1. At COP-27, India insists on higher global climate finance target by 2024
Developing countries require “substantive enhancement” in climate finance beyond the floor commitment of $100 billion a year to meet their ambitious goals and rich countries need to lead the mobilisation of resources, India has stressed at the ongoing UN climate summit COP-27 at Sharm el-Sheikh in Egypt.
At the COP-15 held in Copenhagen in 2009, developed countries had committed to jointly mobilise $100 billion a year by 2020 to help developing countries tackle the effects of climate change.
Rich countries, however, failed to deliver this finance.
Developing countries, including India, are pushing rich countries to agree to a new global climate finance target — also known as the new collective quantified goal on climate finance (NCQG) — which they say should be in the trillions of dollars, given that the costs of addressing and adapting to climate change have grown substantially.
“The commitment of $100 billion made in 2009 by developed countries was not only minuscule given the scale of needs but has also not been achieved yet,” said the Indian delegation at a high-level ministerial dialogue on NCQG at COP-27 on Wednesday.
India said that climate actions to meet the nationally determined contributions (NDC) targets require financial, technological, and capacity-building support from developed countries, people aware of the developments said.
2. Online gaming row: HC to hear plea on Ordinance on Nov. 16
The Madras High Court on Thursday adjourned to November 16 the hearing on a writ petition filed by Mumbai-based All India Gaming Federation (AIGF) challenging the constitutional validity of Tamil Nadu Prohibition of Online Gambling and Regulation of Online Games Ordinance, 2022.
Acting Chief Justice T. Raja and Justice D. Bharatha Chakravarthy adjourned the matter at the request of the petitioner’s counsel. The federation had challenged the Ordinance on many grounds, including its assertion that poker and rummy were purely games of skill and not that of chance.
The AIGF claimed that the Supreme Court had held that even if there was betting or wagering on a game of skill, it would not amount to gaming.
Further, the Law Commission of India, in its 276th report, stated that poker was a game of skill, it added.
“Since the respondents have completely ignored the finding of the Law Commission while promulgating the impugned (under challenge) Ordinance, it would be manifestly arbitrary and violative of Article 14 (equality before law and equal protection of laws) of the Constitution,” the petitioner federation contended.
When the Supreme Court itself had held that games of skill were not gambling activities, banning such games by way of an Ordinance would amount to infringing the right of the members of the petitioner federation to carry out their business under Article 19(1)(g) of the Constitution, it said.
The court was also told that there was absence of intelligible differentia in banning online poker and rummy alone, while the physical version of both the games were legal and could be played throughout the State.
3. ISRO’s cryogenic engine, indigenously developed for LVM3, passes hot test
The Indian Space Research Organisation (ISRO) has successfully conducted the hot test of CE20 cryogenic engine, which has been indigenously developed for Launch Vehicle Mark-3 (LVM3), previously called the GSLV-Mk3, at Mahendragiri in Tamil Nadu on Wednesday (November 9).
According to the space agency, CE20 cryogenic engine is indigenously developed for LVM3. It was subjected to a successful hot test at an uprated thrust level of 21.8 tonne for the first time on Wednesday.
This will enhance the LVM3 payload capability up to 450 kg with additional propellant loading.
The major modifications carried out on this test article compared to previous engines was introduction of Thrust Control Valve (TCV) for thrust control. ISRO said in addition to the hot test, a 3D printed LOX and LH2 turbine exhaust casings were inducted in the engine for the first time.
During this test, the engine operated with ~20t thrust level for first 40s, then thrust level was increased to 21.8t by moving thrust control valve. The engine and facility performance was normal, according to ISRO.
The LVM3 is the heaviest launch vehicle of ISRO.
Last month, the LVM3 placed 36 satellites of OneWeb; this was LVM’s first commercial launch. Following the launch, ISRO said that the LVM3 has become a catalyst for the Indian Space Programme, opening new vistas for heavy payloads to the Low Earth Orbit. Early next year the ISRO is expected to launch LVM’s second commercial launch.
