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Subject: Economics

  • Reversal To Old Pension Scheme (OPS): Potential Impact

    OPS

    Central Idea

    • The New Pension Scheme (NPS) implemented by the NDA government in 2003-04 was a far-sighted reform that moved towards a sustainable contributory pension system. However, some state governments have reversed the pension reform and returned to the financially burdensome and fiscally non-viable Old Pension Scheme (OPS).

    What is pension?

    • A pension is a retirement plan that provides a stream of income to individuals after they retire from their job or profession. It can be funded by employers, government agencies, or unions and is designed to ensure a steady income during retirement.

    What is OPS?

    • The OPS, also known as the Defined Benefit Pension System, is a pension plan provided by the government for its employees in India.
    • Under the OPS, retired government employees receive a fixed monthly pension based on their last drawn salary and years of service.
    • This pension is funded by the government and paid out of its current revenues, leading to increased pension liabilities.

    What is NPS?

    • NPS is a market-linked, defined contribution pension system introduced in India in 2004 as a replacement for the Old Pension Scheme (OPS).
    • NPS is designed to provide retirement income to all Indian citizens, including government employees, private sector workers, and self-employed individuals.

    Negative impacts of the reversal to OPS

    • The reversal to OPS would have negative impacts, especially on the poor and vulnerable population, including women and children. Here are some potential impacts:
    • Reallocation of resources: The reversal to OPS would lead to a reallocation of resources away from the state’s development expenditure, which benefits the poor, and towards a much smaller group of people who have benefited from a secured and privileged job throughout their working life. It could worsen inequality and lower economic growth in the states.
    • Reduction in productivity: Going back to OPS would reduce the productivity of the poor, further diminishing their future economic prospects. Economic services such as infrastructure and rural and urban development would be affected more severely than social services.
    • Fiscal burden: The old pension scheme (OPS) was financially burdensome and fiscally non-viable. As public employees’ life expectancy increased, the state’s fiscal burden under the OPS began to rise exponentially, necessitating pension reforms. Reversing to OPS would put the fiscal burden back on the government, which could have negative impacts on the state’s finances.
    • Tradeoff between pensions and development expenditure: Pension reforms were a watershed moment for the states, and reversing to OPS would result in a tradeoff between pension and development expenditure of the states. The pension reforms aimed to finance the increased non-development expenditure related to pensions through taxes or borrowing. However, our analysis revealed that from 1990 to 2004, the states’ revenues did not match the state’s increased expenditure, resulting in a higher fiscal deficit.

    Facts for prelims: NPS vs OPS

    Parameter National Pension System (NPS) Old Pension Scheme (OPS)
    Type of System Defined Contribution System Defined Benefit System
    Funding Contributions from employee and employer Government-funded
    Investment Market-linked investments in various asset classes No direct investment involved
    Returns Subject to market risks Predetermined and not market-linked
    Pension Amount Depends on accumulated corpus and investment returns Based on last drawn salary and years of service
    Annuity & Lump-sum Withdrawal Minimum 40% corpus used to purchase annuity, remaining can be withdrawn as lump-sum Fixed monthly pension, no annuity or lump-sum withdrawal
    Portability Portable across jobs and sectors Limited to government employees
    Flexibility Choice of investment options, fund managers, and asset allocation No flexibility, pension determined by predefined formula

    Conclusion

    • The state governments should not ignore the impact of the OPS on the poor and vulnerable, particularly women and children. The reversal will deprive them of essential services such as health and education and prevent them from participating in growth opportunities. Therefore, state governments should not reverse the far-sighted pension reform and should continue to focus on development expenditure that benefits the poor.

    Mains Question

    Q. What is the New Pension Scheme (NPS) and how does it differ from Old Pension Scheme (OPS) Now states are reversing to OPS as a populist measure, discuss its the negative impacts.

  • Current Paradigm of Economics In India Is Inadequate

    Central Idea

    • The current paradigm of economics in India is inadequate in providing solutions to the three major economic challenges the country is facing. The economists need to break out of their self-referential silo and examine the science of complex self-adaptive systems.

