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  • [Sansad TV] Perspective: Self-Reliance in Defence

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    Context

    • The Ministry of Defence has been allocated a total budget of Rs 5.25 lakh crore for Financial Year 2022-23.
    • It focuses on modernisation of Defence Services and Defence Security Infrastructure development including the Border Road Infrastructure and Coastal Security Infrastructure.

    In this article, we will discuss and analyse as to how this budgetary allocation will lead to India becoming self-reliant in Defence sector and what more needs to be done.

    India’s defence outlay this year

    • The total allocation under Capital Outlay of the Defence Services has been increased from Rs 86,740 crore in 2013-14 to 1.52 lakh crore in 2022-23.

    What makes it special?

    • 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23, up from 58 per cent in the previous year.
    • This indicates the Government’s commitment to reducing imports and promoting Atmanirbharta in equipment for the Armed Forces.
    • While Defence R&D will be opened up for industry, start-ups and academia, Private industry will also be encouraged to take up design and development of military platforms and equipment.

    Why the fuss over self-reliance?

    1) Reducing import dependence

    • India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, which accounted for 12% of the total imports during the period, says 2019 SIPRI report.
    • Pakistan stood at the 11th position, accounting for 2.7% of all global imports.
    • Such higher import dependency leads to increase in the fiscal deficit.

    2) Security Imperative

    • Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
    • Indigenization is needed in order to avert the threats associated with the frequent ceasefire violations like that of the Uri, Pathankot and Pulwama attacks.
    • India is surrounded by porous borders and hostile neighbours need to be self-sufficient and self-reliant in defence production.

    3) Economic boost

    • Indigenization in defence can help create a large industry which also includes small manufacturers.
    • Example: USA has a strong defence industry with companies like Lockheed martin contributing to economic growth as well.

    4) Employment generation

    • Defence manufacturing will lead to the generation of satellites industries that in turn will pave the way for a generation of employment opportunities.
    • As per government estimates, a reduction in 20-25% in defence-related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India.

    It was the military-industrial set-up of Germany that enabled it to launch its offensive practically against the entire western world both in World War I and World War II.

    Issues retarding defence exports

    1. Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
    2. Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
    3. Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
    4. Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
    5. ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
    6. Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
    7. Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
    8. FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
    9. R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
    10. Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.

    Steps taken to boost indigenous production

    • Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
    • Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
    • Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
    • Indigenization lists: On the domestic front, to boost indigenous manufacturing, the Government had issued two “positive indigenization lists” consisting of 209 items that cannot be imported.
    • Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.

    Policy initiatives: Defence Production and Export Promotion Policy, 2020

    The DPEPP 2020 is envisaged as overarching guiding document of MoD to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.

    The policy has laid out the following goals and objectives:

    1. To achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.
    2. To develop a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
    3. To reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development.
    4. To promote the export of defence products and become part of the global defence value chains.
    5. To create an environment that encourages R&D rewards innovation creates Indian IP ownership and promotes a robust and self-reliant defence industry.

    The Policy brings out multiple strategies under the following focus areas:

    1. Procurement Reforms
    2. Indigenization & Support to MSMEs/Startups
    3. Optimize Resource Allocation
    4. Investment Promotion, FDI & Ease of Doing Business
    5. Innovation and R&D
    6. DPSUs and OFB
    7. Quality Assurance & Testing Infrastructure
    8. Export Promotion

    Way forward

    • The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
    • A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
    • DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
    • The definition of indigenisation itself needs to privilege technology over value or volume.

  • Issues with high gold demand

    Context

    Gold’s appeal as a safe haven is only rising: as tensions escalate in Ukraine, its price is approaching records.

    Factors explaining demand for gold in India

    • India is the world’s second-largest market for the yellow metal, behind China, though it produces almost none at home.
    • This is partly driven by tradition.
    • Brides are given jewellery as part of their dowry and it is deemed auspicious to buy bullion around certain religious festivals.
    • It is a handy store of undeclared wealth, too, often stashed in wardrobes or under the mattress.
    • But the pandemic has also affirmed an investment advice passed on over generations: park savings in gold as a rainy-day fund.

