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Subject: Economics

  • RBI’s job involves trade-offs, not conflicts

    The article discusses three things for the RBI to follow in fulfilling its role, these are- 1) Prudence 2) Flexibility 3) Acting within the mandate. Besides that, problems the RBI has been facing are also discussed. These things are discussed against the backdrop of Covid-19.

    Role of the RBI

    • A central bank like the RBI must replace intellectual certainty with the continuous debate over their actions.
    • RBI’s job involves complex trade-offs — next quarter vs quarter century, growth vs stability, and mandates vs expectations.
    • A global anthropological shock-like COVID makes these trade-offs — they are not conflicts — even harder.
    • The RBI must remember three things — acting prudently to balance the next quarter and quarter century, acting flexibly to blunt this economic cataclysm, and acting within their mandate to ensure institutional legitimacy and immunity.

    These three things are discussed below-

    1. Acting prudently

    • If everybody believed that in the long run we are all dead, we would never sit under trees planted by people who had no chance of sitting under them.
    • The coronavirus is a human tragedy but a central bank must not act like a commercial bank because that would compromise the balance between today and tomorrow.
    • A narcissism — bordering on solipsism — already reflects in global debt levels that steal from our grandchildren.
    • More importantly, India doesn’t have the economic strength to copy the US Federal Reserve’s $2.3 trillion offer to lend to businesses of all sizes and sorts.
    • And run anything close to this year’s expected US fiscal deficit of 15 per cent of GDP, or sustain Japan’s public debt levels at 240 per cent of GDP.
    • We are all in the same storm but we are all not in the same boat.

    2. Acting flexibly within the mandate

    • Renaissance physician Paracelsus had important advice for central banks; the dose makes the poison.
    • Anything powerful enough to help has the power to hurt; handling the inevitable tensions between the RBI’s dual mandate of growth and stability requires continuous work.
    • Our inflation targeting regime is a macroeconomic gift to India.
    • But recognising that is hardly inconsistent with acknowledging that inflation’s secular decline has many parents, some economic models are useful but all are incomplete, and the fog of war involves making second-best choices as long as they are reversible, proportional, and accountable.
    • Central banks often undertake liquidity management while leaving policy rates unchanged; current actions are not a conspiracy to undermine the MPC or its interest rate corridor (between reverse repo rate and MSF rate with repo rate midpoint targeting and call rate operating target).
    • They are a pragmatic encouragement for banks to lend to clients rather than lend Rs 7 lakh crore to the RBI.
    • Other virus flexibility includes repayment moratoriums (with 10 per cent provisions), bad loan accounting forbearance (despite past experience of breaking the thermometer doing little for the fever) and bank windows for NBFC/Mutual Fund liquidity.
    • Listening is hardly compromise.
    • Especially if accompanied by a will to unwind liquidity, asymmetry and forbearance when the planet’s gap year ends.

    3. Follow the mandate

    • Central bank governance is a fine balance; they function best when they don’t declare separation from the government and they aren’t considered a part of the finance ministry.
    • The difficulty of balance isn’t uniquely Indian.
    • The RBI must build on its track record of wisely balancing the trade-offs between depositors vs borrowers, companies vs banks, and stability vs growth.
    • And it must continue to stay out of the government’s domain.
    • The central bank crisis role debate is skewed by the great book, Lords of Finance, by Liaquat Ahamed that shows how central bankers of the 1920s failed to fight the Great Depression.
    • History matters but nobody knows if this is the beginning or ending of the virus.
    • Yet the global central bank COVID toolbox has been substantial; buying corporate bonds, making corporate loans, cutting interest rates, conducting open market operations, and reducing reserve ratios.
    • Additionally, banks have been permitted to grant loan moratoriums, hold less capital, restructure loans, pay lower deposit insurance premiums and delay bad loan recognition.
    • The emergency authority under Section 13 of the US Federal Reserve Act being used — prematurely — also exists in Section 18 of the RBI Act.
    • But emergency powers are the last resort. We are not there yet.
    • The recovery being V-shaped, U-shaped, or Bathtub-shaped is only modellable after the lockdown.

