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GS Paper: GS3

  • [pib] Exercise Dustlik-II

    The Second Edition of Joint Exercise Dustlik is scheduled from tomorrow.

    Must read:

    [Prelims Spotlight] Various Defence Exercises in News

    Exercise Dustlik-II

    • It is a bilateral defence exercise held between the Indian Army And Uzbekistan Army.
    • It is named after Dustlik, a town in the Jizzakh region of Uzbekistan.
    • The first edition of the exercise, Dustlik-I was held in Uzbekistan, near Tashkent, from November 3-13, 2019.
    • Defence Minister Rajnath Singh had flagged off the exercise along with his Uzbek counterpart, Major General Bakhodir Kurbanov in 2019 for the first time.
    • The joint exercise focused on counter-insurgency and counter-terrorism operations in urban settings.

  • Recovery? Different numbers tell different stories

    India’s growth numbers reveal a different story when seen through the quarter-on-quarter growth lense. The article deals with this issue.

    Weakness of India’s GDP statistics

    • The CSO press release for 4Q20 stated that India grew 0.4 per cent on a year-ago basis.
    • That is, relative to the level of GDP four quarters before.
    • Many heaved a sigh of relief at growth turning positive after two-quarters of negative year-ago: -24.4 per cent in 2Q20 and -7.3 per cent in 3Q20 and declared that growth would accelerate from hereon.
    • Nothing could be further from the truth.
    • To know whether the economy will accelerate or decelerate, one needs to know its current speed.
    • To do that, one needs to compute the quarter-on-quarter growth as almost all large economies do.
    • This is a central weakness of India’s GDP statistics, exemplified by last week’s 4Q20 print.

    Challenges in measuring quarter-on-quarter growth

    • These computations are not easy, because each quarter has its own characteristics or, as economists call it, “seasonality”
    • Seasonality naturally increases or decreases activity in that period.
    • Think of quarters with festivals or with harvests versus those without them.
    • The modern economy is more complicated as its seasonal patterns change when its structure does.
    • To compare two quarters, these changes to seasonality need to be excluded from the data.
    • Statisticians have been working on this issue for more than a century and, over the last two decades.
    • As a result, many official statistical bodies (such as the US Census Bureau) have made deseasonalising methods freely available.

    Understanding the issue through example

    • If the level of 1Q20 GDP is set at 100, then the quarterly growth rates imply that it fell to 75, rising to 91.1 in the following quarter and then to 96.3 last quarter.
    • Now assume that the level of GDP remains constant for the next five quarters, that is, there is no growth in the economy until the end of fiscal year 2021-22.
    • This would mechanically put the full-year growth in 2021-22 at 7.2 per cent simply because of the low average level of GDP in the previous year.
    • If the speed of the economy were to remain at its current pace of 5.7 per cent, then the annual growth in 2021-22 would be an astonishing 28.7 per cent.
    • Any annual growth projection for next year that is less than this necessarily implies a slowdown from the current pace.

    So, what is Indian economy’s current growth rate

    • J.P. Morgan uses one of the above mentioned deseasonalising technique.
    • The derived quarterly path is the following: In 1Q20, India’s economy grew 3.7 per cent over the previous quarter, in 2Q20 the economy contracted 25 per cent and then recovered 21.5 per cent in 3Q20 and ended the last quarter at 5.7 per cent.
    • Put differently, growth slowed to 5.7 per cent last quarter — the latest reading of the economy’s “current” speed.

    Putting in context the projected nominal growth

    • The budget documents suggest that the government’s projected nominal growth for 2021-22 is 14.5 per cent.
    • This implies a real growth rate of around 11 per cent assuming inflation averages 3.5 per cent.
    • The implied average quarterly pace, consistent with an 11 per cent annual growth, is just 1 per cent.
    • The year-on-year quarterly numbers will keep rising giving the false assurance of a strengthening recovery when in reality the level of income would rise only at a grinding pace.

    Reasons behind the deceleration

    • India’s growth drivers had already slowed dramatically prior to the pandemic, the pandemic likely exacerbated them.
    • With listed companies posting strong profit growth in 3Q and 4Q, much of the decline in overall income has fallen on households and MSMEs.
    • This is likely to have not only worsened income inequality, but also severely impaired their balance sheets, making it that much more difficult to access credit in the coming quarters.
    • While industry has recovered to 98 per cent of its pre-pandemic level, the service sector remains substantially below.
    • Thus, much of the continued high unemployment (as reported by private surveys) is in services.
    • This is likely to have disproportionately increased women’s unemployment, thereby widening the gender gap.
    • Last quarter, central government spending rose 12 per cent, but overall public expenditure contracted 1 per cent, implying a sharp contraction at the state level.