    Concerns with such a high demand

    • Vast gold imports can destabilise the economy.
    • During the 2013 “taper tantrum”, when India’s foreign-exchange reserves were lower than they are now, a rush of gold imports helped push the current-account deficit to 4.8% of GDP and fuelled worries of a currency crisis.
    • Savings stashed away as idle gold could be put to more productive use elsewhere. 
    • Indian households hold 22,500 tonnes of the physical metal—five times the stock in America’s bullion depository .

    Policy measures by the government

    • Import duties hover around 10%, even after cuts in last year’s budget aimed at keeping smuggling in check.
    • The central bank has ramped up issuance of sovereign gold bonds, which are denominated in grams of gold.
    • Of the 86 tonnes’ worth issued since 2015, about 60% were sold after the pandemic began.
    • And the gold monetisation scheme, which allows households to hand gold over to a bank and earn interest, was revamped last year to reduce limits on the size of deposits.
    • Lockdowns inadvertently helped the state’s agenda.
    • Mobile payments platforms like PhonePe and Google Pay reported rising appetite for digital gold, which is sold online and stored by the seller.
    • Money also rushed into gold exchange-traded funds (ETFs).
    • Their assets hit 184bn rupees ($2.5bn) in December, a 30% rise in a year.

    Conclusion

    Still, only a sliver of the population, mostly well-off urban types and millennials, invest in complex financial products. A large part of India’s demand for physical gold comes from rural areas, where it seems in no danger of losing its lustre.

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  • [Burning Issue] The Tobacco Pandemic

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    Context

    Tobacco is a silent killer in our midst that kills an estimated 1.35 million Indians every year.

    Status of Tobacco Consumption in India

    • According to the Global Youth Tobacco Survey, India has the second-largest number (268 million) of tobacco users in the world and of these 13 lakh die every year from tobacco-related diseases.
    • Ten lakh deaths are due to smoking, with over 2,00,000 due to second-hand smoke exposure, and over 35,000 are due to smokeless tobacco use.
    • About 27 crore people above the age of 15 years and 8.5% of school-going children in the age group 13-15 years use tobacco in some form in India.
    • India bears an annual economic burden of over ₹1,77,340 crore on account of tobacco use.
    • Tobacco use is known to be a major risk factor for several non-communicable diseases such as cancer, cardiovascular disease, diabetes, and chronic lung diseases.
    • Nearly 27% of all cancers in India are due to tobacco usage.

    Socio-Economic Burden of ‘Tobacco’

    • In India, over 1.3 million deaths are attributable to tobacco use every year amounting to 3500 deaths per day, imposing a lot of avoidable socio-economic burden.
    • In addition to the death and diseases it causes, tobacco also impacts the economic development of the country.
    • Smokers face a 40-50% higher risk of developing severe disease deaths from Covid-19.
    • As per the WHO study titled “Economic Costs of Diseases and Deaths Attributable to Tobacco Use in India”, it has been estimated that the economic burden of diseases and deaths attributable to use of tobacco in India was as high as approx 1% of GDP.

    Measures towards tobacco control in India

    • India adopted the tobacco control provisions under WHO Framework Convention on Tobacco Control (WHO FCTC).
    • Cigarettes and Other Tobacco Products Act (COTPA), 2003:
      • It replaced the Cigarettes Act of 1975 (largely limited to statutory warnings- ‘Cigarette Smoking is Injurious to Health’ to be displayed on cigarette packs and advertisements. It did not include non-cigarettes).
      • The 2003 Act also included cigars, bidis, cheroots, pipe tobacco, hookah, chewing tobacco, pan masala, and gutka.
    • Promulgation of the Prohibition of Electronic Cigarettes Ordinance, 2019: Which prohibits Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement of e-Cigarettes.
    • National Tobacco Quitline Services (NTQLS): Tobacco Quitline Services have the potential to reach a large number of tobacco users with the sole objective to provide telephone-based information, advice, support, and referrals for tobacco cessation.
    • mCessation Programme: It is an initiative using mobile technology for tobacco cessation.
      • India launched mCessation using text messages in 2016 as part of the government’s Digital India initiative.

