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  • [pib] Initiatives launched on International Day of Biodiversity

    In a virtual celebration of the International Day for Biological Diversity 2020, Union Minister of Environment, Forest and Climate Change (MoEFCC) has launched key initiatives towards conservation of biodiversity.

    Possible prelim question:

    The ‘Not all Animals Migrate by Choice’ campaign recently seen in news is an initiative by __________.

    About the International Day for Biological Diversity

    • This Day is a United Nations-sanctioned international day for the promotion of biodiversity issues.
    • It is currently held on May 22.
    • The year 2020 is also the “Super Year for Biodiversity”, as the Strategic Plan for Biodiversity with 20 global Aichi targets adopted in 2010 ends in 2020.

    1) Biodiversity Samrakshan Internship Programme

    • The program proposes to engage 20 students with postgraduate degrees for a period of one year through an open, transparent, online competitive process.
    • It has the National Biodiversity Authority (NBA) and the UN Development Programme (UNDP) as a nodal agency.

     2) ‘Not all Animals Migrate by Choice’ campaign

    • It is a United Nations Environment Programme (UNEP) Campaign launched by the Wildlife Crime Control Bureau on Illegal Trafficking of Endangered Species.
    • It aims to curb illegal trade in wildlife which carries the risk of spreading dangerous pandemics.

    Back2Basics: Aichi Targets

    • The ‘Aichi Targets’ were adopted by the Convention on Biological Diversity (CBD) at its Nagoya conference.
    • The short term plan provides a set of 20 ambitious yet achievable targets, collectively known as the Aichi Targets.
    • The IUCN Species Programme provides advice to Parties, other governments and partners on the implementation of the Strategic Plan for Biodiversity and it’s Aichi Biodiversity Targets (2011 – 2020) and is also heavily involved in work towards the Target.

  • What are General Financial Rules (GFR)?

    The union government has notified amendments to General Financial Rules (GFR) to ensure that goods and services valued less than Rs 200 crore are being procured from domestic firms, a move which will benefit MSMEs.

    Possible mains question:

    Q. Discuss how the nationwide lockdown to control the coronavirus outbreak has led to the resurfacing of inherent bottlenecks in India’s MSME Sector.

    What are the General Financial Rules (GFRs)?

    • The GFRs are a compilation of rules and orders of the Government of India to be followed by all while dealing with matters involving public finances.
    • They are instructions that pertain to financial matters.
    • They lay down the general rules applicable to Ministries / Departments, and detailed instructions relating to the procurement of goods.
    • They are issued by the procuring departments broadly in conformity with the general rules while maintaining the flexibility to deal with varied situations.

    Also read:

    [Burning Issues] Fiscal Push for MSME Sector of India (Part I)

  • [Burning Issues] Atmanirbhar Abhiyan Package

     

    Today we decode parts of the “20 lakh crore” Economic Package.

    Fair warning though. It’s a long  journey to walk!

    • The COVID-19 pandemic and the prolonged national lockdown have brought the Indian economy to a standstill.
    • The various announcements made by the Finance Minister concluded the relief measures undertaken in five tranches by the government as part of the economic package announced by PM Modi for ‘Atmanirbhar Bharat’.

    Impacts of COVID-19 on Economy: Broad Picture

    Given an uncertain future for the rest of the year, it can be clearly seen that the Indian economy is contracting.

    • That is, it will produce less in 2020-21 than it did in 2019-20. This means the Gross Value Added across sectors — agriculture, industry and services — will fall.
    • As incomes fall, three things will happen.
    • One, individuals will cut down their expenditure. In particular, all discretionary expenditure — be it an additional pack of cigarettes or a new car or a house — will come down sharply.
    • Two, seeing overall demand fall, businesses, which were already not investing, will likely postpone their investments further.
    • Three, the government revenues will take a massive hit. This means that if the government wants to maintain its level of fiscal deficit (the gap between what it earns as revenues and what it spends), it will have to cut its overall expenditure this year.
    • These three types of “expenditures” — by individuals, businesses and government — essentially make up the GDP of India.
    • There is a fourth component called net exports (that is, the net of exports and imports), but with the global demand plummeting as well, this too is unlikely to help matters.

    Atmanirbhar Bharat: With a special package

    • PM has announced a special economic package and gave a clarion call for Self-reliant India.
    • This package, taken together with earlier announcements by the government during COVID crisis and decisions taken by RBI, is to the tune of Rs 20 lakh crore, which is equivalent to almost 10% of India’s GDP.
    • The package will also focus on land, labour, liquidity and laws. It will cater to various sections including cottage industry, MSMEs, labourers, middle class, and industries, among others.

    Complete details of the package

    First Tranche: Rs 5,94,550 crore

    • The first set of relief measures announced by Nirmala Sitharaman focused on enabling the Indian economy’s backbone – MSMEs that employ around 11 crore people and have a GDP share of approximately 29 per cent.
    • Out of the 16 announcements made by the minister, six were dedicated to the MSME segment to infuse liquidity.
    • This included Rs 3 lakh crore collateral-free loans and Rs 50,000 crore equity infusions for MSMEs through Fund of Funds.
    • Liquidity relief measures worth Rs 30,000 crore were also announced for NBFCs, HFCs etc. and Rs 90,000 crore for power distribution companies.
    • The minister also advised states and regulatory authorities for extending the registration and completion date of real estate projects under RERA to de-stress developers and ensure completion of projects for home buyers to get their booked houses on time.

