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GS Paper: GS3

  • A high growth plan for Indian agriculture

    The article deals with the issue discussed in the recently published book ‘Revitalising Indian Agriculture and Boosting Farmer Incomes’. It suggests strategies for six Indian states and underlies the importance of the diversified approach to different states.

    Why agriculture is central to Indian economy

    • Agriculture engages close to 42 per cent of the country’s workforce.
    • With its close interlinkage with poverty, it is best positioned to alleviate problems of malnutrition and hunger.
    • In addition, agriculture supplies inputs for other industries.
    • It is critical for triggering a multiplier effect in the economy, where a financially empowered farming community triggers a demand-led growth, particularly for manufactured products and services.
    • There is no doubt that the sector needs to grow not just for those employed in it but also for the economy as a whole.

    Growth strategy needs to take into account diversity across the states

    • The growth process of agriculture should not just more efficient, and inclusive of India’s small and marginal but is also sustainable — both financially and environmentally.
    • But then comes the question of the diversity in Indian states, where they differ as much on factors of production like land and water as they do on access to market opportunities.
    • They even differ in their vulnerabilities to climate and weather changes.
    • This begs the question, should the roadmap not be customised to the needs, vulnerabilities, and resource-base of each state?

    Strategies for six states

    • The recently published book “Revitalising Indian Agriculture and Boosting Farmer Incomes” proposes strategies for six Indian states: Punjab, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar and Odisha.
    • In the six states, three factors explained most of the agrarian growth.
    • One, access to infrastructure — mainly irrigation and roads.
    • Two, diversification to high value agricultural products like fruits, vegetables, and allied activities like dairy and poultry.
    • Three, price incentives or favourable terms of trade.
    • Bringing markets closer to farmers and increasing the efficiency of the value-chains emerged as an important factor that explained agricultural growth in Gujarat, Madhya Pradesh, Odisha, and Bihar.
    • By ensuring timely access to sufficient irrigation, states like Gujarat and Punjab could explain their high performances.
    • Role of uninterrupted quality power too emerged important in this.
    • Diversification of the agricultural basket of a state was found to strengthen a state’s agri-performance.

    Relation between growth rate and policy reforms

    • The requirement to undertake policy reforms, mainly related to marketing, emerged as a key driver and predictor of growth.
    • The NITI Aayog’s Agricultural Markets and Farmer Friendly Reforms Index — AMFFRI evaluates Indian states on the extent to which each of them undertook required agri-reforms.
    • A low AMFFRI rank implies the state is undertaking desired reforms.
    • It was found that states that undertook reforms, and were thus ranked low on AMFFRI, witnessed a relatively faster agri-GDP growth rate.
    • States which did not undertake required reforms, and thus were ranked high on the AMFFRI witnessed relatively lower agri-GDP growth rates.
    • There were some exceptions: Karnataka, Haryana and Maharashtra.
    • These states undertook reforms, and thus had low AMFFRI ranks, but they witnessed a low agri-GDP growth rate.
    • This is likely to be attributed to the delayed effect of reforms on the agri-performance.

    Way forward

    • As a part of the roadmap, the book makes a case for states to move beyond production-centric approach to a value-chain approach with FPOs at its centre.
    • It highlights importance and requirement of growing public investments in basic infrastructure.
    • And finally, in the longer run, rationalising subsidies via direct income transfer is suggested.

    Consider the question “Despite its comparatively lower contribution to the GDP, agriculture plays a central role in the Indian economy. What are the factors that make agriculture central to the economy? Suggest the pathway to fuel the growth of the sector.”

    Conclusion

    If the government follows this path of investing in infrastructure, ensuring a more diversified agriculture and linking small-holder FPOs with markets, it will pay rich dividends not only to the farming community but also the entire economy.

  • Forestalling the cyber threats India faces

    The article highlights the threat of a cyber attack on India’s critical infrastructure and suggests the need to take preventive measures.

