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Subject: Economics

  • Container shortage and its impact on international trade

    The government is in talks with exporters to help them deal with an international container shortage that has led to freight rates rising by over 300 per cent in the past year for key shipping routes.

    Why is there an international container shortage?

    • The reduction in the number of shipping vessels operating as a result of the Covid-19 pandemic has led to fewer empty containers being picked up.
    • This has left many containers in inland depots and stuck at ports for long durations.
    • Long waiting times at key ports such as those in the US due to congestion are also contributing to lengthening turnaround time for containers.
    • A sustained global economic recovery has added to the impetus to trade.
    • Some countries are willing to pay a premium for empty containers and that this was further adding to the container shortage.

    Freight rate impact

    • The lack of availability of containers and the faster than expected recovery in international trade has pushed up freight rates significantly over the past year.
    • Some key international routes are seeing an increase in freight rates of over 500 per cent compared to September last year.
    • Structural problems such as the high turnaround time for ships in India also add to the container shortage issue that exporters are currently facing.

    How is the container shortage impacting Indian exporters?

    • Delay: Indian exporters are facing major delays in their shipments and consequent liquidity issues as they have to wait longer to receive payment for exported goods.
    • Liquidity crunch: Exporters noted that shipments that used to take 45 days are now taking 75-90 days leading to a 2–3-month delay in payments leading to liquidity crunch particularly for small exporters.

    How can the government help address this issue?

    • Exporters are calling on the government to regulate the export of empty containers.
    • Exporters have asked the government to curb the export of empty containers at all Indian ports in line with a move by the Kolkata port which restricted the number of empty containers permitted to be exported to 100 per vessel for a three month period.
    • Exporters are also calling on the government to release about 20,000 containers that have been abandoned or are detained by government agencies so that they can augment supply.
    • Indian exporters has also called on the government to notify a freight support scheme for all exports till the end of the fiscal when freight rates are expected to normalise.
    • They are also asking the government to push back on a move by shipping lines to offer priority bookings at higher rates, asking that shipping lines revert to taking bookings on a first come first serve basis.
    • In the medium term, exporters have called on the government to take steps to boost the manufacturing of containers in India.

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  • Catching up on PLI scheme for textile sector

    Context

    The Cabinet approved the Production-Linked Incentive (PLI) scheme for the textile sector that is expressly targeted at the man-made fibre (MMF) and technical textiles segments.

    Why India needs to focus on Man-made fibre (MMF) in textile trade

    • Preference for MMF:  The MMF surpassed cotton as the fibre of choice in the 1990s.
    • The MMFs share in worldwide textile consumption is about 75%.
    • Dominance of natural fibre in India’s export: India’s textile and clothing exports have continued to remain dominated by cotton and other natural fibre-based products.
    • The MMF have contributed less than 30% of the country’s $35.6 billion in overall sectoral exports in 2017-18.
    • While policy makers have been cognisant of the need to bolster support for the MMF segment.

    About the scheme

    • The PLI scheme has a budgeted outlay of ₹10,683 crore.
    • Incentive at two levels: The incentives have been categorised into two investment levels.
    • First level: Firms investing at least ₹300 crore into plant and machinery over two years would need to hit a minimum turnover of ₹600 crore before becoming eligible to receive the incentive over a five-year period.
    • Second level: At a second level an investment of ₹100 crore with a pre-set minimum turnover of ₹200 crore would enable qualification for the incentive.
    • Intermediate products included: The aim of the scheme is to specifically focus investment attention on 40 MMF apparel product lines, 14 MMF fabric lines and 10 segments or products of technical textiles.
    • The inclusion of intermediate products reflects the Government’s keenness to ensure the scheme ultimately delivers on the broader policy objectives.

    Conclusion

    Operational success of the scheme is likely to hinge on how new entrepreneurs and existing companies weigh the risk-reward equation, especially at a time when the pandemic-spurred uncertainty has already made private businesses leery of making fresh capital expenditure.

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  • Why we must focus on Human Development not GDP growth?

