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GS Paper: GS3

  • How policy can bridge the gap

    Context

    India must use the windfall from oil to provide assistance to the most vulnerable to mitigate the impact due to COIVD-19 outbreak.

    Estimates of impact

    • Impact on major economies: Minus 40 per cent, -30 per cent, -22 per cent, and -14 per cent. These are the estimated impacts (at an annualised rate) on the quarterly growth rates of China, the UK, Eurozone, and the US because of the Covid-19 virus.
    • Even excluding China and those that are closely tied to its supply chain — Korea and Taiwan — emerging markets (EM) are expected to go into recession in the first half of 2020, with the second quarter taking the biggest hit at over an 8 per cent quarterly decline.
    • Impact on India: India will not be spared this growth shock. In fact, the economic impact could be deeper and longer in emerging markets where the capacity of public health systems is limited at the best of times.

    Prospects of recovery

    • Sudden stop to economic activity: We also know from the experiences of the countries already infected that the way to control the spread of the virus is through aggressive containment and social distancing that inevitably brings economic activity to a sudden stop.
    • There doesn’t seem to be a middle path. We also know that unlike natural catastrophes like earthquakes, capital stock is not destroyed by the virus.
    • Sharp recovery and conditions: Once the containment period is over and social interaction normalises, there is every reason to believe that activity can recover very sharply.
    • Unless the containment period is long because of capacity constraints in the healthcare system which could turn supply chain disruptions into a long-term problem, or the credit stress created by the lack of earning by households and firms during the sudden stop stymies the recovery.

    India needs to brace itself

    • Unfortunately, India, where the virus still appears to be in the early stage, needs to brace for such a sudden stop.
    • The lockdown could be for an extended period given the already stretched public health system.
    • Impact on urban economy: The swathe of the economy that depends on social interaction — retail sales, entertainment, restaurants, and importantly construction and manufacturing — is very large.
    • Even if one believes that rural areas with relatively low population densities will not be affected much, the impact on urban economic activity could be very large.

    Role of economic policy

    • What is the role of economic policy in such circumstances? It needs to “bridge the gap” between the brutal downturn and the eventual recovery.
    • While public health policies force a sudden stop in the economy to save lives, economic policies need to ensure that the impact from the shutdown is cushioned, incomes of households and firms supported, credit stress is contained, and the recovery is not hamstrung by policy headwinds.
    • This requires policy support to be operated on various fronts.
    • Role of the Central bank: Central banks not only need to cut rates but also need to provide adequate liquidity and extend regulatory forbearance to prevent credit stress and non-performing loans from clogging up the already strained financial system when the economy starts to recover.
    • Role of fiscal policy: The role of fiscal policy is even larger, from direct and indirect tax cuts or postponement to targeted credit support for sectors that are likely to be most affected such as airlines and retail trade.
    • Support to the vulnerable: The key is income support to the most vulnerable: From daily wage earners to SMEs (small and medium enterprises).
    • Using JAM trinity for cash transfer: It is here that the government’s efforts over the last five years make India one of the best-placed economies to deliver such cash transfers.
    • Since 2015, substantial time, effort, and resources have been expended to establish Jan Dhan (bank accounts), Aadhaar and mobile banking (JAM), and Mudra, the programme that dispenses loans to SMEs.
    • The objective of JAM and Mudra is to use Aadhaar as a way of accurately identifying beneficiaries and use mobile banking to digitally and seamlessly transfer cash/subsidies directly to households’ bank accounts and provide loans to SMEs without any leakages.
    • According to government reports, the total number of Jan Dhan accounts stand at around 380 million and 59 million MUDRA loans were sanctioned last year.
    • For a country with a population of 1.3 billion and about 63 million SMEs, even if there are duplicate accounts, JAM and Mudra should be able to cover almost all households and SMEs.
    • With Aadhaar accurately targeting beneficiaries, leakages should be minimised. If there ever was a time that India needed JAM and Mudra it is now.

    Issue of fiscal space and solution

    • Some will argue that India doesn’t have the fiscal space. But it does.
    • Use oil windfall: In the last month or so, the crude oil price has dropped from around $60/bbl to around $30 and is likely to stay at this level given the breakdown in agreement among oil-producing countries and the massive collapse in global demand.
    • If the government simply taxed the oil windfall by raising excise duties, as it did during the 2014-15 oil price collapse, it could potentially raise almost 1 per cent of GDP or a staggering Rs 2.25 trillion.
    • If 50 million households have to be provided assistance because of the shutdown, it comes to about Rs 14,000 per month for three months or about Rs 24,000 a month to half of the 63 million SMEs.
    • And this without even having to increase this year’s budgeted deficit.

