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

  • GIMAC: India’s first maritime arbitration centre

    The Gujarat Maritime University signed a Memorandum of Understanding (MoU) with the International Financial Services Centres Authority in GIFT City to promote the Gujarat International Maritime Arbitration Centre (GIMAC).

    What is GIMAC?

    • The GIMAC will be part of a maritime cluster that the Gujarat Maritime Board (GMB) is setting up in GIFT City at Gandhinagar.
    • The Maritime Board has rented about 10,000 square feet at GIFT House which is part of the Special Economic Zone (SEZ) area with clearance from the development commissioner.
    • This will be the first centre of its kind in the country that will manage arbitration and mediation proceedings with disputes related to the maritime and shipping sector.
    • The centre is expected to be ready by the end of August.

    Why is such a centre needed?

    • It is required because, for instance, the ship owners belong to a different country and the person leasing the ship is from another country.
    • Any dispute arising between them can be resolved within this centre.
    • There are over 35 arbitration centres in India. However, none of them exclusively deals with the maritime sector.
    • The arbitration involving Indian players is now heard at the Singapore Arbitration Centre.
    • The idea is to create a world-class arbitration centre focused on maritime and shipping disputes that can help resolve commercial and financial conflicts between entities having operations in India.
    • Globally, London is the preferred centre for arbitration for the maritime and shipping sector.

    What is the current status of the project?

    • The process of recruiting staff for the arbitration centre is currently underway.
    • A 10-member advisory board for GIMAC, consisting of international experts and professionals, has been created, which will help in the framing of rules for the arbitration centre and in empanelling arbitrators.

  • [pib] Guidelines for Other Service Providers (OSP)

    The Union Minister for Electronics & Information Technology has further liberalized the guidelines for Other Service Providers (OSPs).

    Do you remember quaternary and quinary sectors of Economy from NCERTs?

    What are OSPs?

    • These entities are business process outsourcing (BPO) organizations giving Voice based services, in India and abroad.
    • The term Business Process Outsourcing or BPO as it is popularly known, refers to outsourcing in all fields.
    • A BPO service provider usually administers and manages a particular business process for another company.
    • BPOs either use new technology or apply an existing technology in a new way to improve a particular business process.
    • India is currently the number one destination for business process outsourcing, as most companies in the US and UK outsource IT-related business processes to Indian service providers.

    Main features of the liberalized guidelines

    • Distinction between Domestic and International OSPs has been removed. A BPO centre with common Telecom resources will now be able to serve customers located worldwide including in India.
    • EPABX (Electronic Private Automatic Branch Exchange) of the OSP can be located anywhere in the world. OSPs apart from utilising EPABX services of the Telecom Service Providers can also locate their EPABX at third Party Data Centres in India.
    • With the removal of the distinction between Domestic and International OSP centres, the interconnectivity between all types of OSP centres is now permitted.
    • Remote Agents of OSP can now connect directly with the Centralised EPABX/ EPABX of the OSP/ EPABX of the customer using any technology including Broadband over wireline/ wireless.
    • No restriction for data interconnectivity between any OSP centres of same company or group company or any unrelated company.

  • Why is China targeting Cryptocurrencies?

    China’s crackdown against cryptocurrencies, which are those that aren’t sanctioned by a centralized authority and are secured by cryptography, is said to have a lot to do with the crashing of the value of cryptocurrencies.

    Background

    • The price of the world’s most prominent cryptocurrency Bitcoin has more than halved in the last two months after hitting a peak in mid-April.
    • The second-most valuable cryptocurrency, Ether, has seen a similar fall from its peak last month.

    What is Cryptocurrency?

    • A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers.
    • This decentralized structure allows them to exist outside the control of governments and central authorities.
    • The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network.
    • Blockchains, which are organizational methods for ensuring the integrity of transactional data, are an essential component of many cryptocurrencies.
    • Many experts believe that blockchain and related technology will disrupt many industries, including finance and law.
    • Cryptocurrencies face criticism for a number of reasons, including their use for illegal activities, exchange rate volatility, and vulnerabilities of the infrastructure underlying them. However, they also have been praised for their portability, divisibility, inflation resistance, and transparency.

