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Subject: Economics

  • An effective plan to monetise government assets

    The article discusses the government’s proposal to monetise assets and proposes the idea of an independent commission to carry out the task of monetisation.

    Roadmap for monetisation of asset: National Monetisation Pipeline

    • Finance Minister had introduced a roadmap for monetisation of asset in the Union Budget.
    • In the budget, the government proposed to launch a ‘National Monetisation Pipeline’ to assess the potential value of underutilised and unused government assets.
    • A number of countries including the United States, Australia, Canada, France and China have effectively utilised this policy.
    • In India too, the concept was suggested by a committee led by Vijay Kelkar on the roadmap for fiscal consolidation in 2012.
    •  The committee had suggested that the government start monetisation as a key instrument to raise resources for development.
    •  It asked the government to use these resources for financing infrastructure needs.

    Why monetisation

    • The global pandemic forced the government to increase spending.
    • Thus, total expenditure of the government has jumped to ₹34.50 trillion against the target of ₹30.42 trillion.
    • On the flip side, revenue of the government is shrinking.
    • As a result, total borrowing has increased by 2.3 times, from ₹7.96 trillion to ₹18.49 trillion.
    • An increase in borrowing also increases interest cost.
    • The ratio of interest payment to revenue receipts was 36.3% in 2019-20.
    • As per revised data, it has increased to 44.5% in the current fiscal year and is projected at an all-time high of 45.3% in 2021-22.
    • Almost half of the revenue is going towards servicing old debts. To revive the economy, capital expenditure is indispensable.

    National Infrastructure Pipeline

    • In this backdrop, the government has already launched the National Infrastructure Pipeline (NIP), with 6,835 projects in December 2019.
    • The project pipeline has been increased to 7,400.
    • The NIP has its own specific target and the government is committed to achieve it in the coming years.
    • It called for a major increase in funding.
    • For 2021-22, the government has proposed to spend ₹5.54 trillion, which is 34.5% higher than the budgeted amount of 2020-21.
    • Now, the government found that monetisation of government- and public sector-owned assets would be an important financing option for new infrastructure construction.

    Model for monetisation of asset: REITs

    • The government is looking at the Real Estate Investment Trusts (REITs) model for monetisation of assets.
    • Under REITs, the land assets are transferred to a trust providing investment opportunity for institutional investors.
    • The government has another option to lease or rent out the assets instead of going for monetisation.
    • The government expects monetisation will generate ₹2.5 trillion in non-debt capital revenue.
    • The objective of asset monetisation is to raise resources for future investment into the sector.
    • A pipeline monetisation plan for Indian Oil, GAIL, and Hindustan Petroleum has been drawn up by the government.
    • It is expected that the government will raise ₹0.17 trillion by selling stakes in these three companies.

    Consider the question “What is asset monetisation? What strategy should be followed by the government in the monetisation of assets?

    Conclusion

    To handle effectively the task of monetisation of assets, the government should constitute an independent commission clothed with requisite powers and staffed by professionals and researchers to formulate and implement its monetisation initiative.

  • Digital lending

    Digital lending has been on the rise in India. However, there are several concerns about the model. The article discusses these concerns and suggests the policy approach.

    3 digital lending models

    • Presently, there are three digital-lending models, seen through the regulatory-approach lens:
    • 1) Bank/NBFC-owned digital platforms operating under the direct regulatory purview of RBI.
    • 2) Fintech companies’ proprietary digital platforms, working in partnership with banks/NBFCs.
    • Being mere intermediaries, these platforms are not required to seek any registration with RBI, and are only indirectly regulated through RBI’s outsourcing guidelines applicable to Banks/NBFCs.
    • 3) Peer-to-peer (P2P) lending platforms, which usually involve the otherwise unregulated retail lenders.
    • RBI has mandated such platforms to seek registration as NBFC-P2P; thus, they are directly regulated by RBI.

