THE CONTEXT: Farmers from Punjab in thousands have assembled at three points along the border with Haryana, where they have been stopped from marching to Delhi. The protesters have a range of demands including legally guaranteed MSP for crops.

MORE ON THE NEWS:

• Some of these demands were raised during their earlier protest in 2021-22, which was called off after the central government withdrew three controversial laws that had sought to reform the agriculture sector.
• The protest now is spearheaded by the Sanyukt Kisan Morcha (SKM) (non-political), a splinter group of the body that had led the earlier protest. The body has influence in the interest groups across Haryana, Punjab and western U.P. and Rajasthan.
• There are at least three other strands of protests gathering strength.

1. Farmers in western U.P. affected by the Jewar airport project and Yamuna Expressway are up in arms.

2. In Haryana’s Sonipat, farmers are protesting land acquisition for power cables.

3. The original SKM and several trade unions have called for a national rural and industrial strike with overlapping and additional demands that include the repeal of four labour codes.

Demands of farmers:

• The headline demand in the farmers’ 12-point agenda is for a law to guarantee MSP for all crops, and the determination of crop prices in accordance with the Dr M S Swaminathan Commission’s report.
• The other demands are:

1. Full debt waiver for farmers and labourers

2. Implementation of the Land Acquisition Act of 2013, with provisions for written consent from farmers before acquisition, and compensation at 4 times the collector rate

3. Punishment for the perpetrators of the October 2021 Lakhimpur Kheri killings

4. India should withdraw from the World Trade Organization (WTO) and freeze all free trade agreements

5. Pensions for farmers and farm labourers

6. Compensation for farmers who died during the Delhi protest, including a job for one family member

7. The Electricity Amendment Bill 2020 should be scrapped

8. 200 (instead of 100) days’ employment under MGNREGA per year, daily wage of Rs 700, and scheme should be linked with farming;

9. National commission for spices such as chilli and turmeric; etc.

ISSUES:

• Legal guarantee of MSP unlikely: The government has opened talks with the farmers but a legal guarantee of MSP appears unlikely as government is silent on this matter. The Union Ministry of Agriculture and Farmers Welfare notified a committee headed by former agriculture secretary Sanjay Agrawal to make the MSP more effective and transparent. However, the committee’s terms of reference also do not include any legal guarantee to MSP, which was one of the key demands of the farmers protest of 2020-2021.
• Unsustainable farm practices: Surplus producers of grain have benefited from the MSP scheme, but the scheme bypasses subsistence farmers in poorer regions. This uneven geographical spread of procurement has also led to unsustainable farm practices in some areas.
• Majority of farmers remain uncovered: According to a NSSO survey, less than 6% of Indian farmers i.e over 9 crore agricultural households have benefited directly from selling their wheat or rice under the MSP regime.
• Procurement is concentrated in a few states:The procurement of grains is concentrated only in a few states. For example, Punjab, Haryana, western UP, Chhattisgarh and Telangana for paddy; Telangana and Maharashtra for cotton, etc.
• Poor implementation of the MS Swaminathan Commission recommendations: It recommended that MSP should be at least 50% more than the weighted average cost of production which is not in the sight of implementation.

THE WAY FORWARD:

• Consensus and consultation: The Centre must address grievances of farmers through talks. According to the Union Agriculture Minister, there are some issues on which consensus has been reached. However, some issues need a permanent resolution and there should be a committee to address them.
• Revamping of public support: There is a need for revamping of the public support for farming, which is essential for national food security. This can be achieved better through wide political consultation and by encouraging the beneficiaries of the current system to diversify production and increasing productivity.
• Creation of Agriculture infrastructure: The government should make efforts to enable farmer participation in the market by creating modern world-class agriculture infrastructure like Cold Storage facilities.
• Crop diversification: There is a need for mapping of existing cropping patterns of agro-ecological zones of producer and consumer states. Strategy for diversification policy needs to change the cropping pattern according to the changing needs of the country.

THE CONCLUSION:

Though, the MSP-based procurement by the Food Corporation of India has been the bedrock of food security but there is an urgent need for its reform as the farm sector needs a new model of public support. It cannot be left to the mercy of the market. The government should lead the efforts to create a national consensus on this question.

UPSC PREVIOUS YEAR QUESTION

Q.1 The Minimum Support Price (MSP) scheme protects farmers from the price fluctuations and market imperfections. In the light of the given statement, critically analyse the efficacy of the MSP. (2020)

MAINS PRACTICE QUESTION

Q.1 Discuss the role of Minimum Support Price (MSP) in addressing the issue of farmers’ income and agricultural productivity. Suggest alternative ways to ensure farmers income and their livelihoods.

SOURCE: https://www.thehindu.com/opinion/editorial/farming-consensus-on-the-government-and-the-farmers-on-protest/article67846219.ece

THE CONTEXT: As, the state of the Indian economy and its prospects have to be based on mathematics and statistics, the recently published data by National Statistical Office needs to be analysed. This helps to understand the government’s economic performance as disclosed in Parliament and subsequently published in the media.

ISSUES:

• Misleading data: Post-COVID-19, the growth rate of GDP has been estimated around 6% + annually but this is misleading because what is not disclosed is that the growth rate that includes recovery as well since 2020-22. Hence, if we calculate the GDP growth rate between 2019-20 and 2022-23, two normal years, it can be calculated less than 4% per year for the period.
• Non acknowledgement: India’s GDP growth rate declined annually from 2016-17, and fell below 3.5% in the fourth quarter of 2019-20. This four-year continuous decline from a 7% growth rate to 3.5% rate has never been acknowledged by the government.
• Slow growth rate: It is essential to recognise that since 2020, the current government publicised development model in reality achieved the so-called “Hindu rate of growth” in GDP, which had been “achieved” during the Congress’s socialist period of 1950-77.
• Incoherence in economy: The ruling government has failed to structure economic policy coherently. Incoherence prevailed during the 2014-2023 period and will perhaps continue in the future as well.
• Misleading media: The misleading announcements of promising predictions are being published annually in the media, with claims made by the ruling government. One such claim made in 2019 was that India will become a $5 trillion economy by 2024. There has been no policy structuring presented to achieve this aim nor has anyone in the government shown willingness to debate it on public fora.
• Falling investment: The investment to GDP ratio has been largely falling for many years now. It peaked at 35.81% in 2007–08, which was 15 years ago. In 2022–23, it is estimated to have been 29.21%, an improvement over the three years before that, but worse than where it was before the pandemic broke out.
• Lesser job creation: Falling of investment in the economy implies the creation of fewer jobs, which has an impact on the incomes that people earn, and which, in turn, affects private consumption and further job creation.

THE WAY FORWARD:

• Taking cue from previous governments: During P.V. Narasimha Rao’s and Manmohan Singh’s tenures as Prime Minister, India departed from the socialist path and the GDP growth rates rose for the first time to 6%-8% per year and over a 15-year period i.e., between 1991-96 and 2004-2014. As, then government understood and took steps to reform the Indian economic system by reducing state participation, and increasing incentives for capital and labour providers and achieved a higher and faster growth rate.
• Transparency: The Indian government is elected democratically and it is obligated to disclose the facts and data transparently to the people.
• To generate demand: In this decade of weak demand and relatively excess supply, resources mobilised by the government should be largely through indirect taxes and also through the liberal printing of currency notes to generate demand from non-rich citizens.
• To generate non inflationary demand: The annual interest paid on fixed-term savings in the bank accounts of the middle class should be higher at 9% or so. The interest rates on loans issued to small and medium industries should be no more than 6% on the loans. These essential reforms need to be carried out to generate non-inflationary demand.
• A new economic policy: The recent economic policy of the government has been an unstructured flop. No announced macroeconomic goal has been achieved by the government till date. Thus, India urgently needs a new economic policy that is based on clearly structured and stated objectives and priorities, and a strategy to achieve the targets, with an intelligent and transparent resource mobilisation plan to finance the policies.
• Free market system: The market system is not a free-for-all and is structured with rules of transactions. A market system with transparent and minimal regulation with principal drivers of incentives and domestic savings pushes up factor productivity and thus the GDP growth rate. Even a totalitarian state such as China implemented this. During Deng Xiaoping’s tenure as paramount leader, it allowed the socialist economic system to die, and allowed economic market-based system, even while maintaining the system of political dictatorship.
• Affirmative action: There is a need for affirmative action including social security and safety nets for creating a stake for the poor in the system. It will create a level playing field to ensure transparency, accountability, trusteeship as well as corporate governance to legitimise profit-making that will drive the market system.
• Empowering democratic institutions: Deregulation should also not mean that we reject government intervention for safety nets, affirmative action, market failures, and creating a level-playing field. Democratic institutions have to be empowered to guard against public disorder arising from rapid deregulation, as it happened in Russia post-1991. Russia underwent chaos and misery, which meant dictatorship returned a loss of human rights and democratic values in Russia.

THE CONCLUSION:

India’s economic growth has witnessed significant fluctuations in recent years and to ensure economic stability the government needs to take up stringent measures. This can be done through adequate investment in human capital development along with effective implementation and coordination among various stakeholders.

UPSC PREVIOUS YEAR QUESTIONS

Q.1 Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (2020)

Q.2 Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (2019)

MAINS PRACTICE QUESTION

Q.1 The GDP-centric framing of Indian economic success is wrong-headed and is a flawed metric of national economic welfare. Comment.

SOURCE: https://www.thehindu.com/opinion/op-ed/the-state-of-the-indian-economy-today/article67838620.ece

THE CONTEXT: Recently, the interim Budget or ‘vote on account’ for 2024-25 was presented by Finance Minister. The budget refrained from making any changes to tax rates either for direct taxes or indirect taxes but highlights increased capital expenditures and fiscal consolidation.

HIGHLIGHTS IN THE BUDGET:

• Capital Expenditure: One important feature of the Budgets presented in recent years is an increase in capital expenditures of the Central government. The interim Budget has maintained this trend and has provided for an increase of 11.1% in capital expenditures when a comparison is made with the 2023-24 Budget Estimates. This aims to stimulate investment climate, potentially catalysing private sector participation and underscores the government’s commitment to infrastructure development.
• Growth Rates Analysis: While the interim budget indicates an 11.1% increase in capital expenditures compared to the 2023-24 Budget Estimates, the growth rate is lower than initially planned. This lower growth rate aligns with the real GDP growth of 7.3% in 2023-24.
• Potential Impact on GDP Growth: The projected 17% growth in capital expenditure for 2024-25 suggests the potential for achieving a 7% real GDP growth. It can be achieved if private sector investment momentum is sustained and state governments maintain their capital expenditure growth, supported by government initiatives such as interest-free loans.
• Tax buoyancy: The buoyancy of tax revenue, coupled with nominal GDP growth estimates, provides flexibility for future expenditure adjustments or deficit reductions. The buoyancy of tax revenue comes to 1.33, if the base is taken as Budget Estimates of the present year and using nominal GDP growth for 2023-24 as per the National Statistics Organisation’s (NSO) first advance estimates.
• Fiscal Planning: The budget showcases prudent fiscal planning and the emphasis on fiscal correction and consolidation reflects a cautious approach to economic management.
• Fiscal Deficit Reduction: A significant aspect of the budget is the projected reduction in the fiscal deficit. The fiscal deficit for 2024-25 is forecasted to decrease to 5.1% of GDP reflecting a decrease of a 0.7 percentage point from the previous year.
• Long-term Fiscal Objectives: The budget discussion revolves around the desired fiscal deficit targets, particularly aiming for 3% of GDP for the Central government and not exceeding 6% of GDP when combined with State governments. The rationale behind these targets is intricately linked to household savings, net inflows from abroad, and the imperative to manage debt-GDP ratios effectively.
• Debt-GDP Ratio: The government proposes a debt-GDP ratio target of 40% for the Centre by 2028-29 which a strategic vision for sustainable fiscal management over the long term. This would be feasible as the government has extended the interest-free loan facility for the State governments. The lower fiscal deficit might also facilitate a lowering of interest rates later during the year.
• Capital formation: Though, capital expenditures of the government are not identical with gross fixed capital formation. However, it contributes to increasing capital formation. It is worth noting that the capital expenditures of the Central government in 2024-25 as a proportion of GDP are budgeted to increase marginally from 3.2% in 2023-24 to 3.4% in 2024-25.

