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GS Paper: Issues relating growth and development, employment

South Asia Need to Invest In Human Capital
Central Idea
- The last few years have ushered in a harsh new reality where crises are the norm rather than the exception. Pandemics, economic slumps and extreme weather events were once tail-end risks, but all three have hit South Asia in rapid succession since 2020. To strengthen resilience and protect the well-being of future generations, governments across South Asia need to take urgent policy action and invest in human capital.
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South Asia Overview
- Countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
- Population: The region has a total population of over 1.8 billion people, making it the most populous region in the world.
- Geography: South Asia has a diverse geography, with mountain ranges such as the Himalayas and Hindu Kush, major rivers like the Ganges, Indus, and Brahmaputra, and coastal areas along the Arabian Sea, Bay of Bengal, and Indian Ocean.
- Economy: India is the largest economy in the region, accounting for more than 70% of the region’s total GDP. Agriculture is a major employer in most countries, with rice and wheat being staple crops. The manufacturing sector is also a significant contributor to the region’s economy, with textiles, garments, and leather products being major exports
- Climate: The climate of South Asia is varied, with the monsoon season bringing heavy rainfall to much of the region and causing flooding in some areas. The region’s geography and size also result in varying climate patterns. In general, the region experiences hot and humid summers and mild winters.
- Climate Change Risks: Climate change poses significant risks to the region, with some areas, such as the Maldives, at risk of sea level rise. Other risks include increased frequency and severity of extreme weather events, such as floods and droughts. The region is also vulnerable to the impacts of climate change on health, including increased incidence of heat-related illness and infectious diseases.
- Biodiversity and Environmental Threats:
- South Asia is home to several biodiversity hotspots, such as the Western Ghats in India and the Eastern Himalayas.
- However, the region faces significant environmental threats, such as deforestation, air and water pollution, and climate change.
- Deforestation is a major problem in the region, with logging and land use change leading to habitat destruction and loss of biodiversity.
An underutilized asset of South Asia: Analysis
- South Asia’s people are its biggest asset but remain wastefully underutilized:
- With nearly half its population under the age of 24 and over one million young people set to enter the labour force every month until 2030, the region could reap an enviably high demographic dividend.
- Stunting one of the significant challenges: South Asia is also home to over one third of the world’s stunted children. And a child born in the region today can, by the age of 18, expect to attain only 48% of their full productive potential.
- Governments spending on Health and education: South Asian governments on average spend just 1% of GDP on health and 2.5% on education. In comparison, the global average is 5.9% on health and 3.7% on education.
- COVID-19 pandemic, a blow to regions human capital: The COVID-19 pandemic, which pushed an additional 35 million people across South Asia into extreme poverty, dealt an unprecedented blow to the region’s human capital. Among its most woeful impacts is a rise in learning poverty, or the inability to read and understand a simple text by age 10. Ineffective remote instruction, during the pandemic increased South Asia’s learning poverty from 60% to 78%.
- The poorest and most vulnerable people fell further behind: For example, in Bangladesh, the poorest students lost 50% more in terms of learning than the richest students. Several countries still show little to no signs of recovery, and South Asia’s students could lose up to 14.4% of their future earnings.
Interventions that can make a difference
- Affordable education: Recent evidence suggests that even simple and low-cost education programmes can lead to sizable gains in skills.
- For instance:
- In Bangladesh attending a year of additional pre-school through two-hour sessions significantly improved literacy, numeracy, and social-development scores.
- In Tamil Nadu, six months of extra remedial classes after school helped students catch up on about two-thirds of lost learning linked to 18 months of school closures.
- In Nepal, government teachers ran a phone tutoring programme that helped increase students’ foundational numeracy by 30%.
- Robust systems for crisis management: The need for countries to have robust systems in place to support individuals and families during times of crisis. Such systems, which can include social safety nets, health care, and education programs, can help to mitigate the impact of crises like the pandemic, protect vulnerable populations, and promote resilience. By investing in these systems before a crisis strikes, countries can better prepare themselves to respond to the challenges that may arise.
- Use data and technology: Effective systems are needed to respond to crises quickly and maintain vital services like healthcare and education. Coordination across sectors is important. Data and technology play a crucial role in the delivery of services, human development systems should ensure they are effectively used.
World Bank study: Interdependence of health, education and skills for human development
- A new World Bank study, Collapse and Recovery: how COVID eroded human capital and what to do about it, analyses the pandemic’s impacts on young people, stresses the multi-dimensional and complementary nature of human development.
- The health, education, and skills people acquire at various stages of their lives, build and depend on each other.
- To be effective, human development systems must recognise and exploit these overlapping connections. In other words, they should be agile, resilient and adaptive.
Conclusion
- The road ahead for South Asia is rocky. The next crisis may be just around the corner. A robust human development system would not only mitigate the damage but also help ensure lives and livelihoods are protected. It could provide the resilience South Asia needs to prosper in an increasingly volatile world. While the outlook is grim, it is important to remember that well-designed and implemented interventions can make a difference if governments act fast.
Mains question

Q. South Asia possesses remarkable human capital, but it remains underutilized and has been further impacted by the COVID-19 pandemic. Discuss and suggest what can be done to address the issues?