4. Unlaundered truth
Central agencies should reflect about the way they are used for political ends
A Special Court dealing with cases under the Prevention of Money Laundering Act (PMLA) in Mumbai has made some extraordinarily scathing observations about the way the Enforcement Directorate (ED) functions. While granting bail to Sanjay Raut, Shiv Sena (Uddhav Thackeray) MP, the court has termed his arrest not only illegal but also one recorded for “no reason” at all. The grant of bail and the observations made by Special Judge M.G. Deshpande have galvanised the ED to file an immediate appeal before the Bombay High Court, but the lengthy order contains enough material to substantiate the charge by Opposition parties that central agencies are being utilised to hound political opponents. The judge has found that the underlying criminal case of cheating concerned another set of people who had committed misdeeds, but they were not arrested. As far as Mr. Raut and his associate, Pravin Raut, who has also been given bail, were concerned, it was essentially a civil dispute, and there was nothing to show that money involved in their transactions were “proceeds of crime”. Their arrest under the PMLA was illegal, the court said, because there was no underlying scheduled offence. The ED has alleged that the proceeds of the fraudulent sale of tenements pertaining to a re-development project at Patra Chawl in Mumbai, amounted to ₹1,039 crore. It had further alleged that Mr. Pravin Raut was a proxy for Sanjay Raut, and that the latter and his wife had utilised ₹95 crore out of the proceeds to buy assets.
The misuse of agencies seems to be an unlaundered truth, going by the court’s remarks. There has indeed been a disproportionate targeting of non-BJP political leaders by investigating agencies of the Union government. While lawyers and activists have been arrested under anti-terrorism laws, mainstream political opponents often see tax raids and money-laundering cases. The latter class of cases is made possible by the PMLA that permits the ED to register a money-laundering case whenever there is an FIR by the police involving a given list of offences. In a sardonic comment, the Special judge has noted that the ED works at great speed while making an arrest, but proceeds with the trial at a snail’s pace. ED officers seem to be aware only of Section 19 (power to arrest) and Section 45 (stringent conditions for bail), but not the fact that they should also hold a trial. The judge’s remarks also drive home the fact that money-laundering prosecutions have an abysmally low rate of convictions. Instead of rushing to file appeals against adverse orders, central agencies ought to reflect on the manner in which they are being utilised for political ends.
5. A way out of Kerala’s fiscal vulnerability
Kerala’s fiscal problems have been in the news for several years now. The parlous impacts of the two floods (2018 and 2019) and the COVID-19 pandemic have worsened the situation. In this context, the obfuscating assertions and counter postures on the political chess board of Kerala about the fiscal management of the State demand objective scrutiny. A recent Reserve Bank of India study (RBI Bulletin, June 2022) on the fiscal vulnerability of Indian States undertaken in the backdrop of the Sri Lankan debt-default crisis of May 2022 has identified Kerala among the five most-indebted States of India, the others being Punjab, Rajasthan, Bihar and West Bengal. This article attempts to shed light on Kerala’s fiscal vulnerability and offer some suggestions for improvement.
Understanding the fiscal stress
In an expanding economy, debt is not a sin and becomes a problem only when it turns unsustainable. A government is vulnerable when it finds it difficult to meet its fiscal obligations efficiently. As per the 2022-23 Budget, the public debt/GSDP ratio of Kerala is 37.2% which is clearly high particularly when compared to the average of 14.6% for the 1981-91 decade. That the Fourteenth Finance Commission fixed the upper limit at 25% underscores the vulnerability. Only Kerala, Jharkhand and West Bengal crossed the debt target stipulated by the Fifteenth Finance Commission (FC-15). That the yield rate to be paid for the special development loans issued by the State auctioned by the RBI is pegged high (8.3% in 2018-19. and around that now) keeps Kerala in a bad light. The increasing incremental borrowing along with the growing level of outstanding liabilities, off-budget borrowings, and mounting guarantees foretell a poor situation.
