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  • Minimum Support Prices for Agricultural Produce

    Analysing the impact of reservation

    op-ed snap | Polity | Mains Paper 2: Laws, Institutions & Bodies Constituted For The Vulnerable Sections

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Article 16 (4A)

    Mains level: Paper 2- Reservations and issues with it

    Provision of reservation has helped in correcting the historical injustice in some way. However, the recent decline in government jobs and policy changes could undermine the provision of reservation.

    How reservation helped SCs and OBCs: Some figures

    • In the Central Administrative Services, SCs reached 14 per cent of the Class C in 1984.
    • They reached 14.3 per cent of Class B in 2003.
    • In Class C,13.3 per cent in 2015.
    • In the Central Public Sector Enterprises (CPSEs), their proportion rose from 14.6 per cent in 2004 to 18.1 per cent in 2014.
    • In parallel, the SCs’ literacy rate jumped from 21.38 per cent in 1981 to 66.1 per cent in 2011.
    •  After the Mandal Commission report was implemented, OBCs started to benefit from it.
    • In 2013, OBCs – 52 per cent of India’s population according to the Mandal report – represented 8.37 per cent of Class A in the Central Government Services, 10.01 per cent of Class B and 17.98 per cent of Class C.
    • Their percentage in the CPSEs jumped from 16.6 per cent in 2004 to 28.5 per cent in 2014.

    Number of jobs declining

    • First, the number of vacancies has surged, from 5.5 lakh in 2006 to 7.5 lakh in 2014 so far as central government employment is concerned.
    • Second, the total number of employees has dropped between 2003 and 2012, from 32.69 lakh to 26.30 lakh in the Central Government Services.
    • The number of Dalits benefiting from reservations has been reduced by 16 per cent from 5.40 lakh to 4.55 lakh.
    • While the number of OBCs benefiting from reservations had jumped from 14.89 lakh in 2008 to 23.55 lakh in 2012, it has dropped to 23.38 lakh the year after.
    • Reservations have also been undermined by lateral entry into the bureaucracy.
    • This new procedure undermined the reservations system because the quotas did not apply.

    Judgements that affect the idea of reservation

    • In one judgment the UGC was allowed to shift the unit of provision of reservations from a university as a whole to the departmental level.
    • Such a shift has reduced the quantum of reserved seats and restricted the entry of lower castes.
    • Small departments, where vacancies are few, would be indivisible — thereby no seats would be reserved.
    • As a result, only 2.5 per cent posts were reserved for SCs, none for STs and 8 per cent for OBCs.
    • However, the impact of the ordinance and the subsequent Bill passed by the Parliament in March and July 2019, reversing the Supreme Court’s judgment, is yet to be seen.
    • In another judgement, Supreme Court ruled that reservation in job promotions was not a fundamental right.
    • This ruling undermined the effect of an amendment to the Constitution that had been introduced by the Narasimha Rao government in 1995 and that had resulted in article 16(4A).
    • Article 16(4A) had circumvented a facet of the 1992 decision of the Supreme Court to allow reservation for SCs and STs in promotions.
    • In 2001 the 85th amendment extended the benefit of reservations in favour of the SCs/STs in matters of promotion with consequential seniority.
    • This time, in 2020, the Government of India has decided not to contest the decision of the Supreme Court.

    Policy changes that affect the reservation

    • The National Commission for Backward Classes has issued a notice to the health ministry complaining that the post-Mandal 27 per cent quota was not implemented systematically.
    • The funds earmarked for Dalit education in the Indian budget were reduced by the previous government.
    • While this budget item, within the Special Component Plan is supposed to be proportional to the demographic weight of the Dalits, 16.6 per cent, it fluctuated between 9 and 6.5 per cent.

    Conclusion

    Reservations have been one of the most effective techniques of positive discrimination in India and helped in the goal of delivering social justice. So, any policy that affects it must be reconsidered.

    Original link

    https://indianexpress.com/article/opinion/columns/reservation-in-india-privatisation-push-nirmals-sitharaman-backward-castes-6494931/

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  • Solar Energy – JNNSM, Solar Cities, Solar Pumps, etc.

    What India should do to get its energy transition right

    op-ed snap | Enviro & Biodiversity | Mains Paper 3: Conservation, Environmental Pollution & Degradation, Eia

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: CEA

    Mains level: Paper 3- Challenges renewable energy faces and solutions

    The article analyses the problems renewable energy faces in India and suggests the pathways to overcome these challenges.

    India’s commitments and goals

    • India has committed in the 2015 Paris Agreement to reduce GHG emissions intensity by 33-35% below 2005 levels.
    • It also committed to achieve 40% of installed electric power capacity from non-fossil sources by 2030.
    • At the UN General Assembly in 2019, we announced a target of 450 GW of renewable energy (RE) by 2030.

