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GS Paper: GS3

  • SEBI proposes framework for Gold Exchange

    The Securities & Exchange Board of India (SEBI) has floated a consultation paper on the proposed framework for Gold Exchange in India.

    Why such a move?

    • According to SEBI, the proposed exchange would bring in more transparency in the gold trading market in terms of spot price discovery, quality of the gold and enable greater integration with the financial markets.

    What is a Gold Exchange?

    • As the name suggests, this would offer trading facilities in the precious metal.
    • Entities like retail investors, banks, foreign portfolio investors (FPIs), jewellers and bullion dealers among others would be allowed to trade on the exchange.
    • While there are existing commodity exchanges that offer trading in gold contracts, those are derivative instruments while the proposed gold exchange would allow trading akin to the spot market.
    • This move assumes significance as India is the second-largest consumer of gold – after China – with an annual demand of around 800-900 tonnes.

    Answer this PYQ:

    Q.What is/are the purpose/purposes of the Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?

    1. To bring the idle gold lying with India households into the economy
    2. To promote FDI in the gold and jewellery sector
    3. To reduce India’s dependence on gold imports

    Select the correct answer using the code given below

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

    What are the ways in which one can invest in gold now?

    • For those wanting to buy physical gold, a visit to the neighbourhood jeweller would suffice.
    • Meanwhile, there are online platforms such as Paytm, Kuvera and Indiagold among others that allow an individual to buy gold in digital form.
    • The advantage of buying gold in digital form is that one can put in a very small amount as well with some platforms allowing a minimum investment of just Rs 100.
    • Digital gold products have become quite popular among millennials. Then there are sovereign gold bonds issued by the government.
    • One can even look at Gold ETFs or gold funds by mutual funds.
    • Even gold derivative contracts traded on the exchanges have the option of physical settlement, which means investors can get physical delivery of gold.

    How can one trade on a gold exchange?

    • The SEBI has proposed an instrument called ‘Electronic Gold Receipt’, or EGR.
    • The gold exchange, along with intermediaries like the vault manager and the clearing corporation, would facilitate the creation of EGR and its trading.
    • So, participants can convert their physical gold into EGR, which can then be bought or sold on the exchange like any normal equity share of a listed company.
    • The EGR can even be converted back into physical gold. As part of the draft regulations, SEBI has proposed three denominations of EGR – one kilogram, 100 grams and 50 grams.
    • It has, however, added that EGRs of five grams or 10 grams can also be allowed for trading to increase the liquidity of the market and attract more participants.

    How can one convert physical gold into EGRs?

    • An entity that intends to convert physical gold into EGR will have to go to a ‘Vault Manager’.
    • According to the proposed framework, any entity registered in India and with a net worth of at least Rs 50 crore can apply to become a vault manager.
    • After the receipt of the gold, the vault manager would create an EGR for which the depository will assign an International Securities Identification Number, or ISIN, which is a unique code to identify the specific security.
    • Once the ISIN is issued, the EGR can be traded on the gold exchange just like any other tradable security.

    Can EGRs be again converted into physical gold?

    • To convert an EGR into physical gold, the owner of the EGR will have to surrender the EGR to the vault manager who will deliver the gold and extinguish the electronic receipt.
    • Considering the logistics and delivery challenges, it has been proposed that conversion of an EGR into physical gold should be allowed only if a minimum of 50 grams of gold has been accumulated in electronic form.

    Issues with gold exchange

    • Since the EGRs would be traded on an exchange, Securities Transaction Tax (STT) would be levied. Also, GST would be applicable when EGRs are converted into physical gold for withdrawal.
    • If in case the buyer and seller are from different states then levying state GST could be cumbersome. SEBI is mulling if only IGST or Integrated Goods and Services Tax can be levied to resolve this issue.
    • As far as transactions are concerned, SEBI working groups have suggested that an entire transaction be divided into three tranches.

  • India should walk the talk on TRIPS waiver

    The article highlights the variance in India’s stand on intellectual property rights waiver for Covid related drugs on the international level and domestic level. 

    Removing the IPR barrier

    • When the pandemic hit the globe, India and South Africa piloted the proposal to waive key provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement on COVID-19 vaccines, drugs, therapeutics, and related technologies.
    • The core idea is that IPRs such as patents should not become barriers in scaling up production of medical products essential to combat COVID-19.
    • The TRIPS waiver proposal, now backed by the U.S. would give immunity to member countries from a legal challenge at the WTO if their domestic IPR laws suspend or do not enforce IP protection on COVID-19 medical products.
    • Member countries of the World Trade Organization (WTO) are under an obligation to ensure that their domestic intellectual property rights (IPR) laws conform to the requirements of the TRIPS agreement.

