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Subject: Economics

  • Mayurbhanj’s superfood ‘Ant Chutney’

    The Kai Chutney made from Red Ants by the tribals of Mayurbhanj district in Odisha are seeking a Geographical Indications (GI) tag.

    Ant Chutney

    • Despite this, weaver ants are popular among the people, mostly of the tribes,
    • This food item, rich in proteins, calcium, zinc, vitamin B-12, iron, magnesium, potassium, sodium, copper, fibre and 18 amino acids, is known to boost the immune system and keep diseases at bay.
    • Applied under food category, the GI tag will help develop a structured hygiene protocol in the preparation of Kai chutney for standard wider use.
    • Geographical Indications labels enhance the reputation and value of local products and support local businesses.

    How is the Chutney prepared?

    • Weaver ants, Oecophylla smaragdina, are abundantly found in Mayurbhanj throughout the year.
    • They make nests with leaves of host trees.
    • The chutney is prepared by mixing and grinding salt, ginger, garlic and chilly and is sold by tribal people in rural markets.

     

    Answer this PYQ in the comment box:

    Q.Which of the following has/have been accorded ‘Geographical Indication’ status?

    1. Banaras Brocades and Sarees
    2. Rajasthani Daal-Bati-Churma
    3. Tirupathi Laddu

    Select the correct answer using the code given below:

    (a) 1 only

    (b) 2 and 3 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

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    Back2Basics:  Geographical Indication

    • A GI is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Nodal Agency: Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
    • India, as a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods (Registration and Protection) Act, 1999 w.e.f. September 2003.
    • GIs have been defined under Article 22 (1) of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
    • GI is granted for a term of 10 years in India. As of today, more than 300 GI tags has been allocated so far in India (*Wikipedia).
    • The tag stands valid for 10 years.

     

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  • How the RBI unconventionally innovated policy to fight the pandemic

    Context

    Recently, the RBI has been at the receiving end for mission the inflation target.

    Understanding the RBI’s rationale

    • Supply side shock: Inflation has been largely the result of supply side shocks from vegetable prices, caused by crop damages due to unseasonal rains (tomato, onion and potato) in late 2019 and widespread supply-side disruptions after the outbreak of the pandemic.
    • A narrow-minded focus on inflation caused by supply shocks would have constrained the MPC from supporting growth amidst the unprecedented loss of life and livelihood.
    • Focusing on recovery: Therefore, it was necessary to provide a lifeline to the economy at that juncture by focusing on the recovery.
    • Moreover, the wide tolerance band of 200bps +/- in the inflation targeting framework was specifically designed to accommodate such supply shocks, which provided the flexibility in the flexible targeting (FIT) framework.
    • Taking into account objective of growth: In contrast to a pure inflation targeting framework (inflation nutters), the amended mandate of the RBI under FIT reads as “price stability, taking into account the objective of growth”.
    • Therefore, the MPC was justified in looking through the higher inflation print during the pandemic while trying to resurrect growth.

    No contradiction between Governor’s statement and MPC resolution

    • Recently, the MPC highlighted inflation concerns and voted to raise the policy repo rate.
    • The governor’s statement of the same day noted that the RBI will ensure an orderly completion of the government’s borrowing programme.
    • Contradictory objectives: It is said that the above two actions created confusion as lowering inflation and lowering government bond yields are contradictory objectives.
    • This justification is redundant as an orderly completion of the borrowing programme does not imply lowering yields.
    • It basically ensures that the borrowing programme is completed seamlessly at low costs (ensured through auctions).
    • Moreover, from a theoretical perspective, this is not inconsistent because controlling inflation and lowering inflation expectations bodes well for the term premia of bond yields — which moderate once expectations are anchored.
    • Therefore, if inflation is reined in, the government stands to gain in terms of lower interest costs.
    • Was width of corridor lost during pandemic? It is argued that  the MPC kept repo rates unchanged while the RBI changed the reverse repo rate during the pandemic, meaning that the fixed width of the corridor was lost and the MPC lost its role in setting interest rates and so, its credibility.
    • This argument does not stand scrutiny.
    • During the pandemic, the policy repo rate was cumulatively reduced by an unprecedented 115 bps and the interest rate on the overnight fixed-rate reverse repo was reduced cumulatively by 155 bps.
    • Assymetric corridor justified in crises: This measure was not incongruous with contemporary wisdom as an asymmetric corridor has been justified, particularly during crisis times (Goodhart, 2010).
    • Given that elevated inflation concerns precluded the possibility of any further repo rate cuts (cumulatively reduced by 250 basis points since February 2019), financial conditions were eased substantially by reducing the reverse repo rate, which lowered the floor rate of interest in the economy.
    • Since the mandate of the MPC is to control inflation for which the policy instrument is the repo rate, the RBI had used the LAF through changes in the reverse repo rate to alter liquidity conditions.

