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

  • India’s delayed implementation of mandatory Drug Recall Law

    Central Idea

    • Abbot published a public notice in newspapers, alerting people about a mislabelled batch of medicine that it had inadvertently shipped to the market.
    • Such recalls take place regularly in the US but it is uncommon in India for domestic or foreign pharmaceutical companies to recall substandard or mislabelled drugs.

    Recall of Medicines: India story

    India has been mulling the creation of a mandatory recall law for substandard drugs since 1976.

    • Drugs Consultative Committee (DCC) meeting in 1976: Resolved to have greater cooperation between state drug controllers to recall and destroy drugs that failed tests.
    • DCC meetings in 1989, 1996, 1998, 2004, 2007, and 2011: Issue of recalls came up but resulted in no amendments to the Drugs & Cosmetics Act.
    • CDSCO proposes draft recall guidelines in 2012: National regulator lacks power to convert guidelines into binding law
    • DCC and Drugs Technical Advisory Board meetings in 2016 and 2018-2019: Issue of recalls resurfaces but India still lacks a recall law, 46 years on.

    Why there is no concrete law in India?

    • Complex drug regulatory issues: The Drug Regulation Section of the Union health ministry is not equipped to tackle complex drug regulatory issues.
    • Multiple agencies: India has highly fragmented regulatory structure, with each state having its own drug regulator.
    • Exposing the loopholes: India’s drug regulators are aware that a mandatory drug recall system, will bring to public attention the poor state of affairs in India’s pharmaceutical industry.
    • Evading accountability: The delay in implementing a recall law exposes the lack of accountability and interest in protecting public health.

    Consequences of delay

    • Drug failure hazard: Dozens of drugs fail random testing in government laboratories every month.
    • Substandard quality: The lack of a mandatory recall law means substandard drugs, even those with dangerous consequences for consumers, can circulate in the market.
    • Public health crisis: People, including children, are likely dying or suffering from adverse health events because substandard drugs are not swiftly removed from the market.

    Reasons behind

    The lack of a mandatory recall law in India can be attributed to various factors, including-

    1. Lack of expertise
    2. Apathy
    3. Vested interests in enabling the growth of the pharmaceutical industry.

    Way forward

    • Implementation of a mandatory drug recall law: The Indian government can take steps to implement a mandatory drug recall law. This law should have teeth to hold pharmaceutical companies accountable for their products.
    • Centralization of regulatory powers: To create an effective recall mechanism, the responsibility of recalling drugs has to be centralized, with one authority that has the legal power to hold companies liable for failures to recall drugs from across the country, and further, to also search and seize batches of failed medicine.
    • Streamlining of regulatory processes: The Indian government can take steps to streamline regulatory processes to reduce the time taken for approvals and ensure that drugs are tested thoroughly before they enter the market.
    • Capacity building of regulatory bodies: The Drug Regulation Section of the Union health ministry should be equipped with the necessary resources, expertise and mandate to tackle complex drug regulatory issues.
    • Encouragement of ethical pharmaceutical companies: The Indian government can encourage ethical pharmaceutical companies by providing incentives to companies that comply with regulatory standards, penalizing those that do not, and promoting transparency in drug pricing.

     

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  • The Future of the US Dollar As a World Reserve Currency

    US Dollar

    Central Idea

    • The status of the US dollar as the world reserve currency has been a topic of speculation, especially as China, India, and Russia explore alternative currencies for international trade. However, the demise of the dollar as the world reserve currency is unlikely to happen anytime soon.

    Rise of the dollar: Historical Context

    • The rise of the dollar as the world’s preferred currency aligns with the rise of the US as one of the world’s strongest economies with a deep financial system and stable government.
    • Though the position of the dollar has been challenged over time by the Great Britain Pound, the euro, and other currencies, the dollar has maintained its dominance.

    What is the current status of Dollar as forex reserve?

    • According to reports from the International Monetary Fund, the dollar’s share of foreign exchange reserves has fallen over time from 80% in the 1970s to about 60% in 2022.
    • The euro has made up for about 20% of the remaining 40% room created by this fall.
    • Smaller currencies such as the Australian and Canadian dollars, Swedish krona, and South Korean won have claimed their share in the portfolios of various countries’ foreign exchange reserves making up most of the remaining gap of 20%, with Chinese currency taking up the rest.

