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GS Paper: GS3-12.Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

  • Navratna Status for IRCTC and IRFC 

    Why in the News?

    The Indian Railway Catering and Tourism Corporation (IRCTC) and the Indian Railway Finance Corporation (IRFC) have been granted Navratna status, making them the 25th and 26th Navratna companies in India.

    Other Navratna Companies in Indian Railways

    • Container Corporation of India (CONCOR): Multimodal logistics.
    • Rail Vikas Nigam Ltd (RVNL): Infrastructure expansion.
    • RITES Ltd: Transport consultancy.
    • IRCON International Ltd: Railway and highway construction.
    • RailTel Corporation of India Ltd: IT & communication services.

    What is Navratna Status?

    • Introduced in 1997, the Navratna scheme identifies high-performing CPSEs and grants them financial and operational independence.
    • It allows selected companies to compete globally while maintaining public sector ownership.
    • Categories of PSUs in India:
      • Maharatna:  Largest CPSEs with highest financial powers.
      • Navratna: Mid-tier CPSEs with strategic autonomy.
      • Miniratna: Emerging CPSEs with limited independence.

    Eligibility Criteria for Navratna Status:

    A CPSE must-

    • Be a Miniratna-I company with an Excellent or Very Good rating in its MoU performance in three out of five years.
    • Achieve a composite score of 60+ based on:
      • Net Profit to Net Worth
      • Manpower Cost to Total Cost of Production
      • Profitability Ratios (PBDIT & PBIT)
      • Earnings Per Share
      • Inter-Sectoral Performance

    Benefits of Navratna Status:

    • Investment Autonomy: Can invest ₹1,000 crore or 15% of net worth in a single project without government approval.
    • Strategic Expansion: Freedom to form joint ventures, subsidiaries, and acquisitions.
    • Operational Flexibility: Can make independent business and investment decisions.
    • Enhanced Market Position: Attracts more investors and improves stock performance.

    PYQ:

    [2011] Why is the Government of India disinvesting its equity in the Central Public Sector Enterprises (CPSEs)?

    1. The Government intends to use the revenue earned from the disinvestment mainly to pay back the external debt.

    2. The Government no longer intends to retain the management control of the CPSEs.

    Which of the statements given above is/ are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) neither 1 nor 2

     

  • Not business as usual: On upholding India’s reputation for quality drugs

    Why in the News?

    The pharmacy of the Global South is facing a reputation crisis after cough syrups made by Indian pharmaceutical companies were found to contain harmful levels of diethylene glycol and/or ethylene glycol.

    Why is the pharmacy of the Global South facing a reputation crisis?

    • Quality Control Failures and Contaminated Products:
      • Gambia (2022): Cough syrups made in India containing diethylene glycol and ethylene glycol killed 66 children.
      • Uzbekistan (2022): Similar contamination led to the deaths of 65 children.
      • U.S. (2023): India-made eye drops contaminated with drug-resistant bacteria caused 3 deaths and 8 cases of blindness.
    • Illegal Manufacturing and Unapproved Drugs: Unauthorized drug production and export are damaging India’s credibility. Example: Aveo Pharmaceuticals (Maharashtra) illegally exported unapproved opioid combinations to West Africa, exposed by a BBC investigation in 2023.
    • Regulatory Lapses and Weak Oversight: Inconsistent enforcement by regulatory authorities enables violations. Example: State drug authorities in India have issued licenses for unapproved Fixed Dose Combinations (FDCs) without clearance from the Central Drugs Standard Control Organization (CDSCO).
    • Global Scrutiny and Trade Barriers: Increased surveillance by international health bodies and trade restrictions. Example: The WHO’s alert on toxic cough syrups led to enhanced inspections of Indian pharmaceutical exports, impacting trade with African and Southeast Asian nations.

    How does this impact India’s hegemony?

    • Erosion of Soft Power and Global Reputation: India’s image as the “Pharmacy of the Global South” is under threat due to quality concerns and regulatory lapses. Example: The WHO alerts on contaminated cough syrups in Gambia and Uzbekistan have damaged India’s credibility as a reliable supplier of affordable medicines.
    • Reduced Diplomatic Influence in Developing Countries: Many nations in Africa and Southeast Asia, which depend on Indian pharmaceuticals, may seek alternative suppliers, weakening India’s influence in these regions. Example: Countries like Nigeria and Kenya exploring Chinese and Brazilian pharmaceutical alternatives.
    • Economic and Trade Consequences: Heightened global scrutiny could lead to export restrictions and trade losses, affecting India’s dominance in the generic drug market. Example: In 2023, the U.S. imposed tighter checks on Indian pharmaceutical imports following incidents of contaminated eye drops, impacting Indian drug exports.