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March 3, 2023
SDGs: India’s Progress Analysis
Central Idea
- A recent analysis published in The Lancet has concluded that India is not on-target to achieve 19 of the 33 Sustainable Development Goals (SDGs) indicators. The critical off-target indicators include access to basic services, wasting and overweight children, anaemia, child marriage, partner violence, tobacco use, and modern contraceptive use.
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Analysis
- On-Target: Districts that have not met the SDG target by 2021 and have observed a magnitude of improvement between 2016 and 2021 sufficient to meet the target by 2030.
- Off-Target: Districts that have not met the SDG target by 2021 and either observed worsening between 2016 and 2021 or observed an insufficient magnitude of improvement between 2016 and 2021. If these districts continue with either of these trends, they will not meet their targets by 2030.
- Progress in: Indicators shows the progress in reducing adolescent pregnancy, tobacco use in women, multidimensional poverty, teenage sexual violence, and improving electricity access.
- Areas where more efforts are needed: More efforts are needed for reducing anaemia in women, improving access to basic services, providing health insurance for women, and reducing anaemia in pregnant women.
Sustainable Development Goals (SDGs)
- The SDGs, otherwise known as the Global Goals, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.
- The SDGs were adopted by the United Nations in 2015 with a vision to achieve a better and more sustainable future for all. The 17 SDGs came into force with effect from 1st January 2016 as a part of 2030 Agenda for Sustainable Development.
- India is one of the signatory countries that has committed to achieving these goals by 2030.
- Though not legally binding, the SDGs have become de facto international obligations and have the potential to reorient domestic spending priorities of the countries during the next fifteen years.
- Countries are expected to take ownership and establish a national framework for achieving these goals.
Targets set for each of the SDGs
- No Poverty: By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day.
- Zero Hunger: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious and sufficient food all year round.
- Quality Education: By 2030, ensure that all girls and boys complete free, equitable and quality primary and secondary education leading to relevant and effective learning outcomes.
- Gender Equality: End all forms of discrimination, violence, harmful practices against all women and girls everywhere. Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life.
India’s progress towards achieving SDGs so far
- SDG 1 (No Poverty): India has made significant progress in reducing poverty, with the poverty rate declining from 21.9% in 2011-12 to 4.4% in 2020. The government’s efforts to provide financial inclusion and social protection schemes have contributed to this progress.
- SDG 2 (Zero Hunger): India has made progress in reducing hunger, with the prevalence of undernourishment declining from 17.3% in 2004-06 to 14% in 2017-19. The government’s initiatives such as the National Food Security Act and the Pradhan Mantri Garib Kalyan Anna Yojana have contributed to this progress.
- SDG 3 (Good Health and Well-being): India has made progress in improving maternal and child health, with maternal mortality ratio declining from 167 per 100,000 live births in 2011-13 to 113 in 2016-18. The government’s efforts to strengthen health systems and increase access to healthcare services have contributed to this progress.
- SDG 4 (Quality Education): India has made progress in improving access to education, with the gross enrolment ratio for primary education increasing from 93.4% in 2014-15 to 94.3% in 2019-20. The government’s initiatives such as the Sarva Shiksha Abhiyan and the Right to Education Act have contributed to this progress.
- SDG 5 (Gender Equality): India has made progress in improving gender equality, with the sex ratio at birth increasing from 918 in 2011 to 934 in 2020. The government’s initiatives such as the Beti Bachao Beti Padhao and the Maternity Benefit Programme have contributed to this progress.
Recent findings by National Family Health Survey
- 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.
Conclusion
- The analysis provides a valuable tool for policymakers to address the gaps and focus on the indicators that require more attention, thereby improving the well-being of its citizens and creating a sustainable future for all.
Mains question

