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Subject: Economics

  • Convergence of agrarian discontent in South

    With protests becoming catalysts for anti-authoritarian struggle, the air is ripe for new visions of rural emancipation

    Recent policy changes and its impacts on agriculture

    • There has been a systematic attack on agriculture in South Asia over the last decades. This can be seen in ongoing protests in India.
    • Similar incidences of protests can be seen in Pakistan, where farmers protesting for support prices were beaten up and arrested in Lahore only a month ago, or Sri Lanka, where shortages of imported fertilizers and declining subsidies have led to farmers’ outcry.
    • In the middle of a long-simmering rural economic crisis pushed over the cliff by the COVID-19 pandemic, efforts by South Asian governments to project corporatization and deregulation as the way forward for agriculture have angered long-suffering farmers.
    • Successive governments have imposed a corporate agenda, seeking profits from food production and distribution by relaxing norms for cheap food imports, and encouraging export-oriented production, price speculation, agribusiness and retail supermarkets.
    • South Asia’s rural landscape has been profoundly reshaped by such ‘reforms’, dispossessing farmers of their land, and pushing them into wage labour and migration as coping mechanisms.
    • This hollowing out of rural livelihoods does not come with any assurance of stable jobs or a decent quality of life in urban areas.

    Pandemic opportunism

    • The COVID-19 crisis has increased such efforts and policy changes.
    • India is not the only country to have attempted to seize this moment to deregulate agricultural markets. In Pakistan, the government inked an agreement with the World Bank to further deregulate the country’s wheat market.
    • In Sri Lanka, with the national budget just passed for 2021, there are only meagre allocations towards revitalizing agricultural livelihoods and policies focused on supporting technologies suitable for agribusinesses.
    • Instead of the current crisis sending governments back to the drawing board, South Asia’s authoritarian regimes, complicit with corporate interests, are railroading in anti-farmer agricultural policies.

    Practice Question: Do you think there is a common ground between farmers protests in various South Asian countries. Discuss with proper examples.

    Menace of the corporatization of Agriculture

    • Corporate agriculture further worsens the existential danger faced by South Asian farmers.
    • The corporate solutions do not address the role of middlemen and traders in denying farmers a fair price for their labour.
    • Instead, opening up markets to large corporations is likely to spark the same sort of race to the bottom that has been seen in the industrial and service sectors.
    • Deregulation makes farmers’ livelihoods even more precarious and threatens food sovereignty through increased dependence on global agricultural trade.
    • It was the collapse of global agricultural commodity prices in the 1970s that had a large role to play in the debt crisis that haunts countries such as Pakistan and Sri Lanka.

    Reviving resistance

    • There is a powerful legacy of rural movements in South Asia that have fought for the rights of farmers, peasants and agricultural workers.
    • Rural movements played a crucial role in the anti-colonial struggle and fought for progressive land and agrarian reform after independence.
    • Seventy years on, they continue to fight against the recent waves of anti-farmer policies, while advancing new progressive visions such as peasant agro-ecology and food sovereignty, which put small food producers and the environment at the centre.
    • The current convergence of authoritarianism and corporate capital brings this existential crisis for rural agricultural producers even more sharply in focus.
    • Farmers’ movements have been aware of state connivance with exploitative actors, but they must now also contend with a breakdown of the democratic process and increased repression.
    • These should be ominous signs for regimes across South Asia which continue to act with impunity in the face of demands for economic and social justice.

    Voices of movements

    • The COVID-19 pandemic has pushed food sovereignty back into the public imagination. The solution, of course, only begins with making farming a viable livelihood.
    • Dominant assumptions about inevitable rural-urban migration and techno-utopian transformation in agriculture must be challenged.
    • Questions of land redistribution and other rural inequalities must remain a crucial part of the political agenda.
    • The situation of mostly female agricultural workers, the rural landless and Dalits in South Asia remains precarious. Even as rural movements across South Asia fight the ongoing attack on their livelihoods, they must also tackle rural inequality head-on.

    Conclusion

    • The air is ripe for new visions of rural emancipation in South Asia.
    • Rural movements are working to transform not just their world but are becoming catalysts for a broader anti-authoritarian struggle in South Asia.
    • The current phase of struggles has revived old questions while raising others about the future of our long-ignored rural world.
    • We must listen to the voices and demands of the rural movements converging across South Asia.

