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Distribution: weekly

  • Downturn in tech startup ecosystem

    Context

    The startup ecosystem which has been in overdrive for the past few years — propelled by a combination of factors, but largely, by the era of cheap money — is now showing signs of weakness.

    Factors that helped fuel the tech startups

    • With the combination of accelerated financial inclusion (bank accounts), ease of identification (Aadhaar) and connectivity (mobile phones) it was said that it is ultimately a bet on the Indian consumer, and the economy, not on government regulations/policies.
    • Low-interest rates: In the era of cheap money and negative real interest rates, uncomfortable questions over the true market size and profitability were swept under the rug.
    • Growth fuelled by cash burn: High cash burn rates were the norm as both startups and investors sought growth by subsidising the customer.

    What is going wrong?

    • Lack of profitability: Among the startups that have gone public in recent times, Paytm’s losses stood at Rs 2,396 crore in 2021-22, while for Zomato and PB Fintech (PolicyBazaar) losses were Rs 1,222 crore and Rs 832 crore respectively.
    • Drying-up of investment: Sure, investors will continue to pour money.
    • Some early age start-ups will continue to be funded, as will some of the more mature ones.
    • But investors are likely to be more circumspect in their dealings.
    • Impact on valuation: There are also reports of startups in diverse markets, ranging from Ola to OYO, planning to raise funds at lower valuations.
    • Among those who have gone public in recent times, most are trading much below their listing price.
    • Tighter financial conditions, a re-rating of the market, will impact both fundraising efforts and valuations.

    Lack of discretionary spending capacity

    • Many numbers were given as indicators of the size of the market or TAM (the total addressable market).
    • Smartphone users: One such number thrown around is the smartphone users in the country — some have pegged this at 500 million.
    • UPI transactions: The transactions routed through the UPI platform — in May there were almost six billion transactions worth Rs 10 trillion.
    • Bank account holders: We have the near universality of bank accounts.
    • But in reality, for most of these startups, the market or even the potential market is just a fraction of this.
    • There aren’t that many consumers with significant discretionary spending capacity, and those with the capacity aren’t increasing their spending as these companies would hope.
    • No increase in spending: What is equally worrying is the complete absence of any increase in spending by even these consumers who would have the capacity to spend more.
    • While more consumers are on-board digital payment platforms — Paytm has about 70 million monthly transacting users — these numbers suggest that when it comes to consumers with considerable discretionary spending, the size of the market shrivels considerably.

    Conclusion

    Tech startups are about to witness a tough time ahead. Some startups will survive this period. Many may not. And changes in the dynamics of private markets will also have a bearing on public markets.

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  • online marketplace

    Context

    The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. However, these platforms also have given rise to several concerns as well.

    What is e-commerce ?

    • Electronic commerce or e-commerce is a business model that lets firms and individuals buy and sell things over the Internet.
    • Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion in 2017.
    • India’s e-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.
    • The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034.

    Advantages of e-Commerce

    • The process of e-commerce enables sellers to come closer to customers that lead to increased productivity and perfect competition. The customer can also choose between different sellers and buy the most relevant products as per requirements, preferences, and budget. Moreover, customers now have access to virtual stores 24/7.
    • e-Commerce also leads to significant transaction cost reduction for consumers.
    • e-commerce has emerged as one of the fast-growing trade channels available for the cross-border trade of goods and services.
    • It provides a wider reach and reception across the global market,with minimum investments. It enables sellers to sell to a global audience and also customers to make a global choice. Geographical boundaries and challenges are eradicated/drastically reduced.
    • Through direct interaction with final customers, this e-commerce process cuts the product distribution chain to a significant extent. A direct and transparent channel between the producer or service provider and the final customer is made. This way products and services that are created to cater to the individual preferences of the target audience.
    • Customers can easily locate products since e-commerce can be one store set up for all the customers’ business needs
    • Ease of doing business: It makes starting, managing business easy and simple.
    • The growth in the e-commerce sector can boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.

