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Subject: Economics

  • The April-June quarter GDP numbers indicated at 20.1 per cent growth

    Context

    The April-June quarter GDP numbers indicated at 20.1 per cent growth.

    Making sense of the numbers

    • The higher GDP growth was driven by high indirect tax collections, largely GST.
    • The more representative measure of economic activity, gross value added (GVA), grew by 18.8 per cent.
    • GDP is derived by adding indirect tax collections, net of subsidy payouts, to GVA.
    • These numbers are over a base quarter that had contracted sharply due to the lockdowns during the first Covid wave last year.
    • The revival of manufacturing GVA was the most robust, with mining and electricity growth somewhat moderate.
    • The overall and sector-specific activity levels need to be evaluated vis-Ă -vis the corresponding thresholds of (the pre-pandemic) first quarter of 2019-20.
    • Agriculture grew at 4.5 per cent, with cereals, pulses and oilseeds output at all-time highs.
    • As could be expected, the services sector remained vulnerable, with activity even softer than expected.
    • Steel and cement output growth — proxies for construction activity — were also quite robust in the quarter.
    • Demand and expenditure: Private consumption was up 19.3 per cent while investment was at 55.3 per cent.
    • Government consumption was lower by 4.8 per cent.
    • Export: Net exports are typically in deficit, but the gap was much lower in the first quarter.

    How to sustain recovery: way forward

    • Looking beyond the first quarter, the set of high-frequency economic signals suggest a strong recovery in July and August.
    •  But, how can this recovery over the rest of the year and beyond be sustained, and even accelerated?
    • Sustaining 3 growth drivers: The three distinct potential growth drivers — consumption, investment and exports — will need to be effectively sustained by policy initiatives over the next couple of years.
    • Government spending: Centre’s revenues and expenditures during April-July this year suggest that it has significant room to increase spending.
    • National Monetisation Plan will open up further fiscal space to increase spending, in particular, on capex.
    • Credit support to stressed segment: mid-and small-sized enterprises will take some time to restore their pre-pandemic operational levels.
    • An increase in the flow of credit, from banks, NBFCs and markets, particularly to these stressed segments, is a priority, as a supplement to state spending.
    • Opportunity for exports: Global inventories are low and depending on the progression of the pandemic relaxations across geographies, are likely to provide opportunities for Indian exports to fill some of these gaps.
    • Reforms: Multiple reform initiatives, tax and other incentives are in the process of implementation.
    • These need to be accelerated in coordination with states to enable an environment of steady, high growth in the medium term.

    Challenges

    • Global central banks’ are signalling the imminent normalisation of ultra-loose monetary policy.
    • The resulting increase in financial sector volatility will have spillover effects on emerging markets, including India.
    • To keep the process smooth, it is crucial to raise India’s potential growth so that the economic recovery does not rapidly close the output gap, thereby preventing a surge in inflationary pressures.

    Conclusion

    There is a limited window of opportunity for India to leverage the current ongoing realignment of global supply chains and progressively onboard both manufacturing and services entities.

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  • How to unleash the entrepreneurial power of 1.3 billion Indians

    Context

    Last Independence Day, the PM announced that 15,000 of our current 69,000+ employer compliances and 6000+ filings have been identified for removal.

    Why India is a development economics outlier?

    • Software industry despite being low-income country: Few models predict a $2,500 per-capita income country with five million people writing software and internet data costs per GB at 3 percent of US levels.
    • Digital identity: In India there are1.2 billion people empowered with paperless digital identity verification.
    • Digital economy: India also witnesses 3.5 billion real-time monthly digital payments.
    • Attraction for Investment: $10 billion in private equity raised in July, and a $3 trillion public market capitalization.
    • Harvard’s Ricardo Hausman believes, the only sustained predictor of sustained economic success is economic complexity and suggests that India’s prosperity is less than our economic complexity would predict.

