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GS Paper: GS3

  • Youth Unemployment in India: A Persistent Challenge

    Central Idea

    • In 1932, M Visvesvaraya highlighted the issue of unemployment among educated individuals in India.
    • Ninety years later, the issue of youth unemployment remains a significant concern, despite official data indicating a decrease in the overall unemployment rate.

    Unemployment Trends: Data Analysis

    • Official Statistics: According to the Periodic Labour Force Survey (PLFS), the unemployment rate decreased from 6.1% in 2017-18 to 3.2% in 2022-23.
    • Disparities in Experience: Despite the overall reduction, young, highly educated workers face the highest unemployment rates, indicating a structural problem in the Indian economy.

    Educational Attainment and Unemployment

    • Higher Education and Unemployment: Individuals with higher education have consistently faced higher unemployment rates since the 1990s.
    • Trends Over Time: Unemployment rates for graduates have fluctuated, reaching 17% in 2017-18 and then dropping to 13% in 2022-23.

    Youth Unemployment

    • Young Graduates: The unemployment rate for young workers (aged 18 to 29) with graduate degrees has been notably high, with significant long-term unemployment spells.
    • Increasing Share of Graduates: The proportion of graduates in the labor force has risen from 5% in 1993-94 to around 15% in 2022-23, impacting overall unemployment rates.

    Challenges and Implications

    • Growing Concern: The increasing share of educated workers in the labor force, coupled with high unemployment rates among them, points to a deepening problem.
    • Need for Analysis: Understanding the causes of unemployment among the highly educated is crucial, whether it’s the education system’s failure to impart relevant skills or the economy’s inability to create sufficient jobs.

    Conclusion

    • Serious Issue: Youth unemployment in India is a critical issue that needs comprehensive analysis and action.
    • Harnessing Demographic Dividend: Effective measures are required to ensure that the aspirations of the youth are met and the potential of India’s demographic dividend is fully realized.
    • Policy Focus: Addressing youth unemployment requires targeted policies that focus on skill development, job creation, and aligning education with market needs.

  • RBI enhances Digital Payment Security with CoFT through Banks

    Central Idea

    • The Reserve Bank of India (RBI) has expanded the scope of card-on-file tokenisation (CoFT) services to include card-issuing banks and institutions, enhancing the security of digital payments.
    • Previously, tokenisation services were primarily provided through merchants. The RBI’s recent notification marks a significant shift in this approach.

    Understanding CoFT and Its Importance

    • Card-on-File (CoF) Concept: Traditionally, merchants stored customer card details (CoF) on their platforms, posing risks to financial data security.
    • Tokenisation Solution: To mitigate data breach risks, the RBI introduced tokenisation, where a unique token replaces actual card details at the merchant’s end.
    • Regulatory Measures: In March 2020, RBI mandated that payment aggregators and merchants should not store actual card data, aiming to minimize system vulnerabilities. The deadline for compliance was extended to December 2021 following industry requests.

    Implementation of CoFT by Card Issuers

    • Channels for Token Generation: Customers can generate CoFT tokens through mobile and internet banking, offering a convenient and secure method for digital transactions.
    • Consent and Authentication: Token generation requires explicit customer consent and Additional Factor of Authentication (AFA) validation, ensuring user control and security.
    • Flexibility for Cardholders: Cardholders have the flexibility to tokenise their cards at any time and select specific merchants for maintaining tokens.
    • Token Issuance: The tokens can be issued either by the card network, the issuer, or both, providing multiple layers of security.

    Impact and Adotion of CoFT

    • Enhancing Safety and Convenience: CoFT aims to secure card data without compromising the convenience of card transactions.
    • Implementation Timeline: The RBI introduced CoFT in 2021, with full rollout from October 1, 2022.
    • Usage Statistics: Since its implementation, over 56 crore tokens have been created, facilitating transactions worth over ₹5 lakh crore.

  • Kashmiri political outfit declared unlawful under UAPA

    Central Idea

    • The Ministry of Home Affairs (MHA) has declared the Muslim League Jammu Kashmir faction as an “unlawful association” under the Unlawful Activities (Prevention) Act (UAPA) for five years.
    • It is a very rare occasion that any election-contesting political party has been banned under UAPA.

