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GS Paper: GS3

  • [op-ed snap] Why ‘Make in India’ has failed

    Context

    Five years after its launch its appropriate time to take the stock of the progress made by ‘Make in India’.

    Three major objectives of the initiative

    • First- Manufacturing growth rate at 12-14 %: The first objective is to increase the manufacturing sector’s growth rate to 12-14% per annum in order to increase the sector’s share in the economy.
    • Second-100 million jobs: The second objective is to create 100 million additional manufacturing jobs in the economy by 2022.
    • Third-increase manufacturing’s contribution to GDP to 25%: The third objective is to ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (revised to 2025) from the current 16%.

    Assessment of the progress made so far

    • As the policy changes were intended to usher growth in three key variables of the manufacturing sector — investments, output, and employment growth.
    • Progress on the investment front:
      • Slow growth: The last five years witnessed slow growth of investment in the economy.
      • This is more so when we consider capital investments in the manufacturing sector.
      • The decline in gross fixed capital formation: Gross fixed capital formation of the private sector declined to 28.6% of GDP in 2017-18 from 31.3% in 2013-14 (Economic Survey 2018-19).
      • Gross Fixed Capital Formation is the measure of aggregate investment.
      • Increase in private sector’s savings decrease in investment: Household savings have declined, while the private corporate sector’s savings have increased.
      • This is a scenario where the private sector’s savings have increased, but investments have decreased, despite policy measures to provide a good investment climate.
    • Progress on the output growth front:
      • Double-digit growth only in two quarters: The monthly index of industrial production (IIP) pertaining to manufacturing has registered double-digit growth rates only on two occasions during the period April 2012 to November 2019.
      • Below 3% for the most part: The data show that for a majority of the months, it was 3% or below and even negative for some months.
      • The negative growth implies a contraction of the sector.
    • Progress on the employment growth front:
      • No progress: The employment, especially industrial employment, has not grown to keep pace with the rate of new entries into the labour market.

    Problems with the policy

    • The initiative had two major lacunae.
    • First- Too much reliance on foreign capital: The bulk of these schemes relied too much on foreign capital for investments and global markets for produce.
      • This created an inbuilt uncertainty, as domestic production had to be planned according to the demand and supply conditions elsewhere.
    • Second-Lack of implementation: The policy implementers need to take into account the implications of implementation deficit in their decisions.
      • The result of such a policy oversight is evident in a large number of stalled projects in India.
      • The spate of policy announcements without having the preparedness to implement them is ‘policy casualness’.
      • ‘Make in India’ has been plagued by a large number of under-prepared initiatives.

    Three reasons why ‘Make in India’ failed to perform

    • Too-much ambitious goals: It set out too ambitious growth rates for the manufacturing sector to achieve.
      • Beyond capacity rate for the sector: An annual growth rate of 12-14% is well beyond the capacity of the industrial sector.
      • Overestimation of implementation capacity: To expect to build capabilities for such a quantum jump is perhaps an enormous overestimation of the implementation capacity of the government.
    • Dealing with too many sectors: The initiative brought in too many sectors into its fold.
      • Lack of policy focus: Bringing in too many sectors under its fold led to a loss of policy focus.
      • Lack of understanding of comparative advantages: Further, it was seen as a policy devoid of any understanding of the comparative advantages of the domestic economy.
    • Ill-timed launch
      • Given the uncertainties of the global economy and ever-rising trade protectionism, the initiative was spectacularly ill-timed.

    Conclusion

    • In order to revive the ‘Make in India’ there is a need to make necessary changes in the policy and root out the causes associated with the policy implementation.

     

     

     

     

     

     

  • [op-ed snap] A farm wish list for the budget

    Context

    As finance minister presents the budget the FM need to ensure transparency and to fully account for the food subsidy.

    The excess buffer stock and need to reform

    • A buffer stock norm and actual stock: A buffer stock norm is at 21.4 million tonnes (mt).
      • Actual stock far exceeds the norm: The actual stocks of grains with the central pool stood at 75.5 mt.
      • Which is 3.5 times what the government needs to hold.
    • The economic cost of the excess stock: At its economic cost, the value of the excess stocks with the government stands at Rs 1.6 lakh crore.
      • Potential for revenue: There is no better place to find revenue for the FM than to liquidate these stocks.
      • Need for the reform in grain management system: Unless the grain management system is reformed, the inefficiency of the grain management system will keep on increasing and the nation will suffer.

