USING TRADE TREATIES TO STRENGTHEN ARBITRATION IN INDIA
TOPIC: (GS2) INTERNATIONAL RELATIONS: THE HINDU
India’s expanding network of BITs and FTAs has renewed attention on using trade agreements to strengthen India’s domestic commercial arbitration ecosystem.
Understanding the Issue
- BITs protect and promote investments between two countries, while FTAs primarily facilitate trade by reducing barriers and establishing common rules.
- Investment agreements may provide Investor-State Dispute Settlement (ISDS), allowing a foreign investor to bring certain treaty-based claims against the host State.
- Commercial arbitration, in contrast, generally deals with contractual disputes between businesses or between investors and government entities.
- India’s Arbitration and Conciliation Act, 1996 provides the basic legal framework for domestic and international commercial arbitration.
How Can Trade Treaties Support Arbitration?
- Clarifying the role of arbitration: Future FTAs that do not provide ISDS can clearly explain the availability of domestic commercial arbitration as an alternative dispute-resolution route.
- Separating treaty and contract disputes: BITs can clearly distinguish violations of investment protections from ordinary contractual disagreements.
- Recognising domestic arbitration: Where treaties require investors to approach domestic remedies, they could clarify whether commercial arbitration in India can satisfy this requirement.
- Third-party funding: Rules applicable to ISDS need not automatically determine the position of third-party funding in ordinary commercial arbitration.
Why is This Important for India?
- Investor confidence: Businesses are more willing to invest when disputes can be resolved through predictable procedures.
- Ease of doing business: Faster dispute resolution can reduce the cost and uncertainty associated with commercial contracts.
- Reducing judicial burden: Greater use of institutional arbitration can reduce pressure on courts.
- Global arbitration hub: A credible domestic arbitration ecosystem can attract international disputes and professional services.
Government Measures
- The Arbitration and Conciliation Act has been amended in 2015, 2019 and 2020 to promote faster proceedings, reduce unnecessary court intervention and strengthen institutional arbitration.
- The India International Arbitration Centre Act, 2019 created an independent institution for domestic and international arbitration.
- The government has also promoted institutional arbitration among CPSEs and PSUs through awareness and capacity-building initiatives.
- India’s recent BIT network includes agreements with countries such as the UAE and Uzbekistan.
Way Forward
- Align treaty provisions with domestic arbitration laws.
- Expand high-quality institutional arbitration and trained arbitrators.
- Ensure speedy enforcement of arbitral awards.
- Develop clear rules on third-party funding and conflicts of interest.
- Improve coordination between courts, regulators and arbitral institutions.
Conclusion:
India’s trade treaties can become more than instruments of market access by supporting a credible, efficient and internationally trusted dispute-resolution ecosystem.
PUNJAB’S GROUNDWATER CRISIS AND THE CHANGING ECONOMICS OF FARMING
TOPIC: (GS3) AGRICULTURE: THE HINDU
Punjab continues to face severe groundwater depletion, with intensive irrigation for the rice-wheat system placing heavy pressure on its aquifers.
Groundwater Crisis in Punjab
- The Central Ground Water Board (CGWB) assesses groundwater extraction as the ratio of annual extraction to the annual extractable resource.
- In the 2024 assessment, Punjab’s groundwater extraction was 156.87%, with 115 of 153 assessment units classified as over-exploited.
- Agriculture is the major user of groundwater, particularly for paddy and wheat cultivation.
- Excessive withdrawal can reduce water availability, increase pumping depth and affect the long-term sustainability of agriculture.
Why Has the Problem Persisted?
- Rice-wheat dominance: Assured procurement and established markets make farmers reluctant to shift to less water-intensive crops.
- Subsidised electricity: Free or subsidised power reduces the immediate financial cost of pumping groundwater.
- Limited alternatives: Farmers face uncertainties regarding prices, storage, processing and marketing of alternative crops.
- Technology and finance gap: As groundwater moves deeper, farmers need more powerful pumps and greater investment, creating difficulties for smallholders.
