💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

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

  • Cyprus Confidential: Implications and Taxation Insights

    Cyprus Confidential: Implications and Taxation Insights

    Central Idea

    • The Cyprus Confidential investigation unveils a web of offshore entities controlled from India, shedding light on financial transactions orchestrated by individuals in India.

    Cyprus Confidential and Its Scope

    • Global Offshore Probe: Cyprus Confidential explores 3.6 million documents, unveiling companies established in Cyprus by global elites.
    • International Collaboration: Over 270 journalists from 60 media outlets across 55 countries and territories participate in this investigation.
    • Data Sources: The investigation draws on documents from six offshore service providers in Cyprus, revealing not only Indian investors but also entities formed by prominent business conglomerates to leverage Cyprus’ favorable tax environment.

    The Indian Perspective:

    Setting Up Offshore Entities in Cyprus

    • Indian entities: The investigation aims to lift the secrecy surrounding offshore entities, exposing how they are controlled from India, with financial instructions originating from individuals within the country.
    • Legality: Establishing offshore companies in Cyprus is not illegal. India has Double Taxation Avoidance Agreements (DTAAs) with various countries, including Cyprus, offering advantageous tax rates.
    • Tax Residency Certificates: Companies utilize tax residency certificates in these countries to legally benefit from reduced tax rates. These jurisdictions are characterized by loose regulatory oversight and stringent secrecy laws.

    India’s Tax Treaty with Cyprus

    • Pre-2013: Before 2013, India and Cyprus had a tax treaty exempting investors from capital gains tax, attracting substantial investments. Cyprus also had a low withholding tax rate of 4.5%.
    • 2013 Onward: India categorized Cyprus as a Notified Jurisdictional Area (NJA) in 2013, leading to higher withholding tax rates and transfer pricing regulations for transactions involving NJA entities.
    • Revised DTAA in 2016: A revised DTAA was signed in 2016, rescinding Cyprus from NJA with retrospective effect from November 1, 2013. This treaty introduced source-based taxation of capital gains and a grandfathering clause.

    Tax Benefits in Cyprus

    • Tax Rates: Offshore companies and branches managed from Cyprus are taxed at 4.25%, while those managed from abroad and offshore partnerships enjoy complete tax exemption.
    • Dividends and Capital Gains: No withholding tax on dividends, and no capital gains tax on the sale or transfer of shares in offshore entities.
    • Estate Duty Exemption: No estate duty on the inheritance of shares in offshore companies.
    • Import Duty Exemption: No import duty on the purchase of vehicles, office, or household equipment for foreign employees.
    • Beneficial Owner Anonymity: Ensures anonymity of the beneficial owners of offshore entities.

    India-Cyprus DTAA and Its Significance

    • Tax Planning: The DTAA enables Cyprus, with its favorable tax regime, to be a jurisdiction for tax planning. Foreign investors often set up investment firms in Cyprus to invest in India and benefit from the DTAA.
    • Alternative to Mauritius: Cyprus is now an alternative to Mauritius for establishing offshore entities for Indian investments, as dividends paid from India are subject to withholding tax but not to taxation in Cyprus.

    Offshore Trusts in Cyprus

    • Cyprus International Trust Law: Offshore trusts under this law are exempt from estate duty and income tax, provided the trustee is Cypriot. Confidentiality is guaranteed.
    • Tax Avoidance: Offshore trusts allow businesspersons to avoid taxes they would have paid if income from overseas operations had been remitted to their country of residence.
    • Limitations of Indian DTAA: A DTAA does not prevent the Indian Income Tax department from denying treaty benefits if a company is found to have been inserted as a shareowner in India solely to avoid tax. In such cases, the entire transaction may be questioned.

    Conclusion

    • The India-Cyprus offshore connection is a complex landscape with legal tax planning, secrecy, and regulatory challenges.
    • The Cyprus Confidential investigation has brought these nuances to light, prompting scrutiny and raising questions about the intricacies of offshore financial activities.

  • Acknowledge India’s economic successes too

    Indian Economy To Grow By 7-7.8 Pc In FY23 Despite Global Headwinds: Experts - Goodreturns

    Central idea

    India’s robust economic growth faces challenges in digital inclusion, governance equity, and managing post-COVID-19 effects. Government initiatives, encompassing reforms, infrastructure focus, and poverty alleviation, drive progress. Recognizing successes and addressing shortcomings is vital for informed public discourse and sustained development momentum.

