💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • Scrapping Tax Benefit for Debt Mutual Funds: Analysis

    Central Idea

    • The Finance Bill 2023, passed by the Lok Sabha with 64 amendments, includes the controversial decision to remove the tax benefit for debt mutual funds. While the aim is to remove the advantage of debt funds over bank deposits, this decision will have far-reaching consequences that need to be examined.

    Mutual Funds

    • Investment decisions on behalf of the investors: Mutual funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. Mutual funds are managed by professional fund managers who make investment decisions on behalf of the investors in the fund.
    • Diversified portfolio of securities: Investors in a mutual fund own a proportional share of the fund’s underlying assets, and the value of their investment rises or falls in response to changes in the value of the securities held by the fund. Mutual funds can provide investors with access to a diversified portfolio of securities, which can help to mitigate the risk of investing in individual securities.

    Key differences between Mutual funds and debt mutual funds

    • Mutual funds and debt mutual funds are both types of investment funds, but there are some key differences between them
    Comparison Mutual Funds Debt Mutual Funds
    Types of Investments Stocks, bonds, commodities, and other asset classes Fixed-income securities such as bonds, debentures, treasury bills, and commercial papers
    Risk Generally higher risk due to the inclusion of stocks and other volatile assets Generally lower risk due to the focus on fixed-income securities
    Returns Potentially higher returns over the long term, but subject to more volatility Lower returns compared to equity mutual funds, but also come with lower risk
    Investment Objective Can vary widely depending on the type of fund Provide regular income to investors while preserving capital
    Liquidity Can be less liquid than debt mutual funds due to volatility in underlying securities Generally considered more liquid due to less volatility in underlying securities

    The Debate Over Scrapping Tax Benefit for Debt Mutual Funds

    • Removal of the tax benefit for debt mutual funds: The Finance Bill 2023 passed by voice vote in the Lok Sabha last week with 64 amendments, including the removal of the tax benefit for debt mutual funds.
    • What it means: This change means that investors in debt mutual funds cannot avail the benefit of indexation for the calculation of long-term capital gains. From April 1, such investments will now be taxed at income tax rates applicable to an individual’s tax slab.
    • Motive: This move aims to remove the advantage that such debt funds have over bank deposits. However, the consequences of this decision need to be carefully examined.

    The Impact of Removing Tax Benefit

    • Impact on flow of funds: The removal of the tax benefit will lead to investors reassessing their allocations to debt mutual funds, which may impact flows into these funds.
    • Impact on bond market: This, in turn, may impact the growth and development of the bond market in India since debt mutual funds channel funds into the bond market.
    • For instance: According to a report by Crisil, 70% of the investment in debt funds flows from institutional investors, while individual investors, including high net worth individuals, accounted for 27% as of December 2022.
    • Impact on corporate debt: This change in rule may trigger a shift in investments away from debt mutual funds to other instruments, which will possibly affect flows to the corporate bond market, and demand for corporate debt is likely to be impacted.

    The Need for Rationalization

    • There is a need to acknowledge the finer points of differentiation between bank deposits and debt funds since bank deposits are insured up to Rs 5 lakh while debt mutual funds carry risk depending on the risk profile of the bonds they hold.
    • It has been argued that the capital gains architecture in India needs to be reexamined and reconfigured.
    • Not only are there different rates of taxation for different asset classes, but even the holding period for differentiating between short- and long-term capital gains varies across assets. Thus, rationalisation with regard to the tax rate and/or the holding period is desirable.

    Conclusion

    • While the removal of the tax benefit for debt mutual funds may remove the advantage of such funds over bank deposits, its far-reaching consequences need to be carefully examined. There is a need to acknowledge the finer points of differentiation between bank deposits and debt funds, as well as rationalisation of the tax architecture in India. Therefore, there is a need for broader discussions and debates on these issues.
    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

     

  • Blue Economy: India’s G20 Presidency Offers An Opportunity

    Blue Economy

    Central Idea

    • The potential of the oceans for the sustainable development of the blue economy is immense and the initiatives taken by the Government of India towards achieving it demonstrate India’s commitment to building a sustainable future for its marine resources and the global community. India’s G20 presidency provides an opportunity to promote collective action for the transition.

