November 2019
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Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

[oped of the day] The myths around free trade agreementsop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Trade openness ratio

Mains level : RCEP and FTAs - effectiveness


Context

India decided not to join the Regional Comprehensive Economic Partnership (RCEP). This decision can be seen in the lens of experiences countries have had with free trade agreements (FTAs).

Impact on exports

    • Some have argued that by not signing the RCEP, Indian exporters would miss on exporting to RCEP countries. 
    • FTAs – India has FTAs with the ASEAN, Japan, South Korea. Three-fourths of the bilateral trade already happens zero duty.
    • PTA – India also has a small preferential trade agreement with China.
    • FTA not enough – The mere signing of an FTA does not guarantee an increase in exports. If import duty in the partner country is high, there is a likelihood of an increase in exports by 10% when this duty becomes zero. But the chances of exports increasing are low if the import duty of the partner country is low at 1-3%. 
    • Zero duties – FTAs are of no use for exporting to Singapore, Hong Kong as regular import duties are zero.
    • Few products benefit – FTAs with Malaysia, Japan, Australia, New Zealand, Brunei, etc. benefit few product groups only as more than 60% of imports into these countries happen at zero duty for all countries.
    • Even zero duty no guarantee – even the high import duties coming down to zero through the FTAs do not guarantee exports. Japan reduced duty from 10% to zero for Indian apparels through an FTA in 2011. But India’s apparel exports to Japan have nosedived from $255 million in 2010 to $152 million in 2018.
    • Non Tariff Barriers –non-tariff barriers to trade (NTBs) such as special sourcing requirements are generally not negotiated in FTAs. Countries have to resolve these bilaterally.

Investment flow

    • Many argue that a lower import duty regime help in getting significant investments.
    • A case – Australia, in 1987, produced 89% of the cars it used. It protected the car industry through a high 45% import duty. But the share of locally produced vehicles came down as the duties were reduced.
    • Today, Australia imports nearly all cars as tariffs came further down to a 5% level. Most manufacturers such as Nissan, Ford, General Motors, Toyota, Mitsubishi, etc. which produced cars in Australia shut shop.
    • Higher duties – investment – India could attract significant investments in the car sector on account of high import duties. This resulted in the development of an indigenous car and auto component industry. 
    • India can think of lowering import duties to promote competition.
    • Other reasons for investments – Most investments are a result of the package, such as tax cuts, cheap land, power, etc. offered by the host country.
    • Need for an import wall – If a country is not the most efficient economy, some level of an import wall helps in getting external investments. Without an import wall, many firms may shift production to the more efficient FTA partner countries for exporting back to the home market.
    • Need for efficiency – the quality of investments increases as a country moves towards becoming a more efficient economy. Such countries are in an ideal position to become a manufacturing and services hub.

Entry into Global Value Chains(GVCs)

    • Reforms – A country cannot become a significant part of such value chains unless it has efficient ports, customs, shipping, roads, and regulatory compliance infrastructure.
    • Standards – GVC production also requires harmonization of product and quality standards.
    • GVCs will be disrupted if a shipment is delayed or is of non-standard quality. 
    • ASEAN, Japan, and Korea constitute the core of the Asian regional value chain. Despite FTAs with these countries, India has a weak presence in the electronics, machinery or apparel value chains.

Indian industry protectionism

    • Cheaper imports may replace products from domestic industries.
    • If the duty on a product is low, say, at 3%, the local industry may not care much about the duty elimination through any FTA.
    • Countries that have reached this stage are comfortable doing FTAs with fewer worries.
    • Trade openness – India ranks higher than the U.S., Japan, and China in the trade openness ratio. The ratio is the sum of all imports and exports as % of GDP — India (43) is more open than the United States (27), Japan (35), and China (38).

Steps to have an effect

    • The FTAs can ensure market access to only the right quality products at competitive prices. 
    • Competitiveness – Improvement in firm-level competitiveness is a must. 
    • Duties – The government can lower duties on raw materials and intermediates than on the concerned finished products.
    • Standards –  It can set up an elaborate quality and standards infrastructure for essential products.

Back2Basics

Trade openness ratio

The ratio is the sum of all imports and exports as % of GDP

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

[op-ed snap] A state must honor its past commitmentsop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Ease of Doing Business - Enforcing contracts

Mains level : Contract enforcement for investments


Context

Andhra Pradesh government’s review of the power purchase agreements for renewable energy projects has revived the debate on the sanctity of contracts in India. 