    Issues created by the e-commerce sites

    • Predatory pricing: These companies resort to predatory pricing to acquire customers even as they suffer persistent financial losses.
    • SEBI is rightly revisiting the valuation norms of such companies looking to list on the stock exchange.
    • Exclusionary practice: They take away choice from suppliers and consumers.
    • This, in the long run, can be viewed as an exclusionary practice that eliminates other players from the market. 
    • Lack of level playing field: While neutrality is the fundamental basis of a marketplace and a level playing field is in the fitness of things, claims of outfits such as Flipkart or Amazon to be a marketplace for a wide variety of sellers can be questioned.
    • A few select sellers, who are generally affiliated with the platform, reap the benefits of greater visibility and better terms of trade — reduced commissions and platform-funded discounts.
    • Undue advantage to associated companies: The associate companies are prominent sellers on their platform.
    • It is alleged that undue advantage is given while recommending or listing these products.
    • Cartelisation: Online travel aggregators are often accused of cartelisation.
    • Information asymmetry: The aggregators gather shopping habits, consumer preferences, and other personal data.
    • The platforms are accused of using this data to create and improve their own products and services, taking away business from other sellers on their platform.
    • They capitalise on this data and information about other brands to launch competing products on their marketplace.
    • This information asymmetry is exploited by the aggregators to devour organisations they promise to support.
    • Problems in dispute resolution mechanism: Another issue often noticed is the lack of a fair and transparent dispute resolution mechanism for sellers on these platforms.
    • Delayed payments, unreasonable charges, and hidden fees are common occurrences.
    • Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates) which allows them to offer rooms at a much cheaper rate but bars the hotels from doing so.

    Impact of the e-commerce

    • The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in.
    • The ultimate loss bearer is the consumer who will have a reduced bargaining position.

    Way forward

    • Comprehensive rules: It is time that a set of comprehensive rules and regulations is put together.
    • These regulations need to be inclusive, should eliminate the conflicts of interest inherent in current market practices, and prevent any anti-competitive practices.
    • Model agreement: A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented.
    • Learning from EU act: There is a lot to learn from the Digital Markets Act of the EU that seeks to address unfair practices by these gatekeepers.
    • Need for dispute resolution mechanism: Strong and quick grievance redressal and dispute resolution mechanisms should be established.
    • Punitive penalties: The rules should allow for punitive penalties for unfair practices.
    • Fair competition rules: Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.

    Conclusion

    The nature of our success in dealing with this change will lie in the ways in which we deal with the concerns of all players.

     

  • India’s gig workforce to reach 2.35 Cr by 2030: NITI Aayog

    A NITI Aayog report has identified that is expected to grow to 2.35 crore by 2029-30.

    Do you know?

    According to a study released by NITI Aayog, the number of gig workers in India is estimated to be 77 lakh in 2020-21. Isn’t it too low to imagine? Seems like there is huge under-reporting.

    What is the Gig Economy?

    • In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees.
    • A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career. e.g Employee models of Uber, Ola, Swiggy etc
    • In this economy, tech-enabled platforms connect the consumer to the gig worker to hire services on a short-term basis.
    • Gig workers include self-employed, freelancers, independent contributors and part-time workers.

    Where does gig culture exist in Indian Economy?

    • Sectors such as media, real estate, legal, hospitality, technology-help, management, medicine, allied and education are already operating in gig culture.
    • The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and demand for flexible lifestyles.