    Let’s look into CEA study

    • The optimal electricity mix study of the Central Electricity Authority (CEA), estimated 430 GW non-hydro renewables (280 GW solar + 140 GW wind + 10 GW bio) by 2030.
    • Study put thermal capacity at 266 GW by 2030.
    • So, it puts the percentage of non-fossil fuel (RE + hydro + nuclear) in installed capacity by 2030 at 64%.
    • Which is much higher than India’s Paris commitment.

    Coal contradiction

    • The target for coal production at 1.5 billion tonnes, which was set in 2015, has been reinforced recently to be achieved by 2024.
    • Privatisation of coal mining and recent auctions have given a meaningful thrust to this.
    • Looked at the target set for renewable energy, targets for cola production convey contradictory signals.
    • The targeted coal production of 1.5 billion tonnes, even by 2030, would mean thermal generation capacity could double over the current 223 GW.
    • In that case, even with targeted RE capacity, we will not achieve our emissions intensity Paris commitment.
    • Can a global green champion announce doubling its coal production in five years?

    Problems with Renewables

    1. Policy Issues

    • Solar deployment has seen policy challenges both from Centre and states, these include-
    • Continuous changes in duty structure.
    • Renegotiation of PPAs.
    • Curtailment of solar power.
    • Extremely delayed payments in some states.
    • Policy flip-flops on open access and net metering.
    • Delays by state agencies and regulators.
    • Land possession difficulties.
    • Transmission roadblocks even in solar parks.

    2. Solar cell manufacturing constraints

    • Our capacity for cell manufacture is 3 GW, though workable capacity is actually around 2 GW.
    • Domestically manufactured cells are more expensive and less efficient.
    • There is little upgrade in a rapidly changing world of technology.
    •  90% of cells and 80% modules are imported largely from China or Chinese companies elsewhere.
    • Wafer imports are 100% as we don’t manufacture ingots/wafers.
    • For every GW with an average cost of Rs 5,000 crore in 2019, more than half goes to China.

    3. Storage constraints

    •  Hydro pump storage is limited in quantity and there will be an issue of costs.
    • The other project is a solar-wind hybrid with batteries installed after a few years.
    • Neither intends to meet peak power demand or even the baseload.
    • Forecasts suggest lowering of battery costs by 50% by 2030.
    • It makes sense to wait before we go for large-scale storage.

    Manufacturing domestically

    • 1) At the least plan to make 5 GW of ingot/wafer manufacturing capacity urgently.
    • We may require electricity supply at about Rs 3 per unit, and dedicated power plants.
    • The risk of technology obsolescence would need to be factored in.
    • Policy, fiscal and financial support prescriptions should aim at creating globally competitive industry.
    • 2) We need to develop batteries suitable for extreme Indian weather conditions but globally benchmarked.
    • This demands a mission approach, getting our best people and institutions together, properly funded and tasked to get a battery out in the next three years.
    • 3) We must also simultaneously launch a hydrogen mission—target heavy vehicle mobility through fuel cells.
    • It may become a solution for RE storage, too.

    The issue of supply-demand mismatch

    • In the last two decades, we have been overestimating demand and increasing supply.
    • Our demand projections for 2030 are wildly high.
    • PLF in 2018-19 was 60.30, declining to 56.08 in 2019-20 and hovering around 50% with the Covid-19 impact.
    • Even the latest CEA review of ‘optimal’ mix talks of thermal PLF of 59% in 2030!
    • This is inefficient and costly.
    • Thermal PLF must be taken to over 80%.

    The suggested pathways

    • 1. Build thermal capacity as per CEA estimates and quickly. None after 2030. Retire inefficient plants. Plan for miner rehabilitation.
    • 2. Accelerate RE after 2030 with storage. Aim for 10 GW solar and 5 GW wind annually.
    • 3. Develop 5-10 GW ingot/wafer manufacturing capacity urgently and diversify import sources even at some extra cost.
    • 4. Develop a battery for Indian conditions in three years; full battery manufacturing in India in five years.
    • 5. Revisit the manner of solar generation. Prioritise decentralised and solar agriculture.
    • 6. Plan for hydrogen economy with pilot projects and dedicated highways for long and heavy haul traffic.
    • 7. Put a strong energy demand management system into place with much stronger energy efficiency and the conservation movement.

    Consider the question “Central Electricity Authority finalised the optimal electricity mix study recently setting the targets for the future. Examine the constraints that expansion of solar energy faces and suggest the pathways to overcome the challenges.”

    Conclusion

    Embracing the RE will help India economically and strategically. It will also help it achieve its targets in its fight against climate change.

