Note4Students
From UPSC perspective, the following things are important :
Prelims level: Personal data and non-personal data
Mains level: Paper 3- Making open data-society by sharing making open the data collected by the government
The article highlights the importance of non-personal data collected by the government and lack of any reference to it in the Gopalakrishnan Committee report.
Background
- The Committee of Experts on the Non-Personal Data Governance Framework headed by K Gopalakrishnan has recommended making privately held non-personal data “open”.
- This has raised concerns about state interference in the private data ecoystem.
Importance of data collected by government agencies
- The report is a missed opportunity to address the governance frameworks around data created by government agencies.
- Some of the most important non-personal data sets are held by the government, or result from taxpayer funding.
- Such data can be useful in either framing public policy or creating and providing new services.
Why government data should be open to citizens: 5 Reasons
- First, the state should be transparent about information that it has. This will improve accountability.
- Second, if taxpayer money has funded any of the data sets, then it is an obligation of the state to return the fruits of that funding to the taxpayer.
- Third, by permitting the reuse of government data sets, we avoid the need for duplication.
- Fourth, government data sets, curated according to publicly verified standards, can lead to increased confidence in data quality and increased usage.
- Finally, free flow of information can have beneficial effects on society in general.
Government policies promoting openness of data
- The Right to Information (RTI) Act, 2005, mandates the disclosure of government data on a suo moto basis.
- One of the nine pillars of the Digital India Policy is “information for all”.
- The National Data Sharing and Accessibility Policy (NDSAP), 2012 requires all non-sensitive information held by public authorities to be made publicly accessible in machine readable formats (subject to conditions).
- The government has also set up an Open Government Data Platform to provide open access to data sets held by ministries and other agencies of the government.
- Various States have also either created their own data portals or have provided data sets to the Open Government Data Platform.
Challenges in making the data open to society
- There are two reasons for our failure to create an open data-based society.
- The first is lack of clarity in some of the provisions of the NDSAP or the relevant implementation guidelines.
- The second is the inability to enforce guidelines appropriately.
- Data sets released by governments are often inconsistent, incomplete, outdated, published in non-machine readable or inconsistent formats, include duplicates, and lack quality (or any) metadata, thereby reducing re-usability.
Issues with Gopalakrishnana Committee Report
- The Gopalakrishnan Committee could have evaluated what is going wrong with existing policies and practice pertaining to government data.
- The report is a missed opportunity to address the governance frameworks around non-personal data sets in a country created by government agencies, or those resulting from taxpayer money.
- The report largely focuses on the dangers posed by data collection by private sector entities.
- This has raised concerns about state interference in the private data ecoystem.
- Many of the concerns that should be addressed in the report that are central to the governance of the data ecosystem have remained in the background.
- For instance, India’s cybersecurity framework continues to be inadequate, while even the Justice B.N. Srikrishna Committee report of 2018 highlighted the need to restrict the growing power of the state to carry out surveillance.
Consider the question “What are the key recommendation made by the Gopalakrishnan Committee for the regulation of non-personal data? What are the shortcomings in of the report in your opinion?”
Conclusion
Since data governance is a relatively new concept in India, the government would be better served in taking an incremental approach to any perceived problems. This should begin with reforming how the government itself deals with citizens’ data.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Financial challenges education sector faces in India
The article delineates the challenges academic institutions in India faces in the wake of Covid disruption and suggests some measures to deal with the challenges.
Context
Disruption in the wake of pandemic raised the spectre of educational institutions shuttering their doors completely or taking unprecedented steps that have invariably affected jobs and livelihoods.
Economics of the academics
- Economics has always been a part of academics; it is only in the present circumstances that it has become all the more apparent.
- Management in private institutions, is going to meet demands on the one hand and availability of resources on the other.
- One may call this new phenomenon “acadonomics”.
- “Acadonomics” would imply a careful allocation of resources keeping in mind the transient nature of the issue of how long it is going to take to come back to the steady state of affairs that it once was.
- ‘Acadonomics’ will also involve seeing the economics of moving on to an online mode of the teaching-learning process.
Comparison with the West
- The academic choices are not the same for all countries across the world.
- In the United States the elite private and state subsidised universities have endowments that can be used for a range of academic activities.
- Top 10 of the U.S. have a cushion of anywhere between $10 billion to $40 billion.
- By contrast, private academic institutions in India do not have any such buffers.
- None of the institutions in India possesses big corpuses from alumni or industry.
- Their survival, for the most part, is on the annual income that comes from tuition and the assortment of other fees collected.
Private education in India
- Private institutions in India are hardly in a position to meet an eventuality such as COVID-19.
- In an educational set-up in India, nothing can be reduced — the norms cannot be lowered nor can the infrastructure be dismantled.
- For the most part, the fixed and operational costs remain the same, and infrastructure once created cannot be shrunk.
- The downside to self-financed institutions is that in the time of the pandemic and loss of jobs, students plead inability to pay the requisite fee.
- Which places additional burden on the management which feels already stretched because of existing commitments.
Dual mode of learning and issues
- 1) Cost for persisting with a dual mode of the teaching-learning process is going to be quite prohibitive for the next few years.
- The scaling of operations that would include the dual modes of online and offline is going to be expensive.
- 2) The online teaching mode brings with it increased costs of IT infrastructure such as network bandwidth, servers, cloud resources and software licensing fees.
- 3) Online teaching means new hiring in the IT sector and increased costs due to engagements with Massive Open Online Courses, or MOOCs, and other online platforms.
- 4) Online teaching means setting up multiple studios and educational technology centres which translate into investments in high technology.
- 5) Creation of virtual laboratories across all domains of studies and examination centres, etc. would add to the woes in terms of already depleted finances.
- 6) Additional funds have to be allocated to train faculty for online teaching.
Way forward
- The Centre and State governments should provide soft loans to students to stay with the educational course.
- Students looking at online instruction would be disinclined to pay the same fee charged for offline instruction.
- It would seem prudent for the government and regulatory bodies to not interfere in the fee structure, and, for the future, even consider a measure of higher degree of financial autonomy.
- It is high time institutions in India are allowed to create coffers or corpuses for a rainy day.
- Educational institutions could come to be treated like any other corporate body, with an allowable small margin of profit.
Consider the question “What are the challenges faced by the education system in the aftermath of the pandemic. Suggest ways to mitigate the impact.”
Conclusion
‘Acadonomics’ of the future will not only decide the fate of the academic sector in India but also its quality, ranking, research, innovation potential and its collective impact on our country’s economy.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Widening consumer base to revive growth
The article suggests the widening of consumer base rather than increasing consumption. To augment that, the government should also direct the spending towards such sectors which would help in broadening of the base.
Prescription for long term growth: Broadening the consumer base
- India entered the pandemic with declining growth and limited scope for a conventional and large fiscal stimulus.
- The NSS 68th round consumption survey indicates that in urban India, the top 20 per cent of the population accounted for nearly 55 per cent of discretionary consumption and 45 per cent of all consumption.
- The narrow consumption base coupled with uncertainty over the demographic dividend could belie India’s long-term investment attractiveness.
