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GS Paper: GS3

  • Edible coating to prolong shelf life of fruits and vegetables

    A team of researchers at the IIT — Guwahati has developed an edible coating using marine alga that coated on vegetables and fruits, substantially extends their shelf-life.

    Dunaliella tertiolecta: The Edible coating

    • The team used a mix of an extract of a marine microalga called Dunaliella tertiolecta and polysaccharides to produce it.
    • The microalga is known for its antioxidant properties and has various bioactive compounds such as carotenoids and proteins.
    • It is also used to produce algal oil, a non-animal source of omega-3 fatty acid and is considered a good source of biofuel.
    • After the oil is extracted, the residue is usually discarded.
    • The researchers used extracts from this residue in formulating their film, in combination with chitosan, which is a carbohydrate.
    • It also has antimicrobial and antifungal properties and can be made into an edible film.

    Benefits of this Edible coating

    • The films displayed superior antioxidant activity, thermal stability, mechanical strength, total phenolic content and water vapour barrier property.
    • They also had excellent UV-Vis light-blocking properties.
    • The researchers also tested the biosafety of these coatings.

    Why is it viable?

    • The new coatings can be mass-produced.
    • They are very stable to light, heat, and temperature up to 40C, edible, and can be safely eaten as part of the product formulation and do not add unfavourable properties to it.
    • They retain texture, colour, appearance, flavour and nutritional value.
    • The material can be either directly coated on the vegetables and fruits or made into a vegetable storage pouch.
    • In both cases, the shelf-life of the vegetables can be extended.
    • It is a simple dip coating technique with no significant cost added to the post-harvest processing.

    Economic significance of Edible coating

    • According to the Indian Council of Agricultural Research, between 4.6 and 15.9 per cent of fruits and vegetables go waste post-harvest, partly due to poor storage conditions.
    • In fact, post-harvest loss in certain produce items like potato, onion, and tomato could even be as high as 19%, which results in high prices for this highly consumed commodity.

     

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  • India’s tax-GDP ratio may be too high

    Context

    What the data conclusively show is that the debate on the Indian economy should shift away from simplistic notions (borrowed from the West?) of the tax-GDP ratio being low in India.

    India’s low tax-to-GDP ratio

    • One of the stylised beliefs in India, and amongst some leading economic commentators both in India and abroad, is that our tax/GDP ratio is lower than what it “should” be.
    • This low tax-to-GDP ratio is blamed for a lower rate of investment, a higher fiscal deficit, and lower GDP growth — and all because the tax ratio is too low.
    • There can be reasonable doubts about the presumed links.
    • There are three important fiscal variables in the economy — taxes, fiscal deficit, and debt.
    • They are inter-related — lower tax revenue means higher fiscal deficit, for the same level of expenditures, and higher deficit means higher debt.
    • All three, directly or indirectly, are assumed to affect growth and/or inflation.

    Analysing India’s tax-to-GDP ratio

    • Two common observations on tax-to-GDP for India — first, it is low at around 10-11 per cent of GDP and it has stayed at close to that level for the last 20 years.
    • In 2019, it hit a decade low of 10 per cent of GDP, the same as in 2014.
    • Second, in comparison with our peers, it is much lower.
    • Hence, logic dictates that we should strive to increase it.
    • But which country should we compare India with?

    Issues with comparing tax-to-GDP with other countries

    • A common observation is to look at the tax-GDP ratio in G20 countries.
    • Function of average level of per capita income: This is the beginning of a set of misinterpretations committed either knowingly, or unknowingly.
    • Because simple logic dictates that tax collected is a function of the average level of per capita income.
    • Per capita income in the G20 varies from around $2,100 (India) to around $65,000 (US).
    • The 10-11 per cent figure for India is the tax/GDP ratio for taxes administered at the central level.
    • Challenges in data collection: Taxes in India, as in many other large, especially federal, countries, are collected at both a federal and state level.
    • And many economies have local (municipal) taxes as well. The tax collected is the sum of all these taxes.
    • Until now, collecting such disaggregated data for a large set of countries was challenging.
    • However, in a recent web publication, the IMF on their World Revenue Longitudinal Data set has published such data for all countries, from 1990-2019.
    • In this pre-pandemic year, among G20 economies, India’s tax-GDP (Xtax) ratio of 16.7 per cent was higher than that of China (15.9 per cent), Mexico (14.1 per cent), Indonesia (11.0 per cent), Saudi Arabia (5.9 per cent) and Turkey (15.9 per cent).
    • A more informative indicator of whether a country is taxing too much or too little in comparison with others is to look at the tax-GDP ratio adjusted for PPP per capita income.
    • Prediction via a simple regression of tax-to-GDP on log PPP per capita GDP can yield one estimate of the tax gap — the difference between actual and actual adjusted for level of income.
    • The world average tax gap is -1.3 per cent; India is +1.2 per cent for the nine years 2011-2019.
    • So, India’s tax GDP ratio averages 2.5 percentage points more than an average economy.
    • For every year for which data are available 1990-2019, India has had a positive tax gap — there is little evidence that a higher tax/GDP ratio helps growth.