Reason for the move in AP

    • It is pointed out that the deals struck by the previous government have burdened the state’s power distribution companies with high payment obligations.
    • The unit costs of producing electricity from solar and wind farms have declined sharply. 

Impact of the move

    • Climate change – This goes against India’s commitment to renewable energy against climate change.
    • International impact – the money for these projects came in from several global financial capitals.
    • Fiscal – domestic banks are questioning the strength of their guarantees. 

Upholding contracts

    • India’s record in upholding contracts is mixed. Their sanctity is largely intact. 
    • Limited enforcement – Multilateral agencies and foreign governments have flagged their patchy efforts to enforce them. 
    • Reopening deals – There have been occasions when deals have been reopened by successor governments. These have caused considerable economic losses for the states concerned. 
    • Examples – Enron power project in Maharashtra and the Tata Nano car project in West Bengal became rallying points to win elections.

Industry

    • Clusters – Since India started opening up its economy to foreign capital, several industrial clusters offered stable policy regimes to multinational companies.
    • Stability – Some of these regimes are in states where governments have changed frequently without previous deals being disturbed. 
    • Disputes – Disputed taxes, like those imposed on Vodafone, Cairn, and Nokia were taken to international arbitration tribunals.
    • RCEP – India has turned its back on the trans-Asian trade bloc that would have plugged it into global manufacturing value chains.
    • Negative signals – This signals that India is becoming inward-looking. 

Conclusion

The country can do without a spate of international arbitration over renegotiated power purchase agreements. India needs to be seen globally as a country where governments honor their word.

 


Back2Basics

On the Ease of Doing Business Index(rank 63rd), India lags in enforcing contracts (163rd).

North-East India – Security and Developmental Issues

[op-ed snap] Senselessop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NRC

Mains level : NRC across India


Context

The proposal for a nationwide National Register of Citizens (NRC) is worrisome on several counts. The government would also re-introduce the Citizenship Amendment Bill (CAB) that envisages the grant of Indian citizenship to all refugees from minority communities in Bangladesh, Pakistan, and Afghanistan.

Drawbacks of the idea

    • Experience – the inability to learn from the experience of carrying out the humongous exercise in Assam. 
    • CAB – religion – the Bill denies a benefit to Muslim minorities from other neighboring countries, including Myanmar where Rohingya Muslims face persecution. 
    • Assam again – Home Minister announced that the NRC process would be conducted in Assam again with the rest of the country. 
    • Assam hanging – There is still no clarity on what the 19 lakh plus people outside the NRC could do. They are potentially stateless and at risk of “deportation”.
    • Bangladesh – Bangladesh refuses to acknowledge them.

NRC for the whole country

    • If there is a lesson from Assam, it is that there is no right way of going through a process such as the NRC.
    • Fear for minorities – there are genuine fears that a nationwide NRC will target Muslims. 
    • Administrative details – of how such an exercise will be carried out are not yet known.
    • Cutoff date – In the case of Assam, there was a cut-off date after which all foreigners as per the Assam Accord were to be expelled. The Centre may come out with a cut-off for the nationwide NRC.

Conclusion

Given the dangers that lurk within such exercises, the government could abandon the nationwide NRC-CAB combination. Indians can certainly be spared this pain.


Back2Basics

[Burning Issue] Assam NRC

Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

Explained: Why is it necessary to fix a minimum wage?Priority 1

Note4Students

From UPSC perspective, the following things are important :

Prelims level : The Code on Wages, 2019

Mains level : Minimum Wages


The Ministry of Labour and Employment on November 1 published the draft rules for implementing the provisions and sought comments from stakeholders until Dec 1.

The Code on Wages, 2019

  • The code seeks to regulate wages and bonuses for all workers employed by any industry, trade, business or manufacturer.
  • The Code replaces four laws — the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.
  • Following the consultation, the Centre will notify the rules that will create the mechanisms to fix a floor wage that would then undergird the minimum wages for different categories of workers — unskilled, semi-skilled, skilled and highly skilled — that the States and Central government would have to set and enforce.

Why need minimum wages?

  • Minimum wages are accepted globally to be a vital means to both combating poverty and, equally crucially, ensuring the vibrancy of any economy.
  • In the aftermath of the 2008 global financial crisis, the purchasing power worldwide got eroded.
  • Thus the regular adjustment of wages, in consultation with the social partners is a means of reducing inequality, increasing demand and contributing to economic stability.

Why is the Code significant?