    Back2Basics: Central Electricity Authority

    • Central Electricity Authority (CEA) is an organization originally constituted under Section 3(1) of the repealed Electricity (Supply) Act, 1948, since substituted by Section 70 of the Electricity Act, 2003.
    • It was established as a part-time body in 1951 and made a full-time body in 1975.
    • The functions and duties of CEA are delineated under Section 73 of the Electricity Act, 2003

    Plant Load Factor (PLF)

    • Plant Load Factor (PLF) is the ratio of average power generated by the plant to the maximum power that could have been generated for a given time period.

    Original Op-ed

    https://www.financialexpress.com/opinion/what-india-should-do-to-get-its-energy-transition-right/2016648/

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  • Modern Indian History-Events and Personalities

    Remembering P C Mahalanobis

    op-ed snap | Science Tech | Mains Paper 3: Achievements Of Indians In S&T

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Achievements of Indians

    Prasanta Chandra Mahalanobis, India’s ‘Plan Man’ and the architect of the country’s statistical system is more relevant now in times of Covid pandemic when we grapple with the lack of data.

    Analysing 1944 Bengal famine

    • He conducted a large-scale sample survey of Bengal’s famine between July 1944 and February 1945.
    • Sample survey helped in causal analysis and to assess the extent of the disaster and an estimate of the number of people affected.

    Relevance today

    • Bengal’s famine survey reminds us that we need estimates of the millions who will lose jobs or livelihoods in today’s pandemic.
    • The extent of feasibility, success and problem of online access also needs to be properly estimated in this new dawn.
    • Mahalanobis is perhaps more relevant today when the accuracy of different sorts of data is under the scanner.
    • Mahalanobis envisaged large-scale sample surveys as statistical engineering rather than pure theory of sampling.
    • He was instrumental in establishing the National Sample Survey (NSS) in 1950 and the Central Statistical Organization in 1951.

    Data accuracy

    • Mahalanobis was very careful about data accuracy in his surveys.
    • In Kautilya’s Arthashastra, there is mention of the need for cross-checking by an independent set of agents for data collection.
    • This, according to Mahalanobis, was the “striking feature in the Arthashastra”.
    • This might have prompted him to have an independent supervisory staff during the conduct of field operations by the NSS.
    • His initial training in Physics might have made him conscious about errors in measurement and observation.
    • The desire to have built-in cross-checks and to get an estimate of errors in sampling led him to introduce the Inter-Penetrating Network of Subsamples.
    • The network is considered as the curtain-raiser for re-sampling procedures like Bootstrap.
    • Bootstrap is a revolutionary concept of statistics.

    Difficulties in conducting surveys

    • Even Mahalanobis could have faced hardship had he wished to conduct surveys now.
    • First, even in pre-COVID-19 India, it’s widely reported that surveyors were facing tremendous resistance from people due to some sociopolitical reasons.
    • Pronab Sen, Chairman of the Standing Committee on Economic Statistics, and former Chief Statistician, expressed his concern that the survey system is already in “deep trouble”.
    • Conducting household surveys with the Census as the frame would be “very tough” going ahead.
    • The problem will intensify due to COVID-19.

    Use of technology for survey

    • Mahalanobis never shied away from technology.
    • He was instrumental in bringing computers to India.
    • The Mahalanobis-led Indian Statistical Institute procured India’s first computer in 1956 and the second in 1959.

    Consider the question asked in 2019 “How was India benefitted from the contributions of Sir M.Visvesvaraya and Dr M. S. Swaminathan in the fields of water engineering and agricultural science respectively?”

    Conclusion

    Mahalanobis wrote: “Statistics are a minor detail, but they do help.” This is an eternal truth. What Mahalanobis didn’t spell out is that one needs a top statistician for listening to the heartbeats of data and for framing data-based policy decisions for human welfare and national development.

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  • Foreign Policy Watch: India-China

    Indo-Pacific region

    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: The East China Sea, the Bohai Sea, the Yellow Sea, the South China Sea

    Mains level: Paper 2-India's Indo-Pacific vision and China's BRI

    As India tries to diffuse the tension along the disputed northern border with China, it must focus on the other potential fronts that China could open. India Ocean could be the next one. This article examines the centrality of the Indian Ocean for China and their approach to the region.

    India’s Indo-Pacific vision

    • This vision is based on our historical associations with this region.
    • This vision also acknowledges the importance of the Indian Ocean in building prosperity in this century.
    • So, the key points of this vision are thus-
    • 1) Inclusiveness, openness and ASEAN centrality and unity.
    • 2) India does not see the Indo-Pacific Region as a strategy or as a club of limited members.
    • 3) It is not directed against any country.

    China should have equal access

    • China is not a littoral state in the Indian Ocean.
    • Historically, Chinese naval activity was limited to the East China Sea, the Bohai Sea, the Yellow Sea, and the South China Sea.
    •  In today’s context, China is the second-largest economy and the world’s largest trading nation.
    • The sea-lanes of communication in the Indian Ocean are vital to her economy and security.
    • Under international law, China should have equal access to the Indian ocean.

