly attacks by Baloch nationalists. In late 2021, thousands of Gwadar residents staged a sit-in protest against the lack of promised basic amenities in Gwadar and Chinese deep-sea trawlers reducing fishing opportunities for locals. Other major projects are the orange line metro, coal power plants to tackle energy shortages and the Main Line 1 rail project from Peshawar to Karachi. While coal plants set up and managed by Chinese firms did help improve the power situation in Pakistan, former Prime Minister Imran Khan sought renegotiation of payments to China in 2020 alleging that Chinese companies had overcharged the country by $3 billion. In May this year, Chinese power firms operating in Pakistan threatened to close down if the latter did not pay dues worth 300 billion in Pakistani rupees (approximately $1.5 billion).

What about Sri Lanka?

In Sri Lanka, multiple infrastructure projects that were being financed by China came under the fold of the BRI after it was launched in 2013.

The island nation in the last couple of years has witnessed competition between India and China in port terminal and energy projects. In 2021, Colombo ejected India and Japan out of a deal to develop the East Container Terminal at the Colombo port and got China to take up the project. It then awarded the project for the Western Side of the Terminal to the Adani Group.

Some BRI projects in Sri Lanka have been described as white elephants — such as the Hambantota port, a deep seaport on the world’s busiest east-west shipping lane, which was meant to spur industrial activity. The port had always been secondary to the busy Colombo port until the latter ran out of capacity. The Sri Lankan government took $1.4 billion in Chinese loans for the port’s expansion. Unable to service the huge loan and incurring $300 million in losses due to delays, the government handed Hambantota port to a Chinese state-owned company on a 99-year lease in 2017. Other key projects under BRI include the development of the Colombo International Container Terminal, the Central Expressway and the Hambantota International Airport among others.

Are there projects in Afghanistan?

Afghanistan has not comprehensively been brought into the BRI, despite a Memorandum of Understanding (MoU) being signed with China in 2016. China had promised investments worth $100 million in Afghanistan which is small in comparison to what it shelled out in other South Asian countries. The projects have not materialised so far and uncertainties have deepened after the Taliban takeover last year.

How have projects from India and China progressed in Maldives?

Situated in the middle of the Indian Ocean, Maldives comprises two hundred islands, and both India and China have strategic interests there. One of the most prominent BRI projects undertaken in the Maldives is the two km long China-Maldives Friendship Bridge — a $200 million four lane bridge.

Most of China’s investment in the Maldives happened under former President Abdullah Yameen, seen as pro-China. Over the years, opposition protests grew against the large borrowing from China and Mr. Yameen was defeated in 2018. The Maldives’ current regime of President Ibrahim Solih has tried to distance itself from the BRI, focusing more on its ‘India First’ policy. India has also in recent years sought greater ties with the Maldives under Prime Minister Narendra Modi’s ‘Neighbourhood First’ policy.

What about Bangladesh?

Bangladesh, which joined the BRI in 2016, has been promised the second-highest investment (about $40 billion) in South Asia after Pakistan. Multiple studies, including research by the Council on Foreign Relations, show that Bangladesh has been able to benefit from the BRI while maintaining diplomatic and strategic ties with both India and China. It has managed to not upset India by getting India to build infrastructure projects similar to BRI in the country. In 2016, when the Chinese government promised Dhaka BRI investment worth around $40 billion, India followed up in 2017 by extending a $5 billion line of credit and economic assistance. BRI projects include China-Bangladesh Friendship Bridges, special economic zones, the $689.35 million-Karnaphuli River tunnel project, upgradation of the Chittagong port, and a rail line between the port and China’s Yunnan province. However, multiple projects have been delayed owing to the slow release of funds by China.