Q. What are Sustainable Development Goals (SDGs)? Discuss India’s progress made so far in achieving these targets

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March 2, 2023
R&D Expenditure And The Perils of Inadequate Data
Central Idea
- India’s research and development (R&D) expenditure-GDP ratio of 0.7% is very low when compared to major economies and is much below the world average of 1.8%. The main reason is the low investment in R&D by the corporate sector.
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Overview: Spending’s on R&D in India
- While the corporate sector accounts for about two-thirds of gross domestic expenditure on R&D (GERD) in leading economies, its share in India is just 37%. There is evidence, however, suggesting that India’s GERD data are an underestimate.
- A 2022 infobrief of the National Science Foundation (NSF) of the United States on Foreign R&D by U.S.-based multinational corporations (MNCs) shows a spend of $9.5 billion (₹649.7 billion) on R&D in India in 2018, which increased to $9.8 billion (₹690.2 billion) in the following year.
- There are MNCs from other leading countries also spending on R&D in India.
- But the latest Research and Development Statistics, published by the Department of Science and Technology (DST) in 2020, has provided an estimate of ₹60.9 billion R&D spending in 2017-18 by foreign MNCs, which is only about 10% of what U.S. firms have reported to have spent in India on R&D.
What is Gross Domestic Expenditure On R&D (GERD)?
- Gross domestic spending on R&D is defined as the total expenditure (current and capital) on R&D carried out by all resident companies, research institutes, university and government laboratories, etc., in a country.
- It includes R&D funded from abroad, but excludes domestic funds for R&D performed outside the domestic economy.
- This indicator is measured in USD constant prices using 2015 base year and Purchasing Power Parities (PPPs) and as percentage of GDP.
- It is often used as an indicator of a country’s level of innovation and technological progress.
Issues with the current system
- NSTMIS compiles GERD data: The National Science and Technology Management Information System (NSTMIS) of the DST is the agency that compiles GERD statistics in India.
- Challenge is to collect data from private sector: It is easier to gather the information on R&D by the government sector, the higher education sector and public sector enterprises. The challenge lies in collecting data from the private corporate sector.
There are two key factors that make the official R&D estimates grossly inadequate
1. The method used for identification of R&D performing firms does not capture all the R&D performing firms.
- NSTIMS uses DSIR and Prowess to identify R&D units: A study found only 11% of 298 firms receiving foreign investment (2004-16) for R&D were registered with DSIR. Prowess covers only 3.5% of currently active registered enterprises in India. Leading enterprises in new technology areas may not be listed in both databases, such as SigTuple Technologies.
- The DSIR list may not have many of the actual R&D performers for two reasons: Firms which consider government incentives as not attractive enough or that are sensitive about sharing critical information with the DSIR may not be inclined to register themselves with the DSIR. 2. It may be difficult for R&D firms in services such as software and R&D services to meet the requirement of having separate infrastructure for R&D to distinguish it from their usual business. In fact, many of the R&D performing enterprises in new technology areas may come under the services category.
1. The survey conducted by the NSTMIS is the key source of R&D statistics of India
- Data from Secondary sources works only if firms disclose their R&D spending: If firms don’t respond to the survey, data is collected from secondary sources like annual reports and Prowess. Some firms don’t report R&D spending despite their technology activities, patents and innovators. They may not feel obliged to report accurately to Indian regulatory authorities.
- For instance: A review of the documents submitted to the Ministry of Corporate Affairs (MCA) by some R&D-oriented firms shows that there are firms which do not report any spending on R&D in spite of their declarations that suggest that they are engaged in activities of technology development, adoption and adaptation.
What is to be done?
- Short term measure: the NSTMIS should use the patents granted data, both in India and the U.S., in addition to its current method to identify R&D performing enterprises.
- Mandatory disclosure: Annual R&D estimates can be prepared from mandatory disclosures that the enterprises are required to make to the MCA.
- Technologies can be employed to ensure compliance and proper reporting: In order to ensure compliance and proper reporting, technologies can be used like in the case of revamped income-tax return forms where various sections are interlinked.
- Spending data should be made an essential component of ESG: Additionally, proper disclosure of information to regulatory agencies, including R&D spending data, should be made an essential component of the environmental, social and governance (ESG) ranking of enterprises.
Conclusion
- Concrete data on R&D spending is crucial as it helps to identify areas needing investment, promotes economic growth, informs policymaking decisions, tracks progress, and evaluates policy effectiveness in promoting innovation and technological development. Transforming India’s R&D statistics to truly reflect the R&D ecosystem calls for short-term and medium-term measures.
February 24, 2023
Four-day workweek: Analysis
Central Idea
- Much is being made about the major breakthrough in one of the largest-ever experiments with a four-day workweek in Britain. Sixty-one companies were part of the six-month trial and 56 of them have opted to continue with the program, while 18 have made it permanent. 4 Day Week Global trial, overseen by Autonomy, aimed to improve work-life balance by allowing workers to work four days instead of five with the same salary and workload.
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Advantages of implementing a four-day workweek
- Improved Work-life balance: Having a positive work-life balance can also allow professionals to adopt a better attitude about their work, as they can return to their jobs well-rested. This can help employees remain productive and enthusiastic while working.
- Increased job satisfaction: With more free time, employees may feel more satisfied with their jobs and be more engaged at work.
- Reduced absenteeism and turnover: Offering a four-day workweek could make companies more attractive to potential employees, and employees may be less likely to miss work or leave their jobs if they have a better work-life balance.
- Increased productivity: Some studies have shown that shorter workweeks can actually boost productivity, as employees may be more focused and efficient during their work hours.
- Positive environmental impact: Working four days per week decreases the number of times a professional commute to work. This is helpful to the environment, as most vehicles produce emissions that can harm the environment.
Potential disadvantages
- Limited impact: The benefits of a four-day workweek may be limited in certain industries or job types, such as those that require shift work or have strict deadlines.
- Increased workload: Employees may feel pressure to complete the same amount of work in fewer hours, resulting in an increased workload and potential burnout.
- Reduced productivity: Some employees may find it difficult to maintain focus and productivity over longer workdays. This could lead to a decrease in overall output and quality of work.
- Impact on customer service: If businesses are closed for an extra day each week, it may be more difficult to provide customer service or maintain consistent operating hours.