    What is Blue Economy?

    • Blue Economy is defined by the World Bank as the Sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of the ecosystem.
    • Gunter Pauli’s book, “The Blue Economy: 10 years, 100 innovations, 100 million jobs” (2010) brought the Blue Economy concept into prominence.
    • The UN first introduced “blue economy” at a conference in 2012 and underlined sustainable management, based on the argument that marine ecosystems are more productive when they are healthy. In fact, the UN notes that the Blue Economy is exactly what is needed to implement SDG 14, Life Below Water.
    • The term ‘blue economy’ includes not only ocean-dependent economic development but also inclusive social development and environmental and ecological security.

    The Potential of the Oceans

    • The oceans offer vast opportunities for the prosperity of our planet, with 45% of the world’s coastlines and over 21% of the exclusive economic zones located in G20 countries.
    • They are reservoirs of global biodiversity, critical regulators of the global weather and climate, and support the economic well-being of billions of people in coastal areas.

    Facts for prelims: Government Initiatives

    • The Government of India has launched several initiatives to promote the development of a blue economy, such as
    Initiative Description
    Sagarmala initiative A program launched in 2015 to promote port-led development and boost the country’s maritime sector. It aims to modernize ports, improve connectivity and logistics, and promote coastal community development.
    Shipbuilding Financial Assistance Policy A policy introduced in 2016 to provide financial assistance to Indian shipyards for the construction of ships. It aims to boost domestic shipbuilding and make Indian shipyards globally competitive.
    Pradhan Mantri Matsya Sampada Yojana A scheme launched in 2020 to boost the fisheries sector in India. It aims to increase fish production, modernize fishing infrastructure, and create employment opportunities in the sector.
    Sagar Manthan dashboard An online dashboard launched in 2018 to track the progress of the Sagarmala initiative. It provides real-time information on project implementation, fund utilization, and other related metrics.
    Deep Ocean Mission A program launched in 2021 to explore the deep sea and harness its resources for national benefit. It aims to explore the deep sea, map its resources, develop technologies for deep-sea mining, and promote ocean conservation.
    Coastal Regulation Zone notification A regulation introduced in 2019 to manage development activities along India’s coastline. It aims to balance the economic development of coastal areas with the conservation of coastal ecosystems and livelihoods of coastal communities.
    • The government has also taken steps to eliminate single-use plastic and combat plastic pollution, including in the marine environment.

    India’s G20 Presidency and the Blue Economy

    • Key priority: India’s G20 presidency has prioritized the blue economy as a key area under the Environment and Climate Sustainability Working Group.
    • Promote sustainable and equitable development: The aim is to promote the adoption of high-level principles for sustainable and equitable economic development through the ocean and its resources while addressing climate change and other environmental challenges.
    • A guide for future G20 presidencies: India’s commitment to prioritizing oceans and the blue economy under its presidency would ensure continued discussions on this crucial subject and pave the way for future G20 presidencies.
    • Communication and collaboration: Effective and efficient ocean and blue economy governance presents a significant challenge, and India’s G20 presidency can build an effective communication with all stakeholders to share best practices, foster collaborations for advancements in science and technology, promote public-private partnerships, and create novel blue finance mechanisms.

    Challenges and Responsibility

    • Ambitious efforts by countries to expand their blue economies are threatened by intensifying extreme weather events, ocean acidification, and sea-level rise.
    • Marine pollution, over-extraction of resources, and unplanned urbanization also pose significant threats to the ocean, coastal and marine ecosystems, and biodiversity.
    • The inherent inter-connectedness of oceans implies that activities occurring in one part of the world could have ripple effects across the globe.
    • Therefore, the responsibility of their protection, conservation, and sustainable utilization lies with all nations.

    Conclusion

    • India’s G20 presidency offers an opportunity to promote individual and collective actions towards a sustainable blue economy. The stewardship of oceans is an investment that will sustain future generations, and the global community must unite for the well-being of our ocean commons.
    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

     

  • What is Patent Evergreening?

    patent

    Central idea: Patent Evergreening

    • Indian Patent Office rejects Johnson & Johnson’s attempt to extend monopoly on manufacturing Bedaquiline in India beyond July 2023.
    • This is a victory for patients fighting for wider access to crucial anti-tuberculosis drug Bedaquiline.
    • Expired primary patents pave the way for generic drug manufacturers to produce Bedaquiline, thus ensuring cheaper and wider access to the drug.