6. Editorial-1: Indian aviation needs a strong and steady tailwind

Policymakers ought to recognise the country’s untapped potential and work towards dismantling the many hurdles

Around four decades ago, India had two television channels — Doordarshan One and Doordarshan Two. A programming highlight was a popular R.K. Laxman cartoon. On channel one, there was programming on Indira Gandhi and when a viewer got bored, he switched to the other channel, which had programming on Sanjay Gandhi, her second son and a politician who mattered then. There were only two car companies, manufacturing the Ambassador and the Fiat Premier Padmini; two motorcycle and two scooter companies, that made the Enfield India and Ideal Jawa bikes, and the Bajaj and Lambretta scooters, respectively; one telephone company, two airlines, Air India and Indian Airlines, and a bunch of crumbling public sector airports.

Then came some change. Thanks to the far-sighted reforms ushered in by P.V. Narasimha Rao, who was ably assisted by Manmohan Singh, and carried forward during the Rajiv Gandhi and Atal Bihari Vajpayee eras and also subsequent governments, India now has over 500 television channels, more than 20 automobile and 15 two-wheeler manufacturers, a revolution and proliferation in the cellphone sector (but now in danger of becoming a duopoly), and a plethora of pharmaceutical companies. The country is a pioneer and world leader in vaccine production and a mighty nation in software and financial services, which are the envy of the rest of the world for innovation and being low cost. But there is also a twist to this tale. There are a number of airline companies, but they are struggling.

The reforms that opened up the aviation sector in 1991 and ended the licence raj and the monopoly of Indian Airlines and Air India changed the sector. A slew of private sector airlines were given the licence to fly, but two, Jet Airways and Sahara, survived, resulting in cartelisation. There was change again when the concept of low cost airlines in India took shape in 2003 which overcame the cost barrier. There was an explosion in demand and the common man could think of flying. Along with this came a liberalisation of various other sectors that propelled India to the front; it was a vibrant and an emerging economic power and a leader among developing economies.

Barriers and some data

Sadly, while all other sectors have grown by leaps and bounds, Indian aviation has become ‘the sick man of India’. The growth of aviation has been affected by choking regulations, tough entry barriers for new entrants, high fuel prices on account of sky high taxes, and inefficient public sector airports that are paving the way for monopoly airports that are extortionist in the absence of robust competition. Frequent and knee-jerk changes only point to the absence of a long-term visionary strategic policy not just for airlines but also for the entire gamut of sectors in aviation.

The number of Indians who buy air tickets in a year is 140 million (the figure for 2019) before COVID-19 struck and ravaged the economy. They are not 140 million different individuals as it seems. That number comprises 35 million to 40 million frequent flyers who form the bulk of ticket buyers. It translates to less than 4% of the population who can afford air travel, placing India just alongside some poorer African countries, in terms of the per capita consumption of air tickets. Brazil, Malaysia, Indonesia and China are way ahead of India.

Hard numbers across the world for the pre-COVID-19 year 2019 provide context to the story. Ireland, not the biggest of economies, had 28 million domestic air passengers or tickets sold against a population of five million. In Europe, it was 1,146 million passengers for a population of 447 million; in the United States, it was 927 million passengers for a population of 325 million. Let us leave the most developed economies. Here is more data: Brazil 119 million passengers/population 215 million; Malaysia 63 million passengers/population approximately 33 million; Indonesia 116 million passengers/population nearly 280 million, and China, 660 million passengers/1.4 billion people. In contrast, India, with 1.25 billion people, had 140 million domestic passengers. And, finally, some more numbers: Ethiopia five million passengers/population nearly 120 million and Egypt, 13.2 million passengers/ population 100 million.

A Eureka moment

I founded a helicopter company in 1995, but in 2002 I envisioned a new vibrant India that had unleashed consumer aspirations in its citizens in the wake of a flood of reforms in the economy in China. The explosion of television channels that spurred consumer demand through advertisement unshackled the entrepreneurial ‘animal spirits’ that had been long dormant in India.