    Government’s Stance

    • The Union Home Minister emphasized that the organization and its members are involved in anti-national and secessionist activities, supporting terrorism, and inciting people to establish Islamic rule in Jammu and Kashmir.
    • It stated that the faction is engaged in anti-India and pro-Pakistan propaganda, aiming for Jammu and Kashmir’s secession from India, its merger with Pakistan, and the establishment of Islamic rule.

    About Understanding the Unlawful Activities (Prevention) Act (UAPA)

    • Purpose: The UAPA aims to prevent unlawful activities and associations in India, focusing on maintaining the country’s integrity and sovereignty. Under Section 3 of the UAPA Act, the government has powers to declare an association “unlawful”.
    • Evolution: Originally passed in 1967, the UAPA has evolved from the Terrorist and Disruptive Activities (Prevention) Act (TADA) and the Prevention of Terrorism Act (POTA), with significant amendments in 2004 to include “terrorist act” in its scope.
    • Unlawful Activities: These include actions, whether by deeds, words, or visible representation, that work towards the cession or secession of a part of India, disrupt its sovereignty and territorial integrity, or cause disaffection against the country.
    • Unlawful Association: Under Section 3 of the UAPA Act, the government has powers to declare an association “unlawful”. An association can be deemed “unlawful” if it engages in, supports, or encourages unlawful activities, as defined under Section 2(p) of the UAPA.

    Unlawful Activities and Funding

    • Fundraising for Terrorism: The Ministry highlighted that the outfit has been raising funds through various sources, including Pakistan, to support unlawful activities and terrorism.
    • Stone-Pelting Incidents: The group’s involvement in stone-pelting against security forces was cited as a sign of disrespect towards India’s constitutional authority and setup.

    Linkages with Terrorist Organizations

    • Terror Connections: The MHA provided evidence of the faction’s connections with banned terrorist organizations and its role in supporting terrorist activities to instill terror in the country.
    • Government’s Concerns: The Central government expressed concerns that if unchecked, the faction would continue its anti-national activities, challenging India’s territorial integrity, security, and sovereignty.

    Implications of the Ban

    • UAPA Enforcement: The declaration under Section 3 (3) of the UAPA signifies a stringent approach against the group’s activities for the next five years.
    • National Security Focus: This move aligns with the government’s commitment to maintaining national security and integrity, particularly in the sensitive region of Jammu and Kashmir.

    Conclusion

    • Strong Message: The government’s decision sends a clear message against any forces acting against India’s unity, sovereignty, and integrity.
    • Continued Vigilance: The ban reflects India’s ongoing efforts to combat separatism and terrorism, ensuring peace and stability in Jammu and Kashmir and across the nation.

  • INS Imphal: Everything you need to know

    ins imphal

    Central Idea

    • INS Imphal (Pennant D68), the third ship of the Visakhapatnam class stealth-guided missile destroyers, is set to join the Indian Navy.
    • Part of Project 15B, INS Imphal follows the lineage of the Delhi and Kolkata classes of indigenous destroyers.

    About INS Imphal

    Details
    Ship Name INS Imphal (Pennant D68)
    Class Visakhapatnam class stealth-guided missile destroyer (Project 15B)
    Commissioning Date Scheduled for December 26
    Builder Mazagon Dock Shipbuilders Limited (MDSL)
    Design Indian Navy’s Warship Design Bureau
    Propulsion System Combined gas and gas (COGAG) configuration with four gas turbines
    Maximum Speed 30 knots
    Range 4000 nautical miles
    Armament BrahMos surface-to-surface cruise missiles

    Barak-8 surface-to-air missiles

    127 mm main gun

    AK-630 30mm guns

    Torpedo launchers and anti-submarine rocket launchers
    Helicopter Facilities Can operate two multi-role helicopters (Sea King or HAL Dhruv)
    Strategic Features Stealth capabilities for reduced radar signature

    Advanced combat management system

    Total atmospheric control system (TACS) for protection against nuclear, biological, and chemical threats
    Significance Represents advanced naval warfare capabilities and strategic asset for the Indian Navy
    Tribute to Northeast India Named after the city of Imphal, honoring the strategic and historical significance of the Northeast region

  • SEBI’s Proposal for T+0 Instant Settlement Cycles

    Central Idea

    • The Securities and Exchange Board of India (SEBI) has proposed introducing T+0 (same day) and instant settlement cycles in the equity cash segment, alongside the existing T+1 cycle.