    How Dollar maintained its dominance as a reserve currency?

    • The strength of the U.S. economy: The U.S. has one of the world’s strongest economies, with a deep financial system and a stable government. This has contributed to the popularity of the dollar as a preferred currency for international trade and as a reserve currency.
    • Demand for dollar-denominated assets: Many countries hold U.S. government debt as a hedge against currency fluctuations affecting the valuation of their reserves. Additionally, many currencies are pegged to the U.S. dollar and some countries use the dollar as their own currency. This has meant that a huge proportion of U.S. dollars reside outside the U.S.
    • The dollar premium: The U.S. government debt is in high demand worldwide, which allows it to issue debt at the lowest interest rate. This relaxes the fiscal constraint substantially, boosting the debt-issuing government’s capacity to borrow more without having to deal with the negative effects of such borrowing on the domestic economy. This phenomenon is often referred to as the dollar premium.
    • No serious competition: Although the position of the dollar as the world currency has been challenged from time to time by other currencies, no currency has emerged as a serious contender. The only serious competitor at this point is the euro, which stands second but at quite a distance.

    Facts for prelims

    Common Currency or Reciprocal Trading Arrangement?

    • A common currency or reciprocal trading arrangement refers to an agreement between two or more countries to use a common currency or to trade with each other using their own currencies without the involvement of a third-party currency, such as the US dollar.
    • The purpose of such an arrangement is to increase trade among the participating countries and reduce the reliance on a single currency for international transactions.
    • The idea of a common currency or reciprocal trading arrangement has been discussed among various countries, including China, India, and Russia, as an alternative to the US dollar-dominated international financial system.

    What are the Factors supporting the US Dollar?

    • Status as Reserve Currency: The US Dollar is still the world’s most dominant reserve currency, which means that central banks and governments around the world hold significant quantities of it as part of their foreign exchange reserves.
    • Large Financial Market: The US has one of the largest and most liquid financial markets in the world, which makes it an attractive destination for foreign investment.
    • Safe Haven Status: The US Dollar is often seen as a safe haven during times of global economic uncertainty, due to the perceived stability of the US economy and political system.
    • Demand for US Treasury Bonds: The US government issues Treasury bonds, which are widely held by foreign governments and investors as a low-risk investment.
    • Petrodollars: The US Dollar is used as the currency of choice for global oil trading, which means that countries that buy oil from the OPEC countries must hold US Dollars to pay for it. This leads to a constant demand for US Dollars.
    • Military and Political Influence: The US has a significant military and political influence on the world stage, which gives it leverage in global trade negotiations and financial institutions such as the IMF and World Bank.

    US Dollar

    Challenges facing the US Dollar

    • Increased global competition: As more countries try to shift away from the US dollar, there is increased competition from other currencies such as the euro, the Chinese renminbi, and even cryptocurrencies. This could potentially reduce the demand for the US dollar.
    • Rising US debt levels: The US has been running persistent budget deficits and adding to its national debt for many years. This could lead to inflation and a loss of confidence in the US dollar, particularly if investors begin to worry about the US government’s ability to service its debt.
    • Geopolitical risks: Political tensions and instability around the world could also undermine the US dollar’s status as the world’s reserve currency. For example, sanctions imposed by the US on other countries could prompt them to look for alternatives to the US dollar in international trade.
    • Emerging technologies: The rise of digital currencies and blockchain technology could challenge the dominance of traditional currencies, including the US dollar. If cryptocurrencies become more widely accepted, they could potentially weaken demand for the US dollar as a global reserve currency.

    Future of the US Dollar

    • Despite the challenges, the US dollar is likely to remain the dominant reserve currency for the foreseeable future due to its widespread use in international trade, its deep and liquid financial markets, and its historical stability.
    • The euro and other currencies may continue to gain ground, but are unlikely to displace the dollar anytime soon.
    • The growing use of digital currencies, such as Bitcoin, may also pose a challenge to the traditional reserve currency system in the future, but it remains to be seen how this will play out.

    Facts for prelims: Concept box from civilsdaily

    What is mean by closed capital account?