    Pre-existing problems facing the RBI

    • The RBI’s COVID balm is constrained by pre-existing conditions in Indian banking, which are given below-
    • Bad loans which peaked at Rs 14 lakh crore but still large.
    • Inadequate competition- scheduled commercial bank numbers have hovered between 90 and 100 since 1947.
    • Private bank governance- CEO so powerful that boards and shareholders are weak.
    • Public sector bank governance- shareholder so powerful that boards and CEOs are weak.
    • And the RBI’s own game (process, technology and human capital in regulation and supervision).
    • All these must be tackled with urgency when normalcy returns.

    A question based on the role of the central bank can be asked by the UPSC. Consider the following question “Crises have always tested the utility of central banks, be it the Great Depression, 2008 financial crisis or Covid-19. In light of this statement, explains the trade-offs involved in the RBI’s decisions and how shocks like Covid-19 makes these trade-offs even harder.”

    Way forward

    • Supplementing India’s fiscal and monetary policy interventions by announcing two bold reform plans — 90-day flick-of-pen and one-year structural — that tackle overdue reforms in labour, education, cities, finance, compliance, and civil services, will catalyse hope among employers, employees, banks, and overseas investors.

    Conclusion

    Creating a prosperous India needs many things. One of them is an independent, accountable, and boundaried central bank that listens.

     

  • Three dimensions of food security amid Covid-19

    The article discusses the three dimensions of food security-1)Availability 2)Acces 3) Absorption. The first two are also dependent on job security. All these are now being threatened by the pandemic. Ways to safeguard food security along with its 3 dimensions are suggested at the end of the article.

    1. Availability of food in the market

    • The first is the availability of food in the market, and this is seen as a function of production.
    • Fortunately, thanks to the Green Revolution, today we have enough food in the market and in government godowns.
    • This is a great accomplishment by Indian farmers who converted a “ship to mouth” situation to a “right to food” commitment.
    • Yet we cannot take farmers’ contributions in terms of sustaining production for granted.
    • Some special exemptions have been given to the agricultural sector, farmers are confronted at the moment with labour shortages.
    • But many of the inputs, including seeds, are expensive or unavailable, marketing arrangements including supply chains are not fully functional, pricing is not remunerative, and public procurement is also not adequate.
    • There is no room for complacency, as in the absence of demand, the lack of storage or value addition facilities, especially for perishable commodities, we do not yet know exactly what the impact of the current pandemic will be on the kharif sowing and food availability in the future.

    2. Access to food

    • The second dimension is the access to food, which is a function of purchasing power, as unless you are a farmer and grow your own food, others have to buy it.
    • Fortunately, the government, through the National Food Security Act (NFSA) and the PDS, has assured some additional food to every individual during this crisis.
    • Strengthening the food basket: This should be further strengthened and the food basket widened by including millets, pulses and oil.
    • Hidden hunger: Steps should also be taken to avoid hidden hunger caused by the deficiency of micronutrients in the diet.
    • In light of the closure of schools and anganwadi centres, and the consequent disruptions in the provision of midday meals or other nutritional inputs, it is important to pay attention to the life cycle approach advocated in the NFSA, particularly the first thousand days in a child’s life, when the cognitive abilities of the child are shaped.
    • We may otherwise see negative effects on nutritional security in the medium to longer term.

    After reading the article you’ll be able to answer the question such as this one- “In the ongoing crisis, maintaining the level of food security has become one of the most essential need. In light of the above statement, critically examine the priority areas for maintaining food security in the country. Suggest measures to make accessibility and availability of food easier for all.”

    Job security to ensure food security and access to food

    • Food security and access to nutritious, good quality food is also contingent on job security.
    • Today, a lot of people employed both on farms and in the non-farm sector are without jobs.
    • If job security is threatened, then so is food and nutrition security.
    • We have to ensure people do not lose their jobs, and one way of doing this will be to ensure value addition to primary products.
    • One example of such value addition is the Rice Biopark in Myanmar, wherein the straw, bran, and the entire biomass are utilised.
    • This would mean some attention to and investment in new technologies that can contribute to biomass utilisation.
    • The Amul model provides a good example from the dairy sector of improved incomes to milk producers through value addition.
    • Similar attention needs to be given to the horticulture sector on a priority basis.
    • Women farmers are at the forefront of horticulture and special attention needs to be given to both their technological and economic empowerment during this crisis.
    • A second pathway to livelihood security is strengthening the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
    • Need to cover skilled work: Given the lack of jobs and incomes during the COVID-19 crisis, it is imperative to expand the definition of work in MGNREGA to cover skilled work related to farmers and their farming activities.
    • This is particularly important for women farmers and workers, who should not just be given tasks of carrying stones or digging mud.
    • Apart from farming, they engage in a range of essential care tasks, including caring for children, the elderly and sick people.
    • These tasks, often invisible, need to be recognised as work and supported with appropriate education, including on nutrition.