    The Poly-crisis faced by India

    • The Indian government is grappling with three economic challenges at the same time:
    1. Management of inflation,
    2. Trade agreements, and
    3. Employment
    • Economists do not have a systemic solution for this poly-crisis. Consensus among them has broken down even about solutions to its separate parts.

    Lessons from China and Vietnam

    • Foreign investment in China: China and India opened their economies to global trade around the same time, some 35 years ago. Since then, China attracted foreign investment that was many times more than in India, and the incomes of its citizens increased five times faster.
    • Vietnam emerging as more attractive destination: To attract investors, India must compete with other countries. Vietnam is often cited as a country that is proving to be more attractive than India to western and Japanese investors. However, when looking into Vietnam, they rediscover what was learned from China.
    • High levels of human development: When both countries opened to foreign investors China before Vietnam, they had already attained high levels of human development, with universal education and good public health systems.

    The Problem with the Current Paradigm

    • There are some fundamental flaws in the current paradigm of economics.
    • Economists often cite Tinbergen’s theory, which states that the number of policy instruments must equal the number of policy goals. This is a mechanical and linear view of how a complex system works.
    • In complex organic systems, root causes contribute to many outcomes. The behaviour of the system cannot be explained by linear causes and effects. The causes interact with each other, and effects also become causes.

    Facts for prelims: What is Tinbergen’s theory?

    • Tinbergen’s theory states that the number of policy instruments (P) must be equal to the number of policy goals (G), in order to achieve the desired outcome.
    • In other words: P = G
    • This means that for each policy goal, there should be at least one policy instrument to achieve it.
    • For example, if the policy goal is to reduce inflation, then there should be a policy instrument such as interest rate changes to achieve that goal. Similarly, if the policy goal is to promote employment, then there should be a policy instrument such as job creation programs to achieve that goal. Tinbergen’s theory emphasizes the importance of having a clear and consistent policy framework to achieve desired outcomes

    Crises and the Inadequacy of the System

    • Policies that fit one country may not fit the needs of others: Macro-economists search for global solutions, but trade and monetary policies that fit one country may not fit the needs of others. Their needs have emerged from their own histories.
    • Emphasis on data trends: Economists arrive at solutions by comparing data trends of different countries, and in their models, people are numbers. Economists do not listen to real people, whereas politicians try to at least.
    • For instance: The inadequacy of the current paradigm was revealed by several crises in this millennium, the 2008 global financial crisis, inequitable management of the global COVID-19 pandemic, and the looming global climate crisis.

    Conclusion

    • A new economics is required to solve the poly-crisis faced by India. A movement to change the paradigm of economics’ science to bring perspectives from the sciences of complex self-adaptive systems has begun even in the West. India’s economists must step forward and lead the change towards a new economics paradigm based on the sciences of complex self-adaptive systems. India’s policymakers will have to find a way to strengthen the roots of the economic tree while harvesting its fruits at the same time, and the current paradigm of economics cannot provide solutions.

  • What are Performer’s Rights?

    Central idea

    • This article discusses a recent case involving Bollywood actor and producer, in which the Bombay High Court ruled that sales tax cannot be levied on the transfer of copyright.
    • The ruling has implications for the entertainment industry, particularly in terms of taxation and copyright protection as well as performer’s rights.

    What are Performer’s Rights?

    • It refer to the legal rights granted to performing artists or performers in relation to their performances.
    • These rights generally include the right to control and protect their performances from unauthorized use, reproduction, distribution, and public performance.
    • Performer’s rights may include the right to control the following:
    1. Recording: Performers have the right to prevent others from recording their live performances without their consent.
    2. Broadcasting and Communication to the Public: Performers have the right to control the broadcasting, communication, and distribution of their performances to the public, including radio, television, and online streaming platforms.
    3. Reproduction: Performers have the right to control the reproduction of their performances in any media format.
    4. Adaptation: Performers have the right to control the adaptation of their performances into other forms, such as musicals or films.
    5. Attribution: Performers have the right to be identified as the performers of their works, and to prevent others from falsely claiming authorship of their performances.

    Legal protection of performer’s right

    Legal protection of performers’ rights has evolved over time through international treaties and national laws.

