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Subject: Economics

  • Why has India allowed FIIs to invest in its Green Bonds? | Explained

    Why in the News? 

    On April 5 the Reserve Bank of India (RBI) greenlighted investments in the country’s Sovereign Green Bonds (SGrBs) by Foreign Institutional Investors (FIIS).

    • These are the investors such as insurance companies, pension funds, and nation-states’ sovereign wealth funds.

    What is the Sovereign Green Bond?

    • It is a type of bond issued by a government to finance projects and expenditures that have a positive environmental impact and are aligned with sustainability goals.
    • These bonds are specifically earmarked for funding green projects, assets, and expenditures that contribute to environmental sustainability and climate objectives.

    Why has India allowed FIIs to invest in its Green Bonds?

    • For attracting Foreign Investments: By allowing FIIs to invest in green bonds, India attracts foreign capital into its green projects.
    • For Widening the Pool of Capital: Allowing FIIs to invest in India’s green projects expands the sources of funding available for the country’s ambitious climate goals, including achieving net zero emissions by 2070 and increasing the share of non-fossil fuel-based energy sources to 50%.
    • For Meeting Climate Commitments: Prime Minister Narendra Modi pledged at COP26 in Glasgow in 2021 to reduce India’s carbon emission by 45% and increase the share of renewable energy in the country’s energy mix.
    • For Diversification of Investments: FIIs are looking to diversify their portfolios and seek opportunities in green investments due to regulatory support, particularly in developed countries.
      • India’s Sovereign Green Bonds Framework (2022), addresses concerns about greenwashing by providing a credible framework for green investments.

    Limitation For Govt. of India:

    • Limited credibility of projects: The absence of specific regulations for green bonds leaves investors unable to assess the financial risk associated with the projects.
    • Higher costs of issuing: The high cost of issuing green bonds in India poses a challenge for the market. Green bonds are initially costly but provide long-term cost savings.
    • Greenwashing may not be resolved: Greenwashing, which is the deceptive promotion of a company’s eco-friendly image, is prevalent in the green bond industry. Some bonds are labeled as “green” despite not meeting the specified criteria.

    Way Forward:

    • Establish Clear Regulations: The government should establish clear and stringent regulations for green bonds, outlining specific criteria for eligible projects.
    • Enhance Project Credibility: Implement mechanisms for independent verification and certification of green projects to ensure their credibility.
    • Lower Issuance Costs: Explore options to reduce the issuance costs of green bonds, such as providing incentives or subsidies to issuers.

    BACK2BASICS:

    About India’s Sovereign Green Bonds Framework:

    • It was first announced in the Union Budget 2022-23, where the proceeds of these green bonds will be issued for mobilizing resources for green infrastructure.
    • It was aimed to mobilize Rs 16,000 crore through the issuance of Green Bonds in the fiscal ending of March 2023.

    How they are issued?

    • The Finance Ministry will, each year, inform the RBI about spending on green projects for which the funds raised through these bonds will be used.
    • Green Bonds will be issued through a Uniform Price Auction (a public sale in which a fixed number of similar things are sold at the same price).

    What is the Eligibility for Repurchase Transactions (Repo)?

    • SGrBs will be eligible for Repurchase Transactions (Repo).
    • SGrBs will also be reckoned as eligible investments for Statutory Liquidity Ratio (SLR)

     

    Mains PYQ 

    Q Explain the purpose of the Green Grid Initiative launched at the World Leaders Summit of the COP26 UN Climate Change Conference in Glasgow in November 2021. When was this idea first floated in the International Solar Alliance (ISA)?

  • Growth in Ashwagandha Exports

    Why in the news?

    • Ashwagandha exports have surged by 8 times in the past six years, penetrating markets like the United States, Czech Republic, and Canada.
    • The Ayurvedic industry in India has been growing at a Compound Annual Growth Rate (CAGR) of 17%, with the industry size increasing from $3 billion in 2014 to $24 billion today.
    • Gujarat, with about 850 Ayurvedic manufacturing units, ranks fourth in the country after Uttar Pradesh, Kerala, and Maharashtra.
    • India leads in Ashwagandha production and export, with states like Rajasthan and Madhya Pradesh emerging as key producers.
    • The herb is exported primarily as extracts and has gained significant traction in the United States, where it competes with Chinese Ginseng.

