THE CONTEXT:  From 1960 to 2021, the population of India increased from 450.55 million to 1.41 billion people. This is a growth of 212.4 per cent in 61 years. UN report estimated that India’s urban population is estimated to stand at 675 million in 2035, the second highest behind China’s one billion. Ironically India’s urban growth did not result in an increase in the good performance in Live ability Index. It can be corroborated by the fact that the National Capital, New Delhi, has been ranked 112th on the list of the Global Live ability Index 2022 released by EIU(Economist Intelligence Unit). This article traces the growth of the urban population with the economic growth and various reasons for the dismal status of city livability and suggests some way forward.

INDIA’S HIGH ECONOMIC GROWTH

At $2.3 trillion, the Indian economy has grown nearly 9 times since 1991. In 1991, India’s GDP stood at $266 billion. Agriculture, which accounted for nearly 30 per cent of the total GDP in 1991, now accounts for 17.4 per cent of the economy. The services sector contributes nearly 54 per cent to the domestic GDP (from 39 per cent in 1991), while the industry sector’s contribution to GDP stands at 29 per cent now against 30 in 1991. This economic growth was synchronous with the rise of the urban population.

INDIA’S URBAN LANDSCAPE

Presently, Indian cities are home to an estimated 377 million people or 31.16% of the country’s total population. There are over 4,400 statutory towns and cities in India with around 40 crores of inhabitants today. At the current rate of growth, the urban population in India is estimated to reach a staggering 60 crores by 2030 (WUP, 2018). According to 2011 Census, as many as 53 cities in India had a million plus population. It is projected that more than 50% of the country’s population will be urban by 2050 (WUP, 2018). By some estimates, India needs to build a Chicago every year and is expected to see an influx of population of the size of the entire USA into its cities over the next decade.

ISSUES WITH THE URBAN SPACE

SLUM DEVELOPMENT

According to the Census-2011, 17% of the urban population lives in Slum. Every sixth urban Indian life in slums unfit for human habitation. Slums, in fact, are so common that they are found in 65 per cent of Indian towns. Yet slum dwellers are the most overlooked section of society. Six out of 10 slum dwellers live close to unsanitary drains, and almost four of every 10 do not get treated water.

It has various problems like:

●     It lacks basic hygiene facilities and is prone to unsanitary living conditions.

●     Constant migration increases the population of slums, further increasing hygiene problems.

●     Lack of basic needs and overcrowding.

ISSUES RELATED TO PLANNING

Fractured planning structures are incapable of integrated planning for land use, infrastructure planning, and finance across metropolitan areas.

TRANSPORT

Transport in urban faces various challenges, including inefficiency, roadway congestion, traffic accidents, lack of planning, overcrowding, noise, and a total lack of coordination of any kind.

URBAN CRIME IN INDIA

Urban areas has been spot for various crime like Murder/attempt to murder, Violent crime targetting property, Violent crime against women, Other crime against women.

Including Rape, Cruelty by husband or his relatives, Human trafficking, Attempt to commit rape, Assault on women with intent to outrage her modesty, and Insult to the modesty of women.

ENVIRONMENTAL ISSUES

Urban space in India faces various environmental problems like:

●    Felling of trees

●    Encroachment on water bodies

●    Concretization of the land causing urban heat issues

●    Pollution including Ground Ozone problems

●    Waste generation: Landfills are created

●    Emission: urban constitutes about 3.1% of land but 78% of emission

SOCIAL ISSUES IN THE URBAN AREAS

●   Class Barriers: India’s growing inequality of income is much more evident in urban areas than in rural areas because India’s rich live in the big metro cities and towns and not in villages. Their lifestyle is distinctly different from the lifestyle of the low-income and middle-income groups. Migrants from the villages are attracted by high wages in the cities and join the informal sector. Many are employed in the services of the urban rich.

●   Child labour: The State of Child Workers in India report by UNICEF, based on the latest Indian census data, says the proportion of child workers in the 5-9 year age group jumped to 24.8 percent in 2011 from 14.6 per cent in 2001

●     Migrant issues:

○   The majority of the male migrants and possibly a substantial portion of the women migrants to urban areas migrate to work and earn a livelihood.

○     A substantial portion of the rural-urban migrants is less educated, poor and come from agricultural backgrounds and belongs to Scheduled Caste and Scheduled Tribe communities.

○   Migrants lacks documentation, access to social security, and accessibility to the government schemes like food through the public distribution system.

○    Issue of homeless people in the urban areas

● Lack of social security: COVID-19 has exposed a major gap in social protection coverage, given the disproportionate impact of lockdowns on the livelihoods of the urban poor.

●   Residential segregation: Caste-based residential segregation contributes to the widening of social and cognitive distances between caste groups. Social hierarchies are reinforced by spatial isolation and separation. The greater the segregation – voluntarily or involuntarily — lesser is the likelihood of interaction between communities. Muslims in Indian cities are a classic example of such isolation and ghettoization.

●    Issues of Urban poverty and unemployment.

HEALTH ISSUES IN URBAN AREAS

Water-borne, water-washed (or water-scarce), airborne, food-borne, vector-borne, including some water-related vectors (e.g. Aedes mosquitoes breeding in water containers where households lack reliable piped supplies).

There is a lack of sanitation facilities for the poor and proper drinking water.

Urban services, including water & wastewater and solid waste, do not reach many residents, and those they do serve receive sporadic, unreliable services. And, in the case of non-notified slums, service providers are prohibited from serving residents.

HAZARD IN THE URBAN AREAS:

Issues of the Urban flood: Increasing trend of urban flooding is a universal phenomenon and poses a great challenge to urban planners.

●    The hyderabad floods of 2020 were caused by depression and flash floods

●    Kerala floods of 2018 and 2020 caused heavy landslides

●    Bengaluru floods in 2022 due to inundation and non-connectivity of water bodies.

Urban Fire: India has witnessed many tragic fire incidents. Eg – Uphar cinema, New Delhi (1997); Kamala Mills, Mumbai (2017) and Taxila Coaching Centre, Surat (2019).

ABOUT THE EASE OF LIVING INDEX

●  The Ease of living index is an assessment tool used by the Ministry of Housing & Urban Affairs to evaluate the quality of life and the impact of various initiatives for urban development in the city.

●   It includes the availability of physical amenities like solid waste management, water supply, availability of parks and green spaces, etc.

It provides a comprehensive understanding of participating cities across India, based on various parameters like

●   the quality of life,

●   the economic ability of a city, and

●   its sustainability and resilience.

These span over 13 categories like:

●  Education,

●  Health,

●  Housing and Shelter,

●  WASH and SWM,

●  Mobility,

●  Safety and Security,

●  Environment,

●  Recreation,

●  Level of Economic Development,

●  Economic Opportunities,

●  Green Spaces, and Buildings,

●  Energy Consumption, and

●  City Resilience

These account for 70% of the overall outcome.

GOVERNMENT SCHEMES FOR IMPROVING URBAN LIVABILITY

Smart City Mission: Smart Cities Mission was launched by the Hon Prime Minister on 25 June 2015. The main objective of the Mission is to promote cities that provide core infrastructure, clean and sustainable environment and give a decent quality of life to their citizens through the application of ‘smart solutions’.

AMRUT Mission: The purpose of Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is to:

• Ensure that every household has access to a tap with an assured supply of water and a sewerage connection.
• Increase the amenity value of cities by developing greenery and well-maintained open spaces (e.g. parks) and
• Reduce pollution by switching to public transport.

HRIDAY (Heritage City Development & Augmentation Yojana): The main objective of HRIDAY is to preserve the character of the soul of a heritage city and facilitate inclusive heritage-linked urban development by exploring various avenues including involving the private sector.

Pradhan Mantri Awas Yojana – Urban (PMAY-U): It is a flagship Mission of the Government of India being implemented by Ministry of Housing and Urban Affairs (MoHUA), was launched on 25th June 2015. The Mission addresses urban housing shortage among the EWS/LIG and MIG categories including the slum dwellers by ensuring a pucca house to all eligible urban households by the year 2022, when Nation completes 75 years of its Independence

THE WAY FORWARD: MEASURES TO BE TAKEN TO INCREASE LIVABILITY IN CITIES:

• For Slums: Besides improving the living conditions in slums, the causes of slums creation should be addressed. Distributive development will serve the purpose and thereby, everyone can have a dignified and healthy life.
• Integrated Urban Planning: Integrated urban planning can be implemented at various scales, such as across municipal boundaries, city-region or watershed level, and in collaboration with national governments. This collaborative process aims to engage stakeholders that have not traditionally been involved in urban planning – the private sector, citizen groups and marginalized communities – to produce innovative solutions to interconnected challenges.
• Dealing with an Urban crime: Increasing the exchange of information, experience and technical assistance at international, regional and local levels can help in the development of strategies to prevent crime in mega-cities, and in cities with very high crime rates.
• Incease the social protection to the informal sector including migrants.
• Universal access to the social welfare schemes like PDS, Health and education schemes.
• Environmental considerations should be included in the Urban planning
• Promotion of Renewable energy and green transport in urban areas.
• Integrated and Multimodal transport need to be implemented
• Dedicated space for recreational activities, cultural programmes and green space.

