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  • [Prelims Spotlight] Important Groupings Related to India

    Prelims Spotlight is a part of “Nikaalo Prelims 2020” module. This open crash course for Prelims 2020 has a private telegram group where PDFs and DDS (Daily Doubt Sessions) are being held. Please click here to register.

    Important Groupings Related to India

    05 May 2020

    Trans-Pacific Partnership

    • The Trans-Pacific Partnership (TPP), or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), is a trade agreement between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (until 23 January 2017) and Vietnam
    • The TPP began as an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei Darussalam, Chile, New Zealand, and Singapore in 2005
    • The TPP contains measures to lower both non-tariff and tariff barriers to trade and establish an investor-state dispute settlement (ISDS) mechanism
    • The agreement will enter into force after ratification by all signatories if this occurs within two years
    • APEC members may accede to the TPP, as may any other jurisdiction to which existing TPP members agree. After an application for membership is received, a commission of parties to the treaty negotiates conditions for accession.

    BRICS

    • BRICS is the acronym coined for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa.
    • Originally the first four were grouped as “BRIC” (or “the BRICs”), before the induction of South Africa in 2010.
    • The BRICS members are known for their significant influence on regional affairs; all are members of G20.
    • Since 2009, the BRICS nations have met annually at formal summits. China hosted the 9th BRICS summit in Xiamen on September 2017, while Brazil hosted the most recent 11th BRICS summit on 13-14 November 2019.

    New Development Bank and the Fortaleza Declaration

    • During the sixth BRICS Summit in Fortaleza (2014), the leaders signed the Agreement establishing the New Development Bank (NDB).
    • In the Fortaleza Declaration, the leaders stressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to collective commitments for achieving the goal of strong, sustainable and balanced growth.
    • The bank was established in July 2015 by the BRICS countries (Brazil, Russia, India, China and South Africa).
    • The aim of the bank is to mobilize funding for infrastructure and sustainable development.
    • Its ownership structure is unique, as the BRICS countries each have an equal share and no country has any veto power.
    • In this sense, the bank is a physical expression of the desire of emerging markets to play a bigger role in global governance.
    • NDB was created to help fill the funding gap in the BRICS economies and was intended to grow its global scope over time.
    • The bank, with its subscribed capital base of US$50bn, is now poised to become a meaningful additional source of long-term finance for infrastructure in its member countries.

    Regional Comprehensive Economic Partnership (RCEP)

    • The Regional Comprehensive Economic Partnership (RCEP) is a trade deal that was being negotiated between 16 countries.
    • They include the 10 ASEAN members and the six countries with which the bloc has free trade agreements (FTAs) — India, Australia, China, Korea, Japan, and New Zealand.
    • The purpose of the deal is to create an “integrated market” spanning all 16 countries.
    • This means that it would be easier for the products and services of each of these countries to be available across the entire region.

    RCEP – India

    • It comprises half of the world population and accounts for nearly 40% of the global commerce and 35% of the GDP. RCEP would have become the world’s largest FTA after finalisation, with India being the third-biggest economy in it.
    • Without India, the RCEP does not look as attractive as it had seemed during negotiations.
    • Divided ASEAN – ASEAN has been keen on a diversified portfolio so that member states can deal with major powers and maintain their strategic autonomy. ASEAN member states have tried to keep the U.S. engaged in the region.
    • Act East policy has been well received. With China’s rise in the region, ASEAN member states have been keen on Indian involvement in the region.
    • Indo-Pacific – India’s entire Indo-Pacific strategy might be open to question if steps are not taken to restore India’s profile in the region.
    • Rejected China’s dominance – India signalled that, despite the costs, China’s rise has to be tackled both politically and economically.

    Shanghai Cooperation Organisation (SCO)

    • After the collapse of the Soviet Union in 1991, the then security and economic architecture in the Eurasian region dissolved and new structures had to come up.
    • The original Shanghai Five were China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan.
    • The SCO was formed in 2001, with Uzbekistan included. It expanded in 2017 to include India and Pakistan.
    • Since its formation, the SCO has focused on regional non-traditional security, with counter-terrorism as a priority:
    • The fight against the “three evils” of terrorism, separatism and extremism has become its mantra.
    • Today, areas of cooperation include themes such as economics and culture.

    India’s entry to the SCO

    • India and Pakistan both were observer countries.
    • While Central Asian countries and China were not in favour of expansion initially, the main supporter — of India’s entry in particular — was Russia.
    • A widely held view is that Russia’s growing unease about an increasingly powerful China prompted it to push for its expansion.
    • From 2009 onwards, Russia officially supported India’s ambition to join the SCO. China then asked for its all-weather friend Pakistan’s entry.

    The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)

    • The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) is a regional organization comprising seven Member States lying in the littoral and adjacent areas of the Bay of Bengal constituting a contiguous regional unity. This sub-regional organization came into being on 6 June 1997 through the Bangkok Declaration.
    • The regional group constitutes a bridge between South and South-East Asia and represents a reinforcement of relations among these countries.
    • BIMSTEC has also established a platform for intra-regional cooperation between SAARC and ASEAN members.  The BIMSTEC region is home to around 1.5 billion people which constitute around 22% of the global population with a combined gross domestic product (GDP) of 2.7 trillion economies. In the last five years, BIMSTEC Member States have been able to sustain an average 6.5% economic growth trajectory despite a global financial meltdown.

