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GS Paper: GS3

  • Mini-Seed Kits to boost pulses output in kharif 2021

    Central government to distribute mini-kits of seed

    • The government on said it will distribute over 20 lakh mini-kits of seeds worth Rs 82.01 crore as part of a strategy to boost pulses production in the kharif season of the 2021-22 crop year.
    • The total cost for these mini-kits will be borne by the central government to boost the production and productivity of tur, moong and urad.
    • In addition to this, the usual programme of inter-cropping and area expansion by the states will continue on a sharing basis between the Centre and state, it said.

    Increasing production and productivity

    • From a meagre production of 14.76 million tonnes in the 2007-08 crop year, pulses production has now reached 24.42 million tonnes in the 2020-2021 crop year, which is a phenomenal increase of 65 per cent.
    • India is still importing around 4 lakh tonnes of tur, 0.6 lakh tonnes of moong and around 3 lakh tonnes of urad for meeting its demand.
    • The special programme will increase the production and productivity of the three pulses of tur, moong and urad to a great extent and will play an important role in reducing the import burden.

  • RBI steps in to ease COVID-19 burden

    Term Liquidity Facility announced

    • Reserve Bank of India stepped in on Wednesday with measures aimed at alleviating any financing constraints for healthcare infrastructure and services reeling under the second Covid wave.
    • RBI Governor announced a Term Liquidity Facility of ₹50,000 crore with tenor of up to three years, at the repo rate, to ease access to credit for providers of emergency health services.
    • Under the scheme, banks will provide fresh lending support to a wide range of entities, including vaccine manufacturers, importers/suppliers of vaccines and priority medical devices, hospitals/dispensaries, pathology labs, manufacturers and suppliers of oxygen and ventilators, and logistics firms. 
    • These loans will continue to be classified under priority sector till repayment or maturity, whichever is earlier.

    Measures for individual and MSME borrowers

    • As part of a “comprehensive targeted policy response”, the RBI also unveiled schemes to provide credit relief to individual and MSME borrowers impacted by the pandemic.
    • RBI unveiled a Resolution Framework 2.0 for COVID-related stressed assets of individuals, small businesses and MSMEs.
    • To provide further support to small business units, micro and small industries, and other unorganised sector entities the RBI decided to conduct special three-year long-term repo operations (SLTRO) of ₹10,000 crore at the repo rate for Small Finance Banks.
    • The SFBs would be able to deploy these funds for fresh lending of up to ₹10 lakh per borrower.
    • In view of the fresh challenges brought on by the pandemic and to address the emergent liquidity position of smaller MFIs, SFBs are now being permitted to reckon fresh lending to smaller MFIs (with asset size of up to ₹500 crore) for onlending to individual borrowers as priority sector lending.

    Measure for States

    • To enable the State governments to better manage their fiscal situation in terms of their cash flows and market borrowings, maximum number of days of overdraft (OD) in a quarter is being increased from 36 to 50 days and the number of consecutive days of OD from 14 to 21 days, the RBI said.

  • Atmanirbhar Bharat & the informal sector

    The article highlights the important role the informal sector can play in the vision of Atmanirbhar Bharat.

    Economic development through Atmanirbhar Bharat

    • The vision of the Atmanirbhar Bharat is rooted in the classical paradigm of economic development, based on demand injection in the economy via two sources, domestic and external.
    • ‘Vocal for local’ exhorts a distinct and decisive shift in consumer preferences towards locally-produced goods and services.
    • ‘Make for the world’ is more ambitious and resembles the export-led growth strategy adopted in East Asia.
    • Thus, the Atmanirbhar Bharat categorically bestows the Indian economy with twin engines of growth.

    Important role informal sector can play

    • The strategy is based on an assumption of lack of adequate demand.
    • So a prognosis of supply side with respect to the ability of domestic producers of goods and services to seize the opportunity at the requisite scale and scope is pertinent.
    • The nature, character, structure and contributions of the informal sector require retrospection.
    • The size of India’s informal sector is massive, it accounts for about 50% of GVA and a major share in the export basket.
    • This position proffers it with growth opportunities emanating from domestic as well as external sources.