Impact on Small Farmers
- Rising irrigation costs: Deeper aquifers increase the investment required for tubewells and pumping equipment.
- Growing inequality: Wealthier farmers can invest in deeper wells, while small farmers may become dependent on purchased water.
- Reduced resilience: High dependence on one cropping pattern leaves farmers vulnerable to water stress and climate variability.
- Thus, groundwater depletion is not only an environmental problem but also an issue of rural income inequality.
Government initiatives
- The Crop Diversification Programme, under PM-RKVY, promotes alternatives such as pulses, oilseeds, maize and coarse cereals in Punjab and other Green Revolution States.
- Paani Bachao, Paisa Kamao provides financial incentives to farmers for saving electricity and groundwater used for irrigation.
- Punjab has also established the Punjab Water Resources Management and Regulation framework for sustainable water management.
- Micro-irrigation, direct-seeded rice and efficient irrigation practices can improve water-use efficiency.
Way Forward
- Make crop diversification economically attractive through assured markets, processing facilities and remunerative prices.
- Direct a greater share of subsidies towards small and tenant farmers, rather than subsidising excessive water extraction.
- Promote community-based irrigation infrastructure, water budgeting and aquifer-level management.
Conclusion:
Punjab needs to shift from subsidising groundwater extraction to supporting farmer incomes while rewarding water conservation, ensuring both agricultural prosperity and aquifer sustainability.
WHY IS THE RBI ABSORBING LIQUIDITY?
TOPIC: (GS3) ECONOMY: THE HINDU
The RBI absorbed ₹71,971 crore from banks through an overnight Variable Rate Reverse Repo (VRRR) auction against the notified amount of ₹75,000 crore.
What is VRRR?
- VRRR is a liquidity-management tool used by the RBI to temporarily absorb surplus money from banks.
- Banks deposit their excess funds with the RBI for a specified period and earn interest.
- Unlike the fixed-rate reverse repo, the interest rate in VRRR is determined through an auction.
- In simple terms:
Excess liquidity with banks → Banks park money with RBI → Money temporarily leaves the banking system.
Why does the RBI absorb liquidity?
- Control inflation: Excess money in the financial system can increase lending, consumption and investment, creating demand-side inflationary pressure.
- Manage interest rates: Liquidity conditions influence overnight money-market rates, particularly the call money rate.
- Monetary policy transmission: By managing liquidity, the RBI helps keep short-term market rates aligned with its policy rate.
- Prevent excessive credit expansion: Very high surplus liquidity can encourage banks to lend aggressively.
VRRR vs Repo
- Repo: RBI lends money to banks → injects liquidity.
- VRRR: Banks park money with RBI → absorbs liquidity.
WHY IS LIQUIDITY IMPORTANT?
Liquidity refers to the availability of funds in the financial system.
High liquidity → easier borrowing → higher spending/investment → possible inflationary pressure
Low liquidity → costlier/tighter borrowing → moderates demand → helps control inflation
Therefore, the RBI uses liquidity operations along with the repo rate, Cash Reserve Ratio (CRR) and Open Market Operations (OMOs) to maintain monetary and financial stability.
Conclusion:
Effective liquidity management enables RBI to balance inflation control, financial stability, credit availability and sustainable economic growth without disrupting markets.
INDIA’S NEW NATIONAL ACCOUNTS METHODOLOGY
TOPIC: (GS3) ECONOMY: THE HINDU
MoSPI has introduced the 2022–23 base year National Accounts series, bringing major methodological improvements to the measurement of GDP and GVA.
What are National Accounts?
- National Accounts Statistics (NAS) provide a comprehensive picture of economic activity, including GDP, GVA, consumption, investment, saving and trade.
- They follow internationally accepted frameworks such as the UN System of National Accounts.
- The base year provides a reference point for calculating economic growth at constant prices.
- Updating the base year helps capture changes in the structure of the economy, consumption patterns, production and technology.
How is GDP Measured?
- Production approach: Measures value added by different sectors, along with taxes less subsidies on products.