    India’s software industry

    • Our software industry is an oasis of high productivity — 0.8 per cent of India’s workers generate 8 percent of GDP.
    • The mandatory global digital literacy program and digital investment super-cycle sparked by Covid will double our software employment in five years.
    • Our software industry’s talent, alumni, and global engagement — 50,000 tech startups that have raised over $90 billion since 2014 from 500+ institutional investors.
    • India’s software services industry and tech startups are each estimated to be worth about $400 billion today which is expected to grow to $1 trillion by 2025.

    Why did India’s manufacturing sector fail to perform while its software industry flourished?

    • One of the reasons is the different regulatory thought worlds of the Software Technology Parks India rules of 1991 (STPI) and the Special Economic Zones Act of 2005 (SEZ).
    • STPI’s genius was simplicity. It allowed rebadging existing assets, embraced trust over suspicion, and adopted self-reporting that was largely paperless, presence less, and cashless.
    • SEZs largely replicated the regulatory cholesterol and distrust that has made India unfavorable for employment-intensive industries.

    Way forward

    • Productivity: Raising per-capita needs high productivity manufacturing and domestic services firms that disrupt our low-level equilibrium of labor handicapped without capital and capital handicapped without labor.
    • Opportunities for India: Until recently, China’s tech industry seemed unstoppable — half of their 160 unicorns operate in AI, big data, and robotics. But this is changing.
    • Over 50 recent regulatory actions against China’s tech industry have already cost investors over $1 trillion.
    • This offers an opportunity for India due to its attractiveness to factories, multinationals, startups, venture capital, and pension funds.
    • Replicate regulatory trust and simplicity offered to the technology industry to other sectors: India’s global soft power by reaching revenue and valuation possibilities that felt unimaginable — have come before physical infrastructure, farm employment reduction, and higher women’s labor force participation.
    • Massifying our prosperity needs massive formal, non-farm job creation.
    • Creating the productive firms that will offer these jobs to our young needs replicating the regulatory trust and simplicity that our technology industry enjoys in the rest of our economy.

    Conclusion

    Imagine India@100 if we cut regulatory cholesterol today and spent the next 25 years unleashing the entrepreneurial energies of 1.3 billion Indians — 65 percent of whom are below 35 years old.

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  • Taxing interest on Provident Fund

    Following its Budget announcement in February, the Finance Ministry has now notified the rules for taxing interest income on contributions made to the Employees’ Provident Fund (EPF) beyond Rs 2.5 lakh (for private-sector employees) and Rs 5 lakh (for government sector employees).

    What is Provident Fund?

    • Provident Fund is a government-managed retirement savings scheme for employees, who can contribute a part of their savings towards their pension fund, every month.
    • These monthly savings get accumulated every month and can be accessed as a lump sum amount at the time of retirement, or end of employment.
    • Since the provident fund money consists of a large chunk of savings, it can be used to grow your retirement corpus easily.

    Types of provident funds

    There are mainly three different types of PFs, which are as follows:

    1. General provident fund: It is a type of PF which is maintained by governmental bodies, including local authorities, the Railways, and other such bodies. Thus, these types of PFs are mainly defined by government bodies.
    2. Recognized provident fund: It is the one that applies to all privately-owned organizations that contain more than 20 employees. Moreover, holding a rightful claim to the PF associated with your organization, you will be given a UAN or Universal Account Number. This enables you to transfer your PF funds from one employer to another whenever you move from one occupation to another.
    3. Public provident fund: It is defined by the voluntary nature of investment on the part of the employee. The PPF is also associated with a minimum deposit of Rs. 50 and a maximum amount of Rs. 1.5 lakhs. The PPF has a lock-in period of 15 years.

    What is the tax on EPF contributions?

    • In February, the Budget proposed that tax exemption will not be available on interest income on PF contributions exceeding Rs 2.5 lakh in a year.
    • Although this has been a concern for salaried individuals contributing to EPF, it will impact only those who contribute more than Rs 2.5 lakh in a year.
    • It will not affect their existing corpus or the aggregate annual interest on that.
    • In March, the government proposed to double the cap on contribution from Rs 2.5 lakh to Rs 5 lakh for tax-exempt interest income where there is no contribution by the employer.
    • With this, the government provided relief for contributions made to the General Provident Fund that is available only to government employees and there is no contribution by the employer.