    What is the extent of India’s pharmaceutical exports?

    • Total Export Value: India’s pharmaceutical exports were valued at USD 27.85 billion, contributing substantially to the nation’s economy.
    • Global Market Share: India stands as the world’s third-largest producer of pharmaceuticals by volume, supplying approximately 20% of global generic drugs, with North America being a major recipient.
    • Key Export Destinations: The United States remains the largest importer of Indian pharmaceutical products, accounting for 17.90% of India’s total merchandise exports in this sector.
      • India supplies about 26% of Africa’s generic pharmaceutical market, highlighting its role as a key provider of affordable medicines on the continent.

    What steps has the Indian government taken in this situation?

    • Strengthening Regulatory Oversight: The Central Drugs Standard Control Organization (CDSCO) has intensified inspections of pharmaceutical manufacturing units to ensure compliance with Good Manufacturing Practices (GMP). Example: Following the Gambia and Uzbekistan incidents, the government ordered inspections of 76 cough syrup manufacturers across 20 states, leading to the suspension of several licenses.
    • Policy Reforms and Legal Action: The government introduced a mandatory quality certification for drug exports to certain countries to prevent the export of substandard medicines. Example: After the Aveo Pharmaceuticals case, the Maharashtra government revoked the company’s manufacturing license and seized 13 million illegal medicines.
    • International Collaboration and Transparency: The Indian government has increased cooperation with the World Health Organization (WHO) to address quality concerns and strengthen pharmacovigilance. Example: India joined hands with African health regulators to enhance quality assurance for pharmaceuticals exported to African countries.

    Way forward: 

    • Strengthen Regulatory Oversight: Implement stricter quality controls, regular audits, and a centralized tracking system to ensure compliance with global standards.
    • Enhance Global Collaboration: Partner with international health bodies and key importing nations to improve quality assurance and rebuild trust in Indian pharmaceuticals.

    Mains PYQ:

    Q Why is there so much activity in the field of biotechnology in our country? How has this activity benefitted the field of biopharma? (UPSC IAS/2018)

  • Indian industry needs innovation, not mindless toil

    Why in the News?

    Indian industry leaders are hurting their future by depending too much on cheap labour for growth.

    What are the issues related to cheap labour in India? 

    • Long Working Hours: Migrant industrial workers often work 11-12 hours a day without breaks during peak demand, compromising their physical and mental well-being.
    • Informal Employment: As per the 2023-24 Periodic Labour Force Survey, only 21.7% of workers hold regular jobs with salaries. Even within this group, nearly half face informal conditions (no contracts, paid leave, or social security).
    • Exploitation via Contract Work: 56% of workers joining the factory sector since 2011-12 are contract workers, lacking legal protection and receiving lower wages.
    • Migrant Worker Vulnerability: Migrant workers face multiple disadvantages due to social position, lack of assets, and inadequate access to social security.
    • Profit Maximization: Industries prioritize profit over worker welfare, with profit shares rising from 31.6% in 2019-20 to 46.4% in 2021-22 in the factory sector.

    What is the current situation of the garment industry in India?

    • Stagnant Share in Global Exports: India’s share in global garment exports has remained stagnant at 3.1% over the past two decades. Example: In contrast, Bangladesh (7.9%) and Vietnam (6.4%) have increased their market share by investing in modern technologies and efficient supply chains (Economic and Political Weekly, August 2024).
    • Over-Reliance on Cheap Labour: The industry depends heavily on low-cost, unorganized labour rather than technology and automation, limiting productivity. Example: Over 70% of the workforce in garment manufacturing operates in small, unregistered enterprises with poor working conditions and low wages (PLFS 2023-24).
    • Declining Competitiveness: Rising competition from China, Vietnam, and Bangladesh has reduced India’s competitiveness in both mass-market and premium garment segments. Example: India’s textile and garment exports dropped by 13.3% to $32 billion in 2023-24, while Vietnam’s exports rose to $44 billion (Ministry of Commerce data, 2024).
    • Lack of Innovation and Modernization: Indian firms lag in adopting advanced production technologies, affecting product diversity and design innovation. Example: While countries like Vietnam invest in smart textiles and sustainable practices, Indian firms focus primarily on basic, low-margin garments.
    • Impact of Policy and Infrastructure Gaps: Inadequate government support, high logistics costs, and delayed payments to small firms hinder sectoral growth. Example: The Textile PLI Scheme launched in 2021 aimed to boost manufacturing but has had limited uptake, particularly among smaller manufacturers due to complex compliance issues.