    The much-anticipated estimates of gross domestic product (GDP) for the first quarter of the fiscal year 2021-22 were released on 31 August. This has seen an unprecedented decline in GDP at 24.4%.

    Why debate this?

    • An increasing GDP is often seen as a measure of welfare and economic success.
    • However, it fails to account for the multi-dimensional nature of development or the inherent short-comings of capitalism, which tends to concentrate income and, thus, power.
    • The real issue thriving the Indian Economy is the relevance of GDP estimates as the sole or most important indicator of a recovery.
    • Our economy was slowing down even before the pandemic and was then devastated by it.

    GDP as an indicator

    • Economic growth assesses the expansion of a country’s economy.
    • Today, it is most popularly measured by policymakers and academics alike by increasing gross domestic product or GDP.
    • This indicator estimates the value-added in a country which is the total value of all goods and services produced in a country minus the value of the goods and services needed to produce them.
    • It is common to divide this indicator by a country’s population to better gauge how productive and developed an economy is – the GDP per capita.

    A brief history of Growth and GDP

    • The concept of economic growth gained popularity during the industrial revolution, when market economies flourished.
    • In the 1930s, Nobel laureate, Simon Kuznets wrote extensively about national statistics and propagated the use of GDP as the measure of the national income of the US.
    • Against the backdrop of a bloody world wars, governments were on the look for analytical tools to raise taxes to finance the newly minted war machine.
    • It was at the 1944 Bretton Woods conference that GDP became the standard tool for measuring a country’s economy.
    • Right from the classicals to the neo-classicals, the idea of development was intertwined with economic growth, i.e. accumulation of wealth and production of goods and services.

    Prominence of GDP today

    • GDP as a measure of economic growth is popular because it is easier to quantify the production of goods and services than a multi-dimensional index can measure other welfare achievements.
    • Precisely because of this, GDP is not, on its own, an adequate gauge of a country’s development.
    • Development is a multi-dimensional concept, which includes not only an economic dimension, but also involves social, environmental, and emotional dimensions.

    Limitations of GDP

    • One of the limitations of GDP is that it only addresses average income, failing to reflect how most people actually live or who benefits from economic growth.
    • There is also a possibility that the wealth of a society becomes more concentrated and why this is counterproductive to development.
    • If left unchecked, growing inequalities can not only slow down growth, but also generate instability and disorder in society.

    Therefore, a growing GDP cannot be assumed to necessarily lead to sustainable development.

    Relevance since COVID times

    (a) Failure to capture informal economy

    • A decline in economic activity, as captured by GDP data, is only one part of the distress caused by the slowdown and covid.
    • GDP estimates hardly capture the extent of depressed economic activity in the informal sector.
    • This makes it irrelevant to the cause of understanding the changing fortunes of workers and others who are dependent on these activities.
    • India’s informal sector is not only a significant part of the overall economy but is crucial for generating broad demand, given the significantly large proportion of our population that depends on it.

    (b) Rise in distress employment

    • Most worrisome is a reversal of the trend of non-farm diversification due to reverse migration.
    • After more than five decades, we have seen an actual increase in the proportion of workers employed in agriculture.

    (c) Farmers losses

    • Farmers have fared badly. Already suffering from low output prices, the majority of farmers have seen incomes decline as input costs rose (such as on diesel and fertilizers).
    • Even though our farm sector appears relatively unaffected by covid, the ground reality of farmer incomes is at complete variance with the aggregate statistics from the national accounts.
    • The failure to capture livelihood and income losses in the informal sector is only one aspect of our GDP data inadequacy.

    GDP can never account this

    • This failure to reflect the economic conditions of our population’s majority is partly a result of the way data on GDP is calculated, but also due to infirmities of the database itself.
    • But its limitations at the conceptual level are far more serious.

    Alternate measures

    • One expanded indicator, which attempts to measure the multi-dimensional aspect of development, is the Human Development Index (HDI) by UNDP.
    • It incorporates the traditional approach to measuring economic growth, as well as education and health, which are crucial variables in determining how developed a society is.
    • In 2018, the World Bank launched the Human Capital Index (HCI).
    • This index ranks countries’ performances on a set of four health and education indicators according to an estimate of the economic productivity lost due to poor social outcomes.

