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Subject: Economics

  • Why India needs to build disaster resilience in its critical infrastructure?

    Why in the News?
    The unprecedented surge in electricity demand offers a glimpse into the kind of stress that critical infrastructure endures during extreme weather events and resulting disasters.

    Present Challenges in India -> High Temperatures and Electricity Demand:

    • Record-breaking Electricity Demand: Delhi experienced record-breaking electricity demand due to persistently high temperatures.
    • Frequent Power Cuts: The high demand led to frequent power cuts in Delhi and neighbouring areas.
    • Worsening Conditions: Other regions in central and eastern India faced similar or worse situations, with high night temperatures exacerbating the situation.
    • Heat-related Deaths: The lack of electricity and high temperatures likely contributed to several heat-related deaths.

    Mounting Losses:

    • Increased Economic Losses: Despite early warnings and quick responses reducing human casualties, economic and other losses from extreme weather events and disasters have been rising due to their increasing frequency and intensity.
    • Government Expenditure: States spent over Rs 1.5 lakh crore between 2018 and 2023 on disaster and natural calamity aftermaths.
    • Long-term Costs: Long-term costs include livelihood losses and reduced agricultural land fertility, which are projected to worsen over time.
    • Job Losses: A 2022 World Bank report projected that heat-related stress could result in a loss of around 34 million jobs in India by 2030.
    • Food Wastage: Food wastage due to non-air-conditioned transportation is estimated at about $9 billion annually.
    • Uncounted Infrastructure Damage: Damage to critical infrastructure like transportation, telecommunications, and power supply is often uncounted in government figures, particularly for privately owned services, causing massive disruptions.

    Incorporating Resilience:

    • Disaster Management Plans: Infrastructure sectors have disaster management plans to prepare and respond to events, such as backup power supplies for hospitals, waterlogging prevention for airports and railways, and underground telecommunication lines.
    • Slow Progress: Despite plans, much of India’s infrastructure remains extremely vulnerable to disasters.
    • Future Infrastructure: India is still developing much of its infrastructure, and it is more cost-effective to incorporate disaster resilience during construction than to retrofit later. Upcoming projects need to be climate-smart, sustainable, energy-efficient, and disaster-resilient.
    A case study of Odisha:

    The Coalition for Disaster Resilient Infrastructure (CDRI) studied Odisha’s electricity transmission and distribution infrastructure, revealing its extreme fragility. Over 30% of distribution substations are within 20 km of the coastline; 80% of electricity poles are susceptible to high wind speeds; over 75% of distribution lines are over 30 years old and not cyclone-resistant.

     

    Note: CDRI’s Created in 2019, CDRI aims to make critical infrastructure resilient to natural disasters. It serves as a knowledge hub and collaborates with over 30 countries, but only a few Indian states have engaged with CDRI.

    Way Forward:

    • Proactive Infrastructure Planning and Investment: Future infrastructure projects in India must integrate disaster resilience at the planning and construction stages. This approach ensures that new developments are sustainable, energy-efficient, and capable of withstanding extreme weather events, reducing the need for costly retrofits later.  
    • Collaboration with Expert Bodies and Adoption of Best Practices: States and infrastructure sectors should actively seek expertise and collaboration from organisations like the Coalition for Disaster Resilient Infrastructure (CDRI).  

    Mains question for practice: 

    Q Discuss the implications of extreme weather events on critical infrastructure in India, citing recent examples. What measures can be taken to enhance the resilience of infrastructure against such events? 15M

    Mains PYQ:

    Q Describe the benefits of deriving electric energy from sunlight in contrast to conventional energy generation. What are the initiatives offered by our government for this purpose? (UPSC IAS/2020)

     

  • RBI’s New Guidelines for Asset Reconstruction Companies (ARCs)

    Why in the news?

    The RBI has introduced updated guidelines for Asset Reconstruction Companies (ARCs) through a master direction, effective from April 24, 2024.

    What is an Asset Reconstruction Company (ARC)?

    Description
    About ARC is a special financial institution that acquires debtors from banks at a mutually agreed value and attempts to recover the debts or associated securities.
    Regulation ARCs are registered under the RBI.

    Regulated under the SARFAESI Act, 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act).
    Objective ARCs take over a portion of the bank’s non-performing assets (NPAs) and engage in asset reconstruction or securitization, aiming to recover the debts.
    Functions Asset Reconstruction: Acquisition of bank loans or other credit facilities for realization. 

    Securitization: Acquisition of financial assets by issuing security receipts.
    Foreign Investment 100% FDI allowed in ARCs under the automatic route.
    Limitiations ARCs are prohibited from undertaking lending activities. 

