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Subject: Economics

  • India ranks 134th in global human development index, says UNDP report

    Why in the news? 

    Recently, India’s progress in the global Human Development Index (HDI), as reported by the United Nations Development Programme (UNDP)

    Context-

    • India’s ranking on the United Nations Human Development Index (HDI) improved by one position in 2022 to 134 out of 193 countries compared to 135 out of 191 countries in 2021. Switzerland has been ranked number one.

    The Human Development Index (HDI)-

    About 

    The Human Development Index (HDI), initially introduced by the UNDP in 1990, is a statistical composite index. It measures a country’s average achievement across three fundamental dimensions:

    • Health: This dimension is represented by life expectancy at birth. It reflects the overall health and well-being of the population and their access to healthcare services.
    • Education: This dimension includes indicators such as expected years of schooling for children entering school and mean years of schooling for adults. It assesses the level of educational attainment and the availability of educational opportunities within a country.
    • Standard of Living: This dimension is measured by Gross National Income (GNI) per capita, adjusted for purchasing power parity (PPP). It reflects the economic prosperity and living standards of the population, including income levels and access to basic necessities.

    Background

    • The Human Development Index (HDI) was developed by Pakistani economist Mahbub ul Haq and Indian economist Amartya Sen. It is used by the United Nations Development Programme (UNDP) to assess a country’s development as part of the Human Development Report.
    • Alongside the Human Development Index (HDI), the United Nations Development Programme (UNDP) also presents the Human Development Report (HDR) which present-
    1. Multidimensional Poverty Index (MPI),
    2. Inequality-adjusted Human Development Index (IHDI),
    3. Gender Inequality Index(GII) since 2010 and
    4. Gender Development Index (GDI) since 2014

    Key Points as per Report- 

    • India’s Rank on the HDI: India moved up one rank on the Human Development Index (HDI) from 135 in 2021 to 134 in 2022, with slight improvements in life expectancy and Gross National Income (GNI) per capita.
    • Comparison with Neighbors: India ranks below its southern neighbour Sri Lanka (ranked 78) and China (ranked 75) in the High Human Development category, and below Bhutan (ranked 125) and Bangladesh (ranked 129) in the Medium Human Development category.
    • Reducing inequalities: The report highlights a reverse trend in reducing inequalities between wealthy and poor nations. Despite interconnected global societies, collective action on climate change, digitalization, poverty, and inequality is lacking, leading to a widening human development gap.
    • Challenges in Democracy: While nine in 10 people worldwide endorse democracy, over half express support for leaders who may undermine it. Political polarization and limited control over government decisions are prevalent, leading to protectionist or inward-turning policy approaches.

    Action Plans as per report-

    • Multilateral Cooperation: Strengthen international cooperation and collaboration among governments, NGOs, businesses, and other stakeholders to address global challenges collectively. This could involve fostering dialogue, partnerships, and agreements that promote shared goals and responsibilities.
    • Policy Coordination: Enhance coordination and coherence in policymaking at national and international levels to ensure that policies address interconnected challenges comprehensively. This may involve integrating diverse perspectives, aligning strategies across sectors, and leveraging resources efficiently.
    • Investment in Sustainable Development: Increase investments in sustainable development initiatives that prioritize environmental conservation, social equity, and economic prosperity. This could include funding for renewable energy, education, healthcare, infrastructure, and poverty alleviation programs.
    • Empowering Communities: Empower local communities and grassroots organizations to participate in decision-making processes and contribute to problem-solving efforts. This could involve providing resources, capacity-building support, and platforms for civic engagement.
    • Promotion of Dialogue and Understanding: Foster dialogue, empathy, and mutual understanding among diverse communities to mitigate polarization and build social cohesion. This could involve promoting education, cultural exchange programs, media literacy, and initiatives that promote tolerance and respect for human rights.
    • Transparency and Accountability: Enhance transparency, accountability, and integrity in governance structures and institutions to rebuild trust and confidence among citizens. This could involve strengthening anti-corruption measures, promoting open government initiatives, and ensuring inclusive and participatory decision-making processes.
    • Investment in Education and Awareness: Invest in education, public awareness campaigns, and media literacy programs to increase awareness of global challenges, their interconnections, and the importance of collective action. This could help foster a sense of shared responsibility and mobilize public support for collaborative solutions.
    • Promotion of Inclusive Economic Growth: Promote inclusive economic growth that benefits all segments of society, reduces inequality, and creates opportunities for marginalized populations. This could involve implementing policies that support job creation, entrepreneurship, social protection, and access to essential services.
    • Resilience Building: Build resilience to global challenges such as climate change, pandemics, and economic crises by investing in preparedness, adaptation, and mitigation strategies. This could involve strengthening healthcare systems, disaster risk reduction measures, and social safety nets.
    • Advocacy and Leadership: Advocate for political leadership and commitment at all levels to prioritize collective action and address shared challenges effectively. This could involve mobilizing political will, engaging with policymakers, and holding leaders accountable for their actions.

    Conclusion-

    Strengthening multilateral cooperation, policy coordination, sustainable development investment, empowering communities, promoting dialogue, transparency, education, inclusive economic growth, resilience building, and advocating for leadership are vital for addressing global challenges collectively and fostering a sustainable future.

