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Subject: Economics

  • What is Social Stock Exchange (SSE)?

    social

    The National Stock Exchange of India (NSE India) received an in-principle approval from the Securities Exchange Board of India (SEBI) to set-up Social Stock Exchange (SSE) as a separate segment.

    What is Social Stock Exchange (SSE)?

    • SSE is a novel idea in India, and a stock exchange of this kind is intended to benefit the private and non-profit sectors by directing more capital to them.
    • During her Budget speech for the fiscal year 2019–20, Finance Minister first proposed the concept of SSE.
    • The Securities Contracts (Regulation) Act, 1956 was then invoked by the government, which subsequently published a gazette notification announcing a new security as “zero coupon zero principal”.
    • The SSE will function as a distinct division of the current stock exchanges under the new regulations.

    Who can list on SSE?

    • The SSE will be a distinct division of the current stock exchanges under the new regulations.
    • Not-for-profit organisations (NPOs) and for-profit social enterprises with social intent and impact as their primary goal will be eligible to participate in the SSE.
    • Additionally, such an intent should be shown by its emphasis on social goals that are appropriate for under-served or less privileged populations or areas.
    • The social enterprises will have to engage in a social activity out of 16 broad activities listed by the regulator.

    The eligible activities include-

    1. Eradicating hunger poverty, malnutrition and inequality
    2. Promoting healthcare, supporting education, employability and livelihoods
    3. Gender equality empowerment of women and LGBTQIA communities
    4. Supporting incubators of social enterprise

    Who are not eligible?

    • Corporate foundations, political or religious organisations or activities, professional or trade associations, infrastructure companies, and housing companies, with the exception of affordable housing, will not be eligible to be identified as social enterprises.
    • According to SEBI’s framework, minimum issue size of ₹1 crore and a minimum application size for subscription of ₹2 lakh are currently required for SSE.

    Minimum requirements for sustenance

    • NPO needs to be registered as a charitable trust and should be registered for at least three years, must have spent at least ₹50 lakh annually in the past financial year.
    • They should have received a funding of at least ₹10 lakh in the past financial year.

     

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  • Amrit Bharat Station Scheme

    The Ministry of Railways, as part of its station redevelopment drive, has formulated Amrit Bharat Station Scheme to modernize over 1,000 small stations over the coming years.

    Amrit Bharat Station Scheme

    • Under this, stations will be equipped with facilities inspired by the mega-upgradation of marquee stations such as New Delhi and Ahmedabad, albeit at a lower cost.
    • Key features of these proposed stations include provisions for roof top plazas, longer platforms, ballast-less tracks, and 5G connectivity.
    • The scheme will subsume all previous redevelopment projects where work is yet to begin.

    Implementation strategy

    • The model envisages low-cost redevelopment of stations which can be executed timely.
    • Zonal railways have been given the responsibility of selecting stations, which will then be approved by a committee of senior railway officials.
    • Plans and consequent budgets will only be approved on the basis of factors such as footfall and inputs from stakeholders.

    Facilities Planned under this Scheme

    • Provision for Roof Plaza to be created in future
    • Free Wi-Fi, space for 5G mobile towers
    • Smooth access by widening of roads, removal of unwanted structures, properly designed signages, dedicated pedestrian pathways, well-planned parking areas, improved lighting etc.
    • High level platforms (760-840 mm) at all stations with a length of 600 metres
    • Special amenities for the disabled

     

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  • Why India’s bankruptcy regime needs to be fixed?

    The government is proposing to make changes to India’s six-year-old Insolvency and Bankruptcy Code (IBC).

    What is the Insolvency and Bankruptcy Code (IBC)?

    • The IBC, 2016 is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
    • It is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
    • The code aims to protect the interests of small investors and make the process of doing business less cumbersome.

    Key features

    Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, companies, and partnership firms. The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals.

    1. For companies, the process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree.
    2. For startups (other than partnership firms), small companies, and other companies (with assets less than Rs. 1 crore), the resolution process would be completed within 90 days of initiation of request which may be extended by 45 days.

    Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it. The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the RBI.

    Insolvency professionals: The insolvency process will be managed by licensed professionals. These professionals will also control the assets of the debtor during the insolvency process.

    Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies:

    1. National Company Law Tribunal: for Companies and Limited Liability Partnership firms; and
    2. Debt Recovery Tribunal: for individuals and partnerships

    What are the changes being proposed?

    bank

    • Easier settlements: The process is being proposed to be divided into two phases—phase I will focus on finding potential buyers and handing over the management to the acquirer. Phase II would address the distribution of proceeds among creditors and settle inter-creditor disputes. This would make an effort to revive the units with better management, wherever possible.
    • Preventing delays: Average days taken to resolve a case has risen to 679 days in H1FY23 from 230 days in FY18. The changes presently under consideration seek to address inter-creditor disputes, which have been identified as the leading cause of delays.

    Why is the IBC seen as a game-changer?

    • The IBC has proved to be a deterrent for many unscrupulous borrowers and imparted tools to banks to be reasonably confident about recovering NPAs.
    • Fear of losing control of the firm nudges debtors to settle their dues.
    • Till September 2022, 23,417 applications for initiation of the Corporate Insolvency Resolution Process (CIRP), with an underlying default amount of ₹7.31 trillion, were resolved before admission.
    • Indirectly, the code provides an exit route by winding up commercially unviable units.

     

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  • AVGC-Extended Reality Mission for Gaming Sector

    avgc gaming

    The Animation, Visual Effects, Gaming and Comics (AVGC) Promotion Task Force report has proposed a national AVGC-Extended Reality Mission with a budget outlay to be created for integrated promotion and growth of the sector.

    What is AVGC?

    • While the etymology of the word surrounds everything to do with Animation, Visual Effects, Gaming and Comics, the overarching term is an umbrella for all the sub-sectors that are contributing to India’s digital economy.
    • This includes-
    1. Animation Studios
    2. VFX Studios
    3. Game Development Studios
    4. Platforms
    5. Hardware Manufacturers
    6. Software developers
    7. Virtual Production Studios and many more entities
    • The sector saw immense growth with technological adoption as is, but it witnessed steep uptake with the onset of the pandemic.

    Why focus on the AVGC sector?

    • Emerging sector: The global AVGC industry amounts to $800 billion, and the Indian AVGC sector is brimming with the potential to bag up to 5 percent of the global share ($40 billion).
    • India’s IT prowess: India today contributes about $2.5-3 billion of the estimated $260-275 billion worldwide AVGC market.
    • Skilled workforce availability: According to industry experts, the Indian market which currently employs about 1.85 lakh AVGC professionals, can witness a growth of 14-16% in the next decade.
    • Employment generation: Not only does the sector contribute significantly to the economy, it also creates an abundance of employment opportunities for several skilled sectors, with over 160,000 jobs that it could provide yearly.

    Key recommendations by the task force

    The report has also recommended-

    • “Create in India” campaign with an exclusive focus on content creation
    • Establishment of AVGC accelerators and innovation hubs in academic institutions
    • Democratizing AVGC technologies by promoting subscription-based pricing models for MSME, Start-ups and institutions;
    • Indigenous technology development through incentive schemes and Intellectual Property creation; and
    • Setting up a dedicated production fund for domestic content creation from across India to promote the country’s culture and heritage globally.
    • Memorandum of Cooperation with developed global AVGC markets — U.S., Japan, South Korea, Germany etc.

    Way forward

    • Policy vision: Because of the wide range of sub-sectors that are amass under AVGC’s wide umbrella, there is a need for a broad vision to help further incubate this industry.
    • Up-skilling: There is a requirement for not only financing and resource allocation for the sector, but also education and talent development.
    • Collaboration: Gaming, VFX, and animation markets in the likes of the US or South Korea, for instance, has been heavily incubated, and are thus at the crest of the wave on a global scale today.

    Conclusion

    • If it gets the correct atmosphere to grow in–especially one that covers all the bases under it, the Indian AVGC sector has the capacity to become the zenith of Digital India and the hallmark of the ‘Brand India’ dream that PM envisages.

