💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

GS Paper: GS3

  • Sustaining India’s Growth Momentum

    The article highlights the factors that explain that India’s economic recovery is broad-based and sustainable in nature.

    Revising India’s GDP forecast

    • With major banks, investor advisory groups, and credit rating agencies revising their GDP forecasts for the next financial year while lowering estimates of economic contraction for this fiscal, surely the bounce back is well on track.
    • Some of the earlier assessments were too pessimistic and assumed a gradual pace of economic normalisation.
    • Thus, a reassessment was given but nevertheless welcome.

    Many continue to challenge conventional belief regarding India’s economic recovery being broad-based and sustainable in nature. It is important that we look at underlying data and relate it with steps undertaken by the government with the sole objective of reviving India’s economy.

    1) Employment figures

    •  Economic activity will see a faster revival than employment figures as labour markets tend to lag.
    • This is because most firms face costs associated with hiring and firing and they prefer to adjust the working hours before adjusting employment numbers.
    • Trends labour market does indicate prospects of a cyclical recovery which will lead to jobs being added at a faster pace than what was originally estimated.
    • Critically, the new scheme subsiding part of the EPFO contribution for the unskilled workers will benefit enormously which will then have spill-over effects.

    2) Normalisation driven by rural economy

    • The bulk of the normalisation of economic activity was driven by the rural economy which eventually benefited the rest of the economy.
    • Rural growth has gained momentum and definitely augurs well for the Indian economy as it gets one of the engines firing.
    • The strong push by the government towards financing construction of assets has a significant impact.

    3) Avoiding excessive and inefficient use of public funds

    • The design of the aid by the government is similar in terms of its size to programmes announced by other emerging markets.
    • However, the choice of instruments is along the lines those deployed by developed countries.
    • The government has refrained from excessive and inefficient use of public funds by restricting expenditures to temporary fiscal commitments.
    • This is important as our 2008 response had a lot of permanent fiscal expenditures which led to a systematic deterioration of our macroeconomic fundamentals.
    • The government has taken undertaken a sizable fiscal expansion combining automatic stabilizers, cash transfers, bank guarantees, expansion of expenditure under various programs such as MGNREGA, Food Security Act and Urban Affordable Housing Measures.
    • The fiscal component under each of these policies can be easily reversed making it possible for India to revert to its fiscal consolidation path a lot sooner.

    4) Structural reforms as a part of its economic response package

    • These reforms are geared at unshackling the productivity potential in areas such as APMCs,  labour markets, other reforms that allow for greater private role within the economy in critical areas such as coal, space technology etc.
    • These moves and their productivity gains will help India improve its potential growth rate.
    • This means that India should be better equipped at sustaining a high-growth rate of above 7 per cent due to the productivity gains that will be an outcome of the proposed reforms.
    • This will further help a faster reduction in fiscal deficit as a percentage of GDP and our public debt to GDP figures.

    Conclusion

    Strong macroeconomic fundamentals are necessary for sustained economic growth and the government has focused on a response package which prioritises sustainability of growth rather than having a fast yet unsustainable economic recovery from the crisis.

  • Analysing India’s economic growth

    The article analyses India’s economic trajectory after independence and divides it into five phases. India’s progress is also compared with Pakistan’s as both countries have had much in common.

    What drives economic growth

    • Examining the experiences of different countries to analysing the growth may seem a promising approach.
    • However, generalising from specific experiences can be misleading since ground conditions vary hugely across countries.
    • There are two ways to avoid the pitfalls of generalising from specific cases.
    • 1) The first is to examine the same country over time to look for changes in outcomes at specific points in time.
    • 2) A second approach is to compare countries with shared history, culture and geography.
    • If there are stark differences in outcomes between them, then there may be some policy lessons to be drawn.

    The Indian subcontinent provides lessons from both approaches. The 73 years of post-Independence India has generated a lot of evidence across different political-economic regimes. This period has also provided us with the contrasting experiences of India and Pakistan, two countries that share history, geography and socio-cultural mores.

