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

Civilsdaily

Login

Subject: Economics

  • [pib] PM-KISAN Scheme Completes Two Years

    The PM-Kisan scheme, launched with an aim to ensure a life of dignity and prosperity for farmers has completed two years of successful implementation.

    PM-KISAN

    • Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.
    • This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs. 2,000 each.
    • This programme will be entirely funded by the Government of India.

    Note: Aadhaar was made optional for availing the first instalment (December 2018 – March 2019). But now it is mandatory.

    Exclusion categories

    The following categories of beneficiaries of higher economic status shall not be eligible for benefit under the scheme.

    1. All Institutional Landholders
    2. Farmer families in which one or more of its members belong to the following categories
    • Former and present holders of constitutional posts
    • Former and present Ministers/ MP/MLAs/Mayors /Chairpersons of District Panchayats
    • All serving or retired officers and employees of Central/ State Government Ministries (Excluding Multi Tasking Staff /Class IV/Group D employees)
    • All superannuated/retired pensioners whose monthly pension is ₹10,000/-or more (Excluding Multi Tasking Staff / Class IV/Group D employees) of the above category
    • All Persons who paid Income Tax in the last assessment year
    • Professionals like Doctors, Engineers, Lawyers, Chartered Accountants, and Architects registered with Professional bodies and carrying out the profession by undertaking practices.

    Do you know?

    West Bengal is yet to implement the PM-KISAN scheme while the farmers have completed their registrations!

  • Animal Husbandry Infrastructure Development Fund (AHIDF)

    Importance of animal husbandary and dairy sector

    • As an allied industry of agriculture, the animal husbandry and dairy sector collectively employs more than 100 million people.
    • Since the bulk of establishments in this sector is concentrated in rural India, the socio-economic relevance of this sector cannot be overstated.
    • the Central government unveiled a string of measures to cushion the economy, as a part of which the Animal Husbandry Infrastructure Development Fund (AHIDF) was announced.

    More about AHIDF

    • The AHIDF has been set up with an outlay of ₹15,000 crore.
    • As per the provisions of AHIDF, a project will be eligible for a loan amount that covers up to 90% of the estimated cost –
    • There will be interest subvention of 3% for all eligible entities.
    • Applicants can submit the proposal with a complete Detailed Project Report through the Udyami Mitra Portal.
    • The fund includes a diverse set of stakeholders such as FPOs, private dairy players, individual entrepreneurs, and non-profits within its ambit.

    Strengthening dairy value chain

    • There is a pressing need to enhance chilling infrastructure at collection centres by setting up bulk milk coolers.
    • If the infrastructure needs for milk processing and distribution are included, then the overall potential investment opportunity is to the tune of ₹1,40,000 crore across the dairy value chain.
    • There is also considerable potential to increase the productivity of cattle, especially by enhancing the quality of animal feed.
    • With this in mind, the AHIDF has been designed to support the establishment of animal feed plants of varying capacities.
    • The infrastructure gap of 10-18 MMT in the production and supply of affordable compound cattle feed translates into an investment potential of around ₹5,000 crore.

    Boosting the poultry industry

    • There are not only economic but nutritional benefits to boosting the poultry segment’s output, efficiency and quality.
    • India is the fourth largest chicken meat producer and the second largest egg producer in the world.
    • India is well-positioned to help mitigate rampant malnutrition given that chicken meat provides the cheapest source of protein per unit.
    • With eggs being introduced as part of the mid-day meal within several anganwadis in the country, an upgradation in poultry infrastructure would be closely intertwined with social justice outcomes too.
    • Macro benefits regarding climate change and employment are linked to this sector.
    • Enhanced infrastructure can make processing units more energy-efficient and help mitigate their carbon footprint.

    Consider the question ” As an allied industry of agriculture, the animal husbandry and dairy sector are important for rural area and the socio-economic relevance of this sector cannot be overstated. In light of this, examine the role Animal Husbandry Infrastructure Development Fund (AHIDF) could play in transforming rural economy.”

    Conclusion

    The AHIDF also has the potential to create over 30 lakh jobs, even as it overhauls domestic infrastructure towards giving greater prominence to India’s dairy and livestock products in the global value chain.

     

  • [pib] SFURTI Scheme

    Union Minister for MSME has inaugurated 50 artisan-based SFURTI clusters, spread over 18 States.

    SFURTI is an off-track scheme compared to other HRD schemes with Hindi acronyms. Similar is the SPARSH scheme for philately.