THE WAY FORWARD:

• Continued Government Investment: In developing economies, growth is driven by investment. Therefore, for the continued growth of the economy, there is a need for an sustained investment rate which can be improved only by the government raising its own investment. It could act as a catalyst for private investment.
• Ensuring Economic Stability: These targets are rooted in the goal of ensuring economic stability by maintaining sufficient household savings, curbing inflationary pressures, and fostering sustainable economic growth.
• Setting timelines: The timeline for achieving the targets highlighted in budget must be carefully delineated to mitigate inflationary pressures for ensuring sustainable economic growth.
• Coordination: Achieving these targets necessitate continuous coordination and implementation, considering the dynamic nature of economic conditions amidst evolving global and domestic factors.

THE CONCLUSION:

The recent interim Budget lays a foundation for sustainable fiscal management, emphasizing on capital expenditure enhancement and fiscal consolidation. However, achieving long-term fiscal sustainability requires concerted efforts, including aligning fiscal policies with economic realities and establishing clear targets for deficit reduction.

UPSC PREVIOUS YEAR QUESTIONS

Q.1 What are the reasons for introducing the Fiscal Responsibility and Budget Management (FRBM) Act, 2003? Discuss its salient features and their effectiveness critically. (2013)

Q.2 Public expenditure management was a challenge to India’s government in the context of budget-making during the post-liberalization period. Clarify it. (2019)

MAINS PRACTICE QUESTION

Q.1 Highlight the challenges in achieving long-term fiscal sustainability in the country, considering the dynamic economic conditions amidst evolving global and domestic factors.

SOURCE: https://www.thehindu.com/opinion/op-ed/road-map-for-fiscal-consolidation/article67821293.ece

THE CONTEXT: Recently, the Finance Minister of India presented an interim budget in the Parliament and experts are highlighting concern regarding budget allocation in farm sector.

ANNOUNCEMENT FOR AGRICULTURE IN INTERIM BUDGET

• Agriculture and food processing: Promotion of private and public investment in post-harvest activities including aggregation, modern storage, efficient supply chains, primary and secondary processing and marketing and branding.
• Nano DAP: Application of Nano DAP on various crops will be expanded in all agro-climatic zones.
• Atmanirbhar Oil Seeds Abhiyan: A strategy to achieve ‘atmanirbharta’ for oil seeds such as mustard, groundnut, sesame, soybean, and sunflower will be formulated.
• PM KISAN: Direct financial assistance to 11.8 crore farmers under PM-KISAN.
• PM Fasal Bima Yojana: Crop Insurance to 4 crore farmers under PM Fasal Bima Yojana.
• e- NAM: Integration 1,361 mandis under e- NAM, supporting trading volume of 23 lakh crore.
• Fishermen: A new department “Matsya Sampada” to be set up to address the needs of fishermen. Implementation of Pradhan Mantri Matsya Sampada Yojana (PMMSY) will be stepped up. Five integrated aquaparks will be setup. The Ministry of Fisheries, Animal Husbandry and Dairying witnessed a 27 per cent increase.
• Dairy Sector: A comprehensive programme for supporting dairy farmers will be formulated. The programme will be built on the success of existing schemes such Rashtriya Gokul Mission, National Livestock Mission, and Infrastructure Development Funds for dairy processing and animal husbandry.

ISSUES

• Allocation for agriculture: Allocation for agriculture has not gone up and subsidies have not been rationalised. While schemes like the Pradhan Mantri Fasal Bima Yojana saw an increase in allocation, the allocation under the PM Kisan Samman Nidhi remained the same at ₹60,000 crore. The PM Kisan Man Dhan Yojana, however, saw a decrease in allocation.
• Inadequate for research: For agricultural research, the allocation is ₹9,941.09 crore. The Department of Agricultural Research and Education (DARE) received Rs 99.4 billion (BE) for FY25, a marginal 0.7 per cent increase over Rs 98.8 billion (RE) in FY24. Farmers’ organisations, however, termed the allocations as inadequate.
• Food and Fertiliser subsidies: Budgetary support in the agriculture-food sector has primarily revolved around welfare measures and subsidies. It is compelling to note that the budget allocations for food and fertiliser subsidies, individually, account for a much higher budget than that compared to the Ministries of Agriculture and Farmers Welfare and Fisheries, Animal Husbandry and Dairying.
• Preferring consumer over farmer: In FY25, the budgeted food subsidy fell to Rs 2.05 trillion (BE), compared to Rs 2.12 trillion (RE) in FY24 which is a 3.3 per cent drop. However, this still underscores a significant bias towards consumers, as the subsidy caters to them rather than the farmers. Free ration to 800 million people through the PM-Garib Kalyan Yojana is, of course, an accomplishment. But the necessity of extending this support to such a vast number of people is a matter of concern.
• Did not address MSP: The Budget, however, was silent on issues such as a guaranteed minimum support price based on the S. Swaminathan Committee’s formula, which is a long-standing demand of farmers.

THE WAY FORWARD:

• Investment: There is a need for more public investment in agriculture and subsidies to form producing and marketing cooperatives and collectives.
• Rationalise food subsidies: There is an urgent need to rationalise the food subsidy, on the lines of former PM Atal Bihari Vajpayee where he had streamlined the Targeted Public Distribution System (TPDS). Rationalisation along such lines can save at least Rs 50,000 crore.
• R&D Expenditure: The finance needs to be allocated for agri R&D and more irrigation, especially micro-irrigation. This could help the country to produce “more with less” and ensure food security in the face of climate change.
• Rationalisation in fertiliser: There is a need for rationalisation, especially in minimising the diversion of fertilisers to non-agricultural sectors. It is widely acknowledged in expert circles that around 20-25 per cent of urea is diverted. A potential solution is to shift from subsidising the price of urea to directly empowering farmers through direct cash transfers.

THE CONCLUSION:

India’s agricultural sector is facing several challenges, which are limiting its growth and development and the recent interim budget with lesser allocation raising more concerns.

There is a need to provide adequate budgetary support for agriculture sector to manage food inflation. Adapting to climate change and maintaining macroeconomic fundamentals  are vital for sustained growth of agriculture.

UPSC PREVIOUS YEAR QUESTIONS

Q.1 Comment on the important changes introduced in respect of the Long term Capital Gains Tax (LCGT) and Dividend Distribution Tax (DDT) in the Union Budget for 2018-2019. (2018)

Q.2 One of the intended objectives of Union Budget 2017-18 is to ‘transform, energize and clean India’. Analyse the measures proposed in the Budget 2017-18 to achieve the objective. (2017)

MAINS PRACTICE QUESTION

Q.1 Discuss the role of budgetary allocations in enhancing economic resilience of the farm sector considering the challenges posed by high inflation, increasing food subsidies and climate change.

SOURCE: https://indianexpress.com/article/opinion/columns/after-interim-budget-2024-hand-the-baton-over-to-the-private-sector-9139717/

THE CONTEXT: The upcoming budget session is an appropriate time to assess how the current government has managed the economy in the decade since 2014. There is a worrying trend of Indian economy however in the last ten years.

ISSUES:

• Data deficient: There is a constant issue regarding the government avoiding data on various occasions suppressing statistics. This started with the refusal to publish the GDP back series and instead, a new series was commissioned. For the first time since 1872, the census has been indefinitely delayed.
• Fiscal deficit: A key concern before the government is managing the fiscal deficit. Between 2004 and 2014, the fiscal deficit averaged 4.63% whereas it has averaged 5.13% after 2014. The rise in fiscal deficit was necessitated by crises like the global financial crisis of 2008 and COVID-19
• Rise in Debt to GDP ratio: There has been a sharp rise in the gross debt to GDP ratio, crossing the 80% mark and inviting concern from the International Monetary Fund that the ratio could cross 100% by 2027. The Union government is expected to respond to the debt concerns and bring down the fiscal deficit to 4.5% by 2026 (it was 5.9% in 2023-24).
• Reliance on capital expenditure: There is over reliance on capital expenditure which even the ardent supporters of trickle-down economics admit that this reliance on capital expenditure is not bearing fruits.
• Manufacturing sector: Despite multiple revisions and handsome incentives and initiatives like Production Linked Incentive (PLI) scheme the manufacturing sector has not taken off. The manufacturing growth rate has averaged 5.9% since 2013-14, the share of manufacturing has remained stagnant and was at 16.4% in 2022-23, and manufacturing jobs halved between 2016 and 2021. The decade of Make in India saw the share of manufacturing in the workforce decline from 12.6% in 2011-12 to 11.6% in 2021-22. Make in India and now PLI have failed to enthuse MSMEs.
• Disinvestment: Another failure on the part of the government is disinvestment. To make matters worse, public assets have been handed over to select groups inviting concerns from competitors and public sector employees. The proposed national monetisation pipeline has also failed to yield results.
• Employment: The job market remains depressing, especially for the youth. The Centre for Monitoring Indian Economy notes that the unemployment rate in the age group 20-24 years was 44.5% in the October-December 2023 quarter. For the age-group 25-29 years, it was at a 14 month high of 14.33%.
• Rural India: The adversity of the job market is matched by the distress in rural India where the demand for MGNREGA has reached record highs. Stagnant farmer income and falling rural wages at a time when stock markets are soaring comes as a major concern.
• Crude oil prices: Despite lower prices of crude oil in the international market, the government could not pass the benefit to consumers which could have boosted consumption, and thereby the  Instead, the government has consistently kept petrol and diesel prices at a steady higher price and could not use windfall profits which it has used to keep the fiscal deficit manageable.
• Rise in tax to GDP ratio: Tax to GDP ratio has increased by 1% but it is largely because of an increase in indirect taxes.
• Reduction in subsidies: A consistent feature of the ruling government has been sharp reduction in subsidies. In 2013-14, Union government subsidies accounted for 2.27% of the These now stand at 1.34% in 2023-24.
• Rise in capital expenditure: Between 2014 to 2024, capital expenditure has doubled from 1.67% to 3.32%. Post the COVID-19 pandemic, the government allocated increasing sums towards capital expenditure. The stated logic being that this investment will create jobs and in turn raise demand.
• Facing Hunger: On the health front, the pandemic forced the government to raise healthcare expenditure, yet there has been a rise in hunger and malnutrition. India is ranked 111th of 125 countries on the Global Hunger Index. Instead of addressing the issue, the government’s response has been to reject any such adverse findings.

THE WAY FORWARD:

• Public investment: The government should also invest in public infrastructure, health, education, and social protection, which can create jobs, improve productivity, and enhance human capital. India needs large scale public investments in education and healthcare. Such investments in our human capital have great potential to create significant jobs and will also have a direct impact on the standard of living of our citizens. A key landmark of this government was the adoption of a new National Education Policy (NEP). NEP 2020 recommends that investment in education should be 6% of the
• New economic policy: India needs to adopt a new economic policy urgently. It needs to be a policy that is based on clear objectives, priorities, have a strategy to achieve targets, and spell out an intelligent and transparent resource mobilisation plan to finance policies. As far as the Finance Ministry is concerned, we have only incoherent public announcements a hotchpotch with no accountability.
• Boosting Consumption and Investment Demand: The government should provide direct fiscal stimulus to the sectors and segments of the economythat have been hit hard by the pandemic, such as MSMEs, informal workers, rural households, and low-income groups. The stimulus should aim at increasing their income, purchasing power, and access to credit.