    Conclusion

    The government might have other uses for the oil windfall. But if India is forced into lockdown, the economic costs will be very large and the recovery will crucially depend on whether the pilot-light of the economy is kept lit through this period. This critically requires income transfers to vulnerable households and SMEs. India cannot complain that it does not have the fiscal space or the infrastructure to provide it.

  • Picking up the quantum technology baton

    Context

    With the Budget announcement providing direction for the development in quantum technology, the stakeholders need to roll-out the national mission quickly.

    Pushing India into second quantum revolution

    • Budgetary allocation for NM-QTA: In the Budget 2020 speech, Finance Minister Nirmala Sitharaman made a welcome announcement for Indian science — over the next five years she proposed spending â‚č8,000 crores (~ $1.2 billion) on a National Mission on Quantum Technologies and Applications.
    • This promises to catapult India into the midst of the second quantum revolution, a major scientific effort that is being pursued by the United States, Europe, China and others.

    Timeline of the development of Quantum Mechanics

    • Science to describe nature on atomic-scale: Quantum mechanics was developed in the early 20th century to describe nature in the small — at the scale of atoms and elementary particles.
    • Foundation for understanding: For over a century it has provided the foundations of our understanding of the physical world, including the interaction of light and matter.
      • It also led to ubiquitous inventions such as lasers and semiconductor transistors.
      • Despite a century of research, the quantum world still remains mysterious and far removed from our experiences based on everyday life.
    • Second revolution: A second revolution is currently underway with the goal of putting our growing understanding of these mysteries to use by actually controlling nature and harnessing the benefits of the weird and wondrous properties of quantum mechanics.
    • Challenge of experimental realisation: One of the most striking of these is the tremendous computing power of quantum computers, whose actual experimental realisation is one of the great challenges of our times.
    • Quantum supremacy: The announcement by Google, in October 2019, where they claimed to have demonstrated the so-called “quantum supremacy”, is one of the first steps towards this goal.

    Applications and challenges

    • Applications: Besides computing, exploring the quantum world promises other dramatic applications including the creation of novel materials, enhanced metrology, secure communication, to name just a few.
      • Some of these are already around the corner.
      • Application in communication: China recently demonstrated secure quantum communication links between terrestrial stations and satellites.
      • Applications in cryptography: Computer scientists are working towards deploying schemes for post-quantum cryptography — clever schemes by which existing computers can keep communication secure even against quantum computers of the future.
      • Exploring fundamental questions: Beyond these applications, some of the deepest foundational questions in physics and computer science are being driven by quantum information science. This includes subjects such as quantum gravity and black holes.
    • The need for collaboration: Pursuing these challenges will require unprecedented collaboration between physicists (both experimentalists and theorists), computer scientists, material scientists and engineers.
    • Challenges on the experimental front: On the experimental front, the challenge lies in harnessing the weird and wonderful properties of quantum superposition and entanglement in a highly controlled manner by building a system composed of carefully designed building blocks called quantum bits or qubits.
      • These qubits tend to be very fragile and lose their “quantumness” if not controlled properly, and a careful choice of materials, design and engineering is required to get them to work.
    • Challenges on the theoretical front: On the theoretical front lies the challenge of creating the algorithms and applications for quantum computers.
      • These projects will also place new demands on classical control hardware as well as software platforms.

    Where India stands

    • India late in starting work on technology: Globally, research in this area is about two decades old, but in India, serious experimental work has been underway for only about five years, and in a handful of locations.
    • What are the constraints on Indian progress in this field? So far we have been plagued by a lack of sufficient resources, high-quality manpower, timeliness and flexibility.
      • Resource and quality manpower problem: The new announcement in the Budget would greatly help fix the resource problem but high-quality manpower is in global demand.
      • In a fast-moving field like this, timeliness is everything — delayed funding by even one year is an enormous hit.
    • A previous programme called Quantum Enabled Science and Technology has just been fully rolled out, more than two years after the call for proposals.
    • Laudable announcement: One has to laud the government’s announcement of this new mission on a massive scale and on a par with similar programmes announced recently by the United States and Europe.