    Trade offs involved in inflation targeting for emerging economies

    • Inflation-targeting countries, because of their sole focus on inflation, experience lower inflation volatility but higher output volatility.
    • Higher output volatility entails a higher sacrifice ratio — the proportion of output foregone for lowering inflation.
    • For an emerging economy, the costs of higher output foregone against the benefits of lower inflation must always be balanced as potential output keeps on changing given the shift of the production function.
    • Developed countries, on the other hand, operate near full employment — therefore, sacrifice ratios are lower.
    • As a result, smoothening inflation volatility is relatively costless for them.

    Conclusion

    The RBI has innovated admirably under its current stewards during the pandemic, keeping in mind the task of reinvigorating the economy. Despite the existing targeting framework, it did not get fixated on a one-point agenda, daring to look beyond the inflation print.

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    Back2Basics: Liquidity corridor

    • The Corridor in monetary policy of the RBI refers to the area between the reverse repo rate and the MSF rate.
    • Reverse repo rate will be the lowest of the policy rates whereas Marginal Standing Facility is something like an upper ceiling with a higher rate than the repo rate.
    • The MSF rate and reverse repo rate determine the corridor for the daily movement in the weighted average call money rate.

  • What are G-Sec Yields?

    Government Securities (G-Secs) yields are at an all-time high.

    What are G-Secs?

    • These are debt instruments issued by the government to borrow money.
    • The two key categories are:
    1. Treasury bills (T-Bills) – short-term instruments which mature in 91 days, 182 days, or 364 days, and
    2. Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years

    Note: T-Bills are issued only by the central government, and the interest on them is determined by market forces.

    Why G-Secs?

    • Like bank fixed deposits, g-secs are not tax-free.
    • They are generally considered the safest form of investment because they are backed by the government. So, the risk of default is almost nil.
    • However, they are not completely risk-free, since they are subject to fluctuations in interest rates.
    • Bank fixed deposits, on the other hand, are guaranteed only to the extent of Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

    How are G-sec yields calculated?

    • G-sec yields change over time; often several times during a single day.
    • This happens because of the manner in which G-secs are structured.
    • Every G-sec has a face value, a coupon payment and price.
    • The price of the bond may or may not be equal to the face value of the bond.
    • Here’s an example: Suppose the government floats a 10-year G-sec with a face value of Rs 100 and a coupon payment of Rs 5.
    • If one were to buy this single G-sec from the government, it would mean that one will give Rs 100 to the government today and the government will promises to 1) return the sum of Rs 100 at the end of tenure (10 years), and 2) pay Rs 5 each year until the end of this tenure.
    • At this point, the face value of this G-sec is equal to its price, and its yield (or the effective interest rate) is 5%.

    How do G-sec yields go up and down?

    • Imagine a scenario in which the government floats just one G-sec, and two people want to buy it.
    • Competitive bidding will ensue, and the price of the bond may rise from Rs 100 (its face value) to Rs 105.
    • Now imagine another lender in the picture, which pushes the price further up to Rs 110.

    What do G-sec yields show?

    • If G-sec yields (say for a 10-year bond) are going up, it would imply that lenders are demanding even more from private sector firms or individuals; that’s because anyone else is riskier when compared to the government.
    • It is also known that when it comes to lending, interest rates rise with the rise in risk profile.
    • As such, if G-sec yields start going up, it means lending to the government is becoming riskier.
    • If you read that the G-sec yields are going up, it suggests that the bond prices are falling. But the prices are falling because fewer people want to lend to the government.
    • And that in turn happens when people are worried about the government’s finances (or its ability to pay back).
    • The government’s finances may be in trouble because the economy is faltering and it is unlikely that the government will meet its expenses.
    • By the reverse logic, if a government’s finances are sorted, more and more people want to lend money to such a G-sec.
    • This in turn, leads to bond prices going up and yields coming down.