    Targetting the infrastructure

    • The U.S.-based cyber security firm, Recorded Future revealed that the past blackout in Mumbai was linked to the cyber attack from China.
    • Recorded Future had also found an increase in malware attacks targeting the Indian government, defence organisations and the public sector.
    • Also that, coinciding with Chinese incursions in Eastern Ladakh, certain Indian power facilities had been targets of a cyber attack.
    • This indicates that India’s key infrastructure facilities, such as the power sector, are now in the crosshairs of a hostile China.
    • Indian government agencies, such as the National Critical Information Infrastructure Protection Centre (NCIIPC) and the Indian Computer Emergency Response Team (CERT-In) needs to be on its guard.

    Exploiting vulnerabilities

    • China’s cyber offensive is directed against many advanced nations as well.
    • In attempting this, what China is doing is essentially exploiting to perfection the many vulnerabilities that software companies (essentially those in the West), have deliberately left open (for offensive purposes at an opportune time).
    • Exploiting this loophole, and also turning matters on its head, it is companies in the western world that are now at the receiving end of such antics.
    • Chinese cyber espionage sets no limitations on targets.
    • Towards the end of 2020, and as the world prepared for large-scale deployment of COVID-19 vaccines, their attention was directed to vaccine distribution supply chains around the world.

    Way forward

    •  Nations should beware and be warned about how cyber attacks can bring a nation to its knees.
    • This was well demonstrated way back in 2016 through a major attack on Ukraine’s power grid.
    • The Ukraine example should be a wake-up call for India and the world, as in the intervening five years, the sophistication of cyber attacks and the kind of malware available have become more advanced.
    • India, could well be blindsided by Chinese cyber attacks on critical infrastructure if the latter sets out to do so, unless prophylactic measures are taken in time.

    Consider the question “Examine the threat posed by cyber attack on the critical information infrastructure? Suggest the ways to deal with it.”

    Conclusion

    Cyber’ could well be one of China’s main threat vectors employed against countries that do not fall in line with China’s world view. Drawing up a comprehensive cyber strategy, one that fully acknowledges the extent of the cyber threat from China, has thus become an imperative and immediate necessity.

  • Draft E-Commerce Policy

    The Department for Promotion of Industry and Internal Trade (DPIIT) will soon come out with a common acceptable draft e-commerce policy.

    Earlier policy

    • The previous draft in July last year had proposed a regulator, an e-commerce law, periodic audit of companies that store or mirror Indian users’ data overseas.
    • The latest draft calls for streamlining of regulatory processes to ease the burden of compliance for activities related to e-commerce and regulations for data that will provide for sharing mechanism.

    What are the provisions of the new law?

    Data Usage

    • According to a revised draft, the government would lay down principles for the usage of data for industrial development, where such norms do not already exist.
    • They aim to put in place safeguards to prevent misuse and access of data by unauthorized persons.
    • Such safeguards may include regulating the cross-border flow of data pertaining to Indians and transactions taking place in India and the requirement of adequacy audits to be carried out by Indian firms.
    • As per the recent draft policy, violation of safeguards shall be viewed seriously and attract heavy penalties.

    Regulation, exports

    • Conformity assessment procedures will be put in place to verify that goods and services sold on e-commerce platforms meet required standards and technical regulations.
    • The government shall collect information from e-commerce platforms to aid it in making necessary decisions.
    • In order to ensure that e-commerce is not used to defraud customers, registration with an authority identified by the Government shall be mandatory.
    • The policy shall bring e-commerce exports on par with non-e-commerce exports by enabling online grant of drawbacks, advance authorization and GST refund.

    Consumer protection

    • As per the draft, e-commerce operators must ensure to bring out clear and transparent policies on discounts, including the basis of discount rates funded by platforms.
    • Such a move aims to ensure fair and equal treatment.
    • It said consumers have a right to be made aware of all relevant details about the goods and services offered for sale including country of origin, value addition in India etc.
    • In case the seller fails to establish the genuineness of his products within a reasonable time frame, the e-commerce platform shall delist the seller.

  • What is Index of Industrial Production (IIP)?

