💥Join UPSC 2027,2028 Mentorship (August Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

Subject: Economics

  • [pib] Emergency Credit Line Guarantee Scheme (ECLGS) 3.0

    The Government has extended the scope of Emergency Credit Line Guarantee Scheme (ECLGS) through introduction of ECLGS 3.0 to cover business enterprises in Hospitality, Travel & Tourism, Leisure & Sporting sectors.

    ECGL Scheme

    • Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
    • The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
    • The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.

    Aims and objectives

    • The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
    • The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
    • It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.

    Salient features

    • The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
    • Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
    • No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
    • Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.

    ECLGS 3.0

    • It would involve extension of credit of upto 40% of total credit outstanding across all lending institutions.
    • The tenor of loans granted under ECLGS 3.0 shall be 6 years including moratorium period of 2 years.
    • Further, the validity of ECLGS i.e. ECLGS 1.0, ECLGS 2.0 & ECLGS 3.0 have been extended upto 30.06.2021 or till guarantees for an amount of Rs. 3 lakh crore are issued.
    • The revised operational guidelines in this regard shall be issued by National Credit Guarantee Trustee Company Ltd (NCGTC).

     

  • What are Military Farms?

    Military farms have been closed after 132 years of service.

    Read till the end to know what Project Freiswal is.

    What are Military Farms?

    • The farms were set up with the sole requirement of supplying hygienic cow milk to troops in garrisons across British India.
    • The first military farm was raised on February 1, 1889, at Allahabad.
    • Post-independence, the farms flourished with 30,000 heads of cattle in 130 farms all over India.
    • They were even established in Leh and Kargil in the late 1990s.

    Why are they shutdown?

    • The major task was the management of large tracts of defence land, production and supply of baled hay to animal holding units.
    • There have been several recommendations in the past to shut down the farms.
    • In 2012, the Quarter Master General branch had recommended their closure.
    • Again in December 2016 by Lt. Gen. DB Shekatkar (retd) committee was appointed to recommend measures to enhance combat capability and rebalance defence expenditure of the armed forces.

    Their significance

    • For more than a century, the farms with dedication and commitment supplied 3.5 crore litres of milk and 25,000 MT of hay yearly.
    • It is credited with pioneering the technique of artificial insemination of cattle and the introduction of organised dairying in India, providing yeoman service during the 1971 war.
    • It also supplied milk at the Western and Eastern war fronts as well as during the Kargil operations to the Northern Command.

    Another initiative: Project Freiswal

    • It utilizes Friesian-Sahiwal cross-breeds as a base for the evolution of a new milch strain – “Frieswal” – through interbreeding, selection and progeny testing of bulls.
    • It was introduced on 3 November 1987 at the Military Farm School and Research Centre in Meerut.
    • It had the objective of studying the genetic aspects of Holstein x Sahiwal crossbreeds and those of important indigenous cattle breeds for their improvement through selection.

  • Lessons from past for the new financial institutions

    The article explains the factors that resulted in the failure of several financial institutions created by the government.

    Establishment of Development Finance Institution

    • As promised in the Budget, the Lok Sabha recently passed The National Bank for Financing Infrastructure and Development (NBFID) Bill, 2021.
    • The Bill seeks to establish a development finance institution (DFI) to fund infrastructure.

    Providing finance to NBFID

    • The government will initially own 100% of the proposed NBFID’s ₹20,000-crore share capital.
    • The government’s stake will be reduced later to 26%.
    • The government will also support NBFID in raising cheap, long-term finance.
    • Apart from the initial share capital, the government will also provide a ₹5,000-crore grant at the end of its first financial year, presumably to defray initial costs.
    • The government has also committed to guarantee NBFID’s borrowings and bond issuances in the domestic and overseas markets.
    • In addition, the government will underwrite NBFID’s foreign exchange hedging costs.

