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

Civilsdaily

Login

GS Paper: GS3-02.Inclusive growth and issues therein

  • New India: The world’s next engine of growth

    growth

    “The mantle of the G20 presidency has come at the right time, allowing India to influence the global agenda based on its own priority of accelerated, inclusive and resilient growth”

     Context

    • The pandemic has proven to be the breakout moment in India’s long overdue emergence as the world’s next engine of growth. New India is bearing fruit at a time when one-third of the world’s economy is facing a slowdown. Speaking at FICCI’s 95th annual general meeting, Finance Minister said that the upcoming budget will set the template for the next 25 years, which is India’s Amrit Kaal.

    Crack Prelims 2023! Talk to our Rankers

    A gloomy global outlook

    • Prospectus of global growth: According to the International Monetary Fund (IMF), global growth will nearly halve to 3.2 per cent in 2022 and fall further to 2.7 per cent in 2023, reflecting stalling growth in the US, China and the Euro Zone.
    • Global inflation: Higher food and energy prices have led to global inflation peaking at 8.8 per cent in 2022 which is, however, expected to decline to 6.5 per cent in 2023 and 4.1 per cent in 2024.
    • Developed nations are struggling to tame inflation: Developed nations have adopted excessive stimulus measures. According to a report by the McKinsey Global Institute, in 2020 and 2021, households globally added $100 trillion to global wealth on paper as asset prices soared and $39 trillion in new currency and deposits were minted and debt and equity liabilities increased by about $50 trillion and $75 trillion, respectively, as governments and central banks stimulated economies.
    • Russia- Ukraine conflict inflicting fiscal pain: Meanwhile, the continuing Russia-Ukraine conflict is inflicting fiscal pain beyond the immediate region
    • Disrupted supply chain by China’s covid policy: While China’s Covid policy has disrupted supply chains, which are now once again threatened by a potential fallout of an abrupt reversal.
    • India’s inflation is largely imported: India’s own fight against inflation, which is largely imported, has been aided by fiscal and monetary policy working in tandem with a little help from easing commodity prices.

    growth

    India stands at a bright spot amidst significant challenges

    • Fastest-growing large economy in the world: However, India stands out as a rare bright spot with the economy estimated to grow around 7 per cent in FY23 and a growth forecast of 6.1-6.5 per cent in FY24, thus retaining the tag of the fastest-growing large economy in the world.
    • Inflation coming down within RBI’s tolerance level: In an encouraging sign, retail inflation eased to 5.88 per cent in November, thus coming within the RBI’s tolerance band after 11 months. While it is too early to declare victory in terms of taming inflation, policymakers must now chart out a path that prioritises growth
    • India likely to overtake Japan and Germany to become 3rd largest economy: Having recently surpassed the UK to become the world’s fifth-largest economy, India is likely to overtake Japan and Germany before the end of the decade to become the third-largest economy in the world.
    • What made this possible: Reforms aimed at enhancing ease of doing business and reducing the cost of doing business in a large, unified domestic market along with a focus on boosting the manufacturing sector through the Production Linked Incentive (PLI) schemes, which are helping attract large investments including in critical areas like semiconductors.

    growth

    What India has to share with the world?

    • G20 leadership to bring about structural transformation: Its priority as G20 president is to focus on areas, which have the potential to bring about structural transformation leading to accelerated, inclusive and resilient growth.
    • Concept of LiFE for a sustainable lifestyle: Similarly, the concept of LiFE (Lifestyle for the Environment) draws upon ancient sustainable traditions to reinforce modern-day environmentally conscious practices.
    • Knowledge sharing: Finally, knowledge sharing in areas like digital public infrastructure and financial inclusion will enable the wider adoption of disruptive technologies.

    growth

    Conclusion

    • Investors both domestic and global must now come forward and participate in the India growth story which, in turn, will give a much-needed boost to global growth going ahead. Speaking at the World Economic Forum last year, PM Modi said “Make in India, Make for the World”. There has never been a better time to invest in India and reap the benefits of what it has to offer.

    Mains question

    Q. At a time when one-third of the world’s economy is facing a slowdown India stands at a brighter spot Discuss. Highlight what India has to share with the world?

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Blue economy and marine pollution

    Blue economy

    Context

    • Blue economy relates to presentation, exploitation and regeneration of the marine environment. It is used to describe sustainability-based approach to coastal resources. The worry is that the oceans are under severe threat by human activities, especially when the economic gains come at the cost of maintaining environmental sanity.

    Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes

    Blue economy

    From the beginning: The Blue economy

    • Origin of the concept: Gunter Pauli’s book, “The Blue Economy: 10 years, 100 innovations, 100 million jobs” (2010) brought the Blue Economy concept into prominence.
    • A project to find best nature inspired and sustainable technologies: Blue Economy began as a project to find 100 of the best nature-inspired technologies that could affect the economies of the world. While sustainably providing basic human needs potable water, food, jobs, and habitable shelter.
    • Inclusive approach and objective: This is envisaged as the integration of Ocean Economy development with the principles of social inclusion, environmental sustainability and innovative, dynamic business models
    • Environment friendly maritime infrastructure: It is creation of environment-friendly infrastructure in ocean, because larger cargo consignments can move directly from the mothership to the hinterland through inland waterways, obviating the need for trucks or railways