- With or without the pandemic, the prescriptions for long-term growth remain the same — broaden the consumer base.
- This broadening of the consumer base should happen through empowering the low and middle-income consumers.
Why can’t the government just spend to revive growth
- 1) Temporary incomes coupled with job/income uncertainty will induce precautionary savings without any impact on growth.
- 2) With revenues declined, funding of additional expenditure is through higher borrowings.
- Any incremental debt should be seen in the context of future investments being hampered due to current consumption.
- India’s public debt/GDP will likely reach around 85 per cent and the consolidated gross fiscal deficit to GDP ratio could be around 12.5 per cent this year.
Way forward
- India needs to broaden its consumer base beyond the top 10-20 per cent of the population to improve long-term growth prospects.
- To achieve this we will need well-paid employment for the bottom and middle segments.
- The “safe” group of India’s workforce is extremely small.
- The PLFS 2018-19 report places around 24 per cent of the workforce in the regular wage/salary category.
- Within this segment, around 40 per cent do not have a written contract, paid leaves, or security while 70 per cent do not have any written contract.
- These sharp skews in consumption and labour become a substantial risk for a consumption-led growth in the aftermath of a crisis.
- The PLFS 2018-19 report indicates that around 50 per cent of the rural non-agriculture workforce.
- 35 per cent of the urban workforce is engaged in the construction and manufacturing sectors.
- The rebuild and recover phase should aim for a wider consumer base with infrastructure and manufacturing as the two pillars.
- To make manufacturing easier, the focus should be on labour reforms, fewer/quicker approvals, reducing the compliance burden, and promoting export-oriented sectors.
- Policies should not become too inward-looking such that export promotion becomes difficult.
Directing public spending and policies appropriately
- Most public spending should be directed towards roads, railways, infrastructure, healthcare and educational facilities.
- To promote infrastructure creation along with private sector participation, the government needs to charge an economic price for goods and services such as power, irrigation, and public utilities.
- Establish the rule of law with minimal interference in pricing, streamline processes for quick approvals and ensure timely payments to private operators.
- The government should also signal its vision along with a financing strategy through sharper expenditure management, enhanced market borrowings, setting up of a Development Financing Institution, and an asset monetisation programme.
Conclusion
To achieve economic growth of 7-8 per cent the government needs to start addressing large infrastructure deficit, the weak financial sector, archaic land and labour laws, and the administrative and judicial hurdles.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Extended producer responsibility
Mains level: Paper 3- Coupling growth and environmental protection
Growth and environmental protection are not the polar opposites of each other. The article analyses the issue of balancing the two and using pandemic as an opportunity to evolve novel recovery path.
Pandemic: opportunity to new recovery path
- The pandemic presents an opportunity for us to think of a new recovery path, one that can decouple economic growth and environmental degradation.
- It becomes more important as India sees opportunities on the global call to diversify the supply chain and its internal call for Atmanirbhar Bharat.
- For that, we need to strengthen our production and manufacturing capabilities.
Issue of regulatory infrastructure
- Monitoring and implementing environmental regulations is the biggest challenge we face.
- Take the municipal solid waste rules.
- Two decades after the regulations came into effect, their status not in good shape.
- A comparatively recent regulation, centred around Extended Producer Responsibility, has also posed challenges in monitoring and implementation.
- In a recent ruling, the judiciary not only ruled against the industry but also blamed officials responsible for implementing the regulations.
Focus on implementation and monitoring
- In the long run, diluting regulatory norms will create more adverse impacts resulting in greater community upsurge.
- The focus has to be to improve the system’s capabilities to monitor and implement regulatory requirements.
- There needs to be greater transparency and accountability; there is no dearth of technology to facilitate this.
- The intention and capacity to take action, rectify and diffuse is critical.
- The right ecosystem between the industry, community and regulator is crucial.
- If the three stakeholders remain isolated and get activated only in a crisis, we will not make any progress towards solving the issue.
Way forward
- We need to couple growth and environmental protection.
- Environmental health will be the key enabler of socio-economic growth in the future.
- Industry needs to realise that it is a part of an ecosystem and not at the centre of it.
- Communities get impacted, either positively or negatively, they need to empower themselves through education, so that they are not driven by the agenda of individuals with vested interests.
- We have a challenge in implementing environmental regulations.
- The community does not trust that the industry is meeting its compliance requirements, so, the regulatory system’s role is to improve this trust quotient.
Conclusion
As we plan our recovery past the pandemic, we have a good chance to create a new normal. We need to align towards a common cause and goals. We should not miss this chance.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GST
Mains level: Paper 3- GST compensation issue and reforms needed
The GST compensation issue raises the need for reform in the system. The article discusses this issue and suggests reform.
Background
- Three years ago, the Centre and the States of the Union of India struck a grand bargain resulting in GST.
- The States gave up their right to collect sales tax and sundry taxes, and the Centre gave up excise and services tax.
Issue of compensation
- Consent of the states was secured by a promise of reimbursing any shortfall in tax revenues for a period of five years.
- This reimbursement was to be funded by a special cess called the GST compensation cess.
- The promised reimbursement was to fill the gap for an assured 14% year on year tax growth for five years.
Why is the Centre denying GST compensation
- As the economy battles a pandemic and recession, the tax collection has dropped significantly.
- At the same time, expenditure needs are sharply higher at the State level.
- Using an equivalent of the Force Majeure clause in commercial contracts, the Centre is abdicating its responsibility of making up for the shortfall in 14% growth in GST revenues to the states.
Why Central government is wrong in denying the compensation
- 1) The States do not have recourse to multiple options that the Centre has.[like sovereign bond or a loan against public sector unit shares from the Reserve Bank of India]
- 2) The Centre can get loans at lower rates of borrowing from the markets as compared to the States.
- 3) In terms of aggregate public sector borrowing, it does not matter for the debt markets, nor the rating agencies, whether it is the States or the Centre that is increasing their indebtedness.
- 4) Fighting this recession through increased fiscal stimulus is basically the job of macroeconomic stabilisation, which is the Centre’s domain.
- 5) Using the alibi of the COVID-19 pandemic causes a serious dent in the trust built up between the Centre and States.
- It will weaken the foundation of cooperative federalism.
Reforms needed
- GST is a destination-based consumption tax, which must include all goods and services with very few exceptions.
- That widening of the tax base itself will allow us to go back to the original recommendation of a standard rate of 12%, to be fixed for at least a five-year period.
- Some extra elbow room for the States’ revenue autonomy could be allowed by States non VATable surcharges on a small list of “sin” goods.
- In the long term there are many changes in consumption patterns, production configurations and locations, which cannot be anticipated and hence a static concept of Revenue Neutral Rate cannot be reference.
- The commitment to a low and stable rate is a must.
- We must recognise the increasing importance of the third tier of government.
- After 28 years of the 73rd and 74th Amendments, the local governments do not have the promised transfer of funds, functions and functionaries.
- Of the 12% GST, 10% should be equally shared between the States and the Centre, and 2% must be earmarked exclusively for the urban and rural local bodies.