    Food subsidy reforms

    • Link food prices to procurement price: It is the time to revise the central issue of price and link it to the procurement price-say at half the procurement price.
      • Limit the population coverage: There is a need to limit this highly subsidised food of Rs 3/kg for rice and Rs 2/kg of wheat to say 40 per cent of the population.
      • Move to DBT: The real fundamental reform would be to move towards direct cash transfers for the intended beneficiaries of food subsidy.

    Fertiliser subsidy reforms

    • Imbalance in the subsidisation: The real problem of this sector is the imbalance in the policy of fertiliser subsidisation.
      • While urea (N) is subsidised to the extent of 75 per cent of its cost, phosphatic (P) and potassic (K) fertilisers are subsidised only to the tune of about 25 per cent of their cost.
    • Consequences of this imbalance: The result is the highly imbalanced use of N, P and K on farmers’ fields. Which results in
      • Giving a very low fertiliser-to-grain response ratio.
      • Degrading the soil.
      • Degrading underground water.
      • Degrading the environment with excessive nitrogen use.
      • Discouragement to natural farming: The current fertiliser subsidy discourages those who want to pursue natural farming as they don’t get subsidy anywhere near the amount chemical-based fertilisers do.
    • Reforms: There are two ways in which the fertiliser subsidy regime can be reformed.
      • Bring nitrogenous fertiliser under NBS: The solution to the imbalance in use is to bring nitrogenous fertilisers under the Nutrient Based Subsidy (NBS) scheme.
      • Cash transfer based on per hectare basis: The second option is to move towards direct cash transfers for fertilisers on a per hectare basis, with some adjustment for irrigated tracts.
      • 50,000 Crore saving: The above-mentioned reforms could result in the saving of Rs. 50,000 crores to the public exchequer.

    Way forward

    • Investing the savings where it matters the most: The savings from the reforms could be invested in-
      • Better water management, especially drip irrigation.
      • Infrastructure for agri-markets.
      • Solar trees: The investments could also be made in setting up the solar trees in the farm to harvest solar power on farmer’s fields with buyback agreements for surplus production.

  • Natural Gas Grid (NGG)

    A study to facilitate the development of a National Gas Grid is to be undertaken soon by a U.S. entity. The Government has last year envisaged developing the NGG.

    National Gas Grid

    • At present about 16,788 Km natural gas pipeline is operational and about 14,239 Km gas pipelines are being developed to increase the availability of natural gas across the country.
    • These pipelines have been authorized by Petroleum and Natural Gas Regulatory Board (PNGRB) and are at various stages of execution viz. Pre-Project activities/laying/testing/commissioning etc.

    Aims and Objective

    • To remove regional imbalance within the country with regard to access of natural gas and provide clean and green fuel throughout the country.
    • To connect gas sources to major demand centres and ensure availability of gas to consumers in various sectors.
    • Development of City Gas Distribution Networks in various cities for supply of CNG and PNG.

    NGG Technical Assistance Program

    • The India NGG Technical Assistance programme stems from an agreement in September between PNGRB and the US Trade Development Agency (USTDA).
    • The study will aim at developing an economic basis for building India’s Natural Gas Grid (NGG).

    Utility of the study

    • It would provide an update on the gas demand analysis, including anchor consumers, industries, city gas distribution (CGD) and emerging demand centres such as CNG and LNG for road transport.
    • The study will take a fresh look at the gas supply analysis too. This includes review of LNG imports, domestic supply, potential transnational gas pipeline imports and virtual pipelines.
    • Share of natural gas in India’s energy basket is 6.2% as against 23.4% globally and is expected to increase.

  • IVF of White Rhinos

    Researchers had created another embryo — the third — of the nearly extinct northern white rhino. This is seen as a remarkable success in an ongoing global mission to keep the species from going extinct.

    What is IVF?

