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Subject: Economics

  • Enhanced Access and Service Excellence (EASE) 3.0

     

     

    Union Finance minister has released Enhanced Access and Service Excellence (EASE) 3.0, the new reform agenda for tech-enabled banking.

    EASE 3.0

    • EASE 3.0 aims at providing smart, tech-enabled public sector banking experience for aspiring India, by establishing paperless and digitally-enabled banking at places where people visit the most such as malls, stations etc.
    • With EASE 3.0, the government is trying to enhance the customer experience with the introduction of features like Dial-a-loan, credit at a click, alternate-data-based lending or other analytics-based credit offers.

    Various features

    • Palm Banking for “End-to-end digital delivery of financial service
    • “Banking on Go” via EASE banking outlets at frequently visited spots like malls, stations, complexes, and campuses
    • Digitalizing the experience at public sector bank branches

  • Market Intelligence and Early Warning System (MIEWS)

     

     

    The Union Food Processing Ministry has launched a new Market Intelligence and Early Warning System (MIEWS) portal to monitor the prices of TOP crops – Tomato, Onion and Potato.

    About MIEWS

    • MIEWS portal is the first-of-its-kind platform for ‘real-time monitoring’ of prices of tomato, onion and potato.
    • The system has been designed to provide advisories to farmers to avoid cyclical production and issue early warnings in situations of gluts.
    • It will simultaneously generate alerts for price intervention under the terms of Operation Greens (OG) scheme.
    • It will generate early alerts in case there is going to be a major change in the prices of these crops.
    • This will help in planning and timely intervention for price stabilization. The portal can be accessed at this link- http://miews.nafed-india.com.

    Utility of MIEWS

    The MIEWS would:

    • Monitor the supply situation for timely market intervention,
    • Assist in rapid response during times of glut to move the produce from glut regions to regions with deficit supply.
    • Provide inputs for export/import decision making.

    Back2Basics

    Operation Greens

    • In the budget speech of Union Budget 2018-19, a new Scheme “Operation Greens” was announced on the line of “Operation Flood” to promote Farmer Producers Organizations (FPOs #), agri-logistics, processing facilities and professional management.
    • Accordingly, the Ministry has formulated a scheme for integrated development of Tomato, Onion and Potato (TOP) value chain.
    • Under the OG Scheme, during a glut situation, the evacuation of surplus production from producing areas to consumption centres will be undertaken in the following cases:
    1. When the price falls below the average market price at the time of harvest in the preceding 3 years.
    2. When the price falls more than 50 percent in comparison to the previous year’s market price at the time of harvest.
    3. When the price falls below the benchmark, if any, fixed by either the state or central government for a stipulated period.

    For additional readings, navigate to:

    https://mofpi.nic.in/Schemes/operation-greens

  • National Technical Textiles Mission

    The Cabinet Committee on Economic Affairs has given its approval to set up a National Technical Textiles Mission with a view to position the country as a global leader in Technical Textiles.

    What are Technical Textiles?

    • Technical textile is a textile product manufactured for non-aesthetic purposes, where the function is primary criterion.
    • They are functional fabrics that have applications across various industries including automobiles, civil engineering and construction, agriculture, healthcare, industrial safety, personal protection etc.
    • Technical Textiles is a high technology sunrise sector which is steadily gaining ground in. India.

    National Technical Textiles Mission

    • The Mission would have a four year implementation period from FY 2020-21 to 2023-24.
    • It will move into sunset phase after four years period.
    • A Mission Directorate in the Min. of Textiles headed by an eminent expert in the related field will be made operational.
    • The Directorate will not have any permanent employment and there will be no creation of building infrastructure for the Mission purpose.

    Components of the mission

    Component-I:  Promoting both (i) fundamental research at fibre level and (ii) application-based research in geo-textiles, agro-textiles, medical textiles, mobile textiles and sports textiles and development of bio­degradable technical textiles.

    Component-II: Promotion and Market Development.

    Component-III: Export promotion of technical textiles and ensuring 10% average growth in exports per year upto 2023-24. An Export Promotion Council for Technical Textiles will be set up for this purpose.

    Component-IV: Promoting technical education at higher engineering and technology levels related to technical textiles.

  • [pib] SPICe+ web form

     

    The Ministry of Corporate Affairs has launched SPICe+ web form.

    SPICe+

    • It would offer 10 services by 3 Central Govt Ministries & Departments (Ministry of Corporate Affairs, Ministry of Labour & Department of Revenue in the Ministry of Finance) and One State Government (Maharashtra).
    • It saves as many procedures, time and cost for Starting a Business in India and would be applicable for all new company incorporations.