    Why tax the PF?

    • There have been instances where some employees are contributing huge amounts to these funds and are getting the benefit of tax exemption at all stages — contribution, interest accumulation, and withdrawal.
    • With an aim to exclude high net-worth individuals (HNIs) from the benefit of high tax-free interest income on their large contributions, the government has proposed to impose a threshold limit for tax exemption.
    • This will be applicable for all contributions beginning April 1, 2021.

    How will it get taxed?

    • For an individual in the higher tax bracket of 30%, the interest income on contribution above Rs 2.5 lakh would get taxed at the same marginal tax rate.
    • What this means is that if an individual contributes Rs 3 lakh every year to the provident fund (including the voluntary PF contribution) then the interest on his contribution above Rs 2.5 lakh —that is, Rs 50,000 — will be taxed.
    • So, the interest income of Rs 4,250 (8.5% on Rs 50,000) will be taxed at the marginal rate. If the individual falls in the 30% tax bracket, he/ she will have to pay a tax of Rs 1,325.
    • For an individual contributing Rs 12 lakh in a year, the tax will be applicable on interest income on Rs 9.5 lakh (Rs 12 lakh minus Rs 2.5 lakh). In this case, the tax liability would amount to Rs 25,200.

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  • Our banks are mispricing capital

    Context

    We have a situation in India today where the policy repo rate has been kept low. Banks are just about managing their non-performing assets (NPAs) and there is uncertainty in the air.

    Mispricing of capital by banks

    • There are different components of the cost of funds for banks, which are captured by the MCLR or marginal cost of funds-based lending rate.
    • For every â‚č100 deposits that enter the banking system, there are different accompanying costs for the system.
    • These are deposit costs, provisioning for NPAs, return on assets (ROA or minimum profit), and the regulatory cost of cash reserve and statutory liquidity ratio balances (CRR and SLR) that perforce have to be held.
    • Adding these components, the basic cost works out to be 8.9%, which should be the rate at which incremental lending should take place.
    • By offering loans at a much lower rate of 7.23%, the system is actually mispricing capital.
    • It may be noted that deposit rates have been compressed to a very large degree and so this cost of 4% is very low.
    • Banks do have the advantage of getting free demand deposits and the right to offer differential rates on saving accounts.
    • Clearly, deposit-holders are subsidizing borrowers quite significantly.

    Issue of NPA provisioning in India

    • In the past couple of years, provisions as a proportion of NPAs have averaged 30-40%.
    • As NPAs increase, ideally, banks should load this cost onto their borrowers.
    • But that rarely happens in India. Instead, it is taken on banks’ books and gets reflected in their balance sheets.
    • If NPAs were kept in the region of, say, 4-5% of assets, it would have been possible to bring the cost down to 1.5% (from 3%), which would then have justified the present MCLR.

    Low return on assets (ROA)

    • The ideal return norm is 1%, which should be derived from all assets.
    • This does not happen for banks’ investment portfolios, and the value imputed here is only for loans.
    • The ROA for banks is abysmally low, as this aspect does not go into the pricing of products on the asset side.
    • Deposit costs have been driven down as savers don’t have a choice.
    • But a commensurate return does not materialize in the loan books of banks.

    Cost of regulations

    • The CRR component gets no compensation, while the SLR part earns around 6%, which is the average cost of fresh borrowing for the Union government.
    • While these numbers vary across banks, the minimum rate of 8.9% would hold for the system, which will vary by the level of NPAs.
    • The concept of linking benchmarks to certain loans further misprices fresh lending, as those loans are not ideal anchors to use, for they are being manually driven downwards by a deluge of liquidity in the system after the pandemic.
    • Excess liquidity of â‚č4-7 trillion a day since April 2020 has meant banks have been placing funds costing them 8.9% with the central bank which gives them just 3.35%.
    • This is eventually borne by bank shareholders.