    Significance of the move

    • The drug has been shown to have a high success rate in treating MDR-TB, and is considered to be a significant breakthrough in the fight against this disease.
    • However, the high cost of the drug has made it difficult for many patients to access it, particularly in developing countries.

    What is Bedaquiline?

    • Bedaquiline is a drug that is primarily used in the treatment of multidrug-resistant tuberculosis (MDR-TB).
    • MDR-TB is a serious public health threat, particularly in countries with high TB burdens, as treatment options for this condition are limited and often ineffective.
    • It was developed by Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson. Bedaquiline.
    • It is an antibiotic that works by inhibiting ATP synthase, which is a key enzyme involved in the energy production of TB bacteria.
    • Bedaquiline is typically administered in combination with other drugs for a period of six months.

     

    Implications

    • India and the US has often been at the crossheads due to Section 3(d) of Patents Act that allows for “generic competition by patenting only novel and genuine inventions.”
    • US always accuses India as one of the most challenging major economies as far as IP protection and enforcement is concerned.

    Indian Patent Regime: A Backgrounder

    • Indian patents are governed by the Indian Patent Act of 1970.
    • India has gradually aligned itself with international regimes pertaining to intellectual property rights.
    • It became a party to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement following its membership to the World Trade Organisation on January 1, 1995.
    • The interesting point is that the original Indian Patents Act did not grant patent protection to pharmaceutical products to ensure that medicines were available at a low price.
    • Patent protection of pharmaceuticals was re-introduced after the 2005 amendment to comply with TRIPS.

    What is Patents Evergreening?

    • One of the main points of contention between India and the US has been Article 3(d) of the Indian Patent Act.
    • Section 3 deals with what does not qualifyas an invention under the Act, and Section 3(d) in particular excludes the mere discovery of a new form of a known substance.
    • Section 3(d) prevents the mere discovery of any new property or new use for a known substance from being patented as an invention unless it enhances the efficacy of the substance repetitive.
    • This prevents, what is known as “Evergreening” of patents.
    • According to the Committee’s report, Section 3(d) allows for “generic competition by patenting only novel and genuine inventions.”

    Conclusion

    • The gravity of public health problems affecting developing and least developed nations must be recognized by developed nations such as the US.
    • Though intellectual property protection is important for the development of new medicines but the right to protect public health and, in particular, to promote access to medicines for all is far more important.
    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

  • Explained: Interest Rate Risks

    interest

    Central idea: Finance Minister urged banks to remain vigilant about “interest rate risks” and undertake regular stress tests during a review of public sector banks’ (PSBs) performance on March 25.

    Why in news?

    • Inflation-led rising interest rates across the world have caused concerns of contagion effects from banking crises in the US and Europe.

    What is Interest Rate Risk?

    • Interest rate risk refers to the possibility that a loss could happen as a result of a fluctuation in interest rates.
    • A bond’s or another fixed-income security’s value will decrease if the rate rises.
    • Interest rate movement typically has an inverse relationship with the market value of fixed-income assets.
    • In general, the values of currently issued fixed income instruments decrease when interest rates rise and rise when interest rates decrease.

    How does it affect banks?

    Interest rate risk affects banks in several ways-

    1. Interest yields: Banks earn interest income by lending out funds to borrowers at a higher rate than the cost of borrowing those funds. When interest rates rise, the cost of borrowing funds for banks increases, thereby decreasing their net interest margins (NIMs) and profitability.
    2. Bond yield: Banks also hold a large amount of fixed-income securities in their portfolios, such as government bonds, corporate bonds, and mortgage-backed securities. These securities generate a fixed interest income, which can be affected by changes in interest rates. When interest rates rise, the value of fixed-income securities held by banks decreases, leading to a potential loss in the value of their investment portfolio.
    3. Liabilities burden: Banks’ liabilities, such as deposits, often have short maturities, while their assets, such as loans, have longer maturities. When interest rates rise, the cost of funding short-term liabilities increases, while the interest earned on longer-term assets remains fixed. This can negatively impact banks’ profitability and cash flows.