    Concerns and lessons from the past

    • Studying the performance of IL&FS Ltd and IDFC Ltd, two infrastructure financing institutions, set up in the public sector, will be instructive.
    • IL&FS had borrowed short-term loans to finance long-term infrastructure assets.
    • Sustaining this became difficult when a slowing economy and political interference forced infrastructure borrowers to stop repaying loans.
    • Also, it had grown unwieldy, was mismanaged, and escaped scrutiny for too long by handing out plum postings to select bureaucrats.
    • Similarly, 1996 budget speech announced the setting up of IDFC to address the lack of long-term infrastructure financing.
    • In 2004, interference by the bureaucrats to tackle slow growth of loan led to the resignation of several senior executives in IDFC.
    • IDFC, created originally to finance infrastructure projects, has since then wound down its project finance book.
    • 2021-22 Budget speech also mentioned the creation of another institution that will acquire the banking sector’s stressed assets.
    • On the similar lines, Industrial Reconstruction Corporation of India was create in 1971.
    • Mandated with nursing sick and weak companies, it collapsed under this onerous burden.
    • The institution was eventually shut down in 2012.

    Consider the question “Examine the role the National Bank for Financing Infrastructure and Development will play in the infrastructure development in the country. Also, examine the factors that led to the failure of development finance institutions in the past.”

    Conclusion

    The short lesson is this: Fix the distorted demand side before increasing supply. Any number of institutions can be launched, but cannot be expected to work miracles in a corroded system.

  • Suez Shows Civilization Is More Vulnerable Than We Think

    The recent closure of the Suez Canal highlights the inherent flaw in the global supply chains. Choking of one of the many such points leads to disruption in the global trade.

    Points of vulnerability

    • Suez Canal was blocked this week by a container ship named Ever Given when a gust of wind moved the ship out of the course and grounded it.
    • Egypt has expanded parts of the canal to enable two-way traffic and accommodate larger carriers.
    • The Ever Given ship went off course and got stuck in a part of the waterway that’s still narrow.
    • But it’s also a reminder that even an advanced civilization like ours has points of acute vulnerability. 

    Avoiding single points of failures

    • Systems designers strive to avoid these single points of failure, so that transport, energy and communication networks are able to withstand attacks or unexpected calamities.
    • Technological advances and globalization were also supposed to make us less susceptible to this type of problem.
    • The internet, for example, was conceived as a decentralized system that’s pretty difficult to break, as was Bitcoin.
    • But global infrastructure, defined broadly, still has a surprising number of pinch points.
    • These can be difficult to remedy, as creating back-up options is expensive and counteracts economies of scale.
    • In some cases, the problem is even getting worse:
    • Industries are becoming more concentrated due to corporate takeovers.
    • Big chunks of our lives are now mediated by a just handful of technology companies.
    • The governments are now more cognizant of the political and economic power held by those who control choke points.

    How canal can disrupt the global trade

    • The Panama Canal, the Suez Canal and the Strait of Hormuz are places where container ships and oil tankers are forced to navigate narrow passages.
    • The alternative is a long detour or more expensive air freight.
    • For decades these waterways have been recognized as areas of huge strategic importance and as being susceptible to military or terror attacks.
    • Various back-up routes have been mooted but most haven’t materialized.

    Vulnerabilities in economic sphere

    • In seeking to rid itself of one pinch point — pipelines that traverse Ukraine provides gas to Europ — Germany has created another: the twin Nord Stream gas pipelines that connect Russia and Germany under the Baltic Sea.
    • The U.S. worries these will weaken eastern Europe and increase Germany’s dependence on Russia.
    • In the realm of finance, trillions of dollars of financial instruments are tied to the London interbank offered rate.
    • This rate was easy to manipulate until they were exposed in the years following the 2008 financial crisis.
    • Libor is now being replaced.
    • Similarly, Europe has long relied on the Swift payments system and the U.S. dollar, but that dependence came into question in 2018 as it disagreed with the U.S. over Iran sanctions.
    • In technology, people have warned for years that the U.S. needs a back-up for the Global Positioning System.
    • The system can be spoofed or otherwise disrupted.
    • Semiconductors are where the clearest pinch points are emerging.
    • A global computer chip shortage during Covid has forced auto manufacturers to tear up production plans.
    • Very few companies are able to produce the most advanced chips, due to the technical challenges and vast cost of constructing foundries.
    • The most important of these, Taiwan Semiconductor Manufacturing Co., is based on an island that’s under constant threat of invasion by Beijing.
    • ASML Holding NV of the Netherlands has a monopoly on the machines needed to fabricate the best chips.
    • Now China’s inability to buy the most cutting edge gear from ASML is holding back its own semiconductor ambitions.