    Key Highlights:

    • Impressive Economic Growth: India’s post-COVID-19 economic growth is remarkable, with FY2023 showing a YoY growth of 7.2%, the fastest among major economies.
    • Policy Reforms Driving Growth: Government initiatives, including economic liberalization, Insolvency and Bankruptcy Code (IBC), demonetization, GST, and corporate tax reduction, have propelled India’s economic trajectory.
    • Inclusive Growth Focus: The government’s commitment to “Sabka Saath Sabka Vikas” reflects in poverty alleviation, rural welfare, and inclusive growth measures, leading to improved living standards.
    • Multidimensional Poverty Reduction: NITI Aayog’s report indicates a significant reduction in multidimensional poverty, with 13.5 crore Indians escaping poverty between 2015-16 and 2019-21.
    • Agricultural Success: Support for agriculture has resulted in unprecedented growth in fruits, vegetables, dairy, livestock, and fishery, enhancing the nutritional value of the food basket.

    Challenges:

    • Critique of Growth Metrics: Some critics argue for using compound annual growth rates post-COVID-19, questioning the validity of YoY growth rates as a true measure of economic progress.
    • Long Road to High-Income Status: Acknowledging the challenges, India recognizes the need for sustained efforts to achieve high-income status and a high quality of life for its citizens.

    Key Phrases for mains value addition:

    • “Fastest-growing major economy”: The tagline emphasizes India’s rapid economic growth in the global context, driven by its large size and robust domestic demand.
    • “Sabka Saath Sabka Vikas”: The government’s inclusive growth mantra focusing on uplifting people above the poverty line through various support initiatives.
    • “Multidimensional Poverty”: NITI Aayog’s report highlights a significant decline in multidimensional poverty, reflecting comprehensive progress.

     

    Analysis:

    The article underscores the importance of considering YoY growth rates as a measure of post-pandemic progress and highlights the success of government reforms in driving economic growth and inclusive development.

    Key Facts/Data for value addition:

    • India is the fifth largest economy globally and projected to become the third largest by 2027.
    • The Capex budget of the central government has risen from 1.6% of GDP in FY19 to 2.7% in FY23, further budgeted to increase to 3.3% in FY24.

    Government Measures Since 2014:

    • Government initiatives post-2014 aim to boost the economy, including liberalization, the Insolvency and Bankruptcy Code, demonetization, GST rollout, and corporate tax reduction.
    • In FY22, a substantial Capex program and state-level resource support aimed to bridge infrastructure gaps and attract private corporate investment.

    Poverty Alleviation and Rural Welfare:

    • Government commitment to ‘Sabka Saath Sabka Vikas’ reflects a focus on inclusive growth, poverty reduction, skill development, and infrastructure enhancement.
    • NITI Aayog’s report highlights a significant reduction in multidimensional poverty, particularly in rural areas, with improved living standards and health indicators.

    Innovative Way Forward:

    • Digital Inclusion for Economic Growth: Accelerate digital inclusion strategies to empower citizens, enhance education, and facilitate online business, fostering economic growth.
    • Green Infrastructure Development: Prioritize sustainable and green infrastructure projects, aligning with global environmental goals, to ensure long-term economic resilience.
    • Blockchain for Financial Inclusion: Leverage blockchain technology to enhance financial inclusion, enabling secure and transparent transactions, especially in rural and underserved areas.
    • AI-driven Skill Development: Implement artificial intelligence (AI) in skill development programs, customizing learning paths and enhancing employability in emerging sectors.

     

  • Direct Listing on Foreign Stock Exchanges

    Central Idea

    • In a landmark move, the Indian government has opened doors for select Indian companies to directly list on designated foreign stock exchanges.
    • This strategic decision aims to provide these companies with access to global capital markets and boost capital outflows, marking a significant step in India’s financial evolution.

    Direct Listing vs. Initial Public Offers (IPO)

    IPO Direct Listing
    Share Issuance New shares are created and sold. No new shares are created or sold.
    Underwriters Typically involves underwriters. No underwriters involved.
    Price Determination Price determined through negotiations. Market-driven pricing at launch.
    Lock-Up Period Common for insiders post-IPO. Typically no lock-up period.
    Regulatory Compliance Extensive financial disclosures. Regulatory requirements met.
    Capital Raising Primary goal is to raise capital. Provides liquidity to shareholders.