    Consider the question “Why quarter-on-quarter growth rates reveal a true picture of India’s growth rate as compared to year-on-year rates? What are the challenges in dealing with the quarter-on-quarter data?”

    Conclusion

    Neither fiscal policy nor monetary policy are designed to reverse these widening economic imbalances. This makes it hard to see India’s growth engines firing on all cylinders, despite the rollout of vaccines and the anticipated surge in US growth.

  • Government earnings from the spectrum auction

    The end of India’s first auction of telecommunications spectrum in five years was held with the government generating revenue of ₹77,815 crores from the exercise.

    What is Spectrum?

    • Devices such as cellphones and wireline telephones require signals to connect from one end to another.
    • These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference.
    • The Union government owns all the publicly available assets within the geographical boundaries of the country, which also include airwaves.
    • With the expansion in the number of cellphones, wireline telephone and internet users, the need to provide more space for the signals arise from time to time.

    Spectrum allocations

    • Spectrum refers to the invisible radio frequencies that wireless signals travel over. The frequencies we use for wireless are only a portion of what is called the electromagnetic spectrum.
    • To sell these assets to companies willing to set up the required infrastructure to transport these waves from one end to another, the central government through the DoT auctions these airwaves from time to time.
    • These airwaves called spectrum is subdivided into bands that have varying frequencies.
    • All these airwaves are sold for a certain period of time, after which their validity lapses, which is generally set at 20 years.

    How has the industry been since the last auction?

    A lot has changed in the industry since 2016 when the previous auction took place.

    • In the last few years, there has been a consolidation in the industry, as a result of which there are only a few major players now.
    • While the user base has grown, the industry itself has witnessed unforeseen financial stress in the form of an important court case against it.
    • The reference is to the Supreme Court verdict last September that ordered telecom players to share revenues coming from even non-telecom services with the government.
    • It gave telecom companies 10 years to pay their Adjusted Gross Revenue (AGR) dues to the government, with 10% of the dues to be paid by March 31, 2021.

    Try this question for mains:

    Q.What are the various challenges faced by India’s telecom before the upgradation to 5G technology?

    What about the 5G rollout?

    • The auction for 5G is likely to happen later.
    • In the auction that was held last week the government offered spectrum for 4G in the following bands: 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz.
    • The “king” in 5G, the C-band, which is the band between 3,300 MHz and 4,200 MHz, was not on offer in this round of auctions.

    How did this auction compare to the last round?

    • In 2016, about 40% of the 2,355 MHz of spectrum (at a reserve price of ₹5.6 lakh crore) was sold, giving the government ₹65,789 crores in revenue.
    • This time, the Centre has managed to get more.
    • The government said the revenue generated by the auction has exceeded its expectations, which was about ₹45,000 crore.

  • Adaptation, not mitigation, should inform India’s climate strategy

    The article discusses issues such as China’s changing stance, climate finance and adoption of targets.

    The 26th COP to the UNFCCC

    • Countries Across the world are gearing up for the 26th Conference of Parties (COP) to the UN Framework Convention on Climate Change (UNFCCC).
    • At the forthcoming COP countries will be expected to increase the nationally determined commitments they made as part of that agreement.
    • Those original commitments would put the planet on track towards a 3 degrees centigrade temperature rise by the end of the current millennium.
    • 3-degree centigrade is far beyond the 1.5-degree limit that science considers to be a relatively safe threshold.

    Countries declaring carbon neutrality targets

    • The European Union (EU), the UK, Japan and South Korea have announced more ambitious targets.
    • The EU and the UK have pledged to reduce their carbon emissions by 55 per cent in 2030 with 2000 as the base year
    • They have also pledged to achieve “carbon neutrality” or zero carbon emissions by 2050.
    • China has announced that it will achieve carbon neutrality by 2060 and this has been welcomed by other major economies.