    How can India benefit from its cheap labour?

    • Investing in Skill Development and Training: Enhancing workers’ skills can increase productivity while maintaining cost advantages. Example: The Skill India Mission has trained over 50 million workers since its launch in 2015, improving output quality in sectors like textiles, automotive, and electronics.
    • Promoting Labour-Intensive Industries: Expanding labour-intensive sectors (e.g., textiles, leather, and electronics assembly) can maximize employment and exports. Example: The Apparel Park Scheme in Tamil Nadu supports garment clusters, increasing job opportunities while improving global competitiveness.
    • Strengthening MSMEs and Local Supply Chains: Supporting Micro, Small, and Medium Enterprises (MSMEs) through policy incentives and better access to credit can utilize cheap labour efficiently. Example: The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme has provided ₹3.7 lakh crore in credit to over 65 lakh MSMEs (as of 2024).
    • Encouraging Export-Oriented Production: Facilitating exports through simplified regulations and logistical improvements can enhance global market access. Example: The Remission of Duties and Taxes on Exported Products (RoDTEP) scheme helps Indian exporters by reimbursing embedded taxes, making Indian goods more competitive.
    • Adopting a Hybrid Model of Labour and Technology: Combining low-cost manual labour with affordable automation can balance efficiency with cost advantages. Example: Maruti Suzuki uses a man-machine hybrid system for auto production, reducing costs while maintaining high output, making it India’s largest car exporter.

    Why are industries falling behind in innovation?

    • Low Investment in Research and Development (R&D): India’s gross domestic expenditure on R&D (GERD) is 0.65% of GDP (2022), significantly lower than countries like China (2.4%) and South Korea (4.8%). Example: In the pharmaceutical sector, while India is a major producer of generic medicines, it lags in developing innovative drugs due to limited R&D spending.
    • Dominance of Low-Cost, Labor-Intensive Models: Indian industries prioritize cheap labour over adopting advanced technologies, limiting productivity gains and innovation. Example: In the textile industry, India’s share in global garment exports is 3.1%, while Bangladesh (7.9%) and Vietnam (6.4%) have overtaken India by modernizing production systems.
    • Limited Collaboration between Industry and Academia: Weak ties between academic research institutions and industries hinder the commercialization of innovative ideas. Example: In 2021, only 36 patents were filed jointly by Indian universities and private firms compared to 5,000+ in China under their “Industry-Academia Collaboration” model.
    • Lack of Policy Incentives for Innovation: Insufficient government policies and weak implementation of initiatives like Atal Innovation Mission (AIM) reduce incentives for private-sector innovation. Example: While China’s “Made in China 2025” policy incentivizes innovation-led manufacturing, India’s PLI (Production-Linked Incentive) scheme primarily focuses on output rather than R&D-driven innovation.
    • Financial Constraints on Small and Medium Enterprises (SMEs): SMEs, which form 70% of the manufacturing workforce, face difficulties accessing credit for innovation and upgrading technology. Example: Despite initiatives like CGTMSE, only 15% of MSMEs in India receive formal credit, limiting their ability to invest in new technologies.

    Way forward: 

    • Enhance Technology Adoption and Innovation: Encourage investment in advanced manufacturing technologies and R&D through better policy incentives and stronger industry-academia collaboration to improve productivity and global competitiveness.
    • Support Labour Welfare and Formalization: Implement policies to improve working conditions, ensure social security for informal workers, and promote skill development programs to balance cost efficiency with worker well-being.

    Mains PYQ:

    Q Can the strategy of regional-resource based manufacturing help in promoting employment in India? (UPSC IAS/2019)

  • India introduces new HS code for GI-recognised Rice Varieties

    Why in the News?