    SAARC & SAARC Countries

    • The South Asian Association for Regional Cooperation (SAARC) is a regional intergovernmental organization and geopolitical union in South Asia.  Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka.  SAARC was founded in Dhaka in 1985.
    • Its secretariat is based in Kathmandu.
    • The organization promotes the development of economic and regional integration.
    • It launched the South Asian Free Trade Area in 2006.
    • SAARC maintains permanent diplomatic relations at the United Nation as an observer and has developed links with multilateral entities.
    • Observers Of SAARC: – States with observer status include Australia, China, the European Union, Iran, Japan, Mauritius Myanmar, South Korea and the United States.

    Association of Southeast Asian Nations (ASEAN)

    • The Association of Southeast Asian Nations is a regional intergovernmental organization comprising ten Southeast Asian countries
    • It promotes Pan-Asianism and intergovernmental cooperation and facilitates economic, political, security, military, educational and socio-cultural integration amongst its members and other Asian countries
    • It members are Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar, and Vietnam
    • ASEAN shares land and maritime borders with India, China
    • ASEAN is an official United Nations Observer.

    The Nuclear Suppliers Group (NSG)

    • The Nuclear Suppliers Group (NSG) is a group of nuclear supplier countries that seeks to contribute to the non-proliferation of nuclear weapons through the implementation of two sets of Guidelines for nuclear exports and nuclear-related exports.
    • One of the critical elements for inclusion into the NSG is that the member countries need to signatories of the NPT, a proposal which India has categorically disagreed.
    • However considering India’s history of nuclear non-proliferation, the US and subsequently the NSG have shown some recognition and granted India with the waiver of dealing with other countries for nuclear technology.

    Recent Developments

    • Present Indian government embarked to pursue the ambitious goal of NSG membership aggressively.
    • The prime minister visited countries like the USA, Netherlands, Mexico, and Portugal to secure support from these countries.
    • US administration under Obama and Donald trump reiterated their support for Indian entry to the NSG. Russia also extended its support.
    • NSG takes a decision based on a consensus of the member countries. So it is important to secure the support of each and every member country.
    • China is against the granting membership. Insisted on a criteria-based approach for the non-NPT (Nuclear Non-Proliferation Treaty) signatory countries.
    • China has also maintained that for non-NPT members some definite criteria should be evolved rather than granting country-specific waivers. At other times, it has stated that Pakistan also has similar credentials to join the NSG; and that if India is admitted; Pakistan should also be admitted simultaneously.
    • Some other countries, including Turkey, Switzerland, Mexico and New Zealand, were among those which have stressed on the criteria-based approach, without opposing India’s application outright.

    Organisation for the Prohibition of Chemical Weapons (OPCW)

    • OPCW is an intergovernmental organization and the implementing body for the Chemical Weapons Convention, which entered into force on 29 April 1997
    • The OPCW, with its 193 member states, has its seat in The Hague, Netherlands, and oversees the global endeavour for the permanent and verifiable elimination of chemical weapons
    • The organization promotes and verifies the adherence to the Chemical Weapons Convention, which prohibits the use of chemical weapons and requires their destruction
    • Verification consists both of evaluation of declarations by member states and onsite inspections
    • The OPCW has the power to say whether chemical weapons were used in an attack it has investigated
    • The organization was awarded the 2013 Nobel Peace Prize “for its extensive efforts to eliminate chemical weapons”

    The Australian Group

    • The Australia Group is a multilateral export control regime (MECR) and an informal group of countries (now joined by the European Commission) established in 1985 (after the use of chemical weapons by Iraq in 1984) to help member countries to identify those exports which need to be controlled so as not to contribute to the spread of chemical and biological weapons
    • The group, initially consisting of 15 members, held its first meeting in Brussels, Belgium, in September 1989. With the incorporation of India on January 19, 2018, it now has 43 members, including Australia, the European Commission, all 28 member states of the European Union, Ukraine, and Argentina
    • The name comes from Australia’s initiative to create the group. Australia manages the secretariat
    • The initial members of the group had different assessments of which chemical precursors should be subject to export control
    • Later adherents initially had no such controls
    • Today, members of the group maintain export controls on a uniform list of 54 compounds, including several that are not prohibited for export under the Chemical Weapons Convention but can be used in the manufacture of chemical weapons
    • In 2002, the group took two important steps to strengthen export control
    • The first was the “no-undercut” requirement, which stated that any member of the group considering making an export to another state that had already been denied an export by any other member of the group must first consult with that member state before approving the export
    • The second was the “catch-all” provision, which requires member states to halt all exports that could be used by importers in chemical or biological weapons programs, regardless of whether the export is on the group’s control lists.
    • Delegations representing the members meet every year in Paris, France
    WTO
    • US, UK and a few other countries set up, an interim organisation about trade named GATT (General Agreement on Tariff and Trade) in 1947
    • GATT was biased in favour of the developed countries and was called informally as the Rich men’s club.
    • So, the developing countries insisted on setting up the International Trade Organisation (ITO)
    • That’s the reason, the United Nations Conference on Trade and Development (UNCTAD) was set up in 1964 as an alternative, on the recommendation of the UN committee
    • Next development comes in Uruguay Round of GATT, it sought to expand the scope of the organisation by including, services, investment and intellectual property rights (IPR)
    • Agreements were ratified by the legislatures of 85 member-countries by year-end 1994.
    • On such rectification, the WTO started functioning from Jan 1, 1995, < Marrakesh Agreement>

    Functions of WTO

    • The WTO deals with regulation of trade in goods, services and intellectual property between participating countries.
    • It provides a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants’ adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.