    Following are the features of the new Spice+ web form:

    • SPICe+ would be an integrated Web Form.
    • SPICe+ would have two parts viz.: Part A-for Name reservation for new companies and Part B offering a bouquet of services viz.
    • Registration for Profession Tax shall also be mandatory for all new companies to be incorporated in the State of Maharashtra through SPICe+.
    • All new companies incorporated through SPICe+ would also be mandatorily required to apply for opening the company’s Bank account through the AGILE-PRO linked web form.

  • Making the super-rich pay their fair share

    Context

    It is now beyond obvious that India cannot revive its economy without increasing public spending, and so increasing its fiscal resources is essential. Among other measures, this requires urgent adoption of legislation and institutional reforms to end financial opacity.

    The opacity in the data

    • Unlikely Budget estimates: The Union Budget was presented, based on numbers for revised estimates for the current year and Budget estimates for the coming year that the Finance Ministry itself knows are
    • Where else the opacity in data extends: The opacity of data also extends to cross-border movement of funds generated through a range of activities, including tax evasion, misappropriation of state assets, laundering of the proceeds of crime, and bribery.
      • Even here, India still has a lot to do, as confirmed by the recent publication of the Financial Secrecy Index by the Tax Justice Network, a U.K.-based financial advocacy group.
    • Financial Secrecy Index rank: On the surface, India has managed to reduce its contribution to global financial secrecy, with its rank falling from 32 on the 2018 index to 47 in 2020.
      • But this is partly because the new edition of the index covers more countries than it did two years ago.

    Transparency Reforms by the government

    • Arrangement with Switzerland: It is true that the government has adopted and supported a few transparency reforms, such as the automatic exchange of tax and financial information with other jurisdictions, like Switzerland.
      • What the arrangement with Switzerland mean? If an Indian citizen has an account with a Swiss bank and has a balance over a certain threshold, this information will be sent to the Indian tax authorities automatically.
    • Beneficial ownership register: The government did create a beneficial ownership register- which would allow the identification of the beneficial owner of an asset regardless of whose name the title of the property is in.
      • Exemption making the law weak: The law is weak since it exempts a lot of people at the discretion of the authorities.
      • Also, this register is not accessible to the public.

    Making multinationals and the super-rich pay their fair share of taxes 

    • Need to do more: Stopping the financial haemorrhage and making multinationals and the super-rich pay their fair share of taxes requires much more.
    • Capital flight and consequence for the country’s development: Capital flight out of India by Indian elites and foreigners alike has been undermining our country’s development for decades.
      • Outdated international system: An important part of these flows is the result of artificial profit shifting by multinational companies taking advantage of an outdated international tax system.
    • How the multinationals shifts profits? These multinationals may be making profits in India but can easily declare those profits in a low tax jurisdiction like Hong Kong and justify that transaction as a payment for the use of a patent.
      • The magnitude of loss-$27.5 billion: According to one estimate, this strategy represented a loss of $27.5 billion in 2014 for the Indian government, up from $142 million in 2000.

    Onshore financial services and issues with it

    • Paradoxical decision: Three years ago, the government took the paradoxical decision to set up onshore international financial services in the country.
      • This is how the International Financial Services Centre in the Gujarat International Finance Tec-City (GIFT-City), Gandhinagar, emerged.
      • It was modelled after offshore financial centres such as Hong Kong, Singapore, the City of London and Dubai.
    • Increasing the possibility of regulatory arbitrage: While this has not created much employment, it has led to growing possibilities for regulatory arbitrage by financial firms, with potentially very problematic consequences.

    The issue with the policy of tax incentives

    • Little evidence of attracting investment: The government keeps granting tax incentives on a discretionary basis, even though there is little evidence that these incentives attract investment.
    • What factors matters for investment: Recent research by International Monetary Fund, factors such as-
      • Quality of infrastructure.
      • A healthy and skilled workforce.
      • Market access and-
      • Political stability matters much more.
    • Consequences of the policy-reduction in tax revenue: The massive reduction in corporate tax rates has thus far not led to any increase in private investment.
      • But it has meant a significant reduction in tax revenues, with devastating consequences.
      • Implications for health, educations etc.: Reduction in tax revenue translates into a lack of resources for education, healthcare, food and nutrition and infrastructure.
      • Low tax-GDP ratio: India is already an outlier among similarly placed developing countries with its low tax-GDP ratio of 18%.
      • Making the budget dependent on indirect taxes: The government budget is also highly dependent on indirect taxes like the Goods and Services Tax which are regressive and hit ordinary citizens harder.

