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GS Paper: GS3

  • A new form of socialism powered by cooperative economic enterprises is required

    Context

    Inequalities of wealth have increased around the world and India is becoming one of the world’s most unequal countries.

    Role of globalisation and privatisation in increasing economic distress

    • Economic despair is feeding the rise of authoritarianism, nationalism, and identity politics.
    • Role of Globalisation: Opening national borders to free trade became an ideology in economics in the last 30 years.
    • Taxes of incomes and wealth at the top were also reduced.
    • The ideological justification was that the animal spirits of ‘wealth creators’ must not be dampened.
    • With higher taxes until the 1970s, the U.S. and many countries in Europe had built up their public health and education infrastructure and strengthened social security systems.
    • The rich are now being taxed much less than they were.
    • The pie has grown larger but the richest few have been eating, and hoarding, most of it themselves.
    • Role of privatisation: ‘Privatisation’ of everything became another ideological imperative in economics by the turn of the century.
    • Selling off public enterprises raises resources for funds-starved governments.
    • Another justification is efficiency in delivery of services, setting aside ethical questions of equity.
    • When ‘public’ is converted to ‘private’, rich people can buy what they need.
    • The gaps between the haves and the have-nots become larger.

    How liberal economic policies are creating illiberal societies

    • Liberal economists, promoting free markets, free trade, and privatisation, are worried by nationalism and authoritarian governments.
    • They rail against “populist” policies of governments that subsidise the poor and adopt industrial strategies for self-reliance and jobs for their citizens.
    • Liberals must re-examine their ideas of economics, to understand their own culpability in creating authoritarian and identitarian politics.

    The failure of capitalism and communism

    • While communism had lifted living standards, and the health and education of masses of poorer people faster than capitalism could, communism’s solution to the “property” question — that there should be no private property — was a failure.
    • It deprived people of personal liberties.
    • Capitalism’s solution to the property problem — replacing all publicly owned enterprises with privately owned ones (and reducing taxes on wealth and high incomes) has not worked either.
    • It has denied many of their basic human needs of health, education and social security, and equal opportunities for their children.
    • The private property solution has also harmed the natural environment.

    Way forward

    • Climate change and political rumblings around the world are both warnings that capitalism needs reform.
    • Economic policies must be based on new ideas.
    • Thought leaders and policymakers in India must lead the world out of the rut of ideas in which it seems to be trapped.
    • Principles of human rights must not be overpowered by property rights.
    • A new form of “Gandhian” democratic socialism, powered by cooperative economic enterprises, is required in the 21st century, to create wealth at the bottom, not only at the top, and save humanity and the planet.

    Conclusion

    A new form of ‘Gandhian’ democratic socialism powered by cooperative economic enterprises is required.

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  • Highlights of the India State of Forest Report, 2021

    The Ministry of Environment, Forests and Climate Change (MoEFCC) has released the India State of Forest Report (ISFR) 2021.

    About India State of Forest Report

    • ISFR is an assessment of India’s forest and tree cover, published every two years by the Forest Survey of India under the MoEFCC.
    • The first survey was published in 1987, and ISFR 2021 is the 17th.
    • It compiles data computed through wall-to-wall mapping of India’s forest cover through remote sensing techniques.

    Why need ISFR?

    • It is used in planning and formulation of policies in forest management as well as forestry and agroforestry sectors.

    How are forests categorized?

    The Forest Survey of India has listed four categories of forests. They are:

    1. Very Dense Forest (with tree canopy density of 70 per cent or above)
    2. Moderately Dense Forest (tree canopy density of 40 per cent or above but less than 70 per cent)
    3. Open Forest (tree canopy density of 10 per cent or above but less than 40 per cent)
    4. Scrub (tree canopy density less than 10 per cent)

    Highlights of the ISFR, 2021

    [1] Forest cover is increasing

    • ISFR 2021 has found that the forest and tree cover in the country continues to increase with an additional cover of 1,540 square kilometres over the past two years.
    • India’s forest cover is now 7,13,789 square kilometres, 21.71% of the country’s geographical area, an increase from 21.67% in 2019.
    • Tree cover has increased by 721 sq km.
    • Bamboo forests have grown from 13,882 million culms (stems) in 2019 to 53,336 million culms in 2021.