    India has introduced a Harmonised System (HS) code for geographical indication (GI) recognised rice exports under an amendment to the Customs Tariff Act, 1975 announced by Finance Minister Nirmala Sitharaman in the 2025-26 Union Budget on February 1, 2025.

    About Harmonised System (HS) Code

    • HS Code is an internationally recognized classification system for traded goods, developed by the World Customs Organization (WCO).
    • It is used to standardize the identification of products in global trade, ensuring uniformity in customs procedures, tariffs, and trade policies.
    • The HS Code is a six-digit numerical code, categorized as follows:
      • First two digits: Represent the chapter of goods (e.g., “10” for cereals).
      • Next two digits: Indicate the heading (e.g., “06” for rice).
      • Last two digits: Define the subheading (e.g., “30” for semi-milled or wholly milled rice).
    • Countries can extend the HS Code beyond six digits to accommodate specific national requirements (e.g., India uses an 8-digit system).

    Impact of HS Code on GI Rice Exports:

    Trade experts believe that the introduction of an HS code will:

    • Facilitate GI rice exports, even when general rice exports are restricted.
    • Ensure better market access for specialty rice varieties in global markets.
    • Differentiate GI-tagged rice from conventional rice exports to prevent mislabelling.

    About the World Customs Organization (WCO):

    • The WCO is an intergovernmental organization responsible for overseeing and standardizing global customs regulations.
    • It was established in 1952 as the Customs Co-operation Council (CCC) and later renamed the WCO in 1994.
    • Key Functions of the WCO:
      • Develops and maintains the HS Code, used by over 200 countries and territories.
      • Regulates customs procedures, trade facilitation, and enforcement of trade laws.
      • Supports the fight against illegal trade, smuggling, and counterfeit goods.
    • The organization works closely with the World Trade Organization (WTO) and United Nations (UN) to promote global trade efficiency.
    • India is a member of the WCO and follows its HS classification system for trade regulations.
    • The WCO’s Revised Kyoto Convention (RKC) serves as a blueprint for India’s customs modernization efforts.

    PYQ:

    [2017] Consider the following statements:

    1. India has ratified the Trade Facilitation Agreement (TFA) of WTO.
    2. TFA is a part of WTO’s Bali Ministerial Package of 2013.
    3. TFA came into force in January 2016.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 1 and 3 only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

  • GREAT Scheme

    Why in the News?

    As of February 4, 2025, 4 startups have been approved under the ‘Grant for Research & Entrepreneurship across Aspiring Innovators in Technical Textiles (GREAT)’ Scheme.

    About GREAT Scheme:

    • The GREAT Scheme is a government initiative under the National Technical Textiles Mission (NTTM).
    • Launched by the Ministry of Textiles, it provides financial support to startups working in technical textiles.
    • The scheme focuses on Medical Textiles, Industrial Textiles, and Protective Textiles, fostering innovation, research, and entrepreneurship.
    • It aims to promote entrepreneurship in technical textiles by funding early-stage innovations.
    • Provisions and Features:
      • Financial Support: Startups receive grants of up to ₹50 lakh for up to a period of 18 months.
      • No Royalty Requirement: Unlike private funding, the government does not take a share of the startup’s profits.
      • Upfront Contribution: Startups must deposit 10% of the allocated grant (e.g., ₹5 lakh for a ₹50 lakh grant).
      • Sector Focus: Covers Medical, Industrial, and Protective Technical Textiles.
      • Budget Allocation: Part of the ₹375 crore funding for FY 2025 under NTTM.

    Back2Basics: National Technical Textiles Mission (NTTM) 

    • Launched in 2020 to make India a global leader in technical textiles through research and innovation.
    • Budget of ₹1,480 crore, focusing on medical, industrial, protective, and geo-textiles.
    • Supports R&D, skill development, and investment in high-performance textiles for defense, healthcare, and infrastructure.
    • Includes Production-Linked Incentives (PLI), PM MITRA Parks, and quality control regulations to boost manufacturing.
    • Aims to increase India’s technical textiles market to $40-50 billion with 15-20% annual growth.

     

    PYQ:

    [2013] Analyse the factors for highly decentralized cotton textile industry in India.