    Way forward

    • None of these choke-point problems are easy to resolve.
    • Not only are there geopolitical ambitions at work here but there are also usually trade-offs between building greater resilience and efficiency.
    • But because redundancy offers protection and is therefore a public good, there’s an argument that governments should play a role in providing it.
    • Antitrust polies can be used to challenge monopolies and foster more competition.

    Consider the question “What are the threat emanating from the various forms of choke points to the global trade? Suggest the ways to deal with it.”

    Conclusion

    Having a back-up is a good idea. We learn that when the roof falls in, or when a ship called the Ever Given snarls up the Suez Canal.

  • Need for technological solutions to use water for agriculture more sustainably

    The article examine the use of water for sugarcane and rice cultivation in India and its impact. 

    Water availability and usage in India

    • As per the Central Water Commission’s reassessment of water availability, India receives a mean annual precipitation of about 3,880 billion cubic meters (BCM) but utilises only 699 BCM (18 percent) of this; the rest is lost to evaporation and other factors.
    • The demand for water is likely to be 843 BCM in 2025 and 1,180 BCM by 2050.
    • As per the UN’s report on Sustainable Development Goal-6 (SDG-6) on “Clean water and sanitation for all by 2030”, India achieved only 56.6 per cent of the target by 2019.
    • Further, as per the Niti Aayog’s Composite Water Management Index (2019), 75 per cent households in India do not have access to drinking water on their premises.
    • India ranks 120th amongst 122 countries in the water quality index.
    • India is identified as a water-stressed country with its per capita water availability declining from 5,178 cubic metre (m3)/year in 1951 to 1,544 m3 in 2011 — this is likely to go down further to 1,140 cubic metre by 2050.

    How free or highly subsidised electricity skews water use pattern

    • Despite decades of large public and private investments in irrigation, only about half of India’s gross cropped area:198 million hectares is irrigated.
    • Groundwater contributes about 64 per cent, canals 23 per cent, tanks 2 per cent and other sources 11 per cent to irrigation.
    • This results primarily from incentive policy of free or highly subsidised power, particularly in the country’s north-west, the site of the erstwhile Green Revolution.
    • Overexploitation of groundwater has made this region amongst the three highest water risk hotspots.
    • Overall, about 1,592 blocks in 256 districts in India are either critical or overexploited.

    Need to focus on rice and sugarcane

    • Agriculture uses about 78 per cent of fresh water resources.
    • As per a NABARD-ICRIER study on Water Productivity Mapping, these crops alone consume almost 60 per cent of India’s irrigation water.
    • We need a paradigm shift to increase land productivity measured as tonnes per hectare (t/ha), and to maximise applied irrigation productivity measured as kilogrammes, or Rs, per cubic metre of water (kg/m3).
    • Figure 1 shows applied irrigation water productivity against land productivity for rice and sugarcane in important growing states.
    • Note that while Punjab scores high on land productivity of rice, it is at the bottom with respect to applied irrigation water productivity.
    • In the case of sugarcane, irrigation water productivity in Andhra Pradesh, Karnataka, Maharashtra and Tamil Nadu is only 1/3rd of that in Bihar and UP (Figure 2).
    • There is, thus, a need to realign cropping patterns based on per unit of applied irrigation water productivity.