  • The roots of the agricultural crisis run deep

    The standoff between farmers and the government continues even after a few rounds of discussion.

    Un-timely reforms

    • Currently, the country was struggling with novel coronavirus-caused lockdowns, supply disruptions, job losses and falling incomes in an economy.
    • The reforms embedded in the three Acts are unlikely to help resolve the structural issues facing Indian agriculture, even their withdrawal is unlikely to change the ground reality.

    Farmers protest continues

    • The immediate trigger for the current protests is the enactment of the three Acts, on agricultural marketing, contract farming and stocking of agricultural produce, which deregulates the existing Acts on these.
    • Farmer unions have rejected the proposal and continue to demand complete withdrawal of the three Acts along with making MSP a guarantee.

    Government for negotiations

    • The latest proposal by the government indicates its willingness to amend the three agriculture-related Acts passed in September.
    • The government has proposed amendments which will empower the States to frame rules the contentious issues of registration of private traders, levy of taxes on trade outside the Agricultural Produce Market Committee (APMC) mandis.
    • Similar assurances have been given on access to the judiciary for dispute resolution and continuation of the Minimum Support Price (MSP) mechanism.

    Many protests, one thread

    • The last four years have seen a series of large protests in most of the States.
    • For example, a group of farmers from Tamil Nadu camped in Delhi for over 100 days, Maharashtra was witness to the ‘Kisan Long March’ of farmers on more than one occasion, protests erupted in Rajasthan, UP, Haryana and MP.
    • The latest round of protests may have seen spirited protests from farmers from Punjab and Haryana but has found the support of farmers from the other States as well.
    • The common thread in all these protests — of declining agricultural incomes, stagnant wages and withdrawal of state support to agriculture.

    Changing faces of agriculture

    • The real issue is the lack of remunerative prices for a majority of agricultural commodities, a sharp increase in price variability in recent years, and an unpredictable and arbitrary government policy regime.
    • The other major problem is the changing nature of agriculture which has seen increased dependence on markets, increasing mechanization along with increasing monetization of the agrarian economy.
    • The increased dependence on markets has contributed to increasing variability in output prices.
    • Limited government intervention in protecting farmers’ income and stabilizing prices through MSP-led procurement operations made the increased variability in frequency as well as its spread.
    • Other than rice and wheat — and to some sporadic instances, of pulses — most crops suffer from inadequate intervention from MSP operations.
    • Even these procurement operations are unable to stabilize prices with falling demand and a slowing economy. For example, wheat has seen a steady decline in year-on-year inflation based on Wholesale Price Index (WPI).
    • Uneven nature of procurement in some states is also responsible to arrest the decline in prices. Crops like paddy, maize have seen in many States significantly lower market prices than the MSP.

    Factors behind vulnerability

    • Increasing mechanization and monetization have led to an increase in the cash requirement.
    • Most of these are met by non-institutional sources including middlemen which have contributed to the rising cost of cultivation and an increase in loan defaults.
    • The demand for loan waivers is unlikely to subside with the rising cost of inputs.
    • These trends have accentuated after 2010-11 when the Nutrient Based Subsidy (NBS) for fertilizers regime led to an increase in fertilizer prices.
    • The withdrawal of diesel subsidy and a rise in electricity prices also contributed to making agriculture unviable.
    • The government has declined the agricultural investment in the first four years which resulted in rising input costs and falling output prices.
    • The shocks of demonetization and the lockdown only increased the uncertainty and vulnerability in the agricultural sector both on input and output prices.

    What lies ahead?

    • The demand for making MSP a guarantee for private trade is meaningless if the government is unable to ensure procurement for a majority of the 23 crops for which it announces MSP.
    • Thus, the withdrawal of the three Acts by the government will only seem to offer a temporary truce.

    Policy overhaul needed

    • The existing policy framework with an excessive focus on inflation management and obsession with the fiscal deficit will likely lead to lower support from the government either in price stabilization or reduction in the cost of cultivation through fiscal spending.
    • The agricultural sector needs a comprehensive policy overhaul to recognize the new challenges of agriculture which are diversifying and getting integrated with the non-agricultural sector.
    • This not only entails a better understanding of the structural issues but also innovative thinking to protect farmers’ livelihood from the uncertainty of these changes.
    • Above all, it requires financial support and institutional structures to support the agricultural sector and protect it. Only this can lead to the government’s dream of doubling the farmers’ income.