    3. Absorption of food in the body and its utilisation

    • The third dimension of food security is the absorption of food in the body or its utilisation.
    • Absorption and utilisation of food is dependent importantly on sanitation, drinking water and other non-food factors, including public health services.
    • Ensuring that these services are functional depends on the capacities of the local panchayats and their coordination with other local bodies.
    • The lack of adequate clean water, in particular, has come to the fore in both rural areas and urban slums in the context of COVID-19, where one of the key measures for stopping transmission relates to frequent hand-washing.

    Food security threatened by pandemic

    • If we can ensure food availability, food access and food absorption, then we have a fairly robust system of food and nutrition security.
    • All the above dimensions are, however, now threatened by the novel coronavirus, as discussed earlier.
    • It is very critical to highlight the linkages between agriculture, nutrition and health.
    • The inability to harvest, transport and market perishable fruits and vegetables at remunerative prices during the current crisis has deprived farmers of incomes and livelihoods.
    • It has also deprived consumers of micronutrients in their diets.
    • Farmers making losses, and agriculture moving from being job-led to jobless, raise questions about the sustainability of the production cycle.
    • At the same time, this can have long-term consequences on nutrition and health security.

    A question based on the dimension of the food security can be asked by the UPSC for ex- “Food security involved the security of food in all three dimensions, availability of food, access to food and absorption of food. How far the food security act is effective in ensuring security in all three dimensions?”

    Conclusion

    India avoided what could have been a big famine in the 1960s through the help of technology and public policy, which actively worked with and supported farmers to achieve significant increases in yield. Through a combination of farmers’ cooperation, technological upgrading and favourable public policies in procurement, pricing and distribution, we can deal with the fallouts of the pandemic.

  • National Infrastructure Pipeline (NIP)

    • To augment infrastructure and create jobs in the country, the government task force on National Infrastructure Pipeline (NIP), which in its report projected total investment of Rs 111 lakh crore in infra projects over five years.
    • It said that 18 per cent of the targeted investment is expected to be made in the road sector.

    It is estimated that India would need to spend $4.5 trillion on infrastructure by 2030 to sustain its growth rate. The endeavour of the National Infrastructure Pipeline (NIP), is to make this happen in an efficient manner.

    What is the National Infrastructure Pipeline (NIP)?

    • NIP includes economic and social infrastructure projects.
    • During the fiscals 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India.
    • It has outlined plans to invest more than ₹102 lakh crore on infrastructure projects by 2024-25, with the Centre, States and the private sector to share the capital expenditure in a 39:39:22 formula.

    Key benefits of NIP

    • Economic: Well-planned NIP will enable more infra projects, grow businesses, create jobs, improve ease of living, and provide equitable access to infrastructure for all, making growth more inclusive.
    • Government: Well-developed infrastructure enhances the level of economic activity, creates additional fiscal space by improving the revenue base of the government, and ensures the quality of expenditure focused in productive areas.
    • Developers: Provides a better view of project supply, provides time to be better prepared for project bidding, reduces aggressive bids/ failure in project delivery, ensures enhanced access to sources of finance as a result of increased investor confidence.
    • Banks/financial institutions (F1s)/investors: Builds investor confidence as identified projects are likely to be better prepared, exposures less likely to suffer stress given active project monitoring, thereby less likelihood of NPAs.

    Projects include

    • The report contains recommendations on general and sector reforms relating to key infrastructure sectors for implementation by the Centre and states.
    • These projects will be implemented under the National Infrastructure Pipeline (NIP), a first of its kind exercise, by consulting states, relevant ministries and departments.
    • Three committees will be set up to monitor project progress, eliminate delays, and find ways to raise resources, along with a steering committee in each of the infrastructure ministries.
    • Sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to around 71% of the projected investments.
    • The projects will also be spread across sectors such as irrigation, mobility, education, health, water and the digital sector.

  • Rebate of State Levies (ROSL) Scheme

    The Department of Revenue has allowed the release of pending Rebate of State Levies (RoSL) worth Rs 464.13 crore to garment exporters.

    We may expect a prelim question like- “The Rebate of State Levies (ROSL) Scheme is related to which of the following industrial sector? ” with some unrelatedly looking options.

