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  • Thalinomics: the Economics of a plate of food in India

     

    • The Economic Survey 2019-20 states that affordability of vegetarian Thalis improved 29 per cent from 2006-07 to 2019-20 while that for non-vegetarian Thalis by 18 per cent.
    • Affordability of Thalis vis-à-vis a day’s pay of a worker has improved over time, indicating improved welfare of the common person.
    • The Survey says that food is not just an end in itself but also an essential ingredient in the growth human capital and therefore important for national wealth creation.

    The term ‘Thalinomics’

    • The conclusion has been drawn on the basis of “Thalinomics: the Economics of a plate of food in India” – an attempt to quantify what a common person pays for a Thali across India.
    • Price data from the Consumer Price Index for industrial workers for around 80 centers in 25 States and UTs from April 2006 to October 2019 has been used for the study.
    • Using the dietary guidelines for Indians, the price of Thalis is constructed.
    • The Survey states that across India and also the 4 regions- North, South, East and West- it is found that the absolute prices of a vegetarian Thali have decreased significantly since 2015-16 though the price has increased in 2019.
    • This is owing to the sharp downward trend in the prices of vegetables and dal in contrast to the previous trend of increasing prices.
    • As a result, an average household of 5 individuals that eats two vegetarian Thalis a day, gained around Rupees 10887, on average per year, while a non-vegetarian household gained Rupees 11787, on average per year.

    Shift in Thali dynamics

    • The Survey states that 2015-16 can be considered as a year when there was a shift in the dynamics of Thali prices.
    • Many reform measures were introduced since 2014-15 to enhance the productivity of the agricultural sector as well as efficiency and effectiveness of agricultural markets for better and more transparent price discovery.

  • Strategy for boosting Wealth Creation

    • 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.

    Levers for furthering Wealth Creation

    The Survey identifies several levers for furthering Wealth Creation, which are:

    • entrepreneurship at the grassroots as reflected in new firm creation in India’s districts;
    • promote ‘pro-business’ policies that unleash the power of competitive markets to generate wealth as against ‘pro-crony’ policies that may favour incumbent private interests;
    • eliminate policies that undermine markets through government intervention, even where it is not necessary;
    • integrate ‘Assemble in India’ into ‘Make in India’ to focus on labour intensive exports and thereby create jobs at a large scale;
    • efficiently scale up the banking sector to be proportionate to the size of the Indian economy and track the health of the shadow banking sector;
    • use privatization to foster efficiency. The Survey provides careful evidence that India’s GDP growth estimates can be trusted.

    Is this push for wealth creators new?

    • This is an extension of what PM said during his Independence Day speech in August last year, where he stressed on the need for the country to view “wealth creators” differently.
    • Those who create wealth for the country, those who contribute in the country’s wealth creation — they all are serving the nation as well.
    • We should not look at wealth creators with apprehension and doubt their intentions; we should not look down upon them.
    • The PM had also said there was a need in the country to give such wealth creators due respect and credit.
    • He had said that this change is required because “If no wealth is created, no wealth can be distributed”.

    Focus on Ethical Wealth Creation

    • The Survey emphasised on the importance of ‘Ethical Wealth Creation’, as the key to making India $5 trillion economy 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’.

  • Integrating “Assemble in India” into Make in India

    Giving a new dimension to ‘Make in India’, the Economic Survey 2019-20 suggested that the government should integrate ‘Assemble in India for the world’ into ‘Make in India’ to boost exports and generate jobs.

    Assemble in India

    • Survey says India has unprecedented opportunity to chart a China-like, labour-intensive, export trajectory.
    1. By integrating “Assemble in India for the world” into Make in India, India can:
    2. Raise its export market share to about 3.5 % by 2025 and 6 % by 2030.
    3. Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
    • Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.

    How to harness the situation?

    • The US-China trade war is causing major adjustments in global value chains and firms are scouring alternative locations for operations.
    • Even before the trade war began, China’s image as a low-cost location for final assembly of industrial products was rapidly changing due to labour shortages and increases in wages.
    • These developments present India an unprecedented opportunity to chart a similar export trajectory as that pursued by China and create unparalleled job opportunities for its youth.
    • As no other country can match China in the abundance of its labour, we must grab the space getting vacated in labour-intensive sectors.

    Key suggestions made by the Survey

    Survey suggests a strategy similar to one used by China to grab this opportunity by:

    1. Specialization at large scale in labour-intensive sectors, especially network products.
    2. Laser-like focus on enabling assembling operations at mammoth scale in network products.
    3. Export primarily to markets in rich countries.
    4. Trade policy must be an enabler.