    • IVF is a type of assisted reproductive technology used for infertility treatment and gestational surrogacy.
    • A fertilised egg may be implanted into a surrogate’s uterus, and the resulting child is genetically unrelated to the surrogate.
    • Some countries have banned or otherwise regulate the availability of IVF treatment, giving rise to fertility tourism.
    • Restrictions on the availability of IVF include costs and age, in order for a woman to carry a healthy pregnancy to term.
    • IVF is generally not used until less invasive or expensive options have failed or been determined unlikely to work.

    IVF process

    • In vitro fertilisation (IVF) is a process of fertilization where an egg is combined with sperm outside the body, in vitro (“in glass”).
    • The process involves monitoring and stimulating a female ovulatory process, removing an ovum or ova (egg or eggs) from the female ovaries and letting sperm fertilise them in a liquid in a laboratory.
    • After the fertilised egg (zygote) undergoes embryo culture for 2–6 days, it is implanted in the same or another female uterus, with the intention of establishing a successful pregnancy.

    Types of Rhinos

    • The northern white is one of the two subspecies of the white (or square-lipped) rhinoceros, which once roamed several African countries south of the Sahara.
    • The other subspecies, the southern white is, by contrast, the most numerous subspecies of rhino, and is found primarily in South Africa.
    • There is also the black (or hook-lipped) rhinoceros in Africa, which too, is fighting for survival, and at least three of whose subspecies are already extinct.
    • The Indian rhinoceros is different from its African cousins, most prominently in that it has only one horn.
    • There is also a Javan rhino, which too, has one horn, and a Sumatran rhino which, like the African rhinos, has two horns.

  • Drone Census

    India’s first drone census has seen only 2,500 Ownership Acknowledgment Numbers (OANs) being issued by the Ministry of Civil Aviation (MoCA) since five days of beginning.

    Drone Census

    • The MoCA had issued a notice providing a one-time opportunity for voluntary disclosure of all drones and operators starting from January 14.
    • The DGCA issued the Civil Aviation Requirements (CAR), Section 3 – Air Transport Series X, Part I, Issue I, dated August 27, 2018 regulates use of drones.
    • It provides the process for obtaining Unique Identification Number, Unmanned Aircraft Operator Permit (UAOP) and other operational requirements; there are drones that do not comply with the CAR.
    • If a drone is not enlisted by 5 p.m. on January 31, then it will most definitely be confiscated.
    • After January 31, only authorised retailers will be allowed to sell them after uploading buyers’ Know your Customer (KYC) and sale invoice, similar to the sale of mobile phones and cars.

    Why such move?

    • The exercise will give the government a picture of who owns what kind of drone in which part of the country.
    • It will help in making policy decisions that should ideally become the base for understanding the scale of operations.

  • Irrawaddy Dolphins

    146 Irrawaddy dolphins were recently sighted in Chilika Lake of Odisha. The lake has highest single lagoon population of the aquatic mammal in the world.

    Irrawaddy Dolphins

    • IUCN Status: Endangered
    • Scientific Name: Orcaella brevirostris
    • Habitats: Lakes, Rivers, Estuaries, and Coasts

    • The Irrawaddy dolphin is a euryhaline species of oceanic dolphin found in discontinuous subpopulations near sea coasts and in estuaries and rivers in parts of the Bay of Bengal and Southeast Asia.
    • They are also found in coastal areas in South and Southeast Asia, and in three rivers: the Ayeyarwady (Myanmar), the Mahakam (Indonesian Borneo) and the Mekong.
    • The total population of these aquatic mammals in the world is estimated to be less than 7,500.
    • Of these, more than 6,000 Irrawaddy dolphins have been reported from Bangladesh, while the dolphin distribution in Chilika is considered to be the highest single lagoon population.

  • K-4 Missile

    India successfully test-fired the 3,500-km range submarine-launched ballistic missile, K-4. The test was carried out by the DRDO from a submerged pontoon off the Visakhapatnam coast around noon.

    K-4

    • K-4 is a nuclear-capable Intermediate-range submarine-launched ballistic missile developed and tested successfully in the month of January 2020 by DRDO.
    • The missile has a maximum range of about 3500 km.
    • Once inducted, these missiles will be the mainstay of the Arihant class of indigenous ballistic missile nuclear submarines (SSBN).
    • It will give India the standoff capability to launch nuclear weapons submerged in Indian waters.