     

    What is Ashwagandha? 

    • Also known as Indian Ginseng or Withania somnifera, Ashwagandha belongs to a group of herbs known as ‘adaptogens’( best rejuvenating agent).
    • It is available in various forms such as extracts, powder, and raw herbs, catering to domestic and international markets.

    Medicinal Properties and Usage:

    • In treatment of rheumatic pain, inflammation of joints, nervous disorders and epilepsy.
    • Used as a tonic for hiccup, cold, cough, female disorders, as a sedative, in care of senile debility, ulcers, etc.
    • Leaves are applied for carbuncles, inflammation and swellings.  Leaf juice is useful in conjunctivitis.
    • Bark decoction is taken for asthma and applied locally to bed sores.
    • Ashwagandha and its extracts are used in the preparation of herbal tea, powders, tablets, and syrups.

    Cultivation of Ashwagandha

    • Ashwagandha-growing states: Rajasthan, Punjab, Haryana, Uttar Pradesh, Gujarat, Maharashtra and Madhya Pradesh.
      • Being a hardy and drought-tolerant crop, Ashwagandha requires a relatively dry season throughout its growing period.
      • It is grown as late rainy season (kharif) crop between 600-1200 m altitudes.
      • It grows well in sandy loam or light red soil having pH 7.5 to 8.0 (alkaloid) with good drainage.
    • Black soil or such heavy soil is suitable for cultivation.

    With inputs from: https://agritech.tnau.ac.in/farm_enterprises/Farm%20enterprises_%20Ashwagantha.html

    PYQ:

    [2010] Consider the following statements:

    1. The Taxus tree is naturally found in the Himalayas
    2. The Taxus tree is listed in the Red Data Book.
    3. A drug called “taxol” is obtained from Taxus tree is effective against Parkinson’s disease

    Which of the above statements is/are correct?

    (a) 1 only

    (b) 1 and 2 only

    (c) 2 and 3 only

    (d) 3 only

  • India could face ‘Imported Inflation’: Asian Development Bank (ADB)

    Why in the News?

    The Asian Development Bank recently issued a cautionary note for India’s susceptibility to imported inflation due to potential rupee depreciation amidst escalating interest rates in the West.

    What is Imported Inflation?

    • Imported inflation refers to the increase in the prices of goods and services within a country caused by a rise in the cost or price of imports.
    • This phenomenon occurs when factors such as a depreciating currency, higher import costs, or increased international prices lead to elevated expenses for imported goods and services.
    • Consequently, producers may adjust their prices upward to offset these higher costs, resulting in inflationary pressures within the domestic economy.
    • This idea connects with the theory of cost-push inflation, which means that when input costs go up, it can cause prices for final products to go up too.

    Reason behind the imported inflation:

    • Capital Flows: Increased interest rates in Western economies attract foreign investors seeking higher returns, leading to capital outflows from countries like India and potentially depreciating the Indian rupee.
      • When a currency depreciates, local consumers require more of their domestic currency to procure foreign goods, consequently elevating import prices.
    • Borrowing Costs: Indian businesses and the government may face higher borrowing costs for infrastructure projects and investments if they raise funds in foreign currency-denominated international markets.
    • Inflationary Pressures: Capital outflows can pressure the Indian rupee, causing imported inflation as the cost of imported goods rises due to currency depreciation.
    • Trade Competitiveness: Exchange rate fluctuations from Western interest rate changes affect India’s trade competitiveness, impacting exports, imports, and domestic consumption.

    Back2Basics: Asian Development Bank (ADB)

    Information
    Establishment Established in 1966 as a result of the Conference on Asian Economic Cooperation held by the United Nations Economic Commission for Asia and the Far East.
    Headquarters Manila, Philippines
    Official Status Official United Nations Observer
    Objectives
    • Reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.
    • Providing Loans, technical assistance, and Grants.
    • Offering “hard” loans on commercial terms primarily to middle income countries and “soft” loans with lower interest rates to poorer countries.
    • Providing direct financial assistance to private sector companies for projects with clear social benefits.
    • Maximizing development impact through policy dialogues, advisory services, and co-financing operations.
    Membership
    • 67 members, with 48 from the Asia and Pacific region.
    • Admits members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries.
    Funding
    • Japan and United States hold the largest proportion of shares at 15.607%.
    • China holds 6.444%, India holds 6.331%, and Australia holds 5.786%.
    Sources
    • Bond issues on the world’s capital markets.
    • Members’ contributions and retained earnings from lending operations.
    • Repayment of loans.