    How corporate tax cut helped India

    • Corporate tax cut 2019: For years, the advocacy in India was to increase revenue from corporate tax which is one of three major components of tax revenue, the other being income and indirect taxes.
    • In September 2019, Finance Minister going well against Indian established conventional wisdom, lowered the corporate tax rate by around 10 percentage points.
    • Avoiding triple whammy: Opponents said that empirical evidence around the world (for example, the US) meant that if tax rates were lowered, revenues would decline, the fisc would increase, as would inequality.
    • A triple whammy that is best avoided.
    • However, now, three years later, we can assess the efficacy (or not) of this bold experiment.
    • For the three months April-June 2022, corporate tax revenues, y-o-y, are up 30 per cent.
    • Using fiscal 2019-20 as a base, corporate tax revenue has increased by 66 per cent, GDP by 33 per cent — an average tax buoyancy of 2.0 over three years.
    • The previous largest tax buoyancy was in 2006-7 when the world was buoyant.
    • Tentatively, the tax-GDP ratio in the fiscal year 2022-23 will average over 18 per cent in India, a level close to Japan and the US.

    Conclusion

    In India, the debate should shift to expenditures, and quality of expenditures (and perhaps to reform of the direct tax code). In this regard, suggestion that freebies be critically examined is most timely and welcome.

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     Back2Basics: Tax buoyancy and tax elasticity

    • Tax buoyancy: The buoyancy of a tax system measures the total response of tax revenue both to changes in. national income and to discretionary changes in tax policies over time, and it is traditionally interpreted as the percentage change in revenue associated to a one percent change in income.
    • Tax elasticity: It refers to changes in tax revenue in response to changes in tax rate.
    • For example, how tax revenue changes if the government reduces corporate income tax from 30 per cent to 25 per cent indicate tax elasticity.

  • Using a rupee route to get around a dominating dollar

    Context

    A number of countries, including India, are now considering the use of other currencies to avoid the U.S. dollar and its hegemonic role in settling international transactions.

    Currency hierarchy

    • For India, currency hierarchy goes back to colonial times when the Indian rupee was virtually linked to the British pound rather than to gold which it earned through exports.
    • In the post-War period, the neo-colonial currency hierarchy has been clubbed with the continued use, primarily of the U.S. dollar, for the majority of international transactions.

    Rupee settlement of trade

    • In recent times, India has been taking an active interest in having the rupee used for trade and the settlement of payments with other countries, which include Russia, now facing sanctions.
    • The Reserve Bank of India has recently taken a proactive stand to have rupee settlement of trade (circular dated July 11, 2022).
    • While options for invoicing in rupees were already legal in terms of Regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016, the current circular aims to operationalise the special Vostro accounts with Russian banks in India, in a bid to promote trade and also gain a better status for the rupee as an international currency.

    Opportunities for India

    • The advantages India is currently seeking in these arrangements include avoidance of transactions in the highly priced dollar which has an exchange value of ₹80, impacting the Indian economy with inflation, capital flight and the drop in foreign exchange reserves by $70 billion since September 2021.
    •  Buying oil with a depreciated ruble, and at discounts, is not only cost-saving but also saves transport time with the use of multi-modal routes using land, sea and air routes.
    • In addition, India is looking forward to trade expansion in sanctions-affected Russia.
    • With India having a trade deficit with Russia, which has been around $3.52 billion on average over the last two financial years, India’s opportunities include the possible use, by Russia, of the surpluses in the Vostro rupee account in Russian banks for additional purchases from India.
    • Past attempts: Attempts to use the rupee for invoicing and trading is, however, not new to India.
    • A comprehensive bilateral trade and payments agreement was signed by India in 1953 with the Soviet bloc countries.

