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Subject: Economics

  • Windfall Gains Tax on Oil Production, Diesel-Petrol Export Removed

    Why in the News?

    With global oil prices stabilizing and domestic fuel supply improving, the government has decided to scrap the windfall gains tax, ensuring more predictable taxation for the oil industry.

    What is Windfall Tax?

    • A windfall tax is a levy imposed on companies experiencing unexpected profits due to external factors like market shifts or crises.
    • In India, it was introduced on July 1, 2022, targeting domestic crude oil production and exports of diesel, petrol, and ATF.
      • The tax aimed to capture windfall profits and ensure adequate domestic fuel supply amid rising global prices after Russia’s invasion of Ukraine.
    • The tax was imposed as Special Additional Excise Duty (SAED) on crude oil, and Additional Excise Duty (AED) or Road and Infrastructure Cess (RIC) on fuel exports.
    • Initially, the tax was Rs 23,250 per tonne on crude oil, Rs 13 per litre on diesel exports, and Rs 6 per litre on petrol and ATF exports.
    • The tax was regularly reviewed based on global oil price fluctuations.

    Impact of Removing Windfall Tax

    • Stable Tax Environment: Boosts predictability, encouraging long-term investments in oil production.
    • Revenue Decline: The tax was generating less revenue, falling from Rs 25,000 crore in FY 2022-23 to Rs 6,000 crore in FY 2024-25.
    • Oil Companies’ Profitability: Increased profits for producers like ONGC and Reliance Industries as they no longer pay the levy.
    • Encourages Domestic Production: Promotes higher domestic oil production and exploration.
    • Policy Confidence: Signals that India is confident in stable global oil prices and future supply.

    PYQ:

    [2020] The term ‘West Texas Intermediate’, sometimes found in news, refers to a grade of:

    (a) Crude oil

    (b) Bullion

    (c) Rare earth elements

    (d) Uranium

  • GDP was lower than expected. Here’s how to move ahead

    Why in the News?

    India has been growing well even with global challenges. After growing by 8.2% in 2023-24 and 6.7% in the first quarter of 2024-25, growth slowed down to 5.4% in the second quarter.

    Is the Slowdown in GDP Growth a Temporary Setback or a Sign of a Longer-Term Trend?

    • Current Growth Trends: India’s GDP growth decelerated to 5.4% in the second quarter of FY 2024-25, down from 6.7% in the previous quarter and 8.1% in the same quarter last year. This sharp decline has raised concerns about the sustainability of growth, particularly given that industrial performance has been poor, especially in the mining, manufacturing, and electricity sectors.
    • Sectoral Performance: The industrial sector’s growth slowed to 3.6% from 8.3%, indicating significant challenges in manufacturing and mining.
      • While agriculture has shown recovery due to good Kharif harvests, and the services sector remains robust, the overall industrial slowdown suggests vulnerabilities that could impact future growth.
    • Expectations for Recovery: Despite the current slowdown, there are expectations for GDP growth to rebound in the latter half of the fiscal year due to improved government expenditure and rural consumption. However, this recovery is contingent upon various factors, including global economic conditions and domestic consumption patterns.
    • Long-Term Concerns: Analysts caution that while some recovery is anticipated, the overall GDP growth for FY 2024-25 is projected to be lower at around 6.5%, which is a decrease from the 7-8% range seen in previous years.

    Measures to Stimulate Consumer Sentiment and Boost Household Spending

    • Tax Benefits for Households: The government could consider implementing tax incentives aimed at increasing disposable income for households, thereby encouraging spending. This could involve direct tax cuts or enhanced deductions for certain expenditures.
    • Job Creation Initiatives: A strong focus on job creation, especially in sectors vulnerable to automation, could bolster household incomes and consumer confidence. Initiatives could include skill development programs and incentives for businesses that hire more workers.
    • Support for Agriculture: Given the positive impact of agricultural performance on rural consumption, enhancing support for farmers through subsidies or better access to markets could further stimulate spending in rural areas.
    • Addressing Inflation Concerns: Moderating food inflation through effective supply chain management and price controls could help ease consumer spending pressures. Ensuring stable prices for essential commodities would improve overall consumer sentiment.
    • Incentives for Private Investment: Encouraging private sector investment through favorable policies and easing regulatory burdens can lead to increased economic activity and job creation.