    They can only engage in securitization and reconstruction activities.
    Working Bank with NPA agrees to sell it to ARC at a mutually agreed value. 

    ARC transfers assets to trusts under SARFAESI Act. 

    Upfront payment made to bank, rest through Security Receipts. 

    Recovery proceeds shared between ARC and bank.
    Security Receipts Issued to Qualified Institutional Buyers (QIBs) for raising funds to acquire financial assets.
    Significance Banks can clean up their balance sheets and focus on core banking activities. 

    Provides a mechanism for resolution of NPAs and debt recovery.

     

    What are the new guidelines laid out by the RBI?

    • Enhanced Capital Requirements:
        • Minimum Capital Requirement Increase: ARCs are now mandated to maintain a minimum capital requirement of Rs 300 crore, a significant increase from the previous Rs 100 crore stipulation established on October 11, 2022.
        • Transition Period for Compliance: Existing ARCs are granted a transition period to reach the revised Net Owned Fund (NOF) threshold of Rs 300 crore by March 31, 2026.
        • Interim Requirement: However, by March 31, 2024, ARCs must possess a minimum capital of Rs 200 crore to comply with the new directives.
    • Supervisory Actions for Non-Compliance:
        • ARCs failing to meet the prescribed capital thresholds will face supervisory action, potentially including restrictions on undertaking additional business until compliance is achieved.
    • Expanded Role for Well-Capitalized ARCs:
      • Empowerment of Well-Capitalized ARCs: ARCs with a minimum NOF of Rs 1000 crore are empowered to act as resolution applicants in distressed asset scenarios.
      • Investment Opportunities: These ARCs are permitted to deploy funds in government securities, scheduled commercial bank deposits, and institutions like SIDBI and NABARD, subject to RBI specifications. Additionally, they can invest in short-term instruments such as money market mutual funds, certificates of deposit, and corporate bonds commercial papers.
      • Investment Cap: Investments in short-term instruments are capped at 10% of the NOF to mitigate risk exposure.

    PYQ:

    [2018] With reference to the governance of public sector banking in India, consider the following statements:

    1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.
    2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

    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

     

  • Analyzing Maharashtra’s Water Crisis    

    Why in the news?

    After last year’s deficient monsoon, the Maharashtra government declared several parts of the state as drought-hit.

    Why do different regions of Maharashtra experience varied levels of water stress?

    • Geographical Differences: Coastal areas receive excessive rainfall leading to flooding. Marathwada lies in the rain-shadow region, receiving significantly less rainfall (600-800 mm) compared to the western side of the Western Ghats (2,000-4,000 mm).
    • Topography and Soil: Marathwada has clayey black soil (regur) which retains moisture but has a low infiltration rate, leading to poor groundwater recharge. The region’s topography, with parallel tributaries and gently sloping hills, results in uneven water distribution, with valleys having perennial groundwater and upland areas facing acute water scarcity.
    • Impact of Climate Change: Increasing drought severity and frequency in central Maharashtra due to climate change, worsening water stress in regions like Marathwada and North Karnataka.

    Why is sugarcane production not suited for regions with less rainfall?

    • High Water Requirement: Sugarcane needs 1,500-2,500 mm of water during its growing season, which is much higher than the annual rainfall in low-rainfall areas like Marathwada.
    • Irrigation Demands: Sugarcane requires almost daily irrigation, consuming 61% of the region’s irrigation water while occupying only 4% of the cropped area. This heavy water usage restricts the irrigation of other crops that are more suitable for the region’s climate, such as pulses and millet.
    • Government Policies: Long-standing government support for sugarcane pricing and sales has encouraged its cultivation in unsuitable regions. The recent promotion of sugarcane-juice-based ethanol production exacerbates the issue, diverting water resources away from more sustainable agricultural practices.

    What is meant by the rain-shadow effect?

    • The rain-shadow effect occurs when moist winds from the Arabian Sea rise over the Western Ghats, causing heavy rainfall on the western side. By the time these winds descend on the eastern side (Western Maharashtra and Marathwada), they lose most of their moisture, resulting in significantly lower rainfall.
    • Impact on Marathwada: Marathwada, located in the rain-shadow region, receives only 600-800 mm of annual rainfall, contributing to its dry climate and water scarcity issues.

    Note: Marathwada and North Karnataka have emerged as the second driest regions in India after Rajasthan.

    How can supply-side solutions help the situation?