    Second tranche – Rs 3,10,000 crore

    • FM’s second tranche of measures catered to migrant workers and street vendors.
    • The minister introduced ‘one nation one ration card’ to allow migrant workers to buy ration from any depot in the country.
    • A special credit facility of Rs 5,000 crore was announced to support around 50 lakh street vendors who will have access to an initial Rs 10,000 working capital.
    • The minister also said that close to Rs 2 lakh crore will be given to farmers through Kisan credit cards while 2.5 crore farmers, including fishermen and animal husbandry farmers, would be able to get institutional credit at a concessional rate.
    • The government allowed states to fund the food and shelter facilities to migrant workers from the disaster response fund that would cost Rs 11,000 crore to the centre.

    Third tranche – Rs 1, 50,000 crore

    • The third tranche of the measures worth Rs 1.5 lakh crore focused on the agriculture and allied sectors including dairy, animal husbandry and fisheries as the government announced steps to strengthen the overall farm sector.
    • Sitharaman announced Rs 1 lakh crore agriculture infrastructure funds for farm-gate infrastructure including using it for setting up cold chains and post-harvest management infrastructure.
    • Other key announcements made by the minister included Rs 20,000 to be provided to fishermen through PM Matsya Sampada Yojana, and Rs 10,000 crore to formalize micro food enterprises.
    • Rs 4,000 crore for herbal cultivation, a Rs 15,000 crore Animal Husbandry Infrastructure Development Fund, Rs 500 crore for bee-keeping related infrastructure development were other packages announced by the minister.

    Fourth and fifth tranches – Rs 48,100 crore

    • The fourth instalment comprised of reforms for sectors including coal, minerals, defence production, air space management, airports, MRO, distribution companies in UTs, space sector, and atomic energy.
    • She announced easing utilization of the Indian air space to reduce air travel cost.
    • The minister also announced the commercial mining in the coal sector and privatizing discoms in metros to streamline their functions for better accountability.

    • The minister allocated an additional Rs 40,000 crore for the MGNREGA for job creation in India’s hinterland. The government had earlier allocated Rs 61,000 crore in the budget for this financial year.
    • She also announced the formulation of a new Public Sector Enterprises Policy that would allow for consolidation of the PSU firms in strategic sectors.
    • Each sector would have up to four such firms while state-owned enterprises will be privatized.

    Is this a new package?

    • The PM did not give the details, but he specified that this calculation of Rs 20 lakh crore includes what the government has already announced and the steps taken by the RBI.
    • This means the total amount of additional money — that is over and above what the government would have spent even in the absence of a COVID crisis — will not be Rs 20 lakh crore. It would be substantially less.
    • PM has included the actions of RBI, India’s central bank, as part of the government’s “fiscal” package, even though only the government controls the fiscal policy and not the RBI (which controls the ‘monetary’ policy).
    • A rough estimate suggests that the RBI’s decisions have provided additional liquidity of Rs 5-6 lakh crore since the start of the Covid-19 crisis.

    What is the approach adopted?

    • The measures taken up are largely in line of –

    1) Giving a strong supply-side push by boosting the availability of capital on easy terms

    2) Keeping income and wage support schemes to the minimum

    3) Empowering constituencies ranging from farmers and workers to businesses

    • Above all, the government seems to be keen on keeping the damage to the fiscal as low as possible.
    • The fiscal impact of the Rs. 20-lakh crore packages is estimated by economists at between 2-3% of GDP.
    • This includes withdrawals from provisions already made in the Budget for this fiscal.

    Idea behind the Atmanirbhar

    • The pillar on which the package rests is liquidity support so that businesses can be revived. This, in turn, is expected to set the economic cycle back in motion.
    • The option of a demand-side stimulus through a resort to deficit financing seems to be reserved for a future date.
    • This could be in case if the infection does not subside or a second wave begins prompting another lockdown.

    Significance of self-efficiency and self-reliance

    • Global supply chains have been disrupted and all nations have become preoccupied with meeting their own challenges.
    • The importance of local manufacturing, local market and local supply chains was realized during the pandemic time. All our demands during the crisis were met ‘locally’.
    • Now, it was a ripe time to be vocal about the local products and help these local products become global.
    • For instance, the supply chain and global manufacturing controlled by Chinese economy got disrupted due to COVID. Thus there is a need to become self-reliant for essential goods and service like N95 masks, ventilators etc.
    • Restrictions on travel and mobility have meant tight controls over the flow of goods, services and labour across international, state and district borders.
    • The international economic order is changing; the possibility of greater economic cooperation is diminishing. So the emphasis should be on the need to leverage India’s inner potential.
    • The Self-Reliance neither signifies any exclusionary or isolationist strategies but involves the creation of a helping hand to the whole world.
    • This is neither an economic nationalism or a rejection of globalization, but a call for a new form of globalization — from profit-driven to people-centric which takes into account the needs of labours, vulnerable and have nots.

    Positives of the package

    In the numbers provided, the government has tried to project a ‘maximum bang for minimum buck’ approach.

    Most support measures have translated into forms of regulatory relief, broader liquidity support or are reflected in its contingent liabilities, rather than in the form of explicit budgetary support.

    It seems the Union government has very craftily used the COVID-19 pandemic crisis to plough through long pending, deep-rooted structural reforms. That should be welcomed.

    Other welcome moves

    • The government has done well in increasing the budget for MGNREGA by two-thirds, adding another Rs. 40,000 crore.
    • With migrants now returning to their villages, MGNREGA can be leveraged to keep them occupied with meaningful work.
    • The demand of States for higher borrowings limit has also been granted but with clear reform milestones that they have to meet.
    • The government has also used the opportunity to unleash some much-needed reforms in agriculture marketing.
    • The measures also include –

    1) opening up more sectors for private participation

    2) enhancing foreign direct investment in defence

    3) corporatizing the monolith Ordnance Factory Board, and so on

    On contract farming

    • ‘The Centre is considering introducing a law on contract farming under the Contract Act of 1872 to enable farmers to directly engage with processors, aggregators, large retailers and exporters in a fair and transparent manner.
    • It would allow private players to invest in inputs and technology in the agricultural sector.