    Issues with digital lending

    • The specific issues are unauthorised lenders, exorbitant rates of interest, use of coercive repayment methods, and non-consensual collection or use of user data.
    • These issues entail serious adverse implications for borrowers and have systemic implications, hampering the rise of legitimate fintech players.

    Steps taken

    • With a view to curb such practices, RBI, in 2020, issued a notification to Banks/NBFCs mandating additional disclosures/compliances, and an advisory to borrowers warning them against such platforms.
    • Following the notification, Google removed several such loan apps from its PlayStore.
    • The Digital Lenders’ Association of India (DLAI) also issued guidelines to help borrowers identify such unscrupulous platforms.
    • In the regulatory pipeline on this front is the report of the working group on digital lending, constituted by RBI in January 2021.

    Framing effective policy solutions

    • Given the significant contribution of legitimate fintech players, it is important to ensure that any policy solutions to address such issues do not impede the growth of such players.
    • The key to this lies in adoption of light-touch regulation, along with the effective implementation of the already proposed regulatory initiatives.
    • For instance, the primary cause of the rising supply of unauthorised lending platforms is the existing credit information asymmetry that genuine lenders face in respect of small borrowers.
    • Here, operationalising and on-scale implementation of RBI’s proposed ‘Public Credit Registry’ and the ‘Open Credit Enablement Network’ (an infrastructure protocol enabling digital low cost lending to small borrowers through access of consented data) would lead to increased participation of legitimate players and curb proliferation of unauthorised lenders.
    • Another foundation for framing effective policy solutions lies in leveraging the interdependence and impact of each individual constituent of the digital lending ecosystem, on other constituents.
    • Apart from lenders/platforms/borrowers, these constituents also include the digital lending industry associations, consent managers and technology developers.
    • Regulators and industry associations working together can provide the necessary foundations for addressing these issues.
    • Other solutions spear-headed by industry associations could be to establish ‘certification system’ based maintenance of a repository of lending platforms for easy identification of genuine players.
    • Similarly, on the data protection aspect, a structural solution through coordinated efforts of various digital lending constituents is required.

    Consider the question “Examine the factors aiding the growth of digital lending in India. What are the challenges the sector face? Suggest the measures to deal with these challenges.”

    Conclusion

    For the continued development of the Indian digital lending economy, it is important to implement policy solutions that adequately protect the borrowers from malpractices, while, at the same time, do not dampen innovation in this fast-evolving sector.

    Source:-

    https://www.financialexpress.com/opinion/soft-touch-regulation-for-digital-lending/2215702/

  • Insurance (Amendment) Bill, 2021

    The Rajya Sabha has passed the Insurance Amendment Bill 2021 that increases the maximum foreign investment allowed in an insurance company from 49% to 74%.

    It is very intriguing to see several amendments in news these days. Isn’t it?

    Insurance Amendment Bill

    • The Bill seeks to amend the Insurance Act, 1938.
    • The Act provided the framework for functioning of insurance businesses and regulates the relationship between an insurer, its policyholders and its shareholders.
    • It also had provisions regarding the regulator (the Insurance Regulatory and Development Authority of India).

    Key highlights of the bill

    The Bill seeks to increase the maximum foreign investment allowed in an Indian insurance company.

    () Foreign investment

    • The Act allows foreign investors to hold up to 49% of the capital in an Indian insurance company, which must be owned and controlled by an Indian entity.
    • The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
    • However, such foreign investment may be subject to additional conditions as prescribed by the central government.

    () Investment of assets 

    • The Act requires insurers to hold a minimum investment in assets which would be sufficient to clear their insurance claim liabilities.
    • If the insurer is incorporated or domiciled outside India, such assets must be held in India in a trust and vested with trustees who must be residents of India.
    • The Act specifies in an explanation that this will also apply to an insurer incorporated in India, in which at least: (i) 33% capital is owned by investors domiciled outside India, or (ii) 33% of the members of the governing body are domiciled outside India.
    • The Bill removes this explanation.