    G20

    • Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.
    • Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
    • To tackle the problems or the address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
    • In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.
    • The G20 has no permanent staff of its own and its chairmanship rotates annually between nations divided into regional groupings. 

    Aims and objectives

    • The Group was formed with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
    • The forum aims to pre-empt the balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
    • It seeks to address issues that go beyond the responsibilities of any one organisation.

    Member Countries

    The members of the G20 consist of 19 individual countries plus the European Union (EU).

    • The 19 member countries of the forum are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and the United States.
    • The European Union is represented by the European Commission and by the European Central Bank.

     Who are the G20 Sherpas?

    • A Sherpa is the personal representative of a head of state or government who prepares an international summit, particularly the annual G7 and G20 summits.
    • Between the summits, there are multiple Sherpa conferences where possible agreements are laid out.
    • This reduces the amount of time and resources required at the negotiations of the heads of state at the final summit.
    • The Sherpa is generally quite influential, although they do not have the authority to make a final decision about any given agreement.
    • The name is derived from the Sherpa people, a Nepalese ethnic group, who serve as guides and porters in the Himalayas, a reference to the fact that the Sherpa clears the way for a head of state at a major summit.

    G7

    • The G7 or the Group of Seven is a group of the seven most advanced economies as per the International Monetary Fund (IMF).
    • The seven countries are Canada, USA, UK, France, Germany, Japan and Italy. The EU is also represented in the G7.
    • These countries, with the seven largest IMF-described advanced economies in the world, represent 58% of the global net wealth ($317 trillion).
    • The G7 countries also represent more than 46% of the global gross domestic product (GDP) based on nominal values, and more than 32% of the global GDP based on purchasing power parity.
    • The requirements to be a member of the G7 are a high net national wealth and a high HDI (Human Development Index).

     

  • ‘BharatMarket’: An e-commerce platform for retail traders

    Traders’ body Confederation of All India Traders (CAIT) said that it will soon launch a national e-commerce marketplace ‘BharatMarket’ for all retail traders in collaboration with several technology partners.

    A prelims question with tricky options to throw you off track-

    The BharatMarket initiative recently seen in news is-

    A. Trade of Bharat-22 Exchange Traded Fund (ETF)

    B. Platform for farmer to sell their produce

    C. Initiative in power sector

    D. e-commerce platform

    Here you have to play safe…..

    BharatMarket

    • The marketplace will integrate the capabilities of various technology companies to provide end-to-end services in the logistics and supply chains from manufacturers to end consumers, including deliveries at home.
    • It will include nationwide participation by retailers and aims to bring 95 per cent of retail traders onboard the platform, who would exclusively run the portal.
    • It has been already started as a pilot project, initially with a limited number of essential commodities, in six cities — Prayagraj, Gorakhpur, Varanasi, Lucknow, Kanpur and Bengaluru.
    • This will be an effective way to get essential commodities to consumers during the lockdown period and within containment zones.

  • [pib] UV Blaster: A UV Disinfection Tower

    The DRDO has developed an Ultra Violet (UV) Disinfection Tower for rapid and chemical-free disinfection of high infection-prone areas.

    GYAN:

    We have a UV filter in our home based water filter.  Ever wondered, how do UV rays kill viruses/bacteria?

    UV Blaster

    • The UV blaster is a UV based area sanitizer designed and developed by Laser Science & Technology Centre (LASTEC), the Delhi based premier laboratory of DRDO.
    • It is useful for high tech surfaces like electronic equipment, computers and other gadgets in laboratories and offices that are not suitable for disinfection with chemical methods.
    • The product is also effective for areas with a large flow of people such as airports, shopping malls, metros, hotels, factories, offices, etc.

    How does it work?

    • The UV based area sanitizer may be used by remote operation through laptop/mobile phone using wifi link.
    • The equipment has six lamps each with 43 watts of UV-C power at 254 nm wavelength for 360-degree illumination.
    • For a room of about 12 x 12 feet dimension, the disinfection time is about 10 minutes and 30 minutes for 400 square feet area by positioning the equipment at different places within the room.
    • This sanitizer switches off on the accidental opening of a room or human intervention.

    Back2Basics: UV germicidal irradiation

    • UV irradiation is a disinfection method that uses short-wavelength ultraviolet rays to kill or inactivate microorganisms by destroying nucleic acids and disrupting their DNA, leaving them unable to perform vital cellular functions.
    • UVGI is used in a variety of applications, such as food, air, and water purification.
    • UVGI devices can produce strong enough UVC light in circulating air or water systems to make them inhospitable environments to microorganisms such as bacteria, viruses, moulds, and other pathogens.
    • UVGI can be coupled with a filtration system to sanitize air and water.
    • It has been used primarily in medical sanitation and sterile work facilities.
    • Increasingly, it has been employed to sterilize drinking and wastewater since the holding facilities are enclosed and can be circulated to ensure a higher exposure to the UV.

  • Foreign Policy Watch: United Nations

  • BRICS’ fight against COVID

    “BRICS” is an acronym coined by Jim O’Neill in 2001. In the start of the 21st century, BRICS seemed like the future economic powerhouse. Somehow this picture faded a little with time. This article shows the resilience and potential demonstrated by BRICS in times of Covid-19. It throws light on the latest initiatives of BRICS like New Development Bank. Finally what lies in the future for BRICS?