     

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  •  ‘PRASAD’ Scheme to create a slew of facilities at Srisailam

    President of India inaugurated ‘PRASAD’ project at the tourism facilitation centre in the pilgrim town of Srisailam in Andhra Pradesh.

    About Srisailam

    • The temple at Srisailam is the ancient and sacred place of South India.
    • The presiding deity of the place is Brahmaramba Mallikarjuna Swamy in natural stone formations in the shape of Lingam.
    • It is listed as one of the twelve Jyotirlingams existing in the country.

    Development with PRASAD scheme

    • The pilgrim town will get a pilgrim complex, amenities centres, an amphitheatre, sound and light show, digital intervention, parking areas among others.
    • There is total outlay of ₹48.03 crore under the PRASAD project.

    Back2Basics: PRASAD Scheme

    • PRASAD stands for Pilgrimage Rejuvenation and Spirituality Augmentation Drive (PRASAD).
    • It is 100% Centrally Sponsored Scheme under Tourism Ministry.
    • Provisions under the scheme include-
    1. Tourism Promotion and Tourist Ecosystem
    2. Vocational Training for Tourists and Hospitality Business
    3. Hunar se Rozgar tak (HSRT) and earn while you learn programs
    4. Improving Tourist Infrastructure

     

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  • Research and Development Scenario in India

    development

    Context

    • US, has retained its global leadership for almost a century since World War I thanks to the culture of innovation backed by a solid base of research and development (R&D). China is challenging the leadership of US based on technology and innovation. If India wants to be a Vishwa guru it must invest in R&D.

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    Innovation and missing R&D Investment

    • Engine of growth: Innovation is rightly recognized as an engine for economic growth.
    • Atal innovation Mission: In 2016, the government launched the Atal Innovation Mission (AIM) to create an ecosystem to promote innovation and entrepreneurship in the country.
    • Actual spending is less: All these are steps in the right direction, but the foundation of all this lies in how much India actually spends on R&D, both in absolute terms as well as a percentage of its GDP, in relation to other G20 countries.
    • Sustainable Target: SDG Target 9.5 calls upon nations to encourage innovation and substantially increase the numbers of researchers as well as public and private spending on R&D. Gross domestic expenditure on R&D (GERD) is the proposed aggregate to quantify a country’s commitment to R&D.

    What is the scenario of Global Investment in R&D?

    • Institute for Statistics (UIS): According to UNESCO’s Institute for Statistics (UIS) latest report, the G20 nations accounted for 90.6 per cent of global GERD (current, PPP$) in 2018.
    • Increased spending on R&D: Global R&D expenditure has reached a record high of about 2.2 trillion current PPP$ (2018), while Research Intensity (R&D expenditure as a percentage of GDP) has gradually increased from 1.43 per cent in 1998 to 1.72 per cent in 2018.
    • Investment in PPP terms is inaccurate: Though looking at spending in PPP terms is a reasonable metric for welfare measurement in the economy, when it comes to technological prowess in high-end activities of R&D, it all boils down to measuring hard currency in US dollars.

    development

    Investment in R&D by G20 countries

    • G20 leader in investment: The G20 countries, accounting for 86.2 per cent of the global GDP and over 60 per cent of the global population in 2021, are the leaders in every way.
    • USA spends the Highest: The US leads the G20 by spending $581.6 billion on R&D followed by the European Union ($323 billion), and China ($297.3 billion) in 2018.
    • India spends negligible amount: India lags way behind with a paltry R&D expenditure of only $17.6 billion in 2018. In terms of their relative shares in G20 R&D expenditure, the US is way ahead with 36 per cent, followed by the EU (20 per cent), and China (18 per cent). India’s share is less than 1 per cent of G20 R&D expenditure in dollar terms.