    Criticisms of the package

    • Yet, many have openly questioned the ability of this economic package to either provide adequate immediate relief to the most distressed sections of the economy or indeed stem the rapid decline in India’s GDP growth.
    • There are multiple fronts where this package is seen as inadequate. Let us discuss that-

    1) Old demand met with conditions

    • The package contains several generic announcements which should ideally, has been a part of a normal economic agenda.
    • The industry has been demanding a package to the tune of 7% to 8% of India’s GDP of over $2.8 trillion since a long time.
    • There was nothing unusual given that similar packages have been announced by other countries to mitigate the damage done to their economies.
    • So, a package of the size of almost 10% of the GDP was offered like a masterstroke but without coming clear on the source of funding and oversight provision.

    2) Bluff over MSMEs

    • Since MSMEs have been the hardest hit, being the main employers of industrial workers, their plight is grim.
    • It is small businesses that give traction to entrepreneurial activities in the unorganised sector where migrants from rural India mostly work.
    • The redefinition of MSMEs has been long-pending and cannot be called a reform.
    • There is nothing for the States to look forward to that can serve the immediate purpose.

    3) No stakeholders consulted

    • Ideally, after the first round of an insufficient package, the government should have begun consultations with parliamentarians, states and industry representatives to prepare a well-thought-out relief package.
    • States which have been at the forefront of the war against COVID-19 have not been given the required funds to help them cope with the public health emergency.
    • They have however shouldered the high influx of returning migrant labourers from industrial locations.

    4) Job losses unaddressed

    • India’s great middle class, which is also suffering, has found no solace either; nor is it likely that they will get anything substantial from this package.
    • A large number of workers in the organised sector are facing heavy pay cuts, job losses, a sharp fall in income, and uncertainty.
    • The expansion of MGNREGA, has a negative aspect, as it could impact labour availability, as rural migrants may not rush back for jobs (construction, transport most impacted).

    5) Farmers’ plight ignored

    • The package nowhere mentions resuming normal procurement operations.
    • Farmers are finding it difficult to get the minimum support price (MSP) for their produce; a majority of them are in debt and face many obstacles.
    • Many APMCs are shut with no signs to begin normal operations. Middlemen and Adhatiyas are plunging in to purchase the produces far below the MSP.

    6) Migrant workers ignored

    • The first national lockdown was announced in the most dramatic manner late in the evening and without adequate notice.
    • This created panic among migrants and painful displacement began which could have been avoided by offering the industry a timely financial package on the eleventh hour.
    • Economic desperation might leave poor workers with no choice but to return to work. But many of them are truly worried about getting infected.
    • Though Shramik Express trains were flagged off from certain destinations to take back migrant workers to their home States, but there was another shock — the charges levied by the Indian Railways.
    • Now India faces the loss of lives and livelihoods against the backdrop of the ruling dispensation’s apathy towards the poor and the disadvantaged.

    7) Healthcare needs more attention

    • Our healthcare delivery system in most States is extremely fragile.
    • One wonders, for instance, whether Bihar can handle the consequences if the virus begins to spread with the return of millions of migrant workers back to the State.
    • Many other States also face a similar plight given the poor state of primary healthcare facilities.
    • The pandemic has exposed a hard truth: most private healthcare providers seem to be incapable of and unwilling to help even during a national crisis.

    8) Undue pressure on Banks

    • Indian MSMEs have little access to risk capital, and hence raise it from banks, calling it loans. RBI has lent billions to banks to refinance those loans.
    • It will never get its money back. The FM has, for the first time, showing some awareness of the problem.
    • But the solution is weird. GoI will facilitate— whatever that means — provision of Rs 20,000 crore as subordinate debt. That is debt that does not have to be paid until all other loans have been repaid.
    • In other words, banks will be asked to give loans with an informal guarantee that they are gifts unless the bankrupt firm starts making huge profits someday.

    9) Broader reforms lack the spark

    • India’s self-reliance package to match global stimulus numbers is perhaps the driver for the claim of a large package (USD 280bn, 10% of GDP).
    • India does not have fiscal buffers hence a large fiscal stimulus would have been a bold bet – as that could have impacted ratings and currency, if not executed properly.
    • Not much was discussed on land, labour reforms, tax rationalization or on any coherent plan to invite foreign manufacturing.
    • The government’s defence indigenization plan is not new and has been poorly executed in the past and that is also the case with commercial mining for coal.

    10) Ignoring demand stimulus

    • The problem with this approach is that there is now a desperate need for demand stimulus; the government has focussed on supply-side push.
    • A strategy to drive consumption may have worked better under prevailing conditions.
    • The options could have been suspending GST for a couple of months or at least cutting rates temporarily, combined with a liquidity boost.

    What needs to be done at this immediate hour?

    1) Food and cash transfers first

    • The immediate need is to provide free food and cash transfers to those rendered incomeless.
    • Putting money in the hands of the poor is the best stimulus to economic revival, as it creates effective demand and in local markets.
    • Hence, an immediate programme of food and cash transfers must command the highest priority.

    2) Revamp MGNREGA work

    • Millions of migrant workers have endured immense hardships to trudge back home, and are unlikely to return to towns in the foreseeable future.
    • Employment has to be provided to them where they are, for which the MGNREGS must be expanded greatly and revamped with wage arrears paid immediately.
    • And permissible work must include not just agricultural and construction work, but work in rural enterprises and in care activities too.
    • The revamped MGNREGS could cover wage bills of rural enterprises started by panchayats, along with those of existing rural enterprises, until they can stand on their own feet.