    Implications

    • With rather rigid policies on corporate lending to avert possible NPAs, banks have preferred lending to the retail segment, which is less risky, and small businesses, backed by the Centre’s credit guarantee.
    • The central bank’s government-bond buying programme to provide liquidity has been successful.
    • But in the absence of fructification of lending and a continuous rollover of funds at the reverse-repo window, Indian banks are bearing a negative carry trade, with a 6% return traded for just 3.35%.

    Conclusion

    Banks must price capital appropriately and not get overly influenced by arguments in favor of cheap credit or the fact that loans are cheaper in the West. We need to get practical on this issue.

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    Back2Basics: CRR and SLR

    • Cash Reserve Ratio, or popularly known as CRR is a compulsory reserve that must be maintained with the Reserve Bank of India.
    • Every bank is required to maintain a specific percentage of their net demand and time liabilities as cash balance with the RBI.
    •  The banks are not allowed to use that money, kept with RBI, for economic and commercial purposes.
    • It is a tool used by the apex bank to regulate the liquidity in the economy and control the flow of money in the country.
    • Statutory Liquidity Ratio, shortly called as SLR also an obligatory reserve to be kept by the banks, as prescribed securities, based on a certain percentage of net demand and time liabilities.
    •  It is used to maintain the stability of banks by limiting the credit facility offered to its customers.
    • CRR is maintained in the form of cash while the SLR is to be maintained in the form of gold, cash, and government-approved securities.

  • Gauging household income key for microfinance clients

    Context

    The Reserve Bank of India’s (RBI) recently released a Consultative Document on Regulation of Microfinance in June 2021.

    Consultative document makes household income a critical variable

    • Following the Malegam Committee Report, which is a decade old now, the current document looks to reassess and realign the priorities of the sector.
    • Some of the key regulatory changes proposed in the document take household income as a critical variable for loan assessment
    • Definition of microfinance: The definition of microfinance itself is proposed to mean collateral-free loans to households with annual household incomes of up to â‚č1,25,000 and â‚č2,00,000 for rural and urban areas respectively.
    • Household income assessment: The document requires all Regulated Entities to have a board-approved policy for household income assessment.
    • Cap on repayment: It caps loan repayment (principal and interest) for all outstanding loans of the household at 50% of household income.
    • Therefore, measuring household income accurately becomes critical for the effective implementation of these norms.

    Challenges in measuring the income of Low-Income-Household (LIH)

    • Seasonal and volatile: Low-Income Households (LIHs), who typically form the customer base for Microfinance Institutions (MFIs), often also have seasonal and volatile income flows. 
    • Measuring expenditure doesn’t reflect their income: Since income for LIHs is seasonal and volatile, there have been attempts to understand their inflows by measuring their expenditure.
    • But, given the rotational debts they avail to fund a consumption expenditure here and a loan repayment obligation there, expenditure also does not truly reflect the household’s income.
    • Not separate personal expenditure: Moreover, for most LIHs, their expenditure on income-related activity is not separate from their personal expenses.
    • Therefore, it is difficult to separate the household’s personal expenses from that of their occupational pursuits.
    • Given these complexities, we need to understand and accept that for the bulk of LIHs, household finance is not just personal family finance, but their business finance as well.

    3 ways to measure household income for microfinance client

    • Structured survey approach: A structured survey-based approach could be used by Financial Service Providers (FSPs) to assess a household’s expenses, debt position and income from various sources of occupation and seasonality of income.
    • Template-based approach: A template-based approach could be used wherein FSPs could create various templates for different categories of households (as per location, occupation type, family characteristics, etc.).
    • These templates could then be used to gauge the household income of a client matching a particular template.
    • Centralised database: FSPs could also form a consortium to collect and maintain household income data through a centralised database.
    • This would allow for uniformity in data collection across all FSPs and, over time, can be used to validate the credibility of any new client’s reported income.
    • Such a database would also enable FSPs to track the changes in household income over time.

    Way forward

    • Use technology: Finding cost-effective yet accurate ways of capturing this information becomes crucial.
    • Creating new technology to document and analyze cash flows of LIHs would not only facilitate credit underwriting but also innovation in the standard microcredit contracts through customized repayment schedules and risk-based pricing, depending on a household’s cash flows.