     

    Implementation of Companies (Amendment) Act, 2020

    • Government Notification: The Ministry of Corporate Affairs (MCA) recently issued a notification, effectively putting into action the provisions outlined in the Companies (Amendment) Act, 2020.
    • Key Enabler: This allows both listed and unlisted domestic companies to directly list their equity shares on the International Financial Services Centre (IFSC) in Ahmedabad.
    • Empowering Provision: Section 5 grants the central government the authority to permit specific classes of public companies to list specified classes of securities on foreign stock exchanges, including GIFT IFSC, Ahmedabad.
    • Streamlined Procedures: The government retains the flexibility to exempt such listings from certain procedural requirements, such as prospectus, share capital, beneficial ownership, and dividend distribution.

    Current Listing Mechanism for Foreign Bourses

    • Depository Receipts: Previously, Indian companies desiring overseas listings relied on depository receipts, such as American Depository Receipts (ADR) or Global Depository Receipts (GDR). These receipts were issued to foreign investors through Indian custodians.
    • Past Utilization: Between 2008 and 2018, 109 companies successfully raised Rs 51,847.72 crore via the ADRs/GDRs route. However, after 2018, no Indian company pursued overseas listings.

    Advantages of Direct Foreign Listing

    • Enhanced Fundraising: Direct foreign listing empowers domestic companies to access foreign markets for fundraising, offering improved valuations and exposure to foreign currencies like the US dollar.
    • Startup and Unicorn Growth: This initiative may prove particularly beneficial for startups and unicorns, providing an additional avenue for capital raising and heightened global visibility.
    • Boosting Forex Reserves: The move contributes to India’s foreign exchange reserves, strengthening the nation’s economic stability.
    • Simplified Accounting: Indian Accounting Standards (IndAS) closely align with global accounting norms, reducing the need for extensive and costly accounting preparations following US Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).

    Challenges in Direct Foreign Listing

    • Valuation Discrepancies: A key challenge lies in whether global investors will assign similar valuations as Indian markets. Assessing the commercial advantages of foreign listings will be a crucial consideration for Indian companies.
    • Clarity and Details: More detailed information is essential. This includes clarity on eligible company classes, types of listed securities, permitted foreign jurisdictions and stock exchanges, and exemptions related to procedural compliance.

  • Narayana Murthy’s Proposition: Notion of Extended Working Hours

    narayana murthy

    70 hours Work: Narayana Murthy Suggests

    • Infosys founder N.R. Narayana Murthy’s recent call for young Indians to work 70 hours per week has ignited a debate on worker productivity in India.
    • He cited Japan and Germany as examples of nations that prospered due to longer working hours post-World War II.
    • However, his views raise questions about worker productivity, its relationship with economic growth, and India’s unique context.

    Worker Productivity vs. Labour Productivity

    • Conceptual Difference: Worker productivity involves mental activities, while labour productivity is associated with manual tasks.
    • Measurement: Productivity is typically measured as the output value per unit of labor cost.
    • Complexity in Services: In intellectual labor, measuring output independently is challenging; hence, worker income often proxies productivity.
    • Fallacious Assumption: Murthy’s assertion that increased working hours lead to higher productivity is contentious, as it could exploit workers without commensurate pay.

    Link between Worker Productivity and Economic Growth

    • Complex Relationship: While productivity improvements impact economic growth positively, the relationship is intricate.
    • Distribution of Income: India’s economic growth hasn’t necessarily benefited all income groups; wealth disparities persist.
    • Income Inequality: Income gains have disproportionately favored the top income strata, suggesting a disconnect between productivity and income distribution.
    • Factors Influencing Wealth: Factors like hereditary wealth transfers and arbitrary compensation for the super managerial class have contributed to income disparities.

    Is India’s Worker Productivity One of the Lowest?

    • Proxy Fallacy: Using income as a proxy for productivity can yield misleading conclusions.
    • Indian Workforce: Indians are among the hardest working employees globally, but they receive comparatively lower wages.
    • Contradictory Statements: Narayana Murthy’s claim about low productivity seems unsubstantiated, possibly driven by motives to push labor reforms.

    What data shows?

    • In 1980, India’s Gross Domestic Product was about $200 billion, which by 2015 exceeded $2,000 billion.
    • Income distribution data from 1980 to 2015 in India:
      1. Bottom 50% income groups experienced a 90% increase in income.
      2. Top 10% income group’s share increased from 30% to 58%.
      3. Top 0.01% experienced an increase of 1699%.
      4. Top 0.001% had an increase of 2040%.