    China’s “Malacca Dilemma”

    • China thinks that others would block the Malacca Straits to “contain” the Chinese.
    • So, China has strategized to dominate not just the Malacca Straits, but the ocean beyond it.
    • The PLA Navy (PLAN) made its first operational deployment in the Gulf of Aden in 2008.
    • In 2009 China planned for overseas base or facility.
    • In 2010 a China State Oceanic Administration report alluded to plans to build aircraft carriers.

    BRI: Overcoming the deficiencies China face in India Ocean

    • The US hegemony and India’s regional influence in the Indian Ocean are thought of as a challenge to China.
    • So, China focused on 3 inherent deficiencies that they wanted to overcome.
    • (a) China is not a littoral state.
    • (b) Its passage through key maritime straits could be easily blocked.
    • (c) The possibility of US-India cooperation against China.
    • How to overcome these deficiencies?
    • (1) carefully selecting sites to build ports — Djibouti, Gwadar, Hambantota, Sittwe and Seychelles.
    • (2) By conducting activities in a low-key manner to “reduce the military colour as much as possible”.
    • (3) By not unnerving India and America by cooperating at first, then slowly penetrating into the Indian Ocean, beginning with detailed maritime surveys, ocean mapping, HADR, port construction and so on.

     China acting on the plans

    • The PLA’s new base in Djibouti is the prototype for more “logistics” facilities to come.
    • More port construction projects like Gwadar and Hambantota, are being offered to vulnerable countries.
    • These projects are commercially unviable but have military possibilities,
    • Chinese “civilian” vessels routinely conduct surveys in the EEZ of littoral states.
    • In January 2020 the PLA Navy conducted tripartite naval exercises with Russia and Iran in the Arabian Sea.
    • They have the largest warship building programme in the world.

    Consider the question “What constitutes India’s Indo-Pacific vision? Elaborate on the factors that explain China’s reluctance to subscribe to this vision.”

    Conclusion

    The idea of Indo-Pacific might potentially derail the carefully crafted Chinese plan. So, they now wish to cause alarm by raising fears about Great Power “strategic collision” caused by the so-called American-led “containment” strategy. It is important to look past their propaganda.

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  • Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

    How to counter China

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Not much

    Mains level: Paper 3- Policy changes and reforms needed for growth of India

    There is no doubt that an economically prosperous India will be well placed to deal with China effectively. So, to achieve this prosperity India urgently needs to embark upon the path of reforms. 

    How much China has moved ahead

    • In 1987, both countries’ nominal GDPs were almost equal.
    • China’s economic opening-up has left India behind, contributing to a military imbalance.
    • China’s economy was nearly five times larger than India’s in 2019.
    • Not coincidentally, from rough parity in 1989, China’s military spending last year more than tripled India’s.
    • Heightened vigilance along the LAC demands summoning scarce resources.
    • If India cannot close the economic gap and build military muscle, Beijing may feel emboldened to probe the subcontinent’s land and maritime periphery.

    Reforms: Key to progress

    • In 1991, India enacted changes allowing markets to set commodity prices.
    • But it did not similarly liberalise land, labour and capital.
    • Now, the government has delivered mixed messages about a revitalised reform agenda.
    • Some States have temporarily lifted labour restrictions.
    • Some others intend to make land acquisition easier.

    But a call for self-sufficiency could do harm

    • India emphasis on self-reliance could inhibit growth and constrain investment in a more vigorous foreign and defence policy.
    • Greater self-sufficiency is desired.
    • Home-grown manufacturing of critical medicinal ingredients or digital safeguards on citizens’ personal data would reduce vulnerabilities.
    • Imposing restriction to help the local defence industry would hamper acquisitions helping balance China.

    Competition from other countries

    • China is facing intense scrutiny for its role in the pandemic, geopolitical competition, trade wars, and economic coercion.
    • Businesses are revisiting whether or not to diversify suddenly exposed international value chains.
    • India’s competitors [like Bangladesh, Vietnam] are trying to attract the businesses shifting out form China.
    • These countries are highlighting their regulatory predictability, stable tax policies, and fewer trade obstacles.
    • While India remains outside the Regional Comprehensive Economic Partnership, competitors are wooing companies seeking lower trade barriers.
    • Asian countries are pushing ahead: Vietnam just inked a trade deal with the European Union that threatens to eat into India’s exports.

    Way forward

    • India needs increased exports and investments to provide more well-paying jobs, technology.
    • Before committing to long-term, multi-billion investments, companies often want to test India’s market through international sales.
    • Liberalisation remains the tried-and-true path to competitiveness.
    • If India can unite its people and rapidly strengthen capabilities, it will likely discover that it can deal with China effectively.