    Limits and way forward

    • But there are some limits that come from how the government must do business with public funds.
    • Role of the private sector: Here, private funding, both via industry and philanthropy, can play an outsized role even with much smaller amounts.
    • For example, unrestricted funds that can be used to attract and retain high-quality manpower and to build international networks — all at short notice — can and will make an enormous difference to the success of this enterprise.
    • Private participation is the effective way: This is the most effective way (as China and Singapore discovered) to catch up scientifically with the international community, while quickly creating a vibrant intellectual environment to help attract top researchers.
    • Connection with industry: Further, connections with the Indian industry from the start would also help quantum technologies become commercialised successfully, allowing the Indian industry to benefit from the quantum revolution.
    • We must encourage industrial houses and strategic philanthropists to take an interest and reach out to Indian institutions with an existing presence in this emerging field.
    • For example, the Tata Institute of Fundamental Research (TIFR), home to India’s first superconducting quantum computing lab, would be delighted to engage.

  • Price Support Mechanism under MSP Operations

    The Centre will spend â‚č1,061 crore to reimburse the Cotton Corporation of India (CCI) and its sub-agent in Maharashtra for procuring cotton at the minimum support price in that State since 2014.

    Why Centre reimburses to states?

    In the event of fall in market prices, the Centre intervenes through following schemes-

    Market Intervention Scheme

    • Similar to MSP, there is a Market Intervention Scheme (MIS), which is implemented on the request of State Governments for procurement of perishable and horticultural commodities in the event of fall in market prices.
    • The Scheme is implemented when there is at least 10% increase in production or 10% decrease in the ruling rates over the previous normal year.
    • Proposal of MIS is approved on the specific request of State/UT Government, if the State/UT Government is ready to bear 50% loss (25% in case of North-Eastern States), if any, incurred on its implementation.
    • Under MIS, funds are not allocated to the States.
    • Instead, central share of losses as per the guidelines of MIS is released to the State Governments/UTs, for which MIS has been approved based on specific proposals received from them.

    Price Supports Scheme (PSS)

    • The Department of Agriculture & Cooperation implements the PSS for procurement of oil seeds, pulses and cotton, through NAFED which is the Central nodal agency, at the MSP declared by the government.
    • NAFED undertakes procurement as and when prices fall below the MSP. Procurement under PSS is continued till prices stabilize at or above the MSP.
    • Losses, if any incurred by NAFED in undertaking MSP operations are reimbursed by the central Government.
    • Profit, if any, earned in undertaking MSP operations is credited to the central government.

    Back2Basics

    Minimum Support Price (MSP)

    • MSP is a form of market intervention by the GoI to insure agricultural producers against any sharp fall in farm prices.
    • The MSP are announced at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
    • MSP is price fixed to protect the producer – farmers – against excessive fall in price during bumper production years.
    • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, govt. agencies purchase the entire quantity offered by the farmers at the announced minimum price.
    • The minimum support prices are a guarantee price for their produce from the Government.
    • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.

    Methods of calculation

    • In formulating the level of MSP and other non-price measures, the CACP takes into account a comprehensive view of the entire structure of the economy of a particular commodity or group of commodities.
    • The CACP makes use of both micro-level data and aggregates at the level of district, state and the country.
    • Other factors include cost of production, changes in input prices, input-output price parity, trends in market prices, demand and supply, inter-crop price parity, effect on industrial cost structure, effect on cost of living, effect on general price level, international price situation, parity between prices paid and prices received by the farmers and effect on issue prices and implications for subsidy.

    Procurement agencies

    • Food Corporation of India (FCI) is the designated central nodal agency for price support operations for cereals, pulses and oilseeds.
    • Cotton Corporation of India (CCI) is the central nodal agency for undertaking price support operations for Cotton.

  • Stages in a COVID-19 Pandemic

    Over the past few weeks, India has been dreading the possibility that the novel coronavirus outbreak will move to the stage of community transmission.

    What are the stages of a pandemic?

    Stage I

    • In the first stage of a disease epidemic that eventually takes the form of a pandemic sweeping the globe, cases are imported into a country in which the infection did not originate.
    • An infection whose spread is contained within the boundaries of one or a few countries is obviously not a pandemic.

    Stage II

    • The second stage is when the virus starts being transmitted locally.
    • Local transmission means that the source of the infection is from within a particular area and the trajectory the virus has taken from one person to the next is clearly established.