    Impact of Informal Labor on Worker Productivity

    • Rise in Informal Employment: Economic reforms have witnessed a surge in informal employment.
    • Limited Formalization: Formalization efforts have mostly focused on tax compliance and not labor standards or conditions.
    • Exploitation in MSMEs: Even within the formal manufacturing sector, Micro-Small-Medium Enterprises (MSMEs) engage in wage cutting to maximize profits.
    • Outsourcing Practices: Large corporations outsource production to smaller labour-intensive units, exacerbating labor exploitation.

    Comparing India with Japan and Germany

    • Inadequate Comparisons: India’s unique context, including its labor force, technological trajectory, socio-cultural dynamics, and political structures, makes direct comparisons with Japan and Germany inapt.
    • Unique Development Path: India’s sustainable development requires enhancing social investments, tapping domestic consumption potential, and focusing on human-centric development.

    Conclusion

    • The call for extended working hours to boost worker productivity raises complex issues regarding labor exploitation, income distribution, and India’s economic context.
    • Direct comparisons with Japan and Germany overlook India’s unique challenges and opportunities.
    • A comprehensive approach that addresses these intricacies is essential to ensure sustainable and equitable development in India.

  • Leniency Plus Norms to curb Cartelisation

    Central Idea

    • The Competition Commission of India (CCI) has unveiled a draft of revised lesser penalty regulations, introducing a groundbreaking “Leniency Plus” Norms and shedding light on its strategy for combating cartels.

    About Competition Commission of India (CCI)

    • The CCI is the chief national competition regulator in India.
    • It is a statutory body within the Ministry of Corporate Affairs.
    • It is responsible for enforcing The Competition Act, 2002 in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.

    Understanding “Leniency Plus”

    • Existing Leniency Program: Under the current Competition Act 2002, a leniency program allows companies to receive partial immunity from penalties if they provide substantial information about their involvement in a cartel. This aids competition authorities in uncovering secret cartels and obtaining insider evidence.
    • Additional Reduction in Penalty: In the “Leniency Plus” framework, a cartel member cooperating with CCI for leniency can disclose the existence of another unrelated cartel during the original leniency proceedings. In return, they receive an additional reduction in penalties.
    • Incentivizing Disclosure: “Leniency Plus” serves as a proactive antitrust enforcement strategy, encouraging companies already under investigation for one cartel to report other undisclosed cartels, thus promoting transparency.

    Legal foundation

    • Legal basis: The “Leniency Plus” regime was incorporated into the Competition (Amendment) Act 2023, which received Presidential approval in April of the same year.
    • Global Adoption: The concept of “Leniency Plus” is not new, as it is already recognized and practised in jurisdictions like the UK, US, Singapore, and Brazil.
    • Encouraging Disclosure: One of the key aspects of these regulations is their encouragement for companies already under investigation for one cartel to report other undisclosed cartels to the competition regulator.

    Tap to read more about Cartelization!

  • No restriction on Laptop Imports: Centre

    Central Idea

    • In August, the centre announced its intention to subject laptops, tablets, computers, and related products to a licensing regime starting from November 1.
    • However, it has now clarified that India will not impose licensing requirements on laptop and computer imports but will instead monitor their inbound shipments.

    Lapop Import Restrictions: A Backgrounder

    • Import Restrictions: In August, India imposed import restrictions on various IT hardware products to promote domestic manufacturing and reduce imports, particularly from countries like China.
    • Industry Concerns: The IT hardware industry expressed concerns following the initial licensing announcement.
    • Security and Domestic Manufacturing: The government cited security concerns and the desire to stimulate domestic manufacturing as the reasons for the licensing conditions.

    Import Statistics

    • Import Values: India imports approximately $7-8 billion worth of IT hardware products annually.
    • Recent Trends: Import values for personal computers, including laptops, decreased from $7.37 billion in 2021-22 to $5.33 billion in 2022-23. Imports of certain data processing machines also saw a decline.
    • Production-Linked Incentive Scheme: In May, the government approved the Production Linked Incentive Scheme 2.0 for IT Hardware with a budgetary outlay of ₹17,000 crore. A similar scheme for IT hardware was approved in February 2021.