    How Should Policymakers Respond to Current Economic Challenges? (Way forward)

    • Enhance Public Investment: Policymakers should prioritize increasing government capital expenditure (capex), which has been weak due to election-related restrictions. A robust public investment strategy can stimulate economic activity and create jobs.
    • Focus on Deregulation: Continued efforts to deregulate sectors can improve business confidence and attract private investments, fostering a more conducive environment for growth.
    • Monitor Global Developments: Policymakers need to remain vigilant regarding global economic trends that could impact India’s economy, including potential trade wars or geopolitical tensions. Preparing contingency plans will be crucial in mitigating risks associated with global volatility.
    • Strengthen Domestic Demand: Given the uncertain global environment, strengthening domestic demand through targeted fiscal policies will be essential for sustainable growth. This includes measures that directly enhance consumer spending power.
    • Long-Term Growth Strategy: A comprehensive strategy focusing on enhancing productivity across sectors, investing in infrastructure, and fostering innovation will be critical for raising India’s potential GDP growth over the long term.

    Mains PYQ:

    Q Despite India being one of the countries of Gondwanaland, its mining industry contributes much less to its Gross Domestic Product (GDP) in percentage. Discuss. (UPSC IAS/2021)

  • [pib] SHAKTI Yojana

    Why in the News?

    The SHAKTI Yojana plays a crucial role in enhancing the reliability of coal supply for India’s power sector.

    About SHAKTI Yojana:

    Details • SHAKTI stands for Scheme for Harnessing and Allocating Koyala Transparently in India.
    • Introduced by: Ministry of Coal, Government of India.
    • Launched in 2018, with amendments in March 2019 and November 2023.
    • Purpose: Ensure transparent coal allocation to the power sector, especially stressed power units facing coal shortages.
    Objective Allocate coal supplies to power plants that are unable to secure adequate fuel, ensuring consistent and transparent coal supply to power plants.

    Features:

    Fuel Supply Agreement (FSA): Coal supplied through FSA with Letter of Assurance (LoA) holders, ensuring continuation of supply at 75% of the Annual Contracted Quantity (ACQ).

    Coal Linkages: Linkages granted to State/Central Generating Companies and Independent Power Producers (IPPs) with Long-Term PPAs.
    Significance • Ensures coal supply to stressed units, supporting new power plants and promoting transparency in coal allocation.
    • Supports uninterrupted power generation by ensuring consistent fuel supply.

     

    About India’s Coal Gasification Vision:

    To achieve 100 MT of coal gasification by FY 2030, with a focus on sustainable practices and reducing carbon emissions.

    • Incentive: Reimburse GST compensation cess on coal used for gasification projects for 10 years, contingent on cess extension beyond FY27.
    • Target: Attract both Government PSUs and the Private Sector to drive innovation and investment in coal gasification.
    • Process: Entities selected through a transparent bidding process; government support for eligible PSUs and private firms to implement projects.

     

    PYQ:

    [2019] Consider the following statements:

    1. Coal sector was nationalized by the Government of India under Indira Gandhi.

    2. Now, coal blocks are allocated on lottery basis.

    3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self-sufficient in coal production.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 3 only

    (d) 1, 2 and 3

  • Prospects and Concerns for the Rabi Crop

    Why in the News?

    Due to high October temperatures and shortages of di-ammonium phosphate (DAP) fertiliser, the planting of key Rabi (winter-spring) crops such as wheat, mustard, and chana (chickpea) has been slower than usual.