    Current Settlement Cycle  

    • Evolution: SEBI shortened the settlement cycle from T+5 to T+3 in 2002, and then to T+2 in 2003. The T+1 cycle was introduced in 2021 and fully implemented by January 2023.
    • T+1 Cycle: Currently, the settlement of funds and securities occurs on the next day after the trade.

    About T+0 Settlement Cycle

    • Phased Implementation: SEBI plans to introduce the shorter cycle in two phases: Phase 1 with T+0 Settlement and Phase 2 with Instant Settlement.
    • T+0 Settlement Details: In Phase 1, trades executed until 1:30 PM will be settled by 4:30 PM on the same day.
    • Instant Settlement Mechanics: Phase 2 envisages immediate trade-by-trade settlement, with trading continuing until 3:30 PM.

    Scope and Implementation

    • Initial Focus: Initially, the T+0 settlement will be available for the top 500 listed equity shares based on market capitalization, implemented in three tranches.
    • Surveillance Measures: The same surveillance measures applicable in the T+1 cycle will apply to the T+0 cycle. Trade-for-trade settlement securities will not be eligible for T+0.

    Rationale behind Introducing a Shorter Settlement Cycle

    • Market Growth and Efficiency: With the significant growth in market volumes and participants, SEBI aims to enhance market efficiency and safety, especially for retail investors.
    • Technological Advancements: The evolution of payment systems like UPI and the sophistication of market infrastructure support the feasibility of shorter settlement cycles.
    • Investor Attraction: Faster transactions, reliability, and low costs are key factors that attract investors, making Indian securities a more appealing asset class.

    Features of the Proposed T+0 Settlement Mechanism

    • Early Pay-In Trend: A large percentage of retail investors already make early pay-ins of funds and securities, indicating readiness for instant settlement.
    • Instant Receipt Benefits: The mechanism enables instant receipt of funds and securities, reducing settlement shortages and enhancing investor control.
    • Investor Protection: Direct crediting of funds and securities into investors’ accounts, especially for UPI clients, strengthens investor protection.

    Benefits of the New Mechanism

    • Flexibility for Clients: The new mechanism offers faster payouts of funds to sellers and securities to buyers, providing greater flexibility and control.
    • Market Ecosystem Advantages: The faster settlement cycle is expected to enhance the operational efficiency of the securities market, benefiting the entire ecosystem.

  • Space Exploration in 2024: Key Missions and Scientific Endeavors

    space

    Central Idea

    • The year 2024 is set to be a landmark year in space exploration, following significant achievements in 2023, including NASA’s OSIRIS-REx and India’s Chandrayaan-3 missions.

    Upcoming Missions

    • The year will feature several key missions under NASA’s Artemis plan and Commercial Lunar Payload Services, along with other international endeavors.

    [1] Europa Clipper Mission

    • Objective: NASA’s Europa Clipper will explore Jupiter’s moon, Europa, known for its icy surface and potential subsurface saltwater ocean.
    • Significance: The mission aims to assess Europa’s habitability for extraterrestrial life by studying its icy shell, geology, and ocean.
    • Launch Details: Scheduled for launch on October 10, 2024, aboard a SpaceX Falcon Heavy rocket, with arrival at Jupiter set for 2030.

    [2] Artemis II Mission

    • Program Goals: Part of NASA’s Artemis program to return humans to the Moon, including plans for a sustained presence and future Mars missions.
    • Mission Specifics: Artemis II, following the uncrewed Artemis I, will be the first crewed mission orbiting the Moon since 1972, planned for November 2024.

    [3] VIPER Lunar Mission

    • Mission Overview: VIPER (Volatiles Investigating Polar Exploration Rover) aims to explore the Moon’s south pole for volatiles like water and carbon dioxide.
    • Technology and Schedule: Equipped to handle extreme lunar temperatures, VIPER’s launch is scheduled for November 2024, focusing on resources for future human exploration.