- Reduced income: With a shorter workweek, employees may see a reduction in their pay, which could be a disadvantage for those who rely on their income to cover living expenses.
Examples of companies/organizations considering a four-day workweek
- Microsoft Japan: In 2019, the tech giant conducted a trial where employees worked a four-day week and saw a 40% increase in productivity.
- Iceland: A number of companies and organizations in Iceland have experimented with shorter workweeks, including the country’s government, which is exploring a four-day workweek for public servants.
- New Zealand: Unilever New Zealand recently announced it would be trialing a four-day workweek for all of its employees, while the country’s prime minister, Jacinda Ardern, has previously spoken in favor of the idea.
- Spain: The government of Spain has proposed a three-year trial of a four-day workweek, with the goal of improving work-life balance and boosting productivity.
Feasibility of Four-day workweek in India’s context
- Will require a careful analysis: The feasibility and impact of a four-day workweek in India would depend on various factors such as industry type, workforce demographics, and cultural norms. Implementing a four-day workweek in India would require careful analysis of various factors.
- For instance: With the rise of remote work and the increased focus on work-life balance four day week option could be helpful to enhance productivity with improved work life balance in corporate sector.
- Complex regulations: India’s labour laws and regulations are complex and provide significant protections for workers. Any changes to work arrangements, including a four-day workweek, would need to comply with these laws and ensure that employees’ rights and benefits are protected.
- For example: Any reduction in working hours would need to be accompanied by appropriate compensation and benefits to ensure that employees do not suffer financial losses.
- Specific needs of industries: The feasibility of a four-day workweek would depend on the specific needs of different industries.
- For instance: While some knowledge-based sectors may be well-suited to a four-day workweek, industries that require continuous operations or shift work, such as manufacturing or healthcare, may face significant challenges in implementing a shorter workweek.
Conclusion
- It’s important to carefully consider the potential advantages and disadvantages of a four-day workweek before implementing it in any workplace. The impact may vary depending on the specific work arrangements and the needs of the employees and customers.
February 23, 2023
Divyang friendly digital infrastructure in India
Central Idea
- The estimation in Census 2011, that 2.21% of India’s population is disabled is a gross underestimation. According to the World Health Organization, about 16% of the global population is disabled. While technology has enormous potential to level the playing field for the disabled, it can, at the same time, reinforce the barriers that the disabled otherwise face if it is not designed with their needs in mind.
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Smartphone users with disabilities in India
- It is difficult to determine the exact number of smartphone users with disabilities in India, as there is no specific data available on this.
- However, according to the 2011 Census of India, there are approximately 2.68 crore (26.8 million) people with disabilities in the country.
- India, it is reported, had 750 million Internet/smartphone users in 2020.
- Applying the 16% figure here, this works out to be roughly 120 million (12 crore) Internet/smartphone users with disabilities.
A Report on Accessibility of Apps
- Evaluation of the most widely used apps: A report that evaluates the accessibility of 10 of the most widely used apps in India, across five sectors. The apps were Zomato, Swiggy, PayTM, PhonePe, Amazon, Flipkart, Uber, Ola, WhatsApp and Telegram.
- Goal for launching this report is to start discussion on digital accessibility: 1. Objective assessment of the digital accessibility of the apps. 2. To work with these service providers and help them design practices and processes that will not only improve app accessibility but also educate their stakeholders about accessibility and people with disabilities.
- Findings of the report: Based on the number of violations, categories developed on the level of accessibility of the apps as high, medium and low. Report found that four out of the 10 apps ranked low, while five were in the medium category.
key efforts for Divyanga friendly digital infrastructure
- Guidelines for Indian Government Websites: The Department of Administrative Reforms and Public Grievances (DARPG) has developed guidelines for making government websites accessible to people with disabilities. The guidelines cover various aspects of website design and development, such as colour contrast, keyboard accessibility, and assistive technology compatibility.
- Accessible India Campaign/ Sugamya Bharat Abhiyan: The Campaign was launched by the government in 2015 to make public spaces, including government buildings, transportation, and information and communication technologies (ICT), more accessible to people with disabilities.
- Bharat Interconnectivity Limited (BIL): BIL is a subsidiary of Bharat Sanchar Nigam Limited (BSNL) that provides accessible internet and telecom services to people with disabilities. It offers services such as audiobooks, sign language interpretation, and accessible websites and mobile applications.
- National Institute of Speech and Hearing (NISH): NISH is an autonomous institute under the Department of Empowerment of Persons with Disabilities, Ministry of Social Justice and Empowerment. It provides training and research in the field of speech and hearing disabilities and also offers services like audiobooks and accessible software.
- Making assistive technology more affordable and accessible: The government has also taken steps to make assistive technology more affordable and accessible to people with disabilities.
- For example: The Department of Empowerment of Persons with Disabilities provides financial assistance to purchase assistive devices and the Assistive Technology Industry Association (ATIA) has been established to promote research and development of assistive technology.
Measures to improve the accessibility of digital services
- Promoting education and awareness: Steps must be taken to raise awareness about the needs and capabilities of people with disabilities. This could include providing training to developers and designers on how to create accessible digital products and services.
- Enforcing web accessibility standards: The government should ensure that all websites and mobile applications comply with web accessibility standards such as the Web Content Accessibility Guidelines (WCAG). This will make it easier for people with disabilities to access digital services.
- Encouraging inclusive design: Designing products and services that are accessible to all users, including those with disabilities, should be an essential part of the design process. Companies and developers should be encouraged to incorporate inclusive design principles into their products from the beginning.
- Conducting regular accessibility audits: Regular accessibility audits should be conducted to ensure that digital products and services are accessible to people with disabilities. This can help identify barriers and areas of improvement.
Conclusion
- Core to the project of securing a more disabled friendly digital ecosystem must be the conviction that, everything digital must be accessible to everyone. This starts with incorporating the principles of accessibility and inclusive design into every digital offering, right from inception. India needs to be truly accessible for all people with disabilities. Organisations, companies, civil society, the government and the courts must make this happen.
Mains question