    India’s Dependency on China

    • Critical Dependency: According to a report by the Global Trade Research Initiative (GTRI), India has significant dependency on China for various products, including laptops and mobile phones.
    • Government Initiatives: To reduce this dependency, the government has introduced measures such as the production-linked incentive scheme and increased customs duties on electronic components.

    Conclusion

    • India’s decision to shift from a licensing regime to monitoring for laptop and computer imports aims to balance its goals of reducing import dependency and promoting domestic manufacturing.
    • However, there is a need to ensure smoother transition for businesses and trade.

  • New Royalty Rates for Strategic Minerals, Lithium and REEs

    minerals

    Central Idea

    • The Centre has approved royalty rates of 3% each for lithium and niobium and 1% for Rare Earth Elements (REEs).
    • These changes enable competitive royalty rates for these strategically vital minerals (critical minerals) and open the doors to private sector participation through concession auctions.

    What are Critical Minerals?

    • Critical minerals are elements that are crucial to modern-day technologies and are at risk of supply chain disruptions.
    • These minerals are used in making mobile phones, computers, batteries, electric vehicles, and green technologies like solar panels and wind turbines.
    • Minerals such as antimony, cobalt, gallium, graphite, lithium, nickel, niobium, and strontium are among the 22 assessed to be critical for India.
    • Many of these are required to meet the manufacturing needs of green technologies, high-tech equipment, aviation, and national defence.

    Implications of the Amendment

    • Alignment with Global Benchmarks: The amendments, involving specifying new royalty rates, bring India’s royalty rates in line with global standards. This is crucial to attract bidders’ in future mineral auctions.
    • Competitive Royalty Rates: The Second Schedule of the Mines and Minerals (Development and Regulation) Act, 1957, previously set a 12% royalty rate for unspecified minerals, which was significantly higher than international benchmarks. The revised rates are 3% for lithium and niobium, and 1% for REEs, based on price benchmarks, enhancing the attractiveness of mining in India.
    • Domestic Mining Promotion: Lower royalty rates and commercial exploitation opportunities aim to encourage domestic mining, reduce imports, and stimulate related industries like electric vehicles (EVs) and energy storage solutions.
    • Energy Transition Commitment: Access to critical minerals is integral to India’s commitment to energy transition and achieving net-zero emissions by 2070, aligning with global environmental goals.

    Economic significance of the move

    (A) Lithium

    • Import Dependence: India currently imports all its required lithium. The government’s push for lithium mining extends beyond Jammu & Kashmir to explore lithium extraction from Rajasthan and Gujarat’s brine pools, as well as Odisha and Chhattisgarh’s mica belts.
    • Economic Offensive: This initiative is part of India’s economic strategy to reduce dependency on China for lithium-ion energy storage products, given China’s dominant position in the market.
    • EV Growth: With EVs on the cusp of disruption, securing a lithium supply chain is strategically vital. The global lithium battery market has seen significant growth in recent years.

    (B) Rare Earth Elements

    • Global Supply Challenges: Rare earth elements, primarily sourced from or processed in China, pose challenges in the EV supply chain. Securing supplies can be difficult, and China’s dominance has raised concerns.
    • Usage in Motors: Rare earth elements are crucial in EV motors, particularly permanent magnet motors. Elements like neodymium, terbium, and dysprosium are used in magnets for generating a constant motor flux, enhancing motor efficiency.
    • Environmental Concerns: Mining rare earth elements often involves environmentally damaging open-pit operations, raising environmental and ecological concerns.

    (C) Niobium for Industry

    • Corrosion Resistance: Niobium, known for its resistance to corrosion due to a surface oxide layer, is used in various industries. It strengthens alloys, particularly stainless steel, making them ideal for applications in aerospace, construction, and pipelines.
    • Superconducting Properties: Niobium’s superconducting properties find applications in magnets for particle accelerators and MRI scanners.
    • Global Sources: The main source of niobium is the mineral columbite, found in several countries, including Canada, Brazil, Australia, and Nigeria.

    Conclusion

    • India’s decision to amend mining laws for strategic minerals is a significant step toward aligning with global standards, promoting domestic mining, and securing supplies for emerging industries like EVs and energy storage.
    • It underscores India’s commitment to sustainable energy transition and reduced import dependency while addressing environmental concerns in mining rare earth elements.

  • Manufacturing PMI eased to 5-month low

    Central Idea

    • India’s manufacturing sector experienced a slowdown in September, reaching a five-month low, according to the seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI).
    • The PMI eased to 57.5 from August’s 58.6. A reading of 50 reflects no change in activity levels.