    [2] State-wise gain/losses

    • The states that have shown the highest increase in forest cover are Telangana (3.07%), Andhra Pradesh (2.22%) and Odisha (1.04%).
    • The Northeast states account for 7.98% of total geographical area but 23.75% of total forest cover.
    • Five states in the Northeast – Arunachal Pradesh, Manipur, Meghalaya, Mizoram and Nagaland have all shown loss in forest cover.
    • The report has attributed the decline in the NE states to a spate of natural calamities, particularly landslides and heavy rains, in the region as well as to anthropogenic activities.

    [3] Increase in Mangrove cover

    • Mangroves have shown an increase of 17 sq km. India’s total mangrove cover is now 4,992 sq km.

    [4] Increase in carbon stock

    • The total carbon stock in country’s forests is estimated at 7,204 million tonnes, an increase of 79.4 million tonnes since 2019.

    [5] Big cats population

    • ISFR 2021 has some new features. It has for the first time assessed forest cover in tiger reserves, tiger corridors and the Gir forest which houses the Asiatic lion.
    • The forest cover in tiger corridors has increased by 37.15 sq km (0.32%) between 2011-2021, but decreased by 22.6 sq km (0.04%) in tiger reserves.
    • Buxa, Anamalai and Indravati reserves have shown an increase in forest cover while the highest losses have been found in Kawal, Bhadra and the Sunderbans reserves.
    • Pakke Tiger Reserve in Arunachal Pradesh has the highest forest cover, at nearly 97%.

     [6] Impact of climate change

    • The report estimates that by 2030, 45-64% of forests in India will experience the effects of climate change and rising temperatures, and forests in all states will be highly vulnerable climate hot spots.
    • Ladakh (forest cover 0.1-0.2%) is likely to be the most affected.
    • India’s forests are already showing shifting trends of vegetation types, such as Sikkim which has shown a shift in its vegetation pattern for 124 endemic species.

    [7] Forest fires

    • The survey has found that 35.46 % of the forest cover is prone to forest fires.
    • Out of this, 2.81 % is extremely prone, 7.85% is very highly prone and 11.51 % is highly prone
    • The highest numbers of fires were detected in Odisha, Madhya Pradesh and Chhattisgarh.

    Concerns with the declining trends

    • It is worrying that a 1,582 sq km decline was in moderately dense forests, or “natural forests”.
    • This decline shows a degradation of forests in the country, say experts, with natural forests degrading to less dense open forests.
    • Also, scrub area has increased by 5,320 sq km – indicating the complete degradation of forests in these areas.

     

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  • Millimeter Wave band in 5G auctions

    The Telecom Regulatory Authority of India (TRAI) has asked for views on band plan, block size, and conditions for auction of spectrum in 5G bands, which includes Millimetre (mm) Wave band of 24.25-28.5 GHz.

    Must read:

    Status of 5G Rollout in India

    What is 5G technology?

    • 5G or fifth generation is the latest upgrade in the long-term evolution (LTE) mobile broadband networks.
    • It’s a unified platform that is much more capable than previous mobile services with more capacity, lower latency, faster data delivery rate and better utilisation of spectrum.

    5G spectrum

    5G mainly works in 3 bands, namely low, mid and high-frequency spectrum — all of which have their own uses as well as limitations.

    (1) Low band spectrum

    • It has a great promise in terms of coverage and speed of internet and data exchange but the maximum speed is limited to 100 Mbps (Megabits per second).
    • So Telcos can use and install it for commercial cell phone users who may not have specific demands for very high speed internet, the low band spectrum may not be optimal for specialized needs of the industry.

    (2) Mid-band spectrum

    • It offers higher speeds compared to the low band, but has limitations in terms of coverage area and penetration of signals.
    • This band may be used by industries and specialized factory units for building captive networks that can be moulded into the needs of that particular industry.

    (3) High-band spectrum

    • It offers the highest speed of all the three bands, but has extremely limited coverage and signal penetration strength.
    • Internet speeds in the high-band spectrum of 5G has been tested to be as high as 20 Gbps (giga bits per second), while, in most cases, the maximum internet data speed in 4G has been recorded at 1 Gbps.

    What is Millimetre (mm) Wave Band?

