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

Jul, 28, 2018

[op-ed snap] Outward flow

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Rising footprint of Indian companies in the global market and its advantages for India


Context

Acquisitions by Indian companies

  1. The last few days have seen two big-ticket overseas acquisition announcements by Indian companies
  2. The first is the Aditya Birla Group-promoted Hindalco’s purchase of American aluminium rolled products maker Aleris Corporation and the Shroff family-controlled UPL Ltd’s buyout of the North Carolina-based agrochemicals major, Arysta LifeScience
  3. With Aleris, Hindalco will become a truly value-added aluminium player, as against just a primary metal supplier
  4. The Arysta deal could, likewise, make UPL the fifth biggest global crop protection chemical company

What does this mean for industries in India?

  1. The above acquisitions are significant from the concerned companies’ standpoint
  2. To the extent the strengthened global footprint from these leads to increased sourcing from their Indian manufacturing facilities, there would be some domestic spinoffs as well
  3. It is good that Indian corporates are emboldened to make big investments

Need of the hour

  1. From an overall Indian perspective, this basically represents outward foreign direct investment
  2. What the country really needs today is more investment within the country, whether by domestic or foreign companies

The situation of Indian Economy

  1. The Indian economy is today at a crossroads
  2. The ghosts of demonetisation and GST have been laid to rest, even as the new indirect tax regime has settled down enough to prompt a rationalisation of rates
  3. The “micros”, as far as debt-equity or interest coverage ratios of corporates go, have also improved for many to consider resuming investments
  4. There are two things that are restraining them now:
  • The first is political uncertainty, which may go up in the run-up to next year’s national elections
  • The second is the not-so-great “macros” — global crude prices, rupee, interest rates and fiscal deficits

Way Forward

  1. Adherence to fiscal discipline is what India really needs
  2. It can make a huge difference to investor perception, more so in an uncertain global environment
Jul, 17, 2018

[op-ed snap] Overdue correction: on revisiting the Companies Act

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Companies Act, 2013

Mains level: Changes required in Companies Act, 2013 in order to improve ease of doing business


Context

Panel to review Companies Act

  1. The Centre has announced the constitution of a committee to revisit several provisions of the Companies Act, 2013
  2. This 10-member committee appointed by the Corporate Affairs Ministry has been tasked with checking if certain offences can be ‘de-criminalised’
  3. This is being done as some of the provisions in the law are so tough that even a spelling mistake or typographical error could be construed as a fraud and lead to harsh strictures

Committee’s mandate

  1. The Uday Kotak panel has been tasked to assess whether some of the violations that can attract imprisonment (such as a clerical failure by directors to make adequate disclosures about their interests) may instead be punished with monetary fines
  2. It will also examine if offences punishable with a fine or imprisonment may be re-categorised as ‘acts’ that attract civil liabilities
  3. The committee has also been asked to suggest the broad contours for an adjudicatory mechanism that allows penalties to be levied for minor violations, perhaps in an automated manner, with minimal discretion available to officials

Mindset behind the changes

  1. The government hopes such changes in the regulatory regime would allow trial courts to devote greater attention to serious offences rather than get overloaded with cases as zealous officials blindly pursue prosecutions for even minor violations
  2. Industry captains had red-flagged the impact of such provisions on the ease of doing business, and investor sentiment in general
  3. The rethink is perhaps triggered by the fact that private sector investment is yet to pick up steam and capital still seeks foreign shores to avoid regulatory risks

Way forward

  1. The 2013 law entailed the first massive overhaul of India’s legal regime to govern businesses that had been in place since 1956 and was borne of a long-drawn consultative process
  2. The decision to build in harsh penalties and prison terms for corporate misdemeanours in the 2013 law was influenced by the high-pitched anti-corruption discourse that prevailed in the country at that moment in time
  3. But a trust deficit between industry and government owing to stray incidents of corporate malfeasance should not inhibit normal business operations
Jun, 28, 2018

[pib] President inaugurates Udyam Sangam-2018

Note4Students

From UPSC perspective, the following things are important:

Prelims level: Udyam Sangam, Sampark Portal

Mains level: Various initiatives for MSME developmemt


News

Udyam Sangam-2018

  1. The President of India inaugurated the Udyam Sangam-2018, being organised by the Ministry of Micro, Small & Medium Enterprises (MSME) to celebrate the 2nd United Nations Micro, Small and Medium-sized Enterprises Day (27th June)
  2. On this occasion, he also launched the Solar Charkha and MSME Sampark Portal.
  3. The Udyam Sangam-2018 is an important effort in developing effective eco-systems for MSME sector.
  4. The Sangam will provide representatives of finance, training and educational institutions, industry, media, state governments and NGOs an opportunity to engage in extensive discussions to strengthen the eco-systems in this sector.

Sampark Portal

  1. ‘Sampark Portal’ is a digital platform to connect five lakh job seekers with recruiters
  2. It will be very useful in developing skill-pool and in enabling trained youth to know about different employment opportunities.

India’s MSME Sector

  1. MSME sector is called the backbone of our economy.
  2. This sector is the second largest employment provider after the agricultural sector.
  3. Our demographic dividend shall be most gainfully utilized in this very sector.
  4. This sector generates more employment opportunities at a lower cost of capital.
  5. And the most important thing about this sector is that it creates jobs in rural and backward areas.
  6. This sector could help in achieving the goal of inclusive growth through empowerment of weaker sections and decentralization of development.
Jun, 09, 2018

PM Rojgar Protsahan Yojana: Government adding 5.5 lakh beneficiaries a month under scheme

Note4students

Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), Employees’ Pension Scheme (EPS), Universal Account Number (UAN)

Mains level: Employment opportunities in the organized & unorganized sector and government interventions for it


News

Positive response from the PMRPY scheme

  1. The government is adding about 5.5 lakh beneficiaries a month under the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY)
  2. In March this year, the Cabinet Committee on Economic Affairs approved enhancing the scope of PMRPY scheme

About the scheme

  1. PMRPY scheme was started to incentivise employers for generation of new employment wherein the Government of India pays the employer’s contribution of Employees’ Pension Scheme (EPS) for the new employment
  2. Under the scheme, the government was paying the employers’ contribution of 8.33 percent of wages to the Employees’ Pension Scheme (EPS) for new employees having a new Universal Account Number (UAN) and who joined on or after April 1, 2016 with salary up to Rs 15,000 per month — for first three years
  3. The PMRPY scheme was started in August 2016
  4.  The scheme is aimed at incentivising increasing the employment base of workers in the establishments and facilitate access to social security benefits of the organised sector
May, 03, 2018

Cabinet nods to amend law for speedy disposal of commercial disputes: Law Min

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Ease of doing business

Mains level: Aim of the ordinance.


News

Ordinance on commercial disputes

  1. The government has approved an ordinance to amend a law for faster disposal of commercial disputes
  2. The ordinance will amend the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act

Aim of the ordinance

  1. Government is seeking to improve India’s ranking in the ease of doing business index

What about the pending bill?

  1. The proposed ordinance will replace the pending bill
  2. It would bring down the time taken from the present 1,445 days in resolution of commercial disputes of lesser value

Back2basics

Ease of doing business index

  1. Economies are ranked on their ease of doing business, from 1–190. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm
  2. The rankings are determined by sorting the aggregate distance to frontier scores on 10 topics, each consisting of several indicators, giving equal weight to each topic
  3. The rankings for all economies are benchmarked to June 2017
Apr, 23, 2018

[op-ed snap] Endgame for garment exports?

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: The importance of textiles and apparels industry(in Indian economy) and issues related to it.