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    Back2Basics:

    National Income Accounting

  • [pib] Transport and Marketing Assistance (TMA) scheme for Specified Agriculture Products

    The Centre has revised “Transport and Marketing Assistance” (TMA) scheme for Specified Agriculture Products’.

    What is the TMA Scheme?

    • The TMA Scheme was introduced in 2019 to provide assistance for the international component of freight, to mitigate the disadvantage of higher freight costs faced by the Indian exporters of agriculture products.
    • All exporters, duly registered with relevant Export Promotion Council as per Foreign Trade Policy, of eligible agriculture products, shall be covered under this scheme.
    • The assistance, at notified rates, will be available for the export of eligible agriculture products to the permissible countries, as specified from time to time.
    • Assistance would be provided in cash through a direct bank transfer as part reimbursement of freight paid.

    Following major changes have been made in the revised scheme:

    • Dairy products, which were not covered under the earlier scheme, will be eligible for assistance under the revised scheme.
    • Rates of assistance have been increased, by 50% for exports by sea and by 100% for exports by air.

    List of ineligible products

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  • [pib] Account Aggregator Network (AAN): A financial data-sharing system

    The Account Aggregator system in banking has been started off with eight of India’s largest banks. In this newscard, we shall learn it in a FAQ manner.

    What is an Account Aggregator?

    • An Account Aggregator (AA) is a type of RBI regulated entity (with an NBFC-AA license) that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network.
    • Data cannot be shared without the consent of the individual.
    • There will be many Account Aggregators an individual can choose between.
    • Account Aggregator replaces the long terms and conditions form of ‘blank cheque’ acceptance with a granular, step by step permission and control for each use of your data.

    How would it improve an average person’s financial life?

    • India’s financial system involves many hassles for consumers today.
    • This includes sharing of physical signed and scanned copies of bank statements, stamp documents, or having to share your personal username and password to give your financial history to a third party.
    • The AAN would replace all these with a simple, mobile-based, simple, and safe digital data access & sharing process.
    • This will create opportunities for new kinds of services — eg new types of loans.
    • The individual’s bank just needs to join the Account Aggregator network.

    How is AAN different to Aadhaar eKYC data sharing?

    • Aadhaar eKYC and CKYC only allow sharing of four ‘identity’ data fields for KYC purposes (eg name, address, gender, etc).
    • Similarly, credit bureau data only shows loan history and/or a credit score.
    • The AAN allows sharing of transaction data or bank statements from savings/deposit/current accounts.

    What kind of data can be shared?

    • Today, banking transaction data is available to be shared (for example, bank statements from a current or savings account) across the banks that have gone live on the network.
    • Gradually the AA framework will make all financial data available for sharing, including tax data, pensions data, securities data (mutual funds and brokerage), and insurance data will be available to consumers.
    • It will also expand beyond the financial sector to allow healthcare and telecom data to be accessible to the individual via AA.

    Can AAs view or ‘aggregate’ personal data? Is the data sharing secure?

    • Account Aggregators cannot see the data; they merely take it from one financial institution to another based on an individual’s direction and consent.
    • Contrary to the name, they cannot ‘aggregate’ your data.
    • AAs are not like technology companies which aggregate your data and create detailed profiles of you.
    • The data AAs share is encrypted by the sender and can be decrypted only by the recipient.
    • The end to end encryption and use of technology like the ‘digital signature’ makes the process much more secure than sharing paper documents.

    Can a consumer decide they don’t want to share data?

    Yes. Registering with an AA is fully voluntary for consumers.

    • If the bank the consumer is using has joined the network, a person can choose to register on an AA, choose which accounts they want to link, and share their data.
    • A customer can reject a consent to share request at any time.
    • If a consumer has accepted to share data in a recurring manner over a period (eg during a loan period), it can also be revoked at any time later as well by the consumer.