THE CONCLUSION: There is a need to increase the city livability so that SDG-11 calls for making cities and human settlements inclusive, safe, resilient and sustainable.

Mains Question

1. Urban centres are called the engine of growth; however, it is in a dismal state in the livability index. Analyse
2. Suggest various measures to increase the livability index of the Urban areas.

ENVIRONMENT AND ECOLOGY

1. SEA CUCUMBER

TAGS: GS-III-ENVIRONMENT- PRELIMS

THE CONTEXT:Recently, 105 kilograms of sea cucumber was seized by the Indian Coast Guard (ICG) near Attangarai in the Ramanathapuram district of Tamil Nadu.

About Sea Cucumber:

• Sea cucumbers are echinoderms—like starfish and sea urchins. And they are marine invertebrates that live on the seafloor found generally in tropical regions. They’re named for their unusual oblong shape that resembles a fat cucumber.
• There are some 1,250 known species, and many of these animals are indeed shaped like soft-bodied cucumbers.
• They act like garbage collectors of the ocean world, and they recycle nutrients, thus playing an important role in keeping coral reefs in good condition.
• They are an important constituent of the marine ecosystem as they play a significant role in maintaining the health of the ecosystem.
• It has no limbs or eyes, or blood.

Demand:

• Sea cucumbers are in high demand in China and Southeast Asia, where they are consumed as food and used in medicine.
• This endangered species is primarily smuggled from Tamil Nadu to Sri Lanka.

Protection Status:

• As per IUCN Red List, Brown Sea Cucumber has been listed as an
• In India, it is listed under schedule I of the Wildlife Protection Act of 1972.
• In 2022, COP19 of CITES listed sea cucumbers as ‘threatened’.
• Recently, Lakshadweep administration unveils world’s first sea cucumber conservation reserve.

2. ANIMAL BIRTH CONTROL RULES, 2023

TAGS: GS-III-ENVIRONMENT- PRELIMS

THE CONTEXT:The Central Government has notified the Animal Birth Control Rules, 2023 under Prevention of Cruelty to Animal Act, 1960 and after superseding the Animal Birth Control (Dog) Rules, 2001.

THE EXPLANATION:

• As per the extant Rules, Animal Birth Control programme for the sterilization and immunization of the stray dogs are to be carried out by the respective local bodies/municipalities/Municipal Corporations and Panchayats.
• Also, the Cruelty involved for carrying out of ABC programme need to be addressed. By effective implementation of these Rules, the Animal Birth Control programme can be conducted by the local bodies which will help in reducing the stray dog population addressing the animal welfare issues.
• The Municipal Corporations need to implement the ABC and Anti Rabies Program jointly. The Rules also provides the guidelines how to deal with the human and stray dog conflicts without relocating the dogs in an area.
• One of the requirements under the Rule is that the Animal Birth Control Programme needs to be carried out by Animal Welfare Board of India (AWBI) recognized organization specifically recognised for Animal Birth Control programme.
• The list of such Organizations will be made available on the website of the Board which will also be updated time to time. The Central Government has already issued letters to all the State Chief Secretaries, Principal Secretaries of Animal Husbandry Department and Urban Development Department.
• Therefore, the local bodies are requested to implement the Rules in letter and spirit and not to permit any Organizations to carry out ABC programme which are not recognized by AWBI and approved for ABC programme or otherwise elaborated in the Rules.

Connect the dots:

• Animal Welfare Board of India (AWBI)
• Prevention of Cruelty to Animals Act, 1960 (PCA), 1960

3. TRIPEDALIA MALIPOENSIS

TAGS: GS-III-ENVIRONMENT- PRELIMS

THE CONTEXT: Recently, Hong Kong scientists have discovered a new species of box jellyfish in Mai Po Nature Reserve in northern Hong Kong, Hong Kong Baptist University (HKBU).

THE EXPLANATION:

• It was the first discovery of a new box jellyfish species from the waters of China. A paper describing the new species was published in the international academic journal Zoological Studies in March 2023.
• The new jellyfish species was named Tripedaliamaipoensis, or Mai Po Tripedalia, by the research team.
• Box jellyfish are a small group with only 49 species reported worldwide, and are even poorly known in Chinese marine waters.
• The new species, as most other species of box jellyfish, has a transparent, colorless body and three tentacles at each of its four corners. A flat pedal-shaped structure at the base of each tentacle that looks like a boat paddle, allows box jellyfish to produce strong thrusts when contracting bodies, thus making them swim faster than other kinds of jellyfish.
• Named for its cube-shaped body, the box jellyfish, or scientifically known as class Cubozoa, includes some of the highly venomous marine animals that are widely known in the tropical waters.
• The newly discovered Tripedalia malipoensis belongs to the family Tripedaliidae of the class Cubozoa and is the fourth described species of Tripedaliidae around the world.

SCIENCE AND TECHNOLOGY

4. NATIONAL QUANTUM MISSION (NQM)

TAGS: GS-III-SCIENCE AND TECHNOLOGY

THE CONTEXT:The Union Cabinet, chaired by the  Prime Minister recently approved the National Quantum Mission (NQM) at a total cost of Rs.6003.65 crore from 2023-24 to 2030-31, aiming to seed, nurture and scale up scientific and industrial R&D and create a vibrant & innovative ecosystem in Quantum Technology (QT).

THE EXPLANATION:

Objectives:

• The new mission targets developing intermediate scale quantum computers with 50-1000 physical qubits in 8 years in various platforms like superconducting and photonic technology.
• Satellite based secure quantum communications between ground stations over a range of 2000 kilometres within India, long distance secure quantum communications with other countries, inter-city quantum key distribution over 2000 km as well as multi-node Quantum network with quantum memories are also some of the deliverables of the Mission.
• The mission will help develop magnetometers with high sensitivity in atomic systems and Atomic Clocks for precision timing, communications and navigation. It will also support design and synthesis of quantum materials such as superconductors, novel semiconductor structures and topological materials for fabrication of quantum devices.
• Single photon sources/detectors, entangled photon sources will also be developed for quantum communications, sensing and metrological applications.
• Four Thematic Hubs (T-Hubs) will be set up in top academic and National R&D institutes on the domains – Quantum Computing, Quantum Communication, Quantum Sensing & Metrology and Quantum Materials & Devices.
• The hubs which will focus on generation of new knowledge through basic and applied research as well as promote R&D in areas that are mandated to them.
• NQM can take the technology development eco-system in the country to a globally competitive level. The mission would greatly benefit communication, health, financial and energy sectors as well as drug design, and space applications.
• It will provide a huge boost to National priorities like digital India, Make in India, Skill India and Stand-up India, Start-up India, Self-reliant India and Sustainable Development Goals (SDG).

ECONOMIC DEVELOPMENTS

5. LIMITED PURPOSE CLEARING CORPORATION (LPCC)

TAGS: GS-III- ECONOMIC DEVELOPMENTS

THE CONTEXT: Recently, Securities Exchange Board of India (SEBI) released a circular announcing a dispute resolution mechanism for Limited Purpose Clearing Corporation (LPCC). The mechanism will be placed for the settlement of disputes or claims arising out of transactions cleared and settled by the regulator, in the manner specified by SEBI in consultation with the Reserve Bank of India (RBI).

THE EXPLANATION:

• LPCC is an organization that has been created to manage the process of clearing and settling repo transactions. An efficient repo market enhances the growth of the debt securities market by increasing the liquidity of the underlying debt securities.
• Additionally, it enables market players to obtain funds temporarily by monetizing their debt holdings without disposing of the underlying assets.
• According to the circular, an LPCC shall adopt the dispute resolution mechanism prescribed by the market regulator.
• If there are any disagreements that arise among the clearing members of LPCC, they will be resolved through the process of conciliation or by an arbitration panel made up of three clearing members who are not involved in the dispute. The ruling of the arbitration panel would be considered final and binding for the parties involved.
• Moreover, SEBI has announced that any disputes between a clearing member and the LPCC will be settled following the prescribed dispute resolution mechanism.
• If either the LPCC or a clearing member is not content with the decision made through SEBI’s mechanism, then any disputes between them will be resolved using the procedure outlined in the Payment and Settlement Systems Act of 2007, along with the corresponding rules and directions that have been notified.