    Mains PYQ-

     Q- Despite the consistent experience of high growth, India still goes with the lowest indicators of human development. Examine the issues that make balanced and inclusive development elusive.(UPSC IAS/2019)

  • Food factor: On the latest retail inflation data

    Why in the news? 

    • India’s retail inflation remained virtually unchanged at 5.09% in February, even as food prices paid by consumers resurged from 8.3% in January to 8.66% in February.

    Context-

    • Most economists expect inflation to stay in the 5.1%-5.2% range in March as well, which would lift average inflation in the last quarter of this year over the 5% average projected by the RBI

    The primary reason behind the food inflation in February-

    • Vegetable Prices Surge: Vegetables experienced a significant price surge, with a seven-month high pace of 30.25% in February. This spike in vegetable prices contributed significantly to the overall food inflation.
    • Rise in Egg and Meat Prices: Prices of eggs and meat/fish also rose at a faster pace in February compared to January. Eggs witnessed a notable increase from 5.6% to 10.7%, while meat and fish prices rose from 1.2% to 5.2%.
    • Deceleration in Pulses and Spices Prices: While there was a slight deceleration in the inflation rate of pulses and spices compared to the previous year, these items still experienced steep price increases. Pulses inflation stood at 18.5%, and spices recorded a 13.5% increase.
    • Regional Disparities: Food inflation varied across different states, with some states experiencing inflation rates above the RBI’s upper tolerance threshold of 6%. States like Odisha, Telangana, Haryana, and Assam recorded high inflation rates, while others like Delhi, Madhya Pradesh, Uttarakhand, and West Bengal had relatively lower inflation rates.
    • Seasonal Factors and Supply Chain Issues: Seasonal factors, along with supply chain disruptions, could have contributed to the rise in food prices. Factors such as adverse weather conditions, transportation constraints, and supply-demand imbalances may have affected the availability and prices of food items in the market.

    To address inflation-related issues in the short term and long term, several measures can be considered:

    [A] Short-Term Measures:

    Supply-Side Interventions:

    • Increase the supply of essential commodities by releasing buffer stocks, if available.
    • Facilitate faster transportation of perishable goods through streamlined logistics and distribution channels.
    • Establish temporary market outlets to directly connect farmers with consumers, reducing intermediary costs and price hikes.

    Import Policies:

    • Relax import restrictions on essential food items to augment domestic supply and stabilize prices.
    • Expedite customs clearance procedures to ensure timely availability of imported goods in the market.

    Price Monitoring and Control:

    • Implement strict price monitoring mechanisms to prevent hoarding and profiteering.
    • Set up special task forces or committees to monitor price movements and take swift action against price manipulation.

    Demand Management:

    • Promote alternative dietary choices to alleviate pressure on high-priced items.
    • Encourage conservation and rational utilization of essential commodities through public awareness campaigns.

    [B] Long-Term Measures:

    Investment in Agriculture Infrastructure:

    • Enhance investment in agricultural infrastructure, including irrigation systems, cold storage facilities, and transportation networks, to improve productivity and reduce post-harvest losses.

    Crop Diversification and Technology Adoption:

    • Encourage farmers to diversify their crops to mitigate the impact of price volatility.
    • Promote the adoption of modern agricultural practices, including mechanization, precision farming, and biotechnology, to enhance crop yields and resilience to climate change.

    Market Reforms:

    • Implement market reforms to create a more efficient and transparent agricultural marketing system.
    • Facilitate the establishment of Farmer Producer Organizations (FPOs) and agricultural cooperatives to empower farmers and strengthen their bargaining power in the market.

    Food Processing and Value Addition:

    • Promote investment in food processing industries to add value to agricultural produce and reduce post-harvest losses.
    • Establish food processing clusters and agro-industrial parks to encourage entrepreneurship and create employment opportunities in rural areas.

    Risk Management and Insurance:

    • Introduce crop insurance schemes and risk management tools to protect farmers from income volatility caused by price fluctuations and natural disasters.
    • Provide training and technical assistance to farmers to improve their risk assessment and management capabilities.

    Sustainable Agriculture Practices:

    • Encourage the adoption of sustainable agriculture practices, including organic farming, agroforestry, and soil conservation, to ensure long-term environmental sustainability and food security.

    Conclusion-

    To mitigate food inflation, short-term measures such as supply-side interventions and price monitoring are essential, while long-term solutions like investment in agriculture infrastructure and market reforms are crucial for sustainable food security.

  • Mission Palm Oil: Achieving Self-sufficiency in Edible Oil Production

    Why in the news-

    • The Prime Minister highlighted the National Mission on Edible Oils – Oil Palm (NMEO-OP) during his visit to Arunachal Pradesh, inaugurating the first oil mill under this mission.

    Why discuss this?

    • This results in a substantial outflow of $20.56 billion in foreign exchange, the need for self-reliance in edible oil production has become paramount.