  • Yellow Rust

     

    Yellow Rust was detected in wheat crops in parts of Punjab and Haryana.

    Yellow Rust

    • Yellow Rust disease appears as yellow stripes of powder or dust on leaves and leaf sheaths of the wheat crop. This yellow powder comes out on clothing or fingers when touched.
    • This occurs when the rust colonies in the leaves drain the carbohydrates from the plant and reduce the green leaf area.
    • In India, it is a major disease in the Northern Hill Zone and the North-Western Plain Zone and spreads easily during the onset of cool weather and when wind conditions are favourable.
    • Rain, dew and fog favour the disease’s development.

    Impact of the disease

    • The disease can spread rapidly under congenial conditions and affects crop development, and eventually the yield.
    • Yield due to the disease can affected by between 5 and 30 per cent.
    • According to the IIWBR advisory, if farmers observe yellow rust in patches in their wheat fields, they should spray fungicides.

    Other facts: Pusa Yashasvi

    • Last year, a new variety of wheat called HD-3226 or Pusa Yashasvi was released by the Indian Agricultural Research Institute.
    • It had higher levels of resistance against major rust fungi such as the yellow/stripe, brown/leaf and black/stem.

  • Dividend Distribution Tax (DDT)

     

    Finance Minister announced abolition of DDT to be paid by companies in her budget speech.

    What is DDT?

    • A dividend is a return given by a company to its shareholders out of the profits earned by the company in a particular year.
    • Dividend constitutes income in the hands of the shareholders which ideally should be subject to income tax.
    • However, the income tax laws in India provide for an exemption of the dividend income received from Indian companies by the investors by levying a tax called the DDT on the company paying the dividend.

    Who were required paid DDT?

    • Any domestic company which is declaring/distributing dividend is required to pay DDT at the rate of 15% on the gross amount of dividend as mandated under Section 115O of the Income Tax Act.
    • DDT was also applicable on mutual funds.

    Why it is scrapped?

    • Every MNE investing in India is faced with the question of tax-efficient repatriation of profits that accumulate here.
    • The dividend that the holding company would receive would have already suffered substantial tax in India, although indirectly.
    • The foreign company would normally be required to pay tax on the dividend so received in its home jurisdiction.
    • DDT being a tax in the Indian company and the foreign company not paying taxes directly on such dividend income in India, it would not be able to claim foreign tax credit in its home jurisdiction.
    • This resulted in a double whammy for foreign companies as, at a group level, they suffered double taxation.

  • 1st February 2020 | Prelims Daily with Previous Year Questions

    [WpProQuiz 354]

  • [Burning Issue] Outbreak of Coronavirus

     

    • An outbreak of a new Coronavirus that began in the Chinese city of Wuhan has already killed at least 106 people in China.
    • Infections have been confirmed in many other countries. But of the 4,500 people who have so far contracted the virus, the vast majority live in China.
    • With crumbling health infrastructure due to an overburden of diseases in the country, India’s preparedness for handling epidemics such as novel coronavirus (nCoV) becomes a major challenge.
    • The World Health Organisation has warned that due to human to human transmission, the virus can fast spread in other countries also.

    A world pandemic begins with ignorance

    • Chinese officials underestimated the severity of the outbreak, even downplaying the mode of infection, and this attitude had an important role in the rapid spread of the disease in the country.
    • As India prepares itself against the virus, a similar denial or underplaying of the crisis can have equally serious consequences.

    What is the Novel Coronavirus (nCoV?)

    • Coronaviruses are large family of viruses, which cause illnesses to people and also circulate in animals including camels, cats and bats.
    • They cause illness ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS).
    • 2019-nCoV is a new strain that has not been previously identified in humans.
    • Human to human transmission has been recently confirmed. However the source remains unknown.

    How does it spread?

    • Coronaviruses are zoonotic, meaning they are transmitted between animals and people.  
    • Detailed investigations found that SARS-CoV was transmitted from civet cats to humans and MERS-CoV from dromedary camels to humans.
    • Several known coronaviruses are circulating in animals that have not yet infected humans.

    Signs and symptoms of Coronavirus

    1. Coughing
    2. Fever
    3. Pneumonia
    4. Shortness of breath
    5. Vomiting
    6. Diarrhea
    7. In advanced cases, the patient can have very serious complications, which can lead to death, such as: Sever pneumonia, Renal (Kidney) failure

    Its’ prevention

    • Standard recommendations to prevent infection spread include regular hand washing, covering mouth and nose when coughing and sneezing, thoroughly cooking meat and eggs.
    • Avoid close contact with anyone showing symptoms of respiratory illness such as coughing and sneezing.
    • WHO also advises that people should avoid close contact with anyone showing symptoms of respiratory illness such as coughing and sneezing.

