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GS Paper: GS3

  • The new consumer

    The focus of this article is on the behavioural changes in the consumer post Covid. It also suggest the ways to deal with these changes.

    Context

    • The consumer during and post-COVID is showing remarkable flexibility, bringing about a paradigm shift in her consumption pattern.

    Issue of generating demand

    • Some state governments are busy demanding the opening up of the economy.
    • However, the issue is that the economy does not merely need opening up, but it requires urgent generation of basic demand.
    • That is why consumer behaviour needs to be closely watched.
    • Since the lockdown, the priorities of consumers have seen a drastic shift.

    Factors to consider to increase demand

    • 1) The decrease in the purchasing power to buy products needs to be addressed.
    • The government must look at ways like a reduction in taxes which will help the common man.
    • 2) The current scenario has also made all of us go back to the basic needs.
    • Luxury products hold little value. But renting will increase.
    • 3) The emphasis will be on saving for a rainy day, whether in the case of banks or households
    • 4) Aviation, tourism and hospitality sectors have been hit and continue to remain so even after the restrictions are lifted.
    • 5)  e-commerce has shown exponential growth and will continue to do so.
    • 6) With “Vocal for Local” gaining momentum, there’s a huge increase in local apps, local kirana stores, local artisans and brands.
    • 7) Schools and colleges have taken a hit as e-learning and online courses are being preferred.
    • 8) The entertainment industry has been drastically hit. The media and entertainment industry needs to pay heed to this and curate content accordingly.
    • 9) With a lot of people laying emphasis on their health and immunity, there’s been a substantial rise in the consumption of organic, ayurvedic, and immunity-boosting products.
    • Apart from the obvious products, financial and medical insurance will play an important role.
    • 10) Real estate will suffer as no long-term, high investment purchases will be favoured, but renting will increase.

    Role of the government

    • 1) People need to be provided with their daily needs — basic essentials such as food, water, housing, and electricity.
    • The government is already taking care of that, but money also needs to be given.
    • 2) Jobs need to be provided through development of infrastructure projects.
    • 3) Farmers need to have insurance for their crops and the infrastructure to sell at the right price.
    • 4) Migrant workers with their livelihoods being disrupted are looking for support,and many are focusing on agriculture as a means of income.

    Way forward

    • The government should focus on generating demand for products, and create jobs by improving infrastructure.
    • The government must incentivise spending by offering tax benefits on the amount spent.
    • Government must forget about fiscal prudence this year.
    • Consumers in rural areas are buying more than before.Companies should focus on tapping the rural demand

    Consider the question “Demand has been the driver of India’s growth. But the pandemic has dampened it with devastating effect. Agaist this backdrop suggest the measures to be taken by the government to revive the demand.”

    Conclusion

    With focus on these emerging trends and changing behaviour of the consumers, the government must take steps to bring the economy fast on the tracks.

  • Agriculture Infrastructure Fund (AIF) Scheme

    PM has launched a new financing scheme under the ₹1 lakh crore AIF.

    Note the following things about AIF:

    1) It is a Central Sector Scheme

    2) Duration of the scheme

    3)Target beneficiaries

    Agriculture Infrastructure Fund (AIF)

    • It is a Central Sector Scheme meant for setting up storage and processing facilities, which will help farmers, get higher prices for their crops.
    • It will support farmers, PACS, FPOs, Agri-entrepreneurs, etc. in building community farming assets and post-harvest agriculture infrastructure.
    • These assets will enable farmers to get greater value for their produce as they will be able to store and sell at higher prices, reduce wastage and increase processing and value addition.

    What exactly is the AIF?

    • The AIF is a medium – long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and credit guarantee.
    • The duration of the scheme shall be from FY2020 to FY2029 (10 years).
    • Under the scheme, Rs. 1 Lakh Crore will be provided by banks and financial institutions as loans with interest subvention of 3% per annum.
    • It will provide credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for loans up to Rs. 2 Crore.

    Target beneficiaries

    The beneficiaries will include farmers:

    • PACS, Marketing Cooperative Societies, FPOs, SHGs, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs, Startups, and Central/State agency or Local Body sponsored Public-Private Partnership Projects

  • Restructuring to cushion impact on the economy

    “The article analyses the present scenario of the economy and impact of the steps taken by the central bank and the government.” 

    Context

    • Monetary policy committee (MPC) members, through a unanimous vote, decided to keep policy rates unchanged.
    • MPC also maintained an accommodative stance.
    • This was the result of inflation hovering around 6% i.e. above the MPCs target of 4%.