    Conclusion

    Eventually, an accurate assessment of household-level incomes would avoid instances of over-indebtedness and ensure the long-term stability of the ecosystem.

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  • Govt. tells utilities to ship in coal as demand surges

    The govt. has urged utilities to import coal despite having the world’s fourth-largest reserves, with several power plants on the verge of running out of fuel due to a surge in power demand.

    Coal Mining in India

    • Coal in India has been mined since 1774 and is now the second fastest mined in the world, producing 716 million metric tons (789 million short tons) in 2018.
    • Due to high demand and poor average quality, India imports coking coal to meet the requirements of its steel plants.
    • Dhanbad city is the largest coal-producing city and is called the Coal Capital of India.
    • State-owned Coal India had a monopoly on coal mining between its nationalization in 1973 and 2018.

    Consumption

    • Coal-fired power accounts for more than 70% of India’s electricity generation. Electricity generation makes up three-fourths of India’s coal consumption.

    Quality of coal

    • The ash chemistry of Indian coal is such that it is high in silica and alumina.
    • The ash is also highly abrasive because of its high quartz content, which can lead to erosion of the syngas cooling system when it gets fused.
    • Indian coal’s sulfur content is low, about 0.5 percent.
    • So, from a gas clean-up perspective, the flue gas desulphurization (removal of SOx gases) and NOx removal system is not economically justifiable and, therefore, not important.
    • Also, in the Indian context, this is unnecessary to meet emission norms.

    Coal reserves

    • India has the fourth-largest coal reserves in the world. It is the second-largest producer of coal in the world, after China.
    • Coal deposits are primarily found in eastern and south-central India.
    • Jharkhand, Odisha, Chhattisgarh, West Bengal, Madhya Pradesh, Telangana, and Maharashtra accounted for 98.09% of the total known coal reserves in India.
    • As of 31 March 2019, Jharkhand and Odisha had the largest coal deposits of 25.88% and 24.76% respectively.

    Imports

    • Coking Coal is being imported by the Steel Authority of India Limited (SAIL) and other Steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality.
    • Coal-based power plants, cement plants, captive power plants, sponge iron plants, industrial consumers, and coal traders are importing non-coking coal.
    • Coke is imported mainly by Pig-Iron manufacturers and Iron & Steel sector consumers using mini-blast furnaces.

    Try answering this PYQ:

    Which of the following is/are the characteristics/ characteristics of Indian coal?

    1. High ash content
    2. Low Sulphur content
    3. Low ash fusion temperature

    Select the correct option using the codes given below:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1 and 3 only

    (d) 1, 2 and 3

     

    [wpdiscuz-feedback id=”0tm49llrlj” question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

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  • The National Monetisation Pipeline may not help realise the best value for assets

    Context

    The Government has launched a National Monetisation Pipeline, or NMP  to sell the revenue streams of public assets over the next four years.

    About NMP

    • Financing infrastructure: As outlined in the Union Budget, the NMP aims to mobilize resources for financing infrastructure.
    • Type of assets: The pipeline mostly includes railway stations, freight corridors, airports, and renovated national highway segments amounting to â‚č6-lakh crore, or 3% of GDP in 2020-21.
    • The other two methods of raising resources are: setting up a development finance institution (DFI) and raising the share of infrastructure investment in the central and State Budgets.

    Concerns

    1) Not different from Disinvestment-Privatisation (D-P)

    • Asset monetization as defined in NMP is the same as the net present value (NPV) of the future stream of revenue with an implicit interest rate (whether it is a sale or lease of the asset).
    • Missed targets: Since D-P proceeds (revenues) have seriously missed the targets almost every year, how believable are the NMP targets? And how are they likely to perform differently?
    • If the NMP attempt to shore up public finances, such distress (fire) sale would find it difficult to obtain a “fair value” for public assets.
    • Would the market not factor in the dire state of the economy in beating down the prices, as in any distress sale?
    • The NMP document seems silent on how to overcome past mistakes.