    Expected outcomes

    • More capital at dispense: The FDI limit increase is also expected to provide access to fresh capital to some of the insurance companies, which are struggling to raise capital from their existing promoters.
    • Better solvency: This would not only increase the solvency position for some insurers but would provide long-term growth capital for other companies to invest in newer technologies.
    • Insurance penetration: These technologies would not only help in managing losses but also in customer acquisition and thus insurance penetration.
    • Technological impetus: The additional funds could be used to invest in technology to adapt to the evolving customer needs like responsive service through digital platforms.

  • How e-commerce marketplaces can drive MSME makeover

    Facilitating manufacturing through MSMEs

    • A significant major contributor to the India growth story is going to be manufacturing.
    • Manufacturing by small units, cottage units and MSMEs, if effectively facilitated, will be the game changer.
    • For MSMEs to be sustainable and effective, the need of the hour is not just better automation but also more channels for accessing greater markets and opportunities to become a part of the national and global supply chains.
    • E-commerce marketplaces are today the best possible enablers for this transformation at minimal cost, innovation and investment.

    Need to invest in digital transformation and technology

    • China captured the world market through the traditional method of having guilds and business centres.
    • Today, digital empowerment is the key differentiator.
    • Without that, our MSMEs will not be future ready.
    • E-commerce allows products even from hinterlands to get to the national market, thus, providing opportunities to artisans and small sellers from Tier-2/3 towns to sell online to customers beyond their local catchment.
    • By investing in supply chains, the e-commerce sector provides opportunities for MSMEs to partner them in supply and delivery networks.
    • Start-ups and young brands are also finding opportunities to build national brands and even going global.
    • This leads to additional income generation through multiple livelihood opportunities.
    • Many offline stores are also adopting e-commerce to leverage these opportunities and the traditional and modern retail models are moving towards more offline and online collaborations.

    Challenges in building robust e-commerce sector

    1) No GST threshold exemption

    • Sellers on e-commerce marketplaces do not get advantage of GST threshold exemption (of Rs 40 lakh) for intra–state supplies.
    • Online suppliers have to “compulsorily register” even though their turnover is low.
    • Offline sellers enjoy this exemption up to the turnover threshold of Rs. 40 lakh.

    2) Principal place of business issue

    • Today, the sellers, as in offline, are required to have a physical PPoB which, given the nature of e-commerce, is not practical.
    • The government would do well to simplify the “Principal Place of Business” (PPoB) requirement especially for online sellers by making it digital.
    • Replace physical PPoB with Place of Communication.
    • Eliminating the need for state specific physical PPoB requirement will facilitate sellers to get state-level GST with a single national place of business.

    3) Support MSMEs to understand e-commerce

    • MSMEs should be provided with handholding support to understand how e-commerce functions.
    • The government can collaborate with e-commerce entities to leverage their expertise and scale to create special on-boarding programmes.
    • These can be provided by state governments.
    • There is need to examine the existing schemes and benefits for MSMEs, which were formulated with an offline, physical market in mind.

    4) Build infrastructure

    • There is a need to build infrastructure — both physical and digital infrastructure is important for digital transformation.
    • The road and telecom network will facilitate access to the consumer and enable the seller from remote areas to enter the larger national market as well as the export market.
    • A robust logistic network and warehouse chains created by e-commerce platforms enable similar access and reach.
    • The National Logistics Policy should focus on e-commerce sector needs.

    5) Skilling policies for e-commerce sector

    • Dovetail the skilling policy and programmes with the requirements of the e-commerce sector to meet future demand of the sector.

    6) Steps to increase export via e-commerce

    • We need to take specific steps to increase exports via e-commerce.
    • There is a need to identify products that have potential for the export market, connect e-commerce with export-oriented manufacturing clusters, encourage tie-ups with sector-specific export promotion councils, leverage existing SEZs to create e-commerce export zones.
    • India Posts can play a significant role by creating e-commerce specific small parcel solutions at competitive rates, building a parcel tracking system, and partnering with foreign post offices to enable customs clearances.

