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Subject: Economics

  • What is the Google ‘monopoly’ antitrust case and how does it affect consumers?     

    Why in the news?

    US Federal court ruled Google’s $26 billion payments to default on smartphone browsers violated US antitrust law, blocking competitors and benefiting the Justice Department.

    About Google’s Antitrust Case

    • The U.S. Department of Justice (DOJ) brought an antitrust case against Google, accusing it of maintaining a monopoly in the online search and advertising sectors.
    • The DOJ argued that Google’s dominance was achieved through exclusive distribution agreements, which prevented competitors from succeeding in the market.

    What Did the Ruling State?

    • Google Monopolistic Practices: Google broke antitrust laws to keep its monopoly on “general search services” and “general search text ads.”
    • Note: The Sherman Antitrust Act is a landmark U.S. federal law enacted in 1890 to promote competition and prevent monopolistic practices.
    • Advantageous position due to the “default” search engine: The Google company has an unseen advantage over its competitors where it’s search engine processes an estimated 8.5 billion queries per day worldwide.
      • The present judgment by US District of Colombia limits itself to the relevant geographic market of the US.
    • Paying billions to smartphone makers: Google was accused of paying billions to smartphone makers like Apple and Samsung to ensure Google was the default search engine on their devices and browsers.

    How Do Monopolistic Practices Harm Consumer Experience?

    • Impact on Competition: Monopolistic practices, like those exhibited by Google, stifle competition by preventing rivals from entering the market and can lead to higher prices and reduced innovation.
    • Unfair Platform for Start-ups: The new start-ups would have to surmount the entry barriers to create a GSE of comparable quality to Google. These barriers would cost high capital, access to distribution channels, and brand recognition.
    • Quality Degradation: A monopolist may lose the incentive to improve the quality of its products, as there is little risk of losing customers to competitors.
      • The ruling highlighted that Google conducted a study in 2020 that showed it would not lose search revenue even if it significantly reduced the quality of its search product.
    • Limites the choices of consumer: When a company holds a monopoly, consumers are often left with few alternatives, allowing the monopolist to exploit its position.

    Government Initiatives taken in India for similar line:

    The Draft Competition Bill 2024: The Ministry of Corporate Affairs’ Bill prevents giant tech companies/ Systemically Significant Digital Enterprises (SSDEs) from participating in anti-competitive practices.

    • The Bill imposes restrictions on SSDEs, barring them from favouring their own products and services, and from using or sharing users’ personal data without their consent.
    • Big tech companies have objected to the Bill because the compliance burdens would shift focus from innovation and research.

    Way forward: 

    • Encouraging Innovation: Governments and regulatory bodies should support the development of alternative search engines and platforms through incentives, grants, and support for startups.
    • Banning Exclusive Agreements: Prohibit exclusive distribution agreements that make one product or service the default, ensuring that consumers have a choice and that competitors can fairly compete.

    Mains question for practice: 

    Q Discuss the significance of India’s Competition Act, 2002 in regulating anti-competitive practices and promoting a fair market environment. 10M

  • Diamond Imprest Licence

    Why in the News?

    • Union Minister for Commerce and Industry has introduced Diamond Imprest Licence at the 40th edition of the India International Jewellery Show (IIJS) 2024.
      • The event was organized by the Gem & Jewellery Export Promotion Council (GJEPC).

    What is the Diamond Imprest Licence?

    • The Diamond Imprest Licence is a regulatory framework introduced by the Indian government to facilitate the import of diamonds for exporters, particularly benefiting Micro, Small, and Medium Enterprises (MSMEs) in the diamond industry.
    • It will allow Indian diamond exporters who meet a certain export turnover threshold to import up to 5% of their average export turnover over the preceding three years.
    • This policy aims to create a level-playing field for MSME diamond exporters, enabling them to compete more effectively with larger industry peers.

