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Subject: Economics

  • National Logistics Policy

    logistics

    The government will announce the National Logistics Policy (NLP) this week, aiming to bring down logistics costs and address challenges plaguing importers and exporters.

    What is Logistics?

    • Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their final destination.
    • It involves identifying prospective distributors and suppliers and determining their effectiveness and accessibility.

    Why need a logistics policy?

    logistics

    • Organizing and consolidating the sector: India’s logistics sector is largely unorganized and fragmented.
    • Reducing logistics cost: This is why the country’s logistics costs are as high as 14-15% of the GDP, against 7-8% in developed nations such as the Singapore and the US, who leverage it to boost exports. The NLP aims to bring down India’s logistics cost to 8% in the next five years.
    • Preventing waste of perishable items: As per some estimates in India, about 16% of agri-production is wasted at different stages of the supply chain.
    • Warehousing development: Moreover, due to factors such as limited capacity and availability of warehouses, the cost of transaction increases.
    • Multi-modal integration: The new policy is going about simplification, technology and will have a multimodal approach that will combine rail, water, and air — all modes of transport.

    What role will technology play?

    • Advanced analytics: The NLP will aim to harness technologies such as AI and blockchain. It aims to create a data analytics centre for driving greater transparency and continuous monitoring of key logistics metrics.
    • Single window portal: Under NLP, a portal will be created, where service providers such as warehousing providers, shipping experts, transporters, customs brokers, and various governmental agencies will be unified.

    Will it boost cooperation between ministries?

    • Unifying multiple departments: Currently, the logistics value chain is managed by several ministries—road transport and highways, shipping, railways, and civil aviation.
    • Single-point clearances: Agencies like the Central Drug Standard Control Organization and the Food Safety and Standard Authority of India provide clearances.
    • Nationwide integration: The NLP could enhance their integration at the central level.

    What about reducing the carbon footprint?

    • Energy-efficient transportation: The draft logistics policy lays emphasis on the shift to more energy-efficient means of transportation, as well as the use of greener fuels which could reduce the supply chain’s carbon footprint.
    • Vehicular emission reduction: Moreover, the draft policy, released earlier, emphasized creating regulations for controlling vehicular noise, emissions, and wastage.
    • Green warehousing principles: The new logistics policy also aims to incorporate green principles in the functioning of warehouses which contribute to nearly 10% of the logistics costs.

    Will it change India’s commodity transport?

    • Transport of crucial commodities: The proposed policy aims to focus on the transport of crucial commodities such as coal, steel, iron ore, food grains, steel, cement, fruits and vegetables.
    • Creating nationwide clusters: The current logistical network for transporting them is mainly confined to regional clusters.
    • Integrating national supply-chains: The NLP could help establish a link between the place of origin, and destination place and integrate the supply on a national level.
    • Optimum logistics identification: The draft also proposes identification of the right mode of transport for each of these commodities to minimise losses during transport.

     

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  • Europe heading for Recession

    The Eurozone is almost certainly entering a recession, with surveys showing a deepening cost-of-living crisis and a gloomy outlook that is keeping consumers wary of spending.

    What is Recession?

    • A recession is a significant decline in economic activity that lasts for months or even years.
    • Experts declare a recession when a nation’s economy experiences negative GDP, rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
    • Recessions are considered an unavoidable part of the business cycle—or the regular cadence of expansion and contraction that occurs in a nation’s economy.

    What causes Recessions?

    These phenomena are some of the main drivers of a recession:

    • A sudden economic shock: An economic shock is a surprise problem that creates serious financial damage. The coronavirus outbreak, which shut down economies worldwide, is a more recent example of a sudden economic shock.
    • Excessive debt: When individuals or businesses take on too much debt, the cost of servicing the debt can grow to the point where they can’t pay their bills. Growing debt defaults and bankruptcies then capsize the economy.
    • Asset bubbles: When investing decisions are driven by emotion, bad economic outcomes aren’t far behind. Investors can become too optimistic during a strong economy.
    • Too much inflation: Inflation is the steady, upward trend in prices over time. Inflation isn’t a bad thing per se, but excessive inflation is a dangerous phenomenon. Central banks control inflation by raising interest rates, and higher interest rates depress economic activity.
    • Too much deflation: While runaway inflation can create a recession, deflation can be even worse. Deflation is when prices decline over time, which causes wages to contract, which further depresses prices. When a deflationary feedback loop gets out of hand, people and business stop spending, which undermines the economy.
    • Technological change: New inventions increase productivity and help the economy over the long term, but there can be short-term periods of adjustment to technological breakthroughs. In the 19th century, there were waves of labour-saving technological improvements.

