MAINS Current Affairs includes Global Economic Risks and India’s Resilience & Forest Rights Act (FRA), 2006

ECONOMY

1. Global Economic Risks and India’s Resilience

Context: The Governor of the Reserve Bank of India recently cautioned that geo-economic fragmentation (GEF)—driven by tariffs, industrial policies, sanctions, and trade restrictions—is reshaping global supply chains and disrupting international capital flows.

What is Geo-Economic Fragmentation (GEF)?

• Geo-economic fragmentation refers to a policy-led reversal of global economic integration, where geopolitical and security concerns increasingly shape economic relations.
• It affects major channels of global integration such as:
  • Trade
  • Capital flows
  • Migration
  • Technology transfer
• Unlike market-driven deglobalisation, GEF is largely state-engineered through measures such as export controls, sanctions, subsidies, and strategic trade barriers.

Implications of Geo-Economic Fragmentation

1. Financial Market Risks

• Increased instability in financial markets may create systemic risks similar to the 2008 shadow banking crisis.
• Overvaluation in technology and equity markets raises the possibility of sharp corrections and global contagion effects.

2. Expansion of Private Credit Markets

• Private credit markets are growing rapidly outside the regulated banking system.
• Limited transparency and strong linkages with formal institutions increase financial vulnerability.

3. Macroeconomic Vulnerabilities

• Rising sovereign debt after pandemic-related fiscal expansion has created long-term sustainability concerns.
• Delayed fiscal consolidation further aggravates these risks.

4. Geopolitical Pressures

• Strategic rivalries and ongoing conflicts are increasing defence expenditure, reducing fiscal space for development spending.

5. External Sector Challenges

• Volatile oil prices, currency fluctuations, and trade imbalances are intensifying uncertainty.
• Supply chains are shifting from efficiency-based models toward security-oriented production networks (e.g., China+1 strategy).

6. Fragmentation of Financial Flows

• Cross-border capital mobility is weakening, leading to regionalisation of financial systems.
• FDI and portfolio flows are becoming increasingly volatile.

7. Growth Slowdown Risks

• Advanced economies are witnessing slower growth amid tighter monetary policies.
• India’s growth remains relatively strong but is moderating from an average of around 8.2% (2021–25) toward 6.5–7%.

8. Financial Market Development Constraints

• Challenges include:
  • Limited depth in government securities markets
  • High concentration in derivatives markets
  • Underdeveloped credit derivatives
  • Low retail participation in forex markets

9. Artificial Intelligence Risks

• AI-driven disruptions may lead to:
  • Job displacement
  • Skill mismatches
  • Uneven technological diffusion
  • Uncertain sustainability of business models

India’s Resilience Amid GEF

Diversified Trade Structure

• India’s broad-based trade and services exports help reduce dependence on specific regions or sectors.

Strong External Position

• Forex reserves remain comfortable, covering nearly 11 months of imports.
• Current Account Deficit (CAD) remains within manageable limits.

Stable Investment Flows

• India continues to attract strong FDI inflows, particularly in technology and finance.
• Greenfield investments are also rising.

Growth Performance

• India recorded an average growth rate of about 2% during 2021–25.
• Growth projection for 2026–27 remains around 9%.

Key Domestic Growth Drivers

• Strong domestic demand
• Public capital expenditure
• Crowding-in of private investment

Policy Responses & Way Forward

Global Measures

• Strengthen multilateral cooperation through reforms in institutions like the IMF and WTO.
• Encourage dialogue to manage fragmentation pressures.

India’s Strategy

• Maintain macroeconomic stability
• Improve ease of doing business
• Promote inclusive growth
• Strengthen regulatory systems

Role of RBI

• Monitor systemic financial risks
• Ensure financial stability
• Deploy timely monetary and regulatory interventions

Financial Market Reforms

• Deepen government securities markets across maturities
• Diversify derivative instruments for better hedging
• Expand access and transparency in forex markets
• Develop credit derivative markets
• Banks and primary dealers should improve market efficiency, expand global integration, and ensure ethical conduct.

Conclusion

• Geo-economic fragmentation poses significant risks to global trade, finance, and growth.
• However, India’s relatively strong macroeconomic fundamentals, diversified economy, and policy stability provide resilience against external shocks.
• Sustained reforms, stronger financial markets, and strategic global engagement will be essential for navigating the evolving geo-economic landscape.