Kerala has already breached several fiscal norms. During the last five years, the famous Domar stability rule — namely that interest rate adjusted for inflation should be lower than the GSDP growth rate — has been broken except for 2019-20 and 2020-2021. The condition that the increase in nominal GSDP growth rate should be higher than the debt growth rate is also violated. During the last 10 years from 2013-14 through 2022-23, except for two years the rate of debt growth exceeded GSDP growth. The growth dynamics of the State needs to be closely investigated given its admittedly high per capita consumption, high savings (bank deposits in March 2021 were above ₹6.05 trillion, with an non-resident Indian component of ₹2.29 trillion) along with its weak investment trajectory.
The increase in the interest payments/revenue receipts (IP/RR) ratio from 16.86% in 2014-15 to 21.49% in 2020-21 and the estimated 19.36% for 2022-23 does not portend a healthy situation. If we accept the FC-14 IP/RR ceiling of 10%, Kerala is surely on a sticky wicket. The own tax revenue mobilisation needs drastic improvement to save the situation. In 2010-11, Kerala’s per capita own tax revenue was a remarkable ₹6,521, while the all-States average was ₹3,278, nearly 100% below. However, for 2020-21, Kerala’s per capita tax is ₹12,929, with an all-States average of ₹9,162, the difference falling to 41%. Evidently, the tax effort of Kerala has not improved compared to that of other States. The own tax revenue for 2020-21 of Kerala, at ₹47,661 crore was lower by a huge margin of ₹2,662 crore compared to 2019-20. The 2021-22 (RE) shows a shortfall of ₹13,465 crore vis-à-vis the Budget estimate. The budgeted tax revenue for 2022-23 of ₹74,098 crore is unlikely to be achieved. The tax performance of the State leaves many things to be desired.
That the budgeted non-tax revenue of ₹11,770 crore for 2022-23 is ₹495 crore lower than the actual of 2019-20 is disquieting. The insinuating assertion by some that the State government relies heavily on lotteries is untenable. In the pre-COVID-19 2019-20, the revenue from lotteries was ₹9,973.67 crore, but the gross expenditure on it was ₹8,475.3 crore with a net income of only ₹1,498.3 crore; the corresponding figure in the present Budget works out only to a measly ₹77 crore. That the 133 public sector undertakings with an investment of ₹20,025 crore (as on March 31, 2018) could contribute only a sum of ₹110 crore in 2019-20, and even in 2022-23 (BE) only ₹257 crore to the own source revenue kitty, tells a dismal story.
Decline in capital formation
The quality of spending is a critical variable because it shows prudent fiscal management and good governance. The fiscal norm of generating revenue surplus is almost impossible for Kerala with a huge committed expenditure comprising salary, pension and interest payments, which in 2017-18 reached 80.5% of total revenue expenditure and currently running at 70.7%. A five-yearly salary and pension revision along with an escalator clause to protect the real income of the civil servants go with practices such as providing pension to the staff of Ministers for a minimum service of two years (which arguably has to be extended to all civil servants) etc. and can exist comfortably only in Alice’s wonderland. It is no wonder then that the fiscal space for development expenditure for Kerala with 51% (five- year average, 2017- 22), is way below that of Madhya Pradesh (73.4%), Rajasthan (71.4%) and Bihar (71.3%) — the details are in the RBI Bulletin, June 2022, p.119.
There has been a visible decline in capital formation in crucial sectors such as education, health, infrastructure, agriculture and the like. To be forewarned is to be forearmed. Although the analysis given is suggestive of solutions, the outcomes of continuing social failures and policy miscarriages have to be addressed for any rational rebuilding. Rent-seeking politics, endemic corruption, ecological overkill, a pathological disregard of the rule of law, a visible decline in the public action and public reasoning tradition, a decline in the quality of public services such as health, sanitation, solid waste management, higher education and roads (ubiquitous pot-holes are scandalous), pervasive drug and liquor addiction, an increase in avoidable deaths and so on cannot be solved by public relations managers, but only through informed social choices.