  • A four-point agenda for Indian banking in the post-covid world

    The article suggest 4 imperatives to the banks in India to emerge successful from pain inflicted by the pandemic.

    Impact of pandemic on banking industry

    • Unlike other shocks, covid is not a banking crisis; it is, instead, a crisis of the real economy.
    • Globally, the average return on equity (RoE) for banks could go below 1.5% in 2021 before recovering to the 2019 pre-crisis levels of 9% by 2024
    • This is effectively a loss of five years for the banking industry.
    • This will likely play out in two stages:
    • 1) Loan loss provisions over a period of 12-18 months.
    • 2) Followed by a period where banking revenue growth lags gross domestic product growth, or GDP.

    Important role played by banks in pandemic

    • India has entered this crisis well-capitalized.
    • Their provision coverage ratios improved to 65% in 2019-20, compared to 41% in 2016-17, and RoE (return on equity) has turned positive to 2.5% after two years of negative readings.
    • The banking system is playing a critical role in the economic recovery by supporting businesses and individuals.
    • New challenges, however, continue to emerge. These, if left unmitigated, will lead to severe losses in efficiencies gained.

    4 Imperative to tackle the emerging challenges to banking

    1) Need to increase productivity

    • Indian banks start at a materially higher cost-to-assets ratio of 2.2% versus 1.4% globally.
    • Regaining pre-covid RoE levels and negating higher risk costs and margin compression will, however, require that Indian banks improve productivity by over 30%.
    • The Indian banking sector lagged in efficiency improvements; other industrial peers have leveraged a combination of digital adoption and analytics, and strong governance.

    Suggestions for productivity transformation

    • The productivity transformation will comprise multiple agendas.
    • To start with, there will be a branch format and network re-configuration for custormers who has shifted to online mode.
    • To drive a permanent digital shift, banks will need to accelerate digital engagement via contact centre transformations.
    • In conjunction, there will be the equally important need to create minimum viable support functions (zero-based operations, demand management across human resources, finance, marketing).
    • And, finally, there will be the need to re-skill the workforce for digital operations.

    2) Pre-emptive risk management

    • The second imperative is pre-emptive risk management.
    • Banks must rapidly rewire their policies and analytical models such that they reflect fast- moving indicators of risk.
    • This means investing in self-serve channels, digital nudges and frictionless journeys across payments, settlements and recoveries.
    • The overall collections strategy will have to be underpinned by micro-segmentation, and also leverage analytical models to drive efficiency.

    3) Technology imperative

    • The third is the technology imperative that must scale with demand and analytical complexity.
    • Banks are required to handle high digital traffic and process enormous data sets, and regulators getting increasingly sensitive on downtimes.
    • This will requires modernizing core banking platforms, creating the data architecture that supports the analytics life-cycle, instituting modern engineering practices and moving towards automated infrastructure.

    4) Capital management

    • Banks with exposure to hard-hit sectors will face more of a challenge.
    • And existing risk models are unlikely to be tuned to the differentiated impact the pandemic has had on various sectors.
    • Risk teams will need to review critical models and add overlays to account for different credit risk in each sector.
    • Scenario planning, stress testing and balance sheet optimization will need to become core to planning and management decisions.

    Conclusion

    In its own way, the pandemic has given banks a glimpse into the art of the possible. Banks should take this opportunity to embed their newfound speed and agility, reinvent their business model, and collaborate with the communities they serve to recast their contract with society.

  • Renewable Energy Generation: Betting on the green power market

    The article takes stock of the progress India made on renewable energy capacity and the steps taken for its trade through the creation of green markets.

    India increasing share of renewable energy

    • As a signatory to the Paris Climate Agreement, India is committed to increasing its share of renewable energy capacity to 450 GW by 2030.
    • India has an installed renewable energy capacity of 89 GW.
    • India has today become the most attractive destination for investment in the renewable sector.
    • During the last six years, has attracted over Rs 4.7 lakh crore of investment, including FDI of about Rs 42,700 crore.
    • India witnessed 20% CAGR growth in the renewable generation since FY16 while total electricity generation saw 4.3% growth in the same period.
    • The current levelised cost of energy (LCOE) for large scale solar in India is around Rs 2.5 per kWh, compared to ~Rs 12 in 2010. 

