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Subject: Economics

  • [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.

  • Balancing competition and sustainability for India

    Why in the News?

    • In 2023, the Securities and Exchange Board of India (SEBI) introduced an updated framework for corporate sustainability reporting.
    • The revised Business Responsibility and Sustainability Report (BRSR) framework mandates that companies assess and disclose the environmental impact of their entire value chain.

    Business Responsibility and Sustainability Report (BRSR) 

    • In 2021, the Securities and Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Report (BRSR) framework, mandating that the top 1,000 listed companies in India disclose their performance on environmental, social, and governance (ESG) parameters.
    • This initiative aimed to enhance transparency and encourage responsible business practices, building on the earlier Business Responsibility Report (BRR) introduced in 2012.

    Key Features of the BRSR Framework

    • Expanded Reporting Requirements: The BRSR Core builds upon the initial Business Responsibility and Sustainability Report (BRSR) introduced in 2021, which mandated the top 1,000 listed companies in India to disclose their ESG performance.
    • Mandatory Assurance: Starting from FY 2023-24, the BRSR Core mandates that the top 150 companies obtain reasonable assurance on their ESG disclosures. This requirement aims to improve the credibility of the reported data and combat greenwashing, ensuring that companies provide reliable information about their sustainability practices.
    • Nine ESG Attributes: The framework is structured around nine critical ESG attributes, which include greenhouse gas emissions, water usage, energy consumption, and employee well-being.
    • Comply or Explain Principle: SEBI has adopted a “comply or explain” approach, allowing companies to either adhere to the specified reporting requirements or provide valid reasons for non-compliance.
    • Alignment with International Standards: The BRSR Core is aligned with several internationally recognized frameworks, such as the EU Taxonomy and the Global Reporting Initiative (GRI) standards.  
    • Focus on Value Chain: A significant aspect of the BRSR Core is its emphasis on assessing the ESG impacts of a company’s supply chain.

    For India, every economic sector must contribute to greener means of production 

    For India to achieve its sustainability goals and contribute effectively to greener means of production, every economic sector must play a vital role.

    Importance of Sectoral Contribution to Sustainability

    • Diverse Economic Sectors: The key sectors such as agriculture, construction, power, manufacturing, transport, and tourism are crucial for transitioning to a green economy. For example, electric transport and eco-tourism.
    • Government Initiatives: The Indian government is actively promoting green growth through investments in priority sectors, which include manufacturing, renewable energy, and electric mobility.  For example, An allocation of ₹19,700 crore for the production of green hydrogen.
    • Green Manufacturing: The manufacturing sector is a significant focus for greening efforts, with studies indicating that sustainable manufacturing practices can lead to substantial reductions in greenhouse gas emissions. For example, the (Zero Defect Zero Effect) ZED initiative aims to create a competitive, qualitative, and clean manufacturing ecosystem.
    • Renewable Energy Commitment: India has set ambitious targets for increasing its non-fossil energy capacity to 500 gigawatts by 2030.
    • Collaboration and Policy Frameworks: Initiatives like the Partnership for Action on Green Economy (PAGE) and various policy dialogues aim to facilitate collaboration among sectors to promote inclusive and sustainable economic growth.

    Way forward: 

    • Enhanced Accountability: Ensure stricter enforcement of the BRSR and BRSR Core frameworks, expanding the scope to cover more companies and sectors beyond the top 1,000 listed companies.
    • Capacity Building: Provide training and resources to companies, especially small and medium enterprises (SMEs), to improve their ESG reporting capabilities and integrate sustainability into their core operations.

    Mains question for practice:

    Q Discuss the significance of the Business Responsibility and Sustainability Report (BRSR) framework introduced by the Securities and Exchange Board of India (SEBI) in promoting sustainable business practices among Indian corporations. 15M

  • What do Scientists make of the Budget?     

    Why in the News?

    Modi’s government launched advanced tech missions and boosted private space participation, achieving a moon landing, amid concerns over basic research neglect and stagnant research funding.

    Priority areas – productivity and resilience in agriculture, energy security, and manufacturing and services:

    • Productivity and Resilience in Agriculture

        • The Union Budget emphasizes transforming agricultural research to enhance productivity and climate resilience.
        • Initiatives such as “speed breeding platforms” have been established to accelerate the development of climate-resilient crop varieties, allowing multiple generations of crops to be grown in a single year.

    • Energy Security

        • The budget prioritizes energy security with a focus on research and development of small and modular nuclear reactors and advanced thermal power plants.
        • The proposed “Critical Minerals Mission” is expected to enhance research in critical minerals essential for clean energy technologies.

    • Manufacturing and Services

      • The budget highlights the importance of enhancing domestic manufacturing capabilities and attracting foreign investment through initiatives like the Production Linked Incentive (PLI) schemes.
      • Plans for “plug and play” industrial parks in 100 cities are expected to facilitate the uptake of indigenous technologies and boost manufacturing output.
      • The focus on commercializing technologies with private sector involvement aims to strengthen the manufacturing sector’s contribution to the economy.