    [4] Lunar Trailblazer and PRIME-1 Missions

    • SIMPLEx Program: These missions are part of NASA’s Small, Innovative Missions for Planetary Exploration (SIMPLEx), offering cost-effective, rideshare opportunities.
    • Objectives: Lunar Trailblazer will orbit the Moon to map water locations, while PRIME-1 will test drilling technology, both scheduled for mid-2024.

    [5] JAXA’s Martian Moon eXploration (MMX) Mission

    • Mission Focus: JAXA’s MMX mission aims to study Mars’ moons, Phobos and Deimos, to determine their origin.
    • Science Operations: The spacecraft will conduct a three-year mission, including landing on Phobos and returning a sample to Earth, with a launch planned around September 2024.

    [6] ESA’s Hera Mission

    • Mission Purpose: Hera, by the European Space Agency, will study the Didymos-Dimorphos asteroid system, following NASA’s DART mission’s kinetic impact in 2022.
    • Planetary Defense: Hera will assess the impact of DART’s collision and study the asteroids’ physical properties, with a launch set for October 2024.

  • India’s Steel Sector: Advancements, Challenges, and Global Position in 2024

    steel

    Central Idea

    • The Indian government is focusing on the steel sector with the Production Linked Incentive (PLI) scheme 2.0 and ensuring raw material supply in 2024.
    • Minister of State for Steel highlighted these initiatives, emphasizing the promotion of scrap usage in steel production.

    Growth and Recovery Post-Pandemic

    • Resilience: The steel sector has shown a strong recovery following the impact of the COVID-19 pandemic in 2020-21.
    • Production and Consumption: From April to November 2023, crude steel production increased by 14.5% y-o-y to 94.01 Million Tonnes (MT), and finished steel consumption rose by 14% to 86.97 MT.

    Targets and Technological Advancements

    • Capacity Goal: India aims to reach an installed steel manufacturing capacity of 300 MT by 2030, currently at around 161 MT.
    • Innovation: Efforts are underway to integrate artificial intelligence and new technologies to enhance steel output and reduce carbon emissions.

    PLI Scheme and Industry Expansion

    • PLI Scheme 1.0: The first phase aimed to boost speciality steel production, creating an additional capacity of around 25 MT.
    • Capacity Increase: Steel players are expanding their capacities, with the government facilitating project clearances and easing business operations.

    Challenges and Concerns

    • Rising Imports and Costs: The industry faces challenges with increasing imports, high raw material prices, and geopolitical uncertainties.
    • Dependency: India relies heavily on imports for coking coal, a critical raw material for steel production.

    Global Steel Industry and India’s Role

    • India’s Growth: India, the world’s second-largest steel producer, has shown robust growth, significantly contributing to the global steel industry.
    • Comparison with China: While China remains the largest producer, India has outpaced China in terms of growth rate in recent years.

    Demand and Import Dynamics

    • Sectoral Demand: The construction sector, driven by government infrastructure spending and private investment, leads the demand for steel in India.
    • Import Measures: The government has implemented anti-dumping duties and other barriers to address steel dumping, particularly from China and Vietnam.

    Price Trends and Future Outlook

    • Domestic Prices: Indian steel prices have increased due to strong demand, but global uncertainties may impact future price hikes.
    • Global Market Influence: Domestic pricing trends may be influenced by global economic recovery and price movements in the US and Europe.

    Conclusion

    • Strategic Focus: The Indian government’s initiatives, like the PLI scheme, aim to strengthen the steel sector’s global competitiveness and self-reliance.
    • Balancing Growth and Challenges: While the sector shows promising growth, addressing challenges like raw material dependency and import pressures remains crucial.
    • Global Positioning: India’s significant role in the global steel market underscores its potential to influence industry trends and drive economic growth.

  • A new economics for inclusive growth

    Elements of Inclusive growth - INSIGHTSIAS

    Central idea 

    The central idea urges a reevaluation of India’s economic strategy, emphasizing the necessity to shift from an exclusive focus on high-end skills to inclusive growth. It underscores the mismatch between skills, jobs, and incomes and advocates prioritizing the small-scale manufacturing sector to foster sustainable and locally enriched economic development. The article suggests seizing the opportunity to attract producers and meet unmet needs for India’s growth.