    Try this PYQ:

    Consider the following statements:

    1. The Reserve Bank of India manages and services the Government of India Securities but not any State Government Securities.
    2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
    3. Treasury bills offer are issued at a discount from the par value.

    Which of the statements given above is/are correct?

    (a) 1 and 2 only

    (b) 3 Only

    (c) 2 and 3 only

    (d) 1, 2 and 3

     

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  • GST revenues surpass ₹1.44 lakh crore

    India recorded its second-highest monthly gross GST revenues in June at ₹1,44,616 crore, 56% more than a year earlier when the second COVID wave had hit economic activity.

    What is GST?

    • GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
    • The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. It is a single domestic indirect tax law for the entire country.
    • It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
    • Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

    Answer this PYQ in the comment box:

    Q.All revenues received by the Union. Government by way of taxes and other receipts for the conduct of Government business are credited to the (CSP 2015):

    (a) Contingency Fund of India

    (b) Public Account

    (c) Consolidated Fund of India

    (d) Deposits and Advances Fund

     

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    What are the components of GST?

    There are three taxes applicable under this system:

    1. CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    2. SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    3. IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

    Advantages Of GST

    • GST has mainly removed the cascading effect on the sale of goods and services.
    • Removal of the cascading effect has impacted the cost of goods.
    • Since the GST regime eliminates the tax on tax, the cost of goods decreases.
    • Also, GST is mainly technologically driven.
    • All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

    Issues with GST

    • High operational cost
    • GST has given rise to complexity for many business owners across the nation.
    • GST has received criticism for being called a ‘Disability Tax’ as it now taxes articles such as braille paper, wheelchairs, hearing aid etc.
    • Petrol is not under GST, which goes against the ideals of the unification of commodities.

    Take a look at the share of GST in government earnings for the previous fiscal:

    UPSC can ask about the majority component of the Revenue Receipts of the govt. See how Corporate tax is nearing the GST revenues.

    Do you think it will surpass GST revenue when the economy is fully recovered?

     

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  • What are Primary Agricultural Credit Society (PACS)?

    The Cabinet Committee on Economic Affairs (CCEA) has approved a proposal to digitise around 63,000 primary agricultural credit societies (PACS).

    What are the Primary Agricultural Credit Societies (PACS)?

    • PACS is a basic unit and smallest co-operative credit institutions in India.
    • In 1904 the first Primary Agricultural Credit Society (PACS) was established.
    • It works on the grassroots level (gram panchayat and village level).
    • PACS is the final link between the ultimate borrowers, i.e., rural people, on the one hand, and the higher agencies, i.e., Central cooperative bank, state cooperative bank, and Reserve Bank of India, on the other.

    Who regulates PACS?

    • PACS are registered under the Co-operative Societies Act and also regulated by the RBI.
    • They are governed by the “Banking regulation Act-1949” and Banking Laws (Co-operative societies) Act 1965.

    Various objectives of PACS

    1. To raise capital for the purpose of making loans and supporting members’ essential activities.
    2. To collect deposits from members with the goal of improving their savings habit.
    3. To supply agricultural inputs and services to members at reasonable prices,
    4. To arrange for the supply and development of improved breeds of livestock for members.
    5. To make all necessary arrangements for improving irrigation on land owned by members.
    6. To encourage various income-generating activities through supply of necessary inputs and services.

    Functions of PACS

    • As registered cooperative societies, PACS have been providing credit and other services to their members.
    • PACS typically offer the following services to their members:
    1. Input facilities in the form of a monetary or in-kind component
    2. Agriculture implements for hire
    3. Storage space

    Who can form PACS?

    • A primary agricultural credit society can be formed by a group of ten or more people from a village. The society’s management is overseen by an elected body.
    • The membership fee is low enough that even the poorest agriculturist can join.
    • Members of the society have unlimited liability, which means that each member assumes full responsibility for the society’s entire loss in the event of its failure.