    Low Rabi Sowing this Year

    • The Rabi (winter-spring) season is key for crops like wheat, mustard, and chana.
    • Sowing began in October and continues through November-December.
    • As of November 8, 2024, sowing progress includes:
      • Wheat: 41.30 lakh hectares (down from 48.87 lakh hectares last year)
      • Mustard: 49.90 lakh hectares (down from 50.73 lakh hectares last year)
      • Chana: 24.57 lakh hectares (down from 27.42 lakh hectares last year)
    • Reasons Behind:
      • High October Temperatures: 0.68°C above normal temperatures delayed sowing and caused poor germination, especially in jeera and other spices.
      • Fertiliser Shortage: A shortage of DAP fertiliser hindered the timely planting of crops.
      • Delayed Start of Sowing: Farmers, particularly in Uttar Pradesh, began sowing later than usual (from October 20-22 instead of mid-October).

    About Rabi Cropping Season in India:

    • Rabi crops are generally sown in mid-November, once the monsoon rains have receded.
    • These crops grow using the rainwater that has percolated into the soil or with the help of irrigation systems.
    • The harvesting of Rabi crops generally occurs from April to May.
    • Major Rabi Crops:
      • Wheat: The largest and most important Rabi crop in India.
      • Barley: Grown mainly in North and Central India.
      • Mustard: An essential oilseed crop grown across various regions.
      • Sesame: Grown in many states but harvested early.
      • Peas: Harvested early, with a market peak from January to March (especially in February).
    • Agronomic Features:
      • Rabi crops rely heavily on irrigation and residual moisture from the previous monsoon season.
      • Excessive winter rainfall can harm Rabi crops but benefits the kharif crops grown later.
    rabi crop
    PC: Wikipedia

    PYQ:

    [2013] Consider the following crops:

    1. Cotton
    2. Groundnut
    3. Rice
    4. Wheat

    Which of these are Kharif crops?

    (a) 1 and 4

    (b) 2 and 3 only

    (c) 1, 2 and 3

    (d) 2, 3 and 4

  • North Eastern Tea Association (NETA)

    Why in the News?

    • The North Eastern Tea Association (NETA) has appealed to Ministry of Commerce and Industry seeking permission for tea producers to sell their products through both private sales and public auction systems.
      • A gazette notification issued on February 26, 2024 has mandated that 100% of dust teas must be sold through public auctions.

    About North Eastern Tea Association (NETA)

    Details • NETA is an association of tea producers headquartered in Golaghat, Upper Assam.
    • Established in 1981.
    • A key constituent of the Joint Forum and the Consultative Committee of Plantation Associations (CCPA), Assam Valley branch.
    • Focuses on promoting the interests of its members and enhancing the tea industry in Assam.
    Structural Mandate • Presence: Strong presence in Golaghat, Assam.
    • Role: Represents tea producers and plays a pivotal role in the development of Assam’s tea industry.
    • Mandate: Advocates for improvements in the tea industry, assists with policy suggestions, and provides guidance on the development of the tea sector.
    Powers and Functions • Advisory Role: Provides expert opinions and advice to the government of Assam and its members on issues related to the tea industry.
    • Policy Advocacy: Urges for changes in government policies to improve the tea industry, e.g., suggesting the relocation of the Tea Board of India’s headquarters to Guwahati.
    • Industry Growth: Encourages high-quality tea production and advises growers to enhance the quality of tea to attract international buyers.
    • Small Tea Grower Representation: Advocates for amendments to the definition of Small Tea Growers, proposing that those holding up to 50.6 hectares of land be recognized as small growers.
    • Government Relations: Provides suggestions to the government for improving and scaling up the tea industry in Assam.

     

    PYQ:

    [2022] Consider the following States:

    1. Andhra Pradesh
    2. Kerala
    3. Himachal Pradesh
    4. Tripura

    How many of the above are generally known as tea-producing States?

    (a) Only one State

    (b) Only two States

    (c) Only three States

    (d) All four States

  • [pib] Nutrient Based Subsidy (NBS) scheme

    Why in the News?

    • The government has a Nutrient Based Subsidy (NBS) scheme to regulate the subsidy rates for Phosphatic and Potassic (P&K) fertilizers, based on international prices of raw materials and fluctuations in the global market.
    Note:  Unlike P&K fertilizers, urea is provided to farmers at a statutorily notified Maximum Retail Price (MRP), irrespective of its cost of production.