    5 phases of India’s economic progress in 73 years: first approach

    • 1) The first phase was the period 1950-65. This was the Nehruvian period of state-led industrialisation.
    • Starting in 1950 annual per person GDP growth averaged 2 per cent during this period.
    • This translated to aggregate annual GDP growth of around 4 per cent since the population was growing at close to 2 per cent.
    • 2) The second phase of post-Independence India was during 1965-84.
    • This period was an unmitigated economic disaster with negative per capita growth.
    • The phase was marked with increasing state control of the economy, nationalisation of industry, closing of the economy to trade and a systematic weakening of institutions.
    • 3) The third phase is 1984-91 when the government ushered in the first round of economic reforms by liberalising capital goods imports as well as starting industrial de-licensing.
    • These reforms were rewarded by a growth take-off. India’s annual per capita GDP growth averaged 3.1 per cent while aggregate GDP grew at 5.2 per cent during 1984-91.
    • 4) The period 1991-2004 is typically classified as the liberalisation phase.
    • The reform effort was reflected in the 4.9 per cent annual per capita GDP growth during 1991-2004.
    • 5) India embarked on a distinctive phase of faster growth post-2004 on the back of large investments in infrastructure.
    • Per person GDP growth in the period 2004-2015 averaged 7.7 per cent.
    • The corresponding aggregate GDP growth averaged 9 per cent.
    • This came at a cost, as a number of these infrastructure projects later caused problems in the banking sector on account of burgeoning NPAs, a problem that continues till today.

    Comparison with Pakistan

    • In 1950, Pakistan’s per person GDP was almost 50 per cent greater than India that year.
    • Due to political uncertainty, Pakistan stagnated throughout the 1950s while a politically stable India grew.
    • As a result, by 1960, India had almost caught up with Pakistan in per capita GDP terms.
    • Unfortunately, from 1964, India went into two decades of economic stagnation while Pakistan opened up to foreign capital.
    • By 1984, Pakistan’s per capita income was more than double that of India’s.
    • Pakistan’s slowdown began in the 1980s.
    • This period coincided with the reforms in India.
    • Nevertheless, it wasn’t till as recently as 2010 that India’s per capita GDP finally overtook Pakistan.

    4 takeaways

    •  First, openness to trade and private enterprise usually has positive effects on growth.
    • Second, rapacious and exploitative democratic systems do not necessarily promote growth. Pakistan in the 1950s, 1990 and post-2010 is a good example.
    • Third, the socio-economic environment surrounding religious fundamentalism may be inimical to growth.
    • Fourth, degradation of institutions that regulate, arbitrate and enforce laws can be costly.

    Conclusion

    India’s growth when analysed from both the perspective offers valuable lessons for India and these lessons must guide India’s future economic trajectory.

  • India’s no to RCEP could still be a no

    The article examines the significance of the RCEP and India’s concerns over its provision. 

    Significance of RCEP

    • Last week, 15 East Asian countries signed the Regional Comprehensive Economic Partnership (RCEP), the largest free trade agreement (FTA) ever.
    • In 2019, RCEP members accounted for about 30% of world output.
    • More importantly, about 44% of their total trade was intra-RCEP, which is a major incentive for the members of this agreement.
    • The deal could contribute to the strengthening of the regional value chains.

    Comparing RCEP with Trans-Pacific Partnership (TPP)

    • The TPP included several regulatory issues including labour and environmental standards and “anti-corruption”.
    • All of these issues could raise regulatory barriers and severely impede trade flows.
    • In contrast, RCEP includes traditional market access issues, following the template provided by the World Trade Organization (WTO).
    • RCEP also includes issues like electronic commerce, investment facilitation that are currently being discussed by WTO members to “reform the multilateral trading system”.

    Would RCEP be able to realise trade and investment liberalisation?