    What’s the difference between Recession and Depression?

    • Recessions and depressions have similar causes, but the overall impact of a depression is much, much worse.
    • There are greater job losses, higher unemployment and steeper declines in GDP.
    • Most of all, a depression lasts longer—years, not months—and it takes more time for the economy to recover.
    • Economists do not have a set definition or fixed measurements to show what counts as a depression. Suffice to say, all the impacts of a depression are deeper and last longer.
    • In the past century, the US has faced just one depression: The Great Depression.

    The Great Depression

    • The Great Depression started in 1929 and lasted through 1933, although the economy didn’t really recover until World War II, nearly a decade later.
    • During the Great Depression, unemployment rose to 25% and the GDP fell by 30%.
    • It was the most unprecedented economic collapse in modern US history.
    • By way of comparison, the Great Recession was the worst recession since the Great Depression.
    • During the Great Recession, unemployment peaked around 10% and the recession officially lasted from December 2007 to June 2009, about a year and a half.
    • Some economists fear that the coronavirus recession could morph into a depression, depending how long it lasts.

    How long do recessions last?

    • Gulf War Recession (July 1990 to March 1991): At the start of the 1990s, the U.S. went through a short, eight-month recession, partly caused by spiking oil prices during the First Gulf War.
    • The Great Recession (2008-2009): As mentioned, the Great Recession was caused in part by a bubble in the real estate market.
    • Covid-19 Recession: The most recent recession began in February 2020 and lasted only two months, making it the shortest US recession in history.

    Can we predict a recession?

    Given that economic forecasting is uncertain, predicting future recessions is far from easy. However, the following warning signs can give you more time to figure out how to prepare for a recession before it happens:

    • An inverted yield curve: The yield curve is a graph that plots the market value—or the yield—of a range. When long-term yields are lower than short-term yields, it shows that investors are worried about a recession. This phenomenon is known as a yield curve inversion, and it has predicted past recessions.
    • Declines in consumer confidence: Consumer spending is the main driver of the US economy. If surveys show a sustained drop in consumer confidence, it could be a sign of impending trouble for the economy.
    • Drop in the Leading Economic Index (LEI): Published monthly by the Conference Board, the LEI strives to predict future economic trends. It looks at factors like applications for unemployment insurance, new orders for manufacturing and stock market performance.
    • Sudden stock market declines: A large, sudden decline in stock markets could be a sign of a recession coming on, since investors sell off parts and sometimes all of their holdings in anticipation of an economic slowdown.
    • Rising unemployment: It goes without saying that if people are losing their jobs, it’s a bad sign for the economy.

    How does a recession affect individuals?

    • We may lose your job during a recession, as unemployment levels rise. It becomes much harder to find a job replacement since more people are out of work.
    • People who keep their jobs may see cuts to pay and benefits, and struggle to negotiate future pay raises.
    • Investments in stocks, bonds, real estate and other assets can lose money in a recession, reducing your savings and upsetting your plans for retirement.
    • Business owners make fewer sales during a recession, and may even be forced into bankruptcy.
    • With more people unable to pay their bills during a recession, lenders tighten standards for mortgages, car loans, and other types of financing.

     

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  • Alcohol Laws in India

    The most ambitious Delhi’s Alcohol Policy 2021-22 which brought in big discounts for consumers was scrapped on July 31 amid allegations of corruption and irregularities in the drafting and implementation of the policy.

    After scrapping the new policy, the Delhi government decided to bring back the ‘old excise regime’ that was in force before.