    About the Gem & Jewellery Export Promotion Council (GJEPC )

    Details
    Establishment
    • Established in 1966 by the Ministry of Commerce and Industry, Government of India.
    • Granted an autonomous status in 1998.
    Headquarters
    • Mumbai, India
    • Regional offices in New Delhi, Kolkata, Chennai, Surat, Jaipur
    Membership Represents almost 7,000 exporters from across India.
    Role and Functions
    • Promotes exports of gems and jewellery
    • Presents industry issues to the government and recommends policy interventions.
    Common Facility Centers (CFCs) Established in Amreli, Visnagar, Palanpur, and Junagadh in Gujarat.
    Services include planning, laser sawing, and cutting facilities to process diamonds.
    Awards Organizes premier jewellery design competitions and awards, celebrating creativity and innovation in jewellery design.
    Key Events Hosts the Design Inspirations seminar annually in Mumbai, educating jewellers, designers, and students about upcoming trends in India, Europe, and the US.
    Educational Institutes Operates 7 educational institutes across five cities, including the Indian Institute of Gems & Jewellery (IIGJ) in Mumbai, Jaipur, Delhi, Varanasi, and Udupi.
    Gemmological Laboratories
    • Gemmological Institute of India (GII), Mumbai: Established in 1971, focusing on gemological training, research, and certification.
    • Gem Testing Laboratory, Jaipur: Specializes in grading and certifying colored gemstones.
    • Indian Gemological Institute, New Delhi: Provides gem testing and certification services, particularly for the North Indian market.

     

    PYQ:

    [2018] Which one of the following foreign travelers elaborately discussed about diamonds and diamond mines of India?

    (a) Francois Bernier

    (b) Jean-Baptiste Tavernier

    (c) Jean de Thevenot

    (d) Abbe Barthelemy Carre

  • What is the Yen Carry Trade? Why is it unwinding right now?

    Why in the news?

    The global stock and bond markets, especially Japan’s, are experiencing turmoil due to the unwinding of the immensely popular yen carry trade.

    What is Yen carry trade?

    • The yen carry trade is a popular currency trading strategy that involves borrowing Japanese yen at low interest rates and using the funds to invest in higher-yielding assets denominated in other currencies, with the goal of profiting from the interest rate differential.

    Why is it unwinding right now?

    • Strengthening Yen: The Japanese yen has appreciated significantly, rising over 3% against the dollar after the Bank of Japan (BoJ) raised interest rates to 0.25% and announced a reduction in bond purchases. This strengthening of the yen diminishes the profitability of the carry trade, which relies on a weaker yen to remain viable.
    • Interest Rate Changes: Expectations of imminent interest rate cuts by the U.S. Federal Reserve have contributed to the dollar’s weakness, further impacting the carry trade. As the interest rate differential narrows, the incentive to maintain yen carry positions decreases.

    How does it work?

    • Mechanism: The yen carry trade involves borrowing yen at low interest rates and converting it into higher-yielding currencies. Investors use the borrowed yen to purchase assets in currencies that offer better returns, such as U.S. dollars or Australian dollars.
    • Investors typically aim for annualized returns of around 5% to 6% on dollar-yen carry trades, which is the difference between U.S. and Japanese interest rates. The strategy can be lucrative as long as the yen does not appreciate significantly against the currencies in which the investments are made.

    How did it begin?

    • The yen carry trade can be traced back to 1999 when Japan lowered its policy rates to zero following an asset price bubble burst. This led Japanese investors to seek better returns in international markets, effectively turning Japan into the world’s largest creditor nation.
    • The contemporary form of the carry trade gained prominence in 2013 under Prime Minister Shinzo Abe’s quantitative easing policies, coinciding with rising U.S. rates and a depreciating yen. This trend intensified in 2022 and 2023 as the Federal Reserve raised rates rapidly while the Bank of Japan maintained negative short-term rates.

    How large Is It?

    • The estimated size is about $350 billion in short-term external loans by Japanese banks attributed to yen-funded carry trades. However, this figure may not fully capture the extent of the trades, as it could include commercial transactions or loans to foreign businesses.
    • The actual size of yen carry trades could be larger due to the leverage used by hedge funds and computer-driven funds.

    Is it coming to an end?

    • The Bank of Japan has recently started raising rates, which has led to a stronger yen. As a result, the yield gap between Japanese and other currencies has narrowed, diminishing the profitability of carry trades.
    • The appreciation of the yen (by about 13% in a month) has prompted leveraged investors to unwind their positions, leading to a sell-off in global stock and bond markets. This unwinding is driven by the need to repay yen loans as the currency strengthens, causing further declines in asset prices internationally.