- Expenditure approach: Includes consumption, investment, government expenditure and net exports.
- Income approach: Captures income generated through wages, profits and taxes less subsidies.
Major Change: Double Deflation
- Earlier, manufacturing real GVA was often estimated using a single deflator, which could assume that output and input prices moved similarly.
- Under double deflation, output prices and input prices are adjusted separately.
- Therefore: Real Value Added = Real Output − Real Intermediate Consumption
- For example, if the selling price of manufactured goods rises while the cost of raw materials rises even faster, double deflation can capture the resulting change in real value addition more accurately.
- MoSPI is using detailed price information, including Output Producer Price Indices (PPI), along with ASI data.
Other Major Improvements
- Greater use of GST and administrative data to improve quarterly estimates.
- Better coverage of the unincorporated sector using annual survey information.
- Improved estimation of household consumption using newer survey and administrative datasets.
- Proportional Denton benchmarking has replaced the earlier pro-rata approach for improving consistency between quarterly and annual estimates.
- Updated rates, ratios and data sources are incorporated into the revised series.
Significance
- Better measurement: Separately accounting for output and input prices can improve real manufacturing GVA estimates.
- Policy making: More reliable national accounts help the government design fiscal, industrial and monetary policies.
- International comparability: Updated methodology improves alignment with evolving international statistical practices.
- Evidence-based governance: Better data helps assess productivity, sectoral growth and structural transformation.
Challenges
- Double deflation requires high-quality and detailed price data for both outputs and inputs.
- India’s input PPI is still being developed on an experimental basis, creating data-quality and continuity concerns.
- Mapping imported inputs and services to appropriate price indices remains difficult.
- Changes in methodology can make comparisons with older GDP series more complicated.
GDP VS GVA
GVA tells us how much different sectors PRODUCE.
GDP tells us how much the ECONOMY produces after adding taxes and removing subsidies.
1. GVA — Gross Value Added
GVA measures the value created by producers in an economy.
Formula:
GVA = Value of Output − Intermediate Consumption
Example:
- A farmer produces wheat worth ₹100.
- He uses seeds, fertiliser, electricity etc. worth ₹30.
- GVA = ₹100 − ₹30 = ₹70
So, GVA shows the actual value added by the producer/sector.
2. GDP — Gross Domestic Product
GDP measures the value of final goods and services produced within a country’s territory during a given period.
For the production approach:
GDP = GVA + Taxes on Products − Subsidies on Products
Example:
- GVA = ₹70
- Product taxes = ₹10
- Product subsidies = ₹5
Therefore:
GDP = ₹70 + ₹10 − ₹5 = ₹75
Conclusion:
A modern statistical system is essential for measuring India’s economic transformation accurately and ensuring that policy decisions are based on reliable evidence.
INDIA–NEW ZEALAND FREE TRADE AGREEMENT (FTA)
TOPIC: (GS2) INTERNATIONAL RELATIONS: THE HINDU
The India–New Zealand FTA will enter into force on 20 October 2026 after both countries completed their domestic approval processes.
What is an FTA?
- A Free Trade Agreement is a pact through which countries reduce or remove trade barriers such as customs duties and improve market access.
- It may also cover services, investment, intellectual property, customs procedures, professional mobility and cooperation.
Key Features of India–New Zealand FTA
- Duty-free exports: New Zealand will provide 100% duty-free access for Indian exports from day one.
- India’s market access: India has offered tariff concessions on 70.03% of tariff lines, covering about 95% of bilateral trade value. The remaining 29.97% are largely sensitive products.
- Investment: New Zealand has committed to facilitate US$20 billion of investment in India over 15 years.
- Services: Greater opportunities for Indian IT, professional, tourism, education and other service-sector providers.
- Skilled mobility: A dedicated quota of 5,000 temporary employment visas for skilled Indians and 1,000 working-holiday visas annually for young Indians.
- Students: The agreement expands post-study work opportunities, including up to three years for STEM graduates and four years for doctoral scholars.