    • Millimetre Wave band or mmWave is a particular segment of radio frequency spectrum that range between 24 GHz and 100 GHz.
    • This spectrum, as the name suggests, has a short wavelength, and is apt to deliver greater speeds and lower latencies.
    • This in turn makes data transfer efficient and seamless as the current available networks work optimally only on lower frequency bandwidths.

    Significance of this mm band

    • 5G services can be deployed using lower frequency bands.
    • They can cover greater distances and are proven to work efficiently even in urban environments, which are prone to interference.
    • But, when it comes to data speeds, these bands fail to hit peak potential needed for a true 5G experience.
    • So, mmWave is that quintessential piece in the 5G jigsaw puzzle for mobile service providers.

    Concerns with inclusion of mm-band

    • The mm bands have been preserved for satellite-based broadband services as per the decision taken by the International Telecommunication Union (ITU).
    • Providing excess spectrum could pose a downside risk of the bands going unsold, or even worse, underutilised by terrestrial players at the expense of satellite-based service providers.
    • Offering excessive spectrum will result in Indian citizens being denied the benefits of high-demand, advanced satellite broadband services.
    • In addition to this, it will result in a massive loss to the Indian economy of up to $184.6 billion by 2030, along with the loss of foreign direct investment (FDI) and employment generation benefits.

    How could this disrupt the satellite communication industry?

    • Internet has largely been provided to users via fibre-optic based broadband connectivity or mobile network.
    • Of late, another class of Internet vendors is showing up. These are satellite-based communication service providers.
    • For example, SpaceX’s Starlink and Bharti Airtel’s OneWeb are some of the players in this market.
    • This segment uses Low-Earth Orbit (LEO) satellites to provide broadband to both urban and rural users. Their service could also be used for weather predictions.
    • The mm band had been the subject of controversy due to out-of-band emissions into the passive satellite band used for weather satellites at 23.6-24 GHz.

    HeaWay ahead

    • The allocation of mmWave band is critical to the satellite communication industry, which needs a stronger regulatory support to ensure that 5G operations don’t interfere with their existing operations.
    • The industry body pointed to Europe’s “5G Roadmap”, which is built on the ITU’s decision to hold these bands for satellite-based broadband services.

     

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  • Dravidian Model of Development

    The Chief Minister of Tamil Nadu is pushing for a ‘Dravidian Model’ where economic development is inclusive.

    What is the Dravidian Model?

    • The goal is equal economic development that will be in tune with social justice.
    • It has taken root since the days of the Justice Party government [in pre-Independent India].
    • TN polity has divided the task into short-term and long-term, and travels with the objective of improving the economy by implementing them within the time frame.

    Note: The Government of India Act 1919 implemented the Montagu-Chelmsford reforms, instituting a Diarchy in Madras Presidency. The diarchial period extended from 1920 to 1937, encompassing five elections. Justice party was in power for 13 of 17 years.

    Unique features of this developmental approach

    (1) Financial planning

    • TN has constituted an Economic Advisory Council comprising internationally renowned economists since there is a need to evolve an economic development to suit the current situation.
    • It has emerged out higher as comparatively high levels of human development with economic dynamism.

    (2) Health and education

    • It sought and ensured opportunity-equalizing policies in the expanding modern sectors through affirmative action policies and investments in education and health.
    • Tamil Nadu has been a pioneer in broad-basing entry into school education through a slew of incentives, the noon meal scheme being the most well-known.

    (3) Social Harmony

    • It also succeeded in building a bloc of lower caste groups under a Dravidian-Tamil identity that subsumed and sought to transcend individual caste identities.
    • It has distinct political mobilization against caste-based inequalities in the state.
    • Mobilization built an ethos that questioned the privileges of caste elites and the naturalness of merit in a caste society.

     

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  • Reaping India’s demographic dividend

    Context

    Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped to achieve incredible economic growth by adopting forward-looking policies and programmes.

    The window of demographic opportunity

    • With falling fertility (currently 2.0), rising median age (from 24 years in 2011, 29 years now and expected to be 36 years by 2036), a falling dependency ratio (expected to decrease from 65% to 54% in the coming decade taking 15-59 years as the working age population), India is in the middle of a demographic transition.
    • This provides a window of opportunity towards faster economic growth. India has already begun to get the dividend.
    • As fertility declines, the share of the young population falls and that of the older, dependent population rises.
    • If the fertility decline is rapid, the increase in the population of working ages is substantial yielding the ‘demographic dividend’.
    • The smaller share of children in the population enables higher investment per child.
    • Therefore, the future entrants in the labour force can have better productivity and thus boost income.
    • With the passage of time, the share of the older population rises and that of the working age population begins to fall and hence the dividend is available for a period of time, ‘the window of demographic opportunity’.