    What capitalizes PACS?

    • The primary credit societies’ working capital is derived from their own funds, deposits, borrowings, and other sources.
    • Share capital, membership fees, and reserve funds are all part of the company’s own funds.
    • Deposits are made by both members and non-members.
    • Borrowings are primarily made from central cooperative banks.

    Why need digitization?

    • PACS account for 41 % (3.01 Cr. farmers) of the KCC loans given by all entities in the country and 95 % of these KCC loans (2.95 Cr. farmers) through PACS are to the small and marginal farmers.
    • The other two tiers viz. State Cooperative Banks (StCBs) and District Central Cooperative Banks (DCCBs) have already been automated by the NABARD and brought on Common Banking Software (CBS).
    • Majority of PACS have so far been not computerized and still functioning manually resulting in inefficiency and trust deficit.

    Significance of digitization

    • Computerization of PACS will increase their transparency, reliability and efficiency, and will also facilitate the accounting of multipurpose PACS.
    • Along with this, it will also help PACS to become a nodal centre for providing services such as direct benefit transfer (DBT), Interest subvention scheme (ISS), crop insurance scheme (PMFBY), and inputs like fertilizers and seeds.

    Try this PYQ from CSP 1999:

    Q.The farmers are provided credit from a number of sources for their short and long term needs. The main sources of credit to the farmers include-

    (a) the Primary Agricultural Cooperative Societies, commercial banks, RRBs and private money lenders

    (b) the NABARD, RBI, commercial banks and private money lenders

    (c) the District Central Cooperative Banks (DCCB), the lead banks, IRDP and JRY

    (d) the Large Scale Multi-purpose Adivasis Programme, DCCB, IFFCO and commercial banks

     

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  • Govt. hikes GST for household items

    The Goods and Services Tax (GST) Council has decided to hike and lower GST on certain commodities.

    What is the news?

    • From July 18, tax hikes will kick in for over two dozen goods and services, ranging from unbranded food items, curd and buttermilk to low-cost hotels, cheques and maps.
    • Tax rates will be lowered for about half-a-dozen goods and services, including ropeways and truck rentals where fuel costs are included.
    • It scrapped GST for items imported by private vendors for use by defence forces.

    What is GST?

    • GST launched in India on 1 July 2017 is a comprehensive indirect tax for the entire country.
    • It is charged at the time of supply and depends on the destination of consumption.
    • For instance, if a good is manufactured in state A but consumed in state B, then the revenue generated through GST collection is credited to the state of consumption (state B) and not to the state of production (state A).
    • GST, being a consumption-based tax, resulted in loss of revenue for manufacturing-heavy states.

    What are GST Slabs?

    • In India, almost 500+ services and over 1300 products fall under the 4 major GST slabs.
    • There are five broad tax rates of zero, 5%, 12%, 18% and 28%, plus a cess levied over and above the 28% on some ‘sin’ goods.
    • The GST Council periodically revises the items under each slab rate to adjust them according to industry demands and market trends.
    • The updated structure ensures that the essential items fall under lower tax brackets, while luxury products and services entail higher GST rates.
    • The 28% rate is levied on demerit goods such as tobacco products, automobiles, and aerated drinks, along with an additional GST compensation cess.

    Why rationalize GST slabs?

    • From businesses’ viewpoint, there are just too many tax rate slabs, compounded by aberrations in the duty structure through their supply chains with some inputs are taxed more than the final product.
    • These are far too many rates and do not necessarily constitute a Good and Simple Tax.
    • Multiple rate changes since the introduction of the GST regime in July 2017 have brought the effective GST rate to 11.6% from the original revenue-neutral rate of 15.5%.
    • Merging the 12% and 18% GST rates into any tax rate lower than 18% may result in revenue loss.

    Haven’t GST revenues been hitting new records?

    • Yes, they have – GST revenues have scaled fresh highs in three of the first four months of 2022, going past ₹1.67 lakh crore in April.
    • But there is another key factor — the runaway pace of inflation.
    • Wholesale price inflation, which captures producers’ costs, has been over 10% for over a year and peaked at 15.1% in April.
    • Inflation faced by consumers on the ground has spiked to a near-eight year high of 7.8% in April.
    • The rise in prices was the single most important factor for higher tax inflows along with higher imports.