    Blue economy

    Significance of Maritime transport

    • One of the largest employers within ocean-related activities: Maritime transport plays a big role in the globalised market in the form of containerships, tankers, and ports, coastal tourism is the largest employer within ocean-related activities.
    • Eighty percent trade happens on the seas: Eighty per cent of world trade happens using the seas, 40 per cent of the world’s population live near coastal areas, and more than three billion people access the oceans for their livelihood.
    • Annual value makes up equivalent to seventh largest GDP: A healthy marine environment is essential for a sustainable future for people and the planet. Its value is estimated to be over $25 trillion, with the annual value of produced goods and services estimated to be $2.5 trillion per year, equivalent to the world’s seventh largest economy in gross domestic product (GDP) terms.
    • Ensures food security: The oceans, seas and coastal areas contribute to food security and economic viability of the human population. The ocean is the next big economic frontier, with the rapidly growing numerous ocean-based industries.

    What are the concerns?

    • Human induced Oceanic pollution: Marine activities have brought in pollution, ocean warming, eutrophication, acidification and fishery collapse as consequences on the marine ecosystems.
    • Oceans are rarely financial institutions: The ocean is uncharted territory, and rarely understood by financial institutions. Hence preparedness of these institutions in making available affordable long-term financing at scale is nearly zero.
    • Developing nations pay heavy price: In this journey of achieving blue economy goals, it is developing nations that pay a heavy economic price.
    • Lack of capacity is a critical hindrance: Many of the developing nations have high levels of external debt. Lack of capacity and technology for transition between agri economy and marine economy is also a critical hindrance.
    • Not having a elaborative guiding principles is a major concern: There is concern that without the elaboration of specific principles or guidance, national blue economies, or sustainable ocean economies, economic growth will be pursued with little attention paid to environmental sustainability and social equity.

    Blue economy

    What should be the approach towards achieving Blue economy?

    • Inclusive discussion and participation is must: The blue economy is based on multiple fields within ocean science and, therefore, needs inter-sectoral experts and stakeholders. It is imperative to involve the civil society, fishing communities, indigenous people and communities for an inclusive discussion.
    • SDG-14 journey cannot undermine the other SDGs: The UN stresses that equity must not be forgotten when supporting a blue economy. Land and resources often belong to communities, and the interests of communities dependent on the ocean are often marginalised, since sectors such as coastal tourism are encouraged to boost the economy.
    • Integrated marine spatial planning with national and global expertise is necessary: Developing the blue economy should be based on national and global expertise. It is important that any blue economy transformation should include using integrated marine spatial planning. This would provide collaborative participation of all stakeholders of the oceans, and would make room for debate, discussion and conflict resolution between the stakeholders.

    Where does India stand at this hour?

    • Suitable natural geography: Vast coastline of almost 7,500 kilometres, with no immediate coastal neighbours except for some stretches around the southern tip. In some sense, India has the advantage of its natural geography
    • Opportunity on G20 presidency: It is an opportunity for India to use its G20 Presidency to ensure environmental sustainability, while providing for social equity.
    • Rising role and significance: India’s engagement in the blue economy has been rising, with its active involvement in international and regional dialogues, and maritime/marine cooperation.

    Conclusion

    • Achieving the Blue economy goal would need tremendous human effort, and would call for global cooperation through various legal and institutional frameworks. This also includes the need to develop newer sectors such as renewable ocean energy, blue carbon sequestration, marine biotechnology and ex-tractive activities, with due attention paid to the environmental impacts.

    Mains question

    Q. What do you understand by mean Blue economy? Highlight the importance of maritime transport and discuss what need to be done to achieve blue economy in a true sense?

    (Click) FREE1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • What should India do in the current international energy market?

    energy

    Context

    • India marches ahead carrying the same challenge projected as last year that it will have to navigate the choppy waters of a volatile petroleum market without straying from the green path towards clean energy. Energy security cannot be achieved by focusing only on the supply and distribution side of the equation. The demand conservation and efficiency sides are equally important.

    Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes

    Current situation of international energy market

    • Fragmented energy market: the energy market has fragmented and energy nationalism is the driving force behind policy.
    • Restricted markets for Russia: Irrespective of how and when the Ukraine conflict ends, Russia will not be allowed access to the western markets for as long as President Putin is at the helm of the affairs. One fallout is the tightening energy embrace between Russia and China.
    • Declining western orbit and increasing non-aligned approach: Three, OPEC plus one which is, in effect, Saudi Arabia plus Russia has stepped outside the Western orbit. Saudi Arabia has made clear it intends to pursue a Saudi first, non-aligned approach to international relations including with the US.
    • Emergence of new energy centres: The new centres of energy power are emergent around countries that have a large share of the metals, minerals and components required for clean energy. China is currently the dominant power.

    What should India do against this backdrop?