    Duration of the data shared

    • The exact time period for which the recipient institution will have access will be shown to the consumer at the time of consent for data sharing.

    How can a customer get registered with an AA?

    • One can register with an AA through their app or website.
    • AA will provide a handle (like username) which can be used during the consent process.
    • Today, four apps are available for download (Finvu, OneMoney, CAMS Finserv, and NADL) with operational licenses to be AAs.
    • Three more have received in principle approval from RBI (PhonePe, Yodlee, and Perfios) and may be launching apps soon.
    • A customer can register with any AA to access data from any bank on the network.

    Does a customer need to pay the AA for using this facility?

    • This will depend on the AA. Some may charge a small user fee.
    • Some AAs may be free because they are charging a service fee to financial institutions.

    What new services can a customer access if their bank has joined the AA network of data sharing?

    The two key services that will be improved for an individual is access to loans and access to money management.

    • If a customer wants to get a small business or personal loan today, there are many documents that need to be shared with the lender.
    • This is a cumbersome and manual process today, which affects the time taken to procure the loan and access to a loan.
    • Similarly, money management is difficult today because data is stored in many different locations and cannot be brought together easily for analysis.
    • Through Account Aggregator, a company can access tamper-proof secure data quickly and cheaply, and fast track the loan evaluation process so that a customer can get a loan.
    • Also, a customer may be able to access a loan without physical collateral, by sharing trusted information on a future invoice or cash flow directly from a government system like GST or GeM.

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  • PLI Scheme for Textiles

    The Union Government has approved Production Linked Incentive (PLI) Scheme for Textiles.  This move is a part of the overall announcement of PLI Schemes for 13 sectors made earlier during the Union Budget 2021-22.

    What is PLI Scheme?

    • As the name suggests, the scheme provides incentives to companies for enhancing their domestic manufacturing apart from focusing on reducing import bills and improving the cost competitiveness of local goods.
    • PLI scheme offers incentives on incremental sales for products manufactured in India.
    • The scheme for respective sectors has to be implemented by the concerned ministries and departments.

    Criteria laid for the scheme

    • Eligibility criteria for businesses under the PLI scheme vary based on the sector approved under the scheme.
    • For instance, the eligibility for telecom units is subject to the achievement of a minimum threshold of cumulative incremental investment and incremental sales of manufactured goods.
    • The minimum investment threshold for MSME is Rs 10 crore and Rs 100 crores for others.
    • Under food processing, SMEs and others must hold over 50 per cent of the stock of their subsidiaries, if any.
    • On the other hand, for businesses under pharmaceuticals, the project has to be a greenfield project while the net worth of the company should not be less than 30 per cent of the total committed investment.

    What are the incentives involved?

    • An incentive of 4-6 per cent was offered last year on mobile and electronic components manufacturers such as resistors, transistors, diodes, etc.
    • Similarly, 10 percent incentives were offered for six years (FY22-27) of the scheme for the food processing industry.
    • For white goods too, the incentive of 4-6 per cent on incremental sales of goods manufactured in India for a period of five years was offered to companies engaged in the manufacturing of air conditioners and LED lights.

    What is in the box for Textiles?

    • The PLI scheme for textiles aims to promote the production of high value Man-Made Fibre (MMF) fabrics, garments and technical textiles.
    • Any person or company willing to invest a minimum of Rs 300 crore in plant, machinery, equipment and civil works (excluding land and administrative building cost) to produce products of MMF fabrics, garments and products of technical textiles will be eligible.
    • Investors willing to spend a minimum of Rs 100 crore under the same conditions shall be eligible.

    Benefits offered

    • PLI scheme for Textiles will promote production of high value MMF Fabric, Garments and Technical Textiles in country.
    • The incentive structure has been so formulated that the industry will be encouraged to invest in fresh capacities in these segments.
    • This will give a major push to the growing high-value MMF segment which will complement the efforts of the cotton and other natural fiber-based textiles industry.
    • This will help to generate new opportunities for employment and trade, resultantly helping India regain its historical dominant status in global textiles trade.