    2) PPP mode of implementation

    • The NMP outlines mainly two modes of implementing monetization: public-private partnership (PPP) and “structured financing” to tap the stock market.
    • PPP in infrastructure has been a financial disaster in India, as evident from what happened after the economic boom of 2003-08.
    • After the 2008 financial crisis, many PPP projects failed to repay bank loans leading to the piling up of non-performing assets (NPAs) of banks.
    • Further, the bulk of the lending was too politically connected to corporate houses and firms.
    •  India is still reeling from the legacy of that period without any easy and credible solutions in sight.

    3) Stock market crash threatens the success of InvIT

    • An Infrastructure Investment Trust (InvIT) is being mooted as an alternative means of raising finance from the stock market.
    • In principle, InvIT is much like a mutual fund, whose performance is largely linked to stock prices.
    • The disinvestment process began in 1991 in which the bundles of shares of public sector enterprises (PSEs) were sold by UTI in the booming secondary stock market to realize the best price.
    • However, as the market crashed in the wake of the Harshad Mehta scam, stalling and discrediting the disinvestment process for almost the entire decade.
    • Hence, it may be worth learning the lessons from the historical missteps before exploring the idea all over again by the current stock market boom
    • At present, the U.S. Fed committed to reducing its assets purchase program (known as quantitative easing), the “hot money” inflow that has fuelled Indian stock prices may dry up throwing up nasty surprises.

    Thus, it seems unwise to anchor the acutely needed investment revival strategy on a discredited PPP model or on fickle Foreign Institutional Investors (FII) investment in a frothy stock market.

    Suggestion: Monetise debt

    • With the financial system flush with liquidity with no takers for bank credit, finance the proposed investment — as envisaged in the Budget — by government borrowing.
    • With a negative 0.4% real interest rate (real interest rate is nominal interest rate minus inflation rate), domestic borrowing in home currency is a steal.
    • No Crowding out: Chances of crowding-out private investments are remote with a liquidity overhang in the market.
    • Low inflation risk: Inflation risk is also limited with little aggregate demand pressures (barring temporary bottlenecks due to localized lockdowns).
    • Rating downgrade risk:  If the debt is productively used to expand GDP (the denominator), rating downgrade risk due to the rising Debt-GDP ratio seems minimal.
    •  Moreover, rising external debt by fickle portfolio investors perhaps carries a greater risk to external instability.

    Consider the question “How the National Monetisation Pipeline seeks to implement the asset monetisation? What are the challenges in asset monetisation?”

    Conclusion

    If reviving investment demand quickly is the real goal, debt monetisation seems a better option than asset monetisation.

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  • India becomes 4th largest forex reserves holder globally

    India’s foreign exchange reserves rose by $835 million to touch a record high of $612.73 billion in the week ended July 16, 2021, the Reserve Bank of India (RBI) data showed.

    Forex Reserves

    India’s forex reserves cover:

    • Foreign Currency Assets (FCAs) (rose by $463 million to $568.748 billion)
    • Special Drawing Rights (SDRs) (up by $1 million at $1.548 billion)
    • Gold Reserves (up by $377 million to $37.333 billion)
    • Reserve position with the International Monetary Fund (IMF) (up by $1 million at $1.548 billion)

    (Note the descending order of the shares of various components of forex reserves. UPSC can go factual here.)

    What is Foreign Exchange Reserve?

    • Foreign exchange reserves are important assets held by the central bank in foreign currencies as reserves.
    • They are commonly used to support the exchange rate and set monetary policy.
    • In India’s case, foreign reserves include Gold, Dollars, and the IMF’s quota for Special Drawing Rights.
    • Most of the reserves are usually held in US dollars, given the currency’s importance in the international financial and trading system.
    • Some central banks keep reserves in Euros, British pounds, Japanese yen, or Chinese yuan, in addition to their US dollar reserves.

    Countries with the highest foreign reserves

    Currently, China has the largest reserves followed by Japan and Switzerland. India has overtaken Russia to become the fourth largest country with foreign exchange reserves.

