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GS Paper: GS3

  • RBI comes up with Digital Payments Index

    The RBI has constructed a composite Digital Payments Index (DPI) with March 2018 as the base period to capture the extent of digitization of payments across the country.

    Note various indicators of the DPI.

    Digital Payments Index

    • RBI-DPI will be published on the central bank’s website on a semi-annual basis from March 2021 onwards with a lag of four months.
    • It comprises five broad parameters that enable the measurement of deepening and penetration of digital payments in the country over different time periods.
    • The parameters are:
    1. Payment enablers (weight 25 percent)
    2. Payment infrastructure–demand-side factors (10 percent)
    3. Payment infrastructure – supply-side factors (15 percent)
    4. Payment performance (45 percent) and
    5. Consumer centricity (5 percent)
    • Each of these parameters has sub-parameters which, in turn, consist of various measurable indicators, RBI said.

    Why need such an Index?

    • Digital payments in India have been growing rapidly.
    • The DPI reflects accurately the penetration and deepening of various digital payment modes.

  • What is Interconnection Usage Charge (IUC) in Telecom?

    The termination charge for wireless to wireless domestic calls has been zeroed from January 1 onwards. Until now operators paid Interconnection Usage Charges (IUC) of 6 paise per minute on mobile calls.

    We are heading for 5G and yet we were indulged in 2G era spat. Sounds strange, but finally IUC got away….

    Interconnection Usage Charge (IUC)

    • IUC is the cost that a mobile operator pays to another operator for carrying through/ terminating a call.
    • If a customer of Mobile Operator A calls a customer of Mobile Operator B and the call is completed, then A pays an IUC charge to B for carrying/facilitating the call.
    • Essentially, it is the originating network compensating the receiving network for the cost of carrying the call. In India, IUC is set by the TRAI.

    When was it introduced?

    • IUC was introduced at a time when some operators had a larger network footprint compared to new players.
    • In such a scenario, the larger operators had to be compensated for the investments it had to enable call completion. However, over the years this gap between operators has reduced.
    • All the remaining operators have identical network footprint when it comes to voice calls.
    • TRAI’s original deadline to phase out IUC was January 1, 2020.

    What does it mean to Consumers?

    • For mobile users, this means that all voice calls will be free from now on.
    • While almost all operators had already started offering unlimited calls as part of their bundled pack, some were charging the 6 paise from consumers for paying IUC charges.
    • From January 1, operators will stop collecting the charges.
    • But other than that there will not be any significant gain for users. Tariff packs available in the market already offer data with unlimited voice calls.

    What does the end of the IUC regime imply?

    • For the operators, the end of the IUC regime will lead to easier operations.
    • Many legal battles have been fought in the past over disputes related to IUC charges.
    • Now, the operators can keep whatever money they collect from consumers without having to keep a tab on where the call is terminating.
    • The change in the billing system will not have any significant impact on operators’ revenue.

  • [pib] Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme

    The Union govt. has decided to extend the benefit of the Scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) to all export goods with effect from 1st January 2021.

    Try this PYQ:

    Q.Among the following, which one is the largest exporter of rice in the world in the last five years? (CSP 2019)

    (a) China

    (b) India

    (c) Myanmar

    (d) Vietnam

    RoDTEP Scheme

    • RoDTEP is a scheme for the Exporters to make Indian products cost-competitive and create a level playing field for them in the Global Market.
    • It has replaced the current Merchandise Exports from India Scheme, which is not in compliance with WTO norms and rules.
    • The new RoDTEP Scheme is a fully WTO compliant scheme.
    • It will reimburse all the taxes/duties/levies being charged at the Central/State/Local level which are not currently refunded under any of the existing schemes but are incurred at the manufacturing and distribution process.

    Why need such a scheme?

    • The scheme was announced last year as a replacement for the Merchandise Export from India Scheme (MEIS), which was not found not to be compliant with the rules of the World Trade Organisation.
    • Following a complaint by the US, a dispute settlement panel had ruled against India’s use of MEIS as it had found the duty credit scrips awarded under the scheme to be inconsistent with WTO norms.