    SFURTI Scheme

    • Scheme of Fund for Regeneration of Traditional Industries (SFURTI) is an initiative by the Ministry of MSME to promote Cluster development.
    • Khadi and Village Industries Commission (KVIC) is the Nodal Agency for the promotion of Cluster development for Khadi.
    • Under the Scheme, the MSME Ministry supports various interventions including the setting up of infrastructure through Common Facility Centers (CFCs), procurement of new machinery, design intervention, improved packaging and marketing etc.

    Types of clusters

    • SFURTI clusters are of two types i.e., Regular Cluster (500 artisans) with Government assistance of up to Rs.2.5 crore and Major Cluster (more than 500 artisans) with Government assistance up to Rs.5 crore.
    • The scheme focuses on strengthening the cluster governance systems with the active participation of the stakeholders so that they are able to gauge the emerging challenges and opportunities and respond to them.

  • PSBs should operate like proper banks if they can’t be privatized

    The article deals with the stark differences in the performance of the public sector banks (PSBs) and private banks and suggests ways to deal with the issues.

    Comparing PSBs with private banks

    • The performance of PSBs over the years hasn’t been worth the money that the government has invested in them.
    • As the Economic Survey of 2019-20 pointed out that over ₹4.3 trillion of taxpayer money is invested as government’s equity in PSBs.
    • In 2019, every rupee of taxpayer money invested in PSBs, on average, lost 23 paise.
    • In contrast, every rupee of investor money invested in New Private Banks—banks licensed after India’s 1991 liberalization—on average gained 9.6 paise.
    • The combined market value of HDFC Bank’s shares is ₹8.56 trillion (as of 18 February), whereas the market capitalization of all PSBs is around ₹6.41 trillion (excluding IDBI Bank, which is now categorized as a private bank).
    • Of course, if we add up the assets of PSBs, they are a lot bigger than HDFC Bank’s.

    Dual regulation

    • The private banks are regulated by the Reserve Bank of India (RBI).
    • PSBs are regulated both by RBI and the department of financial services under the finance ministry.
    • The P.J. Nayak Committee report of May 2014 had pointed out this issue of dual regulation.
    • This is primarily because PSBs are used by the government to fulfil its social obligations and pump-prime the economy when it’s not doing well.
    • The stock market discounts these factors while valuing them.

    Way forward

    • The policies for regulating and promoting industrial growth do not have any social content in them.
    • Hence, PSBs should be run as proper banks irrespective of whether they are privatized or not.
    • If they are not privatized, the government’s stake in these banks needs to come down to 33%, something which would help them raise more capital.
    • Once investors see PSBs being run as proper banks their market capitalization will start to go up.
    • Once PSBs are properly valued by the stock market, the government can sell some of its stake in them every year, and use that money to fund its social objectives.
    • It can also use some of that money to incentivize all banks, not just PSBs, to deliver some of its social objectives.

    Conclusion

    The government should take these steps to let the PSBs realise their potential. At the end of the day, nothing improves service delivery more than some good competition.

  • A year of cautious optimism on economic front

    The article argues that we are less likely to witness high growth next year rather it is going to be the year of consolidation.

    Year of consolidation

    • The Economic Survey, the Union budget, and the RBI credit policy attest that the economy is on the recovery path.
    • The fourth quarter will register a positive growth rate, and as a consequence, the contraction for the full year will be between 7.5-8 per cent.
    • The contraction sets the pace for growth in 2021-22 which is now going to be critical as it is the foundation for the fructification of the budget revenue targets.
    • But consider this: GDP in 2019-20 was Rs 146 lakh crore, which has come down to Rs 134 lakh crore in 2020-21.
    • Hence, a 10 per cent growth will take the Indian economy to Rs 147 lakh crore — when compared to Rs 145 lakh crore, this reflects modest growth.
    • Therefore, expectations should be tempered when we talk of growth next year.
    • There will be a revival in economic activity on all ends which will probably bear fruit in 2022-23 — FY 2021-22 will be a year of consolidation.

    Policy architecture

    • The government has brought in a cogent policy framework right from the time of the Atmanirbhar announcements, culminating in the budget.
    • There is a focus on infrastructure as well as providing incentives to investment through the Production Linked Incentive (PLI) scheme.
    • Real estate, power and construction saw several policy reforms last year.
    • There is a strong capex push by the government and there will more action taken here.