Q. Discuss the efforts of the Indian government towards creating a Divyanga-friendly digital infrastructure and suggest measures to improve the accessibility of digital services.

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February 15, 2023
Possibility of global recession?
Context
- There have recently been growing concerns about the global economy slipping into recession. These concerns were primarily triggered by the contraction of the US economy, observed in the first half of 2022. Negative growth in two consecutive quarters is commonly but not officially used as an indication of recession.
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Background: Status of the US economy
- First and second quarter of 2022: As reported by the Bureau of Economic Analysis (BEA), the US real Gross Domestic Product (GDP adjusted for inflation) decreased at an annual rate of 1.6 per cent and 0.6 per cent in the first and second quarters of 2022, respectively.
- Third quarter: In the third quarter, however, the US economy grew by 3.2 per cent, signalling a significant recovery.
- Fourth quarter: The latest BEA advance estimates show that the US real GDP increased at an annual rate of 2.9 per cent in the fourth quarter.
- Expansion of US economy a positive sign: Despite the slight decrease from the third quarter, the continued expansion of the US economy at the end of 2022 marks a positive sign, soothing concerns about a recession in 2023.
Economic recovery of the US economy
- Positive growth in fourth quarter: The positive growth in the fourth quarter can primarily be attributed to consumer spending, which increased by an annualised rate of 2.1 per cent, and private inventory investment that showed an upturn in 2022. Although a significant decline from the 5.9 per cent increase in 2021, the difference accounts for the enthused post-Covid economic recovery in 2021.
- The US labour market continues to remain robust: The unemployment rate was recorded at a low of 3.5 per cent in December 2022, matching the pre-pandemic levels. Also, the total non-farm payroll employment increased by 2,23,000 in December, exceeding the Dow Jones estimate of 2,00,000.
- Inflation has eased: While the labour market remains tight, US inflation has eased in the last few months. Consumer prices fell 0.1 per cent in December the largest month-over-month decrease since April 2020, due to reductions in motor vehicle and gasoline prices.
- Layoffs not yet translated into rise in jobless claims: Although not a perfect association, the decline in jobless claims in January shows that the mass layoffs in recent weeks, particularly in the tech sector, have not yet translated into a rise in claims, suggesting the possibility of finding new jobs.
- The reopening of China’s borders can have positive implications for the global economy: As China resumes its economic activities to pre-Covid levels by boosting growth, domestic consumption is expected to increase significantly. With the ease of trans-border movement and eventual increase in exports of consumer and industrial goods, global trade is expected to strengthen as well.
What is Recession?
- A recession is a significant decline in economic activity that lasts for months or even years.
- Experts declare a recession when a nation’s economy experiences negative GDP, rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
- Recessions are considered an unavoidable part of the business cycle or the regular cadence of expansion and contraction that occurs in a nation’s economy.
Possibility of a global recession
- Elevated inflation continues to be a cause for global concern: Despite the fall in consumer prices, the headline CPI for the US showed an annual increase of 6.5 per cent in December 2022. In spite of the slow-paced increase in headline CPI, persistent elevation in core inflation excluding food and energy continues to be a major issue across economies.
- Interest Rate Hikes on the Horizon: Consequently, the central banks are expected to continue with interest rate hikes in the coming months. On an annualised level, the CPI inflation in Australia also jumped to 7.8 per cent in the 2022 fourth quarter, increasing the likelihood of respective interest rate hikes as well.
- China’s Impact on Commodity Prices: Moreover, an increase in China’s demand for goods post-reopening could drive up commodity prices, thereby creating an inflationary impact. For instance, China’s increased demand for natural gas would mean more competition with the European market, leading to higher commodity prices that can put further inflationary pressures on Europeans already dealing with high energy bills.
- Higher borrowing costs: Rising interest rates would incur even higher borrowing costs that could dampen consumer spending. While sectors sensitive to high borrowing costs such as housing and construction have slowed down significantly.
Conclusion
- Among the positive signs are the continued expansion of the US economy and the reopening of China’s borders. Rising inflation remains a cause for global concern. However, prevalence of mixed signals suggests that the onset and depth of a global recession in 2023 are not certain.
Mains question