    development

    Linkages between Research Intensity and Expenditure on R&D

    • Percentage to GDP: While the absolute expenditure on R&D provides a sense of scale, their percentage to the respective GDP provides the research intensity (RI).
    • South Korea Highest RI: It is interesting to note that in 2018 for which the latest information is available, South Korea has the highest RI at 4.43 per cent, followed by Japan (3.21 per cent), Germany (3.09 per cent), the US (2.83 per cent), France (2.19 per cent), China (2.14 per cent) and EU (2.02 per cent). India is ranked 17th in the G20, with a RI of 0.65 per cent (see infographics).
    • Example of Israel: One of the non-G20 countries is Israel, which, while having an R&D expenditure of just $18.6 billion, a population of only 9.3 million and a per capita income of around $51,430, has the highest RI of over 5 per cent. No wonder, Israel is known as a land of innovations, be it in defence or agriculture.

    development

    What India can learn from Israel?

    • Innovation growth and competition: The innovation system in Israel is a fundamental driver of its economic growth and competitiveness.
    • Active role of government: The government has played an important role in financing innovation, particularly in SMEs, and in providing well-functioning frameworks for innovation, such as venture capital (VC), incubators, strong science-industry links, and high-quality university education.
    • India can emulate Israel: Israel builds a strong case to show that despite being a smaller nation, sustainable growth can be achieved by prioritising investments in R&D. A lesson India can learn.

    Mains Question

    Q. What is difference between investment in R&D and research intensity? What is the missing part in India’s R&D and innovation ecosystem?

     

     

  • Consumer Affairs Ministry unveils ‘Right to Repair’ Portal

    right to repair

    The Food and Consumer Affairs Minister introduced a host of new initiatives, including a right to repair portal.

    Right to Repair portal

    • On the ‘right to repair’ portal, manufacturers would share the manual of product details with customers so that they could either repair by self, by third parties, rather than depend on original manufacturers.
    • Initially, mobile phones, electronics, consumer durables, automobile and farming equipments would be covered.

    What is Right to Repair?

    • It refers to proposed government legislation that would allow consumers the ability to repair and modify their own consumer products (e.g. electronic, automotive devices).
    • The idea behind “right to repair” is in the name: If you own something, you should be able to repair it yourself or take it to a technician of your choice.
    • People are pretty used to this concept when it comes to older cars and appliances, but right-to-repair advocates argue that modern tech, especially anything with a computer chip inside, is rarely repairable.

    The Right to Repair movement aims for:

    1. Easy repair: The device should be constructed and designed in a manner that allows easy repairs
    2. Access to critical components: End users and independent repair providers should be able to access original spare parts and tools (software as well as physical tools) needed to repair the device at fair market conditions
    3. No technical barriers: Repairs should by design be possible and not hindered by software programming
    4. Proper communication: The repairability of a device should be clearly communicated by the manufacturer.

    How did it came to existence?

    • The average consumer purchases an electronic gadget, knowing that it will very quickly become obsolete as its manufacturer releases newer and more amped up version.
    • As your device grows older, issues start to crop up — your smartphone may slow down to a point where it is almost unusable, or your gaming console may require one too many hard resets.
    • When this happens, more often than not, you are left at the mercy of manufacturers who make repairs inaccessible and an inordinately expensive affair.

    Why is such right significant?

    • Exorbitant repair price: Often, manufacturers reduce the durability of the product, compelling consumers to either repurchase the product or get it repaired at exorbitant prices affixed by the manufacturers.
    • Lifespan enhancement: The goal of the movement is to increase the lifespan of products and to keep them from ending up in landfills.
    • Against planned obsolescence: The electronic manufacturers are encouraging such culture so that devices are designed specifically to last a limited amount of time and to be replaced.
    • Scarcity of natural resources: Obsolescence leads to immense pressure on the environment and wasted natural resources.
    • Mitigating climate change: Manufacturing an electronic device is a highly polluting process. It makes use of polluting sources of energy, such as fossil fuel.
    • Boost to repair economy: Right to repair advocates also argue that this will help boost business for small repair shops, which are an important part of local economies.