    • In case of trade in goods, RCEP members have taken big strides towards lowering their tariffs.
    • However, commitments made by RCEP members for services trade liberalisation do look shallow in terms of the coverage of the sectors.
    • Movement of natural persons, an area in which India had had considerable interest, is considerably restricted.
    • The areas of investment and electronic commerce, in both of which India had expressed its reservations on the template adopted during RCEP negotiations, the outcomes are varied.
    • The text on investment rules shows that it is a work-in-progress.
    • The rules on dispute settlement procedures are yet to be written in.

    Will India’s concerns get addressed in near future?

    • The answer seems to be unambiguously in the negative on two counts.
    • 1) Two of the concerns India had raised, namely,  the deep cuts in tariffs on imports from China, and provisions relating to the investment chapter, have become even more significant over the past several months.
    • 2) India’s Atmanirbhar Bharat Abhiyan is primarily focused on strengthening domestic value chains, while RCEP, like any other FTA is solely focused on promoting regional value chains.

    Consider the question “What were India’s concerns about RCEP that resulted in India not signing it? ” 

    Conclusion

    This suggests that the prospects of India joining the RCEP in the near future appears bleak.

  • [pib] IRNSS now part of World Wide Radio Navigation System

    The Indian Regional Navigation Satellite System (IRNSS) has been accepted as a component of the World Wide Radio Navigation System (WWRNS) for operation in the Indian Ocean Region by the International Maritime Organization (IMO).

    Try this PYQ:

    With reference to the Indian Regional Navigation Satellite System (IRNSS), consider the following statements:

    1. IRNSS has three Satellites in geostationary and four satellites the geosynchronous orbits.
    2. IRNSS covers entire India and about 5500 sq. km beyond its borders.
    3. India will have its own satellite navigation system with full global coverage by the middle of 2019.

    Which of the statements given above is/are correct?

    (a) 1 only            

    (b) 1 and 2 only

    (c) 2 and 3 only

    (d) None

    What is IRNSS?

    • The IRNSS, with an operational name of NavIC (acronym for Navigation with Indian Constellation) is an Indian regional satellite navigation system that provides accurate real-time positioning and timing services.
    • It covers India and a region extending 1,500 km around it, with plans for further extension.
    • The system currently consists of a constellation of seven satellites, with two additional satellites on ground as stand-by.
    • The constellation is in orbit as of 2018, and the system was expected to be operational from early 2018 after a system check.
    • It will provide two levels of service, the “standard positioning service”, which will be open for civilian use, and a “restricted service” (an encrypted one) for authorised users (including the military).

    Benefits of the move

    • This move will enable merchant vessels to use IRNSS for obtaining position information similar to GPS and GLONASS.
    • This will assist in the navigation of ships in Indian ocean waters within the area covered by 50°N latitude, 55°E longitude, 5°S latitude and 110°E longitude (approximately up to 1500 km from Indian boundary).

    Back2Basics: International Maritime Organisation (IMO)

    • IMO is the UN specialized agency with responsibility for the safety and security of shipping and the prevention of marine pollution by ships.
    • Its primary purpose is to develop and maintain a comprehensive regulatory framework for shipping and its remit today includes safety, environmental concerns, legal matters, technical co-operation, maritime security and the efficiency of shipping.
    • IMO is governed by an assembly of members and is financially administered by a council of members elected from the assembly.

  • The MSME sector holds the key to an Indian economic recovery

    The article highlights the importance of MSMEs for the economy and issues faced by the sector.

    Context

    • The economy may have recovered from the trough of April but is yet to show signs of a sustained recovery on an annual basis.
    • The number of establishments registered with the Employees’ Provident Fund Organisation declined by more than 30,800 in October, compared to September.