    • Watershed Management: Building water-conserving structures such as contour trenches, earthen bunds, and gully plugs to capture and store runoff. Designing silt-trapping mechanisms to prevent soil erosion and maintain water retention structures.
    • Rainwater Harvesting: Implementing measures to capture rainwater runoff from agricultural fields to recharge groundwater and reduce dependency on external water sources.
    • Utilizing Government Programs: Leveraging funds from the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for watershed management projects and training farmers in water conservation techniques.
    • Promoting Water-Efficient Practices: Encouraging the use of water-efficient irrigation methods, such as drip irrigation, to optimize water usage. Shifting to drought-resistant crops and high-value, low-water-using crops to reduce water demand and improve agricultural sustainability.

    Conclusion: The state government has announced a massive Rs 59,000 crore package to transform the Marathwada region, with a focus on tackling the water crisis. This includes reviving stalled irrigation projects worth Rs 13,677 crore to make the region drought-free through water linking and diverting floodwaters to the Godavari basin

    Mains PYQ:

    Q Elaborate the impact of National Watershed Project in increasing agricultural production from waterstressed areas. (UPSC IAS/2019)

  • K-Shaped Economic Recovery fuels diverse Inflation Dynamics in India

    Why in the News?

    India is experiencing a K-shaped recovery, with uneven growth patterns. This recovery is causing divergent inflation trends, with food and rural prices rising faster than other goods and services, and urban inflation.

    What is K-Shaped Recovery?

    •  A K-shaped recovery is an economic scenario in which different sectors, industries, or groups within an economy recover from a recession at markedly different rates.
    • This results in a divergent economic recovery pattern, with some parts of the economy experiencing robust growth and others continuing to struggle or even decline.

    Features of K-Shaped Recovery

    • Divergent Recovery Rates: Certain sectors, such as technology and finance, may recover quickly and strongly. Other sectors, like hospitality and retail, may continue to struggle or recover much more slowly.
    • Income Inequality: High-income individuals and businesses may see significant improvements in their financial situations. Low-income individuals and small businesses may face prolonged financial hardships.
    • Sectoral Disparities: Industries that can adapt to remote work or have online business models (e.g., tech, e-commerce) thrive.

    Indian Context: Consumption Patterns Post-Pandemic

    • High-End Goods Demand: Post-pandemic recovery is driven by increased demand for higher-end goods and services.
    • Mass Consumption Items: Lower-income households’ consumption of mass-market items remains relatively subdued.

     Contrast Inflation Rate:

    • Rural vs. Urban Inflation: Rural inflation is outpacing urban inflation.
    • Food Prices vs. Other Goods: Food price inflation is higher compared to inflation in other goods and services.
    • Goods vs. Services Inflation: Goods inflation is higher than services inflation.
    • Input vs. Output Prices: Input prices are rising faster than output prices.

    Policy Implications

    • Sensitive Policymaking: Government policies need to be sensitive to the impact on different groups affected by supply-side shocks.
    • Careful Planning: Reforms should be carefully explained and planned to mitigate adverse impacts.

    PYQ:

    [2021] Do you agree that the Indian economy has recently experienced V-shaped recovery? Give reasons in support of your answer.

  • What is in Great Nicobar, site of NITI Aayog’s mega Island Project?

    Why in the News?

    • The opposition party has demanded the immediate suspension of all clearances granted to NITI Aayog’s Great Nicobar Island (GNI) Project.
    • It alleged violations of due process, legal and constitutional provisions protecting tribal communities.

    Great Nicobar Island: An Overview

    • Geography and Ecology: Southernmost tip of India, part of the Andaman and Nicobar archipelago comprising 600-odd islands.
    • Environment: Hilly, covered with lush rainforests, annual rainfall of around 3,500 mm.
    • Biodiversity: Hosts numerous endangered and endemic species including the giant leatherback turtle, Nicobar megapode, Great Nicobar crake, Nicobar crab-eating macaque, and Nicobar tree shrew.
    • Area: 910 sq km with mangroves and Pandan forests along the coast.
    • Indigenous Communities:
      • Shompen Tribe: Approximately 250 people live in interior forests, predominantly hunter-gatherers, classified as a Particularly Vulnerable Tribal Group.
      • Nicobarese Community: Two groups – Great Nicobarese and Little Nicobarese, practice farming and fishing.
      • Resettlement: The Great Nicobarese were resettled in Campbell Bay after the 2004 tsunami.
    • Administrative Hub: Campbell Bay serves as the administrative hub, housing local offices of the Andaman and Nicobar administration and the panchayat.

    Back2Basics: “Nicobar Triangle”

    It is named after the Nicobar Islands, which are located at the northern apex of this triangular area.