- Fresh approach also calls for an overhaul of the interstate GST and the administration of the e-way bill.
Consider the question “Discuss the issue related to GST compensation to the States by the Central government. Suggest the measures changes in the GST regime to deal with flaws.”
Conclusion
GST is a crucial and long-term structural reform which can address the fiscal needs of the future, strike the right and desired balance to achieve co-operative federalism and also lead to enhanced economic growth. The current design and implementation has failed to deliver on that promise. A new grand bargain is needed.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Providing alternative investment destination to China and policy changes in India
The article examines whether India has been proving a favourable alternative to China or not.
Is India becoming alternate supply source and investment destination?
- Despite media reports and strong messaging from Washington, fewer U.S. companies than predicted might quit China.
- Companies focused on the Chinese domestic market rather than as a base for exports will likely remain, at least for now.
- Those that do leave may not choose India as a relocation destination.
- Many U.S. companies with experience working with China are not convinced that India has China’s established industrial base and expertise.
- They also see other Asian countries as more competitive.
India’s strengths
- Democracy: India’s identity as a democratic “un-China” is one of its strongest selling points.
- Strong IPR: There is no threat of stealing of intellectual property rights.
- No coercive tactics: Foreign companies in India are not subject to coercive tactics as in China.
- Institutions: India’s open and vibrant press, an independent judiciary, and other advantages of democratic governance also provide a contrast to China.
- Domestic market:India’s well-off domestic market also attracts foreign investors.
Why China is a favoured destination
- China offers many advantages, such as a manufacturing infrastructure and skill level that allows innovations to move quickly from prototype to product.
- China’s specialised industrial zones are massive, collocating companies, factories, logistics, and even research and universities.
Way forward
1) Focus on the States
- India can start by focusing development in those Indian States that have already demonstrated the ability to produce and export in key sectors.
- Foreign capital could also greatly increase infrastructure funds beyond government spending alone.
- India might also usefully build up new industrial centres with an eye to geography. [for instance-linking the southeast of the country to supply chains in Southeast Asia]
2) Focus on the policy framework
- India should take two great steps-
- 1) Reduce the number of investments needing approval by the Centre.
- 2)To increase intra-Ministry coordination on foreign direct investment policies.
- The same coordination could be extended to the appointment of a high-level official or body in the Prime Minister’s Office.
- This will ensure that all proposed economic policy changes are consistent with the goal of attracting foreign investment.
Conclusion
A policy framework that is transparent, predictable, and provides increased consultations with existing and potential foreign company stakeholders before introducing new Indian economic policies, will play a crucial role in determining India’s foreign investment outlook.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various indicators in Ease of Doing Business index
Mains level: Paper 3- Ease of doing business Index and issues with it
India’s ranking in the World Bank’s ‘Ease of Doing Business’ index has improved spectacularly. However, the World Bank recently halted its publication and announced decision to review and assess data changes for last five years.
Background
- Citing irregularities of data for a few countries, the World Bank halted its annual publication ‘Doing Business’ report.
- It will conduct a systematic review and assessment of data changes that occurred subsequent to the institutional data review process for the last five Doing Business reports.
Why India should be concerned
- Through improved ranking India sought to attract investments to achieve the targets set for ‘Make in India’.
- India’s success in boosting its ease of doing business ranking is spectacular, to 63rd rank in 2019, up from the 142nd position in 2014.
- Policymakers celebrated it to signal India’s commitment to “minimum government and maximum governance”.
- The World Bank decision to audit the ‘Doing Business’ report for the last five years may soon cause discomfort by shining a spotlight on the sharp rise in India’s ranking.
- Study at the Center for Global Development found that the improvement in India’s ranking was almost entirely due to methodological changes.
- During the same period, however, Chile’s global rank went down sharply, from 34th position in 2014 to 67th in 2017.
- The contrasting experience of Chile and India casts doubts on not just the country-level data but also the changes in underlying methodologies.
Does ease of doing business have predictive power?
- While India’s rank drastically improved, it has meant nothing on the ground.
- The share of the manufacturing sector has stagnated at around 16-17% of GDP, and 3.5 million jobs were lost between 2011-12 and 2017-18.
- Annual GDP growth rate in manufacturing fell from 13.1% in 2015-16 to zero in 2019-20, as per the National Accounts Statistics.
- India’s import dependence on China has shot up.
- In case of Russia, ease of doing business rank jumped from 120 in 2012 to 20, but without becoming a magnet for investment inflows.
- China, on the contrary, attracted one of the highest capital inflows but its ease of doing business ranking was low and hovered between 78 and 96 for the years between 2006 and 2017.
Other flaws in the Index
- The Indicators used for the index are de jure (as per the statute), not de facto (in reality).
- The data for computing the index are obtained from larger enterprises in two cities, Mumbai and Delhi, by lawyers, accountants and brokers — not from entrepreneurs.
- The World Bank’s own internal watchdog, the Independent Evaluation Group, in its 2013 report, has widely questioned the reliability and objectivity of the index.
- The World Bank conducts a global enterprise survey collecting information from companies.
- There is no correlation between the rankings obtained from ease of doing business and the enterprise surveys.
Lack of theoretical basis: Major flaw
- There is little in any major strand of economic thought which suggests that minimally regulated markets for labour and capital produce superior outcomes in terms of output and employment.
- Economic history shows rich variations in performance across countries and policy regimes, defying simplistic generalisations.
- Such simplistic basis is used under a seemingly scientific garb of the quantitative index to the disadvantage of workers.
- To meet the ease of doing business targets, safety standards of factories are compromised.
- For instance, in 2016, the Maharashtra government abolished the annual mandatory inspection of steam boilers under the Boilers Act of 1923 and the Indian Boilers Regulation 1950.
- However, no factory has complied with self-certification or submitted the third party certification.
Consider the question “Examine the issues with the World Bank’s ‘Ease of Doing Business Index’? What are its implications for India?”
Conclusion
It is time the World Bank rethinks its institutional investment in producing the ‘Doing Business’ report. India should do some soul searching as to why the much trumpeted rise in global ranking has failed miserably on the ground.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NDHM
Mains level: Paper 2- National Digital Health Mission
The National Digital Health Mission promises to transform the Indian healthcare system with the aid of technology. The article highlights the key aspects of the mission.
Building integrated digital health infrastructure through NDHM
- NDHM is based on the principles of health for all, inclusivity, accessibility, affordability, education, empowerment, wellness, portability, privacy and security by design.
- NDHM will build the backbone necessary to create an integrated digital health infrastructure.
- With its key building blocks HealthID, DigiDoctor, Health Facility Registry, Personal Health Records, Telemedicine, and e-Pharmacy, the mission will bring together disparate stakeholders and radically strengthen and, thus change India’s healthcare delivery landscape.
- NDHM is also a purposeful step towards the achievement of the United Nations’ Sustainable Development Goal of Universal Health Coverage.
Importance of digital intervention in health service
- Digital interventions significantly enhance the outcomes of every health service delivery programme.
- Importance of digital intervention is demonstrated in the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana scheme.
- Under PM-JAY, 1.2 crore cashless secondary and tertiary care treatments have been provided using an indigenously developed state-of-the-art IT platform.