    Last week saw the release of the Index of Industrial Production (IIP), which recorded a contraction of 1.6% in January.

    Index of Industrial Production (IIP)

    • Index of Industrial Production data or IIP as it is commonly called is an index that tracks manufacturing activity in different sectors of an economy.
    • The IIP number measures the industrial production for the period under review, usually a month, as against the reference period.
    • IIP is a key economic indicator of the manufacturing sector of the economy.
    • There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
    • IIP index is currently calculated using 2011-2012 as the base year.

    IIP Index Components:

    • Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
    • The relative weights of these three sectors are 77.6% (manufacturing), 14.4% (mining) and 8% (electricity).
    • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

    Basket of products

    There are 6 sub-categories:

    1. Primary Goods (consisting of mining, electricity, fuels and fertilisers)
    2. Capital Goods (e.g. machinery items)
    3. Intermediate Goods (e.g. yarns, chemicals, semi-finished steel items, etc)
    4. Infrastructure Goods (e.g. paints, cement, cables, bricks and tiles, rail materials, etc)
    5. Consumer Durables (e.g. garments, telephones, passenger vehicles, etc)
    6. Consumer Non-durables (e.g. food items, medicines, toiletries, etc)

    Who releases IIP data?

    • The IIP data is compiled and published by CSO every month.
    • CSO or Central Statistical Organisation operates under the Ministry of Statistics and Programme Implementation (MoSPI).
    • The IIP index data, once released, is also available on the PIB website.

    Try this PYQ:

    Q. In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight?

    (a) Coal production

    (b) Electricity generation

    (c) Fertilizer production

    (d) Steel production

    Who uses IIP data?

    • The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
    • The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

    IIP base year change:

    • The base year was changed to 2011-12 from 2004-05 in the year 2017.
    • The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

    IIP vs ASI

    • While the IIP is a monthly indicator, the Annual Survey of Industries (ASI) is the prime source of long-term industrial statistics.
    • The ASI is used to track the health of industrial activity in the economy over a longer period. The index is compiled out of a much larger sample of industries compared to IIP.
    • The IIP essentially tracks the change in the volume of production in Indian industries.

  • What are AT1 Bonds?

    The decision of the Securities and Exchange Board of India (SEBI) to slap restrictions on mutual fund (MF) investments in additional tier-1 (AT1) bonds has raised a storm in the MF and banking sectors.

    What are AT1 Bonds?

    • AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date.
    • They have a call option, which can be used by the banks to buy these bonds back from investors.
    • These bonds are typically used by banks to bolster their core or tier-1 capital.
    • AT1 bonds are subordinate to all other debt and only senior to common equity.
    • Mutual funds (MFs) are among the largest investors in perpetual debt instruments and hold over Rs 35,000 crore of the outstanding additional tier-I bond issuances of Rs 90,000 crore.

    What action has been taken by the Sebi recently and why?

    • In a recent circular, the Sebi told mutual funds to value these perpetual bonds as a 100-year instrument.
    • This essentially means MFs have to make the assumption that these bonds would be redeemed in 100 years.
    • The regulator also asked MFs to limit the ownership of the bonds to 10 per cent of the assets of a scheme.
    • According to the Sebi, these instruments could be riskier than other debt instruments.

    Try this PYQ:

    Consider the following statements:

    1. The Reserve Bank of India manages and services the Government of India Securities but not any State Government Securities.
    2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
    3. Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 3 Only

    (c) 2 and 3 only

    (d) 1, 2 and 3

    How MFs will be affected?

    • Typically, MFs have treated the date of the call option on AT1 bonds as the maturity date.
    • Now, if these bonds are treated as 100-year bonds, it raises the risk in these bonds as they become ultra long-term.
    • This could also lead to volatility in the prices of these bonds as the risk increases the yields on these bonds rises.
    • Bond yields and bond prices move in opposite directions and therefore, the higher yield will drive down the price of the bond, which in turn will lead to a decrease in the net asset value of MF schemes holding these bonds.
    • Moreover, these bonds are not liquid and it will be difficult for MFs to sell these to meet redemption pressure.