    Way forward

    • Legislation to end financial opacity: Adoption of legislation and institutional reforms to end financial opacity- including, for example-
      • Opening the beneficial ownership register to the public and-
      • Stopping the creation of onshore tax havens is the need of the hour.
    • Opening the debate on how to make the multinationals pay their fair share: The Government of India must also assume a more vocal role in the international debate about how to make multinationals pay their fair share of taxes.
      • This means continuing to appeal for a United Nations tax body, which is much more legitimate than the Organisation for Economic Co-operation and Development (OECD).
      • The issue with the OECD’s proposal: The OECD’s proposals, published at the end of 2019, are neither ambitious nor fair enough.
    • Explore the possibility of going alone: If the organisation continues to remain deaf to the demands of developing countries, India must be prepared to go it alone, thinking unilaterally about how to make multinationals pay what they owe.

     

     

     

     

     

  • Tilhan Mission

    The government will launch Tilhan Mission to make the country self-reliant in oilseed production.

    Why such mission?

    • India is the fourth largest vegetable oil economy in the world after the USA, China and Brazil.
    • Today, the oilseeds account for 13% of the cropped area in the country.
    • Still, India is the largest importer of palm oil in the world.

    Oilseed production in India

    • Total Oilseeds production in the country during 2019-20 is estimated at 34.19 million tonnes which is higher by 2.67 million tonnes than the production of 31.52 million tonnes during 2018-19.
    • Further, the production of oilseeds during 2019-20 is higher by 4.54 million tonnes than the average oilseeds production.

  • [pib] ASKDISHA Chatbot

     

    In order to resolve queries of railway passengers over the internet pertaining to various services offered, Indian Railways had introduced the services of Artificial Intelligence-based ASKDISHA chatbot in October 2018 for the benefit of the users.

    ASKDISHA Chatbot

    • IRCTC had launched this chat bot to answer various queries about ticket booking, cancellation and various value-added services.
    • The chatbot is a special computer programme designed to simulate conversation with users, especially over the internet.
    • It was jointly developed by IRCTC and CoRover Private Limited, a Bangalore-based startup.
    • The first-of-its-kind initiative by IRCTC is aimed at facilitating accessibility by answering users’ queries pertaining to various services offered to railway passengers.

    What is the new update?

    • The ASKDISHA Chatbot was initially launched in English language but in order to further enhance the customer services rendered.
    • To further strengthen the services of the chatbot, IRCTC has now powered voice-enabled ASKDISHA to converse with customers in Hindi language also in the e-ticketing site irctc.co.in.
    • The customers can now ask queries to ASKDISHA in Hindi language by voice as well as text.
    • On an average, around three thousand enquiries are being handled by ASKDISHA in Hindi language on daily basis and the figure is increasing day by day which also shows the acceptability of the new feature by the customer.
    • IRCTC plans to launch ASKDISHA in more languages along with many other additional features in the near future.

  • Conquering the green frontier

    Context

    India has to forge a different development model -one that will shift India’s workforce from agriculture to globally leading, resource-efficient businesses.

     How India can deliver sustainable prosperity?

    • The two intertwined forces: Just as liberalisation and globalisation transformed the economy in the past, two different yet intertwined forces will likely transform the economy in the future.
    • First–High competitiveness: India must have globally leading companies across a range of key sectors such as financial services and manufacturing.
      • Global productivity frontier: These super competitive businesses should define the global productivity frontier so that they can surpass the production processes of the best companies in the world.
    • Second-Long term sustainability: India must also adopt a resource-efficient, low-carbon development pathway to utilise scarce natural resources effectively. There is no other way.
      • Apocalyptic air pollution.
      • Dire water shortages.
      • Rising temperatures and-
      • Extreme climate events- have already brought us to the brink of an environmental crisis.
      • The need for India’s leadership for achieving the target: Moreover, note that the world needs India’s leadership to achieve the 2 degree Celsius global warming target.
      • In short, India’s growth has to be green.
    • What is the problem in achieving these goals?
      • No nation has ever attempted these twin transformations — high competitiveness and long-term sustainability — simultaneously.
      • The traditional development model: The traditional development model has been a farm-to-factory development model with economies transitioning from traditional agriculture to resource-intensive, urban manufacturing.
      • India has to forge a different development model — one that will shift India’s workforce from agriculture to globally leading, resource-efficient businesses.
      • Also, these companies must use the most advanced green technologies and business models.
      • India’s development model will, therefore, need to take the Indian economy from “the farm-to-green frontier”.