    Back2Basics: Merchandise Exports from India Scheme (MEIS)

    • MEIS was launched with an objective to enhance the export of notified goods manufactured in a country.
    • This scheme came into effect on 1 April 2015 through the Foreign Trade Policy and will be in existence till 2020.
    • MEIS intended to incentivize exports of goods manufactured in India or produced in India.
    • The incentives were for goods widely exported from India, industries producing or manufacturing such goods with a view to making Indian exports competitive.
    • The MEIS covered almost 5000 goods notified for the purpose of the scheme.

  • What is Operation Meghdoot?

    Colonel Narinder ‘Bull’ Kumar (Retd.), instrumental in the Army launching Operation Meghdoot and securing the dominating heights of Siachen Glacier in 1984 has passed away at 87.

    Operation Meghdoot

    • Operation Meghdoot was the codename for the Indian Armed Forces’ operation to seize control of the Siachen Glacier in Kashmir, precipitating the Siachen conflict.
    • The Siachen then had become a bone of contention following a vague demarcation of territories in the Karachi Agreement of July 1949.
    • Executed in the morning of 13 April 1984, this military operation, launched on the highest battlefield in the world, was the first offensive of its kind.
    • The operation preempted Pakistan’s impending Operation Ababeel and was a success, resulting in Indian forces gaining control of the Siachen Glacier in its entirety.
    • Currently, the Indian Army remains the first and only army in the world to have taken tanks and other heavy ordnance up to such an altitude (well over 5,000 m or 16,000 ft).

    Bull Kumar’s contributions

    • Kumar, a legendary mountaineer who had spotted Pakistani activities around the Siachen glacier in 1984 that helped India secure it subsequently.
    • He was awarded Padma Shri, the fourth highest civilian award, in 1965.
    • He was decorated with Param Vishisht Seva Medal (PVSM), Kirti Chakra, and Ati Vishisht Seva Medal (AVSM).
    • The battalion headquarters on the glacier located close to an altitude of 16,000 feet is named “Kumar post” in his honor.

  • The growth India deserve

    The Indian economy has been showing the green shoots in the results of the third quarter. However, the recovery is far from complete. The article suggests the strategy to get to the 5 per cent trend line.

    Divergent performance after lockdown

    • At the end of the third quarter, the economy is showing a hugely divergent performance.
    • Pharmaceuticals and chemicals are showing growth on their Year-To-Date numbers.
    • FMCG reached last year’s level in the second quarter.
    •  Construction equipment are showing a huge recovery, with record sales numbers in the last three months, driven by rural demand from sales to individuals.
    • Capital goods are still sluggish with YTD numbers well down on last year, but are now showing some signs of life.
    • In contrast, travel and tourism, real-estate and construction, and retail, are all still at under half last year.
    • These are high employment sectors, and salaried employment has correspondingly taken a big hit, with potentially longer term effects.

    How to achieve ‘full recovery’

    • Full recovery means getting back to the trend line of growth where we would have been pre-COVID.
    • We need to aspire to grow 9 per cent for three years, which is what will get us back to our 5 per cent trend line of growth by 2024.
    • The recovery underway is solid, but we need measures to sustain and deepen it.
    • The government can do three things.

    3 suggestions to sustain the recovery

    1) Stimulate the economy

    • The most immediate fiscal stimulus possible is to put cash into the economy.
    • Distribute the pending tax refunds, pay the bills of all companies, pay off the arbitration awards pending where the government has lost cases, and pay state governments their pending GST dues.
    • All this will run into a few trillion rupees, and it will be cash that immediately stimulates the economy.

    2) Invest in public health infrastructure

    • Some preparation is underway to distribute vaccines, but there is need to go much further.
    • Centre should finance state government efforts to build an extensive public health network so we are equipped to handle a possible second wave of the virus.
    • If we demonstrate that we are much more prepared in February and March 2021 than we were in April and May 2020, we will spread confidence.
    • Government should work in partnership with private sector hospitals.