    • The Rome Convention in 1961 was the first significant development in the protection of performers’ rights.
    • Performers’ rights are protected under various international treaties such as the Rome Convention and the WIPO Performances and Phonograms Treaty.
    • In 1996, WIPO Performance and Phonogram Treaty (WPPT) recognized the moral rights of performers for the first time in any international treaty.
    • In India, performer rights were recognized under the Copyright Act of 1957 in 1994.
    • The Copyright Act is in conformity with the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT), both concluded in 1996.
    • The protection of performers’ rights in India lasts for 50 years from the end of the year in which the performance was fixed or took place.

  • India and Malaysia to settle trade in INR

    india

    India and Malaysia have agreed to settle their trade in Indian rupees instead of the US dollar.

    What is the move?

    • The Reserve Bank of India (RBI) had allowed the settlement of international trade in the Indian rupee in July 2022.
    • Malaysia was one of the eighteen countries that were permitted to open Special Rupee Vostro Accounts (SRVAs) to settle payments in Indian rupees.

    Volume of bilateral trade

    • India-Malaysia bilateral trade reached $19.4 billion during 2021-22.
    • Malaysia is the third-largest trading partner of India in the ASEAN region, after Singapore and Indonesia, with $30.1 billion and $26.1 billion in bilateral trade with India.

    Facts for prelims: Nostro and Vostro Accounts

    Nostro and vostro accounts are two types of accounts used in international trade and banking to facilitate foreign currency transactions.

    A Nostro account is a foreign currency account held by a domestic bank in a foreign bank. It is used to facilitate international transactions, such as foreign currency payments, and to hold foreign currency deposits. The word “nostro” means “ours” in Italian, and the term reflects the fact that the foreign bank holds the domestic bank’s funds on its behalf.

    A Vostro account, on the other hand, is a domestic currency account held by a foreign bank in a domestic bank. It is used by the foreign bank to hold domestic currency deposits, and to facilitate domestic currency transactions such as payments to local vendors. The word “vostro” means “yours” in Italian, and the term reflects the fact that the domestic bank holds the foreign bank’s funds on its behalf.

     

    What are Special Rupee Vostro Accounts (SRVAs)?

    • SRVAs are a mechanism introduced by the RBI to allow banks from certain countries to open accounts in Indian rupees with Indian banks.
    • These accounts can be used to settle trade transactions between the two countries in Indian rupees, instead of using other currencies.
    • The aim of this initiative is to facilitate the growth of global trade and to support the interests of the global trading community in Indian rupees.
    • The Union Bank of India has become the first bank in India to operationalize this option by opening a SRVA through its corresponding bank in Malaysia – India International Bank of Malaysia.
    • Banks from 18 countries so far are allowed by the RBI to open Special Rupee Vostro Accounts (SRVAs) to settle payments in Indian rupees.

    Significance of the move

    • The move aims to provide better pricing for goods and services traded between the two countries and overcome currency-related obstacles that have affected bilateral trade.
    • This shift away from the US dollar signals India’s de-dollarization efforts.
    • The decision also comes against the backdrop of ongoing official efforts to safeguard Indian trade from the impact of the Ukraine crisis.

    Broader implications

    • The sanction on the Russian economy and the ongoing war in Ukraine have made it increasingly difficult to make payments to Russia in US dollars.
    • Many countries are exploring alternatives to the US dollar as the dominant reserve currency for international trade.

     

    Try this MCQ

    Q. Which of the following is a key difference between Nostro and Vostro accounts?

    A) A Nostro account is held by a bank in a foreign country, while a Vostro account is held by a bank in the home country.

    B) A Vostro account is used for incoming transactions, while a Nostro account is used for outgoing transactions.

    C) A Nostro account is denominated in the local currency of the home country, while a Vostro account is denominated in a foreign currency.

    D) A Vostro account is used for trade financing, while a Nostro account is used for personal banking transactions.

     

    [wpdiscuz-feedback id=”pxonls7qde” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

     

  • Bharat 6G project: India plans to roll out high-speed internet by 2030

    6g

    Central idea: Despite over 45,000 Indian villages lacking 4G connectivity and ongoing efforts to build out 5G networks, the Indian government has set its sights on 6G.