     

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  • Downturn in tech startup ecosystem

    Context

    The startup ecosystem which has been in overdrive for the past few years — propelled by a combination of factors, but largely, by the era of cheap money — is now showing signs of weakness.

    Factors that helped fuel the tech startups

    • With the combination of accelerated financial inclusion (bank accounts), ease of identification (Aadhaar) and connectivity (mobile phones) it was said that it is ultimately a bet on the Indian consumer, and the economy, not on government regulations/policies.
    • Low-interest rates: In the era of cheap money and negative real interest rates, uncomfortable questions over the true market size and profitability were swept under the rug.
    • Growth fuelled by cash burn: High cash burn rates were the norm as both startups and investors sought growth by subsidising the customer.

    What is going wrong?

    • Lack of profitability: Among the startups that have gone public in recent times, Paytm’s losses stood at Rs 2,396 crore in 2021-22, while for Zomato and PB Fintech (PolicyBazaar) losses were Rs 1,222 crore and Rs 832 crore respectively.
    • Drying-up of investment: Sure, investors will continue to pour money.
    • Some early age start-ups will continue to be funded, as will some of the more mature ones.
    • But investors are likely to be more circumspect in their dealings.
    • Impact on valuation: There are also reports of startups in diverse markets, ranging from Ola to OYO, planning to raise funds at lower valuations.
    • Among those who have gone public in recent times, most are trading much below their listing price.
    • Tighter financial conditions, a re-rating of the market, will impact both fundraising efforts and valuations.

    Lack of discretionary spending capacity

    • Many numbers were given as indicators of the size of the market or TAM (the total addressable market).
    • Smartphone users: One such number thrown around is the smartphone users in the country — some have pegged this at 500 million.
    • UPI transactions: The transactions routed through the UPI platform — in May there were almost six billion transactions worth Rs 10 trillion.
    • Bank account holders: We have the near universality of bank accounts.
    • But in reality, for most of these startups, the market or even the potential market is just a fraction of this.
    • There aren’t that many consumers with significant discretionary spending capacity, and those with the capacity aren’t increasing their spending as these companies would hope.
    • No increase in spending: What is equally worrying is the complete absence of any increase in spending by even these consumers who would have the capacity to spend more.
    • While more consumers are on-board digital payment platforms — Paytm has about 70 million monthly transacting users — these numbers suggest that when it comes to consumers with considerable discretionary spending, the size of the market shrivels considerably.

    Conclusion

    Tech startups are about to witness a tough time ahead. Some startups will survive this period. Many may not. And changes in the dynamics of private markets will also have a bearing on public markets.

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  • online marketplace

    Context

    The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. However, these platforms also have given rise to several concerns as well.

    What is e-commerce ?

    • Electronic commerce or e-commerce is a business model that lets firms and individuals buy and sell things over the Internet.
    • Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion in 2017.
    • India’s e-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.
    • The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034.

    Advantages of e-Commerce

    • The process of e-commerce enables sellers to come closer to customers that lead to increased productivity and perfect competition. The customer can also choose between different sellers and buy the most relevant products as per requirements, preferences, and budget. Moreover, customers now have access to virtual stores 24/7.
    • e-Commerce also leads to significant transaction cost reduction for consumers.
    • e-commerce has emerged as one of the fast-growing trade channels available for the cross-border trade of goods and services.
    • It provides a wider reach and reception across the global market,with minimum investments. It enables sellers to sell to a global audience and also customers to make a global choice. Geographical boundaries and challenges are eradicated/drastically reduced.
    • Through direct interaction with final customers, this e-commerce process cuts the product distribution chain to a significant extent. A direct and transparent channel between the producer or service provider and the final customer is made. This way products and services that are created to cater to the individual preferences of the target audience.
    • Customers can easily locate products since e-commerce can be one store set up for all the customers’ business needs
    • Ease of doing business: It makes starting, managing business easy and simple.
    • The growth in the e-commerce sector can boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.