    • Government must increase productivity of existing sources: Discounted Russian crude is an opportunistic panacea. It does not provide a sustainable cover to meet our requirements. To secure such a cover, government must increase the productivity of our existing producing fields; additional resources should be allocated for accessing relevant enhanced oil recovery technologies.
    • Secure long- term supply relationship with Saudi Arabia and Iran: Further, it should leverage the country’s market potential to secure a long-term supply relationship with Saudi Arabia and an equity partnership with Iran.
    • Enhance the strategic petroleum reserves: It should enhance the strategic petroleum reserves to cover at least 30 days of consumption and remove the sword of Damocles that the CBI/CVC/CAG wield over the heads of the public sector petroleum companies so that their traders can, without fear, take advantage of market volatility.
    • Expediate gas pipeline grid: The construction of a pan-India national gas pipeline grid should be expedited.

    energy

    Analysis: Phasing out coal and the energy transition in India

    • Coal one of the major sources of energy in India: Coal will remain the bulwark of India’s energy system for decades. It is no doubt the dirtiest of fuels, but it remains amongst, if not the cheapest, source of energy. Plus hundreds of thousands depend on the coal ecosystem for their livelihood.
    • Phasing out is not yet a near possibility: The option of phasing out coal whilst environmentally compelling is not yet a macroeconomic or social possibility.
    • Need a balance: In the interim, the government has to find an energy transition route that balances livelihoods and pushes forward the green agenda.
    • Steps to be taken: Some small, politically feasible steps in that direction would include increased R&D expenditure for coal gasification and carbon capture and sequestration technologies; setting a carbon tax; the establishment of regulatory and monitoring mechanisms for measuring carbon emissions from industry; the closure of inefficient and old plants and a decision not to approve any new ones.
    • Determining competitiveness: In parallel, it would help if Niti Aayog were to pull together a group of economists and energy experts to determine the competitiveness of coal versus solar on a full-cost basis

    Other possible measures 

    • Upgrading the transmission grid: Allocation of funds for upgradation of the transmission grid network to render it resilient enough to absorb clean electrons on an intermittent basis. The sun does not shine at night and the wind does not blow all the time. In parallel, the underlying structural issues currently impeding the scaling up of renewables must be addressed.
    • Repairing the balance sheets of discoms through various regulatory reforms: In parallel, the repair of the balance sheets of state distribution companies (discoms), easing the procedures for the acquisition of land and the removal of regulatory and contract uncertainties are most important.
    • Building up the domestic chip industry: It will take decades to harness our indigenous resources of the metals and minerals critical for clean energy and build up a domestic chip industry. In the interim, diplomats should secure diversified sources of supply to reduce the country’s vulnerability.
    • Developing and commercializing 3G clean energy technologies: Finally, the creation of an enabling ecosystem for developing and commercializing third-generation clean energy technologies like hydrogen, biofuels and modular nuclear reactors. Nuclear, in particular, should be pushed.

    energy

    Conclusion

    • India is not responsible for global warming, but it will be amongst the worst affected. Millions live around its coastline. Their livelihoods will be undermined by rising sea levels. Millions will also be affected by melting glaciers and extremes of temperatures. So irrespective of who is to blame, India has to stay on the path of decarbonization. It cannot afford to develop first and clean up later.

    Mains question

    Q. What is the current situation of international energy market? What are the measures that India should take in the time of global uncertainty of energy market.

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • In news: Small Savings Schemes

    The Central government raised interest rates on eight of the 12 small savings schemes by 20 to 110 basis points for the January to March 2023 quarter.

    Small Savings Schemes

    • Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age.
    • They are popular as they provide returns higher than bank fixed deposits, sovereign guarantee and tax benefits.

    How are they managed?

    • Since 2016, the Finance Ministry has been reviewing the interest rates on small savings schemes on a quarterly basis.
    • All deposits received under various schemes are pooled in the National Small Savings Fund.
    • The money in the fund is used by the Centre to finance its fiscal deficit.

    What are the different saving schemes?

    The schemes can be grouped under three heads –

    1. Post office deposits
    2. Savings certificates and
    3. Social security schemes

    (1) Post Office Deposits

    • Under this we have the savings deposit, recurring deposit and time deposits with 1, 2, 3 and 5 year maturities and the monthly income account.
    • The savings account currently pays an interest of 4% per annum and can be opened individually or jointly with an initial investment of Rs 500.
    • The recurring deposit that pays 5.8% a year compounded quarterly matures after 60 months from the date of opening.
    • It allows investors to save on a monthly basis with a minimum deposit of Rs 100 per month.
    • Investments under the 5-year time deposit up to Rs 1.5 lakh further qualifies for benefit under section 80C of Income Tax Act.

    (2) Savings Certificates

    • Under this, we have the National Savings Certificate and the Kisan Vikas Patra.
    • The National Savings Certificate pays interest at a rate of 6.8% per annum upon maturity after 5 years. The interest that is earned is reinvested into the scheme every year automatically.
    • The NSC also qualifies for tax saving under Section 80C of the income tax act.
    • The Kisan Vikas Patra, which is open to everyone, doubles your one-time investment at the end of 124 months signifying a return of 6.9% compounded annually.
    • The minimum investment amount is Rs 1000 while there is no upper limit.