    What’s so special about K-4?

    : Circular Error Probability

    • India’s Circular Error Probability (CEP) is much more sophisticated than Chinese missiles.
    • The CEP determines the accuracy of a missile.
    • The lower the CEP, the more accurate the missile is.
    • There are very few countries which have managed to achieve this technological breakthrough.

    About INS Arihant

    • The Advanced Technology Project (ATV) began in the 1980s and the first of them, Arihant, was launched in 2009.
    • INS Arihant, the first and only operational SSBN is armed with K-15 Sagarika missiles with a range of 750 km.
    • Given India’s position of ‘No-First-Use’ (NFU) in launching nuclear weapons, the SSBN is the most dependable platform for a second-strike.
    • Because they are powered by nuclear reactors, these submarines can stay underwater indefinitely without the adversary detecting it.
    • The other two platforms — land based and air launched are far easier to detect.

  • [op-ed of the day] Business possibilities in a world of digital payments

    Context

    UPI has brought digital payments to the common man and it has immense scope for growth.

    Zero MDR rate

    • Recently the finance minister made the announcement of the zero merchant discount rate (MDR) policy for payments through RuPay debit cards and Unified Payments Interface (UPI) instruments.
    • What does it mean? This policy dictates that when a consumer pays a merchant using RuPay or UPI, the bank may not charge the merchant a commission on the sale value that it usually charges a merchant.
    • Criticism of the move: Critics of this policy lament that it would begin to reverse the progress India has made in recent years to expand the digital payments network.

    Some facts and figures

    • Setting up of NPCI: In 2008 the National Payments Corporation of India (NPCI) was set up as an umbrella organization for operating retail payments and settlements in India. 
    • UPI:  In 2016, NPCI introduced UPI.
      • UPI has since registered 100 million users.
      • UPI now clocks more than 1 billion transactions every month.
    • Growth prospects for mobile payments: According to the NITI Aayog, mobile payments in India are expected to grow nearly 20-fold to $190 billion in the next three years.
    • Digital payment for the common man: There are 1 billion mobile phone users in India.
    • 420 million users have a feature phone, these users can use the *99# USSD service to dial into 13 different languages.
    • Which would connect them to UPI and brings digital payments to the common man.

    Need for innovation

    • We are far behind: India is far behind china, where 55% of spending is done digitally, compared to only 11% in India.
      • The outlook for future growth is mind-boggling.
      • There is a need for innovation at three levels.
    • First level-Adoption
      • A better understanding of human behaviour, technology, use cases and dis-use cases will facilitate the 10x growth necessary in adoption rates to cover the entire population.
    • Second level-Policy
      • The government has the rare opportunity to develop a data-centric understanding of how the economy conducts itself and uses money, and can set taxes accordingly.
    • Third level-Technology
      • Voice for authentication: At the technology level, there is an opportunity to use voice as a means for authentication and conduct transactions across multiple local languages.
      • Data analysis: Copious amounts of data from payment transactions can be analysed to understand user needs and develop personalized loans and financial solutions at scale.

    Taking UPI to Global Level

    • UPI in Singapore and UAE: The NCPI is gearing up to take UPI to other countries, beginning with Singapore and the United Arab Emirates.
      • NCPI is working with its counterpart in Singapore, the Network for Electronic Transfers for Singapore, to bring UPI live in Singapore.
    • The low hanging fruit is to provide payment solutions to Indians travelling abroad.
    • Competition with global peers: The bigger and tougher game is to increase its usage among local people in countries outside India.
      • This would put UPI in competition with the likes of PayPal and Skrill.

    Conclusion

    We have seen just the tip, albeit a very substantial tip, of the digital payments iceberg. In the coming years, young business leaders of today must learn to uncover the iceberg itself.

     

     

     

     

  • [op-ed snap] When the FRDI Bill Returns

    Context

    The amendments to the FRDI Bill, 2017—now renamed the Financial Sector Development and Regulation (Resolution) Bill, 2019—are being worked out.