    What has China done?

    • In recent weeks, China has reportedly cracked down on crypto mining operations.
    • The country has over the years accounted for a large percentage of the total crypto mining activity that takes place.
    • In purpose, Bitcoin miners play a similar role to gold miners — they bring new Bitcoins into circulation.
    • They get these as a reward for validating transactions, which require the successful computation of a mathematical puzzle.
    • And these computations have become ever-increasingly complex, and therefore energy-intensive in recent years. Huge mining operations are now inevitable if one is to mine Bitcoins.

    Why is Crypto mining booming in China?

    • Access to cheap electricity has made mining lucrative in China.
    • According to the Cambridge Bitcoin Electricity Consumption Index, China accounted for nearly two-thirds of the total computational power last year.

    For an ‘unregulated’ market

    • Actually, there is little change in the policy as far as China is concerned. It first imposed restrictions on cryptocurrencies way back in 2013.
    • It then barred financial institutions from handling Bitcoin.
    • Four years later, it barred what are called initial coin offerings, under which firms raise money by selling their own new cryptocurrencies.
    • This is largely an unregulated market.

    What does China want?

    • An inter-ministerial committee report in India two years ago noted that in 2017, the government of China also banned trading between RMB (China’s currency renminbi) and cryptocurrencies.
    • Before the ban, RMB made up 90% of Bitcoin trades worldwide.
    • The fact that cryptocurrencies bypass official institutions has been a reason for unease in many governments.
    • Not just that. The anonymity that it offers aids in the flourishing of dark trades online.
    • While many countries have opted to regulate the world of cryptocurrencies, China has taken the strictest of measures over the years.
    • According to observers, the latest set of measures are to strengthen its monetary hold and also project its new official digital currency.

    For a digital Yuan

    • China launched tests for a digital yuan in March.
    • Its aim is to allow Beijing to conduct transactions in its own currency around the world, reducing dependency on the dollar which remains dominant internationally.

    Also read:

    Legalizing Bitcoin in El Salvador and takeaways for India

  • [pib] Amendments to the Consumer Protection (E-commerce) Rules, 2020

    For the purposes of preventing unfair trade practices in e-commerce, the Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020 with effect from 23 July 2020.

    Consumer Protection (E-commerce) Rules, 2020

    The proposed amendments aim to bring transparency in the e-commerce platforms and further strengthen the regulatory regime to curb the prevalent unfair trade practices.

    The proposed amendments are as follows:

    (a) Chief Compliance Officer

    • To ensure compliance of the rules, the appointment of Chief Compliance Officer, a nodal contact person for 24×7 coordination with law enforcement agencies, officers to ensure compliance to their orders and Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform, has been proposed.
    • This would ensure effective compliance with the provisions of the Act and Rules and also strengthen the grievance redressal mechanism on e-commerce entities.

    (b) Registration of e-coms

    • Putting in place a framework for registration of every e-commerce entity with the DPIIT for allotment of a registration number which shall be displayed prominently on the website as well as invoice of every order placed by the e-commerce entity.
    • This would help create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity before transacting through their platform.

    (c) Prohibition of miss-selling

    • The goods and services entities selling goods or services by deliberate misrepresentation of information have been prohibited.

    (d) Expiry dates

    • This would ensure that consumers are aware of the expiry date of the products they are buying on the e-commerce platform.
    • It compels all sellers on marketplace e-commerce entities and all inventory e-commerce entities to provide the best before or use before the date to enable consumers to make an informed purchase decision.

    (e) Fair and equal treatment

    • It has been provided that where an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure fair opportunity to domestic goods.

    (f) Fall-back liability

    • This would ensure that consumers are not adversely affected in the event where a seller fails to deliver the goods or services due to negligent conduct by such seller in fulfilling the duties and liabilities.