    Issues with obsolete devices

    • Unfair trade practice:  For manufacturers, either of these options is a win-win case, because high-priced repairs, as well as new sales, mean more profits.
    • High cost to consumers: This often led to higher consumer costs or drive consumers to replace devices instead of repairing them.
    • Generation of E-waste: The global community is concerned over the continuously growing size of the e-waste stream.
    • Recyclability: Up to 95% of raw materials used to produce electronic devices can be recycled, while the vast majority of newly produced devices use little to none recycled material due to the higher cost.

    Why do electronic manufacturers oppose this movement?

    Large tech companies, including Apple, Microsoft, Amazon and Tesla, have been lobbying against the right to repair.

    • IPR violations through reverse engineering: Their argument is that opening up their intellectual property to third party repair services.
    • Threats to device safety: Amateur repairers could lead to exploitation and impact the safety and security of their devices.
    • Personal data security: Tesla, for instance, has fought against right to repair advocacy, stating that such initiatives threaten data security and cyber security.
    • Sheer casualization: Tech giant has allowed repairs of its devices only by authorised technicians and not providing spare parts or DIY manuals on how to fix its products.

    Right to Repair in India

    The ‘right to repair’ is not recognised as a statutory right in India, but certain pronouncements within the antitrust landscape have tacitly recognized the right.

    • Necessary consumer right: Monopoly on repair processes infringes the customer’s’ “right to choose” recognised by the Consumer Protection Act, 2019.
    • Acknowledgment by agencies: Consumer disputes jurisprudence in the country has also partially acknowledged the right to repair.
    • Upholding Competition: In Shamsher Kataria v Honda Siel Cars India Ltd (2017), for instance, the Competition Commission of India ruled that restricting the access of independent automobile repair units to spare parts as anti-competitive.
    • Part of consumer welfare: The CCI observed that the practice was detrimental to consumer welfare.
    • Laws for recycle: The e-waste (management and handling) rules addresses not only to handle the waste in an environmentally friendly manner, but also has laid down rules about its transportation, storage and recycling.

    Way forward

    • Avoiding blanket waiver: While necessary clauses to maintain the quality of the product can be included, a blanket waiver should be avoided.
    • For instance, the quality assurance clause can be incorporated for use of company-recommended spare parts and certified repair shops.
    • Making available the repair manual: Making repair manuals available to certified business owners could go a long way in balancing the rights of consumers and manufacturers.
    • Sign a non-disclosure agreement to protect IP rights: Manufacturers can sign a non-disclosure agreement to protect the IP with certified repairers/businesses.
    • Alloting certification/license: Further, the lack of certification/licensing of repair workers is seen as a reflection of their lack of skills.
    • Insert right to repair in Consumer protection Act: The ‘right to repair’ can be said to be implicit in Section 2(9) of the Consumer Protection Act, 2019.
    • Reparability parameter: The product liability clause under Section 84 can be amended and expanded to impose product liability concerning various reparability parameters of the product.
    • Duration of product liability: The duration of imposing product liability may vary depending on the product and its longevity.

     

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  • NITI Aayog cautions against cutting trade ties with China

    Amid demands for snapping trade ties with China for its transgressions on the border, former NITI Aayog Vice-Chairman has opined that cutting trade ties with Beijing would amount to sacrificing India’s potential economic growth.

    What is the news?

    • Panagariya said both countries can play the trade sanctions game.
    • The ability of a $17 trillion economy (China) to inflict injury on a $3 trillion economy (India) is far greater than the reverse.

    Why in news?

    • The trade deficit, the difference between imports and exports, between India and China touched $51.5 billion during April-October this fiscal.
    • The deficit during 2021-22 had jumped to $73.31 billion as compared to $44.03 billion in 2020-21.

    A quick backgrounder

    • Trade ties began to boom since the early 2000s.
    • This was driven largely by India’s imports of Chinese machinery and other equipment.
    • It rose up from $3 billion in the year 2000 to $42 billion in 2008, the year China became India’s largest trading partner.