    How do the price and taxation of tobacco matter?

    • Although not a communicable disease like SARS-CoV-2, the tobacco epidemic — as the World Health Organisation characterizes it — has some definitive solutions that can reduce the death toll.
    • Research from many countries around the world including India shows that a price increase induces people to quit or reduce tobacco use as well as discourages non-users from getting into the habit of tobacco use.
    • There is overwhelming consensus within the research community that taxation is one of the most cost-effective measures to reduce the demand for tobacco products.
    • There has been no significant tax increase on any tobacco product for four years in a row.
    • This is quite unlike the pre-GST years where the Union government and many State governments used to effect regular tax increases on tobacco products.
    • As peer-reviewed studies show, the lack of tax increase over these years has made all tobacco products increasingly more affordable.
    • The absence of a tax increase on tobacco has the potential to reverse the reduction in tobacco use prevalence that India saw during the last decade and now push more people into harm’s way.
    •  It would also mean foregone tax revenues for the Government.
    • High and increasing tax rates provide a profitable opportunity for tax evasion and encourage growth in illegal trade.

    What is the Taxation Scenario of Tobacco in India?

    • Ever since the introduction of the Goods and Services Tax (GST) legislation in 2017, there has been no significant tax increase on any tobacco product.
    • There was only a minor increase in the National Calamity Contingent Duty (NCCD) during the Union Budget 2020-21 which only had the effect of increasing cigarette prices by roughly 5%.
    • The Union Budget 2022-23 was an excellent but lost opportunity for the Government of India to buck this trend and significantly increase either excise duties or NCCDs.
    • No significant tax increase on any tobacco product for four years in a row has made all tobacco products increasingly more affordable.
    • More affordable tobacco products could attract new users especially among the youth.
    • It would also mean foregone tax revenues for the Government especially at a time when the Government of India is looking forward to increasing the share of public spending on health

    The decline in Tobacco Consumption

    • The prevalence of tobacco use has decreased by six percentage points from 34.6% in 2009-10 to 28.6% in 2016-17.
    • Under the National Health Policy 2017, India has set an ambitious target of reducing tobacco use by 30% by 2025.

    WHO Framework Convention on Tobacco Control

    • Governments adopt and implement the tobacco control provisions of the WHO Framework Convention on Tobacco Control (WHO FCTC).
    • It is the first international treaty negotiated under the auspices of the WHO.
    • It was adopted by the World Health Assembly (apex decision making body of WHO) on 21st May 2003 and entered into force on 27th February 2005.
    • It was developed in response to the globalization of the tobacco epidemic and is an evidence-based treaty that reaffirms the right of all people to the highest standard of health.
    • The FCTC’s measures to combat tobacco use include:
    1. Price and tax measures.
    2. Large, graphic warnings on tobacco packages.
    3. 100% smoke-free public spaces.
    4. A ban on tobacco marketing.
    5. Support for smokers who want to quit.
    6. Prevention of tobacco industry interference.

    Way Forward

    (1) Opportunities in Budget

    • The government should take a considerate view of public health and significantly increase excise taxes — either basic excise duty or National Calamity Contingent Duty (NCCD) — on all tobacco products.
    • Fixing an excise tax of at least ₹1 per stick of bidis while aiming for a significant increase in the excise tax of cigarettes and smokeless tobacco products.
    • Taxation should achieve a significant reduction in the affordability of tobacco products to reduce tobacco use prevalence and facilitate India’s march towards sustainable development goals.

    (2) Role of GST Council

    • There is absolutely no public health rationale why a product as harmful as a bidi does not have a cess levied on it under the GST or why the specific cess applied on cigarettes has remained unchanged for four years in the face of increasing inflation.
    • GST Council meetings must strive to keep public health ahead of the interests of the tobacco industry and significantly increase either the GST rates or the GST compensation cess rates applied on all tobacco products.
    • The aim should be to arrest the increasing affordability of tobacco products in India and also rationalise tobacco taxation under the GST.