    Factor’s responsible

    • Waiver of inter-state transmission charges for the sale of solar and wind power, the renewable purchase obligation (RPO) trajectories for states, focus on maintaining the sanctity of contracts, permitting FDI in the renewable sector have accelerated the progress.

    Trading in renewable power

    • Most renewable power generation companies in India are committed to selling their power to consumers—mostly discoms  under the long-term Power Purchase Agreements (PPAs).
    • It is also a matter of gratification that most generation companies have adopted a robust system of forecasting and scheduling of power.
    • It is in this context, the CERC was approached for creating a market for green energy.
    • Ultimately, the CERC approved trading of renewable energy contracts under Green Term Ahead Market (GTAM) on the energy exchange.
    • The green market commenced trade on August 21, in day-ahead contingency (DAC) and intra-day contracts in both solar and non-solar segments.
    • The green market has now launched two more options—daily and weekly.
    • This will further strengthen the market and allow participants to buy green energy through contracts available for trade in all the segments.
    • The energy will be delivered to the market participants leveraging the national, regional and state-level transmission and distribution network.
    • With robust value proposition such as transparency, competitive prices, flexibility, and payment security and financial savings that the exchange market offers, a pan-India green market has the potential to drive and facilitate the country to meet its renewable energy targets.
    • The green market will ultimately encourage green generators to adopt multiple models of sale and trading.

    Conclusion

    Going forward, the introduction of new segments such as green day-ahead market, long-duration green contracts, contract for difference (CfD), etc, will play a crucial role in furthering sustainability goals, and ensuring that all the renewable energy generated within the country is dispatched in the most efficient manner through a pan India wide exchange-based energy markets.

    Source:-

    https://www.financialexpress.com/opinion/renewable-energy-generation-betting-on-the-green-power-market/2147657/

  • Public Wi-Fi Access Network Interface

    In a bid to improve wireless connectivity, the Union Cabinet approved setting up of the public WiFi was part of the Prime Minister WiFi Access Network Interface (PM- WANI).

    Do you know?

    According to TRAI, in most major economies, for 50%-70% of their total usage time, mobile users use WiFi technology to communicate. However, in India, this figure is less than 10%.

    PM- WANI

    • The WiFi will be provided through public data offices (PDOs) for which there will be no licence, registration or any other fees.
    • The PDO, to be set up along the lines of public calling office, can be a mom-and-pop store in the area or the common services centre present in various small towns, gram panchayats, and villages in the country.
    • The PDOs can either provide the internet on other own or lease it from other telecom and internet service providers.

    The centre-stage: Public Data Offices (PDO)

    • The idea of a PDO was first floated by the Telecom Regulatory Authority of India (TRAI) in 2017.
    • Like a PCO, the PDO allows users to connect to a public WiFi system for a limited session depending on the internet pack chosen by the user.
    • These internet packages can either by charged on per minute or per hour basis by the PDOs.

    Licensing of PDOs

    • There will be no licence for PDOs. A simple registration system will be put in place for PDO aggregators as well as app providers, which will be approved within seven days of the application being submitted.
    • In addition to the PDOs, there will also be PDO aggregators, which will look after the authorisation and accounting of PDOs.

    A note for users

    • A third layer will of app providers, available for download on the Play Store as well as the Apple Store, will enable users to register for using the public WiFi at a particular place.
    • Users, however, will not be required to download different apps, as a single app will provide seamless connectivity to any PDO across the country.

  • [pib] Better Than Cash Alliance (BTCA)

    The Union Ministry of Finance and UN-Based Better Than Cash Alliance (BTCA) organized a joint Peer learning exchange on fintech solutions for responsible digital payments at the last mile.

    Make a note here that it is a BTCA is a global partnership with diverse funding, a UN office as its secretariat and Indian being its member.

    Better Than Cash Alliance

    • The BTCA is a global partnership of 75 governments, companies, and international organizations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth.
    • The United Nations Capital Development Fund serves as the secretariat. It was created in September 2012.
    • The Alliance is funded by the Bill and Melinda Gates Foundation, Citi, MasterCard, Omidyar Network, USAID, and Visa Inc.
    • By the time it launched, the program was already being rolled out in Peru, Kenya, Colombia, and the Philippines.