    Challenges

    • There are quite a few problems that may prevail in implementing the desired rupee payments and avoiding dollar transactions.
    • Willingness of banks and private parties: Apart from issues that concern an agreed exchange rate between the rupee and the ruble (R-R), two volatile currencies, there is also the question of the willingness of private parties (companies, banks) to accept the rupee for trade and settlements.
    •  If Russia opens its door for exports from India, the ‘R-R’ route may prove attractive for Indian exporters.
    • Concerns of the US: There are official concerns for reactions, particularly from the U.S., to deals, especially for purchase of the S-400 defence equipment.
    • Reaction of the Europe: Moreover, the deals between India and Russia, especially on oil, can be considered by the West as ‘indirect back door support’ — as India is importing Russian crude at 30% discount, processing at refineries in Gujarat which include Reliance, and then exporting those to the West.
    • Trade deficit: There were attempts even before the novel coronavirus pandemic to initiate a clearing account on the BRICS platform.
    • The quantitative implications indicate a skewed pattern of transactions — with China having most of the trade surplus.
    • It is a pattern similar to what is happening in India-Russia trade at the moment.

    Conclusion

    The India-Soviet agreements of the past may provide a clue on how the current ‘R-R’ trade and the problems can be managed by initiating a push for Indian exports to Russia and, of course, avoiding all deals in dollars — benefiting both trade partners and countering, globally, the on-going currency hierarchy.

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  • RBI, government must act in coordination during an economically challenging period

    Context

    In the recent MPC meeting, the policy rate hike was widely expected, more anticipated were the MPC and the RBI Governor’s forward guidance on the trajectory of policy — on both monetary policy and liquidity instruments. So, how do we see monetary policy evolve over the rest of the year and beyond?

    Tightening of monetary policy

    • Repo rate at 5.4 per cent: In its latest meeting, the members of the monetary policy committee voted unanimously to increase the policy repo rate by 50 basis points to 5.4 per cent.
    • The repo rate was 5.15 per cent in February 2020.
    • So, in effect, the RBI’s policy has not only been normalised, but has actually tightened compared to the pre-pandemic level.
    •  Even the lower bound of the rate corridor, the Standing Deposit Facility (SDF) rate, at 5.25 per cent is now above the pre-pandemic repo rate.

    Forward guidance on stance

    • The MPS indicated the retaining the policy stance rather than shifting to “neutral”.
    • This retention of stance might be interpreted as being a bit more hawkish than “neutral”, which implies that rates might be both increased or cut, depending on economic conditions.
    • Now that policy is largely normalised, the pace of tightening is likely to moderate.
    • The urgency of aggressive rate hikes and tightening of liquidity has somewhat moderated, although risks remain.
    • RBI’s research suggests that the “real natural rate” — the rate at which policy is neither loose nor tight – is 0.8-1 per cent.
    • This operative interest rate is usually the three-month T-bill rate, which in “normal” times averages 10-15 basis points above the repo rate.
    • Considering that monetary policy is calibrated over a one-year horizon and using the RBI’s inflation forecast of 5 per cent for the first quarter of 2023-24, the “natural” repo rate will be around 5.85 per cent.

    Inflation and growth conditions

    • The RBI’s growth projection for 2022-23 has been retained at 7.2 per cent, with growth frontloaded in the first half.
    • CPI inflation is still forecast to average 6.7 per cent.
    • Inflationary pressures are likely to wane in the second half of 2022-23, particularly if the recent drop in industrial metals prices persists over the next few months.
    • A more or less normal monsoon might help in keeping food prices stable. However, risks remain.
    • Robust growth prospects: Demand for consumption goods seems to be resilient, enabling some further pass-through of input costs.
    • Combine this with tight labour markets and rising wage costs in some tech-oriented sectors.
    • High frequency indicators of economic activity have recovered after some weakness in June.
    • In addition to resilient demand, there is evidence of a closing of the “output gap”.
    • Global growth: Global growth and trade are forecast to significantly slow down in 2022 and 2023, largely due to aggressive tightening by G-10 central banks and a slowdown in China.
    • The IMF predicts global trade volume (both merchandise and services) to slow to 4.1 per cent and 3.2 per cent in 2022 and 2023, down from 10.1 per cent in 2021.
    • With world growth and trade flows moderating, along with a drop in commodities prices, India’s export growth is likely to be lower than last year.