    Rebate of State Levies (ROSL) Scheme

    • Last year, the Union Cabinet has approved the Scheme to Rebate State and Central Embedded Taxes to Support the Textile Sector.
    • The scheme aimed to reimburse the State levies that garment and made-up exports incurred.
    • But it was discontinued on and replaced with the Rebate of State and Central Taxes and Levies scheme.

    Why was such a scheme needed?

    • ROSL plays a vital role for the exporters by providing zero-rated taxation on apparel and made-up products.
    • This scheme enabled the exporters to increase traffic, enhance competitiveness among the global market, and compete against countries such as Sri Lanka, Bangladesh, Cambodia and Vietnam, who enjoy zero taxation.
    • This also benefits the traders who export to the European Union (EU), India’s largest export market for the apparel sector, facing a tariff variation of 9.6 per cent.

  • Kashmir saffron gets GI tag

    Kashmir saffron has been given the Geographical Indication (GI) tag by the Geographical Indications Registry.

    Must read:

    GI Tags in news for 2020 Prelims

    All time GI tags in news

    Kashmir saffron

    • It is cultivated and harvested in the Karewa (highlands) in some regions of Kashmir, including Pulwama, Budgam, Kishtwar and Srinagar.
    • It is a very precious and costly product. Iran is the largest producer of saffron and India is a close competitor.
    • It rejuvenates health and is used in cosmetics and for medicinal purposes.
    • It has been associated with traditional Kashmiri cuisine and represents the rich cultural heritage of the region.
    • Saffron cultivation is believed to have been introduced in Kashmir by Central Asian immigrants around 1st Century BCE. In ancient Sanskrit literature, saffron is referred to as ‘bahukam’.

    3 Types

    The saffron available in Kashmir is of three types —

    • ‘Lachha Saffron’, with stigmas just separated from the flowers and dried without further processing;
    • ‘Mongra Saffron’, in which stigmas are detached from the flower, dried in the sun and processed traditionally; and
    • ‘Guchhi Saffron’, which is the same as Lachha, except that the latter’s dried stigmas are packed loosely in air-tight containers while the former has stigmas joined together in a bundle tied with a cloth thread

    Whats’ so special about Kashmir Saffron?

    • The unique characteristics of Kashmir saffron are its longer and thicker stigmas, natural deep-red colour, high aroma, bitter flavour, chemical-free processing, and high quantity of crocin (colouring strength), safranal (flavour) and picrocrocin (bitterness).
    • It is the only saffron in the world grown at an altitude of 1,600 m to 1,800 m AMSL (above mean sea level), which adds to its uniqueness and differentiates it from other saffron varieties available the world over.

  • [pib] Kisan Sabha App to Connect Farmers to Supply Chain and Freight Transportation

    Kisan Sabha App developed by CSIR to connect farmers to supply chain and freight transportation management system was recently launched.

    Initiatives as such are less likely to be asked in the prelims as the name and purpose create no different analogy. But for the sake of information and mains perspective, it is vital to remember such technology interventions while emphasizing on Agricultural marketing reforms.

    Kisan Sabha App

    • Kisan Sabha aims to provide the most economical and timely logistics support to the farmers and increase their profit margins by minimizing the interference of middlemen and directly connecting with the institutional buyers.
    • It will also help in providing the best market rates of crops by comparing nearest mandis, booking of freight vehicle at the cheapest cost thereby giving maximum benefit to the farmers.
    • The portal connects the farmers, transporters, Service providers (like pesticides/ fertilizer/ dealers, cold store and warehouse owner), mandi dealers, customers and other related entities for a timely and effective solution.
    • The app has 6 major modules taking care of Farmers/Mandi Dealers/Transporters/Mandi Board Members/ Service Providers/Consumers.

    Facilities provided by the app

    • The portal acts as a single stop for every entity related to agriculture, be they a farmer who needs better price for the crops or mandi dealer who wants to connect to more farmers or truckers who invariably go empty from the mandis.
    • It provides a platform for people who want to buy directly from the farmers.
    • It would also prove to be useful for those associated with cold store(s) or godown(s).