    • A closed capital account is a situation where a country has restrictions on the flow of capital in and out of its borders. This means that the government regulates and limits the movement of funds across its borders.
    • Closed capital accounts are often implemented to protect the domestic economy from external shocks and to maintain the stability of the local currency.
    • China, for example, has a relatively closed capital account as it imposes strict controls on capital inflows and outflows.

    Conclusion

    • The run of the US dollar as an international reserve currency is far from over. The only serious contender at this point is the euro, which stands second but at quite a distance. The possibility of the Chinese currency or any other common currency becoming a serious contender is thin and distant at this point. The current system may not be optimal and should be improved, but expecting a common currency between China, India, and Russia or any such reciprocal trading arrangement to replace the US dollar would be an exaggeration.

    Mains Question

    Q. The status of the US dollar as the world reserve currency has been a topic of speculation, especially as China, India, and Russia explore alternative currencies for international trade. In this light discuss the challenges faced by US dollar and viability of reciprocal trading arrangements.

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    Also Read:

    The Rising Demand for De-Dollarisation

     

  • National Manufacturing Innovation Survey (NMIS), 2021-22

    Central Idea: The Department of Science and Technology under the Ministry of Science & Technology has released the National Manufacturing Innovation Survey (NMIS) 2021-22.

    About National Manufacturing Innovation Survey

    Details
    Undertaken by DST and United Nations Industrial Development Organization (UNIDO)
    History First National Innovation Survey in 2011
    Focus Manufacturing competitiveness
    Purpose Innovation performance of Indian manufacturing firms
    Insights Enabling activities and identifying barriers to innovation
    Processes Examines innovation processes, outcomes, and barriers faced by firms
    State/Sector Evaluates performance of states and sectors in producing new products, services, and business processes
    Key manufacturing sectors 5 sectors: textiles; food & beverage; automotive; pharma; ICT.

     

    Components of the survey

    (1) Firm-level survey

    innovation

    • It captured data related to types of innovations and innovative measures taken by firms.
    • Includes: the process of innovation, access to finance, resources, and information for innovation, besides also recording the factors impacting the innovation activities in a firm.
    • One in four firms have successfully implemented an innovation in the observation period.
    • Over 80% of these firms benefitted significantly in expanding markets and production and reducing costs.

    (2) Sectorial System of Innovation survey

    innovation

    • It mapped the manufacturing innovation system and its role in achieving innovations in firms.
    • It measures the interactions between stakeholders of the innovation ecosystem, barriers to innovation, and the convergence or divergence of policy instruments in select 5 key manufacturing sectors important to the Indian economy.

    Key highlights

    • Karnataka is the most “innovative” State, followed by Dadra and Nagar Haveli, Daman and Diu (DNH&DD), Telangana, and Tamil Nadu.
    • Telangana, Karnataka, and Tamil Nadu had the highest share of innovative firms at 46.18% ,39.10% and 31.90%, respectively.
    • Odisha, Bihar, and Jharkhand reported the lowest share of such firms at 12.78%, 13.47% and 13.71%, respectively.
    • Nearly three-fourths of the 8,000-odd firms surveyed, most of them micro, small, and medium enterprises (MSME), neither made any innovative product nor process innovation.
    • However, nearly 80% of the firms that did report significant gains such as expanding markets and reducing production costs.

    Barriers identified

    • The most frequent “barriers to innovation” were the lack of internal funds, high innovation costs, and lack of financing from external sources.
    • Gujarat and DNH&DD reported the highest frequencies of barriers to innovation, despite being among India’s most industrialised States.

    Significance of the survey

    • It will help in the Make-in-India programme, specifically the Production Linked Incentive (PLI) schemes.
    • It will help to boost manufacturing in a variety of sectors, including electronics, pharmaceuticals, and automobiles.

     

     

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  • [pib] Cabinet approves the Policy for the Medical Devices Sector

    medical device

    Central idea: The Union Cabinet, chaired by Hon’ble Prime Minister, approved the National Medical Devices Policy, 2023.

    National Medical Devices Policy, 2023

    • The Policy, 2023 aims to facilitate an orderly growth of the medical device sector to meet the public health objectives of access, affordability, quality, and innovation.
    • The policy lays down a roadmap for accelerated growth of the medical devices sector to achieve various missions.