    The “I” in BRICS

    • India has reinforced its reputation as a rapidly emerging pharmacy of the world.

    • As the world’s largest producer of hydroxychloroquine, India has exported the drug to many countries like Russia, Brazil, Israel, U.S,  SAARC and Gulf nations.

    • Pharma-alliance: The above developments have set the stage for India to forge an inclusive BRICS-driven pharma alliance, which could also actively explore the production of vaccines.

    The “C” in BRICS

    • Despite allegations, China has responded strongly in containing the pandemic, leveraging its position as the workshop of the world.

    • China, using it’s manufacturing capabilities, responded to the disease by providing the “hardware” — masks, gloves, coveralls, shoe covers and testing kits — to hotspots across the globe.

    • Under its Health Silk Road doctrine, the Chinese are reaching out to two of the worst global hotspots, Italy and Iran.

    • China has also rolled out a medical air bridge for Europe.

    The “R” in BRICS

    • Despite fighting the virus at home, Russia too has sent its doctors and virologists overseas including an air mission to Italy.

    • At the request of U.S. President Donald Trump, Russia offered help in the form of medical experts and supplies.

    The “S” in BRICS

    • South Africa, the current rotating head of the African Union, is engaged in framing a pan-African response to COVID-19.

    The “B” in BRICS

    • Only Brazil’s response may need a course correction.

    • In Brazil’s case resistance to breaking the infection chains through travel bans, lockdowns, isolation and testing appear to have led to an infection surge.

    Where does the NDB’s model fit in this picture?

    • The New Development Bank of the BRICS has already demonstrated the way forward to allocate financial resources to combat COVID-19.

    • In April, NDB announced that it is going to disburse a $1 billion emergency loan to China, and subsequently to India, South Africa and Brazil.

    • The NDB had the financial heft to provide $10 billion in “crisis-related assistance” to BRICS member countries.

    The next step for BRICS –  COORDINATION

    • BRICS has demonstrated their comparative strengths as providers of Humanitarian Assistance and Disaster Relief (HADR).

    • BRICS countries now need to pool and coordinate their efforts, in partnership with the WHO, and Europe and North America, as part of a global assault on the virus.

    • BRICS countries also need to earmark resources and assets to combat a whole range of natural disasters, with special focus on the emerging economies and the global south.

    • The NDB’s financial model demonstrated to address the pandemic, can now become a template to address natural disasters.

    Bodies like BRICS have remained the favourite child of UPSC. Be it questions in prelims or mains. A question based on the regional grouping could be asked by the UPSC, for ex- “BRICS nations have proved to be more than merely an economic grouping. In light of the above statement, discuss the Humanitarian Assistance and Disaster Relief (HADR) potential of the BRICS countries.”

    Conclusion

    BRICS in future can leverage the coordination among them to work on finding the vaccine and also build on the experience gathered from the pandemic to form a disaster response policy in the future.

    Back2Basics: BRICS

    • BRICS is the acronym coined for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa.
    • Originally the first four were grouped as “BRIC” (or “the BRICs”), before the induction of South Africa in 2010.
    • The BRICS members are known for their significant influence on regional affairs; all are members of G20.
    • Since 2009, the BRICS nations have met annually at formal summits. China hosted the 9th BRICS summit in Xiamen on September 2017, while Brazil hosted the most recent 11th BRICS summit on 13-14 November 2019.

    New Development Bank and the Fortaleza Declaration

    • During the sixth BRICS Summit in Fortaleza (2014), the leaders signed the Agreement establishing the New Development Bank (NDB).
    • In the Fortaleza Declaration, the leaders stressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to collective commitments for achieving the goal of strong, sustainable and balanced growth.
    • The bank was established in July 2015 by the BRICS countries (Brazil, Russia, India, China and South Africa).
    • The aim of the bank is to mobilize funding for infrastructure and sustainable development.
    • Its ownership structure is unique, as the BRICS countries each have an equal share and no country has any veto power.
    • In this sense, the bank is a physical expression of the desire of emerging markets to play a bigger role in global governance.
    • NDB was created to help fill the funding gap in the BRICS economies and was intended to grow its global scope over time.
    • The bank, with its subscribed capital base of US$50bn, is now poised to become a meaningful additional source of long-term finance for infrastructure in its member countries.

  • 04 May2020 | Nikaalo Prelims Quiz – Economy Test 3: Budget 2020/IYB/Eco Survey

    [WpProQuiz 430]

  • From informal to the formal economy: The crooked road

    The article discusses the issues around the informal workforce in the economy. What are the factors responsible for the high informal sector in India? How is this sector responding in times of COVID? Are there some easy solutions to mainstream the informal sector into our formal economy? These are some of the points one should ponder upon while reading this article.

    The vulnerability of the informal workforce

    • Developing countries such as India are economically vulnerable to Covid-19 because of the presence of huge informal workforce.

    • Lack of protection: This vast informal workforce, which has no labour, social or health protection, is woefully ill-equipped to cope with the medical and economic shocks of the virus.

    The humongous size of the informal economy in India

    • Share of the informal sector: As per Periodic Labour Force Survey, 2017-18, 90.6 per cent of India’s workforce was informally employed.