  • Pandemic calls for deep-set forces and scientific concepts of development for building a modern economy

    The article discusses the recovery strategies for India. There are three examples from the past from which we can draw the lessons. 1) Recovery of the US and Europe after the World Wars 2) Recovery of Japan after World War 3) China’s stimulus package after the 2008 financial crisis. In the case of the first two, climate change was not the factor. But in case of the 2008 financial package, China emphasised green technologies and was benefited from it. Drawing on China’s example, the article suggests three pronged strategy for India’s recovery taking into account the climate change factor.

    Decisions on recovery and lessons from the past recovery frameworks

    • The decisions and directions taken by states from hereon will be judged ruthlessly by historical lenses.
    • Though India has managed the pandemic with relative precision, we cannot deny an impending emergence of a new socio-economic order, where the recovery is going to be hard-earned.
    • This is not the first time the world has faced an economic crisis and won’t be the last.
    • Can a country like India, which might be one of the few countries to come out of the crisis without a recession, take lessons from past recovery frameworks?
    • Recovery frameworks: Even though the very nature of the current health crisis is much different from the past crises like World Wars and their repercussions in Europe, the US and Japan.
    • But the evidence shows that ambitious recovery plans made these nation-states more prosperous than the pre-crisis period.

    Recovery lessons form the western world after the World Wars

    • Hurt by the two World Wars and a Great Depression in between, the western world demonstrated unprecedented recovery to attain post-war full employment and stabilized income levels.
    • Almost thirty years between World War II and 1973 recession (“Glorious Thirties“), the countries like the US, Canada, Germany, and France experienced a golden period of growth.
    • In the US, the labour productivity grew at 2.82% per year which meant that productivity doubled every 25 years thanks to better machines driven by electricity and internal combustion engines, better education and massive capital investment.
    • The world wars accelerated technological innovations in energy, manufacturing and vastly improved the labour pool.

    Recovery of Japan after World War

    • Severely hit by the war, Japan’s miraculous growth from 1950 to 1990 is another example of a state using great adversity to propel itself towards prosperity.
    • Post-war liberalization was augmented by multilateral trade agreements and export promotion schemes.
    • That propelled the Japanese economy to dizzying heights making it the second-largest economy at the time.
    • Apart from fiscal stimuli, immense efforts went into strengthening human capital by promoting R&D and skilling activities.
    • Suddenly, Japan becomes one of the most ingenious economies churning out one innovative product after another in fields like electronics.
    • In addition, pioneering quality systems made Japan the first Asian economy to become a developed state.

    Recoveries based on values and technological innovations

    • All the above recoveries are rooted in modern values like create, explore and meet challenges.
    • While large investments garner a lot of attention, role played by massive skilling and resultant technological innovation should not be forgotten.
    • Skilling and innovation enabled creating goods and services of the future.

    Climate change and recovery

    • These successful recovery plans did not have the responsibility to plan for an impending climate change hanging over our head by a thread.
    • The times were different; the needs were different: more importantly, the evidences were not as irrefutable as now.
    • A 2018 study titled ‘Earth’s future’, estimated that India will lose 10% of its GDP annually in a 3°C scenario and lose 14% of its GDP annually in a 4°C scenario in the long term.
    • And the time to act is ‘now’, as consequences of inaction are existential.

    China’s stimulus after the 2008 crisis with a focus on green technologies

    • Fast-forwarding to the 21st century, the 2008–09 Chinese economic stimulus plan pumped in $586 billion to manage the crisis.
    • With serious money of $586 billion going into upgrading selected industrial sectors to firm up its presence in the global value chains (GVC).
    • Interestingly, a sizeable portion went into green technologies.
    • China understood that if the world is provided with affordable green technologies at scale, the states will incentivize the increasingly eco-aware consumers to buy these products.
    • Catalyzed by plans like “Ten Cities, Thousand Vehicles and “Thousand Talents Program (TTP)” and generous state incentives, China became a global leader in e-vehicles.
    • Chinese-made buses started roaming famous cities across the world, the roads traditionally dominated by European makers.
    • Powered by generous capital infusion, China also attained leadership in solar panels, batteries and associated supply chains in a short period setting up a sustainable growth module.
    • A lesson in fiscal prudence: The 2008–09 Chinese economic stimulus plan is also criticized for raising the Chinese debt levels, hence giving us lessons in fiscal prudence.

    Should India opt for a green recovery module?

    • Can a developing India afford to allocate a significant portion of its precious resources towards a green recovery module?
    • Unbridled economic growth and sustainable development are not mutually exclusive.
    • In fact, we might not have a choice, given the movement of global supply chain towards green technologies and tightening screws around strict sustainability standards.
    • European Commission, for instance, has announced that every euro into the recovery plan will be linked to green recovery.