    (3) Social security schemes

    • In the third head of social security schemes, there is Public Provident Fund, Sukanya Samriddhi Account and Senior Citizens Savings Scheme.
    1. Public Provident Fund
    • The Public Provident Fund is a popular saving option for long term goals like retirement.
    • It pays 7.1% a year and qualifies for tax benefit under Section 80C of the Income Tax Act.
    • Upon maturity of the account after 15 years, it can be extended indefinitely in blocks of 5 years.
    • The accumulated amount and interest earned are exempt from tax at the time of withdrawal.
    1. Sukanya Samriddhi Account
    • The Sukanya Samriddhi Account was launched in 2015 under the Beti Bachao Beti Padhao campaign exclusively for a girl child.
    • The account can be opened in the name of a girl child below the age of 10 years.
    • The scheme guarantees a return of 7.6% per annum and is eligible for tax benefit under Section 80C of the Income Tax Act.
    • The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.
    1. Senior Citizen Savings Account
    • And finally, the 5-year ​​Senior Citizen Savings Account can be opened by anyone who is over 60 years to age.
    • It carries an interest of 7.4% per annum payable quarterly and qualifies for Section 80C tax benefit.
    • These time-tested and safe modes of investments don’t offer quick returns, but are safer when compared to market-linked schemes.

     

    Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Research and Development Scenario in India

    development

    Context

    • US, has retained its global leadership for almost a century since World War I thanks to the culture of innovation backed by a solid base of research and development (R&D). China is challenging the leadership of US based on technology and innovation. If India wants to be a Vishwa guru it must invest in R&D.

    Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes

    Innovation and missing R&D Investment

    • Engine of growth: Innovation is rightly recognized as an engine for economic growth.
    • Atal innovation Mission: In 2016, the government launched the Atal Innovation Mission (AIM) to create an ecosystem to promote innovation and entrepreneurship in the country.
    • Actual spending is less: All these are steps in the right direction, but the foundation of all this lies in how much India actually spends on R&D, both in absolute terms as well as a percentage of its GDP, in relation to other G20 countries.
    • Sustainable Target: SDG Target 9.5 calls upon nations to encourage innovation and substantially increase the numbers of researchers as well as public and private spending on R&D. Gross domestic expenditure on R&D (GERD) is the proposed aggregate to quantify a country’s commitment to R&D.

    What is the scenario of Global Investment in R&D?

    • Institute for Statistics (UIS): According to UNESCO’s Institute for Statistics (UIS) latest report, the G20 nations accounted for 90.6 per cent of global GERD (current, PPP$) in 2018.
    • Increased spending on R&D: Global R&D expenditure has reached a record high of about 2.2 trillion current PPP$ (2018), while Research Intensity (R&D expenditure as a percentage of GDP) has gradually increased from 1.43 per cent in 1998 to 1.72 per cent in 2018.
    • Investment in PPP terms is inaccurate: Though looking at spending in PPP terms is a reasonable metric for welfare measurement in the economy, when it comes to technological prowess in high-end activities of R&D, it all boils down to measuring hard currency in US dollars.

    development

    Investment in R&D by G20 countries

    • G20 leader in investment: The G20 countries, accounting for 86.2 per cent of the global GDP and over 60 per cent of the global population in 2021, are the leaders in every way.
    • USA spends the Highest: The US leads the G20 by spending $581.6 billion on R&D followed by the European Union ($323 billion), and China ($297.3 billion) in 2018.
    • India spends negligible amount: India lags way behind with a paltry R&D expenditure of only $17.6 billion in 2018. In terms of their relative shares in G20 R&D expenditure, the US is way ahead with 36 per cent, followed by the EU (20 per cent), and China (18 per cent). India’s share is less than 1 per cent of G20 R&D expenditure in dollar terms.

    development

    Linkages between Research Intensity and Expenditure on R&D

    • Percentage to GDP: While the absolute expenditure on R&D provides a sense of scale, their percentage to the respective GDP provides the research intensity (RI).
    • South Korea Highest RI: It is interesting to note that in 2018 for which the latest information is available, South Korea has the highest RI at 4.43 per cent, followed by Japan (3.21 per cent), Germany (3.09 per cent), the US (2.83 per cent), France (2.19 per cent), China (2.14 per cent) and EU (2.02 per cent). India is ranked 17th in the G20, with a RI of 0.65 per cent (see infographics).
    • Example of Israel: One of the non-G20 countries is Israel, which, while having an R&D expenditure of just $18.6 billion, a population of only 9.3 million and a per capita income of around $51,430, has the highest RI of over 5 per cent. No wonder, Israel is known as a land of innovations, be it in defence or agriculture.

    development

    What India can learn from Israel?

    • Innovation growth and competition: The innovation system in Israel is a fundamental driver of its economic growth and competitiveness.
    • Active role of government: The government has played an important role in financing innovation, particularly in SMEs, and in providing well-functioning frameworks for innovation, such as venture capital (VC), incubators, strong science-industry links, and high-quality university education.
    • India can emulate Israel: Israel builds a strong case to show that despite being a smaller nation, sustainable growth can be achieved by prioritising investments in R&D. A lesson India can learn.

    Mains Question

    Q. What is difference between investment in R&D and research intensity? What is the missing part in India’s R&D and innovation ecosystem?

     

     

  • [pib] Social Progress Index (SPI) for states and districts

    Economic Advisory Council to Prime Minister (EAC-PM) will release the Social Progress Index (SPI) for states and districts of India on December 20, 2022.

    Social Progress Index (SPI) Report

    • SPI is a comprehensive tool intended to be a holistic measure of the Social Progress made by the country at the national and sub-national levels.
    • The report has been prepared by Institute for Competitiveness, headed by Dr Amit Kapoor and the Social Progress Imperative, headed by Michael Green.
    • It was mandated by Economic Advisory Council to the Prime Minister of India.