    1. China – $3,349 Billion
    2. Japan – $1,376 Billion
    3. Switzerland – $1,074 Billion
    4. India – $612.73 Billion
    5. Russia – $597.40 Billion

    Why are these reserves so important?

    • All international transactions are settled in US dollars and, therefore, required to support India’s imports.
    • More importantly, they need to maintain support and confidence for central bank action, whether monetary policy action or any exchange rate intervention to support the domestic currency.
    • It also helps to limit any vulnerability due to sudden disturbances in foreign capital flows, which may arise during a crisis.
    • Holding liquid foreign currency provides a cushion against such effects and provides confidence that there will still be enough foreign exchange to help the country with crucial imports in case of external shocks.

    Initiatives taken by the government to increase forex

    • To increase the foreign exchange reserves, the Government of India has taken many initiatives like AatmaNirbhar Bharat, in which India has to be made a self-reliant nation so that India does not have to import things that India can produce.
    • Other than AatmaNirbhar Bharat, the government has started schemes like Duty Exemption Scheme, Remission of Duty or Taxes on Export Product (RoDTEP), Nirvik (Niryat Rin Vikas Yojana) scheme, etc.
    • Apart from these schemes, India is one of the top countries that attracted the highest amount of Foreign Direct Investment, thereby improving India’s foreign exchange reserves.

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  • Biofortified food can lead India from food security to nutrition security

    Context

    On August 15, Prime Minister Narendra Modi announced that, by 2024, rice provided to the poor under any government scheme — PDS, mid-day-meal, anganwadi — will be fortified.

    Need for nutrition security in India

    • 15.3 per cent of the country’s population is undernourished.
    • India has the highest proportion of “stunted” (30 per cent) and “wasted” children (17.3 per cent) below five years of age, as per the FAO’s recent publication, ‘The State of Food Security and Nutrition in the World, 2021’.
    • These figures indicate that India is at a critical juncture with respect to nutritional security.
    • Other factors: Other factors like poor access to safe drinking water and sanitation, low levels of immunization and education, especially of women, contribute equally to this dismal situation.

    India’s journey towards nutrition security

    • As per the ICAR website, they had developed 21 varieties of biofortified staples including wheat, rice, maize, millets, mustard, groundnut by 2019-20.
    • These varieties are not genetically modified.
    • These biofortified crops have 1.5 to 3 times higher levels of protein, vitamins, minerals, and amino acids compared to the traditional varieties.
    • A research team at the National Agri-Food Biotechnology Institute in Mohali has also developed biofortified colored wheat (black, blue, purple) that is rich in zinc and anthocyanins.
    • The HarvestPlus program of the Consultative Group for International Agricultural Research (CGIAR) has been working closely with ICAR, to improve the access of the poor in India to iron-rich pearl millet and zinc-rich wheat.
    • Globally, more than 40 countries have released biofortified crops, benefitting over 48 million people.
    • Leveraging science to attack the complex challenge of malnutrition, particularly for low-income and vulnerable sections of society, can be a good intervention.

    Challenges in securing nutrition security

    • Access to nutritious food is only one of the determinants of nutrition.
    • Other factors like poor access to safe drinking water and sanitation, low levels of immunization and education, especially of women, contribute equally to this dismal situation.
    • Need for a multi-pronged approach: In the long run, India needs a multi-pronged approach to eliminate the root cause of this complex problem.

    Way forward: Multi-pronged approach

    1) Focus on mother’s education

    • There is a direct correlation between a mother’s education and the well-being of children.
    • Targeted programs for improving the educational status of girls and reducing school dropout rates need to be promoted.
    • The Global Nutrition Report (2014) estimates that every dollar invested in a proven nutrition program offers benefits worth 16 dollars.

    2) Scale-up innovation in biofortified food by supporting policies

    • Innovations in biofortified food can alleviate malnutrition only when they are scaled up with supporting policies.
    • This would require increasing expenditure on agri-R&D and incentivizing farmers by linking their produce to lucrative markets through sustainable value chains and distribution channels.
    • The government can also rope in the private sector to create a market segment for premium-quality biofortified foods.
    •  For instance, trusts run by the TATA group are supporting different states to initiate fortification of milk with Vitamin A and D. 