    Why in news?

    • On March 22, PM Modi unveiled the Bharat 6G Vision Document, aimed at gearing up policymakers and the industry for the next generation of telecommunications.

    What is 6G?

    • 6G is the next generation of wireless telecommunications technology, which is expected to offer significantly faster data speeds, higher bandwidth, and lower latency than 5G.
    • It is still in the development stage, and its commercial rollout is not expected for several years.
    • However, many countries, including India, are already working on developing 6G technology and setting standards for its implementation.

    Differences between 6G and 5G

    • While 6G will offer faster loading times, improved video quality, and faster downloads, like every new generation of technology, it is unclear how much better it will be.
    • With latency already at the speed of light on existing networks, the benefits of 6G will depend on how different groups plan to use the spectrum.
    • Satellite constellations will join telecom towers and base stations, integrating networks and extending them to rural areas.

    Motivations for pursuing 6G

    • Encourage local industry: The Indian government hopes to encourage local manufacturing of telecom gear and support Indian companies and engineers in international discussions around standardization.
    • Avoid delay unlike 5G: India aims to avoid the delay in previous generations of telecommunications technology, which started rolling out in India years after countries like South Korea and the United States.
    • Increased connectivity: Additionally, the lower frequency in 4G networks may not be able to keep up with the demand for traffic with increasing data usage, making 6G a necessity.

    Government Plans for 6G

    • The Indian government plans to financially support “research pathways” to advance connectivity goals and establish an “apex body”.
    • India’s 6G goals include-
    1. Guaranteeing every citizen a minimum bandwidth of 100Mbps
    2. Ensuring every gram panchayat has half TB (terabyte) per second of connectivity, and
    3. Providing over 50 million internet hotspots with thirteen per square kilometre.

    Roadmap for 6G in India

    • The government plans to implement 6G in two phases.
    1. Phase 1 will support explorative ideas, risky pathways, and proof-of-concept tests.
    2. Phase 2 will support ideas and concepts that show promise for global acceptance, leading to commercialisation.
    • It would appoint an apex council to oversee the project and deal with standardisation, identification of spectrum, finances for research and development, and more
    • The council will finance research and development of 6G technologies by Indian start-ups, companies, research bodies, and universities.
    • Key focus of the council will be on new technologies such as Terahertz communication, radio interfaces, tactile internet, and artificial intelligence.
    • Bharat 6G Mission aligns with the national vision of Atmanirbhar Bharat and aims to make India a leading supplier of advanced telecom technologies that are affordable and contribute to the global good.

    Approaches to 6G in Other Countries

    • South Korea plans significant investments in 6G technology development, with a focus on laying the ground for key original technologies and domestic production of core equipment and components.
    • Countries are also starting to work together, with Japan and Germany planning a workshop to work on everything from “fundamental technologies to demonstrations.”
    • Europe’s equivalent of the Indian 6G Vision Document emphasizes leadership in strategic areas and establishing secure and trusted access to key technologies.

  • Foreign Trade Policy 2023: Aiming for $2 Trillion in Exports and Streamlining Processes

    Central Idea

     

    • Foreign Trade Policy 2023 focuses on shifting from an incentive to a tax remission-based regime, improving the ease of doing business, promoting exports through collaborations, and targeting emerging areas. It aims to achieve $2 trillion in export of goods and services by 2030, up from the previous $900 billion target.