    About the Nutrient Based Subsidy (NBS) Scheme:

    Details
    About • Introduced to provide subsidies on Phosphatic (P) and Potassic (K) fertilizers, based on nutrient content, excluding Urea.
    • Aims to promote balanced fertilization by encouraging use of multiple fertilizers for optimal plant nutrition.
    Structure and Functioning • Launched: 2010, under the Ministry of Chemicals and Fertilizers.
    • Implemented by the Department of Fertilizers, Ministry of Chemicals and Fertilizers.
    • Scope: Applies to Phosphatic and Potassic fertilizers (excluding Urea).
    • Governance: Subsidy rates are decided annually or bi-annually, based on market prices of fertilizers and raw materials.
    Aims and Objectives • Promote Balanced Fertilization: Encourages the use of Phosphorus and Potassium to complement Nitrogen and improve soil health.
    • Enhance Nutrient Efficiency: Aims to reduce over-reliance on Urea and improve use of other essential nutrients.
    • Support Farmers’ Affordability: Makes P&K fertilizers more affordable and accessible to farmers.

     

    About New Investment Policy (NIP) on Urea 

    • The NIP for Urea was announced by the Government of India in 2012 to increase domestic urea production capacity and reduce dependence on urea imports.
    • The policy aims to revive old urea plants and promote investment in new plants to meet the growing demand for urea.
    • The NIP focuses on improving fertilizer availability, and ensuring self-sufficiency in urea production.

    Urea Pricing after NIP

    • The pricing of urea is controlled by the government, and the subsidy mechanism ensures affordable pricing for farmers.
    • The government provides subsidies to urea manufacturers to bridge the gap between the cost of production and the retail price, which is kept constant at ₹5,360 per ton (as of 2023) for farmers.

     

    PYQ:

    [2020] With reference to chemical fertilizers in India, consider the following statements:

    1. At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.

    2. Ammonia, which is an input of urea, is produced from natural gas.

    3. Sulphur, which is a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

  • [pib] India and ADB sign $98 million loan to promote Plants Health management

    Why in the News?

    • The Government of India and the Asian Development Bank (ADB) have signed a $98 million loan to support the Building India’s Clean Plant Programme.

    Aims and Objectives

    • The $98 million loan focuses on improving horticulture crop farmers’ access to certified disease-free planting materials.
    • The primary aim is to boost the yield, quality, and resilience of crops, particularly in response to the impacts of climate change.

    About the Atmanirbhar Clean Plant Programme (CPP):

    Details • Announced in Union Budget 2023-24 to enhance plant health management in India.
    • Aimed at providing farmers access to clean, disease-free planting materials.
    • Anchored by the National Horticulture Board (NHB), which will set up Clean Plant Centers across the country.
    • Ensures global competitiveness of the Indian horticulture sector.
    • Key Objectives:
    – Strengthen the regulatory framework for plant health management.
    – Establish Clean Plant Centres for disease-free horticultural crops.
    – Collaborate with private nurseries, researchers, state governments, and growers’ associations for success.
    • Funding: ADB loan to establish advanced laboratories and diagnostic testing facilities at Clean Plant Centres.
    • Will include a certification scheme for private nurseries to produce disease-free planting materials.
    Where does India stand in its Horticulture Sector? • In 2022-23, India’s horticulture production reached 351.92 million tonnes, surpassing foodgrain production.
    • Second largest producer of fruits and vegetables in the world; Contributes about 33% to the agriculture Gross Value Added (GVA).
    • Ranks first in the production of crops like Bananas, Lime, Papaya, and Okra.
    • Steady increase in horticulture production driven by proactive government policies.

     

    PYQ:

    [2021] What are the present challenges before crop diversification? How do emerging technologies provide an opportunity for crop diversification?

    [2018] Assess the role of National Horticulture Mission (NHM) in boosting the production, productivity and income of horticulture farms. How far has it succeeded in increasing the income of farmers?