Let me give you an example. In 2002, while transiting at Luton airport (one of the six major international airports serving the London Metropolitan area) on my way to the United States for an aviation conference, I saw an advertisement that hit me like lightning — 13 million passengers per annum flew through this tiny airport. To make this more relatable, that was the number of passengers who passed through nearly 40 airports in India that were operational then. Later, on a domestic flight in Phoenix in Midwest U.S., the passenger in the seat next to me was a heavily tattooed burly man in shorts and bunions who was travelling with his family. As we chatted, I learnt that he was a carpenter visiting the Grand Canyon. It was a journey that was my Eureka moment. I decided that India was ready for a revolution and launched a low cost airline on a wing and a prayer, and invested with hope and optimism — the invisible fuel of any economy.

It was a crazy idea but the environment seemed conducive under the National Democratic Alliance government led by Atal Bihari Vajpayee. Entrepreneurs break the status quo, smash cartels and create new markets. There are the examples of Bill Gates, Steve Jobs and even India’s N.R. Narayana Murthy who founded Infosys (with other professionals) with an initial capital investment of ₹10,000. Today, one has the newer examples of Byju or PayTm. Naresh Goyal was a humble travel agent who put together some funds and built a world class airline, Jet Airways. Capital will eventually find entrepreneurs who have revolutionary ideas just as river coursing through land finds the sea. As we have seen many times, a mighty war chest need not guarantee the success of a game-changing venture.

The ‘Start-up India’ initiative is a laudable initiative by the government of the day and the Prime Minister, Narendra Modi. It is by and large the driving force in hi-tech companies and disrupting many conventional businesses. But the point is that this force must spread to other areas. Aviation is integral to equitable economic growth, for a country to be globally competitive and to change the situation in swathes of India that are struggling with poverty and unemployment. Passenger airlines and air cargo overcome geography and connect remote areas are alienated from the mainstream. They can drive investment deep into the country, giving people access to markets. More importantly, they boost tourism, which is the largest employment generator in the unorganised sector.

With mega airports controlling air and ground space, it is almost impossible to connect rural and small towns from the large metros. Despite the regional airport development plan, ‘Ude Desh ka Aam Naagrik ( UDAN) initiative, there is not much regional connectivity. And where slots are made available with difficulty, there is the barrier of prohibitive costs.

Carry out these reforms

India’s air cargo growth is also languishing. Hong Kong airport alone handles more cargo than all of India’s over 100 airports put together. Air cargo integrated with road, rail and port infrastructure is the backbone of a growing economy. It is critical to understand that for passenger airlines to grow, there have to be reforms in all areas of aviation, i.e., air cargo, airports, aviation fuel taxes (State and central, which in India are among the highest in the world) and Maintenance, Repair and Overhaul (MRO). They are in a dismal state in India. For example, there are labyrinthine taxes, customs, other duties and tortuous rules to be overcome to bring in parts, to facilitate repair and overhaul, and to re-export them or for use in aircraft here. This is a huge deterrent. Airlines find it easier to send their aircraft to major MROs abroad (Dubai, Singapore or Germany), some of which employ Indian technicians. Similarly, the charter business has remained stagnant. It is ironic that when there are thousands of pilots and technicians unemployed in India, airlines have to look for foreign pilots and engineers, pushing up costs in the process.

Trough and crest

And, finally, there is India’s Aircraft Act, 1934 and Aircraft Rules, 1937. Though there are frequent modifications under the above overarching mother Act and Rules, India has not kept pace with modern technology in aerospace, increasing costs to the industry and ultimately affecting passenger growth. Regulators are not popular in any country. India’s statutory regulatory authority, the Directorate General of Civil Aviation, needs to be modernised, well-staffed, motivated and incentivised. There need to be aviation professionals in charge rather than the ubiquitous bureaucrat from the Indian Administrative Service There needs to be a comprehensive overhaul and deep reforms.

But despite the setbacks and deterrents, there is a silver lining. India may not possess all. But it has an inexhaustible market and largely untapped potential. That is what gives many of us hope. Policymakers need to be asked only one question: What should the Government do to make the common Indian fly high? How does one increase the figure of 4% who fly now to 50% in the next two decades?