    Constraints faced by informal sector

    • Most firms are micro in size and deploy little capital.
    • They have a small scale of production, substandard/unbranded quality of products, and localised scope of procuring raw material and marketing their products.
    • They are vulnerable to business downturns and other market uncertainties, as reflected in high mortality.
    • Their access to cheap, reliable and long-term credit sources is highly restricted.
    • The sector also endures a lack of official identity and recognition of its existence and contribution.

    Three transformations informal sector need to adopt

    • Atmanirbhar Bharat promises enhanced demand for domestically-produced goods and services, but the exposure to stiff global competition, especially for informal sector units, is imminent.
    • In such a scenario, the informal sector must embrace for three tectonic shifts with respect to internal transformation, strategic positioning and labour-market dynamics.

    1)  Internal transformation

    • Enterprises must undergo drastic internal transformation, progressively converging at incremental formalisation through spontaneous and self-propelled transition into economically-viable units.
    • It requires infusion of capital to ensure enhanced labour productivity and higher wages.
    • A systemic disruption, fostering natural growth must be ushered in, which would also curb the birth of new informal enterprises.
    • Moreover, internal consolidation in the sector via merger and acquisitions of units would bring benefits accruing from scale economies.

    2) Strategic positioning

    • Two, because the vision of the Atmanirbhar Bharat exposes the informal sector to global competition, entrepreneurs must embrace the subtle art of strategic positioning in global mega-supply chains.
    • They must pick their products and markets with utmost care, and engrain two mantras of success at the global stage in the DNA of their business strategies.
    • Global mega-supply chains demand ultra-flexibility in production cycle in addition to heightened resilience to withstand headwinds emanating from not just domestic factors but also global.

    3) Labour market dynamics

    • The informal sector employs more than 80% of India’s workforce.
    • The changes in the first two spheres i.e. higher capital intensity-led enhanced labour productivity and ultra-flexibility in production cycles may have severe repercussions on the availability and quality of jobs in India.
    • To alleviate these concerns, the first assumption is that the proportionate increase in expected demand must be more than the enhanced labour productivity to at least retain the currently employed workers.
    • To generate good quality jobs, diversification (both horizontal and vertical) must be encouraged.
    • Vertical diversification entails products not just be partly produced or assembled in India, they must be the end-products of fully indigenised and integrated production and supply chains, from design to made in India.
    • Horizontal diversification involves expansion into newer products and markets, smartly aligning with India’s comparative advantage of surplus labour.

    Consider the question ” India’s vast informal sector is poised to play an instrumental, decisive and intriguing role in the vision of the Atmanirbhar Bharat.  But the sector, in its current form, appears severely constrained to harness the opportunities. In lights of this, examine the constraints faced by the sector and suggest the measures needed to transform the sector.” 

    Conclusion

    The vision of the Atmanirbhar Bharat is an inflexion point for India’s informal sector, which stipulates adroit manoeuvring between contrasting forces of continuity and change.

  • India should go all out in its Westward trade push

    After walking away from the RCEP, India needs to find alternative trading partners that can offer the potential for trade expansion. The article suggests a Westward trade push as an alternative.

    Forging trade deals with the Western countries

    • Our rejection of RCEP, which covers much of the eastern hemisphere, had exposed us to the risk of losing out on cross-border commercial relations in a highly dynamic part of the world.
    • To compensate for the opportunity cost of that decision, it was imperative to strike other alliances.
    •  As a part of this, India adopted a roadmap for the rest of this decade to elevate ties with the UK and also moving to revive free-trade talks with the EU.
    • An India-UK plan unveiled recently will raise our bilateral relationship to a ‘comprehensive strategic partnership in such areas as economic affairs, defence and health.
    • The two countries signed a £1-billion trade investment pact that is expected to generate jobs in both.
    • Separately, India and the EU are reportedly working out how to resume stalled negotiations for a trade deal.