    Why such major outbreaks occur in China only?

    • Several deadly new viruses in recent years have emerged in China — Severe Acute Respiratory Syndrome (SARS), bird flu, and now the novel Coronavirus (nCOV).
    • The reason could lie in the busy food markets dotting cities across the country — where fruits, vegetables, hairy crabs and butchered meat are often sold next to bamboo rats, snakes, turtles, and palm civets.
    • Closely packed stalls in busy marketplaces, the Chinese taste for exotic meats, and the high population density of cities create the conditions for the spread of zoonotic infections.

    Impacts of Coronavirus

    • For starters, when we have a disease outbreak, the government has to spend a lot of money on diagnosing and treating patients.
    • It’s also imperative that it invest in preventive measures i.e. setting up protocols to screen people in high-risk areas, commission studies to understand the virus/epidemic better, coordinate with other countries to contain the outbreak.

    Human cost of the outbreak

    • When the healthcare infrastructure in your country can’t deal with the crisis effectively, mortality rates shoot up.
    • Think, Ebola. Over 11,000 people died in Guinea, Liberia, and Sierra Leone. But that’s not all.
    • Because the response team was so ill-equipped, over 150 health care workers perished in the process.
    • As the WHO notes — “Every single loss of a doctor or nurse diminishes response capacity significantly” And this further aggravates the crisis.

    Skewed production

    • China is now one of the largest producers and consumers of a wide range of commodities, including oil, steel, copper, corn, wheat and soybean.
    • But considering the country is now in lockdown, there isn’t a whole lot of activity going on here.
    • When workers don’t go back to work, you have to leave the smelters and the refineries as is. Productivity suffers, output declines and supply industries are hit hard.
    • Countries dependant on China for commodities also take a hit.

    Impact on Economy

    • When there are such devastating human costs involved, you will see a material impact on the economy almost immediately.
    • These are people who participate in the labour force i.e. people who work, earn and spend.
    • The eventual loss in productivity because of a sudden collapse of the nation’s workforce doesn’t bode well for anybody.
    • All the people desist from visiting public places, the movies, trains etc. The fear of a widespread epidemic can manifest in ways that further erodes confidence in an economy and hurt it in perpetuity.
    • We are talking about cancelled tourist trips, a decline in retail trade and an overall sense of doom and gloom surrounding the country.
    • Past evidence has shown that consumer spending also goes down dramatically when news of an outbreak spreads.

    India steps up vigil

    • Thermal screening is being done at seven designated airports—New Delhi, Kolkata, Mumbai, Chennai, Bengaluru, Hyderabad and Kochi.
    • The government has set up a 24×7 helpline number to attend to queries about the coronavirus as number of cases rose across the world.
    • Anyone seeking information can call on the number 011-23978046,” the Union ministry of health said in a tweet.
    • Indian authorities are prepared to evacuate citizens from Hubei Province, China.

    India’s limits

    • India’s ability to contain an epidemic is far less than that of China.
    • Its scientific infrastructure is less advanced and extensive, its ability to quarantine a large number of people non-existent, its hospitals ill-equipped to treat large armies of sick people.
    • The only advantage is the knowledge of the Chinese experience, which India can use to limit the spread of the disease.
    • If this is true, there may be a large number of infected people spread widely in the Chinese population, and it makes controlling the epidemic far more difficult.
    • India’s scientific expertise, despite its depth in pockets, is not broad enough to respond quickly in such situations.
    • As the director of the National Institute of Virology said recently, India needs 20 times as many virologists as it has at the moment.
    • For a country of 1.3 billion people, India has too few scientists and healthcare professionals to deal with such emergencies.

    Is India prepared to face this havoc?

    • Current health infrastructure in India paints a dismal picture of healthcare delivery system in the country. Health Infrastructure has been described as the basic support for the delivery of public health activities.
    • Public health experts believe that India is ill-equipped to handle such emergencies. It is not prepared to tackle health epidemics, particularly given its urban congestion.
    • In fact given the city structure and the way the settlements have grown epidemics once occurs will spread at a galloping rate.
    • The slum clusters all around the cities and the unhygienic growth, poor waste disposal system will only aggravate the situation.