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    Back2Basics: India’s textile sector

    • The textile industry in India traditionally, after agriculture, is the only industry that has generated huge employment for both skilled and unskilled labour.
    • The domestic textiles and apparel industry contributes 5% to India’s GDP, 7% of industry output in value terms, and 12% of the country’s export earnings.
    • The textile industry continues to be the second-largest employment generating sector in India. It offers direct employment to over 35 million in the country.
    • India is first in global jute production and shares 63% of the global textile and garment market. India is second in global textile manufacturing and also second in silk and cotton production.
    • 100% FDI is allowed via automatic route in textile sector.

  • How India’s food systems must respond to the climate crisis

    Context

    This month, the UN Secretary-General will convene the Food Systems Summit. There is a proposal to have an International Panel on Food and Nutritional Security (IPFN) — an “IPCC for food,” similar to the panel on climate change.

    Issues with India’s agriculture?

    • What is a food system? According to the Food and Agriculture Organisation (FAO), food systems encompass the entire range of actors involved in the production, aggregation, processing, distribution, consumption and disposal of food products.
    • Effects of Green Revolution: The Green Revolution succeeded in making India food sufficient, however, it also led to water-logging, soil erosion, groundwater depletion and the unsustainability of agriculture.
    • Deficit mindset: Current policies are still based on the “deficit” mindset of the 1960s.
    • Biased policies: The procurement, subsidies and water policies are biased towards rice and wheat.
    • Three crops (rice, wheat and sugarcane) corner 75 to 80 per cent of irrigated water.
    • Lack of diversification: Diversification of cropping patterns towards millets, pulses, oilseeds, horticulture is needed for more equal distribution of water, sustainable and climate-resilient agriculture.

    Issues with various elements of India’s food system

    1) Changes needed in India’s agriculture

    • The narrative of Indian agriculture has to be changed towards more diversified high-value production, better remunerative prices and farm incomes.
    • Inclusive: It must be inclusive in terms of women and small farmers.
    • Similarly, women’s empowerment is important particularly for raising incomes and nutrition.
    • Women’s cooperatives and groups like Kudumbashree in Kerala would be helpful.
    • Small farmers require special support, public goods and links to input and output markets.
    • Better remunerative prices: Farmer producer organisations help get better prices for inputs and outputs for small-holders.
    • The ITC’s E-Choupal is an example of technology benefiting small farmers.
    • Innovation: One of the successful examples of a value chain that helped small-holders, women and consumers is Amul (Anand Milk Union Ltd) created by Verghese Kurien.
    • Such innovations are needed in other activities of food systems.

    2) Hunger and malnutrition in India

    • The NFHS-5 shows that under-nutrition has not declined in many states even in 2019-20. Similarly, obesity is also rising.
    • A food systems approach should focus more on the issues of undernutrition and obesity.
    • Safe and healthy diversified diets are needed for sustainable food systems.
    • The EAT-Lancet diet, which recommends a healthy and sustainable diet, is not affordable for the majority of the population in India.
    • Animal-sourced foods are still needed for countries like India. For instance, per capita consumption of meat is still below 10 kg in India as compared to 60 to 70 kg in the US and Europe.

    3) Ensuring sustainability of food system

    • Estimates show that the food sector emits around 30 per cent of the world’s greenhouse gases.
    • Sustainability has to be achieved in production, value chains and consumption.
    • How to achieve sustainability? Climate-resilient cropping patterns have to be promoted.
    • Instead of giving input subsidies, cash transfers can be given to farmers for sustainable agriculture.

    4) Health and social protection

    • Food systems also need health infrastructure.
    • The Covid-19 pandemic has exposed the weak health infrastructure in countries like India.
    • Inclusive food systems need strong social protection programmes.
    • India has long experience in these programmes. Strengthening India’s National Rural Employment Guarantee Act, public distribution system (PDS), nutrition programmes like ICDS, mid-day meal programmes, can improve income, livelihoods and nutrition for the poor and vulnerable groups.