    External financial condition

    • The current account deficit remains a concern.
    • India’s external balance sheet remains quite robust, as is evident from various balance of payments and debt metrics, and reportedly low unhedged foreign currency borrowings.
    • Continued tightening by global central banks, particularly the US Federal Reserve over the rest of 2022, will keep India’s external financial conditions tight and likely limit portfolio capital flows.
    • However, there are some signs emanating from these central banks that the hitherto front-loaded tightening might moderate going forward.
    • This will take some pressure off the rupee, though, exchange rate volatility management will remain a part of the overall monetary policy management framework.

    Challenge of surplus liquidity

    • During the earlier phase of policy normalisation and the recent tightening, liquidity management has played an important role in influencing short-term money market interest rates.
    • The current latent surplus liquidity — the existing funds with banks and the Union government’s unspent revenues parked with RBI — is over Rs 5 lakh crore.
    • While the extent of liquidity surplus during the Covid months has come down, these levels are still much higher than RBI estimates of non-inflationary levels of surplus, which is around Rs 1.8-2.4 lakh crore.
    • This will gradually fall with cash withdrawals and some potential RBI dollar sales in the coming months.

    Conclusion

    The central bank, in coordination with the government, has ensured an orderly evolution of economic conditions during a very complex and challenging environment. The exit process now will also need the same adroit use of policy instruments.

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    Back2Basics: Standing Deposit Facility rate

    • The Reserve Bank of India (RBI) in April 2022 introduced the Standing Deposit Facility (SDF), an additional tool for absorbing liquidity, at an interest rate of 3.75 per cent.
    • The main purpose of SDF is to reduce the excess liquidity  in the system, and control inflation.
    • In 2018, the amended Section 17 of the RBI Act empowered the Reserve Bank to introduce the SDF – an additional tool for absorbing liquidity without any collateral.
    • By removing the binding collateral constraint on the RBI, the SDF strengthens the operating framework of monetary policy.
    • The SDF is also a financial stability tool in addition to its role in liquidity management.
    • The SDF replaced the fixed rate reverse repo (FRRR) as the floor of the liquidity adjustment facility corridor.
    • The SDF rate will be 25 bps below the policy rate (Repo rate), and it will be applicable to overnight deposits at this stage.
    • It would, however, retain the flexibility to absorb liquidity of longer tenors as and when the need arises, with appropriate pricing.

  • India’s ‘wheat waiver’ WTO demand is risk-fraught

    Context

    The WTO ministerial meeting in June at Geneva did precious little to address the issue of public stockholding of food.

    Public stockholding issue at WTO

    • India’s PSH policy is based on procuring food from farmers at an administered price (minimum support price or MSP), which is generally higher than the market price.
    • PSH’s’ twin objectives: The PSH policy serves the twin objectives of offering remunerative prices to farmers and providing subsidised food to the underprivileged.
    • Trade distortion subsidy: Under WTO law, such price support-based procurement from farmers is counted as a trade-distorting subsidy, and if given beyond the permissible limit, breaches WTO law.
    • India in the World Trade Organization (WTO) — and rightly so — has been to find a permanent solution to the issue of public stockholding (PSH) of food to protect India’s food security (PSH policy).
    • Peace clause: Currently, India has temporary relief due to a ‘peace clause’ which bars countries from bringing legal challenges against price support-based procurement for food security purposes.
    • The WTO ministerial meeting in June at Geneva did precious little to address this issue.
    •  India’s concerns about the PSH issue have been taken on board.

    India’s concerns

    • For India, the real issue is not about maintaining adequate food stocks, which WTO rules do not prohibit, provided food is stocked by employing non-trade distorting instruments such as providing income support to farmers (cash transfers independent of crop production).
    • Use of MSP: India’s concern is that it should have the policy space to hold public food stocks using the MSP, which is a price support instrument.
    • However, there is no mention of price support in the Geneva declaration.
    • India’s demand for a permanent solution to the PSH policy has acquired a new dimension.
    • India insists that it should also be allowed to export food, most notably wheat, from the pool of the foodgrain procured under the MSP.
    • However, WTO law proscribes countries from exporting foodgrain procured at subsidised prices.
    • Paragraph 4 of the 2013 WTO decision on PSH for food security purposes, clearly states that countries procuring food for food-security purposes shall ensure that such procured food does not “distort trade or adversely affect the food security of other Members”.
    • The same spirit is reflected in paragraph 10 of the Geneva ministerial food security declaration, which states that countries may release surplus food stocks in the international market in accordance with WTO law.
    •  However, it is very unlikely that such a request will be acceded to.
    • As per Article IX.3 of the WTO Agreement, waivers can be adopted only in “exceptional circumstances”.