    Consider the question “Do you agree with the view that slowdown in the reforms in land, labour and capital after the reforms of 1991 restricted Indias economic progress? Give reasons in support of your argument.

    Conclusion

    The choices that India makes to recapture consistent, high growth will determine its future. Bold reforms offer the best option to manage Beijing and achieve greater independence on the world stage.

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  • Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

    Aatamnirbhar in Agriculture

    op-ed snap | Agriculture | Mains Paper 3: Transport & Marketing Of Agricultural Produce

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: Export of India's agricultural products

    Mains level: Paper 3- Increasing India's net agri-exports

    India has been the net exporter of agricultural commodities since 1991, however, there is scope for increasing its net export. This article suggests the strategy to achieve this.

    Foreign exchange reserve: then and now in terms of grains

    • In the mid-1960s the country had about $400 million.
    • If India had spent all its foreign currency reserves just on wheat imports, it could have imported about seven million tonnes (mt) of wheat.
    • Today, India has foreign exchange reserves of more than $500 billion.
    • Even if the country has to buy 20 mt of wheat at a landed cost of $250/tonne, it will spend just $5 billion it is just one per cent of its foreign exchange reserves.
    • In that sense, the biggest reform in the last three decades that has led to “aatma nirbharta” in food is the correction of the exchange rate.
    • Another factor is coupling and the gradual integration of India with the world economy.
    • This has helped India increase its foreign exchange reserves from $1.1 billion in 1991 to more than $500 billion today.

    India: Net exporter of agricultural products

    • India has been the net exporter of agricultural products ever since the economic reforms began in 1991.
    • The golden year of agri-trade was 2013-14 when net agricultural trade surplus was $24.7 billion.
    • In 2019-20, agri-exports were just $36 billion, and the net agri-trade surplus at $11.2 billion.
    • With this dull performance doubling agri-exports by 2022 looks almost impossible.

    Let’s look at what India exports

    • Marine products with $6.7 billion exports top the list.
    • The second is rice at $6.4 billion of which basmati is at $4.6 billion and common rice at $2.0 billion.
    • Next is spices at $3.6 billion.
    • Other items are buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.

    Strategy to increase export

    • If one chalks out a strategy we would need to keep in mind the principle of “comparative advantage”.
    • That means exporting more where we have a competitive edge, and importing where we lack competitiveness.
    • Together power and fertiliser subsidies account for about 10-15 per cent of the value of rice and sugar produced on a per hectare basis.
    • So, we should offer similar incentives for exports of high-value agri-produce like fruits and vegetables, spices, tea and coffee, or even cotton, as we do for rice and sugar?

    Decreasing the edible oil imports

    • On the agri-imports front, the biggest item is edible oils — worth about $10 billion i.e. more than 15 MT.
    • India needs to decrease imports through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.
    • The maximum potential of increasing production lies in oil palm.
    • This is the only plant that can give about four tonnes of oil on a per hectare basis.
    • India has about 2 million hectares that are suitable for oil palm cultivation — this can yield 8 mt of palm oil.
    • But it needs a long term vision and strategy.

    Issue of subsidy to rice and sugar

    • Rice and sugar cultivation are subsidised through free power and highly subsidised fertilisers, especially urea.
    • It is leading to the virtual export of water because of their high water requirements.
    • One kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water.
    • This leads to increased pressure on scarce water and highly inefficient use of fertilisers.
    • It may be worth noting that almost 75 per cent of the nitrogen in urea is not absorbed by plants.
    • It either evaporates into the environment or leaches into groundwater making it unfit for drinking.

    Consider the question “While India has been the net exporter of agricultural products ever since the economic reforms of 1991, it is far from realising its potential to become the leading agri-produce exporter. In light of this, suggest the strategy that India should follow to increase India’s net agri-exports.”

    Conclusion

    The government must focus on augmenting export and decrease import dependence in agricultural products which will further its goal of aatmanirbharta and doubling the farmers’ income.

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  • FDI in Indian economy

    Differentiating FDI and trade

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: FDI

    Mains level: Paper 3- Differentiating between trade and investment

    Differentiating between trade and investment is necessary for reaping the benefits that come with foreign investment in firms. However, the concerns over the source of funds are not unfounded. So, some caution is warranted in dealing with FDI.

    Let’s look into the debate

    • Government is asking its citizens to aim for self-reliance.
    • So, should India continue to allow investment inflows from China? This is the debate.
    • China has invested $4 billion in Indian startups in the past 5 years.
    • This amount would be higher if funds located in tax havens with Chinese ownership are also accounted for.

    Some of the questions raised in the debate

    •  Is trade of products like buttons, crockery same as long-term foreign investments in high-risk new age technology-driven products?
    • Is it economically prudent for a country to fulfil all its capital requirements or compromise on innovation due to lack of thereof?