THE CONCLUSION:

The Indian economy is currently facing a number of challenges including high fiscal deficit, high debt to GDP ratio, reliance on capital expenditure and many more. In addition, the country faces significant infrastructure and employment needs and a growing population that is increasingly young and educated. These factors present both opportunities and challenges for the country’s economic growth in the years ahead.

UPSC PREVIOUS YEAR QUESTION

Q: How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is increased informalization detrimental to the development of the country? (2016)

MAINS PRACTICE QUESTION

Q: India’s economic growth is witnessing significant downfalls in recent years. In this context, examine the existing economic challenges responsible for the decline in GDP growth and the measures that the government should undertake to rejuvenate the economy.

SOURCE: https://thewire.in/economy/india-economy-modi-government-rule

THE CONTEXT: There is a growing concern of rising inequality in India amidst the frequent mention of exponential growth of the economy. The recent statement by the World Economic Forum (WEF)’s President that India is a $10 trillion economy in the making is one of the most recent of predictions on the future size of India’s economy.

MORE ON THE NEWS:

• There are instances of constant comments on achieving high growth in economy by leaders of the country. For example, in 2019, upon returning to office, Prime Minister said that India aimed to become a $5 trillion economy by 2024. This also includes the Chief Ministers of Uttar Pradesh and Tamil Nadu.
• Though these leaders represent political parties with widely differing social agendas and ideologies, they seem united in their economic goals.
• Though, this has not materialised yet but has not deterred other political leaders from making predictions of, or expressing an aspiration for, a $1 trillion economy for their States.
• However, alongside this there is issue of unequal growth due to rising inequality in India.

WHAT IS INEQUALITY?

The United Nations describes inequality as “the state of not being equal, especially in status, rights and opportunities”.

Inequality can be broadly classified in to:

• Economic inequality: Economic inequality is the unequal distribution of income and opportunity between individuals or different groups in society.
• Social inequality: It occurs when resources in a given society are distributed unevenly based on norms of a society that creates specific patterns along lines of socially defined categories. For example, religion, kinship, prestige, race, caste, ethnicity, gender etc. have different access to resources of power, prestige and wealth depending on the norms of a society.

ISSUES

• Rising inequality: The most important issue to note about the recent growth in India is that it has been accompanied by growing inequality. It is important to recognise that this trend is not new. Having commenced in the 1980s, it picked up in the next decade, after which it has been unstoppable. It has, by now, reached levels that make India one of the more unequal societies in the world.
• Inadequate Data: The government agencies appear reluctant to supply data which creates difficulty to provide precise estimates of this inequality. But the world’s leading inequality researchers are very likely right in describing India as “a poor country with an affluent elite” highlighted as per ‘World Inequality Report’, 2022.
• Democracy goals: The growth dominates the economic agenda in democracies recently rather than addressing the legitimate aims. This bears mentioning, as a democracy is also meant to deliver other things than only unequal growth.
• Standard of living: Growth is an aspiration in India but given that the majority of the population is yet to attain a reasonable standard of living, there is a need to address the basics. The point highlighted is that a large economic size may not do much by the way of levelling the income of the presently excluded ones.
• Lacunae in Rural wage data: One of the reliable sources of data on wages is that on rural wage rates published by the Labour Bureau. These are based on actual market quotations rather than responses given to surveys. Also, unlike data gathered from income-tax records, which have value in determining the distribution of income, the wage data can convey information on the level of living at the bottom of the pyramid. A weakness of the Labour Bureau data, however, is that it presents data on wages of male workers alone. The absence of data on women workers is a serious omission as women have historically constituted approximately half the workforce in the cultivation of certain crops.
• Stagnant real wage: The Sixth Economic Census of India (2013-14) reports that 51.7% of the employed are in rural India, and, of these, the overwhelming majority (68.9%) are non-agricultural workers. It is estimated that the real wage rate has grown by 4.6% over the nine years from 2014 to 2022-23. This implies that for about 35% of India’s workforce, real wages have not grown since 2014. So, even though there is growth of the economy, per capita income at the bottom of the pyramid is not rising.

THE WAY FORWARD:

• Ensure Constitutional Provision: Enforcement of Constitutional Guarantee of equality as enshrined in fundamental rights. Articles 14, 15 and 16 form part of a scheme of the Constitutional Right to Equality. Article 15 and 16 are incidents of guarantees of Equality, and gives effect to Article 14.
• Promoting Civil Society: There is a need to promote civil society groups like unions and association to address the issue of rising inequality in India.
• Voice to Vulnerable groups: There is a need to provide a greater voice to traditionally oppressed and suppressed groups. For example, Scheduled castes and Scheduled tribes should be motivated to become entrepreneurs and there should be initiatives for women empowerment.
• Strengthen government policies: There is a need to strengthen government policies like schemes like Stand up India need to be expanded to widen its reach by increasing funding. For gender equality policies affirmative action can be taken by reserving seats in legislatures, increasing reservation at Local self government, strict implementation of The Equal Remuneration act,1976 to remove wage gap.
• Progressive Taxes: There is a need to implement progressive taxes on wealthy and by increasing the effective taxation on corporations, more importantly broadening the tax base through better monitoring of financial transactions.
• Economic Policies: By ensuring universal access to public funded high quality services like Public health and education, social security benefits, employment guarantee schemes; inequality can be reduced to great extent.

• Employment Generation: The failure to grow manufacturing sectors like Textile, Clothing, automobiles, consumer goods etc. is the important reason of rising inequalities. The Labor-intensive manufacturing has the potential to absorb millions of people who are leaving farming while service sector tends to benefit majorly urban middle class.

THE CONCLUSION:

It can be concluded that the growth in India is unequal and it is not in the spirit of democracy to have such divergent economic outcomes. Governments need to ensure that its policies address these causes and ensure inclusive growth.

PREVIOUS YEAR QUESTION

Q. Inequality has risen substantially from the 1980s onwards, due to profound transformations in the economy such as deregulation and the reforms of 1990s. Comment. (2019)

MAINS PRACTICE QUESTION

Q. Despite high economic growth, there are persistent issues of rising income inequality in India. In this context, discuss the causes of income inequality in India and suggest measures to address it.

SOURCE: https://www.thehindu.com/opinion/lead/growth-mania-can-be-injurious-to-society/article67790032.ece

THE CONTEXT: The difference between India’s projected GDP growth and the slower growth rates in private final consumption, especially in the rural sector, is a cause for concern. The growth of rural wages not keeping pace with inflation and high demand for MGNREGA work suggests that the economy is still recovering from the pandemic’s impact despite the projected GDP growth figures.

ISSUES:

• Consumption and Income Disparities: Discrepancy between GDP growth and individual consumption reflects growing income disparities, with the brunt being borne by rural and lower to middle-income households.
• Rural Economic Fragility: Sales trends in FMCG and agricultural sectors, such as the decline in tractor sales, denote a weaker rural demand, hinting at deep-seated economic vulnerabilities.
• Inflationary Pressures: The nominal wage growth in rural areas is not adjusted for inflation, which could mean the real income growth is stagnant or negative.
• High Demand for MGNREGA: Despite purported economic recovery, the continued reliance on MGNREGA for employment indicates structural job market issues and persistent unmet demand for employment.
• Welfare versus Wage Growth: While government welfare schemes have successfully reduced multidimensional poverty, they are not a substitute for organic income growth through employment, ultimately driving sustainable consumption and economic growth.

THE WAY FORWARD:

• Job Creation Initiatives: Promote policies that incentivize employment creation, especially in the private sector, including infrastructure development and support for entrepreneurship in rural areas.
• Managing Inflation: Ensure monetary and fiscal policies are attuned to manage inflation so that nominal wage increases translate to real income growth.
• Encouraging Private Investment: Implement reforms that boost investor confidence and attract investments in key sectors that can lead to job-rich growth.
• Rural Income Enhancement: Increase the real income of rural workers by augmenting initiatives like MGNREGA and promoting rural industrialization to create jobs outside the agricultural sector.
• Targeted Support for Agriculture: Offer more support to the agricultural sector through investment in technology and infrastructure, enabling better productivity and higher revenue potential.
• Comprehensive Job Creation: Foster an environment conducive to investment, which could lead to more robust job creation, particularly in industries with the potential to employ large labor forces and add value to the economy.
• Focus on Skill Development: Implement larger-scale skill development programs for urban and rural populations to prepare the workforce for current and future market demands.

THE CONCLUSION:

To ensure that the growth is sustainable and inclusive, there is an imperative to create employment opportunities that spur income growth and reduce inequality. This will lay the foundation for a cycle of positive economic outcomes where increased consumption demands are met by increased production and investments, leading to persistent, broad-based economic development.

UPSC PAST YEAR QUESTION:

Q.1) Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (2019)

Q.2) It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement. (2019)

MAINS PRACTICE QUESTION:

Evaluate the implications of the disparity between India’s GDP growth and private final consumption on the economy’s long-term sustainable development and suggest comprehensive policy measures to address the underlying socio-economic challenges.

SOURCE:

https://indianexpress.com/article/opinion/editorials/indias-worrying-take-of-growth-9131963/

THE CONTEXT: The Economic Research Department of the State Bank of India (SBI) recently published its study Debunking K-shaped recovery.

MORE ON THE NEWS:

• It is being widely debated that the post-pandemic recovery in India has been K-shaped. The debate over K-shaped recovery is also linked to widening inequality in the country.
• However, SBI research study claims to have “debunked” this belief. The report highlighted at a “conspiracy” against India and its growth.

WHAT IS K-SHAPED RECOVERY?

• A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. It refers to a situation where some sectors of the economy revive after slowdown or recession while others don’t. It means not all sectors/parts of the economy are recovering.
• This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
• A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
• This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter “K.”

SBI REPORT’S ARGUMENTS

• Positive Emerging Patterns: It highlights patterns of income, savings, consumption, expenditure and policy measures aimed at public welfare.
• Parameters under Scrutiny: The report challenges traditional parameters used to assess economic well-being. It questions the use of old parameters like low two-wheeler sales or fragmented land holdings.
• New Considerations: It highlights patterns in income, savings, consumption, expenditure, and policy measures designed to empower the masses through technology-driven solutions, questioning the reliance on outdated indicators like 2-wheeler sales or land holdings.
• Rising Disposable Incomes in Non-Metro Areas: It cites data from Zomato as an example of rising disposable income in non-metro areas.
• Decrease in Inequality: It refers to the income tax data for FY22 to note that the Gini coefficient had declined significantly from 0.472 to 0.402 between FY14 and FY22.
  It highlights that 36.3% of individual tax return filers belonging to the lowest income in FY14 have left the lowest income group and shifted upwards.

A DIFFERENT PERSPECTIVE

• Not representative: The research of SBI is not representative of the Indian economy, it also brings out a newly-destined ‘narrative’. It just focuses on the “privileged” formal sector that, going by various estimates, has recorded impressive growth.
• Contrasting Reports: In 2022, another report, “The State of Inequality in India,” commissioned by the Economic Advisory Council to the Prime Minister, highlighted rising inequality in the country. It noted that an individual earning a monthly wage of Rs 25,000 was among the top 10% of earners, underscoring the stark income disparities.
• High Welfare Spending indicated Economic distress: The government has been forced to extend the scheme of subsidized food grain to 800 million Indians.
• Tax Data does not reflect Broader Economy: Only a very small minority of people pay direct income tax. Hence, it is not reasonable to draw conclusions from tax data about broader inequality. Income tax data is nominal and is affected by overall inflation, thus making it unviable for drawing conclusions.