    Issues created by the e-commerce sites

    • Predatory pricing: These companies resort to predatory pricing to acquire customers even as they suffer persistent financial losses.
    • SEBI is rightly revisiting the valuation norms of such companies looking to list on the stock exchange.
    • Exclusionary practice: They take away choice from suppliers and consumers.
    • This, in the long run, can be viewed as an exclusionary practice that eliminates other players from the market. 
    • Lack of level playing field: While neutrality is the fundamental basis of a marketplace and a level playing field is in the fitness of things, claims of outfits such as Flipkart or Amazon to be a marketplace for a wide variety of sellers can be questioned.
    • A few select sellers, who are generally affiliated with the platform, reap the benefits of greater visibility and better terms of trade — reduced commissions and platform-funded discounts.
    • Undue advantage to associated companies: The associate companies are prominent sellers on their platform.
    • It is alleged that undue advantage is given while recommending or listing these products.
    • Cartelisation: Online travel aggregators are often accused of cartelisation.
    • Information asymmetry: The aggregators gather shopping habits, consumer preferences, and other personal data.
    • The platforms are accused of using this data to create and improve their own products and services, taking away business from other sellers on their platform.
    • They capitalise on this data and information about other brands to launch competing products on their marketplace.
    • This information asymmetry is exploited by the aggregators to devour organisations they promise to support.
    • Problems in dispute resolution mechanism: Another issue often noticed is the lack of a fair and transparent dispute resolution mechanism for sellers on these platforms.
    • Delayed payments, unreasonable charges, and hidden fees are common occurrences.
    • Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates) which allows them to offer rooms at a much cheaper rate but bars the hotels from doing so.

    Impact of the e-commerce

    • The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in.
    • The ultimate loss bearer is the consumer who will have a reduced bargaining position.

    Way forward

    • Comprehensive rules: It is time that a set of comprehensive rules and regulations is put together.
    • These regulations need to be inclusive, should eliminate the conflicts of interest inherent in current market practices, and prevent any anti-competitive practices.
    • Model agreement: A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented.
    • Learning from EU act: There is a lot to learn from the Digital Markets Act of the EU that seeks to address unfair practices by these gatekeepers.
    • Need for dispute resolution mechanism: Strong and quick grievance redressal and dispute resolution mechanisms should be established.
    • Punitive penalties: The rules should allow for punitive penalties for unfair practices.
    • Fair competition rules: Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.

    Conclusion

    The nature of our success in dealing with this change will lie in the ways in which we deal with the concerns of all players.

     

  • India’s gig workforce to reach 2.35 Cr by 2030: NITI Aayog

    A NITI Aayog report has identified that is expected to grow to 2.35 crore by 2029-30.

    Do you know?

    According to a study released by NITI Aayog, the number of gig workers in India is estimated to be 77 lakh in 2020-21. Isn’t it too low to imagine? Seems like there is huge under-reporting.

    What is the Gig Economy?

    • In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees.
    • A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career. e.g Employee models of Uber, Ola, Swiggy etc
    • In this economy, tech-enabled platforms connect the consumer to the gig worker to hire services on a short-term basis.
    • Gig workers include self-employed, freelancers, independent contributors and part-time workers.

    Where does gig culture exist in Indian Economy?

    • Sectors such as media, real estate, legal, hospitality, technology-help, management, medicine, allied and education are already operating in gig culture.
    • The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and demand for flexible lifestyles.

    Key Drivers for Gig Economy

    • Unconventional work approach by millennials: Hectic lifestyles of employees in private sectors have created a negative perception of full-time employment among millennials.
    • Emergence of a start-up culture: The start-up ecosystem in India has been developing rapidly. For start-ups, hiring full-time employees leads to high fixed costs and therefore, contractual freelancers are hired for non-core activities.
    • MNCs are hiring contractual employees: MNCs are adopting flexi-hiring options, especially for niche projects, to reduce operational expenses after the pandemic.
    • Rise in freelancing platforms: Rise in freelancing platforms has also aided in the development of the gig economy.
    • Business Models: Gig employees work on various compensation models such as fixed-fee (decided during contract initiation), time & effort, actual unit of work delivered and quality of outcome.
    • Impact of Covid-19: Many laid-off employees are focusing on developing skills to avail freelance job opportunities and become a part of this burgeoning economy.