     

    PYQ:

    [2021] With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?​

    1. Expansionary policies​
    2. Fiscal stimulus​
    3. Inflation-indexing wages​
    4. Higher purchasing power​
    5. Rising interest rates​

    Select the correct answer using the code given below.

    (a) 1, 2 and 4 only

    (b) 3, 4 and 5 only

    (c) 1, 2, 3 and 5 only

    (d) 1, 2, 3, 4 and 5

  • How are hydrocarbons extracted from under the ground? | Explained

    Why in the news? 

    The geological processes, extraction methods, and environmental impact of hydrocarbon extraction.

    BACK2BASICS

    Where are Hydrocarbons located?

    • Hydrocarbons originate from plant and animal fossils that were formed by the forces of temperature and weight over millennia.
    • They are mostly found deep underground, in porous rock formations, such as sandstone, limestone, and shale. Hydrocarbons exist in Subterranean rock formations in various forms like natural gas, coal, crude oil, and petroleum, typically found in reservoirs.
    • The primary source of hydrocarbons in underground rocks is kerogen, organic matter deposits originating from lakes, marine ecosystems, or terrestrial ecosystems.
    • Different types of kerogen yield various hydrocarbon products such as waxy oils, oil and gas, light oils, gas, and coal.
    • Petroleum geologists utilize tools and techniques from petroleum geology to evaluate these rocks, assessing factors like porosity and permeability.

    How Hydrocarbons are extracted? 

    The extraction of hydrocarbons, such as oil and gas, has several negative impacts on the environment: 

    • Damage to Marine Life and Ecosystems: The extraction process can lead to the release of toxic substances and chemicals, which can harm marine life and ecosystems. This can lead to the death of fish, birds, and other marine animals, as well as the destruction of habitats.
    • Deforestation and Destruction of Flora: The search for hydrocarbon deposits often involves the clearing of large areas of land, which can lead to deforestation and the destruction of plant life. This can have a significant impact on local ecosystems and biodiversity.
    • Water Pollution: The extraction process can lead to the contamination of groundwater and surface water.
    • Destruction of Fertile Land: The extraction process can destroy fertile land, which can have serious consequences for agriculture and food production. This can lead to soil erosion, desertification, and the loss of biodiversity.

    Renewable sources that can serve as alternatives for hydrocarbons include:

    • Hydroelectricity: This is the most significant renewable energy source at 6% of the global total
    • Solar Energy: Solar power is a promising renewable energy source that can be harnessed using solar panels to convert sunlight into electrical energy. The solar power development sector is the fastest-growing renewable energy sector in the U.S
    • Wind Energy: Wind turbines can generate electricity from wind power, and this technology is becoming increasingly popular and efficient
    • Biomass Energy: Biomass energy can be derived from organic materials such as wood, agricultural waste, and municipal solid waste.
    • Geothermal Energy: Geothermal energy is generated and stored in the Earth’s crust. This energy source can be used for heating, cooling, and electricity generation
    • Renewable Natural Gas (RNG): RNG is a pipeline-quality gas that can be utilized by utilities interchangeably with conventional natural gas. RNG can be produced from methane waste sources such as farm and landfills

    Conclusion: Hydrocarbons, found in subterranean rock formations, are extracted using petroleum geology techniques. Extraction poses environmental risks like marine damage, deforestation, and water pollution. Renewable alternatives include hydroelectric, solar, wind, biomass, geothermal energy, and renewable natural gas.

    Mains PYQ:

    Q Do you think India will meet 50 percent of its energy needs from renewable energy by 2030? Justify your answer. How will the shift of subsidies from fossil fuels to renewables help achieve the above objective? Explain.

  • What is Shrinkflation?