    Why need such an amendment?

    It was observed that there was an evident lack of regulatory oversight in e-commerce which required some urgent action.

    • Manipulating search results: Moreover, the rapid growth of e-commerce platforms has also brought into the purview the unfair trade practices of the marketplace e-commerce entities engaging in manipulating search result to promote certain sellers.
    • Preferential treatment: This includes preferential treatment to some sellers, indirectly operating the sellers on their platform, impinging the free choice of consumers, selling goods close to expiration etc.
    • Flash sales: Certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales. This prevents a level playing field and ultimately limits customer choice and increases prices.

    Check this PYQ from CSP 2012:

    Q. With reference to consumer’s rights / privileges under the provision of law in India which of the following statements correct?

    1. Consumer are empowered to take samples for food testing
    2. When consumer fi les a complaint in any consumer forum, no fee is required to be paid.
    3. In case of death of consumer, his/her legal heir can file a complaint in the consumer forum on his/her behalf.

    Select the correct answer using the codes given below:

    (a) Only 1

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

  • [pib] Indian Certification of Medical Devices (ICMED) Plus Scheme

    The Quality Council of India (QCI), and the Association of Indian Manufacturers of Medical Devices (AiMeD) have added further features to the ICMED Scheme for Certification of Medical Devices.

     ICMED 13485 PLUS

    • The ICMED 13485 PLUS, as the new scheme has been christened, will undertake verification of the quality, safety and efficacy of medical devices.
    • It was first launched in 2016.
    • It has been designed to integrate the Quality Management System components and product-related quality validation processes through witness testing of products with reference to the defined product standards and specifications.
    • This is the first scheme around the world in which quality management systems along with product certification standards are integrated with regulatory requirements.
    • This scheme will be an end-to-end quality assurance scheme for the medical devices sector in India.

    Details of the scheme

    • This scheme provides the much-needed institutional mechanism for assuring product quality and safety.
    • It will go a long way in assisting the procurement agencies to tackle the challenges relating to the menace of counterfeit products and fake certification.
    • This will also help in eliminating the circulation and use of sub-standard medical products or devices of doubtful origin that could prove to be serious health hazards.

  • [pib] Chennai–Kanyakumari Industrial Corridor (CKIC)

    The Asian Development Bank (ADB) and the Centre have signed a $484 million loan to improve transport connectivity and facilitate industrial development in the Chennai–Kanyakumari Industrial Corridor (CKIC).

    About CKIC

    • CKIC is part of India’s East Coast Economic Corridor (ECEC), which stretches from West Bengal to Tamil Nadu.
    • The project will upgrade about 590 km of state highways in the CKIC influence areas that cover 23 of the 32 districts between Chennai and Kanyakumari in Tamil Nadu.
    • It connects India to the production networks of South, Southeast, and East Asia.
    • ADB is the lead partner in developing ECEC.

    Answer this PYQ in the comment box:

    Q. With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements:

    1. AIIB has more than 80 member nations.
    2. India is the largest shareholder in AIIB.
    3. AIIB does not have any members from outside Asia.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    Significance of CKIC

    • The project is part of the priority infrastructure projects identified for corridor development under the ADB-supported CKIC comprehensive development plan.
    • Enhanced connectivity of industrial hubs with hinterland and ports will particularly help increase the participation of Indian manufacturing in global production networks and global value chains.
    • The project will also strengthen road safety improvement programs through advanced technologies for road monitoring and enforcement.
    • In addition, the project will help improve the planning capacity of Tamil Nadu’s Highways and Minor Ports Department.

    Back2Basics: Asian Development Bank

    • The ADB is a regional development bank established on 19 December 1966 which is headquartered in the Ortigas Center located in the city of Mandaluyong, Metro Manila, Philippines.
    • The company also maintains 31 field offices around the world to promote social and economic development in Asia.
    • From 31 members at its establishment, ADB now has 68 members.
    • The ADB was modeled closely on the World Bank and has a similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions.