    The islands within the Nicobar Triangle include:

    1. Nicobar Islands: This group of islands belongs to India and is situated to the south of the Andaman Islands. They are known for their diverse flora and fauna and are inhabited by indigenous tribes.
    2. Andaman Islands: Located to the north of the Nicobar Islands, the Andaman Islands are also part of India. They are well-known for their lush forests, coral reefs, and indigenous tribes.
    3. Indonesian Archipelago: To the south and southeast of the Nicobar Islands lies the Indonesian archipelago, which includes thousands of islands spanning a vast area between the Indian and Pacific Oceans.

    What is GNI Project?

    The GNI Project refers to the “Holistic Development of Great Nicobar Island,” a proposed mega project being piloted by NITI Aayog.

    • Implementing Agency: The project is to be implemented by the Andaman and Nicobar Islands Integrated Development Corporation (ANIIDCO).
    • Historical Context: Development plans for a port in Great Nicobar date back to the 1970s, aimed at leveraging its strategic location near the Malacca Strait.
    • The project aims to develop the southern end of the Andaman and Nicobar group of Islands in the Bay of Bengal by constructing –
    1. Transshipment port
    2. Dual-use military-civil international airport
    3. Power plant (450 MVA gas and solar-based) and
    4. A township over a span of 30 years on more than 160 sq. km of land, of which 130 sq. km is primary forest

    Features of the Project

    • Transshipment hub of the East: The proposed port will allow Great Nicobar to participate in the regional and global maritime economy by becoming a major player in cargo transshipment.
    • Naval control: The port will be controlled by the Indian Navy, while the airport will have dual military-civilian functions and will cater to tourism as well.
    • Urban amenities: Roads, public transport, water supply and waste management facilities, and several hotels have been planned to cater to tourists.

    Significance of the project

    • Economic significance: The proposed port would allow GNI to become a significant player in cargo transhipment, as it is positioned equidistant from Colombo, Port Klang (Malaysia), and Singapore.
    • Strategic significance: The proposal to develop GNI has been on the table since the 1970s, and it has been highlighted repeatedly as a crucial element for national security and consolidation of the Indian Ocean Region.
      • In recent years, the escalating Chinese presence in the Indian Ocean has added greater urgency to this imperative.

    Issues with the Project

    • The project entails the deforestation of 130 sq km, and felling 10 lakh trees, threatens biodiversity at Galathea Bay, displaces indigenous tribes, lacks thorough impact assessments, and poses seismic risks to vulnerable communities.

    Due-process Violations highlighted by the ‘Opposition’

    (1) Did not recognise the grant ownership: The island administration did not recognise or grant ownership of any forest land to local tribespeople as per FRA, a requisite step under the Forest Conservation Rules, 2017, before Stage-I clearance is granted.

    • This is despite the fact that Rule 6(3)(e) of Forest Conservation Rules-2017 (FCR) requires that any diversion of forest land first requires the District Collector to recognise and vest rights to locals under the FRA.
    • The legislation allows forest communities the right to control and manage the use of the forest land over which they hold titles, and their consent is mandatory for diverting it.

    (2) Inconsistencies with Stage-I Clearance: The Stage-I clearance for the project was granted in October 2022, two years after the application was received. Monthly progress reports show that the district administration did not process any claims over forest land under the FRA in the 26 months since project sanction.

    (3) Withdrawal of Consent: Weeks after the Stage-I clearance was granted, the Tribal Council at Campbell Bay withdrew the consent granted by the Gram Sabha.

  • Power markets in India: their working, advantages, and the road ahead

    Why in the news?

    Amid rising summer demand, the government has permitted the trading of excess electricity produced from “linkage coal” within the nation’s power markets.

    What is the Power Market?

    • A power market is a platform where electricity is bought and sold, enabling generators and consumers to trade electricity based on market-driven prices and conditions.

    Types of Markets related to Power exchanges in India include:

    • Spot Markets: These include real-time markets (RTM) and day-ahead markets (DAM). RTM allows for immediate buying and selling of electricity, while DAM involves bidding for electricity to be delivered the next day.
    • Term-Ahead Markets: These markets facilitate trades for longer durations, ranging from hours to several days in advance, providing more certainty and planning for market participants.

