The Hindu Newspaper Analysis

Editorial Topic : Addressing National Security Risks from FDI and Trade

 GS-3 Mains Exam 

Revision Notes

Context

India lacks a comprehensive legal framework to address foreign direct investment (FDI) and international trade concerning national security. The existing mechanisms are inadequate to manage potential risks associated with foreign investments, particularly from countries sharing land borders with India.

Press Note 3 (PN3)

• Introduction: In April 2020, during the pandemic, India implemented Press Note 3 (PN3) under the Foreign Exchange Management Act (FEMA).
• Objective: PN3 aims to prevent opportunistic takeovers of weakened Indian companies by requiring prior government approval for investments from neighboring countries.
• Chinese FDI: The regulation places particular scrutiny on Chinese investments, highlighting concerns over national security, although the term “national security” is not explicitly mentioned in PN3.

Methodology for Handling Chinese FDI

• Economic vs. Security Debate: The discussion around Chinese FDI in India weighs economic advantages against security risks.
• Global Context: Other liberal democracies like Canada and Australia have also restricted Chinese investments during the pandemic using specific legal frameworks aimed at safeguarding national security.

Foreign Exchange Management Act (FEMA)

• Limitations: FEMA lacks clear provisions regarding FDI and national security. It focuses primarily on foreign exchange management rather than security considerations.
• Legal Vacuum: Without a dedicated law for national security risks related to FDI, FEMA is repurposed to screen foreign investments, exposing a significant legal gap.

Customs Tariff Act

• Emergency Powers: Following the Pulwama attack, India invoked Section 8A(1) of the Customs Tariff Act to raise customs duties on Pakistani imports to 200%. This section grants the government emergency powers to adjust tariff rates, but it is intended for economic emergencies, not security threats.
• Dual Role: Similar to FEMA, the Customs Tariff Act has been used as a national security tool, indicating an absence of specific legislation for security concerns.

International Agreements

• Contrast with Domestic Law: India’s international investment treaties and trade agreements have separate provisions addressing national security issues, which are not reflected in domestic legislation.
• Existing Frameworks: Agreements like the General Agreement on Tariffs and Trade include clauses for trade restrictions due to national security, emphasizing the inconsistency in India’s domestic legal provisions.

Way Forward: Need for Specific Domestic Law

• Vulnerability: The lack of a defined domestic law to manage FDI and international trade on security grounds makes India susceptible to challenges in international courts.
• Call for Legislation: The ongoing discourse around national security risks from FDI, particularly from China, underscores the urgent need for India to establish a dedicated legal framework to address these challenges effectively.

Conclusion

India’s current legislative landscape concerning FDI and international trade lacks the specificity required to mitigate national security risks. Establishing a dedicated law is essential for safeguarding national interests and ensuring that the measures taken can withstand scrutiny in international legal arenas.

 

 

 

The Hindu Newspaper Analysis

Editorial Topic : Employment Data Overview

 GS-3 Mains Exam 

Revision Notes

Economic Growth

• The Reserve Bank of India forecasts the economy to grow at 7.2% this year, with medium-term projections by the IMF suggesting continued momentum.
• Despite this growth, concerns persist regarding the quality of jobs available.

Labour Market Overview (Periodic Labour Force Survey)

• Labour Force Participation Rate: Increased from 8% (2017-18) to 60.1% (2023-24), largely driven by a significant rise in female participation.

• • Female Participation: In rural areas, female participation surged from 24.6% to 47.6%. This may indicate economic distress, as women seek to supplement household incomes.
  • Employment Type: The share of women in salaried positions has decreased, while self-employment has risen from 51.9% to 67.4%.

• Informal Employment:

• • Informal Sector Workers: 73.2% of workers are employed in informal enterprises as of 2023-24, a slight decline from 74.3% (2022-23) but up from 68.2% (2017-18).

• Agricultural vs. Manufacturing Employment:

• • Agriculture: The share of workers in agriculture has increased from 44.1% (2017-18) to 46.1% (2023-24), reversing a previous decline.
  • Manufacturing: The proportion of the workforce in manufacturing has remained stagnant at around 11%.

• Unemployment Rates:

• • Overall unemployment has decreased from 6% (2017-18) to 3.2% (2023-24).
  • Youth unemployment, while down from 17.8% to 10.2%, remains high.
  • Unemployment rates are disproportionately higher among those with secondary and higher education.

Key Challenges

• The labour market data highlights a significant challenge: the inadequate creation of remunerative and productive employment opportunities.
• The production process is becoming more capital-intensive and labour-saving, complicating job creation efforts.

Policy Recommendations

• Addressing the creation of more lucrative and productive employment opportunities must be a top priority in policy agendas.
• Strategies should focus on fostering job creation that aligns with economic growth, while also addressing the quality and security of employment for workers.

Conclusion

While economic growth indicators are positive, the persistent issues of job quality and employment type, particularly for women and youth, underscore the need for comprehensive policy reform to enhance the labour market in India.