    Objectives

    • The policy aims to make the industry competitive, self-reliant, resilient, and innovative.
    • It focuses on meeting the healthcare needs of not only India but also the world.
    • It aims to accelerate the growth of the medical devices sector.
    • It takes a patient-centric approach to meet the evolving healthcare needs of patients.
    • It provides support and directions to the medical devices industry to achieve these goals.

    Strategies to Promote Medical Device Sector

    The medical devices sector will be facilitated and guided through a set of strategies that cover six broad areas of policy interventions:

    Key measures and actions
    1. Regulatory Streamlining Enhance ease of doing research and business, balance patient safety with product innovation, create a Single Window Clearance System for licensing of medical devices, enhance the role of Indian Standards like BIS, and design a coherent pricing regulation.
    2. Enabling Infrastructure Establish and strengthen large medical device parks and clusters equipped with world-class common infrastructure facilities in proximity to economic zones with requisite logistics connectivity.
    3. Facilitating R&D and Innovation Promote research and development in India, establish centres of excellence in academic and research institutions, innovation hubs, and support for startups.
    4. Attracting Investments in the Sector Encourage private investments, funding from venture capitalists, and public-private partnerships, in addition to existing schemes and interventions like Make in India, Ayushman Bharat program, Heal-in-India, and Start-up mission.
    5. Human Resources Development Ensure a steady supply of skilled workforce across the value chain by leveraging available resources in the Ministry of Skill Development and Entrepreneurship, supporting dedicated multidisciplinary courses for medical devices in existing institutions, and developing partnerships with foreign academic/industry organizations to develop medical technologies.
    6. Brand Positioning and Awareness Creation Create a dedicated Export Promotion Council for the sector under the Department, initiate studies and projects for learning from best global practices of manufacturing and skilling system, promote more forums to bring together various stakeholders for sharing knowledge, and build strong networks across the sector.

     

    Medical devices sector in India: A quick recap

    • The medical devices sector in India is an essential and integral part of the Indian healthcare sector.
    • The sector has contributed significantly to the domestic and global battle against the COVID-19 pandemic through the large-scale production of medical devices & diagnostic kits.

    Growth potential in India

    • The market size of the medical devices sector in India is estimated to be $11 billion (approximately, ₹ 90,000 Cr) in 2020, and its share in the global medical device market is estimated to be 1.5%.
    • The Indian medical devices sector has enormous potential to become self-reliant and contribute towards the goal of universal health care.

    Current initiatives in this sector

    • The Government of India has initiated the implementation of the PLI Scheme for medical devices.
    • It supports for setting up of four Medical devices Parks in the States of Himachal Pradesh, Madhya Pradesh, Tamil Nadu, and Uttar Pradesh.

     

     

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  • Critical Minerals and India

    critical

    Central idea

    • A recent working paper from Centre for Social and Economic Progress (CSEP) extends the earlier minerals assessment for 23 minerals by assessing the criticality levels of 43 select minerals for India.
    • This is based on their economic importance (demand-side factors) and supply risks (supply-side factors) which are determined through the evaluation of specific indicators.

    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.

    Why are these resources critical?

    • Clean energy transition: Critical minerals are essential to the ecosystem that fuels the world’s transition towards clean energy and digital economy.
    • Strategic nature: Any supply shock can severely imperil the economy and strategic autonomy of a country that is over-dependent on others to procure critical minerals.
    • Rare availability: Supply risks exist due to rare availability, growing demand, and complex processing value chain.

    What is the China ‘threat’?

    • Dominant role: China is the world’s largest producer of 16 critical minerals, including cobalt and rare earth elements.
    • Monopoly in processing: The country has a strong presence across the board in processing operations, with a share of refining around 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.
    • Control over offshore mines: China also controls cobalt mines in the Democratic Republic of Congo, from where 70% of this mineral is sourced.
    • Supply chain dominance: The country’s dominance in critical minerals production and processing raises concerns of a supply disruption in case of a geopolitical conflict.