    Definitely! We shall not nit-pick the old vs. new policy. Let us generally understand how alcohol is regulated in India.

    Alcohol laws of India: A backgrounder

    • The legal drinking age in India and the laws which regulate the sale and consumption of alcohol vary significantly from state to state.
    • In India, consumption of alcohol is prohibited in the states of Bihar, Gujarat, Nagaland and Mizoram.
    • There is partial ban on alcohol in some districts of Manipur.
    • All other Indian states permit alcohol consumption but fix a legal drinking age, which ranges at different ages per region.
    • In some states the legal drinking age can be different for different types of alcoholic beverage.

    Regulation

    • Alcohol is a subject in the State List under the Seventh Schedule of the Constitution of India.
    • Therefore, the laws governing alcohol vary from state to state.
    • Liquor in India is generally sold at liquor stores, restaurants, hotels, bars, pubs, clubs and discos but not online.
    • Some states, like Kerala and Tamil Nadu, prohibit private parties from owning liquor stores making the state government the sole retailer of alcohol in those states.
    • In some states, liquor may be sold at groceries, departmental stores, banquet halls and/or farm houses.
    • Some tourist areas have special laws allowing the sale of alcohol on beaches and houseboats.

    Drunk driving law

    • The blood alcohol content (BAC) legal limit is 0.03% or 0.03 mg alcohol in 100 ml blood.
    • On 1 March 2012, the Union Cabinet approved proposed changes to the Motor Vehicle Act.
    • Higher penalties were introduced, including fines from â‚č2,000 to â‚č10,000 and imprisonment from 6 months to 4 years.
    • Different penalties are assessed depending on the blood alcohol content at the time of the offence.

    Dry days

    • Dry days are specific days when the sale of alcohol is not permitted.
    • Most of the Indian states observe these days on major national festivals/occasions such as Republic Day (26 January), Independence Day (15 August) and Gandhi Jayanti (2 October).
    • Dry days are also observed during elections in India.

    Taxation on Alcohol

    • Most states levy either Value added Tax (VAT) or Excise duty or both.
    • Excise duty is a tax levied to discourage the consumption of a product.
    • It is calculated on a per-unit basis. Meaning, if you buy 1 litre of liquor, you pay a fixed excise duty of Rs 15.
    • Value-added Tax is charged in the proportion of the product. If a bottle costs Rs 100, and the state levies 10 percent VAT, the price rises to Rs 110.

    Tax rates in States

    • The 29 states/UTs in India approach liquor taxation differently.
    • For instance, Gujarat has banned its citizens from consuming liquor since 1961.
    • But outsiders with special licenses can still buy.
    • Puducherry, on the other hand, earns most of its revenue from alcohol trading.
    • Bihar has prohibited alcohol consumption entirely, meaning the state’s revenue from liquor consumption is nil.
    • Its neighbour, Uttar Pradesh, earns the most excise duty on liquor.
    • The state does not levy VAT but a special duty on liquor, collecting funds for particular purposes.

    Do you know?

    Andhra Pradesh, Telangana, Kerala, Karnataka, and Tamil Nadu consume as much as 45 percent of the liquor sold in the country.

    Nationally, Maharashtra charges the highest rate but draws only a portion of its revenue from its sales.

    Why alcohol isn’t banned everywhere?

    • Taxes from alcohol sales roughly form a quarter of state revenues.
    • If this stream suddenly stops, states have to compulsorily cut some important spending.
    • Also, moderate alcohol consumption may provide some health benefits.

     

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  • What it will take to fulfill India’s Solar Power Dream?

    From less than 10 MW in 2010, India has added significant PV capacity over the past decade, achieving over 50 GW by 2022.

    Solar energy in India

    • Solar photovoltaics (PV) has driven India’s push towards the adoption of cleaner energy generation technologies.
    • India is targeting about 500 GW by 2030, of renewable energy deployment, out of which ~280 GW is expected from solar PV.
    • This necessitates the deployment of nearly 30 GW of solar capacity every year until 2030.

    Key components

    • A typical solar PV value chain consists of first fabricating polysilicon ingots which need to be transformed into thin Silicon wafers that are needed to manufacture the PV mini-modules.
    • The mini-modules are then assembled into market-ready and field-deployable modules.