    3) The urban focus

    • In urban areas, it was absolutely essential to revive the MSMEs.
    • Simultaneously, the vast numbers of workers who have stayed on in towns have to be provided with employment and income after our proposed cash transfers run out.
    • The best way to overcome both problems would be to introduce an Urban Employment Guarantee Programme, to serve diverse groups of the urban unemployed, including the educated unemployed.
    • Urban local bodies must take charge of this programme and would need to be revamped for this purpose.

    4) The ‘care’ economy

    • The pandemic has underscored the extreme importance of a public health-care system, and the folly of privatization of essential services.
    • The post-pandemic period must see significant increases in public expenditure on education and health, especially primary and secondary health including for the urban and rural poor.
    • The “care economy” provides immense scope for increasing employment. Vacancies in public employment, especially in such activities, must be immediately filled.
    • Anganwadi and Accredited Social Health Activists/workers who provide essential services to the population, including during this pandemic, are paid a pittance and treated with extreme unfairness.

    5) Increasing revenue

    • All the tasks mentioned in the package could be financed by printing money. But in the medium term, public revenues must be increased.
    • This is not because there is a shortage of real resources which, therefore, has to take from other existing uses through taxation.
    • Rather, since much-unutilized capacity exists in the economy, the shortage is not of real resources; the government has to just get command over them.
    • A combination of wealth and inheritance taxation and getting multinational companies to pay the same effective rate as local companies through a system of unitary taxation will garner substantial public revenue.

    6) Looping in foreign capital

    • It would be argued that this might cause large financial outflows, which the country can ill-afford.
    • Contrarily, even foreign capital is more likely to be attracted to a growing economy than one in sharp decline because of a lack of stimulus.
    • Also, a fresh issue of special drawing rights by the IMF (which India has surprisingly opposed along with the United States) would provide additional external resources.

    Conclusion

    • The coronavirus disease pandemic has offered India a valuable lesson on the importance of self-reliance and self-sufficiency that we must aspire to attain the twin goals.
    • Self-reliance will prepare the country for tough competition in the global supply chain, and it is important that the country wins this competition.
    • It will not only increase efficiency in various sectors but also ensure quality.
    • In sum, the package has several notable features not all of which are COVID-19 relief. But, the government has clearly refused to borrow and spend more on boosting demand.
    • If the strategy of boosting supply works, it is fine. However, if it does not work on expected lines, the government will be faced with a bigger problem down the line.

    Way Forward

    • Several bold reforms are needed to make the country self-reliant so that the impact of crisis such as COVID can be negated in future.
    • These reforms include supply chain reforms for agriculture, rational tax system, simple and clear laws, capable human resource and a strong financial system.
    • These reforms will promote business, attract investment, and further strengthen Make in India.
    • Local Governments should be playing a key role in supporting the government’s outreach in vast belts of rural India to spread awareness about the coronavirus disease.
    • Local governments can undertake door-to-door campaigns; stitched masks; made hand sanitisers for local populations; and provided support to the local administrative and security machinery in both providing basic services to residents and enforcing the lockdown.

    Try this:

    Q. The palpable unsustainability of the earlier globalisation surfaced after the COVID outbreak means that growth in India in the coming days will have to be sustained by the home market. Examine.

     

    References

    https://www.hindustantimes.com/india-news/stimulus-package-a-lost-opportunity-bernstein/story-dedaae4OQjenIjk9oLjm7H.html

    https://indianexpress.com/article/explained/explainspeaking-why-the-atmanirbhar-bharat-abhiyan-economic-package-is-being-criticised-6414905/

    https://www.thehindu.com/opinion/op-ed/where-is-health-in-the-stimulus-package/article31609611.ece

    https://www.thehindu.com/news/national/coronavirus-package-will-migrant-workers-benefit-from-the-centres-measures/article31603590.ece

    https://www.thehindu.com/opinion/editorial/a-matter-of-relief-on-economic-stimulus-package/article31617547.ece

    https://www.financialexpress.com/economy/breakup-of-the-rs-20-lakh-crore-economic-stimulus-package-by-fm-sitharaman/1961843/

    https://thewire.in/political-economy/modis-stimulus-package-is-a-gigantic-confidence-trick-played-on-the-people-of-india

    https://economictimes.indiatimes.com/news/economy/policy/why-india-needs-to-go-vocal-for-local-stores/articleshow/75812730.cms?from=mdr

    https://www.thehindu.com/opinion/editorial/local-motif-the-hindu-editorial-on-modis-call-for-self-reliance/article31577225.ece

  • Ensuring MGNREGA lives up to its potential

    With migrant workers returning home, work demand under MGNREGA is bound to rise. Sensing that the government increased the allocation to MGNREGA. This article suggests some steps to make the MGNREGA more effective in catering to this surge in the wake of the pandemic. Some issues that plague the scheme are also examined at the end. So, what are the suggestion? and what are the issues? Read to know….

    Acknowledgement of the importance of MGNREGA

    • The government made an allocation of an additional Rs 40,000 crore as part of the stimulus package.
    • This is an acknowledgement of the importance of MGNREGA.
    • The most important part of MGNREGA’s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it.
    • This demand-based trigger enables the self-selection of workers and gives them an assurance of at least 100 days of wage employment.

    Let’s put allocation in context of World Bank recommendations

    • Since 2012, an average of 18 per cent of the annual budgetary allocation for MGNREGA has been spent on clearing pending liabilities from the previous years.
    • Even this financial year began with pending wage and material liabilities of Rs 16,045 crore.
    • An allocation of Rs 1 lakh crore for FY 2020-21 would mean that approximately Rs 84,000 crore is available for employment generation this year.
    • This will still be the highest allocation for MGNREGA in any year since the passage of the law.
    • However, the allocation, which amounts to 0.47 per cent of the GDP continues to be much lower than the World Bank recommendations of 1.7 per cent for the optimal functioning of the programme.