    Incentives for MSMEs

    • The above-cited numbers are indicator of the vulnerability of the employment situation, but also as a performance indicator of micro, small and medium enterprises (MSMEs).
    • The MSME sector is vital for employment generation, as also for an economic recovery to sustain.
    • Under Atmanirbhar Rozgar Yojana the government will bear the entire provident fund contributions for two years of all new employees hired.
    • However, similar announcements earlier failed to enthuse the MSME sector.
    • Along with the employment incentive, the MSME sector has also been provided collateral free credit.
    • But the offtake from the scheme has not been impressive, pointing to deeper issues.

    Why the incentives failed

    • Part of the reason these incentives failed lies in the very nature of the MSME sector and its heterogeneity, which is inherent in its definition as a residual sector once large enterprises are excluded.
    • A 2015-16 survey of the National Statistical Office shows that almost 94% of these enterprises are tiny, with less than four workers.
    • Only 31% are registered under various acts, but these face regulatory hurdles, some of them related to compliance with the goods and service tax (GST).

    Problems faced by MSMEs

    • In 2015-16 survey of the National Statistical Office two most important problems mentioned were a lack of demand and unpaid dues.
    • On both, the situation after 2015-16 has worsened, with the economy slowing down and the government responsible for the largest unpaid dues.
    • With the finances of state governments also strained due to pandemic, the fiscal situation has added to the problem of unpaid dues.
    • The sector is also affected by the political economy of state intervention, which seems biased in favour of large corporations.
    • Unlike the ₹1.5 trillion tax bonanza that large companies received as part of a pre-pandemic stimulus, there was no such bounty for the MSME sector.
    • With most state governments relaxing labour regulations for large companies, even the low-wage advantage that this sector enjoyed has got diminished.
    • Policy changes have not only reduced the compliance burden of labour laws, but have also helped large enterprises reduce wage costs.
    • Consequently, the MSME sector has to now compete with a corporate sector that has easy access to capital, cheap and unregulated labour and a lower tax burden than before.

    Way forward

    • Apart from the fiscal stimulus, the sector requires a political-economy approach that prioritizes MSME interests.
    • India needs to ease the regulatory burden of small units and aid their survival through fiscal support.
    • Above all, they need a level-playing field vis-à-vis big businesses.

    Consider the question “Despite several incentives by the government MSME sector fails to play the role expected of it. What are the issues faced by the sector and suggest the measure to deal with the issues.” 

    Conclusion

    Given the important role played by the sector in the economy, issues faced by it must be addressed on ani urgent basis to revive the economy battered by the pandemic.

  • Faultlines in India’s economic liberalism

    The article counters the argument made by External Affairs Minister S. Jaishankar about the impact of economic liberalisation on India’s economy.

    Impact of liberalism on India

    • India’s External Affairs Minister S. Jaishankar recently disapproved of free trade and globalisation.
    • About FTA’s he said that “the effect of past trade agreements has been to de-industrialise some sectors.”
    • These observations were made days after countries of the Asia-Pacific region signed the Regional Comprehensive Economic Partnership (RCEP) agreement.
    • He said that , “in the name of openness, we have allowed subsidi[s]ed products and unfair production advantages from abroad to prevail”

    Flaws in the argument

    •  There are several flaws in Mr. Jaishankar’s arguments.

    1) India cannot be the part of global value chain

    • India is now truly at the margins of the regional and global economy.
    • With trade multilateralism at the World Trade Organisation (WTO) remaining sluggish, FTAs are the gateways for international trade.
    • By not being part of any major FTA, India cannot be part of the global value chains.
    • India’s competitors such as the East Asian nations, by virtue of they being part of mega-FTAs, are in an advantageous position to be part of global value chains and attract foreign investment.

    2) Indian economy has bee relatively closed economy

    • India is surely a much more open economy than it was three decades ago, globally, India continues to remain relatively closed when compared to other major economies.
    • According to the WTO, India’s applied most favoured nation import tariffs are 13.8%, which is the highest for any major economy.
    • Likewise, according to the United Nations Conference on Trade and Development, on the import restrictiveness index, India figures in the ‘very restrictive’ category.
    • From 1995-2019, India has initiated anti-dumping measures 972 times (the highest in the world) trying to protect domestic industry.