    Their working and Power exchanges in India

    • Market Operation: Power exchanges in India operate as platforms where electricity generators (sellers) and consumers (buyers) participate in trading electricity. Generators submit offers indicating the quantity of electricity they can supply at various prices, while buyers submit bids indicating the quantity they wish to purchase at various prices.
    • Renewable Energy Certificates (REC): Power exchanges also manage the trading of Renewable Energy Certificates (RECs). RECs represent the environmental attributes of renewable electricity generated and can be sold to utilities to meet their renewable purchase obligations (RPOs).
    • Regulation: Power exchanges are regulated by the Central Electricity Regulatory Commission (CERC) in India. The regulatory framework ensures fair and transparent trading practices, oversees market operations and sets rules to promote market integrity.
    • Market Dominance: The Indian Energy Exchange (IEX) is the dominant power exchange in India, handling the majority of electricity trading volume. Other exchanges include Power Exchange India Limited (PXIL) and Hindustan Power Exchange Ltd (HPX), though IEX holds more than 90% of the market share.

    Their advantages 

    • Flexibility: Enables generators to respond swiftly to fluctuating electricity demand by selling surplus power at market-driven prices, enhancing grid stability.
    • Efficiency: Optimizes utilization of coal-based power generation assets, minimizing wastage and maximizing revenue through market-based transactions.
    • Transparency: Promotes transparent pricing mechanisms in the electricity sector, fostering competitive market dynamics and benefiting consumers with potentially lower electricity costs.

    The Road Ahead for Power Exchanges:

    • Market Coupling: It matches bids from different power exchanges to discover a uniform market clearing price, promoting efficiency and reducing price disparities across regions.It enhances price discovery, market stability, and regional grid integration by providing a reliable reference price for policymakers.
    • Capacity Markets: It compensates generators for maintaining available capacity, incentivizing investment in reliable generation infrastructure. They ensure long-term grid reliability, especially during peak demand periods, aligning India’s power market with international standards and attracting investment.
    • International Alignment and Competitiveness: India’s adoption of advanced market structures (like market coupling and capacity markets) aims to align with mature international markets.These developments can foster greater competition, attract investment, and enhance overall sector efficiency and reliability.

    Mains PYQ: 

    Q Write a note on India’s green energy corridor to alleviate the problem of conventional energy. (UPSC IAS/2013)

  • What is the GST Council, and what does it do?   

    Why in the news?

    The 53rd meeting of the Goods and Services Tax (GST) Council convened in Delhi, chaired by Nirmala Sitharaman, Union Minister for Finance and Corporate Affairs, on Saturday, June 22nd.

    What is the GST Council?

    • The GST Council is a constitutional body established under Article 279A of the amended Constitution of India.
    • It is a joint forum consisting of the Union Finance Minister (as Chairperson), the Union Minister of State for Finance, and representatives from each state and Union Territory (UT) with legislatures.
    • The Council is responsible for making recommendations on issues related to GST, including tax rates, exemptions, and model GST laws.

    Powers and Functions of the GST Council

    • Recommendations on GST Issues: The Council advises the Union and State Governments on matters related to the goods and services tax.
    • Tax Rates: It decides on the rates of GST applicable to goods and services, including any modifications or exemptions.
    • Dispute Resolution: It addresses disputes that may arise between the Union and States or among States regarding GST.
    • Administrative Changes: The Council can recommend administrative changes to improve the efficiency of GST implementation.
    • Review and Revision: Periodically review GST rates and provisions to align with economic realities and policy objectives.

    Evolution of the GST Council since its inception:

    • Formation and Initial Years: Established in 2016 after the passage of the 122nd Constitutional Amendment Act. The Council began functioning in 2017 when GST was implemented nationwide.
    • Operational Efficiency: Over the years, the Council has evolved to streamline decision-making processes, including real-time discussions and consensus-building among members.
    • Expansion of Scope: Initially focusing on setting basic tax rates and exemptions, the Council’s scope expanded to include amendments to GST laws and procedural changes.
    • Judicial Scrutiny: In 2022, the Supreme Court clarified that the Council’s recommendations are not binding but reflect collaborative efforts between the Union and States.
    • Adaptation to Challenges: Adapted to economic fluctuations, pandemic challenges (like the postponement of GST filing deadlines during COVID-19), and evolving sectoral needs.
    • Interstate Dynamics: The voting structure of the Council, with states collectively having a two-thirds voting share, underscores its federal and cooperative nature.

    Conclusion: The GST Council, pivotal since 2017, advises on GST matters, sets tax rates, resolves disputes, and evolves with economic shifts. Its federal structure ensures collaborative decision-making for efficient tax administration in India.

    Mains PYQ:

    Q Enumerate the indirect taxes which have been subsumed in the Goods and Services Tax (GST) in India. Also, comment on the revenue implications of the GST introduced in India since July 2017. (UPSC IAS/2019)

  • [pib] Release of Statistical Report on Value of Output from Agriculture and Allied Sectors, 2024

    Why in the News?

    The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI), has released the ‘Statistical Report on Value of Output from Agriculture and Allied Sectors 2024’.