    RBI policies

    • The RBI has promised to continue accommodative policies, which sends a signal of managing liquidity considering the large borrowing programme of the government of Rs 12.8 lakh crore.
    • RBI will carry out more open market operations, and long-term repo operations during the year to ensure that interest rates remain stable.
    • However, there will be concern around state government borrowings too, which will exert pressure on the availability of funds.
    • Hence, there will be more central bank intervention in the market to ensure that funds are available.

    Inflation concerns

    • Inflation is a concern as global commodity prices have already started going up and this has led to core inflation rising.
    • Given that the monsoon has been good in the last four years, there is a possibility of an adverse season this time which can affect food prices. 
    • In India, too, we have seen that the price of petrol and diesel is rising sharply.
    • Add to this rising manufactured goods inflation witnessed of late, and there is a possibility of inflation rising above the MPC’s tolerance levels.

    Lack of consumption growth

    • For growth to take place, consumption growth has to be real and rapid.
    • Consumption growth has been affected by the absence of commensurate job creation.
    • Consumption growth is unlikely too soon as consumption is dependent on job creation.
    • Jobs get created when growth is high and hence there is circular reasoning here.
    • Income has been affected in 2020 due to the pandemic which has led to job losses as well as salary cuts.
    • This has affected the sustainability of the pent-up demand seen in October and November.

    Falling investment

    • Investment has lagged with gross fixed capital formation falling to a low of 24.2 per cent in 2019-20 from 34.3 per cent in 2011-12.
    • Reversing this decline will be challenging because the demand for such projects has slowed down and banks have been wary of lending for infrastructure.
    • There is also surplus capacity in industry with the capacity utilisation rate being 63.3 per cent in the second quarter of 2020-21.
    • Therefore, private investment will rise only gradually and the onus is on governments to manage their targets.
    • Private investment will follow, but at a slower pace and realistically speaking, will fire more in 2022-23 rather than 2021-22.

    Consider the question “Growth has to be driven by two engines- consumption and investment. India has been facing challenges on both fronts. In light of this, suggest the measures India needs to adopt to move forward on both fronts.

    Conclusion

    The year 2021-22 will be one of cautious optimism. Growth will trend upwards, but it has to be interpreted with caution, keeping a check on the consumption while pushing the investment while arresting the inflation.

  • Regulate but do no ban Bitcoin

    The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to ban cryptocurrencies. Banning cryptocurrencies would have several implications for India. This article deals with this issue.

    Soaring value of Bitcoin

    • Recently, Tesla announced that it will soon accept cryptocurrency as legitimate payment for its cars.
    • Mastercard followed by announcing that it will incorporate ‘select cryptocurrencies’ on its global payment network.
    • BNY Mellon, incidentally the US’s oldest bank, announced holding and transferring digital currencies for asset management clients.
    • JP Morgan and Goldman Sachs announced executive positions to look at cryptocurrencies.
    • All of this resulted in a soaring value of Bitcoin, and its younger sibling, Ethereum.

    India’s governments stand on cryptocurrencies

    • India’s government sought to ban cryptocurrency through a proposed legislation, the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
    • The Bill also provides to also set up a legal structure for an “official digital currency”.
    • The Bill promises to “allow for certain exceptions to promote the underlying technology of cryptocurrency (blockchain) and its uses.”
    • The way the technology is built, an ownerless, consensus-driven, distributed ledger like a blockchain needs cryptocurrency to grease its wheels.
    • India tried to ban cryptocurrency once before, in 2018, before it was reversed by the Supreme Court.

    Implications of banning cryptocurrencies

    • The banning will kill innovation.
    • India has more than 30,000 blockchain innovators and practitioners.
    • These innovators will now be looking at moving out to friendlier regimes like the US, Switzerland, Singapore and Estonia.
    • International tech companies will freeze blockchain and crypto-exchange investments in India and the step will undermine India’s reputation as a technology hub.
    • India is the second-largest Bitcoin trading nation in Asia, and all those trades will move to overseas exchanges.
    • China has large crypto trading and mining operations, and an Indian ban on Bitcoin will leave that space open for it.

    Consider the question “What is cryptocurrency? What would be the implications of banning it?”

    Conclusion

    No doubt, there are many problems with cryptocurrency—it is volatile, sucks energy, and is often abused by criminals. But the answer is not to ban it, but regulate it.

     

  • India Energy Outlook Report, 2021

    The International Energy Agency (IEA) has recently released the India Energy Outlook 2021 report.