    Some immediate steps to ensure the MGNREGA lives up to its potential

    • First, state governments must ensure that public works are opened in every village.
    • Workers turning up at the worksite should be provided work immediately, without imposing on them the requirement of demanding work in advance.
    • Second, local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.
    • Third, at the worksite, adequate facilities such as soap, water, and masks for workers must be provided free of cost. For reasons of health safety, MGNREGA tools should not be shared between workers.
    • The government should provide a tool allowance to all workers — some states are already providing such an allowance.
    • Fourth, procedures for implementing MGNREGA must be simplified but not diluted.
    • The pandemic has demonstrated the importance of decentralised governance.
    • Gram panchayats and elected representatives need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.
    • Fifth, as per a study by the RBI, more than half the districts in the country are under-banked.
    • The density of bank branches in rural India is even more sparse.
    • At this time, payments need to not only reach bank accounts on time, but cash needs to reach the workers easily and efficiently.
    • The limited coverage of bank infrastructure in rural areas must not be made a hurdle.
    • Attempts to distribute wages in cash, sans biometric authentication, must be rolled out.
    • Sixth, there needs to be flexibility in the kinds of work to be undertaken, while ensuring that the community and the workers are the primary beneficiaries.

    Issuse with MGNREGA

    • Over the last few years, MGNREGA had begun to face an existential crisis.
    • Successive governments capped its financial resources, and turning it into a supply-based programme.
    • Workers had begun to lose interest in working under it because of the inordinate delays in wage payments.
    • With very little autonomy, gram panchayats had begun to find implementation cumbersome.
    • Barring a few exceptions, state governments were only interested in running the programme to the extent funds were made available from the Centre.
    • Allocating work on demand, and not having enough funds to pay wages on time was bound to cause great distress amongst the workers and eventually for the state too.
    • As a result, state governments had begun to implement MGNREGA like a supply-driven scheme, instead of running it like a demand-based guarantee backed by law.

    Consider the question “With migrant workers returning to villages in the wake of corona pandemic, demand for work is likely to increase. In light of this, discuss the utility of MGNREGA and challenges it may face.”

    Conclusion

    With nearly eight crore migrant workers returning to their villages, and with an additional allocation for the year, this could be a moment for the true revival of MGNREGA. A revival led by workers themselves.

    Mahatma Gandhi National Rural Employment Guarantee Act, 2005

    • The Act aims at enhancing the livelihood security of people in rural areas by guaranteeing hundred days of wage employment in a financial year to a rural household whose adult members (at least 18 years of age) volunteer to do unskilled work.
    • The central government bears the full cost of unskilled labour, and 75% of the cost of material (the rest is borne by the states).
    • It is a demand-driven, social security and labour law that aims to enforce the ‘right to work’.
    • Ministry of Rural Development (MRD), Government of India in association with state governments, monitors the implementation of the scheme.

  • Rising incidences of Chinese Transgressions

    As tensions remain high between Indian and Chinese soldiers, the number of recorded Chinese transgressions across the disputed India-China border surged by 75 per cent in Ladakh in 2019, and the Chinese forays into Indian Territory in the first four months of the current year have also witnessed an increase compared to the same period last year.

    Chinese Transgression:

      • The border between India and China is not fully demarcated and the Line of Actual Control (LAC) is neither clarified nor confirmed by the two countries.
      • This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.
      • Observation Methods: Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.
      • Official data shows that 80% of Chinese transgressions across the LAC since 2015 have taken place in four locations of which three are in eastern Ladakh in the western sector.
        • These areas of eastern Ladakh are Pangong Tso, Trig Heights and Burtse.
        • The fourth area is the Dichu Area/Madan Ridge area (Arunachal Pradesh) of the Eastern sector.

    •  Implications of Increased Number of Transgressions:

      • It is an indicator of increased Chinese assertiveness.
      • Even if there are no major incidents, it should not be taken lightly.
      • So far, there has been no major standoff between the two sides after the 73-day Doklam standoff on Sikkim-Bhutan border in 2017.

    Concerns

    • India is worried about the tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.
    • The increased transgressions lead to more tensions between both countries which are already struggling to contain the Covid-19 pandemic.
    • Nepal’s recent behaviour on the Mansarovar Link Road raising the border map issue also raises Indian concerns.
    • The constant accusations on each other also cause tensions and disrupt the peace on borders.
      • Recently, Chinese media accused India of building defence facilities in the Galwan Valley region of the contested Aksai Chin area.
    • India and China are both nuclear-armed countries with strong militaries and the constant border conflicts are not a desirable thing.

    Way Forward

    • In the Wuhan and Mahabalipuram summits, both China and India had reaffirmed that they will make efforts to ensure peace and tranquility in the border areas.
    • On 1st April, 2020 India and China completed their 70 years of diplomatic relations.
    • Both countries have resolved border issues peacefully in the past four decades which gives the hope that the tensions will subside soon.
    • Establishment of peace between the two big powers of such an important geopolitical region is essential for their own growth and development as well as for maintenance of global peace.

    Practice question for mains:

    Q. Clear demarcation of the national borders is the need of the hour. Discuss.

  • Towards self-reliance in defence manufacturing

    External dependence for defence equipment could turn out to be the chink in the armour of any country, literally. As one of the major importer of defence equipment, India has been struggling to wean itself away from this vulnerability. This article discusses the recent changes announced by the finance minister in defence procurement and manufacturing policy. So, what are the changes and how will these changes benefit us? Read to know more…

    Promoting self-reliance: Addressing strategic and national security concern

    • Recently the Finance Minister announced measures to promote self-reliance in defence production.
    • This address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness.
    • For most of the past decade, India had the dubious distinction of being the world’s largest arms importer.
    • India accounted for about 12% of global arms imports.
    • Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
    • This external dependence for weapons, spares and, in some cases, even ammunition creates vulnerabilities during military crises.
    • COVID-19 has, once again, focused minds on the impact of supply chain disruptions on both civil and defence sectors.
    • With its security environment, its great power ambitions and its technological capacities, India should have a robust defence manufacturing capacity.
    • New Defence Procurement Procedures (DPP) 2020 are under formulation.
    • We now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces.