Protection of Sensitive Indian Sectors
- India has kept dairy, several agricultural products, sugar and edible oils outside tariff concessions.
- Selected products such as apples, kiwifruit and Manuka honey will receive calibrated access through Tariff Rate Quotas (TRQs), Minimum Import Prices and seasonal restrictions.
- This approach seeks to combine trade liberalisation with protection of vulnerable domestic producers.
Significance for India
- Exports: Zero-duty access can improve the competitiveness of Indian textiles, leather, footwear, engineering goods, pharmaceuticals and processed foods.
- Employment: Expansion of labour-intensive exports can support employment, particularly for MSMEs and women workers.
- Investment: New Zealand capital can contribute to agriculture, manufacturing, infrastructure and start-ups.
- Agriculture: Cooperation in horticulture can improve productivity, post-harvest management and supply chains.
- Services and human capital: Easier mobility can expand opportunities for Indian professionals and students.
- Indo-Pacific partnership: The FTA complements the broader India–New Zealand Strategic Partnership and Roadmap to 2030.
Challenges
- Indian firms must improve quality, productivity and global standards to fully utilise market access.
- MSMEs may face difficulties in meeting certification, logistics and rules-of-origin requirements.
- Greater imports in selected sectors could create adjustment pressures for some domestic producers.
- Benefits will depend on effective implementation, awareness and utilisation by exporters.
Way Forward
- Strengthen export infrastructure, testing facilities and trade-finance support for MSMEs.
- Build awareness about FTA concessions, rules of origin and certification requirements.
- Use the agreement to deepen cooperation in technology, skills, agriculture and innovation.
- Regularly monitor trade outcomes and provide targeted support to vulnerable domestic sectors.
Conclusion:
The India–New Zealand FTA can turn market access into wider gains in exports, investment, employment and technology while balancing domestic sensitivities.
VANDE MATARAM AND FREEDOM OF CONSCIENCE
TOPIC: (GS2) POLITY: THE HINDU
Recently, the Supreme Court asked the Centre to clarify its position on compulsory singing of Vande Mataram and protection of religious freedom.
Background
- Written by Bankim Chandra Chattopadhyay, it is recognised as India’s National Song.
- The case focuses on whether the government can make singing the National Song compulsory at public functions.
- It also examines whether a person who respectfully refuses to sing can be punished under law.
- The Supreme Court is examining the balance between respect for national symbols and fundamental rights, especially freedom of conscience and religion.
Constitutional Issues
- Article 25: Protects freedom of conscience and the freedom to profess, practise and propagate religion, subject to constitutional limitations.
- Article 26: Protects certain rights of religious denominations.
- Secularism: The State must maintain constitutional neutrality while regulating public conduct.
- Individual liberty: National symbols can command respect, but the question before the Court concerns whether respect can be enforced through criminal penalties.
Bijoe Emmanuel Case, 1986
- The Supreme Court protected three students who did not sing the National Anthem because their religious beliefs did not allow them to do so.
- The Court held that remaining silent respectfully is not the same as insulting the National Anthem.
- The judgment highlighted the importance of freedom of religion, freedom of conscience and respect for individual beliefs.
Broader Significance
- The case raises the constitutional balance between national unity and individual freedom.
- It also highlights the difference between honouring a national symbol and compelling personal expression.
- The existing National Honour law specifically penalises intentional acts such as preventing the singing of the National Anthem or causing disturbance during it.
HONOURING NATIONAL SYMBOLS AND DPSP
- Article 51A(a): It is a Fundamental Duty of every citizen to respect the National Flag and National Anthem.
- Article 49: The State has a duty to protect national monuments and places of historical or artistic importance.
- Article 51: The State should promote international peace, respect for international law and peaceful settlement of disputes.
Respect for national symbols is encouraged through Fundamental Duties, while Fundamental Rights protect individual freedom of conscience and religion.
Conclusion:
A constitutional democracy can promote respect for national symbols while protecting freedom of conscience, religious liberty and peaceful non-participation.