    Objectives of the report

    • With state and district-wise rankings and scorecards, the report aims to provide a systematic account of the social progress made at all levels in the country.
    • The report also sheds light on the achievements of the districts that have performed well on the index and the role of the states in achieving social progress.
    • A special section of the report provides an analysis of the Aspirational Districts of India, leading to a broader understanding of the social progress at the grassroots level.
    • The report will act as a critical enabler and tool for policymakers in the coming years for achieving sustained socio-economic growth.

    Components of SPI

    SPI assesses the performance of states and districts on three dimensions of social progress:

    1. Basic Human Needs: It assesses the performance of states and districts in terms of Nutrition and Basic Medical Care, Water and Sanitation, Personal Safety and Shelter.
    2. Foundations of Wellbeing: It evaluates the progress made by the country across the components of Access to Basic Knowledge, Access to Information and Communication, Health and Wellness, and Environmental Quality.
    3. Opportunity: It focuses on aspects of Personal Rights, Personal Freedom and Choice, Inclusiveness, and Access to Advanced Education.

    (This newscard will be updated once the report is published.)

    Need for SPI

    • GDP is not a holistic measure of a nation’s development: It would be incorrect to state that the economic progress is completely divorced from progress made in areas mentioned above.
    • Social outcomes of developmental economics: The primary goal of the SPI is to provide a rigorous tool to benchmark progress and stimulate progress within countries.
    • No single holistic parameter available: Several indicators, like GHI and HDI, go beyond GDP, but none captures social progress as finely as SPI.
    • Doing away with biased reports: India does not display a respectable position in the index, as even the small neighbours like Nepal have a better rank. India is also the lowest rank holder in BRICS.

     

    Click and get your FREE Copy of CURRENT AFFAIRS Micro Notes

    (Click) FREE 1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Financial Inclusion in Age of Digitization

    Financial Inclusion

    Context

    • The use of technology in financial inclusion stands to be pertinent in today’s context as it paves the way towards inclusive growth through the upliftment of disadvantaged sections of society.

    Importance of Financial Inclusion

    • Meaning of Financial inclusion: It refers to the availability to both individuals and companies of useful and cost-effective financial goods and services, including payments, transactions, savings, credit, and insurance, that are sustainably and ethically provided.
    • Provides social mobility: The importance of financial inclusion lies in the fact that it allows social mobility. These resources help empower individuals and foster communities, which can aid in promoting economic growth.
    • More financial services: Moreover, account holders are more likely to utilize additional financial services such as credit and insurance to launch and grow enterprises, make investments in their children’s or own health or education, manage risk, and recover from financial setbacks, all of which can enhance their overall quality of life.

    Financial Inclusion

    Challenges to the financial inclusion

    • Inoperative bank accounts: Nearly 80 percent of the Indian population has a bank account, and nearly 18 percent (81.38 million) of bank accounts are inoperative, having “zero balance”. Moreover, up to 38 percent of accounts are inactive, which means that there have been no deposits or withdrawals in the past year, demonstrating that many Indians are still not fully integrated into the formal banking system.
    • Poor telecommunication infrastructure: India still needs a robust telecommunication infrastructure with a stable broadband internet connection. Despite progress in increasing technological features with increasing speeds, the inability of the entire country to adapt to these innovations has widened the gap.
    • All citizens are not cell phone users: India additionally faces the hurdle of getting its citizens online, with more than 310 million individuals needing a basic cell phone. This prevents account holders from receiving crucial information, such as details relating to account transactions.
    • Increasing dependency on local agents: In addition, financial institutions also need to be more willing to deliver messages for transactions of small quantities. These factors have led to an increasing dependency on local agents.

    Financial Inclusion

    The correlation between Technology, digital divide and financial inclusion

    • Rural- Urban digital Divide: There is an evident divide between the urban-rural regions that dominate India. Only 4.4 rural families have computers, compared to 14.4 percent of urban households and 14.9 percent of rural homes have internet connectivity, compared to 42 percent of families in metropolitan regions. Meanwhile, only 13 percent of adults in rural regions have access to the internet, compared to 37 percent in metropolitan areas.
    • High lending rates in rural area: Specifically, such gaps are associated with various factors in finance, starting with small-time lenders charging high-interest rates common in rural regions. Access to credit still needs to be solved. Government programmes are yet to reach more remote areas to improve loan availability efficiently.
    • Unawareness about Online loans: Individuals find that online loans need more options from reliable financial institutions or digital lending. Additionally, rural clients need help accessing prospective financial services due to complicated banking procedures such as requiring identity credentials and maintaining a specific balance in an account.
    • Limited access to technology: The digital divide is also a result of limited access to computer and communication technologies. In India, fewer people can afford the device needed to access digital information.
    • Single nationwide approach is problematic: India additionally faces the burden of providing diversified content across different regions, as individuals across India have different mother tongues. Moreover, the number of individuals who have access to computers or are knowledgeable enough to utilise the internet varies too widely between states. Thus, a blanket approach cannot be implemented nationwide.
    • Lack of Financial literacy: Indian citizens lack the potential to maximise technological interventions. About 266 million adults are illiterate. The lack of financial literacy has also greatly impeded the growth of financial inclusion, with many financial cyber-crimes peaking in proportion to the growing distrust among rural residents, leading to lower adoption rates and a 6-percent jump in cybercrimes in the same year.
    • Concerns of data privacy: As Personal Identifiable Information (PII) guidelines are not strictly enforced and adhered to, large quantities of data are readily accessible to numerous parties, raising serious concerns about data privacy.