- The Arogya Setu mobile app deploys ICT innovations for contract tracing.
Principal highlight of NDHM
1) Voluntary in nature
- HealthID is entirely voluntary for citizens.
- Its absence will not mean denial of healthcare to a citizen.
- They can choose to generate their Health Account or ID using their Aadhaar card or digitally authenticable mobile number and by using their basic address-related details and email ID.
- The use of Aadhaar, therefore, is not mandatory.
2) Data sharing based on consent
- Providing access to and sharing of personal health records is a prerogative of the HealthID holder.
- The consent of the health data owner is required to access this information or a part of it.The consent can be withdrawn anytime.
- The personal health record will enable citizens to store and access their health data, provide them with more comprehensive information and empower them with control over their private health records.
3) Compliance with laws and fundamental rights
- NDHM has been built within a universe of fundamental rights and legislation such as the Aadhaar Act and the IT Act 2008 as well as the Personal Data Protection Bill 2019.
- This project is also informed by the entire gamut of Supreme Court judgments and core democratic principles of cooperative federalism.
- The Mission gets its strategic and technical foundation from the National Digital Health Blueprint, the architectural framework of which keeps the overall vision of NHP 2017 at its core and ensures security and privacy by design.
4) Reaching out to the unconnected population
- NHDM is a digital mission led by technology powered by the internet.
- So, to reach out to and empower the large number of “unconnected” masses specialised systems are being built and off-line modules that will be designed to reach out to the “unconnected”.
5) Partnership with all key stakeholders
- The design of NDHM has been built on the principle of partnership with all key stakeholders — doctors, health service providers, technology solution providers and above all citizens.
- Without their belief, trust, adoption, and stewardship, this mission will not achieve its desired result.
Consider the question “Examine the key aspects of the National Digital Heath Mission and how it could help transform the Indian healthcare landscape?”
Conclusion
NDHM is a mission whose time has come because health is the first step towards self-reliance and only a healthy nation can become Atma Nirbhar.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Provision of compensation to states under GST
Mains level: Paper 3- Issues of GST compensation to states.
The article analyses the issue of GST compensation to states under GST regime for five years and how this has turned to be contentious issues after the economic disruption caused by Covid-19.
The basis for compensation
- Under Goods and Services Tax (GST) regime the Centre would make good the loss in the first five years if States faced revenue deficits after the GST’s introduction.
- States sacrificed their constitutionally granted powers of taxation in the national interest.
GST compensation cess
- To pay the compensation to states, GST compensation cess was introduced.
- When the GST compensation cess exceeded the amount that had to be paid to States, the Central government absorbed the surplus.
- Now, the economy has slowed down dramatically and the resources raised are insufficient.
- The Centre is raising questions about whether it is legally accountable to pay compensation.
- The constitutional framework that ushered in the GST does not provide an escape clause for ‘Acts of God’.
Way forward
- As stated by the Secretary of the GST Council in the tenth meeting, the central government could raise resources by other means for compensation and this could then be recouped by continuing the cess beyond five years.
- Monetary measures are the monopoly of the central government.
- Even borrowing is more efficient and less expensive if it is undertaken by the Central government.
- As equal representatives of the citizens State governments expected the Centre to demonstrate empathy and provide them relief through the Consolidated Fund of India.
Conclusion
Central government should consider the legal provision in the GST regime and act in the spirit of cooperative federalism.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Issue of wage growth
The article discusses the threat posed to the Indian economy by the subdued demand following the return of the labourers to their urban jobs.
Rural employment issue
- About 30 million migrant workers rushed home to their villages during the pandemic.
- About 60 per cent of out-migration from rural India is aspiration-led.
- Income earned in urban jobs is 2.5 higher than earned in rural area.
- Though rural economy has been recovering faster than the urban economy, this optimism could prove short-lived, as eventually the more long-lasting determinants of rural wages could prevail.
What are the determinants of rural wages
1) NREGA wages
- The government has raised the rural employment guarantee programme (NREGA) wages and outlays.
- Demand for the scheme is outpacing supply.
- This demand-supply mismatch means that it may not be an effective driver of higher rural wages.
2) Low construction activities
- Many rural Indians, especially those without land, have become building labourers.
- 70 per cent of construction is related to real estate and property developers are dependent on funding from struggling non-banking financial companies.
- Until this type of lending restarts, construction may not normalise.
- And that means rural wages may not rise quickly either.
3) Rising debt level
- The increase in borrowing and fall in inflation over the last few years has increased the “real” indebtedness of rural Indians.
- This affected particularly the landowners who pay villagers to farm their land.
- This is likely to hurt their ability to pay high wages.
3 Reasons why wage outlook could be dimmer
- As migrant labours start to return to their urban jobs, their wage outlook appears to be bleak for 3 reasons.
- 1) As during demonetisation, workers could find jobs again, but at lower wages.
- 2) There could be a second-round of pandemic-led labour market weakness, driven by job losses and falling wages from the first round.
- 3) We find that both rural and urban wages are driven by economic growth, India’s post-pandemic medium-term growth falling by one percentage point to 5 per cent does not bode well.
Way forward
- Weak wages could keep demand subdued. To offset this policymakers have an important role to play.
- 1) In particular, policymakers may have to ensure that capital is allocated efficiently.
- After all, investment is the only way to increase the economy’s capacity to create well-paying jobs.
- 2) Bringing back investment growth would also involve capital re-allocation.
- This means taking it away from sectors that are not working and redeploying it in sectors that are.
- Improving the Insolvency and Bankruptcy Code procedure is a key step here.
- 3) Another important step is to improve the health of banks as they are the ones allocating capital by giving loans.
- Implementation of the 5-Rs — recognition, restructuring, resolution, recapitalisation and reforms — for the banking sector may be particularly useful here.
Consider the question “After supply-side disruption is over, India’s growth may suffer from the subdued wage growth. Suggest the steps to avoid this from happening.”
Conclusion
Supply disruption caused by reverse migration won’t last long, but led by lower wages, demand could remain weak, requiring policy intervention.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-China relations
The article charts out the plan to leverage the potential and the present size of the India markets to settle the boundary dispute with China.
Boycott of Chinese goods: view and counterview
- After Galwan incident, there have been calls for the boycott of Chinese goods.
- Counter views have been expressed that the Indian economy is so dependent on China that the costs would be disproportionately higher for India.
- Our dependence can be reduced substantially if there is a national will and resolve to do so.
Need for mutually acceptable boundary agreement
- China may not be willing to go back substantially from the areas they have occupied.
- Agreeing on maintaining peace and tranquillity or clarification of the LAC has left space for the Chinese to create border incidents which have now led to casualties.
- So India needs to get China to seriously negotiate a mutually acceptable boundary agreement.
India could use its market as leverage
- Size of Indian market: The size of the Indian market and its potential in the coming years provides India considerable leverage.
- But to use this leverage, Indians, individual consumers as well as firms, have to accept that there would be a period of adjustment in which they would have to pay higher prices.
- The Chinese have a competitive advantage and are integral to global supply chains.