    (3) Tobacco Control Laws

    • It is scientifically established that if a person is kept away from tobacco till the age of 21 and above, there is a very high probability that he/she will remain tobacco-free for the rest of their life.
    • The experts have urged the government to increase the legal age of sale of tobacco products from 18 to 21 by amending the Cigarettes and Other Tobacco Products Act (COTPA), 2003.
    • Also, imposing a comprehensive ban on tobacco advertising and banning sale of single sticks of cigarettes/bidis would go a long way in preventing children and youth from initiating tobacco use.
    • At least 14 countries (Ethiopia, Guam, Honduras, Japan, Kuwait, Mongolia, Palau, Philippines, Samoa, Singapore, Sri Lanka, Thailand, Uganda, and the U.S.) have now increased the minimum age to 21 for buying tobacco products.
    • At least 86 countries have banned the sale of single stick cigarettes to control their easy accessibility and affordability to youth.

    (4) Educating Children

    • The role of teachers is most crucial in creating awareness among children and their parents about harm due to tobacco use and for shaping the attitude of children in this regard.
    • The more and the sooner awareness is created among children about harms due to tobacco use, the better will be the outcomes in terms of reduction in the prevalence of tobacco use among children and consequently among adults.
    • Harmful effects of tobacco use should be incorporated in school curricula at various levels starting right from the primary school level.

    Conclusion

    The aim should be to arrest the increasing affordability of tobacco products in India and also rationalize tobacco taxation under the GST.

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  • Manual Scavenging and its prevalence in India

    Three laborers in Mumbai, allegedly hired for manual scavenging, died after inhaling toxic fumes in a septic tank.

    What is Manual Scavenging?

    • Manual scavenging is the practice of removing human excreta by hand from sewers or septic tanks.
    • India banned the practice under the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013 (PEMSR).
    • The Act bans the use of any individual for manually cleaning, carrying, disposing of or otherwise handling in any manner, human excreta till its disposal.
    • In 2013, the definition of manual scavengers was also broadened to include people employed to clean septic tanks, ditches, or railway tracks.
    • The Act recognizes manual scavenging as a “dehumanizing practice,” and cites a need to “correct the historical injustice and indignity suffered by the manual scavengers.”

    Why is it still prevalent in India?

    • Low awareness: Manual scavenging is mostly done by the marginalized section of the society and they are generally not aware about their rights.
    • Enforcement issues: The lack of enforcement of the Act and exploitation of unskilled labourers are the reasons why the practice is still prevalent in India.
    • High cost of automated: The Mumbai civic body charges anywhere between Rs 20,000 and Rs 30,000 to clean septic tanks.
    • Cheaper availability: The unskilled labourers, meanwhile, are much cheaper to hire and contractors illegally employ them at a daily wage of Rs 300-500.
    • Caste dynamics: Caste hierarchy still exists and it reinforces the caste’s relation with occupation. Almost all the manual scavengers belong to lower castes.

    Various policy initiatives

    • Prohibition of Employment as Manual Scavengers and their Rehabilitation (Amendment) Bill, 2020: It proposes to completely mechanise sewer cleaning, introduce ways for ‘on-site’ protection and provide compensation to manual scavengers in case of sewer deaths.
    • Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013: Superseding the 1993 Act, the 2013 Act goes beyond prohibitions on dry latrines, and outlaws all manual excrement cleaning of insanitary latrines, open drains, or pits.
    • Rashtriya Garima Abhiyan: It started national wide march “Maila Mukti Yatra” for total eradication of manual scavenging from 30th November 2012 from Bhopal.
    • Prevention of Atrocities Act: In 1989, the Prevention of Atrocities Act became an integrated guard for sanitation workers since majority of the manual scavengers belonged to the Scheduled Caste.
    • Compensation: As per the Prohibition of Employment of Manual Scavengers and their Rehabilitation (PEMSR) Act, 2013 and the Supreme Court’s decision in the Safai Karamchari Andolan vs Union of India case, a compensation of Rs 10 lakh is awarded to the victims family.