    Conclusion: The yen carry trade is unwinding due to the strengthening yen and narrowing interest rate differentials. As the yen appreciates, profitability decreases, prompting investors to exit positions, leading to global market sell-offs. This trend signifies a shift in monetary policies and changing economic conditions affecting currency trading strategies.

  • [pib] New Schemes for Co-operatives

    Why in the News?

    The Ministry of Cooperation, since its inception on 6th July 2021, has taken many initiatives to strengthen and deepen the cooperative movement at the grassroots level.

    What is a Co-operative?

    • A cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”.
    • Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors.

    Evolution of Cooperatives in India:

    Pre-Independence Era:

    • First Cooperative Act (1904): Enacted after the Indian Famine Commission (1901) suggested cooperative credit societies to tackle rural debt.
    • Cooperative Societies Act (1912): Amended the 1904 Act to include non-credit societies and support the cooperative movement.
    • Maclagan Committee (1915): Evaluated the cooperative movement’s economic and financial stability.
    • Montague-Chelmsford Reforms (1919): Made cooperation a provincial subject, boosting regional cooperative initiatives.
    • Post Economic Depression (1929): Various committees in regions like Madras, Bombay, Travancore, Mysore, Gwalior, and Punjab restructured cooperatives.
    • Gandhian Influence: Gandhi promoted cooperatives for a socialistic society and decentralization. Established the Phoenix Settlement and Tolstoy Farm as cooperative settlements in South Africa.

    Post-Independence Era:

    • First Five-Year Plan (1951-56): Emphasized cooperatives for comprehensive community development.
    • Multi-State Co-operative Societies Act (2002): Regulated the formation and functioning of multi-state cooperatives.
      • Amendment (2022): Introduced the Co-operative Election Authority to oversee board elections in multi-state cooperatives.
    • 97th Constitutional Amendment (2011): Made the right to form cooperatives a fundamental right under Article 19.
      • Added Part IX-B to the Constitution, establishing “The Co-operative Societies” (Articles 243-ZH to 243-ZT).
      • Empowered Parliament to legislate for multi-state cooperative societies and state legislatures for other cooperatives.
    • Union Ministry of Cooperation (2021): Created to oversee cooperative affairs, previously under the Ministry of Agriculture.

    Initiatives Making Primary Cooperatives Economically Vibrant and Transparent

    Details
    Model Bye-Laws for Primary Agricultural Credit Societies (PACS)
    • Prepared and circulated to all States/UTs.
    • Enables PACS to undertake over 25 business activities.
    • Adopted by 32 States/UTs.
    Establishing New Multipurpose PACS/Dairy/Fishery Cooperatives
    • Plan to cover all Panchayats/villages in 5 years.
    • 6,844 new PACS, Dairy, and Fishery cooperative societies registered.
    World’s Largest Decentralized Grain Storage Plan
    • Create warehouses and agri-infrastructure at PACS level.
    • Pilot project extended to 500 additional PACS.
    Formation of New Farmer Producer Organizations (FPOs) by PACS
    • 1,100 additional FPOs to be formed by PACS.
    • 992 FPOs formed by NCDC.
    PACS Given Priority for Retail Petrol/Diesel Outlets
    • Included in Combined Category 2 (CC2) for allotment.
    • 270 PACS from 25 States/UTs applied online.
    PACS Eligible for LPG Distributorship
    • Allowed to apply for LPG distributorships.
    • 31 PACS from four States/UTs submitted applications.
    PACS as Pradhan Mantri Bharatiya Jan Aushadhi Kendra
    • Promote PACS to operate Janaushadhi Kendras.
    • 2,594 PACS given initial approval, 674 received drug licenses.
    PACS as Pradhan Mantri Kisan Samriddhi Kendras (PMKSK)
    • Ensure easy accessibility of fertilizer and related services.
    • 38,141 PACS functioning as PMKSK.
    Convergence of PM-KUSUM at PACS Level
    • Farmers can adopt solar agricultural water pumps and install photovoltaic modules.
    Micro-ATMs to Bank Mitra Cooperative Societies
    • Provide doorstep financial services.
    • 2,700 micro-ATMs distributed in Gujarat.
    Rupay Kisan Credit Card to Members of Milk Cooperatives
    • Provide credit at lower interest rates.
    • 48,000 Rupay KCC distributed in Gujarat.
    Formation of Fish Farmer Producer Organization (FFPO)
    • 69 FFPOs registered by NCDC.
    • Department of Fisheries allocated work to convert 1000 fisheries cooperative societies into FFPOs.