    Edible Oil Consumption in India: Key Facts

    • India, the world’s biggest importer of vegetable oils, is likely to buy 15.6 million metric tons of cooking oils in the 2023-24 oil year, down from 16.6 million in the current year to Oct.
    • With India imports 57% of its vegetable oil demand.
    • These imports have shown a declining trend in recent months.
    • This decline is attributed to various factors such as reduced availability of palm oil for edible oil requirements due to producers diverting it for biodiesel production.
    • Additionally, the import of soyabean oil from Argentina increased sharply in February 2024, while imports from Brazil declined.
    • The top three vegetable oil imports – palm, soybean, and sunflower seed oil.
    • India’s vegetable oil sector accounts for 13% of the Gross Cropped Area, 3% of the Gross National Product, and 10% of the value of all agricultural commodities.
    • A substantial portion of India’s edible oil requirement is fulfilled through palm oil imports from Indonesia and Malaysia.

    Mission Palm Oil: A Catalyst for Self-Reliance

    • It is a Centrally Sponsored Scheme launched in 2021 targeting a substantial increase in oil palm cultivation and crude palm oil production.
    • It has been introduced with a particular emphasis on the Northeast region and the Andaman and Nicobar Islands.

    Objectives:

    1. Expand oil palm acreage by an additional 6.5 lakh hectares by 2025-26
    2. Increase crude palm oil production to 11.2 lakh tonnes by 2025-26, reaching up to 28 lakh tonnes by 2029-30.
    3. Increase consumer awareness to maintain a consumption level of 19.00 kg/person/annum till 2025-26.

    Focus Areas

    (1)  Fixing of Viability Price

    • Oil palm farmers currently produce Fresh Fruit Bunches (FFBs), from which the industry extracts oil.
    • Presently, FFB prices fluctuate with international Crude Palm Oil (CPO) prices.
    • The Government of India will now assure price stability for FFBs, known as Viability Price (VP), shielding farmers from international CPO price fluctuations.
    • A Formula Price (FP), set at 14.3% of CPO and adjusted monthly, will be established. Viability gap funding will be the difference between VP and FP, directly disbursed to farmers’ accounts via Direct Benefit Transfer (DBT) when necessary.

    (2) Input Assistance

    • The scheme’s second major focus is to significantly enhance input assistance/interventions, including:
      1. Increasing assistance for oil palm planting material from Rs. 12,000 to Rs. 29,000 per hectare.
      2. Boosting support for maintenance and intercropping interventions.
      3. Providing special assistance of Rs. 250 per plant for replanting old gardens to rejuvenate them.
      4. Offering special assistance tailored for the North-East and Andaman regions, including provisions for half-moon terrace cultivation, bio-fencing, land clearance, and integrated farming.

    Try this PYQ from CSE Prelims 2019:

    Among the following, which one is the largest exporter of rice in the world in the last five years?

    (a) China

    (b) India

    (c) Myanmar

    (d) Vietnam

     

    Practice MCQ:

    Consider the following statements:

    1. India is the world’s biggest importer of vegetable oils.
    2. The top three vegetable oil imports include – soybean, palm and groundnut oil.

    Which of the given statements is/are correct?

    (a) Only 1

    (b) Only 2

    (c) Both 1 and 2

    (d) Neither 1 nor 2

     

  • [pib] E- Vehicle Policy to promote India as a Manufacturing Destination for EVs

    Why in the news-

    • The Union Government has approved a scheme aimed at promoting India as a manufacturing destination for e-vehicles (EVs) with the latest technology.
    • The policy aims to attract investments from reputed global EV manufacturers to bolster the EV ecosystem in the country.

    About E- Vehicle Manufacturing Policy

    • Access to Latest Technology: Indian consumers will gain access to the latest technology in EVs, aligning with the Make in India initiative.
    • Strengthening the EV Ecosystem: The policy aims to strengthen the EV ecosystem by fostering healthy competition among EV players, leading to high-volume production and economies of scale.
    • Reducing Import Dependency: By promoting domestic production, the policy aims to reduce imports of crude oil, lower the trade deficit, and curb air pollution, particularly in cities.
    • Key provisions of the Policy include:
    1. Minimum Investment Requirement: A minimum investment of Rs 4150 crore (∼USD 500 million) is required to qualify for the scheme.
    2. Timeline for Manufacturing: Manufacturers must set up manufacturing facilities in India within 3 years, start commercial production of e-vehicles, and achieve 50% domestic value addition (DVA) within 5 years.
    3. Domestic Value Addition (DVA): Localization levels of 25% by the 3rd year and 50% by the 5th year must be achieved during manufacturing.
    4. Customs Duty Incentives: A customs duty of 15% applies to vehicles with a minimum CIF value of USD 35,000 and above, subject to certain conditions.

    Additional Provisions and Requirements

    • Limit on Duty Forgone: The duty foregone on imported EVs is limited to the investment made or ₹6484 crore, whichever is lower.
    • Annual Import Limits: A maximum of 40,000 EVs can be imported annually, subject to investment thresholds.
    • Bank Guarantee Requirement: Investment commitments must be backed by a bank guarantee, which will be invoked in case of non-achievement of DVA and minimum investment criteria.
    • Bank Guarantee Invocation: The bank guarantee will be invoked if companies fail to meet the DVA and minimum investment criteria outlined in the scheme guidelines. 