    Way forward

    • Regular surveys and social audits must be conducted against the involvement of manual scavengers by public and local authorities.
    • There must be proper identification and capacity building of manual scavengers for alternate sources of livelihood.
    • Creating awareness about the legal protection of manual scavengers is necessary.

     

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  • Biological and Toxin Weapons Convention (BTWC)

    India has emphasized on following the Biological and Toxin Weapons Convention (BTWC) at the UNSC meeting on Ukraine.

    Why in news?

    • The meeting came after a request from Russia, who claimed that the US is involved in bioweapon manufacture in war-torn Ukraine.
    • However, Washington has strongly dismissed this claim.

    What is BTWC?

    • The Biological and Toxin Weapons Convention (BTWC) was the first multilateral treaty categorically banning a class of weapon.
    • It is a treaty that came into force in 1975 and prohibits the development, production, acquisition, transfer, stockpiling and use of biological weapons.
    • A total of 183 countries are party to the treaty that outlaws bioweapons, including US, Russia and Ukraine.

    Obligations of the treaty

    • The treaty prohibits the development, stockpile, production, or transfer of biological agents and toxins of “types and quantities” that have no justification for protective or peaceful use.
    • Furthermore, the treaty bans the development of weapons, equipment, or delivery systems to disseminate such agents or toxins.
    • Should a state possess any agent, toxin, or delivery system for them, they have nine months from entry into force of the treaty to destroy their stockpiles, or divert them for peaceful use.
    • The convention stipulates that states shall cooperate bilaterally or multilaterally to solve compliance issues.
    • States may also submit complaints to the UNSCR should they believe another state is violating the treaty.

    Issues with the treaty

    • There is no implementation body of the BTWC, allowing for blatant violations as seen in the past.
    • There is only a review conference that too every five years to review the convention’s implementation, and establish confidence-building measures.

    Signatories to the BTWC

    • The Convention currently has 183 states-parties, including Palestine, and four signatories (Egypt, Haiti, Somalia, and Syria).
    • Ten states have neither signed nor ratified the BWC: Chad, Comoros, Djibouti, Eritrea, Israel, Kiribati, Micronesia, Namibia, South Sudan, and Tuvalu.

     

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  • Indian missile misfires into Pakistan

    India has acknowledged a malfunction led to accidental firing of a missile, which Pakistan says landed in its territory.

    Conducting Missile Tests: NOTAM and NAVAREA Warnings

    • Under the pre-notification of flight testing of ballistic missiles agreement signed in 2005, a country must provide the other an advance notification on flight test it intends to take for any land or sea launched, surface-to-surface ballistic missile.
    • Before the test, the country must issue Notice to Air Missions (NOTAM) or Navigational Warning (NAVAREA) to alert aviation pilots and seafarers, respectively.
    • Also, the testing country must ensure that the launch site is not within 40 km, and the planned impact area is not within 75 km of either the International Boundary (IB) or the Line of Control (LoC).
    • The planned trajectory should not cross the IB or the LoC and must maintain a horizontal distance of at least 40 km from the border.

    Pre-notifications to the neighbours

    • The testing country must notify the other nation “no less than three days in advance of the commencement of a five day launch window within which it intends to undertake flight tests.
    • The pre-notification has to be conveyed through the respective Foreign Offices and the High Commissions, as per the format annexed to this Agreement.

    What is the recent case of misfire?

    • Neither country has spelt this out; Pakistan has only called it a “supersonic” missile.
    • Some experts have speculated that it was a test of one of India’s top missiles, BrahMos, jointly developed with Russia.
    • Their assessment is based on information that it travelled 200 km, manoeuvred mid-air and travelled at 2.5 times to 3 times the speed of sound at an altitude of 40,000 feet.
    Note:  BrahMos has a top speed of Mach 3, a range of around 290 km, and a cruising altitude of 15 km (around 50,000 feet). It can be fired from anywhere, is nuclear-capable, and can carry warheads of 200-300 kg.

     

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  • Art-form in news: Santhali Sohrai Murals

    Santhali communities of Odisha and Jharkhand are changing their ways of painting traditional Sohrai murals to modernity.

    What is Sohrai?