News

Contribution of Textiles and Apparels industry in Indian Economy

  1. India has huge $100 billion-plus textiles and apparels industry
  2. It employs more than 45 million people, accounts for almost 14% of exports and over a quarter of foreign exchange earnings
  3. It is the second-largest employment sector after agriculture
  4. Of this, the apparel sector alone accounts for more than 12 million jobs and a chunk of the exports

The textiles and apparels sector as a job creator

  1. The Economic Survey 2016-17 made a strong case for focusing on the textiles and apparels sector as a job creator
  2. According to the survey, apparels are 80 times more labour-intensive than automobiles and create 240-fold more jobs than steel

What is the issue?:  India is quickly losing its place at the top of the table of apparel-exporting nations
Official export data

  1. Apparel exports in February stood at $1.44 billion, a decline of 10.25% compared to the year before
  2. In fiscal 2017-18 (April to February), overall apparel production declined 10.4% , while garment exports fell 4%
  3. Garment exports have fallen for six months in a row now
  4. There are no signs of any immediate turnaround
  5. The sector got hit with a double whammy: demonetisation and the goods and services tax (GST)
  6. Meanwhile, the rupee has also been appreciating, gaining 6.4% against the dollar through 2017
  7. This means that an exporter who quoted, say, Rs. 100 per piece last April and quotes the same rate this April is already 6% more expensive to his buyer
  8. And the industry simply does not have the margin to take this 6% hit and still stay competitive with countries like Bangladesh and Vietnam which are eyeing India’s already shrinking export market

India and other exporting countries: Why is India lagging behind?

  1. Apparel exports from Bangladesh crossed India’s in 2003, while Vietnam passed India in 2011
  2. Both nations enjoy the same advantage that India does — an abundance of cheap, skilled labour
  3. In addition, they also enjoy favoured access through treaties to major markets like the U.S. and the European Union,
  4. while India is under intense pressure from the WTO to phase out subsidies and incentives given to the textiles sector as the sector has already achieved ‘export competitiveness’

The Main Challenge

  1. India’s garments sector is large in the aggregate, it is comprised mostly of tiny units
  2. Almost 90% of India’s garment manufacturing units are in the unregistered sector
  3. About 78% of the firms employ less than 50 workers and only 10% more than 500 workers
  4. This means that individual entrepreneurs have severe limitations on the kind of capital they can invest in capacity and technology

Other challenges

  1. According to the economic survey 2016-2017, the key issues are:
    (1) Logistics
    (2) labour regulations
    (3) tax and tariff policy
    (4) disadvantages emanating from the international trading environment compared to competitor countries

High logistic consts in India

  1. Logistics costs are also high: around $7/km by road transport(in India), while it is just $2.5/km in China and $3/km in Sri Lanka

What should be done?

  1. The tax policy needs to be aligned with global trends
  2. The scale problem needs to be met through aggregation of individual units in large clusters
  3. Technology upgradation needs serious funding, while trade treaties need to be reviewed to ensure that India gets access for its competitive products in major markets
  4. Above all, Indian entrepreneurs need to also focus on creating their own global brands rather than simply producing for other labels
Apr, 20, 2018

[pib] International SME Convention-2018

Note4Students

From UPSC perspective, the following things are important:

Prelims level: International SME conference

Mains level: Schemes for development of SME sector


News:

  • It is the first ever International SME conference organized by The Ministry of MSME.
  • One hundred and fifty participants from 31 countries and 400 entrepreneurs from India will participate in the four day International SME convention being held in New Delhi.
  • The Ministry of MSME has engaged with over 35 International Trade Development organisations to attract and invite able and willing entrepreneurs and encourage people to people contact with select Indian Entrepreneurs from key sectors of the International counterparts.
  • The convention has specific focus on inclusion of MSMEs in the Make in India program & empowering women entrepreneurs.

Background

  • India is home to more than 60 million MSMEs, majority of who are in low-tech areas and serve the local domestic markets.
  • Of these, a small percentage, have the ability and capability to derive access to International Markets, with the vast majority of enterprises working as ancillaries. 
  • Together the MSMEs constitute a single largest employer after the Agriculture sector in India.
  • Highly developed economies have banked on their small and medium enterprises for both GDP Growth as well as higher employment resulting in higher per capita incomes.
Apr, 17, 2018

[pib] Digital platform for MSME Exporters

Note4Students

From UPSC perspective, the following things are important:

Prelims level: FIEO GlobalLinker

Mains level: Schemes for MSME developmemt


News:

  • The minister of commerce and industry Shri Suresh Prabhu launched the FIEO GlobalLinker– a digital platform for MSME exporters to digitise their businesses and join a global community of growing businesses.
  • Federation of Indian Export Organisations (FIEO) has developed this digital platform.
  • FIEO GlobalLinker is setup with a view to make the business growth of SMEs simpler, more profitable and enjoyable.
  • It is a growing global network currently comprising over 140,000 SME firms, who are seeking business collaboration and growth opportunities through the use of their electronic business card and digital profiles created on the platform.
  • FIEO is available free of cost and it offers exporters a range of features and benefits like:
  • Business Opportunities: Exporters will be able to find clients, suppliers and advisors using the search and review facilities. Creating a free e-commerce store for direct sales and improved chain management.
  • Up-to-date Business Knowledge through business articles, industry news and common interest groups.
  • Improved Efficiencies: Platform provides services like company intranet, integrating email, a business calendar.
  • FIEO’s Services: Application for new RCMC/endorsement/renewal/participation in FIEO’s promotional programme and alerts.
Apr, 09, 2018

India slaps anti-dumping duty on import of phosphorus pentoxide from China

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: Phosphorus Pentoxide, Anti-dumping duty, Directorate General of Anti-Dumping and Allied Duties

Mains level: Measures taken by the government to promote internal trade and safeguard Indian industry


News

Anti-dumping duty imposed

  1. The revenue department has imposed an anti-dumping duty on the import of a chemical from China to protect the domestic manufacturers from cheap shipments
  2. Phosphorus Pentoxide is used as a powerful desiccant and dehydrating agent and is a useful building block and reagent in the chemical industry

Probe by DGAD

  1. The Directorate General of Anti-Dumping and Allied Duties (DGAD) had carried out a probe into the imports of the chemical to ascertain if the shipments were causing injury to the domestic manufacturers of the chemical
  2. After the investigation, the DGAD concluded that the chemical was being exported to India below the normal value and that domestic industry suffered a material injury on account of dumped imports
  3. Based on the recommendation of the DGAD, the revenue department imposed the levy on the import of the chemical from China

Back2Basics

Anti-dumping duty

  1. An anti-dumping duty is a protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value
  2. The Revenue Department in the Finance Ministry imposes anti-dumping duty
  3. It is imposed after following recommendations of Directorate General of Anti-Dumping and Allied Duties (DGAD)
  4. These duties are imposed under the multilateral WTO regime
  5. They are not a measure to restrict imports or cause an unjustified increase in cost of products
Apr, 06, 2018

‘States to compete on new logistics index’

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Logistics index, Global Logistics Summit, FICCI

Mains level: Government initiatives to boost efficiency across various infrastructure sectors


News

Logistics index for states

  1. The government is working on creating a logistics index that would score States on their performance in the sector
  2. Commerce Minister announced this at the Global Logistics Summit jointly organized by FICCI, Ministry of Commerce, Govt. of India and The World Bank Group

Changes related to the logistics sector

  1. The multi-modal transport issue is now being addressed by the new logistics division under the Commerce Ministry
  2. It is the first time that logistics as a subject is being dealt with at the level of the Government of India
  3. Logistics sector was also granted infrastructure status recently
Apr, 05, 2018

Cabinet approves downsizing of Competition Commission of India

Note4students

Mains Paper 2: Polity | Statutory, regulatory & various quasi-judicial bodies.

