The Department of Commerce under the Ministry of Commerce and Industry has launched the Diamond Imprest Authorization (DIA) Scheme to bolster the global competitiveness of India’s diamond sector.
About the Diamond Imprest Authorization (DIA) Scheme
The DIA Scheme permits duty-free import of natural cut and polished diamonds for export purposes.
It mandates an export obligation with a value addition of 10%.
Objective: To retain India’s leadership in the global diamond industry value chain by facilitating ease of doing business.
It will be implemented starting April 1, 2025.
Features of the Scheme:
Duty-Free Import: Allows duty-free import of natural cut and polished diamonds of less than ¼ Carat (25 Cents).
Export Obligation: Requires a minimum 10% value addition to ensure beneficiation.
Eligibility: Open to Two Star Export Houses and above; Exporters with annual exports of at least USD 15 million are eligible.
Support for MSMEs: Provides a level playing field for smaller exporters, enabling them to compete with larger players.
Global Beneficiation Practices: Inspired by beneficiation policies in diamond-mining countries like Botswana, Namibia, and Angola, where manufacturers must establish cutting and polishing facilities.
India’s Diamond Industry: Current Status
India processes over 90% of the world’s diamonds and provides jobs to approximately 5 million people.
India contributes 19% of total global diamond exports.
Challenges:
Exports Decline:
2022: Exports valued at $23 billion.
2023: Declined to $16 billion, with further declines anticipated.
Rough Diamond Imports: Fell by 24.5%, from $18.5 billion (FY 2021-22) to $14 billion (FY 2023-24).
Exports of Cut and Polished Diamonds: Dropped by 34.6%, from $24.4 billion (FY 2022) to $13.1 billion (FY 2024).
Inventory Challenges: The gap between net imports of rough diamonds and net exports of cut and polished diamonds widened from $1.6 billion (FY 2022) to $4.4 billion (FY 2024).
Returns of Unsold Diamonds: The percentage of unsold diamonds returned to India rose from 35% to 45.6% between FY 2022 and FY 2024.
PYQ:
[2018] Which one of the following foreign travellers elaborately discussed about diamonds and diamond mines of India?
The Jawaharlal Nehru Port Authority (JNPA) in Mumbai is on track to become India’s first port to join the ranks of top global ports by handling 10 million TEUs (twenty-foot equivalent units) annually by 2027.
About the Jawaharlal Nehru Port
JNP is situated in Navi Mumbai, Maharashtra, covering an area of 200 square kilometers. Its strategic location enables vital trade links with international shipping routes.
Key Features:
India’s first 100% Landlord Major Port.
Operates five container terminals, including BMCT, NSICT, and GTIPL.
Customs facilities: 30 container freight stations and connectivity to 52 inland depots.
Handles vessels with 9,000 TEUs capacity, soon upgrading to 12,200 TEUs.
Processes 200 international ships monthly.
Future Developments:
Fourth Container Terminal operational by April 2025, adding 4.8 million TEUs capacity.
Developing a satellite port at Vadhvan and dry ports at Jalna and Wardha.
Key Highlights of JNPA’s Expansion
In 2024, JNPA handled its highest-ever container volume of 7.05 million TEUs, operating at more than 90% capacity.
The port recorded an 11% year-on-year growth compared to the previous year.
The second phase of Bharat Mumbai Container Terminal will add 2.4 million TEUs to JNPA’s total capacity.
The upgradation of Nhava Sheva Freeport Terminal in 2025 will further enhance the port’s capabilities.
The total container handling capacity is projected to increase from 7.6 million TEUs to 10.4 million TEUs by 2027.
PYQ:
[2016] Recently, which of the following States has explored the possibility of constructing an artificial inland port to be connected to sea by a long navigational channel?
The Union Minister of Commerce & Industry inaugurated the National Turmeric Board in New Delhi, with Palle Ganga Reddy appointed as its first Chairperson.
About the National Turmeric Board
Details
Operates under the Ministry of Commerce & Industry.
Headquarters: Nizamabad, Telangana.
Aim: To enhance turmeric production, support farmers, and boost global exports.
Structural Mandate
Chaired by a Central Government appointee.