    Concerns about the sidelining of basic research and stagnation in research funding 

    • Sidelining of Basic Research

        • Focus on Advanced Technology: The previous two terms of the Indian government emphasized advanced technology missions (e.g., supercomputing, quantum technologies), which raised concerns that basic research was being neglected.
        • Limited Funding for Basic Research: The establishment of the Anusandhan National Research Fund (ANRF) aims to prioritize basic research, but there are concerns that the emphasis on “prototype development” alongside basic research may indicate a shift towards translational research, potentially sidelining pure scientific inquiry.
        • Disparity in Funding Distribution: Currently, about 65% of research funding is allocated to premier institutions like IITs, while state-run universities receive only about 11% of the funds provided by the Department of Science and Technology (DST). This disparity hampers the growth of basic research across a broader range of institutions.

    • Stagnation in Research Funding

      • Actual Expenditure vs. Allocation: Concerns were raised that the actual expenditure on science and technology and higher education in 2023-2024 was much less than the initial allocation for that year.  
      • Demand for Increased Funding: The scientific community has long demanded higher government funding for basic research, as the private sector has shown limited interest in investing in this area.
      • Impact of Inflation: The nominal increases in budget allocations for research may not be sufficient to counteract inflation, leading to a real decrease in available funding for research activities.

    Way forward: 

    • Increase Research Funding: Need to boost the overall research funding as a percentage of GDP to ensure adequate resources for both basic and applied research. This includes adjusting allocations to counteract the effects of inflation.
    • Equitable Distribution: The government should ensure a more balanced distribution of funds across premier institutions and state-run universities to foster a broader base of scientific inquiry and innovation.

  • [pib] CIL ASHIS Scheme

    Why in the News?

    Coal India Limited (CIL) has launched a CSR initiative named CIL ASHIS to provide scholarships to children who lost their parents to COVID-19 and were unable to continue their studies.

    What is CIL ASHIS Scheme?

    • The CIL ASHIS Scheme, launched by Coal India Limited (CIL), stands for Ayushman Shiksha Sahayata.
    • The scheme aims to provide financial support for the education of children who lost their parents to COVID-19, ensuring they can continue their studies and achieve their dreams.

    Features of the CIL ASHIS Scheme

    • Each eligible child receives a scholarship worth ₹45,000 per year.
    • The scholarship is provided for a period of 4 years.
    • The scheme targets 1,645 children who have been identified as needing assistance.
    • Compassionate Appointment for:
      • Dependents of CIL employees who lost their lives while in service.
      • Beneficiaries need to apply for compassionate appointments through CIL’s established procedures.

    PYQ:

    [2024] With reference to Corporate Social Responsibility (CSR) rules in India, consider the following statements:

    1. CSR rules specify that expenditures that benefit the company directly or its employees will not be considered as CSR activities.
    2. CSR rules do not specify minimum spending on CSR activities.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

  • An unstated shift in Modi’s economic direction             

    Why in the news?

    The introduction of the new ELI scheme for corporates by the Narendra Modi government acknowledges the disconnect between GDP growth and job creation.

    About Employment Linked Incentives (ELI)

    • The ELI scheme aims to encourage companies to hire more employees by providing financial incentives for each new hire.
    • Target Sectors: The scheme is expected to focus on labour-intensive sectors such as toys, textiles, apparel, furniture, tourism, and logistics, which have significant potential for job creation.
    • Incentives Offered: Financial incentives may include tax relief and wage subsidies for new jobs created, along with non-financial incentives like reduced regulatory burdens and support for skill development programs.

    Government’s Failure of Initiatives

    • Previous Economic Strategies: Over the past decade, the Indian government relied on traditional economic models, such as the trickle-down approach and production-linked incentives (PLI), which did not yield the expected job growth.
      • Initiatives like “Make in India” and corporate tax cuts aimed to stimulate investment but failed to translate into significant employment opportunities.
    • Jobless Growth: Despite policies designed to boost production, employment growth has been stagnant, with a study indicating a negligible employment growth rate of just 0.01%.

    Issue of Job and Ideas Deficit

    • Jobs Deficit: The lack of job creation has prompted proposals like reserving jobs for locals, reflecting political pressures in a democracy where job scarcity is prevalent.
    • Ideas Deficit: Economists often suggest reforms in labour, education, and business practices as solutions to job creation, but these are complex and difficult to implement.
    • Unemployment Trends: The unemployment rate has shown fluctuations, with a reported decline from 6.0% in 2017-18 to 3.2% in 2022-23. 

    What can be done?

    • Policy Shift: The ELI scheme represents a significant policy shift towards prioritizing job creation over mere economic output. By encouraging firms to hire rather than invest solely in automation, it aims to address the capital-labour imbalance in the economy.
    • Support for MSMEs: Special focus on micro, small, and medium enterprises (MSMEs) is crucial, as they employ a substantial portion of the workforce.
    • Alignment of Goals: Need to Collaborate among various ministries, particularly finance, skill development, and labour, is essential to ensure that skill development aligns with industry needs, enhancing employability and job creation