    Various challenges

    There are challenges that need to be overcome for the sustainability of the PV economy.

    (1) PV Modules

    • Indian solar deployment or installation companies depend heavily on imports.
    • It currently imports 100% of silicon wafers and around 80% of cells even at the current deployment levels.
    • India currently does not have enough module and cell manufacturing capacity.
    • India’s current solar module manufacturing capacity is limited to ~15 GW per year.
    • The demand-supply gap widens as we move up the value chain — for example, India only produces ~3.5 GW of cells currently.
    • India has no manufacturing capacity for solar wafers and polysilicon ingots.

    (2) Field deployment

    • Also, out of the 15 GW of module manufacturing capacity, only 3-4 GW of modules are technologically competitive and worthy of deployment in grid-based projects.
    • India remains dependent on the import of solar modules for field deployment.

    (3) Size and technology

    • Most of the Indian industry is currently tuned to handling M2 wafer size, which is roughly 156 x 156 mm2, while the global industry is already moving towards M10 and M12 sizes, which are 182 x 182 mm2 and 210 x 210 mm2 respectively.
    • The bigger size has an advantage in terms of silicon cost per wafer, as this effectively means lower loss of silicon during ingot to wafer processing.
    • In terms of cell technology, most of the manufacturing still uses Al-BSF technology, which can typically give efficiencies of ~18-19% at the cell level and ~16-17% at the module level.
    • By contrast, cell manufacturing worldwide has moved to PERC (22-23%), HJT(~24%), TOPCON (23-24%) and other newer technologies, yielding module efficiency of >21%.

    (4) Land issue

    • Producing more solar power for the same module size means more solar power from the same land area.
    • Land, the most expensive part of solar projects, is scarce in India — and Indian industry has no choice but to move towards newer and superior technologies as part of expansion plans.

    (5) Raw materials supply

    • There is a huge gap on the raw material supply chain side as well.
    • Silicon wafer, the most expensive raw material, is not manufactured in India.
    • India will have to work on technology tie-ups to make the right grade of silicon for solar cell manufacturing — and since >90% of the world’s solar wafer manufacturing currently happens in China.
    • It is not clear how and where India will get the technology.
    • Other key raw materials such as metallic pastes of silver and aluminium to form the electrical contacts too, are almost 100% imported.
    • Thus, India is more of an assembly hub than a manufacturing

    (6) Lack of investment

    • India has hardly invested in this sector which can help the industry to try and test the technologies in a cost-effective manner.

    Current govt policy

    • The government has identified this gap, and is rolling out various policy initiatives to push and motivate the industry to work towards self-reliance in solar manufacturing, both for cells and modules.
    • Key initiatives include:
    1. 40% duty on the import of modules and
    2. 25% duty on the import of cells, and
    3. Production Linked Incentive (PLI) scheme to support manufacturing capex
    4. Compulsion to procure modules only from an approved list of manufacturers (ALMM) for projects that are connected to state/ central government grids
    5. Only India-based manufacturers have been approved

    Way forward

    • India’s path to become a manufacturing hub for the same requires more than just putting some tax barriers and commercial incentives in the form of PLI schemes, etc.
    • It will warrant strong industry-academia collaboration in an innovative manner to start developing home-grown technologies which could, in the short-term.
    • It needs to work with the industry to provide them with trained human resource, process learnings, root-cause analysis through right testing and, in the long term, develop India’s own technologies.
    • High-end technology development requires substantial investment in several clusters which operate in industry-like working and management conditions, appropriate emoluments, and clear deliverables.

     

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  • What is a Windfall Tax?

    windfall

    Finance Minister has defended the windfall tax imposed by the Centre on domestic crude oil producers, saying that it was not an ad hoc move but was done after full consultation with the industry.

    What is a Windfall Tax?