    Why in the news?

    • As input prices turn inflationary, the FMCG (Fast-Moving Consumer Goods) segment faces the spectre of shrinking packs, impacting consumer choices and industry dynamics.

    What are FMCGs?

    • Fast-moving consumer goods, also known as consumer packaged goods, are products that are sold quickly and at a relatively low cost.
    • Examples include non-durable household goods such as packaged foods, beverages, toiletries, candies, cosmetics, over-the-counter drugs, dry goods, and other consumables.

    What is Shrinkflation?

    • Shrinkflation is a business practice where companies reduce the size or quantity of a product while keeping its price the same.

    Causes for Shrinkflation:

    1. Cost Management: It helps companies manage rising production costs, such as raw materials or labor, without sacrificing profitability.
    2. Market Competition: In competitive markets, companies may use shrinkflation to maintain their market share by keeping their prices competitive.

    Effects of Shrinkflation:

    • Consumer Perception: If consumers notice the change, it can lead to negative perceptions of the brand, loss of trust, and reduced customer loyalty.
    • Accuracy of Inflation Measurement: Shrinkflation complicates accurate measures of inflation since the price remains constant while the quantity decreases.
    • Limitations: Companies can only implement shrinkflation discreetly and for a limited number of times before consumers become aware and react negatively. Overuse can damage brand reputation.

    PYQ:

    [2015] With reference to inflation in India, which of the following statements is correct?

    (a) Controlling the inflation in India is the responsibility of the Government of India only

    (b) The Reserve Bank of India has no role in controlling the inflation

    (c) Decreased money circulation helps in controlling the inflation

    (d) Increased money circulation helps in controlling the inflation
  • [15 April 2024] The Hindu Op-ed: A manifesto where inclusivity takes center stage

    [15 April 2024] The Hindu Op-ed: A manifesto where inclusivity takes center stage

    Mains PYQ Relevance: 

    Q Individual Parliamentarian’s role as the national lawmaker is on a decline, which in turn, has adversely impacted the quality of debates and their outcome. Discuss. (UPSC IAS/2019)

    Q “The Indian party system is passing through a phase of transition which looks to be full of contradictions and paradoxes.” Discuss. (UPSC IAS/2016)

    Note4Students: 

    Mains: Polity;  Indian Party System;

    Mentor comments: In recent times, many National and State parties have published their manifestos for each general election. Election manifestos are formal statements by political parties outlining their aims and policies if elected. In India, these manifestos play a crucial role in signaling the party’s priorities and choices to the electorate. Election manifestos are not legally binding, and political parties are not obligated to fulfill their promises. Due to this reason, it remains always debatable and never gets challenged in the Judiciary or the Parliament.

    Let’s learn

    —

    Why in the News?

    The Bharatiya Janata Party (BJP) and Congress have released their manifestos for the 2024 Lok Sabha elections, titled ‘Sankalp Patra’ and ‘Nyay Patra’ respectively. 

    • The Manifesto ‘Sankalp Patra’ emphasizes empowering Women, Agricultural Support, and Law Enforcement, the ‘Nyay Patra’ promises Economic Policies and Welfare Programs, including a 10% quota in jobs and educational institutions for economically weaker sections.
    What are Party Manifestos?

    The Party Manifestos in general elections plays a crucial tool for political parties to communicate their vision, policies, and promises to the electorate. Manifestos outline the party’s stance on various issues, their proposed solutions, and the direction they intend to take if elected to govern.

    Supreme Court in its judgment dated 5th July 2013 in SLP(C) No. 21455 of 2008 has inter alia directed the Election Commission of India to frame guidelines on Election Manifesto to be included as part of the Model Code of Conduct. 