Q. Highlight the current situation of global economies. Discuss if there’s a global recession in 2023?

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January 31, 2023
Layoff and the conditions for retrenchment
Context
- Last year, around 1,60,000 workers in the tech industry were laid off globally. In contrast, in just this month alone some 60,000 tech workers have been laid off till now. On the back of a gloomy global economic outlook and prospects of a possible recession, tech firms across the world from US-based giants like Alphabet, Amazon and Meta to early-stage startups have engaged in large-scale retrenchments.
What is means by Lay-Off?
- A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee’s performance.
- Employees may be laid off when companies aim to cut costs, due to a decline in demand for their products or services, seasonal closure, or during an economic downturn.
- When laid off, employees lose all wages and company benefits but qualify for unemployment insurance or compensation (typically in USA).
Inflation after strong recovery of the global economy: Two factors
- Outpaced demand: Buoyed by extraordinary pandemic relief support to households, aggregate demand in advanced economies outpaced supply.
- Supply chain disruption as a result of Russia- Ukraine war: the armed conflict between Russia and Ukraine caused supply-chain disruptions, leading to global inflationary pressures for food and fuel. In response, the US Federal Reserve has rapidly hiked rates.
Layoff drive in India
- Lay-offs in India: As multinational firms seek to cut their payroll figures worldwide, this lay-off drive has made its way to India as well.
- Impact on Indian workers: Indian workers, including expatriates and local employees, in both the traditional IT sector and the tech-based startup sector have been affected.
- Slowdown in funding in 2022: Despite a strong start, funding in India began to slow down in 2022, with third-quarter funding falling to a two-year low.
- Rising interest rates and cost of capital: Rising interest rates have meant that the cost of capital has increased and venture capitalists have to be more selective about how they deploy funds in this funding winter.
- Restructuring and cost-cutting for Indian tech startups: Indian tech startups are under pressure to cut costs and restructure their businesses in search for profitability. As a result, startups, including unicorns have engaged in broad-based retrenchments.
Retrenchment conditions according to Industrial Disputes Act
- One month notice with reasons is must: Employers must give a one-month notice with reasons for retrenchment to workers who have been in continuous service for at least a year.
- Must provide compensation: Employers must give retrenchment compensation.
- Notice shall be served: A notice in the prescribed manner must be served on the appropriate government.
- Principle of last come first go shall be followed: Employers must follow the principle of last come, first go while retrenching employees.
Concerns for contract workers
- Employers often skirt legal requirements by asking for voluntary resignations to remain outside the scope of retrenchment provisions.
- In any case, these mandates only apply to non-managerial employees; managerial employees are governed by their employment contracts.
- There are no similar protections available to gig or contract workers.
Conclusion
- Even as India seeks to lead a digital and technologically-driven world, it is important to note that the tech sector is not immune to harsh macroeconomic realities. It is crucial for the government and private sector to work together to mitigate the impact of layoffs on workers and to ensure that the industry continues to grow and create opportunities for all.
Mains question

Q. Layoffs have been frequently reported in the news recently. In this context, briefly explain the term layoffs and discuss the factors contributing to them? Highlight the impact of layoffs in India.

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January 30, 2023
China plus one (C+1) strategy and advantage for India
Context
- In January 2023, India surpassed China to become the world’s most populous country with a population count of approximately 1.417 billion as against China’s 1.412 billion, as estimated by the World Population Review (WPR). This creates both opportunities and challenges for India.
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The global turmoil and China as enablers of the Indian growth story
- There are three factors that have enabled the Indian growth story.
- Overdependence on specific economies: If the pandemic had had one crucial lesson for the global economy, it must be reducing the overdependence on China-specific Global Value Chains (GVCs). As is evident from the pandemic, the subsequent Ukraine-Russia war or the recent disastrous COVID-19 surge in China the overdependence on specific economies is bound to have cascading effects on the world economy because of the macroeconomic shocks they produce.
- Glocalised models of economic partnerships: Countries now strive to strike the right balance between globalisation and localisation, through bilateral and multilateral platforms characterised by leveraging sub-regional comparative advantages. To a large extent, these emerging forms of glocalised models are also based on controlling Beijing’s political and economic prowess in the Indo-Pacific and beyond, where India plays an active role.
- Use of technology: There is no doubt that the pandemic has provided an uptick in the use of technology ranging from the provision of social security payments at the grassroots to government-level conferences.
China plus one (C+1) strategy
- The US-China trade war and the pandemic-induced supply chain disruptions emanating from China have indeed paved the way for many western corporates to consider a China Plus One (C+1) strategy.
- The strategy would entail diversifying investments from China to other countries, to mitigate the economic and geopolitical risks associated with the former.
- While many also hail Vietnam as another economy to be in the race of attracting investments fleeing China, India could be the potential frontrunner in the C+1 game.
Why makes India to surge ahead in C+1?
- India’s economic advancement: India has a demographic advantage over China, with a larger percentage of its population under 30. This young population is expected to drive consumption, savings, and investments, leading to India’s goal of a multi-trillion dollar economy.
- Low cost of labour is an advantage: India has a low cost of labor and other forms of capital, making production costs lower and increasing competitiveness in international markets. India’s labor cost is also half that of Vietnam, making it a strong player in electronics and semiconductor manufacturing.
- India’s heavy infrastructure investment: A heavy investment in physical infrastructure through the National Infrastructure Pipeline (NIP) is expected to reduce costs in manufacturing sectors and cut transportation time and costs by 20%. This is in contrast to China, where multiple companies handle different parts of the transportation process, increasing costs
- India’s conducive business environment: Recent policy interventions in India such as the Production Linked Incentive (PLI) scheme, tax reforms, liberalization of FDI policies, setting up of land pools and organizing business summits have helped attract investments to the domestic economy. These efforts, driven by the Make in India initiative, have also been supported by efforts to promote competitive federalism and reduce transaction costs of doing business.
- India’s digital advantage: India’s high internet penetration at 43% allows for digital skilling initiatives to bring returns across various economic sectors, particularly services. A combination of home-grown technologies and greater access to Google and Facebook, which are banned in China, gives Indian youth a digital edge.
- As English is the second language provides ease of communication: the prevalence of the English language skill set in the young Indian populace undoubtedly puts India ahead of China. As English is the second official language in the Indian states, it provides business executives with ease of communication in conducting business with North American and European clients.
- Well balanced economic partnerships: India’s economic partnerships are characterized by utilizing sub-regional comparative advantages and controlling Beijing’s political and economic power in the Indo-Pacific. India’s decision to not join the RCEP in 2020 to protect its domestic market and curb trade deficits sends a strong signal of its disassociation with Beijing in trade partnerships. The CEPA signed with the UAE in 2022 is expected to increase two-way trade to $100 billion in five years by opening access for Indian exporters to Arab and African markets.
- Dynamic Indian diplomacy: India has strengthened its economy through diplomatic partnerships and trade agreements, such as the QUAD, I2U2, and agreements with Australia, Canada, the European Union, and African countries. These partnerships have provided Indian businesses with greater access to finance, technology, and new markets. As India assumes the presidency of the G20 and the Shanghai Cooperation Organization this year, it is well-positioned to navigate changing globalisation trends and be a strong voice for the Global South.
- Most important is the large domestic market: India’s large domestic market with a population of 1.3 billion and increasing incomes at 6.9 percent per annum offers a competitive alternative to China’s massive domestic market. With a population base of 98 million, Vietnam’s market is much smaller in comparison.
Conclusion
- Indian economy that has risen from the ashes like a phoenix after a year of negative growth caused by the pandemic-led lockdown. India’s 74th Republic Day, therefore, should not merely mark a remembrance of the past or a celebration of adoption of the world’s largest and most comprehensive constitution, but should also be a celebration of the dazzling future of a roaring economy that will show light to a dreary world.
Mains question