    Challenges in ensuring resilient critical minerals supply

    • Limited availability of critical minerals: The rare availability of critical minerals poses a challenge in meeting the growing demand for these minerals.
    • Geopolitical risks: Complex supply chains can be disrupted by hostile regimes or politically unstable regions, leading to supply chain disruptions.
    • Dominance of certain countries: A few countries, such as China, are the dominant producers of critical minerals, leading to concerns over supply disruptions in case of a geopolitical conflict.
    • Increasing demand for critical minerals: With the shift towards renewable energy technologies and electric vehicles, the demand for critical minerals such as copper, lithium, and rare earth elements is increasing rapidly.
    • Reliance on foreign partners: Countries with limited reserves and higher requirements for critical minerals may have to rely on foreign partners to meet their domestic needs, leading to supply chain vulnerabilities.
    • Environmental and social concerns: The extraction and processing of critical minerals can have negative environmental and social impacts, leading to challenges in meeting sustainability goals.

    What are countries around the world doing about it?

    Several countries are taking measures to ensure a consistent supply of critical minerals to their domestic markets.

    • India: It has set up Khanij Bidesh India Ltd. (KABIL), a joint venture of three public sector companies, to ensure a consistent supply of critical and strategic minerals to the Indian domestic market.
    • US: It has ordered a review of vulnerabilities in its critical minerals supply chains and shifted its focus on expanding domestic mining, production, processing, and recycling of critical minerals and materials.
    • Australia: Its Critical Minerals Facilitation Office (CMFO) and KABIL had recently signed an MoU aimed at ensuring reliable supply of critical minerals to India.
    • UK: It has unveiled its new Critical Minerals Intelligence Centre to study the future demand for and supply of these minerals, and its critical mineral strategy will be unveiled later this year.

    What should India do to ensure resilient supply?

    • Developing domestic sources of critical minerals: This can be achieved by promoting exploration and mining activities, both by public and private sector entities.
    • Encouraging responsible mining practices: The Indian government should encourage responsible mining practices that minimize negative environmental and social impacts of mining activities.
    • Developing recycling capabilities: This can be achieved by promoting research and development in recycling technologies and incentivizing the adoption of recycling practices.
    • Promoting transparency in the supply chain: India should promote transparency in the critical minerals supply chain by ensuring the traceability of minerals from the point of extraction to the point of end-use.
    • Investing in research and development: India should invest in research and development to develop new technologies and processes for efficient extraction, processing, and recycling of critical minerals.
    • Developing a national critical minerals strategy: India should develop a national critical minerals strategy that identifies priority minerals, promotes domestic exploration and mining, and promotes sustainable and responsible mining practices.

    Conclusion

    • India has a significant mineral geological potential, many minerals are not readily available domestically.
    • Hence, India needs to develop a national strategy to ensure resilient critical minerals supply chains, which focuses on minerals found to be critical in this study.

     

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  • What are Stablecoins?

    stablecoins

    The US Congress (Parliament) has made another attempt to create a legislative framework for the increasingly popular stablecoins, a sort of cryptocurrency that is pegged to a particular commodity or currency.

    What are Stablecoins?

    • Stablecoins are cryptocurrencies designed to maintain a stable value, typically by being pegged to a stable asset such as the US dollar.
    • Investing in stablecoins can help mitigate market volatility because they are less susceptible to price fluctuations than other cryptocurrencies such as Bitcoin or Ethereum or any other.

    Types of stablecoins

    Fiat-backed stablecoins Backed by reserves of fiat currency held in a bank account or other secure location. Example: Tether (USDT)
    Commodity-backed stablecoins Backed by reserves of a physical commodity, such as gold or silver. Example: PAX Gold (PAXG)
    Algorithmic stablecoins Use algorithms or smart contracts to maintain a stable value. Example: Dai stablecoin (DAI)

     

    How can Stablecoin mitigate market volatility?

    Explanation
    Hedging against volatility
    • Help investors hedge against volatility and reduce their risk exposure.
    • Pegged to a stable asset, which can provide a haven during market turbulence.
    • If the value of Bitcoin or Ethereum drops suddenly, investors can move their funds into stablecoins to protect their portfolio from further losses.
    Greater flexibility in transferring funds
    • Greater flexibility and convenience compared to traditional fiat currencies.
    • Quickly and easily transferred between wallets and exchanges, making them ideal for cross-border transactions.
    • Investors take advantage of investment opportunities in other markets and avoid currency exchange fees and delays.
    Arbitrage trading
    • Used for arbitrage trading, which involves buying an asset in one market and selling it in another market for a higher price.
    • As stablecoins are pegged to a stable asset, investors can quickly move funds between exchanges without worrying about price fluctuations, making arbitrage trading easier and potentially more profitable.