    Challenges in the General Election Manifesto System:

    • Varied Desires: National parties find it challenging to craft manifestos that resonate with the diverse aspirations of India’s populace, while regional parties are more adept at addressing local priorities.
    • Limited Awareness: Manifestos struggle to gain traction in Indian elections due to voter unfamiliarity, the impact of factors like caste and religion on voting patterns, and a dearth of focus on substantive discussions.
    • Minimum Reach: The Manifesto’s success hinges on the party’s ability to reach the masses, publicize it effectively, and turn it into a tool for mass mobilization and party revival, potentially leading to the healing of social relations and the revitalization of India’s economy, society, and democracy.
    • Unfulfilled Commitments: Political parties frequently fall short of fulfilling the pledges outlined in their pre-election manifestos, resulting in discrepancies between promises and actions.
      • Parties often backtrack on their commitments once in power, lacking mechanisms for ensuring accountability.
    • Encouraging a Culture of Freebies: Manifestos that promise freebies can distort the electoral process by amplifying the role of financial influence.

    Significance of Election Manifestos

    • Shaping Political Narratives: They play a vital role in influencing voter decisions and setting the agenda for public debate during the campaign period. 
    • Offer Perviews: Manifestos provide voters a preview of what the party stands for and what they would prioritize if in power.
    • Source of Awareness and Mobilization: Election manifestos are a source of information regarding the policies of political parties. Political parties publicize their manifestos in a bid to shore up electoral support which results in mass Mobilization.
      • Moreover, it brings on-ground debates and discussions on issues that are considered important for elections.
    • Competition: Election manifestos underline the competitive nature of electoral politics. Election manifestos highlight the aspirations and expectations of citizens which are the critical basis of electoral exercises.
    Legal Provisions in Other Countries:

    In Bhutan and Mexico: Electoral Authorities have the power to vet manifestos and get certain types of content removed.

    In the United Kingdom: the Electoral Authority issues guidelines for campaign materials (which would apply to manifestos also).

    In the United States: Without a central EMB, the State-level EMB regulations generally do not include any provisions about political party platforms. It is the Party Committee that governs internally and develops the platform of a party for a particular election, as per the Charter and By-Laws of the party.

    Conclusion: The Election Commission and political parties need to educate the public about the importance of manifestos. Increased awareness can lead to greater accountability for parties to fulfill their manifesto promises.

  • Fertility Levels drop below one in many Asian Nations

    Why in the News? 

    Many countries in East and Southeast Asia are in the middle of a population crisis, with fewer births every year and record-low fertility rates.

    • In March this year, several hospitals in China stopped offering newborn delivery services due to declining demand.

    What is TFR? 

    Total Fertility Rate is a measure used in demography to represent the average number of children that would be born to a woman over her lifetime.

    TFR of Asian countries and India and Comparison with others: 

    Reasons behind the Fertility levels dropping below one in many Asian nations:

    • Family Planning Measures: Countries like South Korea and Singapore have implemented stringent family planning policies, limiting the number of children couples are encouraged to have. For example, South Korea’s slogan in the 1980s, “Even two children per family are too many for our crowded country,” reflects the emphasis on controlling population growth.
    • Career Opportunities for Women: With more opportunities for women to pursue careers, there has been a shift in priorities away from having children.
    • Declining Marriage Rates: Dropping marriage rates contribute to lower fertility rates, as marriage traditionally correlates with childbearing. As fewer people get married or delay marriage, the window for childbearing narrows.
    • Cost of Raising Children: The rising cost of raising a child is cited as a deterrent to having larger families. Financial considerations such as education, healthcare, and housing expenses may dissuade couples from having more children.
    • Ideal fertility rate: The ideal fertility rate for a population to remain stable, assuming no immigration or emigration, is 2.1 children per woman. This rate is known as the replacement rate, and it ensures that each generation will replace itself.

    Suggestive Measures to maintain an ideal Fertility Rate:

    • Supporting Work-Life Balance: Implement policies that support work-life balance, such as flexible work schedules, parental leave, and affordable childcare, to encourage individuals to have children while pursuing their careers.
    • Financial Incentives: Offer financial incentives or subsidies for families to alleviate the financial burden of raising children, making it more feasible for individuals to start families.
    • Education and Awareness: Provide education and awareness programs on the benefits of having children at a younger age and the importance of family planning to help individuals make informed decisions about their fertility.
    • Healthcare Support: Improve healthcare services related to fertility, pregnancy, and childbirth to ensure a safe and supportive environment for individuals considering starting a family.

    Conclusion: Declining fertility rates in Asian nations prompt a population crisis due to stringent family planning, women’s career opportunities, declining marriage rates, and high child-raising costs. Need to take measures include work-life balance policies, financial incentives, education, and healthcare improvements to maintain an ideal fertility rate.