    Use of technology

    • There are technologies to produce the same output of rice and sugarcane with almost half the irrigation water.
    • Jain Irrigation, for instance, has set up drip irrigation pilots for paddy and sugarcane.
    • The results of these pilots indicate while it takes 3,065 litres of water to produce 1 kg of paddy grain (yield level 7.75 t/ha) under traditional flood irrigation, under drip, it can be reduced to just 842 litres.
    • The benefit cost ratio of drip with fertigation in case of sugarcane in Karnataka is observed to be 2.64.
    • An extension to this is the “Family Drip System” innovated by Israel-based — Netafim.
    • The company has also launched its largest demonstration project in Asia at Ramthal, Karnataka.
    • Technologies like Direct Seeded Rice (DSR) and System of Rice Intensification (SRI) can also save 25-30 per cent of water compared to traditional flood irrigation.

    Need for right pricing policies

    • Technological solutions cannot make much headway unless pricing policies of agri-inputs are put on the right track and farmers are incentivised for saving water.
    • The Punjab government, along with the World Bank and J-PAL, has started some pilots with an innovative policy of “Paani Bachao Paise Kamao” to encourage rational use of water among farmers.

    Consider the question “Examine the impact of rice and sugarcane cultivation on the groundwater table in India. How technological solutions can help use water more sustainably for agriculture?”

    Conclusion

    Overall, it seems it is time to switch from the highly subsidised price policy of water/power (and even fertilisers) to direct income support on a per hectare basis, and investment policies that help with newer technologies and innovations.

  • What is the 2008 Lehman Crisis?

    The fire sale of about $20 billion of Archegos assets, comprising Chinese and US stocks, has sent jitters in the global financial markets, raising worries that the event could be a possible “Lehman moment”.

    What is the Lehman Crisis?

    • The bankruptcy of Lehman Brothers on September 15, 2008, was the climax of the subprime mortgage crisis.
    • After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate to finance for its reorganization.
    • These discussions failed, and Lehman filed a petition that remains the largest bankruptcy filing in US history, involving more than US$600 billion in assets.

    Note: The subprime mortgage crisis occurred when the real estate market collapsed and homeowners defaulted on their loans.

    What defines the moment?

    • It signalled a limit to the government’s ability to manage the crisis and prompted a general financial panic.
    • Money market mutual funds, a key source of credit, saw mass withdrawal demands to avoid losses, and the interbank lending market tightened, threatening banks with imminent failure.
    • The government and the Federal Reserve system responded with several emergency measures to contain the panic.

    Other terminologies:

    Margin Call

    • Typically, a margin call occurs when the value of an investor’s margin account falls below the broker’s required amount during a market correction or sell-off.
    • As the margin account contains securities bought with borrowed money, a margin call occurs when lenders demand that an investor deposit additional money or securities into the account so that it is brought up to the minimum value.
    • A margin call is usually an indicator that the securities held in the margin account have decreased in value.
    • When a margin call occurs, the investor must choose to either deposit more money in the account or sell some of the assets held in their account.
    • If the investor fails to pay up the margin amount, the lender will resort to the sale of assets lying in the investor’s account.

  • Learning economic lessons from Bangladesh

    The article examines the key driving factors of Bangladesh’s stellar economic progress and draws lessons for India.

    Overview of Bangladesh’s economic achievements

    • Bangladesh’s GDP growth in 2019 was an enviable 8.4 per cent — twice that of India’s during that year.
    • It is one of the few countries to have maintained a positive growth rate during the COVID-19 pandemic.
    • Its GDP per capita is just under $2,000 — almost the same as India’s.
    • In five years, by 2026, Bangladesh will drop its least developed country tag, and move into the league of developing countries — on a par with India.

    Parallels between Vietnam and Bangladesh’s progress

    • Vietnam instituted market and economic reforms in 1986, which enabled it to achieve rapid economic growth and industrialisation.
    • It began with the manufacturing of textiles and garments and moved into making mobiles and electronics.
    • As supply chains diversify from China, Vietnam is a beneficiary.
    • It is now the “+1” in the “China +1” strategy of multinationals.
    • Vietnam has signed trade agreements and inserting itself into global supply chains.
    • Bangladesh has followed a similar strategy.
    • Its rise is directly connected with the textiles and garments industry, which accounts for 80 per cent of the country’s exports.
    • Bangladesh also enjoys preferential trade treatments with the European Union, Canada, Australia, and Japan with negligible or zero tax.
    • With India too, Dhaka has a zero-export duty on key products like readymade garments.
    • Like Vietnam, its foreign investment regime is investor-friendly.
    • For instance, Bangladesh’s liberal FDI policy allows 100 per cent equity in local companies and no limits on repatriation of profits in most sectors. 
    • Indian companies are increasingly present in Bangladesh, and Indian products are popular — an outcome of a strong cultural affinity.