    Stage III

    • The third stage is that of community transmission. It is usually localised.
    • According to the WHO community transmission is evidenced by the inability to relate confirmed cases through chains of transmission for a large number of cases, or by increasing positive tests through sentinel samples.
    • In layman terms, it means that the virus is now circulating in the community, and can infect people with no history either of travel to affected areas or of contact with an infected person.
    • If and when community transmission happens, there might arise the need for a full lockdown because in that situation it is theoretically possible for every person, regardless of where they are from and who they have been in contact with, to spread the disease.

    Stage IV

    • There is also a fourth stage in every pandemic. It is when the disease, COVID-19 in this case, becomes endemic in some countries.
    • The Indian government’s containment plan takes this possibility into account.
    • Among diseases that are currently endemic in India — meaning they occur round the year across the country — are malaria and dengue.

    How does categorising an outbreak in this manner help?

    • The stages of a pandemic are uniform the world over.
    • This is so because, in today’s interconnected world, it is important to have a standardised phraseology that conveys the same thing to every person around the world, and helps countries prepare better.
    • The categorization helps countries take specific actions that are necessary to target just that particular scenario.
    • For example, India imposed travel restrictions to China from very early on as the cases they were all imported from China.
    • Later, as cases started being imported from other European countries, flight and visa restrictions were put in place for those countries.
    • India has now shut itself to individuals coming from all countries — this is because the virus is now confirmed as circulating in at least 177 countries and territories.

    Worldwide, in which stage is the COVID-19 pandemic now?

    • The pandemic has spread to nearly every country on the planet. In most, though, it is in the stage of either imported cases or local transmission.
    • Among the countries where community transmission seems to be operating are China, Italy, Iran, South Korea and Japan.
    • China adopted a graded approach in dealing with the infection but the epicentre, Hubei, was in a state of complete lockdown at the peak of the infection.
    • It something that Italy has now effected in a bid to stop the virus from wreaking more havoc, given the country’s ageing population.

    How long before India enters community transmission?

    • It is totally unpredictable. Some doctors perceive that community transmission is inevitable; other experts feel it may have already happened.
    • There are some reports of one strain having less mortality. If indeed a milder strain has come to India, it could change the course of the epidemic.
    • There is another theory that all the various viruses circulating in South Asia and the generally lower levels of hygiene may give us some immunity.

  • Can Vitamin C prevent or cure novel Coronavirus infection?

  • The strategy of ‘Shelter in Place’

    What is the news: As India observed a “janata curfew” from 7 am to 9 pm on 22nd March refraining from making any non-essential movements, they are implementing a version of what is referred to, most commonly in the United States, as a “shelter in place” order.

    What exactly is a “Shelter in Place”?

    • In the context of the US, it is not a precise legal term, and its meaning and implications vary.
    • It conveys the broad idea of a set of restrictions being put into place, but follows not set definition.
    • Broadly, “shelter in place” orders everywhere social distancing, which is the key to “flattening the curve”, that is, spreading out the incidence of infection over a longer time so that healthcare systems are not overwhelmed.
    • Ultimately, the intent of the protocols is to decide what people should and shouldn’t do based on a particular threat to the public.

    Indian concept of self-imposed curfew

    • There is no exact definition of a “Janata curfew” — the PM has laid down guidelines for what Indians should not do, and authorities have taken steps to ensure compliance through appeals, advisories, and executive action such as invoking prohibitory orders.
    • In the cities, traders’ associations and housing societies have voluntarily put curbs on themselves in response to the PM’s call.

  • Species in news: Carissa carandas (the Great Hedge of India)

     

    Carissa carandas, a  multi-utility wild berry, whose thorny plant the British had used to build a barrier through India in the 1870s, has a hitherto unknown wilder cousin in Assam, a new study has revealed.

    Carissa carandas

    • The Carissa carandas was also among several thorny plants the British had grown 140 years ago for a 1,100-mile barrier apparently to enforce taxes and stop the smuggling of salt.
    • It has been used as a traditional herbal medicine for a number of ailments such as diarrhoea, anaemia, constipation, indigestion, skin infections and urinary disorders.
    • The leaves have been used as fodder for silkworms while a paste of its pounded roots serves as a fly repellent.
    • It is better known as karonda in Hindi, kalakkai in Tamil, koromcha in Bengali and karja tenga in Assamese, the Carissa kopilii is threatened by the very river it is named after — Kopili in central Assam.
    • The “sun-loving” plant was distributed sparsely, rooted in rocky crevices along the Kopili riverbed at altitudes ranging from 85-600 metres above sea level.