Connect the Dots:

• SEBI
• Payment and Settlement Systems Act of 2007

INTERNATIONAL RELATIONS

1. INDIA –SRILANKA ANNUAL BILATERAL MARITIME EXERCISE (SLINEX-23)

TAGS: GS-II-INTERNATIONAL RELATIONS-PRELIMS PERSPECTIVE

THE CONTEXT: The 10th edition of IN-SLN bilateral maritime exercise SLINEX-23 is scheduled at Colombo from 03 – 08 April 2023. The exercise is being conducted in two phases: the Harbour Phase from 03-05 April 2023, followed by a Sea Phase from 06-08 April 2023. Indian Navy is being represented by INS Kiltan, an indigenous Kamorta class ASW corvette and INS Savitri, an Offshore Patrol Vessel.

THE EXPLANATION:

• AIM: SLINEX aims at enhancing interoperability, improving mutual understanding and exchanging best practices while jointly undertaking multi-faceted maritime operations. Professional, cultural and sporting events, as also social exchanges are planned during the harbour phase to further bolster the bonds of friendship and camaraderie between both the navies.
• The Indian Navy has already held multiple bilateral and multilateral exercises with foreign navies this month. In March, Konkan 2023—the annual bilateral maritime exercise between the Indian Navy and the Royal Navy—was held off the Konkan coast in the Arabian Sea. The Navy also participated in the third edition of the multilateral exercise La Perouse last month in the Indian Ocean Region.

ECONOMIC DEVELOPMENTS

2. WHAT IS PURCHASING MANAGERS’ INDEX (PMI)?

TAGS:GS-III-ECONOMIC DEVELOPMENTS

THE CONTEXT: India’s manufacturing sector activity continued to expand in March 2023, with the S&P Global Purchasing Managers’ Index (PMI) coming in at 56.4, up from February’s 55.3, according to data released.

About Purchasing Managers’ Index:

• The PMI or a Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors.
• It is a survey-based measure that asks the respondents about changes in their perception of some key business variables from the month before. And these surveys are conducted on a monthly basis.
• It is calculated separately for the manufacturing and services sectors, and then a composite index is constructed.
• The survey is compiled by IHS Markit for more than 40 economies worldwide.

• IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
• IHS Markit is part of S&P Global.

How is the PMI derived?

• The PMI is derived from a series of qualitative questions to a large number of companies in the concerned sector. For manufacturing PMI, the questionnaire is sent to manufacturing companies. The questions are factual in nature, and the survey is not meant for opinions, intentions, or expectations.
• The questions are related to 5 key variables. The variables with their weights in the index are — new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%) and stock of items purchased (10%).
• It is calculated as:

PMI = (P1 * 1) + (P2 * 0.5) + (P3 * 0)

Where:

• P1 = percentage of answers reporting an improvement
• P2 = percentage of answers reporting no change
• P3 = percentage of answers reporting a deterioration

• A PMI number greater than 50 indicates expansion in business activity. A number less than 50 shows a contraction. The rate of expansion is also judged by the difference from the mid-point (50) and also by the previous month’s data.

What are its implications for the economy?

• The PMI is usually released at the start of the month, much before most of the official data on industrial output, manufacturing, and GDP growth becomes available.
• Economists consider the manufacturing growth measured by the PMI as a good indicator of industrial output.
• The index also helps investors who are looking to invest in the stock markets as it helps in determining the economic health of the country. Central banks of many countries also use the index to make decisions on interest rates.

GOVERNMENT SCHEMES IN NEWS

3. REVISION SERIES: PM-DEVINE

TAGS:GS-III- GOVERNMENT SCHEMES

THE CONTEXT: Prime Minister’s Development Initiative for North East Region (PM-DevINE), was announced as a new Central Sector Scheme with an initial allocation of Rs 1500 crore in the Union Budget 2022-23.

THE EXPLANATION:

• The approval of the Cabinet was accorded for the PM-DevINE Scheme on 12 October, 2022. The scheme will have 100% Central funding, and has an outlay of Rs. 6,600 crore for the 4 year period from 2022-23 to 2025-26 (remaining years of the 15th Finance Commission period).
• The objectives of PM-DevINE are to: (i) Fund infrastructure convergently, in the spirit of PM GatiShakti; (ii) Support social development projects based on felt needs of the NER; (iii) Enable livelihood activities for youth and women; and (iv) Fill the development gaps in various sectors.
• PM-DevINE Scheme projects will lead to creation of infrastructure, social development projects, support industries and create livelihood activities for youth and women, thus leading to income and employment generation.

Significance of PM-DevINE Scheme to North Eastern Region:

• The PM-DevINE scheme is considered a boon for North East India. Mr. HimantaBiswaSarma, the Chief Minister of Assam, rightly stated that the PM-DevINE scheme is the first of its kind and that the government’s commitment towards the north-eastern states is being reflected in deeds and not simply in words. The scheme would provide the following benefits:
• Investments: The scheme includes funding for projects in infrastructure, healthcare, agriculture and livelihood. This would help improve the standard of living of people in the region.
• State-specific projects: Mizoram-based projects such as Aizawl bypass and bamboo link roads suggest that Mizoram would be the biggest beneficiary of this initiative, followed by Sikkim. The Aizawl bypass is expected to reduce traffic and congestion. Also, the construction of bamboo link roads for the transport of bamboo from forests would help bamboo growers in remote and inaccessible areas connect better with the outside world, and promote local and regional development.
• Healthcare: Under the scheme, services for the management of paediatric and adult haemotolymphoid cancers would be established. This would help improve cancer care in the region.
• Co-existence with other schemes: The scheme would complement the existing schemes in the region rather than substituting any of them. Thus, the north-eastern states will continue to enjoy the benefits provided by the existing schemes.

PRELIMS PERSPECTIVE

4. GIR CALF AND BREED

TAGS: PRELIMS PERSPECTIVE

THE CONTEXT: Recently, India’s first cloned desi Gir female calf, Ganga was produced at NDRI.

THE EXPLANATION:

• This breed is otherwise known as Desan, Gujarati, Kathiawari, Sorthi, and Surati.
• It originated in the Gir forests of South Kathiawar in Gujarat.
• It derives its name from the Gir forest, which is the natural habitat of the breed.
• Gir cattle is a dairy cattle breed and is mainly raised for milk production in India.
• Under a project by National Dairy Research Institute, Karnal to work on cloning of indigenous cow breeds such as Gir and Sahiwal, India’s first cloned Gir female calf named ‘Ganga’.

Distribution:-

• The native tract of Gir cattle is the Gir hills and forests of Kathiawar.
• It includes the Amreli, Bhavnagar, Junagadh and Rajkot districts of Gujarat.
• The breed is also known as Bhodali, Gujarati, Sorthi, Surti, Kathiawari and Desan.

Export:-

• Gir cattle are also very popular outside India.
• United States, Mexico, Venezuela and Brazil have imported this breed.

Process:-

• To clone the Gir, oocytes are isolated from live animals using ultrasound-guided needles, and then, matured for 24 hours under control conditions.
• The somatic cells of elite cows are used as donor genomes, which are fused with OPU-derived enucleated oocytes.
• Following chemical activation and in-vitro culture, the developed blastocysts are transferred into recipient mothers to deliver the Gir calf.

VALUE ADDITION:

About National Dairy Research Institute (NDRI):-

• ICAR-National Dairy Research Institute (NDRI) is located in Karnal, Haryana.
• It is one of the premier Institutes in the dairy sector.
• It has played a crucial role in India’s development in milk production with its continuous research.
• The Institute has the distinction of being a Deemed University for implementing its academic programmes since 1989.
• The Institute provides high-quality education in the field of dairying, which has no parallel in Asia
• The Institute has been ranked first among all Agricultural Universities of India including 4 Deemed Universities consecutively three times in the years 2016-17, 2017-18 and 2018-19.
• The Institute has also conferred the ‘Sardar Patel Outstanding ICAR Institute award’ in 2014.
• It was awarded Agriculture Leadership Award 2013 for setting up a benchmark in dairy research by contributing to research efforts to augment milk productivity, value addition, quality and safety of milk and economic and marketing aspects related to dairying.
• Prior to this, the Institute also received Education Leadership Award in recognition of the talent and leadership among educational institutes across India.