     

    Foreign Trade Policy 2023

     

    1. Reducing Friction Points:
    • Automatic approvals for various permissions will streamline processes and reduce bureaucratic hurdles for businesses.
    • Reduced processing times for revalidation of authorizations (expected to be brought down to one day), extension of export obligation periods, advance authorizations, and EPCG issuances will expedite export activities.
    • Lowered application fees for MSMEs will provide financial relief and encourage more small businesses to participate in global trade.
    1. Supporting Export Growth:
    • Facilitating e-commerce exports will enable Indian businesses to tap into the growing global e-commerce market, estimated to reach $6.07 trillion by 2024.
    • Widening the basket covered under RODTEP will ensure more exporters benefit from tax remission, increasing competitiveness.
    • Boosting manufacturing, particularly in labor-intensive sectors, will create more jobs and enhance the export potential.
    • Rationalizing thresholds for exporter recognition will make it easier for businesses to be acknowledged and incentivized for their export performance.
    • Merchanting trade reform will promote services exports and reduce transaction costs.
    • Promoting the use of the rupee in international trade can help reduce exchange rate risks and increase trade with countries facing currency restrictions.
    1. One-time Amnesty Scheme: The amnesty scheme aims at faster resolution of trade disputes, clearing pending cases, and improving the overall trade environment.

     

    Supplemental Measures

     

    • Boost to domestic manufacturing: Lowering import tariffs will make raw materials and intermediate goods more affordable, boosting domestic manufacturing and export competitiveness.
    • Competitive Indian goods and services: Ensuring a competitive exchange rate will enhance the affordability of Indian goods and services in global markets.
    • FTA’s: Signing broader and deeper free trade agreements can open new markets for Indian exporters and attract foreign investments.

     

    Conclusion

     

    • The Foreign Trade Policy 2023 comes at a time of global uncertainty, but with India’s small share in global trade (around 1.8% in merchandise exports and roughly 4% in services), there is significant room for improvement. The new policy, along with additional measures, can enhance the country’s trade performance and achieve the ambitious $2 trillion export target by 2030. However, it is crucial to monitor the policy’s implementation and address potential challenges for businesses to fully reap the benefits.

  • Key highlights of the Foreign Trade Policy, 2023

    foreign trade policy

    Union Minister of Commerce and Industry has launched the Foreign Trade Policy 2023.

    Foreign Trade Policy, 2023

    • The policy is dynamic and open-ended to accommodate the emerging needs of the time.
    • It aims to promote India’s overall exports, which has already crossed US$ 750 Billion.
    • The key approach to the policy is based on these 4 pillars:
    1. Incentive to Remission,
    2. Export promotion through collaboration – Exporters, States, Districts, Indian Missions,
    3. Ease of doing business, reduction in transaction cost and e-initiatives and
    4. Emerging Areas – E-Commerce Developing Districts as Export Hubs and streamlining SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) Policy

    Overview of the FTP, 2023

    • FTP to provide the policy continuity and a responsive framework
    • Approach of FTP: From Incentive to Remission
    • Introduces scheme for remission of duties, taxes and govt levies on export goods
    • Digitisation of applications pertaining to FTP
    • Automatic system-based approval of FTP applications
    • Pilot introduced for cutting processing of applications related to advance authorisation to 1 day
    • Norms for recognition as Star Trading Houses eased
    • Promotes trade in Indian Rupee
    • Introduces provisions for merchanting trade
    • Dairy sector to be exempted from maintaining average export obligation * Battery electric vehicles; vertical farming equipment & green hydrogen eligible for reduced obligation under Export Promotion Capital Goods (EPCG) scheme
    • Special advance authorization scheme extended for apparel & clothing sector
    • Extends all FTP benefits to e-commerce exports
    • Value limit for exports through courier service increased from Rs 5 lakh to Rs 10 lakh per consignment
    • Focus on engaging with states & districts through Districts as Export Hubs initiative
    • Aims at streamlining export of dual use items under SCOMET policy
    • Introduces amnesty scheme for one-time settlement of default in export obligation by advance authorisation and EPCG authorisation holders
    • FTP to be dynamic and responsive to the emerging trade scenario
    • Restructuring of Department of Commerce on the anvil to make it future-ready

     

    Key highlights

    (1) Process Re-Engineering and Automation

    • The policy emphasizes export promotion and development, moving away from an incentive regime to a regime which is facilitating, based on technology interface and principles of collaboration.
    • Reduction in fee structures and IT-based schemes will make it easier for MSMEs and others to access export benefits.
    • Duty exemption schemes for export production will now be implemented through Regional Offices in a rule-based IT system environment, eliminating the need for manual interface.