    The Hindi-Chini buy buy

    • A third of machinery and almost two-fifths of organic chemicals that India purchases from the world come from China.
    • Automotive parts and fertilizers are other items where China’s share in India’s import is more than 25 per cent.
    • Several of these products are used by Indian manufacturers in the production of finished goods, thus thoroughly integrating China in India’s manufacturing supply chain.
    • For instance India sources close to 90 per cent of certain mobile phone parts from China.

    India’s export to China

    • Even as an export market, China is a major partner for India.
    • China is the third-largest destination for Indian shipments.
    • At the same time, India only accounts for a little over two percent of China’s total exports, according to the Federation of Indian Export Organisation (FIEO).

    Should we worry about this?

    • Trade deficits/surpluses are just accounting exercises and having a trade deficit against a country doesn’t make the domestic economy weaker or worse off.
    • In this light, India’s trade imbalance with China should not be viewed in isolation.
    • For instance, pharmaceuticals that India exports to the world require ingredients that are imported from China.
    • Chinese imports of Indian seafood are one area that has recently shown robust growth and carries scope to grow in future.

    So, having a trade deficit is good?

    • Of course NOT. Running persistent trade deficits across all countries raises two main issues.
    1. Availability of foreign exchange reserves to “buy” the imports.
    2. Lack of domestic capacity to produce most efficiently.

    Can we ban trade with China?

    Ans. Certainly NOT!

    • It will hurt the Indian poor the most: This is because the poor are more price-sensitive. For instance, if Chinese TVs were replaced by either costlier Indian TVs or less efficient ones, unlike poor, richer Indians may buy the costlier option.
    • It will punish Indian producers and exporters: Several businesses in India import intermediate goods and raw materials, which, in turn, are used to create final goods — both for the domestic Indian market as well as the global market (as Indian exports).
    • Pharma sector could be worst hit: For instance, of the nearly $3.6 billion worth of ingredients that Indian drug-makers import to manufacture several essential medicines, China catered to around 68 percent.
    • Ban will barely hurt China: According to the United Nations Conference on Trade and Development (UNCTAD) data for 2018, 15.3% of India’s imports are from China, and 5.1% of India’s exports go to China.
    • Chinese money funds Indian unicorns: India and China have also become increasingly integrated in recent years. Chinese money, for instance, has penetrated India’s technology sector, with companies like Alibaba and Tencent strategically pumping in billions of dollars into Indian startups such as Zomato, Paytm, Big Basket and Ola.
    • India will lose policy credibility: It has also been suggested that India should renege on existing contracts with China. This can be detrimental to India’s effort to attract foreign investment.

    China is our Frenemy. Here is why.

    • The first thing to understand is that turning a border dispute into a trade war is unlikely to solve the border dispute.
    • Worse, given India and China’s position in both global trades as well as relative to each other, this trade war will hurt India far more than China.
    • Again, these measures will be most poorly timed since the Indian economy is already at its weakest point ever — facing a sharp GDP contraction.

    Way forward

    • Panagariya suggested to expand trade faster with other trading partners rather than cutting it with Beijing through a blunt instrument such as trade sanctions.
    • We should take advantage of India’s excellent growth prospects for the next decade and concentrate on growing the economy bigger as fast as possible.
    • Once we are the third largest economy, our sanctions threats are likely to carry greater credibility.

     

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  • Centre rules out an increase in MSP for Cotton

    While cotton farmers in several States have demanded an increase in the minimum support price (MSP) of the crop, the Centre has said that it is watching the cotton production scenario and decide accordingly.

    What is MSP?

    • The MSP assures the farmers of a fixed price for their crops, well above their production costs.
    • MSP, by contrast, is devoid of any legal backing. Access to it, unlike subsidized grains through the PDS, isn’t an entitlement for farmers.
    • They cannot demand it as a matter of right. It is only a government policy that is part of administrative decision-making.
    • The Centre currently fixes MSPs for 23 farm commodities based on the Commission for Agricultural Costs and Prices (CACP) recommendations.

    Fixing of MSPs

    • The CACP considered various factors while recommending the MSP for a commodity, including the cost of cultivation.
    • It also takes into account the supply and demand situation for the commodity; market price trends (domestic and global) and parity vis-à-vis other crops; and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.