    India and the BTCA

    • India became a member of the alliance in 2015 to digitize payments to achieve financial inclusion and to share success stories from Pradhan Mantri Jan Dhan Yojana, the world’s largest financial inclusion program.
    • The alliance is working with several state governments towards the goal of building knowledge and programs where people, governments, and businesses can make and receive digital payments.

  • Need for avoiding misplaced optimism over economic recovery

    Overoptimism stemming from the signs of recovery shown by the figures for the second quarter could result in reduced spending and the rollback of the stimulus. However, other features indicate that fiscal conservatism at this moment is not a good idea.

    Hype over recovery

    •  India’s economy contracted by 7.5% in the second quarter of financial year 2020-21.
    • There are two ways to look at that figure:-
    • 1) That figure is far lower than the 23.9% contraction registered in the first quarter of this financial year.
    • 2) A 7.5% second quarter contraction is high both in itself and when compared with most similarly placed countries.
    • The government, however, has chosen to focus on the unsurprising evidence that GDP rose sharply, by 23%, between the first quarter and the second when restrictions were substantially lifted.
    • Based on that evidence, the Finance Ministry’s Monthly Economic Report, for November, speaks of a V-shaped recovery reflective of “the resilience and robustness of the Indian economy”.
    • The danger is that such optimism would provide the justification to avoid adoption of the measures crucially needed to pull the economy out of recession.

    India economy is still demand constrained: 3 signs

    • 1) The decline in private final consumption expenditure at constant prices, which accounts for 56% of GDP, has come down from minus 27% in the first quarter to minus 11% in the second, it still remains high.
    • Though there are signs of a short-run recovery in private consumption demand with the lifting of lockdowns, net incomes and consumer confidence are not at levels that can even restore last year’s levels.
    • 2) As is to be expected, with production restraints relaxed, depleted stocks are being replenished with a fall of 21% in the first quarter turning into an increase in stocking of 6.3% in the second quarter.
    • 3) The decline in fixed capital formation has fallen from a high minus 47% in the first quarter to minus 7% in the second, investment is still falling year-on-year.
    • These are all signs of an economy that is severely demand constrained, requiring a significant step up in government expenditure.

    Impact on spending by the Centre and the States

    • Figures from the Office of the Controller General of Accounts for the first seven months of 2020-21 (April to October) indicate that the total expenditure of the central government stood at only 55% of what was provided for in the Budget for 2020-21.
    • In fact, in a non-COVID-19 year, 2019-20, the ratio of actual spending by the central government over April-October relative to that budgeted figure was a higher 59%.
    •  Meanwhile, with Goods and Services Tax (GST) revenues having fallen from their lower-than-expected levels during the COVID-19 months, the States have been cash-strapped.
    • Yet, the government has decided not to compensate them for the shortfall, as promised under the GST regime.
    • States have been left to fend for themselves by going to market and borrowing at high interest rates, which they would find difficult to cover.
    • Needless to say, as a consequence, State spending has also been curtailed.

    Why government should avoid fiscal conservatism

    • The loss of jobs and livelihoods that happened during lockdown is sure to affect demand now.
    • This leads to increased indebtedness and the bankruptcies well after restrictions are relaxed.
    • So, the tasks of providing safety nets, reviving employment and spurring demand become crucial.
    • Since the market cannot deliver on those fronts, state action facilitated by substantially enhanced expenditure is crucial.
    • And since government revenues shrink during a recession, that expenditure has to be funded by borrowing.
    • This is no time for fiscal conservatism, as governments across the world have come to accept.
    • Trend suggests that allocations for welfare expenditures — ranging from subsidised food to minimal guaranteed employment — needed to support those whose livelihoods have been devastated by the pandemic, would be reduced over time.
    • As collateral damage, this frugality in a time of crisis is likely to prolong the recession.

    Conclusion

    The optimism that a V-shaped recovery is imminent, and that optimism, in turn, would justify the view that fiscal conservatism pays. It does not, as time would tell.

    Back2Basics: What is V-shaped recovery?

    • A V-shaped recovery is characterized by a quick and sustained recovery in measures of economic performance after a sharp economic decline.
    • Because of the speed of economic adjustment and recovery in macroeconomic performance, a V-shaped recovery is a best case scenario given the recession.
    • The recoveries that followed the recessions of 1920-21 and 1953 in the U.S. are examples of V-shaped recoveries.
    V-shaped recovery of the U.S. economy

  • Why Surge in FPI in India?