Course correction for the State
To augment its own source revenue, the State has to streamline its tax administration to reduce arrears and evasion and tap its tremendous non-tax revenue potential. Property tax could have been easily doubled. Non-tax revenue can be stepped up by enhancing fees and user charges along with visible quality improvements. Without noticeable quid-pro-quo in services, users will naturally resist hikes. The dividend from the public sector undertakings can be increased if there is efficient rationalisation of management. Unbundling of land values can yield good income. The Kerala State Road Transport Corporation (KSRTC) is a millstone around the fiscal neck of Kerala. Monetisation of the land and asset values of the KSRTC along with restructuring of management can be a solution. Permitting private universities of world class standards can arrest the exodus of brilliant students. Why Kerala with a fabulous remittance inflow since the mid-1970s has failed to be a happy place for the enterprising private sector to create wealth for the State is a moot question for which honest answers elude us. A meaningful pension reform including raising retirement and recruitment ages can make big changes. If the Kerala government wants to put its fiscal house in order, it has to experiment with zero-base budgeting or at least with performance budgeting with determination. Departments have to improve their accountability significantly.
In the fiscal federal polity of India, with yawning mismatches between resources and responsibilities, all inter-governmental transfers must be normative and formula-based. Central transfers are entitlements and certainly not largesses. That 35% of the transfers are still outside the Finance Commission is against the canons of cooperative federalism.
In sum, Nava Kerala cannot be built on a fragile fisc, and rhetoric is not a resounding solution.
6. Human rights defenders must obey law of the land, says India at HRC session
India appreciates the role of human rights defenders, journalists and activists in the democratic system but the activities of these groups and individuals should be in conformity with the law of the land, Solicitor-General Tushar Mehta said at the Human Rights Council (HRC) in Geneva on Thursday. The session was live-streamed.
Starting the fourth cycle of the Universal Periodic Review of India at the HRC, Greece, the Netherlands and Vatican City on Thursday called upon the Government of India to ensure freedom of religion and end discrimination against human rights defenders and religious minorities.
“Actions were taken against some organisations due to their illegal practices including malafide re-routing of money and wilful and continuing violations of extant legal provisions, foreign exchange management rules and tax law of India,” said Tushar Mehta in defence of India’s actions regarding the human rights defenders.
Earlier, the member countries of the HRC made a number of observations touching upon Indian society and polity.
“Immediately release all human rights defenders,” said Luxembourg.
The strongest comment came from Greece that called upon India to “ensure full implementation of freedom of religion”. Germany expressed concern about the rights situation in India and said, “Germany remains concerned about the rights of marginalised groups, especially religious minorities as well as women and girls.” Germany also said that the Foreign Contribution Regulation Act should not “unduly restrict” the “freedom of association” in India. The German representative called upon India to strengthen the National Human Rights Commission and said the discrimination against Dalits should end.
Ireland recommended that the Foreign Contribution Regulation Act be applied in a transparent manner and that Indian States should “repeal” anti-conversion laws to ensure compliance to international human rights laws. The representative of South Korea also raised the issue of the FCRA. Italy asked India to enable civil society organisations and freedom of expression and freedom of religion.
7. Payments still an issue, India and Russia working towards a solution
With larger payments still an issue, of which defence deals account for a large part, India and Russia are trying to find a workaround, and this was one of the issues External Affairs Minister S. Jaishankar discussed with his Russian counterpart, Sergey Lavrov, during his recent visit to Moscow, according to official sources.
“Some modifications with regard to payments are expected following the visit. Both sides are working towards a solution,” an official source said. Mr. Jaishankar was in Moscow earlier this week where the war in Ukraine was top on the agenda.
A defence source said that ‘milestone’ payments which were to be made as per delivery timelines had been delayed.
In some cases, while deliveries had been made by Russia, the payments were yet to be cleared, it has been learnt.