    Following are some of the moves declared by the government and their significance for the country

    1. Encouraging  private manufacturers

    • The decision i) to notify a list of weapons systems for sourcing entirely from Indian manufacturers, ii) the promise to progressively expand this list iii) a separate Budget provision for domestic capital procurement- will encourage our private defence manufacturers.
    • The research capacities, technological skills and quality commitment of our private defence manufacturer are often better appreciated by foreign clients for whom they are subcontractors.
    • There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
    • These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.

    2. Time-bound procurement

    • The government has promised i) a time-bound defence procurement process, ii) overhauling trial and testing procedures iii) establishing a professional project management unit.
    • To understand the significance of the above measures consider the fact below-
    • Over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion.
    • But most are still in relatively early stages of processing.
    • Of course, this delay now provides the opportunity to re-examine them and to prioritise those with indigenous research and development.
    • The CDS could also examine them from a tri-service angle, to avoid redundancy of capacities across the services.

    3. Corporatisation of Ordnance Factory Board

    • Over the decades, our ordnance factories have been the backbone of indigenous supplies to our armed forces.
    • Their structure, work culture and product range now need to be responsive to technology and quality demands of modern armed forces.
    • Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end-user.
    • The factories would be better integrated into the larger defence manufacturing ecosystem.

    4. Realistic specifications of desired weapon platforms

    • Our defence planners will frame “realistic” specifications for their desired weapons platforms.
    • These specifications should be based on the requirements of India’s defence strategy, rather than on aspirational considerations which, the Finance Minister said, may lead to a single foreign vendor.
    • It is also imperative that when we import weapon systems, we should plan for the ammunitions and spares for them to be eventually manufactured in India.
    • This will ensure that we are not driven to seek urgent replenishments from abroad during crises.
    • The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.

    5. FDI limit increased to 74% by automatic route

    • The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
    • It would also sustain domestic industrial activity in the research, design and manufacture of systems and sub-systems.
    • Our companies would now get the opportunity to directly contribute to Indian defence manufacturing.

    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.
    • This partnership should be with a view to achieving indigenisation over a period of time for even sophisticated platforms.
    • Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
    • The definition of indigenisation itself needs to privilege technology over value or volume.
    • Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
    • To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.

    Consider the question, “India has been aspiring to reduce its external dependence for defence equipment but has not succeeded in doing so. Examine the challenges in the way of self-sufficiency in this area. How effective will be the recent policy changes made in meeting the goal?”

    Conclusion

    The government has rightly clarified that self-reliance would not be taken to overzealous extremes. The thrust for indigenous research and development will coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities. Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable. It takes a crisis to change it.

     

     

     

     

  • Stimulus package aims to turn the crisis into opportunity

    Economic disruption caused by the corona crisis stems from both-demand side and supply side. So, the stimulus package announced was expected to address the issues on both sides. This article breaks downs the various elements of the package in demand-side as well as supply-side measures. We also know aggregate demand is not just consumption demand. So, this fact was also considered while deciding the demand-side measures.

    Twin mantra of stimulus package

    • 1) To ensure that human cost of the crisis is minimised, especially for those at the bottom of the pyramid.
    • 2) To convert this crisis into an opportunity by implementing bold structural reforms.
    • Such reforms will go beyond repairing the damage to the production capacities and enhance the overall supply response capabilities of the economy.

    Impact on demand side as well as supply side

    • The present crisis is far worse than both the Asian financial crisis of the late Nineties as well as the global financial crisis of 2008-09.
    • It has seriously impacted both the supply and demand side of the economy.
    • The government’s response has been to effectively address both these aspects.

    Government’s four-fold response to address supply-side problems

    1. Ensuring food security

    • To ensure that the government declared agriculture and all related activities as essential services.
    • This permitted the successful harvesting and efficient procurement of the critical Rabi crop.
    • It also implied pumping in Rs 78,000 crore as new purchasing power in the hands of the farmers.

    2. Preventing cash/liquidity crunch

    • Preventing the pressing cash/liquidity crunch was necessary to avoid insolvencies and bankruptcies.
    • An immediate moratorium was announced on their debt servicing obligations to commercial banks.
    • This measure was reinforced for MSMEs, for whom an additional credit line of Rs 3 trillion without any fresh collateral was extended.
    • MSMEs could also avail of new equity from the Rs 50,000 crore fund of funds and take advantage of the subsidiary debt facility announced by the FM.
    • These measures provided succour to a large number of businesses, especially those in the services sectors like hospitality, entertainment and retail.
    • The Rs 90,000 crore credit package made available to state discoms should also be included in this set of measures.
    • It will prevent bankruptcies of state electricity utilities and the power producers, which would have had disastrous results.

    3. Reforms in agriculture and manufacturing sector

    • The third set of measures were directed to significantly improve the ecosystem for private producers, both in agriculture and manufacturing.
    • Long-pending reforms to give farmers the much-needed freedom to choose their clients and for traders and exporters of agro-products to maintain necessary stocks have now been announced.
    • Defence production and exports will get a new fillip with the liberalisation measures.
    • Greater space will be given to private businesses in sectors in which public sector enterprises hitherto had either a monopoly or a predominant presence.