     

    Mains PYQ  

    Q Critically examine whether growing population is the cause of poverty OR poverty is the mains cause of population increase in India.

  • [pib] Index of Industrial Production (IIP) grows by 5.7% in February, 2024

    Why in the news?

    India’s Index of Industrial Production (IIP) increased by 5.7% in February, up from 3.8% in January, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).

    What is Index of Industrial Production (IIP)?

    • IIP as it is commonly called is an index that tracks overall manufacturing activity in different sectors of an economy.
    • It is currently calculated using 2011-2012 as the base year.
    • It is compiled and published by Central Statistical Organisation (CSO) every month.
    • CSO operates under the Ministry of Statistics and Programme Implementation (MoSPI).

    Components of IIP:

    • Three broad sectors in IIP:
    1. Manufacturing (77.6%),
    2. Mining (14.4%)
    3. Electricity (8%).
    • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

    Basket of products:

    There are 6 sub-categories:

    1. Primary Goods (consisting of mining, electricity, fuels and fertilisers)
    2. Capital Goods (e.g. machinery items)
    3. Intermediate Goods (e.g. yarns, chemicals, semi-finished steel items, etc)
    4. Infrastructure Goods (e.g. paints, cement, cables, bricks and tiles, rail materials, etc)
    5. Consumer Durables (e.g. garments, telephones, passenger vehicles, etc)
    6. Consumer Non-durables (e.g. food items, medicines, toiletries, etc)

    Who uses IIP data?

    • The factory production data (IIP) is used by various government agencies such as the Ministry of Finance, the Reserve Bank of India (RBI), private firms and analysts, among others for analytical purposes.
    • The data is also used to compile the Gross Value Added (GVA) of the manufacturing sector in the Gross Domestic Product (GDP) on a quarterly basis.

    IIP base year change:

    • The base year was changed to 2011-12 from 2004-05 in the year 2017.
    • The earlier base years were 1937, 1946, 1951, 1956, 1960, 1970, 1980-81, 1993-94 and 2004-05.

    What are the Core Industries in India?

    • The main or the key industries constitute the core sectors of an economy.
    • In India, there are eight sectors that are considered the core sectors.
    • They are electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilizers.

    About Index of Eight Core Industries (ICI)  

    • The monthly Index of Eight Core Industries (ICI) is a production volume index.
    • ICI measures collective and individual performance of production in selected eight core industries: Coal (10%), Crude Oil (8.98%), Natural Gas (6.88%), Refinery Products (28.04%), Fertilizers (2.63%), Steel (17.92%), Cement (5.37%), and Electricity (20.18%).
    • Prior to the 2004-05 series six core industries namely Coal, Cement, Finished Steel, Electricity, Crude petroleum and Refinery products constituted the index basket.
    • Two more industries i.e. Fertilizer and Natural Gas were added to the index basket in 2004-05 series. The ICI series with base 2011-12 will continue to have eight core industries.

    Components covered in these eight industries for compilation of index are as follows:

    1. Coal – Coal Production excluding Coking coal.
    2. Crude Oil – Total Crude Oil Production.
    3. Natural Gas – Total Natural Gas Production.
    4. Refinery Products – Total Refinery Production (in terms of Crude Throughput).
    5. Fertilizer – Urea, Ammonium Sulphate (A/S), Calcium Ammonium Nitrate (CAN), Ammonium chloride (A/C), Diammonium Phosphate (DAP), Complex Grade Fertilizer and Single superphosphate (SSP).
    6. Steel – Production of Alloy and Non-Alloy Steel only.
    7. Cement – Production of Large Plants and Mini Plants.
    8. Electricity – Actual Electricity Generation of Thermal, Nuclear, Hydro, imports from Bhutan.

    How is IIP different from ICI?

    • IIP is compiled and published monthly by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.
    • However, ICI is compiled and released by Office of the Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), and Ministry of Commerce & Industry.
    • The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.

    PYQ:

    [2015] In the Index of Eight Core Industries, which one of the following is given the highest weight?