  • The Code acknowledges that the aim in setting the floor wage is to ensure “minimum living standards” for workers and the draft rules incorporate criteria declared in a landmark judgment of the Supreme Court in 1992.
  • These include:
  1. Net calorific needs for a working class family (defined as the earning worker, spouse and two children or the equivalent of three adult consumption units) set at 2,700 calories per day per consumption unit,
  2. Annual clothing requirements at 66 metres per family,
  3. House rent expenses assumed at 10% of food and clothing expenditure, as well as expenses on children’s education, medical needs, recreation and contingencies.
  • The rules, similarly, cover almost the entire gamut of wage-related norms including the number of hours of work that would constitute a normal working day time interval for revision of dearness allowance, night shifts and overtime and criteria for making deductions.
  • A separate chapter of the draft rules also deals with the payment of bonus while another lays down the guidelines for the formation of the Central Advisory Board as well as its functioning.

How will it impact the economy?

  • A lot will depend on the final floor wage or wages (there could be different floor wages for different geographical areas) that the Centre will choose.
  • The Labour Ministry had in February this year recommended that a “need based national minimum wage for India” ought to be fixed at ₹375 per day (₹9,750 per month).
  • Additionally, the committee had mooted payment of a city compensatory allowance averaging up to ₹55 per day for urban workers.
  • Earlier, in 2015, the Seventh Central Pay Commission had recommended setting the minimum pay for government employees at ₹18,000 per month.
  • Such a statutory national minimum wage would have multiple impacts including helping lift wage levels and reducing wage inequality, thus furthering inclusive growth, according to the survey.
  • For India to reap the much-touted ‘demographic dividend’, robust wage expansion would ultimately be essential to help buoy consumption-led economic growth.

Way forward

  • Trade unions have voiced their reservations with multiple aspects of the Code and plan to submit detailed feedback.
  • The points of contention include the nine-hour working day definition, a lack of clarity in the rules on scope for upgradation of workers’ skill category and the lack of representation for trade unions in the wage fixation committee.
  • The ultimate success of the Code will be determined by the extent to which the minimum wage set is both fair and actually implemented so as to benefit the millions of workers in the unorganised sectors of the economy.
Climate Change Impact on India and World – International Reports, Key Observations, etc.

Eco-anxietyPriority 1

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Eco-anxiety

Mains level : Environmentalism: Prospects and Challenges



Context

This newscard is inspired by an article published in The Hindu.

Eco-anxiety

  • Eco-anxiety is anxiety about ecological disasters and threats to the natural environment such as pollution and climate change.
  • Variations to the definition exist such as the broader description explaining it as the “worry or agitation caused by concerns about the present and future state of the environment.”
  • It is the helplessness that makes us see ourselves as just one insignificant entity on the planet, unable to reverse the crisis.
  • It is also the sense that no matter how hard we work, nothing will ever be enough.
  • We know the deteriorating climate is affecting our health or our child’s but you do not know how you can stop it.

A new global epidemic

  • Swedish schoolgirl Greta Thunberg, who started the school strike for climate, warned to be extremely concerned about the matter: “…I don’t want you to be hopeful, I want you to panic.
  • When she was younger, she fell into a depression and she has claimed that this was because of her worries about climate change.
AYUSH – Indian Medicine System

[pib] National Institute of Sowa Rigpa (NISR)PIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Sowa Rigpa

Mains level : AYUSH


The Union Cabinet has approved the establishment of the National Institute for Sowa-Rigpa in Leh.

Sowa-Rigpa

  • “Sowa-Rigpa” commonly known as Tibetan system of medicine is one of the oldest, Living and well documented medical tradition of the world.
  • It has been originated from Tibet and popularly practised in India, Nepal, Bhutan, Mongolia and Russia.
  • In India, this system is widely practised in Sikkim, Arunachal Pradesh, Darjeeling (West Bengal), Dharamsala, Lahaul and Spiti(Himachal Pradesh) and Ladakh region of Jammu & Kashmir.

Similarities with Ayurveda

  • The majority of theory and practice of Sowa-Rigpa is similar to “Ayurveda” .
  • The first Ayurvedic influence came to Tibet during 3rd century AD but it became popular only after 7th centuries with the approach of Buddhism to Tibet.
  • Thereafter this trend of exportation of Indian medical literature, along with Buddhism and other Indian art and sciences were continued till early 19th century.

Major books

  • rGyud-bZhi (four tantra) the fundamental text book of this medicine was composed by Yuthog Yonten Gonpo who is believed to be the father of Sowa Rigpa.
  • The book is based on indigenous medicine of Tibet enriched with Ayurveda, Chinese and Greek Medicine.