     

    What are the risks?

    Explanation
    Stability of the asset
    • Stablecoins are reliant on the stability of the asset they are pegged to.
    • If the value of that asset drops, it can lead to a drop in the stablecoin’s value as well.
    • This could result in losses for investors who hold the stablecoin.
    Transparency and regulation
    • There are concerns over the transparency and regulation of stablecoin issuers.
    • This could result in a loss of trust in the stablecoin and a subsequent drop in its value.
    • There is no proper regulation and oversight.
    • There is a risk that stablecoin issuers may engage in fraudulent or unethical behaviour, which could lead to losses for investors.
    • It is important for investors to carefully assess the reputation and credibility of the stablecoin issuer before investing in a stablecoin.

     

     

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  • WTO panel rules against India in IT tariffs dispute

     

    A World Trade Organization (WTO) panel has ruled that India has violated global trading rules in a dispute with the European Union (EU), Japan, and Taiwan over import duties on IT products.

    About World Trade Organization (WTO)

    Details
    Purpose Regulate and facilitate international trade between nations
    Establishment 1995
    Headquarters Geneva, Switzerland
    Membership 164 member countries as of 2023, representing over 98% of global trade
    Goal Promote free and fair trade by negotiating and enforcing rules and agreements governing international trade
    Agreements Administers a number of agreements, including GATT, SPS Agreement, and TRIPS Agreement
    Dispute Resolution Operates a dispute settlement system to resolve conflicts between member countries
    Technical Assistance Provides technical assistance and training to help developing countries participate more effectively in international trade
    Decision-Making Body Ministerial Conference, which meets every two years
    Director-General Chief executive responsible for overseeing the organization’s operations and activities
    Criticisms Some criticize the WTO for being undemocratic, favoring developed countries, and not doing enough to promote labor and environmental standards in international trade

     

    What was the case?

    • The case involved a dispute over India’s introduction of import duties ranging from 7.5% to 20% on a wide range of IT products, including mobile phones, components, and integrated circuits.
    • The EU, Japan, and Taiwan challenged these import duties in 2019, arguing that they exceeded the maximum rate allowed under global trading rules.
    • The recent ruling by the WTO panel found that India had violated these rules and recommended that India bring its measures into conformity with its obligations.

    WTO Panel’s Ruling

    • The WTO panel has ruled that India violated global trading rules by imposing these import duties.
    • The panel recommended that India bring these measures into conformity with its obligations.
    • While the panel broadly backed the complaints against India, it rejected one of Japan’s claims that India’s customs notification lacked “predictability”.

    Implications of the ruling

    • The EU is India’s third-largest trading partner, accounting for 10.8% of total Indian trade in 2021, according to the European Commission.
    • The ruling could have implications for trade relations between India and the EU, as well as Japan and Taiwan.
    • India may be required to lower or eliminate the challenged import duties.
    • It remains to be seen whether India will appeal against the ruling.
    • If it does, the case will sit in legal purgatory since the WTO’s top appeals bench is no longer functioning due to US opposition to judge appointments.

    Conclusion

    • The panel recommended that India bring such measures into conformity with its obligations, and it remains to be seen whether India will appeal against the ruling.
    • The case highlights the importance of complying with global trading rules and the role of the WTO in resolving trade disputes between countries.

     

  • Lessons Learned: Transition To A Self-reliant Clean Energy System

    Central Idea

    • Lessons learned from the liberalization of upstream petroleum sector can guide India’s transition to a self-reliant clean energy system.

    Background

    • In 1980, then-Prime Minister Indira Gandhi took a significant step in liberalizing the upstream petroleum sector in India. This move aimed to reduce the country’s reliance on external sources for petroleum and protect it from supply shocks. However, the liberalization did not bridge the gap between domestic demand and indigenous supply.
    • In 2020, Prime Minister Narendra Modi introduced the production-linked incentive (PLI) scheme to promote investment in minerals, components, and equipment required for the generation and consumption of clean energy. This decision was driven by the strategic imperative to transition to a self-reliant clean energy system and reduce dependence on external sources of energy.