    Key Drivers for Gig Economy

    • Unconventional work approach by millennials: Hectic lifestyles of employees in private sectors have created a negative perception of full-time employment among millennials.
    • Emergence of a start-up culture: The start-up ecosystem in India has been developing rapidly. For start-ups, hiring full-time employees leads to high fixed costs and therefore, contractual freelancers are hired for non-core activities.
    • MNCs are hiring contractual employees: MNCs are adopting flexi-hiring options, especially for niche projects, to reduce operational expenses after the pandemic.
    • Rise in freelancing platforms: Rise in freelancing platforms has also aided in the development of the gig economy.
    • Business Models: Gig employees work on various compensation models such as fixed-fee (decided during contract initiation), time & effort, actual unit of work delivered and quality of outcome.
    • Impact of Covid-19: Many laid-off employees are focusing on developing skills to avail freelance job opportunities and become a part of this burgeoning economy.

    Why is Gig Economy preferred by workers?

    • Profit through multiple work: One can work on freelancing as well as work full-time somewhere else.
    • Women empowerment: It is very beneficial for womenwho work on this concept when they cannot continue their work or take a break from career due to marriage or child birth.
    • Leisure and dependency: Retired peoplecan stay active after retirement as this will keep them engaged away from loneliness and depression and can earn as well on their own.
    • Flexibility and diversity to the workers: It offers flexibility when workers can work according to their convenience and schedule rather than routine like in full-time jobs.
    • Work from home: The travel costs and energy to travel to the workplace is reduced.

    Why is Gig Economy preferred by Employers?

    • Efficiency, efficacy and productivity of workers in the gig economy are much more than that of a stable full-time job.
    • More rconomical for employers-when employment givers can’t afford to hire full-time workers, they hire people for specific projects and pay them.
    • Start-up companies and entrepreneurs – who do not have big financial space – can grow only if they can leverage the services of contract employees or freelancers.
    • In a gig economy, businesses save resources in terms of benefits, office space and training.
    • Competition and efficiency among workers is improved.

    Challenges faced in Gig economy

    • No perks and benefits: There are no labour welfare emoluments like pension, gratuity, etc. for the workers.
    • Job insecurity: Gig workers may face unfair termination. They may also attain minimum wages and less paid leave.
    • No legal protection: Workers do not have the bargaining power to negotiate a fair deal with their employers.
    • Unionization of workers will be difficult.
    • Confidentiality of documents etc. of the workplace is not guaranteed
    • Urban nature: The gig economy is not accessible for people in many rural areas where internet connectivity and electricity is unavailable.

    New classification by NITI Aayog: Platform vs. Non-platform Workers

    • The NITI Aayog report broadly classifies gig workers into platform and non-platform-based workers.
    • The consequent platformisation of work has given rise to a new classification of labour — platform labour — falling outside of the purview of the traditional dichotomy of formal and informal labour.
    • While platform workers are those whose work is based on online software applications or digital platforms.
    • Non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.

    Recommendations made by NITI Aayog

    • The NITI Aayog has recommended steps to provide social security, including paid leave, occupational disease and accident insurance, support during irregularity of work and pension plans for the country’s gig workforce.
    • It has also recommended introducing a ‘Platform India initiative’ on the lines of the ‘Startup India initiative’.

     

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  • Partners in the Blue Pacific (PBP) Initiative

    To reinforce its Indo-Pacific strategy, the US – along with Australia, New Zealand, UK and Japan – announced a new Partners in Blue Pacific (PBP) initiative.

    What is Partners in the Blue Pacific (PBP) initiative?

    • The PBP is a five-nation “informal mechanism” to support Pacific islands and to boost diplomatic, economic ties in the region.
    • It speaks of enhancing “prosperity, resilience, and security” in the Pacific through closer cooperation.
    • It simply means that through the PBP, these counties — together and individually — will direct more resources here to counter China’s aggressive outreach.
    • The initiative members have also declared that they will “elevate Pacific regionalism”, and forge stronger ties with the Pacific Islands Forum.
    • The areas where PBP aims to enhance cooperation include “climate crisis, connectivity and transportation, maritime security and protection, health, prosperity, and education”.

    How is China trying to transform its ties in the Pacific?