THE WAY FORWARD:

• Increase government spending: The government must spend where necessary to alleviate the concerns in the most troubled areas of the economy.
• Addressing debt issues: There is a need for a credible target for the country’s consolidated debt with the setting up of an independent fiscal council to put forward on the quality of the budget would be a great step.
• Include budgetary resources: Budgetary resources needs to be expanded through asset sales, including parts of government enterprises and surplus government land.
• Analysing data: The shape of economic recovery is not an exact science, but the predictions help governments, investors, and consumers alike in planning monetary policies and investments.

THE CONCLUSION:

The recent SBI research provides a unique perspective on India’s economic recovery and inequality but its focus on a limited sample from the formal sector raises concerns about its representativeness. There is a need to emphasis on more comprehensive understanding of the diverse economic landscape in India.

UPSC PREVIOUS YEAR QUESTION

Q. Do you agree that the Indian economy has recently experienced V-shaped recovery? Give reasons in support of your answer. (2021)

MAINS PRACTICE QUESTION

Q. ‘Recent SBI report has debunked the theory that India has experienced K-shaped economic recovery in the post-pandemic era’. Examine.

SOURCE:https://www.downtoearth.org.in/blog/economy/debunking-k-shaped-recovery-why-the-sbi-s-new-report-gets-it-all-wrong-about-india-s-economic-growth-94086#:~:text=The%20Economic%20Research%20Department%20of,of%20the%20economy%20are%20recovering.

RELEVANCE TO UPSC SYLLABUS: GS 3: ENVIRONMENT: ENVIRONMENTAL POLLUTION AND DEGRADATION; ENVIRONMENTAL IMPACT ASSESSMENT

THE CONTEXT: Air pollution is a big menace for the city of Delhi which faces this issue annually. The problems with poor air quality usually attract attention during late autumn when stubble burning is at its peak in the states neighbouring the NCR. However, data shows that good or even moderately satisfactory air evades the capital’s residents for most parts of the year, especially in winter.

 REASONS:

• Crop Burning:Farmers of the states around Delhi carry out stubble burning which leads to generation of pollution and these pollutants are carried towards Delhi.
• Vehicular Emissions: Vehicle emissions contribute to the dangerous impacts of smog and air pollution. Due to the sheer volume of automobiles on the road, this is a significant source of pollution.
• Construction Dust: Increase in construction and other infrastructure work in the region has led to generation of construction dust, which acts as a pollutant.
• Industrial Pollution: Delhi-NCR’s industries have not embraced environmentally friendly fuels and methods. They emit harmful gases which cause pollution.
• Stagnant Winds: During winter months, the upward movement of air from the layers below is stopped which causes polluted air to be stagnant over the region. Due to stagnant winds, the pollutants generated in the area get trapped over the region which increases the chances of pollution to a great extent.
• Geographical Reason: As Delhi is land-locked from all sides, the north-westerly winds coming from Pakistan and Afghanistan bring in large amounts of dust particles to the region. Due to the presence of Himalayas, which block the escape route of the air, the dust and pollutants settle in the region.
• Lack in programme implementation: There is lack of effectiveness in programme implementation to tackle air pollution. For example, CAQM has not developed a synergy between the different bodies whose work is crucial to ensure clean air pollution. In 2019, the government launched the National Clean Air Programme (NCAP) to reduce pollution by 20-30% by 2024 compared to 2017. In 2022, the programme’s goalposts were shifted 40% reduction in pollution by 2026. Most independent studies show that progress under NCAP has been slow.
• Unutilised funds: Recently, Centre told Parliament that cities in Delhi-NCR have utilised less than 40 per cent of the funds allocated to curb air pollution.

RECENT STEPS TAKEN:

• Commission for Air Quality Management is monitoring agency set up in 2021 and it has imposed restrictions under phase III of the Graded Response Action Plan (GRAP).
• GRAP is a set of incremental anti-pollution measures that are triggered to prevent further worsening of air quality once it reaches a certain threshold in the Delhi-NCR region.
• The implementation of Stage-III GRAP mandates immediate action on multiple fronts. The Sub-Committee decides to invoke 8 point action plan as per Stage-III of revised GRAP in the entire NCR with immediate effect.
• The anti-pollution steps under the 8-point action plan by the central commission are:

1. Intensify the frequency of mechanised and vacuum-based sweeping of roads.
2. Ensure daily water sprinkling, along with dust suppressants, before peak traffic hours on roads and pollution hotspots.
3. Intensify public transport services and introduce differential rates to encourage off-peak travel.
4. Enforce a strict ban on construction and demolition activities in the entire NCR, except essential projects.
5. Close down operations of stone crushers.
6. Close down all mining and associated activities in NCR.
7. Impose strict restrictions on the operation of BS III petrol and BS IV diesel LMVs.
8. Make a decision on discontinuing physical classes in schools for children up to class 4 and conduct classes in an online mode.

THE WAY FORWARD:

• Address Municipal Solid Waste (MSW) burning: A study found that Delhi burns 190 to 246 tons of MSW every day, which severely pollutes the air. Therefore, any form of garbage burning must be stopped and authorities need to develop infrastructure for effective collection and disposal of MSW.
• Promote the use of electric and BS-VI vehicles: On an average vehicle can contribute up to 25% to PM 2.5 levels and at some locations, it can spike to 35%. Using Diesel Particulate Filter (DPF) can significantly reduce emissions from diesel vehicles. The introduction of more electric, hybrid and BS-VI vehicles can also help reduce the pollution. Improvement of public transport is also necessary to address the problem.
• Limit biomass burning: Burning of crop residue in Haryana and Punjab needs to stop on urgent basis. Instead of burning, the residue can be used for energy production, biogas generation and feeding cattle.
• Tackle fly ash: During summers, fly ash is one of the biggest contributors to PM 10 in Delhi. To deal with the pollutants, water spraying, installation of windbreakers and plantations should be done.
• Need of long-term plan: There are several measures that are being taken from spraying water to implementing GRAP to odd even solution. However, these measures provide temporary relief, therefore, the persistent problem of air pollution needs a long-term solution like drafting out an all-year action plan to improve air quality.
• Enhanced powers to the authorities: Though CAQM has taken various steps, but the agency has functioned more like a regulator whose primary responsibility is to implement the Graded Action Response Plan. There is a need for more independent power to authorities to take pre-emptive actions and allow denser monitoring.

THE CONCLUSION: Despite several steps taken for combating air pollution in Delhi, it continues to be a much more serious problem. To significantly improve air quality in Delhi, a host of preventive steps need to be taken to provide a long-term solution to this problem.

UPSC PREVIOUS YEAR QUESTIONS

1. Describe the key points of the revised Global Air Quality Guidelines (AQGs) recently released by the World Health Organisation (WHO). How are these different from its last update in 2005? What changes in India’s National Clean Air Programme are required to achieve revised standards? (2021)
2. What are the key features of the National Clean Air Programme (NCAP) initiated by the Government of India? (2020)

 MAINS PRACTICE QUESTIONS

Delhi registered severe air pollution on the Air Quality Index (AQI) recently. In this context, analyse the major factors contributing to Delhi’s pollution and suggest measures that need to be taken to address the persistent problem of air pollution in Delhi.

SOURCE: https://indianexpress.com/article/opinion/editorials/delhi-air-quality-aqi-aqi-register-caqm-pollution-monitoring-agency-9110840/#:~:text=The%20persistent%20problem%20frames%20the,So%20far%2C%20mechanisms%20are%20failing&text=Delhi’s%20problems%20with%20poor%20air,the%20states%20neighbouring%20the%20NCR.

THE CONTEXT: The International Monetary Fund recently in its report raised concerns about India’s sovereign debt, i.e. the total debt burden on the Union plus State governments. It has sparked critical reactions from the Indian Government.

IMF RECENT REPORT:

• IMF’s annual Article IV consultation report, which is part of the Fund’s surveillance function under the Articles of Agreement with member countries has been released. It made two observations:

1. It has raised concerns about the long-term sustainability of India’s debts.

2. It reclassified India’s exchange rate regime and termed it as a “stabilised arrangement” instead of “floating”.

• The report also acknowledged India’s effective inflation management and projected a balanced outlook for India’s economic growth.
• The IMF states that India’s general government debt, including the Centre and States, could be 100% of GDP under adverse circumstances by fiscal 2028.
• It stated “long-term risks are high because considerable investment is required to reach India’s climate change mitigation targets and improve resilience to climate stresses and natural disasters.

GLOBAL TRENDS OF DEBT:

• The United Nations, notes that the countries are forced to make the difficult decision between providing for their citizens and paying off their debt. It states, in 2022, 3.3 billion people live in countries that spend more on interest payments than on education or health.
• Global public debt: Global public debt has increased more than fourfold since 2000, outpacing global GDP, which tripled over the same period. In 2022, global public debt reached a record USD 92 trillion.
• Rise of debt in developing countries: Public debt has increased faster in developing countries compared to developed countries over the last decade. Developing countries accounted for almost 30% of the total, of which roughly 70% is attributable to China, India and Brazil. The number of countries facing high levels of debt increased from 22 in 2011 to 59 in 2022. The rise of debt in developing countries is due to growing development financing needs intensified by the COVID-19 pandemic, the cost-of-living crisis, and climate change.
• Asymmetric debt: The burden of debt is asymmetric between developed and developing countries as the latter even without considering the costs of exchange rate fluctuations have to pay higher interest rates than the former. For example, the countries in Africa borrow on average at rates that are four times higher than those of the United States and even eight times higher than those of Germany. This higher borrowing costs undermines debt sustainability of developing countries. The number of countries where interest spending represents 10% or more of public revenues increased from 29 in 2010 to 55 in 2020.

THE CHALLENGE FOR INDIA:

1. Credit ratings

• S&P Global Ratings states that Credit ratings are forward-looking opinions about the ability of debt issuers, like corporations or governments to meet their financial obligations on time.
• They provide transparent global language for investors and other market participants and is one of the inputs which is considered as part of their decision-making processes.
• Elevated debt levels and substantial costs associated with servicing debt impact credit rating.
• Even being the fastest growing economy, India faces the challenge of enhancing its credit ratings. Sovereign investment ratings for India have remained the same for a long time.
• Both Fitch Ratings and S&P Global Ratings have kept India’s credit rating unchanged at ‘BBB- with stable outlook’. It should be noted that BBB- is the lowest investment grade rating and India has been on that scale since August 2006.
• India’s credit ratings are undermined by the

1. government’s weak fiscal performance

2. burdensome debt stock

3. India’s low per capita income

2. Managing public debt:

• India is facing challenge of managing public debt to ensure that it does not breach sustainable levels.
• The weight of debt can act as a drag on development due to limited access to financing, rising borrowing costs, currency devaluations and sluggish growth.

a). Breach of FRBM target:

• • The 2018 amendment to the Union government’s FRBM Act specified debt-GDP targets for the Centre, States and their combined accounts at 40%, 20% and 60%, respectively.
  • The central government’s debt was ₹155.6 trillion, or 57.1% of GDP, at the end of March 2023 and the debt of State governments was about 28% of GDP.
  • Finance Ministry stated that India’s public debt-to-GDP ratio has increased from 81% in 2005-06 to 84% in 2021-22 and is back to 81% in 2022-23. This is way higher than the levels specified by the FRBM Act.
  • These high levels of debt-GDP ratio can be attributed to the disruptions due to the pandemic, which resulted in a major deterioration in the debt-GDP ratios.

b). Fiscal slippage:

• • There are worrying signs on the fiscal fronts as well. Despite growth in tax collections, there is the possibility of a fiscal slippage in FY24, according to a report by India Ratings and Research (IR&R).
  • IR&R attributes this to higher expenditure on employment guarantee schemes and subsidies.
  • For example, Budgeted fertilizer subsidy of ₹44,000 crore was almost over by end-October 2023 and the Union government has now increased fertilizer subsidy to ₹57,360 crore.
  • Similarly, due to sustained demand for employment under MGNREGA, a sum of ₹79,770 crore has already been spent till December 19, 2023, as against the budgeted ₹60,000 crore and an additional sum of ₹14,520 crore has been allocated through the first supplementary demand for grants.