    Need for forward-looking policies

    • Without proper policies, the increase in the working-age population may lead to rising unemployment, fueling economic and social risks.
    • This calls for forward-looking policies incorporating population dynamics, education and skills, healthcare, gender sensitivity, and providing rights and choices to the younger generation.

    Lessons for India

    • Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped.
    •  There are important lessons from these countries for India.
    • 1) NTA data: The first is to undertake an updated National Transfer Accounts (NTA) assessment.
    • Using NTA methodologies, we find that India’s per capita consumption pattern is way lower than that of other Asian countries.
    • A child in India consumes around 60% of the consumption by an adult aged between 20 and 64, while a child in China consumes about 85% of a prime-age adult’s consumption.
    • The NTA data for India needs to be updated to capture the progress made on such investments since 2011-12.
    • 2) Invest more in children and adolescents: India ranks poorly in Asia in terms of private and public human capital spending.
    • It needs to invest more in children and adolescents, particularly in nutrition and learning during early childhood.
    • 3) Make health investments: Health spending has not kept pace with India’s economic growth.
    • The public spending on health has remained flat at around 1% of GDP.
    • Evidence suggests that better health facilitates improved economic production.
    • Hence, it is important to draft policies to promote health during the demographic dividend.
    • 4) Make reproductive healthcare services accessible on a rights-based approach: We need to provide universal access to high-quality primary education and basic healthcare.
    • The unmet need for family planning in India at 9.4% as per the latest National Family Health Survey-5 (2019-21) is high as compared to 3.3% in China and 6.6% in South Korea, which needs to be bridged.
    •  5) Bridge gender differentials in education: The gender inequality of education is a concern.
    • In India, boys are more likely to be enrolled in secondary and tertiary school than girls. This needs to be reversed.
    • 6) Increase female workforce participation: As of 2019, 20.3% of women were working or looking for work, down from 34.1% in 2003-04.
    • New skills and opportunities for women and girls befitting their participation in a $3 trillion economy is urgently needed.
    • It is predicted that if all women engaged in domestic duties in India who are willing to work had a job, female labour force participation would increase by about 20%.
    • 7) Address the diversity between StatesWhile India is a young country, the status and pace of population ageing vary among States.
    • Southern States, which are advanced in demographic transition, already have a higher percentage of older people.
    • These differences in age structure reflect differences in economic development and health – and remind us of States’ very different starting points at the outset of the 2030 Sustainable Development Goals Agenda.
    • But this also offers boundless opportunities for States to work together, especially on demographic transition, with the north-central region as the reservoir of India’s workforce.
    • 8) Governance reform: A new federal approach to governance reforms for demographic dividend will need to be put in place for policy coordination between States on various emerging population issues such as migration, ageing, skiling, female workforce participation and urbanisation.

    Conclusion

    In India, the benefit to the GDP from demographic transition has been lower than its peers in Asia and is already tapering. Hence, there is an urgency to take appropriate policy measures.

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  • India improves position in Henley Passport Index, 2021

    India now ranks at 83rd position in the Henley Passport Index, climbing seven places from 90th rank last year.

    Henley Passport Index

    • The Henley & Partners publishes the ranking and the Index of the world’s passports according to the number of destinations their holders can access without a prior visa.
    • It was launched in 2005.
    • The ranking is based on data from the IATA (International Air Transport Association), a trade association of some 290 airlines, including all major carriers.
    • The index includes 199 different passports and 227 different travel destinations.
    • The data are updated in real time as and when visa policy changes come into effect.

    India’s performance this year

    • India is ranked at 83rd position and shares the rank with Sao Tome and Principe in Central Africa, behind Rwanda and Uganda.
    • It now has visa-free access to 60 destinations worldwide with Oman and Armenia being the latest additions.
    • It has added 35 more destinations since 2006.