The answer will guide the aviation road map we aspire for.

7. Editorial-2: Handcuffing, a judicial tap, and the long arm of the law

The Supreme Court’s directives on handcuffing must be observed, but issues that affect police reform cannot be ignored

Recently, the Karnataka High Court passed a verdict on handcuffing, which is significant. In Suprit Ishwar Divate vs The State of Karnataka, while awarding two lakh rupees as compensation for handcuffing an accused, without recording the reasons in the police case diary, it gave liberty to the state to recover the amount from the delinquent police officer.

Principles of handcuffing

The High Court held that an accused, in normal circumstances, need not be handcuffed on arrest. It is only under exceptional circumstances (such as the possibility of escape and/or the possibility of causing harm to himself or others), that handcuffing an accused can be resorted to. Further, when there is such handcuffing, the arresting officer must record the reasons, which then would have to stand judicial/court scrutiny. The petitioner in this case was a law student against whom five criminal cases had been filed for offences under the Negotiable Instruments Act, 1881 for the dishonour of cheques. He had been arrested in furtherance of a non-bailable warrant issued by a magistrate.

There can be three occasions when a person can be (legally) handcuffed, i.e., an accused on his arrest and before he is produced before the magistrate; an under-trial prisoner during transit from jail to the court and back; and a convict being transported from jail to the court and back. The law with regard to handcuffing was settled in 1980 when the Supreme Court of India, in Prem Shankar Shukla vs Delhi Administration, held that ‘the only circumstance which validates incapacitation by irons — an extreme measure — is that otherwise there is no other reasonable way of preventing his escape’. It said that where an arrestee or a convict can be prevented from escape by increasing security, such an increase is to be a norm rather than handcuffing.

On compensation

The Court mandated that in case of handcuffing, the reasons for this have to be recorded in writing and it is the duty of the court to make inquiries with the person arrested as to whether he had been handcuffed or not and then approve or reject the reasons. The Supreme Court passed similar directives in another case with regard to under-trial prisoners. Thus, irrespective of whether the person to be handcuffed is an accused or an under-trial prisoner or a convict, the principles governing handcuffing remain the same. However, if such a person is under the judicial custody of the court, the court’s permission is required for handcuffing except under emergent circumstances.

The next point is about who should pay compensation. It is an established principle that the relief of monetary compensation for an ‘established infringement of the fundamental right guaranteed under Article 21 of the Constitution is a remedy available in public law, which is based on the strict liability for contravention of the guaranteed basic and indefeasible rights of the citizens’. The constitutional courts are empowered to grant such relief ‘against the state or its servants in the purported exercise of their powers’. So, who should pay such compensation?

In State of Maharashtra vs Ravikant S. Patil (1991), when there were allegations of handcuffing and the parading of an under-trial prisoner of murder on the streets, the Bombay High Court held the Inspector of Police responsible for violation of Article 21, ordering him to pay ₹10,000 as compensation. However, the Supreme Court (though it upheld the judgment of the High Court directing compensation) held that the police officer was not personally liable as he had acted in his official capacity.

The top court modified the order to that extent and directed the state (and not the police inspector) to pay the compensation. Therefore, the judgment of the Karnataka High Court (discussed above) as far as payment of compensation by the police officer is concerned, does not appear to be in sync with the ratio of the Supreme Court judgment. The police officer might have failed to implement the court’s directives, but he was not acting in his personal capacity.

Possible solutions

However, the High Court rightly said that it is the state’s responsibility to equip all police stations with adequate and necessary police personnel to discharge their obligations. Therefore, in absence of the required infrastructure, the blame of non-compliance cannot be shifted only to the police officer.

It is undisputed that a police station or a reserve police line is often unable to provide sufficient escort to jail authorities in the transportation of under-trial prisoners to court, the reasons being a lack of manpower or urgent law-and-order duties. It may also become difficult at times to predict the conduct of an arrestee on the spot.