From UPSC perspective, the following things are important:

Prelims level: Competition Commission of India (CCI)

Mains level: Various quasi-judicial bodies and their functioning


News

Going on with “minimum government-maximum governance”

  1. The cabinet has cut the number of members appointed by the central government in Competition Commission of India (CCI)
  2. This move will check government interference in the working of the anti-trust regulator

Change in structure

  1. The government approved rightsizing the CCI from one chairperson and six members (totaling seven) to one chairperson and three members (totaling four)
  2. The move is expected to stimulate the business process of corporates and generate job opportunities by speeding up hearings and approvals

Back2Basics

Competition Commission of India (CCI)

  1. Competition Commission of India is a statutory body of the Government of India
  2. It is responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an appreciable adverse effect on competition in India
  3. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and Merger and acquisition), which causes or likely to cause an appreciable adverse effect on competition within India
  4. It is the duty of the Commission to eliminate practices having an adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India
  5. CCI consists of a Chairperson and 6 Members (now 4) appointed by the Central Government
Mar, 23, 2018

[op-ed snap] Debunking India’s logistics myths

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Sagarmala project, Logistics Performance Index

Mains level: Various issues associated with logistics sector


Context

Logistics an important sector

  1. Logistics—moving goods and connecting producers with consumers—is a critical part of the modern economy
  2. In India, this sector comprises 14% of gross domestic product (GDP), much higher than in the US or Europe, where it is 8-9%

Initiatives for logistics sector by government

  1. Setting up a division in the Union ministry of commerce
  2. Introducing a national goods and services tax
  3. Giving infrastructure status to logistics

Myths associated with logistics sector

  1. The first myth is that direct costs are the key reason for India’s high-priced logistics
  • The reality is that indirect costs are the real culprit
  • Direct logistics costs are those incurred in the process of moving goods, such as transportation, warehousing, and value-added services
  • Indirect (or “hidden”) costs include inventory carrying costs, theft, damages, and losses in transit
  • These account for 40% of India’s total logistics costs
  • Indirect costs are caused by inefficiencies in the supply chain

2. The second myth is that increasing the use of rail can significantly reduce the cost of logistics in India

  • The reality is that given the prevalence of short-haul movement of goods in India, there is limited room for growth
  • India’s railroads carry no more than a third of the country’s freight
  • The great majority of the country’s cargo routes (about 450 out of 500) are less than 800km long
  • The rule of thumb is that rail makes economic sense only on routes longer than that

3. The third myth is that to cut logistics costs, the focus should be on major commodities, such as coal and steel

  • The reality is that streamlining the agricultural value chain matters more
  • Coal and steel account for about 12-16% of India’s total logistics costs while for agriculture this is about 25%
  • Inefficiencies in the agricultural supply chain, such as improper transportation and storage, are rife, leading to wasted food and quality control problems

4. The fourth myth is that the major issue with road transport is the poor quality of roads and trucks

  • The reality is that the quality—and number—of Indian drivers is more important
  • Roads carry more than 60% of India’s cargo and account for the majority of the total logistics costs
  • Many of India’s roads and trucks could be in better condition, of course, but benchmarking studies comparing India to other developing economies have found that the unit economics are not too bad
  • It is the scarcity of skilled drivers that is the bigger problem
  • India’s ministry of road, transport and shipping estimates suggest a 22% shortage in the number of commercial drivers

Possible solutions

  1. An initiative that could help is the government’s Rs8 trillion Sagarmala project, launched in 2015
  2. It goes in an entirely different direction, by investing in ports and coastal areas, with the goal of increasing the use of domestic shipping in moving goods
  3. If Sagarmala works as intended, we believe it could lower the cost of logistics noticeably

India’s current status

  1. The World Bank ranked it 35th (out of 160 countries) in its most recent Logistics Performance Index, which concentrates on trade-related factors, up from 54 in 2014
  2. India was the top performer among lower-middle-income countries
  3. Logistics firms are beginning to address skill development issue by opening driver training schools, boosting wages and benefits, investing in their drivers’ skills, using onboard sensors to monitor driving patterns, and then giving real-time feedback

Way forward

  1. In order to find the right solutions, it’s important to establish what the real problems are
  2. Doing better requires looking at the logistics system from beginning to end, just as companies experience it, and then strengthening each link
Mar, 20, 2018

[op-ed snap] Time to move beyond subsidies

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: WTO, SCM Agreement, Doha negotiations, Gross National Product, Foreign Trade Policy 2015

Mains level: Export promotion policies in India


Context

Contesting India’s subsidies

  1. India’s export promotion schemes face an uncertain future after the United States Trade Representative (USTR) decided to challenge their legality in the World Trade Organisation (WTO)
  2. The complaint of the USTR is that India is violating its commitments under the Agreement on Subsidies and Countervailing Measures (SCM Agreement) using five of the most used export promotion schemes

Why this opposition?

  1. India’s five export promotion schemes violate Articles 3.1(a) and 3.2 of the SCM Agreement, since the two provisions prohibit granting of export subsidies
  2. Until 2015, India had the flexibility to use export subsidies as it is among the 20 developing countries included in Annex VII of the agreement
  3. These countries are allowed to use these subsidies as long as their per capita Gross National Product (GNP) had not crossed $1,000, at constant 1990 dollars, for three consecutive years
  4. This provision applies to the Annex VII countries was an exception to the special provisions provided to the developing countries (the so-called “special and differential treatment”) for phasing out export subsidies
  5. India had crossed the $1,000 GNP per capita threshold in 2015

Amendement sought by India and other countries

  1. In the Doha negotiations, India and several other Annex VII countries sought an amendment of the agreement so as to enable them to get a transition period
  2. In a submission made in 2011, India, along with Bolivia, Egypt, Honduras, Nicaragua and Sri Lanka, argued that the Annex VII countries should be eligible to enjoy the provisions applicable to the other developing countries, namely, those that had GNP per capita above the threshold
  3. The latter set of countries was required to phase out their export subsidies within eight years of joining the WTO

India’s export promotion schemes

  1. Foreign Trade Policy (FTP) unveiled in 2015 did some serious introspection about the future of export promotion schemes
  2. The policymakers recognized that the extant WTO rules and those under negotiation were aimed at eventually phasing out export subsidies
  3. But, contrary to the pronouncements made in the FTP, the government has continued to increase its outlays on export promotion schemes
  4. During this period, the largest export promotion scheme in place currently, the Merchandise Exports from India Scheme (MEIS), was introduced to promote exports by offsetting the infrastructural inefficiencies faced by exports of specified goods and to provide a level playing field

Way forward

  1. Export promotion efforts in the country must make a movement towards more fundamental systemic measures and away from incentives and subsidies
  2. There is a strong case for the government to invest in trade-related infrastructure and trade facilitation measures, which can deliver tangible results on the export front
Mar, 20, 2018

A measure of manufacturing

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Index of Industrial Production, Manufacturing Purchasing Managers’ Index

Mains level: Various indexes related to economic growth


News

Gauging the level of activity in the manufacturing

  1. There are two key parameters that the government and private sector analysts use to gauge the level of activity in the manufacturing sector
  2. The Index of Industrial Production (IIP) and the Manufacturing Purchasing Managers’ Index (PMI)

Manufacturing Purchasing Managers’ Index (PMI)

There are two main points of difference between the PMI and the IIP

  1. PMI is a private sector survey while the IIP is gauged by the government
  2. The IIP is a measure of output while PMI measures activity at the purchasing or input stage

How is the PMI survey conducted?