- But whatever they sell is, and can be, made elsewhere in the world.
- Indian can produce everything imported by China: Most of what we import from China was, is and can be made in India itself.
- With volumes and economies of scale, the cost of production in India would decline as it did in China.
Steps need to be taken to use market as leverage
- Focus on those imports from China which have been increasing: The initial focus should be on items which are still being made in India and where imports from China have been increasing.
- Depriciate Rupees: If the RBI let the currency depreciate in real terms it would be equivalent to an increase in import duties of about 10 per cent.
- China-specific safeguard duties and use of non-tariff trade barriers should be used in segments like electrical appliances to let Indian producers expand production and increase market share.
- Government Finances for expansion: The government should also facilitate the flow of finances for expansion and provide technical support for testing, improving quality and lowering costs of production.
- Look for other players: In critical areas such as Active Pharmaceutical Ingredients, we need a vigorous approach to procure from elsewhere and have early production in India.
- The government could provide support for environmental compliance to bring down costs of production.This would create demand for domestic goods and services.
- There are strategic sectors where we should reduce vulnerability: Like scrutiny of -Chinese FDI, Chinese 5G participation etc.
- Assured government procurement: In critical areas like solar panel and grid storage batteries private investment for manufacturing in India would be triggered by assured government procurement.
Consider the question “Size and potential of India market could be leverage by India to settle the issues it has with its neighbour. What India needs to achieve this is a strategy and its implementation. Comment.”
Conclusion
A sustained and graded economic response to the recent Chinese conduct on the border is needed. We should signal India’s firm resolve and willingness to bear the cost. China could choose to settle the border amicably and have full access to our market. We could then work together to make this the Asian century.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- National Recruitment Agency
Recruitment reform in the form of National Recruitment Agency will resolve many issues faced by the youth appearing for the multiple government exam.
Context
- On average, 2.5-3 crore candidates appear for about 1.25 lakh vacancies in the central government every year.
- But from next year, the NRA will conduct the CET and based on the score, one can apply for a vacancy with the respective agency.
NRA: Composition and functioning
- The NRA will have representatives from the Ministry of Railways, Ministry of Finance/Department of Financial Services, Staff Selection Commission (SSC), Railway Recruitment Boards (RRBs) and Institute of Banking Personnel Selection (IBPS).
- A multi-agency body, the NRA will conduct a Common Eligibility Test (CET) to screen/shortlist candidates for the Group B and C (non-technical) posts.
- The NRA shall conduct a separate CET each for the three levels of graduate, higher secondary (12th pass) and the matriculate (10th pass) candidates for those non-technical posts to which recruitment is presently carried out by the SSC, RRBs and IBPS.
How it will benefit youth
- It will eliminate multiple tests and save time as well as resources.
- It will give a big boost to transparency.
- The multiple recruitment examinations are a burden on the candidates, as also on the respective recruitment agencies, involving avoidable/repetitive expenditure, law and order/security-related issues and venue-related problems.
- The NRA is a combination of convenience and cost-effectiveness for candidates.
- Examination centres in every district would greatly enhance access to the candidates located in far-flung areas, with a special focus on creating examination infrastructure in the 117 Aspirational Districts.
- This will prove a great boon to crores of aspirants residing in hilly, rural and remote areas and most importantly, for female candidates.
- Taking job opportunities closer to the people is a radical step that would greatly enhance ease of living for the youth.
Consider the question “Recruitment reform in the form of National Recruitment Agency is a radical step that would greatly enhance ease of living for the youth.”
Conclusion
Taking job opportunities closer to the people is a radical step that would greatly enhance ease of living for the youth.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Opportunities and challenges in outer space
The article analyses opportunities and challenges the outer space technology offers to us.
Emerging trends in space industry
- The price for reaching low Earth orbit has declined by a factor of 20 in a decade.
- It enhances human space travel possibilities by leveraging new commercial capabilities.
- According to a Bank of America Report, the $350 billion space market today will touch $2.7 trillion by 2050.
- Starlink, the constellation being constructed by SpaceX to provide global Internet access, plans more than 10,000 mass-produced small satellites in low Earth orbit.
- In a decade, 80,000 such satellites could be in space compared to less than 3,000 at present.
- Companies such as Planet, Spire Global and Iceye are using orbital vantage points to collect and analyse data to deliver fresh insights in weather forecasting, global logistics, crop harvesting and disaster response.
- Space could prove attractive for high-tech manufacturing too.
- In short, an exciting new platform is opening up for entrepreneurs.
3 Challenges
1) Governance of outer space
- Framework for governance of outer space as it becomes democratised, commercialised and crowded is becoming obsolescent.
- The Outer Space Treaty of 1967 enshrines the idea that space should be “the province of all mankind” and “not subject to national appropriation by claims of sovereignty”.
- The Rescue Agreement, Space Liability Convention, and the Space Registration Convention expanded provisions of the Outer Space Treaty.
- The Moon Treaty of 1979 was not ratified by major space-faring nations.
- Space law does not have a dispute settlement mechanism, is silent on collisions and debris, and offers insufficient guidance on interference with others’ space assets.
- These gaps heighten the potential for conflict in an era of congested orbits and breakneck technological change.
2) Acknowledging role of non-state entities
- The legal framework related to outre space is state-centric, placing responsibility on states alone.
- However, non-state entities are now in the fray for commercial space exploration and utilisation.
- Some states are providing frameworks for resource recovery through private enterprises.
- Some scholars and governments view this as against the principle of national non-appropriation, violating the spirit if not the letter of the existing space law.
- The lack of alignment of domestic and international normative frameworks risks a damaging free-for-all competition for celestial resources involving actors outside the space framework.
3) The arms race in outer space
- The space arms race is difficult to curb, especially since almost all space technologies have military applications.
- For example, satellite constellations are commercial but governments could acquire their data to monitor military movements.
- Investment in technologies that can disrupt or destroy space-based capabilities is under way.
- Despite concerns about military activity in outer space for long, not much progress has been made in addressing them.
- The UN General Assembly passes a resolution on Prevention of an Arms Race in Outer Space since 1982.
- The current geopolitical situation does not hold hope for addressing concerns of a space arms race.
Need for space legislation in India
- India has invested enormous resources in its space programme through the Indian Space Research Organisation.
- More importantly, our space assets are crucial for India’s development.
- The proposed involvement of private players and the creation of an autonomous body IN-SPACe for permitting and regulating activities of the private sector are welcome efforts.
- However, the space environment that India faces requires us to go beyond meeting technical milestones.
- We need a space legislation enabling coherence across technical, legal, commercial, diplomatic and defence goals.
Consider the question “Outer space technology is expanding its horizon day by day. However, there are certain challenges the expansion of the space technology faces. What are these challenges and suggest ways to deal with such challenges.”
Conclusion
Our space vision also needs to address global governance, regulatory and arms control issues. As space opens up our space vision needs broadening too.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NUE by the RBI
Mains level: Paper 3- Digital currency by the central bank and its advantages
The article discusses the idea of digital currency supported by the RBI and its advantages.