5. GI TAG FOR LADAKH’S WOOD CARVING AND BASOHLI PAINTINGS FROM KATHUA

TAGS: PRELIMS PERSPECTIVE

THE CONTEXT: World famous Basohli Paintings from Kathua district of Jammu & Kashmir (UT) and Ladakh Wood Carving of Ladakh (UT) recently received Geographical Indication (GI) Tagging.

THE EXPLANATION:

• Basohli Painting’: the famous Pahari miniature style of painting known for its use of bright and bold colours and bold colours and peculiar facial forms, from Jammu’s Kathua district, has received the geographical indication (GI tag.)
• Ladakh’s Wood Carving: The craft is practiced in the Wanla and Cjoglamasar districts of Leh.Items ranging from folding tables called choktse, wooden pot called fehpur, tea mixing pot  called gurgur, larger tables, cupboards, ritual bowls, cup with lids to printing blocks are produced under thiscraft-form.
• The GI is an authorization given to a product originating from a specific geographic area having unique attributes. It is a form of Intellectual Property (IP) but unlike other Ips such as patents, copyrights, trademarks etc, is not owned by individuals but by community.
• A GI tag product carries the guarantee of authenticity associated with a specific region.  Some of popular GI products in India include Darjeeling tea, Banarasi saree, Kullu shawls, Mysore silk etc.
• There are 432 GIs granted by Government of India so far.

THE CONTEXT: In January 2023, The RBI released the annual ‘State Finances – A Study of Budgets’ report for 2022-23. The focus of this report is ‘Capital Formation in India – The Role of States’. The report highlights that the States have been spending a greater share of their Gross State Domestic Product (GSDP) on capital expenditure compared to the Centre. In this article, we will analyse the report comprehensively and take the major outcomes of the report. Also, at last we will provide the way forward after analyzing the report on State finances.

ABOUT THE REPORT

The Reserve Bank of India (RBI) released the Report titled “State Finances: A Study of Budgets of 2022-23”, an annual publication that provides information, analysis and an assessment of the finances of State governments for 2022-23 against the backdrop of actual and revised/provisional accounts for 2020-21 and 2021-22, respectively. The theme of this year’s Report is “Capital Formation in India – The Role of States”.

KEY HIGHLIGHTS OF THE REPORT

• The fiscal health of the States has improved from a sharp pandemic-induced deterioration in 2020-21 on the back of a broad-based economic recovery and resulting high revenue collections – States’ gross fiscal deficit (GFD) is budgeted to decline from 4.1 per cent of gross domestic product (GDP) in 2020-21 to 3.4 per cent in 2022-23.
•  States’ debt is expected to decrease to 29.5 per cent of GDP in 2022-23 as against 31.1 per cent in 2020-21, it is still higher than 20 per cent recommended by FRBM Review Committee, 2018.
• States are anticipating an increase in non-tax revenue, which is generated from sources such as fees, fines, and royalties such as State GST, excise taxes and sales taxes in the 2022-2023 fiscal year.
• In 2022-23, States have budgeted higher capital outlay than in 2019-20, 2020-21 and 2021-22. Going forward, increased allocations for sectors like health, education, infrastructure and green energy transition can help expand productive capacities if States mainstream capital planning rather than treating them as residuals and first stops for cutbacks in order to meet budgetary targets.
• It is worthwhile to consider creating a capex buffer fund during good times when revenue flows are strong so as to smoothen and maintain expenditure quality and flows through the economic cycle.
• To crowd in private investment, the State governments may continue to focus on creating a congenial ecosystem for the private sector to thrive. States also need to encourage and facilitate higher inter-state trade and businesses to realise the full benefit of spillover effects of State capex across the country

COMPREHENSIVE ANALYSIS OF THE REPORT

STATES HAVE A HIGHER CAPEX TO GDP RATIO COMPARED TO CENTRE

Data indicates that the Capital Expenditure as a share of GDP is higher for the States (all States) compared to the Centre’s Capital Outlay (CO).  In 2022-23, the average Capital Outplay of States is 2.7% of GDP compared to 2.4% of the Centre. In recent years, there has been a higher proportionate increase in the Centre’s CO as a share of GDP but is still lower than that of States’. If the Central Defence CO is excluded, the gap widens further.

The individual state’s share of CO out of the total share of CO is provided in the report. Uttar Pradesh has the highest share, followed by Maharashtra, Madhya Pradesh, Karnataka, and Tamil Nadu. Also provided in the report is the ratio of each state’s share of CO and the respective states’ share of GSDP.

DECREASING TREND IN PROPORTION OF ACTUAL CAPEX OF STATES COMPARED TO BUDGET ESTIMATES

While the data indicates that the States do have a longer trend of higher allocation towards capital outlay compared to the Centre, the actual expenditure is less than the initial budget estimates. Trends indicate there the proportion of Actuals compared to the estimates (both Budget & Revised) is decreasing.

During 2015-16, the Actual Capital outlay was 90.6% of the BE. However, in the following years, there has been a steady decline. In 2019-20, the Actuals were only about 72% of the BE. In the pandemic year of 2020-21, it fell further to 69.2%. The actuals for 2021-22 would be provided by the states in the budget for 2023-24, to be presented in the following days to weeks. The budget for 2023-24 would tell us if this trend has reversed following the pandemic year.

Comparatively, the proportion of Actual Revenue spending compared to the BE is higher, although there is a declining trend even in this case.

Large variation exists between the states with respect to Actual vs Budgetary capital outlay. Among the large States, Punjab and Andhra Pradesh have cut down their actual Capex compared to the BE by about 40%. Bihar & Chhattisgarh are the other states which have on average reduced their actual capital outlay compared to their estimates. Meanwhile, Haryana, Madhya Pradesh and Karnataka have managed to spend better on capital outlays in proportion to their initial estimates.

INCREASE IN CAPEX TOWARDS HEALTH POST-PANDEMIC

• The COVID-19 pandemic highlighted the importance of investing in Health Infrastructure. The alignment of states’ spending towards this can be seen with an increased Capital outlay for Health. Out of the total CapEx of the states, Economic services constitute the major portion with about 61%.  Expenditure on Social Services, of which Health constitute a part, is about a quarter of the total capital spending.
• There is an increased allocation towards Health as a proportion of GDP in recent years. There is a 79% y-o-y increase in CO to GSDP ratio in 2021-22 compared to the earlier year.
• Although not at the same proportion, there is also an increase in the capital outlay towards another important Social Service i.e., Education.

• While the overall capital outlay of States shows an encouraging trend, there exists a large variation among the states. Among the large states, Haryana, Punjab, and Madhya Pradesh have a higher CO to GSDP ratio towards health. These states also have a higher share of outlay on Health out of the total capital outlay, compared to other major states.

WITH AN IMPROVED FISCAL POSITION, NEED FOR THE STATES TO IMPROVE THEIR CAPEX

• The Study of State Budgets report indicates an improved fiscal position of the States after the pandemic-induced stress. It reports increased revenues and more prudent expenditure by the states. The Gross Fiscal Deficit (GFD) was 4.1% of GSDP in 2020-21. The RE indicates a fall in GFD to 3.7% in 2021-22, with a further estimated fall in 2022-23. As indicated earlier, the actuals for 2021-22 of the States would be known once the budgets for 2023-24 are presented by all the states.

• The report highlights that with the States’ capital expenditure having a higher share of the total country’s capital expenditure (Centre + States), there is more emphasis on the States having a larger contribution to the Capital formation.  Education, health, Infrastructure and Green Energy are a few of the sectors in which increased allocation of capital expenditure can be made to help expand productive capacities as well as create a broader development agenda for the States.  

 STRUCTURAL PROBLEMS IN FISCAL MANAGEMENT OF STATES

VERTICAL FISCAL IMBALANCE BETWEEN THE CENTRE AND THE STATES

• The constitutional allocation of taxation powers between the Centre and the States is based on some economic and administrative considerations such as minimising/avoiding the problem of double taxation, tax rivalry among States, and duplication of tax administration.
• While determining expenditure responsibilities, subjects of regional concern, such as law and public order, agriculture, irrigation, public health and sanitation, roads and bridges are assigned to States due to their proximity to the local issues.
• However, this allocation of taxation powers and expenditure responsibilities between the Centre and the States creates an imbalance referred to as vertical fiscal imbalance. States have the responsibility of development in areas such as education, health, agricultural and industrial growth, construction of roads, bridges and irrigation schemes, etc. However, their revenue raising powers to meet these expenditure responsibilities are inadequate.
• This led to States’ growing dependence on transfers from the Centre to finance their expenditure commitments. The expenditure policies of States are also influenced by the Centre under the objectives of planning (Centrally Sponsored Schemes).