    Restructuring package after moratorium ends

    • Moratorium on loans ends 31 August, RBI said the way forward is a restructuring package for businesses and households.
    • Recent data released by large banks indicate that there has been a sizeable reduction in moratorium in June from 50% in April for all scheduled commercial banks (SCBs).
    • As economic activity normalizes further, the need for restructuring will be even lower.

    What do the trends indicate

    • Most indicators—manufacturing and services Purchasing Managers’ Index(PMI’s) electricity output, vehicle sales, exports, imports—point to economic momentum settling at 10-15% below covid levels in the near-term.
    • The RBI’s consumer confidence survey—gauge of consumer spending—was at its lowest in May, and the one-year outlook is not promising.
    • This implies that consumption demand, especially discretionary demand, will be far lower.
    • With muted consumption, capacity utilization, which had fallen to 68.2% last December, has fallen further in the last few months.
    • Thus, investment demand is not likely to see upward momentum in the near term, even with lower interest rates.

    How RBI’s intervention made the difference

    • An economic slowdown of such proportions leads to an increase in risk premium.
    • Rating upgrade to downgrade ratio of the corporate sector had fallen to 0.05 as in May from a high of 1.11 in December 2018.
    • Spread between 3-year AAA corporate bonds and sovereign bonds rose to 276 basis points on 26 March.
    • But the spread has since fallen to 50bps.
    • This was possible because of the abundant liquidity made available by RBI and credit enhancement provided by the government.

    Way forward

    • RBI and the government will have to work together to revive demand.
    • Centre has already expanded its gross borrowing to ₹12 trillion.
    • Even with net tax collections at 53% of last year’s levels, the Centre has increased its spending by 13% over 2019-20.
    • The government better understand that this is the time to apply Keynesian economics.
    • Global central banks have become large buyers of sovereign debt to support the larger roles being played the governments.
    • In India, too, the Centre and states will have to spend to crowd-in private sector spending.
    • RBI’s role will be important not only as the lender of last resort but also as a buyer of government securities.
    • It has carried out its function as a central bank well, and brought a semblance of stability to financial markets.
    • It will have to do the same in the sovereign bond market.
    • More importantly, it will have to remain vigilant of impending risks to growth and inflation, and be ready to act.

    Consider the question “To what extent the steps taken by the RBI and the government to stabilise the economy battered by the covid pandemic were helpful? 

     Conclusion

    As India’s central bank comes towards the end of its interest rate reduction cycle, it will have to navigate the economy through financial and macroeconomic stability. The government will also have to act in tandem with the central bank in steering the economy through this storm.

    Original

    articles:https://www.livemint.com/opinion/columns/opinion-restructuring-to-cushion-impact-on-the-economy-11596758908360.html

  • Importance of increasing the income of those at the bottom of income pyramid

    India’s growth has been fuelled by demand which has dampened owing to various factors. One untapped source of demand could be the group which lies at the bottom of income pyramid. This article suggests the ways to increase the income of this group.

    Structural demand problem

    • India’s structural demand problem predates the COVID-19 shock.
    • This problem has been compounded after lockdown as jobs have been lost and incomes have collapsed.
    • Boosting domestic demand is critical for an economic revival as external demand is likely to remain muted.
    • It is argued that India’s growth story has been driven by demand generated by those who are at the top of India’s socio-economic pyramid
    • But the demand from that section has now plateaued.

    So, where the demand is going to come from?

    •  Turn to those at the bottom of the pyramid.
    • Those at the bottom of pyramid have a high marginal propensity to consume.
    • But realising the untapped demand potential of this group requires enhancing their incomes and earnings.

    Division of India’s workforce

    • Periodic Labour Force Survey (2018-19) tells us that less than 10 per cent of the workforce is engaged in regular formal jobs.
    • Another 14 per cent are engaged in regular informal jobs with average monthly earnings (Rs 9,500), which is roughly equivalent to or slightly below a minimum wage.
    • The self-employed and casual workers account for 50 per cent and 24 per cent of the workforce respectively and report average earnings that are considerably below a decent minimum amount.
    • Casual workers, who are unlikely to receive work on every day of the month, are at the bottom of the employment structure.