  • [pib] India Post Payments Bank (IPPB)

    Why in the News?

    The Minister of State for Communications has provided crucial information about the India Post Payments Bank (IPPB).

    About India Post Payments Bank (IPPB):

    Details
    What is it? Division of India Post under the Ministry of Communications, launched in 2018.

    Operates as payments bank.
    Vision and Principles • Objective: Promote financial inclusion by providing accessible and affordable financial services.
    • Customer-Centric: Focuses on delivering secure and affordable banking to rural and underserved areas.
    Empowerment Initiatives by IPPB • Financial Inclusion: Offers savings accounts, current accounts, money transfers, bill payments, and insurance.
    • Aadhaar-Linked Services: Implements Aadhaar-enabled Payment System (AePS) for easy and secure transactions.
    • Doorstep Banking: Provides banking services through 3 lakh postmen and Grameen Dak Sewaks.
    • Rapid Expansion: Reached 4 crore customers by December 2020 and crossed 8 crore customers by January 2022, with over 9 crore customers as of March 2024.

     

    Back2Basics: Payments Bank

    • A payments bank operates like a regular bank but without credit risk.
    • It was set up based on the recommendations of the Nachiket Mor Committee.
    • Objective: To promote financial inclusion, especially in unbanked areas, serving migrant workers, low-income households, and small entrepreneurs.
    • Payments banks are registered as public limited companies under the Companies Act, 2013, and licensed under the Banking Regulation Act, 1949.
    • Governed by the Banking Regulation Act, RBI Act, 1934, and the Foreign Exchange Management Act, 1999.
    • Services Offered:
        • Minimum paid-up equity capital is Rs. 100 crores.
        • Can accept deposits up to Rs. 2,00,000 in savings and current accounts.
        • 75% of deposits must be invested in government securities (SLR), with the remaining 25% placed as time deposits with other scheduled commercial banks.
        • Offers remittance services, mobile payments, ATM/debit cards, net banking, and third-party fund transfers.
        • Act as a banking correspondent (BC) for credit and other services.
    • Limitations:
      • Cannot issue loans or credit cards.
      • Cannot accept time deposits or NRI deposits.
      • Cannot set up subsidiaries for non-banking financial activities.

     

    PYQ:

    [2018] Which one of the following links all the ATMs in India?

    (a) Indian banks’ Association

    (b) National Securities Depository Limited

    (c) National Payments Corporation of India

    (d) Reserve Bank of India

  • [pib] Indian Chemical Council wins 2024 OPCW-The Hague Award

    Why in the News?

    The Indian Chemical Council (ICC) was honored with the prestigious Organisation for the Prohibition of Chemical Weapons (OPCW), The Hague Award during the 29th Session of the Conference of the States Parties.

    Significance of the OPCW-The Hague Award

    • Purpose: The award recognizes contributions to advancing the goals of the Chemical Weapons Convention (CWC), focusing on chemical safety, disarmament, and global security.
      • This year, the award was given to the Indian Chemical Council (ICC), the first chemical industry body to receive it, for its role in promoting chemical safety and CWC compliance.
    • Global Impact: The award emphasizes ICC’s work in collaboration with international bodies and advocacy for sustainable practices in chemical security.
    • Legacy: The OPCW, which won the Nobel Peace Prize in 2013, continues to honor impactful organizations and individuals contributing to the global disarmament agenda.

     

    What is the Chemical Weapons Convention (CWC)?