    What changed with the 2018 budget?

    • The Budget for 2018-19 announced that MSPs would henceforth be fixed at 1.5 times of the production costs for crops as a “pre-determined principle”.
    • Simply put, the CACP’s job now was only to estimate production costs for a season and recommend the MSPs by applying the 1.5-times formula.

    How was this production cost arrived at?

    • The CACP projects three kinds of production cost for every crop, both at the state and all-India average levels.
    • ‘A2’ covers all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilizers, pesticides, hired labor, leased-in land, fuel, irrigation, etc.
    • ‘A2+FL’ includes A2 plus an imputed value of unpaid family labor.
    • ‘C2’ is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.

    How much produce can the government procure at MSP?

    • The MSP value of the total production of the 23 crops worked out to around Rs 10.78 lakh crore in 2019-20.
    • Not all this produce, however, is marketed. Farmers retain part of it for self-consumption, the seed for the next season’s sowing, and also for feeding their animals.
    • The marketed surplus ratio for different crops is estimated to range differently for various crops.
    • It ranges from below 50% for ragi and 65-70% for bajra (pearl millet) and jawar (sorghum) to 75% for wheat, 80% for paddy, 85% for sugarcane, 90% for most pulses, and 95%-plus for cotton, soybean, etc.
    • Taking an average of 75% would yield a number of just over Rs 8 lakh crore.
    • This is the MSP value of production that is the marketable surplus — which farmers actually sell.

    Nature of MSP

    • There is currently no statutory backing for these prices, nor any law mandating their enforcement.

    Farmers demand legalization

    • Legal entitlement: There is a demand that MSP based on a C2+50% formula should be made a legal entitlement for all agricultural produce.
    • Private traders’ responsibility: Some say that most of the cost should be borne by private traders, noting that both middlemen and corporate giants are buying commodities at low rates from farmers.
    • Mandatory purchase at MSP: A left-affiliated farm union has suggested a law that simply stipulates that no one — neither the Government nor private players — will be allowed to buy at a rate lower than MSP.
    • Surplus payment by the govt.: Other unions have said that if private buyers fail to purchase their crops, the Government must be prepared to buy out the entire surplus at MSP rates.
    • Expansion of C2: Farm unions are demanding that C2 must also include capital assets and the rentals and interest forgone on owned land as recommended by the National Commission for Farmers.

    Government’s position

    • The PM has announced the formation of a committee to make MSP more transparent, as well as to change crop patterns — often determined by MSP and procurement.
    • The panel will have representatives from farm groups as well as from the State and Central Governments, along with agricultural scientists and economists.

    Back2Basics: Cotton Cultivation in India

    • Cotton, a semi-xerophyte, is grown in tropical & sub-tropical conditions.
    • A minimum temperature of 15C is required for better germination at field conditions.
    • The optimum temperature for vegetative growth is 21-27C & it can tolerate temperature to the extent of 43C but temperature below 21C is detrimental to the crop.
    • Cotton is grown on a variety of soils ranging from well-drained deep alluvial soils in the north to black clayey soils of varying depth in central region and in black and mixed black and red soils in south zone.
    • It is semi-tolerant to salinity and sensitive to water logging and thus prefers well-drained soils.

    Sowing season

    • The sowing season of cotton varies considerably from tract to tract and is generally early (April-May) in northern India.
    • Sowing is delayed as its proceeds down south (monsoon based in southern zone).

     

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  • India’s Path to Prosperity through Formal Employment

    prosperity

    Context

    • Mass prosperity for massive populations is hard. India’s large remittances from a small population overseas and IT sectors employability reinforce that our mass prosperity strategy should be human capital and formal jobs.

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    prosperity

    Why human capital formation is effective tool for mass prosperity?