It has been learnt that rupee-rouble payments are not solving the issue as rupees are accumulating on the Russian side due to the trade imbalance. Since the war in Ukraine and Russia’s ouster from the SWIFT system, while smaller payments have been happening in the last few months, there are issues with larger payments, another official source stated. Goods have been shipped but payments have been held up, as Russia tries to meet timelines, which have seen some slippages with the continuing war in Ukraine.
Russia has emerged as India’s largest supplier of oil for the month of October, according to latest figures, overtaking the traditional suppliers Saudi Arabia and Iraq.
With Russia being shut out of the global SWIFT system for money transfers, India and Russia have agreed to conduct payments through the rupee-rouble arrangement after trying Euro as well. With several big-ticket deals including the S-400 and stealth frigates under implementation, large volume of payments are to be made. Central banks of the two countries have been discussing ways to overcome the impasse.
As reported by The Hindu, speaking at the Army-2022 expo in Moscow in August, Dmitry Shugaev, Director of the Federal Service for Military-Technical Cooperation (FSMTC) of Russia, said Russian exporters of military products today were operating in a new reality and payments for defence deals in U.S. dollars and Euro had been reduced to a minimum and they were adopting various measures to offset impact of sanctions, including switching to payments in national currencies.
8. Iran says it has developed a hypersonic ballistic missile
An Iranian Revolutionary Guards General claimed on Thursday that the Islamic republic has developed a hypersonic missile capable of penetrating all defence systems, raising concerns from the UN nuclear watchdog.
Hypersonic missiles, like traditional ballistic missiles which can deliver nuclear weapons, can fly more than five times the speed of sound. “This hypersonic ballistic missile was developed to counter air defence shields,” General Amirali Hajizadeh, commander of the Islamic Revolutionary Guard Corps aerospace unit said, quoted by Fars news agency.
“This missile, which targets enemy anti-missile systems, represents a great generational leap in the field of missiles.”
9. Tehran warns Saudi Arabia that its patience has limits
Iran has warned its neighbours, including Saudi Arabia, that it will retaliate against moves to destabilise it at a time of daily protests sparked by the death of Mahsa Amini.
Iran has accused its enemies, including the U.S. and Saudi Arabia, of being behind the unrest. “I would like to say to Saudi Arabia that our destiny and that of other countries in the region are linked to each other because of us being neighbours,” its Intelligence Minister, Esmail Khatib, said on Wednesday.
“For Iran, any instability in the countries of the region is contagious, and any instability in Iran can be contagious to the countries of the region,” he said, quoted on the website of Iran’s supreme leader Ayatollah Ali Khamenei.
10. ‘Current account deficit may be lower at 3% this fiscal’
State Bank of India has pencilled in a lower current account deficit for India at 3% for this fiscal as against the minimum consensus of 3.5%, citing rising software exports, remittances and a likely $5-billion jump in forex reserves via swap deals.
Every $10 rise in crude prices impacts the Current Account Deficit (CAD) to the tune of 40 basis points while the same on fuel inflation is 50 bps and also results in 23 bps decline in growth, according to Soumyakanti Ghosh, Group Chief Economic Adviser at SBI. Exchange rate is a major contributor to software exports growth. “Every ₹1 fall against the dollar leads to an increase in software exports by $250 million”.
This, along with an expected $5 billion-forex reserve accrual by way of swap transactions and higher remittances, will cap CAD at 3% of GDP as against the average lowest level projected for the year at 3.5%, Mr. Ghosh said.
Strong remittances and software exports had pushed down CAD by 60 basis points (bps) in the June quarter, he said. If the trends continued in July-September, CAD would fall below 3.5% and stand at 3% for the full fiscal. Even otherwise, the chances of it exceeding 3.5% of GDP are minimal, he added.
Software exports have been rising with the share of offsite mode of exports by domestic IT services firms soaring to 88.8% in FY22 from 82.8% five years earlier.
11. Russia’s withdrawal from Kherson
The story so far:
Ukraine’s defence and intelligence unit has reported on the withdrawal of Russian troops from Kherson but predicts it to be a delusion for a retreat. U.S. President Joe Biden and the EU leaders have termed the withdrawal as a “difficult position” for Russian President Vladimir Putin and condemned the brutality of deporting Ukrainians.