HORIZONTAL IMBALANCES DUE TO DIFFERENCES IN REVENUE GENERATION CAPACITIES AND EXPENDITURE COMMITMENTS ACROSS STATES

• The existence of region-specific disparities as well as diverse socioeconomic structure across States causes variations in resource mobilisation and expenditure responsibilities across States. Populist fiscal measures such as non-levy of certain taxes, differences in tax rates, and State-specific expenditure schemes, also contribute to the differences in revenue generating capacity and expenditure commitments across States. These differences create fiscal imbalances, commonly referred to as horizontal fiscal imbalances.

DOMINANCE OF COMMITTED EXPENDITURE

• The revenue expenditure of States is dominated by committed expenditures such as interest payments, administrative services and pension. Higher committed expenditure resulted in deficit on the revenue account of the States.

MEASURES SUGGESTED BY RBI IN THE REPORT

• Debt consolidation which would help lower overall interests costs, simplify payments, and make it is easier to pay off the debt. Debt consolidation means combining more than one debt obligation into a new loan with a favourable term structure such as a lower interest rate.
• Allocating more resources to key sectors such as healthcare, education, infrastructure, and green energy, the states can promote economic growth and
• State governments can promote investment through both direct and indirect channels. The direct channel involves spending on physical infrastructure and human capital. The indirect channels act by crowding in private investment, promoting good governance, and attracting foreign direct investment (FDI).
• State should establish a fund during strong revenue growth which can be used to buffer capital expenditure. The purpose of this fund would be to maintain a consistent level of spending on capital projects.
• Creating a favourable environment for the Private sector to operate and grow through proper policies implementation and regulations that make it easy for private companies to do business ,as well as providing incentives and support for private investment.
• States also need to encourage and facilitate higher inter-state trade and commerceto realize the full benefit of spillover effects of state capex across the country.

THE WAY FORWARD

TAKING ADVANTAGE OF THE PRESENT SITUATION

• The fiscal health of States has rebounded from pandemic induced stress, aided by buoyant revenue collections and prudent expenditure management. These developments have extended into 2022-23 so far.
• A coincident indicator of this sustained improvement is that market borrowings are much lower than in the indicative calendar due to comfortable cash flow positions of the States, boosted by timely payment of GST compensation by the Centre (May and November 2022) and release of two advance instalments of tax devolution (August and November 2022).
• The States need to take advantage of this ‘sweet spot’ by building up fiscal buffers and stepping up capex.

CREATING A CAPEX BUFFER

• Going forward, increased allocations of capital expenditure for sectors like health, education, infrastructure and green energy transition can help expand productive capacities and create a broad-based developmental agenda for the States. Outlays on social services and physical infrastructure can enhance productivity; hence, States must mainstream capital planning rather than treating them as residuals and first stops for cutbacks in order to meet budgetary targets.
• In this context, it is worthwhile to consider creating a capex buffer fund during good times when revenue flows are strong so as to smoothen and maintain expenditure quality and flows through the economic cycle.

STEP TOWARDS CLIMATE GOVERNANCE

• Climate change is another area that deserves special attention in the coming years. There is a growing recognition of the need for responsible climate change policies at the State level in areas such as clean energy, energy efficiency, clean transport, and sustainable land use, among others.
• Capacity building on access to finance and climate governance would help States meet their potential and realise the committed national target of net zero emissions by 2070.

STEPS SHOULD BE TAKEN STEP TOWARDS SUSTAINABLE DEVELOPMENT GOALS (SDGS)

• The COVID-19 pandemic, geopolitical events and global spillovers from synchronised aggressive monetary policy tightening have stalled the progress on Sustainable Development Goals (SDGs).  Going ahead, India’s commitment to achieve the SDG goals by 2030 is heavily conditioned by policies and actions adopted by the States. With the Centre’s recent thrust towards ‘SDG Localisation’2 , States are now better equipped to orient their spending and investment patterns towards areas requiring attention.
• Capital expenditure by States in critical areas, viz., health, education, infrastructure, R&D and green energy transition holds the key to India achieving the SDGs.

SETTING UP OF STATE FINANCE COMMISSIONS (SFC)

• As a part of institutional reforms, State governments need to set up Finance Commissions (SFC) in a regular and timely manner to decide on the assignment of taxes, fees and other revenues to local governments.
• Institutionalisation of a well defined and timely devolution mechanism to local governments can improve the provision of quality services for the greater public good.

RESEARCH AND DEVELOPMENT (R&D)

• States also need to step up their expenditure on research and development (R&D) from the current lows compared to global peers so as to spur innovation and progress.

THE CONCLUSION: Over the years, considerable progress has been made in terms of creation of infrastructure, both physical and social, through several government initiatives. In particular, the post-pandemic economic recovery in India has been supported by enhanced public capex by both the Central and State governments. As a result, fiscal stimulus by design emphasized sustainable and non-inflationary normalization of economic activity. Also, States should also step up capex in areas like research and development and green energy. States can also realize the full benefit of positive spillover effects by facilitating higher inter-state trade and businesses. Going ahead, all tiers of government must engage along with private participation to create world-class capital assets in India.

JUST ADD TO KNOW YOUR KNOWLEDGE

WHAT IS GROSS FISCAL DEFICIT?

• The gross fiscal deficit (GFD) is the excess of total expenditure including loans net of recovery over revenue receipts (including external grants) and non-debt capital receipts. Since 1999-2000, GFD excludes States’ share in small savings as per the new system of accounting.
• A decrease in GFD is generally considered a positive sign as it indicates that the state government is able to balance its revenue and expenditure more effectively.
• It is calculated by subtracting total revenue from total expenditure.

QUESTIONS FOR MAINS EXAMINATION:

1. According the the Report titled “State Finances: A Study of Budgets of 2022-23”, States have been spending a greater share of their GSDP on capital expenditure compared to the Centre. Explain the reasons behind it.
2. The lack of financial capacity of states has become a significant problem in recent times. Discuss the reasons behind it and also suggest measures to solve this problem.

ENVIRONMENT & ECOLOGY

1. OMORGUS KHANDESH

TAGS: PRELIMS- GS-III-ENVIRONMENT AND ECOLOGY

THE CONTEXT: Recently, a scientist from the Zoological Survey of India, Western Regional Centre (WRC), Pune discovered a new beetle species.

THE EXPLANATION:

• OmorgusKhandesh is necrophagous and is, therefore, also called a keratin beetle. During the decomposition of a body, blowflies are amongst the first ones to arrive in the early stages. Meanwhile, the final successional stage is with the arrival of the keratin feeders, thus their importance in forensic science.
• The beetles of this group are sometimes called hide beetles as they tend to cover their body under the soil and hide. They are not photogenic; they are usually black or grey and encrusted in dirt. Their bumpy appearance is distinct, with short, dense setae all over the body.
• The new species is morphologically most similar to Omorgusrimulosus. The latter is redescribed and illustrated to enable accurate recognition of both species in the new paper.
• OmorgusKhandesh is mainly associated with bird and mammal nests or burrows and the details of their life histories are poorly known. They feign death upon being disturbed and become motionless.
• “The keratin beetles are less studied in the Oriental region generally and India particularly as compared to the other part of the world.
• “Hence, the authors have tried to give the catalogue of the subgenus Omorgus with details on their type depositories, synonyms, chresonomy and known geographical distributions.

ECONOMIC DEVELOPMENTS

2. MARGINAL COST OF FUNDS-BASED LENDING RATE (MCLR)

TAGS: PRELIMS- GS-III-ECONOMIC DEVELOPMENTS

THE CONTEXT: Recently, the State Bank of India, Bank of Baroda and Indian Overseas Bank have raised their marginal cost of fund-based lending rates (MCLR) by up to 15 basis points.

THE EXPLANATION:

Marginal cost of funds-based lending rate:

• It is the minimum interest rate below which no bank is permitted to lend money.
• It is determined by banks internally, depending upon the loan repayment time.
• The Reserve Bank of India introduced the MCLR methodology for fixing interest rates on 1 April 2016.
• It replaced the base rate structure, which had been in place since July 2010.
• The rate is determined internally by the bank depending on the period left for the repayment of a loan.
• MCLR is calculated based on four components Marginal cost of fund, Negative carry on account of cash reserve ratio, Operating costs, Tenor premium.

What is the difference between MCLR and base rate?