Includes representatives from the Ministry of AYUSH, Department of Pharmaceuticals, Department of Agriculture & Farmers Welfare, and Department of Commerce.
Rotating senior representatives from three states are also part of the Board.
Powers and Functions
Promotes awareness of turmeric’s medicinal and essential properties.
Supports farmers across 20 states, including Maharashtra and Tamil Nadu.
Facilitates research, value addition, and development of new products for domestic and global markets.
Enhances logistics, supply chains, and trade opportunities.
Turmeric (Curcuma longa) Production in India
Turmeric is also known as ‘Golden Spice’.
It thrives in temperatures ranging between 20°C and 30°C with high annual rainfall.
India is the largest producer, consumer, and exporter of turmeric globally.
The recent Supreme Court judgment in the Jet Airways case has highlighted several major problems in India’s insolvency system.
What is the Insolvency and Bankruptcy Code (IBC)?
The Insolvency and Bankruptcy Code (IBC), enacted in 2016, is a comprehensive legal framework in India aimed at consolidating the existing laws governing insolvency and bankruptcy.
It establishes a structured process for resolving insolvency for corporate entities, individuals, and partnership firms, promoting timely resolution and maximizing asset value.
What are the structural inefficiencies in the current Insolvency and Bankruptcy Code (IBC)?
Overburdened Tribunals: The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) are tasked with handling both corporate insolvencies under the IBC and cases under the Companies Act. This dual burden leads to inefficiencies and delays in resolving insolvency cases.
Inadequate Institutional Capacity: The NCLT’s structure, established in 1999, is outdated and does not align with contemporary economic demands. With only 63 sanctioned members, many of whom split their time across multiple benches, the tribunal struggles to manage its caseload effectively, resulting in significant backlogs.
Lack of Domain Expertise: Members of the NCLT often lack the necessary domain knowledge to handle complex insolvency cases effectively. This deficiency hampers their ability to make informed decisions, as highlighted by the Supreme Court in the Jet Airways case.
Procedural Delays: The requirement for mandatory hearings for all applications contributes to lengthy delays. The average time for insolvency resolutions has increased, indicating that procedural inefficiencies are exacerbating the situation.
Ineffective Urgent Listings: There is no robust system for urgent listings before the NCLTs, leading to further delays in critical cases. The discretion given to registry staff regarding case listings can lead to inconsistencies and unpredictability in case management.
Judicial Discretion Issues: There is a growing tendency among NCLT and NCLAT members to ignore Supreme Court orders, undermining judicial authority and eroding trust in the system.
How can procedural innovations enhance the effectiveness of insolvency resolution?
Specialized Benches: Establishing specialized benches for different categories of insolvency cases could improve efficiency and ensure that cases are handled by members with relevant expertise.
Mandatory Mediation: Introducing mandatory mediation before filing insolvency applications could reduce the number of cases entering the formal insolvency process, alleviating pressure on tribunals.
Streamlined Hearing Processes: Revising the requirement for mandatory hearings on all applications could expedite processes, allowing for more efficient case management and resolution.
Improved Infrastructure: Investing in adequate courtrooms and permanent support staff is essential to enhance operational capacity and ensure that tribunals can function effectively within the broader economic framework.
What reforms are necessary to transform the IBC into a proactive economic tool?
Reassessment of Tribunal Structure: A comprehensive review of the NCLT and NCLAT structures is needed to align them with current economic realities and demands, potentially increasing their sanctioned strength and operational hours.
Focus on Domain Expertise in Appointments: Reforming the appointment process for tribunal members to prioritise candidates with relevant experience in insolvency matters will enhance decision-making quality.
Encouraging Alternative Dispute Resolution (ADR): Promoting alternative dispute resolution methods within the insolvency framework can help manage caseloads more effectively while providing quicker resolutions for stakeholders.
Legislative Amendments: Continuous legislative amendments should be made based on empirical data and stakeholder feedback to address emerging challenges within the IBC framework.
Cultural Shift Towards Credit Discipline: Encouraging a cultural shift that emphasizes credit discipline among borrowers will support a healthier economic environment conducive to investment and growth.