    Way forward

    • Developed countries have historically opposed India’s PSH programme as they apprehend that India might divert some of its public stock to the international market, thus depressing global prices.
    • India actively pushing for exporting food from its official granaries gives fresh ammunition to the PSH solution opponents.
    • Thus, India should revisit its stand on asking for a waiver for wheat exports from its public stockholding, which, in any case, was not a part of India’s PSH policy.
    • Spending scarce negotiating capital on this issue might dilute India’s core agenda of pushing for a permanent solution for its PSH programme to attain the goal of food security and providing remunerative prices to the farmers.
    • Negotiations at the WTO require crystal clarity of the core objectives that should be relentlessly pursued.
    • Adding newer objectives and shifting goalposts might result in falling between two stools.

    Conclusion

    Instead of asking for the waiver to export wheat from public stockholding, the laudable objective of helping countries facing food crises can be accomplished by strengthening India’s commitment to the United Nations World Food Programme.

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  • Online Dispute Resolution in new-age digital commerce

    Context

    Despite the rapid advancement of digital platforms on the one hand and the pervasiveness of the Internet-enabled phone on the other, small enterprises such as local kirana stores have not gained from this. Online purchases from “near and now” inventory from the local store remain in a digital vacuum.

    Online revolution in country

    • Increased smartphone use: The rise in smartphone use fuelled by affordable data plans has catalysed an online revolution in the country.
    • Pandemic accelerated digital inclusion: The novel coronavirus pandemic has further accelerated the process of digital inclusion.
    • It is now not only routine to transact online it is also common to learn online, have medical consultations online, and even resolve disputes online.
    • Increased scope for innovation in digital space: These realisations have given India the opportunity to disrupt the status quo with its innovative abilities.
    • Systems such as the Unique Identification Authority of India (UIDAI) and Aadhaar, the Unified Payments Interface (UPI) and the Ayushman Bharat Digital Mission have reengineered markets.

    Why mall and medium sided businesses have not benefited from digital revolution?

    • Despite the rapid advancement of digital platforms small enterprises such as local kirana stores have not gained from this.
    • Cost of infrastructure: This is because, to sell on numerous platforms, sellers must maintain a separate infrastructure, which only adds costs and limits participation.
    • Distinct terms and conditions of platforms: The distinct terms and conditions of each platform further limit the sellers’ flexibility.
    • Consequently, small and medium-sized businesses have lost their freedom to choose and participate in the country’s e-commerce system at their will and on their terms.

    Way forward: Open Network for Digital Commerce

    • The Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India established the Open Network for Digital Commerce (ONDC) to level the playing field by developing open e-commerce and enabling access to small businesses and dealers.
    • The ONDC began its pilot in five cities in April 2022, i.e., New Delhi, Bengaluru, Coimbatore, Bhopal and Shillong.
    • Currently, the pilot has expanded to 18 cities, and there are immediate plans to add more cities.
    • The ONDC network makes it possible for products and services from all participating e-commerce platforms to be displayed in search results across all network apps.
    • For instance, a consumer shopping for a product on an e-commerce app named “X” would also receive results from e-commerce app named “Y”, if both X and Y integrated their platforms with the ONDC.