About the Institute

  • The setting up of the National Institute of Sowa-Rigpa would provide an impetus for the revival of Sowa-Rigpa in the Indian Sub-continent.
  • The Institute will also provide opportunities for students of Sowa-Rigpa not only in India but also from other countries.
  • The Institute will be an autonomous National Institute under Ministry of AYUSH with the mandate to undertake interdisciplinary education and research programmes in Sowa-Rigpa.
  • The National Institute of Sowa Rigpa would identify the best treatment – including their standard procedures-within the framework of traditional principle and possible co-relation with bio-molecular western medicine in providing health care facilities to the general public.
Intellectual Property Rights in India

[pib] Patent Prosecution Highway (PPH) ProgrammePIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Patent Prosecution Highway (PPH) Programme

Mains level : IPR protection in India


The Union Cabinet has approved the proposal for adoption of Patent Prosecution Highway (PPH) programme.

About the PPH

  • The Patent Prosecution Highway (PPH) is a set of initiatives for providing accelerated patent prosecution procedures by sharing information between some patent offices.
  • The programme would be run by the Indian Patent Office (IPO) under the Controller General of Patents, Designs & Trade Marks India (CGPDTM) with patent offices of various other interest countries or regions.
  • It will initially commence between Japan Patent Office (JPO) and Indian Patent Office on pilot basis for a period of three years only.
  • Under this Pilot programme, Indian Patent Office may receive patent applications in certain specified technical fields only, namely, Electrical, Electronics, Computer Science, Information Technology, Physics, Civil, Mechanical, Textiles, Automobiles and Metallurgy etc.
  • The patent offices will frame their own guidelines for implementation of the programme.

Benefits of PPH

  • Reduction in time to dispose patent applications.
  • Reduction in pendency of patent applications.
  • Improvement in quality of search and examination of patent applications.
  • An opportunity for Indian inventors including MSMEs and Start ups of India to get accelerated examination of their patent applications in Japan.
Air Pollution

[pib] Satellites to Assess Pollution StatusPIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Aerosol Optical Depth (AOD)

Mains level : Combating urban air pollution in India


ISRO’s INSAT-3D & 3DR satellites are being used for assessment of air pollution.

Aerosol Optical Depth (AOD)

  • Aerosol Optical Depth (AOD) is a quantitative estimate of the amount of aerosol present in the atmosphere, and it can be used as a proxy for surface Particulate Matter PM2.5 (particles smaller than 2.5 µm median diameter).
  • AOD measures the extinction of a ray of light as it passes through the atmosphere.

How is AOD calculated?

  • Using medium resolution Indian Remote Sensing (IRS) satellite data, stubble burned area maps are generated at the end of stubble burning activity in Kharif season.
  • ISRO has been carrying out monitoring of stubble burning since 2015. The products generated are comparable to the NASA products.
  • The Imager payload on-board ISRO’s INSAT-3D & 3DR satellites are used to monitor Aerosol Optical Depth (AOD).

Significance of AOD

  • It is found that AOD, PM2.5 and PM10 concentrations are higher over Indo-Gangetic Plain covering parts of Delhi, Uttar Pradesh and Bihar during October and November.
  • High concentration of these pollutants is seen originating from parts of Punjab and Haryana during stubble burning.
  • Climatological study of satellite based fire occurrences and associated pollutant parameters reveal that fire occurrences increased by 4% over Punjab and Haryana region during Oct-Nov between 2003 and 2017.
  • The model based analysis suggests that there is a high probability of transportation of smoke aerosols from Punjab & Haryana, towards down-wind regions of Delhi, Uttar Pradesh and Bihar.
Wildlife Conservation Efforts

Species in news: Idris ElbaPrelims Only

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Idris Elba

Mains level : NA



  • In the Marvel Cinematic Universe British actor Idris Elba stars as Heimdall. Now, scientists have given the name Idris elba to a species of wasp that is again a protector — of crops.

Idris Elba

  • The wasp, recently discovered in Mexico, was found living as a parasite in the eggs of another insect, known as the bagrada bug, which is a major pest of cruciferous vegetables.
  • In fact, the genus Idris already exists, having been described in 1856.
  • It now contains over 300 species, including the newest one discovered and given the species name elba.
  • While other species of the Idris genus were known to only parasitise spider eggs, specimens of Idris elba have now been found to emerge from eggs of the bagrada bug.