    Why is Gig Economy preferred by workers?

    • Profit through multiple work: One can work on freelancing as well as work full-time somewhere else.
    • Women empowerment: It is very beneficial for womenwho work on this concept when they cannot continue their work or take a break from career due to marriage or child birth.
    • Leisure and dependency: Retired peoplecan stay active after retirement as this will keep them engaged away from loneliness and depression and can earn as well on their own.
    • Flexibility and diversity to the workers: It offers flexibility when workers can work according to their convenience and schedule rather than routine like in full-time jobs.
    • Work from home: The travel costs and energy to travel to the workplace is reduced.

    Why is Gig Economy preferred by Employers?

    • Efficiency, efficacy and productivity of workers in the gig economy are much more than that of a stable full-time job.
    • More rconomical for employers-when employment givers can’t afford to hire full-time workers, they hire people for specific projects and pay them.
    • Start-up companies and entrepreneurs – who do not have big financial space – can grow only if they can leverage the services of contract employees or freelancers.
    • In a gig economy, businesses save resources in terms of benefits, office space and training.
    • Competition and efficiency among workers is improved.

    Challenges faced in Gig economy

    • No perks and benefits: There are no labour welfare emoluments like pension, gratuity, etc. for the workers.
    • Job insecurity: Gig workers may face unfair termination. They may also attain minimum wages and less paid leave.
    • No legal protection: Workers do not have the bargaining power to negotiate a fair deal with their employers.
    • Unionization of workers will be difficult.
    • Confidentiality of documents etc. of the workplace is not guaranteed
    • Urban nature: The gig economy is not accessible for people in many rural areas where internet connectivity and electricity is unavailable.

    New classification by NITI Aayog: Platform vs. Non-platform Workers

    • The NITI Aayog report broadly classifies gig workers into platform and non-platform-based workers.
    • The consequent platformisation of work has given rise to a new classification of labour — platform labour — falling outside of the purview of the traditional dichotomy of formal and informal labour.
    • While platform workers are those whose work is based on online software applications or digital platforms.
    • Non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.

    Recommendations made by NITI Aayog

    • The NITI Aayog has recommended steps to provide social security, including paid leave, occupational disease and accident insurance, support during irregularity of work and pension plans for the country’s gig workforce.
    • It has also recommended introducing a ‘Platform India initiative’ on the lines of the ‘Startup India initiative’.

     

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  • Fertlizer subsidy issue

    Context

    The global prices of urea, DAP, MOP, phosphoric acid, ammonia and LNG have soared by two to two-and-a-half times in the last year

    Resource richness of Indian agriculture

    • No country has as much area under farming as India.
    • Land under cultivation: At 169.3 million hectares (mh) in 2019, its land used for crop cultivation was higher than that of the US (160.4 mh), China (135.7 mh), Russia (123.4 mh) or Brazil (63.5 mh).
    • Ample water: With its perennial Himalayan rivers and average annual rainfall of nearly 1,200 mm – against Russia’s 475 mm, China’s 650 mm and the US’s 750 mm – India has no dearth of land, water and sunshine to sustain vibrant agriculture.
    • But there’s one resource in which the country is short and heavily import-dependent — mineral fertilisers.

    India’s important dependence

    • In 2021-22, India imported 10.16 million tonnes (mt) of urea, 5.86 mt of di-ammonium phosphate (DAP) and 2.91 mt of muriate of potash (MOP).
    • Import value: In value terms, imports of all fertilisers touched an all-time high of $12.77 billion last fiscal.
    • In 2021-22, India also produced 25.07 mt of urea, 4.22 mt of DAP, 8.33 mt of complex fertilisers (containing nitrogen-N, phosphorus-P, potassium-K and sulphur-S in different ratios) and 5.33 mt of single super phosphate (SSP).
    • Import of raw material: The intermediates or raw materials for the manufacture of these fertilisers were substantially imported.
    • Total value of fertiliser imports: The total value of fertiliser imports by India, inclusive of inputs used in domestic production, was a whopping $24.3 billion in 2021-22.