Way forward:
Strengthen Institutional Capacity and Expertise: Enhance the operational capacity of NCLT and NCLAT by increasing strength by appointing members with domain expertise, and providing adequate infrastructure and support staff to streamline case management and reduce delays.
Promote Alternative Dispute Resolution (ADR): Integrate mandatory mediation and other ADR mechanisms within the IBC framework to alleviate tribunal workload, ensure quicker resolutions, and foster a collaborative insolvency ecosystem.
The Telecom Regulatory Authority of India (TRAI) plans to use blockchain technology (DLT) to track and manage customer preferences for blocking spam, according to its chairman, Anil Kumar Lahoti.
What is the Telecom Regulatory Authority of India (TRAI)?
The Telecom Regulatory Authority of India (TRAI) plays a crucial role in regulating Unsolicited Commercial Communications (UCC), commonly referred to as spam. Established under the Telecom Regulatory Authority of India Act, 1997.
What is TRAI’s role in fighting spam?
Do-Not-Disturb (DND) Registry: Launched in 2007, the DND registry allows customers to opt out of receiving commercial calls and messages. Users who register are not supposed to receive any spam communications.
Telecom Commercial Communication Customer Preference Regulation (TCCCPR): Enacted in 2018, this regulation penalizes telemarketers who violate DND preferences. It includes warnings for offenders and potential blacklisting from sending messages if they accumulate enough violations.
DND App Development: TRAI collaborated with external agencies to create a DND application that enables users to register their preferences and report complaints. By 2024, it became mandatory for telecom providers to include DND reporting features in their apps.
What role does blockchain play?
TRAI has mandated the use of Distributed Ledger Technology (DLT) to enhance its spam control measures:
Immutable Record Keeping: Blockchain technology allows for a constantly updated and tamper-proof list of approved SMS senders and message formats. This ensures that only legitimate messages are sent, as each entry is unalterable by any party involved.
Message Traceability: Regulations require that messages be sent using sender IDs instead of phone numbers, enhancing traceability. This measure helps prevent unauthorized entities from sending spam by ensuring that all message origins are recorded.
Enhanced Regulations: In 2024, TRAI tightened regulations to ensure complete traceability of messages, addressing previous loopholes that allowed fraudulent registrations on blockchain systems
What are the other steps taken by the government to end spam?
Sanchar Saathi Portal: This portal includes a reporting platform called Chakshu for complaints about fraudulent calls and messages. It collaborates with law enforcement and banks to identify and cancel numbers associated with unauthorised telemarketers.
Real-Time Monitoring: The establishment of the Telecom Security Operation Centre enables real-time monitoring of suspicious internet traffic, enhancing the government’s ability to respond promptly to spam-related threats.
AI-Based Detection: Telecom companies like Airtel have begun using Artificial Intelligence to label suspicious calls as “Suspected Spam,” a practice that is being adopted by other providers as well.
Way forward:
Strengthen International Collaboration: Partner with global VoIP providers and international regulators to curb spam and fraudulent calls originating from abroad, ensuring seamless enforcement across borders.
Promote AI and ML Integration: Expand the use of AI/ML technologies for proactive detection and blocking of spam calls and messages, while continuously improving user-friendly reporting mechanisms.
Mains PYQ:
Q For achieving the desired objectives,it is necessary to ensure that the regulatory institutions remain independent and autonomous. Discuss in the light of experiences in recent past. (UPSC IAS/2015)
Q) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE 2021)
Mentor’s Comment: UPSC mains have always focused on major issues like the methodology of India’s Gross Domestic Product (GDP) (2021) and steady GDP growth and low inflation (2019).
The real GDP growth of 6.4% in 2024-25, while slightly below the Reserve Bank of India’s forecast of 6.6% which should not be seen as disappointing. The growth rate is expected to improve in the second half, with manufacturing showing a significant slowdown, contributing to a decline from 8.2% growth in the previous year.
Today’s editorial highlights the growth rates of India in Nominal and real terms and what are the factors behind the low growth rate of India. This content can be used in mains answer GS paper 3 related to GDP of India.
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Let’s learn!
Why in the News?
The First Advance Estimates (FAE) of National Accounts for 2024-25 indicate a real GDP growth of 6.4% and a nominal GDP growth of 9.7%.