    What’s the impact on banks?

    • AT1 bonds have emerged as the capital instrument of choice for state banks as they strive to shore up capital ratios.
    • If there are restrictions on investments by mutual funds in such bonds, banks will find it tough to raise capital at a time when they need funds in the wake of the soaring bad assets.
    • A major chunk of AT1 bonds is bought by mutual funds.

    Why has the Finance Ministry asked Sebi to review the decision?

    • The FM has sought withdrawal of valuation norms for AT1 bonds as it might lead to mutual funds making losses and exiting from these bonds, affecting capital raising plans of PSU banks.
    • The government doesn’t want a disruption in the fund mobilization exercise of banks at a time when two PSU banks are on the privatization block.
    • Banks are yet to receive the proposed capital injection in FY21 although they will need more capital to face the asset-quality challenges in the foreseeable future.
    • Fitch’s own estimate pegs the sector’s capital requirement between $15 billion-58 billion under various stress scenarios for the next two years, of which state banks account for the bulk.

  • Martian ‘Blueberries’

    In 2004, NASA’s Mars exploration rover ‘Opportunity’ found several small spheres on the planet, informally named Martian blueberries which find a resemblance to the similar formation in India’s Kutch region.

    There have been several missions to the red planet this year. Make a note of all of them.

    Martian blueberries

    • Opportunity’s mini spectrometers studied mineralogy and noted they were made of iron oxide compounds called haematites.
    • This caused excitement, as the presence of haematites suggests that there was water present on Mars.
    • The widely accepted formation mechanism of hematite concretion [hard solid mass] is precipitation from aqueous fluids.
    • Hematite is known to form in oxidizing environments hence it can be inferred that water must have played a crucial role in the formation of grey hematite on Mars.

    What makes them so special?

    • Indian researchers have been studying hematite concretions in Kutch called the Jhuran formation.
    • These formations are 145 and 201 million years old.
    • Detailed geochemistry and spectroscopic investigations of the haematite concretions in this area revealed that they resemble the ones on Mars.
    • They have similar morphology – spherical, often doublet and triplet – and similar mineralogy – a mixture of haematite and goethite.
    • Hence, several types of research have shown that the Kutch area is a potential Martian analogue locality.

  • Raman Thermometry check on health of power lines

    Researchers at IIT Madras have demonstrated that by using Raman thermometry on fibre optic cables, they can achieve the monitoring of power transmission cables.

    What is Raman Thermometry?

    • Raman spectroscopy is well known as an analytical method for identifying chemical compounds and characterizing the chemical bonding and solid-state structure of materials.
    • Perhaps less well known is the fact that one can use Raman spectroscopy to determine the temperature of the material being analyzed.

    For that, we need to get familiarized with Raman Effect

    • India’s first and so far only Nobel laureate in physics, C.V. Raman, won the prize for his discovery of the Raman Effect.
    • This consisted of experimental observations on the scattering of light.
    • In the Raman Effect, when light is scattered off an object, say a molecule, two bands are observed, with a higher and lower frequency than the original light, called the Stokes and anti-Stokes bands, respectively.
    • By studying the relative intensity of the two bands, it is possible to estimate the temperature of the object that scattered the light.
    • The anti-Stokes component of Raman scattering is strongly dependent on the temperature that the material is subjected to.

    Thus, by measuring the intensity of the anti-Stokes scattered light we can estimate the temperature. This is Raman thermometry.

    Try this PYQ:

    Q.Which Indian astrophysicist and Nobel laureate predicted rapidly rotating stars emit polarized light?

    (a) Subrahmanyan Chandrasekhar

    (b) CV Raman

    (c) Ramanujan

    (d) Amartya Sen

    What has IITM achieved?