    Try this MCQ:

    Q.The Global Energy Transition Index recently seen in news is released by:

    a) International Energy Agency (IEA)

    b) World Economic Forum (WEF)

    c) International Renewable Energy Agency (IRENA)

    d) International Solar Alliance

    Highlights of the India Energy Outlook Report

    (1) Energy consumption

    • India at present is the fourth-largest global energy consumer behind China, the United States and the European Union.
    • It will overtake the European Union as the world’s third-largest energy consumer by 2030.
    • It will account for the biggest share of energy demand growth over the next two decades.

    (2) Energy demand

    • India accounts for nearly one-quarter of global energy demand growth from 2019-40 — the largest for any country.
    • Its share in the growth in renewable energy is the second-largest in the world, after China.
    • A five-fold increase in per capita car ownership will result in India leading the oil demand growth in the world.
    • Also, it will become the fastest-growing market for natural gas, with demand more than tripling by 2040.

    (3) Industrial consumption

    • By 2040, India is set to account for almost 20 per cent of global growth in industrial value-added, and to lead global growth in industrial final energy consumption, especially in steelmaking.
    • The nation accounts for nearly one-third of global industrial energy demand growth to 2040.

    (4) Dependence on fossil fuels

    • To meet its energy needs, India will be more reliant on fossil fuel imports as its domestic oil and gas production stagnates.
    • India’s oil demand is seen rising by rising by 74 per cent to 8.7 million barrels per day by 2040 under the existing policies scenario.
    • The natural gas requirement is projected to more than triple to 201 billion cubic meters and coal demand is seen rising to 772 million tonnes in 2040 from the current 590.

    (5) Coal trade

    • India currently accounts for 16 per cent of the global coal trade.
    • Many global coal suppliers were counting on growth in India to underpin planned export-oriented mining investments.

    (6) Per-capita emission

    • On a per-capita basis, India’s energy use and emissions are less than half the world average, as are other key indicators such as vehicle ownership, steel and cement output.
    • India will soon become the world’s most populous country, adding the equivalent of a city the size of Los Angeles to its urban population each year.

    About International Energy Agency

    • The IEA is a Paris-based autonomous intergovernmental organization established in the framework of the Organisation for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis.
    • It was initially dedicated to responding to physical disruptions in the supply of oil, as well as serving as an information source on statistics about the international oil market and other energy sectors.
    • At the end of July 2009, IEA member countries held a combined stockpile of almost 4.3 billion barrels of oil.
    • They are required to maintain total oil stock levels equivalent to at least 90 days of the previous year’s net imports.
    • The IEA acts as a policy adviser to its member states but also works with non-member countries, especially China, India, and Russia.
    • The Agency’s mandate has broadened to focus on the “3Es” of effectual energy policy: energy security, economic development, and environmental protection.

  • [pib] Draft Blue Economy Policy of India

    The Ministry of Earth Sciences (MoES) has rolled out the Draft Blue Economy policy for India in the public domain inviting suggestions and inputs from various stakeholders.

    Blue Economy Policy

    • India’s draft blue economy policy is envisaged as a crucial framework towards unlocking country’s potential for economic growth and welfare.
    • The draft policy outlines the vision and strategy that can be adopted by the govt to utilize the plethora of oceanic resources available in the country.

    Objectives:

    The policy aims to-

    • Enhance the contribution of the blue economy to India’s GDP
    • Improve the lives of coastal communities
    • Preserve marine biodiversity and
    • Maintain the national security of marine areas and resources

    What comprises India’s blue economy?

    • India’s blue economy is understood as a subset of the national economy.
    • It comprises an entire ocean resources system and human-made economic infrastructure in marine, maritime, and onshore coastal zones within the country’s legal jurisdiction.
    • It aids the production of goods and services that have clear linkages with economic growth, environmental sustainability, and national security.
    • The blue economy is a vast socio-economic opportunity for coastal nations like India to utilize ocean resources for societal benefit responsibly.

    Need for such policy

    • With a coastline of nearly 7.5 thousand kilometres, India has a unique maritime position.
    • Nine of its 29 states are coastal, and the nation’s geography includes 1,382 islands.
    • There are nearly 199 ports, including 12 major ports that handle approximately 1,400 million tons of cargo each year.
    • Moreover, India’s Exclusive Economic Zone of over 2 million square kilometres has a bounty of living and non-living resources with significant recoverable resources such as crude oil and natural gas.
    • Also, the coastal economy sustains over 4 million fisherfolk and coastal communities.