• MCLR is an advanced version of the base rate.
• The base rate is based on the average cost of funds, but MCLR is based on the marginal or incremental cost of money.
• MCLR depends on the repo rates changed by RBI while Base Rate does not depend on the repo rates changed by RBI.

3. INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY (IEPFA)

TAGS:PRELIMS- GS-III- ECONOMIC DEVELOPMENTS

THE CONTEXT: The Investor Education and Protection Fund Authority (IEPFA), will organise a State Level Conference on Financial Literacy in Amrit Kaal – Empowering Investors in association with the Department of Tourism in Aizawl.

THE EXPLANATION:

About Investor Education and Protection Fund Authority:

• It was established in 2016 under the Companies Act, of 2013.
• The Authority is entrusted with;
• The responsibility of administration of the Investor Education Protection Fund (IEPF).
• Make refunds of shares, unclaimed dividends, matured deposits/debentures etc. to investors and promote awareness among investors.
• Nodal Ministry: Ministry of Corporate Affairs

About the Investor Education Protection Fund (IEPF).

• It has been established under Section 205C of the Companies Act, 1956 by way of the Companies (Amendment) Act, 1999.
• The following amounts that remained unpaid and unclaimed for a period of seven years from the date they became due for payment are credited to the Fund:
  o Amounts in the unpaid dividend accounts of the companies
  o The application money received by companies for allotment of any securities and due for refund
  o Matured deposits with companies
  o Matured debentures with companies
  o Grants and donations are given to the fund by the Central Government, State Governments, companies or any other institutions for the purposes of the Fund
  o The interest or other income received out of the investments made from the fund.

PRELIMS PERSPECTIVE

4. SHINKU LA TUNNEL

TAGS: PRELIMS PERSPECTIVE

THE CONTEXT: The Union Cabinet recently approved the construction of the tunnel. With the Atal Tunnel and the completion of the Shinku La Tunnel in 2025, the Nimmu – Padum – Darcha road shall be accessed all through the year.

THE EXPLANATION:

• The Shinku La or Shingo La is a mountain pass located on the border between HP and Ladakh. It is at an altitude of 5,091 metres. In 2016, the Border Road Organization built a road to the pass.
• However, the road couldn’t be accessed during winter and large-wheeled vehicles couldn’t pass through. Following this, in 2020, GoI planned to build a 13.5 km tunnel in the pass.

Significance

• The tunnel will help to boost the Zanskar valley economy. It reduces the travel time between HP and Ladakh.
• Currently, one has to travel 101 km on the Manali-Leh road and then take the Darcha road to enter the Zanskar region. With the tunnel, you can drive to Darcha via Padum.
• The toughest hurdle is the 15-20 feet of snowfall the region received during winter. Almost all roads are closed during this season. The Shinku La Tunnel is to make the Zanskar valley accessible 365 days.

Project Yojak

• The Shinku La tunnel is a part of Project Yojak. This project is implemented by BRO. The main objective of the project is to make sure Manali – Leh route is accessible all through the year.

5. STUDY ON THWAITES GLACIER

TAGS: PRELIMS PERSPECTIVE

THE CONTEXT: The recent study on Doomsday Glacier, also called the Thwaites Glacier says that the weak spots in the glacier are increasing. More and more warm water is seeping into the glacier. There is a threat of massive sea rise. If the glacier melts the sea level will increase by more than half a metre.

THE EXPLANATION:

• The study was conducted by the International Thwaites Glacier Collaboration. It is one of the biggest studies conducted on the glacier so far. More than 13 scientists participated in the study from the UK, the US, and different other countries. They spent more than six weeks coming to this conclusion.

Findings

• Terraces in the glaciers are increasing. These openings are causing the sideways melt of the glacier. Terraces are leading the warm water to the crevasses and increasing the melting further.

What are Glacier Terraces?

• It is a long segment of a glacier. It is formed due to the stripping of soft strata from hard strata. In India, the glacial terraces are addressed as Karewas. They are found in Kashmir valley.
  Glacial Crevasses
• They are deep cracks in glaciers. Their sizes range from a few inches to more than 40 feet. They are formed due to shear stress. Say two big ice masses are moving. Friction develops resulting in shear stress. This leads to breakings in the faces.

THE CONTEXT: The number of startups recognised has surged more than 20-fold in five years. India recognised 14,000 new startups in the first nine months of fiscal, according to the Economic Survey 2022. That compares with 733 recognised in 2016-17. As a result, India has become the third largest startup ecosystem in the world after the US and China. Further, a record 44 Indian startups have achieved unicorn status in 2021 taking the overall tally of unicorns in India to 83, most of these are in the services sector. Despite the current statistics, the startup ecosystem has been free from challenges. Despite the government focus on enhancing the startup ecosystem faces various challenges. This article goes into analysis of the challenges and its solution of the startup ecosystem.

BACK TO BASICS

WHAT IS STARTUP

Startups are nothing but an idea that manifests into a commercial undertaking. A startup venture could be defined as, a new business that is in the initial stages of operation, beginning to grow and is typically financed by an individual or small group of individuals. It is a young entrepreneurial, scalable business model built on technology and innovation wherein the founders develop a product or service for which they foresee demand through disruption of existing or by creating entirely new markets.

Recognition of startups:company must meet the following criteria to be considered eligible for DPIIT startup recognition.

•    Period of existence and operations should not be exceeding 10 years from the Date of Incorporation.

•    Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership.

•   Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its Incorporation

•   Entity should not have been formed by splitting up or reconstructing an already existing business

•   Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment

BENEFITS OF STARTUPS

Startups in India as in many other parts of the world, have received increased attention in recent years. Their numbers are on the rise, and they are now being widely recognised as important engines for growth and jobs generation. Through innovation and scalable technology, startups can generate impactful solutions, and thereby act as vehicles for socio-economic development and transformation.

SCOPE AND CHARACTERISTICS OF THE INDIAN MARKET

There are some important factors that can help in not only setting up a company but running it successfully.

•    Youth Oriented Demography: India is a country with a huge number of youth work forces . They are educated and can be easily trained. These resources can be used for ones benefit and not only generate profit for oneself but also make a meaningful impact on the society by generating jobs.

•   Large Population: The economy works on the policy of demand and supply. With its large population, India is already is a huge market that has a diverse demand, which needs to be catered.

ISSUES AND CHALLENGES OF STARTUPS

1. Financial resources Availability of finance is critical for the startups and is always a problem to get sufficient amounts. Many finance options are available, including family members, friends, loans, grants, angel funding, venture capitalists, crowd funding etc. The requirement starts increasing as the business progresses. Scaling of business requires timely infusion of capital. Proper cash management is critical for the success of the startups .
2. Revenue generation Several startups fail due to poor revenue generation as the business grows. As the operations increase, expenses grow with reduced revenues forcing startups to concentrate on the funding aspect, thus, diluting the focus on the fundamentals of business. Hence, revenue generation is critical, warranting efficient management of burn rate which in common parlance is the rate at which startups spend money in the initial stages. The challenge is not to generate enough capital but also to expand and sustain the growth.
3. Supporting infrastructure There are a number of support mechanisms that play a significant role in the life cycle of startups which include incubators, science and technology parks, business development centers etc. Lack of access to such support mechanisms increases the risk of failure.
4. Perception challenge– People who want to start a venture face.challenge that is understanding the creditworthiness of start-ups. Many point out that banks and other funding entities look at start-ups from a very traditional business point of view. Start-ups are evaluated from the variables of debt-to-equity ratio, profits and other profit and loss and balance sheet items. The point they miss is unlike traditional businesses where the bank takes risks like equity contribution risk, project risk, operational risk and market risk most of the start-ups already have achieved a reasonable scale and have large equity financing upfront before they reach out to traditional lenders. . But venture capitalists and other strategic investors such as private equity firm look at the scalability of business.
5. Exceed customer expectations The next most important challenge is gauging the market need for the product, existing trends, etc. Innovation plays an important role, since, that the startup has to fine-tune the product offerings to suit the market demands (Skok, 2016). Also, the entrepreneur should have thorough domain knowledge to counter competition with appropriate strategies. Due to emerging technologies, the challenge to provide over and above an earlier innovation is pertinent.
6. Team members Startups normally start with a team consisting of trusted members with complementary skill sets. Usually, each member is specialized in a specific area of operations. Assembling a good team is the first major requirement, failure to have one sometimes could break the startup.
7. Creating awareness in markets— Startups fail due to lack of attention to limitations in the markets. The environment for a startup is usually more difficult than for an established firm due to the uniqueness of the product. The situation is more difficult for a new product as the startup has to build everything from scratch.
8. Tenacity of founders —Founders of startups have to be tough when the going gets tough. The journey of starting a venture is fraught with delays, setbacks and problems without adequate solutions. The entrepreneur needs to be persistent, persuasive, and should never give up till he/she achieves desired results.
9. Regulations- Starting a business requires a number of permissions from government agencies. Regulations pertaining to labor laws, intellectual property rights, dispute resolution etc., are rigorous in India. Although there is a perceptible change, it is still a challenge to register a company.
10. Lack of mentorship: Lack of proper guidance and mentorship is one of the biggest problems that exist in the Indian startup ecosystem . Most of startups have brilliant ideas and/or products, but have little or no industry, business and market experience to get the products to the market. It is a proven example that a brilliant idea works only if executed promptly. Lack of adequate mentoring/ guidance is the biggest challenge which could bring a potentially good idea to an end.
11. Lack of a good branding strategy— Absence of an effective branding strategy is another issue that prevents startups from flourishing at a faster pace. Hemant Arora, Business Head-Branded Content, Times Network opines that branding demands paramount attention as it gives an identity and occupies a space in the consumer minds.
12. Cyber Security – This is the digital age. And surviving the challenges in this age requires small startups – especially the ones operating online – to be super agile to counter the so called online security threats. Startups that are active online do face online security threats. Be it unauthorized access to startup’s sensitive information, employee records, bank accounts’ information, or any other related information deemed important for a tech startup’s survival, they are at risk.
13. Winning Trust of Customers- Customer is the king. And that’s absolutely right. Winning a customer’s trust is one of the most important challenges that businesses in general – and startups in particular – face today. With a highly satisfied and loyal customer base, startups can scale and make progress towards excellence.
14. Value creation vs valuations-

