💥UPSC 2027,2028 Mentorship (May Batch) + Access XFactor Notes & Microthemes PDF
Talk to mentor

Civilsdaily

Login

Type: op-ed snap

  • Goods and Services Tax (GST)

    Issue of GST compensation to states

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    Boosting demand with wage hike

    op-ed snap | Economics | Mains Paper 3: Issues relating growth and development, employment

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Foreign Policy Watch: India-China

    Leveraging its market to force China to settle border issue

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

    National Recruitment Agency: Taking jobs closer to people

    op-ed snap | Governance | Mains Paper 2: Health & Education

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • ISRO Missions and Discoveries

    Space industry and challenges

    op-ed snap | Science Tech | Mains Paper 3: Awareness in various sc and tech fields

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • RBI Notifications

    The idea of Central Bank Digital Currency in India

    op-ed snap | Economics | Mains Paper 3: Indian Economy

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    Boosting manufacturing

    op-ed snap | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth,Indian Economy

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Foreign Policy Watch: India-China

    Seeking equilibrium with China

    op-ed snap | International Relations | Mains Paper 2: India & Its Neighborhood – Relations

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Foreign Policy Watch: India-United States

    India’s strategic autonomy and its evolution

    op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

    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.

    Get an IAS/IPS ranker as your 1: 1 personal mentor

  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    The missing large in MSMEs

    op-ed snap | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

    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/

    Get an IAS/IPS ranker as your 1: 1 personal mentor