    Bridging the gap between demand and supply in the clean energy sector

    • Demand and supply gap: The liberalization of upstream petroleum did not bridge the gap between the domestic demand for petroleum and indigenous supply.
    • Capital is not enough: The clean energy sector must not presume that the availability of technical talent and capital will be enough to create a world-class hub for the manufacture of batteries, solar cells, wafers, and modules.

    Efficient Implementation of Technology in Clean Energy Sector

    • India’s oil and gas producing average: The recovery rate of oil and gas from India’s producing fields has averaged between 25-30%, while fields of comparable geology across the world have a recovery rate between 40-60%.
    • China’s dominance in clean energy value chain: China’s dominance of the clean energy value chain is because its process engineers have perfected the implementation of the several technological steps required to convert raw material into end product.

    Reduce entry barriers and improve business condition

    • India cannot compete on the size of the incentive package, and the endeavor should instead be to lower entry barriers, ease business conditions and remove the perception that India offers a high-cost operating environment.

    India’s Dependency on External Market and Two-Track Policy with China

    • India remains dependent on the external market for supplies of petroleum, but the country should desist from building a high-cost, domestic, clean energy hub that is forever dependent on subsidies.
    • India should continue with its two-track policy and strengthen its trading relationship with China.

    Conclusion

    • India can learn from the lessons of the last 40 years to transition to a self-reliant clean energy system. The country needs to focus on creating an enabling ecosystem, efficiently utilizing technology, and easing business conditions to attract international investment. India should focus on trading relationships and not build a high-cost, domestic clean energy hub dependent on subsidies.

    Mains Question

    Q. India’s clean energy sector has enormous potential for growth, however there is a gap between domestic demand and indigenous supply. What specific measures can India take to bridge this gap and emerge as global leader in renewable energy?

  • Key highlights of the Foreign Trade Policy, 2023

    foreign trade policy

    Union Minister of Commerce and Industry has launched the Foreign Trade Policy 2023.

    Foreign Trade Policy, 2023

    • The policy is dynamic and open-ended to accommodate the emerging needs of the time.
    • It aims to promote India’s overall exports, which has already crossed US$ 750 Billion.
    • The key approach to the policy is based on these 4 pillars:
    1. Incentive to Remission,
    2. Export promotion through collaboration – Exporters, States, Districts, Indian Missions,
    3. Ease of doing business, reduction in transaction cost and e-initiatives and
    4. Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) Policy

    Overview of the FTP, 2023

    • FTP to provide the policy continuity and a responsive framework
    • Approach of FTP: From Incentive to Remission
    • Introduces scheme for remission of duties, taxes and govt levies on export goods
    • Digitisation of applications pertaining to FTP
    • Automatic system-based approval of FTP applications
    • Pilot introduced for cutting processing of applications related to advance authorisation to 1 day
    • Norms for recognition as Star Trading Houses eased
    • Promotes trade in Indian Rupee
    • Introduces provisions for merchanting trade
    • Dairy sector to be exempted from maintaining average export obligation * Battery electric vehicles; vertical farming equipment & green hydrogen eligible for reduced obligation under Export Promotion Capital Goods (EPCG) scheme
    • Special advance authorization scheme extended for apparel & clothing sector
    • Extends all FTP benefits to e-commerce exports
    • Value limit for exports through courier service increased from Rs 5 lakh to Rs 10 lakh per consignment
    • Focus on engaging with states & districts through Districts as Export Hubs initiative
    • Aims at streamlining export of dual use items under SCOMET policy
    • Introduces amnesty scheme for one-time settlement of default in export obligation by advance authorisation and EPCG authorisation holders
    • FTP to be dynamic and responsive to the emerging trade scenario
    • Restructuring of Department of Commerce on the anvil to make it future-ready

     

    Key highlights

    (1) Process Re-Engineering and Automation

    • The policy emphasizes export promotion and development, moving away from an incentive regime to a regime which is facilitating, based on technology interface and principles of collaboration.
    • Reduction in fee structures and IT-based schemes will make it easier for MSMEs and others to access export benefits.
    • Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for manual interface.