    No use of compulsory licencing in India

    • The existing flexibilities under the Patents Act of 1970, such as compulsory licences, which are consistent with the TRIPS agreement, can be used to increase the supply of COVID-19 medical products.
    • However, despite the nudging by the judiciary and others, the government inexplicably hasn’t made use of compulsory licences in the pandemic.
    • While issuing compulsory licences for COVID-19 vaccines in the absence of technology transfer is easier said than done, they can be used to augment the supply of drugs and other therapeutics.
    • For instance, there are demands that compulsory licences be issued for drugs such as Remdesivir to augment supply.
    • Natco, an Indian pharmaceutical company, has requested a compulsory licence under Section 92 of the Patents Act for Baricitinib, a COVID-19 drug.
    • This is ironic because India has historically played a leading role in mainstreaming TRIPS flexibilities like the compulsory licence at the WTO.
    • The Central government, in an affidavit filed before the Supreme Court, states that the main constraint in boosting the production of drugs like Remdesivir is the unavailability of raw materials and essential inputs.
    • The affidavit further states, “it is presumptuous to assume that the patent holder will not agree to more voluntary licences”.

    Issues with the government’s stand

    •  If that is the real bottleneck, and not IPR-related legal hurdles, why is India pushing for a TRIPS waiver at the WTO?
    • The first step in advocating for the removal of IPR-related impediments at the WTO is to make use of the existing lawful means.
    • Therefore, the government’s stand before the Supreme Court is not only contradictory with India’s position at the WTO but also severely undermines it.

    Way forward

    • To make its TRIPS waiver stand convincing, the government needs to make aggressive use of Sections 92 and 100 of the Patents Act to license all patents necessary to make COVID-19 medical products.
    • The government should not only transfer Covaxin’s technology to domestic pharmaceutical companies, to boost national supplies, but also offer it to foreign corporations. 
    •  By unlocking its vaccine technical know-how to the world, India would demonstrate its resolve to walk the talk on the TRIPS waiver.

    Conclusion

    India must take a consistent stand on IPRs on COVID-19 medical products internationally and domestically.

  • Why has Indian manufacturing been losing jobs since 2016?

    The State of Working India (SWI) 2021 has documented the impact of one year of Covid-19 in India, on jobs, incomes, inequality, and poverty.

    Highlights of the SWI 2021

    • The SWI 2021 showed that the pandemic had forced people out of their formal jobs into casual work, and led to a severe decline in incomes.
    • There is a sudden increase in poverty over the past year.
    • Maharashtra, Kerala, Tamil Nadu, Uttar Pradesh, and Delhi, contributed disproportionately to job losses.
    • Unsurprisingly, these are also the states that suffered the maximum Covid caseload.

    Labour Participation Rate (LPR) is the ratio of the labour force to the population greater than 15 years of age. It is defined as the section of working population in the age group of 16-64 in the economy currently employed or seeking employment.

    Worsened with COVID

    • It pointed to an ailment of the Indian economy that has not only been a longstanding one but also one that has gotten worse over the past few years even without the help of Covid.
    • Agriculture, mines, manufacturing, real estate and construction, financial services, non-financial services, and public administrative services sectors account for 99% of total employment in India.
    • The number of people employed in the manufacturing sector of the economy has come down from 51 million to 27 million — that is, almost halving in the space of just four years!
    • For instance, the number of people employed in agriculture is going up.
    • Equally disheartening is that employment in non-financial services (such as providing education and entertainment industry etc.) has fallen sharply.

    Why are these trends worrisome?

    • It is important to understand that traditionally Indian policymakers have been of the view that the manufacturing sector is our best hope to soak up the surplus-labour otherwise employed in agriculture.
    • Manufacturing is well suited because it can make use of the millions of poorly educated Indian youth, unlike the services sector, which often requires better education and skill levels.
    • For the longest time, India has struggled to get its manufacturing industries to create a growing bank of jobs.
    • But, and this is what the CMIE data shows, what is happening in the past 4-5 years is that far from soaking up excess labour from other sectors of the economy, manufacturing is actually letting go of workers.