    Key areas

    The policy recognizes the following seven thematic areas.

    1. National accounting framework for the blue economy and ocean governance.
    2. Coastal marine spatial planning and tourism.
    3. Marine fisheries, aquaculture, and fish processing.
    4. Manufacturing, emerging industries, trade, technology, services, and skill development.
    5. Logistics, infrastructure and shipping, including trans-shipments.
    6. Coastal and deep-sea mining and offshore energy.
    7. Security, strategic dimensions, and international engagement.

  • Drafting labour code keeping in mind the realities of informal sector workers

    The article highlights the vulnerabilities of workers in the informal sector and also highlights the issues in the draft rules in the labour codes.

    Context

    • The budget referred to the implementation of the four labour codes.
    • There is also a provision of Rs 15,700 crore for MSMEs, more than double of this year’s budget estimate.

    Impact of pandemic on informal workers

    • India’s estimated 450 million informal workers comprise 90 per cent of its total workforce, with 5-10 million workers added annually.
    • Nearly 40 per cent of these employed with MSMEs.
    • According to Oxfam’s latest global report, out of the total 122 million who lost their jobs in 2020, 75 per cent were lost in the informal sector.
    • The National Human Rights Commission recorded over 2,582 cases of human rights violation as early as April 2020.

    Issues with the draft rules in labour code

    • The rush to clear the labour codes and form the draft rules shows little to no intent on part of the government to safeguard workers.
    • The draft rules envisage wider coverage through the inclusion of informal sector and gig workers, at present the draft rules apply to manufacturing firms with over 299 workers.
    • This leaves 71 per cent of manufacturing companies out of its purview.
    • The draft rules mandate the registration of all workers (with Aadhaar cards) on the Shram Suvidha Portal to be able to receive any form of social security benefit.
    • This would lead to Aadhaar-driven exclusion and workers will be unable to register on their own due to lack of information on the Aadhaar registration processes.
    • A foreseeable challenge is updating information on the online portal at regular intervals, especially by the migrant or seasonal labour force.
    • It is also unclear as to how these benefits will be applicable in the larger scheme of things.

    Neglect of informal sector

    • The draft rules fail to cater to the growing informal workforce in India.
    • The growing informal nature of the workforce and the lack of the state’s accountability makes it a breeding ground for rising inequality.
    • The workers face the risk of violations of their human and labour rights, dignity of livelihood, unsafe and unregulated working conditions and lower wages.

    Consider the question “Assess the impact of covid pandemic on workers in the informal sector. Also examine the issues with the draft rules in the labour code.”

    Conclusion

    The Code on Social Security was envisaged as a legal protective measure for a large number of informal workers in India but unless the labour codes are made and implemented keeping in mind the realities of the informal sector workers, it will become impossible to bridge the inequality gap.

  • Cabinet approves PLI Scheme for telecom

    The Union Cabinet has approved the production-linked incentive scheme for the telecom sector with an outlay of ₹12,195 crores over five years.

    Why such a scheme?

    • The scheme aims to make India a global hub for manufacturing telecom equipment.
    • The sector is expected to lead to an incremental production of about ₹2.4 lakh crore, with exports of about ₹2 lakh crore over five years and bring in investments of more than ₹3,000 crores.

    PLI Scheme

    • The PLI scheme aims to boost domestic manufacturing and cut down on imports by providing cash incentives on incremental sales from products manufactured in the country.
    • Besides inviting foreign companies to set shop in India, the scheme aims to encourage local companies to set up or expand, existing manufacturing units.

    UPSC can directly as the sectors included in the PLI scheme. Earlier it was only meant for Electronics manufacturing (particularly mobile phones).

    Benefits for MSMEs

    • For inclusion of MSMEs in the scheme, the minimum investment threshold has been kept at ₹10 crores, while for others it is ₹100 crore.
    • For MSMEs, a 1% higher incentive is also proposed in the first three years.

    Employment generation

    • The scheme was also likely to generate 40,000 direct and indirect employment opportunities and generate tax revenue of ₹17,000 crores from telecom equipment manufacturing.

    Which equipments?

    • The telecom manufacturing would include core transmission equipment, 4G/5G Radio Access Network and wireless equipment, access and Customer Premises Equipment (CPE), IoT access devices, other wireless equipment.