    3) Invest in inftrstructure

    • There are dozens of projects stuck as funds are not available.
    • The 20 trillion infrastructure pipeline needs to have some cash flow in it.
    • The COVID crisis revealed awful things about living conditions in slums across our cities.
    • We can put in place the right public-private programme to provide decent, accessible housing, with quick and cheap connectivity into our cities.
    • This could trigger a building boom that would stimulate demand like nothing else.

    How to finance the spending: Privatisation program

    • Government can manage the resource for spending through privatisation program.
    • Our current stock market boom says that buyers are ready to invest. But public-sector stock values are still depressed.
    • The best way to see them take off is to announce that the government intends to reduce its share-holding to 26 per cent across public-sector banks, steel companies, oil companies, and every manufacturing company and hotel it currently owns.
    • To avoid opposition to such reforms, we must operate consistent with our democratic institutions.
    • We need discussion papers for public comment, the debate in Parliament, hearing out stakeholders, and compromise with the interests of state governments.

    Consider the question “What are the measures India needs to take to achieve the complete recovery of the Indian economy disrupted in the wake of the pandemic.”

    Conclusion

    Unless we act now we will have a stunted recovery. We must use our economic crisis to set some bigger things right. 2021 will be a year to welcome if it returns us to the growth trajectory we deserve.

  • Need for comprehensive agri policy

    The article examines the reasons for declining farm incomes and the contribution of farm subsidies.

    Contribution of agriculture

    • India’s agriculture, which also supports the rural workforce, was, forever, living beyond its means.
    • In 1950-51, agriculture’s share in the country’s GDP was 45%, the share of the workforce dependent on it was close to 70%.
    • Today, agriculture’s share in GDP is below 16%, but almost 50% of the country’s workforce depends on this sector.
    • The squeeze on the agricultural sector becomes even more evident from its terms of trade vis-à-vis the non-agricultural sectors.
    • Agriculture has been facing adverse terms of trade over extended periods since the 1980s, and even during the phases when the terms of trade have moved in its favour, for instance in the 1990s and again since 2012-13, there was no distinct upward trend.

    Reason for fall in farm incomes: falling investment

    • The decline in farm incomes was triggered by growing inefficiencies.
    • This decline, in turn, was caused by a lack of meaningful investment in agriculture.
    • The share of this sector in the total investment undertaken in the country consistently fell from about 18% in the 1950s to just above 11% in the 1980s.
    • In the most recent quinquennium for which data are available (2014-15 to 2018-19), the average share of agriculture was 7.6%.

    India’s dismal performance in term of yields of major crops

    • If one ranks countries in terms of their yields in wheat and rice — India’s two major crops — the country’s ranks were 45 and 59, respectively, in 2019.
    • This ranking would go down sharply if the areas recording high yields, such as Punjab and Haryana, are excluded.
    • In other words, for farmers in most regions of the country, it is an uphill battle for survival amid low yields.

    Need for coherent policy for agriculture

    • The lack of a coherent policy for agriculture must surely be regarded among the most remarkable failures of the governments in post-Independence India.
    • Compare this failure with the United States, with less than 2% of its workforce engaged in agriculture, has been enacting farm legislations every four years since the Agricultural Adjustment Act was enacted in 1933.
    • These policies comprehensively address the needs of the farm sector through proactive support from the respective governments.

    Issue of the farm subsidies in India

    • The subsidies are the price that the country pays for the failure of the policymakers to comprehensively address the problems of the farm sector.
    • Wanton distribution of subsidies without a proper policy framework has distorted the structure of production and, consequently, undesirable outcomes in terms of excessive food stockpiling.
    • And, yet, the fundamental ills of Indian agriculture are not adequately addressed.
    • Members of the World Trade Organization (WTO) are expected to notify their agricultural subsidies as a part of their commitment under the Agreement on Agriculture (AoA).
    • India’s latest notification, for 2018-19, shows that the subsidies provided were slightly more than $56 billion.
    • In most of the recent years, the largest component of India’s subsidies ($24.2 billion, or 43% of the total) is provided to “low income or resource-poor farmers”, a terminology that the AoA uses.
    • However, the designation of this category of farmers is left to individual members.
    • India has notified that 99.43% of its farmers are low income or resource-poor.
    • According to the agricultural census conducted in 2015-16, these are the farmers whose holdings are 10 hectares or less.
    • Thus, almost the entire farm sector comprises economically weak farmers.