    Why do banks resort to interest rate increases?

    Banks resort to interest rate increases for several reasons-

    • Combat inflation: When the economy experiences a rapid increase in prices, the central bank may raise interest rates to discourage borrowing and spending, thereby cooling down the economy and reducing inflationary pressures.
    • Attract deposits: Banks may raise interest rates to attract more deposits from savers, which in turn allows them to lend more money and earn more profits.
    • Protection against risks: banks may also raise interest rates in response to changes in the global financial market or to protect their own financial stability in the face of potential risks or shocks.

     

    Try this MCQ:

    Which of the following best describes interest rate risk in banking?

    (a) The potential loss of income due to changes in interest rates

    (b) The risk that borrowers will default on their loans due to high-interest rates

    (c) The risk that banks will become insolvent due to low-interest rates

    (d) The potential loss of value of a bank’s assets due to changes in interest rates

     

    [wpdiscuz-feedback id=”u0oxokcx1k” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

     

    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

  • Lok Sabha clears forming GST Appellate Tribunal

    The Lok Sabha passed Finance Bill, 2023 with some amendments, including one that seeks to set up the much-awaited GST Appellate Tribunal (GSTAT), which will deal with tax disputes.

    What is GST Appellate Tribunal?

    • The GST Appellate Tribunal is a quasi-judicial body proposed to be established to resolve disputes related to the Goods and Services Tax (GST) in India.
    • It will function as an independent body to hear appeals against orders passed by the GST authorities or the Appellate Authority.
    • The tribunal will be composed of a national bench and various regional benches, headed by a chairperson appointed by the central government.
    • The proposed tribunal is expected to help expedite the resolution of disputes related to GST and reduce the burden on the judiciary.

    Under GST, if a person is not satisfied with the decision passed by any lower court, an appeal can be raised to a higher court, the hierarchy for the same is as follows (from low to high):

    1. Adjudicating Authority
    2. Appellate Authority
    3. Appellate Tribunal
    4. High Court
    5. Supreme Court

    Composition of GSTAT

    • GSTAT will have a “Principal Bench” in New Delhi.
    • It would have the President (probably a former Supreme Court judge), a judicial member, a technical member (centre), and a technical member (state).
    • It will also have state benches.
    • Appeals pertaining to disputes of less than Rs. 50 lakh that don’t deal with a question of law could be decided by a single-member bench, as per the norms approved by the GST Council.

    Why need such Tribunal?

    • Unburden judiciary: GST Appellate Tribunal will help resolve the rising number of disputes under the 68-month old indirect tax regime that are now clogging High Courts and other judicial fora.
    • Improve the efficiency of GST System: Overall, the establishment of the GST Appellate Tribunal is expected to improve the efficiency and effectiveness of the GST system in India.
    • Independent mechanism: The proposed Tribunal will provide an independent and efficient mechanism for resolving disputes related to GST.
    • Avoid tax evasion: It will help to expedite the resolution of disputes, reduce the burden on the judiciary, and promote greater certainty and predictability in the GST system.

    Issues with present litigation

    • Compliance issues: The GST system is relatively new in India, having been implemented in 2017, and there have been several issues with compliance and interpretation of rules and regulations.
    • Complex adjudication hierarchy: The current dispute resolution mechanism involves multiple layers of adjudication, starting with the GST officer and as mentioned above.
    • Time-consuming process: This process can be time-consuming, costly, and burdensome for taxpayers, especially small and medium-sized enterprises.

    Back2Basics: Finance Bill

    • A Finance Bill is a proposed legislation that is introduced by the government to implement the financial proposals of the Union Budget for the upcoming financial year in India.
    • It is a comprehensive document that outlines the government’s revenue and expenditure for the year, including changes in tax laws, tariffs, customs duties, and other fiscal measures.
    • Since the Union Budget deals with these things, it is passed as a Finance Bill.