    • The temperature measurement was performed in not just one location, but in a distributed manner using an optical fibre.
    • To achieve this, a pulse of light was launched into the optical fibre and the backscattered radiation was observed.
    • The time of flight of the backscattered radiation provided an estimate of the distance from which the light is backscattered.
    • This can go up to tens of kilometres. This technique is married to Raman thermometry to get the results for actual measurements over tens of kilometres.

    What makes this experiment special?

    • The distribution Sector considered the weakest link in the entire power sector.
    • We are much aware of Transmission and Distribution loss that is incurred to our DISCOMS.
    • This IITM technology helps analyze transmission efficiencies in a better way.
    • The present method devised by the team is both economical and provides real-time information.

  • Genetics of Eye Color

    Researchers from London have found that eye colour in Asians with different shades of brown is genetically similar to eye colour in Europeans ranging from dark brown to light blue.

    Human Eye Colour

    • Human eye colour ranges from black, brown to blue, green, and even red.
    • Eye colour is primarily determined by melanin abundance within the iris pigment epithelium, which is greater in brown than in blue eyes.
    • There are two forms of melanin – eumelanin and pheomelanin – and the ratio of the two within the iris as well as light absorption and scattering by extracellular components are additional factors that give irises their colour.
    • Absolute melanin quantity and the eumelanin–pheomelanin ratio is higher in brown irises, while blue or green irises have very little of both pigments and relatively more pheomelanin.

    Try this PYQ:

    Q.Recently, LASIK (Lasser Assisted In Situ Keratomileusis) procedure is being made popular for vision correction. Which one of the following statements in this context is not correct?

    (a) LASIK procedure is used to correct refractive errors of the eye

    (b) It is a procedure that permanently changes the shapes of the cornea

    (c) It reduces a person’s dependence on glasses or contact lenses

    (d) It is a procedure that can be done on the person of any age

    What has the research found?

    • Previously a dozen genes (mainly HERC2 and OCA2) were found to influence eye colour.
    • The researchers have now identified 50 new genes for eye colour.
    • Genetic analysis of nearly 0.2 million people across Europe and Asia helped the researchers to identify the new genes.
    • The findings collectively explain over 53% of eye colour variation using common single-nucleotide polymorphisms.

    Outcome of the research

    • Overall, the study outcomes demonstrate that the genetic complexity of human eye colour considerably exceeds previous knowledge and expectations.
    • These findings will help improve our understanding of eye diseases such as pigmentary glaucoma and ocular albinism where pigment levels play a role.

  • Need for national security shield in FDI

     

    Relaxation on Chinese FDI

    • Last April, India had subjected all Chinese FDI to mandatory government screening.
    • The aim was to curb opportunistic takeovers of Indian companies, a concern fuelled by sharp corrections in equity markets in March 2020.
    • Several economies including the US, Australia, Canada and Germany faced similar concerns.
    • They blocked specific takeover attempts, using special laws for national security screening of inward FDI.
    •  In the absence of similar legislation, India did not differentiate between investments which raised genuine national security concerns and those that did not.
    • This is a crucial shortcoming.
    • With market indices now hovering at their peaks, reportedly India may allow Chinese FDI up to 25 per cent in equity under the automatic route.

    Regulation of FDI and issues with it

    • India regulates foreign investments primarily through FEMA.
    • FEMA clearly provides two specific macro-prudential objectives — facilitating external trade and payments; and promoting orderly development and maintenance of foreign exchange markets in India.
    • Accordingly, it empowers the central government and the RBI, acting in consultation with each other, to regulate capital account transactions.
    • These regulations determine who can invest through the FDI route, in which sector and how much.
    • In practice, however, FEMA regulations have often responded to concerns not strictly related to macro-prudential objectives.
    • One such concern has been national security.

    Need for the law to scrutinise FDI from national security angle

    • Shortcoming of FEMA underscores the need for India to emulates its western peers and enact a statute specifically designed for national security screening of strategic FDI.
    • Unlike FEMA, this new statute must explicitly lay down legal principles for determining when a foreign acquisition of an Indian company poses genuine national security threats.
    • In this regard, a policy paper published by the Peterson Institute for International Economics three types of legitimate threats from foreign acquisitions.