THE WAY FORWARD:

• Need of fiscal corrections: There is a need for fiscal correction particularly in this election year to avoid worst-case scenarios.
• Debt sustainability: To manage and achieve the debt sustainability, there is a need for more prudent management of debt in the medium term. It can be done by narrowing the gap between expenditure and tax revenues as well as increasing the efficacy of our expenditures and increasing revenues.
• Human capital: India needs to spend considerably more on public funds for enhancing human capital, i.e. on primary healthcare and primary education. Also, there is a need to fund research and innovation via public universities. This suggests that new and preferably concessional sources of financing are needed including greater private sector investment in this scenario.
• Government borrowing: The government borrowings can play a vital role in accelerating development, as governments can use it to finance their expenditures and invest in people to pave the way for a better future.

THE CONCLUSION:

There is increasing concerns regarding the rise of global debt as it has potential implications for economic stability and the capacity of financial systems. Thus, there is a need to strike the right balance between debt accumulation and economic growth.

PREVIOUS YEAR QUESTIONS

Q.1 Do you agree that the Indian economy has recently experienced V-shaped recovery? Give reasons in support of your answer. (2021)

Q.2 The public expenditure management is a challenge to the Government of India in the context of budget-making during the post-liberalization period. Clarify it. (2019)

MAINS PRACTICE QUESTION

Q.1 Rising global debt levels often raise concerns about debt sustainability, especially in the case of government debt driven by reckless borrowing for populist programs. Discuss with specific reference to the Indian scenario.

SOURCE: https://www.thehindu.com/opinion/op-ed/the-dispute-on-indias-debt-burden/article67701846.ece#:~:text=As%20stated%20by%20the%20Finance,Budget%20Management%20Act%20(FRBMA).

TAG: GS 3: ECONOMY, AGRICULTURE

THE CONTEXT: The Central Sericultural Research and Training Institute (CSRTI) in Mysuru has initiated a pilot-scale project to explore the production of bioethanol and biohydrogen from waste generated during silkworm rearing.

EXPLANATION:

• The project is in line with the Indian government’s focus on eco-friendly biorefineries.
• Under the direction of CSRTI Director, a team of scientists has been actively engaged in this project since April 2023.
• Initial laboratory experiments focusing on ethanol production have shown promising results.
• The ongoing studies now aim to ascertain the feasibility of producing biohydrogen from the silkworm rearing waste.

Significance in Fuel Development:

• The research assumes significance considering the Indian government’s plans to enhance the blending of bioethanol with petrol, aiming to reduce reliance on fossil fuels.
• The increasing carbon dioxide levels in the atmosphere, primarily stemming from fossil fuel combustion, have become a concerning environmental issue.

Focus on Biohydrogen as a Renewable Fuel:

• During silkworm rearing, significant quantities of mulberry shoot and silkworm litter are generated annually.
• These waste materials contain over 50% cellulose, a key raw material for biorefineries.
• A scientist at CSRTI highlighted the potential of utilizing these residues for second-generation bioethanol and biohydrogen production.
• While bioethanol production has shown promise, biohydrogen is gaining attention as a more attractive renewable fuel.
• Its combustion generates water instead of greenhouse gases, making it an environmentally preferable alternative.
• CSRTI scientists are eager to explore and assess the viability of biohydrogen production from silkworm rearing waste.

Economic Viability and Potential Collaboration:

• CSRTI plans to collaborate with industries if the production of bioethanol and biohydrogen from silkworm rearing waste proves economically feasible.
• The potential collaboration aims to scale up production on an experimental basis and explore the commercial viability of this eco-friendly approach.

Technology Application and Industry Impact:

• If successful, this technology not only holds promise for startups in bioethanol and biohydrogen production but also adds value to the sericulture industry in India.
• The effective utilization of waste materials for renewable energy production can significantly benefit multiple sectors while promoting sustainability.

Central Sericultural Research and Training Institute (CSRTI):

• Central Sericultural Research & Training Institute (CSRTI), Mysore, is the pioneer research institution in the field of tropical sericulture.
• It was established at Chennapattna in 1961 under the administrative control of Central Silk Board, Ministry of Textiles, Government of India.
• It aimed for the over all development of silk industry in the country.
• During the course of development, the Institute was shifted to Mysore the princely city in the year 1963.

Conclusion:

• The initiative by CSRTI showcases a proactive approach towards utilizing agricultural waste for sustainable energy production.
• The exploration of bioethanol and biohydrogen from silkworm rearing waste represents a step forward in addressing environmental concerns related to fossil fuel dependence and carbon emissions.
• If proven viable, this innovative technology can pave the way for eco-friendly fuel production and contribute positively to India’s renewable energy initiatives.

SOURCE: https://www.thehindu.com/news/national/karnataka/research-underway-to-produce-bioethanol-and-biohydrogen-from-silkworm-rearing-waste/article67693233.ecev

THE CONTEXT: The government has set a target of six months to ensure the full saturation of government’s welfare schemes. In this regard, the ruling government is undertaking a “saturation drive” to take the total number of farmer-beneficiaries under the Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) to about 8.75 crore, from the current 8.12 crore or so.

PRADHAN MANTRI KISAN SAMMAN NIDHI

• It is a Central Sector Scheme to provide income support to all landholding farmers families in the country to supplement their financial needs for procuring various inputs related to agriculture and allied activities.
• Under the Scheme, the entire financial liability towards transfer of benefit to targeted beneficiaries will be borne by Government of India.
• It receives allocation of more than 50% of the Department of Agriculture and Farmers Welfare’s budget to the PMKISAN scheme in 2022-23 and 2023-24.
• Under the PM-KISAN scheme, all landholding farmers’ families shall be provided the financial benefit of Rs.6000 per annum per family payable in three equal installments of Rs.2000 each, every four months.
• The Ministry of Agriculture and Farmers Welfare is responsible for the effective implementation of the scheme.

Not eligible to get the benefits of the PM-Kisan scheme:

(a) All institutional Landholders

(b) Farmer families in which one or more of its members belong to following categories:-

• Former and present holders of constitutional posts
• Former and present ministers/ State Ministers and former/present Members of Lok sabha/ Rajya sabha/ state Legislative Assemblies/ State Legislative councils, former and present mayors of Municipal corporation, former and present Chairpersons of District Panchayats.
• All serving or retired officers and employees of Central/ State Government ministries /Offices/Departments and its field units Central or State PSEs and Attached offices /Autonomous institutions under Government as well as regular employees of the Local Bodies (Excluding Multi Tasking staff / Class
  lV/Group D employees).
• All superannuated/retired pensioners Rs.10,000/-or more (Excluding multi Tasking employees) All Persons who paid lncome Tax in last assessment year
• Professionals like Doctors, Engineers’ Lawyers, Chartered Accountants, and Architects registered with Professional bodies and carrying out profession by undertaking practices.

SIGNIFICANCE OF THE SCHEME:

• Income Support to farmers:Farmers receive much-needed financial support from the scheme of Rs. 6,000 annual direct income support. It helps them pay for their urgent needs and lessens their reliance on unofficial lending sources.
• Poverty Alleviation:The program helps to reduce poverty by giving farmers a steady income, especially in rural areas where agriculture is the only source of income.
• Rural Development:By directly supplying capital to the rural economy, boosting small enterprises, and generating jobs, the PM-Kisan initiative is essential to advancing rural development.
• Boosting Agricultural Productivity:With improved access to financial resources, farmers can invest in high-quality seeds, fertilizers, and irrigation facilities, leading to increased agricultural productivity and overall crop yield.
• Equal treatment: The scheme ensures that every eligible landowning farmer in the country gets covered under this flagship scheme. The scheme is a Direct Income Support (DIS) programme. Every farmer is paid equally irrespective of the crops they grow in whatever quantities and sells to whomsoever at any price. The payment does not depend on the inputs used, whether chemical fertilisers and insecticides or organic manure and biological control of pests and diseases.

ISSUES

• Insufficient reach: PM-KISAN is not reaching all farmer households as intended. There are various issues leading to exclusion of beneficiaries. This scheme is not pro-poor since recipients of PM-KISAN seemed to be farmers who are richer than the general rural population.
• Operational challenges: There are concerns at operational level with issues in land record reconciliation, digitization of land records, costs incurred in consolidation of land records. There are various challenges in identifying beneficiaries due to inadequate digitalization of land records.
• Inadequate transfers: The scheme does not provide a clear design of transfers and a framework for effective grievance redress. Also, market volatility tends to lower the effect of the cash transferred to families which has been insufficient to purchase products as the market price increased substantially.
• Issues in beneficiaries: PM KISAN tends to distribute cash transfer equally to both large and middle farmer which is not appropriate as needs are different. Also, PM-KISAN covers small and marginal farmers, landless agricultural labourers and tenant farmers are left in the lurch.

THE WAY FORWARD:

• Identification and Inclusion:It is still difficult to make sure that all farmers who are eligible for the program are found and enrolled. It is imperative to endeavor towards optimizing the beneficiary identification procedure and resolving any concerns pertaining to coverage gaps.
• Strengthening Last-Mile Delivery:To optimize the benefits of the PM-Kisan, funding must be disbursed to farmers in a timely and effective manner. There is a need to improve the delivery methods by coordinating with stakeholders and using technology to speed up the transfer of payments.
• Refinement of the scheme: There is a need for refinement of the scheme within this overall framework of the scheme. For instance, Direct Income Support can be given on a per-acre, rather than per-farmer, basis. For example, The Telangana government’s Rythu Bandhu scheme provides farmers up to Rs 12,000 per acre per year. Those farming larger holdings or growing more crops also incur higher expenditures. Such farmers, who are probably more dependent on income from agriculture than marginal holders, deserve extra support.
• Address the price fluctuation: Due to the volatile market and price fluctuations in different regions, it is important to index the cash transfers to local inflation.

THE CONCLUSION:

Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) scheme is a transformative initiative aimed at providing direct income support to small and marginal farmers across the nation. There is a need of regular monitoring and evaluation of the scheme’s implementation to assess its effectiveness and identify areas for improvement.

PREVIOUS YEAR QUESTIONS

Q.1 The right to fair compensation and transparency land acquisition, rehabilitation and resettlement act, 2013 has come into effect from 1 January 2014. What implication would it have on industrialization and agriculture in India? (2014)

Q.2 Pradhan Mantri Jan Dhan Yojana (PMJDY) is necessary for bringing the unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the poor section of the Indian society? Give arguments to justify your opinion. (2016)

MAINS PRACTICE QUESTION

Q.1 The Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) aims to ensure direct financial support to farmers to improve agricultural activities and overall livelihood. Examine.

SOURCE: https://indianexpress.com/article/opinion/editorials/express-view-on-the-pm-kisan-model-not-the-way-forward-9088031/

TAG: GS 2: INTERNATIONAL RELATIONS, GS 3: ECONOMY

THE CONTEXT: Recent attacks on ships passing through the Red Sea trade route, conducted by Yemen-based Houthi rebels, have raised significant concerns regarding the disruption of global trade.