    Types of Finance Bills

    • There are different kinds of Finance Bills — the most important of them is the Money Bill. The Money Bill is concretely defined in Article 110.
    • In India, there are three types of Finance Bills that can be introduced in the Parliament:
    1. Annual Finance Bill: This is the most common type of Finance Bill and is introduced by the government every year to give effect to the tax proposals announced in the Union Budget. It contains provisions related to taxation, expenditure, and revenue collection for the upcoming financial year.
    2. Finance Bill (Money Bill): A Money Bill is a type of Finance Bill that contains only provisions related to taxation and expenditure, but does not include any other matter. Money Bills are deemed to be passed by the Lok Sabha, the lower house of Parliament, and do not require approval from the Rajya Sabha, the upper house of Parliament.
    3. Finance Bill (Non-Money Bill): This type of Finance Bill contains provisions related to taxation and other matters, such as changes in the structure of regulatory bodies or the introduction of new policies. Unlike Money Bills, Non-Money Bills must be passed by both the Lok Sabha and the Rajya Sabha to become law.

    How is money bill different from Finance Bill?

    • A Money Bill is certified by the Speaker as such — in other words, only those Financial Bills that carry the Speaker’s certification are Money Bills.
    • Article 110 states that a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters:

    (a) the imposition, abolition, remission, alteration or regulation of any tax;

    (b) the regulation of the borrowing of money or any financial obligations undertaken

    (c) the custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund;

    (d) the appropriation of moneys out of the consolidated Fund of India;

    (e) the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;

    (f) the receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or

    (g) any matter incidental to any of the matters specified in sub clause (a) to (f)

     

     

     

  • In news: Liberalised Remittance Scheme (LRS)

    Central idea: The Reserve Bank of India (RBI) is being asked to monitor card spend under the Liberalised Remittance Scheme (LRS).

    Liberalised Remittance Scheme (LRS)

    • LRS is a facility provided by the Reserve Bank of India (RBI) to resident individuals to remit funds abroad for permitted current or capital account transactions or a combination of both.
    • The scheme was introduced in 2004 and has been periodically reviewed and revised by the RBI.
    • Under the scheme, resident individuals can remit up to a certain amount in a financial year for permissible transactions including education, travel, medical treatment, gifts, and investments in equity and debt securities, among others.
    • The limit for LRS is currently set at USD 250,000 per financial year.

    Eligibility for LRS

    • LRS is open to everyone including non-residents, NRIs, persons of Indian origin (PIOs), foreign citizens with PIO status and foreign nationals of Indian origin.
    • The Scheme is NOT available to corporations, partnership firms, Hindu Undivided Family (HUF), Trusts etc.

    Benefits provided by LRS

    • LRS is an easy process that anyone can use to transfer money between two countries.
    • It’s especially useful for businesses because they can use it to transfer funds to India, and investors can receive their investments back home.
    • LRS also has some added benefits, like fast transfer timing and no issues with exchange rates.

     

     

  • India’s Push for Semiconductors

    semiconductor

    Central idea

    • The Indian government has given ₹1,645 crore in PLI incentives to electronics manufacturers to bring more of the supply chain to India.
    • There is a growing need for semiconductors as they are used in almost all modern electronics.
    • Many countries are moving away from China’s dominance in the sector due to supply chain vulnerabilities and geopolitical pressures.

    Semiconductor manufacturing in India

    • Invest India agency estimates electronics manufacturing to be worth $300 billion by 2025-26.
    • While finished product facilities have been growing, fabs for chipsets and displays are rarer.
    • Ministry of Electronics and Information Technology is set to announce the first semiconductor manufacturing fab soon.
    • Semiconductor Industry Association (SIA) suggests India to leverage its strength in the electronics manufacturing value chain.
    • Foundry companies require high investments while OSAT generate better margins.
    • Outsourced Semiconductor Assembly and Test (OSAT) set-ups take care of less capital-intensive parts of chipmaking and run specialized tests.
    • Many chip facilities tend to be captive units of large companies.

    Importance of semiconductor manufacturing

    • Semiconductor fabrication units turn raw elements like silicon into integrated circuits used in practically all electronic hardware.
    • Fabs are highly capital-intensive undertakings costing billions of dollars for large facilities.
    • Fabs require a highly reliable and high-quality supply of water, electricity, and insulation from the elements, reflecting the high degree of precision, cost, and capital needed to make sophisticated circuits.
    • Countries have spotted strategic value in cornering segments of the value chain for fabs.
    • China has pulled ahead of Taiwan last year in terms of global sales from fabs.
    • The US passed the CHIPS Act to provide subsidies and investments to manufacturers opening fabs and making semiconductors in the US.
    • US also pushed some restrictions and sanctions on the Chinese semiconductor industry.