    Issues India may face

    • The signing of pacts would involve mutual tariff reductions and the lowering of other barriers, both of which have proven thorny so far.
    • In general, while the West wants us to lower import duties, our negotiators have been citing India’s sovereign right to protect domestic businesses under World Trade Organization rules.
    • Globally, even before covid knocked the wind out of the sails of cargo ships, commerce across borders had been doing badly under the extended effects of a financial crisis that shook things up in 2008-09.
    • But world trade remains a reliable path to global prosperity and must therefore regain its gusto.
    • For us, deal-making would mean opening up markets to imports in lieu of easier access to foreign ones.

    Way forward

    • Concessions that cause very few job losses in India can easily be made. A broad cost-benefit analysis will have to guide our approach to talks, on complex issues like US visa rules which affect our software exports.
    • Since it is governments that thrash out deals, geopolitical convergences are often sought too.
    • We seem to be in a favourable position on this, given the West’s need to keep China’s rise in check.
    • The UK’s Rolls-Royce has just inked a memorandum with Hindustan Aeronautics Ltd for warship engines, a sign of our strategic ties.
    • Technology could come our way from the US, too.
    • If we can leverage an ability to play a role in Asia’s balance of power to our economic benefit, we should.

    Conclusion

    Mutually assured flexibility on tariff concessions would help India and its Western partners score economic gains and also counterbalance China’s growing dominance of world trade.

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    B2B

    [pib] India-UK Virtual Summit

  • Digital Service tax

    • Starting April 2022, overseas entities that don’t have a physical presence in India but derive significant financial benefit from Indian customers will come under the Indian tax net.
    • While the main legal provision was introduced in 2018, the revenue department notified the thresholds for the purposes of significant economic presence (SEP) on May 3.
    • The concept was introduced via Finance Act, 2018, to enlarge the scope of income of non-residents that accrues or arises in India, by establishing a “business connection” of the foreign entities.
    • The idea is to tax profits of those online and offline businesses that don’t have a physical presence in India but derive significant economic value from the country.
    • Only those entities will get impacted by the SEP provisions who come from non-treaty jurisdictions.
    • That’s because the treaties specify non-resident entities will come under the tax net only if they have a permanent establishment in India.
    • India currently has a Double Taxation Avoidance Agreement with 97 countries.

    Thresholds

    • Transaction Threshold: Any non-resident whose revenue exceeds Rs 2 crore for transactions in respect of goods, services or property with any person in India. This will include transactions on the download of data or software.
    • User Threshold: Any entity that systematically and continuously does business with more than 3 lakh users in India.

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    BACK2BASICS

    Revision of this topic further:

    What are Digital Services Taxes?

  • Govt. gives nod for 5G trials

    Trials for 5G technology

    • The Department of Telecommunications (DoT) on Tuesday gave permission to Telecom Service Providers (TSPs) to conduct trials for the use and application of 5G technology.
    • The applicant TSPs include Bharti Airtel Ltd., Reliance JioInfocomm Ltd., Vodafone Idea Ltd. and MTNL.
    • These TSPs have tied up with original equipment manufacturers and technology providers which are Ericsson, Nokia, Samsung and C-DOT.
    • Each TSP will have to conduct trials in rural and semi-urban settings also in addition to urban settings so that the benefit of 5G technology proliferates across the country.
    • This formally leaves out Chinese companies like Huawei and ZTE from the 5G race in India.

    About 5Gi technology

    • TSPs are encouraged to conduct trials using 5Gi technology in addition to the already known 5G technology.
    •  5Gi technology was advocated by India, as it facilitates much larger reach of the 5G towers and radio networks.
    • The 5Gi technology has been developed by the Indian Institute of Technology, Madras (IIT-M), Centre of Excellence in Wireless Technology (CEWiT) and IIT Hyderabad.

  • [pib] First supply of UCO-based Biodiesel flagged off

    Eco-system for collection and conversion of UCO into Biodiesel

    • Minister of Petroleum & Natural Gas flagged off the first supply of UCO (Used Cooking Oil) based Biodiesel blended Diesel under the EOI Scheme.
    • To create an eco-system for collection and conversion of UCO, Expressions of Interest had been initiated for “Procurement of Bio-diesel produced from Used Cooking Oil” on the occasion of World Biofuel Day on 10th August 2019.
    • Under this initiative, Oil Marketing Companies (OMC) offer periodically incremental price guarantees for five years and extend off-take guarantees for ten years to prospective entrepreneurs.