    3) Economic survey accepts the benefits of FTAs

    • The External Affairs Minister is contradicting government’s economic survey presented earlier this year.
    • The survey concluded that India has benefitted overall from FTAs signed so far.
    • Blaming FTAs for deindustrialisation means ignoring real problem of the Indian industry — which is the lack of competitiveness and absence of structural reforms.

    4) India has been a major beneficiary of economic globalisation

    • It cannot be ignored that India has been one of the major beneficiaries of economic globalisation — a fact attested by the International Monetary Fund (IMF).
    • Post-1991, the Indian economy grew at a faster pace, ushering in an era of economic prosperity.
    • According to the economist Arvind Panagariya, poverty in rural and urban India, which stood at close to 40% in 2004-05, almost halved to about 20% by 2011-12.
    • This was due to India clocking an average economic growth rate of almost 8%.

    Conclusion

    Desire to make India a global destination for foreign investment is a pipe dream because it is naive to expect foreign investors to be gung-ho about investing in India if trade protectionism is the government’s official policy.

  • Community Cord Blood Banking

    Community Cord Blood Banking, a stem cell banking initiative, has recently helped save the life of a girl child making it India’s first dual cord blood transplant through an unrelated donor.

    Must read:

    What is Cord Blood Banking?

    • Community Banking is a new sharing economy model of stem cell banking that was pioneered by LifeCell in India.
    • Parents who choose to store their child’s cord blood in a community bank will have access, in the event of medical need, to all of the other cord blood units in the bank.
    • A community bank is like a public cord blood bank in that the members are supporting each other, but it is also like a private bank because the members pay for this service and outsiders cannot participate.
    • It can fill an unmet health need in a country like India, where there is no national network of public banks and the population has unique genetics that are not covered by banks elsewhere in the world.
    • It is different from “hybrid” banking where both public and family banks share a laboratory, because in hybrid banks the pubic and family sides operate separately.
    • In a community bank the public and family functions are blended.

    Benefits of cord blood

    • It gives protection to a baby against all conditions treatable using stem cells (own & donor).
    • It gives protection to the baby’s siblings, parents and grandparents (maternal & paternal) by providing unrelated donor stem cells.

    Back2Basics: Stem Cell Therapy

    • It is a type of treatment option that uses a patient’s own stem cells to repair damaged tissue and repair injuries.
    • It is used to treat more than 80 disorders including neuromuscular and degenerative disorders. Eg. Bone-marrow transplant is used in Leukemia (blood cancer), sickle-cell anemia, immunodeficiency disorders.
    • Stem cells are usually taken from one of the two areas in the patient’s body: bone marrow or adipose (fat) tissue in their upper thigh/abdomen.
    • Because it is common to remove stem cells from areas of stored body fat, some refer to stem cell therapy as “Adipose Stem Cell Therapy” in some cases.

  • [pib] PM Formalization of Micro Food Processing Enterprises Scheme

    Union Minister for Food Processing Industries has inaugurated the capacity building component of the Pradhan Mantri Formalization of Micro food processing Enterprises scheme (PM-FME Scheme).

    The event also sought the launch of the GIS One District One Product (ODOP) Digital Map of India.

    Practice question for mains:

    Q.What is the PM FME Scheme? Discuss its potential to neutralize various challenges faced by India’s unorganized food industries

    PM-FME Scheme

    • Launched under the Aatmanirbhar Bharat Abhiyan, the PM-FME Scheme is a centrally sponsored scheme.
    • It aims to enhance the competitiveness of existing individual micro-enterprises in the unorganized segment of the food processing industry and promote formalization of the sector.
    • It seeks to provide support to Farmer Producer Organizations, Self Help Groups, and Producers Cooperatives along their entire value chain.
    • Under the PM-FME scheme, capacity building is an important component.
    • The scheme envisages imparting training to food processing entrepreneurs, various groups, viz., SHGs / FPOs / Co-operatives, workers, and other stakeholders associated with the implementation of the scheme.

