From UPSC perspective, the following things are important :
Prelims level: MPC
Mains level: Paper 3- Impact of covid and the role of government and the central bank
“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.
From UPSC perspective, the following things are important :
Prelims level: Marginal propensity to consume
Mains level: Paper 3- Income level and demand problem
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.
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Digital India and role of Google
Context
Google has recently announced a decision to invest $10 billion in India.
To put that sum in context, it is over 10 times the money set aside for 100 smart cities and almost 20 times that for Digital India.
Purpose of that investment is stated to be digitising India.
Digital realities of India Google must consider:
1) Contradictions
India recognises the internet as a human right, and yet, has led the world in internet shutdowns.
Its internet speeds can be slow and variable, but its uptake of smartphones is the world’s fastest.
It is second only to China in internet users, app downloads and social media users.
2) Lack of access to internet
Only 21 per cent of women are mobile internet users, while the percentage for men is twice that number.
There are many societal factors that make it difficult for women and girls to enjoy full digital freedoms.
In rural India, where two-thirds of the country lives, just about a quarter of the population has internet access.
Differences in digital access mean differences in the quality of education.
The gaps are both digital and societal.
3) Lack of access to banks
India’s workforce is mostly informal.
Only 22 per cent of recipients of migrant remittances have access to banks within one km, according to a report by the Centre for Digital Financial Inclusion.
A push from Google and its competitors could make payments and financial access more inclusive.
4) Need for special products for India
you mention new products for India’s unique needs, of which there are many.
Consider the needs in the agricultural sector alone.
Impac of predictive data analytics and basic artificial intelligence into Indian agriculture using readily available technologies would be huge.
Precision farming to improve the timing and quantity of seeding, irrigation and fertiliser usage.
Helping farmers get credit at lower costs and helping predict commodity prices can create $33 billion in new value annually in Indian agriculture.
5) Lack of data governance and issues with it
Nandan Nilekani has said, India will be data rich before it is “economically rich”.
With 650 million internet users, there is a lot of data richness already.
But this data richness exists without a forward-looking and inclusive data governance policy.
The experience with Aarogya Setu, provided a perfect case study on the discomfort within India because of the absence of such governance.
6) Prevalence of misinformation
It is essential to get a handle on the “infodemic” problem in India.
The situation was made far worse by the pandemic, where many of the prejudices, fears have converged.
Google-owned YouTube is a critical medium for spreading information, fact and fiction.
To its credit, YouTube removed over 8,20,000 videos in India in the first quarter of 2020.
This is a great start, but the bad guys will only find ways around it and Google must make deeper investments in both human and machine intelligence to stay ahead.
7) Geopolitical context
India is inching closer to the US corner in the tech Cold War between the US and China.
India-China relationship has cooled this year as a fallout from the political tensions between New Delhi and Beijing.
India acted against Chinese ByteDance-owned video streaming app TikTok, along with 59 mobile apps.
Google’s role will be important as a bargaining chip against China and the partnership with Jio.
This important role may help Google get some domestic leverage with Indian regulators.
8) Job creation
Digital technologies can create jobs.
For this to happen India must streamline the regulations to enhancing the country’s digital and physical foundations.
There is also need for developing more progressive data accessibility laws.
To translate into productive work, the government must invest in skill-building and education at all levels.
Consider the question “Digitising India could accelerate its progress toward development but there are certain factors which must be addressed before India could reap benefits of digitising. Examine such factors and suggest the ways to deal with the issues in digitising the country.”
Conclusion
There is a lot Google can take while working on the task of digitising India. But the above-mentioned factors will help Google chart out its journey well.
| Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: Electric vehicles regulation in India
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:
The main advantage of the use of H-CNG is the elimination of carbon monoxide emissions.
H-CNG as fuel reduces carbon dioxide and hydrocarbon emissions.
Hydrogen up to one-fifth by volume can be blended with CNG as fuel for buses.
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.
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: Urban floods in India
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.
From UPSC perspective, the following things are important :
Prelims level: MHG, CoMP, Corona
Mains level: Study of solar atmosphere
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.
From UPSC perspective, the following things are important :
Prelims level: Handloom, Swadeshi Movement
Mains level: India's handloom sector
Yesterday, August 7th was celebrated as the National Handloom Day. It was in 2015, the first National Handloom Day was celebrated.
Try this PYQ:
What was the immediate cause for the launch of the Swadeshi movement? (CSP 2010)
(a) The partition of Bengal done by Lord Curzon.
(b) A sentence of 18 months rigorous imprisonment imposed on Lokmanya Tilak.
(c) The arrest and deportation of Lala Lajpat Rai and Ajit Singh; and passing of the Punjab Colonization Bill.
(d) Death sentence pronounced on the Chapekar brothers.
Why 7th August?
With the partition of Bengal, the Swadeshi Movement gained strength.
It was on August 7, 1905, that a formal proclamation was made at the Calcutta Town Hall to boycott foreign goods and rely on Indian-made products.
What is handloom?
While different definitions for the word have evolved since the Handloom (Reservation and Articles for Production) Act, 1985, where ‘handloom’ meant “any loom other than power loom”, in recent years it has become more elaborate.
In 2012, a new definition was proposed: “Handloom means any loom other than power loom, and includes any hybrid loom on which at least one process of weaving requires manual intervention or human energy for production.”
Back2Basics: Swadeshi Movement
Credit to starting the Swadeshi movement goes to Baba Ram Singh Kuka of the Sikh Namdhari sect, whose revolutionary movements which heightened around 1871 and 1872.
It gained momentum with the partition of Bengal by the Viceroy of India, Lord Curzon in 1905 and continued up to 1911.
It was the most successful of the pre-Gandhian movements.
Its chief architects were Aurobindo Ghosh, Lokmanya Bal Gangadhar Tilak, Bipin Chandra Pal and Lala Lajpat Rai, V. O. Chidambaram Pillai, Babu Genu.
Swadeshi, as a strategy, was a key focus of Mahatma Gandhi, who described it as the soul of Swaraj (self-rule). It was strongest in Bengal and was also called the Vandemataram movement in India.
Important phases of the Movement
1850 to 1904: developed by leaders like Dadabhai Naoroji, Gokhale, Ranade, Tilak, G. V. Joshi and Bhaswat K. Nigoni. This was also known as the First Swadeshi Movement.
1905 to 1917: Began in 1905, because of the partition of Bengal ordered by Lord Curzon.
From UPSC perspective, the following things are important :
Prelims level: Kavkaz 2020
Mains level: NA
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.
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.
From UPSC perspective, the following things are important :
Prelims level: Kisan Rail
Mains level: Doubling farmers income by 2022
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.