    Data Collection Strategies by NSO:

    • Crops are divided into 12 groups: Cereals, pulses, oilseeds, sugars, fibres, indigo, dyes and tanning material, drugs and narcotics, condiments & spices, fruits & vegetables, other crops, by-products, and kitchen garden.
    • Livestock products are divided into 7 groups: milk, meat, eggs, wool and hair, dung, silk worm cocoons & honey, and increment in livestock.

    About the National Statistical Office (NSO)

      • The NSO was established in 1950 as the Central Statistical Office (CSO) under the Ministry of Planning.
      • It was later renamed the National Sample Survey Office (NSSO) in 1970 and subsequently became the NSO in 2019.
      • Over the years, it has evolved to become the primary statistical agency in India.
    • Organizational Structure:  The NSO consists of several divisions and units responsible for different statistical functions.

    Key organizations under NSO: Central Statistical Office (CSO)

    • The CSO is a part of the NSO and focuses on macroeconomic statistics and national income accounting.
    • It is responsible for producing key economic indicators such as the Gross Domestic Product (GDP), Index of Industrial Production (IIP), Consumer Price Index (CPI), and Wholesale Price Index (WPI).

    Key Reports released by NSO:

    • Household Consumption Expenditure Survey
    • EnviStats India 2024: Environment Statistics
    • Energy Statistics India 2024
    • National Accounts Statistics 2024
    • Quarterly Estimates of GDP

    Sector-wise share of Value of Output

    Salient Features and Summary Results

    • India’s Agricultural Rankings: India ranks second worldwide in arable land, third in cereal production, and is a leading producer of groundnut, fruits, vegetables, sugarcane, tea, and jute. It is also the largest producer of milk, second in egg production, and fifth in meat production.
    • GVA Contribution: The shares of Crop, Livestock, Forestry and Fishing sub-sectors in value of output of Agriculture and allied sector were 54.3%, 30.9%, 7.9% and 6.9% respectively in 2022-23.
    • Crop Sub-sector Trends: The crop sub-sector remains the largest contributor to the Gross Value of Output (GVO) but has seen its share decline from 62.4% in 2011-12 to 54.3% in 2022-23. Fruits and vegetables’ output has significantly increased, highlighting the growing importance of horticulture.
    • Livestock Sub-sector Growth: The livestock sub-sector has seen an increase in the output of milk, meat, and eggs, indicating a steady growth in this area.
    • Forestry and Fishing: The forestry sector has diversified its output sources, and the fishing and aquaculture sector has seen significant growth, especially in Andhra Pradesh.

    State-wise Details from 2011-12 to 2022-23

    State-wise Value of Output of Crop

    • Highest Output: Uttar Pradesh leading in cereals and sugarcane production.
    • Lowest Output: Lakshadweep:

    State-wise Value of Output of Livestock

    • Highest Output:
      • Uttar Pradesh and Rajasthan together accounted for about a quarter of the livestock sub-sector’s output.
    • Lowest Output:
      • Goa: Output remained at ₹0 lakh throughout the period.
    • Key Trends:
      • Madhya Pradesh: Significant increase in livestock output, particularly in milk and meat production.
      • West Bengal: Steady growth in egg production.

    State-wise Value of Output of Forestry and Logging

    Major products: Industrial wood (68%), Fuelwood (20%), and Non-Timber Forest Products (NTFP) (12%) in 2022-23.

    • Top States in 2022-23:Maharashtra: 16.4% share, Rajasthan: 10.6% share,Uttar Pradesh: 8.7% share, Madhya Pradesh: 7.7% share and Odisha: 5.3% share.

    State-wise Value of Output of Fishing and Aquaculture

    • Highest Output: Andhra Pradesh: Share increased from 17.7% in 2011-12 to almost 40.9% in 2022-23, leading in fish and prawn farming.
    • Lowest Output: Arunachal Pradesh: Output increased from ₹0 lakh (2011-12) to ₹3 lakh (2022-23).