Purpose of NUE
- RBI recently released the framework for the establishment of a new umbrella entity (NUE) for retail payments.
- NUE would help reduce payments concentration risk with Unified Payments Interface (UPI) facilitating over 1.5 bn transactions a month.
- Given the sticky adoption and only a few payments apps dominating the UPI market, RBI intends to create a parallel retail system.
5 requirements payment systems should fulfil
- 1) The payments system should reduce the cost and time for government support to reach unbanked and underbanked people.
- 2) It should ensure ease of access to credit for small and medium businesses.
- 3) Improve the effectiveness of the implementation of monetary policy.
- 4) The new payment system should effectively counter risk from unregulated new digital currencies like Bitcoin.
- 5) It should discourage money laundering and tax evasion.
CBDC: Solution to the above 5 requirements
- CBDC is the digital form of fiat money, a digital equivalent of banknotes and coins.
- A Central Bank Digital Currency (CBDC) could potentially solve the above problems.
- Retail CBDCs can be issued directly by the central bank to people without going through traditional banks.
- Individuals would have CBDC accounts directly on the central bank core ledger.
- CBDC can reduce the cost and time for government support to reach people during desperate times (like pandemic).
- CBDC can also enable many financial entities to settle directly with RBI.
- In the current set up only a few large banks can settle directly with RBI.
- With a digital currency, the settlement can be instantaneous and, as a result, more payments services providers like NBFCs could connect with RBI, thereby, reducing credit and liquidity risk.
- CBDC lending would build MSMEs history and make further lending easier.
- For India to be a $5 tn economy, businesses need credit, and that can happen when we have more banks.
- India had 97 banks in 1947; today we are still at 95!
- Interest bearing CBDCs can also improve monetary policy effectiveness by enabling real-time pass-through of the policy rate to the lending markets.
- CBDCs can also allow for direct deposits into accounts of low-income households, senior citizens dependent on pensions and help cushion their purchasing power from the low-level interest rates during the times of economic downturn.
- CBDC can thwart some competition against privately issued foreign currency-denominated digital currencies.
Roles and responsibility of RBI with respect to CBDC
- In terms of managing roles and responsibilities, RBI would only hold the accounts and implement monetary policies as it does now.
- Fintech companies can become the channel for retail CBDC transmission and manage client relationships.
- Fintechs can complement the commercial banks and can draw small businesses/poor households into the formal economy.
- These companies could leverage their data to estimate customers’ creditworthiness and share their findings to banks for more efficient allocation of credit.
Consider the question “A digital currency backed by the central bank could transform the retail payment landscape in India. Discuss.”
Conclusion
India has been at the forefront of the fintech revolution, and other developed countries have been following its path. While the world watches the melee between the Greenback and the Renminbi, it is time India also lays the foundation for a strong currency. CBDC may just be one of the ways to do it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Manufacturing sector in India
The article analyses the issues of increasing manufacturing in India while dealing with the constraints faced by it. It also suggests the important role States can play.
Why companies are expected to exit China
- In the aftermath of the pandemic manufacturing companies are expected to exit China due to three primary reasons.
- 1) Realisation that relying heavily on China for building capacities and sourcing manufacturing goods is not an ideal business strategy due to supply chain disruptions in the country caused by COVID-19.
- 2) Fear of Chinese dominance over the supply of essential industrial goods.
- 3) The growing risk and uncertainty involved in operating from or dealing with China in the light of geopolitical and trade conflicts between China and other countries, particularly the U.S.
Where India stands in comparison with China
- China ranks first in contribution to world manufacturing output, while India ranks sixth.
- Against India’s target of share of manufacturing in Gross Domestic Product (GDP) to 25% by 2022, its share stood at 15% in 2018, only half of China’s figure.
- Industry value added grew at an average annual rate of 10.68% since China opened up its economy in 1978, India’s grew at 7% after India opened up its economy.
- Next to the European Union, China was the largest exporter of manufactured goods in 2018, with an 18% world share.
- India is not part of the top 10 exporters who accounted for 83% of world manufacturing exports in 2018.
Constraints faced by manufacturing sector in India
India faces numerous constraints in promoting the manufacturing sector.
- They chiefly include infrastructure constraints, a disadvantageous tax policy environment, restrictive trade policies, a non-conducive regulatory environment, rigid labour laws.
- Constraints also include high cost of industrial credit, poor quality of the workforce, Low R&D expenditure, delays and constraints in land acquisition, and the inability to attract large-scale foreign direct investment into the manufacturing sector.
What role States can play?
- They can contribute land: Federal government system in India demands the participation of States for the lasting solution to the constraints on the sector.
- An important requirement for the development of the manufacturing sector is the availability of land area.
- This could be one of the reasons why manufacturing activity is mainly concentrated in Maharashtra, Gujarat, Tamil Nadu, Karnataka and Uttar Pradesh.
- However, what is of concern is that some States that also have large land area contribute disproportionately little in manufacturing GSDP.
- These states include Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, Odisha, Rajasthan, Telangana, and West Bengal.
Way forward
- Identify reasons: The reasons for less manufacturing activity in these States have to be carefully examined.
- State-specific industrialisation strategies: Based on such reasons, State-specific industrialisation strategies need to be devised and implemented in a mission mode with active hand-holding by the Central government.
- State specific reforms: Policy actions on the part of individual States would improve India’s overall investment climate, thereby boosting investments, jobs, and economic growth.
- Policy actions of the Centre and the States should be well coordinated: Strategy Group consisting of representatives from the Central and State governments along with top industry executives to instil teamwork and leverage ideas through sharing the best practices of the Centre and States could be formed.
Consider the question “What are the constraints faced by the manufacturing sector in India? Suggest the ways to deal with these constraints highlighting the important role States can play in boosting manufacturing.”
Conclusion
Both the States and the Central government needs to work in tandem to boost the manufacturing in India and transform the economic landscape of India.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- India-China relations
The article analyses the India’s efforts to establish strategic equilibrium with assertive China and how that idea clashes with China’s desire to form an Asian order with itself at the top.
Strategic equilibrium
- External Affairs Minister S Jaishankar articulated that India is seeking strategic equilibrium with an increasingly aggressive China.
- It is hoped that with China’s growing differences with the U.S. China would pay attention to India’s sensitivities.
- In achieving equilibrium with China, India has bravely been confronting a face-off in the Himalayas for the past several months.
- India has been building issue-based alliances with the US and Asian majors like Japan, Korea, Vietnam and Indonesia, and Australia.
- It has taken initiatives in the direction of economic de-coupling with China in the name of “atmanirbharata”.
Hierarchical Asian order with China at top
- China is not interested in equilibrium with any of its Asian neighbours, least of all with India.
- China’s efforts are clearly to build a hierarchical Asian order, with itself at the top.
- It is acutely conscious of India’s economic strength, military modernisation and overall capabilities.
- It knows that India is also far behind on these counts.
- China is ruthlessly resisting India’s access to global governance bodies, such as the UNSC and NSG.