    Purchasing Managers’ Index (PMI)

    • PMI is an indicator of business activity — both in the manufacturing and services sectors.
    • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
    • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.
    • The PMI is compiled by IHS Markit based on responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers.

    How is the PMI derived?

    • The PMI is derived from a series of qualitative questions.
    • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

    How does one read the PMI?

    • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
    • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
    • If the figure is higher than the previous month’s then the economy is expanding at a faster rate.
    • If it is lower than the previous month then it is growing at a lower rate.

    Analysis and Outlook

    • Mild Slowdown: The manufacturing industry in India showed mild signs of a slowdown in September, primarily due to a softer increase in new orders, which tempered production growth.
    • Positive Outlook: Despite the slowdown, both demand and output saw significant improvements, and manufacturers maintained a strongly positive outlook for production.
    • Job Creation and Input Stocks: Upbeat forecasts continued to drive job creation efforts and initiatives to replenish input stocks, indicating a favourable trajectory for the Indian manufacturing industry.
    • Concerns: However, the solid increase in output charges, despite easing cost pressures, could limit sales in the coming months, prompting caution.

  • Circular migration

    What’s the news?

    • Circular migration gained prominence in the wake of globalization and technological advancements, facilitating easier mobility. As the world grapples with migration challenges, circular migration emerges as a balanced approach.

    Central idea

    • Circular migration, characterized by the cyclical movement of people between their country of origin and a destination country in search of seasonal employment, has gained significance in the global context. It offers unique opportunities and challenges in the realm of migration policy and development.

    Defining Circular Migration

    • Philippe Fargues defines circular migration based on specific criteria, including temporary residence, multiple entries into the destination country, freedom of movement between origin and destination, legal rights for migrants, protection of their rights, and a demand for temporary labor in the destination country.
    • A key aspect is the completion of at least two loops between two countries, signifying repeated movement.
    • For instance, if a migrant moves from country A to B and back to A, they are considered a return migrant. However, if they continue to country B again, they have completed two loops, earning them the label of a circular migrant.

    Circular Migration as Public Policy

    • For countries of origin: Remittances from circular migrants boost the domestic economy, fostering infrastructure development and improving living standards. However, it also poses the risk of losing skilled individuals to other nations.
    • For destination countries: Circular migration provides a source of low-skilled labor while minimizing permanent population growth

    The Advantages of Circular Migration in India

    • Rural to Urban Migration:
    • The growth of jobs in sectors like manufacturing, construction, and services has driven a substantial flow of migrants from rural areas to urban cities.
    • This trend has been particularly pronounced between 2004–2005 and 2011–2012 when the construction sector witnessed a significant increase in employment, especially for rural males.
    • This movement has provided rural populations with access to urban employment opportunities.
    • Inter-State Migration:
    • Uneven development following liberalization policies has led to inter-State migration. States like West Bengal, Odisha, and Bihar have witnessed high rates of out-migration.
    • While Delhi was historically a prominent destination, recent trends indicate an increased flow of migrants to southern States as well.
    • Economic Benefits:
    • Migrants often transition from agricultural jobs in their home states to low-skill jobs in destination states.
    • This shift typically results in increased income, with daily wage laborers in Kerala earning substantially more compared to their counterparts in states like West Bengal.
    • Household Welfare: Circular migration contributes to better household welfare through remittances sent back by migrants. These funds support improved nutrition, enhanced access to education and healthcare, and an overall increase in the standard of living for migrant families.
    • Empowerment of Women: The absence of male family members due to migration often leads to increased autonomy and decision-making power for women in migrant households. This shift in gender dynamics can have positive social and cultural implications.

    Challenges

    • Exploitation and Unsafe Conditions: Migrants, especially in southern States, often find themselves vulnerable to exploitation by middlemen or brokers. They may be subjected to unhygienic and unsafe working conditions, often without protective equipment.
    • Language Barriers: Language differences pose a significant obstacle for migrants, particularly when migrating to regions where the local language differs from their native tongue.
    • Resentment and Wage Disputes: Indigenous wage groups and labor unions may resent circular migrants, viewing them as competitors willing to work for lower wages. This can lead to wage disputes and conflicts.
    • Subsistence Migration: Many circular migrants engage in subsistence-level employment, with limited opportunities for savings or asset creation. Jobs are often seasonal and irregular, contributing to economic precarity.
    • Return Migration during Crises: The COVID-19 pandemic highlighted the vulnerability of circular migrants. When a lockdown was imposed in 2020, many migrants embarked on long journeys back to their hometowns due to the lack of job opportunities in the host States.