    Dispute resolution through ODR

    • Disputes will be the obvious by-product of this e-commerce revolution.
    • Therefore, it is imperative to support this initiative with a modern-day, cost-effective, timely and high-speed dispute resolution system.
    • Online Dispute Resolution, or ODR as it is popularly called, has the propensity to work alongside the incumbent setup and deliver quick, affordable and enforceable outcomes.
    • The ODR is not restricted to the use of legal mechanisms such as mediation, conciliation and arbitration in an online environment but can be tailormade for the specific use case keeping the participants in mind.
    • ODR commonly involves case management systems, integration of communication technologies such as email, SMS, WhatsApp, Interactive Voice Response, audio/video conferencing.
    • With appropriate data sets in place, it can also involve advanced automation, the use of technologies such as artificial intelligence and machine learning to enable resolutions at the same time as it would take to initiate a transaction over the network.
    • Many e-commerce companies have turned to the ODR with the realisation that in order to maximise transactions it is important to ensure a positive dispute resolution experience.
    • Adoption in India: The ODR is no more a distant dream for India as well.
    • The National Payments Corporation of India (NPCI) has mandated platforms in the UPI ecosystem to adopt the ODR for complaints and grievances connected to failed transactions.
    •  Ingram, SEBI SCORES (or the Securities and Exchange Board of India SEBI COm plaints REdress System), RBI CMS (or the Reserve Bank of India Complaint Management System), MahaRERA (or the Maharashtra Real Estate Regulatory Authority), MSME Samadhaan (or the Micro Small and Medium Enterprises Delayed Payment Monitoring System), and RTIOnline (or the Right to Information Online) are other examples of ODR systems that are widely used in the country.
    • Mitigating litigation risks: The ODR will help mitigate litigation risk and provide valuable insights into problems faced by consumers.
    • Consumers are provided with another choice for effective redress of their grievances, thereby building trust, confidence and brand loyalty.

    Advantages of ONDC

    • Wider choice for consumers: The ONDC achieves the dual objective of wider choice for consumers on the one hand and access to a wider consumer base for sellers on the other.
    • With India’s e-commerce industry set to reach $200 billion by 2027, this shift from a platform-centric paradigm to democratisation of the nation’s online market will catalyse the inclusion of millions of small business owners and kirana businesses.

    Conclusion

    A dispute resolution framework that includes a customised ODR process can play a role in the network achieving its steep five-year target of adding $48 billion in gross merchandise value to India’s e-commerce market, a network of 90 crore buyers and 12 crore sellers with the least hiccups.

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  • Farmer suicide

    farmer suicideContext

    • An agricultural labourer died by suicide every 2 hours in 2021: NCRB
    • The national catastrophe of farmer suicide since the 1990s, often by drinking pesticides is attributed to their inability to repay loans mostly taken from landlords and banks.

    NCRB Stats on Farmers Suicide

    • Some 5,563 agricultural labourers died by suicide in 2021, according to the latest report of the National Crime Records Bureau (NCRB). The number of suicides increased by nine per cent from 2020 and by around 29 per cent from 2019.

    Causes of Farmers Suicide

    • Non sustainable cropping: Most of the suicides have occurred in areas of cash crops like cotton and sugarcane, which is high input, high output gambling, not based on the principle of sustained and resilient high yield.
    • Multiple causes: There is no consensus on what the main causes might be but studies show farmer suicide victims are motivated by more than one cause however the primer reasons being the inability to repay loans.
    • Combined causes: Major causes reportedly are bankruptcy/indebtedness, problems in the families, crop failure, illness and alcohol/substance abuse.

    farmer suicideFaulty measures

    • Low penetration of irrigation: Irrigation reaches less than half of India’s overall farmland, a picture that has not changed much over the past decade, and more than 60% of our farmers are susceptible to rainfall anomalies.
    • Dry land farming: Rain-fed farming yields are typically less than half those of irrigated farmland.
    • High input cost: Though India has caught up with global levels of fertilizer use, this is neither efficient nor environmentally sustainable. Both add to the cost of cultivation.
    • Slow R&D: Research on high-yielding crops has plateaued after an initial burst during the Green Revolution and farmers have to resort to patented seeds to draw more out of their scanty acres.

    farmer suicide7R’ model utility

    It looks at the prevention of farmer suicide

    • Remunerative agriculture,
    • Resilience building,
    • Rational expenditure,
    • Reassurance through connectivity,
    • Righteous conduct,
    • Religious support and
    • Responsible reporting

    farmer suicideWay Forward

    • Information technology promises to improve weather forecasting, crop identification as well as damage control, soil health monitoring, and mapping of available water resources.
    • Improvements in marketing and logistics can significantly raise the share that cultivators get of the money people pay for their food.
    • The govt. is using technology to connect farmers to a nationwide e-market, but the states need to amend their antiquated farm produce marketing laws that have squeezed farmers’ earnings.
    • An old problem of price signals failing to adjust demand and supply may also need fixing.
    • For agricultural incomes to rise, reforms, rather than cash transfers, loan waivers and the like, are the way ahead.

    Conclusion

    • Along with subsidies, increased farm profits, the focus should also be on resilience building and problem-solving skills of farming families.
    • In suicide-prone states, agricultural institutes and scientists should start distributing seeds of resilience, tolerance and contentment among farmers, suggested researchers.