     Trade vs FDI

    • Trade just helps the country fulfil its requirements of those goods and services (G&S) that may not available in the country.
    • Investments provide the capital to build infrastructure that can plug the G&S deficit, even, sell it to other markets.
    • Trade just provides entry of G&S.
    • FDI inflow is a route for transferring capabilities, technology, building linkages, business capabilities etc.
    • FDI helps generate employment, public assets, tax revenues and develop markets, none of this is contributed by the trade of merchandise.
    • Foreign investment does have an adverse impact on domestic markets in the short-run by crowding out domestic competition or investment.
    • In fact, attracting FDI in employment-intensive sectors can create positive economic and social spillovers.
    • Possibilities to increase exports often arise from companies with significant levels of FDI.
    • Foreign investor exposes itself to regulatory, economic and geo-political risks of the country.

    Foreign investment in Indian firms: Two aspects to consider

    • While discussing the funding composition of the likes of Paytm, OYO hotel chain or Ola, two aspects need to be considered.
    • 1) These companies are Indian companies operating under the law of land, creating economic opportunities for the youth and contributing to the welfare of the Indian community.
    • 2) Success of these ventures is not solely due to the investment, but because of the novelty of the product offering.
    • Investments in start-ups involve high risk; the list of failed start-ups with Chinese investment is bound to be much longer.
    • In the absence of technology giants in India, we may also end up draining the brain to countries with a stronger financial ecosystem for fresh ideas.

    Apprehension over FDI in India

    • Apprehensions related to investments from any country per se, are not unwarranted in India.
    • This is mainly because history suggests foreign investment can potentially lead to economic colonisation.
    • However, times have changed and so has the world order.
    • Steady inflow of investments can exist without impacting the economic or political stability of the country.
    • To do so we should practice some of the following recommendations.

    How to address the concern over FDI

    • Investment funds can be set up outside the home country of the investor or be routed through companies located at tax havens.
    • It is not always possible to map the investor to the country.

    How to solve this problem

    • To solve this identify sectors based on sensitivity, the investment required, technology, employment and social impact.
    • Tighten regulations related to data storage and access by companies through data localisation in these sensitive sectors.
    • Modify the offset policy in defence to ensure a certain portion of the profits is invested in the SMEs.
    • To further India’s interests in nascent sectors such as machine learning, HealthTech, maximum period for an investor to be invested in a greenfield should be limited to 10 years.
    • All firms receiving foreign investment should have a plan to contribute to India’s exports within the product lifecycle and minimum employment generation.
    • Ease listing norms for firms so that funds through public and private placement can be raised by wholly Indian owned companies.
    •  BSE SME & Start-ups Platform has helped 322 companies raise Rs. 3,320.48 crores from the market. Start-ups should be encouraged to make use of the platform wherever possible.
    • Domestic procurement of raw material and intermediate goods has to be non-negotiable as far as possible.

    Consider the question “What are the challenges and opportunities associated with foreign investment and suggest the ways to address the challenges.”

    Conclusion

    From being treated as a ‘dumping bazaar’ to now attracting investors, India does not need to shy away from investments; it certainly needs to be wary of pure trade which limits India’s potential and drive to produce indigenously.

    Back2Basics: Offset policy

    • The offset policy, introduced in 2005, mandates foreign suppliers to spend at least 30% of the contract value in India.
    • It was first revised in 2006 and then again in 2011 and in 2016. Another round of tweaking is currently underway.

     

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  • Pharma Sector – Drug Pricing, NPPA, FDC, Generics, etc.

    Decoupling pharmaceutical industry from China should be strategic

    op-ed snap | Economics | Mains Paper 3: Awareness in various sc and tech fields,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: APIs

    Mains level: Paper 3- Indian pharmaceutical industry

    Abrupt ban on import from China would harm the India pharmaceutical industry and disrupt the supply of several essential medicines. Any attempt at reducing the dependence on China for APIs should be strategies, argues the author.

    Dependence of Indian pharma industry on China

    •  India is the third-largest producer of finished drugs in the world.
    • However, India relies significantly on China for supplies of active pharmaceutical ingredients APIs.
    • An estimated 70 per cent of API requirements of India’s pharmaceutical industry are sourced from China.
    • For some drugs, such as paracetamol and ibuprofen, this dependence is almost 100 per cent.
    • This import reliance has been fuelled by environmental controls in India and competition with China, which has higher volumes of production and lower costs.

    Implications of banning import from China

    • Restricting or banning the import of APIs would cause significant disruption to the Indian pharmaceutical industry
    • The pharmaceutical industry had $40 billion in revenues in 2018-19, according to Pharmexcil.
    • Such a prospect is especially of concern to potential patients.
    •  Indian pharmaceutical industry annually exports $20 billion worth of medicine.
    • An ad hoc or reactive decoupling could disrupt the production of a wide range of medicines in India and globally.
    • Such disruption could affect the availability of Dexamethasone and painkillers, such as paracetamol and ibuprofen, as well as antibiotics, such as penicillin.
    • The impacts would be especially high in low and middle-income countries.
    • In many African countries, in fact, India supplies almost 50 per cent of the medicines in value terms.