ENVIRONMENT

2. Forest Rights Act (FRA), 2006

Context

• The Allahabad High Court recently reiterated an important legal principle while hearing a case related to the Forest Rights Act (FRA), 2006 in Lakhimpur, Uttar Pradesh.

Key Highlights of the Recent Case

• The Court criticised the District Level Committee (DLC) for rejecting forest rights claims in 2021 on the basis of a 2000 interim order of the Supreme Court, despite the FRA overriding earlier restrictive provisions.
• It observed that the DLC acted contrary to the statutory framework of the FRA. However, instead of invoking punitive provisions under the Act, the Court directed reconsideration of the claims.
• The case highlights continuing tensions between the FRA and older forest laws or judicial interpretations.
• Issues such as weak implementation, inconsistent legal interpretation, and reliance on outdated provisions continue to undermine the rights of forest dwellers, particularly in matters relating to eviction protection and grazing rights.

About Forest Rights Act (FRA), 2006

• The Forest Rights Act, 2006 was enacted to address the historical injustice faced by forest-dwelling Scheduled Tribes and other traditional forest dwellers.
• It legally recognises their traditional dependence on forests for:
  • Livelihood
  • Habitat
  • Culture
  • Survival

Major Features of FRA

1. Individual and Community Rights

• Recognises both individual and community forest rights.
• Includes rights related to:
  • Cultivation and habitation on forest land
  • Grazing and fishing
  • Access to water bodies
  • Collection and use of minor forest produce

2. Rights of Vulnerable Communities

• Provides special safeguards for:
  • Particularly Vulnerable Tribal Groups (PVTGs)
  • Nomadic and pastoral communities
• Also acknowledges traditional knowledge systems and biodiversity-related intellectual rights.

3. Diversion of Forest Land for Development

• Permits limited use of forest land for essential public facilities such as:
  • Schools
  • Health centres
  • Basic infrastructure

4. Central Role of Gram Sabha

• Empowers the Gram Sabha to play a decisive role in:
  • Forest governance
  • Conservation
  • Verification of claims
• Encourages participatory management of forests and biodiversity.

5. Protection Against Eviction

• Forest dwellers cannot be evicted without due rehabilitation and legal procedure.
• Requires coordination with land acquisition and rehabilitation laws.

Importance of FRA

Correcting Historical Injustice

• Recognises long-denied rights of tribal and forest-dependent communities.

Livelihood Security

• Provides legal access to forest produce, crucial for food, fodder, fuel, and income generation.

Decentralised Governance

• Strengthens local self-governance through Gram Sabhas and participatory democracy.

Conservation Benefits

• Encourages sustainable forest management by involving communities with traditional ecological knowledge.

Social Justice

• Protects vulnerable communities from displacement and marginalisation while reinforcing constitutional values of equality and dignity.

Challenges and Issues

Arbitrary Rejection of Claims

• Large numbers of claims are rejected without proper scrutiny, often treating genuine claimants as encroachers.

Judicial Conflicts

• In 2019, the Supreme Court of India initially ordered eviction of persons whose FRA claims were rejected, potentially impacting nearly 1.8 million people.
• The order was later stayed after intervention by the Ministry of Tribal Affairs.

Weak Institutional Capacity

• District committees and implementing agencies often lack adequate training and resources.

Conservation vs Rights Debate

• Conflicts arise between wildlife protection laws and FRA rights, especially in tiger reserves and protected areas.

Data and Transparency Issues

• Lack of reliable data on rejected claims reduces accountability and transparency.

Way Forward

Strengthen Gram Sabhas

• Enhance their authority and capacity in forest governance and claim verification.

Improve Transparency

• Ensure fair claim processing with strong grievance redress mechanisms.

Legal Harmonisation

• Align conservation laws with FRA provisions to reduce legal conflicts.

Capacity Building

• Train officials and improve institutional efficiency.

Use of Technology

• Digital mapping and online monitoring can improve transparency and reduce delays.

Promote Community-Based Conservation

• Link FRA implementation with schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGS) for sustainable livelihood generation.

Awareness Campaigns

• Increase awareness among forest dwellers regarding their legal rights and procedures.

Conclusion

• The Forest Rights Act, 2006 represents an important step toward correcting historical injustices and empowering forest communities.
• However, implementation challenges, legal ambiguities, and institutional weaknesses continue to limit its effectiveness.
• A balanced approach that integrates community rights with environmental conservation is essential for achieving both social justice and sustainable forest governance.

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