    While emerging economies have been facing the crunch of foreign capital due to the pandemic, India is witnessing the surge of FPI: a sign of investors confidence in the economy. 

    Surge in FDI: Sign of trust India has built

    • In the September quarter, FDI doubled year-on-year to $28.1 billion dollars.
    • While foreign portfolio investor (FPI) inflows across emerging economies witnessed a decline due to the pandemic, India recorded a surge to $13.5 billion – a testimony to investor confidence in India’s growth story.
    • This surge in foreign funds amid the pandemic has been possible because of the continuous effort of the government, businesses, and agencies to make India a sought-after destination.

    Strategies used by the government

    Various steps described below signalled the government’s intention to open up the economy to investments.

    Such steps include the following:-

    • Allowing NRI’s to acquire up to 100% stake in Air India.
    • 26% FDI in the digital sector.
    • Permitting 100% FDI through automatic route in the coal mining sector.
    • 100% FDI for insurance intermediaries.
    • The National Infrastructure Pipeline, a ₹13 trillion project to open up avenues for infrastructure investment for global investors.
    • Apart from these steps, the more recent Production Linked Incentive (PLI) scheme worth an estimated ₹1.5 lakh crore is also a testimony to the government’s intention to encourage entrepreneurship and investment in the country.
    • Steps to skill-train 3 lakh migrant workers the country to realign the rural youth towards industry-relevant jobs is also a step in the right direction.

    Reducing dependency

    • The urgency the Indian government has shown to reduce dependency on China as a hub of the global supply chain.
    • Also, providing an enabling alternative environment has struck the right chord with the world as we see global biggies contemplating a move to India.

    Consider the question “India witnessed a steady flow of foreign capital while the world was battling pandemic. What are the factors responsible for this? What are the risks associated with such capital in the economy?”

    Conclusion

    While persisting with its efforts to attract the capital, the government also needs to focus on improving the productivity and export competitiveness of the economy.

    Back2basics: Difference between FDI and FII

    • FDI is an investment that a parent company makes in a foreign country.
    • On the contrary, FII is an investment made by an investor in the markets of a foreign nation.
    • While FIIs are short-term investments, the FDI’s are long term investment.
    • FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily.

  • How should India navigate future energy transition?

    The article is based on the book by Daniel Yergin, titled ” The New Map: Energy, Climate and the Clash of Nations”. The book throws some questions to countries dependent on oil and suggests the framework for their transition to renewable.

    Six broad themes underlying the energy transition

    • The first is the US shale revolution, which transformed the US from a major importer of oil and gas to a significant exporter.
    • The second is the leveraging by Russia of its gas exports to compel former members of the Soviet Union to stay within its sphere of influence and to embrace China into an energy partnership.
    • The third is China’s assertion of its rights over the South China Seas — a critical maritime route for its energy imports and the Belt and Road initiative;
    • The fourth is sectarian strife (Sunni/Shia) in the Middle East which, compounded by volatile and falling oil prices, has brought the region to the edge;
    • The fifth is the Paris climate summit and its impact on public sentiment, investment decisions, corporate governance and regulatory norms.
    • Sixth is the consequential impact of the manifold and impressive advancement of clean energy technologies.

    Questions for India

    • The ongoing transition in the energy world raises several questions for India.
    • How might they impact its objective to provide reliable, affordable, clean and universal access to energy?
    • Who will bear the costs of the transition — in particular, the costs of retrofitting industrial infrastructure and upgrading the power grids.
    • How can it prevent the “perfect storm” of high unemployment due to laid-off coal workers and stranded assets thermal power plants, slowed economic growth and environmental degradation?
    • How realistic is a green transition for an economy almost totally dependent on fossil fuels?

    Three policy initiatives for the government

    1) Securing favourable terms with oil suppliers

    • The government leverage its buyer strength to secure “most favoured” terms of trade for crude supplies.
    • In this regard, they bring out one development that plays to India’s advantage — the onset of “peak oil demand” (that is, demand will plateau before supply depletes).
    • However, there is no consensus on the timing of peak demand.