    Three focus area for green transformation

    • The productivity transformation driven by super competitive businesses is well underway.
      • We now need to consider a comprehensive policy package that will enable us to simultaneously undertake a green transformation.
      • Global best practices and India’s own experiences suggest three focus areas for such a transformation.
    • India has the third-largest start-up ecosystem in the world and our larger companies are also pursuing innovation-driven growth.
    • Specific and stable policy goals
      • Specific and stable policy goals need to be established to set detailed green targets for various sectors.
      • A macro-economic model that factors in-
      • Current skills.
      • Sectoral connections.
      • Relative emission and-
      • Financial constraints are necessary to inform such targets going forward.
      • Such a model can then be used to evaluate various green growth scenarios.
      • Decarbonisation approaches in the green frontier scenario will drive the growth of green industries, green jobs, green skills, green entrepreneurs and green finance.
    • Pursuing the policy goals: Global and Indian experience highlights that green targets will have to be pursued in a stable manner across decades.
      • Most large emitters and pollutants are associated with long-lived (20-30 plus years useful life) assets.
      • The basic requirement for investment in green assets: Investments in green assets will only be possible if there is the sanctity of contracts, pricing stability, and consistent policies that are backed up by the full force of law.
      • Implementation: Finally, these specific and stable policy goals need to be implemented urgently to avoid lock-in with high-carbon assets.
    • Revamp the institutional framework: India may need to revamp its existing institutional framework for environmental governance in order to align it with the country’s green transformation.
      • Four levels of institutional structure: As demonstrated by global best practices, a comprehensive institutional framework could include four levels — super sovereign, sovereign, state/province and city.
      • Council for monitoring: An independent council or board may also be required to monitor, report, and verify green targets.
    • Appropriate financing capacity: Indian policymakers and entrepreneurs will unleash market forces that will drive the growth of waste management, solar panels, electric vehicles, super-efficient appliances, recyclable food packaging, clean coal, etc.
      • These green industries will require massive investments and appropriate financing capacity will have to be created to support their growth.
      • Preliminary estimates suggest that India’s green transformation may require an average investment of $95 billion to $125 billion per year, aggregating over $1 trillion in the next decade.
      • A “green super fund” could be established to jumpstart green investments by pooling together international and domestic capital.
      • Dual roles of financial institution: Such a financial institution could play a dual role in mediating and mitigating risk for global capital, as well as identifying sectoral project pipelines.
      • The success of financial institution: Indian financial institutions have been very successful in building up new industries such as microfinance, EdTech, and affordable healthcare, which have delivered both financial and social returns; however, financial support for green industries will have to be orders of magnitude larger.
      • Moreover, the “green super fund” may have to be able to invest across the capital structure (debt plus equity) as well as across the company lifecycle (early stage, growth capital, infrastructure investments, and so on).

    Conclusion

    Our future depends on how we resolve our environmental challenges. Further, we are the world’s third-largest carbon emitter and will play a crucial role in getting the planet to a low-carbon trajectory. Simply put, we must urgently transform our economy to get to the green frontier.

  • Changes in Crop Insurance Scheme

    The Centre has decided to restrict its premium subsidy in its flagship crop insurance schemes to 30% for unirrigated areas and 25% for irrigated areas (from the existing unlimited), and to make enrolment of farmers in the Pradhan Mantri Fasal Bima Yojana (PMFBY) and Restructured Weather Based Crop Insurance Scheme (RWBCIS) voluntary from the 2020 Kharif season.

     Other changes in crop insurance schemes

    • The government has given flexibility to states/UTs to implement PMFBY and RWBCIS, and given them the option to select any number of additional risk covers/features like prevented sowing, localised calamity, mid-season adversity, and post-harvest losses.
    • Earlier, these risk covers were mandatory.

    Why such a move?

    By capping the subsidy for premium rates up to 30%, the Centre wants to dis-incentivize certain crops in such areas where growing these crops involve high risks in terms of crop insurance premiums.

    What were the schemes?

    • At present, under PMFBY and RWBCIS, farmers pay a premium of 2% of the sum insured for all foodgrains and oilseeds crops of Kharif; 1.5% for all foodgrains and oilseeds crops of Rabi; and 5% for all horticultural crops.
    • The difference between actual premium rate and the rate of insurance premium payable by farmers, which is called the Rate of Normal Premium Subsidy, is shared equally between the Centre and the states.
    • However, states and UTs are free to extend additional subsidy over and above the normal subsidy from their budgets.
    • Until now, there was no upper limit for the central subsidy.
    • The Cabinet decided to cap the Centre’s premium subsidy under these schemes for premium rates up to 30% for unirrigated areas/crops and 25% for irrigated areas/crops.