    5) Role of non-agriculture

    • Some economists like T N Srinivasan argued that the solution for problems in agriculture was in non-agriculture.
    • Reduce pressure on agriculture: Therefore, labour-intensive manufacturing and services can reduce pressure on agriculture.
    • Income from agriculture is not sufficient for smallholders and informal workers.
    • Strengthening rural MSMEs and food processing is part of the solution.

    Conclusion

    India should also aim for a food systems transformation, which can be inclusive and sustainable, ensure growing farm incomes and nutrition security.

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  • Green hydrogen, a new ally for a zero carbon future

    Context

    The forthcoming 26th UN Climate Change Conference of the Parties (COP26) in Glasgow from November 1-12, 2021 is to re-examine the coordinated action plans to mitigate greenhouse gases and climate adaptation measures.

    How Green hydrogen as a fuel can be a game changer?

    • Hydrogen is the most abundant element on the planet, but rarely in its pure form which is how we need it.
    • High energy density: It has an energy density almost three times that of diesel.
    • ‘Green hydrogen’, the emerging novel concept, is a zero-carbon fuel made by electrolysis using renewable power from wind and solar to split water into hydrogen and oxygen.
    • Best solution to remain under 1.5° C: The International Energy Agency (IEA) forecasts the additional power demand to be to the tune of 25%-30% by the year 2040.
    • Thus, power generation by ‘net-zero’ emission will be the best solution to achieve the target of expert guidelines on global warming to remain under 1.5° C.
    • Untapped potential: Presently, less than 0.1% or say ~75 million tons/year of hydrogen capable of generating ~284GW of power, is produced.

    Challenges: Production and storage cost

    • The challenge is to compress or liquefy the LH2 (liquid hydrogen); it needs to be kept at a stable minus 253° C.
    • This leads to its ‘prior to use exorbitant cost’.
    • The ‘production cost’ of ‘Green hydrogen’ has been considered to be a prime obstacle.
    • The production cost of this ‘green source of energy’ is expected to be around $1.5 per kilogram (for nations having perpetual sunshine and vast unused land), by the year 2030; by adopting various conservative measures.

    Experiments in India

      • The Indian Railways have announced the country’s first experiment of a hydrogen-fuel cell technology-based train by retrofitting an existing diesel engine; this will run under Northern Railway on the 89 km stretch between Sonepat and Jind.
    • The project will not only ensure diesel savings to the tune of several lakhs annually but will also prevent the emission of 0.72 kilo tons of particulate matter and 11.12-kilo tons of carbon per annum.

    Way forward for India

    • India is the world’s fourth-largest energy-consuming country (behind China, the United States and the European Union), according to the IEA’s forecast, and will overtake the European Union to become the world’s third energy consumer by the year 2030.
    • It is high time to catch up with the rest of the world by going in for clean energy, decarbonising the economy and adopting ‘Green hydrogen’ as an environment-friendly and safe fuel for the next generations.

    Conclusion

    In order to achieve the goal of an alternative source of energy, adopting a multi-faceted practical approach to utilise ‘Green hydrogen’ offers a ray of hope.

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  • Issues related to MSP

    The Centre has increased the Minimum Support Price (MSP) for various crops ahead of the upcoming rabi season harvest.

    Answer this PYQ from CSP 2018

    Q.Consider the following:

    1. Areca nut
    2. Barley
    3. Coffee
    4. Finger millet
    5. Groundnut
    6. Sesamum
    7. Turmeric

    The Cabinet Committee on Economic Affairs has announced the Minimum Support Price for which of the above?

    (a) 1, 2, 3 and 7 only

    (b) 2, 4, 5 and 6 only

    (c) 1, 3, 4, 5 and 6 only

    (d) 1, 2, 3, 4, 5 and 7

     

    [wpdiscuz-feedback id=”s9utkt7b32″ question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

    What is the Minimum Support Price (MSP) system?