    Financial Inclusion

    What can be done to bridge digital divide for financial inclusion?

    • Digital inclusion strategies: It lies in the hands of the government to implement a financial inclusion policy and look at the reasons behind financial exclusion and effectively address them. Information and Communication Technology policies are primarily top-down and supply-focused. Thus, it is necessary to develop financial goods and services focused on the needs of citizens and the disadvantaged. These policies should focus on digital inclusion strategies to ensure that rural areas can access proper internet connectivity.
    • Information in regional language: to ensure digital financial inclusion, the government should encourage the middle-aged bracket to educate themselves in reading and writing to use the various facilities they provide. Government websites have information primarily in Hindi and English, excluding large sections of the population. A systemic strategy focused on digital skills, and financial literacy should be implemented in each region, keeping in mind the language barrier and access to technology.
    • Focus on vulnerable sections: To combat financial fraud, implementing a one-to-one Management of Financial Services (MFS) agent mentorship programme that focuses on vulnerable populations and teaches them the fundamentals of mobile and online interaction is possible. Additionally, removing the barriers to financial service access for low-income persons by reducing transaction costs could facilitate increased participation, as observed in Nepal, where free and easily accessible accounts were more prevalent among women

    Conclusion

    • The digital divide affects every area of life, including literacy, wellness, mobility, security, access to financial services, etc. Therefore, for a fast-growing nation such as India, the focus needs to shift from simple economic growth to equitable and inclusive growth.

    Mains Question

    Q. What are the challenges to Digital financial inclusion in India? Explain in detail the strategies needed to tackle the financial inclusion?

    (Click) FREE1-to-1 on-call Mentorship by IAS-IPS officers | Discuss doubts, strategy, sources, and more

  • Poverty Estimate using National Family Health Survey

    Poverty

    Context

    • The recent release of the National family health survey (NFHS) data for 2019-21 allows for a detailed analysis of the progress in the reduction of absolute poverty and related determinants like nutrition.

    Poverty estimation in India

    • Planning Commission Expert Group (1962): It formulated the separate poverty lines for rural and urban areas at ₹20 and ₹25 per capita per year respectively.
    • VM Dandekar and N Rath (1971): They made the first systematic assessment, based on National Sample Survey (NSS) data. They suggested providing 2250 calories per day in both rural and urban areas.
    • YK Alagh Committee (1979): It constructed a poverty line for rural and urban areas on the basis of nutritional requirements and related consumption expenditure.
    • Lakdawala Committee (1993): It suggested that consumption expenditure should be calculated based on calorie consumption as earlier. State specific poverty lines should be constructed. It asked for discontinuation of scaling of poverty estimates based on National Accounts Statistics.
    • Tendulkar Committee (2009): The current official measures of poverty are based on the Tendulkar poverty line, fixed at daily expenditure of ₹27.2 in rural areas and ₹33.3 in urban areas is criticized by many for being too low.

    Poverty

    How poverty is estimated under NFHS?

    • Multidimensional poverty index: The NFHS surveys are part of a multinational attempt to provide estimates of a multidimensional poverty index. Its computation rests on estimates of poverty according to 10 different indicators:
    1. Nutrition
    2. Child mortality
    3. Years of schooling
    4. School attendance
    5. Cooking fuel
    6. Sanitation
    7. Drinking water
    8. Electricity
    9. Housing
    10. Assets
    • The deprivation index: the deprivation index for each indicator is the per cent poor (deprived) according to that indicator. The aggregation of the 10 indicators into one index involves legitimate issues of weighting, but individual components do not suffer from this drawback.

    Poverty

    What are the findings of NFHS?

    • Multidimensional poverty declined: at a compounded annual average rate of 4.8 per cent per year in 2005-2011 and more than double that pace at 10.3 per cent a year during 2011-2021.
    • Declining child mortality: There are some issues with the 2011 child-mortality data, but for each of the 10 components of the MPI index, the rate of decline in 2011-2021 is considerably faster than in 2005-2011.
    • Average decline in overall indicators: The average equally weighted decline for nine indicators was 1.9 per cent per annum in 2005-2011 and a rate of 16.6 per cent per annum, more than eight times higher in 2011-2021.
    • Consumption inequality decline: Every single household survey or analysis has shown that consumption inequality declined during 2011-2021. This is consistent with the above finding of highly inclusive growth during 2011-2021.

    Poverty

    What are the efforts behind inclusive growth and reduced poverty?