  • [pib] Desertification and Land Degradation Atlas of India

     

    The Union Minister for Agriculture and Farmers Welfare has provided useful information about land degradation in India citing the Desertification and Land Degradation Atlas.

    Desertification and Land Degradation Atlas of India

    • Space Applications Centre (SAC), ISRO has released out an inventory and monitoring of desertification of the entire country in 2016.
    • This Atlas presents state-wise desertification and land degradation status maps depicting land use, process of degradation and severity level.
    • This was prepared using IRS Advanced Wide Field Sensor (AWiFS) data of 2011-13 and 2003-05 time frames in GIS environment.
    • Area under desertification / land degradation for the both time frames and changes are reported state-wise as well as for the entire country.

    Degraded land in India

    • About 29.32% of the Total Geographical Area of the country is undergoing the process of desertification/land degradation.
    • Approximately 6.35% of land in Uttar Pradesh is undergoing desertification/degradation.

    Various move for land conservation

    • National Afforestation & Eco Development Board (NAEB) Division of the MoEFCC is implementing the “National Afforestation Programme (NAP)” for ecological restoration of degraded forest areas.
    • Various other schemes like Green India Mission, fund accumulated under Compensatory Afforestation Fund Management and Planning Authority (CAMPA), Nagar Van Yojana etc. also help in checking degradation and restoration of forest landscape.
    • MoEF&CC also promote tree outside forests realizing that the country has a huge potential for increasing its Trees Outside Forest (TOF) area primarily through expansion of agroforestry, optimum use of wastelands and vacant lands.

    Various institutions for land conservation

    • Indian Institute of Soil and Water Conservation (IISWC): Bio-engineering measures to check soil erosion due to run-off of rain water
    • Central Arid Zone Research Institute (CAZRI), Jodhpur: Sand dune stabilization and shelter belt technology to check wind erosion
    • Council through Central Soil Salinity Research Institute, Karnal: Reclamation technology, sub-surface drainage, bio-drainage, agroforestry interventions and salt tolerant crop varieties to improve the productivity of saline, sodic and waterlogged soils in the country

  • [pib] Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS)

    The Union Cabinet has approved Scheme for Promotion of manufacturing of Electronic Components and Semiconductors.

    About SPECS

    • The scheme aims to offer the financial incentive of 25% of capital expenditure for the manufacturing of goods that constitute the supply chain of electronic products.
    • The scheme will help offset the disability for domestic manufacturing of electronic components and semiconductors in order to strengthen the electronic manufacturing ecosystem in the country.

    Benefits

    The proposal, when implemented, will lead to the development of electronic components manufacturing ecosystem in the country. Following are the expected outputs/outcomes in terms of measurable indicators for the scheme:

    • Development of electronic components manufacturing ecosystem in the country and deepening of Electronics value chain
    • New investments in Electronics Sector to the tune of at least Rs. 20,000 crore
    • Total employment potential of the scheme is approximately 6,00,000
    • Reducing dependence on import of components by large scale domestic manufacturing that will also enhance the digital security of the nation

  • [pib] Defence Procurement Procedure, 2020

    Raksha Mantri unveiled the draft Defence Procurement Procedure (DPP) 2020 that aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment.

    Defence Procurement Procedure

    • The draft of DPP 2020 has been prepared by a Review Committee headed by Director General (Acquisition) based on the recommendations of all stakeholders, including private industry.
    • The first DPP was promulgated in 2002 and has since been revised a number of times to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

    Features:

    • The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production.
    • The major changes proposed in the new DPP are:

     1) Indigenous Content ratio hiked

    • The draft proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10% to support the ‘Make in India’ initiative.
    • A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.

    2) New Category: “Buy Global” Manufacture in India

    • It has been introduced with minimum 50% indigenous content on cost basis of total contract value.
    • Only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India.
    • This would be in preference to the ‘Buy Global’ category as manufacturing will happen in India and jobs will be created in the country.

    3) Leasing introduced as a new category

    • Leasing has been introduced as a new category for acquisition in addition to existing ‘Buy’ & ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments.
    • Leasing is permitted under two categories e, Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a Global entity.
    • This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, etc.

    4) Product support

    • The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), Comprehensive Maintenance Contract (CMC), etc to optimize life cycle support for equipment.
    • The capital acquisition contract would normally also include support for five years beyond the warranty period.