    • MSP is a form of market intervention by the Govt. of India to insure agricultural producers against any sharp fall in farm prices.
    • MSP is price fixed by GoI to protect the producer – farmers – against excessive falls in price during bumper production years.

    Who announces it?

    • MSP is announced at the beginning of the sowing season for certain crops on recommendations by Commission for Agricultural Costs and Prices(CACP) and announced by Cabinet Committee on Economic Affairs (CCEA) chaired by the PM of India.

    Why MSP?

    • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
    • They are a guaranteed price for their produce from the Government.
    • In case the market price for the commodity falls below the announced MSP due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced MSP.

    Historical perspective

    • Till the mid-1970s, Government announced two types of administered prices:
    1. Minimum Support Prices (MSP)
    2. Procurement Prices
    • The MSPs served as the floor prices and were fixed by the Govt. in the nature of a long-term guarantee for investment decisions of producers, with the assurance that prices of their commodities would not be allowed to fall below the level fixed by the Government, even in the case of a bumper crop.
    • Procurement prices were the prices of Kharif and rabi cereals at which the grain was to be domestically procured by public agencies (like the FCI) for release through PDS.
    • It was announced soon after harvest began.
    • Normally procurement price was lower than the open market price and higher than the MSP.

    Crops Covered

    1. Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative prices (FRP) for sugarcane.
    2. The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops.
    3. The list of crops is as follows:
    • Cereals (7) – paddy, wheat, barley, jowar, bajra, maize and ragi
    • Pulses (5) – gram, arhar/tur, moong, urad and lentil
    • Oilseeds (8) – groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed, and nigerseed
    • Raw cotton
    • Raw jute
    • Copra
    • De-husked coconut
    • Sugarcane (Fair and remunerative price)
    • Virginia flu cured (VFC) tobacco

    Exception for Sugar

    • The pricing of sugarcane is governed by the statutory provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955.
    • Prior to the 2009-10 sugar season, the Central Government was fixing the Statutory Minimum Price (SMP) of sugarcane, and farmers were entitled to share profits of a sugar mill on a 50:50 basis.
    • As this sharing of profits remained virtually unimplemented, the Sugarcane (Control) Order, 1966 was amended in October 2009 and the concept of SMP was replaced by the Fair and Remunerative Price (FRP) of sugarcane.

    Back2Basics: Rabi and Kharif Crops

    Rabi Crops Kharif Crops
    ·         Rabi crops are sown at the end of monsoon or the beginning of winter. They are also known as winter crops. ·         Kharif crops are sown at the beginning of the rainy season and are also known as monsoon crops.
    ·         Flowering requires a long day length. ·         Flowering requires a short day length.
    ·         These crops need a warm climate for seed germination and cold climate for growth. ·         These crops require a lot of water and hot weather to grow. They depend on rainfall.
    ·         Unseasonal rainfall can damage Rabi crops. ·         Kharif crops depend on rainfall patterns.
    ·         The harvesting months are March and April. ·         These crops are harvested in September and October
    ·         Examples: Mustard, wheat, cumin, coriander etc. ·         Examples: Rice, bajra, groundnut.

    Zaid Crops

    • The wide range of crops that grow in the short season between Kharif and Rabi crop seasons are known as Zaid crops. These are the months of March till July.
    • Examples: Pumpkin, cucumber, bitter gourd etc.

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  • The economic reforms — looking back to look ahead

    Context

    The economic reforms, so far, have been more focused on the technical nature of the economy than the system, process and people. The fundamentals need to be set right with a focus on human capital, technology readiness and productivity.

    Benefits and limits of economic reforms of 1991

    • Economic reforms of 1991 — and from time to time, subsequent interjections for liberalisation of economy and trade — have enabled some credible gains for the country.
    • Benefits: Foreign exchange reserves (over $600 billion), sustained manufacturing contribution in GDP, increased share in global exports (from 0.6% in the 1990s to 1.8%), robust software exports, and sustained economic growth in the range of 6%-8% are clear indicators of its success.
    • Limits: Primary drivers of the economy — human capital, technology readiness, productivity, disposable income, capital expenditure, process innovation in setting up businesses, and institutional capacity — have not got enough recognition.