    • As China signed a security pact with Solomon Islands in April, the deal flagged serious concerns about the Chinese military getting a base in the southern Pacific.
    • This is very close to the US island territory of Guam, and right next to Australia and New Zealand.
    • The deal, which boosted Beijing’s quest to dominate crucial shipping lanes criss-crossing the region, rattled the US and its allies.
    • It also triggered urgent moves to counter China’s growing Pacific ambition amid a power vacuum fuelled by apparent lack of US attention.

    What is being done by the US and its allies to counter China?

    • Before launching the PBP this month, the US and its partners started the Indo-Pacific Economic Framework for Prosperity (IPEF).
    • Away from the Pacific, the G7 on Monday (June 27) announced a plan — Partnership for Global Infrastructure and Investment (PGII) — to rival China’s BRI.
    • It promises to raise $600 billion to fund development projects in low and middle-income countries.

     

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  • What is Small Savings Scheme?

    Economists expect the Centre to raise the interest rates paid on small savings schemes for the July to September 2022 quarter.

    Small Savings Scheme

    • Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age.
    • They are popular as they provide returns higher than bank fixed deposits, sovereign guarantee and tax benefits.

    How is it managed?

    • Since 2016, the Finance Ministry has been reviewing the interest rates on small savings schemes on a quarterly basis.
    • All deposits received under various schemes are pooled in the National Small Savings Fund.
    • The money in the fund is used by the Centre to finance its fiscal deficit.

    What are the different saving schemes?

    The schemes can be grouped under three heads –

    1. Post office deposits
    2. Savings certificates and
    3. Social security schemes

    (1) Post Office Deposits

    • Under this we have the savings deposit, recurring deposit and time deposits with 1, 2, 3 and 5 year maturities and the monthly income account.
    • The savings account currently pays an interest of 4% per annum and can be opened individually or jointly with an initial investment of Rs 500.
    • The recurring deposit that pays 5.8% a year compounded quarterly matures after 60 months from the date of opening.
    • It allows investors to save on a monthly basis with a minimum deposit of Rs 100 per month.
    • Investments under the 5-year time deposit up to Rs 1.5 lakh further qualifies for benefit under section 80C of Income Tax Act.

    (2) Savings Certificates

    • Under this, we have the National Savings Certificate and the Kisan Vikas Patra.
    • The National Savings Certificate pays interest at a rate of 6.8% per annum upon maturity after 5 years. The interest that is earned is reinvested into the scheme every year automatically.
    • The NSC also qualifies for tax saving under Section 80C of the income tax act.
    • The Kisan Vikas Patra, which is open to everyone, doubles your one-time investment at the end of 124 months signifying a return of 6.9% compounded annually.
    • The minimum investment amount is Rs 1000 while there is no upper limit.

    (3) Social security schemes

    • In the third head of social security schemes, there is Public Provident Fund, Sukanya Samriddhi Account and Senior Citizens Savings Scheme.

    a. Public Provident Fund

    • The Public Provident Fund is a popular saving option for long term goals like retirement.
    • It pays 7.1% a year and qualifies for tax benefit under Section 80C of the Income Tax Act.
    • Upon maturity of the account after 15 years, it can be extended indefinitely in blocks of 5 years.
    • The accumulated amount and interest earned are exempt from tax at the time of withdrawal.

    b. Sukanya Samriddhi Account

    • The Sukanya Samriddhi Account was launched in 2015 under the Beti Bachao Beti Padhao campaign exclusively for a girl child.
    • The account can be opened in the name of a girl child below the age of 10 years.
    • The scheme guarantees a return of 7.6% per annum and is eligible for tax benefit under Section 80C of the Income Tax Act.
    • The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.

    c. Senior Citizen Savings Account

    • And finally, the 5-year ​​Senior Citizen Savings Account can be opened by anyone who is over 60 years to age.
    • It carries an interest of 7.4% per annum payable quarterly and qualifies for Section 80C tax benefit.
    • These time-tested and safe modes of investments don’t offer quick returns, but are safer when compared to market-linked schemes.