Note: The National Statistical Office (NSO) of the Ministry of Statistics and Programme Implementation (MOSPI) releases the FAE.
What is the difference between Real and Nominal GDP growth rates?
• Real GDP growth rate is the rate of change in the volume of goods and services produced, while nominal GDP growth rate is the rate of change in the total value of goods and services produced. • The nominal GDP growth rate includes the effects of inflation, while the real GDP growth rate does not.
What factors are contributing to the slowdown in India’s GDP growth?
• Decline in Government Investment: The Government of India’s capital expenditure growth has been negative at (-)12.3%, which has significantly impacted overall GDP growth. Limited capital expenditure, reaching only 46.2% of the budget target after eight months, is a primary reason for the slowdown. • Weak Manufacturing Sector Performance: The manufacturing sector has experienced a sharp decline in growth from 9.9% in 2023-24 to 5.3% in 2024-25, contributing to lower Gross Value Added (GVA) figures. • Global Economic Uncertainty: Anticipated uncertainties stemming from global economic conditions, including changes in leadership in major economies like the United States, may hinder India’s export performance and overall economic stability. • Lower Private Consumption Growth: Although Private Final Consumption Expenditure (PFCE) is projected to grow by 7.3%, this is still a potential concern if consumer confidence does not recover adequately. • Previous High Base Effect: The high GDP growth of 8.2% in 2023-24 creates a challenging comparison, leading to perceptions of slowdown even when current growth rates may be consistent with long-term potential.
How will different sectors of the economy perform in the upcoming fiscal year?
Agriculture and Allied Sectors: Growth in agriculture is expected to improve significantly, with estimates suggesting a rise to 3.8% compared to 1.4% in the previous year.
Manufacturing Sector Recovery: There is an expectation for recovery in manufacturing, although it remains uncertain given past performance trends.
Construction and Services Sectors: The construction sector is projected to grow at around 8.6%, while financial services are expected to see growth of approximately 7.3%, indicating resilience and potential for expansion.
Private Consumption: Continued growth in private consumption is anticipated which is driven by rural demand and government spending initiatives.
What are the implications of these growth forecasts for policy and investment?
Need for Sustained Government Capital Expenditure: The government must prioritize capital expenditure to stimulate economic growth and encourage private investment, targeting at least a 20% increase based on revised estimates.
Focus on Structural Reforms: Policymakers should consider structural reforms that enhance productivity across sectors, particularly in manufacturing and agriculture, to support sustainable growth.
Investment in Infrastructure: Increased investment in infrastructure projects can provide a multiplier effect on the economy, fostering job creation and boosting demand.
Monitoring Global Economic Trends: Given the potential impact of global economic conditions on domestic growth, India should remain vigilant and adaptable to external shocks while focusing on strengthening domestic demand.
Long-Term Growth Strategies: With a potential long-term real GDP growth rate of around 6.5%, strategies should be developed to ensure that this target is met consistently over the next five years through innovation and investment in human capital.
Way forward:
Accelerate Infrastructure Investment: The government should prioritize and fast-track capital expenditure, especially in infrastructure, to stimulate economic activity, enhance private sector participation, and create jobs, aiming for at least 20% growth in capital investment for the upcoming fiscal year.
Enhance Sectoral Productivity through Reforms: Implement structural reforms in key sectors like manufacturing, agriculture, and services to boost productivity, reduce bottlenecks, and ensure sustainable long-term growth, focusing on innovation and skill development.
The Reserve Bank of India (RBI), along with the Central government, has reviewed the rules under the Foreign Exchange Management Act 1999 (FEMA) to make it easier to carry out cross-border transactions in Indian rupees (INR) according to a statement by the RBI.
What are the recent changes made in FEMA regulations by RBI?
Opening Rupee Accounts for Non-Residents: Overseas branches of authorized dealer (AD) banks can now open rupee accounts for non-residents, enabling them to conduct current and capital account transactions with Indian residents.
Settlement of Transactions: Non-residents can use their balances in repatriable rupee accounts, including Special Non-Resident Rupee Accounts (SNRAs) and Special Rupee Vostro Accounts (SRVAs), to settle transactions with other non-residents abroad.