    Issues affecting the Indian economy

    1) Lack of Human resource capital formation

    • The human resource capital (HRC) formation, a good determinant of labour productivity, has been missing over the entire period of reforms.
    • The HRC rank for India stands at 103; Sri Lanka is at 70, China at 34, and South Korea at 27, as brought out by the Global Human Capital Report, 2017.
    • Factors responsible for low HRC: The lack of quality education, low skilled manpower, and inadequacies in basic health care have resulted in low HRC.

    2) Low disposable income

    • The World Bank database on GDP for 2019 indicates the low per capita GDP in India, at $2,104 (at $6,997 in PPP terms, ranked 125th globally) against the world average of $11,429 (at $17,678 in PPP terms).
    • Low per capita GDP has direct links to low per capita family income.
    • Low wages: The report by Deloitte (Global Manufacturing Competitiveness Index in 2016) reflects that the hourly wages in India have been $1.7; they are $38, $24, $20.7, and $3.3 for the United States, Japan, South Korea, and China, respectively.
    • Low wages have a direct bearing on the disposable income of families, affecting demand.

    3) Low R&D expenditure

    • India’s research and development expenditure stand at 0.8% of GDP, for other fast-emerging economies such as South Korea, it is (4.5%), China (2.1%), and Taiwan (3.3%).
    • Reduced technology readiness: This low expenditure is resulting in lower capacity for innovation in technologies and reduced ‘technology readiness’, especially for manufacturing.

    4) Low labour productivity: Result of low HRC and lack of technology readiness

    • The lack of HRC and low technology readiness have impacted labour productivity adversely.
    • World Bank publication of 2018 indicates that India’s labour productivity in manufacturing is less than 10% of the advanced economies including Germany and South Korea, and is about 40% of China.
    • Low productivity has unfavourable consequences for competitiveness, manufacturing growth, exports and economic growth.

    5) Long time and more cost in setting up a business

    • There are difficulties in acquiring land for businesses, inefficient utilization of economic infrastructure, and in providing business services.
    • This results in a long time and more cost in setting up enterprises, resulting in a loss of creative energy of entrepreneurs.

    Way forward

    • Investment in human capital and technology: First, to attract large investment in manufacturing and advanced services, at a basic level, investment in human capital and technology is a prerequisite.
    • Technology readiness: The reports by McKinsey and the World Economic Forum on advanced manufacturing suggest that Industry 4.0 will be defined by new technologies such as robotics, 3-D printing, artificial intelligence (AI), the Internet of things (IoT), etc.
    • Consequently, efforts for technology readiness are very essential to stay competitive.
    • It demands enhancing public research and development expenditure to 2% of GDP over the next three years.
    • Strategies to enhance per capita income: There is a need to work on strategies to enhance per capita income by more wages for workers through higher skills and enhancing minimum wages, besides improving the social security net.
    • Promote business-centric approach: Using insights from the work of Nobel laureate (1993) Douglass C. North, it is necessary to build the capacity of public institutions to create a good environment for business and industry.
    • Policy reforms should lay an emphasis on process innovation and promote a business-centric approach to create a friendly ecosystem and for efficient internal supply chain management to integrate with the global supply chain.
    • Innovative nature in public policymaking: The future of the economy should be particularly viewed in the backdrop of a significant and irreversible shift in terms of reliance on the global supply chain as a result of the knowledge-intensive nature of businesses and exponential effects caused by advanced technologies under Industry 4.0, since the 2010s.
    • Therefore, the strategies adopted since the 1990s till now may not ensure adequate returns and call for innovative approaches in public policymaking.

    Consider the question “The economic reforms, so far, have been more focussed on the technical nature of the economy than the system. This resulted in fundamental deficiencies. Suggest the way forward to deal with these deficiencies.”

    Conclusion

    In sum, it necessitates a systemic approach for policy reforms for setting the economic fundamentals right and to achieve higher growth.

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