    2) Develop own systems for photovoltaics (PVs) and batteries

    • India must develop its own world-scale, competitive, manufacturing systems for photovoltaics (PVs) and battery storage.
    • Otherwise, India will not be able to provide affordable solar units unless it accepts the further deepening of dependence on Chinese imports.
    • Currently, China manufactures 75 per cent of the world’s lithium batteries; 70 per cent of solar cells; 95 per cent of solar wafers and it controls 60 per cent of the production of poly silica.
    • China is also looking to secure a chokehold over several strategic minerals (cobalt, nickel).

    3) Prepare a clean energy technology strategy

    • Technology is the answer to the energy transition.
    • That is what will bring the system to the tipping point of radical change.
    • China has placed clean energy R&D at the forefront of its “Plan 2025”.
    • The India strategy should identify relevant “breakthrough technologies”, establish the funding mechanisms and create the ecosystem for partnerships (domestic and international).

    Conclusion

    As an economy which is energy import-dependent, fossil-fuel-based India must balance between the rising demand for energy and an unhealthily strong linkage between this demand and environmental pollution.

  • Diversification of output to overcome the MSP trap

    The article analyses the state of agriculture in Punjab and the its dependace on the MSP regime and suggest the diversification as a solution to the MSP trap.

    Punjab’s role in Green Revolution

    • India was desperately short of grains in 1965, and heavily dependent on PL 480 imports from the US against rupee payments, as the country did not have enough foreign exchange to buy wheat at global markets.
    • The entire foreign exchange reserves of the country at the time could not help it purchase more than 7 MMT of grains.
    • It is against this backdrop that the minimum support price (MSP) system was devised in 1965.

     India’s current grains management system: Issue of excess grains

    • Today, the Food Corporation of India (FCI) stocks grains touched 97 MMT in June this year against a buffer stock norm of 41.2 MMT.
    • The economic cost of that excess grain, beyond the buffer stock norm, was more than Rs 1,80,000 crore, a dead capital locked in without much purpose.
    • That’s the situation of the current grain management system based on MSP and open ended procurement.

    Decline in Punjab’s economic level

    •  In 1966 Punjab had the highest per capita income.
    • Punjab’s position fell to 13th in 2018-19.
    • There are several reasons behind this deterioration, ranging from lack of industrialisation to not catching up even with respect to the modern services sector like IT, financial services.

    What explains Punjab’s prosperity

    • Punjab’s agriculture is blessed with almost 99 per cent irrigation against an all-India average of little less than 50 per cent.
    • The average landholding in Punjab is 3.62 hectare (ha) as against an all-India average of 1.08 ha.
    • Punjab’s fertiliser consumption per ha is about 212 kg vis-à-vis an all-India level of 135 kg/ha.
    • The productivity levels of wheat and rice in Punjab stand at 5 tonnes/ha and 4 tonnes/ha respectively, against an all-India average of 3.5t/ha and 2.6t/ha.

    Assesing Punjab’s real contribution to income and agriculture

    • In Punjab, the total farm families are just 1.09 million, a fraction of the all-India total of 146.45 million.
    •  The overall subsidy, from just power and fertilisers would amount to roughly Rs 13,275 crores.
    • That means each farm household in Punjab got a subsidy of about Rs 1.22 lakh in 2019-20.
    • This is the highest subsidy for a farm household in India.
    • Let’s not forget that the average income of the Punjab farm household is the highest in India.[2.5 time’s the India’s average].
    • But to assess the real contribution of farmers/states to agriculture and incomes, the metric is the agri-GDP per ha of gross cropped area of the state in question.
    • This is an important catch-all indicator, as it captures the impact of productivity, diversification, prices of outputs and inputs and subsidies.
    • On that indicator, unfortunately, Punjab has the 11th rank amongst major agri-states.

    Way forward: Diversification of crops

    • States in south India like Andhra Pradesh, Tamil Nadu and Kerala have a much more diversified crop pattern tending towards high-value crops/livestock — poultry, dairy, fruits, vegetables, spices, fisheries.
    •  If Punjab farmers want to increase their incomes significantly, double or even triple, they need to gradually move away from MSP-based wheat and rice to high-value crops and livestock, the demand for which is increasing at three to five times that of cereals.
    • Punjab needs a package to diversify its agriculture — say a Rs 10,000 crore package spread over five years.

    Conclusion

    Once farmers diversify their farm output and double their incomes, they will not be stuck in the MSP trap.