    (2) Towns of Export Excellence

    • Four new towns have been designated as Towns of Export Excellence (TEE) in addition to the existing 39 towns.
    • The TEEs will have priority access to export promotion funds under the Market Access Initiative (MAI) Scheme.
    • It will be able to avail Common Service Provider (CSP) benefits for export fulfilment under the EPCG Scheme.

    (3) Recognition of Exporters

    • Exporter firms recognized with ‘status’ based on export performance will now be partners in capacity-building initiatives on a best-endeavour basis.
    • 2-star and above status holders would be encouraged to provide trade-related training based on a model curriculum to interested individuals.

    (4) Promoting Export from the Districts

    • The FTP aims at building partnerships with State governments and taking forward the Districts as Export Hubs (DEH) initiative.
    • This would promote exports at the district level and accelerate the development of grassroots trade ecosystem.

    (5) Streamlining SCOMET Policy

    • India is placing more emphasis on the “export control” regime.
    • A robust export control system in India would provide access of dual-use High end goods and technologies to Indian exporters while facilitating exports of controlled items/technologies under SCOMET from India.

     

    (6) Facilitating E-Commerce Exports

    • Various estimates suggest e-commerce export potential in the range of $200 to $300 billion by 2030.
    • FTP 2023 outlines the intent and roadmap for establishing e-commerce hubs and related elements such as payment reconciliation, book-keeping, returns policy, and export entitlements.
    • As a starting point, the consignment wise cap on E-Commerce exports through courier has been raised from ₹5Lakh to ₹10 Lakh in the FTP 2023.

    (7) Facilitation under Export Promotion of Capital Goods (EPCG) Scheme

    The government has made several changes to the Foreign Trade Policy, including:

    • Adding PM MITRA scheme for textile and apparel parks to EPCG’s Common Service Provider Scheme
    • Exempting dairy sector from maintaining Average Export Obligation
    • Adding green technologies such as BEVs, vertical farming equipment, and rainwater harvesting to EPCG’s reduced Export Obligation requirement.

    (8) Facilitation under Advance authorization Scheme

    • DTA (Domestic Tariff Area) units can access the Advance Authorization Scheme for duty-free import of raw materials for manufacturing export items, and it can be used for domestic and export production.
    • The Special Advance Authorization Scheme has been extended to the Apparel and Clothing sector to facilitate prompt execution of export orders.
    • The Self-Ratification Scheme for fixation of Input-Output Norms has been extended to 2-star and above status holders.

    (9) Merchanting trade

    • The FTP 2023 has introduced provisions for merchanting trade, which allows the shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary.
    • This will be subject to compliance with RBI guidelines, and it won’t be applicable for goods/items classified in the CITES and SCOMET list.
    • This is expected to allow Indian entrepreneurs to convert certain places into major merchanting hubs.

    (10) Amnesty Scheme

    • The government is introducing a special one-time Amnesty Scheme under the FTP 2023 to address default on Export Obligations and provide relief to exporters who have been unable to meet their obligations under EPCG and Advance Authorizations.
    • All pending cases of default in meeting Export Obligation (EO) of authorizations can be regularized on payment of all customs duties that were exempted in proportion to unfulfilled Export Obligation.
    • The interest payable is capped at 100% of these exempted duties under this scheme, and no interest is payable on the portion of Additional Customs Duty and Special Additional Customs Duty.

     

  • Competition (Amendment) Bill passed in Lok Sabha

    The Lok Sabha passed the Competition (Amendment) Bill, 2023, which could pose new challenges for global technology companies.

    About Competition Act, 2022

    • The Competition Act, 2002 was passed by the Parliament in the year 2002, to which the President accorded assent in January, 2003.
    • It was subsequently amended by the Competition (Amendment) Act, 2007.
    • In accordance with the provisions of the Amendment Act, the Competition Commission of India (CCI) and the Competition Appellate Tribunal (COMPAT) have been established.
    • The CCI is now fully functional with a Chairperson and six members.

    Changes brought by the Amendment

    (1) Penal powers to CCI

    • It grants the CCI the authority to penalize entities found engaging in anti-competitive behavior based on their global turnover, rather than just their annual domestic turnover, which was the case previously.