    • This estimate includes those who are employed in informal enterprises (unincorporated small or unregistered enterprises).

    • It also includes informal workers in the formal sector (workers in the formal sector who are not provided any social security benefits by employers).

    • Take another example: Between 2004-05 and 2017-18, a period when India witnessed rapid economic growth, the share of the informal workforce witnessed only a marginal decline from 93.2 per cent to 90.6 per cent. 

    • Covid effect: Looking ahead, it is likely that informal employment will increase as workers who lose formal jobs during the COVID crisis try to find or create work (by resorting to self-employment) in the informal economy.

    • Also, formal enterprises are likely to continue hiring informal workers as they seek more flexibility and attempt to cut labour costs to cope with the COVID-19 induced economic uncertainty.

    Why is the informal more favourable over the formal?

    • The basic reason: necessity to eke out a subsistence living in the absence of alternative employment opportunities.

    • The ‘not so basic’ reasons: Some self-employed persons choose to be in the informal economy voluntarily to avoid registration or taxation.

    • Many are deterred by the costs of formalisation or don’t see much benefit from formalisation.

    • Finally, the phenomenon of informalisation of wage employment in the formal sector is a consequence of formal firms trying to avoid payroll taxes and employer’s contributions to social security or pensions to reduce labour costs.

    Some solution to smoothen the crooked road

    • A multi-pronged and comprehensive approach is needed to facilitate the transition.

    • Labour intensive growth: It requires creating more formal jobs through labour-intensive growth so that informal workers can move to these jobs.

    • Registering and taxing informal enterprises: The Indian experience of compelling informal firms to register and become tax compliant through demonetisation and introduction of GST formalised them only in a legal sense.

    • There is a need for increasing productivity of informal enterprises and incomes of the informal workforce by providing them with technical and business skills, infrastructure services, financial services, enterprise support and training to better compete in the markets.

    • Promoting the path to entrepreneurship in the informal economy.

    • Many informal enterprises would welcome efforts to reduce barriers to registration and related transaction costs as they expect to reap the benefits of formalising.

    • Reducing decent work deficit: This requires protecting informal workers by providing them a social protection floor, ensuring a set of basic working conditions (adequate living wages, limits on hours of work and safe and healthy workplaces).

    A direct question based on the issue of the informal sector can be asked by the UPSC, for ex- “There is a humongous presence of the informal sector in the Indian economy. What are the factors responsible for this? Suggest ways to transform the informal sector into the formal sector.”

    Conclusion

    Questions around the role of government and who bears the onus of protecting workers deserve careful consideration in the backdrop of the rising incidence of informal employment in the formal sector and the growth of the gig economy. It is apparent that in our relentless pursuit of economic growth, we have ignored the voices of India’s informal sector for too long.

    Back2Basics: What is the informal economy?

    • An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government.
    • Although the informal sector makes up a significant portion of the economies in developing countries, it is sometimes stigmatized as troublesome and unmanageable.
    • However, the informal sector provides critical economic opportunities for the poor.

  • Globalisation 2.0 after Covid-19

    The article discusses the future of the Globalisation after Covid-19. Globalisation 2.0 which has been dominated by China will see several changes in the post-pandemic world. Investment decisions and Global Value Chains would undergo a paradigm shift. The article is concluded by expressing the hope that pandemic doesn’t end  Globalisation 2.0 but it will certainly usher in the new rules of capitalism.

    Globalisation 2.0 and issues with the flow of labour

    • What is Globalisation 2.0? In strictly economic terms, globalisation is about the free movement of capital, goods and labour across national borders.
    • Globalisation 2.0 began in the early 1980s and has lasted for four decades.
    • Under the 2.0 phenomenon, the labour flows were never as free as the movements of capital and goods.
    • This is because one does not necessarily see who produced the goods or capital coming into the borders.
    • But migrants are distinguishable, one can directly observe how ethnically, racially, religiously different they are from the mainstream.

    Rise of right-wing politics in the US and UK due to labour flows

    • Labour flows is a major reason for triggering right-wing politics of nativism in present times.
    • Donald Trump directed his political campaign against non-white immigrants, especially Hispanics and Muslims.
    • He criticised businessmen who, in search of lower costs, had made China the destination of their accumulated investments, transferring jobs away from America’s industrial heartland.
    • Thus, his policies to levy higher tariffs to curtail freer trade. These policies made sure that the American corporations bring capital back to the US.
    • In Europe, a similar politics has been led by the UK, though less vociferously.

    How China has benefited from Globalisation 2.0?

    • In 1980, China was the 48th largest economy in the world: with GDPs at roughly $200 billion, Indian and Chinese economies were similar in size.
    • In 2018, China, with a GDP of $13.6 trillion, was the second-largest economy in the world, behind the US ($20.5 trillion). But far ahead of Japan ($4.9 trillion), Germany ($4.0 trillion), Britain ($2.8 trillion), France ($2.8 trillion) and India ($2.7 trillion).
    • Not only in terms of GDP, but China had also become the largest trading nation in the world by 2018:
    • Exports: worth $2.5 trillion, substantially ahead of the US ($1.6 trillion).
    • FDI in China: In 2018, China attracted over $203 billion worth of net FDI, much more than India ($42 billion), and second only to the US ($258 billion).

    Is COVID-19 a sign of ending Globalisation 2.0?