    Women in workforce and microfinance

    • The world’s most successful and pioneering microfinance organisations like Grameen and BRAC have aided small businesses in the country, and regionally.
    • Many of these schemes, over the years, were directed at women.
    • This has paid dividends not just in financial independence, but also in encouraging them to work outside the home.
    • Consequently, Bangladesh’s workforce in its textiles sector is almost all women — 95 per cent women in an industry which is 80 per cent of Bangladesh’s exports.

    Role of government schemes

    • This, along with government schemes like Pushti Apas (Nutrition Sisters) and community health clinics has helped Bangladesh in the development indices.
    • Bangladesh fares better on infant mortality, sanitation, hunger and gender equality than many countries including India.

    Key lessons for India

    • Increasing women in the workforce, liberalising internal and external trade, and making micro lending accessible, are some of the lessons.
    • But so is the goal of being a global hub for the sub region, building special economic zones which requires infrastructure, connectivity and a welcoming environment for investors both domestic and foreign.
    • both countries have suffered since 1947, without connectivity, at huge cost.
    • It is time to integrate our power systems, think about free trade, liberalise the visa regime.

    Conclusion

    India need not always carry the burden of South Asia’s development alone. It now has a partner with whom to collaborate effectively towards achieving that goal.

  • How fiscal stimulus in the U.S. will impact emerging economies

    The article highlights how the faster recovery of the U.S. economy aided by the faster vaccination and stimulus packages may pose a policy challenge to the emerging economies.

    About the fiscal stimulus in the U.S.

    • With the recent passage of Biden’s $1.9 trillion coronavirus relief package, the cumulative fiscal stimulus amounts to 25 per cent of GDP. 
    • This reliance on fiscal stimulus is in sharp contrast to the policy response in the aftermath of the 2008 global financial crisis (GFC) when monetary policy was the main tool.
    • The over reliance on fiscal measures is because of the “liquidity trap” — interest rates are already treading close to zero.

    So, what does this mean for the US and emerging economies?

    • From the US perspective, this is good news.
    • The U.S. economy is expected to converge to the pre-pandemic GDP projection after the third quarter of 2021, exceeding it by 1 per cent in the fourth quarter.
    • The impact on emerging economies is less certain.
    • A booming US economy generally bodes well for global growth as higher demand “spills over” to the rest of the world.
    • However, the sectoral contribution to US growth presents a different picture this time.
    • Private consumption of goods (tradable) is already back to pre-pandemic levels, while consumption of services remains significantly below pre-pandemic levels.
    • As the vaccination drive gathers pace in the US and the economy slowly opens up, it should be fair to assume that the non-tradable sector would be driving growth.
    • But given the expected nature of the underlying growth, the positive impact on emerging economies will perhaps be softer.
    • With smaller fiscal stimulus in emerging economies and the slower vaccine roll, the US recovery largely being led by the non-tradable sector will result in a divergence in growth between the US and emerging countries.

    Policy challenge for emerging economies which is different from GFC

    • Post-GFC, a combination of zero interest rates and quantitative easing in advanced economies led to a significant surge in capital inflows to emerging countries in search of higher yield leading to an appreciation of their currencies.
    • Now, the situation is exactly the opposite.
    • The differential rate of recoveries has already led to capital outflow from emerging economies.
    • The rise in yield in the U.S. may further fuel capital outflows in coming days leading to tighter monetary conditions in emerging markets.

    What should be India’s policy response

    • As far as India is concerned, the macro-economic fundamentals are much stronger than during the taper-tantrum days.
    • The foreign exchange reserves remain at historically high levels, the current account situation is comfortable and the inflation rate remains within the target band of the RBI.
    • In the event of capital outflows, the RBI should let the currency depreciate as the first line of defence to preserve India’s external competitiveness and intervene only to smoothen out extreme volatility.
    • It should avoid the temptation to increase interest rates at the risk of hurting the pace of economic recovery.