    Comparing subsidies given by various countries

    • America provided $131 billion in 2017 and the EU, nearly €80 billion (or $93 billion) in 2017-18.
    • Instead of absolute numbers; the ratios of subsidies to agricultural value addition for the three countries give a much better picture.
    • Thus, for 2017, India’s farm subsidies were 12.4% of agricultural value addition, while for the U.S. and the EU, the figures were 90.8% and 45.3%, respectively.
    • This then is the reality of farm subsidies that India provides.

    Consider the question “Indian agriculture has been contributing beyond its means since Indian independence. However, agri incomes have shown a gradual decline. What are the reasons for such a decline? How far has farm subsidies succeeded in solving the low-income problem?” 

    Conclusion

    India needs a comprehensive Agri policy to deal with the distortion created by the subsidies.

  • Places in news: Dibru-Saikhowa National Park

    PC: Gmaps

    Assam has asked the State’s Forest and Revenue departments to permanently rehabilitate the indigenous forest dwellers of the Dibru-Saikhowa National Park.

    Try this PYQ from CSP 2019:

    Q. Which of the following are in Agasthyamalai Biosphere Reserve?

    (a) Neyyar, Peppara and Shendurney Wildlife Sanctuaries; and Kalakad Mundanthurai Tiger Reserve

    (b) Mudumalai, Sathyamangalam and Wayanad Wildlife Sanctuaries; and Silent Valley National Park

    (c) Kaundinya, Gundla Brahme-swaram and Papikonda Wildlife Sanctuaries; and Mukurthi National Park

    (d) Kawal and Sri Venkateswara Wildlife Sanctuaries; and Nagarjunasagar-Srisailam Tiger Reserve

    Dibru-Saikhowa National Park

    • DSNP is a national park in Assam located in Dibrugarh and Tinsukia districts.
    • It was designated a Biosphere Reserve in July 1997 with an area of 765 sq. km.
    • The park is bounded by the Brahmaputra and Lohit Rivers in the north and the Dibru river in the south.
    • It mainly consists of moist mixed semi-evergreen forests, moist mixed deciduous forests, canebrakes, and grasslands.
    • It is the largest Salix swamp forest in north-eastern India, with a tropical monsoon climate with a hot and wet summer and cool and usually dry winter.

     Why in news?

    • Rehabilitation of some 10,000 people has been hanging fire since 1999 when the Dibru-Saikhowa Wildlife Sanctuary was upgraded to a national park.
    • The park, home to a few wild horses, had been in focus since May when a blowout at an Oil India Limited gas well in the vicinity posed an ecological threat.

    What is the issue?

    • The affected people belong to the Missing community.
    • The forest dwellers of the 425-sq. km. Dibru-Saikhowa National Park has been denied access to government schemes since 1986 through a notification.
    • It allowed them to continue staying until their shifting to a suitable place.
    • The organization said the villagers’ problems started when 765 sq. km. around their habitations was declared a biosphere reserve in 1997, limiting the access of the forest to the community.
    • The hardship compounded in 1999 when the national park came into existence.

  • The climate policy needs new ideas

    The article highlights the issues with the current climate policies which are centred on the inequality.

    Inequality and climate change

    • Inequity is built into the climate treaty, which considers total emissions, size, and population, making India the fourth largest emitter.
    • According to the United Nations, the richest 1% of the global population emits more than two times the emissions of the bottom 50%.
    • .China, with four times the population of the U.S., accounts for 12% of cumulative emissions.
    • India, with a population close to that of China’s, for just 3% of cumulative emissions that lead to global warming.
    • In an urbanized world, two-thirds of emissions arise from the demand of the middle class for infrastructure, mobility, buildings, and diet.
    • Well-being in the urbanized world is reflected in saturation levels of infrastructure.
    • Growth in the developed countries is consumption-driven not production driven.
    • The vaguely worded ‘carbon neutrality’, balancing emitting carbon with absorbing carbon from the atmosphere in forests is a triple whammy for latecomers like India.
    • Such countries already have less energy-intensive pathways that will not encroach on others’ ecological space, a young population, and are growing fast to reach comparable levels of well-being with those already urbanized and in the middle class.