    Global performance

    • Japan and Singapore has topped the list.
    • The US and the UK passports regained some of their previous strength after falling all the way to eighth place in 2020.
    • The passport of the Maldives is the most powerful in South Asia (58th) enabling visa-free entry to 88 countries.
    • In South Asia, Bangladesh (103rd) is ahead of Pakistan (108th) and Nepal (105th).
    • Afghanistan undoubtedly stands at the last rank.

     

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  • A planetary pressure-adjusted Human Development Index (HDI).

    Context

    Ever since the UNDP took up computation of the HDI in 1990, there have been adjustments such as inequality-adjusted HDI. The environment is one such issue now considered to be an essential component to be factored in to measure human development.

    Planetary pressure-adjusted Human Development Index

    • The purpose of the planetary pressure adjusted HDI, or PHDI, is to communicate to the larger society the risk involved in continuing with existing practices in our resource use and environmental management, and the retarding effect that environmental stress can perpetuate on development.
    • When planetary pressure is adjusted, the world average of HDI in 2019 came down from 0.737 to 0.683.
    • PHDI of India: In the case of India, the PHDI is 0.626 against an HDI of 0.645 with an average per capita CO2 emission (production) and material footprints of 2.0 tonnes and 4.6 tonnes, respectively.
    • India gained in global rankings by eight points (131st rank under HDI and 123rd rank under PHDI), and its per capita carbon emission (production) and material footprint are well below the global average.

    India’s twin challenge

    • India faces the twin challenges of poverty alleviation and environmental safeguarding.
    • India’s natural resource use is far from efficient, environmental problems are growing, and the onslaught on nature goes on unabated with little concern about its fallout.
    • At the same time, India has 27.9% people under the Multidimensional Poverty Index ranging from 1.10% in Kerala to 52.50% in Bihar, and a sizable section of them directly depend on natural resources for their sustenance.

    India’s performance on SDGs

    • The SDGs have acquired high priority in the context of the issue of climate change and its impact on society.
    • The Sixth Assessment Report (AR6) of IPCC 2021 laid stress on limiting global temperature rise at the 1.5° C level and strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty.
    • ‘No poverty’ and ‘Zero hunger’ are the first and second SDGs.
    •  According to NITI Aayog (2020-21), out of 100 points set for the grade of Achiever, India scored 60 (Performer grade, score 50-64) for no poverty and 47 (Aspirant grade, score 0-49) for zero hunger, with wide State-level variations.
    • India’s score in the SDGs of 8, 9, and 12 (‘Decent work and economic growth’; ‘Industry, Innovation and Infrastructure’ and ‘Responsible Consumption and Production’, respectively) — considered for working out planetary pressure — are 61 (performer), 55 (performer) and 74 (front runner), respectively.

    Way forward

    • Nature-based solutions: It is now well established that there are interdependencies of earth system processes including social processes, and their relationships are non-linear and dialectic.
    • Therefore, the central challenge is to nest human development including social and economic systems into the ecosystem, and biosphere building on a systematic approach to nature-based solutions that put people at the core.
    • Integrated perspective and local level involvement: Social and environmental problems cannot be addressed in isolation anymore; an integrated perspective is necessary.
    • This can be conceived and addressed at the local level, for which India has constitutional provisions in the form of the 73rd and 74th Amendments.

    Conclusion

    An integrated perspective is necessary as social and environmental problems cannot be addressed in isolation anymore.

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  • Extending GST compensation as a reform catalyst

    Context

    In 2020-21, the compensation payment episode plunged the Union-State relationship to a new low, creating humongous mistrust.

    Background of the compensation to the States

    • To allay the fears of States of possible revenue loss by implementing GST in the short term, the Union government promised to pay compensation for any loss of revenue in the evolutionary phase of five years.
    • This was estimated by taking the revenue from the merged taxes in 2015-16 as the base and applying the growth rate of 14% every year.
    •  To finance the compensation requirements, a GST compensation cess was levied on certain items such as tobacco products, automobiles.
    • Period of five years: The agreement to pay compensation for the loss of revenue was for a period of five years which will come to an end by June 2022.
    • Mistrust between Centre and the State: In 2020-21, due to the most severe lockdown following the novel coronavirus pandemic, the loss of revenue to States was estimated at ₹3 lakh-crore of which ₹65,000 crore was expected to accrue from the compensation cess.
    • Of the remaining ₹2.35 lakh-crore, the Union government decided to pay ₹1.1 lakh-crore by borrowing from the Reserve Bank of India.
    • The entire compensation payment episode plunged the Union-State relationship to a new low, creating humongous mistrust.