EXPLANATION:

• The attack on the Chemical tanker MV Chem Pluto near Gujarat, India, has heightened tensions among Indian oil importers and exporters dealing in commodities like basmati rice and tea.
• The Houthi rebels’ attacks, driven by their opposition to Israel’s military actions in Gaza, have prompted swift countermeasures from the US-led maritime security coalition.
• However, these attacks represent just one facet of the challenges impacting global shipping routes.

Critical Choke Points and Trade Implications

• Two pivotal choke points, the Suez Canal and the Panama Canal, are under threat, potentially disrupting over one-third of global trade.
• These choke points serve as essential channels for global maritime transport, with over 80% of global goods trade relying on sea routes.
• Any blockage in these critical passages forces shipping lines to adopt longer alternative routes, elevating freight rates and causing significant logistical disruptions.
• The disturbance in the Red Sea route, coupled with the potential blockage or slowdown in the Panama Canal due to drought conditions, poses severe repercussions for global trade.
• The diversion of shipments through alternative routes, such as the Cape of Good Hope, adds to transit times and increases freight costs significantly.

Impact on Indian Trade and Agriculture

• India, heavily reliant on sea routes for trade, faces adverse consequences due to these disruptions.
• For instance, Indian agricultural product prices are anticipated to surge by 10-20% as shipments reroute through longer paths.
• This price hike is particularly concerning amidst higher interest rates in Western countries, potentially impacting demand for Indian exports and affecting sectors like textiles and gems, majorly exporting to the European Union.

Challenges in the Panama Canal and Trade Route Deterioration

• The Panama Canal has experienced a more than 50% reduction in shipping due to drought conditions, compelling vessels traveling from Asia to the US to opt for the lengthier Suez Canal
• Concerns arise about prolonged canal bottlenecks due to Panama’s exceptionally dry rainy season.
• Additionally, LNG vessels are resorting to costly auctions to expedite their transit, revealing the severity of the situation.

Resilience of Indian Oil Imports and Impact on Prices

• Surprisingly, India’s oil imports from Russia have not suffered disruptions despite global shipping majors like Maersk avoiding the Red Sea route.
• Russian tankers, perceived as allied with Iran, continue their passage through the Red Sea despite the ongoing attacks by Houthi rebels.
• However, the spike in global benchmark crude prices to around $80 per barrel post-attacks on the Red Sea highlights market volatility and concerns regarding oil flow stability.

Freight Rate Surge and Economic Consequences

• War risk surcharges imposed by global shipping firms due to Red Sea security concerns have led to an escalation in freight rates.
• Indian exporters fear a substantial surge of 25-30% in freight rates for shipments bound to Europe and Africa, impacting crucial export sectors like textiles and gems, already grappling with reduced demand from the European Union.

Potential Resumption of Operations and Future Scenario

• While shipping giant Maersk plans to resume operations in the Red Sea following increased security measures, uncertainties persist.
• The company remains cautious, prepared to divert ship traffic based on evolving safety conditions, highlighting the volatile and precarious nature of current global trade routes.

Conclusion

• The combined challenges faced by global shipping routes due to Red Sea attacks and Panama Canal droughts pose severe threats to the stability of global trade.
• India, a significant player in international trade, faces potential disruptions impacting its exports and economic sectors.
• The evolving situation underscores the need for strategic planning and robust measures to navigate the complexities of global trade in an increasingly uncertain environment.

SOURCE: https://indianexpress.com/article/explained/explained-economics/red-sea-attacks-shipping-global-trade-panama-canal-9083539/lite/

TAG: GS 3: ECONOMY

THE CONTEXT: Recent official data highlighted a substantial increase in female participation in the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) during the ongoing financial year 2023-24.

EXPLANATION:

• The proportion of women’s person-days in the total MGNREGS work touched an impressive 59.25% until December 24, marking the highest recorded participation in the past ten fiscal years.
• This upward trend in female participation within NREGS showcases a significant surge from 54.78% in 2019-20 and 53.19% during the COVID-19 outbreak in 2020-21.

NREGS Data Analysis

• The NREGS portal data reveals a detailed breakdown, indicating that out of a total of 238.62 crore person-days during 2023-24 until December 24, women accounted for 141.37 crore person-days, reflecting the increased participation rate.
• Furthermore, the data suggests a consistent rise in female involvement, reinforcing a steady upward trajectory in rural women’s engagement in this job guarantee scheme.

Regional Disparities and State-Level Participation Rates

• Notably, while southern states like Kerala, Tamil Nadu, Puducherry, and Goa exhibited commendable rates of women’s participation, surpassing 70%, northern states such as Uttar Pradesh and Madhya Pradesh have struggled to maintain rates above 40% or even below over the years.
• For the fiscal year 2023-24, states/UTs like Jammu and Kashmir, Lakshadweep, Uttar Pradesh, Madhya Pradesh, and Maharashtra reported the lowest women participation rates.
• However, there have been marginal improvements in participation rates in Uttar Pradesh, Madhya Pradesh, and Lakshadweep during the current financial year.

Trends in NREGS Participation

• The data reflects an increase in the number of families availing NREGS benefits in recent years.
• In 2023-24, approximately 5.38 crore families accessed NREGS by December 24, marking a slight decline compared to 6.18 crore in 2022-23 and 7.25 crore in 2021-22.
• Despite fluctuations in family participation, the focus remains on the rising trend of female involvement in NREGS activities.

National Trends in Female Labour Force Participation

• The Periodic Labour Force Survey (PLFS) by the Ministry of Statistics and Programme Implementation underscores an overall increase in female Labour Force Participation Rate (LFPR) in the country, particularly in rural areas.
• The rural female LFPR surged to 30.5% in 2022-23 from 18.2% in 2017-18, indicating a remarkable growth trajectory.
• Simultaneously, the female unemployment rate witnessed a decline from 3.8% in 2017-18 to 1.8% in 2022-23, affirming positive strides in women’s employment opportunities.

Conclusion

• The burgeoning participation of women in employment schemes like NREGS reflects a growing trend of empowerment and engagement in the rural workforce.
• Despite regional disparities, the concerted efforts to elevate female participation are evident, aligning with broader national trends in increasing female Labour Force Participation Rates and declining unemployment rates among women.

SOURCE: https://indianexpress.com/article/india/women-participation-in-nregs-continues-to-rise-59-this-fiscal-9082675/

TAG: GS 2: INTERNATIONAL RELATIONS, GS 3: ECONOMY

THE CONTEXT: India and the ASEAN bloc are gearing up to reevaluate and modernize their Free Trade Agreement (FTA) dating back almost 15 years.

EXPLANATION:

• Top of Form
• The primary intention behind this initiative is to rebalance the FTA, which currently appears skewed against India’s interests.
• However, this modernization exercise will focus on revitalizing elements like product-specific rules and trade remedies, omitting newer areas such as labour, environment, Small and Medium-sized Enterprises (SMEs), and gender-related aspects.

Negotiation Schedule and Objectives

• Negotiations to review the ASEAN India Trade in Goods Agreement (AITGA) will commence on February 18-19 in New Delhi, with a projected timeline aiming to conclude by 2025.
• The discussions are slated to follow a quarterly schedule to streamline the revision process.
• India has long pushed for a reassessment of the AITGA, particularly due to the imbalance in trade.
• The current trade deficit of $43.57 billion with the ASEAN, significantly expanded from $7.5 billion annually when the agreement was initiated, prompts India to seek a more balanced trade scenario.

Challenges and Industry Inputs

• Various industry sectors in India have raised concerns regarding both tariff and non-tariff barriers encountered in trade with ASEAN nations.
• Sectors like chemicals, alloys, plastics, rubber, minerals, leather, textiles, gems, and jewellery need enhanced market access, according to industry analyses.

Key Components of FTA Revamp

• Modernizing the AITGA encompasses significant alterations in the Rules of Origin (ROO), intending to favour India by potentially expanding market access for specific products and preventing the circumvention of goods by China through ASEAN nations.
• This revamp is anticipated to introduce Product Specific Rules (PSRs) within the ROO chapter to facilitate relaxed rules for certain items to bolster exports and curb potential loopholes exploited by China.
• Additionally, the revised AITGA will include a chapter on trade remedies, aiming to shield domestic industries against unfair trade practices or sudden surges in imported goods.

Exclusion of New Areas in FTA

• The updated FTA will not include additional domains like environment, labour, MSMEs, or gender-related aspects.
• The primary focus remains on optimizing the existing pact without complicating it with newer issues.

ASEAN’s Role and Impact on India’s Trade

• The ten-member ASEAN bloc, including countries like Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia, constituted 11.3% of India’s global trade in the 2022-23 period.

Conclusion

• The modernization of the India-ASEAN FTA aims to rectify trade imbalances and reinvigorate the agreement to benefit both parties.
• By addressing concerns regarding market access, rules of origin, and trade remedies, the updated agreement seeks to foster a more equitable trade relationship between India and the ASEAN bloc.

SOURCE: https://www.thehindubusinessline.com/economy/india-asean-set-to-review-trade-pact-for-modernisation-in-february/article67673605.ece

THE CONTEXT: There are many indications everywhere that India continues to be going through a job crisis. Both official data sources as well as many on-the-ground reports point to this fact.

Two types of employment that prevail in an economy such as India.

1. Wage employment: It is a result of labour demanded by employers in their pursuit of profits.

2. Self-employment: Here labour supply and labour demand are identical, i.e., the worker employs herself.

A further useful distinction can also be made between wage labour and jobs.

1. Wage labour: It includes all forms of labour done for an employer including daily wage work at one extreme and highly paid corporate jobs at the other.

2. Jobs generally refer to relatively better paid regular wage or salaried employment. In other words, all jobs are wage labour, but all wage labour cannot be called jobs.

The labour demand in the formal non-agricultural sector is determined by two distinct factors:

1. Demand for output: Firms in the formal sector hire workers to produce output for profit, labour demand depends on the amount of output that firms are able to sell. Under any given level of technological development, labour demand in the formal sector rises when demand for output rises.

2. State of technology: Labour demand depends on the state of technology that dictates the number of workers that firms need to hire to produce one unit of output. Introduction of labour-saving technologies enables firms to produce the same amount of output by hiring a lower number of workers.

Employment growth rate is determined by the relative strength of two factors:

1. Output growth rate: Policies that promote higher economic growth would also achieve higher employment growth.

2. Labour productivity growth rate i.e growth rate of output per worker: If labour productivity growth rate rises, employment growth rate falls for a given output growth rate. If labour productivity growth rate does not change, higher output growth rate increases employment growth rate.

Macroeconomic policy framework

• Keynesian theory: It highlight the role of aggregate demand as the binding constraint on employment. Fiscal policy was perceived to increase labour demand by stimulating output. The developing countries that inherited a dual economy structure during their independence, confronted additional constraints on output.
• Mahalanobis strategy: It identified the availability of capital goods as the binding constraint on output and employment, putting forward the policy for heavy industrialisation.
• The structuralist theories based on the experiences of developing countries highlighted the possibility of agrarian constraint and the balance of payment constraints.
• Both these constraints led to key policy debates in India, particularly during the decade of the 1970s and early 1990s.
• Nonetheless, what remained common to all these different frameworks was the presumption that increasing the output growth rate in the non-agricultural sector would be a sufficient condition for increasing the employment growth rate in the formal sector.

Reasons for this crisis:

• Low labour demand: There is inadequate labour demand particularly for regular wage work.
• Disguised employment: The Indian economy has historically been characterised by the presence of both open unemployment and disguised employment. It means high level of informal employment consisting of the self-employed as well as casual wage workers. It also indicates a lack of adequate employment opportunities in the formal sector. This lack of opportunities is reflected by a more or less stagnant employment growth rate of salaried workers in the non-agricultural sector in the last four decades.
• Jobless growth: In India, the employment growth rate of the formal and non-agricultural sector remained unresponsive despite a significant rise in the GDP growth rate and the value added growth rate during the 2000s as compared to the decade of the 1980s and 1990s. The lack of responsiveness of employment growth rate to changes in output growth rate reflects a phenomenon of jobless growth.