    Way Forward

    • The aerial spread of the newly detected coronavirus poses a threat of rapid dissemination but it can still be contained with an efficient response which combines effective public health, microbiological, clinical and communication responses.
    • While our laboratory network has improved after the H1N1 scare, much needs to be done to improve the community facing primary health services and risk communication to the public.
    • In general, hospital services can quickly gear up to treat severe cases in urban areas but rural healthcare needs a step up.
    • Kerala’s success in responding swiftly and smartly to the Nipah outbreak should be a role model to other states.
    • Effective risk communication to the general public needs to be circulated to prevent panic and provide advice on precautionary measures.
    • Central and state health agencies must act in tandem. The media too must helping in increasing awareness without triggering panic.

    Conclusion

    • Capacity to contain a virus outbreak depends on the ability to identify cases and contacts in the community on clinical criteria while ensuring smart surveillance on inward travellers; isolate and identify the causative virus; treat severe cases while counselling mild cases.
    • India’s healthcare system is too small for such a large population.
    • Dealing with pandemics would require a multi-pronged approach, ranging from mathematical analysis to the ability to rapidly develop drugs and vaccines.

     

    References

    https://www.civilsdaily.com/news/pib-novel-corona-virus-ncov/

    https://www.civilsdaily.com/news/why-china-has-emerged-as-the-epicentre-of-global-outbreaks-of-disease/

    https://www.business-standard.com/article/current-affairs/limited-expertise-may-hurt-india-s-ability-to-contain-coronavirus-outbreak-120012800181_1.html

    https://www.livemint.com/news/india/is-india-equipped-to-handle-health-epidemics-like-coronavirus-11580199650282.html

  • [op ed of the day] Stay with stimulus

    Context

    The stimulus needs to continue and the reforms will help to keep the economy going. If gross savings and investment rates keep on falling it is difficult to revive the economy.

    What was expected in the last budget?

    • Increase in pubic investment: The first thing, it said, was to increase public investment and not play statistical or token announcement games.
    • The upswing in manufacturing growth, from negative to slightly less than 3 per cent (not industrial growth, because that includes mining and electricity), needed consolidation.
    • Real outlays in infra did not go up: Real outlays on the infrastructure needed to go up, but they did not.
      • So the push to private demand and a virtuous cycle of growth was missed.
      • The implicit numbers in the Budget math comprise growth of around 7 per cent, assuming a 5 per cent inflation rate.

    Prospects of the Agri-sector

    • A good sign in Agri in midterm: For agriculture, in the medium-term, we are alright. Kharif grain production was 6.4 per cent higher than the previous five-year average output.
      • Kharif oilseeds output around eleven lakh tonnes above the earlier year.
      • This was, however, based on a delayed monsoon which caused problems and anxieties in the second quarter of this year.
    • Nightmare of government unloading grain in the market: Foodgrains are doing well and we have huge food stocks.
      • But, instead of a blessing, the government turned public operations in grain into a nightmare by announcing that FCI will unload grain at a reserve price less than MSP.
      • Rabi acreage recovered and is now 8 per cent more than last year, but the policy of government operations to reduce the market price of grain by its intervention is a nightmare.
    • This is bound to affect input growth in the expanded acreage in the winter crops.

    Wrong policy in Agriculture

    • Terms of trade against agriculture: The terms of trade are going against agriculture, according to CACP (Commission for Agricultural Costs & Prices) estimates, and selling of the grain will make it worse.
    • While the fundamentals are alright, to wallop the farmer with a “cut in the reserve price” would harm the farmers.
    • The rabi report of CACP will say that the terms of trade have gone down more.

    Conclusion

    The Government should continue with the stimulus and opt for the reforms in the economy only to keep the economy going. If the gross savings and investment rates keep falling it would be difficult to revive the economy. If savings keep up, the government will have actual space to divert some real resources to infrastructure investment.

     

     

     

     

  • [op-ed snap] Optimal delivery or mere optics in Bodo peace deal?

    Context

    It is to be seen if the pact will lead to true autonomy, true peace, and true development.

    What the pact involved?