A National Crime Records Bureau publication (Ministry of Home Affairs) on ‘Crime in India- 2020’ shows that 810 cases of prisoner escape from police custody (against 931) were reported in the year 2020. No less than 117 cases were registered against negligent police officers as well. These numbers may not be very high, but are sufficient to substantiate the fact that the use of handcuffs is generally done to prevent escape and not to dehumanise criminals.

Nonetheless, if any malice is found behind the use of handcuffs, it needs to be dealt with strongly by the department. Similarly, there cannot be a justifiable excuse for not mentioning the reasons for handcuffing in the case diary.

The Supreme Court, in the Ravikant S. Patil (supra) case, had rightly said that the authorities concerned may, if they think it necessary, hold an inquiry and then decide on action against the police inspector. Therefore, the right approach would be to initiate disciplinary action against the errant officer under service conduct rules, rather than to order the payment of compensation.

It would also be appropriate for State governments to review the mobility of the police, the requirement of additional manpower and technical gadgets (such as body cameras, as recommended by the Karnataka High Court) periodically, and exempt at least the police department from the ban on recruitment. Per contra, the enforcement agencies and lower courts are duty bound to implement, in letter and spirit, the Supreme Court’s directives on handcuffing.

8. Editorial-3: A matter of import

Spectre of wider trade and current account deficits is dragging the rupee down

India’s monthly merchandise trade deficit hit a fresh record of $25.6 billion in June as per preliminary estimates released by the Commerce and Industry Ministry on Monday. This is the third occasion in seven months and the second month in a row that the trade deficit has widened to all-time highs. In June, the value of outbound shipments grew 16.8%, marginally slower than the 20.6% growth recorded in May, to about $38 billion — reflecting the third successive month of moderation. Worryingly, four of India’s top 10 export items — engineering goods, cotton yarn, drugs and pharma and plastic products — contracted from a year ago. Petroleum exports were up 98% from June 2021, but about $0.7 billion lower than May 2022. Even as exports growth slid, imports surged by over 51% to $63.6 billion in June, crossing the $60 billion mark for the fourth month in a row. Coal imports, up almost 242% year-on-year, and petroleum inflows, up 94.2%, drove nearly three-fourths of this surge. And although gold imports, which had soared nearly eight-fold in May to touch 107 tonnes, moderated from over $6 billion that month to $2.6 billion in June, they were still 169% higher than a year ago and significantly over April’s imports of $1.7 billion. The trade deficit for Q1 adds up to a record $70.25 billion, over two times higher than a year ago.

The tangible slowdown in exports, due to weaker global demand, is unlikely to change much soon, with recessions or sharp growth slowdowns expected in several developed markets. Domestic demand for imports of oil, fertilizers, coal and even gold — a safe haven for investors amid tumultuous financial markets — is largely inelastic, and elevated global prices for these will continue to escalate the import bill through this year. The weakening rupee, which tumbled further to 79.37 vis-à-vis the U.S. dollar on Tuesday, will raise import costs further. Analysts expect the rupee to scale the 82 to a dollar mark by the October to December quarter before recovering and the current account deficit to more than double to around 3% of GDP this year from 1.2% in 2021-22. Robust forex reserves notwithstanding, the persistent outflows of foreign capital from the financial markets have triggered concerns about the balance of payments situation. Last week, the Government imposed a windfall tax on crude oil production that could help bridge concerns about the fiscal deficit. It also placed restrictions on petroleum products’ exports and acknowledged that gold imports were hurting the current account by raising customs duties to 15% from 10.75%. This may end up hurting petroleum exports further while import duties may not dent India’s unparalleled appetite for the yellow metal as much as hoped. Coal imports, on the other hand, are expected to keep hitting record highs as the monsoon will affect domestic output. Policy makers may have little room to manoeuvre out of this vicious cycle, but missteps must be avoided and domestic inefficiencies hurting exports reviewed urgently.

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