    How to increase the earning of those at the bottom of employment structure

    • Devising strategies that enhance productivity growth in the informal economy could increase their income.
    • Raising the minimum wages of the worst-off workers.
    • At present, under the Minimum Wage Act,  India has a complex set of minimum wages which offer different wages by occupation type and skill levels.
    • The Code on Wages (2019) seeks to universalise minimum wages and extend them to the unorganised sector.

    Way forward

    • 1) Ensuring a decent minimum wage for those who are the bottom of the distribution — the casual labour, would be helpful in this context.
    • This will help set a higher wage floor for others engaged in low-paid work, including regular informal workers.
    • 2) It is also important that minimum wages are paid in public workfare programmes too, in particular MGNREGA works.
    • At present, MGNREGA wages are not covered under the Minimum Wages Act.
    • 3) The minimum wage can be linked to the consumption expenditure of the relatively better-off group of workers.

    Consider the question “India’s growth story is scripted by demand which has been tapering off. The new source of demand could be those at the bottom of income structure. Suggest the strategies to increase the income of this group which could then translate into demand.”

    Conclusion

    The Indian employment challenge today cannot be seen independently of the problem of inadequate income. The above intervention will not only enable income enhancement of those in low-paid work but also add fuel to demand and growth, this time from those at the bottom of the distribution.

  • Delhi government’s Electric Vehicle Policy

    Image source: TOI

    The Delhi government has notified the new Electric Vehicle Policy under which it aims to make a quarter of all new vehicle registrations battery-operated by 2024 and thereby help reducing air pollution.

    Try this PYQ:

    Q.In the context of proposals to the use of hydrogen-enriched CNG (H-CNG) as fuel for buses in public transport, consider the following statements:

    1. The main advantage of the use of H-CNG is the elimination of carbon monoxide emissions.
    2. H-CNG as fuel reduces carbon dioxide and hydrocarbon emissions.
    3. Hydrogen up to one-fifth by volume can be blended with CNG as fuel for buses.
    4. H-CNG makes the fuel less expensive than CNG.

    Which of the statements given above is/are correct? (CSP 2018)

    (a) 1 only

    (b) 2 and 3 only

    (c) 4 only

    (d) 1, 2, 3 and 4

    Some key highlights of the policy are:

    • A purchase incentive of Rs 5,000 per kilowatt/hour of battery capacity (advanced battery), a maximum incentive of Rs 30,000 per vehicle for two-wheelers.
    • A purchase incentive of Rs 30,000 per vehicle (advanced battery) for e-autos.
    • A purchase incentive of Rs 30,000 per vehicle for the purchase of one e-rickshaw and e-cart. Additionally, an interest subsidy of 5 per cent on loans on vehicles with advanced battery.
    • Conversion of 50 per cent of all new stage carriage buses (all public transport vehicles with 15 seats or more) by 2022.
    • A purchase incentive of Rs 10,000 per kilowatt/hour of battery capacity (advanced battery), and maximum incentive of Rs 150,000 per vehicle to the first 1,000 e-four wheelers.
    • Complete removal of road tax and registration fee for all battery electric vehicles.

    Significance of the policy

    • According to the VAHAN database of the Ministry of Road Transport and Highways, electric vehicles comprised only 3.2 per cent of the new vehicles registered in Delhi in 2019-20.
    • The proposed 25 per cent transformation of Delhi’s new-vehicle market could catalyse electric vehicle production and bring more product diversity.

  • Twin issues: Shrinking water bodies and floods in urban landscapes

    This newscard is an excerpt from the original article published in the D2E.

    Try this question for mains:

    Q.Shrinking water bodies and floods in urban landscapes are mutually induced by each other. Analyse.

    Water in urban landscapes

    • Lakes and wetlands are an important part of the urban ecosystem.
    • They perform significant environmental, social and economic functions — from being a source of drinking water and recharging groundwater to supporting biodiversity and providing livelihoods.
    • Their role becomes even more critical in the present context when cities are facing the challenge of rapid unplanned urbanisation.
    • Their numbers are declining rapidly. For example, Bangalore had 262 lakes in the 1960s; now only 10 of them hold water.

    Issues with urban water bodies

    • Natural streams and watercourses, formed over thousands of years due to the forces of flowing water in the respective watersheds, have been altered because of urbanisation.
    • As a result, the flow of water has increased in proportion to the urbanisation of watersheds.
    • Ideally, natural drains should have been widened to accommodate the higher flows of stormwater.
    • But, on the contrary, they have been a victim of various unlawful activities:

    (1) Pollution

    • There has been an explosive increase in the urban population without a corresponding expansion of civic facilities such as infrastructure for the disposal of waste.
    • As more people are migrating to cities, urban civic services are becoming less adequate.
    • As a result, most urban water bodies in India are suffering because of pollution. The water bodies have been turned into landfills in several cases.
    • Guwahati’s Deepor Beel, for example, is used by the municipal corporation to dump solid waste since 2006. Even the Pallikarni marshland in Chennai is used for solid waste dumping.