    • Windfall taxes are designed to tax the profits a company derives from an external, sometimes unprecedented event — for instance, the energy price-rise as a result of the Russia-Ukraine conflict.
    • These are profits that cannot be attributed to something the firm actively did, like an investment strategy or an expansion of business.
    • The US Congressional Research Service (CRS) defines a windfall as an “unearned, unanticipated gain in income through no additional effort or expense”.
    • One area where such taxes have routinely been discussed is oil markets, where price fluctuation leads to volatile or erratic profits for the industry.

    When did India introduce this?

    • In July this year, India announced a windfall tax on domestic crude oil producers who it believed were reaping the benefits of the high oil prices.
    • It also imposed an additional excise levy on diesel, petrol and air turbine fuel (ATF) exports.
    • Also, India’s case was different from other countries, as it was still importing discounted Russian oil.

    How is it levied?

    • Governments typically levy this as a one-off tax retrospectively over and above the normal rates of tax.
    • The Central government has introduced a windfall profit tax of â‚č23,250 per tonne on domestic crude oil production, which was subsequently revised fortnightly four times so far.
    • The latest revision was on August 31, when it was hiked to â‚č13,300 per tonne from â‚č13,000.

    Why govt. introduced windfall tax?

    • There have been varying rationales for governments worldwide to introduce windfall taxes like:
    1. Redistribution of unexpected gains when high prices benefit producers at the expense of consumers,
    2. Funding social welfare schemes, and
    3. Supplementary revenue stream for the government

    Why are countries levying windfall taxes now?

    • Prices of oil, gas, and coal have seen sharp increases since last year and in the first two quarters of the current year, although they have reduced recently.
    • Pandemic recovery and supply issues resulting from the Russia-Ukraine conflict shored up energy demands, which in turn have driven up global prices.
    • The rising prices meant huge and record profits for energy companies while resulting in hefty gas and electricity bills for households in major and smaller economies.
    • Since the gains stemmed partly from external change, multiple analysts have called them windfall profits.

    Issues with imposing such taxes

    • Companies are confident in investing in a sector if there is certainty and stability in a tax regime.
    • Since windfall taxes are imposed retrospectively and are often influenced by unexpected events, they can brew uncertainty in the market about future taxes.
    • IMF says that taxes in response to price surges may suffer from design problems—given their expedient and political nature.
    • It added that introducing a temporary windfall profit tax reduces future investment because prospective investors will internalise the likelihood of potential taxes when making investment decisions.
    • There is another argument about what exactly constitutes true windfall profits; how can it be determined and what level of profit is normal or excessive.
    • Another issue is who should be taxed — only the big companies responsible for the bulk of high-priced sales or smaller companies as well— raising the question of whether producers with revenues or profits below a certain threshold should be exempt.

     

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  • GST Council

    The Union Finance Minister has heaped praises on Goods and Services Tax (GST) Council.

    Why in news?

    • FM was reacting to a case made by Fifteenth Finance Commission chief N.K. Singh to set up a Fiscal Council with the Centre and States.
    • This is another such recommended body to act as a bridge between the GST Council and the Finance Commission.

    What is the GST Council?

    • The GST regime came into force after the 101st Constitutional Amendment was passed by both Houses of Parliament in 2016.
    • The GST Council – a joint forum of the Centre and the states — was set up by the President as per Article 279A (1) of the amended Constitution.
    • The members of the Council include the Union Finance Minister (chairperson), the Union Minister of State (Finance) from the Centre.
    • Each state can nominate a minister in-charge of finance or taxation or any other minister as a member.

    Why was the Council set up?

    • The Council, according to Article 279, is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.
    • It also decides on various rate slabs of GST.
    • For instance, an interim report by a panel of ministers has suggested imposing 28 per cent GST on casinos, online gaming and horse racing.
    • A decision on this will be taken at the Council meeting.

    Recent reforms

    • The ongoing meeting is the first since a decision of the Supreme Court in May this year, which stated recommendations of the GST Council are not binding.
    • The court said Article 246A of the Constitution gives both Parliament and state legislatures “simultaneous” power to legislate on GST .
    • Recommendations of the Council are the product of a collaborative dialogue involving the Union and States.
    • This was hailed by some states, such as Kerala and Tamil Nadu, who believe states can be more flexible in accepting the recommendations as suited to them.