  • [pib] Budget 2025-26 removes 7 Custom Duties for Industrial Goods

    Why in the News?

    The Budget proposes to remove 7 customs tariff rates for industrial goods, following a similar step in Budget 2023-24. This will leave only 8 tariff rates, including a zero rate, making customs duty structure more transparent and predictable.

    What is Customs Duty?

    • Customs Duty is a tax imposed on goods that cross international borders to regulate their movement.
    • It helps protect a country’s economy, jobs, environment, and residents by controlling imports and exports.
    • It prevents illegal trade, ensures fair competition, and generates government revenue.
    • The Customs Act, 1962, which defines and regulates customs duty in India.
    • The Central Board of Indirect Taxes and Customs (CBIC) under the Ministry of Finance manages customs duties.
    • Types of Customs Duties in India:
    1. Basic Customs Duty (BCD): Levied on imported goods (0-100%).
    2. Countervailing Duty (CVD): Imposed to balance foreign subsidies (0-12%).
    3. Social Welfare Surcharge (SWS): 10% surcharge to support welfare projects.
    4. Anti-Dumping Duty: Imposed on goods sold below market price to prevent unfair trade.
    5. Compensation Cess: Levied on items like tobacco and pollution-causing goods.
    6. Integrated GST (IGST): Imposed on imports at 5%, 12%, 18%, or 28% rates.
    7. Safeguard Duty: Applied when excessive imports harm domestic industries.
    8. Customs Handling Fee: 1% charge for customs processing.
    • Customs Duty Calculation: Based on product value, origin, composition, and international trade agreements.

    Key Changes Announced to Customs Tariffs:

    • Tariff rates reduced from 15 to 8, Social Welfare Surcharge was removed on 82 items.
    • 36 new life-saving medicines exempted, 5% duty on six more drugs.
    • Full BCD exemption on 35 EV battery capital goods, 28 mobile battery items, and key minerals like cobalt & lithium.
    • 10-year duty exemption for shipbuilding materials; Ethernet Switch duty cut from 20% to 10%.
    • 20% export duty on crust leather removed, handicraft export timeline extended to 1 year.
    • Frozen fish paste duty cut from 30% to 5% to boost seafood exports.
    • Customs assessments limited to 2 years, quarterly importer reporting instead of monthly.

    How India is Protecting Its Economy from Trade War Impact?

    • Rupee-based trade settlements with Russia, UAE & Sri Lanka to reduce dollar dependence.
    • Stockpiling essential imports like semiconductors, rare earth metals, and crude oil.
    • Attracting companies shifting from China with PLI incentives for manufacturing.
    • Paperless customs clearance, AI-driven trade monitoring, and blockchain documentation for smoother trade.
    • Strengthening global trade alliances like IPEF (Indo-Pacific Economic Framework) and Supply Chain Resilience Initiative (SCRI) (Japan-Australia) for supply chain stability.

    PYQ:

    [2018] Consider the following statements

    1. The quantity of imported edible oils is more than the domestic production of edible oils in the last five years.

    2. The Government does not impose any customs duty on all the imported edible oils a special case.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

  • [pib] National Manufacturing Mission (NMM)

    Why in the News?

    The Union Finance Minister, while presenting the Union Budget 2025-26, announced the launch of the National Manufacturing Mission (NMM) to boost India’s manufacturing sector under the Make in India initiative.

    What is the National Manufacturing Mission?

    • The NMM was announced in Union Budget 2025-26 to boost India’s manufacturing sector under the Make in India initiative.
    • It covers small, medium, and large industries and aims to strengthen domestic production capabilities, enhance competitiveness, and create jobs.
    • The mission provides policy support, execution roadmaps, and governance frameworks for both central ministries and state governments.
    • It promotes Clean Tech manufacturing and focuses on developing an ecosystem for critical industrial components such as solar PV cells, EV batteries, wind turbines, and high-voltage transmission equipment.
    • Aims and Objectives:
      • Boost domestic production to reduce import dependence.
      • Enhance MSME sector growth with credit expansion (₹10 crore from ₹5 crore).

    Key Features & Significance:

    • Infrastructure & Industrial Clusters to strengthen supply chains.
    • National Action Plan for Toys to make India a global toy hub.
    • New footwear & leather industry scheme to create 22 lakh jobs and boost exports.
    • National Institute of Food Technology in Bihar to increase farmer incomes through food processing.