  • Ordinance Factory Board corporatization gets Cabinet approval

    Addressing a long-pending reform, the Union Cabinet has approved a plan to corporatize the Ordnance Factory Board (OFB).

    Ordnance Factory Board (OFB)

    • OFB consisting of the Indian Ordnance Factories is a government agency under the control of the department of defence production (DDP).
    • It is engaged in research, development, production, testing, marketing and logistics of a product range in the areas of air, land and sea systems.
    • OFB comprises 41 ordnance factories, nine training institutes, three regional marketing centres and four regional controllers of safety, which are spread all across the country.

    Why are OFBs significant?

    • OFB is the world’s largest government-operated production organization and the oldest organization in India.
    • It has a total workforce of about 80,000.
    • It is often called the “Fourth Arm of Defence” and the “Force Behind the Armed Forces” of India.
    • OFB is the 35th largest defence equipment manufacturer in the world, 2nd largest in Asia, and the largest in India.

    Why corporatization?

    • Once implemented, the OFB, the establishment of which was accepted by the British in 1775, will cease to exist.
    • It is a major decision in terms of national security and also make the country self-sufficient in defence manufacturing as repeatedly emphasized by PM.
    • This move would allow these companies autonomy and help improve accountability and efficiency.
    • This restructuring is aimed at transforming the ordnance factories into productive and profitable assets, deepening specialization in the product range, enhancing competitiveness, improving quality and achieving cost efficiency.

    Adhering to past recommendations

    • There have been several recommendations by high-level committees in the past for corporatising it to improve efficiency and accountability.

    What about employees?

    • All employees of the OFB (Group A, B and C) belonging to the production units would be transferred to the corporate entities on deemed deputation.
    • The pension liabilities of the retirees and existing employees would continue to be borne by the government.

    How would this be accomplished?

    • The 41 factories would be subsumed into seven corporate entities based on the type of manufacturing.
    • The ammunition and explosives group would be mainly engaged in producing ammunition of various calibre and explosives, with huge potential to grow exponentially.
    • Similarly, the vehicles group would mainly engage in producing defence mobility and combat vehicles such as tanks, trawls, infantry and mine protected vehicles.

  • Places in news: Sardar Sarovar Dam

    The Sardar Sarovar Dam is providing irrigation water in summer for the first time in history.

    Sardar Sarovar Dam

    • The Sardar Sarovar Narmada Dam is a terminal dam built on the Narmada river at Kevadia in Gujarat’s Narmada district.
    • Four Indian states, Gujarat, Madhya Pradesh, Maharashtra and Rajasthan, receive water and electricity supply from the dam.
    • The foundation stone of the project was laid out by Prime Minister Jawaharlal Nehru on 5 April 1961.
    • The project took form in 1979 as part of a development scheme funded by the World Bank through their International Bank for Reconstruction and Development, to increase irrigation and produce hydroelectricity
    • Called the ‘lifeline of Gujarat’, it usually has no water for irrigation during summers.

    Answer this PYQ in the comment box:

    Q.Which one of the following pairs is not correctly matched?

     

    Dam/Lake River

    (a) Govind Sagar: Satluj

    (b) Kolleru Lake: Krishna

    (c) Ukai Reservoir: Tapi

    (d) Wular Lake: Jhelum

    A successful model of river water sharing

    • River Narmada is a classic case of Integrated River Basin Planning, Development, and Management, with water storage available in all major, medium, and minor dams on the main river and its tributaries.
    • Its water is shared amongst four party states – Gujarat, Rajasthan, Madhya Pradesh and Maharashtra — in the ratio stipulated by the 1979 award of the Narmada Water Dispute Tribunal.

    How has it saved water for summers?