  1. The Nikkei India Manufacturing PMI is based on data compiled from monthly survey responses by purchasing managers in more than 400 manufacturing companies
  2. The manufacturing sector is divided into eight broad categories — basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper and transport
  3. The survey responses are meant to reflect month-to-month changes based on the data collected mid-month
  4. The Nikkei India Manufacturing PMI is composite index based on five individual indices with their own weightages — new orders (weightage 0.3), output (0.25), employment (0.2), suppliers’ delivery times (0.15), stock of items purchased (0.1) and the delivery times index inverted so that it moves in a comparable direction
  5. Once the overall number for the month is computed, the score is arrived at
  6. A score above 50 denotes expansion while one below 50 signifies contraction

Advantage of PMI over IIP

  1. The manufacturing PMI report for any given month comes out either on the last day of that month or on the first day of the next month
  2. The IIP, however, comes out after considerable delay
  3. The data for a given month comes out almost one and a half months later

Back2Basics

Index of Industrial Production (IIP)

  1. The all India index of Industrial Production (IIP) is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period
  2. It is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends
  3. IIP is a short-term indicator of industrial growth till the results from Annual Survey of Industries and National Accounts Statistics are available
  4. IIP is used as core ingredient in the compilation of annual and quarterly national accounts and forecasts of GDP
  5. In India, due to constraints of data availability and other resources, the index is compiled using figures of mining, manufacturing and electricity sectors only
Feb, 08, 2018

[op-ed snap] The formal-informal divide

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level:Not much

Mains level: Investment slowdown, specific sectors affected by the slowdown, the divide and what should be done, etc.


News

What is the issue?

  1. It is now well recognised that there is an investment slowdown in India, which is delaying a thorough recovery in the economy
  2. The slowdown started five years ago, and is, as Economic Survey 2018 notes, the most severe in India’s history

The Investment slowdown in various sector
(1) Informal Sector

  1. The private investments slowdown is statistically visible chiefly in the informal segment of the economy

(2) Corporate Sector

  1. The corporate sector is not the source of the decline
  2. Corporate investments have been on the upswing, rising through the five-year slowdown

(3) Public and Private finance companies

  1. There is negligible change in the investment behaviour of public and private finance corporations
  2. Public non-financial corporations reduced investments marginally. The government stepped up its investments, but its share the benefit is small

(4) Household Sector

  1. The sharpest pullback has been by the household sector, its investments are down 6.6 percentage points since the start of the slowdown
  2. Economy-wide investments are down 5.8 percentage points
  3. The slowdown is mainly because of the household sector’s troubles

What is the household sector?

  1. Households can be producing or non-producing, in which case they are consuming households
  2. The 73rd round of the survey by the National Sample Survey Office had found about 6.34 crore unincorporated non-agricultural enterprises in the country
  3. A chunk of private investments is undertaken by these firms that often operate out of homes, with, typically, less than 10 workers

The formal and informal divide

  1. The investments estimates (Gross Fixed Capital Formation) cover physical investments in plants, machinery and equipment, and dwellings and buildings, but not land
  2. The two largest investing segments in the economy, households and private non-financial corporations, correspond roughly to the informal and formal economies
  3. The formal-informal divide shows up also in savings
  4. Corporate savings are rising consistently, while those of the household sector are slowing.

What has made the informal sector more vulnerable than the rest of the economy?

  1. Corporates can access capital in difficult times, but the unincorporated are left without recourse
  2. Corporates can borrow overseas and raised funds from the capital markets
  3. But he informal sector has not had the sophistication or resources required

The way forward

  1. Given the anatomy of the private investments slowdown, a macroeconomic stimulus may not be the best policy choice
  2. Urgent fiscal deficit reduction, quick clean-up of the bad loans mess, and restoration of banks’ health are more likely to revive private investments
Feb, 01, 2018

[op-ed snap] The de-urbanization of India’s manufacturing

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Industrial growth and associated issues


Context

Relation between industrialization and urbanization

  1. Conventional wisdom suggests that industrialization and urbanization go hand in hand
  2. Policymakers often adopt an active “industrial policy” to accelerate growth
  3. They also embrace an active “urban policy”, since industrialization without urbanization gets stalled

Change in this phenomenon

  1. India’s industrialization and urbanization did grow together in the early 1990s
  2. Manufacturing growth was initially concentrated around the megacities
  3. It has dispersed in the last decade
  4. The share of the manufacturing sector has increased in rural areas

Current scenario

  1. Unlike in China and US, the growth drivers in India are still concentrated in megacities
  2. Secondary cities have yet to become engines of growth and job creation in India

Future of India’s economic growth

  1. India’s future economic growth may not be in its megacities
  2. It might be in its secondary cities, where there is substantial untapped potential
  3. Inter-urban competition between tier I and II cities could be India’s big driver of economic transformation and growth
  4. Next phase of urbanization could result in a four-fold increase in per capita income

What can be done to scale up secondary cities?

  1. Building a smart tier II and tier III city calls for scaling up investments in physical and human infrastructure
  2. This would make them more competitive, attract new enterprises, and create more jobs
  3. New technology can play a more dynamic role in urbanization
  4. It can reduce congestion costs, make cities green and sustainable, and increase the efficiency of local government programmes

Way forward

  1. New urbanization should build more bridges with rural areas
  2. India’s renewed emphasis on rural development, and the current trend of the manufacturing sector moving away from densely populated urban areas, opens new doors and provides immense potential for regional and spatial development
Jan, 10, 2018

[op-ed snap] Reducing financial misallocation in India

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Twin balance-sheet problem

Mains level: Financial misallocation and its effects


Context

Concerns about India’s future growth trajectory

  1. The twin balance-sheet problem, of highly leveraged corporate entities and bad loan-ridden banks, has raised concerns about India’s future growth trajectory
  2. If firms are not able to grow, and banks not able to lend, that trajectory will slow down

Financial misallocation in India

  1. Financial misallocation is a bigger problem in the manufacturing sector than in services in India
  2. Growth requires more efficient firms to produce more output and use more factors of production, including greater access to bank loans
  3. But, less efficient firms manage to access more bank loans, leaving less room for growth of more efficient firms
  4. This is India’s financial misallocation problem

Reasons behind misallocation

  1. The underlying cause behind the financial misallocation is distortion in the land market
  2. Access to bank loans is disproportionately tied to access to land, as land and buildings provide strong collateral support for most bank loans
  3. Less efficient firms have been accessing more land and thus more bank loans
  4. This is not a problem for the service industry, which is less land-intensive

Industry distributions of financial misallocation

  1. Most bank loans in the manufacturing sector are taken up by large firms in the organized sector
  2. The small firms in the unorganized sector, which account for nearly 80% of jobs, and about half of the value of land and buildings held in the manufacturing sector, pull in a very small share of bank loans
  3. The value of financial loans reported in the informal sector is barely 2-6% of the value of total bank loans reported in the manufacturing sector

Geographic distributions of financial misallocation

  1. There is a huge spatial diversity in access to bank loans within India
  2. Access to bank finance is significantly higher in the leading states compared to the lagging regions
  3. This is true for manufacturing enterprises in both the organized and the unorganized sector
  4. States like Gujarat, Haryana and Rajasthan have access to financial loans for over 95% of the organized sector plants
  5. Lagging states like Bihar and Uttar Pradesh perform poorly in access to bank loans
  6. The differences in misallocation within India are larger than the differences across countries

Financial misallocation and growth

  1. India is one of the most land-scarce countries in the world
  2. Land and financial misallocation trumps labour misallocation
  3. Financial misallocation has constrained the growth of the manufacturing sector
  4. Rapidly growing firms in asset-intensive sectors require external finance due to their capital growth needs
  5. This is reduced due to financial and land misallocation which explains why India’s manufacturing firms have trouble scaling up
  6. Poorly functioning land and financial markets also explain why India has so few start-ups

Way Forward

  1. India remains one of the fastest growing market economies
  2. Financial misallocation has constrained the growth of the manufacturing sector, a key driver of growth and job creation
  3. Policymakers need to pay more attention to addressing the underlying causes of financial misallocation
  4. This would involve removing land market distortions, better land-use regulations, and more efficient taxation of properties
Nov, 06, 2017

Centre plans to set up more commercial courts

Note4Students

                 Mains Paper 3: Indian Economy | Issues relating to growth and development.

Prelims:  World Bank’s Ease of doing Business

Mains level: This article highlights the steps the government is planning to take to further improve India’s ranking in the World Bank’s Ease of doing Business.