    Return to Agriculture

    • India has seen a hike in the number of people “employed” in agriculture over the past year.
    • This is nothing but disguised unemployment.
    • Essentially, labourers and workers are returning to their rural homes in the absence of jobs either in manufacturing or services.

    Why is Indian manufacturing failing to create jobs?

    • On the face of it, every past government has come out with a policy to boost manufacturing jobs. But still, the situation is getting worse.
    • There are different ways to look at this question.
    1. One is to look at why manufacturing has struggled to create as many jobs in the past
    2. The second is to look at the specific reasons why manufacturing has been bleeding jobs, instead of creating them, since 2016-17.

    Let’s tackle the historical question first.

    • If one looks at any of the sectors in the economy — agriculture, industry, services — starting a manufacturing unit requires the highest amount of fixed investment upfront (relative to the output that may be generated later).
    • In other words, it is a big commitment on the part of an entrepreneur to put up a huge amount of money without necessarily knowing how it will all pan out.
    • What has traditionally made this truly risky is the highly extractive nature of governments.
    • In simpler terms, far too often governments have been corrupt, with officials and politicians extracting bribes.

    Less focus on manufacturing goods

    • As regards the demand for manufacturing goods, experts point out that Indians have always consumed relatively less of manufacturing goods and relatively more of food and services.

    There are two possible reasons for this.

    1. One, most Indians are quite poor and hence most of the income is spent on food.
    2. Two, repairs and maintenance are a very high part of our consumption choice.
    • In other words, when Indians buy a manufactured product — say a refrigerator — they tend to use it for much longer than in developed countries.

    Core of the problem

    • The trouble lies with policymakers repeatedly neglecting the labour-intensive industries.
    • Since the second five year plan, the P C Mahalanobis strategy was to gain self-reliance by investing in capital intensive industries so that India does not have to import machines etc. from other countries.
    • The hope was that the demand from Indian consumers will make the domestic industry viable.
    • But Indian domestic demand was quite anaemic due to poverty levels.

    Other policy lacunas

    • As against the capital intensive industries, which were involved in making heavy machines, the labour-intensive ones (such as leather, handicrafts, textiles etc.) were reserved for the small-scale industry framework.
    • But while the labour-intensive manufacturing firms could not match the capital-intensive firms in terms of GDP value or growth of output, they did have a distinct advantage of creating more jobs.
    • But, by treating them as small-scale industries, policies held back their growth.
    • Moreover, India did not push for integrating its labour-intensive manufacturing in the global supply chains by aggressively following exports.
    • Instead, the idea was to substitute imports in the name of self-reliance.

    What has happened since 2016-17?

    • Things have become worse over the past five odd years despite the Indian government unveiling its ambitious Make in India (MII) initiative and the latest Production-Linked Incentive (PLI) scheme.
    • For one India is repeating the same mistakes with MII and PLI schemes.
    • They are again aimed more at capital intensive manufacturing, not labour intensive ones.
    • Moreover, India is reverting to the protectionist approach, aimed at self-reliance, yet again in recent years.
    • Further, much like in the past, this time, too, the domestic demand is weak for aggressively boosting labour-intensive industries aimed at capturing the export markets.

    Conclusion

    • The growing rift in the fortunes of informal and formal manufacturing could be the reason why India is seeing such a massive decline in manufacturing jobs.
    • The government has tried its level best to push for greater formalization but it has often been accused of not understanding the nature and functioning of India’s informal economy.

    Way forward

    • For the same level of employment, formality is good.
    • But if there is a trade-off between formality and employment generation, choosing formality may not be so beneficial. And this trade-off appears to be quite sharp in India.
    • Indian manufacturing is still at best hope for creating new jobs and soaking up excess unskilled labour through better infrastructure and easier regulatory support — to create millions of new jobs.

  • Tianwen-1 lands successfully on Mars

    China landed a spacecraft on Mars carrying its first Mars rover in a big boost to its space ambitions.

    UPSC may ask an MCQ asking: Which of the following is/are the space missions related to Mars? It may throw up 4-5 options (which we all get confused at after few months) like Cassini , InSight , Messanger, Voyager etc.

    Tianwen-1 Mission

    • The mission is named after the ancient Chinese poem ‘Questions to Heaven’, the Tianwen-1.
    • It is an all-in-one orbiter; lander and rover will search the Martian surface for water, ice, investigate soil characteristics, and study the atmosphere, among completing other objectives.
    • It will be the first to place ground-penetrating radar on the Martian surface, which will be able to study local geology, as well as rock, ice, and dirt distribution.
    • The lander descended successfully onto the surface of the red planet carrying a rover named Zhurong, named after a god of fire for a planet known in Chinese as the planet of fire.
    • Only the Soviet Union and the United States had previously carried out a successful landing on Mars.