    Three crucial issues

    • Specifics are being worked out in the bill on three crucial issues.
      • First issue: The first issue is regarding the increase in the deposit insurance cover of customers.
      • Second issue: To iron out the contentious issues related to the bail-in clause
      • Third issue: To decide whether this resolution framework should apply to the public sector banks.
    • Advantages of the move: At a time when the public sector banks have come under the stress of bad loans, increasing the deposit insurance coverage limit would be a welcome approach.
      • Increasing the depositor’s confidence: The move will reinforce depositors’ confidence in the banking system in general, and the public sector banks in particular.

    The issue of the government “ownership” of the banks and financial stability

    • Ownership of government: The role of the “ownership” of banks towards financial stability is a much-debated issue in the country.
      • RBI is positive about govt. ownership: The Reserve Bank of India (RBI) has attributed a positive role to the government ownership of banks in attaining financial stability.
      • The issue of competitive neutrality: Committee to Draft Code on the Resolution of Financial Firms has blamed govt. ownership for causing a “lack of competitive neutrality” in the financial sector.
      • Need of level playing field: Committee argued for the need of a “level playing field” for both the public and private sector financial firms for the sake of competitive neutrality.
      • The concept of an overarching resolution framework for all financial firms gained traction.

    Would the all-encompassing Resolution Corporation be efficacious?

    • The FRDI Bill, 2017 sought to amend as many as 20 legislations for the diverse financial sector in this country, which is regulated by various institutions, like-
      • RBI for the banks and the non-banking financial corporations.
      • Insurance Regulatory and Development Authority (IRDA) for the insurance markets,
      • Securities and Exchange Board of India (SEBI) for securities markets and mutual funds.
      • The Pension Fund Regulatory and Development Authority for pension funds.
    • The pertinent question
      • The pertinent question is whether an all-encompassing resolution corporation can be really efficacious for the much-discussed financial stability of this country.

     

    Fundamental issues

    • Neutrality of ownership
      • Different motives behind operations: While private financial institutions are predominantly governed by profit motives, for the public sector agencies, various social obligations, such as “financial inclusion,” assume primacy.
      • Reason for commoner’s confidence: It is the sense of the government’s involvement (or ownership) that has forged commoners’ confidence to park their financial savings with them.
      • The move may end up destabilising the financial sector: If the sovereign guarantee and resolving power are taken away from the government domain to some resolution corporation, it may destabilise the financial system.
    • The Bail-in clause
      • Deposit over 1 lakh included in bail-in mechanism: The FRDI Bill 2017 suggests that deposit amounts over and above the cover limit (which currently is at one lakh) will be included in the bail-in mechanism.
      • Further, despite the RBI’s caution against financial instability, short-term debts and uncategorised client assets are also currently under this mechanism.
      • The falling growth rate of deposits: These provisions and the bill per se came against the backdrop of the Financial Stability Report, 2017 that revealed a 3.3% drop in the year-on-year growth rate of deposits for all scheduled banks in the country.

    Conclusion

    In the context of decelerating financial stability, the government needs to undertake these resolution reforms with caution that the reforms do not end-up eroding depositors’ faith in the domestic financial institutions.

     

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  • National E-Mobility Mission Plan 2020

     

    The Supreme Court has sought the response of the government on a petition that alleges the non-implementation of the National E-Mobility Mission Plan, 2020 (NEMMP), which came out in 2012.

    National Electric Mobility Mission Plan (NEMMP) 2020

    • The plan was launched by the Government of India in 2013 with the objective of achieving national fuel security by promoting electric and hybrid vehicles.
    • It had set a target of achieving a sale of seven million EVs by 2020 and thereby aimed to cut total carbon dioxide emissions by three per cent from the ‘do nothing’ scenario.
    • The government would provide fiscal and monetary incentives for this industry.
    • The plan had made several recommendations for the adoption of electric vehicles (EVs), including electric-powered government fleets and public transportation and subsidies for those who opt for EVs.

    What was the petition about?

    • The petition contended that the governmental apathy has violated the fundamental rights of citizens to health and clean environment guaranteed under Articles 14 and 21 of the Constitution.
    • The government had failed in its obligation to mitigate the impact of climate change and air pollution partly attributable to emissions from vehicles that burn fossil fuels.
    • Government’s failure to suitably implement these recommendations is the direct cause of air pollution levels that have turned our cities into virtual ‘gas chambers’.