    Various Policy Moves for Promoting E-Vehicles

    • FAME scheme II (2019): Offers incentives such as subsidies, tax rebates, and preferential financing for EV manufacturers and buyers.
    • National Electric Mobility Mission Plan (2013): Aims to achieve annual sales targets of 6-7 million hybrid and electric vehicles by 2020 through fiscal incentives.
    • Amendments to the Model Building Bye-laws (2016): It requires 20% of parking spaces in residential and commercial buildings to be allocated for EV charging facilities.
    • National Mission on Transformative Mobility and Battery Storage (2019): Aims to create an ecosystem for EV adoption and support the establishment of large-scale battery manufacturing plants.
    • Production Linked Incentive (PLI) scheme (2021): It incentivises EV and component manufacturing.
    • Vehicle Scrappage Policy (2021): It incentivizes the scrapping of old vehicles and the purchase of new EVs.
    • Ministry of Power’s guidelines: It mandates charging stations every 3 km along grids and every 25 km on highways.

    Try this PYQ from CSE Mains 2019:

    Q. How is efficient and affordable urban mass transport key to the rapid economic development in India?

  • [pib] Integration of Kisan Credit Card (KCC) Fisheries Scheme and JanSamarth Portal

    Why in the news-

    • The Department of Fisheries inaugurated the integration of the Kisan Credit Card (KCC) Fisheries scheme onto the JanSamarth Portal, marking a revolutionary step in providing credit facilities to fishers and fish farmers nationwide.

    JanSamarth Portal

    • It is a first-of-its-kind online platform for directly connecting lenders with beneficiaries. Citizens can avail loans under 13 Central government schemes under 4 loan categories.
    • The one-stop portal allows citizens to check eligibility, apply online and get digital approval.

    About KCC Fisheries Scheme

    • The GoI, in the year 2018-19, extended KCC facility to fisheries and animal husbandry farmers to help them to meet their working capital requirements.
    • Bank authorities have been instructed to issue KCC within 14 days of receipt of the completed application from the fish farmers.
    • Benefits Include:
    1. For the existing KCC holders the benefits of interest subvention and prompt repayment incentive will be admissible up to the credit limit of Rs. 3 lakhs including fisheries activities.
    2. In the case of new card holders, the credit limit is Rs. 2 lakhs to meet their working capital requirements for fisheries activities.
    3. In the KCC scheme @7% is the lending rate to farmers including @2% interest subvention per annum by GoI. Also, another @3% per annum is provided in case of prompt repayment as an additional incentive as per the existing guidelines.
    4. This implies that the farmers repaying promptly as above would get a loan @ 4% per annum effectively for loan amount upto Rs 2 lakhs.

    Kisan Credit Cards (KCC) Scheme

    • The KCC scheme was introduced on the recommendation of R.V. Gupta of the National Bank for Agriculture and Rural Development.
    • The scheme was launched in 1998 to provide adequate and timely credit support from the banking system to the farmers.
    • It provides a single window with flexible and simplified procedures to the farmers for their cultivation and other needs like purchasing agriculture inputs such as seeds, fertilizers, pesticides etc. and drawing cash for their production needs.
    • The scheme was further extended for the investment credit requirement of farmers viz. allied and non-farm activities in the year 2004.
    • In 2018-19, it was extended to fisheries and animal husbandry farmers.

    Objectives include:

    1. To meet the short-term credit requirement for cultivation
    2. To manage post-harvest expenses
    3. To meet the consumption requirement of farmer’s household
    4. Working capital for maintaining the farm assets and activities allied to agriculture
    5. Investment credit requirement for agriculture-allied activities

    KCC scheme is implemented by:

    1. Commercial banks
    2. Regional Rural Banks (RRBs)
    3. Small Financial Banks, and
    4. Cooperative banks

    Try this PYQ from CSE Prelims 2020:

    Under the Kisan Credit Card scheme, short-term credit support is given to farmers for which of the following purposes?

    1. Working capital for maintenance of farm assets
    2. Purchase of combine harvesters, tractors and mini trucks
    3. Consumption requirements of farm households
    4. Post-harvest expenses
    5. Construction of family house and setting up of village cold storage facility

    Select the correct answer:

    (a) 1, 2 and 5 only

    (b) 1, 3 and 4 only

    (c) 2, 3, 4 and 5 only

    (d) 1, 2, 4 and 5

     

    Practice MCQ:

    The JanSamarth Portal often seen in the news is related to:

    (a) Lending Facility

    (b) E-KYC

    (c) Consumer Grievances

    (d) Right to Information

     

  • Has poverty really dropped to 5% in India?

    Why in the news? 

    • NITI Aayog’s B.V.R. Subrahmanyam stated that less than 5% of Indians live below the poverty line based on HCES(Household Consumption Expenditure Survey) 2022-23 findings.

    Context:

    • According to the World Bank, in India, 21.9% of the population lives below the national poverty line in 2011.
    • In 2018, almost 8% of the world’s workers and their families lived on less than US$1.90 per person per day (international poverty line).
    • About HCES (Household Consumption Expenditure Survey): The HCES is usually conducted by the National Statistical Office (NSO) every 5 years. It is designed to collect information on the consumption of goods and services by households

    What does the  HCES Survey say?