    Back2Basics: Various missions on Mars

    • The USSR in 1971 became the first country to carry out a Mars landing– its ‘Mars 3’ lander being able to transmit data for 20 seconds from the Martian surface before failing.
    • The country made it’s second and Mars landing two years later in 1973.
    • The second country to reach Mars’s surface, the US, holds the record for the most number of Mars landings.
    • Since 1976, it has achieved 8 successful Mars landings, the latest being the ‘InSight’ in 2019 (launched in 2018).
    • India and the European Space Agency have been able to place their spacecraft in Mars’s orbit.
    • India’s Mars Orbiter Mission (MOM) or ‘Mangalyaan’ was able to do so in September 2014, almost a year after its launch from the Satish Dhawan Space Centre in Andhra Pradesh.
    • The Chinese mission now is expected to take off around the same time when NASA is launching its own Mars mission– the ambitious ‘Perseverance’ which aims to collect Martian samples and bring them back.

  • Mucormycosis infection in COVID-19 patients

    Hospitals across the country have started to report a number of cases of Mucormycosis, an invasive fungal infection affecting patients who have recently recovered from COVID-19.

    What is Mucormycosis?

    • Mucormycosis is an aggressive and invasive fungal infection caused by a group of moulds called micromycetes.
    • It can affect various organs but is currently manifesting as invasive rhino-orbito-cerebral disease, crawling through the sinus and working its way to the brain, affecting the ear, nose, throat, and mouth.
    • While it is not contagious, it can cause a lot of damage internally and can be fatal if not detected early.
    • It is an old disease; perhaps new and concerning is the sudden increase in the invasive form of the sinus variant, which involves the orbit, and at times the brain, leading to blindness, stroke or death.

    What causes the disease?

    • Diabetes mellitus is the most common underlying cause, followed by haematological malignancies and solid-organ transplants.
    • Diabetes mellitus was reported in 54% to 76% of cases, according to a report.
    • What seems to be triggering Mucormycosis in patients post COVID-19 is indiscriminate use of a high dose of steroids in COVID-19 patients, sometimes even in minimally symptomatic patients.
    • This leads to spikes in the sugar level among diabetics, which, in turn, renders them vulnerable.

    Symptoms

    • The symptoms to watch out for are a stuffy nose, bloody, blackish, or brown discharge from the nose etc.
    • Other symptoms include blackish discolouration of the skin, swelling or numbness around the cheek, one-sided facial pain, toothache or jaw pain, drooping of the eyelids or eyelid swelling, double vision, redness of eyes, and sudden decrease in vision.

    Treatment

    • The mainline of treatment is an anti-fungal drug called amphotericin B, which is given over an extended period of time under the strict observation of a physician.
    • Rational use of steroids is necessary, and constant monitoring of sugar levels and resorting to insulin use to control these levels if required is essential.
    • Surgery to remove the fungus growth might also be warranted.

    Preventive measures

    • It is important to keep blood sugar levels under control and ensure that appropriate calibration of oral drugs or insulin is done from time to time.
    • Further, recognising the symptoms and seeking treatment early if there are two or three symptoms at a time is key.
    • Like most illnesses, if detected early, Mucormycosis can be cured.

  • 2-DG: DRDO’s new oral drug for Covid-19

    Defence Minister has released the first batch of the indigenously developed anti-Covid-19 drug, 2-deoxy-D-glucose or ‘2-DG’.

    What is the news?

    • The Drugs Controller General of India (DCGI) had cleared the formulation on May 1 for emergency use as an adjunct therapy in moderate to severe Covid-19 patients.

    What is 2-DG?

    • 2-DG has been developed by the Institute of Nuclear Medicine and Allied Sciences (INMAS), New Delhi, a lab of the DRDO in collaboration with Hyderabad-based pharma company Dr Reddy’s Laboratories (DRL).
    • The 2-DG anti-Covid drug is expected to reduce dependence on medical oxygen in Covid-19 infected patients.
    • The pseudo glucose molecule in the drug stops the virus in the tracts.
    • Hence, it has been prescribed for Coronavirus infected patients requiring critical medical oxygen.

    How does it work?