    (2) Encroachment

    • This is another major threat to urban water bodies. As more people have been migrating to cities, the availability of land has been getting scarce.
    • Today, even a small piece of land in urban areas has a high economic value.
    • These urban water bodies are not only acknowledged for their ecosystem services but for their real estate value as well.
    • Charkop Lake in Maharashtra, Ousteri Lake in Puducherry, Deepor beel in Guwahati are well-known examples of water bodies that were encroached.

    (3) Illegal mining activities

    • Illegal mining for building material such as sand and quartzite on the catchment and bed of the lake have an extremely damaging impact on the water body.
    • For example, the Jaisamand Lake in Jodhpur, once the only source of drinking water for the city, has been suffering from illegal mining in the catchment area.
    • Unmindful sand mining from the catchment of Vembanad Lake on the outskirts of Kochi has decreased the water level in the lake.

    (4) Unplanned tourism activities

    • Using water bodies to attract tourists has become a threat to several urban lakes in India.
    • Tso Morari and Pongsho lakes in Ladakh have become polluted because of unplanned and unregulated tourism.
    • Another example is that of Ashtamudi Lake in Kerala’s Kollam city, which has become polluted due to spillage of oil from motorboats.

    (5) Absence of administrative framework

    • The biggest challenge is the government apathy towards water bodies.
    • This can be understood from the fact that it does not even have any data on the total number of urban water bodies in the country.
    • Further, CPCB had not identified major aquatic species, birds, plants and animals that faced threat due to pollution of rivers and lakes.

    Original article:

    https://www.downtoearth.org.in/news/urbanisation/two-sides-of-the-same-coin-shrinking-water-bodies-and-urban-floods-72702

  • Magnetoseismology of Sun’s Corona

    A group of researchers has measured the global magnetic field of the Sun’s corona for the very first time.

    Try this PYQ:

    The terms ‘Event Horizon’, ‘Singularity’, `String Theory’ and ‘Standard Model’ are sometimes seen in the news in the context of (CSP 2017)-

    (a) Observation and understanding of the Universe

    (b) Study of the solar and the lunar eclipses

    (c) Placing satellites in the orbit of the Earth

    (d) Origin and evolution of living organisms on the Earth

    Basis of the research

    • The properties of waves depend on the medium in which they travel.
    • By measuring certain wave properties and doing a reverse calculation, some of the properties of the medium through which they have travelled can be obtained.
    • Waves can be longitudinal waves (for example, sound waves) or transverse waves (for example, ripples on a lake surface).
    • The waves that propagate through magnetic plasma are called magnetohydrodynamic (MHD) waves.
    • From the theoretical calculation, it can be shown that the properties of the transverse MHD wave are directly related to the strength of magnetic fields and the density of the corona.

    How was the Magnetic Field measured?

    • The team used a technique known as coronal seismology or magnetoseismology to measure the coronal magnetic field which has been known for a few decades.
    • This method requires the measurement of the properties of magnetohydrodynamic (MHD) waves and the density of the corona simultaneously.
    • In the past, these techniques were occasionally used in small regions of the corona, or some coronal loops due to limitations of our instruments/and proper data analysis techniques.

    The CoMP instrument

    • The team used the improved measurements of the Coronal Multi-channel Polarimeter (CoMP) and advanced data analysis to measure the coronal magnetic field.
    • CoMP is an instrument operated by High Altitude Observatory, of the U.S.
    • It is located at Mauna Loa Solar Observatory, near the summit of that volcano on the big island of Hawaii.

    Why measure the solar magnetic field?

    • It is very important to measure the corneal magnetic fields regularly since the solar corona is highly dynamic and varies within seconds to a minute time scale. There are two main puzzles about the Sun which this advancement will help address:

    (1) Coronal heating problem

    • Though the core of the Sun is at a temperature of about 15 million degrees, its outer layer, the photosphere is a mere 5700 degrees hot.
    • However, its corona or outer atmosphere, which stretches up to several million kilometres beyond its surface, is much, much hotter than the surface.
    • It is at a temperature of one million degrees or more.
    • What causes the atmosphere of the Sun (corona) to heat up again, though the surface (photosphere) is cooler than the interior? That is the question which has baffled solar physicists.
    • Popular attempts to explain this puzzle invoke the magnetic field of the corona. Hence the present work will help understand and verify these theories better.