    • The survey indicates 2.5 times increase in consumption expenditure since 2011-12, but critics question income rise parity on basis of the following conditions:
      • Nominal vs. Real Terms: Consumption has increased about 40% per capita in real terms over the past 11 years, despite nominal terms showing a 2.5 times increase.
      • Wage Growth: Data from the Periodic Labour Force Survey (PLFS) reveals a 3.2% annual increase in wages for agricultural workers since 2011, indicating real wage growth.
      • Tax Data: Tax records demonstrate robust growth in the wages of salaried workers since 2011, further supporting the claim of increased incomes lead to higher consumption.

     

    How the Poverty line is defined in India? Does the poverty line need to be raised?

    • The poverty line in India: Historically based on the Tendulkar Committee observation, the poverty line, currently approximates ₹1,500 in rural and ₹1,800 in urban areas. However, it lacks a clear conceptual basis, diverging from traditional calorie-based metrics. Additionally, there’s no officially declared poverty line presently.
    • Poverty Line Calculation: NITI Aayog’s task force calculates the poverty line in India using data from the National Sample Survey Office, which is part of the Ministry of Statistics and Programme Implementation.
    • Need for raising the Poverty line: In 2011-12, India’s poverty rate was 12.5%, but it has decreased to 5% by 2022-23. Using the Tendulkar poverty line, poverty levels are around 2%, indicating the need to increase the poverty line. Extreme poverty has been reduced, but raising the poverty line is necessary, as indicated by different calculations.

    What is the Criticism faced along the lines of income rise parity?

    • Real Wage Growth: Contrary to claims of wage growth, numerous studies indicate that real wages have grown by less than 1% annually since 2017, and have even declined for construction workers.
    • Employment Data: The celebrated increase in employment shown in the latest PLFS survey for 2022-23 is misleading, as it primarily stems from a rise in unpaid family helpers rather than genuine job creation.
    • Unpaid Workers: The prevalence of unpaid family helpers, particularly among women, has increased significantly, with 37.5% of women workers now being unpaid, up from 32% in previous years.
    • Paid Employment Rates: When considering only paid employment (those receiving compensation for work), the rates are notably low, with only 48% for men and 13% for women, indicating a lack of genuine employment opportunities and wage growth for most working families.
    • Stagnant Demand for Mass Consumption Goods: Despite overall consumption growth, demand for mass-consumption goods and fast-moving consumer goods (FMCGs) remains stagnant, suggesting limited improvement in the purchasing power of the majority of the population.
    • Two-Wheeler Sales: Sales of two-wheelers, a key indicator of consumer demand, have not recovered to pre-demonetization levels (pre-November 2016), indicating persistent challenges in the broader economy affecting consumer spending habits.

    The Other side of the coin- 

    • Concerns with Private Sector Data: There is skepticism regarding the quality of data provided by private sector entities like CMIE, particularly regarding indicators such as female labor force participation rates.
    • Female Labor Force Participation Rate: CMIE data suggests a significantly low female labor force participation rate in India, with only 9% of women reportedly working, raising questions about the accuracy and reliability of these statistics.
    • Comparison with Other Countries: The data implies that India’s female labor force participation rate is lower than that of countries like Yemen and Iraq, highlighting the severity of the issue and prompting concerns about the credibility of the data.

    Way Forward: Measures to improve the data and poverty line – 

    • Revising Poverty Line Definition: Develop a clear conceptual basis for defining the poverty line, moving away from historical metrics like the Tendulkar poverty line towards more comprehensive and inclusive criteria, such as calorie-based metrics or multidimensional poverty indicators.
    • Official Declaration of Poverty Line: Establish an officially declared poverty line, supported by rigorous research and consultation with experts, to provide clarity and consistency in poverty estimation efforts.
    • Enhanced Monitoring and Evaluation: Strengthen monitoring and evaluation mechanisms to regularly review and update the poverty line based on evolving socio-economic conditions, ensuring its relevance and accuracy over time.

    Conclusion:

    The poverty line in India, historically based on the Tendulkar poverty line, needs revision due to its lack of conceptual basis and the absence of an official declaration. Despite reductions in extreme poverty, concerns persist over stagnant wage growth, misleading employment data, and the need for improved poverty measurement methodologies.

  • RBI may move some NBFCs to Top Layer this year

    In the news

    • Nearly two years after introducing a revised regulatory framework for non-banking finance companies (NBFCs), the Reserve Bank of India is set to review the categorisation of NBFCs in 2024.
    • Currently, 16 NBFCs are placed in the upper layer.

    What are Non-Banking Financial Companies (NBFCs)?

    • A NBFC is a company registered under the Companies Act, 1956.
    • It engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, and chit business.
    • It does NOT include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.

    How are NBFCs different from Bank?

    • NBFCs lends and make investments and hence their activities are akin to that of banks.
    • However, there are a few differences as given below:
    1. Commercial Banks are regulated under Banking Regulation Act, 1949.
    2. NBFC CANNOT accept demand deposits.
    3. NBFCs DO NOT form part of the payment and settlement system and cannot issue cheques drawn on itself.
    4. Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is NOT available to depositors of NBFCs, unlike in case of banks.