    Mains question

    Q. Despite agricultural growth Indian farmers are committing suicides Discuss the causes and give dynamic way forward to address the issue.

     

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  • Contract Enforcement in India

    Ease of doing business in India remains low, dragged down by the way contracts are enforced in the country. Recent reforms have improved the business climate somewhat, but there is a long way to go.

    What is the Ease of Doing Business index?

    • It is an index designed by the World Bank to rank 190 economies.
    • A higher rank (closer to 1) means the country’s regulatory environment is favourable to business operations.
    • India was ranked 63rd in the overall index in 2020.
    • World Bank has now discontinued the Doing Business index.

    Indicators used

    The ranking is calculated on the basis of indicators such as:

    1. Starting a Business
    2. Dealing with Construction Permits
    3. Getting Electricity
    4. Registering Property
    5. Getting Credit
    6. Protecting Minority Investors, Paying Taxes
    7. Trading across Borders
    8. Enforcing Contracts and
    9. Resolving Insolvency

    How is ‘Enforcing Contracts’ measured?

    • In 2020, in the parameter of ‘Enforcing Contracts’, India was ranked 163rd, against 186th in 2015. The parameter considers time, cost and quality of the judicial process.
    1. Time considers the number of days to resolve a commercial dispute in courts;
    2. Cost measures the expenses of attorney, courts and enforcement as a percentage of claim value; and
    3. Quality considers the use of best practices which can promote efficiency and quality i.e., court proceedings, case management, alternative dispute resolution and court automation.
    • Each of the three indicators have a 33.3% weightage.

    How is India doing on this parameter now?

    • At 163rd position in 2020, the country continues to struggle, with the time taken to resolve a commercial dispute being approximately 1,445 days in the Doing Business Report 2020.
    • However, as of August 2022, law ministry data shows a marked improvement of close to 50% in days taken to resolve a dispute to 744 days in New Delhi and 626 days in Mumbai.

    What are some of the reforms undertaken?

    • The Department of Justice, the nodal point for ‘Enforcing Contracts’ indicator along with the eCommittee of the Supreme Court, has undertaken a series of reforms.
    • Some of the steps include the establishment of dedicated commercial courts with monetary jurisdiction up to ₹3 lakh.
    • There also exists online case filing, e-payment of court fees, electronic case management, special courts for infrastructure project contracts, as well as automatic and random allocation of commercial cases thereby eliminating human intervention.

    What further steps are required?

    • An efficient judiciary instils confidence in investors and signals the commercial viability of transactions.
    • The number of court hearings should be minimized too; often, lawyers have an incentive to stretch out the process.
    • The judicial system should encourage out-of-court settlements through the respective lawyers as practised in advanced countries.
    • It is equally important that the judiciary leaves matters relating to economic governance to governments.

     

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  • One Nation One Fertiliser (ONOF) Scheme

    The Ministry of Chemicals and Fertilisers will implement One Nation One Fertiliser (ONOF) by introducing a Single Brand for Fertilisers and Logo under the fertiliser subsidy scheme named “Pradhanmantri Bhartiya Janurvarak Pariyojna” (PMBJP).

    One Nation One Fertiliser (ONOF)

    • The single brand name for UREA, DAP, MOP and NPK etc. would be BHARAT UREA, BHARAT DAP, BHARAT MOP and BHARAT NPK etc. respectively for all Fertiliser Companies, State Trading Entities (STEs) and Fertiliser Marketing Entities (FMEs).
    • Also a logo indicating Fertiliser subsidy scheme namely Pradhanmantri Bhartiya Janurvarak Pariyojna will be used on said fertiliser bags.
    • Under the scheme, companies are allowed to display their name, brand, logo and other relevant product information only on one-third space of their bags.
    • On the remaining two-thirds space, the “Bharat” brand and Pradhanmantri Bharatiya Jan Urvarak Pariyojana logo will have to be shown.

    What is the government’s argument for introducing this scheme?