    Details
    What is it? • CWC bans the development, use, and stockpiling of chemical weapons and mandates their destruction.
    • Genesis: Negotiations began in 1980.
    • Established: Opened for signature on January 13, 1993, and entered into force on April 29, 1997.
    • More comprehensive than the 1925 Geneva Protocol, which only banned the use of chemical weapons.
    Structure and Functions • Conference of States Parties (CSP): The main decision-making body, meeting annually.
    • Executive Council: 41-member body overseeing CWC implementation.
    • Technical Secretariat: Provides support for verification and compliance.
    • Verification: Inspects facilities and ensures compliance with the treaty.
    Membership criteria and members • Open to all nations: Any state can join if it meets requirements.
    • 193 States-Parties: Includes most nations.
    • Non-Signatories: Egypt, North Korea, and South Sudan have neither signed nor ratified the CWC.
    Functioning Arm • Organization for the Prohibition of Chemical Weapons (OPCW) implements the CWC, headquartered in The Hague.
    • Role: Oversees the destruction of chemical weapons and ensures treaty compliance.
    • Inspection: Conducts inspections of chemical facilities worldwide.
    • Awards: The OPCW won the Nobel Peace Prize in 2013 for its efforts in chemical weapons elimination.

     

    PYQ:

    [2016] With reference to ‘Organization for the Prohibition of Chemical Weapons (OPCW)’, consider the following statements:

    1. It is an organization of the European Union in working relation with NATO and WHO.
    2. It monitors the chemical industry to prevent new weapons from emerging.
    3. It provides assistance and protection to States (Parties) against chemical weapons threats. Which of the statements given above is/are correct?

    (a) 1 only
    (b) 2 and 3 only
    (c) 1 and 3 only
    (d) 1, 2 and 3

  • Central government scheme to promote natural farming launched

    Why in the News?

    Recently, the Union Cabinet approved the “National Mission on Natural Farming (NMNF)”, a Centrally Sponsored Scheme by the Agriculture Ministry to promote natural farming nationwide in mission mode.

    What is Natural Farming?

    • Natural farming is defined by the Agriculture Ministry as a chemical-free agricultural system that relies solely on inputs derived from livestock and plant resources. This approach emphasizes the use of local agroecological principles and traditional knowledge, integrating crops, trees, and livestock to enhance biodiversity and soil health.
    • Aim: The goal is to rejuvenate soil quality while minimizing external inputs, thus reducing costs for farmers and promoting healthier food production.

    How is the NMNF Different from Earlier Interventions?

    The NMNF represents an evolution of previous initiatives, particularly the Bhartiya Prakritik Krishi Paddhti (BPKP), which was launched in 2019. 

    • Higher Budgetary Outlay: The NMNF has a total financial outlay of ₹2,481 crore, with ₹1,584 crore from the central government and ₹897 crore from states until 2025-26.
    • Targeting More Farmers: The mission aims to engage over one crore farmers, significantly expanding its reach compared to earlier efforts.
    • Establishment of Standards: It seeks to create scientifically supported standards and streamlined certification processes for naturally grown produce, along with a national brand for such products.

    Why is it Necessary to Diversify the Farming Basket?

    • Environmental Sustainability: Reducing chemical inputs helps restore soil health and biodiversity, making agriculture more resilient to climate change.
    • Economic Viability: By promoting local inputs and reducing dependency on purchased fertilizers, farmers can lower their costs and increase their profitability.
    • Food Security: A diverse agricultural system can lead to improved food quality and nutritional security for communities.

    Why a Mission on Natural Farming is Needed?

    • Excessive Fertilizer Use: The initiative targets districts with high fertiliser consumption, aiming to shift practices towards more sustainable methods that rejuvenate soil health and reduce environmental degradation.
    • Health Risks: By eliminating synthetic chemicals from farming, the mission aims to lower health risks associated with pesticide exposure for both farmers and consumers.
    • Climate Resilience: Natural farming practices enhance resilience against climate-related challenges such as droughts and floods by improving soil structure and water retention capabilities.

    Way forward: 

    • Policy and Infrastructure Support: Strengthen institutional frameworks by expanding Bio-input Resource Centres (BRCs), offering financial incentives, and ensuring easy access to natural farming resources and certification systems.
    • Awareness and Capacity Building: Conduct large-scale training programs for farmers on natural farming practices, promote successful models through Krishi Vigyan Kendras (KVKs), and foster collaborations with agricultural universities for research and innovation.

    Mains PYQ:

    Q What is an Integrated Farming System? How is it helpful to small and marginal farmers in India? (UPSC IAS/2022)