    Different types/categories of NBFCs registered with RBI

    NBFCs are categorized:

    1. in terms of the type of liabilities into Deposit and Non-Deposit accepting NBFCs,
    2. non deposit taking NBFCs by their size into systemically important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND) and
    3. by the kind of activity they conduct.

    Within this broad categorization the different types of NBFCs are as follows:

    Definition
    Asset Finance Company (AFC) A financial institution primarily engaged in financing physical assets used in productive/economic activities, such as automobiles, tractors, machinery, and industrial equipment.
    Investment Company (IC) A company whose principal business involves acquiring securities.
    Loan Company (LC) A financial institution primarily engaged in providing finance through loans, advances, or other means for activities other than its own.

    Does not include Asset Finance Companies.
    Infrastructure Finance Company (IFC) A non-banking finance company that deploys at least 75% of its total assets in infrastructure loans, with a minimum Net Owned Funds of ₹300 crore, a minimum credit rating of ‘A’ or equivalent, and a CRAR of 15%.
    Systemically Important NBFCs NBFCs with an asset size of ₹500 crore or more, as per the last audited balance sheet.

    Considered significant due to their potential impact on the overall financial stability of the economy.

     

    Scale-Based Regulation of NBFCs

    • Scale-based regulations came into effect in October 2021 and were implemented a year later by RBI.
    • There are four layers namely the base layer, middle layer, upper layer and top layer.
    • As on September 30, 2023, NBFCs in the base, middle and upper layers constituted 6 per cent, 71 per cent and 23 per cent of the total assets of NBFCs respectively.
    • Presently, no NBFC is listed in the top layer.

    Here’s a breakdown of the key aspects of the SBR:

    1. Base Layer (NBFC-BL)
    • The Base Layer primarily comprises non-deposit-taking NBFCs with assets below Rs 1,000 crore.
    • It encompasses NBFC Peer to Peer (P2P), NBFC-Account Aggregator (AA), Non-Operative Financial Holding Company (NOFHC), and NBFCs without public funds and customer interface.
    1. Middle Layer (NBFC-ML)
    • The Middle Layer includes deposit-taking NBFCs and non-deposit-taking NBFCs with assets exceeding Rs 1,000 crore.
    • It encompasses NBFCs involved in specific activities such as Standalone Primary Dealers (SPDs), Infrastructure Debt Fund – NBFCs (IDF-NBFCs), Core Investment Companies (CICs), Housing Finance Companies (HFCs), and Infrastructure Finance Companies (NBFC-IFCs).

    III. Upper Layer (NBFC-UL)

    • The Upper Layer comprises NBFCs identified by RBI as requiring enhanced regulatory requirements based on specific parameters and scoring methodology.
    • The top 10 eligible NBFCs in terms of asset size will always be placed in the Upper Layer, irrespective of other factors.
    1. Top Layer (NBFC-TL)
    • NBFCs in the Upper Layer may be transferred to the Top Layer if RBI perceives a significant increase in potential systemic risk.
    • Currently, the Top Layer remains vacant but serves as a precautionary measure for heightened risk situations.

     

    With inputs from: https://rbi.org.in/scripts/PublicationsView.aspx?Id=21580

    Practice MCQ:

    Q. With reference to the Scale-Based Regulation of Non-Banking Financial Companies (NBFCs), consider the following statements:

    1. Higher the layer, least is the regulatory intervention required by the RBI.
    2. Currently, no NBFC is listed in the top layer.

    Which of the given statements is/are correct?

    a) Only 1

    b) Only 2

    c) Both 1 and 2

    d) Neither 1 nor 2

    Try this PYQ from CSE 2020:

    1. If you withdraw ` 1,00,000 in cash from your Demand Deposit Account at your bank, the immediate effect on aggregate money supply in the economy will be:

    (a) to reduce it by ` 1,00,000

    (b) to increase it by ` 1,00,000

    (c) to increase it by more than ` 1,00,000

    (d) to leave it unchanged

     

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  • Nuclear Waste Management and India

    nuclear waste

    In the news

    • India recently achieved a significant milestone in its nuclear program with the loading of the core of the Prototype Fast Breeder Reactor (PFBR).
    • However, as India progresses towards energy independence, it faces the complex challenge of managing nuclear waste.

    What is Nuclear Waste?

    • Composition: Nuclear waste comprises radioactive by-products generated during the fission process in nuclear reactors.
    • Radioactive Elements: These by-products include elements such as barium-144, krypton-89, and various isotopes of uranium and plutonium.