    • A major factor behind the inclusive nature of growth during 2011-2021 is the focus of government policies on each of the individual indicator’s indicative of a dignified standard of living. A direct impact of this dedicated fiscal push is that slow-moving variables such as housing, access to cooking fuel, sanitation, etc, have witnessed a remarkable increase.
    • Swachh Bharat Mission: The government’s Swachh Bharat mission in 2014-2021 constructed over 110 million toilets even if some were without easy access to water, many were.
    • Saubhagya Yojana: Similarly, close to one-third of Indians were deprived of electricity till as recently as 2014. It was only after a dedicated push (Saubhagya Yojana) that India managed to electrify every village, and eventually households. Electricity deprivation declined by a 28.2 per cent rate post-2014; between 2005 and 2011, the rate of decline was close to zero.
    • Jan Dhan Yojana: Another example is the Jan Dhan Yojana which made financial inclusion a reality in India, especially for women.
    • Ujjwala Yojana: On access to modern cooking fuel (through the Ujjwala Yojana), deprivation was nearly halved from 26 per cent to 14 per cent in just five years. The previous halving (2005/6 to 2015/16) took 10 years.
    • Awas Yojana: The affordable housing scheme (Awas Yojana) has meant that less than 14 per cent are now deprived, compared to thrice that number in 2011/12.
    • Jal Jeevan Mission: More recently, government has embarked on an ambitious project of ensuring universal access to piped water under the Jal Jeevan Mission. Rural piped water coverage was a little less than 17 per cent in 2019, but is now well above 54 per cent and expected to at least be near, if not meet, the 100 per cent target by 2024.

    Conclusion

    • Extreme poverty in India is surely on decline but pandemic have pushed people again back to the poverty. Pandemic have put the break on inclusive growth of people. Government must realize these and plan accordingly.

    Mains Question

    Q. Analyze the data of NFHS for poverty estimation in India? How government policies have helped to reduce the extreme poverty in India?

    Click and Get your FREE copy of Current Affairs Micro notes

  • India’s Direct Benefit Transfer Schemes

    Transfer

    Context

    • Last week, the International Monetary Fund (IMF) lauded India’s Direct Benefit Transfer (DBT) Scheme as a “logistical marvel” that has reached hundreds of millions of people and specifically benefitted women, the elderly and farmers. Paolo Mauro, Deputy Director in the IMF’s Fiscal Affairs Department, praised the role of technological innovation in achieving this feat.

    What is Direct Benefit Transfer(DBT)?

    • With the aim of reforming Government delivery system by re-engineering the existing process in welfare schemes for simpler and faster flow of information/funds and to ensure accurate targeting of the beneficiaries, de-duplication and reduction of fraud Direct Benefit Transfer (DBT) was started on 1st January, 2013.
    • DBT Mission was created in the Planning Commission to act as the nodal point for the implementation of the DBT programmes. The Mission was transferred to the Department of Expenditure in July, 2013 and continued to function till 14.9.2015. To give more impetus, DBT Mission and matters related thereto has been placed in Cabinet Secretariat under Secretary (Co-ordination & PG).

    Transfer

    Efforts behind the efficient DBT

    • Mission-mode approach for financial inclusion: Government endeavoured to open bank accounts for all households, expanded Aadhaar to all, and scaled up the coverage of banking and telecom services.
    • Public Finance Management System through Aadhar: It evolved the Public Finance Management System and created the Aadhaar Payment Bridge to enable instant money transfers from the government to people’s bank accounts.
    • Participation of various stakeholders for extensive UPI: The Aadhaar-enabled Payment System and Unified Payment Interface further expanded interoperability and private-sector participation.
    • Directly receiving of subsidies: This approach not only allowed all rural and urban households to be uniquely linked under varied government schemes for receiving subsidies directly into their bank accounts but also transferred money with ease.

    What is the Present status of DBT?

    • The status of JAM trinity (Jan Dhan Aadhar Mobile)
    • By 2022, more than 135 crore Aadhaar’s have been generated,
    • There are 47 crore beneficiaries under Pradhan Mantri Jan Dhan Yojana,
    • Mobile subscribers number more than 120 crores.
    • Riding on this network, the DBT programme has reached commanding heights towards achieving the government’s vision of “sabka vikas”.
    • Last mile banking through Bank Mitras: 5 lakh Bank Mitras delivering branchless banking services.
    • DBT applicable to government schemes: Becoming the major plank of the government’s agenda of inclusive growth, it has 318 schemes of 53 central ministries spanning across sectors, welfare goals and the vast geography of the country.

    Transfer

    How benefits are delivered through DBT?

    • DBT in rural areas: In rural Bharat, DBT has allowed the government to provide financial assistance effectively and transparently to farmers with lower transaction costs be it for fertilisers or any of the other schemes including the PM Kisan Samman  Nidhi, PM Fasal Bima Yojana, and PM Krishi Sinchayi Yojana  thus becoming the backbone for supporting the growth of the agricultural economy.
    • DBT in urban area: In urban India, the PM Awas Yojana and LPG Pahal scheme successfully use DBT to transfer funds to eligible beneficiaries.
    • Benefits under MGNAREGA: The benefits received under the Mahatma Gandhi National Rural Employment Guarantee Act and Public Distribution System drive the rural demand-supply chain.
    • Various assistance programmes: Various scholarship schemes and the National Social Assistance Programme use the DBT architecture to provide social security.
    • Scheme for rehabilitation: DBT under rehabilitation programmes such as the Self Employment Scheme for Rehabilitation of Manual Scavengers opens new frontiers that enable social mobility of all sections of society.
    • DBT as last mile support in Pandemic: The efficacy and robustness of the DBT network were witnessed during the pandemic. It aided the government to reach the last mile and support the most deprived in bearing the brunt of the lockdown. From free rations to nearly 80 crore people under the Pradhan Mantri Garib Kalyan Yojana, fund transfers to all women Jan Dhan account holders and support to small vendors under PM-SVANidhi, DBT helped the vulnerable to withstand the shock of the pandemic.