- To keep India tied at that level, China is objecting to India’s growing strategic proximity to the US. I
- It is encircling India strategically and economically through its strategic and economic corridors — BCIM (Bangladesh, China, India and Myanmar), CPEC and the Trans-Himalayan Connectivity Network.
- It is raising issues like Kashmir at the UN and establishing footprints in the Indian Ocean.
What should India do
1. Adjust with China, at least tactically.
- Such an adjustment could be based on mutual give and take.
- For India, our first priority could be the resolution of the border dispute.
- Secondly, since China has offered to mediate between India and Pakistan, it should be asked to prevail over Pakistan to resolve the Kashmir issue.
- In return for these “takes” India could offer access to Chinese commercial cargos to sea, through the Nathula pass.
- India could also join China’s BRI on mutually acceptable terms.
- India may also show its willingness, at least tactically, to join CPEC as both Pakistan and China have asked for, provided, India is allowed to undertake projects in PoK and Balochistan.
2.India should revisit its Tibet policy, which is a core irritant for China.
Consider the question “China seeking to establish an Asian order with itself at the top comes in the way of India establishing strategic equilibrium with China. Comment.”
Conclusion
It is possible that this “give” and “take” may not be acceptable to China. Even if it does not work out as planned, India would have made a bold diplomatic initiative and a huge tactical move towards thinking through out-of-the-box solutions and displaying that it can undertake risks to pursue its long-term national interests.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Evolution of the idea of strategic autonomy
The article analyses the evolution of India’s approach to strategic autonomy from the unipolar world dominated by the U.S. to now when the Chinese threat has been looming large.
Context
- Addressing a Southeast Asian forum last week, external affairs minister outlined India’s new quest for “strategic autonomy” in its global economic engagement.
Connection with Atmanirbhar Bharat
- This new quest for “strategic autonomy” is the natural external complement to new economic strategy, described as “Atmanirbharata” or “self-reliance”.
- The concept carries so much ideological baggage, its revival by Government inevitably raised many questions
- Senior ministers and officials of the NDA government sought to reassure India’s partners that Delhi was not marching backwards.
- When applied to the foreign policy framework, “self-reliance” becomes “strategic autonomy”.
Evolution of the idea of strategic autonomy
- America towered over the world after the collapse of the Soviet Union in 1991.
- India’s past emphasis on strategic autonomy was in the context of the “unipolar moment” [dominated by the U.S.] that emerged after the Cold War.
- On the one hand, India needed Western capital as well as technology and better access to its markets.
- On the other hand, Delhi had to protect some of its core national interests from the threats of US intervention.
India-U.S. Relations: Evolution after the Cold war
- In the early 1990s, the Clinton Administration strong desire to resolve the Kashmir dispute between India and Pakistan.
- The Clinton Administration saw the nuclear and Kashmir disputes as one and the same thing.
- Indian diplomacy for the next two decades tried to change the US policy on both Kashmir and nuclear issues.
- Under President George W Bush, the US discarded the long-standing temptation to insert itself in the Kashmir dispute.
- The US also went out of the way to resolve the nuclear dispute with India by changing its domestic laws and international norms on nuclear proliferation.
- The Obama and Trump Administrations have stayed the course since then.
China challenge for India
- On the atomic front, as the US sought to lift the prolonged atomic blockade against India, China sought to block the process.
- China turned an obstacle to India’s membership of the Nuclear Suppliers Group.
- China takes up the Kashmir issue regularly in the United Nations Security Council.
- Today, India’s strategic autonomy is about coping with China’s challenge to India’s territorial integrity and sovereignty.
- China today is viewed in Delhi as a major threat to India’s economic development.
- The bilateral trade deficit reached nearly $55billion in 2019.
- India pulled out of an Asia-wide free-trade arrangement called the Regional Comprehensive Economic Partnership late last year, sensing the threat posed by China-led economic order.
- Ladakh aggression forced India to go from a passive commercial withdrawal to an active economic decoupling from China.
Way forward
- The logic of strategic autonomy from China nudges India to look for strong security partnerships with the US, Europe, Japan and Australia.
- On the economic front, India is exploring various forms of collaboration with a broad group of nations that have a shared interest in developing trustworthy global supply chains.
Consider the question “Delineate the evolution of India’s approach towards the idea of strategic autonomy. How it differs from the past?”
Conclusion
Threats to either territorial integrity or economic prosperity are powerful enough on their own to compel drastic changes in any nation’s policies. Coming together, they promise to make strategic autonomy from an assertive China an enduring theme of India’s economic and foreign policies in the years ahead.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSMEs
Mains level: Paper 3- MSMEs issues and opportunities
MSMEs in India has huge untapped potential. This article suggest the ways to tap it and make the MSMEs major contributor to India’s growth.
What is an issue with MSMEs
- Despite MSME contributing 20% of the GDP and employing about 110 million workers, we have failed to make bold policy-moves to make it more productive and competitive.
- MSMEs are not becoming ‘larger’ and more dynamic, with 99% of the estimated 60 million being micro-enterprises with limited aspirations.
- At the core of this lack of competitiveness is a structural issue.
Addressing the structural challenges
Size
- Consider India’s largest textile cluster vs Bangladesh’s largest.
- More than 70% of the units in Tirupur are micro-enterprises with less than 10 employees while only 20% of the units in Narayanganj in Bangladesh have less than 10 employees.
- This factor makes the cluster in Bangladesh more competitive and helping Bangladesh’s exports grow faster than India’s.
- Though Bangladesh has other advantages also, but this structural difference is critical.
Relation between size and productivity
- Productivity data from manufacturing MSMEs in OECD show that the productivity of medium firms (50-250 people) could be as much as 80-100% higher than that of micro firms (<9 employees).
- Growth in scale allows them to invest in people to improve skills, in better technology & processes, and in innovation.
- The most-competitive of them grow from their small beginnings to become world-beaters.
- This push to grow and improve capabilities and productivity is central to dynamism of any country’s industrial structure.
- This dynamism of micro-enterprises has been one of the less-reported policy levers behind China’s rise as an industrial powerhouse.
What stops MSMEs in India from growing?
- Our policy-legacy of highly restrictive asset-based definition which has only recently been relaxed, coupled with a mindset, and, policies, to support the ‘small is beautiful’ narrative.
- Overly complex regulatory regime doesn’t differentiate enterprises on their scale, other than the really tiny ones, in terms of compliance needs.
- For example, if a unit has more than six employees, the trade union law becomes applicable, If a unit has more than 10 employees, the Factories Act is applicable.
- Small enterprises thus face the same multitude of regulatory requirements as larger ones, and end up having compliance costs account for a higher percentage of revenue.
- For the tiny/micro units, there is simply no incentive to grow and enter the formal economy.
Policy intervention needed
1) Getting MSMEs into formal credit system
- To do this, we need to adopt an approaches that can help banks and NBFCs move away from asset-backed lending, towards some form of cash-flow-based lending.
- Small retailers are outside the formal credit system, unable to invest, modernise and grow, given they lack fixed ‘assets’.
- But, all of them are linked to, and sell, brands of well-known, large companies.
- If banks and NBFCs work with these companies and use anonymised data on sales and credit-performance to develop credit-scores for lending to them?