    Nuclear Waste Handling Techniques

    • Spent Fuel Storage: Spent fuel, initially stored underwater for cooling, is later transferred to dry casks for long-term storage. This process is critical due to the high radioactivity of spent fuel. Ex.: The U.S. had 69,682 tonnes of spent fuel (as of 2015), Canada had 54,000 tonnes (2016), and Russia had 21,362 tonnes (2014).
    • Liquid Waste Treatment: Nuclear power plants have facilities to treat liquid waste, with some waste being discharged into the environment after treatment.
    • Vitrification: Liquid high-level waste is vitrified to form a stable glass for long-term storage.
    • Reprocessing: Reprocessing separates fissile material from non-fissile elements in spent fuel, allowing for the reuse of valuable materials. Ex.: India operates reprocessing plants in Trombay, Tarapur, and Kalpakkam.
    • Geological Disposal: Some experts advocate for burying nuclear waste deep underground in stable geological formations. Waste is sealed in containers and buried in granite or clay formations, away from human activity.

    Challenges and Concerns

    • Environmental Risks: Improper waste management can lead to contamination of water resources and surrounding areas.
      • Ex.: The Asse II salt mine in Germany faced contamination concerns due to nuclear waste storage.
    • Safety Concerns: Accidents at nuclear waste storage sites highlight the need for stringent safety measures.
      • Ex.: The Waste Isolation Pilot Plant (WIPP) in the U.S. experienced an accident in 2014, releasing radioactive materials.
    • Cost Implications: Waste management accounts for a significant portion of the overall cost of nuclear energy production.
      • Cost Estimate: Waste management imposes a cost of $1.6-7.1 per MWh of nuclear energy.

    India’s Nuclear Waste Management

    • On-Site Storage: Low and intermediate-level nuclear waste generated at power stations is treated and stored on-site. India’s PFBR project aims to address waste management challenges by utilizing fast breeder reactor technology.
    • IAEA Safeguards: India adheres to International Atomic Energy Agency (IAEA) safeguards, ensuring the safe and secure handling of nuclear materials and waste.
    • Challenges Ahead: The delayed commissioning of the PFBR suggests potential complications in managing spent fuel with different compositions.

    Way Forward

    • Investment in Research: Continued investment in research and development of advanced waste treatment technologies can enhance efficiency and safety in nuclear waste management.
    • International Collaboration: Collaborating with international organizations and sharing best practices can provide valuable insights and expertise in addressing nuclear waste challenges.
    • Public Engagement: Engaging with stakeholders and the public to raise awareness about nuclear waste management and address concerns regarding safety and environmental impact is crucial.
    • Regulatory Framework: Strengthening regulatory frameworks and implementing robust safety standards can ensure compliance with international guidelines and safeguard against potential hazards.

    Conclusion

    • As India advances its nuclear program, effective waste management strategies are crucial to mitigate environmental and safety risks.

    Try this PYQ from CSE Prelims 2018:

    Q.In the Indian context, what is the implication of ratifying the ‘Additional Protocol’ with the `International Atomic Energy Agency (IAEA)’?

    (a) The civilian nuclear reactors come under IAEA safeguards.

    (b) The military nuclear installations come under the inspection of IAEA.

    (c) The country will have the privilege to buy uranium from the Nuclear Suppliers Group (NSG).

    (d) The country automatically becomes a member of the NSG.

  • India’s First Cattle Dung-based Bio-CNG Station in Gujarat

    In the news

    • Nestled along the Deesa-Tharad highway in Gujarat’s Banaskantha district lies India’s pioneering gas-filling station, seemingly unremarkable at first glance.
    • However, this station, powered by cattle and buffalo dung, marks a significant leap in renewable energy innovation.

    Fuel Production from Dung: A Technological Marvel

    • Innovative Concept: The ‘BioCNG’ outlet in Dama village of Deesa taluka stands as India’s sole gas-filling station utilizing cattle and buffalo dung.
    • Daily Operations: The outlet serves 90-100 vehicles daily, selling 550-600 kg of gas generated from 40 tonnes of dung processed at an adjacent plant.
    • Dung Utilization: Approximately 40,000 kg of dung are sourced daily from 2,700-2,800 animals belonging to 140-150 farmers residing within a 10 km radius of the plant.

    Understanding the Dung-to-Fuel Process

    • Biogas Production: Fresh dung, rich in methane and water, undergoes anaerobic digestion in a sealed vessel, yielding raw biogas.
    • Purification Process: The raw biogas undergoes purification to remove impurities like CO2 and H2S, resulting in compressed biogas (CBG) suitable for vehicle use.
    • Production Output: From 40 tonnes of dung, the plant generates 2,000 cubic meters of raw biogas containing 55-60% methane, 35-45% CO2, and 1-2% hydrogen sulphide (H2S) and moisture.

    Dual Benefits: Fuel and Fertilizer

    • Fuel Value: CBG is sold at the station for Rs 72/kg, offering a renewable and eco-friendly alternative to traditional fuels.
    • Fertilizer Production: The process also yields bio-fertilizer, enriching soil health and providing an additional income stream for farmers.
    • Fertilizer Sales: The Banaskantha Union markets 8,000-10,000 kg of bio-fertilizer daily, with phosphate-rich organic manure (PROM) fetching Rs 15-16/kg and compost Rs 8-10/kg.

    Significance: Decentralized Model for Sustainable Agriculture

    • Community Involvement: The initiative engages local farmers, who supply dung to the plant, fostering community participation and economic empowerment.
    • Replicability and Scalability: The model holds potential for replication across districts and states, offering a scalable solution for energy and agricultural needs.
    • Investment Plans: The Banaskantha Union plans to commission four additional 100-tonnes capacity plants by 2025, with a total investment of Rs 230 crore.