News

Context

Commercial courts

  1. Days after India jumped 30 positions in the World Bank’s Ease of Doing Business ranking; Law Ministry said the Union government proposed to establish commercial courts in districts to further improve the parameters.
  2. Legal remedy to commercial disputes and enforcement of business contracts are parameters of the World Bank ranking.
  3. In terms of ease of enforcing contracts, India jumped from 172 to 164.
  4. Though the jump in the ranking sounds small, it is substantial given the diversities of laws in our country and the complex demography.

Varying performance

  1. India’s performance has been varied within the legal framework.
  2. For example, the World Bank’s ranking marked court system and proceedings in India 4.5 out of a total of 5, but in management of cases, it was 1.5 out of 6.
  3. India also fared well in alternative dispute redress mechanism and scored 2.5 out of a total of 3 marks.
  4. The government is proposing amendments to facilitate the establishment of commercial courts, at the district level, in places where the High Courts have ordinary original civil jurisdiction.
  5. The specified value of commercial disputes would be brought down so as to expand the scope of commercial adjudication effectively and expeditiously.
Nov, 01, 2017

Suggestions for New National Mineral Policy

Image source

Note4students

Mains Paper 2: Governance | Government policies & interventions for development in various sectors & issues arising out of their design & implementation

From UPSC perspective, the following things are important:

Prelims level: New national mineral policy, National Mineral Policy, 2008, District Mineral Foundation, National Mineral Exploration Trust, Compensatory Afforestation, Make in India, Mines and Minerals (Development and Regulation) Amendment Act (MMDRA), 2015, Atomic Minerals Directorate (AMD)

Mains level: Various policies of government that need to be revamped in order to provide ease of doing business


News

Niti Aayog’s suggested steps to the mines ministry

  1. Mines ministry is currently in the process of formulating a new national mineral policy
  2. Niti Aayog has given following suggestions to ministry regarding policy
  • Revamp the taxation structure applicable to the mining sector in India
  • Reduce the “widespread instances of corruption prevailing in the administration” of mining rules and regulations through “technology-based monitoring approach”
  • Avoid the tendency to incorporate financial conditions while granting the environment clearance
  • Involve mining sector consultants to evaluate mineral blocks before they are put up for auction

Effect of Supreme Court judgment

  1. On August 2, 2017, the Supreme Court had passed a judgment, wherein it directed the Central government to revisit the National Mineral Policy, 2008
  2. It also asked government to announce a “fresh and more effective, meaningful and implementable policy” before the end of this year

High taxation burden

  1. In its comments, the Niti Aayog has listed a number of taxes and charges that miners pay, which ultimately take their taxation burden to around 65 percent of the revenue
  2. The global average taxation applicable for mining is 40 percent
  3. India is constantly adding to the taxation burden for mining industry with royalty, DMF (District Mineral Foundation), NMET (National Mineral Exploration Trust) and host of other statutory levies implemented by the states
  4. Adding to this are the one-time regulatory costs related to ECs (environment clearances) and FCs (forest clearances) mostly on account of NPV (net present value) for forest land, CA (compensatory afforestation) charges, CA land procurement, etc

Ideal tax system desired

  1. According to the Niti Aayog, it is “necessary to define an ideal tax system for the industry to make it more lucrative
  2. This is especially for the foreign investors, under the Make in India initiative of the Central government
  3. Several regulatory payments like DMF, NMET, etc., have not been subsumed into GST (goods and services tax)
  4. The bidding price quoted by the bidder during auction is subject to GST and the interpretation is that the act of auction by the government is a form of service being provided and hence the tax

Mines and Minerals (Development and Regulation) Amendment Act (MMDRA), 2015

  1. According to this new mining law, non-coal mines have to be auctioned by the respective state governments
  2. Under the old mining law, the states had the powers to grant the mining lease to any company as per their discretion
  3. The Niti Aayog has suggested that the mining blocks that are being placed for auction should be evaluated by agencies having expertise in mineral commodity and as per international codes

Exploration of all the rare-earth and nuclear minerals

  1. Currently, China is dominating this sector with over 90 percent of the world market share
  2. Immediate necessary actions should be taken for the exploration of all the rare-earth and nuclear minerals
  3. It should be carried out under the umbrella of the Atomic Minerals Directorate (AMD) under a subset of the MMDRA Act, 2015
  4. This will reduce India’s dependence on external sources that may not be reliable due to socio-political reasons
Oct, 21, 2017

‘All major ports to get LDB services’

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: Logistics Data Bank, Indian Ports Association (IPA), Radio Frequency Identification Tag (RFID), ease of doing business, Special Purpose Vehicle, Delhi Mumbai Industrial Corridor (DMIC)

Mains level: Various initiatives that are being undertaken to improve efficiency as well as ease of doing business


News

The Logistics Data Bank’s (LDB) services to be extended to all major ports in India

  1. Logistics Data Bank was begun to help track containers, reduce transaction costs
  2. Discussions between the Government and the Indian Ports Association (IPA) have begun in this regard

What is LDB project?

  1. As part of the LDB project, each container is attached to a Radio Frequency Identification Tag (RFID) tag and tracked through RFID readers
  2. This, in turn, helps importers and exporters to track their goods in transit
  3. It helps reduce the overall lead time of container movement, besides bringing down transaction costs that consignees and shippers incur
  4. LDB project covers the entire movement through rail or road till the Inland Container Depot and Container Freight Station.

Objective and implementation

  1. The LDB project’s objective is to ensure greater efficiency in the country’s logistics sector through the use of information technology
  2. The LDB project was unveiled in July 2016 as an important ‘ease of doing business’ initiative to boost the country’s foreign trade and bring about greater transparency
  3. The project is implemented through a Special Purpose Vehicle called Delhi Mumbai Industrial Corridor Development Corporation Logistics Data Services Ltd. (DLDSL) — jointly (50:50) owned by the Delhi Mumbai Industrial Corridor (DMIC) Trust and Japanese IT services major NEC Corporation

Also linked to railways

  1. The LDB System has been integrated with the Freight Operations Information System of railways
  2. The move will help users track in-transit rail container movement

Back2Basics

Special Purpose Vehicle

  1. The name SPV is given to an entity which is formed for a single, well-defined and narrow purpose
  2. No SPV can be formed for an unlawful purpose, or for undertaking activities which are contrary to the provisions of law or public policy
  3. An SPV is mainly formed to raise funds by collateralizing future receivables
  4. An SPV is, primarily, a business association of persons or entities eligible to participate in the association
  5. Technically, an SPV is a company. It has to follow the rules of formation of a company laid down in the Companies Act
  6. It has all the attributes of a legal person. It is independent of members subscribing to the shares of the SPV
  7. An SPV can also be a partnership firm
Oct, 11, 2017

[op-ed snap] A new industrial policy for Bharat

Note4Students

Mains Paper 3: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.

The following things are important from UPSC perspective:

Prelims: Not much

Mains level: This article talks about the recently released discussion paper on Industrial Policy 2017 by DIPP .It highlights the issues with it and also gives suggestions on how to make it more effective.

 


News

Context

  1. A recent report by Deloitte LLP pointed out that India’s young population will drive its economic growth to overtake China and other Asian tigers in the next few decades.
  2. The potential workforce in India is set to increase to 1.08 billion in the next 20 years and hold above the billion mark for 50 years.
  3. This requires enabling conditions for growth are created and sustained.

About Industrial Policy, 2017

  1. The Department of Industrial Policy and Promotion (DIPP), released the discussion paper on Industrial Policy 2017.
  2. It highlights the progress made in the last 25 years and facilitates discussions for the formulation of new industrial policy aimed at building a globally competitive Indian industry equipped with skill, scale and technology.
  3. It recognizes the need to gainfully employ a growing workforce and lists long-term and medium-term measures and related challenges.