     

    Initiatives Strengthening Urban and Rural Cooperative Banks

    Details
    Urban Cooperative Banks (UCBs) Allowed to Open New Branches
    • Open up to 10% (max 5 branches) without prior RBI approval.
    Doorstep Services by UCBs
    • Provide banking facilities at home.
    Extended Time Limit for Priority Sector Lending (PSL) Targets
    • Timeline extended to March 31, 2026.
    Nodal Officer in RBI for UCBs
    • Designated for regular interaction.
    Increased Housing Loan Limit by RBI
    • Doubled for UCBs to Rs. 60 lakhs.
    • Increased to Rs. 75 lakhs for Rural Cooperative Banks.
    Rural Cooperative Banks Lending to Real Estate/Residential Housing
    • Diversify business to benefit Housing cooperative societies.
    Non-scheduled UCBs, StCBs, and DCCBs Notified as MLIs in CGTMSE Scheme Risk coverage up to 85% on loans.
    Doubled Monetary Ceiling for Gold Loan by RBI Increased from Rs. 2 lakhs to Rs. 4 lakh.
    Umbrella Organization for UCBs Approval given to NAFCUB for formation, providing IT infrastructure and operational support.

     

    PYQ:

    [2011] In India, which of the following have the highest share in the disbursement of credit to agriculture and allied activities?

    (a) Commercial Banks

    (b) Cooperative Banks

    (c) Regional Rural Banks

    (d) Microfinance Institutions
  • [7th August 2024] The Hindu Op-ed: Powering up to get to the $30-trillion economy point

    [7th August 2024] The Hindu Op-ed: Powering up to get to the $30-trillion economy point

    PYQ Relevance:

    Mains:

    Q1 Define potential GDP and explain its determinants. What are the factorsthat have been inhibiting India from realizing its potential GDP?  (UPSC IAS/2020) 
    Q2 Explain the difference between the computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC IAS/2021) 

    Note4Students: 

    Mains:  Challenges related to Indian economy ;

    Mentor comments: India aims to achieve a $30 trillion GDP by 2045-2050, driven by robust consumption and exports. Current projections estimate GDP growth at around 6.3% annually, with nominal growth potentially reaching 10-12%. To realize this ambitious target, India must enhance private sector involvement, improve infrastructure, and foster industrial clusters. Urbanization and technological advancements in agriculture will also play crucial roles in boosting productivity and employment. Maintaining a steady growth trajectory is essential for transforming India into a global economic powerhouse while addressing income inequality challenges.

    Let’s learn!

    __

    Why in the News? 

    India should pursue rapid economic growth through liberal policies that harness the potential of the private sector, remaining undeterred by criticisms regarding income inequality.

    Demographic Dividend

    • India’s demographic dividend is poised to peak around 2041 when the share of the working-age population (20-59 years) is expected to hit 59%. This window of opportunity provides a chance for India to achieve higher economic growth by engaging more people in the workforce.
    • By 2020, India had one of the youngest populations in an ageing world, with a median age of just 28, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan. This youthful population can drive innovation and productivity.

    Gender Disparities

    • Female Labor Force Participation Rate (FLFPR): India’s FLFPR stands at 37%, significantly lower than that of countries like China and Japan, which range between 60%-70%. This disparity represents a vast untapped resource, as increasing women’s participation in the workforce could lead to substantial economic benefits and poverty reduction.
    • Post-COVID Recovery: The FLFPR was reported at 26% in 2019, but post-COVID-19, many women have returned to work, primarily in agriculture. This trend underscores the importance of creating more diverse employment opportunities for women in various sectors.