    A three-pronged approach is suggested for recovery

    1. Investment and incentives for green economic activities in the selected sectors

    • First, ambitious investment and incentives in catalyzing futuristic green economic activities in selected sectors.
    • Developing, manufacturing and deploying low carbon products could help India create more jobs: the kind of jobs that will survive into the future.
    • With Giga scale battery and solar manufacturing plans already underway, there is a huge demand globally for sustainable supply chain of even traditional sectors such as textiles.
    • India could choose 5 sectors where it can fill the sustainability vacuum helping the sub-continent emerge as a new global leader in those sectors.
    • India has the potential to scale-up currently ready technologies like e-VTOLs (intra-city electric aerial mobility), which will upend the global mobility modules, increasing the profitability of growing Indian e-mobility supply chain.
    • Companies like Hyundai who have already announced manufacturing of e-VTOLs should be attracted to India.
    • Crisis situations often provide policy windows, where all the stakeholders are empowered, and historically time-consuming decisions are fast-forwarded.
    • If India manages to efficiently remove regulatory bottlenecks and creates standards for e-VTOLs before anyone else, it will take a huge chunk of the global future mobility pie.
    • Similar initiatives for other strategic sectors could be carried out.

    2. Resolve regulatory and on-ground legacy issues

    • Aggressively resolving on-ground legacy issues and challenges.
    • Shackles around entrepreneurship from labour laws to clearances regimes should be broken one by one.
    • It could be done by leveraging the cooperative and competitive federalism evidenced through the crisis under the able leadership of the Hon’ble Prime Minister.
    • And the current policy window might be an ideal opportunity for Indian democracy to deliver.

    3. Focus on skilling people

    • Third, a big-ticket omni-channel skilling architecture should be instituted.
    • Universities should be empowered and enabled to come up with new-age educational programmes to serve futuristic industries.
    • A special focus should be given to develop enough trainers to train the millions of Indian youth getting ready for the labour market every year, in new-age skills.
    • Adequate online-offline training courses must be designed in a way that it does not affect daily wages drastically.
    • The big-ticket vocational programmes, specially directed at the informal sector which constitute more than 90% of the total workforce, has the potential to employ displaced and poor labourers.
    • A strategic skill committee may be empowered to dynamically identify key skills and tweak the training modules.
    • This can be integrated with the Ministry of Environment’s Green Skill Development Program to train 10 million youth by 2030.

    The issues discussed here are important for achieving sustainable and inclusive growth. A question based on this theme was asked by UPSC in 2019.

    Consider the question “It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement.”

    Conclusion

    The current pandemic calls for deep-set forces and scientific concepts of development for building a dynamic and modern economy. Green growth is one such concept that will add a new dimension to the economic dynamism of the sub-continent helping it serve the aspirations of its citizens.

  • GI tag to Manipur black rice, Gorakhpur terracotta and Kovilpatti kadalai mittai

    Chak-Hao, the black rice of Manipur and the Gorakhpur terracotta and the Kovilpatti kadalai mittai of Tamil Nadu have bagged the Geogrphical Indication (GI) tag.

    Must read: GI Tags in news for 2020 Prelims

    Chak-Hao

    • Chak-Hao, the scented glutinous rice which has been in cultivation in Manipur over centuries.
    • It is characterized by its special aroma. It is normally eaten during community feasts and is served as Chak-Hao kheer.
    • The application for Chak-Hao was filed by the Consortium of Producers of Chak-Hao (Black Rice), Manipur and was facilitated by the Department of Agriculture.
    • Chak-Hao has also been used by traditional medical practitioners as part of traditional medicine.
    • According to the GI application filed, this rice takes the longest cooking time of 40-45 minutes due to the presence of a fibrous bran layer and higher crude fibre content.
    • At present, the traditional system of Chak-Hao cultivation is practised in some pockets of Manipur.
    • Direct sowing of pre-soaked seeds and also transplantation of rice seedlings raised in nurseries in puddled fields are widely practised in the State’s wetlands.