Investment Opportunities: Balances in these accounts can be utilized for foreign investments, including Foreign Direct Investment (FDI) in non-debt instruments, thereby promoting rupee-based investments.
Flexibility for Exporters: Indian exporters are now permitted to open foreign currency accounts overseas to receive export proceeds and use these funds for import payments, enhancing operational flexibility.
Support for Local Currency Transactions: The new guidelines support cross-border transactions in local currencies, reducing reliance on dominant foreign currencies like the US Dollar
What is Internationalisation of Rupee?
The internationalization of the rupee refers to the process of increasing the use and acceptance of the Indian rupee (INR) in global trade, investment, and cross-border transactions. This initiative aims to promote the rupee as a viable alternative to dominant currencies like the US dollar in international markets.
What are the key features of the Internationalisation of Rupee?
Cross-Border Transactions: The primary goal is to facilitate more cross-border transactions in rupees, allowing businesses and individuals to conduct trade and investments without relying on foreign currencies.
Current and Capital Account Transactions: Initially focused on promoting the rupee for import and export trade, the process will extend to other current account transactions and eventually capital account transactions, enabling investments in rupee-denominated assets.
Full Convertibility: Achieving full capital account convertibility is essential for internationalization, meaning there would be no restrictions on converting rupees into foreign currency or vice versa for investments and loans.
Strengthening Economic Sovereignty: Reducing reliance on foreign currencies enhances India’s economic sovereignty and minimizes exposure to currency fluctuations, thereby stabilizing trade relations.
Enhancing Global Trade: By allowing direct transactions in rupees, internationalization can simplify cross-border trade processes, eliminate currency conversion needs, and reduce transaction costs.
What are the significance of Internationalisation of Rupee?
Reducing Exchange Rate Risks: By promoting INR usage in international trade, India can mitigate exchange rate risks associated with reliance on major currencies like the USD.
Enhancing Trade Competitiveness: Facilitating rupee transactions can improve India’s trade competitiveness by lowering transaction costs and simplifying payment processes for exporters and importers.
Strengthening Economic Sovereignty: Greater acceptance of the INR in global markets can enhance India’s economic sovereignty and reduce vulnerability to external economic shocks and geopolitical tensions.
Encouraging Foreign Investment: The ability to conduct transactions in INR may attract more foreign investors looking for stable investment opportunities in India
Way forward:
Strengthen Global Agreements: Expand bilateral and multilateral trade agreements to encourage invoicing and settlement in rupees, promoting its global acceptability.
Enhance Domestic Financial Infrastructure: Improve financial systems to support seamless cross-border rupee transactions, including achieving full capital account convertibility and increasing trust in the INR.
Mains PYQ:
Q How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India? (UPSC IAS/2018)
PM has expressed his happiness as the QS World Future Skills Index ranks India 2nd for Digital Skills, ahead of Canada and Germany.
About the QS World Future Skills Index
The index is launched by Quacquarelli Symonds (QS), a London-based higher education firm, the index evaluates countries on their readiness to meet evolving job market demands.
It assesses over 190 countries, analyzing:
280 million job postings
5 million employer skill demands
17.5 million research papers
4 Key Indicators:
Skills Fit: Alignment between workforce skills and employer demands.
Academic Readiness: Higher education’s capability to prepare students for future skills.
Future of Work: Job market readiness for emerging skills in digital, AI, and green technologies.
Economic Transformation: Capacity for innovation and sustainable growth.
Countries are classified into 4 categories as:
Future Skills Pioneers
Practitioners
Contenders (India’s category)
Aspirants
Key Observations
India ranks 2nd globally in digital, AI, and green skills, showcasing its leadership in technology and sustainability.
It achieved a perfect score in economic capacity, reflecting strong growth potential.
However, India scored poorly in skills fit (59.1) and sustainability innovation (15.6), highlighting gaps in education and innovation alignment.
Developed nations like the USA, UK, and Germany lead as “future skills pioneers.”
Significance of the Index
The report serves as a global benchmark for readiness in meeting evolving job market demands.
It highlights the importance of digital, AI, and green skills for future industries.
It provides actionable insights for policy reforms in education and workforce training.