    • Despite the pure economic logic of how easy it is to manufacture at scale in China, the global leader today are more concerned about the political overtones.
    • Given all the doubts about how China handled the information about the origins of the virus in Wuhan, anger against China in world capitals is evident.
    • Such anger can have impact on the rules of globalisation.
    • Strict regulation of labour laws: We can expect labour flows will now be more strictly regulated than before.
    • Political risks in investment decisions: Western investors will also have to factor in political risks in their investment decision-making.
    • National security concern: New concerns like what if China threatens supply disruptions for critical materials.
    • Instead of chasing lower labour costs, investors will either bring capital back to domestic shores or geographically restructure their supply chains.
    • To summarize it, Globalisation will not end, but it will be pushed into greater retreat. Thus, changing the rules of the BIG game of capitalism.

    A question based on the impact of the pandemic on the global trade, issues associated with and opportunities for India could be asked in the Mains Paper 3.

    Also the Idea of Globalisation is important from the aspect of paper 1 and Essay. “Globalisation’ vs ‘Nationalism’ was one of the topic in Essay paper in 2009.

    Conclusion

    For the foreseeable future, economic efficiency, the cornerstone of market-based systems, will not be high on priority. Politics will drive new economic policies, not market-based rationality.

  • 80% IAS 2021 Aspirants struggle with time table. Talk to us, OK?

    80% IAS 2021 Aspirants struggle with time table. Talk to us, OK?

    Click to fill the form: Samanvaya for IAS 2021

    5 minutes, or 10 minutes, no more than that. That’s all the time we will need to get to know each other before we start talking about your IAS Preparation strategies.

    Last week we chatted with about 850+ aspirants via our Samanvaya outreach – 65% were full-time aspirants and 35% were preparing for it along with their job. Here’s what we chatted about:

    1. Working Junta? If you are preparing for IAS 2021 and working simultaneously, we can help you design a timetable that fits right in your hectic schedule.
    2. First-time prep? If you are in last year of college or thinking of dropping a year and preparing for IAS 2021 full time, we can help you pick the right books and craft a practical & personal strategy

    You just have to take 5 minutes out and fill this form: Samanvaya For IAS 2021

    Once done, we will call you within 24 hours or so.

    What happens when you fill this form? How does a call help you?

    1. Identifying your weaknesses

    Over 80% of students who claimed to have revised NCERTs twice were unable to answer basic questions. Many were not comfortable with at least 1 GS subject and Optional. Many struggled with ‘What went wrong’ after 2-3 years of hard work. Our mentors will provide free preliminary assignments so we can assess your preparedness and suggest accurate strategies.

    2. Strategy and study plan discussions

    Over 90% of students couldn’t stick to a plan. Study plans and strategies are iterative in nature and we want to help you with that. Many are unable to perform in tests despite preparing hard. This could be due to a variety of factors – lack of adequate prep, jitters in the exam hall, inadequate revision, lack of practice of test series or just a bad day at work. Tell us what you think went wrong and we’ll figure out a way to get you over the line next time.

    3. Helping you understand the exam better – which books to read, different approaches, etc. Over 60% of students we talked to did not find NCERTs relevant and saw no point in being thorough with them.

    4. Lack of motivation

    We have all had those days when it’s been hard to motivate ourselves to hit the books and just study. It happens to the best of us sometimes and for some of us, it happens more frequently. And it is understandable, Civil Service preparation is a long and often lonely process. Every aspirant, from toppers to those who have quit have been overwhelmed by this process at some point in time. Working alone is monotonous and helps you keep motivated by ensuring you are actively and passively studying every day. Focused telegram groups to foster discussions.

    Click to fill the form: Samanvaya for IAS 2021

  • [Prelims Spotlight] Important Keywords in Budget and Eco Survey

    Prelims Spotlight is a part of “Nikaalo Prelims 2020” module. This open crash course for Prelims 2020 has a private telegram group where PDFs and DDS (Daily Doubt Sessions) are being held. Please click here to register.

    Important Keywords in Budget and Eco Survey

    04 May 2020

    The Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament today. The Key Highlights of the Survey are as follows:

    Wealth Creation: The Invisible Hand Supported by the Hand of Trust

    • The big idea from the Economic Survey 2019-20 is the need to push towards increasing the number of wealth creators in the Indian economy.
    • The Survey states that to achieve the goal of becoming a $5-trillion economy, the invisible hand of markets will need the support of “the hand of trust”.

    Wealth Creation

    • Essentially, this means that regulation and rules in the economy should be such that they make it easy to do business but not turn into crony capitalism.
    • The Survey states: “The invisible hand needs to be strengthened by promoting pro-business policies to:
    1. Provide equal opportunities for new entrants, enable fair competition and ease doing business,
    2. Eliminate policies that unnecessarily undermine markets through government intervention,
    3. Enable trade for job creation, and
    4. Efficiently scale-up the banking sector to be proportionate to the size of the Indian economy.”

    How can this be done?

    • The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”.
    • In other words, it states that policies must empower transparency and effective enforcement using data and technology to enhance this public good.
    • A key element here is the need to increase the opportunities for new entrants.
    • “Equal opportunity for new entrants is important because… a 10 per cent increase in new firms in a district yields a 1.8 per cent increase in Gross Domestic District Product (GDDP)”.
    • According to the Survey, the right policy mix can boost job creation

    Focus on Ethical Wealth Creation

    • The Survey emphasised on the importance of ‘Ethical Wealth Creation’, as the key to making India $5 trillion economies by 2025.
    • Krishnamurthy V. Subramanian, the Chief Economic Adviser of Ministry of Finance has done a commendable job in producing a thought-provoking masterpiece on ‘ethical wealth creation’.