    Gorakhpur terracotta

    • The terracotta work of Gorakhpur is a centuries-old traditional art form, where the potters make various animal figures like, horses, elephants, camel, goat, ox, etc. with hand-applied ornamentation.
    • The application was filed by Laxmi Terracotta Murtikala Kendra in Uttar Pradesh.
    • Some of the major products of craftsmanship include the Hauda elephants, Mahawatdar horse, deer, camel, five-faced Ganesha, singled-faced Ganesha, elephant table, chandeliers, hanging bells etc.
    • The entire work is done with bare hands and artisans use natural colour, which stays fast for a long time.
    • There are more than 1,000 varieties of terracotta work designed by the local craftsmen.
    • The craftsmen are mainly spread over the villages of Aurangabad, Bharwalia, Langadi Gularia, Budhadih, Amawa, Ekla etc. in Bhathat and Padri Bazar, Belwa Raipur, Jungle Ekla No-1, Jungle Ekla No-2 in Chargawan block of Gorakhpur.

    Kovilpatti kadalai mittai

    • It is a candy made of peanuts held together with glistening syrup, and topped with wisps of grated coconut dyed pink, green and yellow.
    • It is made using all natural ingredients such as the traditional and special ‘vellam’ (jaggery) and groundnuts and water from the river Thamirabarani is used in the production, which enhances the taste naturally.
    • It is manufactured in Kovilpatti and adjacent towns and villages in Thoothukudi district.
    • It is produced by using both groundnuts and jaggery (organic jaggery), in carefully selected quantities from selected specific locations in Tamil Nadu.

    Back2Basics: Geographical Indications in India

    • A Geographical Indication is used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
    • Such a name conveys an assurance of quality and distinctiveness which is essentially attributable to its origin in that defined geographical locality.
    • This tag is valid for a period of 10 years following which it can be renewed.
    • Recently the Union Minister of Commerce and Industry has launched the logo and tagline for the Geographical Indications (GI) of India.
    • The first product to get a GI tag in India was the Darjeeling tea in 2004.
    • The Geographical Indications of Goods (Registration and Protection) Act, 1999 (GI Act) is a sui generis Act for protection of GI in India.
    • India, as a member of the WTO enacted the Act to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights
    • Geographical Indications protection is granted through the TRIPS Agreement

  • It is time to design clear rules for departure from accepted norms of fiscal prudence

    This editorial spells out the size of the stimulus package that would be required to restart the economy. It also discusses the possible sources that the government could tap to raise the revenue. Such huge expenditure is likely to result in the huge fiscal deficit which would necessitate that the stimulus is time-bound and transparent.

    Prospects of substantially negative growth

    • Arvind Subramanian has likened the current economic situation to a “pralay (deluge)”.
    • A deluge in which the government should spend more than even what it ought to in a rainy day.
    • India, the former chief economic adviser said that India must plan for a “substantially negative” growth this year that might require an additional fiscal expenditure of Rs 10 lakh crore.
    • Corporate indebtedness was already high before the lockdown.
    • Insolvency cases will mount further.
    • Even companies facing no significant cash flow issues wouldn’t invest in uncertain public health as well as the demand-constrained environment.
    • Banks, too, aren’t going to lend, no matter how much liquidity the Reserve Bank of India (RBI) may infuse.
    • The burden of non-performing assets, which is set to get heavier in the coming months, makes it impossible for them to finance an economic recovery.
    • Last, but not the least, are faced with layoffs and pay cuts, they would rather save and will be afraid to spend.

    Importance of government spending in the current situation

    • Under the circumstances, the onus for ensuring that the wheels of the economy start moving lies on the government.
    • There’s no guarantee of it happening even with all lockdown restrictions being lifted.
    • Without somebody to spend, the economy is in real danger of contraction, which will, in turn, worsen the problem of businesses going bust, joblessness and loan defaults that can spread to the entire financial services industry.

    No “3F” constraints and risk of deflationary shocks

    • The one consolation today is that India is not saddled with its traditional “3F” constraints — food, fuel and foreign exchange — which were triggers for inflation and balance of payments crises.
    • On the contrary, public foodgrain stocks are at an all-time high, global oil prices have crashed and there is no run on the rupee, unlike during the “taper tantrum” period of May-August 2013.
    • Risk of deflationary shock: The risks, if at all, are tilted more towards demand-side “deflationary shocks” than supply-side inflation concerns.

    How will the government manage the resources?