    (a) Coal Production

    (b) Electricity generation

    (c) Fertilizer Production

    (d) Steel Production

  • India Initiates Review of Asean Trade Pact to Boost Domestic Manufacturing

    Why in the news?

    The review aims to address concerns such as the inverted duty structure, which puts local manufacturers at a disadvantage.

    Trade deficit issue with ASEAN 

    • High trade deficit: The trade deficit between India and the Association of Southeast Asian Nations (ASEAN) has been a significant issue, with the deficit widening to USD 43.57 billion in the last fiscal from USD 25.76 billion in 2021-22 and just USD 5 billion in 2010-11
    •  Review AITIGA:This has led to a review of the ASEAN-India Trade in Goods Agreement (AITIGA) by 2025, aiming to address concerns about trade barriers, abuse of the agreement, and the growing trade gap between India and the ASEAN region

    ASEAN-India Trade in Goods Agreement (AITIGA)

    • The ASEAN-India Trade in Goods Agreement (AITIGA) is a trade agreement between the ten member states of ASEAN and India, signed in 2009 and implemented in 2010. The agreement aims to establish a free trade area between the parties, covering trade in physical goods and products, and progressively eliminating duties on 76.4 percent of goods. 

    The trade deficit between India and the ASEAN region is primarily due to the following reasons:

    • Tariff disparities: India’s tariffs were much higher than partner countries, leading to a significant reduction in tariffs for partner countries, which in turn caused India’s imports to grow faster than exports. This imbalance has been widening since 2010-11, the year India entered into an agreement with ASEAN
    • Non-tariff barriers and regulations: India’s exports to ASEAN have been affected due to non-reciprocity in FTA concessions, non-tariff barriers, import regulations, and quotas. These factors have hindered India’s ability to fully benefit from the FTA
    • Routing of goods from third countries: There have been concerns about the routing of goods from third countries, such as China, to ASEAN countries with minimum value addition and then being imported into India, misusing the India-ASEAN FTA. This practice has contributed to the growing trade deficit
    • Limited market access for Indian products: India’s exports of products such as textile clothing, footwear, food products, and minerals don’t have a significant place in ASEAN imports, while there is a higher dependence on products such as vegetables, fuels, chemicals, and metals from ASEAN, which are essential commodities

     Conclusion 

    India’s review of the ASEAN-India Trade in Goods Agreement aims to tackle the widening trade deficit by addressing tariff disparities, non-tariff barriers, and the misuse of the agreement, crucial steps toward fostering fair and balanced trade relations.

    Mains question for practice 

    Q Discuss the factors contributing to high  deficit between India and ASEAN. 

     

  • Understanding perspectives: Farmers’ Protests raise divisive opinions

    Why in the news? 

    A recent survey conducted by CSDS-Lokniti aimed to gather opinions regarding the ongoing farmer protests.

    Opinion about the Farmer Protest:

    The major key demands of Farmers in India include:

    • On Minimum Support Price (MSP): Farmers demand a legal guarantee for MSP for crops, which is a crucial lifeline for farmers facing market uncertainties.
    • On Electricity Act 2020: Farmers are demanding the repeal of the Electricity Act 2020, which they believe will negatively impact their income.
    • On Compensation: Farmers are demanding compensation for farmers who died during the previous agitation in Lakhimpur Kheri.
    • Withdrawal of Cases: Farmers are demanding the withdrawal of cases registered against farmers during the 2020-21 agitation.

    Government Initiatives: 

    • Negotiations: The government has taken several steps to address the farmer agitation, including negotiations with protesting farmers, proposing the formation of a committee to provide statutory backing to the Minimum Support Price (MSP), and engaging in talks with farmer representatives.
    • Demands: Despite promises made to farmers in 2021, the government has not fully responded to their demands, leading to continued tensions and protests. The government’s reaction to the protest still appears to be focused on maintaining law and order rather than proactively addressing the underlying issues raised by the farmers

    Conclusion: The CSDS-Lokniti 2024 pre-poll survey highlights divisive opinions on farmer protests, citing demands for an MSP guarantee, repeal of the Electricity Act, and compensation for fatalities. Despite negotiations, unresolved grievances persist, indicating a need for proactive governmental action and dialogue