    GST reform is still in transition

    • Misuse of input tax credit: The technology platform could not be firmed up for a long time due to which the initially planned returns could not be filed.
    • This led to large-scale misuse of input tax credit using fake invoices.
    • Revenue uncertainty faced by the States: This is the only major source of revenue for the States.
    • Considering their increased spending commitments to protect the lives and livelihoods of people, they would like to mitigate revenue uncertainty to the extent they can.
    • They have no means to cushion this uncertainty for the Finance Commission which is supposed to take into account the States’ capacities and needs in its recommendations has already submitted its recommendations.
    • Changes needed: More importantly, the structure of GST needs significant changes and the cooperation of States is necessary to carry out the required reforms.

    Changes needed in GST structure

    • Reducing exemption items: Almost 50% of the consumption items included in the consumer price index are in the exemption list; broadening the base of the tax requires significant pruning of these items.
    • Bringing petroleum products, real estate etc under GST: Sooner or later, it is necessary to bring petroleum products, real estate, alcohol for human consumption and electricity into the GST fold.
    • Single rate: The present structure is far too complicated with four main rates (5%, 12%, 18% and 28%).
    • This is in addition to special rates on precious and semi-precious stones and metals and cess on ‘demerit’ and luxury items at rates varying from 15% to 96% of the tax rate applicable which have complicated the tax enormously.
    •  Multiple rates complicate the tax system, cause administrative and compliance problems, create inverted duty structure and lead to classification disputes.

    Way forward

    • Extending the compensation period: Reforming the structure to unify the rates is imperative and this cannot be done without the cooperation of States.
    • Thus, extending the compensation payment for the next five years is necessary not only because the transition to GST is still underway but also to provide comfort to States to partake in the reform.
    • Reforming the structure is important not only to enhance the buoyancy of the tax in the medium term but also to reduce administrative and compliance costs to improve ease of doing business and minimise distortions.
    • New rate of compensation: It has been pointed out by many including the Fifteenth Finance Commission that the compensation scheme of applying 14% growth on the base year revenue provided for the first five years was far too generous.
    • The issue can be revisited and the rate of growth of reference revenue for calculating compensation can be linked to the growth of GSDP in States.

    Conclusion

    The transition to GST is still in progress and an extension will provide comfort to States to help roll out crucial changes.

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  • Issues with India’s GDP data

    Context

    There are three major reasons why the GDP data, and hence any narrative of economic recovery based on it, are questionable.

    Background

    • The NSO released the current GDP series in 2015, using 2011-12 as its base year.
    • Some have argued that the problem in the new series is the real growth rate. This is debatable.
    • Scholars have pointed to measurement problems, both in the nominal and real GDP growth rates.

    Three issues with the GDP data, and  narrative of economic recovery based on it

    [1] Double deflation problem

    • The new series entailed a shift from a volume-based measurement system to one based on nominal values, thereby making the deflator problem more critical.
    • Simply put, the NSO calculates real GDP by gathering nominal GDP data in rupees and then deflating this data using various price indices.
    • The nominal data needs to be deflated twice: Once for outputs and once for inputs.
    • But the NSO — almost uniquely amongst G20 countries — deflates the nominal data only once.
    • It does not deflate the value of inputs.
    • To see why this is a problem, consider what happens when the price of imported oil goes down.
    • In that case, input costs will fall and the profits recorded by Indian firms will rise.
    • This increase in profits is merely the result of a fall in input prices, so it needs to be deflated away.
    • But the NSO doesn’t deflate away the increase in profits.
    • Since the cost of inputs is measured by the WPI (wholesale price index), a crude measure of the overestimation caused by the absence of “double deflation” is given by the gap between the WPI and the CPI (consumer price index).
    • In the 2014-2017 period, oil prices plunged, causing the WPI to fall sharply relative to the CPI.
    • This meant that real growth was probably overstated.
    • In the last few months, the exact opposite has been happening. WPI inflation is soaring.
    • The rapid increase in the WPI relative to the CPI is imparting an upward bias to the deflator.