    • Disproportionate contribution of IT employees: A strong case for human capital-driven productivity is our software employment — 0.8 per cent of workers generate 8 per cent of GDP.
    • Remittance by NRIs: This case is reinforced by remittances from our overseas population of less than 2 per cent of our resident population crossing $100 billion last year.
    • Shift towards formal employment: A World Bank report suggests that the qualitative shift during the previous five years from low-skilled, informal employment in Gulf countries (dropped from 54 per cent to 28 per cent) to high-skilled formal jobs in high-income countries (increased from 26 per cent to 36 per cent) is significant.
    • Remittances are higher than FDI: Our rich forex remittance harvest roughly 25 per cent higher than FDI and 25 per cent less than software exports is fruit from the tree of human capital and formal jobs.

    prosperity

    Limitations of Fiscal and monetary policy

    • Credit availability is bigger issue: Monetary policy is, at best, a placebo, painkiller, or steroid especially since credit availability is a bigger problem in India than credit cost.
    • Source of finance is important than expenditure: Global experience suggests where governments spend money (pensions, interest, salaries, education, healthcare, roads, etc) and how this spending is financed (taxes or debt) matters more than how much is spent (about Rs 80 lakh crore in India this year).
    • Fiscal policy tends to overshoot: Covid made enormous fiscal and monetary policy demands, but the bigger the binge, the bigger the hangover. Western central banks are struggling to shrink their balance sheets because they used what Harvard’s Paul Tucker calls “unelected power” to chase goals outside their mandate, administer medicine with poorly understood side effects, and speed down highways with no known return paths.
    • India avoided the fiscal and monetary trap: Rich-country borrowing rates have risen by 300 per cent plus and inflation hurts the poor the most. India avoided these fiscal and monetary policy excesses. This prudence now combines with previous structural reforms (GST, IBC, MPC, UPI, DBT, NEP, etc) and a reform “tone from the top” to create a fertile habitat for productive citizens and firms.

    prosperity

    What should be the strategy in next fiscal year for employment generation?

    • Targeting the job creation: The Finance Bill must target productivity and continuity by legislating human capital and formal job reforms previously proposed.
    • NEP should be implemented in 5 years: It should reduce the implementation glide path for the powerful National Education Policy 2020 from 15 years to five years.
    • Abolishing the licensing: It should abolish separate licensing requirements for online degrees and freely allow all our 1,000-plus accredited universities to launch online learning.
    • Accelerating apprentices: It should accelerate growing our 0.5 million apprentices to 10 million by allowing all universities to launch degree apprentice courses under tripartite contracts with employers under the Apprentices Act.

    What are the other steps that can be taken through next budget?

    • Notify labour code: It should notify the four labour codes for all central-list industries while appointing a tripartite committee to converge them into one labour code by the next budget.
    • Universal enterprise number: It should continue EODB reforms by designating every enterprise’s PAN number as its Universal Enterprise Number.
    • Remove the factory act: It should explore manufacturing employment by abolishing the Factories Act this painful Act accounts for 8,000 of the 26,000 plus criminal provisions in employer compliance and require all employers to comply under each state’s Shops and Establishment Act (like Infosys, TCS, and IBM India do).
    • Ensuring better compliances by employer: It should create a non-profit corporation (like NPCI in payments) that will operate an API-driven National Employer Compliance Grid and enable central ministries and state governments to rationalise, digitise and decriminalise their employer compliances.
    • Making EPFO contribution optional: Making employees’ provident fund contributions optional but raising employer PF contributions from the current 12 per cent to 13 per cent. It should notify a previous budget announcement to create employee choice in their contributions to health insurance (ESIC or insurance companies) and pensions (EPFO or NPS).
    • Subsidy to high wage employer: Most importantly, it should link all employer subsidies and tax incentives to high-wage employment creation (a difficult-to-fudge and easy-to-measure effectiveness metric for this public spending is employer provident fund payment).

    Conclusion

    • Experience and evidence now firmly suggest the odds of mass prosperity in the planet’s most populous nation rise from possible to probable by anchoring our strategy in human capital and formal jobs rather than fiscal or monetary policy.

    Mains Question

    What are the limitations of Fiscal and monetary policy in mass welfare of people? What are the possible strategies for creation of mass prosperity in India?

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