     

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  • Performance Grading Index for Districts (PGI-D)

    The Ministry of Education has released the Performance Grading Index for Districts (PGI-D) for 2019 which studied 83 indicators grouped in six categories.

    What is PGI-D?

    • The 83-indicator-based PGI for District (PGI-D) has been designed to grade the performance of all districts in school education.
    • The data is filled by districts through an online portal.
    • The indicator-wise PGI score shows the areas where a district needs to improve.
    • The PGI-D structure comprises a total weightage of 600 points across 83 indicators.
    • They are grouped under 6 categories, viz., Outcomes, Effective Classroom Transaction, Infrastructure Facilities & Students’ Entitlements, School Safety & Child Protection, Digital Learning, and Governance Process.
    • These categories are outcomes, effective classroom transaction, infrastructure facilities and student’s entitlements, school safety and child protection, digital learning and governance process.

    How does the grading scale works?

    • The PGI-D grades the districts into 10 grades with the highest achievable grade being ‘Daksh’, which is for districts scoring more than 90% of the total points in that category or overall.
    • ‘Utkarsh’ category is for districts with score between 81-90%, followed by ‘Ati-Uttam’ (71-80%), ‘Uttam’ (61-70%), ‘Prachesta-I’ (51-60%), ‘Prachesta-II’ (41-50%) and ‘Pracheshta III’ (31-40%).
    • The lowest grade in PGI-D is called ‘Akanshi-3’ which is for scores up to 10% of the total points.

    Performance of the states

    • Rajasthan’s Sikar is the top performer, followed by Jhunjhunu and Jaipur.
    • The other States whose districts have performed best are Punjab with 14 districts in ‘Ati-uttam’ grade (scoring 71-80% on a scale of 100).
    • It followed by Gujarat and Kerala with each having 13 districts in this category.
    • However, there are 12 States and UTs which do not have even a single district in the ‘Ati-uttam’ and ‘Uttam’ categories and these include seven of the eight States from the North East region.

    Significance

    • The PGI-D will reflect the relative performance of all the districts on a uniform scale which encourages them to perform better.
    • It is expected to help the state education departments to identify gaps at the district level and improve their performance in a decentralized manner.

     

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  • G-20

    The Jammu and Kashmir administration has constituted a committee to coordinate with the delegates of G-20 countries scheduled to participate in a meeting to be held in the Union Territory (UT) next year.

    Why such move?

    • The participation of the delegates from G-20 countries will be a major boost to the efforts of the Centre to project the situation in J&K as normal.
    • This is especially after J&K’s special constitutional position was ended in 2019.

    What is G-20?

    • Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.
    • Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
    • To tackle the problems or address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
    • In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.
    • The G20 has no permanent staff of its own and its chairmanship rotates annually between nations divided into regional groupings.

    Aims and objectives

    • The Group was formed with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
    • The forum aims to pre-empt the balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
    • It seeks to address issues that go beyond the responsibilities of any one organization.

    Members of G20

    The members of the G20 consist of 19 individual countries plus the European Union (EU).

    • The 19 member countries of the forum are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and the United States.
    • The European Union is represented by the European Commission and by the European Central Bank.

    Its significance

    • G20 is a major international grouping that brings together 19 of the world’s major economies and the European Union.
    • Its members account for more than 80% of global GDP, 75% of trade and 60% of population.

    India and G20

    • India has been a member of the G20 since its inception in 1999.

     

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  • Political crisis in Maharashtra underscores ineffectiveness of anti-defection law

    Context

    The political crisis in Maharashtra has brought focus back on the anti-defection law. By all accounts, the law has failed to shore up the stability of elected governments.