    The Way Forward: Measures to fully unlock the potential of circular migration

    • Ensuring Migrant Rights: Robust protection of migrant rights is crucial to address exploitation and abuse.
    • Skills Training: Providing migrants with skills training and language proficiency programs can enhance their employability and integration into host communities.
    • Safety Nets: Establishing social safety nets for circular migrants during times of crisis, such as the pandemic, is essential to prevent humanitarian disasters.
    • Integration Efforts: Encouraging integration initiatives in destination areas can help migrants feel more included and less marginalized.
    • Data Collection and Research: Governments should invest in data collection and research to better understand the extent and dynamics of circular migration.

    Conclusion

    • Circular migration presents a viable pathway to balance the needs of development and individual economic advancement. As circular migration continues to shape the global landscape, it is imperative that governments and policymakers adapt their strategies to harness its potential for the greater good.

  • Purchasing Managers’ Index (PMI) reaches 31-month high

    pmi manager

    Central Idea

    • Surge in PMI to 31-month high: The S&P Global India Manufacturing PMI soared to 58.7 in May, the highest level in 31 months.

     

    Service Sector

    The service sector, also known as the tertiary sector, includes a wide range of economic activities that are focused on providing intangible goods and services to customers.

    Some examples of activities that fall under the service sector include:

    1. Hospitality and tourism: This includes activities such as hotels, restaurants, travel agencies, and tour operators.
    2. Retail and wholesale trade: This includes businesses that buy and sell goods, such as supermarkets, department stores, and online retailers.
    3. Financial services: This includes banks, insurance companies, and investment firms.
    4. Professional and business services: This includes activities such as legal services, accounting, consulting, and advertising.
    5. Information and communication technology: This includes activities such as software development, telecommunications, and data processing.
    6. Healthcare and social assistance: This includes activities such as hospitals, clinics, nursing homes, and social services.
    7. Education and training: This includes activities such as schools, colleges, universities, and vocational training.
    8. Transportation and logistics: This includes activities such as shipping, warehousing, and distribution.

    Purchasing Managers’ Index (PMI)

    • PMI is an indicator of business activity — both in the manufacturing and services sectors.
    • The S&P Global India Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies.
    • It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before.
    • It is calculated separately for the manufacturing and services sectors and then a composite index is constructed.

    How is the PMI derived?

    • The PMI is derived from a series of qualitative questions.
    • Executives from a reasonably big sample, running into hundreds of firms, are asked whether key indicators such as output, new orders, business expectations and employment were stronger than the month before and are asked to rate them.

    How does one read the PMI?

    • A figure above 50 denotes expansion in business activity. Anything below 50 denotes contraction.
    • Higher the difference from this mid-point greater the expansion or contraction. The rate of expansion can also be judged by comparing the PMI with that of the previous month data.
    • If the figure is higher than the previous month’s then the economy is expanding at a faster rate. If it is lower than the previous month then it is growing at a lower rate.

    Key insights of recent trend

    • Fastest factory order growth: Factory orders rose at the fastest pace since January 2021.
    • Unprecedented accumulation of inputs: Producers accumulated inputs at an unprecedented pace due to lower costs.
    • Improvement in operating conditions: The index reflects a substantial improvement in operating conditions, with a significant increase from 57.2 in April.
    • Strong growth in order books and exports: Order books grew for the 23rd consecutive month, supported by a rise in export deals.
    • Highest output levels in 28 months: Output levels reached the highest point in 28 months.
    • Increased hiring: Pressure on capacities led firms to increase hiring, reaching a six-month high.

    Reasons behind this rise

    • Rise in selling prices: Producers raised selling prices at a solid and quicker rate in May, the highest in a year.
    • Mild input costs but adjusted charges: Input costs remained historically mild, but producers adjusted their charges due to sustained cost increases and a supportive demand environment.
    • Improved business confidence: Business confidence about growth improved, reaching a five-month high.
    • Public faith in economy: Factors such as publicity and demand resilience contributed to the optimistic outlook.

     

    Get an IAS/IPS ranker as your personal mentor for UPSC 2024 | Schedule your FREE session and get the Prelims prep Toolkit!