    Two costs involved in import

    • 1] Foreign exchange outgo for import: The first is foreign exchange outgo:
    • Imports are mostly from the following countries:
    • Urea: Imported from China, Oman, UAE and Egypt
    • DAP: Imported from China, Saudi Arabia and Morocco.
    • MOP: Imported from Belarus, Canada, Russia, Israel and Jordan.
    • LNG: Imported from Qatar, US, UAE and Nigeria.
    • Ammonia: Morocco, Jordan, Senegal and Tunisia (phosphoric acid); Saudi Arabia and Qatar.
    • Rock phosphate: Jordan, Morocco, Egypt and Togo.
    • 2] Fiscal cost: The second cost is fiscal.
    • Fertilisers are not only imported but also sold at subsidised prices.
    • The difference is paid as a subsidy by the government.
    • That bill was Rs 1,53,658.11 crore or $20.6 billion in 2021-22 and projected at Rs 2,50,000 crore ($32 billion) this fiscal.
    • Unsustainably high costs: Both costs are unsustainably high to bear for a mineral resource-poor country.

    Suggestions

    1] Reduce consumption of high-analysis fertilisers

    • There is a need to cap or even reduce consumption of high-analysis fertilisers – particularly urea (46 per cent N content), DAP (18 per cent N and 46 per cent P) and MOP (60 per cent).
    • Incorporate urease and inhibition compounds in urea: This can be done by incorporating urease and nitrification inhibition compounds in urea.
    • These are basically chemicals that slow down the rate at which urea is hydrolysed and nitrified (which increases leaching).
    •  By reducing ammonia volatilisation and nitrate leaching, more nitrogen is made available to the crop, enabling farmers to harvest the same yields with a lesser number of urea bags.
    • Liquid nano-urea: Together with products such as liquid “nano urea” –it is possible to achieve a 20 per cent or more drop in urea consumption from the present 34-35 mt levels.
    • Liquid nano-urea with their ultra-small particle size is conducive to easier absorption by the plants than with bulk fertilisers, translating into higher nitrogen use efficiency.

    2] Promote the sale of SSP and complex fertilisers

    • A second route is by promoting sales of SSP (containing 16 per cent P and 11 per cent S) and complex fertilisers such as “20:20:0:13” and “10:26:26”.
    • Restrict DAP use: DAP use should be restricted mainly to paddy and wheat; other crops don’t require fertilisers with 46 per cent P content. 
    • India can also import more rock phosphate to make SSP directly or it can be converted into “weak” phosphoric acid
    • The latter, having only about 29 per cent P (compared to 52-54 per cent in normal “strong” merchant-grade phosphoric acid), is good enough for manufacturing “20:20:0:13”, “10:26:26” and other low-analysis complex fertilisers.

    3] Incorporate MOP into complexes

    • As regards MOP, roughly three-fourths of the imported material is now applied directly and only the balance is sold after incorporating into complexes.
    • It should be the other way around.
    • India, to re-emphasise, needs to wean its farmers away from all high-analysis fertilisers. 

    4] Use of NPKS complexes and indigenous sources

    • The moment to use more NPKS complexes and SSP, is already happening.
    • It requires a concerted push, alongside popularising high nutrient use-efficient water-soluble fertilisers (potassium nitrate, potassium sulphate, calcium nitrate, etc).
    • Exploiting alternative indigenous sources needs to be considered (for example, potash derived from molasses-based distillery spent-wash and from seaweed extract).

    5] Revise nutrient application recommendations

    • Farmers need to know what is a suitable substitute for DAP and which NPK complex or organic manure can bring down their urea application from 2.5 to 1.5 bags per acre.
    • It calls for agriculture departments and universities not just to revisit their existing crop-wise nutrient application recommendations, but disseminating this information to farmers on a campaign mode.

    Conclusion

    The costs associated with the use of fertilisers are unsustainably high to bear for a mineral resource-poor country such as India. We need to act on the measures to reduce our import dependence.

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    Back2Basics: High-analysis fertilisers

    • Fertilizers that have more than 30% total available nutrients are called high analysis fertilizers, whereas those with less than 30% total available nutrients are called low analysis fertilizers.
    • A 15-15-15 is a high analysis fertilizer; a 5-10-10 is a low analysis fertilizer, and a 10-10-10 is right on the borderline.