    • During the monsoon from July to October, the reservoir operation is well synchronized with the rain forecast in the catchment area.
    • The strategic operation of River Bed Power House (RPBH) ensures that minimum water flows downstream into the sea and maximum water is used during the dam overflow period, which is not calculated in the annual water share.
    • These measures help in maximizing the annual allocation of water share.
    • Similarly, in non-monsoon months, the measures for efficient use of the allocated share typically include minimizing the conventional and operational losses.
    • It includes: avoiding water wastage, restricting water-intensive perennial crops, adopting of Underground Pipelines (UGPL); proper maintenance and operation of canals on a rotational basis.

  • What is Global Minimum Corporate Tax?

    Global_Minimum_Corporate_Tax

    The US has anticipated support from the G7 industrial democracies for the Biden Administration’s proposed 15%-plus global minimum corporate tax.

    Multinational corporations rather monopolies don’t like to pay their fair share of taxes. They’ll do everything in their power to exploit loopholes and minimize their tax liability. Most companies simply open offices in destinations where tax rates are low or negligible. And at the end of it all, they’ll have done just enough to avoid paying billions of dollars in taxes.

    Global Minimum Corporate Tax

    • Major economies are aiming to discourage multinational companies from shifting profits – and tax revenues – to low-tax countries regardless of where their sales are made.
    • Increasingly, income from intangible sources such as drug patents, software, and royalties on intellectual property has migrated to these jurisdictions.
    • This has allowed companies to avoid paying higher taxes in their traditional home countries.
    • With a broadly agreed global minimum tax, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage.

    How would such tax work?

    • The global minimum tax rate would apply to companies’ overseas profits.
    • Therefore, if countries agree on a global minimum, governments could still set whatever local corporate tax rate they want.
    • But if companies pay lower rates in a particular country, their home governments could “top-up” their taxes to the agreed minimum rate, eliminating the advantage of shifting profits to a tax haven.
    • The Biden administration has said it wants to deny exemptions for taxes paid to countries that don’t agree to a minimum rate.

    Back2Basics: Base Erosion and Profit Shifting (BEPS)

    • BEPS refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions.
    • It thus “erodes” the “tax base” of the higher-tax jurisdictions.
    • Corporate tax havens offer BEPS tools to “shift” profits to the haven, and additional BEPS tools to avoid paying taxes within the haven.
    • It is alleged that BEPS is associated mostly with American technology and life science multinationals.

  • Semiconductor chips shortage, and how carmakers are coping

    A shortage of inputs, especially semiconductor chips, has made India-based car manufactures and premium bike makers curtail production across categories.

    Do you know?

    Electronic parts and components today account for 40% of the cost of a new internal combustion engine car, up from less than 20% two decades ago.

    Chip famine

    • The trigger point was the beginning of the Covid-19 pandemic and the subsequent lockdowns across the world that forced shut crucial chip-making facilities in countries including Japan, South Korea, China and the US.
    • A key feature in a chip shortage is that it almost always causes cascading effects, given that the first one creates pent-up demand that becomes the cause for the follow-up famine.

    Why such famine?

    • The COVID-19 pandemic caused disruptions in supply chains and logistics.
    • This is coupled with a 13% increase in global demand for PCs owing to some countries’ shift to a stay-at-home economy.
    • This has impacted the availability of key chips necessary for the manufacturing of a broad range of electronics being a necessary component of every industry.

    What is the impact of the chip famine?

    • Consumers of semiconductor chips, which are mainly car manufacturers and consumer electronics manufactures, have not been receiving enough of this crucial input to continue production.
    • There were two reasons for this: a steady decline in input prices and improvements in the processing power of chips.
    • The number of transistors mounted in IC circuit chips has doubled every two years.
    • Notably, the increase in chip consumption over the last decade is also partly attributable to the rising contribution of electronic components in a car’s bill of materials.

    How have vehicle makers responded?

    • Supply constraints are learned to have caused some output issues at notable Indian auto firms.
    • In addition to delaying vehicle deliveries, some companies have reportedly started discarding features and high-end electronic capabilities on a temporary basis.