Where is Kherson and why is it important?
Geographically, Kherson is a strategic location for Russia and Ukraine. Situated in the northwest of the Dnipro River, the province shares borders with Donetsk, Crimea and the Black Sea.
With Moscow capturing Crimea in 2014, the occupation of Kherson in March 2022 has benefited Russia in transferring its military from Crimea to counter Ukraine. It provides access to Odesa and Black Sea ports in the west and serves as the main route to secure southern Ukraine.
For Ukraine, regaining Kherson is significant to protect its population in Kalanchak and Chaplynka districts and also to recapture Crimea. Kherson is also an important region for its agricultural produce, with irrigation channels.
How did Kherson come under Russia’s control?
In early March 2022, Kherson was captured by Russia through intense fighting. The battle of Kherson proved to be the starting point to capturing and occupying the southern part of Ukraine while the battles for Kharkiv and Kyiv in the north progressed. Russia’s hold over Kherson since March 2022 enabled Moscow to capture the key port cities — Mariupol in the Sea Azov, and Odesa, thus expanding control. Kherson’s irrigation canals were used as defence positions, creating a strong line preventing Ukraine’s counter-attacks. Russia also had positioned its soldiers in Kherson and stockpiled the ammunition.
Why has Moscow announced its withdrawal from Kherson?
There are three reasons behind the move. First is the mobilisation failure. When Russia was advancing rapidly in capturing the southern and northern cities of Ukraine, its military personnel and weapon systems started to run thin.
Russia then pursued a partial mobilisation as the next strategy to circumvent its on-ground limitations. The failure of new recruits added an additional challenge to Russia to keep its hold against the Ukraine counter-offensive in Kherson.
Secondly, the inability of Russia to govern Kherson. Despite imposing martial law, Russia could not effectively rule Kherson; the three-level security in the occupied areas could not enforce Russia’s control on the ground.
Third, Ukraine’s expanding counter-offensive. Until August, Ukraine was supplied only with short-range and low-grade weapons by the West. Later, Ukrainian soldiers received military training; as Moscow continued its onslaught, the West upgraded its support with medium to high-range weapons systems such as the Howitzers, HIMARS, air defence systems, battle tanks and drone technologies. It came from the U.S., the U.K. and Germany, whereas Russia’s procurement was slow and limited to Shahed drones.
This helped Ukraine recapture Russian-occupied areas including Izyum, northeast, southeast of Kharkiv, Izyum-Slovyansk, Kupiansk in Eastern Ukraine, and northwest Kherson in the south. On the other hand, Russia has been facing challenges in augmenting its military hardware on the battleground.
Is the withdrawal final, or a tactical move by Russia?
Russia’s new mobilisation has failed to stop the advancing of Ukraine forces. The challenges to remobilise its defence systems and the shortage of weapons must have played a role in Russia’s withdrawal.
With Ukraine strengthening its military capacity through support from the West, upgrading from land-based to air-based to heavy battle tanks, Russia is facing a challenge to hold its occupied territories in Ukraine.
However, this is not the first time Moscow is making a withdrawal, after an initial onslaught. The attack on Ukraine’s capital Kyiv was an initial strategy of Russia. Later, Moscow shifted its strategy from capturing Kyiv to concentrating on eastern Ukraine. Similarly, Russia also withdrew from its strategy to capture Kharkiv. Controlling Donetsk and Luhansk have become a significant objective.
Withdrawal from Kherson exposes a serious gap in Russia’s strategy to hold southern Ukraine. However, it also underlines its strategy — to withdraw under serious attack or resistance by the Ukrainian forces — as it happened in Kyiv and Kharkiv.
Will Ukraine get emboldened and expand its attack into the Donbas and Luhansk regions? Will Russia withdraw, as it did in Kherson? These are two big questions for Kyiv and Moscow, and their larger political objectives on how far they would go with the war.