    Conclusion

    • The establishment of India’s first dung-based gas-filling station represents a significant stride towards renewable energy adoption and agricultural sustainability.
    • As technology continues to evolve, decentralized models like these hold promise for transforming rural economies while mitigating environmental impact.
    • With ongoing support and investment, such initiatives can pave the way for a greener and more resilient future.

    Try this PYQ from CSE Prelims 2019:

    Q.In the context of proposals to the use of hydrogen-enriched CNG (H-CNG) as fuel for buses in public transport, consider the following statements:

    1. The main advantage of the use of H-CNG is the elimination of carbon monoxide emissions.
    2. H-CNG as fuel reduces carbon dioxide and hydrocarbon emissions.
    3. Hydrogen up to one-fifth by volume can be blended with CNG as fuel for buses.
    4. H-CNG makes the fuel less expensive than CNG.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 and 3 only

    (c) 4 only

    (d) 1, 2, 3 and 4

  • FAO publishes first national report on AMR Surveillance in India’s fisheries, livestock sectors

    In the news

    • The Food and Agriculture Organization of the United Nations (FAO) and the Indian Council of Agricultural Research (ICAR) jointly published the surveillance data of the Indian Network for Fishery and Animal Antimicrobial Resistance (INFAAR) for 2019-22.
    • This report marks the first comprehensive analysis of antimicrobial resistance (AMR) trends in India’s fisheries and livestock sectors.

    About INFAAR

    • Network Formation: INFAAR, established under ICAR, comprises 20 laboratories, including 17 ICAR Research Institute Laboratories, one Central Agriculture University Laboratory, one State Agriculture University Laboratory, and one State Veterinary University.
    • Collaborative Support: Technical assistance from FAO and the United States Agency for International Development (USAID) enhances INFAAR’s capabilities for data collection and analysis.
    • Expansion Goals: INFAAR aims for further expansion to encompass more laboratories and enhance surveillance coverage.

    Antibiotic Use and AMR Trends

    • Impact of Antibiotics: Antibiotic usage in food animal production contributes to AMR development, necessitating surveillance to inform policy decisions.
    • Production Systems: Three key aquaculture systems—freshwater, brackish-water, and marine—were surveyed, covering diverse environments.
    • Panel of Antibiotics: Antibiotics tested included amikacin, ampicillin, amoxicillin-clavulanic acid, aztreonam, cefotaxime, cefepime, cefoxitin, ceftazidime, chloramphenicol, co-trimoxazole, enrofloxacin, gentamicin, imipenem, meropenem, and tetracycline.

    Surveillance Methodology

    • Sample Collection: Samples collected from 3,087 farms spanning 42 districts in 12 states of India, including fish or shrimp tissues and pond or seawater samples.
    • Bacterial Isolates: A total of 6,789 bacterial isolates were analyzed, including 4,523 freshwater, 1,809 shrimp, and 457 mariculture isolates.
    • Resistance Profiles: Resistance profiles were analyzed for Staphylococcus aureus, coagulase-negative Staphylococcus species (CONS), Escherichia coli, Vibrio parahaemolyticus, Vibrio sp., and Aeromonas species.

    Key Findings:

    (1) Resistance Patterns in Fisheries Sector

    • Species Specific Resistance: Isolates of Staphylococcus aureus and coagulase-negative Staphylococcus species exhibited high resistance against penicillin across all systems.
    • Variation across Environments: Freshwater fish showed notable resistance to ciprofloxacin, while marine samples demonstrated higher resistance to cefotaxime.
    • Shrimp Aquaculture: Notable resistance against ampicillin and cefotaxime was observed in shrimp samples, indicating a concerning trend.

    (2) Resistance Patterns in Livestock Sector

    • Animal Origins: E. coli and Staphylococcus isolates from cattle, buffalo, goat, sheep, pig, and poultry were characterized for AMR profiles.
    • Poultry Resistance: Poultry-origin isolates exhibited higher resistance rates across various antibiotics compared to other food animals.

    (3) Multidrug Resistance Analysis

    • Emergence of MDR: Approximately 39% of aquaculture-origin E. coli isolates and 15.8% of poultry isolates exhibited multidrug resistance (MDR).
    • ESBL and AmpC Producers: Detection of extended spectrum β-lactamase (ESBL) and AmpC type β-lactamase producers underscores the complexity of AMR challenges.

    Key Recommendations by the Study

    • Baseline Data: The report provides foundational data for understanding AMR trends and evaluating intervention effectiveness.
    • Judicious Use: High resistance to critical antibiotics underscores the importance of prudent antibiotic use in food animal production.
    • Policy Implications: The findings will inform policy and decision-making for AMR containment in India’s fisheries and livestock sectors.

    Conclusion

    • The INFAAR surveillance report sheds light on the evolving landscape of antimicrobial resistance in India’s fisheries and livestock sectors.
    • By highlighting resistance patterns and advocating for responsible antibiotic usage, this initiative paves the way for effective AMR containment strategies and sustainable agricultural practices.