    About Anti-defection law

    • The Anti-Defection Law under the Tenth Schedule of the Constitution punishes MPs/ MLAs for defecting from their party by taking away their membership of the legislature.
    • It gives the Speaker of the legislature the power to decide the outcome of defection proceedings.
    • It was added to the Constitution through the Fifty-Second (Amendment) Act, 1985 when Rajiv Gandhi was PM.
    • The law applies to both Parliament and state assemblies.

    How provisions of the law are being thwarted?

    • There are many ways to thwart provisions of the law:
    • The Speaker can sit on the defection pleas for the term of the assembly;
    • The beneficiary party can facilitate accretion of defectors to hit the magic two-thirds threshold.
    • The voters don’t seem to care about punishing the defectors either.

    Is an amendment to the law a solution?

    • Some have thus argued that the way forward is to amend the anti-defection law to fill these lacunae by mandating time-bound decisions by the Speaker and disqualifying defectors from standing for the next election as well.
    • These proposed amendments like the original law want to consolidate power without necessarily putting in the requisite politics.

    Why amendment to the law will not solve the problem

    •  Politicians are adept at subverting institutional processes for their own ends and there are many possibilities for payoff for defectors outside of elected office alone.
    • Moreover, politics has a rich history of exercise of power by proxy and the disqualified representative may simply choose to have a family member stand in their stead.
    •  The anti-defection law and proposed amendments approach the issue of defections from the prism of denying power to the defector, a framing which repeatedly comes up short in the face of a bigger and/or more punitive power.

    Way forward

    • Parties need to project power: Within this framework, if political parties want to resist defections, they must be able to project (imminent) power themselves.
    • Parties need to address organisational issues: At the same time, political parties must address organizational and ideological infirmities which have made them susceptible to mass defections in the first place.
    • Ideological clarity: Political parties need ideological clarity and the ability to attract individuals with a sense of purpose and not love for power alone.
    • This ideological depth if reflected in the party organization and its political programs will give members the ability to withstand lean periods of power.
    • Inner-party democracy: Political parties are failing to create intra-party forums where grievances can be expressed and resolved on an ongoing basis.
    • Internal mechanisms for inner-party democracy – from elections to deliberative forums – are ultimately at the discretion of the party leadership.
    • Scrap anti-defection law: Scrapping the anti-defection law would provide some institutional leverage to express intra-party dissidence and while it may be more chaotic in the short-term would lead to greater stability and political strength in the long-term.
    • Contributed to polarisation: The anti-defection law has undermined not just the very principle of representation but has also contributed to polarization in our country by making it impossible to construct a majority on any issue outside of party affiliation.
    • Avoid ceding political power to the judiciary: Political parties are repeatedly giving primacy to legal instead of political battles since these issues inevitably end up in court.
    • This repeated ceding of political power to the judiciary is a serious deviation from the democratic paradigm and must be checked.

    Conclusion

    Anti-defection law has failed to prevent the defections and subsequent toppings of the several state government. Scrapping it could provide leverage to express intra-party dissidence.

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  • Centre asks firms to arrange Tricolours

    Independence Day 2020 | Independence Day: Facts about Indian tricolour that you may have missed | India News

    The Centre has reached out to manufacturers and e-commerce sites to boost the availability of the Tricolour, according to officials aware of the programme.

    Why in news?

    • The Centre is set to launch a large-scale campaign to encourage Indians to fly the National Fag at their homes to mark the 75th Independence Day.
    • The aim of the campaign was to inspire people, rather than carry out a distribution drive.

    How is it made possible?

    • In order to facilitate the campaign, the Union Home Ministry had last year amended the Flag Code, which earlier only allowed hand-woven or hand-spun flags to be made.
    • It has now allowed flags to be polyester and machine-made.

    Do you know?

    Earlier, the display of the national flag was governed by the provisions of The Emblems and Names (Prevention of Improper Use) Act, 1950 and the Prevention of Insults to National Honour Act, 1971.

    What is the Flag Code of India?