    Lessons from the past: Policy initiative matters

    • Market share of foreign-owned multinationals in India was 80-90 per cent in 1970 in the pharmaceutical industry.
    • It fell to 50 per cent by the early 1980s, and down to 23 per cent today.
    • The prices of medicines in India fell from being amongst the highest in the world to amongst the lowest.
    • But this did not happen through sudden decoupling from foreign multinationals or a complete boycott or ban on imports.
    •  The 1970 Indian Patent Act removed product patent protection in pharmaceuticals.
    • So, the 1970 Patent Act is widely lauded for facilitating the growth of India’s industry.
    • India also benefited from the 1973 Foreign Exchange Regulation Act (FERA) and the subsequent New Drug Policy (1978).
    • Thus, a series of policy initiatives succeeded in tilting the balance in favour of Indian-owned firms.

    But does it mean we have to depend on China forever?

    • No, but reducing dependence on China will not be easy to achieve.
    • In India, any decoupling from China must be strategic, with significant policy support.
    • It will take time for a paced indigenisation.

    Government moves to reduce dependence for API

    • In March, the government announced Rs 3,000 crore to develop three bulk drug parks.
    • The government also announced Rs 6,940 crore to manufacturers of 53 bulk drugs over the next eight years.
    • Planning ahead towards greater domestic production of APIs, as well as reduced dependence on China, is an understandable and sensible policy objective.
    • Despite a decline in recent decades, India has a stronger starting point than most countries given the continued presence of some API production capabilities.
    • Indian firms have capacities, for instance, to produce COVID-19 treatments, including Remdesivir.

    Consider the question “What are the APIs? Why India depends on other countries for it and what are implications of it? Suggest ways to reduce this dependence.”

    Conclusion

    In the short run, boycotts or bans would be counter-productive for the Indian industry, while also affecting access to much-needed medicines to India’s citizens and beyond. In the long run, however, reducing dependence on China would be strategically prudent.

    Back2Basics: What are APIs?

    • Active pharmaceutical ingredient (API), is the term used to refer to the biologically active component of a drug product (e.g. tablet, capsule).
    • Drug products are usually composed of several components.
    • The API is the primary ingredient.
    • Other ingredients are commonly known as “excipients” and these substances are always required to be biologically safe, often making up a variable fraction of the drug product.
    • The procedure for optimizing and compositing this mixture of components used in the drug is known as “formulation.”

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  • India’s Bid to a Permanent Seat at United Nations

    In an uncertain world a seat at the UNSC

    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: UNSC

    Mains level: Paper 2- India as non-permanent member of the UNSC

    As a non-permanent member of the UNSC for the next two years, India will have to navigate through a tumultuous world. Anti-terrorism will be top priority for India.

    India at UNSC

    • India will be back in the United Nations Security Council for a two-year term beginning January 1, 2021.
    • Two-year term will be a critical time in the history of the UN.
    • It is hoped that by then COVID-19 will have subsided, a U.S. President will have been elected.
    • And the contours of a new world order may have emerged.

    How elections take place

    • The basic contest for the non-permanent seats takes place in the respective regional groups and their sub-groups.
    • Voting in the General Assembly is to fulfil the requirement of countries having to secure a two-thirds majority of the member states.
    • But regional endorsement is becoming difficult.
    • Last time, it was Kazakhstan which vacated the place for India.
    • This time, it was Afghanistan. India could not have got the endorsement without such gestures from friendly countries.

    What will be India’s priorities as a member of UNSC

    • India will continue to provide leadership and a new orientation for a reformed multilateral system.
    • How far the UN will be able to reform itself in the new situation remains uncertain.
    • The UN did not succeed in either defining terrorism or in adopting the Comprehensive Convention on International Terrorism.
    • Counter-terrorism will be one of the highest priorities for India at the UNSC.

    Permanent member of India issue

    • India’s election as a non-permanent member has understandably ignited the hope that its quest for permanent membership.
    • Nothing is farther from the truth.
    • Seeking to amend the Charter to add new permanent members is difficult task.
    • None of the proposals has the possibility of securing two-thirds majority of the General Assembly and the votes of the five permanent members.
    • A majority of the UN members are against the privileges of the permanent members, particularly the veto.
    • India’s performance in the Council will not lead to its elevation to permanent membership as the opposition to any expansion is not India-specific.