Q. What is China plus one (C+1) strategy? Discuss why it is said that India will surge ahead in C+1?

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January 27, 2023
India’s Path to Prosperity through Formal Employment
Context
- Mass prosperity for massive populations is hard. India’s large remittances from a small population overseas and IT sectors employability reinforce that our mass prosperity strategy should be human capital and formal jobs.
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Why human capital formation is effective tool for mass prosperity?
- Disproportionate contribution of IT employees: A strong case for human capital-driven productivity is our software employment — 0.8 per cent of workers generate 8 per cent of GDP.
- Remittance by NRIs: This case is reinforced by remittances from our overseas population of less than 2 per cent of our resident population crossing $100 billion last year.
- Shift towards formal employment: A World Bank report suggests that the qualitative shift during the previous five years from low-skilled, informal employment in Gulf countries (dropped from 54 per cent to 28 per cent) to high-skilled formal jobs in high-income countries (increased from 26 per cent to 36 per cent) is significant.
- Remittances are higher than FDI: Our rich forex remittance harvest roughly 25 per cent higher than FDI and 25 per cent less than software exports is fruit from the tree of human capital and formal jobs.
Limitations of Fiscal and monetary policy
- Credit availability is bigger issue: Monetary policy is, at best, a placebo, painkiller, or steroid especially since credit availability is a bigger problem in India than credit cost.
- Source of finance is important than expenditure: Global experience suggests where governments spend money (pensions, interest, salaries, education, healthcare, roads, etc) and how this spending is financed (taxes or debt) matters more than how much is spent (about Rs 80 lakh crore in India this year).
- Fiscal policy tends to overshoot: Covid made enormous fiscal and monetary policy demands, but the bigger the binge, the bigger the hangover. Western central banks are struggling to shrink their balance sheets because they used what Harvard’s Paul Tucker calls “unelected power” to chase goals outside their mandate, administer medicine with poorly understood side effects, and speed down highways with no known return paths.
- India avoided the fiscal and monetary trap: Rich-country borrowing rates have risen by 300 per cent plus and inflation hurts the poor the most. India avoided these fiscal and monetary policy excesses. This prudence now combines with previous structural reforms (GST, IBC, MPC, UPI, DBT, NEP, etc) and a reform “tone from the top” to create a fertile habitat for productive citizens and firms.
What should be the strategy in next fiscal year for employment generation?
- Targeting the job creation: The Finance Bill must target productivity and continuity by legislating human capital and formal job reforms previously proposed.
- NEP should be implemented in 5 years: It should reduce the implementation glide path for the powerful National Education Policy 2020 from 15 years to five years.
- Abolishing the licensing: It should abolish separate licensing requirements for online degrees and freely allow all our 1,000-plus accredited universities to launch online learning.
- Accelerating apprentices: It should accelerate growing our 0.5 million apprentices to 10 million by allowing all universities to launch degree apprentice courses under tripartite contracts with employers under the Apprentices Act.
What are the other steps that can be taken through next budget?
- Notify labour code: It should notify the four labour codes for all central-list industries while appointing a tripartite committee to converge them into one labour code by the next budget.
- Universal enterprise number: It should continue EODB reforms by designating every enterprise’s PAN number as its Universal Enterprise Number.
- Remove the factory act: It should explore manufacturing employment by abolishing the Factories Act this painful Act accounts for 8,000 of the 26,000 plus criminal provisions in employer compliance and require all employers to comply under each state’s Shops and Establishment Act (like Infosys, TCS, and IBM India do).
- Ensuring better compliances by employer: It should create a non-profit corporation (like NPCI in payments) that will operate an API-driven National Employer Compliance Grid and enable central ministries and state governments to rationalise, digitise and decriminalise their employer compliances.
- Making EPFO contribution optional: Making employees’ provident fund contributions optional but raising employer PF contributions from the current 12 per cent to 13 per cent. It should notify a previous budget announcement to create employee choice in their contributions to health insurance (ESIC or insurance companies) and pensions (EPFO or NPS).
- Subsidy to high wage employer: Most importantly, it should link all employer subsidies and tax incentives to high-wage employment creation (a difficult-to-fudge and easy-to-measure effectiveness metric for this public spending is employer provident fund payment).
Conclusion
- Experience and evidence now firmly suggest the odds of mass prosperity in the planet’s most populous nation rise from possible to probable by anchoring our strategy in human capital and formal jobs rather than fiscal or monetary policy.
Mains Question

What are the limitations of Fiscal and monetary policy in mass welfare of people? What are the possible strategies for creation of mass prosperity in India?