    • The finances of both the Centre and states are in a mess, with receipts from tax and non-tax sources hardly covering even existing expenditures.
    • But governments enjoy sovereign borrowing powers that allow fund-raising at rates below that of triple A-rated instruments issued by private corporates, more so in the present risk-averse scenario.
    • Also, there is the option of deficit financing (“printing money”) through the RBI subscribing to primary auctions of government securities.
    • There are, of course, costs in such powers being exercised.
    • Past precedents — whether the issuance of ad hoc Treasury Bills to the RBI prior to April 1997 or the stimulus package post the 2008 global financial crisis — do not inspire confidence.

    A question based on the stimulus package and its consequences can be framed, for ex- “Do you agree with the view that a stimulus package by the government to restart the economy is necessary? What are the options with the government to raise the money for such a package? What could the consequences of such a package on the economy in the future?”

    Conclusion

    This is the time to design clear rules for departure from accepted norms of fiscal prudence. Any stimulus has to be transparent and time-bound.

  • Ease legal constraints on fiscal expenditure

    The article discusses the two legal provisions that need to be changed in order to provide a fiscal stimulus of the size that could save the economy from collapse. Other major concern after the package would be the inflationary pressure resulting from government spending.

    The urgency of the fiscal package by the Centre

    • The longer the Centre dithers over a big-bang fiscal package to counter the adverse economic fallout of covid-19, the closer it risks pushing India’s economy to the precipice of disaster.
    • The nationwide lockdown has more or less paralysed commercial activity, our exit path looks dreadfully long-winded, and the distress being seen right now could just be an early sign of what is to come.
    • The suffering of citizens will likely expand once the shutdown’s second-order effects, which operate with a lag, begin to kick in.
    • Estimates of ₹10 trillion needed by way of fiscal relief, once seen as too much by some, could yet turn out to be too little.
    • Either way, preparatory work in terms of legal enablers should be done alongside the arithmetic

    Legal constraints in the way of the stimulus programme

    • There are two major constraints that we need to be relieved of—if only temporarily—for a stimulus programme to take shape.
    • The first is the Fiscal Responsibility and Budget Management (FRBM) Act of 2003.
    • And the second is the amendment done in 2016 of the Reserve Bank of India Act to give legislative cover to a flexible inflation-targeting framework that set our central bank the task of keeping India’s retail price index within a certain band.
    • Both of these were aimed at long-term economic stability but made no allowance for a robust fiscal response to the kind of crisis we now face.
    • It would be best if these were tweaked appropriately by a special session of Parliament.
    • If not, then ordinances should be issued to suspend specific restrictions for a while.

    Projections of fiscal deficit

    • Under the budget presented in February, the Centre’s fiscal deficit for 2020-21 was projected at 3.5% of gross domestic product (GDP).
    • This included a half percentage point deviation from the FRBM glide path allowed by the law’s contingency clause.
    • Total expenditure was placed at a little over ₹30.4 trillion, and receipts at ₹22.4 trillion-plus.
    • With tax revenues and asset-sale realizations expected to fall short, the fiscal gap could widen to about ₹10 trillion even without any extra spending.
    • Drastic cuts in expenditure could save some money, but even if a heavy axe is wielded on expenses, the government’s deficit this year would have to exceed twice the legal limit for a stimulus that saves the economy from collapse.
    • If this turns out to be a year of negative growth, as some fear, effecting a revival will only get harder.
    • For pre-emptive action, the government should use its parliamentary clout to permit a limitless deficit for 2020-21.

    A question based on the limits placed by the FRBM Act and the changes brought by the amendment to the RBI Act which mandated RBI with managing the inflation could be asked by the UPSC.

    Prospects of inflationary pressure and RBI’s mandate

    • An effort to spend our way out of an economic morass could prove inflationary if too much cash ends up chasing too few goods and services.
    • As we have undergone both demand and supply shocks, opinion is divided on whether prices will go haywire.
    • This risk would depend on how much cash gets pumped around at what point in time and the pace at which supplies are restored.
    • In other words, the inflation outlook is highly uncertain.
    • But should prices threaten to rise, it would be counterproductive of the central bank to tamp them down by tightening credit.
    • As of now, RBI’s mandate is to keep inflation at 4%, with a tolerance band of 2% on either side.
    • This target is valid till March 2021, but needs to be reviewed right away to let the central bank focus on growth.
    • The acceptable range could be widened and the time limit to achieve the goal lengthened as a special reprieve.

    Conclusion

    A few tweaks of the law must go alongside calculations of a stimulus package designed to relieve economic distress. The government should act on these quickly to save the day.