    Economic Growth and Poverty Reduction

    • Historical Context: From 1991 to 2011, India’s economic liberalization led to a significant reduction in poverty, with the poverty rate dropping from approximately 50% to around 20%. This period saw 35 crore people lifted out of abject poverty, illustrating the direct correlation between economic growth and poverty alleviation.
    • Growth Elasticity of Poverty Reduction: The growth elasticity of poverty reduction in India is relatively low, at just over 0.12 between 1995 and 2012.
      • In contrast, countries like China exhibit a higher elasticity (0.28), suggesting that while growth has reduced poverty in India, it has not done so as effectively as in other nations, indicating room for improvement in how growth translates into poverty alleviation
    The growth elasticity of poverty reduction measures how much poverty decreases in response to economic growth, typically expressed as the percentage reduction in poverty per percentage increase in income.

    Structural Challenges

    • Labour Utilization: India has struggled to leverage its surplus labour effectively in low-end manufacturing sectors. The inability to transition workers from low-productivity sectors like agriculture to manufacturing hampers economic diversification and growth potential.
    • Dependency on High-Tech Sectors: The IT sector has provided an alternative growth pathway, but it has limitations in terms of employment generation. 

    Economic Growth Requirements

    • Sustained Growth Rate: To avoid falling into the middle-income trap, India needs to maintain a nominal growth rate of around 8% until 2047. This is crucial for increasing its GDP and per capita income significantly, especially given that it grew at approximately 9% over the last 25 years.
    • 3I Strategy: The World Bank recommends a “3I strategy”—Investment, Infusion, and Innovation. While investment and infusion (adopting foreign technologies) have been effective in the past, India must now focus on fostering innovation to escape the middle-income trap.
      • Countries like South Korea successfully implemented this strategy, which included substantial investments in education and public universities to develop necessary skills for growth.

    Way Forward: 

    • Focus on Manufacturing and Exports: To maximize the potential of its workforce, India should prioritize low-skilled, employment-intensive manufacturing with a strong focus on exports.
      • Historical examples from South Korea, Taiwan, and Vietnam demonstrate that such strategies can lead to sustained economic growth and job creation.
    • Investment in Human Capital: Enhancing education and skill development is essential for preparing the workforce to meet the demands of a rapidly evolving economy. This investment will help improve productivity and earnings, thereby reducing poverty.
    • Avoiding Protectionism: As India seeks to attract global manufacturers, it is crucial to maintain an open trade policy to facilitate growth. High tariffs could hinder the import of necessary goods and technologies, which are vital for boosting domestic industries and exports.

  • RBI Report on Currency and Finance (RCF), 2023-24

    Why in the News?

    The Reserve Bank of India (RBI) released the “Report on Currency and Finance (RCF)” for the year 2023-24 with the theme – India’s Digital Revolution.

    What is the Report on Currency and Finance (RCF)? 

    • The RCF is an annual publication by the Reserve Bank of India (RBI).
    • It covers various aspects of the Indian economy and financial system, providing insights and analysis on current economic conditions, financial stability, and policy issues.
    • The theme for the 2023-24 report is “India’s Digital Revolution.”
    • Focus: It focuses on the transformative impact of digitalization across various sectors in India, especially in the financial sector.
    • Highlights: The report highlights how digital technologies are reshaping economic growth, financial inclusion, public infrastructure, and the regulatory landscape. It also addresses the opportunities and challenges associated with digitalization.

    Key Highlights of the RCF:

    [1] Digital Revolution

    • The RCF emphasizes India’s leading role in the global digital revolution.
    • With robust digital public infrastructure (DPI), evolving institutional frameworks, and a tech-savvy population, India has emerged as a frontrunner in this arena.
    • Key initiatives such as Aadhaar, the world’s largest biometric-based identification system, and the UPI, a real-time, low-cost transaction platform, have revolutionized service delivery and financial inclusion.

    [2] Digitalization in Finance

    • The above-discussed initiatives have made retail payments faster and more convenient, while the RBI’s pilot runs of the E-Rupee position India at the forefront of digital currency initiatives.
    • The digital lending ecosystem is also vibrant, with the Open Credit Enablement Network and the Open Network for Digital Commerce (ONDC) driving growth.