    4. Credit to street vendors

    • Finally, this is a measure that does not have a large fiscal footprint, but touches the lives and livelihoods of more than 50 lakh families.
    • Under which street vendors all over the country have been given a credit of Rs 10,000 each for re-stocking and use as working capital.

    Understanding the aggregate demand

    •  It is important to point out that aggregate demand is made up of- i) consumption, ii) investment iii) demand for intermediate goods.
    • So,  the cash-in-hand of consumers is not the only means for reversing the declining demand in the economy.
    • Therefore, additional credit lines provided to MSMEs, vendors or farmers will contribute to the strengthening of aggregate demand.

    Government’s response to address demand-side problems

    • A significant number of measures were announced to hike consumption demand directly as well.
    • Among these are:
    • Rs 1.73 lakh crore for improving the incomes and welfare of the most vulnerable, including the 20 crore female Jan Dhan account holders who will receive monies directly into their bank accounts.
    • Rs 50,000 additional incomes in the hands of those whose TDS and TCS were reduced by 25 per cent.
    • Rs 40,000 crore additional allocation for MNREGA, which will provide jobs and succour to those returning to their villages from metros and cities.
    • Rs 30,000 crore for construction workers.
    • Rs 17,800 crore transferred to 12 crore farmers and Rs 13,000 crore transferred to states to finance the costs of running quarantine homes and shelters for migrant workers.
    • These measures, which will directly benefit different categories of individuals, will surely raise the flagging demand — the necessary condition for triggering a fast-paced recovery in economic activity.

    Consider the question “The stimulus package announced by the government in the wake of pandemic sought to address both the demand side as well as supply-side problems. Examine the various components of package and other reforms announced in the economy.”

    Conclusion

    Combined with the significant number of bold structural reform measures, which hold the potential to make Indian firms attain global scales and competitiveness and give the much-needed freedoms, flexibility and financial strength to our beleaguered farmers, “the package” promises to promote India’s economic recovery in the post-COVID-19 period.

  • India and China after pandemic

    The article broadly discusses the impact of the pandemic on the Indian economy. While the package has been declared to alleviate the economic pain, the government faces the challenge of finding the resources to plug the gaps. Though pandemic erupted from China, it successfully controlled it. This along with the its calibrated approach towards strategic progression is going to stand China in good stead.

    Grappling with the “unknown unknowns”

    • Several weeks before the advent of the COVID-19 pandemic, India’s Minister for External Affairs delivered a lecture.
    • In the lecture, he had observed that “what defines power and determines national standing is also no longer the same. Technology, connectivity and trade are at the heart of the new contestations.”
    • He did mention a point about “known unknowns”.
    • But the pandemic has forced us to face the “unknown unknowns”.
    • Within a few weeks, his prediction would be overtaken by a tectonic shift in the global situation thanks to a virus and a pandemic.

    Impact on India’s economy

    • What distinguishes the present pandemic from earlier ones is its economic impact.
    • The economic impact is perhaps even more threatening than the human costs involved.
    • In the case of India, all forecasts have had to be shredded.
    • Job losses have been massive, specially in urban areas.
    • India’s exports in the month of April, for instance, were the worst in the past 30 years.

    Finding resources for the stimulus package

    • Well before pandemic India had been witnessing a persistent economic downward slide.
    • Prime Minister Narendra Modi’s announcement of a ₹20-lakh crore stimulus package was, hence, timely.
    • Even though economists now believe that in real terms it amounts to around 2% of GDP rather than 10% .
    • Finding resources for even this stimulus package will, however, not be easy.
    • The Centre’s finances are not in the best of health. It has already had to resort to a second tranche of $1 billion loan from the World Bank to support COVID-19 relief measures.
    • The finances of States are, to say the least, in a perilous state.
    • Questions are, thus, bound to be raised as to whether adequate funds would be forthcoming for relief purposes.

    China’s calibrated approach: Strategic progression

    • Since its early recovery, China has followed a calibrated approach — one that stems from a policy of deliberate strategic progression conceived over the years.
    • It may be worthwhile to understand the facts so as to underscore the gap that currently exists between China and India.
    • In 2015, China’s President, Xi Jinping, had floated the idea of “a Community of Common Destiny of Mankind”.
    • In this, he outlined China’s viewpoint on aspects such as economic globalisation and the information technology revolution.
    • The Belt and Road Initiative — which encompasses policy, infrastructure, trade, financial, and people-to-people connectivity, and, implicitly also, security ties — was an adjunct to it.
    • The 19th National Congress of the Communist Party of China (2017), thereafter, gave its assent, considering it essential to enable China to achieve pre-eminence status within the global order.
    • Ever since, China has focused on-
    • i) attaining economic and technological progress.
    • ii) defining how power would be determined in the new globalised era through devising new international norms in many emerging domains such as cyber, space, artificial intelligence, etc.
    • China also set about rewriting international rules, premised not so much on governing where global goods are made, but on setting standards that define production, exchange and consumption.
    • China Standards 2035 plans to set new standards with regard to the Industrial Internet of Things (IoT) and define next-generation information technology and biotechnology infrastructure.
    • China is hoping, to reap the “early bird” advantage, even as other industrial nations struggle to recover from the devastation caused by the COVID-19 pandemic.
    • Internationalisation of Chinese standards would provide China a clear advantage by providing it an opportunity to set the standards in emerging industries such as high-end equipment manufacturing, unmanned vehicles, new materials, cybersecurity and the like.
    • This would enable it gain a dominant position in the global economy.