    3) National awareness drive

    • A national awareness drive on the lines of the “Salt Iodisation Programme” launched by the government in 1962 can play an important role at the individual and community levels to achieve the desired goals of poshan for all. 
    • Branding, awareness campaigns, social and behavioral change initiatives, can promote the consumption of locally available, nutrient-dense affordable foods among the poor and children.

    Consider the question” Access to nutritious food is only one of the determinants of nutrition, and fortified food can play important role in this direction. Suggest the other measures to ensure nutrition safety in India.” 

    Conclusion

    Biofortified food is a step in the right direction, however, other factors should also be given equal attention in securing national security in India.

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  • Poultry Farm Establishment Rules

    Small and marginal poultry farmers in India will now have to take measures similar to their bigger counterparts to prevent environmental pollution, according to new guidelines issued recently by Central Pollution Control Board (CPCB).

    What are the new guidelines?

    (A) Establishment

    • Consent to Operate: The new guidelines state that for establishing and operating a medium-sized poultry farm of 25,000-100,000 birds, a farmer will have to obtain a certificate of Consent. Permission will be valid for 15 years.
    • Designated Authority: This will have to be taken from the State Pollution Control Board or Committee under the Water Act, 1974, and the Air Act, 1981. The Animal Husbandry Department will be responsible for implementing the guidelines at the state and district level.
    • Location: A farm should be set up 500 metres away from a residential area, 100 metres from rivers, lakes, canals, and drinking water sources, 100 metres from national highways, and 10-15 metres from village footpaths and rural roads.

    (B) Operational directives

    • Ventilated farms: The guidelines state that the poultry farm should have a ventilated room to reduce the gaseous pollution from the birds.
    • Wastewater management: Also, care should be taken so that poultry feces do not mix with running water or any other pesticide.
    • Manure generation: Farmers of small- and medium-sized poultry farms will have to arrange for manure. After use, the water from a poultry farm must be collected in a tank. The guidelines suggest using it in horticulture.
    • Disposal of deads: Emphasis has also been given to the daily removal of birds that die, through burial, without harming the environment. Burial should be done three metres above the groundwater level.

    (C) Large/ Small Farmer

    The new guidelines have defined who is a ‘large’ or ‘small’ poultry farmer in India.

    • Those who have 5,000-25,000 birds are small farmers.
    • Those who have more than 25,000 and less than 100,000 birds are medium farmers.
    • Those who have more than 100,000 birds are large farmers.

    Why need such regulation?

    • Poultry, hatchery and piggery were considered ‘green’ by the Central Pollution Control Board (CPCB) in its guidelines of 2015.
    • This meant they were exempt from the air, water, and environmental protection laws.
    • Gaseous emissions and waste are major problems in poultry farming.
    • The feces of poultry birds emit gaseous ammonia, hydrogen sulfide, and methane, all of which produce odors.

    Poultry sector of India

    • According to the 20th Livestock Census 2020, there are 851.8 million poultry birds in India.
    • About 30 percent (250 million) of this is ‘backyard poultry’ or small and marginal farmers.
    • According to the 19th Livestock Census, the number of such farmers is about 30 million.
    • Chickens, turkeys, ducks, geese, etc, are reared in poultry farms for meat and eggs. Chickens that are reared for eggs are called ‘laying hens’ or ‘layers’. Those reared for meat are called ‘broilers’.

    According to the 20th Livestock Census, Tamil Nadu (120 million), Andhra Pradesh (107 million), Telangana (79 million), West Bengal (77 million), Maharashtra (74 million), Karnataka (59 million crores), Assam (46 million) and Kerala (29 million) have the highest poultry populations.

    Try answering this PYQ:

    Consider the following statements:

    1. Agricultural soils release nitrogen oxides into environment.
    2. Cattle release ammonia into environment.
    3. Poultry industry releases reactive nitrogen compounds into environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

     

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