    • Clinical trial data show that the molecule helps in faster recovery of patients hospitalized with Covid-19, and reduces their dependence on supplemental oxygen.
    • The drug accumulates in virus-infected cells, and prevents the growth of the virus by stopping viral synthesis and energy production.
    • Its selective accumulation in virally-infected cells makes this drug unique.

    Advantages

    • 2-DG being a generic molecule and an analogue of glucose, it can be easily produced and made available in large quantities.
    • The drug is available in powder form in a sachet, and can be taken orally after dissolving in water.

  • RBI should return to its dharma of taming inflation

    The article highlights the need for the RBI to focus on inflation instead of pursuing elusive growth.

    Is inflation at a level to be concerned about?

    • Due to the devastation caused by the pandemic, MPC kept its stance to ‘look through’ the sustained rise in prices through much of last year.
    • The release of the consumer-price inflation number for April 2021 (4.3%) might seem to validate their decision.
    • But there are many reasons why the MPC should be concerned.
    • To start with, the April print carries little validity since the base for comparison (April 2020) has been rubbished by RBI in the past on the grounds that it relates to the first month of the lockdown.

    Inflation comes down but after causing devastation

    • Through a combination of the base effect (high level of inflation in the previous comparable period), belated but inevitable monetary policy action and a fall in demand that more than offsets the disruption in supply, inflation will come down.
    • However, before inflation comes down, it brings untold misery to the public at large.
    •  In a country where close to 20% of the population lives below the poverty line and food is a major item of their consumption basket, any rise in inflation, especially food inflation, hurts the poor disproportionately.
    • Add to that the distress caused by job losses on account of the pandemic, and this time round, the pain is likely to be magnified many times over.

    What is causing inflation?

    • Monetary policy acts with long and indeterminate lags.
    • Far from spurring credit offtake through low interest rates excess liquidity has spilled over into price pressures in India.
    • Wholesale price inflation at 7.4% (March 2021) was the highest in 8 years, while it would be naïve to take any solace from the latest consumer price index number.
    • The RBI needs to be appreciated for doing its bit to keep the wheels of our economy moving during the pandemic.
    • However, its failure to shift gear in the face of mounting evidence of inflation cannot be neglected.
    • When inflation was breaching the upper end of RBI’s target band for months on end, the message should have been clear.

    US recovery and its impact on Indian economy

    • Globally, commodity prices are already on the rise.
    • Not without reason, it would seem, as borne out by 12 May’s inflation print of 4.2%, America’s highest in 12 years
    • Part of the reason is the excessive easing of US monetary and fiscal policies.
    • Rising US inflation has huge implications for countries like India that are at the receiving end of US policies.
    • As the US economy recovers, the dollar strengthens and US interest rates rise, the rupee is bound to weaken in response, adding to inflationary pressures here.

    Consider the question “What are the factors stoking inflation in the pandemic? How far the monetary policies pursued by the central bank is responsible for it?”

    Conclusion

    When the MPC meets next in early June, it must re-order its priorities. Instead of chasing elusive growth, it must revert to its swadharma, own dharma, and focus instead on inflation.

  • Native Indian turtles face U.S. slider threat across Northeast

    About red-eared slider

    • The red-eared slider (Trachemys scripta elegans) derives its name from red stripes around the part where its ears would be and from its ability to slide quickly off any surface into the water.
    • Native to the U.S. and northern Mexico, this turtle is an extremely popular pet due to its small size, easy maintenance, and relatively low cost.

    Reports about threat

    • Between August 2018 and June 2019, a team of herpetologists from NGO Help Earth published the finding in ‘Reptiles & Amphibians’, journal of the U.S.-based International Reptile Conservation Foundation in August 2020.
    • But the alarm was raised experts from Mizoram University’s Department of Zoology published another report in the same journal in April this year.

    How is it a threat?

    • They grow fast and virtually leaves nothing for the native species to eat.
    •  People who keep it as pets become sensitive about turtle conservation but endanger the local ecosystem, probably unknowingly, by releasing them in natural water bodies after they outgrow an aquarium, tank or pool at home.
    • Much like the Burmese python that went to the U.S. as a pet to damage the South Florida Everglades ecosystem, the red-eared slider has already affected States such as Karnataka and Gujarat, where it has been found in 33 natural water bodies.
    • Preventing this invasive species from overtaking the Brahmaputra and other river ecosystems in the Northeast is crucial because the Northeast is home to more than 72% of the turtle and tortoise species in the country, all of them very rare.