    [3] Remittance Inflows in India

    • India continues to lead as the highest remittance recipient globally, with US$ 115.3 billion in 2023, accounting for 13.5% of the world’s total remittances.
    • The RCF highlights that more than half of India’s inward remittances in 2021 came from the Gulf countries, with North America contributing 22%.
    • The remittance-to-GDP ratio for India has risen from 2.8% in 2000 to 3.2% in 2023, surpassing the gross FDI inflows to GDP ratio of 1.9% in 2023.
    • Looking forward, India is poised to remain a leading supplier of labor, with its working-age population expected to rise until 2048, potentially propelling remittances to around $160 billion by 2029.

    [4] Smartphones Penetration

    • India’s mobile penetration has seen remarkable growth, with internet penetration reaching 55% in 2023 and an increase of 199 million internet users over the past three years.
    • The cost per gigabyte of data in India is the lowest globally, at an average of Rs. 13.32 per GB.
    • India has one of the highest mobile data consumption rates worldwide, with an average per-user per-month consumption of 24.1 GB in 2023.
    • The number of smartphone users in India was about 750 million in 2023, expected to reach 1 billion by 2026. 
    • The RCF projects that India will become the second-largest smartphone manufacturer within the next 5 years.

    PYQ:

    [2017] Which of the following is the most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

    (a) Mobile wallets will not be necessary for online payments.
    (b) Digital currency will replace physical currency in about two decades.
    (c) FDI inflows will drastically increase.
    (d) Direct transfer of subsidies to poor people will become very effective.

  • GST on Health and Life Insurance Premiums

    Why in the News?

    • Insurance premiums on health and life policies have increased this year, and the 18% Goods and Services Tax (GST) has made insurance less affordable for many people.
      • Medical inflation, estimated at 14% towards the end of last year, along with increased premiums, has made buying medical insurance difficult for many.

    What is the GST on Health and Life Insurance Premiums?

    • GST replaced all indirect taxes like service tax and cess from July 1, 2017.
    • Currently, GST on health and life insurance policies is fixed at 18%.
    • According to the formula, the Centre collects 9% GST with a matching collection by states.
      • Before GST, life insurance premiums were subject to 15% service taxes, including Basic Service Tax, Swachh Bharat cess, and Krishi Kalyan cess.

    Rational behind the Tax

    • GST Council Recommendations:
      • GST rates and exemptions on all services, including insurance, are prescribed on the recommendations of the GST Council, which includes the Union Finance Minister and ministers nominated by state governments.
      • Insurance is considered a service, and policyholders pay tax on their premiums, generating significant revenue for the government.
    • Tax Deductions:
      • Insurance policies allow certain deductions while computing income tax under Sections 80C and 80D of the Income Tax Act, 1961. Customers can avail deductions on the premium, including the GST applicable.

    Arguments for Withdrawing the GST on Premiums

    • High Premium Increases:
      • Significant increases in premiums on health insurance policies this year have been observed, with some public sector insurers hiking premiums by 50%.
      • The renewal rate of policies is declining due to frequent premium hikes and medical inflation.
    • Comparative GST Rates:
      • The Confederation of General Insurance Agents’ Associations of India points out that GST on insurance in India is the highest in the world.
      • The high GST rate is seen as a deterrent to insurance penetration, which conflicts with the goal of “Insurance for All by 2047”.
    • Recommendations for Rationalisation:
      • The Standing Committee on Finance recommended rationalising the GST rate on insurance products to make them more affordable.
      • Suggestions include reducing GST rates for health insurance, especially for senior citizens, micro-insurance policies, and term policies.

    Insurance Penetration in India:

    • According to a Swiss Re Sigma report, insurance penetration in India’s life insurance sector reduced from 3.2% in 2021-22 to 3% in 2022-23, while the non-life insurance sector remained stagnant at 1%.
    • Overall insurance penetration reduced to 4% in 2022-23 from 4.2% in 2021-22.

     

    PYQ:

    [2018] Consider the following items:

    1. Cereal grains hulled

    2. Chicken eggs cooked

    3. Fish processed and canned

    4. Newspapers containing advertising material

    Which of the above items is/are exempted under GST (Goods and Services Tax)?

    (a) 1 only

    (b) 2 and 3 only

    (c) 1, 2 and 4 only

    (d) 1, 2, 3 and 4

  • Why was a Customs Duty hike imposed for Lab Chemicals?   