It positions India to address gaps and leverage its strengths to secure a competitive global role.
PYQ:
[2022] What are the main socio-economic implications arising out of the development of IT industries in major cities of India?
On January 16 (National Startup Day), 2025, India marks 9 successful years of Startup India, a flagship initiative that has revolutionized the entrepreneurial ecosystem in the country.
About the Startup India Initiative
Startup India is a flagship initiative launched by the Government of India on January 16, 2016, to create a robust ecosystem for nurturing startups and innovation.
It aims to drive economic growth and generate large-scale employment opportunities, with a focus on empowering entrepreneurs through innovation and regulatory support.
The PM first announced the initiative on August 15, 2015, during his Independence Day address at Red Fort, New Delhi.
The program aims to establish 75+ startup hubs across India and encourages entrepreneurship in Tier-2 and Tier-3 cities.
A related scheme, Stand-Up India, was launched on April 5, 2016, to facilitate loans between ₹10 lakh to ₹1 crore for SCs, STs and women entrepreneurs to establish Greenfield enterprises.
The program emphasizes the 3 Cs—Capital, Courage, and Connections, which Prime Minister Modi identifies as essential for entrepreneurial success.
It seeks to eliminate restrictive policies, including those related to License Raj, foreign investment proposals, and land permissions, ensuring ease of doing business.
Definition of a Startup (as per DPIIT)
A startup must be registered as a private limited company, partnership firm, or limited liability partnership (LLP) in India.
The entity must not have completed 10 years since its incorporation.
Annual turnover should not exceed ₹100 crore in any financial year since incorporation.
The startup should focus on innovative products or services and demonstrate scalability, potential for wealth creation, or employment generation.
Entities formed through splitting or restructuring of existing businesses are not classified as startups.
Startup related terminologies analogously used in India:
Unicorn: A startup valued at over $1 billion.
Decacorn: A startup valued at over $10 billion.
Hectocorn: A startup valued at over $100 billion.
Soonicorn: A rapidly growing startup expected to become a unicorn soon.
Mincorn: A startup valued at less than $1 billion.
Key Achievements of Startup India
India is the third-largest startup hub globally, following the United States and China.
DPIIT-recognized startups grew from 500 in 2016 to 1,59,157 by January 2025.
Women-led startups accounted for 73,151 entities as of October 2024, with 48% of startups having at least one woman director by December 2023.
Startups have generated 16.6 lakh direct jobs from 2016 to October 2024.
Over 50% of startups originated from Tier-2 and Tier-3 cities, including emerging hubs like Indore, Jaipur, and Ahmedabad.
Key Government Initiatives for Startups:
Startup India Seed Fund Scheme (SISFS), 2021: Provides financial assistance to early-stage startups for proof of concept, prototype development, product trials, market entry, and commercialization.
Total allocated amount: ₹945 crore for startups over a four-year period.
Credit Guarantee Scheme for Startups (CGSS), 2022: Offers collateral-free loans to startups through Scheduled Commercial Banks, NBFCs, and SEBI-registered AIFs.
Covers loans up to ₹10 crore for eligible startups.
Fund of Funds for Startups (FFS), 2016: Established with a ₹10,000 crore corpus to provide funding support to startups through SEBI-registered Venture Capital Funds.
By 2024, ₹7,980 crore was committed to 99 Alternative Investment Funds (AIFs), benefiting over 800 startups.
BHASKAR (Bharat Startup Knowledge Access Registry), 2024: A centralized platform aimed at streamlining interactions within India’s entrepreneurial ecosystem.
Fosters innovation, collaboration, and startup growth through knowledge-sharing and networking.
Startup Village Entrepreneurship Program (SVEP): A sub-component of the National Rural Livelihood Mission (NRLM), implemented by the Ministry of Rural Development.
Supported 3,02,825 enterprises as of 2024, creating 6,26,848 jobs.
TIDE 2.0 (Technology Incubation and Development of Entrepreneurs): Focuses on supporting startups in emerging technologies like AI, IoT, and Blockchain.
Established 51 incubators and supported 1,235 startups.
GENESIS (Gen-Next Support for Innovative Startups), 2024: Aims to boost startups in Tier-II and Tier-III cities.