     

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  • GPS-based toll system to replace FASTag

    The government plans to start a GPS-based toll system in place of FASTag to ensure seamless payment and vehicle movement on national highways.

    Why in news?

    • The move would end the role of toll plazas across the country.

    How will a GPS-based tolling system work?

    • Vehicles will be fitted with an electronic device that can track their movement.
    • Highways will be geo-fenced, creating virtual boundaries. The system will use GPS or radio frequency identification technologies.
    • The software will recognize when a mobile device enters or leaves a particular area, and toll will be charged based on the distance travelled at the highway’s exit point.
    • As the system is based on sensors, there will be no need to stop at toll plazas.
    • Vehicles and users must be registered with the GPS toll system, linked to bank accounts that will be used to transfer toll payments.

    What are FASTags?

    • FASTags are stickers that are affixed to the windscreen of vehicles and use Radio Frequency Identification (RFID) technology to enable digital, contactless payment of tolls without having to stop at toll gates.
    • RFID uses electromagnetic fields to automatically identify and track tags attached to objects.
    • The tags are linked to bank accounts and other payment methods.
    • As a car crosses a toll plaza, the amount is automatically deducted, and a notification is sent to the registered mobile phone number.

    Issues with FASTags

    • Since the card is affixed to the windscreen, it can be easily misplaced, damaged or stolen.
    • The existing FASTag system, though faster than cash payments, still requires vehicles to stop at toll booths to enable reading of tags.
    • Also, the vehicle must wait till the gate is opened.
    • It has been observed that sometimes the toll fee is deducted twice from user account. Mostly, this happens due to a technical glitch.
    • Some card readers take longer time to read and register. Hence the purpose of saving time is itself defied.
    • Still, the wait time at toll booths is much more than the 30 seconds that was promised earlier.
    • Also, it has not helped reduce the number of toll booths.

    Hence the benefits of using FASTag far outweigh the challenges.

    Is FASTags a total failure?

    • Usage has increased since FASTag was made mandatory in 2021 after its launch in 2015.
    • Penetration has grown from nearly 16% in FY18 to 96.3% in FY22.
    • Total toll collection in FY18 was â‚č21,948 crore, including â‚č3,532 crore collected through FASTags.
    • In FY22, toll collection through FASTags increased sharply to â‚č33,274 crore out of total toll collection of â‚č34,535 crore.

    How will GPS benefit highway users?

    • GPS tolling uses satellite-based navigation and requires no halting.
    • Also, vehicles can be charged only for their actual travel on a highway stretch.
    • Currently, toll is paid at toll booths which is fixed between two points of tolling and a user does not get any concession even if he/she exits before completing the full run between two toll plazas.
    • The new system should reduce the toll amount charged for travel on highways.

    What is the progress so far on GPS tolling?

    • The Union road ministry has amended the National Highways Fee (Determination of Rates and Collection) Rules, 2008, allowing for the collection of toll based on distance travelled on national highways.
    • This will facilitate the introduction of GPS tolling.
    • First trials may be done on the under-construction Mumbai-Delhi expressway which will be geo-fenced.
    • Also the cost of GPS devices needs to be considered at very beginning.

    Way forward

    • The system needs a proper legislative framework, and a full launch is still years away. The government intends to introduce it in phases.
    • The road ministry is expected to amend the Motor Vehicles Act and create rules to facilitate GPS tolling as well as to penalize offenders.
    • Moreover, GPS will come with its own set of complications on calculating differential tolls.
    • Regulations and framework for these need to be developed first.

     

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  • IIP gives us true health of our economy

    IIPContext

    • India’s statistics ministry generates only one high-frequency gauge of economic activity. And that lone barometer, the index of industrial production (IIP), is completely broken.

    What is IIP?

    • The Index of Industrial Production (IIP) is an index that indicates the performance of various industrial sectors of the Indian economy. It is a composite indicator of the general level of industrial activity in the economy.

    IIPHow is IIP calculated?

    • IIP is calculated as the weighted average of production relatives of all the industrial activities. In the mathematical calculation Laspeyre’s fixed base formula is used.