    What changes are required in the policies

    • At present, the focus is on physical quantities which indicates effects on nature.
    • The solutions require analysis of drivers, trends, and patterns of resource use. 
    • This anomaly explains why the link between well-being, energy use, and emissions is not on the global agenda.
    • Modifying unsustainable patterns of natural resource use and ensuring comparable levels of well-being are societal transformations.
    • New thinking must enable politics to acknowledge transformational social goals and the material boundaries of economic activity.

    India’s unique national circumstances

    • India must highlight its unique national circumstances.
    • For example, the meat industry, especially beef, contributes to one-third of global emissions.
    • Indians eat just 4 kg of meat a year compared to those in the European Union who eat about 65 kg.
    • Also to be noted is the fact that the average American household wastes nearly one-third of its food.
    • Transport emissions account for a quarter of global emissions.
    • Transport emissions are the symbol of Western civilization and are not on the global agenda.
    • Rising Asia uses three-quarters of coal drives industry and supports the renewable energy push into cities.
    • India, with abundant reserves and per capita electricity use that is one-tenth that of the U.S., is under pressure to stop using coal.

    Way forward

    • India has the credibility and legitimacy to push an alternate 2050 goal for countries currently with per capita emissions below the global average.
    • These goals should include well-being within ecological limits, the frame of the Sustainable Development Goals, as well as multilateral technological knowledge cooperation around electric vehicles, energy efficiency, building insulation, and a less wasteful diet.

    Conclusion

    Emissions are the symptom, not the cause of the problem. India, in the UN Security Council, must push new ideas based on its civilizational and long-standing alternate values for the transition to sustainability.

  • Importance of Resilient supply chains

    What does supply chain resilience mean? 

    • When assembly lines are heavily dependent on supplies from one country, the impact on importing nations could be crippling if that source stops production intentionally (economic sanction) or unintentionally (natural disaster)
    • Example: Japan imported $169 billion worth from China, accounting for 24% of its total imports. Japan’s imports from China fell by half in February 2020 that impacted Japan’s economic activity.
    • In the context of international trade, supply chain resilience is an approach that helps a country to ensure that it has diversified its supply risk across a clutch of supplying nations instead of being dependent on just one or a few

    Recent incidents that led to supply chain disruption

    • Disruptions in supply chains can be natural or man-made.
    • When the novel coronavirus pandemic broke out, it had an immediate and telling effect on supply chains emanating from China.
    • In Japan’s case, a nuclear disaster (Fukushima Daiichi) caused a sharp drop in Japanese automobile exports to the United States.
    • Terrorist drone attacks on oil refineries in Saudi Arabia in September 2019 resulted in a drop of 5.7 million barrels of oil per day.
    • That attack triggered a steep plunge in Saudi Arabia’s stock market and a sharp spike in global oil prices.
    • Tensions with China led the United States government to impose restrictions on the export of microchips to China’s biggest semiconductor manufacturer SMIC.

    Supply Chain Resilience Initiative (SCRI)

    • Geo-politics and geo-economics can never be truly separated.
    • Also, there is a growing trend of weaponization of trade and technology.
    • China had imposed sanctions on its key exports of grain, beef, wine, coal, etc to Australia for demanding an inquiry into the origins of the coronavirus and advocating a robust Indo-Pacific vision.
    • It is against this backdrop that India, Japan, and Australia initiated the Supply Chain Resilience Initiative (SCRI).
    • It focuses on automobiles and parts, petroleum, steel, textiles, financial services, and IT sectors.
    • The SCRI may be strengthened by the future involvement of France.
    • Kingdom has also shown interest in the SCRI.