    The government’s logic for introducing a single ‘Bharat’ brand for all subsidised fertilisers being marketed by companies is as follows:

    (1) Subsidies normalization

    • The maximum retail price of urea is currently fixed by the government, which compensates companies for the higher cost of manufacturing or imports incurred by them.
    • The MRPs of non-urea fertilisers are, on paper, decontrolled.
    • But companies cannot avail of subsidy if they sell at MRPs higher than that informally indicated by the government.
    • Simply put, there are some 26 fertilisers (inclusive of urea), on which government bears subsidy and also effectively decides the MRPs;

    (2) Harmonizing markets

    • Apart from subsidising and deciding at what price companies can sell, the government also decides where they can sell.
    • This is done through the Fertiliser (Movement) Control Order, 1973.
    • Under this, the department of fertilisers draws an agreed monthly supply plan on all subsidised fertilisers in consultation with manufacturers and importers.
    • This supply plan is issued before the 25th of each month for the following month, with the department also regularly monitoring movement to ensure fertiliser availability as per requirement, including remote areas.

    (3) Farmers welfare

    • The government is spending vast sums of money on fertiliser subsidy (the bill is likely to cross Rs 200,000 crore in 2022-23).
    • By deciding where and at what price companies can sell, it would obviously want to take credit and send that message to farmers.

    What can be the drawbacks of the scheme?

    • It may disincentivise fertiliser companies from undertaking marketing and brand promotion activities.
    • They will now be reduced to contract manufacturers and importers for the government. Any company’s strength ultimately is its brands and farmer trust built over decades.
    • Currently, in case of any bag or batch of fertilisers not meeting the required standards, the blame is put on the company. But now, that may be passed on fully to the government.
    • Politically, the scheme might well boomerang rather than benefit the ruling party.

     

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  • Decoding the Crypto Route for Money Laundering

    Money laundering is one of the key charges made by the Enforcement Directorate (ED) against crypto exchange WazirX.

    Also a leader in Maharashtra has made ridiculous claim after ED inquiry that he has made Rs.15 Lakh by investing only Rs.5000 in crypto.

    Are Blockchains traceable?

    • Transactions on a blockchain are always traceable.
    • Most courts and law enforcement bodies around the world have recognized their immutable nature and accept blockchain records as legal proof of transaction histories.
    • However, crypto transactions can sometimes happen “off-chain”, or other methods can be used to obfuscate the flow of funds.
    • Moreover, blockchains are like conveyor belts, which facilitate the flow of crypto from one wallet to another.
    • The identity of the person who holds that wallet has to be ascertained by the wallet service provider and this is often not done to protect user privacy.

    How do they hide transaction trails?

    • One of the most common methods used by hackers and criminals, is called mixing or tumbler.
    • As each crypto token is traceable, tumblers break down multiple tokens from different blockchains and mix them.
    • They then transfer the original amount to the owner, but through multiple transactions and from multiple wallets, obfuscating the trail.
    • Illicit users also transfer traceable tokens to privacy-centric blockchains such as Monero, which hide wallet addresses and particulars.
    • There are also over-the-counter brokers who accept payments in any form, including cash, and transfer the equivalent amount in crypto to a user’s wallet.

    What has ED accused Binance and WazirX of?

    • Among other things, the ED claims that WazirX’s holding company is offering “contradictory and ambiguous answers” about crypto-to-crypto transactions made on WazirX.
    • The ED said WazirX had failed to provide data and show transactions on its blockchain for purchases made by numerous under-investigation fintech firms.

    How do off-chain transactions work?

    • When users withdraw crypto from an exchange, they enter a wallet address and the tokens are transferred, with a record being maintained on the blockchain.
    • However, they also have to pay a gas fee, which is used to pay miners on the blockchain.
    • To avoid this fee, two platforms can integrate with each other and allow users to transfer crypto without using the blockchain.
    • Such transactions can raise questions regarding the tracing of money, as the records aren’t maintained on the blockchain.

    How can exchanges prevent laundering?

    • Exchanges could adopt a resolution on KYC data and maintain transaction logs for eight to 10 years on a blockchain, said industry stakeholders.
    • The use of KYC-compliant wallets could help add a layer of traceability.
    • However, KYC norms for wallets held on platforms outside India can differ from those in India.
    • Some blockchain research firms are also working on machine learning-based tools that can flag illicit accounts.

    Back2Basics: Cryptocurrency

    • Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions.
    • It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments.
    • Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions.
    • When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
    • The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the best known today.
    • Much of the interest in cryptocurrencies is to trade for profit, with speculators at times driving prices skyward.

    How does cryptocurrency work?

    • Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
    • Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.
    • Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets.
    • If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
    • Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future.
    • Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.

     

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