    3 Types of threat from foreign acquisitions

    1) Dependency on foreign supplier

    • The first threat arises if a foreign acquisition renders India dependent on a foreign-controlled supplier of goods or services crucial to the functioning of the Indian economy.
    • For this threat to be credible, it needs to be further established that the industry in which the acquisition is supposed to take place is tightly concentrated, the number of close substitutes limited, and the switching costs are high.

    2) Technology transfer

    • The second threat emanates from a proposed acquisition transferring a technology or an expertise to a foreign-controlled entity that might be deployed by that entity or a foreign government in a manner harmful to India’s national interests.
    • The credibility of this threat again depends on whether the market for such technology or expertise is tightly concentrated or if they are readily available elsewhere.

    3) Threat of infiltration, surveillance or sabotage

    • The third threat arises if a proposed acquisition allows insertion of some potential capability for infiltration, surveillance or sabotage via human or non-human agents into the provision of goods or services crucial to the functioning of Indian economy.
    • This threat is particularly credible when the target company supplies crucial goods or services to the Indian government, its military or even critical infrastructure units and the switching costs are high.

    Way forward

    • The above stated 3 types of threats could provide conceptual clarity in the new statute could make national security assessments objective, transparent and amenable to the rule of law.
    • On procedure, the statute must empower only the finance minister to reject certain strategic foreign acquisitions on national security grounds.
    • Both the power and accountability mechanisms should be hardcoded into the statute itself, as is the case in some mature parliamentary democracies.
    • For instance, the Australian Foreign Acquisitions and Takeovers Act, 1975 empowers the treasurer to block certain foreign acquisitions on national security grounds.
    • Similarly, the Investment Canada Act, 1985 empowers a minister to reject certain foreign acquisitions.

    Consider the question “India needs to recognise the national security threat emanating from strategic FDI. This requires identifying threats. In lights of this, examine the types of threats and suggest the ways to deal with it.” 

    Conclusion

    Overall, India’s tryst with Chinese FDI underscores the importance of identifying specific national security threats emanating from strategic FDI and addressing them objectively. This is too sensitive a matter to be left to capital controls under FEMA. A dedicated statute for national security screening of inward FDI would be best suited for handling such issues.

  • Curbing Benzene Emission

    A joint committee appointed by the National Green Tribunal (NGT) to study air pollution in Kerala has pointed out that petrol refuelling stations were a major source of benzene emissions and volatile organic compounds (VOCs).

    Why such a move?

    • Benzene is a major constituent of evaporative emission due to its high volatility.

    Try this PYQ:

    Q.Consider the following:

    1. Carbon monoxide
    2. Methane
    3. Ozone
    4. Sulphur dioxide

    Which of the above are released into atmosphere due to the burning of crop/biomass residue?

    (a) 1 and 2 only

    (b) 2, 3 and 4 only

    (c) 1 and 4 only

    (d) 1, 2, 3 and 4

    What is Benzene?

    • Benzene is a chemical that is a colourless or light yellow liquid at room temperature. It has a sweet odour and is highly flammable.
    • It evaporates into the air very quickly. Its vapour is heavier than air and may sink into low-lying areas.
    • It dissolves only slightly in water and will float on top of the water.

    Its formation and uses

    Benzene is formed from both natural processes and human activities.

    • Natural sources of benzene include volcanoes and forest fires. Benzene is also a natural part of crude oil, gasoline, and cigarette smoke.
    • Some industries use benzene to make other chemicals that are used to make plastics, resins, and nylon and synthetic fibres.
    • It is also used to make some types of lubricants, rubbers, dyes, detergents, drugs, and pesticides.

    Benzene emission

    • The major sources of benzene exposure are tobacco smoke, automobile service stations, exhaust from motor vehicles, and industrial emissions.
    • Benzene is present in both exhaust and evaporative emissions. Motor vehicles account for approximately 85% of the total benzene emissions.
    • However, ingestion and dermal absorption of benzene can also occur through contact with contaminated water.