What does Economic Survey 2017 says about the rising workforce?

  1. It points out that the richer peninsular states in India will initially witness a sharp increase in working age populations, followed by a sharp decline.
  2. In contrast, the poorer hinterland states will remain young and dynamic, characterized by a rising working age population for some time, plateauing towards the middle of the century.

What needs to be done to cash upon demographic dividend?

  1. The poorer states in the hinterland are characterized by a substantial rural, informal economy where agriculture and allied non-farm activities are the principal sources of livelihood.
  2. For India to realize its economic potential, it is this population which needs to be tapped and provided opportunities.
  3. Significant migration in search of better sources of livelihood is also being witnessed from such areas towards urban centres, which needs to be carefully managed.

Issues with the discussion paper on Industrial Policy 2017

  1. The policy does not discuss ideas for creating jobs for and in Bharat.
  2. It follows conventional approach that confines the scope of industrial policy to “manufacturing enterprises”, unrelated to agriculture and the services sectors.
  3. This myopic industrial policy can have adverse consequences in the longer term.
  4. It recognizes the importance of competition and strengthening global linkages and value chains. But incentives to select sunrise sector will potentially disincentivize competition and innovation, and curb the growth of other sectors
  5. This sector specific approach might result in policies soon becoming out of sync with dynamic economic developments and with our World Trade Organization (WTO) obligations.
  6. An effective industrial policy cannot be merely a collection of sectoral policies.

Way Forward

  1. It must appreciate its linkages with agriculture, services policies and with trade, competition and sector-specific policies at a broader level.
  2. A systems’ view informed by a whole-of-government approach is needed.
  3. It will treat the economy like a complex human body, composed of many sub-systems, each of which performs a function to enable the entire system to remain healthy and grow.
  4. The Indian economy has suffered from several ill-advised medications in the past, and more recently as well. Such experiments need to be prevented.
  5. It requires different actors and government departments engaged in specific sub-systems to work with each other.
  6. Stakeholders involved in the design of specific policies must interact with each other and optimize the functioning of crucial sub-systems.
  7. A powerful nodal department in the prime minister’s office should be authorized to ensure coherence through coordination with different departments and related stakeholders, and enable swift decision making within predetermined time frames.
  8. A new forward-looking industrial policy for India must have Bharat as its soul.
  9. A long-term view needs to be taken on competition and trade-related issues, and the industrial policy should avoid the temptation of short-term benefits of over-protectionism.

 

Aug, 30, 2017

[op-ed snap] Unease of doing business

Image result for Ease of doing business in India

Image source

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

Once you are done reading this op-ed, you will be able to attempt the below.

What are the reasons for India’s low position in World Bank’s “Doing business” ranking? How India should improve to better its rank?

From UPSC perspective, the following things are important:

Prelims level:  World Bank’s Ease of Doing Business Ranking

Mains level: Prepare Ease of doing business in India- problems, government Initiatives, challenges and way forward


News

Context

  1. Last year, World Bank’s Ease of Doing Business Ranking placed India at a lowly 130 out of 150 countries

Niti Aayog Survey finding

  1. Survey by the Niti Aayog and the Mumbai-based think tank, IDFC Institute, reveals that the despite Centre and state government’s efforts to ease the system of permits and clearances, most entrepreneurs still feel hobbled by the country’s regulatory environment.
  2. Most firms do not use the single-window systems for business and regulatory clearances.

Problems

  1. Centre claims that a firm can be incorporated in less than a week
  2. But the survey shows that even in the best performing state, Tamil Nadu, the process takes more than 60 days — on average it takes nearly four months to set up a business in India. 
  3. It is sign of a persistent problem with governance in India: The difficulty of cutting the red tape of the lower bureaucracy. 
  4. The World Bank’s report, last year, highlighted that delays in issuing construction permits affected the ease of doing business in India. 
  5. The report finds that entrepreneurs in these employment-intensive sectors are more likely to face problems and securing construction and other permits, compared to the capital-intensive ones.

The survey should serve as a wake-up call to government and a reminder that over two decades after economic reforms the Indian state is still flailing when it comes to easing the path for entrepreneurs.

Oct, 27, 2016

Suggest ways to improve EoDB ranking: PM

  1. What: PM Modi has urged the states and the central government departments to immediately analyse the World Bank’s latest report on ease of doing business
  2. And within a month, suggest ways to improve India’s ranking
  3. The nodal agency at the Centre for ease of doing business initiatives – Department of Industrial Policy and Promotion (DIPP), has already sent its report
Oct, 26, 2016

Doing Business Index: Centre to hold meeting with 17 ‘laggard’ States/UTs II

  1. There are ten States that have an implementation percentage of 90% or more
  2. Andhra Pradesh and Telengana share the top spot
  3. The 340 reform areas are broadly under categories including construction permit, environmental and labour registration, obtaining electricity connection etc
Oct, 26, 2016

Doing Business Index: Centre to hold meeting with 17 ‘laggard’ States/UTs I

  1. 17 States/Union Territories (UTs) have abysmal performance in effecting reforms for ease of doing business
  2. The Centre will soon hold a special high-level meeting with them
  3. The States include Kerala, those in the entire North-Eastern region and others
  4. They have managed to implement only 25 per cent or below of the 340-point ‘Business Reform Action Plan’ that was circulated in late October 2015
Oct, 26, 2016

India up one position in WB ease of business ranking II

  1. Reforms: Exporting and importing is easier because of the introduction of ICEGATE portal and simplification of border and documentary procedures
  2. It scored well on protecting minority investors
  3. The overhaul of the Companies Act has brought Indian companies in line with global standards
  4. Particularly regarding accountability and corporate governance practices
Oct, 26, 2016

India up one position in WB ease of business ranking I

  1. Ranking: India improved its position to 130 in the World Bank Ease of Doing Business 2017 report
  2. Last year: It was placed at 131 according to the revised rankings for last year
  3. India could not improve its ranking more despite reform measures because other countries around it in the ranking list also did well last year
  4. However, India had made a noticeable improvement in the distance to frontier (DTF) score — an absolute measure of progress towards best practices
Oct, 24, 2016

‘One India’ concept push for ease of business II

  1. Global ranking: India was ranked a lowly 130th out of 189 economies in the World Bank Group’s ‘Doing Business’ 2016 index.
  2. The government aims to ensure that India gets a place in the top 50 soon
  3. Other initiatives: The Centre is already developing an eBiz project that is basically a government-to-business portal
  4. The services offered under the portal are on starting, running and closing down a business
  5. It was introduced in January 2014
Oct, 24, 2016

‘One India’ concept push for ease of business I

  1. Proposal: The Centre, in collaboration with State governments, plans to introduce a ‘One India’ concept
  2. It will be the biggest and the most comprehensive ‘ease of doing business’ initiative so far
  3. Purpose: Under the ‘one-form-one-portal’ model the processes will be simplified to an extent where investors will need to fill only a single e-form for investing and doing business anywhere in India
  4. Currently: Firms are mandated to complete multiple forms at the Central and state-levels
  5. It gets more complicated as each state has different requirements and regulation
Oct, 24, 2016

Justice delay keeps investors away: CJI

  1. Source: Chief Justice T.S. Thakur
  2. He said foreign investors continue to be wary of India’s labyrinthine and delayed justice delivery mechanism
  3. Investors feel that Indian courts would delay justice due to them
  4. According to him, alternative dispute resolution mechanisms like arbitration, mediation and conciliation would become effective only if backed by a robust justice delivery system steered by conventional courts
  5. Civil courts should be able to hear and decide challenges to arbitration awards in a time-bound manner
Oct, 06, 2016