    Pro-business versus Pro-markets Strategy

    • Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on:
    1. Promoting a ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth.
    2. Weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.
    • Pro-crony policies such as discretionary allocation of natural resources till 2011 led to rent-seeking by beneficiaries while the competitive allocation of the same post-2014 ended such rent extraction.

    Strengthening the invisible hand by promoting pro-business policies to:

    1. Provide equal opportunities for new entrants.
    2. Enable fair competition and ease doing business.
    3. Eliminate policies unnecessarily undermining markets through government intervention.
    4. Enable trade for job creation.
    5. Efficiently scale-up the banking sector.
    • Introducing the idea of trust as a public good, which gets enhanced with greater use.
    • The survey suggests that policies must empower transparency and effective enforcement using data and technology.

    Entrepreneurship at the Grassroots

    • Entrepreneurship as a strategy to fuel productivity growth and wealth creation.
    • India ranks third in a number of new firms created, as per the World Bank.
    • New firm creation in India increased dramatically since 2014:
    1. 2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014.
    2. About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in 2014.
    • The survey examines the content and drivers of entrepreneurial activity at the bottom of the administrative pyramid – over 500 districts in India.
    • New firm creation in services is significantly higher than that in manufacturing, infrastructure or agriculture.
    • Survey notes that grassroots entrepreneurship is not just driven by necessity.
    • A 10 percent increase in registration of new firms in a district yields a 1.8 % increase in Gross Domestic District Product (GDDP).

    Impact of education on entrepreneurship

    • Literacy and education in a district foster local entrepreneurship significantly:
    1. The impact is most pronounced when literacy is above 70 per cent.
    2. New firm formation is the lowest in eastern India with the lowest literacy rate (59.6 % as per 2011 Census).
    • Physical infrastructure quality in the district influences new firm creation significantly.
    • Ease of Doing Business and flexible labour regulation enable new firm creation, especially in the manufacturing sector.
    • Survey suggests enhancing ease of doing business and implementing flexible labour laws can create maximum jobs in districts and thereby in the states.

    Divestment in public sector undertakings

    • The Survey has aggressively pitched for divestment in PSUs by proposing a separate corporate entity wherein the government’s stake can be transferred and divested over a period of time.
    • The survey analysed the data of 11 PSUs that had been divested from 1999-2000 and 2003-04 and compared the data with their peers in the same industry.
    • Further, the survey has said privatized entities have performed better than their peers in terms of net worth, profit, return on equity and sales, among others.
    • The government can transfer its stake in listed CPSEs to a separate corporate entity.
    • This entity would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over a period of time.
    • This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs.

    Golden jubilee of bank nationalization: Taking stock

    • The survey observes 2019 as the golden jubilee year of bank nationalization
    • Accomplishments of lakhs of Public Sector Banks (PSBs) employees cherished and an objective assessment of PSBs suggested by the Survey.
    • Since 1969, India’s banking sector has not developed proportionately to the growth in the size of the economy.
    • India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.
    • A large economy needs an efficient banking sector to support its growth.

    The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking:

    1. PSBs are inefficient compared to their peer groups on every performance parameter.
    2. In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while in NPBs it led to the gain of 9.6 paise.
    3. Credit growth in PSBs has been much lower than NPBs for the last several years.

    Solutions to make PSBs more efficient:

    • Employee Stock Ownership Plan (ESOP) for PSBs’ employees
    • Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
    • Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.

    Doubts regarding GDP Growth

    • GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the recent debate about the accuracy of India’s GDP estimation following the revised estimation methodology in 2011 is extremely significant.
    • As countries differ in several observed and unobserved ways, cross-country comparisons have to be undertaken by separating the effect of other confounding factors and isolating effect of methodology revision alone on GDP growth estimates.
    • Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.

    Fiscal Developments

    • Revenue Receipts registered a higher growth during the first eight months of 2019-20, compared to the same period last year, led by considerable growth in Non-Tax revenue.
    • Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).
    • Structural reforms undertaken in taxation during the current financial year:
    • Change in the corporate tax rate.
    • Measures to ease the implementation of GST.
    • Fiscal deficit of states within the targets set out by the FRBM Act.
    • Survey notes that the General Government (Centre plus States) has been on the path of fiscal consolidation.

    External Sector

    Balance of Payments (BoP):

    • India’s BoP position improved from US$ 412.9 bn of forex reserves in end-March, 2019 to US$ 433.7 bn in end September 2019.
    • Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.
    • Foreign reserves stood at US$ 461.2 bn as on 10th January 2020.

    Global trade:

    • India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
    • India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.

    Exports:

    • Top export items: Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals.
    • Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by the United Arab Emirates (UAE), China and Hong Kong.
    • The merchandise exports to GDP ratio declined, entailing a negative impact on BoP position.
    • A slowdown of world output had an impact on reducing the export to GDP ratio, particularly from 2018-19 to H1 of 2019-20.
    • Growth in Non-POL exports dropped significantly from 2009-14 to 2014-19.