    Way forward

    • There is an urgent need to create a consolidated policy framework for e-commerce exports.
    • Policies like the upcoming Foreign Trade Policy needs to be fully leveraged.
    • The Foreign Trade Policy should identify areas and include e-commerce export specific provisions in the revised policy that comes into effect in April this year.

    Consider the question “E-commerce marketplaces can help MSMEs in accessing greater markets and provide opportunities to become a part of the national and global supply chains. In light of this, examine the opportunities provided by e-commerce also mention the challenge the sector faces in India.” 

    Conclusion

    By facilitating and supporting e-commerce, we can leverage the potential of MSMEs in manufacturing which could help in the economic growth of the country by creating job opportunities.

  • Mines and Minerals (Development and Regulation) Amendment Bill, 2021

    The coal and Mines Minister has introduced the Mines and Minerals (Development and Regulation) Amendment Bill, 2021 in Lok Sabha to streamline the renewal of the auction process for minerals and coal mining rights.

    MMDR Amendment Bill, 2021

    The Bill seeks to amend the Mines and Minerals (Development and Regulation) Act, 1957.  The Act regulates the mining sector in India.

    (1) Removal of restriction on end-use of minerals

    • The Act empowers the central government to reserve any mine (other than coal, lignite, and atomic minerals) to be leased through an auction for a particular end-use (such as iron ore mine for a steel plant).
    • Such mines are known as captive mines.  The Bill provides that no mine will be reserved for particular end-use.

    (2) Sale of minerals by captive mines  

    • The Bill provides that captive mines (other than atomic minerals) may sell up to 50% of their annual mineral production in the open market after meeting their own needs.
    • The central government may increase this threshold through a notification.  The lessee will have to pay additional charges for mineral sold in the open market.

    (3) Auction by the central government in certain cases

    • Under the Act, states conduct the auction of mineral concessions (other than coal, lignite, and atomic minerals).
    • Mineral concessions include mining lease and prospecting license-cum-mining lease.
    • The Bill empowers the central government to specify a time period for completion of the auction process in consultation with the state government.
    • If the state government is unable to complete the auction process within this period, the auctions may be conducted by the central government.

    (4) Transfer of statutory clearances

    • Upon expiry of a mining lease (other than coal, lignite, and atomic minerals), mines are leased to new persons through auction.
    • The statutory clearances issued to the previous lessee are transferred to the new lessee for a period of two years.
    • The new lessee is required to obtain fresh clearances within these two years.
    • The Bill replaces this provision and instead provides that transferred statutory clearances will be valid throughout the lease period of the new lessee.

    (5) Allocation of mines with expired leases

    • The Bill adds that mines (other than coal, lignite, and atomic minerals), whose lease has expired, may be allocated to a government company in certain cases.
    • This will be applicable if the auction process for granting a new lease has not been completed, or the new lease has been terminated within a year of the auction.
    • The state government may grant a lease for such a mine to a government company for a period of up to 10 years or until the selection of a new lessee, whichever is earlier.

    (6) Rights of certain existing concession holders

    • In 2015, the Act was amended to provide that mines will be leased through an auction process.
    • Existing concession holders and applicants have been provided with certain rights.
    • The Bill provides that the right to obtain a prospecting license or a mining lease will lapse on the date of commencement of the 2021 Amendment Act.
    • Such persons will be reimbursed for any expenditure incurred towards reconnaissance or prospecting operations.

    (7) Extension of leases to government companies

    • The Act provides that the period of mining leases granted to government companies will be prescribed by the central government.
    • The Bill provides that the period of mining leases of government companies (other than leases granted through auction) may be extended on payment of additional amount prescribed in the Bill.