    India’s advantages in semiconductor manufacturing

    • India has an advantage in semiconductor manufacturing as a large portion of semiconductor design engineers globally are either Indian or Indian-origin.
    • Chipmaking firms such as Intel and NVIDIA have large facilities in India that are already flush with Indian talent working on design problems.
    • China is losing control over this advantage in the face of sanctions and an ageing population.
    • Experts believes that without a sustainable pipeline of high calibre talent, China’s goals for the semiconductor sector will not be achievable.

    Various challenges

    • Huge Investments involved: Semiconductor Fabrication facility requires many expensive devices to function. Complex tools and equipment are required to test quality and move silicon from location to location within the ultra-clean confines of the plant.
    • Economy of scale:  In semiconductor fabrication, a high volume of production is required to be maintain so as to meet the increasing demand of the marketplace, at the same time, a strong financial backing as Indian market is very much uncertain about financial fluctuations.
    • Requirement highly skilled labour: Semiconductor fabrication is a multiple-step sequence of photolithographic and chemical processing steps during which electronic circuits are gradually created on a wafer made of pure semiconducting material. This actually requires high skills.
    • Scarcity of raw materials: From a value-chain perspective, it needs silicon, Germanium & Gallium arsenide and Silicon carbide which are not available in India and needs to be imported.
    • Uncertain Indian market: A semiconductor fabrication facility in India cannot independently rely on Indian customers for their entire sales structure. They have to maintain overseas customer base to balance inflections from Indian market due to market trends, government policies etc.
    • Disposal of hazardous waste: Many toxic materials are used in the fabrication process such as arsenic, antimony, and phosphorus. Hazardous impact on the environment by the industry may act as an impediment to India’s commitment to mitigate climate change.

    Policy initiatives in India

    • Make in India:This aims to transform India into a global hub for Electronic System Design and Manufacturing (ESDM).
    • PLI scheme:In December 2021 the Centre sanctioned ₹76,000 crore under the production-linked incentive (PLI) scheme to encourage the manufacturing of various semiconductor goods within India.
    • DLI scheme:It offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design.
    • Digital RISC-V (DIR-V) program: It intends to enable the production of microprocessors in India in the upcoming days achieving industry-grade silicon and design wins by December 2023.
    • India Semiconductor Mission (ISM):The vision is to build a vibrant semiconductor and display design and innovation ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design

    Way forward

    To ensure greater resilience in a volatile world, India needs to undertake the following measures to sustain the domestic and global semiconductor demand:

    • Policy framework: As foundry setup is highly Capital intensive, it must be supported with a solid long term plan and financial backing. This backing is required from the entrepreneur & the government both.
    • Fiscal sustenance: In text of Indian Government as tax holiday, subsidy, zero duty, financial investment etc. will play an important role in promoting the Fab along with the semiconductor industry in India; this will put further pressure on already large Fiscal Deficit.
    • Support Infrastructure: World class, sustainable infrastructure, as required by a modern Fab be provided, with swift transportation, large quantity of pure water, uninterrupted electricity, communication, pollutant free environment etc.

    Conclusion

    • India’s electronic manufacturing incentive programs are geared towards breaking new ground in ambitious plans connected to popular brands such as Apple.
    • The Indian government is working to create an ecosystem that will facilitate sustainable growth and fiscal feasibility in the semiconductor industry.
    • The electronics value chain must be an international undertaking among like-minded nations with common values to be effective.

     

  • Call Before u Dig Application

    dig

    Prime Minister has launched the ‘Call Before u Dig’ (CBuD) app, to facilitate coordination between excavation agencies and underground utility owners to prevent damage to utilities due to digging.

    Call Before u Dig (CBUD)

    • The app is an initiative of the Department of Telecommunications, Ministry of Communications.
    • Uncoordinated digging and excavation causes damage to underlying assets like optical fibre cables, leading to losses of about Rs 3,000 crore every year.
    • The app aims to prevent damage to utilities due to digging.
    • It will save potential business loss and minimise discomfort to citizens due to reduced disruption in essential services like road, telecom, water, gas and electricity.