India needs to remove bottlenecks: Singapore PM

  1. Singapore PM: India is not as open for business as investors hope
  2. Why? Land acquisition, over-regulation and legal hassles are among the biggest bottlenecks
  3. For trade to grow, India must make a strategic decision that you want to encourage interdependence and more openness and more trade-based economy
  4. Bilateral trade: India and Singapore have stepped up contacts as a part of the Govt’s ‘Look east, Act east’ policy
  5. However, bilateral trade between India and Singapore has declined year on year, down 11.2% in 2015-2016 to US $15 billion compared to 2014-2015, with Indian exports dropping 21.2% in a year
Sep, 19, 2016

No repeat of 2G, Satyam if laws are sincerely implemented

  1. A sincere implementation of laws including those dealing with insolvency and bankruptcy will ensure that there is no repetition of 2G and Satyam like scams in India
  2. Bankruptcy laws are very strict in the US and Mallya type of instances cannot take place there & if the law is implemented sincerely, it is not going to happen here also
  3. Satyam scam: One of the biggest corporate frauds, which involves financial mis-statements to the tune of about Rs 12,320 crore

Discuss: In the light of the Satyam Scandal (2009), discuss the changes brought in corporate governance to ensure transparency, accountability [UPSC Mains 2015, GS 2]

Sep, 19, 2016

Simplify factory inspections for ease of doing business: CII

  1. Source: Confederation of Indian Industries (CII) white paper- Inspections and Regulatory Enforcements for Micro Small and Medium Enterprises (MSMEs) in India
  2. The factory inspection system needs a complete overhaul to bring India among the top 50 countries in terms of ‘ease of doing business’ in the next two years
  3. India is currently placed at 130 out of 189 countries in the ‘ease of doing business’ rankings
  4. The excessive number of inspections in India weighs down on the competitive advantage and the ‘ease of doing business’ of Indian businesses
  5. It called for an integrated inspection system and highlighted the need for inculcating a risk-based approach in the inspection system
  6. The system should rationalise the number of inspections and weed out the redundancy and duplicity
Aug, 30, 2016

India is keen to be a global arbitration hub: Prasad

  1. Law Minister: The international arbitration system is ad hoc and unpredictable & India is keen to become a global hub for international arbitration
  2. Mumbai is coming as a big hub of dispute resolution & Delhi would also come along in the same way
  3. Background: The comments come at a time when Cairn Energy has initiated international arbitration seeking $5.6 billion in compensation from the Indian government against a retrospective tax demand of Rs.29,047 crore made by tax authorities
Jul, 16, 2016

India slips on business optimism index

  1. News: India slipped to the third position on the scale of global business optimism during Q2 2016 (April-June) Grant Thornton International Business Report (IBR)
  2. India had after remaining on top globally for the two preceding quarters
  3. Concerns: Delays in key reforms like the goods and services tax, non-resolution of tax disputes and the banking sector’s performance
Mar, 03, 2016

Winding up of National Manufacturing Competitiveness Council (NMCC)

  1. News: Cabinet Committee on Economic Affairs has given its approval for winding up of NMCC
  2. About NMCC: established in 2004 as a part of the Common Minimum Programme (CMP) of erstwhile govt
  3. To provide a continuing forum for policy dialogue to energize and sustain the growth of manufacturing industry
  4. Function: NMCC conducted various studies independently in consultation with several Government Ministries and shared these studies with the Ministries
Feb, 03, 2016

Tapan Ray Panel Recommendations

The panel was constituted to suggest amendments in the Companies Act, 2013, to make it easier for companies to do business.

  1. Doing away with any kind of government intervention in managerial remuneration and allowing startups to issue more sweat equity and employee stock options (ESOPs).
  2. Removal of provision under Section 2(87), which prohibited the companies to not have more than two levels of subsidiaries.
  3. Only those frauds which involve Rs 10 lakh or above, or 1% of the company’s turnover, whichever is lower, may be punishable under Section 447.
  4. Section 447 lays down the punishment for any person found guilty of fraud to minimum 6 months imprisonment.
  5. A firm to be called associate company only when the parent firm owns 20 per cent of voting power in it.
  6. Insider trading and forward dealing provisions to be removed from the Act as Sebi regulations already exist.
  7. Institute of Chartered Accountants of India’s regulatory powers to be taken away; National Financial Reporting Authority would be formed.
  8. Private placement process to be simplified, doing away with separate offer letter, making valuation details public.
Feb, 03, 2016

Companies Law Committee submits report to Government

Suggestions include omitting provisions relating to forward dealing, insider trading.

  1. The Companies Law Committee — constituted in June 2015 to make recommendations on the issues related to implementation of the Companies Act, 2013.
  2. The recommendations including definitions, raising of capital, accounts and audit, corporate governance, managerial remuneration, companies incorporated outside India and offences/ penalties.
  3. Some key changes proposed are regarding managerial remuneration to be approved by shareholders.
  4. The modification of definition of associate company and subsidiary company.
  5. Companies may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement.
  6. Auditor will report on internal financial controls with regard to financial statements.
Jan, 27, 2016

Government makes it easier to set up companies, do business

The government has unveiled two initiatives to expedite clearances and ensure greater ease of doing business in the country.

  1. These initiatives ensure faster clearances to incorporate companies and improve the ease of doing business.
  2. The Government Process Re-engineering (GPR) involves a 3-pronged approach of further automating some of the approval processes.
  3. By utilising advanced software tools, rationalising and modifying certain rules and engaging professionals to expedite the process of manual scrutiny.
  4. The Central Registration Centre (CRC) will process applications for name availability, submitted online and endeavour to process them by the end of the next working day.
Jan, 12, 2016

Partnership Summit - Andhra Pradesh

Deals covering a gamut of sectors were also signed—retail, steel and gas, among others, and pledged policy changes that would ensure ease of doing business.

  1. First-ever retail policy by a state in India—that makes it easier for retailers to do business in the state.
  2. It proposes single-desk clearance of business plans, let’s stores stay open longer.
  3. Makes it easier for retailers to acquire land to build warehouses, simplifies labour laws and relaxes stocking limits for essential commodities.
  4. It is aimed at attracting investments worth Rs.5,000 crore and creating 20,000 additional jobs in the sector by 2020.
Oct, 29, 2015

Up the ranks

India’s improved Doing Business rank puts the spotlight on state and local governments

ease of doing business, ease of doing business rank, india ease of doing business, india's business policies, world bank, world bank report, WB rank india ease of doing business, business news, economy news, india news, latest news,


  1. The World Bank’s latest “Doing Business” report ranks India 130 out of 189 countries.
  2. One of the main reasons for the improvement was the current government amending the Companies Act.
  3. Another reason, India jumped a 29 rungs in “getting electricity”, changes made by the Delhi and Mumbai electricity utilities, that made getting a connection easier.
  4. India ranks a shocking 183 for “dealing with construction permits”, an area in the exclusive jurisdiction of these levels of government.
  5. The Centre could enact a modern bankruptcy code, as promised in this year’s budget.
  6. A good start has also been made with the formation of a committee to overhaul the 1961 Income Tax Act to make it less litigation-prone.
  7. These rankings are, at best, an incomplete snapshot of micro regulatory constraints that affect small and medium enterprises.

Governments at various levels must note that India is not the most hospitable place for SMEs, which are key for job creation.

 

Oct, 28, 2015

India moves up in ‘ease of doing business’ ranking

World Bank official lauds efforts of Modi government, ‘It took four months in 2005 to start a business in India, but it takes only 29 days now’

  1. India improved its position from last year’s 134 to 130 in the World Bank Doing Business 2016 ranking.
  2. Last year’s report ranked India at 140, this year’s report features the recalculated 2015 rankings, in which India comes at 134.
  3. The WB Doing Business reports, started in 2002, review business regulations and their enforcement across 189 countries.
  4. Among South Asian economies, India made the biggest improvement in business regulation.
  5. India ranks in the top 10 in Protecting Minority Investors (8).

The improvement in two indicators, ‘starting a business’ and ‘getting electricity,’ pushed India up the ladder.