Value creation

• It refers to the value created by startup in the society through their products and services. Startup create the value through problem solving in the society
• value creation should be the focus of the entrepreneurs

valuation

• It refers to the market value of the companies.
• Valuation should be the focus of market

The problem exists in the startup ecosystem is shifting of the focus of the startups from value creation to valuation. In this game startup’s inflate their valuation artificially to get the investment from the investors

SOLUTIONS TO THE PROBLEM OF STARTUPS

Lack Of Finances–: A solution to this challenge is finding ways in which cost can be minimized. Entrepreneurs can make use of accounting software to keep track of their inflow and outflow. It’s also not a bad idea to go the digitalized way.

Fund Raising-The startup needs to assess why the funding is required, and the right amount to be raised. The startup should develop a milestone-based plan with clear timelines regarding what the startup wishes to do in the next 2, 4, and 10 years. This would enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.

Support by the Government–

• Income Tax Exemption on profits under Section 80-IAC of Income Tax Act:. A DIPP recognized Startup shall be eligible to apply to the Inter-Ministerial Board for full deduction on the profits and gains from business.
• Startup India Seed Fund Scheme (SISFS) aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization.
• Fund of Funds for Start-ups (FFS) was unveiled in line with the Start-up India Action Plan. Introduced with a focused objective of supporting development and growth of innovation driven enterprises, FFS facilitates funding needs for Start-ups through participation in capital of SEBI registered Alternative Investment Funds. It has approved corpus of Rs 10,000 crore for contribution to various Alternative Investment Funds (AIFs) registered with SEBI.

Business Planning–Before launching a business, it is important to carry out proper research by investigating necessary details such as competitors’ prices, suppliers and the rest. This approach builds a solid foundation for a successful business. Also, writing an effective business plan helps startups to define their business, target audience, operational conduct and the amount of money that it will generate and spend.

Proper Marketing Strategy–Technology today has practically made a lot of things easier as it has opened a broad spectrum of avenues for marketing in the form of electronic, print, online etc. Therefore, startups need to seek out ways in which they can create innovative marketing plans, advert placing, to let people know the worth of their product or services.

Competition–There is, in fact, a whole lot of opportunities existing for entrepreneurs because switching costs for most customers are low and many are willing to try new, relatively untested products or services. To overcome the challenge of competition, startups need to research and analyze their niche industry; should be unique and different in approach.

Framework to reduce the regulatory burden on startups  To create a document listing all compliance requirements for all products and services in one place. For instance, if an entrepreneur wants to open a restaurant or a school etc. There is no common source of information, and the entrepreneur is at the mercy of intermediaries. A standardised document withholding all the important information will make the process and business transparent.

Setting up a single-window system – For example, a person needs 12-16 approvals from multiple government agencies to set up a warehouse. While some can be obtained simultaneously, others require much going back and forth, making it a cumbersome process that takes about six months. But in the single window system – one can simply apply for all the approvals on an online portal. The platform will be responsible for running the operation, administration and oversight of the entire process. The inbuilt intelligence system will direct all the information to the appropriate authorities, and the service agreement will bind them to respond within a timely manner.

Introducing an ease of implementation score (EIS) will rate all the government schemes/programmes/information sources. The EIS will hold a minimum performance standard in implementing a service/scheme. A high EIS will mean that service can be programmed to ensure automated decision making. The government may appoint someone to calculate the EIS for a government agency. A high EIS will be the point of pride and, therefore, promote all online services to enhance, starting an improvement race that needs no oversight.

Simplification of legal language will decrease discretionary powers, reduce litigation and allow easy online processes.

Using technology, outsourcing rule making and mutual recognition Agreements (MRA) –  Using technology will make the process transparent, maintaining the integrity of all transactions, and MRA’s will promote foreign trade in goods and services.

SOME INITIATIVE FOR THE STARTUPS

There are numerous government and semi-governmental initiatives to assist startups.

1. Start-Up India

• This initiative provides three-year tax and compliance breaks intended for cutting government regulations and red tapism.

2. Mudra Yojana

• Through this scheme, startups get loans from the banks to set up, grow and stabilize their businesses.

3. SETU (Self-Employment and Talent Utilization)

• Fund Government has allotted Rs 1,000 Cr in order to create opportunities for self-employment and new jobs mainly in technology-driven domains.

4. E-Biz Portal

• Government launched e-biz portal that integrates 14 regulatory permissions and licenses at one source to enable faster clearances and improve the ease of doing business in India

5. The 19-point Action Plan

• Organized by the Department of Industrial Policy & Promotion (DIPP), focuses both on restricting hindrances and promoting faster growth by way of:

• Simplification and Handholding
• Funding Support and Incentives
• Industry-Academia Partnership and Incubation

Launch of Startup India Action Plan Startup India’s 19-Point Action Plan consist of following steps–

1. Self-certification compliance,
2. single point of contact via Startup India Hub
3. Simplifying processes with mobile app and portal (for registration, filing compliances & obtaining information)
4. Legal support, fast tracking & 80% reduction in patent registration fee
5. Relaxed norms of public procurement
6. Easier & faster exit
7. Funding support via a fund of funds corpus of INR 10,000 crore
8. Credit Guarantee Funding
9. Tax exemption on capital gains
10. 3-Year income tax exemption
11. Tax exemption on investments above Fair Market Value (FMV)
12. Annual startup fests (national & international)
13. Launch of world-class Innovation Hubs under Atal Innovation Mission (AIM)
14. Set up of country-wide incubator network
15. Innovation centers to augment incubation and R&D
16. Research parks to propel innovation
17. Promote entrepreneurship in biotechnology
18. Innovation focused programs for students
19. Annual incubator grand challenge

THE CONCLUSION: India is evolving fast and what is needed is not innovation that is ‘cut and paste’, but creative solutions using thinking that is ‘out-of-the-box’ to produce star innovators, startups and entrepreneurs to handle current problems in India. With over three thousand plus startups working nonstop to address India’s problems, entrepreneurs will need a support system that helps free up their time and focus on their business efforts.

Mains Question

1. Startups in India have large scope however, there are various challenges that affect their future prospects. Analyse.
2. What are the reasons for the dismal performance of the startups in creating employment despite various schemes of government?

INDIAN POLITY

1. WHAT IS A CURATIVE PETITION?

TAGS: PRELIMS PERSPECTIVE- GS-II- INDIAN POLITY

THE CONTEXT: Recently, Supreme Court told the Central Government that it cannot decide its curative plea seeking an additional Rs 7,844 crore from the successor firms of Union Carbide Corporation (UCC) for giving compensation to the victims of the 1984 Bhopal gas tragedy as a lawsuit.