    Advantages

    • This is a landmark in India’s pursuance of Biofuels and will have a positive impact on the environment.
    • This initiative will garner substantial economic benefits for the nation by shoring up indigenous Biodiesel supply, reducing import dependence, and generating rural employment.

  • Climate change causing a shift in Earth’s axis, finds new study

    About the study

    • A study is published in Geophysical Research Letters of the American Geophysical Union (AGU).
    • The study has added yet another impact of climate change on the earth – marked shifts in the axis along which the Earth rotates.
    • It says that due to the significant melting of glaciers because of global temperature rise, our planet’s axis of rotation has been moving more than usual since the 1990s.

    How the earth’s axis shifts

    • The Earth’s axis of rotation is the line along which it spins around itself as it revolves around the Sun.
    • The points on which the axis intersects the planet’s surface are the geographical north and south poles.
    • The location of the poles is not fixed, however, as the axis moves due to changes in how the Earth’s mass is distributed around the planet.
    • Thus, the poles move when the axis moves, and the movement is called “polar motion”.
    • Generally, polar motion is caused by changes in the hydrosphere, atmosphere, oceans, or solid Earth.
    • But now, climate change is adding to the degree with which the poles wander.

    What the study says

    • As per the study, the north pole has shifted in a new eastward direction since the 1990s, because of changes in the hydrosphere (meaning the way in which water is stored on Earth).
    • From 1995 to 2020, the average speed of drift was 17 times faster than from 1981 to 1995.
    • The faster ice melting under global warming was the most likely cause of the directional change of the polar drift in the 1990s, the study says.
    • The other possible causes are terrestrial water storage change in non‐glacial regions due to climate change and unsustainable consumption of groundwater.

  • RBI to strengthen risk-based supervision (RBS) of banks, NBFCs

    About RBS model

    • The RBI uses the Risk-Based Supervision (RBS) model, including both qualitative and quantitative elements, to supervise banks, urban cooperatives banks, non-banking financial companies and all India financial institutions.

    Decision to review the model

    • The Reserve Bank has decided to review and strengthen the Risk-Based Supervision (RBS) of the banking sector with a view to enable financial sector players to address the emerging challenges.
    • The review process will help make the extant RBS model more robust and capable of addressing emerging challenges, while removing inconsistencies if any.
    •  Annual financial inspection of UCBs and NBFCs is largely based on CAMELS model (Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Systems & Control).
    • It is intended to review the existing supervisory rating models under CAMELS approach for improved risk capture in a forward-looking manner and for harmonising the supervisory approach across all Supervised Entities.

    Source:

    https://www.financialexpress.com/industry/banking-finance/rbi-to-strengthen-risk-based-supervision-of-banks-nbfcs/2244259/

  • Melting of Glaciers

    Glaciers shrinking faster than before

    • A new study by ETH Zurich and University of Toulouse researchers finds that the world’s glaciers are shrinking at a faster rate than before.
    •  If the trend continues this will put the densely-populated parts of Asia at risk of flood and water shortages.
    • The study found the world’s ice fields lost 298 gigatons of ice per year from 2015 to 2019, a 30% increase in the rate of retreat compared with the previous five years.
    • Glaciers in Alaska, the Alps and Iceland are among those disappearing at the fastest pace.
    • The scientists used images from a special camera aboard NASA’s Terra satellite, which has circled the Earth every 100 minutes since its launch in 1999.

    Impact

    • The situation in the Himalayas is particularly worrying.
    • Swathes of India and Bangladesh could face water stress during dry periods when major rivers like the Ganges and Indus are mainly fed by glacial runoff.
    • Glaciers typically accumulate ice in the winter, but a warming climate means summer melting has outstripped those gains and caused a net loss of ice in mountain regions.
    • The melting in turn contributes to global warming and indirectly accelerates sea level rise, raising the risk of flooding faced by coastal communities.