    • The Flag Code of India is a set of laws, practices and conventions that apply to the display of the national flag of India.
    • The Code took effect from 26 January 2002 and superseded the “Flag Code-India” as it existed earlier.
    • It permits the unrestricted display of the tricolour, consistent with the honour and dignity of the flag.

    The Flag Code of India has been divided into three parts:-

    • First Part: General Description of the National Flag.
    • Second Part: Display of the National Flag by members of public, private Organisations & educational institutions etc.
    • Third Part: Display of National Flag by Union or State Governments and their organisations and agencies.

    Disposing of the national flag

    • A/c to the Flag Code, such paper flags are not to be discarded or thrown on the ground after the event.
    • Such flags are to be disposed of, in private, consistent with the dignity of the flag.

    Hoisting the national flag is a fundamental right

    • The bench headed by Chief Justice of India V. N. Khare said that under Article 19(1)(a) of the Constitution of India, citizens had the fundamental right to fly the national flag on their premises throughout the year.
    • However, it provided that the premises do not undermine the dignity of the national flag.

    About Prevention of Insults to National Honour Act

    • The law, enacted on December 23, 1971, penalizes the desecration of or insult to Indian national symbols, such as the National Flag, the Constitution, the National Anthem, and the Indian map, as well as contempt of the Constitution of India.
    • Section 2 of the Act deals with insults to the Indian National Flag and the Constitution of India.

    Do you know?

    Article 51 ‘A’ contained in Part IV A i.e. Fundamental Duties asks:

    To abide by the constitution and respect its ideals and institutions, the National Flag and the National Anthem in clause (a).

    Back2Basics: Story of our National Flag

    (1) Public display for the first time

    • Arguably the first national flag of India is said to have been hoisted on August 7, 1906, in Kolkata at the Parsee Bagan Square (Green Park).
    • It comprised three horizontal stripes of red, yellow and green, with Vande Mataram written in the middle.
    • Believed to have been designed by freedom activists Sachindra Prasad Bose and Hemchandra Kanungo, the red stripe on the flag had symbols of the sun and a crescent moon, and the green strip had eight half-open lotuses.

    (2) In Germany

    • In 1907, Madame Cama and her group of exiled revolutionaries hoisted an Indian flag in Germany in 1907 — this was the first Indian flag to be hoisted in a foreign land.

    (3) During the Home Rule Movement

    • In 1917, Dr Annie Besant and Lokmanya Tilak adopted a new flag as part of the Home Rule Movement.
    • It had five alternate red and four green horizontal stripes, and seven stars in the saptarishi configuration.
    • A white crescent and star occupied one top corner, and the other had Union Jack.

    (4) Final version by Pingali Venkayya

    • The design of the present-day Indian tricolour is largely attributed to Pingali Venkayya, an Indian freedom fighter.
    • He reportedly first met Mahatma Gandhi in South Africa during the second Anglo-Boer War (1899-1902), when he was posted there as part of the British Indian Army.
    • Years of research went into designing the national flag. In 1916, he even published a book with possible designs of Indian flags.
    • At the All India Congress Committee in Bezwada in 1921, Venkayya again met Gandhi and proposed a basic design of the flag, consisting of two red and green bands to symbolise the two major communities, Hindus and Muslims.

    (5) During Constituent Assembly

    • On July 22, 1947, when members of the Constituent Assembly of India, the first item on the agenda was reportedly a motion by Pandit Nehru, about adopting a national flag for free India.
    • It was proposed that “the National Flag of India shall be horizontal tricolour of deep saffron (Kesari), white and dark green in equal proportion.”
    • The white band was to have a wheel in navy blue (the charkha being replaced by the chakra), which appears on the abacus of the Sarnath Lion Capital of Ashoka.

     

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  • What does our Current Account Deficit (CAD) show?

    The data for the country’s current account balance for the fourth quarter of FY 2021-22 shows a decrease in the deficit to 1.5% of gross domestic product (GDP) from 2.6% of GDP in Q3 FY 2021-22.