    (8) Conditions for lapse of mining lease

    • The Act provides that a mining lease will lapse if the lessee: (i) is not able to start mining operations within two years of the grant of a lease, or (ii) has discontinued mining operations for a period of two years.
    • However, the lease will not lapse at the end of this period if a concession is provided by the state government upon an application by the lessee.
    • The Bill adds that the threshold period for lapse of the lease may be extended by the state government only once and up to one year.

    (9) Non-exclusive reconnaissance permit

    • The Act provides for a non-exclusive reconnaissance permit (for minerals other than coal, lignite, and atomic minerals).
    • Reconnaissance means preliminary prospecting of a mineral through certain surveys.
    • The Bill removes the provision for this permit.

    Why such a move?

    • The move would likely lead to greater transparency in the auction process.
    • There is a perception that states governments may in some cases prefer some bidders, and try to delay or cancel mining rights if their preferred bidders do not win mining rights.

    Could the amendment face legal challenges?

    • The amendment, if passed, was likely to face legal challenges particularly from state governments.
    • If an act is passed in which any state government’s discretionary power is taken away or their rights or benefits are infringed, it is likely to be challenged in the Supreme Court.

    (With inputs from PRS)

  • State budgets belies the hopes of public-spending-led recovery

    The article highlights the trends emerging from the State budgets which dashes the hopes of public-spending led economic recovery.

    State-level budget trends

    • Over the past few weeks, several state governments have presented their budgets for the financial year 2021-22.
    • The states, put together, account for a larger share of general government spending than the Centre.
    • States’ spending stance is pivotal to the hopes of a government spending-led economic recovery.

    5 Broad trends from the state budgets

    • The broad state-level budget trends are based on 11 states that account for a little over 60 per cent of India’s GDP.

    1) Offsetting the additional spending by Centre

    • There is a collapse in states’ revenues and transfers from the Centre.
    • Along with it, there is a “reluctance” among some states to borrow more to spend.
    • Thus, the aggregate level spending by these states in 2020-21 will end up being lower than what they had budgeted for before the onset of the pandemic.
    • The revised estimates peg their total expenditure to decline by around 6 per cent in 2020-21 from their budget estimates.
    • If these trends were to hold for the other states as well, then it would imply that the additional spending by the central government, over and above its budget estimate is likely to be offset by the decline in spending by states.

    2) From revenue surplus to revenue deficit

    • This year, states which typically run revenue surpluses will run revenue deficits.
    • The collapse in revenues meant that states that usually borrow to finance capital expenditure have had to borrow to finance their recurring expenditure (revenue expenditure) as well.
    • As a consequence, capital spending by states has been cut sharply.
    • States, though, expect the situation to reverse in the coming fiscal year, with most projecting a return to revenue surpluses even as the Centre will continue to run revenue deficits.
    • This anomaly is unlikely to be resolved unless the root cause of the situation — the nature of the fiscal compact between the Centre and the states — is addressed.

    3) Reluctance by states to borrow

    • The Centre had raised the ceiling on their market borrowings from 3 to 5 per cent of GSDP.
    • Of this 2 percentage point increase in the borrowing limit, part was unconditional while the remaining was subject to fulfilling Centre-mandated reforms.
    • As per ICRA’s estimate, 17 states qualified based on the One Nation One Ration Card reforms, 15 qualified based on the ease of doing business reforms, seven partially completed power sector reforms, while six had completed the urban local body reforms.
    • But, it is only the low-income states of Bihar, Rajasthan and Madhya Pradesh with already stretched finances that seem to have availed the additional borrowing space.
    • The high-income states of Gujarat, Maharashtra and Karnataka, all of whom had greater fiscal headroom going to the crisis, and were better placed to borrow more and spend, have not done so.

    4) Aggressive fiscal consolidation

    • As is the case with the Centre, states have, remarkably, budgeted for aggressive fiscal consolidation next year.
    • The average fiscal deficit across these states is expected to fall by more than 1 percentage point of GSDP, more than twice the decline recommended by the 15th finance commission.