    Imports:

    •  Top import items: Crude petroleum, gold, petroleum products, coal, coke & briquettes.
    •  India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.
    •  Merchandise imports to GDP ratio declined for India, entailing a net positive impact on BoP.
    • Large Crude oil imports in the import basket correlates India’s total imports with crude prices. As crude price raises so does the share of crude in total imports, increasing imports to GDP ratio.

    Logistics industry of India:

    • Currently estimated to be around US$ 160 billion.
    • Expected to touch US$ 215 billion by 2020.
    • According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.

    Direct investments and remittances:

    • Net FDI inflows continued to be buoyant in 2019-20 attracting US$ 24.4 bn in the first eight months, higher than the corresponding period of 2018-19.
    • Net FPI in the first eight months of 2019-20 stood at US$ 12.6 bn.
    • Net remittances from Indians employed overseas continued to increase, receiving US$ 38.4 billion in H1 of 2019-20 which is more than 50% of the previous year level.

    External debt:

    • Remains low at 20.1% of GDP as at end September, 2019.
    • After significant decline since 2014-15, India’s external liabilities (debt and equity) to GDP increased at the end of June, 2019 primarily by increase in FDI, portfolio flows and external commercial borrowings (ECBs).

    Monetary Management and Financial Intermediation

    Monetary policy:

    • Remained accommodative in 2019-20.
    • Repo rate was cut by 110 basis points in four consecutive MPC meetings in the financial year due to slower growth and lower inflation.
    • However, it was kept unchanged in the fifth meeting held in December 2019.
    • In 2019-20, liquidity conditions were tight for initial two months; but subsequently it remained comfortable.

    Prices and Inflation

    Inflation Trends:

    • Inflation witnessing moderation since 2014
    • Consumer Price Index (CPI) inflation increased from 3.7 per cent in 2018-19 (April to December, 2018) to 4.1 per cent in 2019-20 (April to December, 2019).
    • WPI inflation fell from 4.7 per cent in 2018-19 (April to December, 2018) to 1.5 per cent during 2019-20 (April to December, 2019).

    Drivers of CPI – Combined (C) inflation:

    • During 2018-19, the major driver was the miscellaneous group
    • During 2019-20 (April-December), food and beverages was the main contributor.
    • Among food and beverages, inflation in vegetables and pulses was particularly high due to low base effect and production side disruptions like untimely rain.

    Cob-web Phenomenon (Cyclical fluctuations in inflation) for Pulses:

    • Farmers base their sowing decisions on prices witnessed in the previous marketing period.
    • Measures to safeguard farmers like procurement under Price Stabilization Fund (PSF), Minimum Support Price (MSP) need to be made more effective.

    The volatility of Prices:

    • The volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14.
    • Lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.

    Essential Commodities Act is outdated

    • The Centre’s imposition of stock limits in a bid to control the soaring prices of onions over the last few months actually increased price volatility, according to the ES.
    • The finding came in a hard-hitting attack in the report against the Essential Commodities Act (ECA) and other “anachronistic legislation” and interventionist government policies, including drug price control, grain procurement and farm loan waivers.
    • The Centre invoked the Act’s provisions to impose stock limits on onions after heavy rains wiped out a quarter of the Kharif crop and led to a sustained spike in prices.
    • However the Survey showed that there was actually an increase in price volatility and a widening wedge between wholesale and retail prices.
    • The lower stock limits must have led the traders and wholesalers to offload most of the kharif crop in October itself which led to a sharp increase in the price volatility.

    Agriculture

    • Agricultural productivity is also constrained by a lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %).
    • With regard to the Agri sector, the Survey argued that the beneficiaries of farm loan waivers consume less, save less, invest less and are less productive.
    • It added that the government procurement of foodgrains led to a burgeoning food subsidy burden and inefficiencies in the markets, arguing for a shift to cash transfers instead.

    Food Management

    • The share of agriculture and allied sectors in the total Gross Value Added (GVA) of the country has been continuously declining on account of relatively higher growth performance of non-agricultural sectors.
    • GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 %.

    Services Sector

    The increasing significance of services sector in the Indian economy:

    1. About 55 % of the total size of the economy and GVA growth.
    2.  Two-thirds of the total FDI inflows into India.
    3. About 38 per cent of total exports.
    4. More than 50 % of GVA in 15 out of the 33 states and UTs.

    Social Infrastructure, Employment and Human Development

    • The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
    • India’s ranking in the Human Development Index improved to 129 in 2018 from 130 in 2017:
    • With 1.34 % average annual HDI growth, India is among the fastest-improving countries
    • Gross Enrolment Ratio at secondary, higher secondary and higher education level needs to be improved.
    • Gender disparity in India’s labour market widened due to a decline in female labour force participation especially in rural areas:
    • Around 60 % of productive age (15-59) group engaged in full-time domestic duties.

    Sustainable Development and Climate Change

    • India moving forward on the path of SDG implementation through well-designed initiatives
    • SDG India Index:
    1. Himachal Pradesh, Kerala, Tamil Nadu, Chandigarh are front runners.
    2. Assam, Bihar and Uttar Pradesh come under the category of Aspirants.
    • India hosted COP-14 to UNCCD which adopted the Delhi Declaration: Investing in Land and Unlocking Opportunities.
    • COP-25 of UNFCCC at Madrid:
    1. India reiterated its commitment to implement the Paris Agreement.
    2. COP-25 decisions include efforts for climate change mitigation, adaptation and means of implementation from developed country parties to developing country parties.

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