    Delinking from China

    • It is anticipated that the Biden administration may engage with China to come up with a template for COP-26.
    • That template did not take into account India’s interests despite China being part of the BASIC group of Brazil, South Africa, China and India.
    • BASIC, as major emerging economies, had been taking coordinated positions at multilateral climate negotiations.
    • Going forward, India must delink itself from China, let BASIC become a consultative forum only and reconstruct a larger coalition of developing countries whose climate change goals are more aligned with its own.
    • After Paris, BASIC has lost whatever rationale it originally possessed.

    Course of action for India: Adaptation is the key

    • There will be some important international conferences before COP-26, where major efforts are expected to set down an agenda for that meeting.
    • Biden has called for a summit of major emitting nations on April 22.
    • In June there will be a G-7 summit of western countries and Japan to which India has been invited.
    • The UK has let it be known that climate change would be at the top of the summit agenda.
    • What should India’s stance be at these meetings?
    • Both for India and other developing countries, it is important that mitigation does not overshadow other key elements of the Paris Climate agreement.
    • There has been step-motherly treatment of adaptation, which is a bigger challenge for most developing countries than mitigation is.
    • Adaptation should have equal billing with mitigation whenever and wherever climate change action is being deliberated upon.
    • India may find itself under pressure to commit to decisions that limit rather than enhance its development prospects.
    • One should not yield to pressures to declare a peaking year for India’s carbon emissions or to follow China into declaring a target year for carbon neutrality.
    • There is a relentless effort by the US and Western European countries to include climate change on the UN Security Council (UNSC) agenda.
    • At a recent UNSC meeting, this was strongly opposed by Russia and by India.
    • We will need to work out a persuasive case for opposing it since a large number of countries seem to believe that climate change is indeed a security issue and needs to be treated as such.
    • The potentially menacing intent behind it should be exposed.

    Climate finance falling short

    • The developed countries had committed themselves to providing $100 billion a year in climate finance to developing countries up to 2020.
    • There was a pledge to increase the size of this funding significantly in the period 2021-2025.
    • Even by the very accommodative accounting methods used by the OECD, the actual flows have fallen far short, being only $79 billion in 2018.
    •  Our own ministry of finance has estimated that there has been only a billion dollars in new and additional finance transferred to developing countries annually against the $100 billion pledge.
    • It is therefore important for India to highlight the finance component.
    • This will also enable the mobilisation of other developing countries, in particular small and medium countries and small island developing states.
    • These countries look up to India to provide intellectual leadership in a domain that is often quite technical and complex.

    Consider the question “What are the factors India should highlight and focus on as it heads to the 26th COP to the UNFCCC?”

    Conclusion

    It is evident that India needs to fashion a fresh strategy on climate change negotiations to safeguard its interests, contribute to a global climate regime that enhances and does not diminish India’s development prospects and helps the country both to adapt to climate change that is already taking place and to accelerate its transition to a low carbon growth trajectory.

  • Technology and Innovation Report, 2021

    According to UNCTAD’s Technology and Innovation Report 2021, India is the greatest outperformer among developing countries to use, adopt and adapt frontier technologies than their per capita GDPs.

    Q.What do you mean by Frontier technologies? Discuss their potential for path-breaking technological change that will profoundly affect markets and societies. (250W)

    Technology and Innovation Report, 2021

    • The report critically examines the possibility of frontier technologies such as AI, robotics, and gene-editing widening existing inequalities and creating new ones.

    What are Frontier technologies?

    • Frontier technologies include AI, IoT, big data, blockchain, fifth-generation mobile telephony, 3D printing, robotics, drones, gene-editing, nanotechnology, and solar power — the ones that take advantage of digitalization and connectivity.
    • Frontier technologies are essential for sustainable development, but they also could accentuate initial inequalities.

    Country-Readiness Index

    • The country-readiness index released by the United Nations Conference on Trade and Development (UNCTAD) under this report.
    • The index analyzed the progress of countries in using frontier technologies, considering their national capacities related to physical investment, human capital, and technological effort.

    India’s performance

    • India’s actual index ranking was 43, while the estimated one based on per capita income was 108.
    • This meant that India overperformed other countries by 65 ranking positions.
    • It was followed by the Philippines, which overperformed by 57 ranking positions.

    Global performance

    • China was at position 25; both India and China performed well in research and development.
    • This was reflective of their abundant supplies of qualified and highly skilled human resources available at a comparatively low cost.
    • The Philippines has a high ranking for the industry—because of high levels of foreign direct investment in high-technology manufacturing, especially electronics.
    • The United States, Switzerland, and the United Kingdom were “best prepared” for frontier technologies, the report highlighted.
    • Most of the best-prepared countries are from Europe, except the Republic of Korea, Singapore, and the United States. Some transition economies, such as Russia, also perform well on the index.