    5) Ambitious revenue assumptions

    • The aggressive consolidation next year is expected to be achieved not by expenditure compression, as is the case with the Centre, but by significant revenue enhancement.
    • However, some revenue assumptions are quite ambitious, to say the least — some states have pegged their GST and VAT collections to grow far in excess of 30 per cent in 2021-22.
    • A deterioration in fiscal marksmanship will mean that expenditure in the coming fiscal year will also end up being lower than what has been budgeted for.

    Consider the question “The pandemic has upended the States’ fiscal space, which is evident in their budgets. In light of this, examine the trends emerging from the budgets of the States and their implications for the economy.”

    Conclusion

    Subdued general government spending during these tumultuous years heightens the risks to economic recovery. Considering the possibility of the economy exiting from this period with lower medium-term growth prospects, there is a strong case for greater government spending during these years.

  • India should abandon its suspicion of digital currency

    The article discusses the advantages of central bank digital currency which could combine the advantages of both fiat money and cryptocurrency.

    India’s suspicion of the cryptocurrencies

    • In 2018, the Reserve Bank of India prohibited regulated entities from providing services to anyone who deals with or settles trades in any virtual currency.
    • This was effectively banning Bitcoin trading in the country.
    • The Supreme Court lifted this restriction in 2020.
    • There were rumours earlier this year that a new law was in the works that would make it a crime to possess, issue, mine, trade or transfer crypto assets in India.

    Thinking of digital currencies as asset not currency

    • There are concerns over the speculative nature of cryptocurrencies.
    • There are also law enforcement concerns around how digital currencies make it hard for the police to track down criminals.
    • One of the most important attributes of a currency is that it should be a stable store of value, and Bitcoin is anything but.
    • To deal with this difficulty, it will be helpful to think of digital currencies as just another asset—the digital equivalent of a scarce commodity that, like gold, certain collectors prize.

    Difference between working of banks and cryptocurrencies

    • Our financial system relies on banks to record transactions.
    • It is a ‘permissioned’ ledger system in that only trusted intermediaries-registered banks under the supervision of the central bank-can make changes to the ledgers to certify that a given transaction has been completed.
    • Cryptocurrencies, on the other hand, are ‘permissionless’ systems that need no intermediary.
    • Instead of a centralized ledger, transactions are recorded on a distributed database.
    • A purely permissionless system has no need of banks.

    Role of banks in maintaining financial health

    • Central banks are not just intermediaries managing the great big financial ledger of the country, they are responsible for its financial health.
    • To perform this function, they need to be able to take money out of the system when required or put money back into economic circulation.
    • None of this is possible in a purely permissionless system.

    Advantages of digitally native currencies

    • Digitally native currencies are programmable and capable of being incorporated into smart contracts, offering various opportunities for innovative digital solutions.
    • Since they can be directly allotted to citizens who don’t have a bank account, they are ideal for financial inclusion.
    • Being digitally auditable, transactions can be audited, reducing the scope for illicit activity.
    • The challenge is one of integrating the best that digital currencies have to offer into the traditional financial paradigm.

    Central bank digital currencies as an alternative

    • CBDCs are a completely re-engineered form of money that use a distributed ledger as their underlying technology layer, but are backed by suitable amounts of monetary reserves, just like normal fiat currency.
    • Many countries have been toying with the idea of a central bank digital currency (CBDC).
    • They are run by central banks along with select financial entities responsible for managing the distributed ledger.
    • The best CBDCs will converge the best of both worlds—the programability and security of cryptocurrencies and the reserve-backed stability of fiat currency.
    • Several countries are already testing this concept.

    How central bank digital currency differs from cryptocurrency? What are its advantages?”

    Conclusion

    Banning technology has never made it go away. Instead, let’s make an effort to better understand it, and having done so, do all we can to create the digital currency our country needs.