    Key Highlights:

    • The book “Breaking the Mould: Reimagining India’s Economic Future” suggests a shift from manufacturing to exporting high-end services, challenging traditional economic strategies.
    • The mismatch between skills, jobs, and incomes is identified as a major obstacle to India’s growth, reflecting in social and political demands for better wages and security.
    • The growth pattern focusing on high-end skills has not generated sufficient decent jobs for the majority of India’s population.

    Key Challenges:

    • The Achilles heel of India’s economy is insufficient jobs and incomes, evident in demands from various sectors for fair wages and social security.
    • A critical mismatch between skills, jobs, and incomes poses a significant challenge to India’s growth and economic well-being.
    • The reliance on high-end skills has not translated into enough decent jobs for the majority, hindering inclusive growth.

    Key Terms and Phrases:

    • Leapfrogging manufacturing in favor of exporting high-end services.
    • Mismatch between skills, jobs, and incomes.
    • “India was Shining” era and its economic implications.
    • Inclusive and sustainable economic growth.
    • Small-scale and informal manufacturing sector.
    • The importance of richness of economic activity within local webs.

    Key Quotes:

    • “India cannot afford to neglect its small-scale and informal manufacturing sector any longer.”
    • “Investing in education and skills for ‘high end’ manufacturing and services will not benefit the masses if they cannot be employed.”
    • “There are no shortcuts to inclusive economic growth.”

    Key Statements:

    • The book’s recommendation challenges India’s traditional approach to economic development.
    • The focus on high-end skills has not translated into inclusive growth or sufficient employment opportunities.
    • Policymakers must reimagine the path for India’s growth and prioritize inclusive economic growth.

    Key Examples and References:

    • Reference to the book “Breaking the Mould: Reimagining India’s Economic Future” by Raghuram Rajan and Rohit Lamba.
    • Examples of social and political demands for better wages and security in various sectors.
    • Mention of the mismatch between India’s skills development and job creation.

    Key Facts and Data:

    • 60% of Indians are classified as “economically weaker sections” entitled to job reservations.
    • India invested in world-class institutions of science and engineering 70 years ago.
    • The growth pattern focusing on high-end skills has not generated sufficient decent jobs for India’s masses.

    Critical Analysis:

    • The article critiques the existing economic growth pattern for its failure to generate inclusive and sustainable development.
    • Emphasis on the importance of inclusive economic growth and challenges posed by the mismatch between skills and jobs.

    Way Forward:

    • Policymakers need to reimagine India’s growth path with a focus on inclusive economic growth.
    • There are no shortcuts, and investments in the small-scale and informal manufacturing sector are crucial for sustainable development.
    • India should leverage its unmet needs to attract producers and make more for India in India, thereby growing jobs and incomes.

  • RBI reports reduced risk of Stagflation in India

    stagflation

    Central Idea

    • The Reserve Bank of India (RBI) officials have reported a decreased risk of stagflation in India, now estimated at 1%, down from 3% in August

    What is Stagflation?

    Details
    Definition   An economic condition characterized by stagnant growth, high unemployment, and high inflation.
    Indian context Fluctuating growth rates; periods of slowdown have raised concerns about stagnation.
    Inflation Dynamics in India Historically high at times, often driven by rising food and fuel prices.
    Supply Shocks Vulnerable to global oil price fluctuations and agricultural supply shocks (e.g., monsoon variability).
    Past Episodes Elevated stagflation risks were noted during the Asian Crisis, Global Financial Crisis, taper tantrum, and COVID-19 pandemic.

    Methodology for Assessing Stagflation

    • Two-Pronged Approach: RBI assessment utilized two methods: analyzing periods of low economic growth with high inflation, and employing ‘at-risk’ frameworks, namely “Inflation at Risk” (IaR) and “Growth at Risk” (GaR), using quantile regression.
    • Determinants of Stagflation: Key factors identified include supply-side shocks, commodity price spikes, tighter financial conditions, and currency depreciation.