    What is Current Account Deficit (CAD)?

    • A current account is a key component of balance of payments, which is the account of transactions or exchanges made between entities in a country and the rest of the world.
    • This includes a nation’s net trade in products and services, its net earnings on cross border investments including interest and dividends, and its net transfer payments such as remittances and foreign aid.
    • A CAD arises when the value of goods and services imported exceeds the value of exports, while the trade balance refers to the net balance of export and import of goods or merchandise trade.

    Components of Current Account

    Current Account Deficit (CAD) =

    Trade Deficit + Net Income + Net Transfers

    (1) Trade Deficit

    • Trade Deficit = Imports – Exports
    • A Country is said to have a trade deficit when it imports more goods and services than it exports.
    • Trade deficit is an economic measure of a negative balance of trade in which a country’s imports exceeds its exports.
    • A trade deficit represents an outflow of domestic currency to foreign markets.

    (2) Net Income

    • Net Income = Income Earned by MNCs from their investments in India.
    • When foreign investment income exceeds the savings of the country’s residents, then the country has net income deficit.
    • This foreign investment can help a country’s economy grow. But if foreign investors worry they won’t get a return in a reasonable amount of time, they will cut off funding.
    • Net income is measured by the following things:
    1. Payments made to foreigners in the form of dividends of domestic stocks.
    2. Interest payments on bonds.
    3. Wages paid to foreigners working in the country.

    (3) Net Transfers

    • In Net Transfers, foreign residents send back money to their home countries. It also includes government grants to foreigners.
    • It Includes Remittances, Gifts, Donation etc

    How does Current Account Transaction takes place?

    • While understanding the Current Account Deficit in detail, it is important to understand what the current account transactions are.
    • Current account transactions are transactions that require foreign currency.
    • Following transactions with from which component these transactions belong to :
    1. Component 1 : Payments connection with Foreign trade – Import & Export
    2. Component 2 : Interest on loans to other countries and Net income from investments in other countries
    3. Component 3 : Remittances for living expenses of parents, spouse and children residing abroad, and Expenses in connection with Foreign travel, Education and Medical care of parents, spouse and children

    What has been the recent trend?

    • In Q4 FY 2021-22, CAD improved to 1.5% of GDP or $13.4 billion from 2.6% of GDP in Q3 FY 2021-22 ($22.2 billion).
    • The difference between the value of goods imported and exported fell to $54.48 million in Q4FY 2021-22 from $59.75 million in Q3 FY2021-22.
    • However, based on robust performance by computer and business services, net service receipts rose both sequentially and on a year-on-year basis.
    • Remittances by Indians abroad also rose.

    What are the reasons for the current account deficit?

    • Intensifying geopolitical tensions and supply chain disruptions leading to crude oil and commodity prices soaring globally have been exerting upward pressure on the import bill.
    • A rise in prices of coal, natural gas, fertilizers, and edible oils have added to the pressure on trade deficit.
    • However, with global demand picking up, merchandise exports have also been rising.

    How will a large CAD affect the economy?

    • A large CAD will result in demand for foreign currency rising, thus leading to depreciation of the home currency.
    • Nations balance CAD by attracting capital inflows and running a surplus in capital accounts through increased foreign direct investments (FDI).
    • However, worsening CAD will put pressure on inflow under the capital account.
    • Nevertheless, if an increase in the import bill is because of imports for technological upgradation it would help in long-term development.

    Should a widening CAD worry policymakers?

    • Data shows the trade deficit widened to $24.29 billion in May 2022 from $6.53 billion a year ago.
    • Merchandise exports in May 2022 rose by 20.55% over May 2021, while merchandise imports rose by 62.83%.
    • However, if increasing imports is accompanied by an expansion in industrial production, it is a sign of economic development.
    • Immediately after the covid-19 lockdown, after a long time, the country experienced a current account surplus.

     

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