    Features of the scheme

    • The Scheme adopts One District One Product (ODODP) approach to reap the benefit of scale in terms of procurement of inputs, availing common services and marketing of products.
    • The States would identify food product for a district keeping in view the existing clusters and availability of raw material.
    • The ODOP product could be a perishable produce based product or cereal-based products or a food product widely produced in a district and their allied sectors.
    • An illustrative list of such products includes mango, potato, litchi, tomato, tapioca, kinnu, bhujia, petha, papad, pickle, millet-based products, fisheries, poultry, meat as well as animal feed among others.
    • The Scheme also place focus on waste to wealth products, minor forest products and Aspirational Districts.

     About ODOP Digital Map

    • The GIS ODOP digital map of India provides details of ODOP products of all the states to facilitate the stakeholders.
    • The digital map also has indicators for tribal, SC, ST, and aspirational districts.
    • It will enable stakeholders to make concerted efforts for its value chain development.

  • Export remain key to economic growth

    The article highlights the argument made by Arvind Panagaria about the primacy of export for the progress of the country in his new book India Unlimited: Reclaiming the Lost Glory.

    (more…)

  • What are Deemed Forests?

    Karnataka Forest Minister has announced that the state government would soon declassify 6.64 lakh hectares of the 9.94 lakh hectares of deemed forests in the state (nearly 67%) and hand it over to Revenue authorities.

    Try this PYQ:

    Q. In India, in which one of the following types of forests is teak a dominant tree species?

    (a) Tropical moist deciduous forest

    (b) Tropical rain forest

    (c) Tropical thorn scrub forest

    (d) Temperate forest with grasslands

    What are Deemed Forests?

    • The concept of deemed forests has not been clearly defined in any law including the Forest Conservation Act of 1980.
    • However, the Supreme Court in the case of T N Godavarman Thirumalpad (1996) accepted a wide definition of forests under the Act.
    • It covered all statutorily recognised forests, whether designated as reserved, protected or otherwise for the purpose of Section 2 (1) of the Forest Conservation Act.
    • The term ‘forest land’ occurring in Section 2 will not only include ‘forest’ as understood in the dictionary sense but also any areas recorded as forest in the government record irrespective of the owners said the court.

    Why it is in news?

    • The issue of deemed forests is a contentious one in Karnataka, with legislators across party lines often alleging that large amounts of agriculture and non-forest land are “unscientifically” classified as such.

    Demands to reclassify

    • A deemed forest fits “dictionary meaning” of a forest, “irrespective of ownership”.
    • Amidst claims that the move hit farmers, as well as barred large tracts from mining, the state has been arguing that the classification was done without taking into account the needs of people.

    Why does the government want to release these forests?

    • In 2014, the then government decided to have a relook at the categorisation of forests.
    • The dictionary definition of forests was applied to identify thickly wooded areas as deemed forests, a well-defined scientific, verifiable criterion was not used, resulting in a subjective classification.
    • The subjective classification in turn resulted in conflicts.
    • Ministers have also argued that land was randomly classified as deemed forest by officials, causing hardship to farmers in some areas.
    • There is also a commercial demand for mining in some regions designated as deemed forests.

    Back2Basics: Forest Classification in India

    The Forest Survey of India (FSI) classifies forest cover in 4 classes.

    • Very Dense forest: All lands with tree cover (including mangrove cover) of canopy density of 70% and above.
    • Moderately dense forest: All lands with tree cover (including mangrove cover) of canopy density between 40% and 70%.
    • Open forests: All lands with tree cover (including mangrove cover) of canopy density between 10% and 40%.
    • Scrubs: All forest lands with poor tree growth mainly of small or stunted trees having canopy density less than 10%.