  • [pib] Multi-Layer Farming

    ICAR is undertaking location-specific multi-layer farming involving crops of different heights.

    Multi-Layer Farming

    • Multi-layer farming means growing and cultivating compatible plants of different heights on the same field and at the same time.
    • It is generally practised in orchards and plantation crops for the utmost use of solar energy even under high planting density.
    • It is mostly cash crop-based and it includes a combination of vegetables and fruits that can be grown together.

    How it is done?

    • In Multi-layer farming, the crops are grown at different heights on the same land.
    • This farming cannot be done in open fields as shade is required. It is one type of intercropping.
    • Growing plants of different height in the same field at the same time is termed Multi-layer cropping. It is generally practised in orchards and plantation crops for maximum use of solar energy even under high planting density. It is the practice of several crops of varying heights, rooting pattern and duration to cultivate together.
    • The objective is to utilize vertical space more effectively.
    • In this, the tallest components have foliage of strong light and high evaporative demand and shorter components with foliage requiring shade and high humidity.

    Try this PYQ:

    Q.What are the advantages of fertigation in agriculture?

    1.Controlling the alkalinity of irrigation water is possible.
    2. Efficient application of Rock Phosphate and all other phosphatic fertilizers is possible.
    3. Increased availability of nutrients to plants is possible.
    4. Reduction in the leaching of chemical nutrients is possible.

    Select the correct answer using the code given below:

    (a) 1, 2 and 3 only

    (b) 1,2 and 4 only

    (c) 1,3 and 4 only

    (d) 2, 3 and 4 only

    Benefits offered

    • Prevent water evaporation from the soil; as an effect, 70% of water is saved.
    • The income per unit area increases substantially
    • Minimize risks of crop yield loss and this system enables a steady supply of farm products the whole round the year.
    • Reduces the impacts of hazards such as high-intensity rainfall, soil erosion, and landslides.
    • Improve the soil characteristics and adds organic matter to the soil.
    • Effective utilization of leaching materials and helps in effective weed control.
    • Provide micro-climate conditions that advantage crops underneath.

    What else?

    : Agricultural Technology Management Agency (ATMA)

    • In addition to this, a Centrally Sponsored Scheme ‘Support to State Extension Programs for Extension Reforms” popularly known as ATMA Scheme is already under implementation since 2005.
    • Presently, the Scheme is being implemented in 691 districts of 28 states & 5 UTs in the country.
    • The scheme promotes a decentralized farmer-friendly extension system in the country.
    • Under the scheme, grants-in-aid are released to the State with an objective to make available the latest agricultural technologies and good agricultural practices in different thematic areas of agriculture and allied areas to farmers including training for multi-layer farming.
    • Training of farmers is one of the eligible activities of the ATMA Scheme.

  • Places in news: Baralacha Pass

    For the first time ever, the Border Roads Organisation (BRO) has started work on reopening the crucial Baralacha Pass in Himachal Pradesh much before schedule to restore connectivity to Leh in Ladakh.

    Note all the Himalayan passes from their N-S sequences.

    Baralacha Pass

    • Bara-lacha la also known as Bara-lacha Pass is a high mountain pass in the Zanskar range connecting the Lahaul district in Himachal Pradesh to Leh district in Ladakh.
    • It is situated along the Leh–Manali Highway.
    • The Bhaga river, a tributary of the Chenab river, originates from Surya Taal lake, which is situated a few kilometres from the pass towards Manali.
    • The native name of Chenab “Chandrabhaga” represents the union of Chandra and Bhaga rivers downstream.
    • The pass also acts as a water-divide between the Bhaga River and the Yunan River.

    Why is this pass so important?

    • The BRO had kept crucial passes open for a longer duration to enable the Army to undertake advanced winter stocking for the thousands of additional troops deployed in Ladakh.
    • The team has traversed a total distance of 20 km in super high-altitude conditions scrupulously crossing the Baralacha La in the Zanskar range on foot amidst sub-zero freezing conditions.
    • Frequent avalanches and slides with 15 to 20 feet of snow accumulation.