Total outlay: ₹490 crore over five years, targeting over 1,500 startups.
Atal Innovation Mission (AIM): Operates under NITI Aayog to foster innovation and entrepreneurship through the establishment of Atal Incubation Centers (AICs).
Provides physical infrastructure and mentorship for startups to scale effectively.
Startup Mahakumbh: A flagship event organized to bring together startups, unicorns, investors, and industry leaders.
First edition in 2019 saw over 500 participants; the fifth edition is scheduled for March 7-8, 2025, in New Delhi.
PYQ:
[2014] What does venture capital mean?
(a) A short-term capital provided to industries
(b) A long-term start-up capital provided to new entrepreneurs
(c) Funds provided to industries at times of incurring losses
(d) Funds provided for replacement and renovation of industries
There is an ongoing heated discussion about whether farmers should be given a legal guarantee for Minimum Support Price (MSP).
Is a legal guarantee for MSP feasible within India’s economic framework?The arguments in favour of the legalisation of MSP:
Protects Farmers from Market Fluctuations: Farmers often face volatile market prices due to surplus production, inadequate infrastructure, or global competition. A legal guarantee for MSP ensures a minimum income and shields them from sudden price crashes.
Example: Crops like onions and tomatoes frequently see price collapses that leave farmers unable to cover costs.
Addresses Rural Distress and Ensures Livelihood Security: A guaranteed MSP provides a reliable source of income, reducing poverty and addressing the rural distress that drives issues like farmer suicides.
Example: In drought-prone regions, assured MSP acts as a safety net against the dual impacts of climate change and market failures.
Supports National Food Security: Incentivizing farmers through a guaranteed MSP ensures the continued production of essential crops, securing food for the nation and stabilizing food prices for consumers.
Example: Government procurement of rice and wheat at MSP forms the backbone of the Public Distribution System (PDS), ensuring affordable food for millions.
The arguments against the legalisation of MSP:
Risk of Market Distortions: A legally enforced MSP could disrupt natural price discovery, discouraging private investment in agriculture and creating inefficiencies in the market. Example: Guaranteed MSP could encourage overproduction of certain crops, leading to supply gluts and environmental degradation.
Unsustainable Fiscal Burden: Implementing MSP for a wide range of crops would require massive public expenditure, diverting resources from other developmental priorities like healthcare and education.
What mechanisms can ensure farmers receive the MSP without direct government purchases?
Widening Food Basket: Expanding the food basket in the Public Distribution System (PDS) and increasing procurement levels at MSP can help ensure farmers receive fair prices without direct purchases.
Market Intervention Schemes: Establishing targeted market intervention schemes can prevent prices from falling below the MSP, thus providing farmers with necessary price support.
Price Deficit Payment (PDP): A legally mandated compensation mechanism for farmers when market prices fall below the MSP could be implemented. This would not require direct procurement but would ensure farmers are compensated based on official data regarding area sown and average productivity.
What are the broader implications of a legal MSP guarantee on agricultural policy and farmer welfare?
Social Contract: The demand for a legally guaranteed MSP reflects an unwritten social contract between the Indian state and farmers. Breaching this contract could lead to further disenfranchisement of farmers facing challenges like climate change and global competition.
Market Dynamics: A legal guarantee could alter market dynamics by ensuring that farmers are not solely dependent on volatile market conditions. This might encourage more stable agricultural production and investment in rural areas.
Political Considerations: Given the electoral implications of food prices in a democracy, a legally guaranteed MSP could compel governments to prioritise farmer welfare over consumer price suppression, potentially leading to more balanced agricultural policies.
Way forward:
Strengthen Decentralized Procurement and PDP Mechanisms: Expand the food basket under PDS and introduce Price Deficit Payment (PDP) schemes to ensure farmers receive MSP without burdening government finances through direct procurement. This would also reduce inefficiencies in distribution.
Promote Diversification and Agri-Infrastructure: Encourage crop diversification by linking MSP with environmentally sustainable and high-value crops, supported by improved storage, transportation, and market access to minimize post-harvest losses and enhance farmer incomes sustainably.
Mains PYQ:
Q What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low-income trap? (UPSC IAS/2018)