    (2) Mechanisms of eruptions of the Sun

    • The eruptions on the Sun include solar flares and coronal mass ejections.
    • These are driven by magnetic reconnections happening in the Sun’s corona.
    • Magnetic reconnection is a process where oppositely polarity magnetic field lines connect and some of the magnetic energy is converted to heat energy and also kinetic energy which leads to the generation of heating, solar flares, solar jets, etc.

  • Exercise Kavkaz 2020

    In a resumption of bilateral and multilateral military exercises which were deferred due to coronavirus (COVID-19), India will take part in the Russian Kavkaz 2020 strategic command-post exercise next month.

    Go through the list for once. UPSC may ask a match the pair type question asking exercise name and countries involved.

    https://www.civilsdaily.com/prelims-spotlight-defence-exercises/

    Kavkaz 2020

    • The Kavkaz 2020 is also referred to as Caucasus-2020.
    • The exercise is aimed at assessing the ability of the armed forces to ensure military security in Russia’s southwest, where serious terrorist threats persist and preparing for the strategic command-staff drills.
    • The main training grounds that will be involved are located in the Southern Military District.
    • The invitation for participation has been extended to at least 18 countries including China, Iran, Pakistan and Turkey apart from other Central Asian Republics part of the SCO.

  • [pib] First “Kisan Rail” flagged off

    Indian Railways introduced the first “Kisan Rail” from Devlali (Maharashtra) to Danapur (Bihar).

    Try this question for mains:

    Q.Discuss the role of agricultural marketing and logistics for doubling farmer’s income by 2022.

    Kisan Rail

    • From Maharashtra’s Devlali to Bihar’s Danapur, the train will cover the journey of 1,519 kilometres in over 31 hours.
    • It will take stops at Nasik Road, Manmad, Jalgaon, Bhusaval, Burhanpur, Khandwa, Itarsi, Jabalpur, Satna, Katni, Manikpur, Prayagraj Chheoki, Pt. Deendayal Upadhyay Nagar and Buxar.
    • This train will help in bringing perishable agricultural products like vegetables, fruits to the market in a short period of time.
    • The train with frozen containers is expected to build a seamless national cold supply chain for perishables, inclusive of fish, meat and milk.
    • It is a step towards realizing the goal of doubling farmers’ incomes by 2022.

    Other facts

    • Indian Railways have earlier run single commodity special trains like Banana Specials etc.
    • But this will be the first-ever multi-commodity trains and will carry fruits like Pomegranate, Banana, Grapes etc and vegetables like Capsicum, Cauliflower, Drumsticks, Cabbage, Onion, Chilies etc.

  • AI integration will be at the core of the transition

    The article tracks the latest developments in the field of AI by the leading technology companies.

    Integrating AI in the phone

    • Over the last few years, most mobile phone manufacturers have been content with design upgrades, apart from specs.
    • Samsung launched a device which has been able to integrate artificial intelligence (AI) in its phones.
    • In the case of S-Pen, Samsung demonstrated that it has been able to reduce latency between pen operation and what appears on the screen to 9 milliseconds using predictive analysis.
    • Latency is a major concern in technologies like smart cars.
    • Samsung also showcased active noise cancellation, which again uses prediction analysis to drown out ambient noises.
    • Apple’s virtual event also focused on higher integration and more uses of AI.
    • Siri has become even smarter and is increasingly being integrated with more services.
    • The camera function of Apple devices, for instance, pieces together a picture using best angles to create the perfect image.
    • Samsung and Apple now can monitor health more accurately using their smartwatches.

    Future scope

    • This indicates how much further we are moving towards a future with more edge computing.
    • This computing will power technologies like a smart car.
    • Given the progress in IoT, there is a huge likelihood that those betting early on AI integration will reap the biggest rewards of the connected living market.

    Consider the question “What is artificial intelligence? How it could transform the world of technology?”

    Conclusion

    Integration of AI in the devices we use in everyday life holds a promising future for us. India must encourage its development.

    Source-

    https://www.financialexpress.com/opinion/ai-integration-will-be-at-the-core-of-the-transition-to-future-technologies-such-as-smarts-cars/2047309/