    How does the app work?

    • The CBuD app connects excavators and asset owners through SMS/Email notifications and click-to-call.
    • It ensures planned excavations in the country while ensuring the safety of underground assets.
    • Excavating companies can inquire about existing subsurface utilities before starting excavation work.
    • Utility owners can find out about impending work at the location.

     

    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

  • The Great Nicobar Island Project: Environmental Recklessness or Economic Opportunity?

    Central Idea

    • The ₹70,000 crore Holistic Development of Great Nicobar Island project raises concerns about its ecological impact and the Union government’s hasty clearances, while its feasibility and sustainability remain questionable.

    What is Holistic Development of Great Nicobar Island project is all about?

    • The Holistic Development of Great Nicobar Island project is a major infrastructure development initiative launched by the Indian government in 2020.
    • The Union Ministry of Environment, Forest and Climate Change (MoEFCC) has cleared the way for the ‘Holistic Development of Great Nicobar Island project.
    • The project aims to transform the Great Nicobar Island, the largest island in the Nicobar group of islands in the Bay of Bengal, into a modern, sustainable, and self-sufficient territory.
    • The project includes an international transhipment port, an international airport, a gas and solar-based power plant, and an ecotourism and residential township.

    Environmental and Ecological Concerns

    1. Quick Clearances and Exemptions: The project’s quick approvals, clearances, exemptions, and de-notifications indicate the Union government’s keenness to implement it.
    2. Urbanization and Biodiversity: The project is expected to attract a population equal to the entire island chain, with potential negative impacts on the region’s marine and terrestrial biodiversity.
    3. Biosphere Reserve and Tribal Reserves: The island was declared a biosphere reserve in 1989 and is home to vulnerable tribal communities, such as the Nicobarese and Shompen.

    Feasibility and Sustainability Issues

    1. Hinterland Economic Activities: A successful transhipment hub requires viable hinterland economic activities, which may be wishful thinking in Great Nicobar.
    2. Afforestation and Coral Reef Translocation: The far-field afforestation recommendation and coral reef translocation are questionable compensation methods.
    3. Tectonic Instability: Great Nicobar Island’s proximity to the Ring of Fire and its history of earthquakes raise concerns about the feasibility of developing an urban port city.

    Facts for Prelims: Andaman and Nicobar Islands (ANI)

    • Location: Located between 6° and 14° North Latitude and 92° and 94° East Longitude lie the Andaman and Nicobar Islands, a union territory in India.
    • Two groups of Island: It consists of two groups of islands. The islands located north of 10° north latitude are known as Andaman while islands located south of 10° north latitude are called Nicobar.
    • The Andamans: More than 300 islands make up the Andamans. North, Middle, and South Andaman, known collectively as Great Andaman, are the main islands;
    • The 10- degree channel: The 10-degree channel which is about 145 km long separates Little Andaman in the south from the Nicobar Islands.
    • The Nicobars: The Nicobars consists of 19 islands. Among the most prominent is Car Nicobar in the north; and Great Nicobar in the south. About 90 miles to the southwest of Great Nicobar lies the northwestern tip of Sumatra, Indonesia.
    • Formation: Both the Andaman and Nicobar groups are formed by the above-sea extensions of submarine ridges of mountains and are a part of a great island arc. The highest peak is 2,418 feet at Saddle Peak on North Andaman, followed by Mount Thullier at 2,106 feet on Great Nicobar and Mount Harriet at 1,197 feet on South Andaman. Barren island, the only known active Volcano in south Asia lies in the Andaman Sea. In the late 20th and early 21st centuries, there were volcanic eruptions on Barren Island.
    • Andaman Terrain: Formed of sandstone, limestone, and shale of Cenozoic age, the terrain of the Andamans is rough, with hills and narrow longitudinal valleys. Flat land is scarce and is confined to a few valleys.
    • Nicobar Terrain: The terrain of the Nicobar is more diverse than that of the Andamans. Some of the Nicobar Islands, such as Car Nicobar, have flat coral-covered surfaces with offshore coral formations that prevent most ships from anchoring. Other islands, such as Great Nicobar, are hilly and contain numerous fast-flowing streams.
    • Great Nicobar is the only island in the territory with a significant amount of fresh surface water.
    • Climate: The climate of the Andaman and Nicobar Islands is tropical but is moderated by sea.