    Key Risk Factors for India

    • Financial Conditions and Rupee Depreciation: Financial conditions and the depreciation of the rupee against the U.S. dollar are significant risk factors for stagflation in India.
    • Empirical Evidence: The integrated IaR and GaR frameworks corroborate these findings, although the impact of crude oil prices on domestic fuel prices has limited predictive power for stagflation.
    • Global Concerns: Post-pandemic, higher commodity prices and the U.S. dollar’s appreciation raised global stagflation concerns.

    Back2Basics: Economic Conditions: Definitions and Concepts

    Explanation
    Depression A sustained, long-term downturn in economic activity.

    Characterized by significant decline in GDP, high unemployment, low spending, and reduced industrial output.
    Deflation A general fall in the price level of goods and services over some time, indicating negative inflation rates.
    Disinflation A decrease in the rate of inflation, i.e., a slowdown in the rate at which prices increase.

    Example: Inflation rate falling from 8% to 6%.
    Reflation Economic measures, such as increasing money supply or reducing taxes, aimed at stimulating the economy to reach its long-term growth trend after a downturn.
    Skewflation A situation where the price of some items rises significantly while others remain stable.

    Example: Seasonal rise in the price of onions while other prices are stable.

  • India’s Disinvestment Strategy amidst upcoming Elections

    Central Idea

    • India’s disinvestment process, primarily focusing on minority stake sales rather than full privatisation, is expected to fall short of its fiscal year 2024 target.
    • The government’s cautious approach, influenced by the upcoming general elections, has led to a slowdown in the privatisation of major public sector undertakings (PSUs).

    Disinvestment Performance and Targets

    • Past Achievements: Over the past decade, disinvestment has generated over ₹4.20 lakh crore, but the current fiscal year’s target appears challenging.
    • FY24 Target: The government set a disinvestment goal of ₹51,000 crore for FY24, a reduction from the previous year’s estimate.
    • Major PSUs on Hold: Plans for the privatisation of Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR have been deferred.
    • Progress So Far: Approximately ₹10,049 crore, or 20% of the budgeted amount, has been raised through IPOs and OFS.
    • Pipeline Projects: Strategic sales of CPSEs like SCI, NMDC Steel Ltd, BEML, HLL Lifecare, and IDBI Bank are planned but face delays due to various procedural hurdles.

    Factors Influencing Disinvestment

    • Political Considerations: Strategic disinvestment decisions are being influenced by the upcoming elections, leading to a cautious approach.
    • Challenges in Strategic Sales: The sale process involves multiple stakeholders and complex procedures, making it a lengthy affair.
    • Public and Political Resistance: Certain sectors, particularly defence and shipping, face opposition to privatisation, causing delays and policy reassessments.
    • Economic Think Tank Views: Observers note a recent slowdown in PSU stake sales, attributed to regulatory processes, global economic volatility, and shifting government priorities.

    Historical Context and Government Policy

    • Post-2014 Strategy: Since 2014, the government has revived its disinvestment policy, focusing on stake sales and listing of PSEs on the stock market.
    • Union Budget 2023-24: The disinvestment target for FY24 is the lowest in seven years, with the government yet to meet the target for 2022-23.
    • Reasons for Disinvestment: The government undertakes disinvestment to reduce fiscal burdens, finance deficits, invest in development, and retire debt.
    • Types of Disinvestment: The process includes minority disinvestment, majority divestment, and complete privatisation, managed by the Department of Investment and Public Asset Management (DIPAM).

    Recent Disinvestment Performance

    • Meeting Targets: The government has met its disinvestment targets only twice since 2014.
    • Challenges in Execution: Strategic sales have been complicated by various factors, including market volatility and political opposition.

    Future of Disinvestment in 2023-24

    • No New Additions: The government plans to continue with the already announced privatisation of state-owned companies without adding new ones.
    • Challenges and Vision: Observers suggest that disinvestment should align with the government’s long-term vision for privatisation and sectoral presence, rather than being driven solely by revenue needs.

    Conclusion

    • Strategic Policy Shifts: The government’s disinvestment strategy is evolving, balancing between raising revenues and managing political and public sentiments.
    • Impact of Upcoming Elections: With general elections approaching, the focus on disinvestment might shift, impacting the progress and priorities of stake sales.