    • Sohrai is a harvest festival of the Indian states of Bihar, Jharkhand, Chhattisgarh, Odisha, and West Bengal.
    • It also called cattle festival. It is celebrated after harvest and coincide with festival of Diwali.

    What are Sohrai Murals?

    • Sohrai Mural is an indigenous art form is practised by the women of Santhal Community.
    • Ritualistic art is done on mud walls to welcome the harvest and to celebrate the cattle.
    • The women clean their houses and decorate their walls with murals of Sohrai arts.
    • This art form has continued since 10,000-4,000 BC. It was prevalent mostly in caves, but shifted to houses with mud walls.

    Features of this art

    • This Sohrai art form can be monochromatic or colorful.
    • The people coat the wall with a layer of white mud, and while the layer is still wet, they draw with their fingertips on it.
    • Their designs range from flowers and fruits to various other nature-inspired designs.
    • The cow dung that was earlier used to cake the walls of the house is used to add colour.
    • The dark outline is visible due to the previously applied contrasting white mud coat.
    • The artists are spontaneous in their drawing. The designs are usually drawn from the artist’s memory.
    • The personal experience of the artist and their interaction with nature are the biggest influence.

     

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  • Taking stock of the Indian economy

    Context

    This article takes the stock of the Indian economy using the EFGHIJ framework.

    Export

    • The $400-billion target of goods exports in FY22 appears achievable:
    • This is a structural break from ~$300-330 billion per year over the last decade.
    • Note that in calendar year 2021, India exported almost $400 billion worth of goods.
    • This export growth comes at a time when global shipping and freight markets have been in a tizzy over the last few months as Covid-related supply chain disruptions across commodities and final products reverberated across the globe.

    Fiscal growth

    • India has significant fiscal headroom in FY23 with a 6.4% fiscal deficit pencilled in.
    • The revenue buoyancy, assumed at less than 1, is conservative as is the overall assumption on nominal growth at 11%.
    • In as volatile a world as this, the conservatism in forecasting should come to India’s advantage.
    • India saw healthy direct and indirect tax receipts in FY22: the GST collections have consistently remained above the `1 trillion-a-month mark for many months now.
    • Two aspects need a close watch:
    • (a) as the prices of various commodities rise, there can be calls for softening the blow on the final consumer via tax cuts or direct support, and
    • (b) the disinvestment programme of the government which could face a market where investor appetite is uncertain.

    Growth challenges and opportunities for India

    • India’s GDP growth in FY23 is projected to be 7.6-8.5%, making it one of the fastest-growing economies.
    • With the newly changed circumstances, it is possible that this tight range and the absolute number may require revision.
    • It is, however, too early to say in which direction and by what amounts.
    • Opportunities for India: Global dislocations of supply chain or the creation of new supply sources could create divergent challenges and opportunities for India.
    • The post Covid rebound in high frequency indicators (air and rail passengers, toll collections, UPI payments, etc.) suggests that the internal consumption economy is currently back on track.
    • It is important to note that India continues to be the fastest-growing nation of its size in the world.

    Health

    • India has now completed almost 1.8 billion doses.
    • The Omicron wave, thankfully both due to the inherent nature of the virus and the large vaccination drive, did not cause significant economic upheaval.
    •  It may be time to think of Covid as endemic and plan accordingly.

    Inflation

    • The inflation in 2021 was based on a sudden bout of fiscal-support-driven spending meeting with tight supply chain bottlenecks.
    • It was expected that as spending normalises and supply chains open, prices will stabilise.
    • However, the sharp uptick in the prices of crude, coal, commodities, and chips has created a more sustained scare for inflation.
    • Many measures may be taken across the world to curb the impact for the common man: from opening of oil reserves, to cutting of taxes, to direct support, etc—all of which could impact the fiscal.

    Capital

    • Denoted by K by economists, expect to see a lot of ebb-and-flow here as investors react to evolving, volatile trends.
    • Higher public investment in the last two years has supported economic recovery: India has planned for a record `10 lakh crore plus public capex.
    • Net FDI has been strong at $25.3 billion up to December in FY2022.
    • While FPIs have withdrawn $9.5 billion in FY22, DIIs and retail investors have supported the markets.