    Way forward

    • Although the red-eared slider is traded legally, the time has come for the government to come up with regulations against keeping invasive as pets.
    • There is a need to create awareness among pet traders for maintaining a database of red-eared slider buyers.
    • They can be contacted to hand over the turtles to the repository insulated from any wetland or natural water body.

  • Israel’s Iron Dome rocket defence system

    Context

    • Amid the Israel-Palestine conflict, the night sky over Israel has been ablaze with interceptor missiles from Iron Dome shooting down the incoming rockets in the sky.

    What is Iron Dome?

    • Iron Dome is a multi-mission system capable of intercepting rockets, artillery, mortars and Precision Guided Munitions as well as aircraft, helicopters and Unmanned Aerial Vehicles (UAV) over short ranges of up to 70 km.
    • It is an all-weather system and can engage multiple targets simultaneously and can be deployed over land and sea.
    • Iron Dome is jointly manufactured by Rafael Advanced Systems and has been in service with Israeli Air Force since 2011.
    • The radar system was developed by Elta.

    Working of Iron Dome

    • An Iron Dome battery consists of a battle management control unit, a detection and tracking radar and a firing unit of three vertical launchers, with 20 interceptor missiles each.
    • The interceptor missile uses a proximity fuse to detonate the target warhead in the air.
    • One of the system’s important advantages is its ability to identify the anticipated point of impact of the threatening rocket, to calculate whether it will fall in a built-up area or not, and to decide on this basis whether or not to engage it.
    • This prevents unnecessary interception of rockets that will fall in open areas and thus not cause damage, the paper states.
    • The system has intercepted thousands of rockets so far and, according to Rafael Advanced Systems, its success rate is over 90%.

    Limitations of the system

    • The system can see limitations when it is overwhelmed with a barrage of projectiles.
    • The system has a ‘saturation point’.
    • It is capable of engaging a certain number of targets at the same time, and no more.
    • One of the possible limitations is the system’s inability to cope with very short range threats as estimates put the Iron Dome’s minimum interception range at 5-7 kilometres.

     

  • Remittance received by India remain unaffected by pandemic

    What the World Bank report says

    • India received over USD 83 billion in remittances in 2020, according to a World Bank report.
    • In 2019, India had received USD 83.3 billion in remittances.
    • The report said India’s remittances fell by just 0.2 per cent in 2020.
    • Much of the decline was due to a 17 per cent drop in remittances from the United Arab Emirates, which offset resilient flows from the United States and other host countries.
    • The World Bank, in its latest Migration and Development Brief, said despite COVID-19, remittance flows remained resilient in 2020.

    Trend analysis

    • China, which received USD 59.5 billion in remittances in 2020 against USD 68.3 billion the previous year, is a distant second.
    • India and China are followed by Mexico (USD42.8 billion), the Philippines (USD34.9 billion), Egypt (USD29.6 billion), Pakistan (USD26 billion), France (USD24.4 billion) and Bangladesh (USD21 billion).
    • Remittance outflow was the maximum from the United States (USD68 billion), followed by UAE (USD43 billion), Saudi Arabia (USD34.5 billion), Switzerland (USD27.9 billion), Germany (USD22 billion), and China (USD18 billion).
    • The relatively strong performance of remittance flows during the COVID-19 crisis has also highlighted the importance of timely availability of data.
    • Given its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting, and granularity by corridor and channel.

    B2BASICS

    Remittances

    • Remittances are usually understood as financial or in-kind transfers made by migrants to friends and relatives back in communities of origin.
    • These are basically sum of two main components – Personal Transfers in cash or in kind between resident and non-resident households and Compensation of Employees, which refers to the income of workers who work in another country for a limited period of time.
    • Remittances help in stimulating economic development in recipient countries, but this can also make such countries over-reliant on them.

    Remittance and the Indian Economy

    Benefits

    • Increased inward remittance is a boon for the economy at both macro and micro levels.
    • At the macro level, remittances contribute to maintaining stable foreign reserves.
    • Remittances help Indian Rupee hold its value against the US dollar and forms a significant part of the GDP.
    • On a micro level, remittances have shown a positive impact on healthcare, entrepreneurship, education, and overall economic development of the recipient families.

    Issues

    An increase in outward remittances however, raises an alarm. It causes the rupee to weaken against the dollar, which in return impacts the businesses exposed to foreign exchange, and the economy overall.