    Back2Basics: National Manufacturing Policy (NMP)

    • Launched in 2011 to boost India’s manufacturing sector.
    • Aims to increase GDP share to 25% and create 100 million jobs in a decade.
    • Focuses on National Investment and Manufacturing Zones (NIMZs) to attract investment and enhance productivity.
    • Promotes technology advancement, skill development, and sustainable growth with fiscal & infrastructure incentives.
    • Key areas: Ease of doing business, labor law reforms, export growth, and global competitiveness.

     

    PYQ:

    [2012] What is/are the recent policy initiative(s) of Government of India to promote the growth of manufacturing sector?

    1. Setting up of National Investment and Manufacturing Zones

    2. Providing the benefit of ‘single window clearance’

    3. Establishing the Technology Acquisition and Development Fund

    Select the correct answer using the codes given below:

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

  • [pib] What is Geo-Economic Fragmentation?

    Why in the News?

    The Economic Survey 2024-25 highlights the shift from globalization to geo-economic fragmentation (GEF). Countries are now forming economic blocs, with concepts like “friend-shoring” gaining prominence.

    What is Geo-Economic Fragmentation (GEF)?

    • GEF refers to the breakdown of global economic integration, caused by strategic national policies.
    • It involves disruptions in trade, capital flows, foreign direct investment (FDI), and migration.
    • The shift resembles the Cold War era, with countries aligning into economic blocs.
    • Western nations’ imposition of uniform environmental, labor, and social standards has fueled economic divisions.
    • The World Trade Organization (WTO) Trade Monitoring Report (October 2024) recorded:
      • 169 new trade-restrictive measures, affecting $887.7 billion worth of trade.
      • A sharp rise from $337.1 billion in 2023, reflecting escalating protectionism.
    • The IMF notes that trade fragmentation today is costlier than during the Cold War, when global trade was just 16% of GDP.
      • Today, it is 45%, making economic isolation riskier.

    Significance and Impacts of GEF:

    • Decline of Global Trade: WTO reported 169 new trade restrictions covering $887.7 billion in 2023-24, making trade costlier.
    • FDI Relocation: Friend-shoring is concentrating FDI among geopolitically aligned nations, reducing capital for emerging economies.
    • China’s Economic Dominance: Controls 80% of solar panels, 80% of batteries, and 60% of wind energy, reshaping supply chains.
    • Supply Chain Disruptions: Firms are shifting from China to India, Vietnam, and Mexico to diversify risks.
    • Emerging Market Challenges: Increased trade barriers, inflation, and tech restrictions slow down growth.
    • Rise in Economic Nationalism: Nations are prioritizing domestic industries, energy security, and localized production over global collaboration.

    PYQ:

    [2022] Elucidate the relationship between globalization and new technology in a world of scarce resources, with special reference to India.

    [2017] Which of the following has/have occurred in India after its liberalization of economic policies in 1991?

    1. Share of agriculture in GDP increased enormously.

    2. Share of India’s exports in world trade increased.

    3. FDI inflows increased.

    4. India’s foreign exchange reserves increased enormously.

    Select the correct answer using the codes given below:

    (a) 1 and 4 only

    (b) 2, 3 and 4 only

    (c) 2 and 3 only

    (d) 1, 2, 3 and 4

  • A pragmatic picture: Economic Survey

    Why in the News?

    The Budget session of Parliament has started at a time when India’s economic situation is shifting. After four years of strong growth following the pandemic, the economy is slowing down.

    What are the key projections for India’s economic growth in FY 2024-25?

    • Projected GDP Growth: The National Statistical Office (NSO) has estimated that India’s GDP will grow by 6.4% in FY 2024-25. This figure marks a decline from the 8.2% growth recorded in FY 2023-24 and is lower than earlier forecasts which ranged from 6.5% to 7%.
    • Sectoral Performance: The slowdown is attributed to weaker performance in sectors such as manufacturing and services. The first half of FY 2024-25 is expected to see a growth rate of around 6%, necessitating a stronger performance of 6.8% in the second half to meet the annual target.
    • Comparative Estimates: While the NSO’s estimate stands at 6.4%, other organizations like the International Monetary Fund (IMF) have projected a slightly higher growth rate of 7%, reflecting differing outlooks on economic recovery and consumer demand.