    How many farmers are covered under these two schemes?

    • During 2018-19, about 5.64 crore farmers are enrolled with PMFBY for an insured sum of Rs 2,35,277 crore, and 30% of the gross cropped is insured.
    • When the government approved PMFBY four years ago, it was described as a path-breaking scheme for farmers’ welfare” under which there was no upper limit on government subsidy.
    • Even if balance premium was 90%, it was to be borne by the Government
    • While PMFBY is based on yield, RWBCIS is based on proxies and farmers are provided insurance protection against adverse weather conditions such as excess rainfall, wind and temperature.
    • The number of insured farmers under RWBCIS is relatively low.

    Impact of the move

    This change will have two main implications.

    • First, it may bring down the rates of overall premium as the state governments now will not be required to invite bids factoring these risks.
    • Second, it will make these schemes less attractive for farmers.
    • However, states/UTs can offer specific single peril risk/insurance covers like hailstorm etc under PMFBY.

    Burden of premium

    • One interpretation of this decision is that the burden of premium subsidy will go up for the states.
    • Example: In the old regime, if a farmer’s Kharif crop was insured for Rs 1,00,000 and the rate of actuarial premium was 40%, then the premium paid by the farmer was 2% (Rs 2,000), and the remaining premium was shared by the Centre and the state equally (19% or Rs 19,000).
    • In the new regime, for the same sum insured (Rs 1,00,000) and the same rate of premium (40%), the Centre will give subsidy for premium rates up to 30%.
    • This means that from the Kharif 2020 season , the Centre will have to pay premium at the rate of 14% (out of 30%, the farmer’s share is 2%, and the Centre’s and state’s 14% each).
    • The state has to bear the entire burden of the premium subsidy in cases where the rate of premium goes beyond the threshold of 30%.

    No insurance of certain crops

    • Another interpretation is that the Centre may stop supporting insurance of certain crops in certain areas where the rate of premium is more than 30%.
    • The Department of Agriculture, Cooperation and Farmers Welfare in consultation with other stakeholders/agencies will have to prepare State specific, alternative risk mitigation programme for crops/areas having high rate of premium.
    • While the average premium rate under PMFBY and RWBCIS at the national level was 12.32% for 2018-19, for some crops in certain districts, the rate of premium has been higher than 30% in recent years.
    • For instance, the rate of premium for Kharif groundnut has reached 49% in Rajkot of Gujarat, and the rate for Rabi paddy crop Ramnathapuram (Tamil Nadu) has reached 42%.

    Impact on states

    • The states are already defaulting on their share, and the Centre’s new cap will put an additional financial burden on them.
    • Madhya Pradesh has not paid its share of premium even for Kharif 2018, which comes to Rs 1,500 crore. As a result, farmers have not got their claims.
    • In fact, most states have delayed the payment of their share of premium.
    • Sources said that in some states, the expenditure on premium of PMFBY is more than 50% of their budget for agriculture.

    Immediate implications

    • That move will lead to a rise in the rates of premium, as the area covered under insurance and the number of enrolled farmers is expected to come down significantly.
    • As of now the schemes are compulsory for all loanee farmers and optional for other farmers.
    • Non-loanee farmers under the crop insurance schemes are much fewer than loanee farmers.
    • If the latter opt out of the schemes, the number of insured farmers will drastically come down.
    • In such a scenario the rate of premium of certain crops in some areas may go beyond 30%.

    Back2Basics

    Pradhan Mantri Fasal Bima Yojana – Min Premium, Max Insurance

  • Buddah Nullah

    The Punjab govt. has approved ₹650 crore in the first phase for rejuvenation of the highly polluting Buddah Nullah — a seasonal tributary of Sutlej in Ludhiana.

    Buddah Nullah

    • Buddah Nullah or Budha Nala is a seasonal water stream that runs through the Malwa region of Punjab.
    • It passes through highly populated Ludhiana and drains into Sutlej River, a tributary of the Indus river.
    • It has also become a major source of pollution in the region as well the main Sutlej river, as it gets polluted after entering the highly populated and industrialized Ludhiana city, turning it into an open drain.
    • Also, since a large area in south-western Punjab solely depend on the canal water for irrigation, and water from Buddha Nullah enters various canals after Harike waterworks.

    Why such move?

    • The pollution in the Buddah Nullah is a major threat to public health and environment and the main sources of pollution in the nullah are direct flow of pollutants by industries and dairies.
    • Also, treated effluents from existing STPs, based on UASB technology, does not meet the required quality and overflow from sewer lines add to the problem.
    • The NGT has already directed the government to take proactive steps to immediately address the problem.