    Consider the question “Uneven economic recovery on the global level poses a policy challenge to India. In this context, discuss the possible impact of uneven recovery and suggest the policy measures to deal with it.”

    Conclusion

    Uneven recovery at the global level demands an unconventional policy approach. The policy approach of India should be based on this premise.

    Back2Basics: Taper Tantrum

    • The phrase, taper tantrum, describes the 2013 surge in U.S. Treasury yields, resulting from the Federal Reserve’s (Fed) announcement of future tapering of its policy of quantitative easing.
    • The Fed announced that it would be reducing the pace of its purchases of Treasury bonds, to reduce the amount of money it was feeding into the economy.
    • The ensuing rise in bond yields in reaction to the announcement was referred to as a taper tantrum in financial media.

  • Why privatising public assets is poor economics

    The article highlights the issues with government expenditure driven by the selling of public sector assets.

    How public asset selling could affects private investment decisions

    • Public sector assets are not bought by reducing consumption or investment.
    • Current investment expenditure depends on decisions taken in the past and is more or less pre-determined.
    • Investment decisions that are taken today for fructification tomorrow that may be scaled down by such a purchase.
    • However, if investment decisions taken today are scaled-down, then it results in crowding out and such a strategy should be avoided anyway.
    • This implies that selling public sector assets therefore does not release any resources from private use for government spending.

    How selling public asset has same macroeconomic effect as fiscal deficit

    • In case of fiscal deficit, the government puts its bonds in private hands; in sale of a public asset, the government puts its equity held in public sector assets in private hands.
    • The macroeconomic consequences of a fiscal deficit on the economy are no different from those of selling public assets.
    • However, finance capital, and institutions like the IMF treat the sale of public assets on a different footing from a fiscal deficit, for ideological — not economic — reasons, because they ideologically favour a dismantling of the public sector.

    How fiscal deficit leads to wealth inequality

    • In a situation of demand-constraints, where unutilised capacity and unemployed workers exist aplenty, if an appropriate monetary policy is pursued, it can have no adverse effects whatsoever, except one: It increases wealth inequality.
    • The government expenditure financed by the fiscal deficit creates additional aggregate demand that increases output and incomes until the additional savings generated out of such incomes exactly match the fiscal deficit.
    • These additional savings accrue to the savers without their having to reduce their consumption, compared to the initial situation (that is, prior to government expenditure increase).
    • Since savings represent additions to wealth, this amounts to putting extra wealth into the hands of the rich.
    • Selling public assets puts into private hands public assets, and that too at prices well below the capitalised value of earnings.
    • This increases wealth inequality for two reasons:
    • First, it does so exactly as a fiscal deficit does.
    • Second, the public asset it puts in private hands is under-priced.

    Why tax financed government spending should be preferred

    • If the same government expenditure is financed by taxation, no matter who was taxed, then there would be no addition to private wealth and hence no increase in wealth inequality.
    • Which is why tax-financed government expenditure should always be preferred to fiscal-deficit-financed government expenditure.

    What alternative government have

    • The obvious one is wealth taxation.
    • Taxing away the private wealth created by a fiscal deficit leaves private wealth inequality unchanged at its initial level; it does not exacerbate it.
    • If the government is unwilling to impose higher wealth or profit taxes, it can raise GST rates on several luxury goods.

    Consider the question “How fiscal deficit financed government spending differs in its impact on weath inequality from the tax-financed government spending?”

    Conclusion

    Thus, selling public assets to finance government spending is both undesirable and unnecessary.

  • Applying the policy of self-reliance to health, infrastructure and green technologies

    The article highlights how Atmanirbhar Bharat policies can play important role in India’s post-pandemic recovery.