Oct, 21, 2015

Stamp out petty corruption for ease of business

Did you know?

  1. An investigative report by The Wall Street Journal said Wal Mart had paid millions of dollars in bribes in India. But not to the biggies!
  2. Many of the payments were of small value, $5 to $200.
  3. That’s what it takes to do business in India. This is a problem for multinationals which end up having to report these bribes.

 

To make it easier to do business in India, the government needs to focus as much on stamping out petty corruption as it does on big-bang reforms.

Oct, 15, 2015

India now most attractive investment destination: EY

  1. India has emerged as the most attractive investment destination in the world in a global survey of top decision-makers in MNCs.
  2. Perception about India’s macroeconomic stability is up to 76% in 2015 in comparison to 70% in the 2014 survey.
  3. Investors rated India’s domestic market and availability of labour among the most attractive features for doing business.
  4. Investors mentioned implementation of GST and legislation on land acquisition as important for attracting FDI.
Oct, 09, 2015

Vodafone wins transfer pricing tax dispute case

In a major relief to British telecom major Vodafone in the transfer pricing case, the Bombay High Court ruled in its favour, setting aside a tax demand of Rs. 3,700 crore imposed on Vodafone India.

  1. The case of 2007-8 involving the sale of Vodafone India Services Private Ltd., to Hutchison, and the tax authorities demanded capital gain tax for this transaction.
  2. This is likely to benefit multinational companies such as IBM, Royal Dutch Shell and Nokia that face similar tax demands.
  3. Transfer pricing is referred to the setting of the price for goods and services sold between related legal entities within an enterprise.
  4. For example, if a subsidiary company sells goods to a parent company, the cost of those goods is the transfer price.
Sep, 07, 2015

India ranks low on inclusive growth, development in WEF report

Ranked in the bottom half of the 38 countries that make up our lower middle income bracket.

  1. India’s overall place in the Global Competitiveness Index 2014–2015 rankings is 71 out of 144 countries.
  2. Particularly disappointing is its position in terms of Fiscal Transfers, where it ranks 37th out of 38. It also ranks very low at 32nd for Tax Code and 36th for social protection.
  3. WEF said that India would need to prioritise improvement would be ‘Asset building and entrepreneurship’, in particular the Small business ownership.
  4. For business and political ethics, India ranks 12th, while it ranks 11th on the Financial intermediation of real economy investment pillar, which suggests that money invested in the economy generally gets directed towards productive uses.

What are the parameters of Global Competitiveness Index ? Why it is important for Indian economy?

Aug, 02, 2015

India aiming to be among top 30 in ‘ease of doing business’

  1. Currently, India is ranked 142nd out of 189 countries ranked by the WB.
  2. Contributions are expected from initiatives like e-biz portal, GST, mobile platform for setting up business and closer cooperation with states.
  3. Initiatives like Skill India, Make in India, Mudra Bank etc. will further provide an impetus to achieve the target.
Aug, 01, 2015

Centre to pump Rs. 70,000 cr. into PSU banks

  1. In a bid to boost investments, Centre will over the next four years infuse Rs.70,000 crore out of budgetary allocations into PSU banks – Rs. 25,000 in this year and the next, Rs.10,000 crore in 2017-18 and 2018-19.
  2. NIIF will make equity investments of Rs. 20,000 crore every year in commercially viable long gestation projects.
  3. Reason for the capital infusion is global and domestic slowdown in demand, menace of NPAs and lowered profitability of PSU banks.
  4. NIIF is owned 49% by the govt. outside the purview of the Parliament and CAG, and is run by commercial managers.
Jul, 23, 2015

A Labour Litmus Test


 

  1. The Industrial Disputes Act proves to be an impediment in the investments in India because of a chapter, which was incorporated into it during Indira Gandhi’s regime.
  2. The chapter V-B has a clause which says that any employer who employs a “specified number” of people has to take prior approval of the govt. in the time of layoffs, retrenchment or closure.
  3. In 1976 this “special number” was fixed at 300 workers but later in a 1984, it was changed to 100, thereby making the provision even more restrictive.
  4. We need to ensure a balance between workers protection and investors confidence.
  5. Indian labour laws are seen as some of the most restrictive in the world.
Jul, 04, 2015

CCI amends merger regulations to increase ease of doing business

What is the intent?

The changes to regulations are intended to make the paperwork for mergers and acquisitions simpler, and bring in greater transparency, clarity and reduce delays.


 

  1. The measures would make for greater ease of doing business, a parameter on which India has consistently come up short.
  2. India dropped two places to rank 142nd in the World Bank’s Ease of Doing Business report last year.
Jul, 02, 2015

Govt. to roll out road map for corporate tax reduction

  1. Government in the next 45 days will unveil the road map of how it will go about reducing the corporate tax rate.
  2. Plan is reduce it to 25% over 4 years, and eliminate the existing incentives and exemptions.

Though the effective rate of collection is 23% due to many exemptions but the base rate of 30% is much higher than global standards making our domestic industry uncompetitive.

Jul, 01, 2015

[Discuss] Can corruption be good for the economy?

We have been talking about Ease of Business and what not, right! Let’s take a quirky detour around the murkier waters and try to answer the question above in the Indian context.


 

Of course, we are not talking about those sinister, outrageous corruption marathons, but what if we say this – a bit of controlled malfeasance can work like a lubricant that makes it easier for us to address some of our most pernicious social ills.

The Fortune begs you to think – 

Most of us fail to imagine that corruption can also grease the wheels of prosperity. Yet in places where bureaucracies and organizations are inefficient (meaning entrepreneurs and big firms struggle to transport or export or comply with regulation), corruption could improve efficiency and growth. Bribes can act like a piece rate or price discrimination, and give faster or better service to the firms with highest opportunity cost of waiting.


 

Although, there is an equally important world view which says this – 

  1. Most of the time, corrupt officials are like parasites that feed off society and benefit only themselves.
  2. Furthermore, as corruption becomes more prevalent, ethical people lose faith in the system and are sapped of their drive to work honestly.
  3. But it’s important to understand that because we live in an imperfect world, a bit of controlled corruption can function as a lubricant to overcome some of our worst problems.
Jun, 14, 2015

To cut project delays, Telangana brings in ‘Right to Clearance’

  1. Right to Clearance, on the lines of Right to Information, for industrial projects.
  2. For every day of delay in clearance, the State will fine the official concerned Rs. 1,000. No country has such a policy, the government says.
  3. The Right to Clearance is intended to convey a message that the government is determined to create an ecosystem in which ease of doing business “matches and even exceeds the best global standards”.
Jun, 12, 2015

[cd explains] Bits & pieces of the Doing Business report

 

Jun, 11, 2015

World Bank team in India to assess ease of doing business

  1. India is currently ranked 142 among 189 nations in World Bank’s Ease of Doing Business 2015 study.
  2. With the exception of 2 parameters (Getting credit and Protecting minority investors), India does not feature in the top 100 in the remaining parameters.
  3. Recent measures taken by the GoI on the ease of doing business?
  4. Removal of minimum paid-up capital requirement for companies, only 3 documents required for exports and imports, removal of requirement of filing declaration of commencement for companies etc.
May, 26, 2015

States to be ranked on ease of doing business: DIPP

  1. Department of Industrial Policy and Promotion will assess and rank them in terms of ease of doing business with the help of the World Bank.
  2. This is aimed at prompting competitiveness among states to attract investments.
  3. By July-end, the result of the ranking would be declared, which would help in further alluring investments.
Mar, 16, 2015

Centre identifies parameters to ensure ease of doing business

  1. The Centre has identified some 98 parameters to ensure ease of doing business in India.
  2. The measures include digitizing the process of applying for industrial licenses, industrial entrepreneurial memorandum and also setting up of the e-biz platform.
  3. States must benchmark themselves against model nations such as Singapore to achieve industrial growth and attract investment.
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