    Conclusion

    • The Great Nicobar Island project’s ecological and environmental costs, along with its questionable feasibility and sustainability, raise concerns about India’s commitment to conservation, sustainability, and green development models. It is crucial that the green developmental model becomes the guiding principle for future economic activities, ensuring that growth does not result in irretrievable loss of natural capital.

    Mains Question

    Q. Recently Union Ministry of Environment, Forest and Climate Change (MoEFCC) has cleared the way for the Holistic Development of Great Nicobar Island project. In this backdrop, discuss environmental and ecological concerns and sustainability issues.

    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left

     

  • HDI: Addressing India’s Subnational Human Development

    Central Idea

    • India is now one of the fastest-growing economies globally. However, this growth has not resulted in a corresponding increase in its Human Development Index (HDI). According to the Human Development Report of 2021-22, India ranks 132 out of 191 countries, behind Bangladesh (129) and Sri Lanka (73).

    Facts for Prelims: Human Development Index (HDI)

    • Composite statistical measure by UNDP: The HDI is a composite statistical measure created by the United Nations Development Programme to evaluate and compare the level of human development in different regions around the world.
    • As an alternative with broader aspects: It was introduced in 1990 as an alternative to conventional economic measures such as Gross Domestic Product (GDP), which do not consider the broader aspects of human development.
    • Aspects: The HDI assesses a country’s average accomplishment in three aspects 1. A long and healthy life, 2, knowledge, and 3. A decent standard of living.
    • India ranks 132 out of 191 countries in the HDI 2021.

    The subnational HDI: A new index

    • Given India’s large size and population, it’s critical to address subnational or state-wise disparities in human development.
    • A new index has developed by using the methodology suggested by the UNDP and the National Statistical Office (NSO), which measures human development on a subnational level for 2019-20.

    HDI Calculation

    • The HDI is calculated using four indicators: life expectancy at birth, mean years of schooling, expected years of schooling, and Gross National Income (GNI) per capita.
    • The subnational HDI uses GSDP per capita as a proxy indicator for GNI since GNI per capita estimates are unavailable at the subnational level.
    • The methodology involves calculating the geometric mean of the normalised indices for the three dimensions of human development while applying the maximum and minimum values recommended by the UNDP and NSO.

    Subnational HDI Findings

    • The subnational HDI shows that while some states have made considerable progress, others continue to struggle. Delhi occupies the top spot and Bihar occupies the bottom spot.
    • The five states with the highest HDI scores are Delhi, Goa, Kerala, Sikkim, and Chandigarh. Nineteen states, including Kerala, Maharashtra, Tamil Nadu, Haryana, Punjab, Telangana, Gujarat, and Andhra Pradesh, have scores ranging between 0.7 and 0.799 and are classified as high human development states.
    • The bottom five states are Bihar, Uttar Pradesh, Madhya Pradesh, Jharkhand, and Assam, with medium levels of human development.

    Reasons for Discrepancies

    1. The economic growth has been unevenly distributed, with the top 10% of the Indian population holding over 77% of the wealth. This has resulted in significant disparities in access to basic amenities, healthcare, and education.
    2. While India has made significant progress in reducing poverty and increasing access to healthcare and education, the quality of such services remains a concern.

    Conclusion

    • The government needs to prioritize human development alongside economic growth to ensure that the benefits of growth are more evenly distributed, and it requires a multi-faceted approach to address various issues such as income inequality, gender inequality, access to quality social services, environmental challenges, and social infrastructure investment. India must prioritize investments in human development and job creation, particularly for its youth, to realize its demographic dividend.

    Mains Question

    Q. Analyze the performance of different states in terms of their Human Development Index (HDI) and suggest measures that could be taken to address the disparities in human development in the country

    Are you an IAS Worthy Aspirant? Get a reality check with the All India Smash UPSC Scholarship Test

    Get upto 100% Scholarship | 900 Registration till now | Only 100 Slots Left