    What are the Core Industries in India?

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

    Which has highest weightage in IIP?

    • The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

    IIPWhy is IIP important?

    • IIP is the only measure on the physical volume of production. It is used by government agencies including the Ministry of Finance, the Reserve Bank of India, etc. for policy-making purposes. IIP remains extremely relevant for the calculation of the quarterly and advance GDP estimates.

    Who releases IIP data?

    How useful are monthly IIP figures to draw a conclusion about India’s growth?

    • IIP figures are monthly data and as such it keeps going up and down.
    • In fact, the release calls them “quick estimates” because they tend to get revised after a month or two.

    IIP Index Components

    • Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
    • The relative weights of these three sectors are 77.6% (manufacturing), 14.4% (mining) and 8% (electricity).
    • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP.

    Basket of products

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

    IIP base year change

    • The base year was changed to 2011-12 from 2004-05 in the year 2017.

    Way ahead

    • IIP remains extremely relevant for the calculation of the quarterly and advance GDP (Gross Domestic Product) estimates.

    Mains question

    Q. What do you understand by IIP? How it helps us to understand economic health?

     

     

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  • Sustainable Tourism in India

    TourismContext

    • Ministry of Tourism identified Tourism Industry’s potential as a Sunrise Industry.
    • There is a need for tourism analysts to hold tourism planners accountable.

    What is tourism?

    • Tourism is travel for pleasure or business; also the theory and practice of touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tours.

    Types of tourism

    • Domestic tourism: Refers to activities of a visitor within their country of residence and outside of their home (e.g. a Indian visiting other parts of India)
    • Inbound tourism: Refers to the activities of a visitor from outside of country of residence (e.g. a Spaniard visiting Britain).
    • Outbound tourism: Refers to the activities of a resident visitor outside of their country of residence (e.g. an Indian visiting an overseas country).

    What does sustainable tourism mean?

    • Sustainable tourism is defined by the UN Environment Program and UN World Tourism Organization as “tourism that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities.”

    TourismWhat is the main importance of tourism?

    • Tourism boosts the revenue of the economy, creates thousands of jobs, develops the infrastructures of a country, and plants a sense of cultural exchange between foreigners and citizens.

    Why tourism is needed?

    • Tourism is not a fad. It is a compulsion driven by the urge to discover new places. Because we have this compulsion to venture into the unknown, we need each other. When humans travel, meet and exchange ideas, civilisation flourishes.

    What should be done to promote tourism?

    • National Tourism Authority: A separate National Tourism Authority (NTA) should be established for executing and operationalizing various tourism related initiatives. Simple, flexible and elegant processes will be laid down to allow for nimbleness.
    • National Tourism Advisory Board: A National Tourism Advisory Board (NTAB) should be set up to provide overall vision, guidance and direction to the Development of Tourism Sector in the country.
    • Creating Synergy in Tourism Eco System: In order to ensure synergy at various levels of Government and with the Private Sector, it is important to have a well-defined framework in place.
    • Quality Tourism Framework: A robust framework for quality certification of products and services across all segments like accommodation providers, tour operators, adventure tour operators, service providers like spa and wellness, guides, restaurants etc. should be laid down.
    • Enhancing the existing luxury tourism products: The existing tourism products such as Nilgiri Mountain Railway, Palace on Wheels etc. should be enhanced and their numbers will also be increased. Haulage charges will be rationalised to make luxury trains viable.
    • Railways can be a game changer: For tourism Railways have presence in most parts of the country. Most of the tourist destinations in the country are connected by rail. Railways is also in the process of connecting more places especially the strategic locations that also are tourist places with limited connectivity at present. Indian Railways is working towards promoting tourism in the country by operating more trains connecting tourists’ destinations and also by providing an array of products starting from luxury tourist trains to budget catering tourist trains

    TourismWhat is MICE tourism of Gujarat?

    • The acronym “MICE” stands for “Meetings, Incentives, Conferences and Exhibitions”, and is essentially a version of business tourism that draws domestic and international tourists to a destination.
    • The policy aims to make Gujarat one of the top five MICE tourism destinations in the country.