    (2) Towns of Export Excellence

    • Four new towns have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns.
    • The TEEs will have priority access to export promotion funds under the Market Access Initiative (MAI) Scheme.
    • It will be able to avail Common Service Provider (CSP) benefits for export fulfilment under the EPCG Scheme.

    (3) Recognition of Exporters

    • Exporter firms recognized with ‘status’ based on export performance will now be partners in capacity-building initiatives on a best-endeavour basis.
    • 2-star and above status holders would be encouraged to provide trade-related training based on a model curriculum to interested individuals.

    (4) Promoting Export from the Districts

    • The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative.
    • This would promote exports at the district level and accelerate the development of grassroots trade ecosystem.

    (5) Streamlining SCOMET Policy

    • India is placing more emphasis on the “export control” regime.
    • A robust export control system in India would provide access of dual-use High end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

     

    (6) Facilitating E-Commerce Exports

    • Various estimates suggest e-commerce export potential in the range of $200 to $300 billion by 2030.
    • FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, book-keeping, returns policy, and export entitlements.
    • As a starting point, the consignment wise cap on E-Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh in the FTP 2023.

    (7) Facilitation under Export Promotion of Capital Goods (EPCG) Scheme

    The government has made several changes to the Foreign Trade Policy, including:

    • Adding PM MITRA scheme for textile and apparel parks to EPCG’s Common Service Provider Scheme
    • Exempting dairy sector from maintaining Average Export Obligation
    • Adding green technologies such as BEVs, vertical farming equipment, and rainwater harvesting to EPCG’s reduced Export Obligation requirement.

    (8) Facilitation under Advance authorization Scheme

    • DTA (Domestic Tariff Area) units can access the Advance Authorization Scheme for duty-free import of raw materials for manufacturing export items, and it can be used for domestic and export production.
    • The Special Advance Authorization Scheme has been extended to the Apparel and Clothing sector to facilitate prompt execution of export orders.
    • The Self-Ratification Scheme for fixation of Input-Output Norms has been extended to 2-star and above status holders.

    (9) Merchanting trade

    • The FTP 2023 has introduced provisions for merchanting trade, which allows the shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
    • This will be subject to compliance with RBI guidelines, and it won’t be applicable for goods/items classified in the CITES and SCOMET list.
    • This is expected to allow Indian entrepreneurs to convert certain places into major merchanting hubs.

    (10) Amnesty Scheme

    • The government is introducing a special one-time Amnesty Scheme under the FTP 2023 to address default on Export Obligations and provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations.
    • All pending cases of default in meeting Export Obligation (EO) of authorizations can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation.
    • The interest payable is capped at 100% of these exempted duties under this scheme, and no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty.

     

  • Competition (Amendment) Bill passed in Lok Sabha

    The Lok Sabha passed the Competition (Amendment) Bill, 2023, which could pose new challenges for global technology companies.

    About Competition Act, 2022

    • The Competition Act, 2002 was passed by the Parliament in the year 2002, to which the President accorded assent in January, 2003.
    • It was subsequently amended by the Competition (Amendment) Act, 2007.
    • In accordance with the provisions of the Amendment Act, the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT) have been established.
    • The CCI is now fully functional with a Chairperson and six members.

    Changes brought by the Amendment

    (1) Penal powers to CCI

    • It grants the CCI the authority to penalize entities found engaging in anti-competitive behavior based on their global turnover, rather than just their annual domestic turnover, which was the case previously.

    (2) Turnover Definition

    • The definition of “turnover” has been a widely debated subject in the competition law landscape.
    • The Supreme Court had previously fixed the criteria for determining turnover in competition law contraventions, holding that it should be the “relevant turnover,” i.e., turnover derived from the sales of goods or services.

    (3) Mergers and acquisition

    • The CCI will have greater authority in mergers and acquisitions worth more than Rs 2,000 crore.
    • Additionally, the time limit for approval of mergers and acquisitions has been reduced from 210 days to 150 days.

    Impact on Tech Companies

    • While the provision on global turnover will not be exclusively applicable to tech companies, they are likely to be the most affected by it, given the nature of their business that operates across geographies.
    • Typically, the revenue earned from these companies’ India operations is much smaller than their income in other regions, such as the US and Europe.