    India must plan well to cope with the China challenge

    • Mounting an effective challenge to China at this time would require a well-conceived and carefully calibrated plan of action by India.
    • As of now, this is not evident.
    • India and China will certainly emerge from the pandemic more diminished than previously, but to varying extents.
    • Each country will, no doubt, suffer an economic setback.
    • But while both nations would be among the very few that would still have a positive growth rate in the near future.
    • Which is 1% in the case of China and 1.8% in the case of India, according to the International Monetary Fund.
    • Given the size of China’s economy, it does not translate into a massive shift in India’s favour.

    Consider the question “Economies across the world have been bruised by the corona pandemic. There have also been talks of India being the beneficiary of changes in the global supply chains. In light of this, examine the issues and challenges that India may face in this regard.”

    Conclusion

    India would more than welcome some of the entities exiting China, but there are no “green shoots” to suggest that such a shift has, or is, about to take place. Many alternatives are available to these companies and it would be excessively optimistic on our part to hold on to the belief that India is the only alternative choice for most of them.

  • What is Solar Minimum?

    The sun is said to have gone into a state called the ‘solar minimum’ and is about to enter the deepest period of ‘sunshine recession’ as sunspots are virtually not visibly at all.

    Practice question for Mains:

    Q. What are Solar minima and maxima? Discuss its impact on space weather and the Earth.

    What is a solar minimum and why is it happening now?

    • Sun has a cycle that lasts on average 11 years, and right now we are at the peak of that cycle.
    • Every 11 years or so, sunspots fade away, bringing a period of relative calm.
    • This is called the solar minimum. And it’s a regular part of the sunspot cycle.
    • While intense activity such as sunspots and solar flares subside during solar minimum, that doesn’t mean the sun becomes dull. Solar activity simply changes form.

    What about Solar Maximum?

    • Solar minima and maxima are the two extremes of the Sun’s 11-year and 400-year activity cycle.
    • At a maximum, the Sun is peppered with sunspots, solar flares erupt, and the Sun hurls billion-ton clouds of electrified gas into space.
    • Sky watchers may see more auroras, and space agencies must monitor radiation storms for astronaut protection.
    • Power outages, satellite malfunctions, communication disruptions, and GPS receiver malfunctions are just a few of the things that can happen during a solar maximum.

    What are its effects on Earth?

    a) On space weather

    • The Solar wind from coronal holes will temporarily create disturbances in the Earth’s magnetosphere, called geomagnetic storms, auroras, and disruptions to communications and navigation systems.
    • The space weather during solar minimum will also affect Earth’s upper atmosphere on satellites in low Earth orbit changes.
    • This means that the Earth’s upper atmosphere will cool down which is generally heated and puffed up by ultraviolet radiation from the sun.
    • However, the heat at the upper atmosphere of our planet helps Earth to drag debris and keep the low Earth orbit clear of manmade space junk.
    • Apart from this, the solar minimum will change the space weather significantly which will lead to an increase in the number of galactic cosmic rays that reach Earth’s upper atmosphere.
    • These Galactic cosmic rays are high energy particles which are a result of distant supernova explosions and other violent events in the galaxy.

    b) On astronauts

    • According to NASA the sun’s magnetic field weakens and provides less shielding from these cosmic rays during a solar minimum which will directly increase the threat to astronauts travelling through space.
    • This may cause health risks to astronauts travelling through space as the sun’s magnetic field weakens and provides less shielding from these cosmic rays.

  • India to chair ‘WHO Executive Board’

    India would now be playing a more prominent role at the World Health Organisation (WHO), with Union Health Minister taking charge as chairman of the WHO Executive Board at its 147th session.  Dr Harsh Vardhan would succeed Dr Hiroki Nakatani of Japan.

    Practice question for Mains:

    Q. The World Health Organisation (WHO) had “missed the call” on the COVID-19 pandemic. Critically comment with context to the ongoing spat between the US and China.

    About WHO

    • The WHO is a specialized agency of the United Nations responsible for international public health.
    • It is part of the U.N. Sustainable Development Group.
    • The WHO Constitution, which establishes the agency’s governing structure and principles, states its main objective as ensuring “the attainment by all peoples of the highest possible level of health.”
    • It is headquartered in Geneva, Switzerland, with six semi-autonomous regional offices and 150 field offices worldwide.

    The WHO Executive Board

    • The WHO is governed by two decision-making bodies — the World Health Assembly and the Executive Board.
    • The Board is composed of 34 members technically qualified in the field of health, with members being elected for three-year terms.
    • The Health Assembly is the WHO’s decision-making body and consists of 194 Member States.
    • The Board chairman’s post is held by rotation for one year by each of the WHO’s six regional groups: African Region, Region of the Americas, South-East Asia Region, European Region, Eastern Mediterranean Region, and Western Pacific Region.

    Functions of the Board

    • The main functions of the Board are to give effect to the decisions and policies of the Health Assembly, to advise it and generally to facilitate its work.
    • The Board and the Assembly create a forum for debate on health issues and for addressing concerns raised by the Member States.
    • Both the Board and the Assembly produce three kinds of documents — Resolutions and Decisions passed by the two bodies, Official Records as published in WHO Official publications, and Documents that are presented “in session” of the two bodies.

    Back2Basics: India at the WHO

    • India became a party to the WHO Constitution on 12 January 1948.
    • The first session of the South East Asia Regional Committee was held on October 4-5, 1948 in the office of the Indian Minister of Health, and was inaugurated by Jawaharlal Nehru, the first PM.
    • The first Regional Director for South-East Asia was an Indian, Dr Chandra Mani, who served between 1948-1968.
    • Currently, the post has again been occupied by an Indian appointee, Dr Poonam Khetrapal Singh, who has been in office since 2014.
    • Since 2019, Dr Soumya Swaminathan has been the WHO’s, Chief Scientist.

    Also read:

    [Burning Issue] World Health Organization (WHO) And Coronavirus Handling