THE EXPLANATION:

The concept of curative petition originated from the case of Rupa Ashok Hurra Vs. Ashok Hurra and another case (2002) where the following question arose before the court of law- ‘whether an aggrieved person is entitled to any relief against the final judgment/order of the Supreme Court, after the dismissal of a review petition.

What is a Curative Petition?

• A curative petition is the final and last option for the people to acquire justice as mentioned and promised by the Constitution of India.
• A curative petition may be filed after a review plea against the final conviction is dismissed.
• Objective: It is meant to ensure there is no miscarriage of justice, and to prevent abuse of process.

Criteria for admission:

• The court ruled that a curative petition can be entertained if the petitioner establishes there was a violation of the principles of natural justice, and that he was not heard by the court before passing an order.
• It will also be admitted where a judge failed to disclose facts that raise the apprehension of bias.
• The SC has held that curative petitions must be rare rather than regular, and be entertained with circumspection.
• A curative petition must be accompanied by certification by a senior advocate, pointing out substantial grounds for entertaining it.

Who hears Curative petitions?

• A curative petition must be first circulated to a bench of the three senior-most judges, and the judges who passed the concerned judgment, if available.
• Only when a majority of the judges conclude that the matter needs hearing should it be listed — as far as possible, before the same Bench.
• A curative petition is usually decided by judges in chamber, unless a specific request for an open-court hearing is allowed.
• It shall be open to the Bench at any stage of consideration of the curative petition to ask a senior counsel to assist it as amicus curiae.
• In the event of the Bench holding at any stage that the petition is without any merit and vexatious, it may impose exemplary costs on the petitioner.

ENVIRONMENT, ECOLOGY AND CLIMATE CHANGE

2. WHITE TUFTED ROYAL BUTTERFLY

TAGS: PRELIMS PERSPECTIVE- GS-III- ENVIRONMENT & ECOLOGY

THE CONTEXT: Recently, a team of butterfly observers and researchers have found White Tufted Royal Butterfly, a rare butterfly species at Kalliyad in Kannur district of Kerala.

THE EXPLANATION:

What is White tufted royal butterfly?

• White tufted royal butterfly is a rare butterfly species.
• It is protected under Schedule 2 of the Wildlife Protection Act.
• The wingspan of the butterfly is just 32-40 mm. Its larvae feed on Scurrula parasitica, a plant belonging to the Loranthaceae family.
• The species had been spotted in Agasthyakoodam in 2017 and the Shendurney Wildlife Sanctuary in 2018.
• Significance of finding: There were eight species of the butterfly. While two are common, the others are rare. Since we are able to get the egg, the life cycle of the butterfly can be documented.
• Threats: The survival of such rare species is under severe threat and steps should be taken to protect the hills.

ECONOMIC DEVELOPMENTS

3. GLOBAL ECONOMIC PROSPECTS REPORT 2023

TAGS: PRELIMS PERSPECTIVE- GS-III- ECONOMIC DEVELOPMENTS- REPORT AND INDEXES

THE CONTEXT: Recently, World Bank has released its latest report on Global Economic Prospects, outlining a slowdown in global growth due to a variety of factors including elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.

THE EXPLANATION:

The report warns that any additional negative developments, such as a resurgence of the COVID-19 pandemic or escalating geopolitical tensions, could push the global economy into recession, marking the first time in more than 80 years that two global recessions have occurred within the same decade.

Growth Projections

• According to the report, the global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. The downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies.
• Over the next two years, per-capita income growth in emerging market and developing economies is projected to average 2.8%, a full percentage point lower than the 2010-2019 average.

Impact on Developing Countries

• The report highlights that the crisis facing development is intensifying as the global growth outlook deteriorates. Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies.
• This will result in a weakness in growth and business investment, compounding the already-devastating reversals in education, health, poverty, and infrastructure, as well as the increasing demands from climate change. In Sub-Saharan Africa, which accounts for about 60% of the world’s extreme poor, growth in per capita income over 2023-24 is expected to average just 1.2%, a rate that could cause poverty rates to rise, not fall.

Advanced Economies

• Growth in advanced economies is projected to slow from 2.5% in 2022 to 0.5% in 2023. Over the past two decades, slowdowns of this scale have foreshadowed a global recession. In the United States, growth is forecast to fall to 0.5% in 2023, the weakest performance outside of official recessions since 1970. In 2023, Euro-area growth is expected at zero percent, and in China, growth is projected at 4.3% in 2023.

Emerging Market and Developing Economies

• Excluding China, growth in emerging market and developing economies is expected to decelerate from 3.8% in 2022 to 2.7% in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds.
• By the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below levels expected before the pandemic. Although global inflation is expected to moderate, it will remain above pre-pandemic levels.

Investment Growth

• The report also offers a comprehensive assessment of the medium-term outlook for investment growth in emerging market and developing economies. Over the 2022-2024 period, gross investment in these economies is likely to grow by about 3.5% on average—less than half the rate that prevailed in the previous two decades.
• The report suggests a menu of options for policymakers to accelerate investment growth, such as establishing sound fiscal and monetary policy frameworks and undertaking comprehensive reforms in the investment climate.

PRELIMS PERSPECTIVE

4. HENLEY PASSPORT INDEX 2022

TAGS: PRELIMS PERSPECTIVE- REPORT AND INDEXES

THE CONTEXT: Recently, the Henley Passport Index released the global ranking of world’s passport according to the number of destinations their holders can access without a prior visa.

THE EXPLANATION:

• According to the index, the strongest passport is defined by the number of countries people with a passport can visit visa-free or visa-on-arrival. The top 10 strongest passports in the world are:
  1. Japan (193)
  2. Singapore/South Korea (192)
  3. Germany/Spain (190)
  4. Finland/Italy/Luxembourg (189)
  5. Austria/Denmark/Netherlands/Sweden (188)
  6. France/Ireland/Portugal/United Kingdom (187)
  7. Belgium/Czech Republic/New Zealand/Norway/Switzerland/United States (186)
  8. Australia/Canada/Greece/Malta (185)
  9. Hungary/Poland (184)
  10. Lithuania/Slovakia (183)

India’s Position in the Index

• India ranks 85th on the index, up two places from last year’s 87th position. Despite having the world’s fifth-largest economy, Indian passport holders can access only 59 destinations worldwide and only 6.7% of global GDP, of which India’s own GDP accounts for about half. Indian passport holders have lost visa-free access to Serbia.
• Starting January 1, 2023, Indian passport holders are required to apply for a visa to enter the country, unlike in the past when visa-free travel to the country for 90 days was allowed. Indian passport holders can travel visa-free to 59 destinations such as Bhutan, Indonesia, Macao, Maldives, Nepal, Sri Lanka, Thailand, Kenya, Mauritius, Seychelles, Zimbabwe, Uganda, Iran, and Qatar. Some countries require visa-on-arrival.

VALUE ADDITION:

What is the Henley Passport Index?

• The Henley Passport Index is prepared by London-based Henley and Partners, a global citizenship and residence advisory firm. The index claims to be the “original ranking of all the world’s passports” and is updated quarterly according to countries’ visa policy changes.
• It gathers data from the International Air Transport Association (IATA), which manages inter-airline cooperation globally. The index covers 227 destinations and 199 passports and compares the visa-free access of 199 different passports to 227 travel destinations. If no visa is required, then a score with value = 1 is created for that passport. The same applies if you can obtain a visa on arrival, a visitor’s permit, or an electronic travel authority (ETA) when entering the destination.

5. POLYETHYLENE TEREPHTHALATE(PET)

TAGS: PRELIMS PERSPECTIVE

THE CONTEXT: Researchers from the University of Cambridge, the United Kingdom have recently developed a system that can transform polyethylene terephthalate (PET) plastic waste and greenhouse gases into sustainable fuels and other valuable products using solar energy.

THE EXPLANATION:

• The researchers developed an integrated reactor with two separate compartments: One for plastic and one for greenhouse gases.
• The reactor uses a light absorber based on perovskite – a promising alternative to silicon for next-generation solar cells.
• Tests of the reactor under normal temperature and pressure conditions showed the reactor could efficiently convert polyethylene terephthalate (PET) plastic bottles and CO2 into different carbon-based fuels such as CO, syngas or formate, in addition to glycolic acid.
• The reactor produced these products at a rate that is also much higher than conventional photocatalytic CO2 reduction processes.

What is Polyethylene terephthalate?

• It is a condensation polymer of ethylene glycol and terephthalic acid.
• The by-product of the reaction is water so it is an example of condensation or step-growth polymerization.
• PET Plastic is a thermoplastic synthetic substance which malleable under heat and can be placed into nearly any shape.