    Transfer

    What are the reasons for successful DBT schemes?

    • An enabling policy regime: Proactive government initiatives and supportive regulatory administration allowed the private and public sector entities in the financial sector to overcome longstanding challenges of exclusion of a large part of the population.
    • Creation of a dedicated ecosystem: These are essential elements of the pioneering ecosystem created by the government for the aggressive rollout of the ambitious DBT programme, achieving impressive scale in a short span of six years.

    Conclusion

    • Direct Benefit Transfer has transformed the welfare aspect of the governance. Going forward digital and financial literacy, robust grievance redressal, enhancing awareness and an empowering innovation system are some of the aspects that would require continued focus. This would play a vital role for India in meeting the diverse needs of its population and ensuring balanced, equitable and inclusive growth.

    Mains Question

    Q.Enlist the schemes that comes under DBT. How DBT has changed the lives of needy people in urban and rural India?

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

     

  • Food Security, Success Story and Challenges Ahead

    Food Security

    Context

    • The Hunger Hotspots Outlook (2022-23) a report by the Food and Agriculture Organization of the United Nations (FAO) and the World Food Programme (WFP) forebodes escalating hunger, as over 205 million people across 45 countries will need emergency food assistance to survive. 16 October is celebrated as World Food Day.

    What is the current situation of Food security worldwide?

    • Adverse impact of COVID 19 pandemic: Globally, food and nutrition security continue to be undermined by the impacts of the COVID 19 pandemic, climate change, spiralling food inflation, conflict, and inequality.
    • Challenge of Severe hunger continues: Today, around 828 million people worldwide do not have enough to eat, and over 50 million people are facing severe hunger.

    Food Security

    What are the challenges for ensuring food security?

    • The challenge of Climate change: Recent climate shocks have raised concerns about India’s wheat and rice production over the next year. Therefore, it is important to place a greater focus on climate adaptation and resilience building.
    • Rising population will need more resource: By 2030, India’s population is expected to rise to 1.5 billion. Agro food systems will need to provide for and sustainably support an increasing population.
    • The challenge of Soil degradation: Nutrition and agricultural production are not only impacted by climate change but also linked to environmental sustainability. Soil degradation by the excessive use of chemicals, non-judicious water use, and declining nutritional value of food products need urgent attention.

    How India managed its food security?

    • Constant efforts towards Self-sufficiency: India has had an inspiring journey towards better production and achieving self-sufficiency and is now one of the largest agricultural product exporters. During 2021-22,it recorded $49.6billion in total agriculture exports a 20%increase from 2020-21.
    • Efficient targeted public distribution system: One of India’s greatest contributions to equity in food is its National Food Security Act (NFSA)2013 which anchors the Targeted Public Distribution System (TPDS), the PM POSHAN scheme (earlier known as the Midday Meals scheme), and the Integrated Child Development Services (ICDS).
    • Extensive food safety net: Today, India’s food safety nets collectively reach over a billion people. The WFP works with State and national governments to strengthen these systems to reach the people who need them most.
    • Large scale digitization of programmes: The Government continues to take various measures to improve these programmes with digitisation and measures such as rice fortification, better health, and sanitation.
    • Better buffer stock policy: Food safety nets and inclusion are linked with public procurement and buffer stock policy visible during the global food crisis (2008-12)and the COVID19 pandemic fallout, whereby vulnerable and marginalised families in India continued to be buffered by the TPDS which became a lifeline.
    • Successful implementation of PMGKAY: An International Monetary Fund paper titled ‘Pandemic, Poverty, and Inequality: Evidence from India’ asserted that‘ extreme poverty was maintained below 1% in 2020 due to the Pradhan Mantri Garib KalyanAnna Yojana (PMGKAY

    Food Security

    How India and World can manage food security?

    • Avoiding conventional input intensive agriculture: There is increased recognition to move away from conventional input intensive agriculture towards more inclusive, effective and sustainable agro food systems that would facilitate better production.
    • Promoting sustainable practices: Since 1948, the FAO has continued to play a catalytic role in India’s progress in the areas of crops, livestock, fisheries, food security, and management of natural resources through the promotion of sustainable practices.
    • Focus on millets: Millets have received renewed attention as crops that are good for nutrition, health, and the planet. As climate-smart crops, they are hardier than other cereals. Since they need fewer inputs, they are less extractive for the soil and can revive soil health.
    • India’s Efforts as an example: India has led the global conversation on reviving millet production for better lives, nutrition, and the environment, including at the UN General Assembly, where it appealed to declare 2023 as the International Year of Millets. It is the world’s leading producer of millets, producing around 41% of total production in2020. The national government is also implementing a Sub-Mission on Nutrition-Cereals (Millets) as part of the National Food Security Mission.
    • G20 presidency an opportunity for India: India’s upcoming G20 presidency is an opportunity to bring food and nutrition security to the very centre of a resilient and equitable future.

    Food Security

    Conclusion

    • India can lead the global discourse on food and nutrition security by showcasing home grown solutions and best practices, and championing the principle of leaving no one behind working continuously to make its food system more equitable, empowering, and inclusive.

    Mains Question

    Q.Food security has become increasingly challenging due to unpredictable weather conditions. Illustrate. How India can contribute to the global food security issue.

    UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)