    Major takeaways of the report

    The report urges all developing nations to prepare for a period of deep and rapid technological change that will profoundly affect markets and societies.

    • Developing countries should align science, technology, and innovation policies with industrial policies.
    • New technologies can re-invigorate traditional production sectors and speed up industrialization and economic structural transformation.
    • It is up to policymakers to reduce this risk and make frontier technologies contribute to increasing equality, says the report.
    • Low-and middle-income developing countries and the least developing countries cannot afford to miss the new wave of rapid technological change.

  • What is OPEC+?

    India, the world’s third-biggest oil importer, has said that the decision by major producers to continue with output cuts as prices move higher could threaten the consumption led-recovery in some countries.

    Try this PYQ:

    Q.The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of

    (a) Crude oil

    (b) Bullion

    (c) Rare earth elements

    (d) Uranium

    What is the news?

    • The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, agreed not to increase supply in April as they await a more substantial recovery in demand amid the COVID-19.
    • Crude prices rose after the announcement and are up 33% this year (meanwhile India flaring up prices to 100 Rs/litres for Petrol).

    What is OPEC+?

    • The non-OPEC countries which export crude oil along with the 14 OPECs are termed as OPEC plus countries.
    • OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
    • Saudi and Russia, both have been at the heart of a three-year alliance of oil producers known as OPEC Plus — which now includes 11 OPEC members and 10 non-OPEC nations — that aims to shore up oil prices with production cuts.

    Concerns for India

    • Rising oil prices are posing fiscal challenges for India, where heavily-taxed retail fuel prices have touched record highs, threatening the demand-driven recovery.
    • India imports about 84% of its oil and relies on West Asian supplies to meet over three-fifths of its demand.
    • As one of the largest crude-consuming countries, India is concerned that such actions by producing countries have the potential to undermine consumption-led recovery.
    • This would hurt consumers, especially in our price-sensitive market.

  • [pib] Nag River Pollution Abatement Project

    The Nag River Pollution Abatement Project has been approved under the National River Conservation Plan.

    Try this PYQ:

    Q.On the planet earth, most of the freshwater exists as ice caps and glaciers. Out of the remaining freshwater, the largest proportion:

    (a) is found in the atmosphere as moisture and clouds

    (b) is found in freshwater lakes and rivers

    (c) exists as groundwater

    (d) exists as soil moisture

    Nag River

    • The Nag River is a river flowing through the city of Nagpur in Maharashtra.
    • It is known for providing the etymology for the name Nagpur. It is a part of the Kanhan-Pench river system.
    • The Kanhan River is an important right-bank tributary of the Wainganga River draining a large area lying south of the Satpura range in central India.
    • Along its 275 km run through Maharashtra & Madhya Pradesh, it receives its largest tributary – Pench River, a major water source for the metropolis of Nagpur.
    • It joins the Wardha River, the united stream, which is known as the Pranahita River, empties into the Godavari River at Kaleshwaram, Telangana.

    About the Project

    • The Nag River which flows through Nagpur city, thus giving its name to the city, is now a highly polluted water channel of sewage and industrial waste.
    • The project, approved under the National River Conservation Plan, will be implemented by the National River Conservation Directorate.
    • It will reduce the pollution level in terms of untreated sewage, flowing solid waste, and other impurities flowing into the Nag River and its tributaries.

  • Reforms-Linked, Result-Based Scheme for Distribution’ (RLRBSD)

    The debt burden of discoms is estimated to touch 4.5 lakh crore by the end of 2020-21. This high level of debt underscores the need for reforms in the discoms. With this in view, RLRBSD has been launched by the Centre. The article highlights the issues with this scheme.