    Conclusion

    With two waves of COVID-19 largely behind us, many macroeconomic factors have changed dramatically, especially in the last fortnight.

    Source:

    https://www.financialexpress.com/opinion/efghijk-taking-stock-of-the-indian-economy/2457255/

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  • Why society gains when start-ups fail

    Context

    As per the Economic Survey 2021-22, India has become the third-largest startup ecosystem in the world after the US and China.

    Start-up ecosystem in India

    • India attracted huge investment in startups in 2021: Private equity investment was $77 billion, of which $42 billion went to early-stage ventures.
    • Every startup where salaries are paid by investors rather than customers is breathlessly rethinking business plans.

    How do startups benefit society?

    1] Innovation, productivity and job creation:

    • The high failure rate of startups is not a problem per se — society only needs a few successes to harness the gains of innovation, productivity and job creation.
    • A new book, The Power Law makes the case that startup investing is unlike public market investing.
    • He suggests public markets follow a “normal” distribution like human height — most people cluster around the average with a few exceptionally low or high.
    • But venture investments follow a “power law” of distribution, that is, most go to zero but the tiny number that succeeds more than compensate for the losses or mediocrity of the many.

    2] Losses caused by startups are not passed on to society

    • Startups don’t socialise their losses, Corporate bank loans expanded from Rs 18 lakh crore in 2008 to Rs 54 lakh crore in 2014.
    • Such high corporate bank loans created bad loans that needed many lakh crores of government money to recapitalise nationalised banks.
    • This money was diverted from government spending on healthcare, education and defence.
    • The current venture capital binge will also create many write-offs but this cost will fall on consenting adults with broad shoulders — foreign institutions, angel investors and entrepreneurs with successful previous exits.

    3] Startups will solve real problems for Indians:

    • Ending our poverty needs higher productivity regions, cities, sectors, firms and individuals.
    • A modern state is a welfare state that does less commercially so it can do more socially.
    • It needs allies in reimagining financial inclusion, supply chains, distribution logistics, employability, retail, transport, media, healthcare, agriculture and much else.
    • Many of our startups shall redeem their pledge to solve these problems “not wholly or in full measure, but very substantially”.

    Three issues related to startups

    • 1] Fiscal and monetary policy normalisation: The global capital supply fuelling startup funding faces challenges from fiscal and monetary policy normalisation: The rate-sensitive two-year US government bond recently touched a 1.6 per cent yield after being at 0.4 per cent as recently as November — because the risk-free return cannot be return-free-risk forever.
    • Investors are returning to weighing financial sustainability and capital efficiency along with addressable markets.
    • 2] Excesses: This explosive startup funding has created excesses.
    • 3] A different approach of public markets: Private markets are not only delaying IPOs — Amazon went public within three years of starting with less than half the value of a unicorn — but unicorn IPOs’ underperformance suggests that public markets have a different calibration.

    Conclusion

    The few startups that survive will raise India’s soft power and prosperity by using improbable ideas to solve impossible problems. What we need is to ensure the policy environment for the startups to boom.

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  • Water management needs a hydro-social approach

    Context

    The Global Water System Project, which was launched in 2003 as a joint initiative of the Earth System Science Partnership (ESSP) and Global Environmental Change (GEC) programme, epitomises global concern about the human-induced transformation of fresh water and its impact on the earth system and society.

    Valuation of water

    • It is globally estimated that the gap between demand for and supply of fresh water may reach up to 40% by 2030 if present practices continue.
    • SDG 6: The formation of the 2030 Water Resource Group in 2008, at the instance of the World Economic Forum, and the World Bank’s promotion of the group’s activity since 2018, is in recognition of this problem and to help achieve the Sustainable Development Goal (SDG) on water availability and sanitation for all by 2030 (SDG 6).
    • The latest UN World Water Development Report, 2021, titled ‘Valuing Water’, has laid stress on the proper valuation of water by considering five interrelated perspectives: water sources; water infrastructure; water services; water as an input to production and socio-economic development, and socio-cultural values of water.