Two types of jobless growth regimes based on the connection between output growth and labour productivity growth.

1. Responsiveness of labour productivity growth rate to output growth rate is weak: The possibility of jobless growth in this case emerges exclusively on account of automation and the introduction of labour-saving technology. But employment growth rate in such regimes would necessarily increase if output growth rate happens to increase. Here, the solution to the jobs crisis is just more rapid economic growth.

2. Responsiveness of labour productivity growth rate to output growth rate is high: This is the case in Inda. Here, the positive effect of output growth rate on employment fails to counteract the adverse effect of labour-saving technologies. Employment growth rate in such regimes cannot be increased simply by increasing GDP growth rate.

THE WAY FORWARD:

• Both demand and supply side reforms: Such employment policies will need both demand side and supply side components. At the same time, direct public job creation will be needed.
• Bridging the skill gaps: There is a need for adequate skilled labour and increasing the quality of the workforce through better public provisioning of education and health care.
• Reorienting macroeconomic framework: Financing expenditures while maintaining debt-stability requires the reorienting of the current macroeconomic framework in a significant way. It can include increasing the direct tax to GDP ratio by reducing exemptions and improving compliance.

THE CONCLUSION:

With the given scenarios, the employment challenge can no longer be met only through more rapid GDP growth. There is a need for separate policy focus on employment.

UPSC PREVIOUS YEAR QUESTIONS

Q) Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (2023)

Q) Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India. (2022)

MAINS PRACTICE QUESTIONS

India is witnessing jobless growth in current times. In this respect, analyse India’s recent economic performance and its impact on job creation.

Source: https://www.thehindu.com/opinion/lead/indias-jobs-crisis-the-macroeconomic-reasons/article67671927.ece

TAG: GS 3: ECONOMY

THE CONTEXT: Angola has decided to exit the Organization of the Petroleum Exporting Countries (OPEC), raising concerns about OPEC’s ability to manage global oil supplies, increased US crude output, and geopolitical tensions impacting oil shipping routes.

EXPLANATION:

• Angola, an oil-producing nation, announced its departure from OPEC, citing that its membership in the organization did not serve its interests.
• Angola’s decision raises questions about the effectiveness of OPEC’s strategies in stabilizing and influencing oil prices.
• Angola’s production stands at about 1.1 million barrels per day, a fraction compared to OPEC’s total output of 28 million barrels per day.

Impact on OPEC’s Cohesion and Direction

• Despite being one of the smaller producers in OPEC, Angola’s exit prompts concerns about the unity and direction of the organization.
• While its departure may not significantly affect global oil supplies due to its relatively smaller output, it highlights potential internal disagreements within OPEC regarding production quotas and strategies to manage oil prices.

OPEC’s Efforts to Support Oil Prices

• OPEC, led by Saudi Arabia, has been attempting to stabilize oil prices by implementing production cuts.
• However, challenges persist as non-OPEC producers, such as the United States, have increased their output, filling the supply gap and impacting OPEC’s ability to control prices.

Increased US Crude Output

• The US Energy Information Administration (EIA) reported a record rise in US crude oil output to 13.3 million barrels per day.
• This surge in production, reaching a new high, contributes to global oil market dynamics and may counterbalance OPEC’s efforts to limit supply and raise prices.

Geopolitical Tensions and Oil Shipping Routes

• Recent attacks by Yemeni Houthi militants on vessels bound for Israeli ports have caused disruptions in global trade by forcing major maritime carriers to avoid the Red Sea.
• These disruptions raise concerns about potential supply diversions and interruptions due to geopolitical tensions, impacting oil shipping routes.

Israel-Hamas Conflict

• The conflict between Israel and Hamas has escalated, affecting truce talks and potentially causing further disruptions in the region.
• These geopolitical tensions add uncertainty to oil markets due to their potential to disrupt supply chains and shipping routes in the Middle East.

Conclusion:

• The confluence of events, including Angola’s exit from OPEC, increased US crude output, and geopolitical tensions impacting shipping routes due to conflicts in the Middle East, contributes to uncertainties in global oil markets.
• These factors collectively influence oil prices and market stability, challenging OPEC’s efforts to manage supplies and stabilize prices amid a complex geopolitical landscape.

SOURCE: https://www.moneycontrol.com/news/business/markets/oil-falls-more-than-1-as-angola-decides-to-exit-opec-11940551.html

TAG: GS 3: ECONOMY

THE CONTEXT: Recently, the Lok Sabha passed Central Goods and Services Tax (Second Amendment) (CGST) Bill, 2023.

EXPLANATION:

• The Central Goods and Services Tax (Second Amendment) Bill, 2023 was introduced in Lok Sabha on December 13, 2023.
• It amends the Central Goods and Services Tax (CGST) Act, 2017.
• The Act provides for the levy and collection of CGST on the intra-state supply of goods and services.

HIGHLIGHTS OF THE BILL:

• Change in qualification for members of Appellate Tribunal:
  • The Act allows the central government to set up an Appellate Tribunal on the recommendation of the GST Council.
  • The Tribunal comprises the President, a judicial member, and two technical members.
  • Persons eligible to be appointed as the judicial member are:

(i) a judge of the High Court, or

(ii) a district judge or additional district judge having served for at least 10 years.

• The Bill allows advocates with at least 10 years of experience to be appointed as the judicial member.
• They must have substantial experience in matters relating to indirect taxation.
• The minimum age to be appointed as a member or president of the Tribunal will be 50 years.

• Age limit:
  • The Bill increases the age limit:

(i) for the president of the Tribunal from 67 to 70 years, and

(ii) for members from 65 to 67 years.

SOURCE: https://www.barandbench.com/news/lok-sabha-passes-cgst-amendment-bill-indirect-tax-lawyers-10-years-experience-gstat-members

TAG: GS 3: ECONOMY

THE CONTEXT: Recently, the World Bank has initiated a significant step towards enhancing Multilateral Development Banks (MDBs) by forming a task force.

EXPLANATION:

• This task force, proposed by an independent group of experts during India’s G20 presidency, aims to scrutinize and act upon recommendations geared towards fortifying MDBs.
• The group president of the World Bank confirmed this development during discussions held recently.

Leadership Role and Reform Roadmap

• During the interaction with Finance and Corporate Affairs Minister, The minister urged the World Bank, being a prominent MDB, to lead the implementation of the reform agenda for MDBs.
• The primary objectives of these reforms revolve around amplifying the global presence, efficacy, and assertiveness of these lending institutions.

Global Challenges and Focus Areas

• It was highlighted that the World Bank had identified eight distinct global challenges demanding immediate attention.
• However, the Finance Ministry’s statement did not provide detailed insights into these challenges.
• Despite the lack of elaboration, Finance Minister assured the World Bank of India’s full support in addressing these challenges, indicating India’s commitment to global development endeavours.

India’s Priorities in World Bank’s Reporting

• It was emphasized that the Country Climate and Development Report by the World Bank should intricately consider India’s specific priorities and circumstances.
• This directive underscores India’s stance on aligning global initiatives, especially those by prestigious institutions like the World Bank, with the nation’s developmental goals and environmental concerns.

MULTILATERAL DEVELOPMENT BANKS (MDBS):

• A multilateral development bank (MDB) is an international financial institution chartered by two or more countries for the purpose of encouraging economic development in poorer nations.
• Multilateral development banks consist of member nations from developed and developing countries.
• MDBs provide loans and grants to member nations to fund projects that support social and economic development, such as the building of new roads or providing clean water to communities.
• Multilateral development banks (MDBs) originated in the aftermath of World War II to rebuild war-ravaged nations and stabilize the global financial system.
• Today, MDBs fund infrastructure, energy, education, and environmental sustainability in developing countries.
• While commercial banks seek to make profits on loans and other financial services, the goal of MDBs is to issue grants and low-cost loans to improve the economic conditions of impoverished or developing nations.
• MDBs now operate throughout the world and control trillions of dollars in assets.

Conclusion

• The formation of a task force by the World Bank to explore and implement reforms in MDBs demonstrates a proactive approach to bolstering global lending institutions.
• The acknowledgment of significant global challenges and India’s insistence on aligning World Bank reports with its priorities showcase the evolving landscape of international collaborations, where nations seek tailored solutions while supporting broader global agendas.

SOURCE: https://www.thehindu.com/business/world-bank-sets-up-task-force-to-act-on-mdb-reform-plan/article67659110.ece

TAG: GS 3: ECONOMY

THE CONTEXT: Despite reaching an all-time high in production this year, global coal demand is expected to decline by 2026 as per a report by the International Energy Agency (IEA).

CURRENT STATE OF GLOBAL COAL DEMAND

• Production vs. Projected Decline in Demand
  • Despite reaching an all-time high in production, the International Energy Agency (IEA) projects a decline in global coal demand by 2026.
  • The report attributes this anticipated reduction to a shift towards renewable energy sources and a saturation of demand from China, while highlighting India’s pivotal role in sustaining coal demand until 2026.
• Regional Disparities in Demand
  • The forecasted decline in coal demand conceals regional differences.
  • While the European Union and the United States are expected to witness a significant drop in demand by 20% each, India and China are projected to experience an increase in demand by 8% and 5%, respectively.
  • It is primarily due to electricity needs and reduced hydropower generation.

FACTORS INFLUENCING THE DECLINE IN COAL DEMAND

• Renewable Energy Expansion
  • The anticipated decrease in coal demand is underpinned by the burgeoning capacity of renewable energy sources.
  • The report emphasizes the substantial deployment of low-cost solar photovoltaic systems and the projected increase in nuclear energy generation, especially in China, India, and the European Union.
• Climate and Weather Conditions
  • The IEA report correlates the decline in coal demand with climate factors.
  • It anticipates the transition from El Nino to La Nina, potentially leading to improved rainfall in Asia during 2024-2026, thereby augmenting hydropower generation and reducing the reliance on coal.

COAL’S ENVIRONMENTAL IMPACT AND POLICY IMPLICATIONS

• CO2 Emissions and Climate Targets
  • Coal remains a dominant energy source but is also the largest contributor to carbon dioxide (CO2) emissions.
  • The report highlights the necessity of reducing ‘unabated’ coal use to meet international climate targets, emphasizing the United Nations Framework Convention on Climate Change’s agreement to decrease coal emissions by nearly 95% between 2020-2050 to limit global temperature rise.
• Shift in Climate Policy
  • The IEA underscores the significance of global climate policy in steering away from unabated coal usage.
  • Efforts to limit temperature increases to 1.5°C by the end of the century mandate a substantial reduction in coal emissions, signalling a pivotal moment for renewable energy expansion.

GLOBAL COAL PRODUCTION TRENDS

• Production Records and Major Producers
  • China, India, and Indonesia, the world’s three largest coal producers, are expected to set production records in 2023, collectively contributing over 70% of global coal production.
  • Despite rising production levels, the report highlights the divergence between production surges and the projected decline in demand.

INTERNATIONAL ENERGY AGENCY

• It is an autonomous inter-governmental organisation within the OECD framework.
• It works with governments and industry to shape a secure and sustainable energy future for all.
• It was founded in 1974 to ensure the security of oil supplies.
• It was created in response to the 1973-1974 oil crisis when an oil embargo by major producers pushed prices to historic levels and exposed the vulnerability of industrialised countries to dependency on oil imports.
• It consists of 31 member countries and eleven association countries.
• A candidate country to the IEA must be a member country of the Organisation for Economic Co-operation and Development (OECD).
• India joined this organization in 2017 as an Associate member.