    Reforms-Linked, Result-Based Scheme for Distribution’ (RLRBSD)

    • In her FY22 Budget speech, Finance Minister proposed Electricity (Amendment) Bill, 2021, which intends to delicence the distribution business, bring in competition, and give the consumer power to choose her supplier.
    • She also unveiled the Rs 3 lakh crore electricity distribution reform programme to reduce losses and improve the efficiency of discoms.
    •  Against this background, the RLRBSD aims at helping discoms trim their electricity losses to 12-15% from the present level.
    • The aggregate technical and commercial (AT&C) losses and shortfall in the average revenue realisation from the sale of electricity vis-a-vis the average cost of supply or the ACS-ARR gap, are major causes for losses of discoms.
    • Accordingly, the scheme sets the target for both to be achieved by 2025.
    • It also aims to gradually narrow the deficit between the cost of electricity and the price at which it is supplied to ‘zero’ by March 2025.
    • It will also have a compulsory pre-paid and smart metering component to be implemented across the power supply chain, including in about 250 million households.

    Funding for RLRBSD

    • The Centre is expected to contribute around Rs 60,000 crore to the scheme’s corpus.
    • The rest may be raised from multilateral funding agencies such as ADB and World Bank (WB).
    • The Centre’s contribution will be met through the previous commitment of the ongoing schemes, viz. the Integrated Power Development Scheme (IPDS) and the Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY).
    • The funds will be released subject to discoms meeting reform-related milestones.

    Analysing RLRBSD against the context of UDAY

    • Under UDAY, discoms were required to reduce AT&C losses from 20.7% during 2015-16 to 15% by 2018-19.
    • During 2019-20, their AT&C losses were 18.9% against the 15% target for 2018-19.
    • Further, they were to reduce the ACS-ARR gap from Rs 0.59 per unit during 2015-16 to ‘zero’ by 2018-19.
    • The ACS-ARR gap during 2019-20, stood at Rs 0.42 per unit against target of ‘zero’ for 2018-19.
    • Simultaneously, the government gave them a financial restructuring package (FRP).
    • The FRP was nothing but a condoning of discoms’ staggering debt of about Rs 4 lakh crore.
    • Against this backdrop, aims of achieving those targets by 2025 under RLRBSD, which should have been achieved by 2018-19 under UDAY seems difficult.

    3 factors that contribute to  debt of discoms

    • 1) At the root of persistent and increasing losses of discoms is the orders issued by state governments to sell electricity to some preferred consumers, viz. poor households and farmers.
    • Electricity is supplied to these customers either at a fraction of the cost of purchase, transmission and distribution, or even free.
    • On the units sold to these groups, discoms incur colossal under-recovery.
    • 2) This is aggravated by AT&C losses—most of it plain theft.
    • 3) Inflated tariff allowed to independent power plants (IPPs) under purchase agreements adds to the revenue shortfall.

    Consider the question “Why the discoms in India require frequent bail-outs? How far will the Reforms-Linked, Reforms-Based Scheme for Distribution be successful in addressing the woes of discoms?”

    Conclusion

    The problem is entirely political. In a bid to win elections almost every political party promises sops which include, among others, power supply to farmers and poor households at a throwaway price or even free. As long as this effect of populist politics persists, the discoms will continue to be in the red, needing a bailout at frequent intervals.

  • Minimum Selling Price for Sugar

    The Indian Sugar Mills’ Association (ISMA) has asked for an increase in the Minimum Selling Price of Sugar.

    Try this PYQ:

    Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:

    (a) Cabinet Committee on Economic Affairs

    (b) Commission for Agricultural Costs and Prices

    (c) Directorate of Marketing and Inspection, Ministry of Agriculture

    (d) Agricultural Produce Market Committee

    Minimum Selling Price (MSP) for Sugar

    • The price of sugar is market-driven & depends on the demand & supply of sugar.
    • However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
    • MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.

    How is the pricing of Sugarcane done?

    • With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
    • The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
    • This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.

  • [pib] ‘Red Rice’ exports from Assam to the US

    In a major boost to India’s rice exports potential, the first consignment of ‘red rice’ was flagged off today to the USA.

    Try this PYQ from CSP 2019

    Q.Among the following, which one is the largest exporter of rice in the world in the last five years?

    (a) China

    (b) India

    (c) Myanmar

    (d) Vietnam

    Red Rice

    • Iron rich ‘red rice’ is grown in the Brahmaputra valley of Assam, without the use of any chemical fertilizer.
    • The rice variety is referred to as ‘Bao-dhaan’, which is an integral part of Assamese food.
    • Much like brown rice and white rice, red rice also comes with many incredible health benefits.
    • Due to the presence of a component called anthocyanin, this rice is usually consumed either partially hulled or unhulled.
    • Red rice derives this eye-grabbing colour from this component and has much more nutrient value as compared to other varieties of rice.