    How does the Economic Survey address challenges such as inflation and global uncertainties?

    • Food Inflation Concerns: Despite the overall decline in inflation, food inflation remains a challenge, rising from 7.5% in FY24 to 8.4% in the same period due to supply chain disruptions and adverse weather conditions. 
      • The survey emphasizes the need for improved agricultural practices and climate-resilient crops to manage these risks effectively.
    • Inflation Trends: The survey reports a reduction in retail inflation from 5.4% in FY24 to 4.9% during April-December 2024, indicating a positive trend towards achieving the RBI’s target of around 4% by FY26, contingent on stable global commodity prices and favorable domestic agricultural output.
    • Global Economic Uncertainties: The survey highlights that ongoing geopolitical tensions and global trade risks pose significant challenges to inflation management, necessitating careful policy interventions to mitigate potential impacts on the domestic economy.
    • Policy Recommendations: To address these challenges, the Economic Survey advocates for strategic policy measures, including enhancing supply chain resilience, improving data collection for better price monitoring, and fostering an environment conducive to investment and growth.

    What structural reforms are recommended to enhance long-term economic stability?

    • Deregulation and Ease of Doing Business: The Economic Survey advocates for significant deregulation to foster a more conducive business environment. It stresses that the government should “get out of the way” of businesses by minimizing micro-management and enhancing accountability among regulators.
    • Empowering Small Firms: Recommendations include empowering small enterprises, enhancing economic freedom, and ensuring a level playing field across sectors to stimulate growth and investment.
    • Focus on Domestic Demand: The budget is expected to prioritize boosting domestic demand through increased government spending, particularly in infrastructure and capital projects, as a countermeasure against global uncertainties and inflationary pressures.

    Way forward: 

    • Strengthen Domestic Resilience – Focus on boosting domestic consumption and investment through targeted fiscal measures, infrastructure expansion, and support for MSMEs to counter global uncertainties.
    • Enhance Inflation Management – Implement climate-resilient agricultural policies, improve supply chain efficiency, and strengthen monetary-fiscal coordination to maintain stable inflation and ensure sustainable growth.

    Mains PYQ:

    Q Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.(UPSC IAS/2022)

  • [pib] DGFT launches enhanced eCoO 2.0 System

    Why in the News?

    The Directorate General of Foreign Trade (DGFT) has launched the enhanced Certificate of Origin (eCoO) 2.0 system, a major upgrade aimed at simplifying export certification and improving trade efficiency.

    What is eCoO 2.0 System?

    • The eCoO 2.0 system is a digital platform launched by the Directorate General of Foreign Trade (DGFT) to simplify and streamline the issuance of Non-Preferential Certificates of Origin (CoO).
    • Effective January 1, 2025, exporters must electronically file CoO applications through this platform.
    • It aligns with India’s Ease of Doing Business initiative by improving trade facilitation, digital authentication, and document processing.

    Key Features of the eCoO 2.0 System

    • Exporters must submit Non-Preferential Certificates of Origin (CoO) online.
    • Allows exporters to authorize multiple users under a single Importer Exporter Code (IEC).
    • Aadhaar-based e-Signing provides an alternative to Digital Signature Tokens, enhancing security and ease of use.
    • Offers real-time access to eCoO services, Free Trade Agreement (FTA) details, trade events, and notifications.
    • Exporters can request In-lieu CoO for rectifications on previously issued CoOs.
    • The system handles 7,000+ eCoOs daily, integrating 125 issuing agencies, 110 chambers of commerce, and 650+ issuing officers.

    Significance of the eCoO 2.0 System

    • Reduces manual paperwork and speeds up export documentation.
    • Digitally signed CoOs prevent fraudulent certifications and ensure traceability.
    • Facilitates smoother re-exports, trans-shipments, and intermediary trade, boosting India’s position in global supply chains.
    • Faster approvals help exporters comply with international trade agreements, enhancing competitiveness.
    • Aligns with India’s push for paperless trade, reinforcing DGFT’s trade facilitation efforts.

    PYQ:

    [2011]  A “closed economy” is an economy in which:

    (a) the money supply is fully controlled

    (b) deficit financing takes place

    (c) only exports take place

    (d) neither exports or imports take place