    All India Item-wise Value of Output from Agriculture, Livestock, Forestry, and Fishing

    • Cereals: Paddy and wheat are the top contributors to the cereals sub-sector. Paddy output in 2022-23 was ₹220,200 crore, while wheat output was ₹137,300 crore.
    • Pulses: Gram and Arhar together accounted for nearly 59% of the pulses output. Madhya Pradesh led in pulses production with a 22% share in 2022-23.
    • Oilseeds: Groundnut and Rapeseed & Mustard are the highest contributors within the oilseeds group. Gujarat and Rajasthan are the leading states in oilseeds production.
    • Sugar Crops: Uttar Pradesh remains the largest producer of sugarcane, increasing its share from 41% in 2011-12 to 54.5% in 2022-23.
    • Livestock Products: Milk, meat, and eggs are the major contributors within the livestock sub-sector. The share of milk, meat, and eggs in the livestock sub-sector was 66.5%, 23.6%, and 3.7% respectively in 2022-23.
    • Forestry Products: The forestry sector’s output is mainly driven by industrial wood, fuelwood, and NTFP. The share of industrial wood increased to 68% in 2022-23.
    • Fishing and Aquaculture: The fishing and aquaculture sector has seen a significant increase in output, with Andhra Pradesh leading the production. The output of fishing and aquaculture increased from ₹80 thousand crore in 2011-12 to ₹195 thousand crore in 2022-23.

    PYQ:

    [2011] A state in India has the following characteristics:

    1. Its northern part is arid and semiarid.
    2. Its central part produces cotton.
    3. Cultivation of cash crops is predominant over food crops.

    Which one of the following states has all of the above characteristics?

    (a) Andhra Pradesh

    (b) Gujarat

    (c) Karnataka

    (d) Tamil Nadu

  • [pib] Viability Gap Funding (VGF) Scheme for Offshore Wind Energy Projects

     

    Why in the News?

    • The Union Cabinet, chaired by the PM, approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects.

    Note: Offshore wind energy projects refer to developing and operating wind farms located offshore, typically in coastal waters or oceans.

    Back2Basics: Viability Gap Funding (VGF) Scheme

    • The VGF scheme is a financial tool to support infrastructure projects that are economically justified but face financial viability challenges.
    • It was launched in 2004 to address the gap between economically viable infrastructure projects and their financial feasibility under traditional financing models.
      • Administration: Administered by the Ministry of Finance, Government of India, the scheme operates as a Plan Scheme with annual budget allocations.

    Features:

    1. Capital Subsidy: VGF provides a grant (capital subsidy) to infrastructure projects to make them financially attractive for private sector participation. This subsidy helps cover part of the cost that private investors would find economically unviable.
    2. Project Eligibility: Projects eligible for VGF are typically selected through competitive bidding processes. They must demonstrate economic justification but face challenges in attracting private investment solely on commercial terms.
    3. Disbursement Timing: The VGF grant is disbursed during the construction phase of the project. However, disbursement is conditional upon the private sector developer making the required equity contribution to the project.
    4. Budgetary Allocation: Funds for VGF are allocated from the government’s budget. Sometimes, contributions may also come from the statutory authority that owns the project asset.
    5. Limitations: Additional financial assistance beyond the VGF amount is capped at 20% of the total project cost. This additional support can be provided by the sponsoring Ministry, State Government, or the statutory entity involved.

    Benefits:

    • Encouraging Investment: By reducing the financial risks associated with infrastructure projects, VGF encourages private sector participation, leading to faster project implementation and improved service delivery.
    • Infrastructure Development: The scheme supports the development of critical infrastructure such as transportation (roads, railways, airports), energy (power generation, transmission), and public utilities.

    About VGF Scheme for Offshore Wind Energy Projects

      • The VGF scheme aligns with the National Offshore Wind Energy Policy (2015) to harness India’s offshore wind potential.
      • It aims to reduce power costs from offshore wind projects, making them viable for DISCOMs through government support.
      • It seeks installation and commissioning of 1 GW of offshore wind energy projects (500 MW each off the coast of Gujarat and Tamil Nadu).
    • Functionaries: 
      • Private Developers will execute projects via transparent bidding.
      • Power Grid Corporation of India Ltd (PGCIL) will build power evacuation infrastructure.
    • Total outlay: Rs. 7453 crore, including Rs. 6853 crore for installing and commissioning 1 GW of projects in Gujarat and Tamil Nadu.

    Advantages of Offshore Wind Energy:

    • Offshore wind offers higher reliability, lower storage requirements, and greater employment potential than onshore wind and solar.
    • The development will attract investments, build indigenous manufacturing capabilities, and foster technology advancements.

    Environmental and Economic implications:

    • 1 GW projects will generate 3.72 billion units annually, reducing CO2 emissions by 2.98 million tons per year for 25 years.
    • Expected to kickstart India’s offshore wind sector, supporting initial development of 37 GW capacity with an investment of Rs. 4,50,000 crore.
    • Creates an ecosystem for ocean-based economic activities, contributing to India’s energy transition goals.

    PYQ:

    [2018] With reference to solar power production in India, consider the following statements:

    1. India is the third largest in the world in the manufacture of silicon wafers used in photovoltaic units.
    2. The solar power tariffs are determined by the Solar Energy Corporation of India.