    Way forward

    • Enhance the contribution of tourism in Indian economy by increasing the visitation, stay and spend
    • Create jobs and entrepreneurial opportunities in tourism sector and ensure supply of skilled work force
    • Enhance the competitiveness of tourism sector and attract private sector investment
    • Preserve and enhance the cultural and natural resources of the country
    • To ensure sustainable, responsible and inclusive development of tourism in the country

    Conclusion

    • We know that India has the highest tourism potential of any country. That is because we have every terrain and climate zone, and a range of customs, traditions, cuisines, crafts, art forms and festivals unmatched by any other nation. We should monetize our potential through putting comprehensive National tourism policy in place.

    Mains question

    Q. What should be done to transform our tourist destinations to provide world class visitor experience making India one of the topmost destinations for sustainable and responsible tourism?

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  • Apple Farming in India

    apple farmersContext

    • The increasing cost of production and the increase in GST on apple cartons has triggered protests in Himachal Pradesh’s apple farmers.

    What is the issue?

    • The cost of production of agricultural items increased substantially, denying remunerative prices to the poor and marginal apple farmers.

    Reason for crisis in apple farming

    • Increase in cost of production: The input cost of fertilizers, insecticides, and fungicides has risen in the last decade by 300%, as per some estimates. The cost of apple cartons and trays and packaging has also seen a dramatic rise. In the last decade, the cost of a carton, for instance, has risen from about â‚č30 to â‚č The cost borne to market the Produce has also risen.
    • High taxation: The increase in the Goods and Services Tax on cartons from 12% to 18%. This was done to ensure that farmers are forced to sell their produce to big buyers instead of selling it in the open market. Just as the three farm laws were designed on the pretext of getting rid of the middlemen, the argument here was that commission agents, who fleece the apple farmers, will be forced to exit the picture. But this leaves the apple growers at the mercy of large giants in procurement, who have precedence of even deciding the procurement price.
    • No MSP in Himachal: Unlike in Jammu and Kashmir, where there is a minimum rate for procurement, there is no such law in Himachal. The government also does not seem prepared to bring in such a law. The farmers are demanding that legally guaranteed procurement at a Minimum Support Price (C2+50%) should be ensured to improve apple farmers condition.

    apple farmersHow to address this issue?

    • Need for a regulator: What is required is an independent body that is duly supported and trusted by the farmers. Such a body should have representatives of apple growers, market players, commission agents and the government. This must be a statutory body that is also given the task of conducting research in the apple economy.
    • Directional efforts: Issues such as high input cost, lack of fair price and unavailability of infrastructure such as cold chains should be addressed.
    • Required research to support improvements in apple farming systems: Over the past few decades, the priorities in research projects and government policies on apple production were focused on the improvement of tree productivity and product quality. This was important to enhance the net incomes and living standards of apple producers in India. This research should be further enhanced by introducing European varieties in India.
    • Focussing on Alternative Market Channels: The alternative market channel works on the principles of decentralisation and direct-to-home delivery. The idea is to create smaller, less congested markets in urban areas with the participation of farmers’ groups and Farmer Producer Companies (FPCs) so that farmers have direct access to consumers.
    • Logistics transformation: To sustain the demand for agricultural commodities, investments in key logistics must be enhanced. Moreover, e-commerce and delivery companies and start-ups need to be encouraged with suitable policies and incentives. The small and medium enterprises, running with raw materials from the agriculture and allied sector or otherwise, also need special attention so that the rural economy doesn’t collapse.

    apple farmersConclusion

    • Agriculture is dying, not as in the production of food but as a desirable profession. One bad yield, whether due to errant rains, pests, etc., and most farmers have no buffer available. The last point worth considering is that food and agriculture are not the same. Expenditures on food span the value-add, including processing, preparation, service in restaurants, etc. Farmers in India merely get paid for their product and not for the food we eat.

     

    Mains question

    Q. Do you think there is urgent need to extend MSP to horticulture sector also? Discuss what can be done to solve the apple farmer crisis in Himachal Pradesh.

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