    Need for hydro-social cycle approach

    • Designing a comprehensive mix of divergent views about water along with ecological and environmental issues held by stakeholder groups is necessary.
    • In this context, a hydro-social cycle approach provides an appropriate framework.
    • It repositions the natural hydrological cycle in a human-nature interactive structure and considers water and society as part of a historical and relational-dialectical process.
    • The anthropogenic factors directly influencing a freshwater system are the engineering of river channels, irrigation and other consumptive use of water, widespread land use/land cover change, change in an aquatic habitat, and point and non-point source pollution affecting water quality.

    The intra- and inter-basin transfer (IBT) of water

    • IBT is a major hydrological intervention to rectify the imbalance in water availability due to naturally prevailing unequal distribution of water resources within a given territory.
    • There are several IBT initiatives across the world.
    • The National River Linking Project of India is one of those under construction.
    • Based on a multi-country case study analysis, the World Wildlife Fund/World Wide Fund for Nature (2009) has suggested a cautious approach and the necessity to adhere to sustainability principles set out by the World Commission on Dams while taking up IBT projects.

    Issues with assumptions, use and management of freshwater resources in India

    1] Contestation on concept of the surplus and deficit basin

    • The basic premise of IBT is to export water from the surplus basin to a deficit basin.
    • However, there is contestation on the concept of the surplus and deficit basin itself as the exercise is substantially hydrological.
    • Besides this, rainfall in many surplus basins has been reported as declining.
    • The status of the surplus basin may alter if these issues are considered.

    2] Low capacity utilisation

    • There is concern about the present capacity utilisation of water resources created in the country.
    • By 2016, India created an irrigation potential for 112 million hectares, but the gross irrigated area was 93 million hectares.
    • There is a 19% gap, which is more in the case of canal irrigation.
    • In 1950-51, canal irrigation used to contribute 40% of net irrigated area, but by 2014-15, the net irrigated area under canal irrigation came down to less than 24%.
    • Groundwater irrigation now covers 62.8% of net irrigated area.
    • Low efficiency of irrigation projects: The average water use efficiency of irrigation projects in India is only 38% against 50%-60% in the case of developed countries.
    • More water consumption for crops: Even at the crop level we consume more water than the global average.
    • Rice and wheat, the two principal crops accounting for more than 75% of agricultural production use 2,850 m 3/tonnes and 1,654 m 3/tonnes of water, respectively, against the global average of 2,291m 3/tonnes and 1,334m 3/ tonnes in the same order.
    • The agriculture sector uses a little over 90% of total water use in India.
    • And in industrial plants, consumption is 2 times to 3.5 times higher per unit of production of similar plants in other countries.
    • Similarly, the domestic sector experiences a 30% to 40% loss of water due to leakage.

    3] Low use of greywater

    • Grey water is hardly used in our country.
    • It is estimated that 55% to 75% of domestic water use turns into greywater depending on its nature of use, people’s habits, climatic conditions, etc.
    • At present, the average water consumption in the domestic sector in urban areas is 135 litres to 196 litres a head a day.
    • If grey water production in the rural areas is considered it will be a huge amount.
    • The discharge of untreated grey water and industrial effluents into freshwater bodies is cause for concern.
    • The situation will be further complicated if groundwater is affected.

    4] Other issues

    • Apart from the inefficient use of water in all sectors, there is also a reduction in natural storage capacity and deterioration in catchment efficiency.

    Way forward

    • The issues are source sustainability, renovation and maintenance of traditional water harvesting structures, grey water management infrastructure, groundwater recharge, increasing water use efficiency, and reuse of water.
    • The axiom that today’s water system is co-evolving and the challenges are mainly management and governance has been globally well accepted.
    • It is important to include less predictable variables, revise binary ways of thinking of ‘either or’, and involve non-state actors in decision-making processes.

    Conclusion

    A hybrid water management system is necessary, where along with professionals and policy makers the individual, a community and society have definite roles in the value chain. The challenge is not to be techno-centric but anthropogenic.

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