    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

    [2016] Give an account of the current status and the targets to be achieved pertaining to renewable energy sources in the country. Discuss in brief the importance of National Programme on Light Emitting Diodes (LEDs).

  • Proposed Amendments to Insolvency Resolution Process by IBBI

    1. Why in the News?
    • The Insolvency and Bankruptcy Board of India (IBBI) has proposed amendments to the Insolvency Resolution Process for Corporate Process regulations to enhance efficiency, reduce costs, and increase transparency.
      • This aims to align with the Companies (Registered Valuers and Valuation) Rules and streamline the Corporate Insolvency Resolution Process (CIRP).

    Do You Know?

    Since its enactment, the IBBI has achieved notable successes in resolving insolvency cases and recovering debts:

    • Debt Resolution: The IBC has successfully resolved Rs. 3.16 lakh crore of debt across 808 cases within seven years (as per CRISIL).
    • Higher Recovery Rates: Creditors have realized an average of 32% of admitted claims and 169% of the liquidation value through IBC proceedings, demonstrating higher recovery rates compared to previous mechanisms.
    • Behavioural Change: Companies have been proactively involved in the settlement of debts amounting to over Rs. 9 lakh crore before cases enter formal insolvency processes.

    Proposed amendments by IBBI

    • Simplified Valuation: Instead of separate reports for different types of assets, there will be one comprehensive valuation report covering the entire company. This helps in keeping valuation consistent and clear.
    • Single Valuer for Small Companies: For smaller companies with assets up to ₹1,000 crore and MSMEs, only one valuer will be appointed to determine the company’s value unless there’s a good reason for more than one.
    • Option for Two Valuers: If needed, the creditors’ committee can choose to have two valuers to deal with complex cases, but they have to explain why.
    • Faster Appointment of Representatives: Representatives appointed to represent creditors can start participating in meetings as soon as their application is submitted, to avoid delays.
    • Guarantees in Resolution Plans: If a resolution plan suggests releasing guarantees, it won’t stop creditors from going after guarantors or using the guarantees according to their agreements.

    About Insolvency and Bankruptcy Board of India (IBBI)

    Details
    Establishment Established on 1st October 2016 under the Insolvency and Bankruptcy Code (IBC), 2016.

    • Objective: To promote a creditor-driven insolvency resolution process and enhance India’s credit culture and business environment.
    Responsibility Responsible for implementing and enforcing the IBC,

    IBC consolidated laws related to insolvency resolution for individuals, partnership firms, and corporate entities.
    Functions
    • Regulates insolvency professionals and processes.
    • Oversees insolvency professional agencies, entities, and information utilities.
    • Enforces rules for corporate and individual insolvency resolution, liquidation, and bankruptcy.
    • Sets eligibility criteria and curriculum for insolvency professionals.
    • Collects and maintains records on insolvency cases and disseminates related information.
    Composition Total 10 members

    • Chairperson appointed by the Central Government.
    • Three members from central government officers (Ministries of Finance, Corporate Affairs, Law).
    • One member nominated by RBI (Reserve Bank of India).
    • Five other members nominated by the Central Government, including at least three full-time members.

    The term is 5 years or until age 65, with reappointment possible.

    Adjudicating Authorities under the IBC:

    Under the IBC, two primary adjudicating authorities handle insolvency cases based on the nature of the entity:

    • National Company Law Tribunal (NCLT): NCLT adjudicates insolvency cases involving corporate entities and other limited liability entities.
    • Debt Recovery Tribunal (DRT): DRT has jurisdiction over insolvency cases concerning individuals and partnership firms, excluding Limited Liability Partnerships (LLPs).

    Recent Amendments to the IBC:

    • Approval for segregated sale of assets or resolution plans.
    • Increase in the number of NCLT benches to 16 for faster adjudication.
    • Extension of timelines for filing claims to accommodate procedural complexities.
    • Sector-specific amendments tailored to address unique challenges in various industries.
    • Modifications in procedural forms such as Form G2 to enhance clarity and efficiency in insolvency proceedings.

    PYQ:

    [2017] Which of the following statements best describes the term ‘Scheme for Sustainable Structuring of Stressed Assets (S4A)’, recently seen in the news?

    (a) It is a procedure for considering the ecological costs of developmental schemes formulated by the Government.

    (b) It is a scheme of RBI for reworking the financial structure of big corporate entities facing genuine difficulties.

    (c) It is a disinvestment plan of the Government regarding Central Public Sector Undertakings.

    (d) It is an important provision in ‘The Insolvency and Bankruptcy Code’ recently implemented by the Government.