    “China plus one” strategy

    • For many Japanese companies, global performance and profits are linked to manufacturing facilities and supply chains in China.
    • Yet, they have shown an early capacity for risk mitigation through the “China Plus One” business strategy.
    • The “China plus one” strategy aims at diversification of investments to the Association of Southeast Asian Nations (ASEAN), India, and Bangladesh.
    • Japan announced a 2.2 billion Relocation Package.
    • Of the companies that availed this package, 57 relocated to Japan, 30 to Southeast Asia, and two to India.

    India’s vulnerability to supply chain disruptions

    • India can ill-afford the shocks of disruption in supply chains.
    • For instance, the pandemic caused a breakdown in global supply chains in the automotive sector.
    • For India, which imports 27% of its requirement of automotive parts from China, this quandary was a wake-up call.
    • It is t is noteworthy is that despite being the fourth largest market in Asia for medical devices, India has an import dependency of 80%. 
    • Given the renewed thrust in the health-care sector, this is the right time to fill gaps through local manufacturing.

    India increasing its presence in global supply chains

    1) Electronic industry

    • India’s electronics industry was worth $120 billion in 2018-2019 and is forecast to grow to $400 billion by 2025.
    • India is enhancing its presence in the global supply chains by attracting investments in the semiconductor components and packaging industry.
    • The Indian electronics sector is gradually shifting away from completely knocked down (CKD) assembly to high-value addition.

    2) Defence sector

    • Defence is among the key pillars of the ‘Atmanirbhar Bharat’ policy.
    • The government is providing a big boost to defence manufacturing under the ‘Make in India’ program.
    • It has identified a negative import list of 101 items.
    • There is a tremendous opportunity for foreign companies to enter into tie-ups with reputed Indian defence manufacturers to tap into the growing defence market in India.

    Consider the question “Pandemic has demonstrated the damage vulnerable supply chains can cause. It also underscored the importance of resilient supply chains. In light of this, examine the importance of diversification of supply chains.”

    Conclusion

    India has the capacity and the potential to become one of the world’s largest destinations for investments, and one of the world’s largest manufacturing hubs, in the aftermath of the pandemic.

  • What are Dedicated Freight Corridors (DFCs)?

    Prime Minister has inaugurated a 351-km section between Khurja and Bhaupur in Uttar Pradesh for commercial operations of the Dedicated Freight Corridor (DFC).

    There is another concept named Dedicated Passenger Corridors (DPCs). Can you guess the idea behind?

    Background of DFCs

    • The concept of Dedicated Freight Corridor (DFC) was mooted in 2006 to generate substantial capacity for freight traffic by developing separate tracks on identified routes.
    • The Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) was incorporated as a separate company under the Ministry of Railways.

    What is the DFC?

    • Under the Eleventh Five Year Plan (2007–12), Railways started constructing a new DFC in two long routes, namely the Eastern and Western freight corridors.
    • The section recently launched is part of the 1,839-km Eastern DFC that starts at Sohnewal (Ludhiana) in Punjab and ends at Dankuni in West Bengal.
    • The other arm is the around 1,500-km Western DFC from Dadri in Uttar Pradesh to JNPT in Mumbai, touching all major ports along the way.
    • There is also a section under construction between Dadri and Khurja to connect the Eastern and Western arms.

    Why is it important?

    • Around 70% of the freight trains currently running on the Indian Railway network are slated to shift to the freight corridors, leaving the paths open for more passenger trains.
    • Tracks on DFC are designed to carry heavier loads than most of the Indian Railways.
    • DFC will get track access charge from the parent Indian Railways, and also generate its own freight business.

    What trains will use the new section?

    • Freight trains plying on this section from now on will help decongest the existing Kanpur-Delhi main line of Indian Railways, which currently handles trains at 150% of its line capacity.
    • The new section means on the Indian Railway mainline, more passenger trains can be pumped in and those trains can, in turn, achieve better punctuality.
    • Foodgrain and fertilizers from the northern region are transported to the eastern and Northeast regions.
    • From East and Northeast, coal, iron ore, jute, and petroleum products are transported North and West.