    (2) Turnover Definition

    • The definition of “turnover” has been a widely debated subject in the competition law landscape.
    • The Supreme Court had previously fixed the criteria for determining turnover in competition law contraventions, holding that it should be the “relevant turnover,” i.e., turnover derived from the sales of goods or services.

    (3) Mergers and acquisition

    • The CCI will have greater authority in mergers and acquisitions worth more than Rs 2,000 crore.
    • Additionally, the time limit for approval of mergers and acquisitions has been reduced from 210 days to 150 days.

    Impact on Tech Companies

    • While the provision on global turnover will not be exclusively applicable to tech companies, they are likely to be the most affected by it, given the nature of their business that operates across geographies.
    • Typically, the revenue earned from these companies’ India operations is much smaller than their income in other regions, such as the US and Europe.

  • Issues with new Quality Control Orders for fibres

    quality

    Central idea

    • Quality Control Orders (QCO) have been issued for fibres like cotton, polyester, and viscose to control the import of sub-quality and cheaper items and to ensure that customers get quality products.
    • The QCOs are made mandatory for some and yet to be finalized for others.

    What is the move?

    • The Bureau of Indian Standards (BIS) will issue certificate to manufacturers of viscose staple fibre (VSF) who comply with its standards (IS17266: 2019).
    • The hallmark is made mandatory.

    Why are fibres covered under QCOs?

    • The Indian textile and clothing industry consumes both indigenous and imported fibres and filaments.
    • The imports are for different reasons, such as cost competitiveness, non-availability in the domestic market, or to meet a specified demand of the overseas buyer.
    • The main aim of the QCO is to control the import of sub-quality and cheaper items and to ensure that customers get quality products.

    Reasons behind

    • India’s move to introduce a draft of Quality Control Orders (QCO) aims to curb a Chinese import surge and boost exports to western markets.

    What challenges does the new mandate bring?

    • Supply chain disruption: India imports annually 50,000 – 60,000 tonnes of viscose fibre and its variants such as Modal and Tencel LF from nearly 20 countries. In the case of polyester, almost 90,000 tonnes of polyester fibre and 1.25 lakh tonnes of POY (Polyester Partially Oriented Yarn) are imported annually.
    • Unease of doing business: Getting the certificate from the BIS involves a cost and hence not all are interested in getting the certificate.
    • Value chain disruption: The Indian textile manufacturers who are dependent on these suppliers for the raw material will have to either look at other suppliers or lose orders.
    • Material shortage: Some varieties of fibres have special functional properties and separate HS (Harmonised Commodity Description and Coding System) code when imported. The textile industry imports just small quantities of such fibres, and restricting their availability will deny Indian consumers of niche products.
    • Prospected price rise: Several textile units use lower-grade fibres that are generated from rejects and wastes and these are not covered under the QCO.

    Textile industry’s expectation

    • The industry is of the view that the import of speciality fibres that are used as blends with other fibres should be made available without restriction.
    • Any overseas applicant for the BIS certificate should get it without delay after inspection.

    Way forward

    • Polyester-spun yarn mills in the MSME sector need capital support to set up labs to test products.
    • The QCO should be implemented only after the ambiguities are cleared and the anomalies set right, says the industry.

  • SMART-PDS: The Transformative Potential Beyond Food Security

    Central Idea

    • India’s National Food Security Act, 2013 (NFSA) governs the largest beneficiary-centric program, the Targeted Public Distribution System (TPDS), providing food security to 81.35 crore persons every month. The government is now implementing the Scheme for Modernisation and Reforms through Technology in Public Distribution System (SMART-PDS). This initiative generates vast amounts of data, which can be leveraged to improve the delivery of other central schemes and welfare programs.