- Similar innovative ways could help cover other micro-unit segments.
2) Simplified tax and regulatory regime
- The second policy intervention needed is to de-average and implement a simplified tax and regulatory regime for MSMEs.
- This would also reduce the cost of compliance.
3) Development of digital platform
- The third intervention, appropriate for digital era, is to develop a comprehensive ‘digital platform’ for the sector.
- This will call for a mandatory, unique identifier for all.
- The platform will have to be linked to different relevant databases.
Consider the question “MSMEs in India continues to play an important role in India’s development yet it suffers from structural challenges which hinders it from fueling India’s growth. In light of this, examine the challenges MSMEs faces and suggest the policy interventions.”
Conclusion
As India launches the Atmanirbhar Bharat Abhiyan to reignite growth of the economy for a post-COVID world, building such a globally-competitive MSME has to become one of the initiative’s core pillars. Only then can our industry improve and sustain its global competitiveness.
Source-
https://www.financialexpress.com/opinion/the-missing-large-in-msmes-a-globally-competitive-indian-mittelstand-is-the-need-of-the-hour/2063155/
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: GST
Mains level: Paper 3- GST and its benefits to various stakeholders
The article analyses the instrumental role played by the GST in transforming nation into a single market dismantling the barriers across the states.
Reduced tax burden on consumers
- In the pre-GST era, the total of VAT, excise, CST and their cascading effect led to 31 per cent as tax payable, on an average, for a consumer.
- In its first two years, as the collections improved, the GST Council kept reducing the tax burden on consumers.
- Most items have been brought in the 18 per cent, 12 per cent or even 5 per cent category.
- Most items of daily common use are in the zero to 5 per cent slab.
- An analysis by the Reserve Bank of India (RBI) observes that since the roll out of GST, the rate changes have brought down the GST incidence from 14 per cent to 11.6 per cent.
- This explains the revenue loss stated above. The consumer pays less tax now under the GST.
Flexibility and increased compliance
- Taxation threshold for goods was increased to Rs 40 lakh.
- The composition limit was increased from Rs 75 lakh to Rs 1.5 crore.
- For manufacturers, composition tax rate was lowered from 2 per cent to 1 per cent.
- The composition scheme was extended to services as well.
- Special lower rates without Input Tax Credit (ITC) were prescribed for construction and restaurants.
- As per an RBI calculation, the weighted GST rate at present is 11.6 per cent.
- The revenue-neutral rate determined at the time of GST introduction by its own committee was 15.3 per cent.
Widened tax base
- Today, there are 1.2 crore GST assessees compared to 65 lakh at the time of introduction of the tax regime.
- The average revenue collected per month for the nine months (July-March) in 2017-18 was Rs 89,700 crore in 2018-19 it rose by 10 per cent to Rs 97,100 crore.
- In FY 2019-20, the revenue per month was Rs 1,02,000 crore.
- This steady increase was despite the various concessions and rate reductions mentioned above.
Simplification
- GST is an IT-enabled platform.
- Accounting and billing software is provided free to the small taxpayers.
- Those with nil return to file can do so with an SMS.
- Since the registration is completely online, the refund process is also fully automated.
- The Centre is the only refund disbursal authority and no physical interface is required.
Agriculture sector under GST
- Concessions are extended to the agriculture sector under GST, agricultural inputs such as fertilisers, machinery have seen a considerable reduction in rates.
- Other inputs such as cattle/poultry/aquatic feeds are kept at the nil rate.
- Agricultural produce such as vegetables, fruits, flowers and foodgrains are exempt from GST.
- Dairy products — milk, curd, lassi, buttermilk and minor forest produce such as lac, shellac and sisal leaves are also exempt.
- Silk cocoon, raw silk, wool, jute fibre are nil rated.
- In the pre-GST era, many of these were in the 5 per cent slab.
- Service inputs to agriculture are similarly treated.
- Before the introduction of GST, many such items were taxed at a standard rate of 15 per cent.
MSME under GST
- Micro, small and medium enterprises (MSMEs) have consistently received sensitive treatment under the GST regime.
- Items that have large employment creating activities, rough diamond/precious stone sorting and polishing for example, have seen a GST reduction from 3 per cent to 0.25 per cent.
- Services rendered by MSMEs have also received such sensitive treatment.
Concerns
- Tax reduction in some cases has led to an inversion of duty structure.
- Manufactured goods in lower slabs have suffered due to inversion in the duty structure.
- With lockdowns and consequential deferrals in tax payments, compensation payments to the states is a concern that the Council has taken cognisance of.
Consider the question “Elaborate on how the GST has been benefiting the various stakeholders and helped in transforming India into a single market?”
Conclusion
The states have shown maturity and understanding. The spirit of collective responsibility and statesman-like thinking have kept mutual trust and confidence high. The much talked about cooperative federalism is actually in action in the GST Council.
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Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 2-Increasing the age of marriage for girls and implications
The article examines the issue of the age of marriage of girls and its relation with their education level and economic status.
Trends in early marriage
- The National Family Health Survey (NFHS-4) data 2015-16 points to certain trends in early marriages:
- That rural women are likely to marry earlier than their urban counterparts.
- The higher up a woman is on the wealth quintile, the later she marries.
- Most importantly, it establishes a direct causal link between education levels and delayed age of marriage.
- Women with 12 years or more of schooling are most likely to marry later.
- Only 8 per cent rural girls who drop out in the age group 6 to 17 years cite marriage as the reason.
Impact on STs and SCs
- According to the wealth quintile data, the poorest households are concentrated in rural India.
- The lowest quintile, which is most likely to marry off their girls early out of socio-economic necessities, have 45 per cent of the Scheduled Tribe (ST) and 25.9 per cent Scheduled castes.
- The NFHS-4 data on women aged 15-49 by number of years of schooling completed shows that 42 per cent ST women and 33 per cent SC women have received no schooling.
Issues
- Marriages in India are governed by various personal laws which set varying minimum ages for girls as also the Prohibition of Child Marriage Act (PCMA), 2006, where it is 18 years for girls and 21 for boys.
- This is compounded by The Protection of Children from Sexual Offences (POCSO) Act, 2012, that increased the age of consent, from 16 years to 18 years.
- Several studies have shown how this has criminalised self-arranged adolescent marriages as parents often misuse it to punish couples marrying without their approval, especially in cases of inter-caste marriages.
Way forward
- The National Human Rights Commission showed how higher education levels lead to a lower likelihood of women being married early and recommended that the Right to Education Act, 2009, be amended to make it applicable up to the age of 18 years.
- Noting the law’s patriarchal underpinnings, the 18th Law Commission report (2008) asked for uniformity in the age of marriage at 18 years for both men and women and lowering the age of consent to 16 years. Government could act on such a recommendation.
Consider the question “What are the advantages of increasing the minimum age of marriage for girls. Also, examine the issues with the move.
Conclusion
The median age at first marriage for both men and women in India has registered a significant decadal improvement with more people now marrying later than ever before. Any attempt to leapfrog through quick-fix and ill-conceived punitive measures will only considerably reverse these gains.
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