    Decline of trade-led catch-up growth

    • The Asian Development Bank identifies India as an outlier, with the country’s GDP growth likely to range between eight and 10 per cent — as against 7.7 per cent for China and seven per cent for the Asian region.
    • The convergence between the rich and poor countries in the 1990s and 2000s was founded on high relative growth rates driven by globalisation and export-led growth.
    • The World Bank and many international think tanks are now projecting a process of de-globalisation, reduction in exports, and reduced service exports from the tourism, travel and hospitality sector in response to COVID.
    • So, the phenomenon of trade-led catch-up growth is declining.

    How Atmanirbhar Bharat is different from past strategies

    • India’s import substituting growth strategy of the 1960s did not succeed because the high protective customs barriers led to the growth of non-competitive industries.
    • The current Atmanirbhar Bharat project is different because tariffs are low and public investment is focused on non-tradable infrastructure rather than commodity production.

    1) Atmanirbhar in heath: Atmirbhar Swasth Bharat

    • Atmanirbhar Swasth Bharat is a domestic non-trade dependent initiative which will invest over Rs 64,000 crore in setting up 17,800 rural and 11,000 urban health and wellness centres and 602 critical care hospitals in the country’s districts.
    • Today India has 29 health workers per 10,000 population, while we need 60 such professionals per 10,000 people, as per WHO norms.
    • Creating such a cadre will mean nearly four million new jobs, which can be self-paying.

    2) Infrastructure

    • China and emerging markets like Russia and Brazil have a fairly advanced transport and energy infrastructure.
    • India has a huge potential to renew its railways and highways and shift to solar energy from its current dependence on coal.
    • In fact, the country’s long-neglected fourth largest rail network in the world is undergoing rapid transformation.
    • While rail track coverage expanded by 5,000 km during 2010 to 2014-15, nearly 7,000 km of tracks were added between 2015 and 2020.
    • The Railways now aim to lay 9.5 km of track daily and have raised adequate capital for the same by leveraging domestic insurance funds.
    • Railways are also aiming for 100 per cent electrification and zero carbon footprint by 2024.
    • Electrified track has doubled from 20,000 km in 2012/13 to nearly 40,000 km in 2020.
    • The Centre’s decision to invest heavily in urban mass transit systems since 2014 has led to the rapid expansion of such services.
    • The resolution of financial problems of blocked PPP projects and smooth land acquisition process has increased the pace of construction of national highways.
    • Pace of construction of the national highway increased from 3,330 km per year during 2009-20014 to nearly 9,450 km in 2020-21.

    3) Renewable energy

    • Today over 55 per cent of India’s energy comes from coal but the share of renewable has been steadly increasing.
    • Starting with only 10 MW of solar power in 2010, India has installed nearly 35 GW of solar power by 2020.
    • This has been propelled by economic reforms which drove solar power prices down from Rs 17 per unit in 2010 to Rs 2.44 per unit in 2020.
    • The target of reaching 100 GW by 2022 can drive growth further.
    • Currently nearly 25 per cent of India’s electricity is used for pumping underground water for irrigation.
    • Providing irrigation energy from decentralised solar grids — solar power can be generated at the points on consumption.
    • This will reduce huge transmission losses and the associated carbon footprint of non-renewable energy sources.

    4) Privatising public sector outfits

    • The Centre’s shift towards privatising public sector outfits including banks, insurance companies and other PSUs can fund the growth of rail, road and energy infrastructure.
    • This will also foster efficiency in India’s credit system.
    • China achieved supernormal growth in infrastructure without access to international financing in the initial decades.
    • Recent studies have revealed that China’s financial decentralisation and commercial exploitation of state-owned lands was critical for the success.
    • In India, too, regional development authorities like the Mumbai Metropolitan Regional Development Authority and Maharashtra Industries Development Corporation have financed the metro, trans-harbour links and industrial infrastructure through a similar commercial land allocation model.
    • This model can be extended throughout the country to finance infrastructure expansion.

    Consider the question “How Atmanirbhar Bharat policies differ from the past import-substituting growth strategy? Examine the role Atmanirbhar Bharat can play in the post-pandemic recovery?” 

    Conclusion

    In such a way, Atmanirbharta with its various facets will pave the road of post-pandemic recovery.