    Role of India as non-permanent member

    • The non-permanent members have a collective veto over every resolution in the Council.
    • As a part of collective veto, India will have a higher profile at the UN for the next two years
    • Permanent members can prevent the adoption of resolutions by themselves through veto.
    • But they need at least nine votes to get a resolution passed.
    • India will also have a rare peep into the consultations chamber of the UNSC, which is closed to non-members of the Council.
    • India will get involved in many issues in which it may not have any direct interest.
    • Since India does not have a veto, it shall have to proceed cautiously not to offend anyone.

    Consider the question “India has been chosen as the non-permanent member of the UNSC and will be there at the critical time in the history of the UNSC. What should be India’s priority and approach as a member of the UNSC?”

    Conclusion

    India’s mission in New York has earned a reputation that it is next only to the permanent members in influence. But whether it will be able to deal with traditional challenges in novel ways will depend on the turns and twists in an uncertain world.

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  • MGNREGA Scheme

    Safety net of income post Covid

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

    Note4Students

    From UPSC perspective, the following things are important:

    Prelims level: MGNREGA

    Mains level: Paper 3- Minimum income and issues

    Providing a minimum basic income post-Covid will require some novel approach. This article proposes an approach with the mix of direct cash transfer and changes in the employment guarantee scheme.

    Non-universal targeted programs

    •  It is true that a universal schemes are easy to implement.
    • Non-universal targeted programmes face the problem of identification.
    • Narrowly-targeted programmes will run into complex problems of identification.
    • And the problem of identification gives rise to exclusion and inclusion errors.

    How to solve identification problem

    • There are three proposals which meet the objective of providing a minimum basic income.
    • 1) Give cash transfers to all women above the age of 20 years.
    • 2) Expand the number of days provided under MGNREGA.
    • 3) Have a national employment guarantee scheme in urban areas.
    • In all the three proposals, there is no problem of identification.
    • A combination of cash transfers and an expanded employment guarantee scheme can provide a minimum basic income.

    1) Cash transfer to all women

    • One way of doing it will be to give it to all women say above the age of 20.
    • This is an easily identifiable criterion because the Aadhaar cards carry the age of the person.
    • The female population above the age of 20 is around 42.89 crore.
    • Making available a minimum of Rs 4,000 annually as a cash transfer to all of them will cost Rs 1.72 lakh crore.
    • Which is 0.84 per cent of GDP.
    • The cost of the scheme to the government will be less if the well-off women choose not to take the cash transfer.

    2) Expanding MGNREGA

    • The Act guarantees 100 days of employment.
    • At present, MGNREGA is availed of only for 50 days of employment.
    • One way to help the poor and informal workers is to strengthen it.
    • The government needs to increase the number of days under the scheme from 100 to 150 in rural areas.

    3) Employment guarantee scheme for urban areas

    •  Introducing Employment Guarantee Act in urban areas would help also provide income.
    • Providing employment for 150 days instead of 100 days will also prove beneficial.

    Some facts and figures

    • In 2019-20, the government spent Rs 67,873 crore for providing 48 days of employment to 5.48 crore of rural households.
    • Out of this, the wage expenditure was Rs 48,762 crore.
    • The government has increased the per day wage rate from Rs 182.1 in 2019-20 to Rs 202.5 in 2020-21.
    • So, the estimated expenditure for 150 days of employment to 5.48 crore households in rural areas and 2.66 crore households in urban areas — together they account for 33 per cent of total households in the country.
    •  The additional expenditure needed for the new proposal proposal is Rs 1.9 to 2.5 lakh crore.
    • This additional expenditure is around 1 to 1.22 per cent of GDP.
    •  The total cost of the three proposals would be Rs 4.9 lakh crore or 2.4 per cent of GDP.

    But the total cost could be lower

    •  As the Employment Guarantee Programme is a demand-based programme, the number of days availed could be lower.
    •  This is happening even now.
    • Second, on cash transfers, some women, particularly from richer classes, may voluntarily drop out of the scheme.
    • Alternatively, we can provide that everyone receiving cash transfer must declare that her total monthly income is less than Rs 6,000 per month.

    Where the additional money will come from

    • Removing all exemptions in our tax system would give enough money.
    • Tax experts advocate removing exemptions so that the basic tax rate can be reduced.
    • Perhaps, out of the Rs 4.2 lakh crore which is needed, Rs 1 lakh crore can come out of phasing out of some of the expenditures.
    • While another Rs 3 lakh crore must come out of raising additional revenue.
    • Some of the non-merit subsidies, another item of expenditure, can be eliminated.

    Consider the question “What are the issues non-universal schemes faces? Suggest the ways to do with the issue of identification which such schemes face.”

    Conclusion

    In the post-COVID-19 situation, we need to institute schemes to provide a minimum income for the poor and vulnerable groups and trying the mixed approach of cash transfer to women and modification of Employment Guarantee Acts could do that.

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