    Why in the News?

    The Finance Ministry has reversed the proposed post-Budget customs duty hike on imported laboratory chemicals following an outcry from scientists.

    What are the different kinds of chemicals which are imported into the country?  

    • Inorganic Chemicals: This category includes substances like ammonia, phosphoric acid, and sulfuric acid, which are essential for various industrial applications.
    • Organic Chemicals: Key imports in this category are methanol, acetic acid, and phenol, which are used in the production of plastics, solvents, and pharmaceuticals.
    • Petrochemicals: Significant imports include polyethene, polypropylene, and styrene, which are crucial for manufacturing plastics and synthetic materials.
    • Speciality Chemicals: Chemicals such as ethyl vinyl acetate and maleic anhydride are imported for specific applications in industries like adhesives and coatings.
    • Agrochemicals: This includes various pesticides and herbicides, which are vital for agricultural productivity and crop protection.

    How important are these chemicals for scientific research?    

    • Foundation for Experimental Work: Laboratory chemicals are essential for conducting experiments in various scientific fields, enabling researchers to test hypotheses and validate results.
    • Facilitate Innovation: These chemicals allow for the development of new products and technologies, driving advancements in industries such as pharmaceuticals, biotechnology, and materials science.
    • Support Medical Diagnostics: Laboratory chemicals play a crucial role in medical testing and diagnostics, aiding in disease detection and treatment monitoring, which is vital for public health.

    What was the issue?

    • Steep Duty Increase: The hike in customs duty on laboratory chemicals alarmed the scientific community, with prices of essential chemicals projected to rise dramatically, such as a batch that typically costs ₹1,00,000 now estimated at ₹2,50,000.
    • Impact on Research: Researchers expressed concerns that the increased costs would hinder scientific research and experimentation, as many essential chemicals are imported and the hike could disrupt ongoing projects.

    Is Ethanol also imported into the country?

    • Import Volume: India imported approximately 635 million liters of ethanol in 2022, primarily for use as fuel and in industrial applications.
    • Types of Ethanol: There are two main types of ethanol relevant to India:
      • Denatured Ethanol: This type is mixed with additives to make it unfit for consumption and is primarily used in laboratories and industrial applications. India has reduced the import tariff on denatured ethanol to encourage its use in manufacturing.
      • Undenatured Ethanol: This type incurs a higher import tariff of 150% and is generally used for beverage production.
    • Domestic Production Challenges: Although India has a significant capacity for ethanol production, it often faces challenges such as insufficient molasses supply. The government has set ambitious goals for ethanol blending in gasoline, aiming for a 20% blend by 2025.

    How was the issue resolved?

    • The Finance Ministry clarified that all imported laboratory chemicals, except undenatured ethyl alcohol, will be taxed at the original 10% customs duty rate instead of the proposed 150% hike.
    • The customs department had initially hiked the duty to 150% to curb the import of undenatured ethyl alcohol that was being mis-declared as laboratory chemicals to avoid the higher 150% duty on undenatured ethanol.

    Way forward: 

    • Strengthen Local Production of Niche Chemicals: Need to invest in domestic manufacturing capabilities for niche and specialty chemicals to reduce dependency on imports, enhance self-sufficiency, and lower costs for research institutions.
    • Facilitate Smooth Import Processes: Govt. should streamline import regulations for essential laboratory chemicals, ensuring clear guidelines and minimal delays, while maintaining necessary checks to prevent misclassification and misuse.

  • Powering India’s future  

    Why in the News?

    In her seventh consecutive Budget address, the Finance Minister unveiled initiatives demonstrating India’s dedication to advancing its clean energy transition.