    [2] Sectoral weight not updated

    • When it calculates GDP, it takes a sample of activity in each sector, then aggregates the figures by using sectoral weights.
    • To make sure that the weights are reasonably accurate, the NSO normally updates them once a decade.
    • It has now been more than 10 years since the weights were changed, and there are no signs of a base year revision.
    • As a result, the sectoral weights are still based on the structure of the economy in 2010-11, when in particular the information technology sector was much smaller.

    [3] Measurement of unorganised sector

    • Measurement of the unorganised sector has always been difficult in India.
    • Once in a while, the NSO undertakes a survey to measure the size of the sector.
    • In the meantime, it simply assumes that the sector has been growing at the same rate as the organised sector.
    • However, starting in 2016 the unorganised sector has been disproportionately impacted by a series of shocks.
    • In 2018, the NBFC sector reported serious problems, which in turn impacted unorganised sector firms since they were heavily dependent on NBFCs for funds.
    • From 2020 onwards, the pandemic has impacted the unorganised sector more than the organised sector enterprises.
    • Despite these shocks, the NSO does not seem to have made any adjustments to its methodology for estimating the growth of the unorganised sector.

    Consider the question “Elaborate the issues with India’s GDP data. Suggest the way forward.”

    Conclusion

    There are serious problems with India’s GDP data. Any analysis of recovery or growth forecast based on this data must be taken with a handful of salt.

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  • Red Sanders falls back in IUCN’s ‘endangered’ category

    Red Sanders (Red Sandalwood) has fallen back into the ‘endangered’ category in the International Union for Conservation of Nature’s (IUCN) Red List.

    A recently released and trending Telugu movie plot provides a fictional account of red sandal smuggling.

    About Red Sanders

    • The species, Pterocarpus santalinus, is an Indian endemic tree species, with a restricted geographical range in the Eastern Ghats.
    • It is endemic to a distinct tract of forests in Andhra Pradesh.
    • It is mainly found in Chittoor, Kadapa, Nandhyal, Nellore, Prakasam districts of Andhra Pradesh.
    • It was classified as ‘near threatened’ in 2018 and has now joined the ‘endangered’ list once again in 2021.
    • It is listed under Appendix II of CITES and is banned from international trade.

    Status of legal protection in India

    • The Union Environment Ministry had decided to keep Red Sanders (red sandalwood) OUT of the Schedule VI of Wild Life Protection Act, 1972, arguing that this would discourage the cultivation of the rare plant species.
    • Schedule VI regulates and restricts the cultivation, possession, and sale of a rare plant species.

    Significance of listing

    • It was a moment of celebration when the species was lifted off from the endangered category for the first time since 1997.
    • Over the last three generations, the species has experienced a population decline of 50-80 percent.
    • It is also scheduled in appendix II of the CITES and Wildlife Protection Act.

    Threats to this species

    • Red Sanders are known for their rich hue and therapeutic properties, are high in demand across Asia, particularly in China and Japan.
    • They are used in cosmetics and medicinal products as well as for making furniture, woodcraft and musical instruments.
    • Its popularity can be gauged from the fact that a tonne of Red Sanders costs anything between Rs 50 lakh to Rs 1 crore in the international market.

    Try this question from CSP 2016:

    Q.With reference to ‘Red Sanders’, sometimes seen in the news, consider the following statements:

    1. It is a tree species found in a part of South India.
    2. It is one of the most important trees in the tropical rain forest areas of South India.

    Which of the above statements is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

     

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    Back2Basics: Red List Categories of IUCN

    Species are classified by the IUCN Red List into nine groups specified through criteria such as rate of decline, population size, area of geographic distribution, and degree of population and distribution fragmentation. They are:

    • Extinct (EX) – beyond reasonable doubt that the species is no longer extant.
    • Extinct in the wild (EW) – survives only in captivity, cultivation and/or outside native range, as presumed after exhaustive surveys.
    • Critically endangered (CR) – in a particularly and extremely critical state.
    • Endangered (EN) – very high risk of extinction in the wild, meets any of criteria A to E for Endangered.
    • Vulnerable (VU) – meets one of the 5 red list criteria and thus considered to be at high risk of unnatural (human-caused) extinction without further human intervention.
    • Near threatened (NT) – close to being at high risk of extinction in the near future.
    • Least concern (LC) – unlikely to become extinct in the near future.
    • Data deficient (DD)
    • Not evaluated (NE)

     

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