    Existing challenges for TPDS

    • Leakage and diversion of food grains: One of the most pressing issues in the TPDS is the leakage and diversion of food grains meant for beneficiaries, leading to corruption and losses in the system. This problem is primarily due to poor monitoring, lack of transparency, and weak enforcement mechanisms.
    • Inaccurate targeting of beneficiaries: The TPDS often suffers from errors in identifying eligible beneficiaries, resulting in the exclusion of deserving households and the inclusion of ineligible ones. This misidentification can be attributed to outdated data, lack of verification mechanisms, and manipulation of records.
    • Inefficient supply chain management: TPDS faces logistical challenges in transporting, storing, and distributing food grains across the vast country. Inadequate storage facilities, poor transportation infrastructure, and delays in procurement and distribution contribute to wastage and inefficiencies in the system.
    • Limited portability of benefits: Until recently, the TPDS lacked portability, which meant that beneficiaries could only access their food grains from designated Fair Price Shops (FPS) in their home states. This restriction made it difficult for migrant workers and their families to access their entitled benefits.
    • Lack of transparency and accountability: Corruption, fraud, and manipulation of records are pervasive issues in the TPDS, partly due to the lack of transparency and accountability in the system. The absence of real-time monitoring and the reliance on manual record-keeping exacerbate these problems.
    • Technological constraints: Many states and union territories in India face technological constraints in implementing IT-based solutions for TPDS operations. Limited access to IT hardware, software, and technical manpower can hinder the adoption of technology-driven reforms, such as electronic Point of Sale (ePoS) devices and biometric authentication systems

    What is SMART-PDS?

    • SMART-PDS (Scheme for Modernisation and Reforms through Technology in Public Distribution System) is an initiative by the Indian government aimed at improving the efficiency, transparency, and accountability of the country’s Targeted Public Distribution System (TPDS).

    The key objectives of the SMART-PDS initiative

    • Preventing leakage of food grains: By leveraging technology, SMART-PDS aims to reduce diversion and pilferage of food grains, ensuring that the intended beneficiaries receive their due share of food subsidies.
    • Enhancing efficiency in the distribution chain: The initiative focuses on streamlining the supply chain from procurement to distribution by incorporating technology-driven solutions, such as electronic Point of Sale (ePoS) devices, real-time monitoring, and tracking systems.
    • Data-driven decision-making: Data Analytics on the TPDS ecosystem generates critical information about beneficiaries, food security needs, and migration patterns, addressing the long-standing challenge of credible and dynamic data for efficient delivery of central welfare schemes to vulnerable sections of society.
    • Convergence and integration with AI: The national leadership’s push for trans-ministerial convergence and AI integration can be a game-changer for both people and governments, bringing accountability across all programs.
    • Technology-led PDS reforms: The Centre plans to use data analytics, BI platforms, and ICT tools to standardize PDS operations through technology integration with FCI, CWC, transport supply chain, Ministry of Education, Women and Child Development, and UIDAI. This is expected to overcome state-level technological limitations in PDS operations and institutionalize an integrated central system for all PDS-related operations across states/UTs.
    • Aadhaar authentication and ePoS devices: With 100% digitization of ration cards and the installation of ePoS devices, nearly 93% of the total monthly allocated foodgrains are distributed through Aadhaar authentication mode.

    Integrated Management of Public Distribution System (IM-PDS)

    • The government has launched the IM-PDS to implement One Nation One Ration Card (ONORC), create a national-level data repository, and integrate data infrastructure/systems across ration card management, foodgrain supply chain, and FPS automation.
    • The ONORC plan has recorded over 100 crore portability transactions since its inception in 2019.

    SMART-PDS benefits beyond ration distribution

    • The data generated by SMART-PDS has become a tool for central ministries and state governments, benefiting initiatives like e-Shram Portal, Ayushman Bharat, and PM-SVANidhi Yojana.
    • The Ministry of Agriculture and Farmers’ Welfare (MoAFW) plans to use ONORC/ration card data to map beneficiaries, and seamless tracking of nutrition from ICDS centers to PM Poshan will become a reality with Aadhaar numbers for the newly born.

    Conclusion

    • The transformative potential of SMART-PDS goes beyond food security, enabling data-driven decision-making, convergence, and integration with AI for improved delivery of central schemes and welfare programs across India.

    Mains Question

    Q. Despite several efforts taken by the government the Targeted Public Distribution System still faces various challenges. In this backdrop discuss the new initiative of SMART-PDS and its key features