  • A high growth plan for Indian agriculture

    The article deals with the issue discussed in the recently published book ‘Revitalising Indian Agriculture and Boosting Farmer Incomes’. It suggests strategies for six Indian states and underlies the importance of the diversified approach to different states.

    Why agriculture is central to Indian economy

    • Agriculture engages close to 42 per cent of the country’s workforce.
    • With its close interlinkage with poverty, it is best positioned to alleviate problems of malnutrition and hunger.
    • In addition, agriculture supplies inputs for other industries.
    • It is critical for triggering a multiplier effect in the economy, where a financially empowered farming community triggers a demand-led growth, particularly for manufactured products and services.
    • There is no doubt that the sector needs to grow not just for those employed in it but also for the economy as a whole.

    Growth strategy needs to take into account diversity across the states

    • The growth process of agriculture should not just more efficient, and inclusive of India’s small and marginal but is also sustainable — both financially and environmentally.
    • But then comes the question of the diversity in Indian states, where they differ as much on factors of production like land and water as they do on access to market opportunities.
    • They even differ in their vulnerabilities to climate and weather changes.
    • This begs the question, should the roadmap not be customised to the needs, vulnerabilities, and resource-base of each state?

    Strategies for six states

    • The recently published book “Revitalising Indian Agriculture and Boosting Farmer Incomes” proposes strategies for six Indian states: Punjab, Madhya Pradesh, Gujarat, Uttar Pradesh, Bihar and Odisha.
    • In the six states, three factors explained most of the agrarian growth.
    • One, access to infrastructure — mainly irrigation and roads.
    • Two, diversification to high value agricultural products like fruits, vegetables, and allied activities like dairy and poultry.
    • Three, price incentives or favourable terms of trade.
    • Bringing markets closer to farmers and increasing the efficiency of the value-chains emerged as an important factor that explained agricultural growth in Gujarat, Madhya Pradesh, Odisha, and Bihar.
    • By ensuring timely access to sufficient irrigation, states like Gujarat and Punjab could explain their high performances.
    • Role of uninterrupted quality power too emerged important in this.
    • Diversification of the agricultural basket of a state was found to strengthen a state’s agri-performance.

    Relation between growth rate and policy reforms

    • The requirement to undertake policy reforms, mainly related to marketing, emerged as a key driver and predictor of growth.
    • The NITI Aayog’s Agricultural Markets and Farmer Friendly Reforms Index — AMFFRI evaluates Indian states on the extent to which each of them undertook required agri-reforms.
    • A low AMFFRI rank implies the state is undertaking desired reforms.
    • It was found that states that undertook reforms, and were thus ranked low on AMFFRI, witnessed a relatively faster agri-GDP growth rate.
    • States which did not undertake required reforms, and thus were ranked high on the AMFFRI witnessed relatively lower agri-GDP growth rates.
    • There were some exceptions: Karnataka, Haryana and Maharashtra.
    • These states undertook reforms, and thus had low AMFFRI ranks, but they witnessed a low agri-GDP growth rate.
    • This is likely to be attributed to the delayed effect of reforms on the agri-performance.

    Way forward

    • As a part of the roadmap, the book makes a case for states to move beyond production-centric approach to a value-chain approach with FPOs at its centre.
    • It highlights importance and requirement of growing public investments in basic infrastructure.
    • And finally, in the longer run, rationalising subsidies via direct income transfer is suggested.

    Consider the question “Despite its comparatively lower contribution to the GDP, agriculture plays a central role in the Indian economy. What are the factors that make agriculture central to the economy? Suggest the pathway to fuel the growth of the sector.”

    Conclusion

    If the government follows this path of investing in infrastructure, ensuring a more diversified agriculture and linking small-holder FPOs with markets, it will pay rich dividends not only to the farming community but also the entire economy.