    • Which groups signed the deal?
      • Four factions of the National Democratic Front of Bodoland (NDFB), along with an influential Bodo students’ organization and a Bodo civilian pressure group, signed the peace agreement with the central and Assam governments.
    • What are the major concessions given?
      • The Bodoland Territorial Area Districts, the name given to Kokrajhar, Baksa, Chirang and Udalguri, the four contiguous districts bordering Bhutan and Arunachal Pradesh, will now be known as Bodoland Territorial Region.
      • Acknowledgement of Bodo homeland: The changed nuance from districts to the region is significant as it acknowledges a Bodo homeland within the state of Assam, without separating from Assam.
      • Why this acknowledgement matters: This is dialled down from earlier rebel demands for a breakaway state and later suggestions for Union territory status.
    • What is the significance of the change from district to the region?
      • Satisfying identity aspiration: The renaming is designed to satisfy the identity and aspirations of the Bodo people.
      • Not ceding territory solved tricky matter: Renaming also solved the politically tricky matter of ceding territory for the government of Assam.
      • Ceding territory would also have fuelled similar demands from the other parts of the state like- Karbi Anglong, Dima Hasao and Cachar, which also have homelands of non-Ahom ethnicities.
      • Avoiding similar demand from other states: Indeed, it could have affected the ongoing Naga peace process, leading Naga rebels to demand territorial and administrative autonomy in Naga homelands in Manipur.

    Scope of the success of the pact

    • Inherent vulnerability: There is already an inherent vulnerability to the Bodo peace deal even without the overhang of ceding territory.
      • This is rooted in the birth of the Bodo rebellion, which began in the 1980s on account of administrative and development apathy of the state of Assam.
    • Feeling of subsuming in Bodo: A feeling that Bodo, the people, the language, the identity, was subsumed by the Assamese and migrants.
    • The relation between NDFB and the Front: The Bodoland People’s Front, is in majority in the District council. Will the front be comfortable with newly peaceable colleagues of NDFB?

    Conclusion

    The Government of Assam needs to ensure that the pact signed changes the situation on the ground and leads to a development on the ground. The state also needs to allay the fears in the Bengali-speaking minority. Moreover, true autonomy, true peace, and true development are always worth more than the paper on which they are promised.

  • [op-ed snap] Cybersecurity a critical challenge for India’s digital payments ecosys

    Context

    Digital payments in India are witnessing consistent growth at a compound annual growth rate (CAGR) of 12.7%.

    Growth potential and challenges involved in digital payments

    • Expected growth in mobile wallet payment: The mobile wallet market is expected to continuously grow at a CAGR of 52.2% by volume between 2019-23, according to a recent report by KPMG.
      • This digital explosion can be seen in the accelerating rise in the download and use of electronic wallets as well as an unprecedented increase in digital transactions/payments.
      • UPI/IMPS use growth: Payment systems such as UPI/IMPS are likely to register average annualised growth of over 100%, according to RBI’s 2021 vision document.
    • Challenge of Cybersecurity: Cybersecurity is one of the most critical challenges faced by stakeholders of the digital payment ecosystem.
      • Types of risks involved: With more and more users preferring digital payments, the chances of getting exposed to cybersecurity risks such as-
      • Online fraud
      • Information theft.
      • Malware or virus attacks are also increasing.
      • Digital payment frauds account for about half of all bank frauds in India.

    Steps taken by the RBI

    • Guidelines issued: In view of risks, the Reserve Bank of India (RBI) has also issued some guidelines as security and risk mitigation measures for digital payments.
      • It has also issued guidelines that limit the liability of customers on unauthorised electronic banking transactions
    • Steps taken: The central bank has taken steps for securing card transactions, internet banking, electronic payments, ATM transactions, and prepaid payment instruments (PPIs).

    Securing the fintech revolution

    • Fraudsters building advanced technologies: The changing nature of cybersecurity attacks such as-
      • Web application attack.
      • Ransomware.
      • Reconnaissance.
      • The DDoS attack clearly establishes cyber-risk as a new reality.
    • What needs to be done to secure the fintech revolution?
      • A robust regulatory framework.
      • An effective customer redressal framework.
      • Foolproof security measures to enable confidence and trust.
      • Incentives for larger participation and benefits similar to cash transactions- are some measures that can help ensure long-term success for digital payments.
    • Leveraging technology: Technology can be leveraged for making popular methods of cashless payments secure.
      • Biometric authentication-enabled cards can provide a greater layer of security by enabling replacement of the traditional PIN.
      • Through biometric authentication, consumers can authenticate transactions by placing their finger on a fingerprint sensor embedded in the card.
      • Ensuring security: Safety is ensured as the consumer’s fingerprint is stored only in the secure chip within the card and the same chip is used to match the scanned fingerprint with the stored one.
      • The biggest advantage: The biggest advantage is that the bank or merchant cannot access the consumer’s biometric data, which also counters potential privacy concerns.

    Conclusion

    To reap the advantages of the promising fintech revolution steps must be taken to secure the digital environment.

     

     

     

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