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December 22, 2022
Urban-rural manufacturing shift: A mixed bag
Context
- There is growing evidence to suggest that the most conspicuous trend in the manufacturing sector in India has been a shift of manufacturing activity and employment from bigger cities to smaller towns and rural areas. This ‘urban-rural manufacturing shift’ has often been interpreted as a mixed bag, as it has its share of advantages that could transform the rural economy, as well as a set of constraints, which could hamper higher growth.
Recent data by Annual Survey of Industries for 2019-20
- In terms of capital: The rural segment is a significant contributor to the manufacturing sector’s output. While 42% of factories are in rural areas, 62% of fixed capital is in the rural side.
- In terms of value addition: In terms of output and value addition, rural factories contributed to exactly half of the total sector.
- In terms of employment: In terms of employment, it accounted for 44%, but had only a 41% share in the total wages of the sector.
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Why is this shift of manufacturing away from urban locations to rural?
- A report on manufacturing shift brought out by World Bank: The movement of manufacturing away from urban locations was brought out by the Work Bank in a report a decade ago, “Is India’s Manufacturing Sector Moving Away from Cities? Policy Research Working Paper, World Bank).
- Higher urban-rural cost caused this shift: This study investigated the urbanisation of the Indian manufacturing sector by “combining enterprise data from formal and informal sectors and found that manufacturing plants in the formal sector are moving away from urban areas and into rural locations, while the informal sector is moving from rural to urban locations”. Their results suggested that higher urban-rural cost ratios caused this shift.
- Steady investment in rural areas: This is the result of a steady stream of investments in rural locations over the last two decades.
- Input costs are relatively less in rural area: Rural areas have generally been more attractive to manufacturing firms because wages, property, and land costs are all lower than in most metropolitan areas.
- Factory floorspace supply constraints: When locations get more urbanised and congested, the greater these space constraints are.
- Increased capital intensity of production: The driving force behind such a shift is the continuing displacement of labour by machinery as a result of the continuous capital investments in new production technologies. In cities, factories just cannot be expanded as opposed to rural areas.
How this trend is a welcome sign?
- Fulfilling the need of balanced development: Given the size of the Indian economy and the need for balanced regional development, the dispersal of manufacturing activities is a welcome sign.
- Created an opportunity for small scale industries to survive after liberalization: In the aftermath of trade liberalisation, import competition intensified for many Indian manufacturers, forcing them to look for cheaper methods and locations of production. One way to cut costs was to move some operations from cities to smaller towns, where labour costs are cheaper.
- Source of livelihood diversification in rural area: The shift in manufacturing activities from urban to rural areas has helped maintain the importance of manufacturing as a source of livelihood diversification in rural India.
- Make up for loss of employment: This trend helped to make up for the loss of employment in some traditional rural industries. The growth of rural manufacturing, by generating new jobs, thus provides an economic base for the transition out of agriculture
What are the challenges ahead and a solution to it?
- While the input cost is less but the cost of capital is high, offsetting the benefits: Though firms reap the benefits of lower costs via lower rents, the cost of capital seems to be higher for firms operating on the rural side. This is evident from the shares in rent and interest paid. The rural segment accounted for only 35% of the total rent paid, while it had 60% of the total interest payments. The benefits reaped from one source seem to be offset by the increased costs on the other front.
- Skill shortages in rural area: There exists an issue of “skills shortage” in rural areas as manufacturing now needs higher skilled workers to compete in the highly technological global ‘new economy’. Manufacturers who need higher skilled labour find that rural areas cannot supply it in adequate quantities. Manufacturers who depend only on low-wage workers simply cannot sustain their competitive edge for longer periods as this cost advantage vanishes over time.
- Solution to this issue lies in skill development: This suggests the need for clear solutions to the problems of rural manufacturing and the most important is the provision of more education and skilling for rural workers. A more educated and skilled rural workforce will establish rural areas’ comparative advantage of low wages, higher reliability and productivity and hasten the process of the movement out of agriculture to higher-earning livelihoods
Conclusion
- Given the size of the Indian economy and the need for balanced regional development, the dispersal of manufacturing activities is a welcome sign. However, the compulsions of global competition often extend beyond the considerations of low-wage production and depend on the virtues of ‘conducive ecosystems’ for firms to grow.
Mains Question

Q. There is growing evidence to suggest that the trend in the manufacturing sector in India has been a shift of manufacturing activity and employment from bigger cities to smaller towns and rural areas. Discuss the reasons for this trend and note down the challenges ahead.

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December 14, 2022