    Recent Observations

    • In a seventh consecutive Budget speech, the Finance Minister announced measures indicating India’s commitment to its clean energy transition, including developing policies on pumped hydro storage, energy transition pathways to support nuclear energy, and energy efficiency.
    • The memories of this summer’s record-breaking heatwaves, which drove up power demand, reflect both a growing economy and a warming climate.
    • India has achieved 3 key milestones in the last decade: 
      • Near-universal electrification through the Saubhagya scheme;
      • Five-fold increase in installed renewable energy capacity making India the fourth-largest country globally, and
      • 40% drop in aggregate losses of power distribution companies.
    • India’s annual electricity demand has been growing by 7-9% every year since the COVID-19 pandemic, with peak demand rising even faster. Climate change-induced weather extremes further exacerbate these challenges.
    • In 2023 alone, China added 300 GW of solar and wind capacity, while the European Union added 73 GW. As of March, India’s cumulative renewable capacity stood at 144 GW, with another 128 GW in the pipeline

    Investing in a cleaner, flexible, and resilient power grid will help our economy grow sustainably and create jobs in the clean energy sectors

    • Infrastructure Development: The government has allocated significant resources for infrastructure development, recognizing that a robust energy grid is crucial for economic growth.
    • Renewable Energy Capacity Goals: India aims to achieve 500 GW of renewable energy capacity by 2030. This goal is part of a broader strategy to increase the share of renewables in the energy mix, which currently stands at only 13%.
    • Job Creation: Investments in clean energy infrastructure are expected to create numerous jobs.
    • Diverse Clean Energy Resources: The Budget encourages the faster deployment of various clean energy resources, including solar and wind, to meet rising energy demands.
    • Energy Storage Solutions: The emphasis on developing pumped energy storage systems and battery storage solutions is crucial for addressing the intermittency of renewable energy sources, enhancing grid flexibility and reliability.
    • Taxonomy for Climate Finance: The introduction of a taxonomy to identify green activities aims to attract climate finance, facilitating investments in clean energy projects and supporting the transition to a sustainable energy economy.

    Way forward:

    • Accelerate Renewable Energy Deployment: Need to expedite the deployment of solar, wind, and other renewable energy projects to meet the 500 GW target by 2030.
    • Enhance Energy Storage and Grid Resilience: Need to develop robust energy storage solutions, such as pumped hydro and battery storage, to address renewable energy intermittency.

    Mains PYQ:

    Q Clean energy is the order of the day.’ Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics. (2022)

  • [pib] National Coastal Mission Scheme (NCM)

    Why in the News?

    The Ministry of Environment, Forest and Climate Change (MoEFCC) has expanded the National Coastal Mission Scheme (NCM) to address the challenges posed by rising sea levels.

    About National Coastal Mission Scheme (NCM)

    • The NCM was launched in July 2014.
    • It aims to address the climate change impact on coastal areas and ensure sustainable development of coastal regions.
    • It is part of India’s National Action Plan on Climate Change (NAPCC), focusing on sustainable development and climate resilience in coastal areas.
    • Key Areas:
      • Coastal protection
      • Conservation of coastal ecosystems
      • Development of sustainable livelihoods
      • Enhancing climate resilience
    • The MoEFCC, Government of India, is responsible for implementing the scheme.

    Key Strategies

    • Coastal Protection: Construction and maintenance of coastal protection infrastructure to prevent erosion and manage coastal disasters.
    • Ecosystem Conservation: Conservation and restoration of mangroves, coral reefs, and other critical coastal ecosystems.
    • Sustainable Livelihoods: Promotion of sustainable livelihoods for coastal communities through skill development and capacity building.
    • Climate Resilience: Improving the resilience of coastal communities and infrastructure to climate change impacts.

    Major Initiatives:

    1. Management Action Plan on Conservation of Mangroves and Coral Reefs
    2. Research & Development in Marine and Coastal ecosystem
    3. Sustainable Development of Beaches under Beach Environment & Aesthetic Management Service
    4. Capacity Building / Outreach Programme of Coastal States/UTs on conservation of marine and coastal ecosystem including beach cleaning drive.

    PYQ:

    [2022] Explain the causes and effects of coastal erosion in India. What are the available coastal management techniques for combating the hazard?

    [2011] The 2004 Tsunami made people realize that mangroves can serve as a reliable safety hedge against coastal calamities. How do mangroves function as a safety hedge?

    (a) The mangrove swamps separate the human settlements from the sea by a wide zone in which people neither live nor venture out.

    (b) The mangroves provide both food and medicines which people are in need of after any natural disaster.

    (c) The mangrove trees are tall with dense canopies and serve as an excellent shelter during a cyclone or tsunami.

    (d) The mangrove trees do not get uprooted by storms and tides because of their extensive roots.