CONCLUSION: THE TRANSITION AWAY FROM COAL

• The IEA report points to a transformative period marked by a structural decline in coal demand, driven by sustained expansion in renewable energy technologies.
• It emphasizes the pivotal role of Asia’s renewable energy expansion in determining the pace of coal’s phase-out.
• However, meeting international climate targets necessitates accelerated efforts towards reducing coal emissions.

SOURCE: https://www.thehindu.com/news/international/global-coal-demand-expected-to-decline-by-2026-iea-report/article67647691.ece

TAG: GS 3: SCIENCE AND TECHNOLOGY

THE CONTEXT: The recent approvals by regulatory agencies in the UK and the US for CRISPR-based therapies targeting sickle-cell disease and β-thalassemia mark a transformative era in medicine.

EXPLANATION:

• These inherited blood disorders affect millions globally, and the approvals signify a shift towards addressing their molecular basis rather than just symptom management.

THE EVOLUTION OF CRISPR TECHNOLOGY

• Origins of CRISPR
  • CRISPR, an acronym for Clustered Regularly Interspaced Short Palindromic Repeats, originated from the discovery of DNA elements in 1993 by Spanish researchers.
  • These elements were found in archaea and later in bacterial genomes.
  • Initially thought to be a part of the bacterial immune system against viruses, it was revealed that CRISPR, combined with CRISPR-associated proteins (Cas), functioned as an antiviral defense mechanism.
• Milestone Discoveries
  • The groundbreaking work of Emmanuelle Charpentier, Jennifer Doudna, and Virginijus Siksnys led to key discoveries.
  • In 2010, it was demonstrated that CRISPR, specifically with Cas9 proteins, could cut DNA at precise points.
  • The identification of RNA molecules guiding Cas9 to specific genomic positions further revolutionized its potential.
  • This work culminated in the development of a programmable ‘molecular scissor’ capable of editing DNA accurately.
• CRISPR-Cas9 Advancements
  • Subsequent research by Feng Zhang and George Church showcased CRISPR-Cas9’s ability to edit the genomes of eukaryotic organisms.
  • This innovation expanded its applications, ranging from genetic therapies to agricultural advancements.

CRISPR IN MEDICINE: CURRENT ACHIEVEMENTS AND FUTURE PROSPECTS

• First-Generation Technologies
  • The approved CRISPR-based therapeutics represent first-generation technologies.
  • Though groundbreaking, they are continuously evolving to become more efficient and effective.
  • Novel approaches like base editing and prime editing hold immense promise for precise genome editing at the nucleotide level, addressing diseases like familial hypercholesterolemia.
• Emerging Techniques and Challenges
  • Techniques like base editing and prime editing are showing potential, yet safety and accuracy issues persist.
  • Off-target events, where CRISPR systems inaccurately edit unintended parts of the genome, pose risks.
  • Balancing short-term benefits with long-term risks remains critical, especially as these therapies are still in early developmental stages.

THE FUTURE LANDSCAPE AND CONSIDERATIONS

• Potential and Caution
  • While celebrating the transformative potential of CRISPR-based therapies like Casgevy, it’s essential to acknowledge potential risks.
  • Continued scrutiny and surveillance are imperative to identify and address unforeseen side effects.
  • The enormous promise of these technologies must be cautiously balanced with potential risks to ensure patient safety and ethical considerations.
• Moving Forward
  • CRISPR technology has opened doors to a future where the correction of genetic anomalies is a reality.
  • The ongoing advancements in CRISPR-based therapies signify a promising era in medicine, holding immense potential to alleviate the suffering of millions affected by genetic diseases.

CONCLUSION

• The approval of CRISPR-based therapies represents a significant leap in medical science, offering hope to patients with genetic disorders.
• While these treatments mark a milestone, continuous research, vigilance, and technological advancements are crucial to maximize benefits while minimizing risks associated with genome editing technologies.

SOURCE: https://www.thehindu.com/sci-tech/science/crispr-casgevy-sickle-cell-disease-genetic-therapeutics-explained/article67641478.ece

THE CONTEXT: There is resurgence in headline retail inflation in November which was totally unexpected after the RBI just predicted a  small increase. It is a stark reminder of the risks volatile food prices pose.

INFLATION TREND ANALYSIS

• National Statistical Office’s provisional reading of headline inflation shows the Consumer Price Index rose by 5.55% year-on-year to a three-month high, from October’s 4.87%.
• Food price gains measured by the Consumer Food Price Index accelerated by a steep 209 basis points to 8.7% last month. Cereals and vegetables surged 10.3% and 17.7% inflation, respectively.
• Vegetable price’s rate surging by almost 15 percentage points from October’s 2.8%. Only potato prices, which continued to remain in deflationary territory, offered some respite.
• Pulses and sugar are other areas of concern, with the first witnessing more than 20% inflation and the sweetener also experiencing an uptick in the pace of price gains to 6.55%.
• With the RBI having opted to refrain from raising rates for now, the onus lies on the government to help temper inflation.

ABOUT INFLATION:

• Inflation is defined by the International Monetary Fund as the rate of increase in prices over a given period, encompassing a broad measure of overall price increase or for specific goods and services.
• It reflects the rising cost of living and indicates how much more expensive a set of goods or services has become over a specified period, usually a year.

Headline Inflation

• Headline inflation is the raw inflation figure reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics.
• Headline inflation is not adjusted to remove highly volatile figures, including those that can shift regardless of economic conditions.

Core Inflation

• Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors.
• It is most often calculated using the consumer price index (CPI), which is a measure of prices for goods and services.

CAUSES OF INFLATION:

• Supply Shocks: Inflation is caused due to sudden and unexpected disruption to the supply of goods and services. Some of the reasons for reduction in supply are Natural disasters, geopolitical events, or other unforeseen circumstances.
• Demand-Pull Inflation: It occurs when the demand for goods and services exceeds their supply. When the overall demand in the economy is high, consumers are willing to pay more for the available goods and services that leads to a general rise in prices.
• Cost-Push Inflation: It is driven by an increase in the production costs for goods and services. This can be caused by factors such as increased incomes, increased costs of raw materials, or disruptions in the supply chain.
• Increase in the money supply in an economy: When there is more money in circulation, consumers have more purchasing power, which can drive up demand and prices.

CONCERNS RELATED TO INFLATION:

• Decreased Purchasing Power: Inflation erodes the purchasing power of money, meaning that with the same amount of money, individuals can buy fewer goods and services.
• Uncertainty and Planning Challenges: High inflation can create uncertainty in the economy. It becomes challenging to plan for the future when prices are constantly changing. Long- planning term becomes difficult, and uncertainty can lead to hesitancy in making investment decisions. This forces the government to spur the investments and leads to crowding-out effects.
• Reduces overall demand: The eventual fallout of reduced purchasing power is that consumers demand fewer goods and services.
• Worsens the exchange rate: High inflation means the rupee is losing its power. Investors will take away their capital because of reduced returns. Thus, high inflation can lead to worsening of exchange rate.

THE WAY FORWARD:

• Monetary Policy: The Reserve Bank of India (RBI), India’s central bank, plays a crucial role in controlling inflation through monetary policy. The RBI adjusts key interest rates, such as the repo rate, to influence money supply and credit in the economy. These monetary measures can help in tackling inflation.
• Fiscal Policy Measures: The government uses fiscal policies like taxation and public spending to manage inflation. Appropriate fiscal measures can help in curbing demand and controlling inflationary pressures. Higher taxes can reduce disposable income, curbing spending and inflation.
• Food Price Management: Given that food prices often contribute significantly to inflation in India, the government needs to implement initiatives to manage food supplies and prices. For examples, there is need to strengthening Minimum Support Price (MSP) and the Public Distribution System (PDS). To prevent artificial scarcity and price manipulation, the government need to conduct regular checks  against hoarding and black marketing.

THE CONCLUSION:

There is a need to address the high commodity prices and shortages of raw materials to support the consumption in the country by preserving macro-financial stability.

PREVIOUS YEAR QUESTIONS

Q.1 Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.(2019)

Q.2 It is argued that the strategy of inclusive growth is intended to meet the objectives of inclusiveness and sustainability together. Comment on this statement.(2019)

MAINS PRACTICE QUESTION

Q.1 How does inflation affect the consumption and economic growth in the country?. Suggest measures to tackle high inflation in India.

SOURCE: https://www.thehindu.com/opinion/editorial/acceleration-foretold-on-volatile-food-prices/article67642176.ece

TAG: GS 3: ECOLOGY AND ENVIRONMENT

THE CONTEXT: A recent study, published in the International Journal of Water Resources Development, delves into the intricate relationship between climate variability and its effects on crop yield in India.

EXPLANATION:

• The study offers critical insights into the challenges faced by the agricultural sector, particularly concerning water risks.
• Here, we will explore the nuanced findings and their implications for informed policy decisions.

Climate Variability and Crop Yield Analysis

• Seasonal Impact on Crop Yield:
  • The study highlights the significant influence of climate variables like rainfall, evapotranspiration, temperature, and windspeed across different seasons on crop yields.
  • Each crop exhibits varying degrees of sensitivity to these climate elements, impacting both the expected yield and yield variability.
• Crop-Specific Responses:
  • Crops such as bajra, chickpea, groundnut, rice, and sugarcane demonstrate unique relationships with climate variables.
  • For instance, the optimal levels of rainfall and temperature vary for different crops, influencing their yields positively or negatively.
• Risk Assessment and Water Elements:
  • Extremes in rainfall, temperature, evapotranspiration, and windspeed are associated with increased yield risks for specific crops.
  • Moreover, the study identifies how low or high values of these climatic factors affect crop yield variability.

Water Management Implications and Policy Considerations

• Water Availability and Crop Production:
  • Changes in water availability due to climate variations significantly impact crop production.
  • To mitigate adverse effects, the study suggests strategies such as diverting surplus water for storage to meet higher water demands during dry seasons.
• Addressing Extreme Climate Events:
  • Flooding and droughts caused by extreme rainfall and temperature pose challenges.
  • Effective drainage systems and reallocation of water to crops benefiting from irrigation expansion or tolerant to extremes are recommended for better water management.
• Adaptive Strategies:
  • The study emphasizes the need for seasonal adaptations and crop-specific measures to sustain long-term water availability.
  • It suggests identifying high-tolerant crops and optimizing irrigation diversification based on climate effects.

Policy Implications and Future Directions

• Enhancing Water Management Policies:
  • Policy re-evaluation is essential to address the impact of climate change on farm water management.
  • Decision-makers need to consider strategies like predictive techniques, diversification of irrigation, and climate-smart agriculture for sustainable outcomes.
• Incorporating Scientific Techniques:
  • Implementing modern irrigation techniques and utilizing rainwater effectively can alleviate pressure on groundwater resources.
  • Precision farming, scientific water management, and climate-smart agricultural practices are advocated for resilient crop production.
• Inclusive Governance and Farmer Participation:
  • Encouraging farmer involvement in water management and aligning policies with region-specific sustainable agricultural practices can yield efficient, equitable, and economically viable outcomes.

Conclusion

• Understanding the intricate effects of climate variability on crop yield and water security is paramount for reevaluating agricultural policies in India.
• This study underscores the need for adaptive strategies, scientific water management, and climate-resilient agriculture to mitigate risks associated with climate change.
• Policy interventions that prioritize sustainable water use and empower local governance can pave the way for resilient agricultural practices and long-term food security in India.

SOURCE: https://www.downtoearth.org.in/blog/agriculture/understanding-climate-effect-on-crop-yield-and-associated-risks-to-water-security-in-india-is-crucial-93393